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.

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.

On Valentine’s Day in 2015, Natasha Ruckel and her husband, Fred, were sitting in their living room in Gilboa, N.Y. Natasha was improvising on the piano, and Fred was listening while messing around with the couple’s cat, Yoda. Fred noticed a ripple in the living room rug, forming a half circle on one side. Again and again he tossed toys into the ripple and a delighted Yoda darted in and out. Natasha looked up from her playing. “That’s when we came up with the idea for the Ripple Rug,” she says.

The Ruckels, who had spent around 25 years earning their living in marketing and advertising for brands from PepsiCo to ESPN to Hasbro, were already in the midst of creating their first venture: an app that provided a way for amateur photographers to monetize online images. But they both agreed that the Ripple Rug was a better bet.

A couple of days later, Natasha went to Home Depot and bought some cheap pieces of carpet, and they got to work on a prototype. When they had that, they launched a Kickstarter campaign in May 2015, pricing the American-made product at $39.95, to test the market. Within 30 days, they received $15,000 in backing. They had the products made in Georgia for $15 each, and filled the orders.

The Ruckels were weighing their next step when, that fall, the opportunity of a lifetime hit. QVC, in conjunction with the Today show, hosted an ongoing competition called the “Next Big Thing” for entrepreneurs with new retail products. Participants presented their offerings on the TV program, and the winning products received an order from QVC.

Following an arduous vetting process — including proof of a multi­million-dollar insurance policy, a guarantee of having 1,500 items available for sale and sample videos of the Ruckels in pitch mode — Ripple Rug made the cut. “We drove into New York City, and at every exit, we practiced the pitch,” Fred remembers. “We were there by 5 a.m. and hardly slept the night before.”

They sold a few hundred units immediately. QVC bought 1,500 more and Ripple Rug became a top seller. “It was pretty damned amazing,” says Fred. “We were profitable out of the gate, which is virtually unheard of. It felt like a great moment.”

It was, and it wasn’t. Over the next 14 months, the Ruckels learned that coming up with a truly original innovation attracts not only devoted customers but also the kind of highly organized, deep-­pocketed bootleggers who rip off products and systematically grind their inventors into the ground — both financially and emotionally. “It creates so much discord that you are willing to give up the dream of entrepreneurship and go back to your day job,” says Fred.

In the thick of battle, however, the Ruckels learned critical lessons: the importance of copyrighting assets before launching; the reality that people will steal everything from your marketing pitch to your product to your advertising photos; the need to continually patrol for ripoffs and take action. They also got a darkly fascinating glimpse of how ruthless, well-funded, deeply sophisticated bootlegging operations work — and how, with tenacity, vigilance, a good lawyer and the right strategy, they can be beaten.

Continue reading at Entrepreneur.com

The World Trade Organization stipulates that tariffs can only be imposed when there is material injury to the domestic industry, such as the detrimental effects of currency manipulation. However, in the U.S. Treasury’s most recent semi-annual report, China was not found to be maintaining an artificially low Yuan. However, if the Treasury Department did designate China a currency manipulator, a one-year mandatory negotiation period would be required to attempt to resolve the problem. If unresolved, the U.S. could then retaliate by, among other actions, implementing the 45-percent tariff proposed by the Trump administration. However, given the current administration’s unconventional approach, tariffs could be levied – theoretically – without congressional approval.

The news media has been bombarding us with information on how this tariff will affect the auto industry, in particular, but what do increased tariffs mean for others – such as the consumer product industry? As it is commonplace for such products to be manufactured in China, if a product marketer chose to continue to manufacture in China after the implementation of a tariff, that $19.99 retail price could be pushed up to $28.99. Alternatively, rather than continuing to manufacture in China (and be subject to the threat of higher tariffs), the product marketer can choose to move its manufacturing to the U.S. or elsewhere.

There is no dispute that manufacturing is costlier in the U.S. than in China; that is why most manufacturing occurs overseas. However, in addition to current (underutilized) incentives, such as the Domestic Productions Activities Deduction, and export incentives including the Interest Charge Domestic Sales Corporation (IC-DISC), President Trump is promising to cut regulations and lower corporate taxes. This could, theoretically, make U.S. manufacturing a viable option. Further, should this tariff become a reality and manufacturing jobs do come home, it could significantly reduce the number of counterfeit products entering the country. This, perhaps, may be the biggest advantage to manufacturing in the U.S. or other countries that are not on the counterfeit watch list, such as Bangladesh or Vietnam.

As the product industry is fully aware, China is severely lagging in intellectual property protections. Product leaks (sometimes by the manufacturer or its employees) and subsequent infringement are rampant. A winning product is likely to be knocked off and/or counterfeited and selling on Alibaba and Amazon before it even hits the shelves.

The Commission on the Theft of American Intellectual Property reported that China is responsible for as much as 80 percent of counterfeit goods globally. It is unquestionably the largest source of counterfeits in the United States. Global imports of counterfeit and pirated goods are worth nearly half a trillion dollars per year, with 20 percent of that affecting U.S. intellectual property and product owners. In 2013 alone, U.S. Customs and Border Patrol (USCBP) seized $1.3 billion in counterfeit goods – and that’s just what was detected. Pulling manufacturing out of China would significantly reduce the ever-growing influx of counterfeit items into the country and around the world.

