Amazon Seller Can't Pursue Trade Libel Claims in TM Dispute

By Tiffany Hu

Law360 (March 25, 2020, 5:08 PM EDT) -- An Amazon third-party seller who was booted from the platform for allegedly selling counterfeit network products can't bring trade libel claims against a Wi-Fi device maker after a California federal judge found that "even fraudulent, deliberately false" statements may be protected by state law.

In an order Tuesday, U.S. District Judge Josephine L. Staton granted Wi-Fi device maker TP-Link USA Corp.'s bid to throw out counterclaims brought by Brooklyn-based Careful Shopper LLC after it was sued by TP-Link in early 2019 for trademark infringement.

Careful Shopper had contended that TP-Link pursued a "maliciously and intentionally" false complaint with Amazon, even after the seller told the device maker that its products were authentic. The "scheming accusations" against Careful Shopper counts as libel, the seller said.

But Judge Staton was unmoved, finding that TP-Link's statements to Amazon were protected by litigation privilege under California state law, which covers certain communications that are relevant to the present case.

"Even fraudulent, deliberately false, or other types of tortious communication must be susceptible to coverage by the litigation privilege; if that were not true, the privilege would be unable to achieve its purpose of ensuring that fear of being subjected to derivative tort suits does not prevent open communication and the “utmost freedom of access to the courts” and other channels of redress," the judge wrote.

"Defendants cannot avoid the litigation privilege by alleging that TP-Link engaged in knowingly false, prelitigation communication," she concluded.

Judge Staton also struck down Careful Shopper's counterclaim for interference with the seller's business relationships and per se violation of the antitrust laws, though she gave Careful Shopper 21 days from the order to amend its antitrust claim.

Counsel for the parties did not immediately respond to requests for comment Wednesday.

The companies' dispute started in 2016, when Careful Shopper sued TP-Link in New York federal court over claims of libel per se and defamation. According to Careful Shopper, its "commercial and financial ruination" was brought by TP Link's false report against it though Amazon's internal process for adjudicating disputes with third-party sellers.

Careful Shopper had notified TP-Link that the products were authentic and bought directly from Amazon, but the device maker chose not to withdraw its complaint, leading to the seller's expulsion from the platform, it said.

In January 2019, TP-Link lodged its own lawsuit against Careful Shopper, claiming that it has been using its trademark to sell networking products since at least 2008. Careful Shopper began selling products beginning in 2016, it said.

TP-Link's lawsuit was put on hold pending the resolution of the device maker's bid to dismiss the New York case for a lack of personal jurisdiction, which the court granted in September 2019, according to court documents.

TP-Link is represented by Heather F. Auyang, Joe H. Tuffaha and Prashant Chennakesavan of LTL Attorneys LLP.

Careful Shopper is represented by Mark Schlachet of the Law Office of Mark Schlachet and Christopher J. Hammond of LA Law Group APLC.

The case is TP-Link USA Corp. v. Careful Shopper LLC et al., case number 8:19-cv-00082, in the U.S. District Court for the Central District of California.

--Editing by Alyssa Miller.