[vc_row row_type="row" use_row_as_full_screen_section="no" type="full_width" text_align="left" background_animation="none" css_animation=""][vc_column][vc_column_text]
By: Paul K. Smith
The fashion industry has developed into one of the most profitable global industries, with revenue from sales reaching just shy of $2 trillion in 2019.[1] One of the unique features that sets the fashion industry apart from others, and is largely attributable to such rapid and exponential economic growth, is the need for adaptation and change. Designers and brands continue to adapt in order to anticipate the desires of consumers, and this has led to changes in the manufacturing process, the design process, distribution, and sales to consumers.[2] Most notably, in the early 1980s, “transnational corporations, cyber technology, and electronic mass media have spawned a web of tightly linked networks that cover the globe.”[3] Globalization has had an impact on virtually every major industry, but for the fashion industry, “globalization [meant] an abundance of fashions sold by giant retailers who can update inventory, make transnational trade deals, and coordinate worldwide distribution of goods at the click of a computer.”[4]The shift to a focus on e-commerce has benefitted the fashion industry tremendously. Online sales of apparel for 2019—in the United States alone—constituted an estimated 38.6%, an increase in roughly ten percentage points over the past three years.[5] Notwithstanding the recent impact from the COVID-19 pandemic, “worldwide revenue” for the fashion industry was “expected to rise from $481.2 billion in 2018 to $712.9 billion by 2022.”[6] This trend, while projected to slow in growth[7], is likely to continue into the near future. Brands and designers are able to reach consumers directly through use of online service providers (“OSPs”), and consumers are able to keep in style through the press of a button while in the comfort of their own homes. Additionally, the recent COVID-19 impact is has contributed in part to the growth of e-commerce. In August of 2020, “online sales reached $63 billion, and the first eight months of 2020 generated $497 billion in online sales.”[8]Unsurprisingly, the growth of OSPs such as Amazon and eBay—which perpetuate the sale of, among other items, apparel, footwear, and other fashion accessories from third parties—has coincided with the fashion industry’s continued reliance on e-commerce. The goals of both industries have been somewhat the same: expand to a greater consumer base and increase sales. According to Elaine Kwon, a former executive at Amazon’s fashion business, “‘brands are now realizing that people are buying from Amazon, and if I, as a brand, refuse to participate, someone else can take my product and make that money.’”[9] In addition to fashion brands reaching a larger consumer base, the online platforms benefit significantly from these third-party sellers. In 2007, “Jeff Bezos told Amazon employees . . . that ‘in order to be a two-hundred-billion-dollar company, we’ve got to learn how to sell clothes and food.’”[10] It is safe to say that the crossover of the fashion industry and OSPs that perpetuate sales from third parties is unlikely to subside any time soon.One facet in particular that complicates the relationship between fashion brands and OSPs is the facilitation of sales from third parties.[11] “One of the little-known (at least by the mainstream) parts of Amazon’s business is that it allows people to sell products on its site, which means you can take advantage of this brand name’s tremendous reach and influence.”[12] It is estimated that “[a]bout 50 percent of sales on Amazon are made through third-party sellers,” and that “Amazon has shipped out more than two billion third-party items in 2016.”[13] While this has had a mutually positive effect for both fashion brands and OSPs, the issues that have plagued that fashion industry have been magnified by this intertwined relationship. More importantly, Amazon in particular has taken a “hands off” approach in response to claims filed against it despite its growing involvement in the industry. For example, Amazon was recently involved in a products liability case over damages suffered by a consumer shortly after the consumer had purchased a product off of Amazon through a third-party seller.[14] The product was purchased from a third party, and Amazon processed and completed the plaintiff’s order. Amazon sought to dismiss the case, arguing that “strict products liability claims do not apply, as it did not distribute, manufacture, or sell the product at issue.”[15] The court held that Amazon can be held strictly liable for defective products offered by third-party sellers “on the basis that Amazon is not merely a marketplace operator, and in reality, played a ‘pivotal’ role ‘in bringing the product here to the consumer,’ and acted ‘as a powerful intermediary between the third-party seller and the consumer.’”[16] With the growth of e-commerce and the utilization of OSPs in the fashion industry, the question has resurfaced as to whether such platforms should be held contributorily liable when third parties offer counterfeit products on their sites.The issue of counterfeiting has persisted since the industry’s inception, so much so that areas such as New York City’s Canal Street have become synonymous with fake designer goods.[17] This is not a problem that will be going away any time soon. “What was once confined to illicit shopping districts around the world, such as Canal Street in New York City, has ballooned into a global, multibillion-dollar business.”[18] Various protective measures have been in place in order to assist fashion companies with combatting the issue of counterfeit sales. For instance, the § 1114 of the Lanham Act defines the use and/or reproduction of counterfeit products associated with a registered mark,[19] and the statute provides for several civil remedies available for brands, one of which permits brands to have the counterfeit goods seized from the infringer.[20] Federal and state governments have also codified “[t]rafficking in counterfeit goods or services” in their respective criminal codes, providing criminal penalties for those who engage in selling counterfeit products.[21]Despite these protections for direct trademark infringement, the Lanham Act and a majority of criminal codes are silent as to the issue of contributory infringement liability, which “is when the defendant does not control the infringer but knowingly assists or somehow provides the means for the infringement.”[22] “[A]n act of direct infringement is still necessary, as defined by the Lanham Act’s criminal or civil provisions, for a contributory infringement action to commence.”[23] Contributory infringement liability for the sale of counterfeit goods has thus been traditionally a court-defined doctrine. The Supreme Court of the United States took up the issue of contributory infringement liability and recognized that liability for trademark infringement extends beyond those who directly infringe on a brand’s trademark.[24] Contributory infringement liability was then expanded to apply to flea markets,[25] landlords,[26] and credit card processors.[27] It was in the seminal case Tiffany (NJ), Inc. v. eBay where the Court held that an online service provider cannot be held contributorily liable for the sale of counterfeit goods when there was a lack of specific knowledge as to the specific counterfeit sale(s).[28] Courts have since been consistent in holding that an online service provider must have specific knowledge, as opposed to general knowledge, of the alleged infringing activity.The rule set forth by the courts has not stopped brands, agencies, policymakers, and even the President from pushing for greater measures to stop the sale of counterfeit goods on online service providers, and for holding such providers liable for the third party sales of counterfeit products on their platforms.[29] As of 2020, a bill has been introduced which would amend the Lanham Act and require online service providers to take more proactive measures in order to prevent the sale of infringing and counterfeit products on their platforms.[30] The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act (“SHOP SAFE Act of 2020”) sets forth ten requirements for online service providers.[31] If an online service provider has not taken the specific measures outlined in the SHOP SAFE Act, and it is later found that third parties have been selling counterfeit products on their platforms, the online service provider can be held contributorily liable so long as the counterfeit products pose a “health and safety” risk to the public.[32]If enacted, the SHOP SAFE Act would provide for the first statutory establishment of contributory infringement liability and would go beyond the judicial doctrine which only required specific knowledge of specific infringing sales and sellers.[33] However, the additional qualifying language of counterfeit products that pose a “health and safety” risk is new compared to the current general statutory prohibitions against counterfeiting contained in both the Lanham Act as well as various criminal codes which does not contain such qualifying language. This has raised questions as to the reach of the SHOP SAFE Act in its imposition of contributory infringement liability for OSPs that do not comply with the requirements set forth. Namely, what type of products will be included under the category of “health and safety,” and whether such language will be insufficient in addressing the issue of counterfeit sales by third parties on OSPs.[34]In this Note, I will argue that inclusion of the qualifying language “health and safety” reduces the otherwise important efforts for combatting counterfeit sales on OSPs. Part 1 will analyze the civil and criminal statutes that define the scope of liability for trademark infringement through the counterfeit sales. In addition to the implications of the current statutory framework, the language of the statutes is of particular importance as they omit qualifying criteria compared to the proposed language in the SHOP SAFE Act. Part II examines the development of contributory infringement liability as set forth in the courts. As mentioned above, such liability has largely been constructed by the judiciary, and the rules established by the courts are particularly important insofar as they highlight the necessity for legislative action. More importantly, there are remedial factors that courts look at when assessing contributory liability,[35] and this has been codified in the SHOP SAFE Act.[36]Part III will focus on the language of the SHOP SAFE Act and how it modifies the Lanham Act. This part will also focus on how the SHOP SAFE Act extends the contributory infringement liability rules created by the courts, in addition to exploring the potential issues that will arise with the qualifying language contained in the Act that imposes contributory infringement liability only on counterfeit goods sold that pose a “health and safety” risk to consumers. As the fashion industry’s expansion into e-commerce continues at exponential rates, and as companies such as Amazon and eBay continue to develop both in respects to their technological advances and consumer reach, the SHOP SAFE Act does set forth much-needed requirements in order to protect against counterfeit sales by increasing the scope of contributory infringement liability.Part IV will look at the future of the fashion industry, including its relationship with e-commerce, which has been incredibly exacerbated by the recent COVID-19 pandemic. In particular, I examine the fashion industry’s response to the pandemic and its utilization of online platforms. The fashion industry’s response to the COVID-19 pandemic is of particular importance because it suggests a larger movement towards direct-to-consumer business through e-commerce. This shift from brick-and-mortar stores to a focus on direct-to-consumer business model through e-commerce preceded the COVID-19 pandemic.[37] However, the “pandemic has only hastened what was already becoming clear: The era of the department store is on its way out.”[38] The importance of this shift will be the continued growth of online counterfeit sales, further evidencing the need for the proper legislative action, and such legislation cannot appropriately address the issue if it omits a significant portion of products.I. Legal Background and Framework
The Lanham Act is the starting point in addressing any issue regarding trademark infringement through counterfeiting. “Trademark counterfeiting is the act of manufacturing or distributing a product bearing a mark identical to, or substantially indistinguishable from, a registered trademark.”[39] Section 32 of the Lanham Act states that trademark infringement includes the use in commerce of “ any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.”[40] Section 32 of the Lanham Act also states:“any person who shall . . . (b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive . . . shall be liable in a civil action by the registrant . . .”[41]An individual who counterfeits and/or sells a product(s) bearing one or more trademarks is liable for direct trademark infringement, and this permits the fashion brand to recover damages from the infringing party.[42] The language of the Section 32 is particularly important, as it specifically states that “any person who shall . . . counterfeit . . . a registered mark,” which suggests that its primary and exclusive application is against the direct infringer who engages in the trade or business of counterfeit goods. Fashion brands pursuing trademark infringement actions against direct infringers was, and still is, the primary pursuit of a trademark infringement action under Section 32 of the Lanham Act.Traditional trademark infringement under the Lanham Act differs in several ways from trademark infringement through the sale of counterfeit goods. In order to establish liability against a party for direct trademark infringement, courts will typically assess the likelihood of confusion of the mark. This analysis focuses on numerous factors that assist a particular court in determining whether there has been a likelihood of confusion between the trademark owner and the allegedly infringing party.[43] In a trademark infringement action involving the sale of counterfeit goods, the harmed party must prove: “(1) that [it] has a valid and legally protectable mark, (2) the plaintiff owns the mark, and (3) the defendant’s use of the mark causes a likelihood of confusion”[44]; however, courts will not go through a likelihood of confusion analysis since counterfeit marks are considered inherently confusing.[45] Instead, the focus of a court in a trademark infringement action involving counterfeit goods is “where there are items to be confused in the first place—that is, whether the items at issue . . . are, in fact, counterfeit and whether Defendants sold those items.”[46]In Gucci America, Inc. v. Duty Free Apparel, Ltd., the defendant maintained a business that sold, among other products, wallets and handbags that bore several registered Gucci trademarks.[47] Gucci hired an investigator to purchase several of the products offered at the defendant’s business, and after purchasing the products, they were able to determine that they were not genuine. Gucci brought a trademark infringement action against the defendant and succeeded in showing both that the products were not made by Gucci, and that the marks on the products only deviated slightly from the registered Gucci trademarks.[48] The defendants contested Gucci’s claims and argued that they were not in the business of selling counterfeit goods, but the court held that “[t]he plain language of the relevant statutes does not require that the plaintiff prove that a defendant committed the infringement in any particular amount, or with any amount of regularity.”[49] The Lanham Act therefore establishes trademark infringement liability against a party that engages in any single sale of counterfeit goods.In order to succeed in a trademark infringement action under the Lanham Act, the trademark owner must show that “(1) the defendant infringed a registered trademark in violation of the Lanham Act, and (2) the defendant intentionally used the trademark knowing it was counterfeit or was willfully blind to such use.”[50] The court in Coach, Inc. v. Fashion Paradise, LLC stated that “‘willful’ infringement involves an intent to infringe or a deliberate disregard of a mark holder’s rights,” and that this conduct can be demonstrated “through deliberate and unnecessary duplicating of a plaintiff’s mark in a way that was calculated to . . . benefit from the good will” built by the plaintiff.[51] Therefore, in order to be liable for direct trademark infringement under the Lanham Act, an individual must at least have engaged in a minimal amount of sales of counterfeit goods, and either deliberately intended to infringe or was willfully ignorant of the trademark owner’s rights in the mark.Section 32 of the Lanham Act provides the means of protecting consumers from the harm caused by counterfeit goods. In contrast, Section 34(d) of the Lanham Act offers protection to fashion brands harmed by the business of counterfeit goods. Under Section 34(d), a trademark owner may obtain a civil seizure order, otherwise known as an “ex parte” seizure order, which permits the “seizure of goods and counterfeit marks involved in such violation and the means of making such marks.”[52] In order to meet the requirements for an ex parte civil seizure order, a brand owner must meet several requirements, including, but not limited to, providing a description of what products will be seized, the exact location where such products will be seized, immediate harm that cannot be avoided without a seizure order, and that the person against whom the seizure will be ordered is likely to destroy any of the infringing products.[53]Section 34(d) provides a unique remedy for fashion brands in that it allows for the seizure of not only the counterfeit goods, but also the means by which the counterfeit products were made in addition to any records that documented the sale and manufacture of the counterfeit goods. Direct infringement can cause of surplus of counterfeit products in the market which in turn causes significant harm to fashion brands, so the ability to seize the goods and the means of producing such goods greatly mitigates the harms caused by direct trademark infringement.One example of a fashion brand using Section 34(d) is Cartier Int’l B.V. v. Ben-Menachem.[54] The defendants were engaged in importing, distributing, and offering for sale counterfeit watches bearing Cartier’s registered trademarks. Cartier was able to gather enough evidence to obtain a civil seizure order under Section 34(d) of the Lanham Act, and as a result of the execution of the seizure, they were able to seize numerous documents detailing the extent of the counterfeit operation, the means of producing and selling the counterfeit goods, and several counterfeit watches bearing Cartier’s trademark.[55]The cases and relevant sections of the Lanham Act discussed above demonstrate that, with respect to counterfeits, the Act is designed to protect both consumers and trademark owners from the harms caused by the sale of counterfeit goods. It is limited insofar as it only pertains to direct infringement, whereby an individual may be held liable for trademark infringement when he is directly engaged in the sale and/or trafficking of counterfeit goods bearing registered trademarks.[56] Notwithstanding its limited application to direct infringement, the Lanham Act does not limit the category of goods or services to which one may be held liable for trademark infringement when involved in the sale of counterfeit goods. In other words, the Act does not distinguish between the categories of goods eligible for an infringement action under Section 32.[57] In the above-mentioned Gucci America, Inc. and Cartier Int’l B.V. cases, the counterfeit goods were fashion accessories and jewelry, respectively.[58] Conversely, in Johnson & Johnson Consumer Companies, Inc. v. Aini, Johnson and Johnson had manufactured various health and beauty products, including various types skin care.[59] It alleged violations of sections 32 and 43(a) of the Lanham Act for the defendants’ manufacture and sale of counterfeit skincare products.[60] The court held in part that the defendants were liable under the Lanham Act for selling products nearly identical to Johnson & Johnson’s health and beauty products.[61] Therefore, a trademark holder can bring an infringement action under the Lanham Act against a direct infringer(s) regardless of the type of product alleged to be counterfeit.B. Criminal Statutes When an individual or individuals have engaged in the manufacture and sale of counterfeit goods bearing a registered trademark, fashion brands will almost always resort to bringing an infringement action under the Lanham Act; however, trademark infringement via counterfeit sales is unique in that it can also be found in criminal statutes at both the federal and state level. In general, these statutes describe who may be held criminally liable for selling counterfeit products, what the requirements are for finding the party guilty of engaging in the act, and what penalties are available.The Trademark Counterfeiting Act was passed by Congress in 1984, and it is the federal statute governing the act of trafficking in counterfeit goods or services. The statute—in similar terms used in the Lanham Act—defines a “counterfeit mark” as a mark “that is used in connection with trafficking in any goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature.”[62] The mark must also be nearly identical to a mark registered in the U.S. Patent and Trademark Office, it must be used in connection with a good or service which is registered in the U.S. Patent and Trademark Office, and finally, it must be likely to confuse consumers when used.[63] In order for the government to succeed in establishing the criminal offense under the Trademark Counterfeiting Act, it must prove:(1) that the defendant trafficked or attempted to traffic in goods or services; (2) that such trafficking, or attempt to traffic, was intentional; (3) that the defendant used a "counterfeit mark" on or in connection with such goods or services; and (4) that the defendant knew that the mark so used was counterfeit.”