Information will be incomplete without a shift to proactive enforcement – the CP drains enforcement resources to pursue dead ends

//DH

1.The Burden of Enforcement is Disproportionately Reactive and Placed on the Rights Holder

Currently, online marketplaces lack an effective, proactive, transparent process for screening sellers or products that are offered by sellers. Instead, under the current legal regime, the burden of enforcement disproportionately relies on rights holders and consumers to police and report infringement. The current system places no responsibility on the seller or the marketplace and instead requires that rights holders scour online marketplaces and investigate, report, and prove infringement to the marketplace before counterfeit items are removed. This causes delay, allows sales of counterfeits to unsuspecting consumers, and puts the responsibility and expense on brand owners. This problem is compounded because marketplace processes vary, forcing rights holders to constantly navigate different, and often changing, marketplace enforcement procedures. This process removes the initial burden from the seller and without basis further gives the sellers the benefit of the doubt, to the detriment of rights holders and consumers.

a. Reactive Measures Will Never Keep up with Counterfeiters and Proactive Screening Must be the First Line of Defense

While online marketplaces continue to grow and provide benefits to legitimate companies looking to more easily reach consumers, by not adequately screening sellers or products, these same marketplaces allow bad actors and sellers to prosper. Without proactive approaches, bad actors remain a step ahead and continue to flourish. Without seller screening, sellers can provide inaccurate or fake information, making it impossible for online marketplaces to track and suspend bad actors, or for rights holders, law enforcement, or consumers, to enforce their rights. Importantly, there is no amount of resources rights holders can expend to adequately neutralize bad actors if marketplace approaches are disproportionately reactive in nature.

Proactive procedures must be the first line of defense. Every marketplace must implement a proactive system to verify whether a product being sold on its platform is counterfeit and whether it meets regulations such as labeling requirements and consumer product safety regulations. While marketplaces do not act as traditional brick-and-mortar retailers that curate goods to sell to consumers, this should not absolve the online marketplace from all responsibility for the goods from which they profit.

Some marketplaces have argued that thorough verification is not possible because of the volume of sellers or products on their marketplaces. This volume of sellers and products is not inevitable though; rather, it is a business decision that online marketplaces themselves make. If a marketplace is unable to verify the identity of its sellers or products because of the high volume, that is a result of its own creation.

b. Marketplace Brand Protection Programs are Inconsistent

Many online marketplaces tout their brand protection programs and investments made. Some marketplaces claim to have expanded the ability to implement different filters and rule systems to proactively block counterfeits and some online marketplaces have begun offering more robust collaborative programs for rights holders to more easily report and submit enforcement claims.

Unfortunately, to date, it appears that these have had little impact on counterfeiters. In part, this may be because they are inconsistently applied, and they remain largely reactive. Toy Association member experience is that certain tools are only made available to brands that have registered for particular marketplace enforcement programs that may have onerous terms; some are only available at a cost to the brand owner; and some may only be available to accepted brands after application to the marketplace. Further, they are not uniform across marketplaces.

Another hinderance is that marketplace shipping practices can create further enforcement challenges. At least one marketplace that fulfills third party orders will ship product from the warehouse closest to the consumer, regardless of whether it is the seller from which the consumer ordered. If shipped from a seller that is different than the one from which the consumer purchased, this creates another layer of obfuscation, removes consumer choice, and hinders seller identification, investigation, verification, and enforcement.

c. A Lack of Transparency and Verification of Seller Identity Undermines Enforcement

Transparency of seller information remains inadequate, resulting in a lack of information available to consumers making purchasing decisions, and to rights holders and law enforcement attempting to track and enforce against counterfeiters. Some online marketplaces are beginning to increase access to seller information, such as through brand owner programs. However, access is often inconsistent across marketplaces, providing a variety of different information depending on the program.

Further, even when marketplaces do offer such information that is necessary for subsequent enforcement actions, it is often incomplete or incorrect due to inadequate preliminary verification. Without complete or verified information, rights holders cannot take the necessary next steps and are often forced to expend time and valuable resources chasing dead ends.