First off, this is not a request for legal advice.
There exists a tort in many jurisdictions in the US (and I would guess other Common Law countries) called “reverse passing off”, which basically consists of buying a product, replacing the labels with your own, and selling it. The “victim” in this case is the manufacturer whose stuff you are selling under your own name.
We’re assuming here that the stuff that one is reselling was legally acquired and could be legally resold (not stolen, not contraband etc.)
Why is this so bad that there is a cause of action for it? My understanding is that “badge engineering” is fairly common for manufactured products nowadays.
Now, I could see that one could argue that:
Selling manufactured stuff you bought on the free market under your own name is deceitful in that it makes people believe that you have your own factory or manufacturing capability. (but doesn’t Apple famously outsource all of its manufacturing nowadays?).
If the item you are reselling is famous, then it could deceive people into thinking that you have a “special” relationship with the OEM manufacturer. (e.g. if bought a truckload of iPods through some legal means, filed off all the “Apple” markings and relabelled them as “The robert_andrews Ultimate Music Experience Device”, but the thing still obviously looks like an Apple product).
Basically, you’re stealing the other company’s reputation. Say you’ve been going to Costco, buying Grey Poupon, relabelling it as Robert Andrew’s Gourmet Mustard and selling it.
First of all, there are going to be people who love RAG Mustard, but when they get to a store will pass up real Grey Poupon because they don’t know that’s the same thing. So that hurts Grey Poupon’s sales.
And then, you might now put out Robert Andrew’s Gourmet Mayonaise that you make yourself. People will naturally assume that RAG Mayonaise is made to the same high quality as RAG Mustard. So you’re benefiting from Grey Poupon’s hard work to make a high quality product.
In the end, you’re taking the benefit of Grey Poupon’s work while they’re not getting it. Sounds like a reason to make it a tort to me.
Agreed that it’s very much a matter of reaping where you haven’t sown, and leads up to a point where you could become unjustly enriched.
The other thing is that while you are taking the credit for their hard work, if something should go wrong with one of these products, you have no wherewithal to make good any defective merchandise, and the public then has to be protected.
I’m confused. What if it were not obvious that the re-labeled item is the same? If I took the label off Grey Poupon and put on my own, how is the consumer confused?
If it is indeed not obvious, the consumer is confused into thinking your product is not Grey Poupon when in fact it actually is Grey Poupon. Then, as Quercus pointed out, “…when they get to a store will pass up real Grey Poupon because they don’t know that’s the same thing. So that hurts Grey Poupon’s sales.”
What happens if you mislabel the product and somebody gets hurt because they misused it? Clearly they would sue you, but it isn’t that far a reach to imagine that they would also sue the actual manufacturer.
If this were the case, then your actions would create a lawsuit risk for the original manufacturer.
I’m confused. How is this any different than MegaCorp Clothing Label Inc having Nameless SlaveWorker Co make a 1000 shirts for them. Then they apply a label, resell, and profit. This happens every day.
What’s the distinction?
Substitute RAG Mustard for MegaCorp Clothing Label Inc and Grey Poupon for Nameless SlaveWorker Co.
The distinction is that MegaCorp contracted with Nameless Slaveworker to have this work done for them. Both sides agreed to the terms. This didn’t happen with Grey Poupon and RAG Mustard. Grey Poupon never agreed to the deal, and they’re not getting compensated beyond selling their product at retail.
I’m sure Nameless Slaveworker isn’t getting compensated beyond the price of the shirts they make for MegaCorp. But you bring up what’s probably the main factor: informed activity.
If I contracted Grey Poupon to make 100,000,000 jars of mustard for me in order to resell under my name, would they really balk? If I’m a rotten reseller then I eat the jars and GP still gets their payoff.
Or is it the fact the I’m selling Grey Poupon in all but name. But who’s business is it where my goods came from? If you were to discover that your Gap Jeans were made by Slobbo Knitters Inc and resold, are you honestly going to track down Slobbo Knitters and buy directly?
I doubt it.
If RAG mustard is really Grey Poupon, why does it matter if I bought RAG or GPs. GP is manufacturing both and profitting either way.
It matters because GP spent untold dollars, man-hours, and creative genius not only making their mustard but also establishing their brand name and reputation. They have a legal right to whatever patents, trademarks, and copyrights apply, and a moral right to be acknowledged for making a unique product. They may stand to profit far more in the long run from this than in the short run from RAG buying their stuff while at the same time destroying any public perception that GP alone can cut the mustard (sorry, couldn’t resist) when it comes to concocting tasty condiments.
There might also be a design infringement angle involved. I could buy a bunch of Coke in glass bottles and slap Daithi-Cola stickers on them. I would then have the pants sued off me just for using that highly distinctive container, never mind the contents. Grey Poupon’s containers are pretty distinctive as well; they may have a patent on the shape.
This, and they have a right to decide how to sell the product they have created. If there is a market for Grey Poupon with a different label, at a higher price, it’s a market GP should be able to exploit themselves. RAG mustard, due to a higher price, would be filling the same niche that a hypothetical “Grey Poupon Super Ultra Premium” might fill.
So again, if GP agreed to sell to RAG with the understanding that RAG would resell, there’s no issue. The crux of this OP is the act being a tort because GP is unaware and never agreed to that sort of relationship.
Does the law change if RAG “adds value” to the formula? Do they still have to let GP know their end goal of selling upscale mustard?
GP doesn’t get any consideration from the deal. It doesn’t benefit them at all. Until that is addressed how can it be otherwise?
I believe (IANAL) the laws change if the item is transformed enough so that it is no longer the original product in an identifiable manner. But that’s a pretty hazy memory.
IP is a pretty nebulous term, but it’s usually meant to include patent, trademark, and copyright. You’re not stealing a patent, because you’re not making anything, just reselling. You’re not stealing a trademark. In fact, it’s the opposite; you’re denying a trademark. And you’re not stealing copyright, obviously, because you didn’t copy anything.
The closest this comes to is some kind of fraud, or false advertising, not “theft”.
In Intellectual Property Law in Law School, we took the case of H.J. Heinz Company of Canada Ltd. v. Edan Foods Sales Inc. (1991), 35 C.P.R. (3d) 213 (Federal Court of Canada) where Heinz sued to keep Heinz Ketchup from being imported into Canada.
Well actually, Heinz of Canada sued to keep American Heinz Ketchup from being imported into Canada by Edan. Other than the differences in the labels (the Canadian one being bilingual) there was little difference between the two products when placed side by side.
However, there was a great difference in taste – Canadian Heinz is a little spicier, and American Heinz is more tomatoey. Heinz wanted to protect the public from buying what it may have found to be an inferior-tasting product without realizing that its product differs in taste from one side of the border to the other, or from feeling that they had gotten a defective or spoiled shipment. Naturally, if the public felt that way, the ramifications in the sales of Canadian Heinz Ketchup could have been impacted in Canada.
Heinz Canada won at all levels of Court, and Edan was estopped from importing American Heinz Ketchup into Canada and reselling it.