A Utah federal court has denied a motion to dismiss filed by an unauthorized grey market seller, allowing the brand’s claims against the unauthorized seller to proceed.
Daren Garcia of Vorys, Sater, Seymour and Pease LLP argued the case on behalf of Skullcandy, Inc., which manufactures and sells headphones and speakers under the Skullcandy brand. See Skullcandy, Inc. v. Filter USA, Inc., No. 2:18-cv-00748 (D. Utah).
The U.S. District Court for the District of Utah found that Skullcandy stated viable claims against the defendants—unauthorized sellers of Skullcandy products on Amazon—for trademark infringement, unfair competition, trademark dilution, deceptive trade practices, and tortious interference with contract. The Court’s decision made a number of key findings, including that:
- Skullcandy stated a claim for trademark infringement and unfair competition where the products sold by the defendants did not come with Skullcandy’s warranty. Notably, the Court determined that New York General Business Law § 369-b did not bar Skullcandy’s claim because Skullcandy’s denial of warranty coverage was not based solely on the defendant’s status as an unauthorized seller.
- Skullcandy stated a claim for trademark infringement and unfair competition in light of its allegations that authorized dealers are required to abide by certain quality controls, that the defendants failed to adhere to and interfered with these quality controls in several ways, and that this interference harmed Skullcandy.
- Skullcandy sufficiently pleaded its claim for trademark dilution, noting that the claim does not require a showing of a likelihood of confusion.
“The Court’s ruling is significant for brands grappling with the threats posed by anonymous online sellers. The decision demonstrates that the material difference and quality control exceptions to the first sale doctrine apply to online marketplace sales,” said Daren Garcia, a Vorys eControl partner and the attorney who argued the case before the Utah court.
About Vorys eControl
Vorys eControl was founded on this vision: to provide effective, efficient and legally compliant solutions that allow companies to protect and grow their brand value by controlling sales in the age of eCommerce. We have represented more than 300 brands, including several of the world’s largest companies. We regularly speak across the country educating companies and service providers regarding innovative solutions to the challenges brands face in today’s market.
We work with companies to identify and overcome issues relating to unauthorized sales, erosion of brand equity, pricing policies, product diversion and quality control. We help companies achieve their goals with an array of services from consultations and strategy development to preparing and implementing foundational policies and conducting enforcement. Vorys eControl’s full scope of services allows us to provide a truly comprehensive approach that delivers unique business value. Learn more at https://www.vorysecontrol.com.
About Skullcandy, Inc.
Founded at the center of music and board sports, Skullcandy is the original lifestyle audio brand. The company lives by the mantra: “We don’t want you to just listen to music. We want you to feel it.” Skullcandy drives innovation in audio experiences from groundbreaking technology in its headphones to once in a lifetime music events featuring emerging artists that inspire and move its culture forward. Based in Park City, Utah, Skullcandy designs, markets, and distributes audio products globally with international offices in Tokyo, Zurich, London, Shenzhen and Vancouver, as well as through partners in some of the most important cultural hubs in the world. The company’s website can be found at https://www.skullcandy.com
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