The SHOP SAFE act proves that trademarks increase trademark litigation for small online marketplaces

[Andrew, 05/2022, Journal of Intellectual Property Law, “Reconsidering the Willful Blindness Doctrine in Contributory Trademark Infringement,” https://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1491&context=jipl, accessed: 07/09/2024, shl]

2. Legislative Proposals Fall Short of Solving the Problem

Recently, there has been a move towards statutory solutions to counterfeiting and contributory trademark infringement.142 The legislative proposals have offered some promise of addressing the commercial problems— uncertainty both as to which party bears the burden of policing infringement and the requirements for avoiding liability—but fall short more generally. The Stopping Harmful Offers on Platforms by Screening Against Fakes in ECommerce (SHOP SAFE) Act of 2021 is a good example of such proposed legislation.143 The bill purports to amend the Lanham Act to statutorily impose contributory trademark infringement liability on electronic commerce platforms unless the platform meets certain safe harbor requirements.144

The SHOP SAFE Act has its virtues. For example, it codifies the “continues to supply” prong of Inwood and its progeny.145 It eliminates uncertainty as to when a marketplace is obligated to ban a vendor who is a repeat-offender with a “three strikes in a year and you’re out” rule.146 The SHOP SAFE Act is also endorsed by the American Bar Association (ABA) Section of Intellectual Property Law.147

The problems with the SHOP SAFE Act, though, are as numerous as its virtues. The Act only applies to counterfeiting and not to trademark infringement, more generally, so even if the SHOP SAFE Act were passed into law it would provide no guidance for how marketplaces could avoid liability for most contributory trademark infringement.148

The SHOP SAFE Act also only applies to products that “implicate health and safety.”149 The Act defines products that “implicate health and safety,” but the language is unhelpful in line-drawing and will undoubtedly leave online marketplaces unsure which products fall under the Act’s umbrella.150 But regardless of how courts interpret the language, the Act does not apply to all products. Therefore, products that do not implicate health and safety are back in the conundrum of modern contributory trademark infringement jurisprudence. And although the ABA’s letter concerning the SHOP SAFE Act encouraged Congress to expand the Act to all products if it proves to be successful, it made no mention of expanding the SHOP SAFE Act to all trademark infringement.151

The most problematic part of the SHOP SAFE Act is its requirement that online marketplaces implement a program to “expeditiously” take down counterfeit listings the platform is reasonably aware of.152 The Act adopts a very broad view—similar to the “reason to know” standard that the Tiffany court rejected153—of when an online marketplace should be reasonably aware of the use of a counterfeit mark.154 If an online marketplace has a program but perhaps does not take down counterfeit listings “expeditiously,” it may be exposed to liability despite good faith efforts. This could be a reasonable outcome if the marketplace could otherwise avail itself of a safe haven through reasonable efforts, but the requirement for such a program is actually an eligibility requirement for the safe haven.

The Act purports to create a safe haven, but the numerous exceptions to the rules and reliance on reasonableness muddy the waters and invite litigation.155 One such exception is found in the Act’s definition of “repeated use of a counterfeit mark”: “[u]se of a counterfeit mark by a third-party seller in 3 separate listings within 1 year shall be considered repeated use, except when reasonable mitigating circumstances exist.”156 What qualifies as a reasonable mitigating circumstance is anyone’s guess.

Another use of a reasonableness standard that will be problematic for the SHOP SAFE Act is its requirement, without definition, that online marketplaces ensure their vendors take reasonable steps to verify authenticity.157

The Act also purports to impact only large online marketplaces with sales of more than $500,000 annually. 158 If a smaller marketplace receives only ten notices of listings that “reasonably could be determined to have used a counterfeit mark,” they then fall under the SHOP SAFE Act.159 Therefore, the reality is that the SHOP SAFE Act will give trademark registrants a tool to legally stifle competition by shutting down smaller online marketplaces that cannot afford to avail themselves of the safe harbor provisions.