Dealing with Unauthorized Online Dealers: Sales of “Genuine” Products

The growth of the Internet as an online marketplace has created not only many new opportunities for companies to sell their goods or services, but also poses many new challenges to companies seeking to protect their intellectual property rights. As many companies know far too well, online sellers (some authorized by the manufacturer; many more not authorized) now have low-cost, direct access to consumers through their own websites and through online market places such as alibaba.com, eBay, and amazon.com. This has led to a tsunami of online dealers infringing intellectual property rights. 
While many products sold by unauthorized online retailers are counterfeits, some sell products actually manufactured by and for the trademark owner. The sale by unauthorized dealers of “genuine” goods poses the greatest legal challenge to makers of well-known brands. It may or may not be a bigger business challenge, but counterfeits do not pose serious legal issues; “genuine” goods, on the other hand, are another matter. Further, the unauthorized sale of “genuine” goods is exploding on the Internet. Just look at a typical page on Amazon and hit the link to other offerings of “new” versions of the product on the Amazon Marketplace. 
Unauthorized dealers obtain the products they sell as “new” and “genuine” in a variety of ways. The dealers may purchase their goods from overseas markets where prices are lower than in the United States, then import them into the United States as “gray market” goods. They may buy the products cheaply in clearance sales or returns from authorized dealers in the United States. The goods may also have been transshipped by an authorized dealer to another for resale, in contravention of the distribution contract. The goods may simply have been stolen from the brand owner’s normal distribution channels. 
Such unauthorized dealers compete unfairly in a sense. They are essentially “free riders.” They have minimal overhead and do not invest significantly in customer service, showrooms, quality, or advertising. Nevertheless, unauthorized dealers reap the benefits of such efforts. They trade off the brand owner’s hard-earned reputation for quality and customer service. Not having the same overhead, they can undercut authorized dealers on price, driving prices down with their unfair advantage and making it difficult for authorized dealers (and ultimately the brand owner itself) to make a profit. Additionally, the product may differ in some way, such as lacking warranty protection. It is this differential in service and quality of promotion and quality inherent in a system of authorized dealerships which needs to be protected. 
Brand owners are not without legal recourse against unauthorized dealers, however. First, some simple, self-help measures need to be considered. 
Self-Help: Warranty Policy and the Unauthorized Dealer Page
As will be discussed in depth below, warranties are a key element to your armor against unauthorized dealers. Company warranties should expressly warn consumers that purchases from unauthorized dealers, even of otherwise “new” products from the company, void warranty protection. Aside from giving a benefit to customers who buy from preferred dealers, it provides an important trademark/copyright infringement weapon noted below. 
So, adopt a firm warranty policy. Next, publish it on the company website, listing authorized dealers for self-verification purposes. Examples are common with any company struggling with unauthorized dealers (see, e.g., www.monsterproducts.com/warranty/; www.klipsch.com/unauthorized; http://hoover.com/aut