Shifting contributory liability causes trademark owners to shut down secondary markets and stifle platform innovation

Existing law correctly recognizes that trademark owners are in the best position to accurately and efficiently distinguish counterfeit products from authentic goods. Shifting legal responsibility to e-commerce sites, online marketplaces, or other third-party intermediaries through new liability rules would stifle innovation, reduce cooperation, and fail to prevent counterfeiting.

The current doctrine of secondary liability in trademark law achieves the proper balance, fostering a diverse ecosystem of online marketplaces that benefits small businesses and consumers. When intermediary services fail to act on specific knowledge of infringement (for example, when a brand owner has notified an online service of a counterfeit product), courts have generally held services liable. The existing regime has helped provide the legal framework to grow a robust secondary market for safe, genuine goods at competitive prices. Consumers derive enormous value from secondary markets, where they have the opportunity to resell products they no longer need, or purchase genuine products at a discount.

Historically, premium brands have disliked secondary markets because they do not afford brandowners total control over the pricing or images of their merchandise. Yet U.S. law has never afforded that. The U.S. approach to trademark is one that acknowledges your personal property rights in the goods you buy. Many brands would prefer consumers not resell what they lawfully own. To respect property rights means honoring the principle that if you bought it, you own it. If consumers buy a legitimate, lawfully manufactured luxury good, they have the right to do whatever they want with their property, including reselling that good online. Even if some prominent foreign brand owner would rather not compete against that resale market.

We must ensure that any new legislation does not undermine personal property rights, or harm the valuable resale market for consumers. Changing secondary liability rules could encourage trademark owners to engage in anticompetitive practices and pursue secondary market goods that may not be counterfeit but may be competing with the trademark owner's products. In fact we're already seeing evidence of this.7 Aggravating this phenomenon would result in the diminution of the secondary market, harming consumers; to avoid increased liability, e-commerce sites would allow only sellers authorized by the trademark owner.

Additionally, changes would not eliminate counterfeit goods. Infringement analysis is often too fact-specific to permit wide-scale removal by services while maintaining a fair and robust marketplace. Liability for e-commerce sites and marketplaces would instead incentivize trademark owners to go after intermediaries instead of the actual bad actors: the counterfeiters.