E-commerce counterfeiting is high

Trademark owners are in a constant battle with knockoffs and counterfeits that try to deceive consumers by imitating trademark owners’ authentic services or goods. During the internet age, “the greatest risk of importation of counterfeit and pirated goods, harming both United States content creators and United States consumers, is posed . . . by inadequate policies and inadequate action by e-commerce companies that market and sell foreign products to American consumers.”1 The rapid growth in online retail sales further exacerbate this risk.2 In the United States (“U.S.”), online retail sales grew by 13.3% for the second quarter of 2019, while total retail sales only increased by 3.2%.3 Consider some of the largest online retailer’s volume to further illustrate this growth: Amazon reported sales by third-party sellers grew from $0.1 billion in 1999 to $160 billion by 2018.4 Similarly, eBay reported that $95 billion worth of goods were sold in 2018, an increase of 7% on an as-reported basis,5 And Walmart had a 40% increase of online sales in 2018.6 Unfortunately, the prevalence of counterfeit and pirated goods has grown alongside e-commerce.7 The Organization for Economic Co-operation and Development reported that sales of counterfeit and pirated goods totaled $509 billion in 2016— a 32% increase from 2013.8 Because counterfeits cause significant financial losses for trademark owners and pose serious risks to consumer health and safety,9 the Office of the United States Trade Representative has warned “[t]he significant and continued growth in the importation of counterfeit and pirated goods into the United States shows that e-commerce platforms, other intermediaries, right holders, and governments must significantly increase their efforts and collaboration to protect consumers, businesses, governments, and economies from the dangers of counterfeit and pirated goods.”10

Given the emergence of e-commerce platforms, trademark owners now face an unprecedented number of counterfeit products sold online, which makes it exceedingly difficult for owners to monitor and take down the counterfeit postings by sending cease and desist letters or reporting the counterfeit goods to the e-commerce platforms.11 These counterfeiting activities also displace legitimate economic activities by contributing to a “net job loss[] of 4.2 to 5.4 million by 2022.”12 Furthermore, it is nearly impossible to hold anonymous online counterfeit sellers directly liable for trademark infringement. 13 Therefore, instead of pursuing mysterious direct infringers on the Internet, trademark owners have increasingly tried to go after secondary infringers—i.e, the e-commerce platforms themselves. 14 However, under the current secondary trademark liability theory in the U.S., ecommerce platforms are rarely held liable under federal trademark law because they are not required to actively monitor the authenticity of the goods sold on their websites. 15 Thus, two key questions facing Congress and the courts are (1) how to protect trademark owners’ rights and (2) when to hold e-commerce platforms secondarily liable. This Comment will analyze these questions in greater detail including their history and the current standard and propose workable solutions to these two questions.