This is a business story about authorized dealers of radar detectors that stripped the serial numbers off the detectors so that they could sell the detectors through back channels. The distributors were sued, and lost, for trademark infringement.
Beltronics made radar detectors and sold them to two authorized distributors. Beltronics' distribution agreement said that those two distributors were the only ones who could distribute the product. The two distributors stripped the serial numbers off the radar detectors and then sold them to other distributors. The authorized distributors stripped the serial number off because they didn't want Beltronics to know that it was the authorized distributors who were selling the radar detectors to other distributors. Beltronics found out and sued for trademark infringement. The authorized dealers defended by saying that Beltronics lost its rights when it sold the detectors to the authorized distributors, this defense is called the first sale doctrine. The court held that the first sale doctrine does not apply when the alleged infringer sells goods that are materially different than the goods sold by the trademark owner. The court found that stripping serial numbers off detectors makes the detectors materially different. The authorized distributors lost the trademark infringement suit.
So, if you're going to breach a distribution agreement with your supplier don't do it in a way that materially changes the goods that the supplier supplied you with; Or, you can do whatever you want and just budget for a trademark infringement lawsuit.
Beltronics made radar detectors and sold them to two authorized distributors. Beltronics' distribution agreement said that those two distributors were the only ones who could distribute the product. The two distributors stripped the serial numbers off the radar detectors and then sold them to other distributors. The authorized distributors stripped the serial number off because they didn't want Beltronics to know that it was the authorized distributors who were selling the radar detectors to other distributors. Beltronics found out and sued for trademark infringement. The authorized dealers defended by saying that Beltronics lost its rights when it sold the detectors to the authorized distributors, this defense is called the first sale doctrine. The court held that the first sale doctrine does not apply when the alleged infringer sells goods that are materially different than the goods sold by the trademark owner. The court found that stripping serial numbers off detectors makes the detectors materially different. The authorized distributors lost the trademark infringement suit.
So, if you're going to breach a distribution agreement with your supplier don't do it in a way that materially changes the goods that the supplier supplied you with; Or, you can do whatever you want and just budget for a trademark infringement lawsuit.
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