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The real deal: A Milo & Gabby dinosaur pillowcase, as pictured on the company's site.
The real deal: A Milo & Gabby dinosaur pillowcase, as pictured on the company’s site.

A federal judge in Seattle ruled in favor of Amazon this week in a dispute over counterfeit goods sold by a third-party retailer on the e-commerce giant’s site, but said he’s “troubled” by the outcome and called the underlying law an issue for Congress to address.

The court “is troubled by its conclusion and the impact it may have on the many small retail sellers in circumstances similar to the Plaintiffs,” wrote U.S. District Court Judge Ricardo Martinez, ruling in favor of Amazon after a jury sided with the tech giant on the key questions in the case. “There is no doubt that we now live in a time where the law lags behind technology. This case illustrates that point.”

The potentially landmark case was filed by Seattle-based novelty pillowcase maker Milo & Gabby in 2013. The boutique business said a Chinese manufacturer copied their designs, stole their product photos and began selling indistinguishable pillowcases on Amazon. The counterfeits were even stored in Amazon warehouses as part of the Fulfillment by Amazon program.

Milo & Gabby argued that Amazon was liable for the infringement because it made an “offer to sell” the counterfeit goods, even if it wasn’t the one who created the product listings.

But Amazon countered that its fulfillment, payment processing and product listing services don’t mean that Amazon is offering a product for sale. Instead, the company argued, those are services the company provides to third-party retailers, which are the ones making the offer of sale.

According to Martinez’s decision, the courts have never determined who made an offer of sale in a situation like this. But a jury determined last week that Amazon wasn’t the one who had made the offer, and so Martinez could only conclude that Amazon was not liable for patent, copyright or trademark infringement.

“Amazon enables and fosters a market place reaching millions of customers, where anyone can sell anything, while at the same time taking little responsibility for ‘offering to sell’ or ‘selling’ the products,” Martinez wrote. “Indeed, under the current case law, Amazon has been able to disavow itself from any responsibility for ‘offering to sell’ the products at all.”

He called it “a subject which must be addressed to Congress and not the courts.”

The judge’s callout to lawmakers underscores the complexity of the issue at hand and suggests it’s not something that will be going away anytime soon. Amazon may have won this round of the legal battle, but appeals are looming as the e-commerce giant gears up for a fight that will affect the entire online marketplace industry.

A lawyer for Milo & Gabby says they plan to appeal the decision, adding this isn’t about going to “war” with Amazon.

“However, it is Amazon’s website and Amazon’s policies that make it possible for unknown knock-off artists to blatantly rip-off Milo & Gabby not once but an admitted fourteen times,” Philip Mann of the Mann Law Group wrote in an email to GeekWire. “Do we simply tell Milo & Gabby, ‘Tough?’ Or do we ask Amazon to take better care to keep this from happening in the first place? That remains the question, which now goes to the appellate court.”

An Amazon spokesperson declined to comment.

Milo & Gabby opinion

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