Drop-shipper’s “in stock” and “trust us over others” claims not shown to be deceptive

Krikor v. Sports Mall, LLC, 2023 WL 2372068, No. CV
22-5600-DMG (MRWx) (C.D. Cal. Jan. 24, 2023)

decision here
—really interesting attack on internet arbitrage; defendant
copied Krikor’s eBay memorabilia photos and listed the memorabilia on its own
site with a markup; anyone who bought from defendant would actually have
defendant buy from Krikor and drop-shipped to the purchaser. Both copyright and
false advertising claims (based on Sports Mall’s disparagement of eBay sellers
as unreliable) survived a motion to dismiss, but the false advertising claim can’t
make it past summary judgment, while Krikor received partial summary judgment
on the copyright claim.

Sports Mall advertises items as “in stock” when either (1)
it has an item available in its own inventory or (2) the item is in the
inventory of a third-party source from which Sports Mall can purchase and
either ship or have the item “drop-shipped” to fill an order. “Sports Mall
claims that whenever it purchases items from other, third-party vendors of
sports memorabilia, it requires certificates of authenticity or has items
authenticated by third party service providers.”

Its website FAQ includes: “Why can I, when searching, find
the same item for a lower price on eBay?” and the answer states:

You might find the same item or one
very similar for various reasons. Most of our leading competitors buy their
collectibles in bulk and resell them on their site. SportsCollectibles.com
deals directly with the athletes at signings along with their agents and our
highly reputable vendors, therefore our products are 100% authentic. We would
never sacrifice the quality or authenticity of your collectible for a lower
price. Anyone can sell their items on eBay, so unless you personally know the
vendor you should be cautious when purchasing.

So too “How do I know that what I am purchasing is

SC does not purchase autographed
sports memorabilia from private collectors. We do this for your protection. We
do not take a chance in purchasing from individuals that we do not know as we
want to be able to guarantee our products 110%. All our products come direct
from a private session with the athlete in which a reputable company (such as
Steiner, Upper Deck, APE, Real Deal, etc.) was present…. We will not purchase
any of these items as we only deal direct [sic] with the authenticator.

The court grouped the UCL/Lanham Act claims together.

“In Stock”: This wasn’t literally false, but it could be
misleading. The dictionary definitions didn’t show that “in stock” always means
that the goods are in the possession of a retailer, rather than merely
available “for immediate sale” or “available for sale or use.” There was a
genuine dispute of material fact about misleadingness. Even if drop-shipping is
a common industry practice used by retail giants such as Amazon, “that does not
mean that SportsCollectible.com’s use of ‘in stock’ does not tend to mislead
consumers to believe it literally possesses the item, especially given its
assurances regarding its process for ensuring authenticity.”

“Why can I, when searching, find the same item for a lower
price on eBay?”: This too was misleading in context, because it “implies that
the eBay sellers of ‘the same’ merchandise are inauthentic, when in fact, those
are the very sellers from which Sports Mall sources at least some of its ‘100%
authentic’ products.”

“All our products come direct from a private session with
the athlete in which a reputable company… was present. We will not purchase
any of these items as we only deal direct [sic] with the authenticator”: Not
literally false. The statement didn’t mean that Sports Mall itself is present
at these signings, but rather that it verifies the certificates of authenticity
of its products. And the record was “replete” with evidence that Sports Mall
makes all reasonable efforts to ensure that its products are authenticated in
the manner described in this statement. There was no evidence that the
statements led any consumers to believe that Sports Mall or its agents
personally knows all their vendors and/or has a company representative present
at all sessions with the athletes.

However, in the context of the website, the claim that “we
only deal direct [sic] with the authenticator” could plausibly mislead a
consumer to believe that Sports Mall never sells items obtained by third-party
sellers, which is untrue. Nor was it clear whether Sports Mall was
distinguishing between products it directly purchases and holds in its own
inventory versus products it advertises and sells through other vendors.

Deception: Here’s where the claim failed, because there was
only evidence of a single person—a family friend—who may have been deceived by
Sports Mall’s advertising, and even that one person’s testimony fell short of
supporting that claim. He merely stated that he “couldn’t understand how the
exact same item could be in two different places” and “I did not feel right
about the decision” to buy from SportsCollectibles.com, and that he “just
wasn’t sure of [the item’s] authenticity.” This wasn’t enough to show that a substantial
number of reasonable consumers were deceived.

Unsurprisingly, the copyright claims fared better. The
photos of the items were original: Krikor submitted a declaration describing
his intentional choices behind the lighting, composition, and framing of the
photographs. Nor was the use of the photos fair use. Sports Mall’s use of the
photographs was not “transformative,” but merely “exact copying from
Plaintiff’s store to Defendant’s store.” The photos were created to advertise,
not as artistic expression, and Krikor didn’t lose his right of first
publication, so factor two favored neither party (probably truer to say it
favored defendant but was of essentially no weight). They were used in their
entirety. And the photos “serve little use outside of the marketing” of the
memorabilia. Krikor licensed the photos to co-plaintiff Kevorkian for $100. “The
market for the photos may be small, but Sports Mall is Plaintiffs’ direct
competitor, and its use of the photos helps it make a profit. The photos help
Plaintiffs sell the depicted merchandise and it follows that any potential
buyer might be less likely to buy the jerseys directly from Kevorkian’s eBay
store if the photos were copied everywhere.”

Unclean hands: Sports Mall alleged that the plaintiffs “created
and registered the copyrights in the two photos at issue and put them on
[Kevorkian’s] second eBay store (which was never mentioned to Sports Mall),
intending only to trick Sports Mall into copying the photos in order sue Sports
Mall.” “Though slim, triable questions of fact remain as to whether this
defense bars Krikor’s infringement claim.”

There were also triable issues on willfulness. It was
uncontroverted that Sports Mall uses an algorithmic “crawler” to locate
listings for its site, but it was unclear from the record how that “crawler”
works, and how much Sports Mall monitors its listings and manages its “block

The parties even disputed whether Sports Mall took down the
allegedly unlawful photographs referenced in a September 2020 demand letter, and
about whether Sports Mall was aware or should have been aware of Kevorkian’s
additional eBay stores and blocked its “crawler” from those sites as well.

from Blogger http://tushnet.blogspot.com/2023/03/drop-shippers-in-stock-and-trust-us.html

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