Watch What You Write: Court Awards Damages for False and Misleading Statements by Amazon Seller

February 23, 2024
By François Larose and Adam Aucoin

Amazon is one of Canada’s most popular and profitable online marketplaces, but it is not the wild west. Sellers must take care not to make false or misleading statements about competitors and should ensure that any complaints made to Amazon alleging intellectual property infringement by other sellers are well-founded. The recent decision in Keezio Group, LLC v. The Shrunks’ Family Toy Company Inc., 2024 BCSC 64, suggests that the courts are willing to police sellers’ conduct on Amazon, at least to uphold the provisions of the Trademarks Act that prohibit false or misleading statements tending to discredit a competitor.

Amazon and Intellectual Property Enforcement

By way of background, Amazon provides sellers with a few mechanisms for enforcing their intellectual property rights. Any seller can submit a complaint using Amazon’s Report Infringement Form to notify Amazon of alleged infringements, such as individual instances where third-party sellers of counterfeit goods have added themselves to another seller’s listing for the genuine article. More robust enforcement tools, such as the ability to operate listings under the seller’s brand name, are available to sellers who have enrolled in the Amazon Brand Registry. Enrolling in the Brand Registry requires sellers to proceed through the Amazon IP Accelerator, which connects each seller with an approved law firm to prepare and file a Canadian trademark application for the seller’s desired brand name on Amazon. Trademark registration is an important goal for Amazon sellers in Canada, as it allows sellers to operate exclusive product listings under their own brand name and stay competitive in the marketplace.

The Dispute Between Keezio and The Shrunks

Both parties to the proceeding sell inflatable beds for children on The dispute began in 2017 when the Defendants submitted complaints to Amazon alleging trademark and copyright infringement by Keezio. The complaints referred to the similarity of the two competitors’ product designs and the use of The Shrunks’ registered trademark in a product comparison chart included in one of Keezio’s product listings. As a result of the complaints, Amazon de-listed Keezio’s inflatable beds for a short time before the complaint was retracted and the listings were restored. Keezio brought an action under s. 7(a) of the Trademarks Act, which prohibits false or misleading statements tending to discredit the business, goods, or services of a competitor, and proceeded by summary trial.

The Court found that both infringement complaints submitted by the Defendants to Amazon were false and misleading. In particular, the Court held that the trademark infringement complaint about the product comparison chart was unfounded because the use of a competitor’s trademark for comparison purposes does not constitute infringement, citing the landmark case of Clairol International Corp. v. Thomas Supply & Equipment Co. The Defendants should have pleaded the prohibition against using a competitor’s trademark in comparative advertising under section 22 of the Trademarks Act. That section prohibits the use of another’s trademark in a manner that would depreciate the value of the goodwill attached to it. While the Defendants’ pleadings did claim a section 22 violation, they did not argue it at the hearing or provide evidence to establish the required elements of depreciation of goodwill.

The Court also found the copyright infringement complaint based on the parties’ respective product designs to be unfounded in view of the “useful article” exception to copyright infringement under s. 64(2) of the Copyright Act, which provides that it is not an infringement to reproduce the design of a useful article where the article has been reproduced in a quantity exceeding fifty.

After finding that the Defendants’ complaints were false and misleading, the Court went on to hold that Keezio was entitled to damages based on estimated lost sales for the period during which its product listings were taken down as a result of the complaints, in the amount of $24,450 US dollars. However, the Court declined to order a permanent injunction (because the complaints were over four years old at the time of the decision and there was no evidence that The Shrunks had engaged in such conduct since) or award punitive damages (because there was insufficient evidence of malicious conduct by the Defendants).

Key Takeaways

The Court’s decision in Keezio serves as a warning that Amazon sellers should exercise caution in making complaints or other statements about competitors, even where those statements are not public and directed only towards Amazon for the purpose of intellectual property enforcement. Further, the Court noted that a statement can still be false and misleading under the Trademarks Act even if the person making the statement believed it to be true and harboured no malicious intent. Accordingly, sellers who are considering submitting a complaint about another seller can minimize the risk of making a false and misleading statement by first seeking advice from a lawyer or trademark agent to determine whether the complaint is well-founded.

Navigating the intellectual property aspects of the Amazon marketplace can be daunting. Sellers should be aware that they can only enroll in the Amazon Brand Registry and be considered for their own brand name if they have filed a trademark application for the name through a law firm approved by the Amazon IP Accelerator program, such as Bereskin & Parr. Sellers seeking assistance with their Canadian trademark and Amazon Brand Registry needs should reach out to François Larose or Adam Aucoin.

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