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There are several additional problems with the legislation that should be reviewed. The bill includes a provision that would appear to require platforms to prevent any sellers who have been terminated—regardless of whether the termination is related to the use of counterfeit trademarks—from rejoining or remaining on the platform. The legislation indicates that platforms must determine that sellers have designated a registered agent in the U.S. or risk facing liability. This could be quite burdensome, requiring periodic searches of various secretary of state registries. Another new provision states that "reasonable awareness [of counterfeits/IP infringements]... may be inferred based on information regarding the use of a counterfeit mark on the platform generally, general information about the third-party seller, identifying characteristics of a particular listing, or other circumstances as appropriate."31 This clarification is highly problematic in that it essentially defines constructive knowledge in terms of general knowledge, which is the opposite of how the law had previously handled it.

7. Require third-party sellers to “use images that accurately depict the goods sold, offered for sale, distributed, or advertised on the platform.” [Does this create an affirmative obligation to include images? While rare, I believe that some marketplace sellers sometimes currently sell their items without including any photo.]

[Also, product shots have been a constant source of copyright litigation. The manufacturer can sue the seller for copying its shots; the manufacturer can sue for false advertising if non-official shots aren’t “accurate,” and freelancers love to sue over product shots they took and ones they think are too similar to the ones they took.]

Back in 2010, Tiffany v. eBay held that online marketplaces were not liable for trademark infringement, false advertising, or trademark dilution when a third-party seller sold counterfeit goods. SHOP SAFE would essentially overturn the Tiffany decision and open up third-party sellers to liability. Trademark owners would now be able to pursue both the infringing party, the third-party seller, and the online marketplace. The bill does not require that trademark holders send takedown notices for these situations.

Well if third-party sellers aren’t selling counterfeit goods then they should be fine, right? Not necessarily. SHOP SAFE would require online marketplaces to implement systems or “reasonable proactive technical measures” that pre-screen for trademark infringement. These technological measures would likely involve a type of automated screening or filtering, which is susceptible to error and overcorrection and products that are in compliance could unintentionally be flagged. These pre-screen measures have already not been very effective in the copyright space in distinguishing between infringing and non-infringing uses, and we don’t see why that would improve with trademark.

In such cases, it is important to distinguish between abusive trademark enforcement and enforcement that seeks to execute legitimate trademark rights. 180 While the latter goal is clearly deserving of support, the former scenario - overenforcement - has a deleterious effect on startups and smaller platforms that may lack the resources to respond properly to a dispute. In such situations, the assertion of overbroad trademark rights, facilitated by an overreliance on automated systems of enforcement, may produce false positives without significant human oversight.181 In some cases, these complaints can be sent by a rightsholder who uses these notices to undermine a competitor or to censor critical commentary. 182 For example, a recent filing noted an incident where a political action committee requested a takedown of material that parodied Hilary Clinton's campaign logo.183 Or a similar situation where another candidate, Ben Carson, requested takedown requests regarding merchandise that used Carson's name on items relating to his candidacy.184 Often, these claims involve a mixture of trademark and copyright claims, further muddying the waters of potential defenses, but they can often involve politically oriented speech worthy of protection. 185 The collective effect of these claims, however, limits the potential circulation of the free flow of information and ideas, further amplifying how smaller platforms become implicated in a system of overbroad (and inconsistent) regulation.

What is worse, is the cost for e-Commerce sites to implement these new identification and “technological measures” would likely fall on the sellers. SHOP SAFE states that the cost will not fall on trademark owners, so that only leaves the sellers and the online marketplaces. These costs may be manageable for some sellers, but not for all, essentially shutting some out of the market. In a 2021 Report from JungleScout that surveyed Amazon sellers, over 20% of sellers derive their income solely from selling on Amazon. New sellers, within their first year or two of business, are making an average of about $42,000.00 a year in profits. SHOP SAFE compliance and/or takedowns would render some of those 20% without an income at a time where Americans are struggling financially.

If platforms are required to actively seek out and block or remove potentially infringing content, the situation will only get worse. A case currently pending in federal court, Melo v. Frida Kahlo Corporation, offers a preview of what this might look like. Ms. Melo, an independent artist, alleges that Frida Kahlo Corporation (FKC) claims ownership of several Frida Kahlo-related trademarks and uses those purported marks to have Kahlo-inspired artwork removed from platforms such as Redbubble, Etsy, and Zazzle.6 Zazzle in particular has an agreement with FKC to take down “all references to Frida Kahlo in the title or search terms for any product”; Zazzle agreed to this arrangement in response to 2010 infringement allegations by FKC.7 Of course, FKC does not and cannot have a monopoly over all uses of the name Frida Kahlo—that is not how trademark law works. But when the responsibility for policing infringement is shifted to intermediaries, the predictable result is that they will prefer to bar non-infringing uses, no matter how numerous, rather than risk liability for letting an infringing use fall through the cracks.

