The first sale doctrine is a defense to trademark infringement. In the US, federal trademarks are governed by the Lanham Act. The Lanham Act prohibits unauthorized persons or entities from using a registered trademark “in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.” See 15 U.S.C. ยง 1114. When a trademark is registered with the Trademark Office, after a while, that registration confers upon the owner the presumptions that the trademark is valid and that the owner has the exclusive right to use the mark nationwide.
If a person or entity uses a trademark without authorization, the holder/owner of the trademark may bring a lawsuit for trademark infringement. To win, the trademark holder/owner must show two legal elements:
- A valid trademark
- That the infringer’s use of the same or similar trade mark is likely to cause consumer confusion
However, depending on the facts of the case, there are several defenses that an accused infringer can raise, including what is known as the “first sale doctrine.” In general, the Lanham Act only protects the first sale of manufactured goods. This means that if an individual RESELLS trademarked items, there can be no claim for trademark infringement (as long as the goods are genuine and bear a true mark). This is true even if the original manufacturer does not authorize the RESELLING of its goods. Courts have held that the first sale doctrine flows from the text of the Lanham Act and from the public policy principle that a manufacturer has only the right to control the original distribution of its products. To allow otherwise would endanger the free flow of products in the marketplace.
Where a defendant invokes the first sale doctrine as a defense to a claim of trademark infringement, the defendant must first prove that the trademark holder/owner authorized the first sale of the goods. Usually, proof of that is straight-forward; but not always. A recent case involving Hallmark greeting cards provides an interesting example where the first sale doctrine was rejected as a defense. See Hallmark Licensing, LLC v. Dickens, Inc., Case No. 17-cv-2149 (E.D.N.Y. October 21, 2020). In that case, Hallmark sold 20 truck trailers of greeting cards to a pulp and paper company. This was after Hallmark closed one of its processing and manufacturing centers. The trailers of greeting cards were destined to be destroyed and recycled.
However, instead of destroying the greeting cards, the pulping company sold them and, eventually, a subsequent buyer, defendant Dickens, began to sell the greeting cards to the public. This prompted Hallmark to sue Dickens for various causes of action including Lanham Act trademark infringement. Dickens defended by raising the first sale doctrine. Dickens highlighted the undisputed fact that Hallmark sold all the greeting cards to the pulping company.
However, the court rejected the argument. In simple terms, the “sale” to the pulping company was not a “sale” as contemplated by the Lanham Act. The “sale” was not for the purpose of injecting the goods into the stream of commerce; but rather for the purpose of having the greeting cards destroyed. As such, there was no “first sale” and, therefore, Hallmark retained its rights under the Lanham Act to control the distribution of its goods. Dickens was found to be infringing Hallmark’s trademarks. For more information or if you have questions about creating and registering a trademark or if you need legal services related to trademark litigation, contact the trademark lawyers at Revision Legal at 231-714-0100.