One of the many advantages of the Internet for consumers is the competition it creates. When Internet shoppers can easily compare the prices of hundreds of dealers online, it is difficult for any one dealer to get away with charging more. Thus, prices fall and consumers benefit.
Not surprisingly, however, some companies don't like their prices being undercut on the Internet and have devised a variety of strategies to squelch unwanted competition. Some companies claim using their names in an online listing infringes their trademark in the name. An even more common approach is to claim copyright infringement over unauthorized use of product images.
California resident Jamie Olson ran into this problem when she decided to make some money selling salon hair care products online. To test the waters, she bought some shampoo made by a company called Aquage and put it up on eBay. Because consumers generally like to see what they are buying, the eBay listing includes a picture of the bottle that Olson took with her own camera.
The company was not pleased. Olson soon received an email from a private investigator hired by SalonQuest, the maker of Aquage, demanding that she stop selling the products. The reason: "You are displaying copyrighted Aquage containers in your advertisements," which, according to the private investigator, is a "violation of SalonQuest's legal rights under the federal Copyright Act." Olson was given five days to "immediately remove all Aquage products from your Ebay offerings" and "confirm for us in writing your agreement to permanently discontinue all sales of Aquage products over the internet or through any other form of mail order." In other words, displaying a picture of the company's product, according to the company, infringes its copyright in the product's packaging.
Companies commonly claim that showing a picture of a product taken off a company's website for the purpose of reselling the product is an infringement of the company's copyright in the photograph. Google, for example, receives a lot of claims that pictures turned up by its Froogle shopping system infringe various copyrights, and Google adds the demand letters it receives to the database at Chilling Effects Clearinghouse. Many of these claims are not frivolous. Courts generally hold that a work need only be minimally creative to be copyrightable, and since most photographs involve at least some creative use of angles, lighting, and other compositional elements, they are generally protected. Only the most uninspired of product photographs would be too unoriginal for copyright protection.
To get around this problem, smart online sellers usually take their own pictures of the product and use those with their listings. This doesn't always work, however, because companies that think a photograph looks "too professional" will sometimes assume the picture was stolen. And other companies, like Aquage, claim to own a copyright in the underlying product, which would make any photograph of the product a copyright infringement.
Aquge's bottle appears to be a regular shampoo bottle, not particularly distinctive other than the name on the label. Utilitarian objects like a shampoo bottle generally cannot be copyrighted, nor can purely textual material on a label. Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d 1068 (9th Cir. 2000). Even if the bottle were copyrightable, taking a picture of it for purposes of resale would likely be considered fair use under copyright law. Cf. Ty, Inc. v. Publications Int'l Ltd, 292 F.3d 512 (7th Cir. 2002).
Aquage also raises another claim commonly raised by companies trying to prevent online resale. It argues that it has contracts with its distributors limiting resale of products only to licensed vendors. Therefore, it claims that reselling its products is a breach of its contracts. But Olson never entered into a contract with Aquage. She just bought the shampoo at a store and is now trying to resell it. Aquage's contracts with its distributors doesn't give it the power to control the entire secondary market for its products.
Even if a claim like Aquage's is without legal merit, however, many small online sellers who receive a threat like this would rather cut their losses and back down than risk a lawsuit. It's usually not worth hiring a lawyer when you are only hoping to make a few bucks off the sale in the first place. With threats alone, companies are thus able to control the secondary market.
Olson, however, refused to cancel her sales in response to Aquage's threatening email. This week, she got a second email from the company's private investigator:
As you have been previously advised, this office represents SalonQuest LLC on issues relating to the distribution policies of its professional product
On September 7, 2006, this office contacted you on behalf of SalonQuest concerning your unauthorized sales of Aquage products on eBay. Despite being formally notified that you are violating SalonQuest's legal rights, you have continued to list additional Aquage products on eBay. Also, you have continued to display copyrighted Aquage containers in your advertisements, yet another violation of SalonQuest's legal rights under the federal Copyright Act.
SalonQuest would prefer to resolve this issue amicably. However, unless you immediately and permanently discontinue your sales of Aquage products on eBay and through any other unauthorized channels, SalonQuest has authorized us to forward this matter and your file to its legal counsel for further action.
For now, Olson has decided to continue to ignore the company's demands. I'll post updates on this blog as the conflict develops.