Gold on First Sale Doctrine, Disclaimers and Metatags: Standard Process, Inc. v. Banks
In Standard Process, Inc. v. Banks, 2008 U.S. Dist. LEXIS 31993 (E.D. Wisc. 2008), a chiropractor bought dietary supplements from a manufacturer and sold them on his website, despite the fact that he had agreed not to sell the products on the internet. The manufacturer terminated the chiropractor’s account. When the manufacturer sued for trademark infringement and false designation of origin, the chiropractor won. How did this happen? Andrew M. Gold, a partner in the firm of Bogatin, Corman & Gold, analyzes the case and discusses the First Sale Doctrine. He writes:
The First Sale Doctrine provides that the right of a producer to control distribution of its trademarked products does not extend beyond the first sale of the product. Thus, as a general matter trademark law does not apply to the resale of genuine goods bearing a true mark even though the sale is not authorized by the owner of the mark. However, the First Sale Doctrine does not protect unauthorized resellers when their use gives the reasonable impression that they are authorized dealers for a product. Thus, the key determination by the court was whether Dr. Banks’s sale of plaintiff’s trademarked goods gave consumers the reasonable impression that he was an authorized dealer of the products.
Defendant’s website prominently displayed a disclaimer in the first paragraph of the page where a customer might buy plaintiff’s products. The disclaimer explicitly stated that defendant was not an authorized seller of plaintiff’s products and was not affiliated with plaintiff. Though the effectiveness of a disclaimer can be a question of fact, a disclaimer expressly declaring that the seller is not affiliated with the owner of the trademark or is not an authorized distributor of the trademark owner’s products has been held to be an effective means of preventing confusion in the minds of consumers as to affiliation with the owner of the trademark. In other words, when it comes to marketing trademarked products as to which you do not have rights, honesty seems to be the best policy!
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Based on the prior Seventh Circuit law, it would appear that the Court would be bound to find that defendant's use of plaintiff’s trademarks in his metatags would establish a claim of initial interest confusion, or at least create a triable issue of fact on initial interest confusion sufficient to defeat defendant’s motion for summary judgment. However, the court instead noted that modern search engines make little if any use of metatags due to the fact that as more and more webmasters manipulated their keyword metatags to provide suboptimal keyword associations, search engines progressively realized that keyword metatags were a poor indicator of relevancy. Instead, search engines now use algorithms that rank a website by the number of other websites than link or point to it.
(footnotes omitted)