[64]Unlike the Lanham Act, the Trademark Counterfeiting Act does identify and define the goods that would render one liable. For example, the Trademark Counterfeiting Act also states that one who intentionally “traffics in a drug and knowingly uses a counterfeit mark on or in connection with such drug” is liable and subject to the appropriate penalties. “Drug” is defined as a drug, as defined in section 201 of the Federal Food, Drug, and Cosmetic Act.”[65] Despite these definitions and distinctions, the statute covers the range of products and services in which one could manufacture and sale a counterfeit version. In effect, it is a supplement to the Lanham Act and only criminalizes conduct that is prohibited under the Lanham Act.[66]The Trademark Counterfeiting Act also provides a higher degree of penalties compared to those available under the Lanham Act. “An individual found guilty of the trafficking in counterfeit goods or services can be fined $2,000,000 or imprisoned not more than 10 years, or both, and, if a person other than an individual, shall be fined not more than $5,000,000,”[67] and these penalties are increased with any subsequent offense. Additionally, the penalties are more severe when the individual has engaged in the manufacture and sale of counterfeit drugs.[68]The Trademark Counterfeiting Act is another means available to fashion brands that seeks to mitigate the harm caused by counterfeiting, and to deter future infringement. It is often difficult for a brand to actually receive payment under a judgment from the infringing party, and therefore, a conviction ensures that the infringing parties are unable to continue trafficking in counterfeit goods. In United States v. Chong Lam, the defendants manufactured and sold wallets and handbags that bore several of Burberry’s registered trademarks.[69] The government brought charges against the defendants under the Trademark Counterfeiting Act, and a jury returned a conviction.[70] The defendants appealed and argued that the Act is unconstitutionally vague, but the Fourth Circuit affirmed their convictions.[71] While brands are still likely to face the issue of counterfeiting even after a conviction is rendered, such a penalty ensures that those particular offenders are unable to continue their illegal acts for a period of time.In addition to the Trademark Counterfeiting Act and other federal statutes criminalizing the act of trafficking in counterfeit goods or services, numerous statutes operate in similar fashion at the state level. For example, in New York it is a class A misdemeanor, or a class E or C felony “to sell or offer for sale goods that bear a counterfeit trademark if the defendant acts ‘with the intent to deceive or defraud some other person or with the intent to evade a lawful restriction [of] sale.’”[72] A “counterfeit trademark” is defined as an imitation of a registered trademark that is “(a) used in connection with trafficking in goods; and (b) used in connection with the sale, offering for sale or distribution of goods that are identical with or substantially indistinguishable from a trademark.”[73] Courts in New York have interpreted the statutory definitions as encompassing a broad range of categories. For example, in People v. Levy, the court held that an individual has trafficked in counterfeit products when a product merely bears an identical mark to one on the principal register.[74] Unlike the Trademark Counterfeiting Act, New York courts have held that this broader interpretation of the statute affords brands with a greater ability to protect their trademarks and remedy the harm caused by counterfeit goods.[75]California has also criminalized trafficking in the sale of counterfeit goods and services. An individual “who willfully manufactures, intentionally sells, or knowingly possesses for sale any counterfeit mark registered . . . on the Principal Register of the United States Patent and Trademark Office” is guilty under the statute and subject to monetary fines and the possibility of imprisonment.[76] Much like New York’s statutes criminalizing trafficking in counterfeit goods, the California statute does not limit the category of products that would subject one to criminal punishment. A “counterfeit mark” is defined as a “spurious mark that is identical with, or confusingly similar to, a registered mark and is used, or intended to be used, on or in connection with the same type of goods or services for which the genuine mark is registered.”[77] Therefore, while criminal prosecution under this statute is a common tool utilized by fashion brands[78], it is also available for any brand owning trademarks on the principal register, regardless of their respective industry.The statutory language of both the federal and state statutes is of particular importance, in addition to the statutory interpretation by the courts. The Trademark Counterfeiting Act, New York Penal Code § 165.70, and California Penal Code § 350 each contain rather broad definitions of what constitutes a “counterfeit mark,” in addition to when an individual may be found guilty under each for trafficking in counterfeit goods.[79] These broad statutory definitions have allowed for numerous brands across several industries to seek criminal sanctions for counterfeiting, including fashion brands,[80] and it has been essential in further remedying the issue of counterfeiting.
Pursuing a direct infringement action under the Lanham Act is typically a brand’s starting point when facing a counterfeiting issue; however, pursuing an indirect infringement action against a third-party is vital for several reasons. First, a brand has a greater choice of not only obtaining a larger damage remedy against a third-party, but it is also more likely to have that judgment paid.[81] Weighing the likelihood of whether a brand is going to receive payment on its judgment is important to determine at the outset because a judgment not only acts as a possible deterrent, but it also allows the brand to recover some of the cost of engaging in expensive litigation.[82] It is commonly the case that the direct infringer does not have the money to pay a judgment. Therefore, it is more advantageous to pursue an action for indirect infringement against a third party when possible because “[s]uch third parties almost always have greater financial resources.”[83] Second, in many instances, the third party has had some role in facilitating the infringing activity. Courts have applied secondary liability against various third parties, such as flea market operators,[84] landlords,[85] and credit card processing companies.[86] Therefore, receiving a judgment against a third party through an action for secondary liability not only ensures a greater chance of receiving payment on a judgment, but it is often also necessary to deter additional infringing action.Third-party liability is a unique form of trademark infringement in that it is not recognized in the Lanham Act. When a trademark owner files suit under Section 32 of the Lanham Act for trafficking counterfeit goods or services, it is always against the party directly manufacturing and/or selling the counterfeit goods or services.[87] The Lanham Act is silent in regard to third-party liability, and it is instead an entirely judicially-created doctrine.[88] In Inwood Laboratories, Inc. v. Ives Laboratories, Inc., the Supreme Court extended trademark infringement beyond its traditional application to those who directly manufacture and sell infringing goods.[89] More specifically, the Court recognized two different types of third-party liability: contributory liability and vicarious liability.[90] “Contributory liability is when the defendant does not control the infringer but knowingly assists or somehow provides the means for the infringement,” whereas vicarious liability occurs “when the direct infringer is an agent or business partner of the defendant,” and the defendant maintains the ability to control the conduct of the direct infringer while deriving a financial benefit from the infringement.[91]Vicarious liability is arguably easier to establish because there often exists some evidence that the third party has a direct relationship with the infringer which allows it to exercise some control while also deriving a financial benefit. This also makes it much less controversial insofar as the third party has a greater influence and role in the infringing activity. For example, the court in Coach, Inc. v. Goodfellow addressed the question of whether a flea market operator could be held liable for trademark infringement resulting from the vendors’ sale of counterfeit goods.[92] Goodfellow successfully argued that there was no evidence suggesting a partnership relationship between the vendors and the flea market operator; however, this only countered the argument for vicarious liability.[93] The court held that the flea mark operator was still contributorily liable since he had “actual knowledge that the infringing activity was occurring” and “continued to supply . . . resources to vendors with knowledge of and willful blindness toward ongoing infringing activities, thereby facilitating continued infringing activity.”[94]The standard for contributory liability poses a unique challenge when brought against online platforms that facilitate sales from third parties. In the aforementioned cases, the requirement of knowledge was necessary in order to find a defendant contributorily liable; however, there was no level of knowledge that a plaintiff had to prove. Instead, “courts considered the totality of the circumstances, including the prevalence of infringing activity in the marketplace, and then asked whether that should be sufficient to warrant the imposition of contributory liability.”[95] This standard shifted follow the decision reached by the Second Circuit in Tiffany (NJ) Inc. v. eBay Inc.At the turn of the century, consumers had increasingly turned to purchasing various products from third parties through websites such as eBay, Craigslist, and other similar platforms. As this usage increased, the problem of counterfeiting had also increased dramatically, and one of the brands significantly harmed was Tiffany.Tiffany sells its products through limited distribution channels which allows it to authentic the quality of the products sold; however, it became aware that its merchandise had increasingly appeared for sale on sites such as eBay.[96] Tiffany purchased several of the items offered for sale and found out that many were not authentic. It filed suit against eBay for trademark infringement and argued that eBay was contributorily liable because it had knowledge of the counterfeit sales occurring on its platform and continued to facilitate the transactions.[97]The court applied the Inwood test which finds a defendant contributorily liable if (1) “the service provider ‘intentionally induces another to infringe a trademark,’ or (2) the service provider “‘continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement.’”[98] Tiffany argued that “eBay continued to supply its services to the sellers of counterfeit Tiffany goods while knowing or having reason to know that such sellers were infringing Tiffany’s mark.”[99] The Second Circuit rejected Tiffany’s argument that eBay had knowledge of the infringing activity on its site. More specifically, the court held that eBay certainly possessed general knowledge of the counterfeiting taking place on its site; however, it lacked specific knowledge about particular instances of infringement.[100] This was demonstrated in part through one of eBay’s anti-counterfeiting measures, which permitted brands that suspected infringement to send a request to have a particular seller investigated. If the seller was found to be trafficking counterfeit products, eBay would remove the seller from the site.[101] As a result, the Second Circuit modified the Inwood test and added the requirement of finding knowledge of “specific instances of actual infringement.”[102]The Supreme Court solidified the requirements that fashion brands must demonstrate in order to succeed on a claim of secondary liability, but these requirements presented almost insurmountable hurdles that made it virtually impossible to succeed in receiving an adequate remedy for online counterfeiting. It was clear that the legislature, not the judiciary, needed to intervene and establish governing rules that would balance the interests of both the online platforms and the fashion brands.
The ruling in Tiffany has been wrought with controversy since the decision was reached back in 2010. The Second Circuit had properly applied the Inwood test and it was reasonable to conclude that eBay lacked the requisite knowledge in order to be found contributorily liable. eBay had an anti-counterfeit program in place and certainly tried to minimize infringement as much as it could in order to not only avoid liability, but also to maintain the integrity of its own brand. Nevertheless, the effect of the court’s decision was that the burden of policing its trademark rested entirely with the trademark holder.[103]A trademark holder generally has the burden of policing its trademark with respect to direct infringers and typically protects its assets by filing an infringement action under the Lanham Act; however, this is much more difficult in the context of sales on the internet and poses insurmountable challenges to brands. This begs the question that, given the increased widespread use of the internet as a marketplace, whether that burden should rest entirely on the trademark holders to police their trademarks in order to protect against infringement. Inwood was decided at a time when the Internet was in its infancy, and it had not yet been expanded into the marketplace whereby consumers could purchase and exchange goods.[104]Tiffany was also decided at a time where technical advancements were not as developed as they would later become, making it more difficult for online platforms such as eBay to provide adequate means of combatting the issue of counterfeiting on their sites. The Second Circuit spent a considerable amount of analysis focused on the measures eBay had in place, but its decision ultimately did not require an online platform to take affirmative steps to combat the sale of counterfeit goods taking place on its site.[105] Courts have since deviated to a degree from this rule, and will often look to any affirmative measures that are in place; however, it is still not a requirement for finding an online platform contributorily liable and courts will typically look at these measures generally without offering a closer look at their effectiveness.[106]Additionally, the Second Circuit modified the rule set forth in Inwood and established a requirement of finding “specific” knowledge of infringing sales.[107] No such standard was created in Inwood and courts following the Inwood decision had traditionally held that mere knowledge of infringing activity was sufficient to find contributory liability.[108] This heightened standard of knowledge made it increasingly challenging for brands to be successful in pursuing a claim for contributory infringement, particularly in the context of internet sales. Online platforms such as eBay, Craigslist, and Amazon engage in numerous transactions on a daily basis, making it highly unlikely that they will in fact have knowledge of specific instances of infringement. These two components have effectively insulated online platforms from being held liable for infringing activity that takes place on their sites. Therefore, trademark holders are not only required to bear the entire burden of establishing contributory liable under a new standard that is almost impossible to satisfy given the extent of business engaged in on the internet, but they are left with little to no remedy for the harm experienced as a result of the infringing activity.The criticisms following the Tiffany decision have continued to surface especially given the increased utilization of online platforms. The lack of an adequate judicial rule has raised the need for an amendment to the Lanham Act, or some other updated statute that addresses the unique issues posed by counterfeiting sales occurring through the internet. By comparison, the area of copyright has appropriately adjusted to some of these universal changes. In response to the issue of copyright infringement and its increased occurrence on the internet, Congress passed the Digital Millennium Copyright Act (“DMCA”), “which contains a limitation on contributory liability for e-commerce sites providing they take certain actions similar to those in Tiffany.”[109] Unlike copyright law, “[t]rademark law simply has not kept up with copyright statutes, bringing into question whether current statutes and case rulings are sufficient in the nearly limitless marketplace of the World Wide Web, where new sites are added daily and the cost to monitor is impossibly high.”[110] Therefore, the only plausible means by which to establish a rule that addresses the issues following the Tiffany decision would be through an Act of Congress.
In response to the demands for statutory intervention, a bill was introduced in 2020 which would amend the Lanham Act and shift some of the burden to online platforms. The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act (“SHOP SAFE Act”) is the result of a bipartisan effort to incentivize online platforms to limit the sale of counterfeit goods on their sites.[111] The Act followed numerous calls to address the issue of counterfeiting in the context of e-commerce, particularly with the increased difficulty of identifying and tracking online sellers who sold their products on platforms such as Amazon.[112] The SHOP SAFE Act would amend Section 32 of the Lanham Act and “provide for contributory liability for e-commerce platforms for use of a counterfeit mark by a third-party seller unless the platforms satisfy certain statutory requirements.”[113] Trademark owners had constantly been involved a whack-a-mole pattern of responding to counterfeit sales, whereby a brand would seek to have a seller removed from a platform only to have them reappear under a different alias. The Act was therefore introduced to aid brands in counterfeiting this futile response to counterfeiting.As previously stated, the SHOP SAFE Act explicitly states that “[a]n electronic commerce platform shall be contributorily liable for infringement by a third-party seller participating on the platform for use in commerce of a counterfeit mark.”[114] This would be the first time contributory liability is set forth in a federal statute, and provides a direct means for trademark holders to pursue an infringement action for the sale of counterfeit goods stemming from third parties. In addition to establishing a cause of action for contributory infringement, the Act also creates a “safe harbor” for online platforms that meet the ten requirements contained in the Act. If a brand implements the ten preventative measures set forth in the Act, they cannot be held contributorily liable should it be found that some goods sold were counterfeit.[115] Some of these requirements include the following: verifying the identity of the third-party seller, requiring confirmation from the seller that the products for sale are not counterfeit, consent to suit in a U.S. court should the goods in fact be counterfeit, requiring the seller to clearly identify their identity, contact information, and where the goods are coming from.[116] Many of these measures are similar to those utilized in the Tiffany case. For example, in order to fall under the Act’s “safe harbor,” online platforms must implement a timely takedown process that allows for the removing of listings that offer counterfeit goods for sale.[117] Platforms must also terminate sellers who have sold counterfeit goods on the particular platform at least three times, and sellers must be screened in order to ensure that terminated sellers are not rejoining the platform under a different alias.[118]The requirements set forth in the Act are appropriate in two significant ways. First, they shift the otherwise lopsided burden placed on brands to relentlessly police the use of their trademarks and place some of that burden on online platforms. Courts had previously looked at whether an online platform had taken preventative measures in order to determine whether the required specific knowledge of infringement existed, but they were not required to have such measures in place.[119] The SHOP SAFE Act modifies this by requiring platforms to take certain preventative measures in order to avoid liability. This operates to the benefit of both the platforms and brands. Online platforms are able to avoid liability so long as they implement the ten preventative measures contained in the Act, while also protecting the integrity of their own brand by ensuring that consumers are not purchasing counterfeit goods. Platforms such as Amazon, eBay, TheRealReal, etc. are just as interested in protecting their brand image as they generate revenue from partnering with various fashion brands, and if they develop a reputation as being a platform that contains a plethora of counterfeit goods, consumers will be less likely to purchase goods on their platforms. Trademark owners are able to spend less resources on policing their trademarks, and when they do identify counterfeit products on any online platform, they can be assured that there are adequate measures in place to remove the goods and the seller(s) from the platform.The SHOP SAFE Act also brings the Lanham Act up to date with the current technological landscape involving the use of the internet to sell and exchange goods. Tiffany was decided at a time when the internet was still in its relative infancy, and it was novel that eBay had had certain programs in place to assist in preventing counterfeit sales. Developing and maintaining these programs at the time cost eBay a significant amount of resources. eBay had spent close to $20 million annually on its programs, including more than $5 million in maintaining a fraud engine which enabled eBay to identify activity that violated its policies.[120] With the explosive expansion of internet usage since Tiffany, there must be an amendment to the Lanham Act that brings it up to date with these changes. The SHOP SAFE Act provides the necessary mechanism to fight online trademark infringement by ensuring that online platforms have the appropriate preventative measures available to trademark owners.
