Just this month, pet medication supplier, Pet King Brands, discovered multiple counterfeit listings for its hydrocortisone ear solution, Zymox.   Upon notification, Amazon removed the listings and issued refunds to customers who purchased the bogus products.  In the past, refunds have been issued for some counterfeits, but usually only months after the listing was reported.  Pet King is currently testing the counterfeit items to determine their contents and offer consumers more information (i.e., about potential health concerns, etc.).

Other brand owners, however, have been fighting counterfeit trolls for years with only bare minimum support from Amazon; relying heavily on their own lawyers to exterminate these brand leeches.  For example, 71-year-old inventor Bonnie Tyler a/k/a “Granny Thug” has, with the help of her attorneys, removed about 800 counterfeit listings of her egg pealing product, the NEGG.  Tyler herself spends time every day on the platform sniffing out infringers, and when asked what advice she would give to new product owners, Tyler said “I would immediately get your trademark.”  Tyler’s battle has been ongoing for two years and predates Amazon’s new unit.  Given the sheer volume of products on the platform, like Tyler, many owners will have to scare off counterfeiters with limited assistance from Amazon’s new task force.

If you are a brand owner, it is imperative that you monitor Amazon daily for cheap knockoff products disguised as your own.  Contact an attorney who can offer a brand quality and safety enforcement program for your product to ensure that consumers are getting treated, not tricked, when they buy your product this holiday season.

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.

A recent investigation by the Wall Street Journal revealed that over 4000 items for sale on Amazon were mislabeled, declared unsafe by US agencies, or all-out banned by federal regulators.  Horrifically, over 2000 of those Amazon listings were medications and children’s toys that lacked proper health and safety warnings.  Specifically, the investigators ordered and tested 10 children’s products, many promoted as “Amazon’s Choice.” Four failed tests based on federal safety standards.  Moreover, 46% of the 4152 unsafe products were fulfilled by Amazon. 

Sadly, a mislabeled product sold on Amazon was involved in the death of one consumer.  In 2014, Albert Stokes purchased a motorcycle helmet on Amazon that was listed as certified by the U.S. Department of Transportation (DOT). Subsequently, Mr. Stokes was involved in a fatal accident wherein his helmet came off. His mother sued Amazon claiming the helmet was defective, but ultimately settled for $5,000 with no admission of liability from Amazon. However, in July 2019 the National Highway Traffic Safety Administration stated that the helmet was not DOT compliant and that it had been recalled.  At that time, it was still listed as DOT compliant on Amazon.  The listing has since been removed (5 years after the accident). 

Whether you are selling lens wipes or motorcycle helmets, cheap counterfeits of your product can pose hidden dangers to consumers.  Not only does this erode your brand image, but it can also open you up to unwanted liability claims.  While Amazon is taking steps to make it easier to monitor and remove counterfeits from the platform, it is far from a perfect system. Product marketers should consult with an experienced attorney who can navigate Amazon’s platform and help ensure that their trademarks, copyrights and brand name do not appear on listings for potentially hazardous counterfeits.

Fake reviews have been a pretty standard marketing tool for some time; with product owners paying companies to post rave reviews of its product and poor reviews of competing goods. Fake reviews are so ubiquitous that, according to Saoud Khalifah, founder and CEO of Fakespot, a site that flushes out fake reviews, up to 70% of reviews on Amazon are fake. This staggering figure is perhaps why the Federal Trade Commission (FTC) has finally decided (likely to the dismay of product owners) to take action.

On February 19, the FTC filed a complaint against Cure Encapsulations, Inc. and its owner Naftula Jacobowitz, alleging that the defendants violated the FTC Act by, among other fraudulent actions, paying amazonverifiedreviews.com to create and post approximately 30 Amazon reviews a day of their “weight loss” product, Garcinia Cambogia. The FTC argued that such practices constituted “unfair or deceptive acts or practices in or affecting commerce.” In light of the quick settlement by the defendants, there was no 5-star argument to refute the allegation.

The proposed court order settling the complaint prohibits the defendants from making claims for any dietary supplement, food, or drug unless they have competent and reliable scientific evidence in the form of human clinical testing supporting the claims. The order also requires the defendants to notify Amazon, Inc. that they purchased reviews of their product and to identify to Amazon the fake reviews. Finally, the order imposes a judgment of $12.8 million, to be suspended upon payment of $50,000 to the FTC, in light of the defendant’s current financial status.

