Online shopping has changed the way consumers shop for retail products. The global Covid-19 pandemic shifted even more sales online.1 E-commerce platforms have made it easier, faster, and more convenient to shop online. But they have also created a fertile ground for counterfeiters whose cunning tactics have sometimes outpaced the efforts of e-commerce platforms to subvert them and rid their marketplaces of counterfeits.
In 2019, the sale of fake goods represented 3.3% of world trade.2 In 2020, US Customs and Border Protection and US Immigration and Customs Enforcement seized more than 26,000 shipments of fake goods, the value of which, had they been genuine, was in excess of $1.3bn.3 Counterfeits can pose health and safety risks to consumers. They also harm the bottom line and reputation of rights owners.
What to Do if You Suspect Online Counterfeits
Intellectual property owners should regularly monitor e-commerce sites for suspected counterfeit products. This can be done in-house or with the assistance of outside companies.
If you suspect that counterfeits of your products are being sold online, consider taking one or more of the following steps.
Establish and conduct a test-buying programme
One of the first steps you should take upon suspicion of counterfeits, is to establish and conduct a test-buying programme, which will help you determine whether the products are indeed counterfeit and collect evidence that will be useful in stopping the problem.
Purchase the suspected product and retain all associated documentation, including a screenshot of the listing page, invoice, shipping information and correspondence with the seller. If possible, purchase at least three products. This can help determine whether the seller is selling all counterfeits or a mix of counterfeits and genuine products. Establishing a pattern of counterfeit sales by the same seller can help get the seller suspended or removed from the marketplace.
When the products arrive, inspect, photograph, and test them. Identify and document all the characteristics and features that indicate it is a counterfeit. This can include markings, surface features, packaging, or observations about the quality of certain components or materials. It can be helpful to create a document that compares the counterfeit product to a genuine product side-by-side with annotations identifying the features that distinguish the counterfeit from a genuine product. Through this process, you may determine that there are multiple types of counterfeits, which may suggest that there is more than one counterfeit manufacturer at work.
If the matter ends up in litigation, the evidence collected from the test-buying programme will be important to prove infringement and liability. It can also be some of the most impactful evidence for a jury. For that reason, it is imperative to be organised and thoroughly document the chain of custody to ensure the evidence collected will be admissible at trial. If the product needs to be examined or sent away for testing, document each transfer in the chain of custody.
Report IP infringement to specific platforms
On Amazon, rights owners can report copyright, trademark and patent infringement through a Report Infringement Form.4 Amazon will share the rights owner's contact information with the seller, so there may be an opportunity for a dialogue to resolve the issue or at least collect additional information on the seller and possibly the manufacturer. If Amazon ultimately accepts the complaint, it will remove the listing.
On eBay, rights owners can submit a Notice of Claimed Infringement (NOCI)5 for trademark, copyright, and patent infringement. eBay also has a Verified Rights Owner (VeRO) programme through which brand owners can submit advance proof of ownership of their IP. Once eBay confirms ownership, the rights owner can submit multiple claims of infringement without re-submitting proof of ownership each time.
Online platform Wish has a similar tool6 as Amazon and eBay for reporting copyright, trademark and patent infringement.
Unfortunately for rights owners, reporting through infringement tools often proves to be a temporary solution. It is not uncommon for the seller to create a new seller account and re-list the counterfeit products. Rights owners need to continuously monitor and report infringing listings, which can be a time-consuming, frustrating cycle.
Legal Options Available to Rights Owners
US Customs and Border Protection (CBP)
CBP has the authority to examine, inspect, and search vessels, vehicles, cargo, baggage and persons entering the US for any breach of US law. CBP can detain and seize goods that infringe pending and registered copyrights and registered trademarks, including trade dress rights, that are recorded with CBP. After recording their copyrights and trademarks with CBP, rights owners can meet with CBP and provide the following additional information to assist CBP: criteria to help identify genuine and counterfeit goods, the geographic origins and manufacturers of genuine goods, and the names of known infringers.
US District Courts and US International Trade Commission (ITC)
If reporting infringement and sending cease-and-desist letters does not sufficiently resolve the counterfeit problem, rights owners can pursue the infringers in district courts or the ITC.
The ITC is an attractive forum because of its speed (12-16 months to resolution) and available remedies (cease-and-desist orders and exclusion orders, which are enforced by CBP). Damages are not an available remedy, and to utilise the ITC as a forum, the rights owner must establish a domestic industry. In district court actions, rights owners should consider moving for an ex parte seizure order, temporary restraining order, and/or a preliminary injunction. Unlike the ITC, damages are available in district court.
In either forum, challenges face rights owners. It can be difficult to go after the manufacturer of the counterfeit goods because, assuming you are able to identify the manufacturer (which is not always possible), many are located in China, making service of process difficult. And if rights owners want to pursue the e-commerce platform itself, proving liability may be challenging. Historically, e-commerce platforms have argued that they should not be held liable for the sales of counterfeit goods by third parties on their platforms. But in products liability cases, courts have begun to hold e-commerce platforms responsible for the sales of third parties on their platforms,7 and courts may find the principles underlying these cases persuasive in patent cases.