The SHOP SAFE Act appropriately modifies the Lanham Act; however, the Act falls short because it imposes liability on e-commerce platforms only when the counterfeit goods sold pose a “health and safety” risk to consumers.[121] The Act further defines a good implicating health and safety as any good, “the use of which can lead to illness, disease, injury, serious adverse event, allergic reaction, or death if produced without compliance with all applicable Federal, State, and local health and safety regulations and industry-designated testing, safety, quality, certification, manufacturing, packaging, and labeling standards.”[122] This qualifying language significantly limits the application of the Act, thereby cutting against the drafters’ goal of protecting consumers from counterfeit goods that “pose significant threats to consumer health and safety.”[123] Protecting the health and safety of consumers is a legitimate and reasonable goal, but the restrictive language the SHOP SAFE Act contains does not fully satisfy that goal.The SHOP SAFE Act’s application to only goods that implicate health and safety concerns diverts significantly from current statutory protections. By comparison, Section 32 of the Lanham Act does not limit its application to a certain class of goods when one seeks a direct infringement action.[124] A trademark owner is able to bring an action for direct infringement so long as it can establish that it owns a protectable mark and the infringer uses the counterfeit mark in commerce.[125] There is no language in the Lanham Act requiring the good or service to pose a health or safety risk to consumers in order for there to be a finding of infringement.Additionally, no such language is included in the various criminal statutes at both the federal and state levels. The Trademark Counterfeiting Act does not contain any language that limits its application to certain categories of goods.[126] The Act does establish higher penalties for trafficking in counterfeit drugs and specifically defines what goods would fall under this section, which differentiates in from the Lanham Act in that regard.[127] However, establishing more severe penalties for trafficking in counterfeit drugs does not diminish the liability for counterfeiting other types of goods under the Act. Similarly, the New York and California statutes criminalizing trafficking in counterfeit goods or services do not contain any qualifying language limiting their application.[128] To the contrary, New York has applied its criminal statute over a broad range of categories in order to prevent against limitation on its application.[129]Given the current statutory framework, it begs the question why the SHOP SAFE Act would significantly limit its application to only goods that pose a health and safety risk. The aforementioned statutes do not distinguish between which categories of goods they apply to, and this has enabled a wide range of trademark owners to bring infringement actions. Justification for this may be that omitting those specific qualifying terms would severely widen the scope of liability, a measure that may simply pose too great of a burden on online platforms, and perhaps this qualifying language was included in order to gain support from those who have difficulty in imposing more stringent standards for online platforms for all counterfeit products sold through their channels. After all, platforms like Amazon and eBay are just as interested in protecting their own brand as they are in protecting other brands, which means that they already have an incentive to curb sales of counterfeit goods on their websites in order to keep a positive image in the eyes of the consumers. This is an understandable concern particularly because removing the “health and safety” language from the SHOP SAFE Act would allow for more third-party infringement actions to be brought against online platforms; however, this does not override the need for adequate measures for all trademark owners, regardless of the products they sell. Fashion brands have had limited means in protecting themselves from the harm caused by counterfeit sales on online platforms, and the “health and safety” language merely serves only one of the two interests inherent in trademark law—consumer safety. Removing the “health and safety” language would not only safeguard consumers from counterfeit goods, but it also allows any brand to pursue an infringement action against an online platform. If fashion brands are unable to seek redress for the harm they experience, they will also be unable to protect consumers since their goods are not within the Act’s qualifying language.Moreover, consumers’ health and safety is not a new concern as the Lanham Act and various criminal statutes have been interpreted to encompass a broad range of counterfeit goods and have been applied as such.[130] The SHOP SAFE Act should contain the same broad language as the other statutes in order to allow for a broader range of protection.Another problem posed by the SHOP SAFE Act’s limitation in application to goods that pose a health and safety risk is determining what goods actually fall within that definition. While the Act does define goods that implicate health and safety,[131] it does not provide any real guidance for brands to determine if their goods qualify under the Act. “[B]rand owners are unaware of the exact conditions in which counterfeit versions of their products are manufactured; they just know that they are not manufactured in accordance with own processes.”[132] Certain product categories, including cosmetics[133] and eyewear[134] are regulated on a federal level, so there is little question that those categories and others are directly addressed in the SHOP SAFE Act. Other categories of products, such as luxury handbags, t-shirts, shoes, etc. likely do not fall within the SHOP SAFE Act’s purview; however, if an individual purchases a shirt specifically because they believe it does not contain certain materials and instead receive a counterfeit which causes an allergic reaction, it is less clear whether the SHOP SAFE Act would apply since shirts are not typically the type of good that would lead to illness or allergic reaction. “Products that don’t ordinarily pose a health risk if made incorrectly won’t receive the same kind of attention from commerce platforms.”[135] This kind of language could potentially render the statute more reactive than proactive since defining what constitutes a “health and safety” risk will be largely left up to the courts.Notwithstanding the potential issues stemming from determining when the SHOP SAFE Act applies, the requirement that the trafficked counterfeit goods pose a “health or safety” concern significantly limits the protection that brands need in order to police their trademarks. Sales of counterfeit pharmaceuticals is an increasing problem that needs to be addressed, but they represent a fraction of the total trade in fakes, particularly compared to luxury goods alone. Of the estimated $4.5 trillion resulting from the trade of fakes, “fake luxury merchandise accounts for 60% to 70% of that amount, ahead of pharmaceuticals and entertainment products.”[136] A majority of the counterfeit sales that occur on e-commerce platforms will likely not be covered by the Act under its current drafting, despite the fact that many fashion brands experience the most harm from counterfeiting.It is possible that, in practice, the Act will be interpreted to encompass a broader range of goods that have a tangential impact on consumer health and safety. This potential interpretation would therefore allow for protection of various fashion products that are not immediately identified as posing health and safety risks, but it shifts one of the central goals of trademark law: brand protection.[137] Under this interpretation, the focus of protection is on the goods, and not the good will and integrity of brands. In order to balance the protections for consumers and for all trademark owners, the “health and safety” language should be omitted from the SHOP SAFE Act.
The need for legislative intervention into the trafficking of counterfeit goods on e-commerce platforms has become more apparent given the recent global pandemic. In response to the pandemic, consumers have taken shelter in their homes and only stray outside for purchasing essential items. Roughly 52% of consumers have avoided shopping in brick-and-mortar stores as a result of the pandemic.[138] Fashion brands have reacted to the pandemic by shifting their focus in marketing, advertising, and sales from brick-and-mortar stores building their presence on the internet.[139] While many brands have revamped their online presence, the usage of e-commerce platforms has also skyrocketed during the pandemic. For example, Amazon and eBay are among the top retail e-commerce websites for revenue generated during the pandemic.[140] Even prior to the pandemic, these online platforms have been steadily growing their presence in the fashion industry. In 2019, Amazon unveiled a feature built into its app that utilizes an AI-powered feature allowing consumers to shop for certain items based on pictures they upload.[141]Fashion brands are likely to continue to utilize these e-commerce platforms in the future even when the pandemic subsides. “The behaviors, preferences, and shifts in mindset that people have adopted during the pandemic will lead to permanent changes, including bifurcated spending, accelerated adoption of e-commerce, and increased demand for purpose-driven brands and sustainable fashion.”[142] This shift is necessary in order to respond to consumers’ desires to shop safely and effectively, as many of these new programs make it easier for consumers to look for various goods, try them on virtually, make purchases, and even make returns.[143]
The shift to a more e-commerce focused business model comes at significant risk given the current lack of a statutory framework that protects brands from the trafficking of counterfeit goods on e-commerce platforms. The problem of counterfeiting has exponentially impacted the fashion industry as a result of the COVID-19 pandemic.[144] Fashion brands have had to shift their resources and focus away from extensively policing their intellectual property, and “[t]his isn’t because there aren’t nefarious counterfeiters around . . . but because fashion companies hit hard by the worldwide impact of the pandemic are no longer able or willing to hire him for investigations and enforcement actions.”[145] The SHOP SAFE Act could alleviate some of the burden placed on fashion brands who are operating on limited budgets and do not have the resources to constantly police their intellectual property; however, it can only do so successfully if it applies beyond its current drafting which limits it to goods that pose a health and safety risk.The SHOP SAFE Act’s qualifying language places many fashion brands at a disadvantage especially during the COVID-19 pandemic. According to Herry Luo, general manager of Roy IP Legal Consultant Limited, “‘[b]ecause the budgets of fashion brands are decreasing, we are focusing more on pharmaceutical and food areas [right now].’”[146] This is an appropriate response as the pandemic has prompted a large focus on pharmaceuticals and other protective gear which poses a significant threat to consumer health and safety if counterfeit versions are purchased.[147] Even fashion brands have shifted from apparel and other goods into making masks that bear various trademarks.[148] The SHOP SAFE Act would operate as an effective protection measure for brands that produce these types of goods, but the focus on only that category exacerbates the already increasing problem of counterfeit goods on e-commerce platforms. “‘The counterfeiters know when the brands aren’t striking them as hard as before and that encourages them to counterfeit more.’”[149] Moreover, there are an increasing number of “up and coming” e-commerce platforms that do not necessarily have the resources to invest in preventative measures. This has resulted in an exponential growth in sales of counterfeit goods on these newer platforms.[150] Therefore, while the SHOP SAFE Act would address the concerning problem of counterfeit goods that pose a serious health and safety risk to consumers, the Act should not limit protection exclusively to that category because fashion brands will continue to experience significant harm from counterfeiting on e-commerce platforms.
Counterfeiting in the fashion industry is a problem that is unlikely to be fully resolved, but it is clear the current statutory and judicial frameworks provide little assistance to brands that face this issue as it continues to persist and grow on e-commerce platforms. The consistent push from brands, politicians, and others suggests that this problem must be addressed, and that the legislature is in the best position to act. The SHOP SAFE Act is the latest legislative attempt to provide a remedy for brands that are combatting individuals trafficking in counterfeit goods on online platforms. The Act, if passed by Congress and signed into law by the President, would codify secondary liability in the Lanham Act and shift part of the burden to the e-commerce platforms. It would provide an incentive to platforms that, in order to avoid liability, they must implement numerous preventative measures that address the counterfeit sellers and sales that plague their sites.If the Act is passed, it would be a milestone, but unfortunately, its current drafting—providing secondary liability only in cases where the goods pose a health or safety risk—does not adequately address the wide range of products that are counterfeited and sold on these platforms. In order for the SHOP SAFE Act to provide the most effective relief, it should be re-drafted without the “health and safety” language. This language significantly limits the category of goods required to impose secondary liability, and it is likely to raise future issues in determining which goods actually fall within the Act’s purview. An all-encompassing statute would provide the long-awaited assistance that fashion brands desperately need in order to combat trafficking of counterfeit goods on online platforms.[1] Liam O’ Connell, U.S. Apparel Market – Statistics & Facts, Statista (Sept. 2, 2020), https://www.statista.com/topics/965/apparel-market-in-the-us/#:~:text=In%202019%2C%20global%20retail%20sales,trillion%20U.S.%20dollars%20by%202030.&text=Store%2Dbased%20retailing%20was%20valued,million%20U.S.%20dollars%20of%20revenue [https://perma.cc/M5EE-4DKY].[2] Eric Wilson, Evolution of the Fashion Industry, LoveToKnow, https://fashion-history.lovetoknow.com/fashion-clothing-industry/globalization-fashion-industry.[3] Leslie W. Rabine, Globalization and the Fashion Industry, LoveToKnow, https://fashion-history.lovetoknow.com/fashion-clothing-industry/globalization-fashion-industry [https://perma.cc/KK2Q-5G4V].[4]Id.[5] April Berthene, Ecommerce is 38.6% of All Apparel Sales, Digital Commerce 360 (Aug. 4, 2020), https://www.digitalcommerce360.com/article/online-apparel-sales-us/#:~:text=Online%20apparel%20sales%20accounted%20for,growth%20in%20retail%20clothing%20sales.&text=In%20fact%2C%20ecommerce%20contributed%20all,in%20total%20U.S.%20apparel%20sales [https://perma.cc/R6LE-97QT].[6] Aaron Orendorff, The State of the Ecommerce Fashion Industry: Statistics, Trends & Strategy, Shopify (Jan. 10, 2019), https://www.shopify.com/enterprise/ecommerce-fashion-industry [https://perma.cc/F44L-KL6E].[7]Id.[8]See April Berthene, Online merchants gain an extra $107 billion in 2020 thanks to pandemic, Digital Commerce 360 (Sept. 14, 2020), https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/ [https://perma.cc/2R8F-G7DT] (“Shoppers continue to flock to buy online pickup in store (BOPIS) for fulfillment, with BOPIS sales increasing in 59% in August compared with July.”); Berthene, supra note 5 (“Many of these online sales throughout the pandemic likely went to marketplace giant Amazon.com Inc., as shoppers flocked to the marketplace to buy COVID-19-related goods, according to a recent study by Remazing GmbH, an agency that helps brands sell on Amazon. It found that 71% of the top 100 search terms on the U.S. Amazon marketplace were related to COVID-19 from mid-February to mid-March.”).[9] Anna Nicolaou & Leslie Hook, Now Amazon is disrupting fashion retail, too, Financial Times (Jan. 26, 2018), https://www.ft.com/content/795935ac-0205-11e8-9650-9c0ad2d7c5b5 [https://perma.cc/7AUW-F7WZ].[10] Nicolaou & Hook, supra note 9.; see Pamela N. Danziger, Amazon, Already The Nation’s Top Fashion Retailer, Is Positioned To Grab Even More Market Share, Forbes (Jan. 28, 2020), https://www.forbes.com/sites/pamdanziger/2020/01/28/amazon-is-readying-major-disruption-for-the-fashion-industry/#760c7cfd67f3 [https://perma.cc/K647-CQC7].; see also Melissa Fares, Amazon fashion growth, Reuters Graphics, https://fingfx.thomsonreuters.com/gfx/editorcharts/AMAZONCOM-BRANDS-APPAREL/0H001PBM45KL/index.html [https://perma.cc/8L6T-PA89].[11] Brian Edmondson, How to Become a Profitable Amazon Seller, The Balance Small Business (Jun. 5, 2019), https://www.thebalancesmb.com/how-amazon-sellers-can-profit-4143331 [https://perma.cc/T7Z8-FJCV].[12]Id. (“[Amazon has] been offering this opportunity in ‘third party selling’ since 2000.”).[13]Id.[14] Bolger v. Amazon.com, LLC, 53 Cal.App.5th 431 (2020).; see alsoAmazon Can Be Liable for Third-Party Sellers’ Defective Products, Says California Appeals Court, The Fashion Law (Aug. 14, 2020), https://www.thefashionlaw.com/amazon-is-liable-for-third-party-sellers-defective-products-says-california-appeals-court/ [https://perma.cc/JD4K-V2CV].[15]Amazon Can Be Liable for Third-Party Sellers’ Defective Products, Says California Appeals Court, supra note 14.[16]Id.[17] Hayley Phelan, The Gentrification of Canal Street, N.Y. Times (May 16, 2018), https://www.nytimes.com/2018/05/16/style/canal-street-fashion.html [https://perma.cc/9JKS-CSTB].[18] Barbara Kolsun & Douglas Hand, The Business and Law of Fashion and Retail 447 (Carolina Academic Press ed., 2020).; see also The Counterfeit Report: The Big Business of Fakes, The Fashion Law (Oct. 11, 2019), https://www.thefashionlaw.com/the-counterfeit-report-the-impact-on-the-fashion-industry/ [https://perma.cc/FX3U-3GB7] (“The shadowy business of counterfeits has taken over the globe to become a more than $500 billion industry.”).[19] 15 U.S.C. § 1114.[20] 15 U.S.C. § 1116; see also 15 U.S.C. § 1114.[21] 18 U.S.C. § 2320; see also N.Y. Penal Law § 165.73.[22] Kolsun & Hand, supra note 18, at 503.[23] Rebecca Dunlevy, Note, Internet Immunity: The Limits of Contributory Trademark Infringement Against Online Service Providers, 22 Fordham Intell. Prop. Media & Ent. L.J. 927 (2015).; see also J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 25:17 (4th ed. 2012).[24] 456 U.S. 844 (1982).[25] Coach, Inc. v. Goodfellow, 717 F.3d 498 (6th Cir. 2013).[26] Polo Ralph Lauren Corp. v. Chinatown Gift Shop, 855 F.Supp. 648 (S.D.N.Y. 1994).[27] Gucci Am., Inc. v. Frontline Processing Corp., 721 F.Supp.2d 228 (S.D.N.Y. 2010).