In the last quarter-century, e-commerce has revolutionized businesses large and small, creating opportunities to reach a far broader customer base than ever before. Unfortunately, this unlimited online marketplace also has created new opportunities for counterfeit and pirated goods.
Bogus merchandise that once had to be sold at flea markets or from the trunks of cars now can be found for sale on websites visited by hundreds of millions of potential customers. Counterfeit operations that once were confined to certain areas now can market their illegal goods across the globe. So it isn’t surprising that the Organisation for Economic Cooperation and Development (OECD) noted that international counterfeiting increased 154 percent between 2005 and 2016. The OECD estimates that the annual global market for counterfeit goods now exceeds a half-trillion dollars, and makes up more than three percent of all global trade.
To date, most enforcement efforts have been directed toward the primary trademark infringers—namely, the parties making and selling counterfeit goods. But federal officials have indicated a new interest in enforcing contributory trademark infringement targeting online e-commerce platforms.
The US Patent and Trademark Office recently published a public notice in the Federal Register titled, “Secondary Trademark Infringement Liability in the E-Commerce Setting.” The notice seeks “information from intellectual property rights holders, online third-party marketplaces and other third-party online intermediaries, and other private sector stakeholders, on the application of the traditional doctrines of trademark infringement to the e-commerce setting. More specifically, the USPTO seeks input on the application of contributory and/or vicarious trademark infringement liability (secondary infringement liability) to e-commerce.” Comments are due by 5 p.m. EST on December 28, 2020.
The USPTO request for public input follows a US Department of Homeland Security report on counterfeiting released earlier in 2020. The report notes that “Online platforms have avoided civil liability for contributory trademark infringement in several cases,” and calls for further study into whether more vigorous contributory and/or vicarious trademark enforcement against e-commerce platforms is needed.
Of course, the X-factor in this federal push for greater contributory trademark infringement liability is that a new administration will take over on January 20, 2021. How will a Biden Administration approach the question of contributory trademark infringement in e-commerce?
The Current State of Contributory Trademark Infringement & E-Commerce
Existing law makes it difficult for manufacturers to pursue contributory trademark infringement claims against third-party online retailers. These e-commerce sites must know that the third-party sellers are peddling counterfeit goods—and proving that knowledge can be difficult for trademark owners. Currently, manufacturers of legitimate goods are left to police online sites and report infringement to those sites.
In March, federal lawmakers introduced the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act aimed at addressing the flood of counterfeit goods available for purchase online. The authors of the SHOP SAFE Act correctly note that many sellers of counterfeit goods are located overseas, putting them outside the jurisdiction of US criminal law or civil liability. In addition, simply requiring e-commerce sites to remove counterfeit items or ban counterfeit sellers hasn’t been particularly effective, as sellers simply shift these items to other accounts. Like the mythical Hydra, cut down one online counterfeit account and two more rise to take its place.
The SHOP SAFE Act would require online e-commerce platforms to:
- Verify (through government ID or other reliable documentation) the identity, principal place of business and contact information of the third-party seller;
- Require sellers to verify and attest to the authenticity of their goods;
- Require sellers to contractually agree not to sell or promote counterfeit goods. Any disputes related to the third-party seller’s participation on the platform must be adjudicated in US courts.
- Display the identity, contact info, and principal place of business of the third-party seller, as well as the country of origin and manufacture of the goods, and from where the goods will be shipped.
- Require third-party sellers to only use images they have permission to use and that accurately depict the goods offered for sale.
- Screen goods for counterfeit trademarks;
- Expeditiously remove any listings that appear to use counterfeit marks;
- Terminate accounts of third-party sellers who have offered or advertised counterfeit goods on more than three occasions;
- Work to ensure that sellers banned under these terms do not rejoin under a different alias; and
- Provide information on counterfeit sellers to law enforcement agencies when requested.
To date, however, the SHOP SAFE Act remains mired in the Judiciary Committee of the House of Representatives. It remains to be seen if Congress will take up the Act again in 2021.
It also should be noted that some e-commerce platforms already have vigorous protocols in place to detect and weed out counterfeit goods. Poshmark, for example, offers these tips for online sellers to help them avoid posting trademark-infringing merchandise, and Poshmark will cancel orders and refund buyers if the site determines an item is counterfeit.
The online sale of counterfeit goods remains an ongoing challenge for many manufacturers. Concerned parties should consider responding to the USPTO’s request for comment (with the aid of legal counsel) to ensure their needs are considered by federal decision-makers.