Shop Safe Act threatens overregulation – broad provision creates inefficiencies

[Megan, Christopher Ford, Debevoise & Plimpton LLP Counsel, Kate Saba, Debevoise & Plimpton LLP Associate, Hannah Beattie, Debevoise & Plimpton LLP Associate, 4/20/2024, World Trademark Review, “Does the US SHOP SAFE Act go too far in shifting liability? ”, https://www.worldtrademarkreview.com/article/does-the-us-shop-safe-act-go-too-far-in-shifting-liability, accessed 7/11/2024, LR]

By 2025, online marketplaces are predicted to account for up to 50% of e-commerce sales in the United States. Counterfeiters have sought to exploit the rise of online marketplaces, leading to new debates around how to identify and prevent counterfeits from reaching consumers and who should hold this responsibility.

The most widely followed case discussing marketplace liability – the Tiffany v eBay decision decided in 2010 by the US Court of Appeals for the Second Circuit – held that online marketplaces are contributorily liable for counterfeit goods on their sites only if they knew, or should have known, the goods were counterfeit. In practice, the Tiffany standard has meant that brand owners have primary responsibility for policing their marks and identifying counterfeits to marketplaces. Lawmakers are now questioning whether the standard should change.

Beginning in 2020, bipartisan legislators have introduced versions of the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act and the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM Consumers) Act. Both bills are intended to address counterfeit goods on online marketplaces. But only the more limited INFORM Consumers Act, which requires certain marketplaces to collect information from high-volume third-party sellers, has so far become law.

The provisions of the SHOP SAFE Act have far-reaching implications for the operators of online marketplaces. In this article, we dig into some of the key provisions of the SHOP SAFE Act and discuss:

The current state of the law governing online marketplace liability for counterfeits;

How the SHOP SAFE Act would change the existing law, in particular, by broadly regulating both products and marketplaces – including social medial marketplaces – and shifting the existing burden of combatting counterfeits; and

How the act’s provisions, though rightfully aimed at stopping the influx of counterfeits, are not well-tailored to address the reality of counterfeiting activity on online marketplaces.

While the SHOP SAFE Act is an applaudable effort by Congress to address the serious concerns that counterfeiting brings, the provisions in the current draft go too far. A more balanced approach would better help protect the public against counterfeiting and would also promote efficiency in terms of where the responsibility for monitoring and enforcing against counterfeits lies. A joint effort – where all involved parties share responsibility – will be the best chance of protecting against these potential harms.