Advertising Law Blog

3M filed its first lawsuit of this kind against Performance Supply, LLC in the Southern District of New York. The claims set out in the complaint are largely representative of those set out in 3M’s subsequent, similar complaints. In its first action, 3M asserts that there are a number of wrongdoers seeking “to exploit the current public health emergency and prey on innocent parties through a variety of scams” including “unlawful price-gouging, fake offers, counterfeiting, and other unfair and deceptive practices.”  In this particular case, 3M alleged that the defendant, an unauthorized distributor of 3M-branded N95 respirators, sent a formal quote to New York City’s Office of Citywide Procurement, offering to sell millions of 3M-branded respirator masks “at a grossly inflated aggregate price of approximately $45 million.” While counterfeiting is not alleged, 3M asserts that the defendant used 3M’s trademarks on the formal quote and technical specification sheet it provided to the New York City agency, thereby implying that the quote came from 3M directly or that the defendant was associated or affiliated with 3M. Further, 3M alleges that the prices listed on the quote were “500%-600% above 3M’s list price,” constituting price-gouging under New York law.

3M also moved for injunctive relief and damages.  In its application for a temporary restraining order and preliminary injunction, 3M asserted that the “damage to the famous 3M brand and its associated goodwill as a result of Defendant’s unlawful conduct is immediate, immeasurable and irreparable, and has the potential to define the 3M brand in the eyes of consumers for years to come.”  On April 24, 2020, the court granted 3M’s motion for a temporary restraining order, and on May 4, 2020, the court issued a preliminary injunction. 3M has since filed several additional similar lawsuits. In each case, 3M asserts that the defendants have falsely represented that the heightened prices offered are authorized by 3M, or that the defendants are affiliated with 3M. 

Takeaway: Pursuant to the first sale doctrine, trademark holders generally do not have the right to control the resale of goods. For example, a trademark owner may not generally control the price at which genuine goods are resold. Here, 3M asserts that defendants’ use of the 3M mark falsely implies defendants are authorized sellers or representatives of 3M, thereby associating 3M with the inflated prices.  Brand owners looking to invoke similar claims against unauthorized resellers should closely monitor the impact of the 3M cases as they unfold, particularly as they relate to the effect of price-gouging by unauthorized resellers on the first sale doctrine and defense.