In fiscal year 2012 the Department of Homeland Security and its agencies – US Customs and Border Protection (CBP) and Immigration and Customs Enforcement – seized more than $1 billion worth of counterfeit and pirated goods at and within US borders. Ranging from apparel and luxury goods to electronics, automotive parts, pharmaceuticals and toys, the trafficking of counterfeit goods has become a problem in nearly every sector of the economy. Unfortunately, the goods seized by customs and law enforcement officials in the United States and elsewhere represent only a small fraction of the total volume of such goods in the retail market. There is also a continued shift in the business models adopted by counterfeiters, which presents greater challenges to criminal and civil enforcement efforts than ever before. Where illicit sales of counterfeit and pirated goods were once confined to bricksand- mortar shops, the maturing of the Internet as a commercial platform has created new opportunities for the distribution and marketing of such goods. The relative anonymity, minimal cost of entry and decreased overheads of the online retail market, compared to the traditional market, provide criminals with a highly desirable environment for illegal sales, while also resulting in various practical impediments to the civil and criminal enforcement of IP rights. CBP has noted the “[c]ontinued growth of websites selling counterfeit and piratical merchandise directly to consumers” as a contributing factor to the trend of increased importation of such goods via mail and express courier shipments (CBP Office of International Trade, IP Rights Fiscal Year 2011 Border Seizure Statistics, available at www. ce-ip.com/downloads-free/2011-Border-Seizure- Statistics.html). Such ‘direct-to-consumer’ trafficking represents a marked shift from the traditional distribution chain – and that shift has required the development of new online enforcement strategies. In recognition of the changing landscape for the sale and distribution of IP-infringing goods, Congress sought to update the statutory framework for dealing with that increased online trafficking with the introduction of two bills during the 112th Congress – the Stop Online Piracy Act and the Preventing Real Online Threats to Economic Creativity and Theft of IP Act. While neither of these legislative proposals was ultimately enacted, many expressed concerns that in the aftermath of the intense debates surrounding these acts, efforts to address counterfeiting and piracy online would grind to a halt for the foreseeable future. However, although those involved in the debate failed to reach a consensus in crafting legislation, there was near-universal acknowledgement by both rights holders and service providers involved in the e-commerce and financial sectors that the proliferation of rogue sites is a serious problem. The dialogue that had begun with the legislative process continued after the bills had been set aside; however, IP owners and other key players in the online ecosystem sought common ground on what each acknowledged as a serious concern. Contrary to the expectations of many two years ago, the post-Stop Online Piracy Act period has been characterised more by collaboration, rather than gridlock. RogueBlock initiative One such example of cross-industry collaboration took root even before the legislative debate had ended. In January 2012 the International AntiCounterfeiting Coalition (IACC) launched its Payment Processor Initiative (later termed RogueBlock) in collaboration with a number of the world’s largest payment processing and money transfer companies, with the objective of providing a streamlined, simplified procedure by which rights holders could report online sellers of counterfeit or pirated goods to participating credit card, payment processing and money transfer networks. The programme is designed to aid in the identification and remediation of merchants which are using those services to conduct illegal transactions, in violation of the networks’ existing policies. If, on submission and investigation of a verified complaint, the participating networks determine that a merchant has breached its contractual obligations, remedial action may be taken. Because merchants are bound by their service providers’ usage policies regardless of jurisdiction, the programme has global reach, allowing action even against operators of websites which would normally be insulated from domestic civil or criminal actions. The payment system provides a natural choke-point in the online retail environment. Merchants selling counterfeit goods must be able to receive payments for their illicit wares in order to stay in business; by directly attacking that capability, rights holders can cut off the revenue stream that makes such illegal businesses possible (and profitable). Traditional methods of online enforcement (eg, Uniform Domain Name Dispute Resolution Policy proceedings) often focused on the website itself, resulting in a ‘whack-a-mole’ process, as counterfeiters simply shifted to new domains to continue their operations. However, re-establishing new capabilities to receive payments is a more expensive and timeconsuming process that is also subject to greater oversight. An additional benefit is that operators of sites trafficking in counterfeit goods generally use a single merchant account to process payments for numerous-sometimes thousands of-websites; enforcement against a single site’s payment facilities will, in turn, impact on the entire network of illicit sites. To date, participants in the programme have referred more than 8,000 websites for investigation by the partners in the programme, resulting in the identification of more than 28,000 payment channels and the termination of more than 2,600 individual counterfeiters’ merchant accounts. While it is often said that success begets success, in this case it also begets greater collaboration. Beyond its immediate impact on addressing the proliferation of websites trafficking in counterfeit goods, rights holders have begun to cooperate more closely on training others in the financial sector in IP-related areas, such as due diligence in the onboarding process of new merchants and proactively monitoring the compliance of existing merchants. In addition, the ongoing efforts have generated useful data and investigative leads for use by law enforcement agencies in the United States and abroad.
