Automated Retail: Stores without Staff, but Not Without Issues

For many, air travel is required for business while for others it is used for pleasure. As millions of people are hustling through airports to make their flights, some may have taken a moment to stop to shop at one of the many staffless stores that are opening in airports. These staffless stores, which are often referred to as automated retail, sell goods that range from electronics such as headphones and chargers to cosmetics and clothing.

The staffless store phenomena is not limited to just airports as there is an increasing trend towards using these retail outlets in shopping centers throughout the country. We wrote on this new trend back in August of 2014 when the focus was on brick and mortar stores without staff, such as fitness centers and mattress stores. The 2016 version of staffless stores are a hybrid of the traditional kiosks/carts and a vending machine. They are typically similar in size to a vending machine but are situated in locations comparable to that of a traditional kiosk or inside of department stores. While branded in a manner similar to a kiosk, these automated outlets allow the retailer to avoid the cost of staffing the location.

The staffless store offers landlords and tenants a number of positive opportunities. For example, by offering tenants a lower cost way of penetrating a new market and giving landlords a way to increase revenues through the use of spaces that cannot be utilized effectively with traditional kiosks or carts. It can also introduce new retailers that otherwise would not be willing to incur the operating expense of having employees. Establishing the retailer in the Center initially through the use of an automated retail operation could also lead to later expansion opportunities with that retailer.

A landlord and tenant will often document the relationship for a staffless store by using a traditional kiosk or specialty lease form. However, there are a number of items that the parties should review when documenting the relationship. Some of those items include:

  • Many kiosk leases include operational and staff requirements so any language requiring a certain number of staff at the location or staff attire needs to be addressed.

  • Kiosk or cart leases often require that the kiosk/cart be adequately stocked with merchandise. While this requirement may still be applicable, the retailer needs to confirm that it has an adequate inventory monitoring process or software to ensure that the automated retail machine does not run out of product.

  • The exchange/refund policy may need to be modified to address the fact that retailer personnel will not be present to make any exchange of product.

  • The use of Center gift cards to pay for goods should be addressed in the Lease and by the automated retailer.

  • Confirming that the insurance requirements for the tenant are appropriate given that there will not be staff located at the leased premises. The indemnification provisions should also be carefully reviewed for accuracy given the facts of a given situation.

©2016 von Briesen & Roper, s.c

Amazon Wins Ruling on Results for Searches on Brands It Doesn’t Sell

On October 21, 2015, the Ninth Circuit ruled that online retailer Amazon does not violate the Lanham Act when, in response to a search for a brand it doesn’t sell, it returns a results page that fails to disclose that fact and simply offers competing products sold under different brands. The decision in MultiTime Machine, Inc. v. Amazon.com, Inc. weakens the “initial interest confusion” doctrine in the Ninth Circuit and will likely be perceived as a significant victory for online retailers.

Plaintiff MultiTime Machine (MTM) sells an expensive military-style watch known as the “MTM Special Ops,” but doesn’t sell it through Amazon. When an Amazon customer types “mtm special ops” into the Amazon search box, the result is a list of other brands of military-style watches that Amazon sells. Meanwhile, “MTM Special Ops” remains visible within the search box and also in smaller type at the top of the page. Nothing on the page indicates that Amazon does not sell MTM products. MTM sued Amazon for trademark infringement, claiming that Amazon’s use of its trademark in this way created a likelihood of confusion.

The district court dismissed the case on summary judgment. MTM appealed. In a 2-1 decision issued July 6, 2015, the Ninth Circuit remanded the case, holding that there were issues of fact as to consumer confusion that precluded summary judgment. MTM then petitioned for a rehearing en banc.

On Wednesday, while that petition was pending, the same panel reversed itself and held in a 2-1 decision that “no rational trier of fact could find that a reasonably prudent consumer accustomed to shopping online would likely be confused by the Amazon search results.” Summary judgment in favor of Amazon was affirmed.

Judge Silverman (the dissenter in the July opinion, now writing for the majority) wrote that Amazon is doing no more that “responding to a customer’s inquiry about a brand it does not carry by … stating clearly (and showing pictures of) what brands it does carry.” In the majority’s view, this is “not unlike when someone walks into a diner, asks for a Coke, and is told ‘No Coke, Pepsi’.”

The Court held that the Ninth Circuit’s traditional eight-factor Sleekcraft test for assessing likelihood of confusion is not appropriate for this case. Sleekcraft is designed for cases analyzing similarity of the marks of competing brands. Here, said the Court, there is no issue as to the other marks involved; the only issue is Amazon’s use of MTM’s mark in displaying search results. In cases involving trademarks in the Internet search context, the more appropriate test is “(1) Who is the relevant reasonable consumer; and (2) What would he reasonably believe based on what he saw on the screen?”

Adopting the standard set forth in Toyota Motor Sales, U.S.A. Inc. v. Tabari, 610 F.3d 1171 (9th Cir. 2010), the Court held that the relevant consumer here is a “reasonably prudent consumer shopping online … Unreasonable, imprudent and inexperienced web-shoppers are not relevant.” The Court also noted that the watches at issue are relatively expensive and that consumers are therefore likely to be even more vigilant than usual.

