As most product marketers are aware, Amazon has a serious problem with counterfeits. What’s worse, is that many of the counterfeits are so convincing, consumers are unaware that they purchased inauthentic product. This is especially true when consumers purchase products under the seemingly protective marker of “fulfilled by Amazon.” Although not all consumers may be feeling the effects of the counterfeit pandemic (except that “brand name” products are of poorer quality than expected), product owners and marketers have been paying the price in terms of lost sales and goodwill for years. Fortunately, the current administration has taken up the cause.
On Friday, the Department of Homeland Security (DHS) released a report (Report) pursuant to President Trump’s April 3, 2019, Memorandum on Combatting Trafficking in Counterfeit and Pirated Goods. The Report – the first of its kind – outlines a series of recommendations and actions that should be taken by both the federal government and industry players in order to combat the counterfeit goods epidemic that has swept the US product industry. While Amazon is not directly named, it is clear from the practices and examples detailing how e-commerce sites have made it easy for counterfeit goods to reach the masses, that Amazon was most certainly the basis for much of the Report.
One of the critical determinations of the Report is that the US government needs to “ensure entities with financial interests in imports bear responsibility.” As such, companies such as Amazon will have to take steps to actively prevent counterfeits from reaching consumers, such as working more closely with US Customs and Border Patrol, as well as thoroughly vetting sellers on the platform.
The report provides the following list of “Best Practices” for e-commerce platforms and third-party marketplaces:
1. Comprehensive Terms of Service Agreements
2. Significantly Enhanced Vetting of Third-Party Sellers
3. Limitations on high risk products
4. Efficient Notice and Takedown Procedures
5. Enhanced Post-Discovery Actions
6. Indemnity Requirements for Foreign Sellers
7. Clear Transactions Through Banks that Comply with U.S. Enforcement Requests
8. Pre-Sale Identification of Third-Party Sellers
9. Establish Marketplace Seller IDs
10. Clearly Identifiable Country of Origin Disclosures
Additionally, and quite significantly, the Report recommends that the Department of Commerce consider changing contributory and/or vicarious infringement standards so that e-commerce platforms can be held liable for contributory trademark infringement. This would be a colossal change from the status quo, as numerous intellectual property owners have unsuccessfully sued Amazon for trademark infringement due to its role in counterfeit product distribution.
Moreover, the groundbreaking Report goes on to suggest the development of a national awareness campaign that “should involve platforms, rights holders, and the applicable government agencies to provide education for consumers regarding the risks of counterfeits as well as the various ways consumers can use to spot counterfeit products.”
While we may not see a decrease in counterfeits immediately, the DHS Report and subsequent actions to be taken are a major step in the right direction. For more information on the Report and what it means for intellectual property rights holders, please email us at DLG@DigitalLawGroup.com.