Amazon's patent neutral evaluation programme
Amazon recently launched its Patent Neutral Evaluation Programme, which is a mechanism available to resolve issues of utility and design patent infringement. If a patent owner requests the programme, and the seller declines to participate, Amazon will remove the listing. If the seller agrees to participate, each party pays $4,000 (which is refunded to the prevailing party), and Amazon selects a neutral third party to be the evaluator. Defences available to the seller are limited to: non-infringement; a prior order finding the patent invalid or unenforceable; or that the accused product was on sale at least one year before the earliest effective filing date.
If the patent owner prevails, the products will be removed from Amazon, typically within 10 days. If the seller prevails, Amazon keeps the listing active. This new programme may be attractive to patent owners because of its speed (two to five months) and low cost compared to district court or ITC actions. But the remedy is limited to delisting the products; damages are not available. And because sellers are limited in the types of defences they can present, they may be disappointed with the inability to present a prior-art based invalidity defence.
Preventing Counterfeiting Strategies
Obtain IP protection covering different aspects of your product and brand
As discussed previously, certain approaches for combatting counterfeiters are only available for certain IP rights, so it is important to seek multiple types of protection. If possible, obtain utility and design patents covering your product. Pursue federal trademark registration of your brand name, logos and other marks. Consider trade dress protection for your packaging. Seek copyright protection for artwork, photographs and content included with the product. The more IP you have, the more weapons you have in your arsenal to deploy against counterfeiters.
Educate customers about differences between genuine and counterfeit products
Through your test-buy programme, you will have identified the specific characteristics and features that indicate that a product is counterfeit; post a guide that explains and shows those differences to your customers. Also educate customers on the reasons they should avoid purchasing counterfeits, including health, safety and quality issues with counterfeit products. Use a limited number of authorised retailers and let your customers know how to purchase genuine products from those retailers. Finally, include a mechanism where customers can contact you if they suspect they have received counterfeit goods, which will provide you with helpful information and build customer trust.
Implement anti-counterfeiting and authentication tech
Using holograms, special visible markings, and serialised labels that are difficult to duplicate on packaging can discourage counterfeiters and make them easier to identify. QR codes and serial numbers on packaging can help customers track and identify genuine products. Blockchain technology and non-fungible tokens (NFTs) are a promising new tool in the fight against counterfeiters. NFTs associated with genuine physical products can be used to confirm their authenticity and trace the chain of custody of the product from the genuine producer, through the chain of distributors and retailers, to the customer, and beyond to any second-hand sales. Anna Naydonov, a trademark and false advertising litigator at Finnegan, wrote about the promise of using NFTs in the fight against counterfeits in a recent edition of Intellectual Property Magazine and anticipates that "[i]n the not-so-distant future, we can expect most luxury items to come with an NFT/blockchain component."8
Footnotes
1. Digital Commerce 360, Covid's Impact on Online Shopping (16 June 2021) https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/ (reporting 32.4% increase in online retail sales year-over-year in 2020 and 39% increase in Q1 2021).
2. Organisation for Economic Co-operation and Development (OECD), Trade in fake goods is now 3.3% of world trade and rising (18 March 2019), https://www.oecd.org/newsroom/trade-in-fake-goods-is-now-33-of-world-trade-and-rising.htm.
3. US Customs and Border Protection, IP rights, (3 Sept 2021), https://www.cbp.gov/trade/priority-issues/ipr.
4. Amazon, Report infringement, https://www.amazon.com/report/infringement (last visited 16 Sept 2021).
5. eBay, Notice of claimed infringement, https://ir.ebaystatic.com/pictures/aw/pics/pdf/us/help/community/EN-NOCI.pdf (last visited 16 Sept 2021).
6. Wish, Report intellectual property (IP) violations, https://merchant.wish.com/brand-protection/brand-violation-report (last visited 16 Sept 2021).
7. See, eg, Bolger v Amazon.com, LLC, 53 Cal App 5th 431, 439, 451-62 (Cal Ct App 2020), review denied (18 Nov 2020) ("Under established principles of strict liability, Amazon should be held liable if a product sold through its website turns out to be defective."); State Farm Fire & Cas Co v Amazon.com, Inc, 390 F. Supp. 3d 964, 966 (W D Wis. 2019) ("Amazon does not merely provide a marketplace where third-parties sell to Amazon customers. Amazon was so deeply involved in the transaction. that Wisconsin law would treat Amazon as an entity that would be strictly liable for the. defects, if, as in this case, the manufacturer cannot be sued in Wisconsin.").
8. Anna B Naydonov, Brand new world, Intellectual Property Magazine (July/August 2021 issue), https://www.intellectualpropertymagazine.com/patent/brand-new-world-147584.htm.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
