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Growing Infringement of OEM IP Rights on Online Marketplaces

Sales of consumer products through online marketplaces have been commonplace for years and account for a significant portion of the total consumer products marketplace.  Sellers of industrial products such as replacement parts for industrial or heavy equipment are enthusiastically taking advantage of these online marketplaces to gain access to a huge population of potential industrial equipment consumers.

A review of online marketplaces such as Amazon, Walmart, eBay, and AliExpress shows that these marketplaces are quickly becoming an increasingly popular market for the promotion and sale of industrial products, manufacturing components, and replacement parts.  Today, online shoppers can readily purchase precision boring machines, food-grade conveyor systems, or any number of replacement parts for their heavy equipment via these online marketplaces.  For example, bucket teeth are a common wear component for mini excavators and will-fit versions of these bucket teeth can be easily purchased on Amazon and Walmart:

Amazon
Wal-Mart

Purchasers of these industrial products get many of the same benefits such as payment method flexibility, shipping expediency, and return policy convenience offered by these online marketplaces as consumers of conventional products such as dish soap and paper towels.  On the other side of the transaction, an obvious benefit for sellers of these industrial products is the immediate access to a large pool of potential purchasers not otherwise available to retailers of these industrial products and replacement parts.

OEMs Need to Proactively Monitor these Online Marketplaces for IP Infringements

As sales of industrial products and replacement parts transition to the “wild, wild west” of online marketplaces, so too do infringements of Original Equipment Manufacturers’ (OEMs) intellectual property.  The barriers to entry for an industrial part retailer to create an online page selling will-fit replacement parts are very low so these listings are growing as both industrial retailers and consumers discover these online markets.  As the number of industrial retailers on these online platforms increases, the retailers need to be more creative and push the limits even further to drive search engine traffic to their particular ecommerce pages.  Unfortunately for OEMs, the creativity of these retailers often results in misuse or infringements of OEMs’ valuable IP rights.

In reviewing the example of the mini excavator bucket teeth above, a common search term for these products is the well-known BOBCAT brand along with Bobcat’s part number for these replacement parts.  A search on Amazon for BOBCAT in conjunction with the part number “6737325” generates dozens of hits for the will-fit versions of the bucket teeth, all of which are competing with the genuine BOBCAT branded bucket teeth.  IP protections for both OEM brands and the wear parts themselves—coupled with effective and diligent enforcement of these IP protections—will take on increased importance for OEMs as they try to fend off the tsunami of will-fit copies that is likely coming (or has already arrived).

Fortunately for OEMs, consumer products companies previously forced online marketplaces to develop and implement custom, in-house IP enforcement programs to give brand owners a pathway for relatively quick and efficient enforcement of trademark rights.  As industrial products and replacement parts transition to these online marketplaces, OEMs should leverage the existing, custom, in-house IP protection systems to protect their valuable IP.

In exchange for access to each online platform, retailers must agree to comply with the rules and controls imposed by the marketplace host. One such rule is to require retailers to participate in—and be bound by—the custom, in-house IP enforcement program hosted by the marketplace.  With varying degrees of success, these custom, in-house IP enforcement programs provide OEMs with a (typically) relatively fast and (typically) inexpensive means to remove infringing listings from the online marketplace.  Because these custom, in-house systems were originally developed with consumer brands in mind, trademarks are the typical focus of these in-house IP enforcement programs.  However, as industrial products have migrated to these marketplaces, platforms such as Amazon have expanded the programs to provide streamlined processes for enforcing both utility patents and design patents.

OEMs leveraging these in-house IP enforcement programs can often shut down infringing listings posted on these online marketplaces within a matter of days or weeks with a fraction of the financial investment and without the risk of a validity challenge to the IP asset being enforced. As an OEM creates an established record of enforcing a particular patent, the time from filing to of the infringing listing can decrease.  In our experience, an OEM may even be able to get infringing product listings taken down on the same day the objection was filed.  So, while online marketplaces provide a retailer located solely in China easy access to sell replacement parts in the U.S. industrial market, most online marketplaces also provide a reasonably effective mechanism for the OEM to shut down these sales if the replacement parts infringe a U.S. patent or the online product posting infringes a registered trademark or copyright.

While these in-house IP enforcement programs can be an effective tool for OEMs, there are some challenges in using these platforms. Our experience has been that many of these enforcement programs are a black box, and thus the user may experience inconsistent results, both procedurally and substantively. We have submitted some infringement complaints that have sailed through with the infringing posts being pulled down within 24 hours of submission, whereas other filings have lingered for weeks with no action.  Prior success of an infringement complaint is not necessarily indicative of success in a subsequent filing of the substantially same infringement complaint. Moreover, when a complaint is rejected, you don’t always receive a meaningful explanation. The online platforms are also not designed to facilitate direct communication with a live person and thus it may be virtually impossible to connect with the same person if it is necessary to make a resubmission.   These in-house IP enforcement systems provide a helpful tool for OEMs to proactively police and protect their IP assets, but as OEMs start to take advantage of these systems, they need to be prepared for potentially inconsistent results and a lack of clarity in both the process and the rationale for the outcome.

The following is a summary of some key points for a handful of the in-house IP enforcement programs.

