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We have world at our fingertips. We can buy products in the comfort of our home, to gain something we desire is just few clicks away. E-commerce platforms made great trade facilitation possible, however they are accompanied with the risk of exposure to online frauds and increase of counterfeit and pirated goods that flood national borders and penetrate our homes.

With increased globalisation spreading the sale of goods throughout the world and with appeal for cheaper prices, counterfeiting has become a successful industry.  ‘‘Organisation for Economic Cooperation and Development (OECD) report, which details a 154 percent increase in counterfeits traded internationally — from $200 billion in 2005 to $509 billion in 2016information collected by the U.S. Department of Homeland Security (DHS) between 2000 and 2018 shows that seizures of infringing goods at U.S. borders have increased 10-fold, from 3,244 seizures per year to 33,810”[1]

Counterfeit goods are typically inferior quality products that are sold under another company’s trademark, and chances that you encountered or inattentional purchased one, are pretty high.

Consumers are tricked into thinking that they come across a bargain, only to potentially later realise that this is not the brand product at incredible price at it was advertised.  This imitation of real products manufactured without approval from the owner of the brand can vary from clothing, jewellery (which are among America’s most counterfeited items) to electronics, toys and even military gear, aerospace supplies, and even pharmaceutical products . Counterfeit goods raise enormous concern in the aspect of intellectual property law, civil law, criminal law, administrative law and have great impact on business and governments. More so, the quality, safety, environmental and health impact of those products are questionable and usually represent great risk for costumers. Typically, counterfeited goods are not made using materials of the same quality or under standards, regulations of manufacture as the authentic products and do not undergo safety testing. “According to the OECD, the trade in counterfeit goods is often set up by criminal organisations, which use the profit for their other criminal activities, such as tax evasion, money laundering and drug trafficking.[2]

Online commerce, such as Amazon, or E-bay offer goods from third-party sellers on its websites. Orders from third-party sellers are routed which takes a cut of those sales. The usage of algorithms and fulfilment centres differentiate between Amazon and other online retailers, because they manage to allow company to consistently deliver faster and offer cheaper prices to costumers. The retailer ships the item, but it’s not responsible for whether consumers get what they paid for.

In most countries selling counterfeit products is prohibited and can cause civil and criminal penalties In United States, federal law prohibits illegal knowingly traffic counterfeit products, however it does not prohibit an individual from buying those products. In Europe counterfeit goods can be detained or destroyed by customs administrations when entering the EU, even when bought without knowing that they are counterfeit products. Consumer can also be fined by national authority under national law.

Third party online marketplace create perfect environment for counterfeiters, that use them as a ”store-front” to compete with legitimate businesses, without effort or limitation, especially because many platforms request only little identifying information to begin selling,  e-commerce platforms try to increase profitability for the platform by reducing the cost for seller and buyers to join. The rating system of costumers can give counterfeiters information about a successful product, which they will attempt to outcompete original seller with lower-cost counterfeit and pirated versions, without spending time and money into research and design. Counterfeited products therefore also damage reputation of a company and have enormous effect on original brand, because they give this wrong impression of genuine product, when costumers buy a fake product thinking he has bought the original one.

E-commerce pose a number of challenges to already establish brands, small business enterprises and start-ups. Intensity of online competition, SEO and paid search, challenges of already establish brands are however small in comparison to online counterfeiting facing brands. It is not enough for small business to develop a product with significant local consumer demand, and then use that revenue to grow the business nationally and internationally, instead placing products online to create greater geographic scope they begin to face increased foreign infringement threat. Cost of e-commerce market entry is low, which means entry is happening early in the product circle, which increases risk of infringement.