The goal of trademark law is to protect consumers by increasing access to information and promoting fair competition. But if the proper balance is not struck in the standards for intermediary liability, the resulting suppression of lawful speech and competition will end up doing more harm than good. EFF urges the USPTO and policymakers not to pursue changes to the doctrine of secondary trademark liability that would shift the cost of policing infringement from trademark owners onto intermediaries—and ultimately consumers.

Cooperation between rights owners and online stores is necessary to combat counterfeiting. Any regime of secondary trademark infringement liability that attempts to assign primary responsibility to online stores would not address the core criminal activity. To the contrary, it would undermine cooperation by encouraging rights owners to pursue online stores out of convenience instead of bringing their expertise and resources to bear on counterfeiting directly. This shift also would have a harmful chilling effect on the secondary market for safe, genuine goods by raising barriers to entry for honest sellers and online stores and by encouraging online stores to err on the side of caution, resulting in restricted price competition and selection to the detriment of consumers and SMBs.

As acknowledged in the DHS Report, “[t]he rapid growth of e-commerce has revolutionized the way goods are bought and sold,”4 and the central role of e-commerce has been underscored by the unprecedented challenges of the COVID-19 pandemic. Online stores are pivotal in providing consumers with genuine goods and necessities quickly and safely more than ever before. Shifting the trademark liability legal regime would impede the fight against counterfeiting. For this reason, among others, Amazon favors maintaining the existing doctrine of secondary trademark infringement liability.

The SHOP SAFE Act is a typical piece of safety-themed legislation, in that it would accomplish something much more sinister than what its name promises. Far from protecting online shoppers from harmful products, this legislation—sponsored by Rep. Jerry Nadler (D–N.Y.) in the House and by Sen. Chris Coons (D–Del.) in the Senate—threatens to obliterate online marketplaces by subjecting them to increased liability.

Democrats are currently plotting to add the SHOP SAFE Act to the bipartisan Endless Frontier Act, a technology infrastructure bill that already passed in the Senate and could certainly become law sometime in the future. This would be a disaster; the SHOP SAFE Act has massive problems that would make it very difficult for smaller online marketplaces to survive. While the bill is undoubtedly intended to seize on Congress's anti–Big Tech fervor, the likely outcome of its passage would be the solidification of Amazon's dominance.

III. There are improper takedowns and abuse of the current system, and policymakers should avoid shifting liability to e-commerce platforms which would exacerbate problems and lead to a sizeable removal of legitimate content

While the current doctrine of contributory liability is largely working well, there is still abuse of the system and few opportunities for startup e-commerce platforms and users wrongfully accused of infringement to fight back. Abusive trademark assertion or enforcement has an especially “deleterious effect on startups and smaller platforms that may lack the resources to respond properly to a dispute” between a purported mark owner and the user accused of infringement.27 This puts a fine point on the value of balanced frameworks, and strongly cautions against adopting any new legal doctrines which would make these forms of abuse easier or more profitable. And shifting more liability onto e-commerce platforms would end up escalating the removal of more legitimate posts and goods, which would hurt small businesses and creators who have posts improperly removed.

Indeed, brand owners, not online marketplace owners, are in the best position to identify infringement in ecommerce because of their expertise in their products and registered marks.174 Also, as Professors Schechter and Thomas argue, brand owners are the better cost distributors.175 If marketplaces must absorb the cost of policing and paying compensation for infringement, the cost would likely be borne by every user since such cost would likely be distributed across all goods sold in the marketplace.176 Whereas, if brands—like Tiffany— absorb the cost, only consumers of that brand would bear the cost since the cost would be distributed across all of that brand’s genuine goods.177

“This bill” refers to the SHOP SAFE Act, which would provide contributory trademark liability for online marketplaces

Why Would Anyone Support This Bill? This bill will kill online marketplaces and make markets less efficient. Where the online marketplace owner has a retailing function, like Amazon and Walmart, they can shut down the marketplace and subsume some items into their standard retailing function. That transition cuts off the long tail of items consumers expect to find online, and it burns hundreds of thousands of independent businesses that currently thrive in the marketplace system but become irrelevant in a retailing model. Meanwhile, standalone online marketplaces, like eBay and Etsy, have to revamp their entire business or exit the industry entirely, which further reduces competition for online retailing. The net competitive effects, then, are that consumers will pay higher prices, consumers will lose their ability to find long-tail items and incur higher search costs to do so, existing market leaders will consolidate their dominant positions, and hundreds of thousands of people will lose their jobs.

