On Amazon, T-Shirts With Slogans Expose Frivolous-Trademark Feud

(Bloomberg) -- A growing number of sellers on Amazon.com Inc.’s platform are finding how painful it can be when Amazon’s absolute power over their small businesses meets a bureaucratic U.S. government system not built for the 21st century.

The issue involves trademarks filed with the U.S. Patent and Trademark Office, a federal agency meant to ensure brands big and small can protect their intellectual property. The office processes hundreds of thousands of trademark applications a year, and experts at a hearing this month warned Congress that spurious trademarks have overwhelmed the system.

Some sellers on Amazon’s platform say competitors are exploiting weaknesses in the PTO’s system to register trademarks that they can then use to force rival sellers to remove merchandise from Amazon’s marketplace, even if those trademarks would not likely survive scrutiny in court.

The disputes surround “Merch by Amazon,” a service that lets sellers upload designs to put on T-shirts and other products. When a customer places an order, Amazon will print and ship it out while paying the seller a royalty.

It’s just the latest example of the difficulty that Amazon, the largest online retailer, faces in policing content sold by third parties in its marketplace. The company has come under fire from large, global brands for letting sellers hawk counterfeit products on its platform, an issue that policing trademarks helps address.

But small sellers say the PTO is registering trademarks for commonly used terms that don’t deserve the protection. That, combined with Amazon’s tendency to side with the trademark holder, is crushing them.

Dave Cadoff, who runs a print-on-demand business in Orange County, California, said he first ran into the problem while selling T-shirts on Amazon that contained the phrase “What’s your superpower?” Cadoff said he had around 75 shirts that gave a specific profession along with the phrase, such as “I’m a nurse. What’s your superpower?” The problem arose when someone complained to Amazon that they owned the trademark to “What’s your superpower” for use on clothing.

Cadoff received a notice from Amazon that his shirts violated a trademark, and Cadoff raced to remove them from the site, afraid that if he got too many black marks, Amazon would ban his business completely. He estimates taking the shirts down cost him thousands of dollars.

“I don’t want to risk my whole business on a phrase like that and have Amazon cancel me completely,” Cadoff said. “It wasn’t worth fighting.”

More than half of Amazon’s sales now come through third-party sellers, according to the company, and for some sellers, Amazon handles nearly all their business. That’s given the company as much power over some small businesses as would normally be found in a government regulator. The situation has raised alarm bells among lawmakers concerned about antitrust issues even as they praise Amazon for allowing small businesses to access international marketplaces they’d never be able to reach otherwise.

“Merch by Amazon,” which Cadoff uses, started in 2015. The business carries large brands, such as those for Walt Disney Co. and Cartoon Network Inc., but also enables thousands of sellers to easily become their own merchandisers, coming up with clever phrases or new designs that might strike a chord with Amazon customers. Some sellers say they upload dozens of designs a day in the hope that one or two catches on.

Competition among Merch by Amazon sellers can be intense. “OK Boomer,” which was mostly unknown a couple of months ago, now has dozens of competing shirts, hoodies, coffee mugs and other merchandise sporting the phrase.

If a competitor can win a trademark for a phrase and sends Amazon a notice, the company removes products by other sellers who try to use it, even if the sellers say the phrase had been in widespread use for years. Sellers can try to appeal the decision. Registered trademarks are presumed to be valid by law, so the owner of the mark has a leg up.

“Amazon respects the intellectual property rights of others, including trademarks issued” by the PTO, an Amazon spokeswoman said in a statement. “We require third parties, including those that use Merch by Amazon, do the same.”

The spokeswoman added that, as a retailer, “Amazon is not the proper place to challenge the validity of duly issued trademarks.”

Last year, Ken Reil, a Merch by Amazon seller in Las Vegas started a Facebook group called “Trademark Watch Dawgs” to see if other sellers faced the issue on Amazon and other print-on-demand services, and its membership has grown to more than 11,000. Users have flooded the group with horror stories of alleged trademark violations that resulted in Amazon removing their products.

At one time, sellers said they couldn’t post some merchandise that included the word “Classy” in the item description. Reil said he and others had to take down merchandise that included the word “Deplorable” or “Deplorables,” which included some of the hottest-selling items after presidential candidate Hillary Clinton used the phrase in 2016 to describe supporters of Donald Trump.

“It’s ridiculous. Even if the guy is wrong, all he has to do it outlast you” if you take him to court, Reil said.

Amazon’s near-automatic enforcement of trademark claims isn’t how the system works in most settings. Even if the PTO grants a trademark application, it’s up to the trademark owner to police it by issuing cease and desist letters and taking violators to court. The court can then decide whether the alleged trademark-infringement is likely to confuse customers about the product’s source. That’s why an attempt to enforce a trademark for “OK Boomer” won’t have much practical effect in most cases, even if the trademark office did allow its registration for a category like clothing.

“There’s kind of a land grab when a phrase takes off but from a pure trademark perspective, those tend to be short-lived,” said Gaston Kroub, a trademark attorney in New York.

Kroub said that since Amazon prints and sells the merchandise itself when a seller uses Merch by Amazon, the company might be liable if a legitimate trademark issue arises, which would encourage the online retailer to err on the side of caution.

On Dec. 3, New York University law professors Barton Beebe and Jeanne Fromer, in prepared testimony at a congressional hearing, warned that the trademark registry has been flooded with marks that likely shouldn’t have been approved or that are very general. Beebe and Fromer said about 81% of the most frequently used 1,000 words in American English have won a trademark.

The PTO “is aware of the problems that result when a registration issued for a relatively common word or phrase is used as a basis for cease-and-desist letters by overzealous trademark owners,” an agency spokesman said in a statement. The office can make sure a registration complies with the law but can’t control owners who try to go too far in enforcing it, the spokesman said.

Reil said he’s raised the issue of Amazon’s automatic takedowns with PTO employees. “They say I should go to Amazon or the trademark owner and tell them ‘That’s not how trademarks work,’” Reil said. “Amazon just doesn’t want to deal with it,” adding that he blames the PTO’s approval process rather than Amazon.

Helen Kinson, a Merch by Amazon seller in the Washington, D.C., area, said she’s noticed that Amazon has started to not even allow many designs to be uploaded to the website if they contain a phrase that crosses a trademark.

Now, Reil’s Facebook group is on the constant hunt for trademark applications to contest, lest all sellers get shut out of using certain words or phrases. For two years, the group has battled the attempted trademark registration of “Mama Bear” on clothing. Other concerns have involved sillier or more obscure phrases, like “Drama Llama” or “Pot Head.”

Every time the group sees an application, members send the trademark office a “letter of protest,” an informal means of showing the agency that a phrase was actually sold on clothing or in widespread use before the applicant tried to claim it.

In the past two years, the number of such letters received by the PTO grew by more than 50% to more than 4,000, which the spokesman said is straining the agency’s resources. To offset the costs to process the letters, the agency plans to introduce a $100 per letter processing fee, which could be finalized next year. The fee would likely cripple that method of fighting trademarks for most sellers, Reil said.

To contact the reporter on this story: Joe Light in Washington at jlight8@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Paula Dwyer

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