It is well recognised that the advent of e-commerce, and in particular platforms such as Amazon, have caused an increase in counterfeiting.  More recently, however, Amazon’s growing popularity, and its Brand Registry program, have led to a novel form of fraud: trademark registry fraud.  

Vendors, many located in China, have been flooding the United States Patent and Trademark Office (USPTO) with applications to register trademarks for all sorts of goods, supported by photo-shopped specimens to obtain fraudulent registrations.  

It is claimed that various Chinese governmental units have paid Chinese nationals $800 for each US trademark application filed. As the USPTO only charges $275 for a simple application, the resulting over $500 profit is considered substantial in China. 

And in some cases, this has adversely affected legitimate brand owners, who have been forced to litigate to cancel USPTO issued registrations and force these vendors to cease monopolising brand owners’ brands on Amazon. 

Trademark owners need to understand this new phenomenon, and how to combat it. 

This new form of trademark fraud gives heightened importance to early registration.  Trademark owners are advised to do a full review of their trademark portfolios and all marks (including logos and design marks) they are using, to ensure that these are covered by registrations.  Unless their trademark rights are protected by USPTO-issued registrations, there is a real risk these rights will be pirated.

Amazon’s Brand Registry Program

Some two-thirds of the sales on Amazon’s enormous, worldwide, selling platform are made by third-party sellers, who register with Amazon and then offer and sell products through its website.  Amazon provides many marketing tools to help sellers increase exposure and sales in what can be a very crowded Amazon marketplace. 
One of Amazon’s key offerings is a Brand Registry.  Similar to governmental registries, trademark owners “register” their brands with Amazon, which gives them exclusivity in use of that brand for those goods. Amazon maintains a separate Brand Registry for each country in which it operates, each with slightly different requirements. 

The Amazon Registry affords sellers many advantages.  Amazon provides registrants with tools related to controlling counterfeits and infringements.  Amazon also affords those in its Brand Registry some control over how products with its brand are presented by other sellers using the Amazon registered brand.  

Other tools provided by Amazon enhance brand visibility on its platform.  For example, Amazon runs an Early Review Program; it selects early purchasers of a seller’s product and asks them to provide an anonymous review, rewarding them with a modest gift certificate.  The item then receives an orange badge from Amazon showing that it has been so reviewed.  This is considered a positive selling point, especially if the reviews are positive.    

Other marketing tools offered to those in the Brand Registry include Enhanced Brand Content, Stores, Sponsored Brands, and the Brand Dashboard, each of which Amazon touts as ways to increase both exposure and sales.

Amazon conditions use of all of these tools upon entry into the Brand Registry.  According to one expert, that makes entry into the Brand Registry “vital” to achieving success on Amazon.

So, not surprisingly, many third-party sellers seek entry into the Brand Registry program.  But entry is conditioned on the brand owning a trademark registration issued by the particular country it wants to register in.  For the US that means a trademark registration issued by the United States Patent and Trademark Office.  And this is where registration fraud becomes an issue.

US registration requirements

Elementary US trademark law provides that trademark rights flow from use of a mark in commerce.  Registration is not required; unregistered trademarks are protected as common law marks and can be quite powerful.  Nevertheless, federal registration does confer various advantages, so most larger brand owners automatically seek registration when new trademarks are introduced.

Under the Trademark Act, before registration can be obtained, the trademark owner must prove that it has used the mark in commerce.  This requires the trademark owner to submit a specimen of use, evidencing the mark has been used on the goods or in connection with services. And this is where trademark registration fraud becomes an issue.  There has been an explosion of cases where companies seek to register unused marks in an attempt to obtain a registration.  These companies will often submit photoshopped specimens, where, for example, the mark is digitally inserted onto a picture of a generic item.

The problem has become pervasive.  In a December 2019 Senate hearing, two professors testified that nearly two-thirds of use-based trademark registrations from China  could be fraudulent. And the USPTO has taken notice. It has tightened requirements for specimens for foreign applications, instituted a periodic audit program to review registrations for fraudulent specimens, and even provided a mechanism for third parties to report fraudulent applications. 

What seems to be driving this problem is Amazon’s Brand Registry program.  Sellers are registering fraudulent marks just so they can enter the Amazon program.  Some of these borders on the comedic; marks that have been subject to applications include such unpronounceable nonwords as TTOOHHJD and MAJCF. 
 
The motivation here is not to protect trademark rights in these nonsense words, but simply to obtain a registration, any registration, that is then a ticket to Amazon’s Brand Registry program.  These sellers then offer generic, often unmarked items, using Amazon’s marketing tools.  While these nonsense registrations may not generally directly affect legitimate brand owners, they illustrate the great impetus to obtain false government registrations as a means to enter Amazon’s program. 

Legitimate brand owners get hurt

In instances this wave of trademark-registration fraud can actually hurt legitimate sellers.  In January 2020, a federal court in New York reported an unusual case. A New York company named Home It, in the business of selling home furniture through e-commerce portals, had been using the mark SAGANIZER for over five years.  But it never got around to registering the mark.

Sometime later, a Chinese individual named Wupin Wen registered the identical mark, also for furniture, submitting a specimen showing an item with the mark digitally added.  (The exact same photograph of the item, without any mark, was easily found on the internet and submitted to the court.)  After obtaining a federal registration, Wen registered the Saganizer brand with Amazon. That’s when Home It’s problems began.  Amazon began de-listing Home It’s items, relying on Wen’s brand registry.  Apart from the loss of that business, Home It feared that multiple delistings by Amazon would result in its being completely barred from the platform.

Ironically, this was the situation of the legitimate trademark owner being treated like a counterfeiter because of the purported rights of a trademark pirate! So, Home It was forced to expend significant resources in bringing a civil case against Wen in federal court.  Because time was of the essence, it had to seek a preliminary injunction, to which courts give, particularly scrutiny. Although initially rejecting Home It’s motion, the court eventually granted the motion, and ordered Wen to remove the registration from Amazon’s Brand Registry.

While victorious in the end, Home It expended considerable time and resources to get there.  And that was to deal with only one pirated mark.

What should brand owners do to protect themselves?

There are several steps that brand owners can do to protect themselves.  Most obviously, it is important to register trademarks that are used to support the brand.  This includes not only word marks, but logos, and other design marks.  Amazon has a specific category for such marks in its Brand Registry.  Early registration of the brand’s marks is the best weapon to prevent this form of piracy.  Trademark owners should review their portfolio of marks used and registered and verify that the range of marks used in the company’s business is covered by USPTO registrations.

Another important step is a trademark watch service. For a relatively modest fee, a watch service will provide alerts of applications to register marks similar to one’s own.  Such early warnings give brands a heads-up when dealing with these issues.

If an application is a problem, one option is to file an opposition with the PTO; oppositions are due 30-days from publication, although that can be extended to 90 days.  But oppositions are a form of litigation before an administrative tribunal and may well  be protracted and expensive.The USPTO recently set up a program that presents a less expensive option.  Where fraudulent specimens are involved, anyone can send an email to [email protected], and the USPTO will then investigate the issue.  The USPTO does require certain evidence to show the specimen is fraudulent, so it is important to do sufficient legwork to present a convincing case. Still, this can be a less involved and less expensive option.  

Summary

The COVID crisis has only increased Amazon’s importance in the retail market, and that will further increase incidence of this new form of fraud.  To combat this, trademark owners need to be diligent by ensuring that their rights are fully registered, and that they are keeping watch on new, possibly problematic, applications.  That will put them in the best position to protect their brand equity.