If Amazon and other online marketplaces can address the sale of counterfeit and pirated goods convincingly, why does Congress keep introducing legislation to stop the sale of such products?

Liam Reilly, an attorney with Husch Blackwell LLP in Kansas City

Caroline Chicoine

Caroline Chicoine, an attorney with Husch Blackwell LLP in St. Louis

The struggle to combat counterfeit and pirated goods existed long before the internet ushered in the present era of ecommerce. Today, however, online marketplaces—and their ever-increasing prevalence—present the problem at scale. As owners of the online marketplaces scramble to address the issue, Congress’s interest in the matter has increased.

The cost of counterfeit and pirate goods is staggering. In 2019, the Organisation for Economic Co-operation and Development (OECD) and the EU’s Intellectual Property Office claimed that trade in counterfeit and pirate goods stood at 3.3% of global trade. According to Steve Shapiro, the then-unit chief for the Federal Bureau of Investigation’s intellectual property rights unit, the cost of counterfeit goods to the U.S. economy was about $600 billion annually.

Marketplaces take steps to combat counterfeit goods

Owners of online marketplaces understand the significance of this threat to legitimate commerce. Many marketplaces have implemented policies and procedures to address counterfeit and pirated goods, including Amazon, which is often at the forefront of such efforts.

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In fact, in its first Brand Protection Report issued this May, Amazon lauded its efforts to protect brands (and ultimately consumers) on its platforms from selling such goods. However, it appears that the U.S. government is less convinced that such efforts are creating progress. Indeed, Amazon’s foreign domains (i.e., amazon.co.uk, amazon.de, amazon.es, amazon.fr, and amazon.it) made the list of the Office of the United States Trade Representative Executive Office of the President’s 2020 Review of Notorious Markets for Counterfeiting and Piracy.

Notably, in its Brand Protection Report, Amazon touts its investment of over $700 million toward protecting its online stores from fraud and abuse. Presumably, this number does not include costs borne directly by brand owners. Such costs include some fees Amazon charges brand owners to participate in its transparency program, Project Zero’s product serialization service and utility patent neutral evaluation process. Each is among the programs Amazon promotes as part of its arsenal of strategies to drive counterfeits on its platforms to zero.

So, if Amazon and other online marketplaces can address the sale of counterfeit and pirated goods on their respective platforms convincingly, why does Congress keep introducing legislation intended to tackle the sale of such products? One can only suspect that the government does not believe current policies and procedures designed to address the issue have gone far enough. This belief appears to be shared by many brand owners, who have expressed widespread support for such legislation.

Legislation in Congress

Specifically, an amended version of the Stopping Harmful Offers on Platforms by Screening Against Fakes in Ecommerce Act (SHOP SAFE ) Act (which we have previously discussed counterfeit) has been reintroduced in Congress. The act—which was pending before the 116th Congress–aims to establish liability for online marketplaces not only when a third party sells a counterfeit or pirated good that poses a risk to consumer health and safety but also when it fails to follow certain best practices as set forth below:

  • Verifying the seller’s identity, location, and contact information.
  •  Requiring the seller to verify and attest that its goods are not counterfeit.
  • Conditioning the seller’s use of the platform on agreeing not to sell counterfeits and consenting to be sued in U.S. court.
  • Displaying the seller’s identity, location, and contact information, where the goods are made, and from where the goods will be shipped.
  • Requiring sellers to use images that accurately depict the actual goods offered for sale and the seller owns or has permission to use.
  • Using technology to screen for counterfeits before a seller’s goods appear on the platform.
  • Implementing a timely takedown process for removing listings for counterfeit goods.
  • Terminating sellers that are repeat offenders.
  • Screening sellers to prevent terminated sellers from rejoining or remaining on the platform under a different alias or storefront; and
  • Sharing an infringing seller’s information with law enforcement and, upon request, the rights owner.

Industry groups approve

Various industry groups have been quick to express their support for the bill’s goals. For example, in 2020, the Toy Association praised the introduction of the SHOP SAFE Act, saying it would implement many of the recommendations in its white paper, “The Real Threat of Fake Toys.”

