Information sharing in the status quo is insufficient because of legal barriers that the CP removes

//DH

CBP = Customs and Border Patrol

Despite dedicated efforts by brand sellers, online marketplaces, and law enforcement agencies, counterfeiters continue to evade detection. As noted, counterfeiters use multiple merchant accounts, withhold their business information, and provide false information to CBP (this includes covering or obscuring infringing trademarks until the counterfeit goods clear with CBP). Counterfeiters also avoid detection by shipping infringing marks separately from the goods, relying on in-country assembly and distribution after the separate components have crossed the U.S. border.44 Counterfeiters also minimize detection by CBP by intentionally mislabeling shipping containers.

For example, CBP recently seized fake Nike shoes that were incorrectly labeled as napkins on the shipping containers in an attempt to hide the counterfeit goods.45 And data for shipping manifests of small packages is often incomplete or of poor quality, which makes it difficult for CBP to use it for identifying packages at high risk of containing counterfeits.46

Today, all three stakeholders—brands, online marketplaces, and law enforcement agencies—recognize the need to create and share up-to-date information about authorized manufacturers and sellers, the geographic origin of products, and key identifying aspects of authentic products and their packaging. This information could help them work together to remove fakes from the market as well as get to the root of counterfeiting operations. At present, online marketplaces and law enforcement agencies do not share sufficient information about counterfeits to address the problem. There are three main reasons for this.

First, antitrust concerns regarding the sharing of corporate information have forestalled cooperation among various brand sellers and online marketplaces.47 Antitrust law focuses on improving consumer welfare by preventing collusion among market participants. However, active cooperation—targeted to share and analyze data concerning suppliers and map logistics networks to detect flows of counterfeit products—is needed among these participants in order to improve consumer welfare. To the extent legal and academic conceptions of antitrust lag behind advances in data innovation, the resulting ambiguity could restrain advances in anticounterfeiting policy.48

Second, U.S. laws prohibit CBP from sharing any more information about counterfeits with e-commerce platforms and common carriers (such as FedEx, UPS, and DHL). A 2019 report by the Senate Finance Committee notes that TFTEA allows CBP to share information that “appears on the merchandise and its packaging and labels” with rights holders if it believes that the good in question may infringe upon a registered copyright or trademark, but that TFTEA does not authorize CBP to share information with e-commerce platforms or common carriers.49 Sharing this information more broadly would allow these actors to work together to stop the distribution of counterfeit products. Further, TFTEA does not provide CBP sufficient authority to disclose information to rights holders regarding the containers used to ship the goods to the United Sates (exclusive of retail packaging).50 Sharing this information would improve tracking of counterfeit shipments.

The Senate report also notes that the Trade Secrets Act (TSA) prevents CBP officers from sharing information on counterfeit goods that have been seized or detained at U.S. ports with e-commerce platforms and common carriers. While such information could be used by retailers to curtail sales of counterfeits and warn consumers, CBP officials fear that this action might reveal trade secrets regarding importers’ supply chains, thereby placing it at odds with the law.51

Third, while CBP is able to provide rights holders with information about seized counterfeit goods under existing regulations, it is unable to provide them with information about abandoned goods that are suspected of being counterfeit.52 In response, CBP has proposed amending customs regulations to allow it to disclose to rights holders details about abandoned infringing goods, such as the date of importation, port of entry, a description of the merchandise, and the country of origin. Rights holders could use this information to help CBP identify IPR violations and identify channels of counterfeit shipments.53

Disclosing information about abandoned goods is a further step in the right direction, but it only goes so far. In comments to the proposed rule, the International Anti-Counterfeiting Coalition (IACC) welcomed this proposal but pointed out that “the abandonment process must also provide a lasting deterrent to those counterfeiters attempting to evade CBP’s efforts, particularly in light of the fact that they’ve already pocketed their profits by the time the merchandise has been detained.”54 Noting the adaptive strategies of counterfeiting organizations, IACC has recommended that deterrence should come from “improved targeting against future shipments, joint criminal actions, civil enforcement by rights-holders, and voluntary collaborative efforts among industry stakeholders to identify and effectively remove bad actors from the ecosystem.”55 Such proactive actions require enhanced cooperation among enforcement agencies, rights holders, and e-commerce retailers, for which a shared partnership platform is required.