In the wake of reports that the trademarks of brands ranging from fashion industry stalwarts like Louis Vuitton and Chanel, and buzzy streetwear brands like Supreme and Off-White to those of industrial and safety supply conglomerate 3M were making their way on to counterfeit masks in light of the rising demand for face coverings as COVID-19 continues to spread, 3M has filed a strongly-worded lawsuit to cut down on the “false and deceptive price-gouging scheme on unwitting consumers, including agencies of the government” that is being perpetrated by a New Jersey-based manufacturer.
According to the complaint that Minnesota-based 3M filed on Friday in a New York federal court, “The demand for 3M-branded respirators has grown exponentially in response to the [COVID-19] pandemic, and 3M has been committed to seeking to meet this demand while keeping its respirators priced fairly.” To be exact, 3M says that it “has not increased the prices that it charges for 3M respirators as a result of the COVID-19 outbreak.”
Despite 3M’s efforts to increase the supply of its coveted marks, including “doubling its global output rate to nearly 100 million respirators per month, and [aiming to] produce around 50 million respirators per month in the U.S. by June 2020,” demand for the masks abounds, and “wrongdoers [are] seeking to exploit the current public health emergency and prey on innocent parties through a variety of scams involving 3M N95 respirators and other products in high demand.” 3M claims that such “scams include unlawful price-gouging, fake offers, counterfeiting, and other unfair and deceptive practices—all of which undercut the integrity of the marketplace and constitute an ongoing threat to public health and safety.”
St. Paul-headquartered 3M alleges that Performance Supply, LLC is a “prime example of this unlawful behavior,” asserting that “on or about March 30, 2020, [the defendant] sent a Formal Quote to New York City’s Office of Citywide Procurement, offering to sell millions of 3M-brand N95 respirator masks at a grossly inflated aggregate price of approximately $45 million” even though the company is “not an authorized distributor of any of [3M’s] products and has no rights to use [3M’s] famous 3M trademarks.”
In furtherance of its quest “to confuse and deceive New York City officials into believing that [it] was an authorized distributor of [3M’s] products,” 3M claims that Manalapan, New Jersey-based Performance Supply “reproduced the famous 3M trademarks throughout the Formal Quote, and attached to it Technical Specification Sheets that prominently feature [3M’s] famous 3M marks,” all while offering to sell the masks to city officials at prices that were “500 percent to 600 percent above 3M’s list price.”
“Not only does such price-gouging further strain the limited resources available to combat COVID-19,” 3M argues, this “exploitative pricing behavior … justifiably has caused public outrage, which threatens imminent and irreparable harm to 3M’s brand.”
Given the “level of specificity in the [fraudulent] Formal Quote” that Performance Supply sent to New York City’s Procurement Office, it “actually misled and deceived experienced buyers in the Procurement Office … into believing that [Performance Supply] was an authorized ‘vendor’ of approximately $45 million-worth of 3M-brand N95 respirators.”
With that in mind, and given 3M’s assertion that it “does not – and will not – tolerate individuals or entities deceptively trading off the fame and goodwill of the 3M brand and marks for personal gain,” and its vow to “protect governmental actors and consumers from confusion and mistake, to reduce the amount of time and energy that government officials are forced to waste interacting with such schemes, as well as to forestall any further diminution to the 3M brand and marks’ reputation, fame, and goodwill,” 3M has filed suit on the basis of trademark infringement and dilution, unfair competition, false association, false endorsement, and false designation of origin, among other claims.
In connection with the suit, which is 3M’s first COVID-19-specific filing, the company is seeking injunctive relief to bar Performance Supply from infringing its “3M” trademarks any further and an array of monetary damages, which 3M says “will be donated … to a COVID-19 charitable organization(s)/cause(s) of [its] choosing.”
Reflecting on 3M’s claims, Mark McKenna, the acting Director of Notre Dame Technology Ethics Center and Director of Notre Dame Law School’s Program on Intellectual Property & Technology Law, stated that trademark rights holders “do not get to control the re-sale of genuine goods,” as established by the First Sale Doctrine, the trademark (and copyright) tenet that cuts off a trademark holder’s right to police to use of its mark on a product that it has released into the mark (meaning its right to control the distribution of the good via trademark claims is exhausted). However, “They do get to prevent others from falsely representing themselves as authorized re-sellers.”
Having said that, McKenna asserts that the fact that Performance Supply is “price gauging is 3M’s motivation [for filing suit], but it is not relevant to its claims.”
In a statement on Friday, as cited by Law360, 3M said it will take further legal action where necessary: “This lawsuit is only one of the many legal tools 3M is using to protect the public. 3M is also making referrals to law enforcement authorities, taking down websites with fraudulent or counterfeit product offerings, removing false or deceptive social media pages, and sending cease and desist letters as a first step prior to taking further legal action.”
UPDATED (May 5, 2020): In an order for a preliminary injunction, U.S. District Judge Loretta Preska sided with 3M and ordered that Performance Supply cease its use of 3M’s trademarks “or any other word, name, symbol, device, or combination thereof that is confusingly similar to the 3M marks,” and is enjoined from posing as an authorized 3M distributor, stating that the defendant “is not, and has never been, a licensed or authorized distributor, agent, or representative of 3M-brand N95 respirators.”
In the 5-page order, Judge Preska stated that Performance Supply “is trading off the widespread commercial recognition and goodwill of 3M in connection with offering to sell products that 3M is widely known for manufacturing and selling, namely, N95 respirators. Accordingly, it is no surprise that [Performance Supply] confused New York City procurement officials into believing that Defendant was an authorized vendor of 3M-brand N95 respirators.”
The judge continued on, specifically noting the “inflated prices” of the masks that the defendant was offerings and the attempts by such “third parties seeking to exploit the increased demand for 3M-brand N95 respirators,” and saying that “when lives are at stake and time is, of the essence, as is clearly the case in this crisis, the public interest demands accountability.”
* The case is 3M Company v. Performance Supply, LLC, 1:20-cv-02949 (SDNY).