Small Sellers Are Getting Swept Up as Brands 'Weaponize' the Legal System

An eBay seller is having panic attacks… A prominent legal expert is shocked and outraged… Seller online marketplace accounts are being shut down…

Law firms are increasingly using a tactic called “Schedule A Defendant” lawsuits to target online merchants on behalf of their clients in the name of trademark enforcement, and it’s having a devastating effect. A single lawsuit targeting hundreds of sellers at a time for selling a branded product can leave each seller owing many tens of thousands of dollars through default judgments that obliterate their businesses.

Law professor Eric Goldman wrote about what he dubbed SAD Schemes (“Schedule A Defendants” schemes) after being retained to opine in one such case in 2021. It led him to look at such cases holistically, and he told us he was shocked by what he saw.

“I saw so many places where the procedures and outcomes just didn’t comport with the law as I understood it,” he told EcommerceBytes in a telephone interview on July 14. “And I couldn’t understand how that kept replicating. It wasn’t like a one-off mistake. It was a systematic sequence of errors that the courts were producing. And when I give the presentation on my paper, the audiences are shocked.”

Most sellers are familiar with programs like eBay’s VeRO, set up to efficiently handle takedown notices by brands who report specific listings as being in violation of their intellectual property. The SAD Schemes bypass such marketplace programs – instead, the brands (“rightsowners”) sue scores of sellers in a single complaint in federal court, accusing them of trademark infringement and counterfeiting.

In an article in April, Bloomberg Law reported that the US District Court for the Northern District of Illinois had received 817 Schedule A filings in 2022, an increase of over 900% from 2013, when the first Schedule A cases were filed.

The SAD lawsuits seek fast injunctions against defendants who don’t…

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