[28] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[29]See Rebecca Kern & Naomi Nix, Retailers Launch Lobbying Group to Fight Counterfeit Goods on Amazon, Business of Fashion (Aug. 14, 2020), https://www.businessoffashion.com/articles/news-analysis/retailers-launch-lobbying-group-to-fight-counterfeit-goods-on-amazon [https://perma.cc/9W5Y-GLMS].; see also Gina Heeb, Trump team cracks down on counterfeit sales made through sites like Amazon and Walmart, Markets Insider (Jan. 24, 2020), https://markets.businessinsider.com/news/stocks/trump-administration-announces-crackdown-counterfeit-goods-sold-online-amazon-walmart-2020-1-1028844133# [https://perma.cc/LTA6-K5MB].[30] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[31]Id.[32]Id.[33] Tiffany (NJ) Inc., 600 F.3d 93 (2010).[34]How Effective Would the Shop Safe Act be for Fashion and Luxury Brands in the Fight Against Fakes?, The Fashion Law (July 24, 2020), https://www.thefashionlaw.com/is-the-shop-safe-act-2020-a-new-tool-for-brand-owners-in-the-fight-against-fakes/ [https://perma.cc/CM2L-FXPM].; Marc Reiner, Newly Introduced SHOP SAFE Act of 2020 Takes on Counterfeiting in Electronic Commerce But Does Not Go Far Enough, HBA, LLP (Mar. 13, 2020), https://hballp.com/Newly+Introduced+SHOP+SAFE+Act+of+2020+Takes+on+Counterfeiting+in+Electronic+Commerce+But+Does+Not+Go+Far+Enough [https://perma.cc/YQ7T-EDHG].[35] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[36] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[37] Tom Ryan, What It Means When Retailers Close Their NYC Flagships, Forbes (Jan. 17, 2019), https://www.forbes.com/sites/retailwire/2019/01/17/what-it-means-when-retailers-close-their-nyc-flagships/?sh=6e24d48972e1 [https://perma.cc/H6Z3-7A8J].; see alsoIs This The End Times For Brick-And-Mortar Retail?, PYMNTS (Apr. 16, 2019), https://www.pymnts.com/news/retail/2019/brick-and-mortar-physical-store-closures/ [https://perma.cc/WM28-VNGN]. Many major fashion brands, such as Calvin Klein, Ralph Lauren, Coach, and others, have been closing their flagship stores, in part due to the inability to gain foot traffic.[38] Danny Parisi, The end of the department store era, Glossy (Aug. 5, 2020), https://www.glossy.co/fashion/the-end-of-the-department-store-era/ [https://perma.cc/K8KH-G95Y].[39] Kolsun & Hand, supra note 18.[40] 15 U.S.C. § 1114.[41]Id.[42]Id.[43] Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir. 1961).; see also Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir. 1984). (The tests and factors employed by the courts vary based on jurisdiction, but the central focus is on the likelihood of confusion between the two marks.).[44] Coach, Inc. v. Fashion Paradise, 2012 U.S. Dist. LEXIS 7429 (D.N.J. Jan. 20, 2012).[45] Cartier Int’l B.V. v. Ben-Menachem, 2008 WL 64005 (S.D.N.Y. Jan. 3, 2008) (“In cases involving counterfeit marks, this Court has found it unnecessary to perform a Polaroid examination because counterfeit marks are inherently confusing.”); see also Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003).[46] 286 F.Supp.2d 284 (S.D.N.Y. 2003).[47]Id.[48]Id.[49]Id.[50] Coach, Inc. v. Fashion Paradise, LLC, 2012 U.S. Dist. LEXIS 7429 (D.N.J. Jan. 20, 2012).[51]Id.[52] 15 U.S.C. § 1116.[53]Id.[54] Cartier Int’l B.V. v. Ben-Menachem, 2008 WL 64005 (S.D.N.Y. Jan. 3, 2008).[55]Id.[56]See Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003).[57] 15 U.S.C. § 1116.[58]See Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003).; see also Cartier Int’l B.V. v. Ben-Menachem, 2008 WL 64005 (S.D.N.Y. Jan. 3, 2008).[59] Johnson & Johnson Consumer Companies, Inc. v. Aini, 540 F.Supp.2d 374 (E.D.N.Y. 2008).[60]Id.[61]Id.[62] 18 U.S.C. § 2320(f)(1).[63]Id.[64] U.S. Dept. of Justice Archives, https://www.justice.gov/archives/jm/criminal-resource-manual-1704-trademark-counterfeiting-elements-18-usc-2320 [https://perma.cc/3WHF-Q34Y].[65]Id.[66] COMPUT. CRIME & INTELLECTUAL PROP. SECTION, CRIMINAL DIV., U.S. DEP'T OF JUSTICE, PROSECUTING INTELLECTUAL PROPERTY CRIMES 174 (4th ed. 2013), https://www.justice.gov/sites/default/files/criminal-ccips/legacy/2015/03/26/prosecuting_ip_crimes_manual_2013.pdf [https://perma.cc/LVS4-2JFH].[67] 18 U.S.C. § 2320(b)(1)(A).[68] 18 U.S.C. § 2320(b)(3) (“Whoever commits an offense under subsection (a) involving a counterfeit military good or service or drug that uses a counterfeit mark on or in connection with the drug—(A) if an individual, shall be fined not more than $5,000,000, imprisoned not more than 20 years, or both, and if other than an individual, be fined not more than $15,000,000”).[69] United States v. Chong Lam, 677 F.3d 190 (4th Cir. 2012).[70]Id.[71]Id.[72] Kolsun & Hand, supra note 18, at 487 (quoting N.Y. Penal Law §§ 165.71, 165.72, and 165.73).[73] N.Y. Penal Law § 165.70.[74] People v. Levy, 15 N.Y.3d 510 (2010).[75]Id.[76] Cal. Penal Code § 350(a).[77] Cal. Penal Code § 350(c)(3).[78] Burberry Ltd. v. Salim, 2013 WL 12146120 (C.D. Cal. July 12, 2013).[79] 18 U.S.C. § 2320(f)(1).; see N.Y. Penal Law § 165.70.; see also Cal. Penal Code § 350(a).[80] United States v. Chong Lam, 677 F.3d 190 (4th Cir. 2012).[81] Kolsun & Hand, supra note 18, at 503.[82] Mark Sommers, Taking an Aggressive Stance Against Counterfeiters: An Overview of Trademark Counterfeiting Litigation under the Lanham Act, Finnegan (Sept. 1999), https://www.finnegan.com/en/insights/articles/taking-an-aggressive-stance-against-counterfeiters-an-overview.html [https://perma.cc/WR4B-DBHA].[83]Id.[84] Coach, Inc. v. Goodfellow, 717 F.3d 498 (6th Cir. 2013).[85] Omega SA v. 375 Canal LLC, 324 F.R.D. 47 (S.D.N.Y. 2018).; see also 1165 Broadway Corp. v. Dayana of N.Y. Sportswear, Inc., 166 Misc. 2d 939 (N.Y. Civ. Ct. 1995).[86] Gucci America, Inc. v. Frontline Processing Corp., 721 F.Supp. 2d 228 (S.D.N.Y. 2010).[87]See generally 15 U.S.C. § 1116.[88] 456 U.S. 844 (1982).; see also Restatement (Third) of Unfair Competition § 27 (Trademark infringement occurs when “. . . (a) the actor intentionally induces the third person to engage in the infringing conduct; or (b) the actor fails to take reasonable precautions against the occurrence of the third person’s infringing conduct in circumstances in which the infringing conduct can be reasonably anticipated.”).[89]Id.[90]Id.[91] Kolsun & Hand, supra note 18, at 503.[92] Coach, Inc. v. Goodfellow, 717 F.3d 498 (6th Cir. 2013).[93]Id.[94]Id.[95] David H. Burnstein & Michael R. Potenza, Why the Reasonable Anticipation Standard Is the Reasonable Way to Assess Contributory Trademark Liability in the Online Marketplace, 2011 Stan. Tech. L. Rev. 9 (2011).[96] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[97]Id.[98]Id. at 104 (quoting Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982).[99]Id.[100]Id.[101] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[102]Id.[103] Justin Nicholas Redman, Post Tiffany (NJ) Inc. v. eBay, Inc.: Establishing A Clear, Legal Standard For Online Auctions, 49 Jurimetrics J. 467 (2009).[104]Id.[105] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[106]See Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, 186 F.Supp.3d 1370 (N.D. Ga. May 16, 2016).; see also Louis Vuitton Malletier SA v. eBay, Tribunal de Commerce de Paris [T.C.] [Commercial Court] Paris, June 30, 2008 (Unlike in the United States, Paris has recently held in favor of several fashion brands in their suit against eBay. The Commercial Court, in contrast to the Second Circuit, found that eBay had not taken adequate measures to prevent the sale of counterfeit goods on its site.)[107] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).; Burnstein, supra note 96 (“Prior to the Second Circuit's decision in Tiffany, the inquiry in other contributory liability cases did not explicitly focus on a particular level of knowledge, either specific or general, that would trigger liability.”).[108] Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).[109] Redman, supra note 104.[110]Id.[111] Press Release, House Committee on the Judiciary, Nadler, Collins, Johnson & Roby Introduce Bipartisan SHOP SAFE Act to Protect Consumers and Businesses from the Sale of Dangerous Counterfeit Products Online (Mar. 2, 2020).[112] Meaghan H. Kent & Nicholas W. Jordan, SHOP SAFE Act: How a proposed amendment to the Lanham Act aims to make online shopping safer (Nov. 9, 2020), Westlaw 6554912.[113]Id.[114] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[115] Brett Heavner, Stopping Cyber-Fakes: A Guide to the SHOP SAFE Act 2020, IP Watchdog (Mar. 23, 2020), https://www.ipwatchdog.com/2020/03/23/stopping-cyber-fakes-guide-shop-safe-act-2020/id=119994/ [https://perma.cc/5WLS-5AMG].[116] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[117]Id.; see Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010) (Note that the Second Circuit analyzed the preventative measures eBay had in place, but did not require them in order for it to avoid being held contributorily liable.).[118] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[119] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[120]Id.[121] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020) (“An electronic commerce platform shall be contributorily liable for infringement by athird-party seller participating on the platform for use in commerce of a counterfeit mark in connectionwith the sale, offering for sale, distribution, or advertising of goods that implicate health and safety.” (emphasis added)).[122]Id.[123]Supra note 112.[124] 15 U.S.C. § 1114.[125]Id.[126] 18 U.S.C. § 2320.[127]Id.[128]See N.Y. Penal Law § 165.70; see also Cal. Penal Code § 350(a).[129] People v. Levy, 15 N.Y.3d 510 (2010).[130] U.S. v. Hitsman, 624 Fed.Appx. 462 (9th Cir. 2015) (counterfeit Viagra); Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003) (counterfeit Gucci accessories); Coach, Inc. v. Fashion Paradise, LLC, 2012 U.S. Dist. LEXIS 7429 (D.N.J. Jan. 20, 2012) (counterfeit Coach accessories).[131] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[132] Marcella Ballard & Maria R. Sinatra, How Effective Would the Shop Safe Act be for Fashion and Luxury Brands in the Fight Against Fakes?, The Fashion Law (July 24, 2020), https://www.thefashionlaw.com/is-the-shop-safe-act-2020-a-new-tool-for-brand-owners-in-the-fight-against-fakes/ [https://perma.cc/C3LK-D8PJ].[133] 21 U.S.C. § 361.[134] 21 C.F.R. § 820.[135] Brogan Woodburn, Everything you should know about the Shop Safe Act, Red Points (last visited Dec. 18, 2020), https://www.redpoints.com/blog/everything-you-should-know-about-the-shop-safe-act/ [https://perma.cc/WGF2-2JSF].[136] Roberto Fontana, Stephane J.G. Girod, & Martin Kralik, How Luxury Brands Can Beat Counterfeiters, Harvard Business Review (May 24, 2019), https://hbr.org/2019/05/how-luxury-brands-can-beat-counterfeiters [https://perma.cc/9ZKD-VFKB].[137]Id.[138] Anam Bhatti, Hamza Akram, Hafiz Muhammad Basit, Ahmed Usman Khan, Syeda Mahwish RazaNaqvi, & Muhammad Bilal, E-commerce trends during COVID-19 Pandemic, 13 Int’l J. Future Generation Comm. & Networkin 1449 (2020).[139] Puneet Kapani, COVID-19 Impact: Fashion Houses Embrace E-commerce, Entrepeneur (Sept. 5, 2020), https://www.entrepreneur.com/article/355805 [https://perma.cc/FJ7E-7CRR].[140] Bhatti, supra note 141, at 1450.[141] Remi Rosmarin, StyleSnap is a new feature on Amazon that uses AI to help you shop any photo from social media—here’s how it works, Insider (Sept. 9, 2020), https://www.insider.com/amazon-stylesnap-review [https://perma.cc/3XJK-SK2R].[142] Filippo Bianchi, Pierre Dupreelle, Felix Krueger, Javier Seara, Drake Watten, & Sarah Willersdorf, Fashion’s Big Reset, Boston Consulting Group (June 1, 2020), https://www.bcg.com/publications/2020/fashion-industry-reset-covid [https://perma.cc/RVC3-NCX5].[143] Tracey Meyers, COVID-19 May Alter the Way We Shop for Apparel, WWD (July 7, 2020), https://wwd.com/business-news/business-features/covid-19-may-alter-the-way-we-shop-for-apparel-1203667029/ [[144] Casey Hall, The Pandemic Has Created a ‘Perfect Storm’ for Counterfeits. Just Ask Louis Vuitton., The Business of Fashion (Sept. 9, 2020), https://www.businessoffashion.com/articles/professional/china-luxury-counterfeits-flourish-louis-vuitton-covid-19-douyin-pinduoduo [https://perma.cc/KA7X-QYKE].[145]Id.[146]Id.[147] McKenna Oxenden, Nearly 59,000 counterfeit masks, hundreds of fake COVID-19 tests seized at Mid-Atlantic ports, including Baltimore, The Baltimore Sun (Oct. 7, 2020), https://www.baltimoresun.com/coronavirus/bs-md-counterfeit-masks-tests-seized-20201008-wp6lv2x5kbatte2uzvan6u2b3e-story.html [https://perma.cc/8CQ9-DG6Q].[148] Danny Parisi, The rise of the fake designer mask, Glossy (July 21, 2020), https://www.glossy.co/fashion/the-rise-of-the-fake-designer-mask/ [https://perma.cc/3VNQ-94Y8].[149] Hall, supra note 150.[150]Id. (“Luo also stated that that while major e-commerce platform operators Alibaba and JD.com have made inroads into stamping out fakes, counterfeit products are now increasingly rife on up-and-coming e-commerce players, including Douyin and Pinduoduo.”).[/vc_column_text][/vc_column][/vc_row]
[vc_row row_type="row" use_row_as_full_screen_section="no" type="full_width" text_align="left" background_animation="none" css_animation=""][vc_column][vc_column_text]
By: Paul K. Smith
The fashion industry has developed into one of the most profitable global industries, with revenue from sales reaching just shy of $2 trillion in 2019.[1] One of the unique features that sets the fashion industry apart from others, and is largely attributable to such rapid and exponential economic growth, is the need for adaptation and change. Designers and brands continue to adapt in order to anticipate the desires of consumers, and this has led to changes in the manufacturing process, the design process, distribution, and sales to consumers.[2] Most notably, in the early 1980s, “transnational corporations, cyber technology, and electronic mass media have spawned a web of tightly linked networks that cover the globe.”[3] Globalization has had an impact on virtually every major industry, but for the fashion industry, “globalization [meant] an abundance of fashions sold by giant retailers who can update inventory, make transnational trade deals, and coordinate worldwide distribution of goods at the click of a computer.”[4]The shift to a focus on e-commerce has benefitted the fashion industry tremendously. Online sales of apparel for 2019—in the United States alone—constituted an estimated 38.6%, an increase in roughly ten percentage points over the past three years.[5] Notwithstanding the recent impact from the COVID-19 pandemic, “worldwide revenue” for the fashion industry was “expected to rise from $481.2 billion in 2018 to $712.9 billion by 2022.”[6] This trend, while projected to slow in growth[7], is likely to continue into the near future. Brands and designers are able to reach consumers directly through use of online service providers (“OSPs”), and consumers are able to keep in style through the press of a button while in the comfort of their own homes. Additionally, the recent COVID-19 impact is has contributed in part to the growth of e-commerce. In August of 2020, “online sales reached $63 billion, and the first eight months of 2020 generated $497 billion in online sales.”[8]Unsurprisingly, the growth of OSPs such as Amazon and eBay—which perpetuate the sale of, among other items, apparel, footwear, and other fashion accessories from third parties—has coincided with the fashion industry’s continued reliance on e-commerce. The goals of both industries have been somewhat the same: expand to a greater consumer base and increase sales. According to Elaine Kwon, a former executive at Amazon’s fashion business, “‘brands are now realizing that people are buying from Amazon, and if I, as a brand, refuse to participate, someone else can take my product and make that money.’”[9] In addition to fashion brands reaching a larger consumer base, the online platforms benefit significantly from these third-party sellers. In 2007, “Jeff Bezos told Amazon employees . . . that ‘in order to be a two-hundred-billion-dollar company, we’ve got to learn how to sell clothes and food.’”[10] It is safe to say that the crossover of the fashion industry and OSPs that perpetuate sales from third parties is unlikely to subside any time soon.One facet in particular that complicates the relationship between fashion brands and OSPs is the facilitation of sales from third parties.[11] “One of the little-known (at least by the mainstream) parts of Amazon’s business is that it allows people to sell products on its site, which means you can take advantage of this brand name’s tremendous reach and influence.”[12] It is estimated that “[a]bout 50 percent of sales on Amazon are made through third-party sellers,” and that “Amazon has shipped out more than two billion third-party items in 2016.”[13] While this has had a mutually positive effect for both fashion brands and OSPs, the issues that have plagued that fashion industry have been magnified by this intertwined relationship. More importantly, Amazon in particular has taken a “hands off” approach in response to claims filed against it despite its growing involvement in the industry. For example, Amazon was recently involved in a products liability case over damages suffered by a consumer shortly after the consumer had purchased a product off of Amazon through a third-party seller.[14] The product was purchased from a third party, and Amazon processed and completed the plaintiff’s order. Amazon sought to dismiss the case, arguing that “strict products liability claims do not apply, as it did not distribute, manufacture, or sell the product at issue.”[15] The court held that Amazon can be held strictly liable for defective products offered by third-party sellers “on the basis that Amazon is not merely a marketplace operator, and in reality, played a ‘pivotal’ role ‘in bringing the product here to the consumer,’ and acted ‘as a powerful intermediary between the third-party seller and the consumer.’”[16] With the growth of e-commerce and the utilization of OSPs in the fashion industry, the question has resurfaced as to whether such platforms should be held contributorily liable when third parties offer counterfeit products on their sites.The issue of counterfeiting has persisted since the industry’s inception, so much so that areas such as New York City’s Canal Street have become synonymous with fake designer goods.[17] This is not a problem that will be going away any time soon. “What was once confined to illicit shopping districts around the world, such as Canal Street in New York City, has ballooned into a global, multibillion-dollar business.”[18] Various protective measures have been in place in order to assist fashion companies with combatting the issue of counterfeit sales. For instance, the § 1114 of the Lanham Act defines the use and/or reproduction of counterfeit products associated with a registered mark,[19] and the statute provides for several civil remedies available for brands, one of which permits brands to have the counterfeit goods seized from the infringer.[20] Federal and state governments have also codified “[t]rafficking in counterfeit goods or services” in their respective criminal codes, providing criminal penalties for those who engage in selling counterfeit products.[21]Despite these protections for direct trademark infringement, the Lanham Act and a majority of criminal codes are silent as to the issue of contributory infringement liability, which “is when the defendant does not control the infringer but knowingly assists or somehow provides the means for the infringement.”