American E-Commerce Companies Unlikely to Face China-Like Counterfeit Liability
Attempting to root out counterfeiters online is like playing a game of whack-a-mole, but is placing the burden on e-commerce platforms an effective—or even reasonable—way to stem the sale of fraudulent goods?
July 08, 2019 at 09:30 AM
3 minute read
Last January, China enacted a new e-commerce law that holds online platforms liable for failing to “take necessary measures” to prevent the sale of counterfeit goods.
If you're a consumer who doesn't fancy the prospect of tarnishing your sneaker collection with a pair of knock-off Nikes, then this is potentially a welcomed development. For e-commerce companies in China, who can now face steep fines for failing to take action against the sale of counterfeit materials on their platform, the issue could be a little bit more complex. And it should possibly be of some concern to their counterparts in America as well.
“I think that flavors of [the Chinese law] could easily penetrate the U.S. marketplace… I could see some things coming down the pike where they are going to hold private industry responsible,” said Jason Bernstein, a partner at Barnes & Thornburg.
However, such an outcome is by no means a given. In the past, U.S. courts have sided with commerce companies when it comes to issues of trademark infringement. One of the more notable examples may be a 2004 lawsuit filed by specialty retailer Tiffany & Co. against e-commerce giant eBay. Tiffany alleged that a large amount of counterfeit silver jewelry had been made available for purchase on eBay, arguing that the platform should be held liable for trademark infringement.
Judges with the U.S. Court of Appeals for the Second Circuit ruled in favor of eBay, noting that a service provider must have “more than a general knowledge or reason to know that its service is being used to sell counterfeit goods.” In other words, an e-commerce company would need to be made aware of a specific instance of trademark infringement in order to be held liable.
The decision has provided something of a fall-back for other e-commerce companies such as Amazon that have found themselves butting up against copyright infringement woes.
“In these various lawsuits that Amazon has had, they tend to rely on that [decision] as sort of a bellwether case,” said Eric Giler, CEO of the IP protection company Ciprun Global.
Still, he pointed to the “Fulfillment By Amazon” service as one potential point of legal vulnerability for the e-commerce giant. Third party vendors sell a product, and Amazon handles the storage, shipping and customer service.
However, he thinks that there's the potential for the U.S. to continue to favor more a “buyer beware” approach then the more hardline stance China is taking with its e-commerce platforms.
“Amazon is trying to say, 'We're just a platform.' The question is going to become, do they have any responsibility? And so far they've managed to duck it,” Giler said.
To be sure, an online business taking responsibility for the content on its platform is not totally without precedent in recent history. Bernstein compared e-commerce companies identifying and expelling counterfeiters to the ongoing efforts by some social media platforms to eradicate the presence of fake news or other unsavory materials.
Bernstein could envision similar efforts being undertaken by U.S. e-commerce companies anxious about regulators potentially imposing their own equivalent of the Chinese law. Still, a video of a beheading is easier to flag than a counterfeit Gucci handbag. “It's really hard to look at content on eBay or Amazon and say, 'That looks like a counterfeit, I think we should take it down.' That's tough,” Bernstein said.
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