Standard Process, Inc. is a producer of whole-food nutritional supplements as well as related products. The company does not offer its products directly to everyone but through a group of licensed health experts and authorized resellers. For instance: Standard Process requires its customers (resellers) to be able to agree to not to market its products on the Internet or sell to other companies and not direct sell to any member of the population other than licensed health clinics or pharmacies.

Through the years, Standard Process has pursued legal action against numerous unauthorized resellers–companies who bought Standard Process products (sometimes via third-party vendors) and then made them available to sell them online (e.g. through Amazon or other independent websites, etc.)) and in contravention of the resale policy of Standard Process. The principal defendants include Total Health Discount, Inc., KDealz Ltd. Co. and AVC Infinite, LLC among other companies.

The claims usually involve trademark violations, the false identification of origin/false advertisement in violation of the Lanham Act (15 U.S.C. SSSS 1114 and 1125) and unfair competition as well as tortious interfering with business or contractual relationships. For instance the case of Standard Process, Inc. in v. Total Health Discount, Inc. the complaint accused of illegal sales of Standard Process products via internet retail, the use of the logos/logos of the company’s trademarks, false declaration that the seller is “authorized,” and interference with Standard Process’s contractual distribution agreements.

Key Lawsuits & Legal Issues

1. Standard Process Inc. V. Total Health Discount, Inc. (2008)

In this instance, Plaintiff alleged that Total Health Discount, Inc. offered Standard Process products online without authorization, and used the Standard Process trademarks/logos on its website, and lied about the fact that it bought the products via “authorized third parties.” The complaint contained allegations in violation of the Lanham Act (false designation of origin/false advertisement) as well as state law claims (fraudulent representations pursuant to Wis. Stat. SS 100.18, tortious interference, unfair competition).

The court considered the motion of defendants in favor of summary judgement. The main question was whether Standard Process suffered actual harm (i.e. lost goodwill, or customer confusion) and whether the claimed policy of resale was a binding contract, which meant that tortious interference could be a factor. The court concluded that genuine questions of factual substance arose regarding the claims of trademarks or false advertising which led to the denial of the motion for summary judgment.

1. Standard Process Inc. V. KDealz Ltd. Co. (2018)

Another instance was KDealz the online reseller with an Amazon storefront, which allegedly bought Standard Process products (despite not being legally authorized) and then sold them on the internet. Standard Process sued for trademark violations as well as untrue advertising, unfair competition and deceitful trade practices as well as interference. The case of KDealz one of the key issues concerned personal jurisdiction. Specifically, whether a Wisconsin court has authority on KDealz (based within Kentucky) because of its online sales and the shipments of product to Wisconsin. The court found the Standard Process made a prima sufficient showing of specific personal jurisdiction. The court also denied its motion for dismissal due to insufficient jurisdiction.

1. Standard Process Inc. Version. AVC Infinite, LLC (2020-2021)

In this case, Standard Process obtained default judgment as well as a permanent injunction against AVC Infinite and associated defendants who had sold Standard Process products via Amazon. The court concluded that Standard Process’s sole authorised reseller model, along with its quality control and monitoring measures, were sufficiently defended in a manner that unauthorised sales on the internet compromised the company’s quality control and caused confusion for consumers.

Legal Doctrines & Themes

A variety of legal principles are in the forefront during the Standard Process lawsuits:

• Trademark Infringement or False Designation of Origin (Lanham Act) – Standard Process claims that unauthorised resales undermine its quality control and creates confusion with customers (for instance, if the reseller is licensed or not, if consultation is necessary and whether the product is properly stored and handled). In Standard Process v. Banks, the court discussed that to maintain its trademark rights in a selective-distribution network, the trademark holder must show legitimate, substantial, non-pretextual quality-control procedures and that deviations may dilute the mark.
• First Sale Doctrine and Authorized Reseller Restraints – The defendants argue that if a product is legally purchased, resales are allowed in the “first sale” doctrine. Standard Process counters that its authorized-reseller program as well as quality-control regulations make it difficult to sell the product to authorized individuals. The conflict between distribution and control of product agreements and antitrust/first sale rights is the main topic.
• Individual Jurisdiction for Internet Sales – In KDealz the court’s discussion of minimal contact with Wisconsin that are based on the sale or shipping of goods through Amazon in order to Wisconsin customers offers a framework for the issues of jurisdiction in e-commerce distribution disputes.
• Unfair competition/ tortious interfering Unfair competition / tortious interference Standard Process has asserted that resellers who are not authorized to sell products do not just infringe trademarks, they also disrupt Standard Process’s contractual relationship with authorized resellers. The viability of these claims usually depends on the extent to which Standard Process’s resale policy is legally binding and if harm can be demonstrated.

Implications for Manufacturers, Resellers & Consumers

For Manufacturers

Manufacturers who employ specific distribution networks (requiring authorized resellers, quality control standards, restricting online sales) should ensure that their policies are clear, well-documented, and are not pretextual. To protect trademark rights and stop unauthorized resales they need to demonstrate that they have legitimate procedures for control and prove that any deviations from the rules harm the reputation of the brand. Monitoring and timely enforcement letters may help them defend their position.

For Resellers / Online Sellers

Resellers need to determine whether they’re “authorised” distributors and whether the source of their product is in compliance with the policy of the manufacturer. Unauthorized sales can be liable to legal action in accordance with laws such as the Lanham Act and state law. Resellers should be aware that manufacturers who use selective distribution strategies may seek injunctive relief. Additionally, sales made from the interstate states in which the manufacturing facility is located could trigger legal jurisdiction.

For Consumers

Customers who purchase products on the internet from sellers who are not authorized can face risk: loss of manufacturer’s warranty, incorrect storage or handling, and lessening the control over the authenticity of products. Naturally from a legal enforcement standpoint the transactions can attract enforcement actions from manufacturers.

Why These Lawsuits Matter

The Standard Process cases are a good illustration of key aspects of modern law of distribution and e-commerce:

• The conflict between the control over distribution channels by brand owners as well as their freedom of market philosophy on the web.
• The way online marketplaces (Amazon and others.) blur boundaries and cause problems of jurisdiction.
• The application for trademark laws (Lanham Act) in contexts of distribution control, not just traditional counterfeiting, but “unauthorized resale/parallel import” scenarios.
• The balance between the legitimate resales doctrine (first sale) and the brand’s need for quality control and selective distribution.

Conclusion

The legal battle surrounding Standard Process presents a clear illustration of how a brand owner who has a limited distribution model could and will be able to litigate to enforce restrictions on distribution as well as defend trademarks and ensure control over its authorized network and reputation. If you are a manufacturer who are considering similar models Standard Process case provides an instructive, yet cautionary path to document your policy ensure compliance and be prepared to apply. For retailers and online sellers It highlights the legal pitfalls of illegal online sales, even if items themselves are genuine.