US senators revive anti-counterfeit bill despite pushback
Bill places more onus upon brand owners and online platforms to tackle rising problem of online fake goods in bid to protect consumers | Critics say bill is ‘highly flawed’ and could harm small businesses, e-commerce, and innovation.
Two bipartisan senators have reintroduced a bill to tackle the increasing problem of online counterfeits being sold by third-party sellers such as Amazon and eBay.
US Senators Chris Coons and Thom Tillis announced the ‘Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act’ last week, September 28.
This was followed by a hearing yesterday, October 3, in which testimonies from stakeholders were heard both supporting and criticising the bill.
Six major industry groups have endorsed the bill: the American Apparel & Footwear Association; the Alliance for Automotive Innovation; the Toy Association; the National Association of Manufacturers; the Footwear Distributors and Retailers of America; and the Council for Innovation Promotion (C4IP).
‘Highly flawed proposal’
However, the proposed regulation, which was first introduced in 2020, continues to face strong opposition.
For example, Matt Schruers, president of the Computer & Communications Industry Association (CCIA), said in his testimony that the bill is “a highly flawed proposal that is widely opposed by industry and dozens of civil society groups, companies, associations, and trademark scholars, most of whom opposed a virtually identical bill last year.”
While he acknowledged that “fighting counterfeits is a shared mission”, he warned that “American small businesses should not be expected to shoulder a disproportionate burden.”
He added that the “scale of the problem is far from clear”.
“A popular figure that is frequently invoked ($500 billion) is a four-year-old, worst-case scenario that sweeps in estimated copyright and patent infringement and precedes recent legislation, and is thus not useful for this policy discussion.”
He urged the senators to give the ‘INFORM Consumers Act’, introduced in June this year, time to work, which aims to add more transparency to online transactions and deter criminals from acquiring stolen, counterfeit, or unsafe items and selling them through online marketplaces.
He argued that existing trademark law “correctly recognises that trademark owners are in the best position to accurately and efficiently distinguish counterfeit products from authentic goods”.
Aims of the bill
The bill aims to tackle the rising number of harmful potentially fatal counterfeit goods sold on e-commerce platforms, such as toys, car seats, electronics, bicycle helmets, clothing and footwear, car parts and prescription drugs.
The senators say that the Shop Safe Act would reduce the availability of harmful counterfeit products online by incentivising platforms to engage in best practices for vetting sellers and goods and blocking repeat counterfeiter sellers.
Speaking at the October 3 hearing, Senator Coons, chair of the Senate Judiciary Committee’s Intellectual Property Subcommittee, pointed out that the problem is “dramatically increasing”.
Today’s online counterfeits, he noted, are producing and selling more convincing fake products, sold with clever marketing and fake reviews.
Coons used the example of fake lithium batteries, which can explode or catch fire, causing serious injury and death. He pointed out that if a consumer unknowingly bought a laptop using a fake battery in a brick-and-mortar store, the seller would be liable to the consumer and the brand owner.
“This ‘framework for liability’ incentivises brick and mortar stores to thoroughly and proactively vet their supply chains, to keep counterfeit products out of consumer’s hands,” said Coons.
“That same counterfeit battery bought online is met with a different liability framework. Platforms don’t have the same proactive obligations—in fact they need not remove a listing until a brand owner tells them the platform specifically that a listing is counterfeit.
“The onus for policing online counterfeits is principally on brands, not platforms. Under this structure brand owners have to play a never ending game of whack-a-mole as they monitor a multiplying number of online marketplaces for counterfeit listings.”
‘Dangerous’ counterfeits from China
Senator Tillis said in a statement: “With Americans continuing to rely on online shopping, it’s crucial that we do all we can to protect consumers from dangerous counterfeit sales which are often coming from China.
“I look forward to working with my colleagues to effectively reduce online counterfeit sales without unnecessarily disrupting legitimate business and e-commerce platforms.”
According to Senators Coons and Tillis, the Shop Safe Act will:
- Establish trademark infringement liability for e-commerce platforms when a third party sells a counterfeit product that poses a risk to consumer health or safety and that platform has not implemented certain best practices;
- Require brand owners to provide platforms with advanced notice of their mark(s) and a point of contact so that the platforms can implement proactive measures to prevent sales of counterfeit goods; and
- Provide a safe harbour from liability for platforms that vet sellers to ensure their legitimacy, remove counterfeit listings, and remove sellers who repeatedly sell counterfeits.
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