[22] “[A]n act of direct infringement is still necessary, as defined by the Lanham Act’s criminal or civil provisions, for a contributory infringement action to commence.”[23] Contributory infringement liability for the sale of counterfeit goods has thus been traditionally a court-defined doctrine. The Supreme Court of the United States took up the issue of contributory infringement liability and recognized that liability for trademark infringement extends beyond those who directly infringe on a brand’s trademark.[24] Contributory infringement liability was then expanded to apply to flea markets,[25] landlords,[26] and credit card processors.[27] It was in the seminal case Tiffany (NJ), Inc. v. eBay where the Court held that an online service provider cannot be held contributorily liable for the sale of counterfeit goods when there was a lack of specific knowledge as to the specific counterfeit sale(s).[28] Courts have since been consistent in holding that an online service provider must have specific knowledge, as opposed to general knowledge, of the alleged infringing activity.The rule set forth by the courts has not stopped brands, agencies, policymakers, and even the President from pushing for greater measures to stop the sale of counterfeit goods on online service providers, and for holding such providers liable for the third party sales of counterfeit products on their platforms.[29] As of 2020, a bill has been introduced which would amend the Lanham Act and require online service providers to take more proactive measures in order to prevent the sale of infringing and counterfeit products on their platforms.[30] The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act (“SHOP SAFE Act of 2020”) sets forth ten requirements for online service providers.[31] If an online service provider has not taken the specific measures outlined in the SHOP SAFE Act, and it is later found that third parties have been selling counterfeit products on their platforms, the online service provider can be held contributorily liable so long as the counterfeit products pose a “health and safety” risk to the public.[32]If enacted, the SHOP SAFE Act would provide for the first statutory establishment of contributory infringement liability and would go beyond the judicial doctrine which only required specific knowledge of specific infringing sales and sellers.[33] However, the additional qualifying language of counterfeit products that pose a “health and safety” risk is new compared to the current general statutory prohibitions against counterfeiting contained in both the Lanham Act as well as various criminal codes which does not contain such qualifying language. This has raised questions as to the reach of the SHOP SAFE Act in its imposition of contributory infringement liability for OSPs that do not comply with the requirements set forth. Namely, what type of products will be included under the category of “health and safety,” and whether such language will be insufficient in addressing the issue of counterfeit sales by third parties on OSPs.[34]In this Note, I will argue that inclusion of the qualifying language “health and safety” reduces the otherwise important efforts for combatting counterfeit sales on OSPs. Part 1 will analyze the civil and criminal statutes that define the scope of liability for trademark infringement through the counterfeit sales. In addition to the implications of the current statutory framework, the language of the statutes is of particular importance as they omit qualifying criteria compared to the proposed language in the SHOP SAFE Act. Part II examines the development of contributory infringement liability as set forth in the courts. As mentioned above, such liability has largely been constructed by the judiciary, and the rules established by the courts are particularly important insofar as they highlight the necessity for legislative action. More importantly, there are remedial factors that courts look at when assessing contributory liability,[35] and this has been codified in the SHOP SAFE Act.[36]Part III will focus on the language of the SHOP SAFE Act and how it modifies the Lanham Act. This part will also focus on how the SHOP SAFE Act extends the contributory infringement liability rules created by the courts, in addition to exploring the potential issues that will arise with the qualifying language contained in the Act that imposes contributory infringement liability only on counterfeit goods sold that pose a “health and safety” risk to consumers. As the fashion industry’s expansion into e-commerce continues at exponential rates, and as companies such as Amazon and eBay continue to develop both in respects to their technological advances and consumer reach, the SHOP SAFE Act does set forth much-needed requirements in order to protect against counterfeit sales by increasing the scope of contributory infringement liability.Part IV will look at the future of the fashion industry, including its relationship with e-commerce, which has been incredibly exacerbated by the recent COVID-19 pandemic. In particular, I examine the fashion industry’s response to the pandemic and its utilization of online platforms. The fashion industry’s response to the COVID-19 pandemic is of particular importance because it suggests a larger movement towards direct-to-consumer business through e-commerce. This shift from brick-and-mortar stores to a focus on direct-to-consumer business model through e-commerce preceded the COVID-19 pandemic.[37] However, the “pandemic has only hastened what was already becoming clear: The era of the department store is on its way out.”[38] The importance of this shift will be the continued growth of online counterfeit sales, further evidencing the need for the proper legislative action, and such legislation cannot appropriately address the issue if it omits a significant portion of products.I. Legal Background and Framework
The Lanham Act is the starting point in addressing any issue regarding trademark infringement through counterfeiting. “Trademark counterfeiting is the act of manufacturing or distributing a product bearing a mark identical to, or substantially indistinguishable from, a registered trademark.”[39] Section 32 of the Lanham Act states that trademark infringement includes the use in commerce of “ any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.”[40] Section 32 of the Lanham Act also states:“any person who shall . . . (b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive . . . shall be liable in a civil action by the registrant . . .”[41]An individual who counterfeits and/or sells a product(s) bearing one or more trademarks is liable for direct trademark infringement, and this permits the fashion brand to recover damages from the infringing party.[42] The language of the Section 32 is particularly important, as it specifically states that “any person who shall . . . counterfeit . . . a registered mark,” which suggests that its primary and exclusive application is against the direct infringer who engages in the trade or business of counterfeit goods. Fashion brands pursuing trademark infringement actions against direct infringers was, and still is, the primary pursuit of a trademark infringement action under Section 32 of the Lanham Act.Traditional trademark infringement under the Lanham Act differs in several ways from trademark infringement through the sale of counterfeit goods. In order to establish liability against a party for direct trademark infringement, courts will typically assess the likelihood of confusion of the mark. This analysis focuses on numerous factors that assist a particular court in determining whether there has been a likelihood of confusion between the trademark owner and the allegedly infringing party.[43] In a trademark infringement action involving the sale of counterfeit goods, the harmed party must prove: “(1) that [it] has a valid and legally protectable mark, (2) the plaintiff owns the mark, and (3) the defendant’s use of the mark causes a likelihood of confusion”[44]; however, courts will not go through a likelihood of confusion analysis since counterfeit marks are considered inherently confusing.[45] Instead, the focus of a court in a trademark infringement action involving counterfeit goods is “where there are items to be confused in the first place—that is, whether the items at issue . . . are, in fact, counterfeit and whether Defendants sold those items.”[46]In Gucci America, Inc. v. Duty Free Apparel, Ltd., the defendant maintained a business that sold, among other products, wallets and handbags that bore several registered Gucci trademarks.[47] Gucci hired an investigator to purchase several of the products offered at the defendant’s business, and after purchasing the products, they were able to determine that they were not genuine. Gucci brought a trademark infringement action against the defendant and succeeded in showing both that the products were not made by Gucci, and that the marks on the products only deviated slightly from the registered Gucci trademarks.[48] The defendants contested Gucci’s claims and argued that they were not in the business of selling counterfeit goods, but the court held that “[t]he plain language of the relevant statutes does not require that the plaintiff prove that a defendant committed the infringement in any particular amount, or with any amount of regularity.”[49] The Lanham Act therefore establishes trademark infringement liability against a party that engages in any single sale of counterfeit goods.In order to succeed in a trademark infringement action under the Lanham Act, the trademark owner must show that “(1) the defendant infringed a registered trademark in violation of the Lanham Act, and (2) the defendant intentionally used the trademark knowing it was counterfeit or was willfully blind to such use.”[50] The court in Coach, Inc. v. Fashion Paradise, LLC stated that “‘willful’ infringement involves an intent to infringe or a deliberate disregard of a mark holder’s rights,” and that this conduct can be demonstrated “through deliberate and unnecessary duplicating of a plaintiff’s mark in a way that was calculated to . . . benefit from the good will” built by the plaintiff.[51] Therefore, in order to be liable for direct trademark infringement under the Lanham Act, an individual must at least have engaged in a minimal amount of sales of counterfeit goods, and either deliberately intended to infringe or was willfully ignorant of the trademark owner’s rights in the mark.Section 32 of the Lanham Act provides the means of protecting consumers from the harm caused by counterfeit goods. In contrast, Section 34(d) of the Lanham Act offers protection to fashion brands harmed by the business of counterfeit goods. Under Section 34(d), a trademark owner may obtain a civil seizure order, otherwise known as an “ex parte” seizure order, which permits the “seizure of goods and counterfeit marks involved in such violation and the means of making such marks.”[52] In order to meet the requirements for an ex parte civil seizure order, a brand owner must meet several requirements, including, but not limited to, providing a description of what products will be seized, the exact location where such products will be seized, immediate harm that cannot be avoided without a seizure order, and that the person against whom the seizure will be ordered is likely to destroy any of the infringing products.[53]Section 34(d) provides a unique remedy for fashion brands in that it allows for the seizure of not only the counterfeit goods, but also the means by which the counterfeit products were made in addition to any records that documented the sale and manufacture of the counterfeit goods. Direct infringement can cause of surplus of counterfeit products in the market which in turn causes significant harm to fashion brands, so the ability to seize the goods and the means of producing such goods greatly mitigates the harms caused by direct trademark infringement.One example of a fashion brand using Section 34(d) is Cartier Int’l B.V. v. Ben-Menachem.[54] The defendants were engaged in importing, distributing, and offering for sale counterfeit watches bearing Cartier’s registered trademarks. Cartier was able to gather enough evidence to obtain a civil seizure order under Section 34(d) of the Lanham Act, and as a result of the execution of the seizure, they were able to seize numerous documents detailing the extent of the counterfeit operation, the means of producing and selling the counterfeit goods, and several counterfeit watches bearing Cartier’s trademark.[55]The cases and relevant sections of the Lanham Act discussed above demonstrate that, with respect to counterfeits, the Act is designed to protect both consumers and trademark owners from the harms caused by the sale of counterfeit goods. It is limited insofar as it only pertains to direct infringement, whereby an individual may be held liable for trademark infringement when he is directly engaged in the sale and/or trafficking of counterfeit goods bearing registered trademarks.[56] Notwithstanding its limited application to direct infringement, the Lanham Act does not limit the category of goods or services to which one may be held liable for trademark infringement when involved in the sale of counterfeit goods. In other words, the Act does not distinguish between the categories of goods eligible for an infringement action under Section 32.[57] In the above-mentioned Gucci America, Inc. and Cartier Int’l B.V. cases, the counterfeit goods were fashion accessories and jewelry, respectively.[58] Conversely, in Johnson & Johnson Consumer Companies, Inc. v. Aini, Johnson and Johnson had manufactured various health and beauty products, including various types skin care.[59] It alleged violations of sections 32 and 43(a) of the Lanham Act for the defendants’ manufacture and sale of counterfeit skincare products.[60] The court held in part that the defendants were liable under the Lanham Act for selling products nearly identical to Johnson & Johnson’s health and beauty products.[61] Therefore, a trademark holder can bring an infringement action under the Lanham Act against a direct infringer(s) regardless of the type of product alleged to be counterfeit.B. Criminal Statutes When an individual or individuals have engaged in the manufacture and sale of counterfeit goods bearing a registered trademark, fashion brands will almost always resort to bringing an infringement action under the Lanham Act; however, trademark infringement via counterfeit sales is unique in that it can also be found in criminal statutes at both the federal and state level. In general, these statutes describe who may be held criminally liable for selling counterfeit products, what the requirements are for finding the party guilty of engaging in the act, and what penalties are available.The Trademark Counterfeiting Act was passed by Congress in 1984, and it is the federal statute governing the act of trafficking in counterfeit goods or services. The statute—in similar terms used in the Lanham Act—defines a “counterfeit mark” as a mark “that is used in connection with trafficking in any goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature.”[62] The mark must also be nearly identical to a mark registered in the U.S. Patent and Trademark Office, it must be used in connection with a good or service which is registered in the U.S. Patent and Trademark Office, and finally, it must be likely to confuse consumers when used.[63] In order for the government to succeed in establishing the criminal offense under the Trademark Counterfeiting Act, it must prove:(1) that the defendant trafficked or attempted to traffic in goods or services; (2) that such trafficking, or attempt to traffic, was intentional; (3) that the defendant used a "counterfeit mark" on or in connection with such goods or services; and (4) that the defendant knew that the mark so used was counterfeit.”[64]Unlike the Lanham Act, the Trademark Counterfeiting Act does identify and define the goods that would render one liable. For example, the Trademark Counterfeiting Act also states that one who intentionally “traffics in a drug and knowingly uses a counterfeit mark on or in connection with such drug” is liable and subject to the appropriate penalties. “Drug” is defined as a drug, as defined in section 201 of the Federal Food, Drug, and Cosmetic Act.”[65] Despite these definitions and distinctions, the statute covers the range of products and services in which one could manufacture and sale a counterfeit version. In effect, it is a supplement to the Lanham Act and only criminalizes conduct that is prohibited under the Lanham Act.[66]The Trademark Counterfeiting Act also provides a higher degree of penalties compared to those available under the Lanham Act. “An individual found guilty of the trafficking in counterfeit goods or services can be fined $2,000,000 or imprisoned not more than 10 years, or both, and, if a person other than an individual, shall be fined not more than $5,000,000,”[67] and these penalties are increased with any subsequent offense. Additionally, the penalties are more severe when the individual has engaged in the manufacture and sale of counterfeit drugs.[68]The Trademark Counterfeiting Act is another means available to fashion brands that seeks to mitigate the harm caused by counterfeiting, and to deter future infringement. It is often difficult for a brand to actually receive payment under a judgment from the infringing party, and therefore, a conviction ensures that the infringing parties are unable to continue trafficking in counterfeit goods. In United States v. Chong Lam, the defendants manufactured and sold wallets and handbags that bore several of Burberry’s registered trademarks.[69] The government brought charges against the defendants under the Trademark Counterfeiting Act, and a jury returned a conviction.[70] The defendants appealed and argued that the Act is unconstitutionally vague, but the Fourth Circuit affirmed their convictions.[71] While brands are still likely to face the issue of counterfeiting even after a conviction is rendered, such a penalty ensures that those particular offenders are unable to continue their illegal acts for a period of time.In addition to the Trademark Counterfeiting Act and other federal statutes criminalizing the act of trafficking in counterfeit goods or services, numerous statutes operate in similar fashion at the state level. For example, in New York it is a class A misdemeanor, or a class E or C felony “to sell or offer for sale goods that bear a counterfeit trademark if the defendant acts ‘with the intent to deceive or defraud some other person or with the intent to evade a lawful restriction [of] sale.’”[72] A “counterfeit trademark” is defined as an imitation of a registered trademark that is “(a) used in connection with trafficking in goods; and (b) used in connection with the sale, offering for sale or distribution of goods that are identical with or substantially indistinguishable from a trademark.”[73] Courts in New York have interpreted the statutory definitions as encompassing a broad range of categories. For example, in People v. Levy, the court held that an individual has trafficked in counterfeit products when a product merely bears an identical mark to one on the principal register.[74] Unlike the Trademark Counterfeiting Act, New York courts have held that this broader interpretation of the statute affords brands with a greater ability to protect their trademarks and remedy the harm caused by counterfeit goods.[75]California has also criminalized trafficking in the sale of counterfeit goods and services. An individual “who willfully manufactures, intentionally sells, or knowingly possesses for sale any counterfeit mark registered . . . on the Principal Register of the United States Patent and Trademark Office” is guilty under the statute and subject to monetary fines and the possibility of imprisonment.[76] Much like New York’s statutes criminalizing trafficking in counterfeit goods, the California statute does not limit the category of products that would subject one to criminal punishment. A “counterfeit mark” is defined as a “spurious mark that is identical with, or confusingly similar to, a registered mark and is used, or intended to be used, on or in connection with the same type of goods or services for which the genuine mark is registered.”[77] Therefore, while criminal prosecution under this statute is a common tool utilized by fashion brands[78], it is also available for any brand owning trademarks on the principal register, regardless of their respective industry.The statutory language of both the federal and state statutes is of particular importance, in addition to the statutory interpretation by the courts. The Trademark Counterfeiting Act, New York Penal Code § 165.70, and California Penal Code § 350 each contain rather broad definitions of what constitutes a “counterfeit mark,” in addition to when an individual may be found guilty under each for trafficking in counterfeit goods.[79] These broad statutory definitions have allowed for numerous brands across several industries to seek criminal sanctions for counterfeiting, including fashion brands,[80] and it has been essential in further remedying the issue of counterfeiting.
