As the e-commerce retail online platform gains in popularity and captures a larger percentage of consumer spending, counterfeiting increases as well. The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act (Shop Safe Act 2020) seeks to provide brand owners a way to successfully take action against third-party e-commerce market platforms that infringe upon their trademark. The act provides 10 best practices marketplaces must perform to avoid liability.
The rise in online counterfeiting has forced the government, brand owners and third-party marketplaces to increase their policing efforts. Despite current endeavors, counterfeits are still prevalent online. Why? There are relatively low barriers for entry into selling online and holding sellers of counterfeit goods accountable is extremely difficult due to their complex supply chains – sellers are often physically located outside the United States, therefore outside the jurisdiction for criminal prosecution or civil liability. Counterfeiters employ strategic actions to shield themselves from liability, including the use of multiple merchant accounts; providing none or false personal identifying information (names or addresses) to consumers; abandoning their merchant account; and creating a new one.
A recent report by the Organization for Economic Cooperation and Development (OECD) detailed a 154% increase in counterfeits traded internationally from $200 billion in 2005 to $509 billion in 2016. The U.S. Department of Homeland Security (DHS) collected information that shows seizures of infringing goods at U.S. borders have increased 10-fold from 2000 to 2018, from 3,244 per year to 33,810.
Congress took action, holding several hearings on the issue throughout 2019, and on March 2, 2020, introduced the Shop Safe Act 2020. This act seeks to protect consumers and provide transparency, by providing brand owners with an opportunity to successfully act against third-party e-commerce platforms.
The Shop Safe Act will attempt to:
- Establish trademark liability for online marketplace platforms when a third-party sells a counterfeit product that poses a risk to consumer health or safety and that platform does not follow certain best practices.
- Incentivize online platforms to establish best practices such as vetting sellers to ensure their legitimacy, removing counterfeit listings, and removing sellers who repeatedly sell counterfeits.
- Call for online marketplaces to take steps necessary to prevent the continued sale of counterfeits by the third-party seller or face contributory liability for their actions.
Some of the proposed requirements (10 best practices) attempt to address the problem of merchant counterfeiter anonymity and to reduce the occurrence of repeat bad actors appearing on marketplaces using different merchant accounts.
Until this Act is passed, and even after, brand owners need to take every step in protecting their brand from falling victim to counterfeiters. Employing the counsel of experienced IP attorneys is the most valuable resource available to you. The professionals at Ference & Associates are national leaders in online brand protection and anti-counterfeiting. They can be reached at 412-741-8400 or contact@ferencelaw.com.