Contributory liability will force platforms to over-police and remove legitimate listings

In its current form, the act requires that marketplaces ensure sellers use images that accurately depict the goods sold and use “identifying characteristics” of listings and sellers to determine if goods are counterfeit, but it does not require trademark owners to provide a way for marketplaces to know what authentic goods should look like. Instead, the act only requires the trademark owner to provide the notice of its mark and a point of contact. It expressly prohibits requiring that trademark owners “participate in any program specific to the electronic commerce platform” such as an information-sharing programme. Without reliable information about brands’ products and trademarks, platforms cannot possibly implement successful screening measures and may be forced to remove non-infringing listings for fear of liability.

Though AI tools are being developed that may have the future ability to compare logos and trademarks used in listings to those provided by brands, those tools may yield false positives and false negatives and will lack the context and judgement to identify legitimate activity that is protected by doctrines like fair use. To avoid engaging in costly inquiries, marketplaces may simply overcorrect by removing any suspect listings, sweeping in authentic products as well. While all parties should be engaged in the fight against counterfeits, shifting the burden entirely onto marketplaces in this way will harm all parties – the marketplaces, trademark owners, sellers and consumers.

The path forward

It is unclear whether the SHOP SAFE Act will move forward in a divided Congress during an election year. Regardless, while there is a real need to find a way to fight the influx of counterfeit goods, the act’s provisions on the whole are not realistically tailored to address the reality of counterfeiting activity on online marketplaces.

Some of the act’s provisions would codify current best practices for online marketplaces; for example, marketplaces should collect enough information to be able to identify sellers and have policies in place to suspend sellers who repeatedly try to sell counterfeit products. But the act’s vague definitions and onerous strict liability provisions could harm consumers and stifle competition by encouraging platforms to overpolice to avoid the expense and uncertainty of liability stemming from borderline cases.