The “specific knowledge” standard gives platforms incentives to allow counterfeiting to continue.

E-commerce platforms today are integrally involved in the commercial process – rather than mere conduits for buyers to connect with sellers, many e-commerce platforms actively facilitate sales by categorizing, optimizing, and promoting products and sellers, handling inventory and logistics, shipping, and processing financial transactions. These platforms facilitate access to the US marketplace and US consumers at a level that would otherwise generally be unavailable to international merchants, and which allows sellers within the US and abroad a level of anonymity that brick and mortar retailers in the US are simply not afforded. As a result, the current US legal regime applied to e-commerce platforms has enabled the circumvention of certain aspects of the usual commercial regulatory scheme, which has been unable to keep pace with rapid technological developments.

Currently under US law, online intermediaries are generally not liable for the products sold on their platforms by third parties unless they fail to act upon specific knowledge of particular infringements. Because e-commerce platforms have no affirmative duty to prevent or remedy infringement, there is a strong disincentive for those intermediaries to proactively stop the sale of counterfeits and other harmful products. On the contrary, e-commerce platforms have a strong financial incentive to allow these sales to proliferate, as they make their profit regardless of whether the articles sold are genuine or infringing. Furthermore, many direct infringers using e-commerce platforms are located outside the US, putting them beyond the jurisdiction of US courts and therefore leaving limited recourse to brand owners or consumers impacted by sales of counterfeit or other infringing products by such foreign sellers. Remedies at the border against the import of infringing goods, such as through the International Trade Commission or Customs and Border Protection, are often practically infeasible when attempting to stop the flow of small parcel shipments that are commonly used by international counterfeiters – especially where their products are intermingled with other supplies by e-commerce providers or shipped using the e-commerce providers’ own branded packaging.

Accordingly, there is a grave imbalance in terms of the risks and responsibilities as between brand owners, consumers, and online marketplaces. We strongly believe that changes to the US legal regime of secondary liability are needed to remedy these issues. In addition to this general input, please find our specific responses to the questions presented in the Federal Register notice below.

1. Is the doctrine of secondary infringement liability, as currently applied by the courts, an effective tool in addressing the problem of the online sale of counterfeit goods? If not, please identify the shortcomings in this approach to combatting counterfeits sold online, including whether the shortcomings are general to all goods and modes of e-commerce or whether they are specific to a particular type of goods or e-commerce.

The doctrine of secondary infringement liability as currently applied by the courts1 is not an adequate tool in addressing the problem of online sales of counterfeit goods. The current doctrine, as applied to the e-commerce setting, is not effective because: (1) proving specific knowledge is difficult for trademark owners and inconsistent across jurisdictions, and (2) the burden of online enforcement is disproportionately on trademark owners.

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1 The generally accepted standard for secondary infringement liability for e-commerce platform providers is enumerated in Tiffany v. eBay, 600 F.3d 93 (2d Cir. 2010), applying the test outlined in Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 854 (1982).

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The time burden and financial cost to brand owners to meaningfully provide specific knowledge as to each and every instance of infringement across every e-commerce platform is prohibitively high. Even with unlimited resources, it would be impossible to constantly monitor for and identify each incident of infringement across all platforms, particularly for large brand owners with dozens or even hundreds of individual brands. The specific knowledge requirement encourages platforms to turn a blind eye toward monitoring their own ecosystems, to avoid liability based on specific knowledge generated through their own review. General awareness of infringement on the platform is not sufficient to trigger any platform obligations, and some courts have found that programs employed by certain platforms to promote infringing goods, the practice of co-mingling of counterfeit and genuine goods, and the fulfillment of goods by the platform itself, still fail to trigger secondary infringement liability.

As a result, nearly full responsibility for policing the vast online e-commerce ecosystem falls squarely on individual brand owners. This involves deploying complex technological solutions and human capital to trawl the multitude of e-commerce platforms, identify potential infringements and weed out false positives, and provide notice or pursue other enforcement action as to each individual incidence of infringement. For large brand owners, this involves a combination of automated and manual review of tens of thousands of listings per month. This is a substantial drain on brand owner resources, while e-commerce platforms are left to benefit from continued sales of infringing material. It is clear that market forces, standing alone, are not sufficient to change platform behaviors in this regard.

Some platforms are taking steps to try and mitigate infringement beyond the minimum notice and takedown approach. Our members are very grateful for such initiatives, but in our experience these are often designed to provide an appearance of credibility and utility while stopping short of meaningfully preventing infringement on a large scale. Thus, changes to the secondary liability legal regime are necessary to redistribute the burden of preventing and addressing counterfeiting and other infringement through e-commerce platforms, so there is greater responsibility-sharing among platforms along with brand owners to ultimately protect consumers.