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.

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.

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.

RUN-DMC’s complaint alleges that the defendants are advertising, manufacturing, selling, and distributing multiple products with the iconic 1980s rap/hip-hop group’s RUN-DMC trademark without the permission of RUN-DMC, which is owned by former band member, Darryl McDaniels. Run-DMC alleges that Amazon directly advertises and sells infringing products, as well as fulfills orders for infringing products sold by third parties who are also named in the lawsuit.

Although this complaint did not layout out an abundance of evidence against Amazon – unlike the complaint by DRTV companies Allstar Marketing Group LLC, Ontel Products Corp., and Ideavillage Products Corp. (filed just three weeks before RUN-DMC’s complaint) – the key is that, similar to the DRTV complaint, Amazon is accused of direct infringement, rather than just contributory or vicarious infringement claims, which Amazon has been able to successfully avoid liability for in the past.

In addition to troubles in the U.S., Amazon has agreed to pay $1.1 million Canadian in penalties and costs to the Canadian Competition Bureau to settle a matter regarding its pricing practices. The fine comes after a two-year investigation into list prices on Amazon’s Canadian site, Amazon.ca. According to the Competition Bureau, “Amazon often compared its prices to a regular price – or ‘list price’ – signaling attractive savings for consumers.” The Bureau concluded that these claims created the impression that prices for items offered on Amazon.ca were lower than usual market prices, even though they may not have been. The investigation found that Amazon relied on its suppliers to provide list prices and did not verify that those prices were accurate. The savings claims at issue were not only advertised on Amazon.ca, but were also e-mailed to customers and displayed in online ads.

Amazon has since made changes to these anticompetitive practices in Canada and now validates list prices provided by suppliers on the Canadian platform. According the Bureau, new practices have also been applied to Amazon.com, which was engaging in the same behaviors as its Canadian counterpart. Although unclear as to when exactly the plan to change this practice was set in motion, in May 2016, former general counsel of the U.S. Senate’s antitrust subcommittee, Seth Bloom, stated that he had not heard anything said about how Amazon was harming consumers (which is a necessary element in the test for antitrust violations). Just a few months later, amidst antitrust probes in Japan and Europe, Amazon hired Bloom to lobby on its behalf.

Although not insignificant, a million-dollar payout is just a drop in the bucket for the online behemoth, which has a market value of approximately $250 billion. The point, however, is that many more drops in the bucket could add up as an increasing number of lawsuits continue to be filed by similarly harmed marketers. In spite of these issues, marketers, distributors, and consumers alike love Amazon’s convenience, free shipping for Prime customers, and simple return policies. The point is not to take down Amazon with fines and lawsuits, but rather, persuade Amazon into changing its illegal and deceptive practices. The more product owners and governments take action against Amazon’s egregious counterfeit and knockoff goods problem and deceptive practices, the more likely Amazon will be forced to reform.

As always, stay tuned to this space for updates.

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

Sales platforms such as Amazon, eBay and Alibaba are great channels to sell products to the masses; however, unless monitored on a regular basis, these sites enable third-party sellers of counterfeit, and in some cases, damaged or expired goods, to cut into your profits.

Alibaba should be of particular concern for many sellers because counterfeit goods are sold on a colossal scale.  For example, consumer electronic sellers (e.g., Bose, Beats by Dre) can easily have tens of thousands of counterfeit listings on Alibaba.  This not only makes it difficult for consumers to identify who the underlying seller is and whether the product is legitimate, but it also makes it difficult for you to know whether your authorized distributor is behind the listings.

Policing the sale of your goods online can be daunting and time consuming if your product is being heavily infringed upon. 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 at times, storefronts.

This holiday season, make sure your customers are buying from you or your authorized sellers.  Digital Law Group has extensive takedown experience and knows how to most efficiently navigate each platform’s reporting system.