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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

Standard Process Inc. v. Dr. Scott J. Banks

Case No. 06-C-843 (E.D. Wis., April 18, 2008)

Court holds that unauthorized reseller of plaintiff Standard Process Inc.’s products can use Standard Process’ trademark on its website, and in the website’s meta tags, to advertise the sale of such products.  The Court held that consumers were not likely to be confused by such conduct, because defendant’s site featured a prominent disclaimer that advised consumers that defendant is “not an authorized seller” of plaintiff’s products, “purchases Standard Process supplements from authorized third parties for resale, and is in no way affiliated with, authorized, sponsored or related to Standard Process Inc.”  In reaching this result, the Court rejected plaintiff’s argument that the use of its marks in the meta tags of defendant’s site was barred by application of the “initial interest confusion” doctrine, because the consumer who came to defendant’s site was presented with an opportunity to purchase actual Standard Process products. 

Finally, the Court rejected plaintiff’s claim that defendant was improperly selling ‘gray market’ goods which were ‘materially different’ from those plaintiff intended for sale in this market.  Plaintiff grounded this argument on the fact that authorized resellers are required to have a one-on-one consultation with the consumer before sale of the products, which consultation does not take place when the consumer purchases the product from defendant’s website.  The Court rejected this argument, because the products being resold were in fact the same as those offered by Standard Process, and because consumers were not likely to be confused, as they knew they were not receiving a one-on-one consultation prior to purchase.

Plaintiff Standard Process manufactures and sells dietary supplements.  Standard Process only markets its products through authorized resellers.  Such resellers are allowed to sell these products only if they agree not to sell the products to other businesses or on the internet, and to conduct a one-on-one consultation with the consumer before product sale.

Defendant Dr. Scott J. Banks is a chiropractor and nutritional consultant who sells supplements from approximately 80 manufacturers at his clinic and over the internet at his website www.spinelife.com  For approximately 5 years, Dr. Banks was an authorized reseller of plaintiff’s products.  However, this authority was terminated because of his sale of Standard Process products on the internet.  Dr. Banks nonetheless continued to sell plaintiff’s products on his internet website.  The products he sold were authentic and obtained from other Standard Process resellers.

Initially, defendant’s website advertised these products for sale by use of both plaintiff’s trademark and logo, and photographs of the product.  In response to a cease and desist letter from plaintiff’s counsel, defendant removed the product photographs, and plaintiff’s logo.  He continued, however, to use plaintiff’s trademark both to describe the product he was selling and in the meta tags of his website.

He also placed a prominent disclaimer on his site, in the first paragraph a consumer sees when he clicks on the ‘Standard Process’ link found thereon.  This disclaimer advised consumers that:

Spinelife is not an authorized seller of Standard Process Inc. products.  Spinelife purchases Standard Process supplements from authorized third parties for resale, and is in no way affiliated with, authorized, sponsored or related to Standard Process, Inc.

Dr. Banks also advertised Standard Process products for sale via email solicitations.  Unlike his website, these solicitations used product photographs, and did not contain a disclaimer.

Plaintiff commenced this suit, charging Dr. Banks with trademark infringement and false designation of origin in violation of Lanham Act.  Dr. Banks moved for summary judgment, dismissing these claims.

The Court held that defendant’s use of plaintiff’s trademark on his website to advertise his sale of authentic Standard Process products did not infringe plaintiff’s trademark because, given the prominent disclaimer, consumers were not likely to believe that Dr. Banks was an authorized reseller of plaintiff’s products.  As such, defendant’s sales were protected by the ‘first sale’ doctrine.  Said the Court:

As a general rule, trademark law does not apply to the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner.  This rule is known as the ‘first sale doctrine’ and it provides that ‘the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product.’ …  However, the first sale doctrine does not protect unauthorized resellers who use other entities’ trademarks when such use gives a reasonable impression that the resellers are authorized dealers for a product.  Dr. Banks’ website does not create such an impression.  It does not include any pictures of SP Products, and most importantly, it prominently displays a disclaimer in the first paragraph of the page where a customer may buy SP Products.  The disclaimer explicitly states that Spinelife is not an ‘authorized seller’ of SP Products and is not ‘affiliated with’ Standard Process.   While the effectiveness of a disclaimer may generally 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.

While the Court indicated that Dr. Banks’ email solicitations were likely to confuse consumers, it did not rule on whether they infringed plaintiff’s trademark because defendant voluntarily agreed both to remove product photographs from these emails, and add the same disclaimer of his affiliation with Standard Process that was contained on his website.

The Court also rejected Standard Process’ attempts to bar defendant from selling its products because the products defendant offered were ‘materially different’ from those  sold by Standard Process, and thus were likely both to diminish the value of its mark, and lead consumers to believe they were purchasing a product they would not in fact receive.  Plaintiff conceded that the products offered for sale by Dr. Banks were authentic.  It rested its claim on the fact that its authorized sellers were not allowed to sell its product unless they first engaged in a one-on-one consultation with the consumer, a practice Dr. Banks did not follow.  The Court held that this was not likely to confuse consumers, or cause them to believe they were getting a product that was different from that they sought, because they were well aware they did not have such a consultation prior to purchase.

Finally, the Court rejected plaintiff’s argument that the use of its trademark in the meta tags of Dr. Banks’ website infringed its trademark by creating ‘initial interest confusion’ and diverting consumers to a competitor’s products.  After noting that ‘modern search engines make little if any use of metatags,’ the Court held that the ‘initial interest confusion’ doctrine was inapplicable because Dr. Banks was offering actual Standard Process products for sale at his website, which eliminated the likelihood of consumer confusion.  Said the Court:

Consumers who enter ‘Standard Process’ in a search engine may be diverted to Dr. Banks’ website where, unlike the plaintiff’s site in Promatek, it actually provides an opportunity to purchase the trademark holder’s goods.  Dr. Banks is not a direct competitor to Standard Process.  Consumers will still be able to purchase unaltered SP Products on his site, so the likelihood of consumer confusion is not present here like it was in Promatek.

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