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Newly Introduced SHOP SAFE Act of 2020 Takes on Counterfeiting in Electronic Commerce But Does Not Go Far Enough

The sale of counterfeit products is a worldwide and widespread issue that touches nearly every field of goods.  Counterfeit products rob businesses of sales of their products, governments of tax revenues, individuals of legitimate jobs, and also often put the health and safety of consumers at risk.  The negative impacts of counterfeiting and piracy are projected to drain $4.2 trillion from the global economy and put 5.4 million legitimate jobs at risk by 2022.  The goods making up the biggest share of seizures of counterfeit goods include footwear, clothing, leather goods, electrical equipment, watches, medical equipment, perfumes and cosmetics, toys, jewelry, and pharmaceuticals.  The Government Accountability Office (GAO) found that 20 of 47 items purchased from third-party sellers on popular consumer websites were counterfeit.

The use of internet marketplaces or stand-alone websites to sell counterfeit goods has created a host of new problems.  First, the counterfeit nature of goods of dubious quality is less likely to be noticed because the seller is likely to use false images depicting genuine goods rather than the shoddy knockoffs.  Second, rather than shipping goods in large shipping containers that are more difficult to evade inspection, counterfeiters that sell on the internet are more likely to ship in small parcels sent by mail or express courier.  Small parcels are considerably less likely to be screened by customs and seized where applicable.  Finally, and most disturbingly, the anonymous nature of internet commerce, and the frequency with which goods are sold from overseas, can make the identification and prosecution of counterfeiters difficult or even impossible.

With the scourge of counterfeiting in mind, we were therefore excited to learn of the introduction of the bipartisan Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act.  The SHOP SAFE Act was introduced by Reps. Jerrold Nadler (D-NY), Chairman of the House Judiciary Committee; Doug Collins (R-GA), Ranking Member of the House Judiciary Committee; Hank Johnson (D-GA), Chairman of the Subcommittee on Courts, Intellectual Property and the Internet; and Martha Roby (R-AL), Ranking Member of the Subcommittee on Courts, Intellectual Property and the Internet.

The SHOP SAFE Act proposes to:

  • Establish trademark liability for online marketplace platforms when a third-party sell a counterfeit product that poses a risk to consumer health or safety and that platform does not follow certain best practices;
  • Incentivize online platforms to establish best practices such as vetting sellers to ensure their legitimacy, removing counterfeit listings, and removing sellers who repeatedly sell counterfeits; and
  • Call for online marketplaces to take steps necessary to prevent the continued sale of counterfeits by the third-party seller or face contributory liability for their actions.

A copy of the full text of the bill can be found here.

Although the SHOP SAFE Act is an excellent first step, its limited scope does not address the full economic harms created by counterfeiting.  The Act is limited to the sale of goods that pose a risk to consumer health or safety.  Examples given, include cosmetics, baby formula, batteries, chargers, airbags, car seats, and auto brakes.  These goods should certainly be given priority, but the majority of seized goods involve industries that do not necessarily affect health or safety, such as apparel and footwear.  Arguably, these goods can also affect health or safety as shoddy footwear can be dangerous as can mislabeled apparel that triggers allergies.  But limiting the scope of the SHAPE SAFE Act in ways that do not protect considerable numbers of consumers from being deceived is a missed opportunity.

We will continue to monitor the legislative progress of the SHOP SAFE Act and, where possible, work with our clients to try and increase the scope of that act.

HBA attorneys have considerable experience in advising and assisting clients in dealing with combatting counterfeiting and other violations of our clients’ intellectual property rights.  Please feel free to contact us to discuss these issues.

 

Marc Reiner’s current practice includes General Commercial Litigation; the registration of trademarks; litigation and counseling in the areas of trademarks, copyrights, false advertising, cybersquatting, and violations of the rights of privacy and publicity.