Pursuing a direct infringement action under the Lanham Act is typically a brand’s starting point when facing a counterfeiting issue; however, pursuing an indirect infringement action against a third-party is vital for several reasons. First, a brand has a greater choice of not only obtaining a larger damage remedy against a third-party, but it is also more likely to have that judgment paid.[81] Weighing the likelihood of whether a brand is going to receive payment on its judgment is important to determine at the outset because a judgment not only acts as a possible deterrent, but it also allows the brand to recover some of the cost of engaging in expensive litigation.[82] It is commonly the case that the direct infringer does not have the money to pay a judgment. Therefore, it is more advantageous to pursue an action for indirect infringement against a third party when possible because “[s]uch third parties almost always have greater financial resources.”[83] Second, in many instances, the third party has had some role in facilitating the infringing activity. Courts have applied secondary liability against various third parties, such as flea market operators,[84] landlords,[85] and credit card processing companies.[86] Therefore, receiving a judgment against a third party through an action for secondary liability not only ensures a greater chance of receiving payment on a judgment, but it is often also necessary to deter additional infringing action.Third-party liability is a unique form of trademark infringement in that it is not recognized in the Lanham Act. When a trademark owner files suit under Section 32 of the Lanham Act for trafficking counterfeit goods or services, it is always against the party directly manufacturing and/or selling the counterfeit goods or services.[87] The Lanham Act is silent in regard to third-party liability, and it is instead an entirely judicially-created doctrine.[88] In Inwood Laboratories, Inc. v. Ives Laboratories, Inc., the Supreme Court extended trademark infringement beyond its traditional application to those who directly manufacture and sell infringing goods.[89] More specifically, the Court recognized two different types of third-party liability: contributory liability and vicarious liability.[90] “Contributory liability is when the defendant does not control the infringer but knowingly assists or somehow provides the means for the infringement,” whereas vicarious liability occurs “when the direct infringer is an agent or business partner of the defendant,” and the defendant maintains the ability to control the conduct of the direct infringer while deriving a financial benefit from the infringement.[91]Vicarious liability is arguably easier to establish because there often exists some evidence that the third party has a direct relationship with the infringer which allows it to exercise some control while also deriving a financial benefit. This also makes it much less controversial insofar as the third party has a greater influence and role in the infringing activity. For example, the court in Coach, Inc. v. Goodfellow addressed the question of whether a flea market operator could be held liable for trademark infringement resulting from the vendors’ sale of counterfeit goods.[92] Goodfellow successfully argued that there was no evidence suggesting a partnership relationship between the vendors and the flea market operator; however, this only countered the argument for vicarious liability.[93] The court held that the flea mark operator was still contributorily liable since he had “actual knowledge that the infringing activity was occurring” and “continued to supply . . . resources to vendors with knowledge of and willful blindness toward ongoing infringing activities, thereby facilitating continued infringing activity.”[94]The standard for contributory liability poses a unique challenge when brought against online platforms that facilitate sales from third parties. In the aforementioned cases, the requirement of knowledge was necessary in order to find a defendant contributorily liable; however, there was no level of knowledge that a plaintiff had to prove. Instead, “courts considered the totality of the circumstances, including the prevalence of infringing activity in the marketplace, and then asked whether that should be sufficient to warrant the imposition of contributory liability.”[95] This standard shifted follow the decision reached by the Second Circuit in Tiffany (NJ) Inc. v. eBay Inc.At the turn of the century, consumers had increasingly turned to purchasing various products from third parties through websites such as eBay, Craigslist, and other similar platforms. As this usage increased, the problem of counterfeiting had also increased dramatically, and one of the brands significantly harmed was Tiffany.Tiffany sells its products through limited distribution channels which allows it to authentic the quality of the products sold; however, it became aware that its merchandise had increasingly appeared for sale on sites such as eBay.[96] Tiffany purchased several of the items offered for sale and found out that many were not authentic. It filed suit against eBay for trademark infringement and argued that eBay was contributorily liable because it had knowledge of the counterfeit sales occurring on its platform and continued to facilitate the transactions.[97]The court applied the Inwood test which finds a defendant contributorily liable if (1) “the service provider ‘intentionally induces another to infringe a trademark,’ or (2) the service provider “‘continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement.’”[98] Tiffany argued that “eBay continued to supply its services to the sellers of counterfeit Tiffany goods while knowing or having reason to know that such sellers were infringing Tiffany’s mark.”[99] The Second Circuit rejected Tiffany’s argument that eBay had knowledge of the infringing activity on its site. More specifically, the court held that eBay certainly possessed general knowledge of the counterfeiting taking place on its site; however, it lacked specific knowledge about particular instances of infringement.[100] This was demonstrated in part through one of eBay’s anti-counterfeiting measures, which permitted brands that suspected infringement to send a request to have a particular seller investigated. If the seller was found to be trafficking counterfeit products, eBay would remove the seller from the site.[101] As a result, the Second Circuit modified the Inwood test and added the requirement of finding knowledge of “specific instances of actual infringement.”[102]The Supreme Court solidified the requirements that fashion brands must demonstrate in order to succeed on a claim of secondary liability, but these requirements presented almost insurmountable hurdles that made it virtually impossible to succeed in receiving an adequate remedy for online counterfeiting. It was clear that the legislature, not the judiciary, needed to intervene and establish governing rules that would balance the interests of both the online platforms and the fashion brands.
The ruling in Tiffany has been wrought with controversy since the decision was reached back in 2010. The Second Circuit had properly applied the Inwood test and it was reasonable to conclude that eBay lacked the requisite knowledge in order to be found contributorily liable. eBay had an anti-counterfeit program in place and certainly tried to minimize infringement as much as it could in order to not only avoid liability, but also to maintain the integrity of its own brand. Nevertheless, the effect of the court’s decision was that the burden of policing its trademark rested entirely with the trademark holder.[103]A trademark holder generally has the burden of policing its trademark with respect to direct infringers and typically protects its assets by filing an infringement action under the Lanham Act; however, this is much more difficult in the context of sales on the internet and poses insurmountable challenges to brands. This begs the question that, given the increased widespread use of the internet as a marketplace, whether that burden should rest entirely on the trademark holders to police their trademarks in order to protect against infringement. Inwood was decided at a time when the Internet was in its infancy, and it had not yet been expanded into the marketplace whereby consumers could purchase and exchange goods.[104]Tiffany was also decided at a time where technical advancements were not as developed as they would later become, making it more difficult for online platforms such as eBay to provide adequate means of combatting the issue of counterfeiting on their sites. The Second Circuit spent a considerable amount of analysis focused on the measures eBay had in place, but its decision ultimately did not require an online platform to take affirmative steps to combat the sale of counterfeit goods taking place on its site.[105] Courts have since deviated to a degree from this rule, and will often look to any affirmative measures that are in place; however, it is still not a requirement for finding an online platform contributorily liable and courts will typically look at these measures generally without offering a closer look at their effectiveness.[106]Additionally, the Second Circuit modified the rule set forth in Inwood and established a requirement of finding “specific” knowledge of infringing sales.[107] No such standard was created in Inwood and courts following the Inwood decision had traditionally held that mere knowledge of infringing activity was sufficient to find contributory liability.[108] This heightened standard of knowledge made it increasingly challenging for brands to be successful in pursuing a claim for contributory infringement, particularly in the context of internet sales. Online platforms such as eBay, Craigslist, and Amazon engage in numerous transactions on a daily basis, making it highly unlikely that they will in fact have knowledge of specific instances of infringement. These two components have effectively insulated online platforms from being held liable for infringing activity that takes place on their sites. Therefore, trademark holders are not only required to bear the entire burden of establishing contributory liable under a new standard that is almost impossible to satisfy given the extent of business engaged in on the internet, but they are left with little to no remedy for the harm experienced as a result of the infringing activity.The criticisms following the Tiffany decision have continued to surface especially given the increased utilization of online platforms. The lack of an adequate judicial rule has raised the need for an amendment to the Lanham Act, or some other updated statute that addresses the unique issues posed by counterfeiting sales occurring through the internet. By comparison, the area of copyright has appropriately adjusted to some of these universal changes. In response to the issue of copyright infringement and its increased occurrence on the internet, Congress passed the Digital Millennium Copyright Act (“DMCA”), “which contains a limitation on contributory liability for e-commerce sites providing they take certain actions similar to those in Tiffany.”[109] Unlike copyright law, “[t]rademark law simply has not kept up with copyright statutes, bringing into question whether current statutes and case rulings are sufficient in the nearly limitless marketplace of the World Wide Web, where new sites are added daily and the cost to monitor is impossibly high.”[110] Therefore, the only plausible means by which to establish a rule that addresses the issues following the Tiffany decision would be through an Act of Congress.
In response to the demands for statutory intervention, a bill was introduced in 2020 which would amend the Lanham Act and shift some of the burden to online platforms. The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act (“SHOP SAFE Act”) is the result of a bipartisan effort to incentivize online platforms to limit the sale of counterfeit goods on their sites.[111] The Act followed numerous calls to address the issue of counterfeiting in the context of e-commerce, particularly with the increased difficulty of identifying and tracking online sellers who sold their products on platforms such as Amazon.[112] The SHOP SAFE Act would amend Section 32 of the Lanham Act and “provide for contributory liability for e-commerce platforms for use of a counterfeit mark by a third-party seller unless the platforms satisfy certain statutory requirements.”[113] Trademark owners had constantly been involved a whack-a-mole pattern of responding to counterfeit sales, whereby a brand would seek to have a seller removed from a platform only to have them reappear under a different alias. The Act was therefore introduced to aid brands in counterfeiting this futile response to counterfeiting.As previously stated, the SHOP SAFE Act explicitly states that “[a]n electronic commerce platform shall be contributorily liable for infringement by a third-party seller participating on the platform for use in commerce of a counterfeit mark.”[114] This would be the first time contributory liability is set forth in a federal statute, and provides a direct means for trademark holders to pursue an infringement action for the sale of counterfeit goods stemming from third parties. In addition to establishing a cause of action for contributory infringement, the Act also creates a “safe harbor” for online platforms that meet the ten requirements contained in the Act. If a brand implements the ten preventative measures set forth in the Act, they cannot be held contributorily liable should it be found that some goods sold were counterfeit.[115] Some of these requirements include the following: verifying the identity of the third-party seller, requiring confirmation from the seller that the products for sale are not counterfeit, consent to suit in a U.S. court should the goods in fact be counterfeit, requiring the seller to clearly identify their identity, contact information, and where the goods are coming from.[116] Many of these measures are similar to those utilized in the Tiffany case. For example, in order to fall under the Act’s “safe harbor,” online platforms must implement a timely takedown process that allows for the removing of listings that offer counterfeit goods for sale.[117] Platforms must also terminate sellers who have sold counterfeit goods on the particular platform at least three times, and sellers must be screened in order to ensure that terminated sellers are not rejoining the platform under a different alias.[118]The requirements set forth in the Act are appropriate in two significant ways. First, they shift the otherwise lopsided burden placed on brands to relentlessly police the use of their trademarks and place some of that burden on online platforms. Courts had previously looked at whether an online platform had taken preventative measures in order to determine whether the required specific knowledge of infringement existed, but they were not required to have such measures in place.[119] The SHOP SAFE Act modifies this by requiring platforms to take certain preventative measures in order to avoid liability. This operates to the benefit of both the platforms and brands. Online platforms are able to avoid liability so long as they implement the ten preventative measures contained in the Act, while also protecting the integrity of their own brand by ensuring that consumers are not purchasing counterfeit goods. Platforms such as Amazon, eBay, TheRealReal, etc. are just as interested in protecting their brand image as they generate revenue from partnering with various fashion brands, and if they develop a reputation as being a platform that contains a plethora of counterfeit goods, consumers will be less likely to purchase goods on their platforms. Trademark owners are able to spend less resources on policing their trademarks, and when they do identify counterfeit products on any online platform, they can be assured that there are adequate measures in place to remove the goods and the seller(s) from the platform.The SHOP SAFE Act also brings the Lanham Act up to date with the current technological landscape involving the use of the internet to sell and exchange goods. Tiffany was decided at a time when the internet was still in its relative infancy, and it was novel that eBay had had certain programs in place to assist in preventing counterfeit sales. Developing and maintaining these programs at the time cost eBay a significant amount of resources. eBay had spent close to $20 million annually on its programs, including more than $5 million in maintaining a fraud engine which enabled eBay to identify activity that violated its policies.[120] With the explosive expansion of internet usage since Tiffany, there must be an amendment to the Lanham Act that brings it up to date with these changes. The SHOP SAFE Act provides the necessary mechanism to fight online trademark infringement by ensuring that online platforms have the appropriate preventative measures available to trademark owners.