While $50,000 may not seem so bad as compared to how much money can be made due to sales generated by fake product reviews, a deeper pocketed company could have been on the hook for the full $12.8 million.

This is the first time the FTC has gone after a company for paid reviews, and more actions should be anticipated now that the foundation has been laid.

In addition to bogus reviews on Amazon, fake review websites such as tvstuffreviews.com and freakinreviews.com, often featuring “as seen on tv” and weight loss products, are quite prevalent. Sites such as these look like a source of legitimate reviews; however, the “reviewers” have likely never actually tested or investigated the products they are allegedly reviewing. As such, it is probably just a matter of time before enough complaints generate an FTC investigation into the financial sources behind those reviews.

Be sure to consult an experienced attorney if you have questions or concerns about your marketing methods or how to spot and remove fake reviews.

Steve Suddell, inventor of the “Neck Hammock,” raised just over $200k on Kickstarter. He was on cloud nine – for about a minute. A week later, he began receiving angry emails from backers stating that his product was being sold for 50% less on other websites. After some investigation, he found websites featuring all of his images, videos, and content, advertising the Neck Hammock at half the price. He was concerned that Kickstarter would take his project down (as was the case with another product campaign, C-Rest), because the listings violated their policy of “not being able to sell the product anywhere else as long as the campaign is active.” The problem was, his product was not being sold elsewhere; rather, it had been copied and counterfeited. This has become very common with Kickstarter projects, and while Kickstarter is aware of the problem, it has not taken any steps to help the creators/inventors on its platform.

Yekutiel Sherman also knows all too well what it’s like to become a victim of China’s lightning-speed copycats. After he launched his Kickstarter campaign (but prior to manufacturing his first unit) of the “Stikbox,” a smartphone case that turns into a selfie stick, a cheap knockoff version of the product was being sold on AliExpress at half the price.

Unfortunately, these experiences are not uncommon. Crowdfunding platforms, Amazon and sites like Taobao have become feeders for knock-off artists to source other people’s new gadgets. These companies are deep-pocketed, and can get a product manufactured and sold well before the inventor’s campaign is fully funded. This just goes to show that your brilliant idea – even if it is patented or trademarked – could be on sale through Chinese distributors or other bootleggers even before you’ve gotten your project funded.

If you are an inventor who is considering using a crowdfunding site to fund your new idea, be diligent in protecting your proprietary information. There are strategies you can employ that describe the features, advantages, benefits and objectives of your invention without disclosing key details that would enable someone else to rip you off. Consider scheduling a consultation with an experienced intellectual property attorney who can provide you with some affordable strategies to protect your product, such as working with U.S. Customs and Border Control.

Cybersecurity firm, RiskIQ, reported that Black Friday scams have been on the rise significantly since 2016. Not only do consumers and product marketers need to be wary of the usual suspects (i.e. Amazon, Alibaba, eBay), but fake mobile applications are also a serious concern. According to tests run by RiskIQ, a search of popular retail brand names in conjunction with the term “Black Friday,” resulted in over 200 malicious apps. The firm’s full assessment revealed over 6,600 mobile apps were illegitimate; offering holiday shopping deals that were in reality, a scam.

Additionally, last year nearly a quarter of counterfeits purchased by millennials were done via social media sites such as Facebook and Instagram; thus, monitoring these platforms is essential to brand protection and a successful holiday shopping season.

Whether you are a shopper or a seller, here are some keys to identifying counterfeits online:

Deep discounts. A deal that is too good to be true is likely just that. If you can purchase a big    brand product like MAC lipstick or BEATS by DRE at a deep discount, the product is likely a fake.

Shipping from China. Products shipping directly from China can be a red flag, as most (not all) legitimate U.S. products are shipped from U.S. distribution/fulfillment centers.

Unverified third-party sellers. Most reputable online sellers also have their own product websites (e.g. snuggiestore.com). Do a web search prior to purchase to find out whether the seller is the same as the one listed on Amazon, and whether there is a major price difference in the products.

Typically, you won’t know if you purchased a fake until you have received your shipment. Signs to look for are:

Packaging that is flimsy or has misspelled words.

Electronics that do not have the UL (Underwriters Laboratory). This is particularly concerning as counterfeit electronics can be a safety hazard.

