A deposit requirement disincentivizes malicious claims and encourages cooperation between brands and platforms in reducing counterfeiting

A deposit requirement would be a more robust check on malicious claims and constitute an effective deterrent against those claims without overly disincentivizing genuine claims. A deposit system is consistent; parties know how the deposit will be calculated and take that deposit cost into account when determining whether to file a claim.187 That consistency will reduce incentives to file frivolous claims with an expectation of evading liability.188 Another benefit of a deposit is that it is easy to apply. The deposit calculation is simple and having that payment be a deposit that is paid upfront will reduce any concerns with unruly trademark owners not paying upon a finding of no infringement.

The payment going to the injured party is a further benefit of this deposit system. As discussed above, frivolous claims can have strong adverse economic effects.189 Abusers of a takedown system, especially abusers with large pockets, could choose to cause harm to competitors and swallow any monetary penalties they may face.190 Abusers may do this because the long-term economic benefit from pushing competitors out of the marketplace could outweigh the economic harm of paying any penalties. A deposit system will remedy that issue because any money paid by a false claimant will go directly to the accused party. Making the accused party (close to) whole again will dramatically reduce any incentive to bully competitors. While not a guarantee, the risk of directly paying one of your competitors might also incentivize mark businesses to only file claims when they have a genuine belief that the other party is infringing their mark.

Having a deposit system also encourages Online Marketplaces and mark owners to cooperate more. This system creates a set of affirmative and detailed steps for both Online Marketplaces and trademark holders to follow, leading to more consistent and transparent interactions. Over time, these interactions can build rapport among trademark holders and Online Marketplaces, leading to more familiarity and trust throughout the process and more activity and faith in the process. Once parties build this rapport and familiarity, Online Marketplaces will also have a norms-based means to police fraudulent claims.191 Data will bolster accountability because Online Marketplaces can use their data to easily identify parties who are consistently making unsuccessful claims.192 By keeping the process open and between the parties with economic stakes, the process will become more open and can create a more team-oriented way of fighting counterfeiting.193