Plan creates a global model for contributory trademark liability and harmonizes anti-counterfeiting law

In the decades since Ives, counterfeiting has ballooned into a social and economic menace, creating severe public health and safety hazards, as well as substantial economic harm to legitimate business, on a national and global scale. According to FBI estimates, counterfeiting costs the U.S. economy more than $200 billion in lost sales annually8 ; worldwide, counterfeiting accounts for an estimated $750 billion dollars in global trade each year.9 The FBI, Interpol, World Customs Organization and International Chamber of Commerce estimate that an astonishing 7-8 percent of world trade every year is in counterfeit goods. 10 Sales of counterfeit goods reportedly support terrorist groups throughout the world.11 As a result, counterfeit goods not only tarnish the carefully-built reputations of legitimate businesses and undermine the credibility both of brand owners and the online markets where such goods are sold, they cause enormous harm to consumers and threaten national and global security.

Even before the era of online commerce, it had long been recognized that counterfeiting had reached "epidemic" proportions. S. Rep. No. 98-526, at 5 (2d Sess. 1984), reprinted in 1984 U.S.C.C.A.N. 3627, 3630. The rise of the Internet as a commercial forum has only exacerbated this problem. The Organization for Economic Co-operation & Development ("OECD") notes that the Internet has provided counterfeiters with a new and powerful means to sell their products and that a significant share of counterfeit trade is attributable to the Internet. 12 Indeed, one survey estimated that, during 2006, up to 3 million consumers may have bought a counterfeit item that carried one of the "top ten" luxury brand names, with almost a third (29 percent) of such purchases from online marketplaces such as eBay.13 In 2007 alone, eBay reportedly contained more than 2 million potentially counterfeit listings, and hosted 50,000 sellers attempting to sell fake goods.14 Consumers thus suffer the greatest harm of all from the sale of counterfeit goods. Especially when transactions are completed online, without an opportunity to inspect the goods, consumers are particularly susceptible to unscrupulous counterfeiters who tout their knock-offs as legitimate goods. This risk is heightened in light of the growing sophistication of counterfeiters and their ability to produce knock-offs that, on their surface (and in online listings), appear to be genuine articles. 5

This is an issue of great importance not only under federal law, but internationally. Courts from foreign jurisdictions have considered similar issues, reaching inconsistent results, although all courts appreciate the importance of the issue.

The Paris Court of Appeals recently affirmed a lower court ruling that eBay was liable for the sale of counterfeit goods by third party vendors.16 Other French courts have reached similar results.17 Courts in other foreign jurisdictions, however, have refused or severely limited efforts to extend liability to online intermediaries. In L'Orial S.A. v. eBay Int'l A.G. 8, for example, the English High Court of Justice declined to find eBay liable, although it referred the question of whether an injunction should issue to the European Court of Justice. Courts in Germany appear to have adopted a middle ground, dismissing claims for damages against Internet-based auction hosts, but admitting of the possibility of an injunction to prevent future infringements, with the issue of the degree of knowledge required to trigger the injunction a matter of controversy.19

As this issue works its way through European courts, the lack of a clear statement of United States law prevents the United States from leading the debate worldwide. Just as the United States has on occasion considered the laws of other countries 20, other nations should be able to look to the United States Supreme Court's position on important issues affecting global commerce in formulating their legal principals.21 This would be an opportune time for the Court to articulate an updated clear statement of the standard for contributory trademark liability, which not only would harmonize the law throughout the United States, but also could influence other nations' courts, thus helping to harmonize this law on a global basis. Harmonization would be particularly useful in this area because Internet commerce is borderless.

CONCLUSION

In sum, because the scope of the counterfeiting problem in online commerce is so enormous and because it implicates cross-border legal issues, brand owners and providers of online markets alike have an interest in working cooperatively to address the issue. Without clear guidance as to who (brand owners or the online market providers) bears the burden of ensuring the legitimacy of transactions in the online world, allocating that responsibility is inefficient at best and impossible at worst. The issue is worthy of this Court's attention.