  • Amazon
    • APEX (“Amazon Patent Evaluation Express”) is Amazon’s relatively new program for IP owners to enforce their design and utility patents. However, a prerequisite for participation in APEX is for the patent owner to first join Amazon’s “Brand Registry” system which requires enrolling at least one US trademark in the Brand Registry (remember, these in-house systems were initially developed in response to objections by consumer product trademark owners). Once enrolled, the IP owner starts the takedown process by submitting a simple, short, online form identifying the patent infringed and the unique “ASIN” code associated with the allegedly infringing product(s).If the formal APEX process is taken to completion, then there will be brief submissions by both the IP Owner and the alleged infringer summarizing the infringement claim. These submissions are reviewed by an independent, patent attorney approved by Amazon to act as a neutral evaluator. If this neutral evaluator confirms infringement, then the $4,000 fee for the evaluation is paid entirely by the infringer and the posting is taken down. However, if the neutral evaluator finds no infringement, then the IP Owner must pay the $4,000 evaluation fee. One key benefit for an IP owner using the APEX system is that challenges to the validity of the patent are extremely limited, unlike conventional litigation in court.
      Our experience has been that alleged infringers are not willing to invest the time or money necessary to get a determination of non-infringement.  Instead, the retailers are willing to have the particular Amazon posting removed.  We have filed over 50 take downs and not a single retailer has elected to utilize the APEX process and have our client’s infringement claim reviewed by the neutral evaluator.  There appears to be some sort of “strike” or black mark applied by Amazon against a retailer that either fails to respond to an APEX filing or is found to infringe because several retailers have anxiously reached out to us upon receipt of our APEX complaint urgently trying to resolve the matter before a formal default is entered.Admittedly, we could just be playing a game of whack-a-mole where our APEX filing success against one Amazon posting merely results in the infringer moving the product to a different Amazon posting or moving to a different online platform. However, we have experienced good results using the Amazon APEX program by applying a concerted and consistent effort against a specific, patent-protected product.  In our experience, Amazon’s APEX tool is more robust and reliable than other in-house IP enforcement platforms.    
    • “Report Infringement” Tool – An alternative to the Amazon APEX system is the “Report Infringement” platform which is, once again, a simple, short online form submitted by the IP owner. One benefit of this system is that it does not require the IP owner to join the Brand Registry system. This system, like APEX, is a black box so precisely who (or what) reviews these submissions is not entirely clear. The only form of relief available is the removal of the posting of the infringing product. If the IP owner expects to need to enforce the same patent against multiple infringers, then the APEX program is probably a better tool. However, the Report Infringement tool might be the better tool for an IP owner who wants to limit its contractual connections with Amazon or does not anticipate repeat infringements of the IP asset. 
  • Walmart:
    • Walmart offers a “Brand Portal” that seeks to “enable rights owners to better manage and protect their intellectual property rights on Walmart.com.” Once again, a requirement to participate in this program is at least one valid U.S. trademark registration. IP owners submit a form to report patent, trademark, and copyright infringements by providing a hyperlink to the infringing listing, the relevant IP registration number, and a short description of the infringement. In addition to this information, IP owners must declare that they have a good faith belief that the listing is infringing. 
    • The Walmart portal is geared to encouraging the IP owner and retailer to amicably resolve the dispute themselves. Namely, rather than taking substantive action on the submission, Walmart instead forwards the infringement allegation to the seller. If the parties cannot amicably resolve the dispute, then the IP Owner can involve Walmart in the dispute. Similar to the Amazon platform, every retailer agrees, as part of the initial agreement gaining access to the platform, that Walmart has the right to remove listings for infringing products and to suspend sellers of infringing products. 
  • eBay:
    • “Verified Rights Owners Program” (VeRO) is eBay’s in-house system for IP owners to report infringing listings. Once again, a prerequisite for participation in VeRO is a valid U.S. Trademark registration but, once enrolled, IP owners can report copyright, trademark, or “other” infringements (e.g., patent infringements).Like the other platforms discussed above, an IP owner submits to eBay a form providing basic details identifying the IP rights infringed and identifying the infringing posting. Similarly, the IP owner must sign a declaration that it has a good faith belief that the reported listing infringes the listed patent, trademark, or copyright. 
    • Following submission of the form, eBay states that it will remove the listing as soon as possible, after which, the seller can seek to relist the product in a non-infringing manner. If the seller believes the listing did not violate the manufacturer’s intellectual property rights, the seller can contact the IP owner or eBay to resolve the dispute. 
  • AliExpress:
    • “Intellectual Property Protection Platform” (IPP Platform) is a web-based platform for IP owners to submit a takedown notice requesting removal of infringing listings. To enroll, an IP owner need only have a valid email address, but the submittal of a takedown notice requires that the IP owner prove their identity (e.g., via business registration) and ownership of the infringed IP asset.The takedown notice can include links to multiple infringing listings and include supporting documents, such as trademark registrations or patent claim charts. 
    • Once submitted, AliExpress will process the takedown requests and remove the infringing listing in some unspecified amount of time. The seller of the allegedly infringing listing can submit a counter-notice, which is reviewed by AliExpress to determine if the infringing listing should be reinstated. AliExpress shares very little detail about who (or what) reviews the takedown notice, how the notice is processed, or how quickly the dispute will be resolved. No guidance is provided as to whether or how the merits of an infringement allegation are evaluated. It is likewise unclear how the merits of a seller’s counter-notice are evaluated or whether there is any means to appeal an AliExpress decision to reinstate a listing.

OEMs cannot afford to ignore online marketplaces

As more industrial products and replacement parts shift to the online marketplace, OEMs need to embrace and take full advantage of the available IP enforcement tools made available by Amazon, eBay, and the like.  Otherwise, they stand to experience significant losses from these IP infringements.  OEMs can achieve success in shutting down the sales of infringing products using these platforms with only a moderate investment.  However, OEMs need to be flexible and patient given the limited available information surrounding the black box operation of these platforms.  Overall, several of our clients have achieved meaningful results for limited expense by taking full advantage of these in-house IP enforcement systems.

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