No country of origin or manufacturer contact information on either the packaging or the product itself.

Policing the sale of goods online can be a daunting and time-consuming task for product marketers – especially if a product is being heavily counterfeited. It also doesn’t help that each marketplace has a different system (some more user-friendly than others) for reporting and ultimately removing counterfeit goods and storefronts.

Ensure that you can take advantage of this season’s millennial impulse buying extravaganza by making certain consumers are purchasing authentic products from you or your authorized distributors, so that buyers and product owners, not counterfeiters and scammers, can benefit from holiday season spending.

Due to China’s classification under the UPU, the U.S. is forced to subsidize shipping costs for Chinese imports – including counterfeit products – to the tune of approximately $300 million annually. As such, it oftentimes costs Chinese manufacturers and counterfeiters less to manufacture and ship products to the U.S. than it does for American companies to ship products within the U.S. This has become an increasingly troubling matter for American businesses over the past few years as consumer shopping has largely moved from brick and mortar stores to e-commerce platforms such as Amazon. Specifically, Chinese counterfeiters are able to severely undercut the price of authentic goods on Amazon (and eBay, etc.); making the counterfeit a significantly more appealing option to the unaware consumer.

This concern was echoed by President Trump’s trade advisor, Peter Navarro, who stated in a recent op-ed that this pricing “inequity puts American small businesses and manufacturers at a severe competitive disadvantage.” Navarro went on to detail how U.S. businesses and manufacturers pay between $19 and $23 to ship a 4.4lb package while China post only pays $5. It does not take an economist to see how such a disproportion is harming U.S. businesses.

As such, and in keeping with his America first policy, President Trump formally moved last week to withdraw from the UPU; an effort that is widely supported by U.S. shipping companies and manufacturers. Withdrawing from the UPU is a yearlong process, and if finalized in 2019, the U.S. will lose access to internationally recognized barcodes that allow parcels to be shipped throughout the UPU member countries. However, because it does take so long to formally withdraw, it gives the Trump administration ample time to renegotiate the rules and rates with the UPU and then rescind its notice of withdrawal. This is the most likely outcome, and one that will benefit U.S. product inventors, owners and distributors considerably.

Until this matter with the UPU is resolved, it is essential for product marketers to monitor third party sales of their products online to ensure counterfeits are not being offered at a lower price (and quality). Federally registering product trademarks and copyrights, as well as utilizing tools such as Amazon’s Brand Registry can help combat these counterfeiters and more effectively remove unauthorized product listings.

The copyright is so overlooked that even product attorneys forget what a powerful member of the IP protection league it is. For example, patent rights enforcement tends to be technical and complex, often requiring long, costly legal battles with Tony Stark caliber experts to prove infringement. However, copyrights, which protect property such as images, illustrations, infomercials, and product packaging, are pretty easy to eyeball, even for an untrained juror.

Copyright is also the most affordable IP protection to secure. Moreover, copyright infringement triggers statutory damage awards that can soar to up to $30,000 per occurrence; plus, recovery of attorney’s fees. As such, trial attorneys are more willing to take on a (properly registered) copyright infringement case on a contingency basis. Of course, statutory damages are merely a fallback, with many product owners seeking actual damages (i.e., lost profits), which is an entirely different hulk of a task.

Additionally, the copyright is the only member of the IP protection league that successfully combats counterfeit sales on platforms such as Amazon; trademark registration alone will not suffice to remove counterfeits on Amazon. To be sure, the counterfeit seller merely has to allege that it is selling a legitimate product, and then there is no infringement thanks to the First Sale Doctrine (you bought it, you own it, you can resell it and call it what it is). In some instances, the infringer changes the name of the product, which effectively shields it from a trademark infringement claim altogether. However, the right to resell a product does not give rise to the right to display copyrighted images for the purpose of that sale. This is another reason why the copyright is so powerful.

While patents and trademarks are formidable tools for many reasons other than defending against knock-offs and counterfeits, with the copyright being such a low-cost titan in the IP universe, it’s a wonder more businesses do not utilize its armor. For maximum protection, copyrights need to be registered in a flash, so be sure to summon an intellectual property attorney prior to your product rollout.

