Think Twice Before Selling on Amazon

Amazon is one of the most popular shopping websites, selling everything from books to electronics. As a result, it is no wonder that most companies want to sell their goods on Amazon. In order to sell on Amazon, you must agree to the Amazon Vendor Terms and Conditions. Did you read the terms and conditions? If you’re like most, you probably didn’t.

A paragraph of the Amazon Vendor Terms and Conditions, Service Business Solutions Agreement and Amazon Brand Registry Terms states “you grant Amazon and its affiliates a royalty-free, non-exclusive, worldwide, perpetual, irrevocable, and sub-licensable right and license to reproduce, perform, display, distribute, adapt, translate, modify, re-format, create derivative works of, and otherwise commercially or non-commercially exploit in any manner, any and all of your Materials.” Materials include your company’s trademarks, copyrights, product packaging, pictures, product description, etc.

Yes, you read that correctly. By selling on Amazon you are granting Amazon (and its affiliates!) a royalty-free, non-exclusive, perpetual, irrevocable and sub-licensable right to use some of your most valuable property.

Granting Amazon such a broad license may be cause for concern. Trademark owners have a duty to control the quality of goods bearing their mark. Without such quality control and monitoring, it is possible such a license may be considered a “naked license.” A “naked license” is an uncontrolled license which may result in the trademark losing its value and its ability to function as a trademark. A federal appellate court in New York has stated that naked licensing without quality control is a fraud on the public and unlawful. See Societe Comptoir de L’Industrie Contonniere Etablissements Boussac v. Alexander’s Dep’t Stores, Inc., 299 F.2d 33 (2d Cir. 1962). The federal appeallate court in California took it a step further and said that naked and uncontrolled licensing is “inherently deceptive and constitutes abandonment” of all rights in the trademark and results in cancellation of its registration. Barcamerica Inter. USA Trust v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002).

While no court has ruled on the issue of whether the license granted to Amazon constitutes a naked license, it is cause for concern. One federal court held that Amazon had the right to use a vendor’s trademarks in Google keyword advertising for products of the vendor’s competitors, even after the vendor terminated its vendor agreement. See Video Professor Inc. v., Inc., No. 09-cv-00636, 2010 WL 1644630 (D. Colo. April 21, 2010).

With a company as large as Amazon it may be difficult to negotiate the terms of the Vendor Terms and Conditions. Another option is to refrain from selling on Amazon altogether, as some companies are choosing to do.

Practical Tips:

  • Always read the terms and conditions before you agree to them;
  • Consult an attorney with any questions you have; and
  • Set a recurring reminder to check the terms and conditions as companies like Amazon may change them at any time. By continuing to sell you are agreeing to the updated terms and conditions.