Strengthening trademarks would hurt online marketplaces

[Jonathan , 05/27/2021, Internet Association, “The SHOP SAFE Act: Stemming the Rising Tide of Unsafe Counterfeit Products Online,” https://docs.house.gov/meetings/JU/JU03/20210527/112713/HHRG-117-JU03-Wstate-BerroyaJ-20210527.pdf, accessed: 07/10/2024, shl]

V. UNINTENDED ISSUES WITH THE SHOP SAFE ACT

The SHOP Safe Act establishes that an electronic commerce platform shall be liable for contributory trademark infringement by a third-party seller of goods that “implicate health and safety” unless the platform takes certain actions. In addition to the fact that almost any product could “implicate health and safety” as that phrase is defined in the bill text, several other provisions included in the language would impose unworkable compliance obligations. While IA strongly encourages the committee to confer with individual e-commerce platforms to discuss their specific concerns with the legislation, we have included a non-comprehensive list of examples of unintentional problems the SHOP Safe Act would create.

The bill would require platforms to verify the identity of each third-party seller, presumably using government identification that the platforms are not in a position to physically inspect or properly verify. They would also be required to investigate and periodically confirm the physical address of each seller or their US-based registered agent to determine that the address exists and, presumably, its nexus to the seller.

The SHOP Safe Act would create significant and unreasonable impediments for small and “micro” businesses that rely on platforms to sell and resell products to other businesses and consumers. The bill would make it difficult for such businesses to use trademarks to describe the products they are offering, by requiring platforms to use reasonable technological tools to scan nearly every third-party listing or advertisement that includes a trademark, and to rely on such automated processes to make determinations that brand-trained experts are expected to make in every other legal context, including in alleging copyright infringement under the DMCA. Technology is not perfect, and by threatening platforms with legal liability if they fail to take action to remove potential “false positives,” the bill would incentivize overenforcement at a potentially massive scale. The bill would also require companies to impose punitive consequences on sellers who have used trademarks that are presumed to be counterfeit—including permanently banning them from the platform, but the draft language is remarkably devoid of any semblance of due process to allow sellers to confront brand owners and assert that their use of a trademark was valid.

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.” This 31 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.

Finally, the legislation would introduce unnecessary confusion into the Lanham Act by establishing requirements that are, in some cases, unhelpfully specific, and in other cases concerningly broad and vague. The legislation targets only one sector even though its goal is to address an economy-wide problem that requires all stakeholders to work together in good faith to stop bad actors. The bill also “requires each third-party seller to use images that the seller owns or has permission to use.” IA members already prohibit sellers from using images that they do not have rights to use, but the unlawful use of copyrighted images is already covered by the DMCA, and adding copyright protections into a trademark law could create confusion between the two statutes with no added benefit. The bill also fails to precisely define the term “electronic commerce platform.” The definition of that term is so vague that it would include websites well beyond online marketplaces including social media platforms, discussion communities, cloud services, video chat services, and even email service providers. If the scope of the bill is intended to be that broad, it would be difficult for many of the impacted companies to comply with several of the enumerated obligations

VI. CONCLUSION

IA appreciates the opportunity to provide comments on behalf of its member companies and to highlight some of the proactive policies they have implemented. IA’s member companies share the Subcommittee’s goal of promoting consumer health and safety, which is why they have created a range of tools and programs to help brand owners police the misuse of their trademarks, and developed strong working relationships with law enforcement officers who investigate and prosecute intellectual property crime. IA strongly encourages the committee to work with individual e-commerce platforms to talk through concerns with the SHOP Safe Act. The internet industry looks forward to continuing to engage with the Subcommittee members on these matters in the future.