Many heavy hitters believe that cryptocurrency is the cash of the future, including Shark Tank’s Mark Cuban and Robert Herjavec. While Herjavec is a bit more cautious and won’t be diving in just yet, Cuban recently announced that fans would be able to use Bitcoin and Ether to purchase season tickets to Dallas Mavericks games for the 2018-2019 season. This will make the Mavs the second NBA team (after the Sacramento Kings) to delve into the cryptocurrency market.

More notably, retailers such as Overstock.com, Expedia, Newegg, Shopify stores, Etsy sellers, Subway, and Dish Network are among companies currently accepting cryptocurrency as payment for some or all of their products/services. Though these companies are not in direct competition with DR players, there is some overlap, which could make shopping at these retailers more appealing to consumers than those that do not accept cryptocurrency.

Still not convinced? Rumor has it that the big kahuna, Amazon, may be all in. In November, Amazon purchased the domains amazonethereum.com, amazoncryptocurrency.com, and amazoncryptocurrencies.com. Such purchases suggest that not only might Amazon be accepting cryptocurrency soon, but it may also be setting up its own exchanges. While the domains could mean nothing at all (three years ago, Amazon purchased amazonbitcoin.com, which merely redirects to amazon.com), with so much activity in the cryptocurrency market right now, it would be foolish to think that such a forward-thinking and progressive company that doesn’t shy away from new ventures wouldn’t have cryptocurrency in its game plan.

If Amazon does get in the market, it will put direct response companies at an even bigger disadvantage. Currently, Amazon is perhaps the biggest distributor of counterfeit and knockoff goods, and now it is even in the market of manufacturing its own competing products. Add a new purchase payment option, such as Bitcoin or Dash (commonly used to purchase consumer products), and it could be game over for the direct response industry.

Think about it. If a consumer has a choice between going to a product website and paying $19.99 plus processing and handling and (P&H) waiting possibly weeks for delivery … or going to Amazon and paying $19.99 or less in cryptocurrency and receiving the product in two days with Prime shipping, the choice is obvious. While many distributors do sell their products on Amazon, as well, the return is certainly not as high as the online and phone sales that allow for upsells and marked up P&H charges. Of course, distributors can always add Amazon Pay as a payment option on their sites (assuming cryptocurrency becomes an Amazon Pay option), but this may not be enough to keep sales on product websites. If product distributors and their merchants begin accepting cryptocurrency, it may help keep those sales competitive.

Despite the volatility of cryptocurrency right now, demand for it appears to be there. With kinks needing to be worked out, the house is not on fire just yet, but it is certainly the time for performance-based marketers to at least start doing their homework. There are whispers that some companies may be doing just that.

Essentially, companies are assigning their patents to tribes in order to take advantage of the tribes’ sovereign immunity, thus shielding them from the patent review process and potential patent invalidation.  The most recent targets of these lawsuits in the tech industry have been Apple, Amazon and Microsoft.

The method works something like this.  A company files for and is granted a patent.  That patent is assigned by the company to a Native American tribe, meaning the tribe is now the owner of the patent. The tribe then licenses the patent back to the company in exchange for a substantial royalty (last month pharmaceutical company Allergan agreed to pay the St Regis Mohawk Tribe $13.5 million up front and a royalty of $15 million annually for its now defunct Restasis patent).  Then, when instructed by the company, the tribe files a lawsuit against a third party (i.e. Apple) for patent infringement.

Normally at this stage (as previously discussed in our Battle of the Copper Pans article), the best course of action for the company being sued would be to attempt to invalidate the patent it is allegedly infringing upon through the USPTO’s inter partes review process (“IPR”).  The IPR occurs before the Patent Trial and Appeals Board (“PTAB”) rather than in the courts, and is therefore a much more time and cost-effective way to invalidate improperly issued patents.  However, if the owner of the patent is a Native American entity, it has sovereign immunity, and is not subject to the jurisdiction of the PTAB.  The company is therefore forced to litigate the infringement claims, which typically lasts over a year, and can result in the defendant companies being enjoined from selling their “infringing products” during such time.

Although defendants are crying foul at this tactic, it seems brilliant for owners who want to ensure their patents are not subject to invalidation proceedings.  However, this trend may not continue for long as we certainly expect to see the defendants of the lawsuits challenge these so-called “sham” transactions and the sovereign status of the tribes.

It is best to have a knowledgeable attorney during all stages of the patent process.  Please email us if you have any questions or if you would like more information regarding the content above.