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The Personal Care Products Council also praised the bill’s introduction, noting that one of its member companies employs ten external firms to manage online platform notice and takedown processes. The Automotive Anti-Counterfeiting Council Inc. likewise applauded the reintroduction of the SHOP SAFE Act to help protect U.S. consumers from the dangers of counterfeit automotive parts and accessories. The council is a collaborative industry group comprised of Ford, General Motors, Honda, Hyundai, Kia, Nissan, Subaru, Toyota, and Volkswagen Group of America.

The American Apparel & Footwear Association (AAFA) agrees. AAFA calls the reintroduced SHOP SAFE Act a step in the right direction for incentivizing online platforms “to establish best practices such as seller vetting to ensure their legitimacy, removing counterfeit listings, and removing sellers who repeatedly sell fake goods.”

The AAFA said government and the business community must do more to ensure that products Americans buy via online marketplaces “are legitimate, meet safety standards and do not steal intellectual property that supports American jobs.” The SHOP SAFE Act must promote “a culture of continuous improvement that is needed to stay one step ahead of counterfeiters,” AAFA says.

Similarly, the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM) Act—which also was pending before the 116th Congresshas been reintroduced. The INFORM Act would require online marketplaces to collect and disclose certain verified information regarding “high-volume third-party sellers” of consumer products to inform consumers and makes counterfeiters more accountable. A high-volume third-party seller, the bill says, is a participant on an online marketplace’s platform that—in any continuous 12-month period during the previous 24 months—conducted “200 or more sales or transactions of new or unused consumer products” totaling $5,000 or more. The Buy Safe America Coalition, a diverse group of responsible retailers, consumer groups, manufacturers, intellectual property advocates and law enforcement officials, supports the INFORM Act and increased “transparency and accountability for online marketplaces amid the rapidly growing problem of illicit goods sold online.”

Finally, the U.S. Customs and Border Protection (CBP) and the U.S. Chamber of Commerce announced a new joint initiative to address the importation of counterfeit and pirated goods. Specifically, the initiative allows the agencies to exchange information regarding known or suspected violations of intellectual property rights and to conduct training and outreach to raise awareness of efforts directed to combating the sale of counterfeit and pirated goods. William A. Ferrara, CBP’s executive assistant commissioner for the Office of Field Operations, described this initiative as “a first-of-its-kind framework for public-private collaboration on combatting counterfeit and pirated goods.” The joint effort will “strengthen [the agencies’] ability to defend intellectual property standards that generate American jobs, save lives, and enhance our economic prosperity,” he said.

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Public/private cooperation to battle counterfeits

Finally, the U.S. Customs and Border Protection (CBP) and the U.S. Chamber of Commerce announced a new joint initiative to address the importation of counterfeit and pirated goods. Specifically, the initiative allows the agencies to exchange information regarding known or suspected violations of intellectual property rights and to conduct training and outreach to raise awareness of efforts directed to combating the sale of counterfeit and pirated goods. William A. Ferrara, CBP’s executive assistant commissioner for the Office of Field Operations, described this initiative as “a first-of-its-kind framework for public-private collaboration on combatting counterfeit and pirated goods.” The joint effort will “strengthen [the agencies’] ability to defend intellectual property standards that generate American jobs, save lives, and enhance our economic prosperity,” he said.

The marked rise in government action, including bi-partisan support, signals that this is a crucial concern to elected officials. Indeed, any effort in this area is a step in the right direction, but whether private action or new laws and regulations—or some combination thereof—will yield any measured success in addressing the scale of online sales of counterfeit or pirated goods remains unclear. That said, it is unequivocally crucial to combat this ever-increasing issue, which continues to place increasingly unnecessary costs on brand owners and consumers alike every day.

Caroline Chicoine is an attorney with Husch Blackwell LLP in St. Louis who routinely advises clients on registering and enforcing trademarks used in online commerce.

Liam Reilly is an attorney in Husch Blackwell LLP’s Kansas City office and is a firm’s intellectual property team member.

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