Growing Infringement of OEM IP Rights on Online Marketplaces

Sales of consumer products through online marketplaces have been commonplace for years and account for a significant portion of the total consumer products marketplace.  Sellers of industrial products such as replacement parts for industrial or heavy equipment are enthusiastically taking advantage of these online marketplaces to gain access to a huge population of potential industrial equipment consumers.

A review of online marketplaces such as Amazon, Walmart, eBay, and AliExpress shows that these marketplaces are quickly becoming an increasingly popular market for the promotion and sale of industrial products, manufacturing components, and replacement parts.  Today, online shoppers can readily purchase precision boring machines, food-grade conveyor systems, or any number of replacement parts for their heavy equipment via these online marketplaces.  For example, bucket teeth are a common wear component for mini excavators and will-fit versions of these bucket teeth can be easily purchased on Amazon and Walmart.

Purchasers of these industrial products get many of the same benefits such as payment method flexibility, shipping expediency, and return policy convenience offered by these online marketplaces as consumers of conventional products such as dish soap and paper towels.  On the other side of the transaction, an obvious benefit for sellers of these industrial products is the immediate access to a large pool of potential purchasers not otherwise available to retailers of these industrial products and replacement parts.

OEMs Need to Proactively Monitor these Online Marketplaces for IP Infringements

As sales of industrial products and replacement parts transition to the “wild, wild west” of online marketplaces, so too do infringements of the intellectual property of the OEMs.  The barriers to entry for an industrial part retailer to create an online page selling will-fit replacement parts are very low so these listings are growing as both industrial retailers and consumers discover these online markets.  As the number of industrial retailers on these online platforms increases, the retailers need to be more creative and push the limits even further to drive search engine traffic to their particular ecommerce pages.  Unfortunately for OEMs, the creativity of these retailers often results in misuse or infringements of OEMs’ valuable IP rights.

In reviewing the example of the mini excavator bucket teeth above, a common search term for these products is the well-known BOBCAT brand along with Bobcat’s part number for these replacement parts.  A search on Amazon for BOBCAT in conjunction with the part number “6737325” generates dozens of hits for the will-fit versions of the bucket teeth, all of which are competing with the genuine BOBCAT branded bucket teeth.  IP protections for both OEM brands and the wear parts themselves—coupled with effective and diligent enforcement of these IP protections—will take on increased importance for OEMs as they try to fend off the tsunami of will-fit copies that is likely coming (or has already arrived).

Fortunately for OEMs, consumer products companies previously forced online marketplaces to develop and implement custom, in-house IP enforcement programs to give brand owners a pathway for relatively quick and efficient enforcement of trademark rights.  As industrial products and replacement parts transition to these online marketplaces, OEMs should leverage the existing, custom, in-house IP protection systems to protect their valuable IP.

In exchange for access to each online platform, retailers must agree to comply with the rules and controls imposed by the marketplace host. One such rule is to require retailers to participate in—and be bound by—the custom, in-house IP enforcement program hosted by the marketplace.  With varying degrees of success, these custom, in-house IP enforcement programs provide OEMs with a (typically) relatively fast and (typically) inexpensive means to remove infringing listings from the online marketplace.  Because these custom, in-house systems were originally developed with consumer brands in mind, trademarks are the typical focus of these in-house IP enforcement programs.  However, as industrial products have migrated to these marketplaces, platforms such as Amazon have expanded the programs to provide streamlined processes for enforcing both utility patents and design patents.

OEMs leveraging these in-house IP enforcement programs can often shut down infringing listings posted on these online marketplaces within a matter of days or weeks with a fraction of the financial investment and without the risk of a validity challenge to the IP asset being enforced. As an OEM creates an established record of enforcing a particular patent, the time from filing to of the infringing listing can decrease.  In our experience, an OEM may even be able to get infringing product listings taken down on the same day the objection was filed.  So, while online marketplaces provide a retailer located solely in China easy access to sell replacement parts in the U.S. industrial market, most online marketplaces also provide a reasonably effective mechanism for the OEM to shut down these sales if the replacement parts infringe a U.S. patent or the online product posting infringes a registered trademark or copyright.

While these in-house IP enforcement programs can be an effective tool for OEMs, there are some challenges in using these platforms. Our experience has been that many of these enforcement programs are a black box, and thus the user may experience inconsistent results, both procedurally and substantively. We have submitted some infringement complaints that have sailed through with the infringing posts being pulled down within 24 hours of submission, whereas other filings have lingered for weeks with no action. Prior success of an infringement complaint is not necessarily indicative of success in a subsequent filing of the substantially same infringement complaint. Moreover, when a complaint is rejected, you don’t always receive a meaningful explanation. The online platforms are also not designed to facilitate direct communication with a live person and thus it may be virtually impossible to connect with the same person if it is necessary to make a resubmission.   These in-house IP enforcement systems provide a helpful tool for OEMs to proactively police and protect their IP assets, but as OEMs start to take advantage of these systems, they need to be prepared for potentially inconsistent results and a lack of clarity in both the process and the rationale for the outcome.

OEMs cannot afford to ignore online marketplaces

As more industrial products and replacement parts shift to the online marketplace, OEMs need to embrace and take full advantage of the available IP enforcement tools made available by Amazon, eBay, and the like.  Otherwise, they stand to experience significant losses from these IP infringements.  OEMs can achieve success in shutting down the sales of infringing products using these platforms with only a moderate investment.  However, OEMs need to be flexible and patient given the limited available information surrounding the black box operation of these platforms.  Overall, several of our clients have achieved meaningful results for limited expense by taking full advantage of these in-house IP enforcement systems.