The SHOP SAFE Act appropriately modifies the Lanham Act; however, the Act falls short because it imposes liability on e-commerce platforms only when the counterfeit goods sold pose a “health and safety” risk to consumers.[121] The Act further defines a good implicating health and safety as any good, “the use of which can lead to illness, disease, injury, serious adverse event, allergic reaction, or death if produced without compliance with all applicable Federal, State, and local health and safety regulations and industry-designated testing, safety, quality, certification, manufacturing, packaging, and labeling standards.”[122] This qualifying language significantly limits the application of the Act, thereby cutting against the drafters’ goal of protecting consumers from counterfeit goods that “pose significant threats to consumer health and safety.”[123] Protecting the health and safety of consumers is a legitimate and reasonable goal, but the restrictive language the SHOP SAFE Act contains does not fully satisfy that goal.The SHOP SAFE Act’s application to only goods that implicate health and safety concerns diverts significantly from current statutory protections. By comparison, Section 32 of the Lanham Act does not limit its application to a certain class of goods when one seeks a direct infringement action.[124] A trademark owner is able to bring an action for direct infringement so long as it can establish that it owns a protectable mark and the infringer uses the counterfeit mark in commerce.[125] There is no language in the Lanham Act requiring the good or service to pose a health or safety risk to consumers in order for there to be a finding of infringement.Additionally, no such language is included in the various criminal statutes at both the federal and state levels. The Trademark Counterfeiting Act does not contain any language that limits its application to certain categories of goods.[126] The Act does establish higher penalties for trafficking in counterfeit drugs and specifically defines what goods would fall under this section, which differentiates in from the Lanham Act in that regard.[127] However, establishing more severe penalties for trafficking in counterfeit drugs does not diminish the liability for counterfeiting other types of goods under the Act. Similarly, the New York and California statutes criminalizing trafficking in counterfeit goods or services do not contain any qualifying language limiting their application.[128] To the contrary, New York has applied its criminal statute over a broad range of categories in order to prevent against limitation on its application.[129]Given the current statutory framework, it begs the question why the SHOP SAFE Act would significantly limit its application to only goods that pose a health and safety risk. The aforementioned statutes do not distinguish between which categories of goods they apply to, and this has enabled a wide range of trademark owners to bring infringement actions. Justification for this may be that omitting those specific qualifying terms would severely widen the scope of liability, a measure that may simply pose too great of a burden on online platforms, and perhaps this qualifying language was included in order to gain support from those who have difficulty in imposing more stringent standards for online platforms for all counterfeit products sold through their channels. After all, platforms like Amazon and eBay are just as interested in protecting their own brand as they are in protecting other brands, which means that they already have an incentive to curb sales of counterfeit goods on their websites in order to keep a positive image in the eyes of the consumers. This is an understandable concern particularly because removing the “health and safety” language from the SHOP SAFE Act would allow for more third-party infringement actions to be brought against online platforms; however, this does not override the need for adequate measures for all trademark owners, regardless of the products they sell. Fashion brands have had limited means in protecting themselves from the harm caused by counterfeit sales on online platforms, and the “health and safety” language merely serves only one of the two interests inherent in trademark law—consumer safety. Removing the “health and safety” language would not only safeguard consumers from counterfeit goods, but it also allows any brand to pursue an infringement action against an online platform. If fashion brands are unable to seek redress for the harm they experience, they will also be unable to protect consumers since their goods are not within the Act’s qualifying language.Moreover, consumers’ health and safety is not a new concern as the Lanham Act and various criminal statutes have been interpreted to encompass a broad range of counterfeit goods and have been applied as such.[130] The SHOP SAFE Act should contain the same broad language as the other statutes in order to allow for a broader range of protection.Another problem posed by the SHOP SAFE Act’s limitation in application to goods that pose a health and safety risk is determining what goods actually fall within that definition. While the Act does define goods that implicate health and safety,[131] it does not provide any real guidance for brands to determine if their goods qualify under the Act. “[B]rand owners are unaware of the exact conditions in which counterfeit versions of their products are manufactured; they just know that they are not manufactured in accordance with own processes.”[132] Certain product categories, including cosmetics[133] and eyewear[134] are regulated on a federal level, so there is little question that those categories and others are directly addressed in the SHOP SAFE Act. Other categories of products, such as luxury handbags, t-shirts, shoes, etc. likely do not fall within the SHOP SAFE Act’s purview; however, if an individual purchases a shirt specifically because they believe it does not contain certain materials and instead receive a counterfeit which causes an allergic reaction, it is less clear whether the SHOP SAFE Act would apply since shirts are not typically the type of good that would lead to illness or allergic reaction. “Products that don’t ordinarily pose a health risk if made incorrectly won’t receive the same kind of attention from commerce platforms.”[135] This kind of language could potentially render the statute more reactive than proactive since defining what constitutes a “health and safety” risk will be largely left up to the courts.Notwithstanding the potential issues stemming from determining when the SHOP SAFE Act applies, the requirement that the trafficked counterfeit goods pose a “health or safety” concern significantly limits the protection that brands need in order to police their trademarks. Sales of counterfeit pharmaceuticals is an increasing problem that needs to be addressed, but they represent a fraction of the total trade in fakes, particularly compared to luxury goods alone. Of the estimated $4.5 trillion resulting from the trade of fakes, “fake luxury merchandise accounts for 60% to 70% of that amount, ahead of pharmaceuticals and entertainment products.”[136] A majority of the counterfeit sales that occur on e-commerce platforms will likely not be covered by the Act under its current drafting, despite the fact that many fashion brands experience the most harm from counterfeiting.It is possible that, in practice, the Act will be interpreted to encompass a broader range of goods that have a tangential impact on consumer health and safety. This potential interpretation would therefore allow for protection of various fashion products that are not immediately identified as posing health and safety risks, but it shifts one of the central goals of trademark law: brand protection.[137] Under this interpretation, the focus of protection is on the goods, and not the good will and integrity of brands. In order to balance the protections for consumers and for all trademark owners, the “health and safety” language should be omitted from the SHOP SAFE Act.
The need for legislative intervention into the trafficking of counterfeit goods on e-commerce platforms has become more apparent given the recent global pandemic. In response to the pandemic, consumers have taken shelter in their homes and only stray outside for purchasing essential items. Roughly 52% of consumers have avoided shopping in brick-and-mortar stores as a result of the pandemic.[138] Fashion brands have reacted to the pandemic by shifting their focus in marketing, advertising, and sales from brick-and-mortar stores building their presence on the internet.[139] While many brands have revamped their online presence, the usage of e-commerce platforms has also skyrocketed during the pandemic. For example, Amazon and eBay are among the top retail e-commerce websites for revenue generated during the pandemic.[140] Even prior to the pandemic, these online platforms have been steadily growing their presence in the fashion industry. In 2019, Amazon unveiled a feature built into its app that utilizes an AI-powered feature allowing consumers to shop for certain items based on pictures they upload.[141]Fashion brands are likely to continue to utilize these e-commerce platforms in the future even when the pandemic subsides. “The behaviors, preferences, and shifts in mindset that people have adopted during the pandemic will lead to permanent changes, including bifurcated spending, accelerated adoption of e-commerce, and increased demand for purpose-driven brands and sustainable fashion.”[142] This shift is necessary in order to respond to consumers’ desires to shop safely and effectively, as many of these new programs make it easier for consumers to look for various goods, try them on virtually, make purchases, and even make returns.[143]
The shift to a more e-commerce focused business model comes at significant risk given the current lack of a statutory framework that protects brands from the trafficking of counterfeit goods on e-commerce platforms. The problem of counterfeiting has exponentially impacted the fashion industry as a result of the COVID-19 pandemic.[144] Fashion brands have had to shift their resources and focus away from extensively policing their intellectual property, and “[t]his isn’t because there aren’t nefarious counterfeiters around . . . but because fashion companies hit hard by the worldwide impact of the pandemic are no longer able or willing to hire him for investigations and enforcement actions.”[145] The SHOP SAFE Act could alleviate some of the burden placed on fashion brands who are operating on limited budgets and do not have the resources to constantly police their intellectual property; however, it can only do so successfully if it applies beyond its current drafting which limits it to goods that pose a health and safety risk.The SHOP SAFE Act’s qualifying language places many fashion brands at a disadvantage especially during the COVID-19 pandemic. According to Herry Luo, general manager of Roy IP Legal Consultant Limited, “‘[b]ecause the budgets of fashion brands are decreasing, we are focusing more on pharmaceutical and food areas [right now].’”[146] This is an appropriate response as the pandemic has prompted a large focus on pharmaceuticals and other protective gear which poses a significant threat to consumer health and safety if counterfeit versions are purchased.[147] Even fashion brands have shifted from apparel and other goods into making masks that bear various trademarks.[148] The SHOP SAFE Act would operate as an effective protection measure for brands that produce these types of goods, but the focus on only that category exacerbates the already increasing problem of counterfeit goods on e-commerce platforms. “‘The counterfeiters know when the brands aren’t striking them as hard as before and that encourages them to counterfeit more.’”[149] Moreover, there are an increasing number of “up and coming” e-commerce platforms that do not necessarily have the resources to invest in preventative measures. This has resulted in an exponential growth in sales of counterfeit goods on these newer platforms.[150] Therefore, while the SHOP SAFE Act would address the concerning problem of counterfeit goods that pose a serious health and safety risk to consumers, the Act should not limit protection exclusively to that category because fashion brands will continue to experience significant harm from counterfeiting on e-commerce platforms.
Counterfeiting in the fashion industry is a problem that is unlikely to be fully resolved, but it is clear the current statutory and judicial frameworks provide little assistance to brands that face this issue as it continues to persist and grow on e-commerce platforms. The consistent push from brands, politicians, and others suggests that this problem must be addressed, and that the legislature is in the best position to act. The SHOP SAFE Act is the latest legislative attempt to provide a remedy for brands that are combatting individuals trafficking in counterfeit goods on online platforms. The Act, if passed by Congress and signed into law by the President, would codify secondary liability in the Lanham Act and shift part of the burden to the e-commerce platforms. It would provide an incentive to platforms that, in order to avoid liability, they must implement numerous preventative measures that address the counterfeit sellers and sales that plague their sites.If the Act is passed, it would be a milestone, but unfortunately, its current drafting—providing secondary liability only in cases where the goods pose a health or safety risk—does not adequately address the wide range of products that are counterfeited and sold on these platforms. In order for the SHOP SAFE Act to provide the most effective relief, it should be re-drafted without the “health and safety” language. This language significantly limits the category of goods required to impose secondary liability, and it is likely to raise future issues in determining which goods actually fall within the Act’s purview. An all-encompassing statute would provide the long-awaited assistance that fashion brands desperately need in order to combat trafficking of counterfeit goods on online platforms.[1] Liam O’ Connell, U.S. Apparel Market – Statistics & Facts, Statista (Sept. 2, 2020), https://www.statista.com/topics/965/apparel-market-in-the-us/#:~:text=In%202019%2C%20global%20retail%20sales,trillion%20U.S.%20dollars%20by%202030.&text=Store%2Dbased%20retailing%20was%20valued,million%20U.S.%20dollars%20of%20revenue [https://perma.cc/M5EE-4DKY].[2] Eric Wilson, Evolution of the Fashion Industry, LoveToKnow, https://fashion-history.lovetoknow.com/fashion-clothing-industry/globalization-fashion-industry.[3] Leslie W. Rabine, Globalization and the Fashion Industry, LoveToKnow, https://fashion-history.lovetoknow.com/fashion-clothing-industry/globalization-fashion-industry [https://perma.cc/KK2Q-5G4V].[4]Id.[5] April Berthene, Ecommerce is 38.6% of All Apparel Sales, Digital Commerce 360 (Aug. 4, 2020), https://www.digitalcommerce360.com/article/online-apparel-sales-us/#:~:text=Online%20apparel%20sales%20accounted%20for,growth%20in%20retail%20clothing%20sales.&text=In%20fact%2C%20ecommerce%20contributed%20all,in%20total%20U.S.%20apparel%20sales [https://perma.cc/R6LE-97QT].[6] Aaron Orendorff, The State of the Ecommerce Fashion Industry: Statistics, Trends & Strategy, Shopify (Jan. 10, 2019), https://www.shopify.com/enterprise/ecommerce-fashion-industry [https://perma.cc/F44L-KL6E].[7]Id.[8]See April Berthene, Online merchants gain an extra $107 billion in 2020 thanks to pandemic, Digital Commerce 360 (Sept. 14, 2020), https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/ [https://perma.cc/2R8F-G7DT] (“Shoppers continue to flock to buy online pickup in store (BOPIS) for fulfillment, with BOPIS sales increasing in 59% in August compared with July.”); Berthene, supra note 5 (“Many of these online sales throughout the pandemic likely went to marketplace giant Amazon.com Inc., as shoppers flocked to the marketplace to buy COVID-19-related goods, according to a recent study by Remazing GmbH, an agency that helps brands sell on Amazon. It found that 71% of the top 100 search terms on the U.S. Amazon marketplace were related to COVID-19 from mid-February to mid-March.”).