As for what is seen on the screen, the Court focused on the “clear labeling” of all of the competing products returned in the search. MTM argued that “initial interest confusion” might occur because the phrase “mtm special ops” appears three times at the top of the search results page. It also argued that Amazon should change its results page to explain to consumers that it does not offer MTM watches. The Court brushed off both contentions. “The search results page makes clear to anyone who can read English that Amazon carries only the brands that are clearly and explicitly listed on the web page.”

As a result, in the Court’s view, no jury trial is necessary because there are no material issues of disputed fact. The contents of the web page showing “clear labeling,” and the expensive price of the watches, is undisputed. The Court needs no more to conclude that “no reasonably prudent consumer accustomed to shopping online” could be deceived, even initially.

Judge Bea, who had written the majority opinion in the July decision, wrote a sharp dissent. In his view, a jury is entitled to decide whether shoppers would believe that there is a relationship between MTM and the products listed in the Amazon search results. MTM had argued that this could arise from a belief that MTM had acquired those brands, or because they are other brands from the same parent company (much as Honda and Acura automobiles come from the same company). Determining whether or not MTM is correct, said Judge Bea, is a question for a jury, not appellate judges. This is especially true in a case involving brands whose relationships to each other may not be so obvious to consumers – unlike the relationship between Coke and Pepsi.

Judge Bea claims that, by “usurping the jury function,” the majority effectively overrules the “initial interest confusion” basis for infringement. In his view, the question of whether the defendant’s labeling is clear enough to prevent customers from initially believing that the products are connected with those of plaintiff is a fact-intensive inquiry, and prior Ninth Circuit cases have not applied the doctrine as a matter of law, as the Court does here.

Apart from the technical legal issues, the two opinions reflect differing views of how the public interacts with online commerce. The majority appears to believe that online buying is now so common that consumers are conditioned to understand that entering a trademark as a search term will not necessarily return results pointing only to that brand. Its apparent desire to create a bright-line rule on “clear labeling” may make it easier for e-retailers to move to dismiss, without a trial, infringement claims from brand owners concerned about use of their marks to search for competing products. The dissent is more skeptical about consumer sophistication; its approach would create a greater burden on online retailers to defend against infringement claims.

It is unclear whether the majority intends its holding to be applied only in cases where, as here, the goods are relatively expensive and the brands are not well known. Given this uncertainty, the fact that it was a split decision, the prior petition for rehearing en banc, and the participation by multiple amici curiae, it is possible that there will be an en banc rehearing in this case. If the decision stands, however, it may diminish the doctrine of “initial interest confusion” in the Ninth Circuit and allow a freer hand to online retailers in using trademarks to generate searches for broad classes of competitive products.

© 2015 Foley & Lardner LLP

Join RILA and the Retail Litigation Center – 2015 Retail Law Conference – October 28-30, San Antonio

The Retail Law Conference, co-hosted by RILA and the Retail Litigation Center, is the only conference designed specifically for in-house legal counsel from all retail channels.

Through educational sessions and retail-only roundtable conversations you will have unparalleled opportunities to network with leading corporate lawyers in the retail industry and gain insight into the most pressing legal issues affecting the retail community, such as:

  • Data Breach and Privacy
  • Employment Litigation
  • Labor Law Developments
  • Compliance Programs
  • and more!

Participate in general sessions that will educate and motivate your legal team, breakout sessions that dive deeper into the issues that matter the most to you, and unique retail-only conversations where you and other legal counsel can talk openly about the challenges you face every day.

Also, you can earn up to 12.5 Continuing Legal Education (CLE) credits by attending, including one for ethics.

Don’t miss this opportunity to learn from and problem-solve with top retail corporate legal executives and their teams. Plus, register by August 8 for the Advance Rate and receive $200 off of your registration fee!

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The Retail Law Conference is brought to you by:

Days of Tax-Free Internet Sales May Soon Be Over With Introduction of Remote Transactions Parity Act

The imposition of sales tax on internet transactions is a continuing topic of conversation on Capitol Hill that has recently gained even more momentum. In June, Rep. Jason Chaffetz and Rep. Steve Womack introduced the Remote Transaction Parity Act (RTPA), a bill which would require online retailers to collect sales taxes from buyers in remote states even if the retailer does not have a physical location in such state. The passing of the RTPA would be a marked shift from current law, which requires internet retailers to pay sales tax only in those states where they have a physical location.

The RTPA is the most recent iteration of bills proposing to broaden the taxing authority of states by allowing them to capture additional sales tax revenue from internet retailers and closing what some have called a tax loophole that for years has allowed internet retailers a great pricing advantage over brick-and-mortar retailers who are forced to charge higher prices for identical merchandise to cover the sales taxes imposed on them. The Marketplace Fairness Act (MFA), which was passed by the Senate but not the House of Representatives in 2013 was also reintroduced earlier this year, showing the importance of this issue to some lawmakers.

