sinking-the-counterfeit-ship
Photo: Rostislav Glinsky / Shutterstock.com
1 May 2014TrademarksRoxana Sullivan

Sinking the counterfeit ship: brand owners and online retailers respond

As in the game Battleship, brand owners cannot see their counterfeiting opponents online. They must blindly target, ‘shoot’, and then see if they hit their mark. Unlike the game, in which each ship has a fixed location, online counterfeiters can quickly switch operations to a new website or different account once they have been identified. This switch can happen in days or even hours.

With the fast-paced growth of e-commerce, the availability of counterfeit goods continues to grow to ever higher levels. The International Chamber of Commerce estimates that, by 2015, $1.7 trillion of counterfeit goods will have infiltrated international markets. The International AntiCounterfeiting Coalition (IACC) reports that in the fiscal year 2012, the US Department of Homeland Security seized counterfeit goods valued at more than $1.25 billion in the US alone; this includes products from electronics and luxury goods to baby food, pharmaceuticals and car parts.

The anonymity and fluidity of the internet enable counterfeiters to trick consumers into thinking that they are buying legitimate goods when, in fact, they are fakes. Many consumers are duped by pictures of legitimate products, but what they really order and receive from these online marketplaces are inferior, counterfeit items. Enforcement on these actions is often patchy and, because of the fluidity with which accounts are moved, ineffective. For brand owners, it is as though the Battleship board is tilted in the counterfeiters’ favour.

"Taobao has assured the US that it will continue to work to rid its website of infringing products and work with Chinese law enforcement authorities to address remaining issues."

As a result, the fight against online counterfeiters has many fronts. Some payment service providers (PSPs) have adopted policies and procedures that discourage the sale of counterfeit goods by disabling payment options to those known to sell counterfeit products. They also work with local law enforcement agencies to identify those under investigation. When law enforcement is not involved, PSPs will sometimes work with IP rights holders and provide email address and ‘steps to address‘ notices.

Individual websites that sell multiple brands have also taken steps to combat the sale of counterfeit goods. Many have adopted takedown procedures through which rights holders can identify infringing products and sellers of counterfeit goods. It is proactive approaches such as these that have provided credibility to some online retailers, while the lack thereof has landed others on the Notorious Markets List compiled by the Office of the US Trade Representative (USTR).

The Out of Cycle Review of Notorious Markets identifies particularly infamous markets worldwide. This annual review identifies both online and physical marketplaces that engage in commercial-scale IP rights infringement. The last report, published on February 12, 2014, focuses on websites that appear to engage in or facilitate IP infringement.

The review not only names notorious markets but also mentions positive developments from the previous year. In some cases, previously identified infringing websites have been shut down as a result of litigation, been shut down by the business itself, or have decided to cooperate with local authorities.

Other identified websites, such as Chinese website PaiPai.com, have reworked their takedown procedures to streamline the process and make it easier for IP rights holders to assert their claims. Rights holders can expect to see a quicker response through these streamlined processes. While websites such as PaiPai.com have been removed from the Notorious Markets List, they continue to be monitored by the USTR.

Another website that has been removed from the list is Chinese website Taobao.com. This large online marketplace has made significant efforts to combat counterfeiting and greatly reduce the availability of counterfeit goods through its online retailers. Taobao has assured the US that it will continue to work to rid its website of infringing products and work with Chinese law enforcement authorities to address remaining issues.

Additionally, Alibaba Group, which owns websites such as alibaba.com, aliexpress.com and taobao.com, has entered into a Memorandum of Understanding with the IACC to facilitate cooperation in submitting and processing takedown notices. According to a statement issued by the Alibaba Group, Taobao removed 87 million allegedly IP-infringing product listings from its marketplace in 2012.

Taobao also introduced a ‘four strikes’ system to address the issue of repeat offenders. Under the four strikes system, a seller who has been penalised at least twice is identified as a “repeat and high volume infringer”. If that infringer is found to be selling counterfeit goods on two more occasions in one calendar year, then that seller is banned from the Taobao marketplace.

While eradicating counterfeit goods from online marketplaces is a continual battle, positive steps made by service providers such as PSPs, and especially proactive efforts from e-commerce sites, are encouraging for rights holders. For brand owners and online retailers, more streamlined takedown procedures and enforcement actions in the online marketplace are often the most effective way to curb infringers from selling counterfeit goods.

Roxana Sullivan is an attorney at law at Dennemeyer & Associates. She can be contacted at: rsullivan@dennemeyer-law.com

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