An organization’s ability to change and innovate quickly is a key competitive advantage. Similarly, its ability to anticipate and deal with change in a challenging environment is tantamount to survival. Any prudent business owner will need to do an analysis of alternative sources of supply, or renegotiate with suppliers for better pricing to offset increased tariffs and then decide the best course of action. Contact a knowledgeable attorney and seek professional accounting advice to conduct due diligence on the best options for your business.

Naturally, we were concerned by this information and perplexed as to why so many marketers continue to do business with Amazon in spite of the fact that knockoffs and counterfeits were harming their brands’ reputations as well as their profit margins.

However, it seems that the tide has turned, as a few industry leaders – putting their competitive natures aside – banded together to take on what is arguably the largest source of counterfeits, knockoffs, and intellectual property infringement in the country. Here’s a quick synopsis of the lawsuit:

On Dec. 5, Allstar Marketing Group LLC, Ontel Products Corp., and Ideavillage Products Corp. filed a lawsuit against Amazon in the U.S. District Court for the Southern District of New York. Their claims include direct trademark infringement, direct counterfeiting, contributory counterfeiting and trademark infringement, unfair competition and false designation of origin, copyright infringement, and contributory copyright infringement. These claims are based on Amazon’s routine practice of manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling unlicensed and/or infringing versions of the plaintiffs’ “As Seen on TV” products.

What is noteworthy about this action is that it includes direct infringement rather than just contributory infringement claims, which Amazon has been able to skirt in the past – relying on immunity theories under Section 512(2) of the Digital Millennium Copyright Act, which protects internet service providers who operate third-party vendor platforms.

The complaint calls Amazon out on its well-known practice of commingling products sold by third parties (counterfeits) with inventory supplied by authentic sellers and fulfilled by Amazon. Further, the complaint details how Amazon allows third-party sellers to list their products against a legitimate product’s listing, such that a consumer can see the less expensive option, but believe it to be authentic because it shows up on the primary listing’s page. This particular conduct has been a thorn in marketers’ for some time, as it prevents easy removal of counterfeit listings (and negative reviews) on the platform.

Damages sought by the plaintiffs include profits and treble damages in the amount of a sum equal to three times such profits or damages. Alternatively, the plaintiffs are seeking statutory damages in the amount of not more than $2 million per counterfeit mark infringed. The plaintiffs are also demanding that the court order Amazon to destroy all infringing products along with advertising and promotional materials.

A pretrial hearing has been set for Feb. 15, 2017. If the complaint isn’t thrown out, as was in the case in previous efforts to sue Amazon for infringement, expect to see many other industry players jumping on the bandwagon to have their day in court. If you have concerns about infringing products being sold on third-party marketplaces like Amazon, we’d love to hear your story. Watch this space for updates.

Those of us in the consumer products industry are either directly or indirectly aware of the problems Amazon poses to brand integrity and consumer protection. It is impossible to prevent counterfeit products from being sold on the platform, and, perhaps even more frustrating, Amazon is making it exceedingly difficult to remove those counterfeit listings and stop repeat offenders. In many cases, before Amazon will remove a listing, the product owner is required to purchase the knockoff and prove to Amazon, via photos, that the goods are fake. And, of course, Amazon takes its percentage on that sale. Outrageous, right?

Not only do counterfeit goods sold on Amazon harm the product owner in the way of lost sales, but brand integrity suffers as well. Because the infringer can get away with using product copyrights and trademarks to sell counterfeit goods, the consumer believes she is ordering the real deal. In turn, when the consumer receives the product and it breaks, or does not perform as advertised, that consumer leaves a poor review, which the product owner then cannot remove from Amazon. It’s a nasty cycle that, as many product owners can attest to, Amazon seems to have no interest in remedying. And honestly, why would it? The courts have held, including most recently in Milo & Gabby, that Amazon is not liable for the infringement of third-party sellers on its platform. What’s the possible solution for product owners (and ultimately, consumers)? Enter, Donald Trump.

As he does with so many, the Donald has been spatting with Amazon owner Jeff Bezos via Twitter and on the campaign trail. Trump claims that Bezos is concerned that if he wins the election, Trump will go after Amazon for its “huge antitrust problem.” According to Trump, it is for this reason that Bezos, who also owns the Washington Post, has 20 staffers digging for dirt on the presidential candidate. While many others are also doing their best to prevent a Trump presidency for various reasons, could Trump be right about Bezos’ motivation?

Antitrust laws promote competition and protect consumers from predatory business practices. Seth Bloom, former general counsel of the U.S. Senate’s Antitrust subcommittee, recently stated that because there needs to be some illegal behavior and not just a large market share, “The test … is whether the conduct of Amazon is benefiting or harming consumers.” He went on to say that he hasn’t heard anything said about how Amazon is harming consumers. Well, apparently Bloom has not ordered a counterfeit food chopper that arrives broken, or counterfeit skin care products that cause severe allergic reactions. If he had, he would know that consumers are being harmed and that Amazon’s brand protection department is well aware of it.

These practices could spell trouble for Amazon should the Federal Trade Commission or Department of Justice start poking around. So, perhaps being called out by Trump — and (hopefully) other high profile individuals/companies — will put some pressure on Amazon to come to the table and address some of these issues in order to … err … make Amazon great again.

Jessica M. Pfau is a partner at Phillips & Pfau LLP. She can be reached via e-mail at 

Jessica@DigitalLawGroup.com