Trademark enforcement slows growth – changes discourage innovation and competition

[28/12/2020, Patent and Trademark Office, “Engine Advocacy”, https://downloads.regulations.gov/PTO-T-2020-0035-0008/attachment_1.pdf, accessed 7/9/2024, LR]

The limits of filters—which will fail sometimes (likely often)—and the fact that startups would be incapable of identifying and removing all infringement on their own also brings substantial litigation cost and risk. Expanding platform liability over users’ alleged IP infringement would put early-stage companies at risk of being sued out of existence. It would also discourage entrepreneurs and investors from developing new technology or pursuing new e-commerce business models. Internet platforms, in particular, have been able to innovate and launch because they do not have to hire teams of lawyers to brace for litigation when users are accused of infringement. And investors would be reluctant to fund emerging e-commerce platforms if they knew the money would go to cover liability for user infringement.21

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

Finally, most platforms experience little, if any, alleged trademark infringement.24 Changing the law to increase the costs and risks platforms face would therefore catch little, if any, additional infringement.25 But the costs and risks of a shift in liability would be substantial, which would make it harder for startups and emerging e-commerce platforms to launch and compete, and restrict economic growth in multiple sectors.26