Basing safe harbor provisions off of DHS’s list of best practices reduces litigation and costs

In response to these trends, Congress proposed the Stopping Harmful Offers on Platforms by Screening Against Fakes in Ecommerce Act (“SHOP SAFE Act”) of 2023 on September 26, 2023 to combat counterfeits that posed a risk to consumer health and safety. This bill, if passed, would build upon the first federal law ever passed to regulate e-commerce platforms: the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (“INFORM Consumers Act”), which became effective on June 27, 2023.

One of the principal goals of these legislative efforts is to protect consumers shopping online. Although such legislation is a good first step, more work must be done for such legislation to achieve the ultimate goal of protecting consumers from counterfeit goods.

SHOP SAFE Act of 2023

As the New York Times noted in 2020, “the Government Accountability Office recently found that 20 of 47 items purchased from third-party sellers on popular consumer websites were counterfeit. Many of those products, which include car seats, airbags and baby formula, pose life-threatening risks.” Allan Rappeport, Lawmakers Propose Making E-Commerce Companies Liable for Counterfeits, N.Y. Times (Mar. 2, 2020). For this reason, in every year from 2020 to 2023, Congress has proposed a version of the SHOP SAFE Act, whose stated purpose is “to provide for contributory liability for certain electronic commerce platforms for use of a counterfeit mark by a third party on such platforms.” S. 2934, 118th Cong. (2023-2024) at Preamble. The scope of the bill, however, is limited to situations where third-party sellers “have used in commerce a counterfeit mark in connection with the sale, offering for sale, distribution, or advertising of a good that implicates health and safety.” Id. at § 2(a)(4)(A).

The idea behind the first version of this bill in 2020 was that Congress would create a private cause of action for contributory trademark counterfeiting against those e-commerce platforms that failed to follow the best practices Congress set forth to protect consumers from harmful counterfeit goods. Although this quid pro quo – a safe harbor from contributory liability in exchange for adopting best practices protecting consumers – sounds straight-forward, Congress has proposed language that would make this simple formula harder than necessary for consumers and e-commerce platforms alike.

For example, the bill sets forth a series of best practices e-commerce platforms must take “reasonable measures” to follow. Id. at § 2(a)(4)(B). The bill further states that whether a platform’s measures are “reasonable” depends on (1) the platform’s size and resources; (2) the nature of the goods and services offered on the platform; (3) what solutions are available; (4) how much information trademark owners have provided; and (5) “any other factor considered relevant by a court.” Id. at § 2(a)(4)(C). In other words, Congress has created a multi-factor test that expressly anticipates litigation about what which platform measures are “reasonable” – an approach that would take years for courts to sort out. Most significant, this approach makes it difficult, if not impossible, for e-commerce platforms (much less consumers) to anticipate which measures courts will find “reasonable” without costly litigation.

Rather than frame the bill’s best practices in terms of “reasonable measures,” Congress should follow the simpler approach the U.S. Department of Homeland Security (DHS) took in 2020 when it set forth its own set of clear best practices. Dept. of Homeland Security, Combating Trafficking in Counterfeit and Pirated Goods: Report to the President of the United States (Jan. 24, 2020). Although DHS’s list of best practices is not perfect, they are set forth clearly without as much ambiguity, making them easier for e-commerce platforms and consumers to follow and to understand. Not only would such an approach make the SHOP SAFE Act more effective, it would minimize the litigation costs that platforms, trademark owners, and consumers would have to endure.