On January 31, 2020, the White House issued an executive order outlining several new steps to address the ongoing and growing issue of the sale of counterfeit goods through e-commerce platforms over the internet, which harms both manufacturers and sellers of authentic products and the consumers who purchase the fake (and sometimes physically harmful) products. Estimates show that the annual value of counterfeit goods traded internationally rose from $200 billion in 2005 to $509 billion in 2016. U.S. Customs and Border Protection reports 27,599 shipment seizures stemming from intellectual property violations in fiscal year 2019. Those most commonly affected by the sale of counterfeit goods include the personal care, apparel, electronics, luxury goods, software, entertainment and media, and automotive industries.
Several agencies, including CBP, the Department of Homeland Security, Immigration and Customs Enforcement, and the U.S. Postal Service are involved in the anti-counterfeiting efforts. New steps include (1) the revocation or suspension of Importer of Record numbers for those caught importing counterfeit goods; (2) requirements for consigners, carriers, hub facilities, and customs brokers to notify CBP of any importers known to be dealing in counterfeit goods and to cease transacting with such parties, with increased scrutiny and penalties for noncompliance; (3) the creation of a task force between the CBP, DHS, and USPS in order to determine permissible ways to prevent and deter the transport of counterfeit goods through the postal system, including the targeting of particular international posts (for example, the Chinese postal system) for repeated violations; (4) the periodic publishing by DHS of information relating to seizures and violations; (5) DHS and CBP recommendations of best practices for e-commerce platforms and third-party marketplaces; and (6) the prioritization by Federal prosecutors of offenses involving counterfeiting or piracy.
Importantly, per DHS reports, CBP will “treat domestic warehouses and fulfillment centers,” like ones operated by e-commerce giant Amazon, “as the ultimate consignee for any good that has not been sold to a specific consumer at the time of its importation.” As such, e-commerce platforms that store violative products, even if those products are technically in the possession of third-party sellers while they are being stored, will have a “greater responsibility” to cooperate in the identification and removal of such products, and “greater liability” for failure to cooperate. This could potentially benefit private litigants as well – if e-commerce stores have a greater responsibility to inspect, identify, and address counterfeit products, the threshold for a finding of willful or knowing infringement, which can lead to damage multipliers and attorney fee awards, could be reduced. Even the prospect of such increased penalties can create powerful leverage for settlements beneficial to infringement plaintiffs.
Conkle, Kremer & Engel has extensive experience helping product manufacturers and distributors investigate and enforce their rights to stop and remedy counterfeiting, parallel importation, gray market and other trademark- and intellectual property-infringement claims. CK&E attorneys are well-versed in the careful initial steps that should be taken promptly when sales of illicit products are suspected. CK&E keeps abreast of the latest laws and techniques that permit manufacturers and distributors to identify, prevent, and report counterfeiters and other IP violators. Stay tuned for additional CK&E blog posts as we monitor important developments relating to e-commerce counterfeiting.