Indeed, even under the current, relatively balanced approach to contributory liability, the high costs of monitoring and covering legal risk for potentially infringing user-generated posts are already seen as a competitive advantage. Changing the law to increase those costs and risk, by imposing more liability on platforms, would entrench incumbents and defeat the ability of nascent companies to compete.22 As scholars have noted:

[W]hile the eBays of the world can afford to spend millions of dollars combatting counterfeiting, this may not be the case for smaller-scale market participants. Requiring “mom and pop” online brokers to wage a million-dollar war against counterfeiting would likely drive these retailers out of business, undesirably narrowing consumer choice.23

We are U.S. academics with expertise in trademark law. We write to express our opposition to the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce (SHOP SAFE) Act. The SHOP SAFE Act represents one of the most significant proposed reforms of trademark law that Congress has contemplated in years, and it will likely reshape e-commerce in unwanted ways. Due to these implications, the SHOP SAFE Act should not be included in the final version of any omnibus act, like the United States Innovation and Competition Act (USICA) or the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (America COMPETES) Act.*

Rather than protecting consumers, the SHOP SAFE Act would curtail many existing online marketplace offerings that currently give consumers greater choices and spur price competition that reduces consumer costs. In a pandemic era with rising inflation, taking away options for consumers to shop at home and increasing consumer prices is the opposite of what constituents want Congress to do. The bill also puts many small online entrepreneurs, and the jobs they provide for Americans, at risk.

To address these empirical challenges, this article exploits an unanticipated and unintended differential increase in the length of copyrights—from low levels of existing copyright lengths. In 1814, Britain’s Parliament passed the Copyright Act to clarify a requirement to deposit copyrighted books with research libraries. Due to the timely and opportunistic intervention of a member of parliament, however, who was also an author, the law also extended the length of copyrights in an unusual way. Until 1814, the length of copyright was 14 years (starting from the first edition) for books whose authors had died within 14 years since the first edition, and 28 years for books whose authors had survived the first 14 years. After 1814, copyright length increased from 14 to 28 years for books whose authors had died within 14 years since the first edition, and from 28 years to author’s remaining years of life for books whose authors had survived the 14-year term. Given the life expectancies of romantic period authors, this change created no meaningful increase in copyright length for living authors, but it created a 14-year extension for books by dead authors.5

Our empirical design takes advantage of this differential increase in copyright length to compare changes in price after 1814 for books by dead and living authors. This difference-indifferences approach allows us to control for unobservable factors that may have changed the price of all books after 1814, irrespective of changes in copyright length. For example, books may have become more expensive after 1814 because the demand for reading increased with improvements in literacy. Book prices may also have declined as a result of technological progress that reduced production costs, for example, through the diffusion of continuous papermaking andsteam-powered printing.6 An additional benefit of our approach is that death is easily observable, whereas other proxies for the remaining length of copyright are subject to measurement error.7

We find that longer copyright terms raised prices by improving publishers’ ability to practice intertemporal price discrimination. A straightforward extension of models of price discrimination (Stokey, 1989) to the case of temporary monopoly rights predicts that prices increase in response to longer copyrights. This result requires that consumers vary in their willingness to pay for books, which is consistent with the historical record. Commercial circulating libraries and wealthy individuals were the main buyers of romantic period books (Erickson, 1990). Circulating libraries had a higher willingness to pay than individual readers, because they could rent the same book to many readers. By the 1800s, more than 1,000 libraries operated in Britain (St. Clair, 2004). Publishers sold to wealthy libraries in London first, whereas smaller provincial libraries and individual buyers waited for lower priced editions. Personal letters reveal that even wealthy buyers, such as the Earl of Dudley, waited for prices to fall before they would buy a book. Analyses of book-level price data over time confirm that publishers reduced the price of new editions as books approached the end of copyrights.