While some claim the RTPA is intended to “level the playing field” among internet retailers and brick-and-mortar businesses, the lines of support are not so clear. In today’s marketplace many brick-and-mortar retailers also have some (if not a significant) internet sales presence, which means this Act will not just impact the Amazon’s of the world. Under the RTPA, retailers of all sizes that sell products online face potential new taxes and, at the very least, will be required to implement stringent sales tracking systems. Considering the expected costs of imposing these systems, the RTPA may actually create a competitive advantage for the larger online retailers as they would have the resources to implement these systems while continuing to provide products at a lower cost, while smaller retailers may have to increase prices to cover the additional costs of this system. As such, it is extremely important that retailers understand how the proposed destination-based taxation system will impact their bottom line and to become involved in the discussion prior to the final legislation.

The RTPA includes several notable differences from the MFA that may make this slightly more palatable than its predecessor. These differences include a larger initial small seller exception that phases back over three years and is eliminated in year four rather than the set smaller exception amount included in the MFA, increased protections for sellers using certified software providers, and additional audit protections. However, the basic premise remains the same. Under both Acts, states would be gaining greater authority to look inside a retailer’s business and impose tax based on the location of its customers, not just the location of the retailer itself. This shift in tax law would have a significant impact on the way retailers do business and is something that should be watched carefully in the coming months.

©2015 von Briesen & Roper, s.c

Attend the Retail Law Conference October 28-30th in San Antonio, Texas – Early Bird Rate ends August 14th!

The Retail Law Conference, co-hosted by RILA and the Retail Litigation Center, is the only conference designed specifically for in-house legal counsel from all retail channels.

Through educational sessions and retail-only roundtable conversations you will have unparalleled opportunities to network with leading corporate lawyers in the retail industry and gain insight into the most pressing legal issues affecting the retail community, such as:

  • Data Breach and Privacy
  • Employment Litigation
  • Labor Law Developments
  • Compliance Programs
  • and more!

Participate in general sessions that will educate and motivate your legal team, breakout sessions that dive deeper into the issues that matter the most to you, and unique retail-only conversations where you and other legal counsel can talk openly about the challenges you face every day.

Also, you can earn up to 12.5 Continuing Legal Education (CLE) credits by attending, including one for ethics.

Don’t miss this opportunity to learn from and problem-solve with top retail corporate legal executives and their teams. Plus, register by August 8 for the Advance Rate and receive $200 off of your registration fee!

regbutton_rlaw_200x91.png


The Retail Law Conference is brought to you by:

Canada to Implement Electronic Travel Authorization System

Starting in March 2016, Canada will require individuals who may visit Canada without a visa to first obtain approval from its electronic travel authorization system (eTA). Visitors to the United States will recognize eTA as similar to the ESTA (Electronic System for Travel Authorization), which is used by the United States to pre-screen its visa-exempt visitors. Applicants will be able to use the eTA system starting Aug. 1, 2015.

The eTA will only be required for visa-exempt individuals seeking to travel to Canada by air for a short-term visit. Applicants must pay a CAD $7.00 processing fee and the resulting electronic travel authorization will be valid for five years or until the applicant’s passport expires, the eTA is cancelled, or a new eTA is issued. The eTA will include the applicant’s name, date, place of birth, gender, address, nationality, and passport information.

Notably, U.S. citizens are exempt from the eTA requirement, as are individuals who already have a Canadian visitor visa in their passport.

Authored by Rebecca Schechter of Greenberg Traurig

©2015 Greenberg Traurig, LLP. All rights reserved.

Only two more weeks until the Retail Law 2014 Conference – October 15-17, 2014, Charlotte, NC

The National Law Review is pleased to bring you information about the upcoming Retail Law Conference:

Retail Law 2014: At the Intersection of Technology and Retail Law
Retail Law 2014: At the Intersection of Technology and Retail Law

Register Today!

When

October 15-17, 2014

Where

Charlotte, NC

The 2014 Retail Law Conference takes place October 15-17 in Charlotte, NC. This year’s program is stronger than ever with relevant, compelling and interactive sessions focused on the legal issues affecting retailers. In partnership with the Retail Litigation Center (RLC), RILA will host legal counsel from leaders in the retail industry for the fifth annual event.

This year’s Retail Law Conference will feature issues at the intersection of technology and law, how the two spaces interact and the impact that they have on retailers. Topics will likely include:

  • Anatomy of a Data Breach: Prevention & Response
  • Privacy: Understanding New Technologies & Data Collection
  • Advertising Practices: Enforcement & Social Media
  • ADA Implications for New Technologies
  • Legal Implications for Future Payment Technologies
  • Policies & Procedures of The “Omnichannel” Age
  • Patent Litigation “Heat Maps”
  • Union Organizing Campaigns
  • Wage & Hour Litigation
  • EEOC Enforcement
  • Foreign Corrupt Practices Act
  • Corporate Governance & Disclosure
  • Election 2014
  • Dueling Views of The U.S. Supreme Court
  • Legal Ethics

The Retail Law Conference is open to executives from retail and consumer goods product manufacturing companies. All others, such as law firms and service providres, must sponsor in order to attend, and can do so by contacting Tripp Taylor at tripp.taylor@rila.org.