COVID-19 has led to a significant rise in price gouging and deceptive advertising putting businesses and trademark owners at risk. Brand owners are finding that third party “distributors” are reselling their products (or counterfeit products) without proper authorization and at significantly inflated prices. Such illegal activity puts the manufacturers’ and brand owners’ reputations at risk and could subject them to regulatory issues. The Department of Justice, Federal Trade Commission, Food and Drug Administration and state Attorneys General are not taking this conduct lightly and are policing the situation carefully, especially in regard to products claiming to treat or prevent the coronavirus.
Fortunately, the Lanham Act provides injunctive and monetary relief to trademark owners where a third party’s use of the trademark could cause confusion as to whether the third party is associated with the or authorized by the trademark owner. State law can also provide injunctive relief against deceptive business practices where a manufacturer can show actual harm to its reputation.
One multi-national company is doing just that. 3M Company, fresh from a stinging, and allegedly unfair, reprimand from President Trump has turned to trademark law in a pair of cases, in California (read here) and New York (read here). What distinguishes these cases from normal trademark disputes is not that the issue of whether the N95 masks sold were counterfeit (which may or may not be true), but that Defendants were not authorized sellers (which is apparently very true) and therefor their price-gouging activities injured the 3M brand.
Trademark owners who learn of unauthorized resellers attempting to “price gouge” and/or hold themselves out as an authorized reseller should immediately demand they cease and desist such conduct, and seek prompt relief in federal court if the activity does not stop. Further, trademark owners dealing with the sale of counterfeit products can also seek immediate injunctive relief. Judicial remedies are available to protect businesses, brands and trademark owners.
THE BUSINESS TAKE AWAY: This is an interesting and perhaps very powerful tool for trademark owners. Its cuts through multiple levels of proof, such as whether the products are genuine, etc., and goes directly to the injury to reputation suffered by association with profiteers and price-gougers.