The 19th-century publishing industry shares many traits of publishing today, but marginal costs of distribution are approaching zero for e-books and online movies today. A simple extension of our model to the case of zero marginal costs of distribution confirms that extensions in copyright terms increase price. Another distinct feature of the historical setting is that resale markets were thin. For example, circulating libraries such as Mudie’s “kept most of the books which had done their rounds in huge ‘catacombs’ for decades or longer” to prevent competition with used copies of their books (St. Clair, 2004). Today, textbooks and other types of books are traded in active resale markets, which can limit publishers’ ability to practice intertemporal price discrimination (Chevalier and Goolsbee, 2009).52 However, similar to 19th-century publishers, copyright owners take active steps to prevent resale, for example, by making it more difficult for students to use earlier editions of a textbook, or by distributing goods digitally through streaming or rentals (Shiller, 2013).53

The extent of both the incentive effect and the costs of copyright are, in principle, empirically testable. On the question of cost, some attention has been paid to the effect of copyright on the availability and perceived quality of creative work. Exploiting the fact that works written before 1923 are in the public domain in the United States, Heald (2008, 2014) finds that copyright status is associated with a significant increase in the proportion of books that are out of print and functionally unavailable.8 Similarly, Reimers (2019) uses a regression discontinuity to identify the effect of copyrights on the price and availability of literature, and concludes that copyright results in higher prices (and fewer editions) for popular works, and lesser availability among low- and mediumquality works. Reimers draws a mixed picture of the welfare effects of this tradeoff, finding that, in this case, the decrease in consumer surplus from reduced access to lowerquality works was not offset by increased profits for owners of popular books.

Difference-in-differences estimates of these data reveal a substantial increase in price in response to longer copyright terms. Controlling for the age of a book, author fixed effects, time fixed effects, and physical characteristics, the price of books by dead authors increased by an additional 7.19 shillings after 1814, compared with books by living authors. Relative to an average price of 19.38 shillings before 1814, this implies a 37% increase, roughly 3% for each additional year of copyright, and an elasticity of price with respect to copyright length of 0.45.

These results are robust to a broad range of alternative specification, including alternative controls for literary quality and for variation in price across genres.9 Time-varying estimates yield no evidence of differential pretrends in the price of books by dead authors. A placebo test moves the post period to begin in 1809, five years before the Copyright Act, to check whether the change in copyright length may have been anticipated. This test indicates no differential increase in price before the 1814 Act. Estimates increase when we exclude books by Sir Walter Scott (1771–1832) and Lord Byron (1788–1824), two extremely popular authors who had died after 1814. More generally, results are robust to excluding books by recently deceased authors.

While that analysis decides whether a use is fair, is a fair use forever fair? Do technologies that are deemed fair uses in the past necessarily constitute fair uses in the present? Courts, enmeshed in “rapidly changing technological, economic, and business-related circumstances,”15 cannot predict the future, but their decisions of whether a use is fair are binding precedent on future generations. This dynamic upsets the careful balance in copyright law between the rights of content creators and access to copyrighted works by the public. To explore this tension, this Note considers what Judge Pierre Leval classified as “utility-expanding transformative fair uses,”16 or technologies that have the capability to deliver copyrighted content in particularly efficient or novel ways.

Copyright law serves the dueling purposes of protecting content creators’ rights and ensuring the public’s access to works. This tension plays out centrally in the doctrine of fair use and how judges work through the four statutorily dictated factors to find a fair use. In addition to the statute,18 judges also consider the reasoning of past judges within a system of stare decisis. Stare decisis claims the benefits of fairness, predictability, stability, the rule of law, economic investment, and decisionmaking efficiency. Walking through the purpose of copyright law, fair use doctrine, and the rationales for stare decisis will position the television and music distribution cases in Part II and will inform Part III’s recommendation about the application and generation of legal precedent relating to utility-expanding transformative fair uses.

Copyright law is currently applied in multifaceted and sometimes problematic ways, and it has often been extended far outside of its original scope. In the evolving legal landscape of digital technologies, the fair-use doctrine stands on precarious ground, especially considering the new challenges posed by AI litigation.

The flexibility of the fair-use doctrine is a double-edged sword. It allows the doctrine to accommodate new emerging scenarios, but it is also unpredictable and creates uncertainty as one is at risk of infringement until a judge rules otherwise. These rulings could solidify interpretations of fair use that may not have been foreseen or intended by the original framers of the doctrine. And because of the principle of stare decisis, the outcomes of these cases could set significant judicial precedents. Thus, a verdict in the context of AI that shrinks fair use could have far-reaching implications for other scenarios across various unrelated fields, where the stakes and the players are substantially different.