[9] Anna Nicolaou & Leslie Hook, Now Amazon is disrupting fashion retail, too, Financial Times (Jan. 26, 2018), https://www.ft.com/content/795935ac-0205-11e8-9650-9c0ad2d7c5b5 [https://perma.cc/7AUW-F7WZ].[10] Nicolaou & Hook, supra note 9.; see Pamela N. Danziger, Amazon, Already The Nation’s Top Fashion Retailer, Is Positioned To Grab Even More Market Share, Forbes (Jan. 28, 2020), https://www.forbes.com/sites/pamdanziger/2020/01/28/amazon-is-readying-major-disruption-for-the-fashion-industry/#760c7cfd67f3 [https://perma.cc/K647-CQC7].; see also Melissa Fares, Amazon fashion growth, Reuters Graphics, https://fingfx.thomsonreuters.com/gfx/editorcharts/AMAZONCOM-BRANDS-APPAREL/0H001PBM45KL/index.html [https://perma.cc/8L6T-PA89].[11] Brian Edmondson, How to Become a Profitable Amazon Seller, The Balance Small Business (Jun. 5, 2019), https://www.thebalancesmb.com/how-amazon-sellers-can-profit-4143331 [https://perma.cc/T7Z8-FJCV].[12]Id. (“[Amazon has] been offering this opportunity in ‘third party selling’ since 2000.”).[13]Id.[14] Bolger v. Amazon.com, LLC, 53 Cal.App.5th 431 (2020).; see alsoAmazon Can Be Liable for Third-Party Sellers’ Defective Products, Says California Appeals Court, The Fashion Law (Aug. 14, 2020), https://www.thefashionlaw.com/amazon-is-liable-for-third-party-sellers-defective-products-says-california-appeals-court/ [https://perma.cc/JD4K-V2CV].[15]Amazon Can Be Liable for Third-Party Sellers’ Defective Products, Says California Appeals Court, supra note 14.[16]Id.[17] Hayley Phelan, The Gentrification of Canal Street, N.Y. Times (May 16, 2018), https://www.nytimes.com/2018/05/16/style/canal-street-fashion.html [https://perma.cc/9JKS-CSTB].[18] Barbara Kolsun & Douglas Hand, The Business and Law of Fashion and Retail 447 (Carolina Academic Press ed., 2020).; see also The Counterfeit Report: The Big Business of Fakes, The Fashion Law (Oct. 11, 2019), https://www.thefashionlaw.com/the-counterfeit-report-the-impact-on-the-fashion-industry/ [https://perma.cc/FX3U-3GB7] (“The shadowy business of counterfeits has taken over the globe to become a more than $500 billion industry.”).[19] 15 U.S.C. § 1114.[20] 15 U.S.C. § 1116; see also 15 U.S.C. § 1114.[21] 18 U.S.C. § 2320; see also N.Y. Penal Law § 165.73.[22] Kolsun & Hand, supra note 18, at 503.[23] Rebecca Dunlevy, Note, Internet Immunity: The Limits of Contributory Trademark Infringement Against Online Service Providers, 22 Fordham Intell. Prop. Media & Ent. L.J. 927 (2015).; see also J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 25:17 (4th ed. 2012).[24] 456 U.S. 844 (1982).[25] Coach, Inc. v. Goodfellow, 717 F.3d 498 (6th Cir. 2013).[26] Polo Ralph Lauren Corp. v. Chinatown Gift Shop, 855 F.Supp. 648 (S.D.N.Y. 1994).[27] Gucci Am., Inc. v. Frontline Processing Corp., 721 F.Supp.2d 228 (S.D.N.Y. 2010).[28] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[29]See Rebecca Kern & Naomi Nix, Retailers Launch Lobbying Group to Fight Counterfeit Goods on Amazon, Business of Fashion (Aug. 14, 2020), https://www.businessoffashion.com/articles/news-analysis/retailers-launch-lobbying-group-to-fight-counterfeit-goods-on-amazon [https://perma.cc/9W5Y-GLMS].; see also Gina Heeb, Trump team cracks down on counterfeit sales made through sites like Amazon and Walmart, Markets Insider (Jan. 24, 2020), https://markets.businessinsider.com/news/stocks/trump-administration-announces-crackdown-counterfeit-goods-sold-online-amazon-walmart-2020-1-1028844133# [https://perma.cc/LTA6-K5MB].[30] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[31]Id.[32]Id.[33] Tiffany (NJ) Inc., 600 F.3d 93 (2010).[34]How Effective Would the Shop Safe Act be for Fashion and Luxury Brands in the Fight Against Fakes?, The Fashion Law (July 24, 2020), https://www.thefashionlaw.com/is-the-shop-safe-act-2020-a-new-tool-for-brand-owners-in-the-fight-against-fakes/ [https://perma.cc/CM2L-FXPM].; Marc Reiner, Newly Introduced SHOP SAFE Act of 2020 Takes on Counterfeiting in Electronic Commerce But Does Not Go Far Enough, HBA, LLP (Mar. 13, 2020), https://hballp.com/Newly+Introduced+SHOP+SAFE+Act+of+2020+Takes+on+Counterfeiting+in+Electronic+Commerce+But+Does+Not+Go+Far+Enough [https://perma.cc/YQ7T-EDHG].[35] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[36] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[37] Tom Ryan, What It Means When Retailers Close Their NYC Flagships, Forbes (Jan. 17, 2019), https://www.forbes.com/sites/retailwire/2019/01/17/what-it-means-when-retailers-close-their-nyc-flagships/?sh=6e24d48972e1 [https://perma.cc/H6Z3-7A8J].; see alsoIs This The End Times For Brick-And-Mortar Retail?, PYMNTS (Apr. 16, 2019), https://www.pymnts.com/news/retail/2019/brick-and-mortar-physical-store-closures/ [https://perma.cc/WM28-VNGN]. Many major fashion brands, such as Calvin Klein, Ralph Lauren, Coach, and others, have been closing their flagship stores, in part due to the inability to gain foot traffic.[38] Danny Parisi, The end of the department store era, Glossy (Aug. 5, 2020), https://www.glossy.co/fashion/the-end-of-the-department-store-era/ [https://perma.cc/K8KH-G95Y].[39] Kolsun & Hand, supra note 18.[40] 15 U.S.C. § 1114.[41]Id.[42]Id.[43] Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir. 1961).; see also Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir. 1984). (The tests and factors employed by the courts vary based on jurisdiction, but the central focus is on the likelihood of confusion between the two marks.).[44] Coach, Inc. v. Fashion Paradise, 2012 U.S. Dist. LEXIS 7429 (D.N.J. Jan. 20, 2012).[45] Cartier Int’l B.V. v. Ben-Menachem, 2008 WL 64005 (S.D.N.Y. Jan. 3, 2008) (“In cases involving counterfeit marks, this Court has found it unnecessary to perform a Polaroid examination because counterfeit marks are inherently confusing.”); see also Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003).[46] 286 F.Supp.2d 284 (S.D.N.Y. 2003).[47]Id.[48]Id.[49]Id.[50] Coach, Inc. v. Fashion Paradise, LLC, 2012 U.S. Dist. LEXIS 7429 (D.N.J. Jan. 20, 2012).[51]Id.[52] 15 U.S.C. § 1116.[53]Id.[54] Cartier Int’l B.V. v. Ben-Menachem, 2008 WL 64005 (S.D.N.Y. Jan. 3, 2008).[55]Id.[56]See Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003).[57] 15 U.S.C. § 1116.[58]See Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003).; see also Cartier Int’l B.V. v. Ben-Menachem, 2008 WL 64005 (S.D.N.Y. Jan. 3, 2008).[59] Johnson & Johnson Consumer Companies, Inc. v. Aini, 540 F.Supp.2d 374 (E.D.N.Y. 2008).[60]Id.[61]Id.[62] 18 U.S.C. § 2320(f)(1).[63]Id.[64] U.S. Dept. of Justice Archives, https://www.justice.gov/archives/jm/criminal-resource-manual-1704-trademark-counterfeiting-elements-18-usc-2320 [https://perma.cc/3WHF-Q34Y].[65]Id.[66] COMPUT. CRIME & INTELLECTUAL PROP. SECTION, CRIMINAL DIV., U.S. DEP'T OF JUSTICE, PROSECUTING INTELLECTUAL PROPERTY CRIMES 174 (4th ed. 2013), https://www.justice.gov/sites/default/files/criminal-ccips/legacy/2015/03/26/prosecuting_ip_crimes_manual_2013.pdf [https://perma.cc/LVS4-2JFH].[67] 18 U.S.C. § 2320(b)(1)(A).[68] 18 U.S.C. § 2320(b)(3) (“Whoever commits an offense under subsection (a) involving a counterfeit military good or service or drug that uses a counterfeit mark on or in connection with the drug—(A) if an individual, shall be fined not more than $5,000,000, imprisoned not more than 20 years, or both, and if other than an individual, be fined not more than $15,000,000”).[69] United States v. Chong Lam, 677 F.3d 190 (4th Cir. 2012).[70]Id.[71]Id.[72] Kolsun & Hand, supra note 18, at 487 (quoting N.Y. Penal Law §§ 165.71, 165.72, and 165.73).[73] N.Y. Penal Law § 165.70.[74] People v. Levy, 15 N.Y.3d 510 (2010).[75]Id.[76] Cal. Penal Code § 350(a).[77] Cal. Penal Code § 350(c)(3).[78] Burberry Ltd. v. Salim, 2013 WL 12146120 (C.D. Cal. July 12, 2013).[79] 18 U.S.C. § 2320(f)(1).; see N.Y. Penal Law § 165.70.; see also Cal. Penal Code § 350(a).[80] United States v. Chong Lam, 677 F.3d 190 (4th Cir. 2012).[81] Kolsun & Hand, supra note 18, at 503.[82] Mark Sommers, Taking an Aggressive Stance Against Counterfeiters: An Overview of Trademark Counterfeiting Litigation under the Lanham Act, Finnegan (Sept. 1999), https://www.finnegan.com/en/insights/articles/taking-an-aggressive-stance-against-counterfeiters-an-overview.html [https://perma.cc/WR4B-DBHA].[83]Id.[84] Coach, Inc. v. Goodfellow, 717 F.3d 498 (6th Cir. 2013).[85] Omega SA v. 375 Canal LLC, 324 F.R.D. 47 (S.D.N.Y. 2018).; see also 1165 Broadway Corp. v. Dayana of N.Y. Sportswear, Inc., 166 Misc. 2d 939 (N.Y. Civ. Ct. 1995).[86] Gucci America, Inc. v. Frontline Processing Corp., 721 F.Supp. 2d 228 (S.D.N.Y. 2010).[87]See generally 15 U.S.C. § 1116.[88] 456 U.S. 844 (1982).; see also Restatement (Third) of Unfair Competition § 27 (Trademark infringement occurs when “. . . (a) the actor intentionally induces the third person to engage in the infringing conduct; or (b) the actor fails to take reasonable precautions against the occurrence of the third person’s infringing conduct in circumstances in which the infringing conduct can be reasonably anticipated.”).[89]Id.[90]Id.[91] Kolsun & Hand, supra note 18, at 503.[92] Coach, Inc. v. Goodfellow, 717 F.3d 498 (6th Cir. 2013).[93]Id.[94]Id.[95] David H. Burnstein & Michael R. Potenza, Why the Reasonable Anticipation Standard Is the Reasonable Way to Assess Contributory Trademark Liability in the Online Marketplace, 2011 Stan. Tech. L. Rev. 9 (2011).[96] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[97]Id.[98]Id. at 104 (quoting Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982).[99]Id.[100]Id.[101] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[102]Id.[103] Justin Nicholas Redman, Post Tiffany (NJ) Inc. v. eBay, Inc.: Establishing A Clear, Legal Standard For Online Auctions, 49 Jurimetrics J. 467 (2009).[104]Id.[105] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[106]See Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, 186 F.Supp.3d 1370 (N.D. Ga. May 16, 2016).; see also Louis Vuitton Malletier SA v. eBay, Tribunal de Commerce de Paris [T.C.] [Commercial Court] Paris, June 30, 2008 (Unlike in the United States, Paris has recently held in favor of several fashion brands in their suit against eBay. The Commercial Court, in contrast to the Second Circuit, found that eBay had not taken adequate measures to prevent the sale of counterfeit goods on its site.)[107] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).; Burnstein, supra note 96 (“Prior to the Second Circuit's decision in Tiffany, the inquiry in other contributory liability cases did not explicitly focus on a particular level of knowledge, either specific or general, that would trigger liability.”).[108] Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).[109] Redman, supra note 104.[110]Id.[111] Press Release, House Committee on the Judiciary, Nadler, Collins, Johnson & Roby Introduce Bipartisan SHOP SAFE Act to Protect Consumers and Businesses from the Sale of Dangerous Counterfeit Products Online (Mar. 2, 2020).[112] Meaghan H. Kent & Nicholas W. Jordan, SHOP SAFE Act: How a proposed amendment to the Lanham Act aims to make online shopping safer (Nov. 9, 2020), Westlaw 6554912.[113]Id.[114] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[115] Brett Heavner, Stopping Cyber-Fakes: A Guide to the SHOP SAFE Act 2020, IP Watchdog (Mar. 23, 2020), https://www.ipwatchdog.com/2020/03/23/stopping-cyber-fakes-guide-shop-safe-act-2020/id=119994/ [https://perma.cc/5WLS-5AMG].[116] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[117]Id.; see Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010) (Note that the Second Circuit analyzed the preventative measures eBay had in place, but did not require them in order for it to avoid being held contributorily liable.).[118] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[119] Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2010).[120]Id.[121] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020) (“An electronic commerce platform shall be contributorily liable for infringement by athird-party seller participating on the platform for use in commerce of a counterfeit mark in connectionwith the sale, offering for sale, distribution, or advertising of goods that implicate health and safety.” (emphasis added)).[122]Id.[123]Supra note 112.[124] 15 U.S.C. § 1114.[125]Id.[126] 18 U.S.C. § 2320.[127]Id.[128]See N.Y. Penal Law § 165.70; see also Cal. Penal Code § 350(a).[129] People v. Levy, 15 N.Y.3d 510 (2010).[130] U.S. v. Hitsman, 624 Fed.Appx. 462 (9th Cir. 2015) (counterfeit Viagra); Gucci America, Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284 (S.D.N.Y. 2003) (counterfeit Gucci accessories); Coach, Inc. v. Fashion Paradise, LLC, 2012 U.S. Dist. LEXIS 7429 (D.N.J. Jan. 20, 2012) (counterfeit Coach accessories).[131] Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, H.R. 6058, 116th Cong. (2020).[132] Marcella Ballard & Maria R. Sinatra, How Effective Would the Shop Safe Act be for Fashion and Luxury Brands in the Fight Against Fakes?, The Fashion Law (July 24, 2020), https://www.thefashionlaw.com/is-the-shop-safe-act-2020-a-new-tool-for-brand-owners-in-the-fight-against-fakes/ [https://perma.cc/C3LK-D8PJ].[133] 21 U.S.C. § 361.[134] 21 C.F.R. § 820.[135] Brogan Woodburn, Everything you should know about the Shop Safe Act, Red Points (last visited Dec. 18, 2020), https://www.redpoints.com/blog/everything-you-should-know-about-the-shop-safe-act/ [https://perma.cc/WGF2-2JSF].[136] Roberto Fontana, Stephane J.G. Girod, & Martin Kralik, How Luxury Brands Can Beat Counterfeiters, Harvard Business Review (May 24, 2019), https://hbr.org/2019/05/how-luxury-brands-can-beat-counterfeiters [https://perma.cc/9ZKD-VFKB].[137]Id.[138] Anam Bhatti, Hamza Akram, Hafiz Muhammad Basit, Ahmed Usman Khan, Syeda Mahwish RazaNaqvi, & Muhammad Bilal, E-commerce trends during COVID-19 Pandemic, 13 Int’l J. Future Generation Comm. & Networkin 1449 (2020).[139] Puneet Kapani, COVID-19 Impact: Fashion Houses Embrace E-commerce, Entrepeneur (Sept. 5, 2020), https://www.entrepreneur.com/article/355805 [https://perma.cc/FJ7E-7CRR].[140] Bhatti, supra note 141, at 1450.[141] Remi Rosmarin, StyleSnap is a new feature on Amazon that uses AI to help you shop any photo from social media—here’s how it works, Insider (Sept. 9, 2020), https://www.insider.com/amazon-stylesnap-review [https://perma.cc/3XJK-SK2R].[142] Filippo Bianchi, Pierre Dupreelle, Felix Krueger, Javier Seara, Drake Watten, & Sarah Willersdorf, Fashion’s Big Reset, Boston Consulting Group (June 1, 2020), https://www.bcg.com/publications/2020/fashion-industry-reset-covid [https://perma.cc/RVC3-NCX5].[143] Tracey Meyers, COVID-19 May Alter the Way We Shop for Apparel, WWD (July 7, 2020), https://wwd.com/business-news/business-features/covid-19-may-alter-the-way-we-shop-for-apparel-1203667029/ [[144] Casey Hall, The Pandemic Has Created a ‘Perfect Storm’ for Counterfeits. Just Ask Louis Vuitton., The Business of Fashion (Sept. 9, 2020), https://www.businessoffashion.com/articles/professional/china-luxury-counterfeits-flourish-louis-vuitton-covid-19-douyin-pinduoduo [https://perma.cc/KA7X-QYKE].[145]Id.[146]Id.[147] McKenna Oxenden, Nearly 59,000 counterfeit masks, hundreds of fake COVID-19 tests seized at Mid-Atlantic ports, including Baltimore, The Baltimore Sun (Oct. 7, 2020), https://www.baltimoresun.com/coronavirus/bs-md-counterfeit-masks-tests-seized-20201008-wp6lv2x5kbatte2uzvan6u2b3e-story.html [https://perma.cc/8CQ9-DG6Q].[148] Danny Parisi, The rise of the fake designer mask, Glossy (July 21, 2020), https://www.glossy.co/fashion/the-rise-of-the-fake-designer-mask/ [https://perma.cc/3VNQ-94Y8].[149] Hall, supra note 150.[150]Id. (“Luo also stated that that while major e-commerce platform operators Alibaba and JD.com have made inroads into stamping out fakes, counterfeit products are now increasingly rife on up-and-coming e-commerce players, including Douyin and Pinduoduo.”).[/vc_column_text][/vc_column][/vc_row]
.png)
.png)