Online marketplaces try to stop the flood of fake goods by implementing different procedures and programs. In 2017, Amazon launched program  Brand Registry, which was proven to be ineffective for many brands. In 2019 it launched Project Zero, with intention to ‘’empower brands to help drive counterfeits to zero’’.[3]  Automated protections continuously scan Amazon stores and proactively remove suspect counterfeits, product serialization allows to Individually scan and confirm the authenticity of every one of brand’s products on Amazon platform. This tools provide brands the ability to remove counterfeit listings themselves, as in the past it was required from brands to file a report of counterfeit to Amazon, which were then investigated by Amazon. However, there are many limitations of this program and flaws in approach to infringement on its platforms.

  1. It is not brand protection solution; it is not designed to assist with the full spectrum of intellectual property issues on Amazon.
  2. Brands are expected to actively monitor the platform for infringements, with the burden of responsibility lying on them. ”Self-service removal data also feeds into the automated protection tool and will likely require significant enforcement input from the brand to ensure Amazon gets takedowns right.’’[4]
  3. Brands without trademarks cannot register,…

On the other hand Amazon’s Utility Patent Neutral Evaluation’ process seems like potentially an efficient intellectual property tool, that can resolve potential disputes by utilizing a private patent attorney (third party) as an arbitrator. It is limited to utility patents, confidential and voluntary. ‘’If both parties agree to participate in the neutral evaluation, Amazon selects a neutral third-party patent lawyer and requires each party to pay the evaluator a $4,000 deposit.If the evaluator determines that the accused product infringes the patent, Amazon will take down the listings for the accused products. If the evaluator’s conclusion is in favor of the seller, the accused products will remain listed on Amazon.”[5] If the seller does not participate in the neutral evaluation, Amazon removes that seller’s listing of accused products from Amazon marketplace. However, there were several court ”complaints filed by Amazon storefronts since December contend that Amazon frequently removes products or entire storefronts without reviewing infringement complaints in depth, making it easy for unscrupulous sellers to get their competitors eliminated.”[6]

Efforts of e-commerce platforms to fight counterfeiting did give mixed result, but they are not enough efficient to successfully eliminate counterfeit products, or even in some cases provide sufficient protection of intellectual property. Counterfeiters partly, because of those efforts diverted their actions on social platforms.

US lawmakers have proposed a bill to make e-commerce platforms liable for counterfeit goods on their platforms.

The Shop Safe Act of 2020, outlines a series of steps that e-commerce platforms must take to prevent the sale of counterfeit goods by third-party sellers. If the e-commerce platforms fail to do so, they can be liable for the sale of counterfeits.

E-commerce platforms will have to verify the third party seller’s identity, principal place of business and contact information, require the third party seller to verify and attest to the authenticity of its goods, implement technology to screen goods before posting to prevent counterfeit sales, screen and prevent third-party sellers from participating on the platform under a different seller identity or alias, provide the infringing third-party to relevant law enforcement and, upon request, the trademark owner and so on.[7]

The problem with counterfeit goods flooding online marketplaces is national and international threat, and a hard nut to crack. The problem requires strict legal and operational measures made by both e-commerce platforms and Governments. The Shop Safe Act is another step further to narrow down success of counterfeiters and provide better protection from fraud, protection of intellectual property of companies and companies reputation and most importantly decrease safety and health risks of costumers. But is the burden enforced on to e-commerce platforms too unjust and heavy?

If you need help with removal of counterfeits, we are here for you.

[1] https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf

[2] https://www.epc.si/media/media_2017/JP_counterfeit_report.pdf

[3] https://blog.aboutamazon.com/company-news/amazon-project-zero

[4] https://www.incoproip.com/six-key-limitations-of-amazon-project-zero/

[5] https://www.ipwatchdog.com/2020/02/11/navigating-amazons-neutral-patent-evaluation-real-life-part/id=118736/

[6] https://news.bloomberglaw.com/ip-law/amazons-judging-of-ip-disputes-questioned-in-sellers-lawsuits

[7] https://www.jdsupra.com/legalnews/shop-safe-act-of-2020-making-e-commerce-72695/

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