Gold on Material Differences and Disclosures for First Sale Doctrine

Gold on Material Differences and Disclosures for First Sale Doctrine


In Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067 (10th Cir. Kan. 2009), Beltronics' distributors violated their distribution agreements by selling Beltronics radar detectors to Midwest, which in turn resold them as "new" on the internet. To prevent Beltronics from discovering the violation, the serial number labels were either removed or replaced with phony labels. Upon discovering the resale, Beltronics filed a trademark infringement action against Midwest, and on appeal, the appellate court affirmed an order granting Beltronics a preliminary injunction. In this Analysis, Andy Gold, a partner in the Oakland firm of Bogatin, Corman & Gold, examines Beltronics and discusses the first sale doctrine. He writes:
 
[U]nder the First Sale doctrine the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product. The essence of the first sale doctrine [is] that a purchaser who does no more than stock, display, and resell a producer's product under the producer's trademark violates no right conferred upon the producer by the Lanham Act.
 
     However, the first sale doctrine is not applicable when an alleged infringer sells trademarked goods that are materially different than those sold by the trademark owner. Of course, not all differences are material. Though there is no clear test for determining materiality, a difference is normally considered material if consumers would consider it relevant to a decision about whether to purchase a product. In this case, there is no question that the physical products sold by Midwest (the radar detectors manufactured by Beltronics) are genuine. The question is whether the differences in the warranty and other services provided by Beltronics to its authorized buyers, which it does not provide to the buyers of the Midwest products since they lack the original serial number label, constitute material differences sufficient to render the first sale doctrine inapplicable.
 
     Midwest argued that material differences were limited to differences in physical quality. It claimed that the absence of Beltronics' warranties and other services were collateral to the physical quality of the radar detectors, and thus there were no material differences to distinguish the Beltronics radar detectors from those it sold.
 
(citations omitted)