Commenters on Platform Liability for Counterfeits Argue for More Legislation

The Computer and Communications Industry Association, in the same comments at Regulations.gov, said shifting responsibility to platforms would reduce voluntary cooperation and would not reduce the number of counterfeits for sale. The deadline for comments is the close of business on Jan. 25.

The American Apparel and Footwear Association said that while the test of platform liability, that the company should “know or have reason to know” of trademark infringement, seems straightforward, courts have applied it differently. AAFA said that even willful blindness or direct control and monitoring as a standard of liability is not “workable in practice.”

“The court in Tiffany v. eBay believed that market-based forces would provide a strong incentive for platforms to combat counterfeits. Empirically, it is irrefutable that this assumption is false -- market-based factors do not provide an adequate incentive for platforms to establish systems and technology that actually prevent the sale of counterfeits. In fact, it is just the opposite,” wrote Christina Mitropoulos manager, of brand protection at AAFA. Because the liability issue is so difficult for companies, some AAFA companies have included platforms as third parties when they sued counterfeiters, and thereby got the merchant's storefront frozen, and expedited discovery. “While these third-party remedies are of some benefit, they don’t in any way penalize the platforms,” AAFA said.

The SHOP SAFE Act of 2020 (see 2003030049) would create a new form of secondary liability for counterfeits, but AAFA said it needs a clearer definition, and its coverage should be expanded. The SHOP SAFE Act would only apply to counterfeits that are unsafe or could affect health. “This distinction not only leaves out often-infringed products, but also may impose more difficult judgement evaluations on platforms as to whether a particular product falls within the scope,” AAFA said.

It said companies should be required to talk to trademark owners as they design proactive screening. “Legislation should also require platforms to provide written explanation to the trademark owner when it does not remove or reinstates infringing product listings identified by the trademark owner,” AAFA said.

The group also argued that if a platform takes control of a product to fulfill an order, or highlights the product, such as with an “Amazon's Choice” banner, those actions should automatically create secondary liability, and that legislation should require companies to terminate third-party sellers' right to list after two instances of infringement.

The Footwear Distributors and Retailers of America said the incentives are perverse now, because if platforms don't vet sellers, the companies avoid knowledge, and thus, liability. “Brands do not have the resources or ability to get in touch with every online seller suspected of selling counterfeit or infringing product to ask for additional information and pictures. Our companies have discovered that many individuals and entities selling counterfeit or infringing goods on these Platforms use false identifies, making it impossible for brands to identify the bad actors,” FDRA wrote.

When FDRA's member companies sue sellers, they find many sellers located in China used false contact information to register on the platform; the sellers default; the funds in their platform accounts are not enough to satisfy the judgment. “Platforms should be required to: i. Implement stricter registration requirements for third-party sellers, including identity verification measures that allow the authentication of both seller and product. For example, require online sellers from outside the US to submit business licenses or identify a legal representative,” FDRA said.

They also said any keywords such as “copy and replica” should not be allowed, and that there should be a method to ban offenders from reregistering under a different alias.

The National Association of Manufacturers said legislation is also needed, and it should set “judicial review standards that encourage courts to develop critical fact-specific case law.” It also said some courts say the Section 230 protections for platforms give them a safe harbor to host sellers of bogus goods, and that was not what Congress intended.

CCIA argued the current doctrine of secondary liability “achieves the proper balance, fostering a fair and robust online marketplace to the principal benefit of consumers.”

Amazon argued that in 2019, it invested more than a half-billion dollars to fight counterfeits and other fraud and abuse on its site. “Amazon’s primary focus is on preventative, technology-driven tools built on machine learning and data science to proactively scan the more than 5 billion changes submitted to Amazon’s worldwide catalog each day,” the comment said. “For every one of the self-service takedowns by brands, Amazon’s automated protections proactively stop more than 100 listings.”

It said it launched a new Counterfeit Crimes Unit in June 2020, which hired “former federal prosecutors, experienced investigators, data analysts, and other experts trained to catch and prosecute criminals. They are dedicated specifically to building and referring cases to law enforcement, pursuing civil litigation against bad actors, and undertaking investigations independently and with brand partners.” Amazon needs the help of rights holders, the company said, and information sharing, from both CBP on seizures and from other platforms, would help the company stop counterfeiters from creating listings.