MarketSafe initiative Building on the successful cross-industry partnerships that rights holders have fostered in the financial sector, the IACC has also sought to develop further alliances with new partners in other areas. In August 2013 the IACC signed a memorandum of understanding with Taobao Marketplace to begin work on the development of procedures intended to identify and take action more efficiently against listings for counterfeit products on Taobao, the largest consumer-to-consumer platform in China. The programme is expected to launch in early 2014. As is the case with the RogueBlock programme, participating rights holders will provide information through a centralised point of contact and in a standardised form to enable a more streamlined and efficient use of resources. Where the RogueBlock initiative has focused on standalone websites trafficking in counterfeit goods, the focus of MarketSafe is on larger retail platforms with numerous individual sellers, seeking to weed out the offers for illicit product while improving consumer trust and confidence for the legitimate traders on the platform. It is hoped that this collaboration will provide significant long-term benefits in cultivating best practices for similar online marketplaces in the consumer-to-consumer, business-to-consumer and business-to-business sectors. Other private sector efforts In addition to the initiatives discussed above, the past two years have seen the development of a variety of collaborative programmes focused on some of the many pieces of the online puzzle. In 2013 the American Association of Advertising Agencies and Association of National Advertisers jointly published best practices for online advertising. The best practices document recognised that in some instances, illicit sites profit not only from the sale of counterfeit and pirated goods, but also from selling advertising to legitimate businesses. Those advertisements – particularly in the case of advertisements for well-known brands – provide an air of legitimacy to the sites, while further lining the pockets of the sites’ operators. Accordingly, the two organisations encouraged their members to adopt policies to ensure that they were not unwittingly supporting the illegal activities with their ad buys. In July 2013 the White House Office of the Intellectual Property Enforcement Coordinator announced the adoption of a set of best practices for online advertising networks, which had been agreed to by several of the largest networks in the sector. Shortly thereafter, the Interactive Advertising Bureau released an updated version of its quality assurance guidelines, which likewise include a framework to help ensure that legitimate advertising dollars are not being directed to sites that exist for purely illegitimate purposes. In addition to the voluntary programmes already discussed, a number of industry-specific and cross-industry collaborations continue to be undertaken to increase public awareness concerning the threats posed by counterfeiting and piracy, focusing on those harms not often recognised by consumers. For example, the Alliance for Safe Online Pharmacies and the Centre for Safe Internet Pharmacies have developed consumer-directed initiatives to raise awareness regarding the proliferation of unlicensed and unregulated ‘pharmacy’ websites trafficking in counterfeit drugs. The ‘IP Delivers’ campaign, created by the US Chamber of Commerce’s Global Intellectual Property Centre, meanwhile highlights the positive effects of intellectual property and the connection between IP rights, jobs and innovation; and the IACC’s ‘DesignsFauxReal. com’ website campaign highlights risks to consumers of shopping on rogue retail sites, such as credit card fraud and identity theft. The Centre for Copyright Information’s Consumer Alert System was launched in 2013 – the result of collaboration between the five largest internet service providers and the music and film industries. The system was designed primarily as an educational tool, with the rationale that many consumers are simply unaware of what is legal and what is illegal in the context of the Internet. The system provides a means by which copyright owners may notify individuals when their internet access accounts have been used to download or share copyrighted music, television programmes or films illegally. When such activity is identified, the user receives a notification, along with educational information intended to help consumers better understand the issues, and to encourage their adoption of legal means of obtaining entertainment content. The government has taken an active role in encouraging the private sector to develop creative solutions to deal with the continuing concerns of online trafficking, while also monitoring the industry initiatives to determine whether they are working as well as they could, or whether legislation might still be necessary to address the problem. In June 2013 the Office of the Intellectual Property Enforcement Coordinator published its 2013 Joint Strategic Plan, highlighting the value of such private sector initiatives, and encouraging the private sector to further build on and broaden its voluntary efforts. In the same month, the US Patent and Trademark Office published a request for public comments in the Federal Register in connection with a study that it is undertaking into the effectiveness of those initiatives, and in the hope of developing metrics for gauging their performance. In September 2013 the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet held a hearing on the role of voluntary agreements in the US IP system, during which committee members generally expressed support for the efforts, while also acknowledging their openness to exploring new legislation should the efforts fall short or prove unsustainable. Determining the effectiveness of cooperative voluntary initiatives is an inherently difficult proposition, particularly in light of the illicit nature of the activity that such initiatives are seeking to address. However, participants in many of the collaborative programmes that have been launched during the past two years appear to be generally pleased with the progress of those efforts thus far; rights holders have expressed support broadly for building on these initial successes by developing new partnerships with market leaders in other segments of the online marketplace. For example, in the area of online searches, rights holders would welcome greater engagement by market leaders such as Google in devising creative and effective approaches to ensure that consumers are directed to legitimate online retailers and platforms, rather than those sites trafficking in counterfeit goods. As noted by IACC President Bob Barchiesi at the House Judiciary Committee hearing, “[successful collaboration] takes a willingness on the part of the other parties’ side to work together, roll your sleeves up and get it done. We were able to go over China, and recently put together an agreement with Taobao and Alibaba Group… I’m a bit frustrated that I can’t go over to California to Google and do the same thing.” In August 2012 Google announced a change to its search algorithm that would factor valid copyright removal notices into a site’s ranking, as a means to helping consumers find legitimate content. Collaboration between trademark owners and search engines could likewise aid consumers in finding legitimate retailers, selling authentic goods. There will undoubtedly be further refinements and adjustments to the initiatives, whether in response to lessons learned or changes in counterfeiters’ own methods of operation. Although the development of the legal framework tends to lag behind that of new technologies such as the Internet, those legislative gaps can be overcome when relevant stakeholders are willing to partner responsibly to address the challenges presented by those new technologies. Both rights holders and their counterparts in the payments and e-commerce industries have significant roles to play in ensuring that the Internet remains a safe, trusted and robust outlet for the sale of legitimate goods, while working together to remove ‘bad actors’ from the marketplace. It is essential that all the parties involved live up to that responsibility.