Counterfeit Goods on Online Marketplaces: Protecting Your IP Rights

Online marketplaces make selling counterfeits easy. Third party sellers are welcome to offer goods to buyers all around the world via easy-to-set stores and listings. E-commerce also makes buying counterfeits much easier. You no longer have to go to a street vendor for fakes or experience how different it is compared to buying genuine goods in a designer store. Genuine and fake goods are both there for offer, often one right next to the other, both appearing legitimate.

As a result, the counterfeit business is part of online marketplaces, even the big ones such as Amazon, Etsy, and eBay. This means brands have their intellectual property rights (IPR’s) infringed upon, and therefore have to monitor and actively protect their intellectual property (IP).

Are counterfeits illegal?

Counterfeit goods are fake products, typically of inferior quality, that imitate genuine products. They usually contain protected intellectual property (IP), such as names and logos of brands with registered trademarks. This makes them illegal.

Knockoffs are different from counterfeits. Knockoffs are also an imitation, but although the genuine and knockoff products look similar, they do not infringe on trademark rights because they do not contain exact names or logos of brands that have a registered trademark. They may infringe on a design or invention patent, in which case they could be reported even without trademark use.

Is buying counterfeits illegal?

Consumers may choose to buy counterfeit goods, usually because counterfeits tend to be significantly cheaper compared to the genuine goods. Consumers may also be deceived to buy a fake, believing they purchased the real thing, and pay the full price for it.

In the U.S., buying a counterfeit product is legal, even when done knowingly.

The EU has no rules prohibiting buying counterfeits, and legal questions are therefore determined by each country.

Is selling counterfeits legal?

Selling counterfeits is illegal. U.S. trademark laws prohibit the production, sale and transport of counterfeit goods. There are penalties associated with the selling of fakes, depending on the country or jurisdiction. Knockoffs are not illegal, but they can be challenged by the intellectual property rights owner as infringing on his rights.

Similar to the U.S., many countries in the EU prohibit bringing fake goods into the country, such as France, Austria, and Ireland.

China, with its booming e-commerce and notorious counterfeiting industry, has a new e-commerce law that took effect on January 1, 2019. The law strengthens intellectual property protection and addresses the issue of sale of counterfeit goods. It holds e-commerce platform operators jointly and severely liable with the individual sellers for infringements if “necessary measures are not taken promptly” after being notified by the intellectual property holders.

In addition, an e-commerce platform operator who knows or should know that an on-platform business operator has infringed on any intellectual property right, should “take necessary measures” to ban this seller, such as “deleting, blocking, or disconnecting links and terminating transactions or services.” Under the law, e-commerce platform operators may also be liable for harm caused by one of their “consumer health” vendors, if the platform operator did not act on its obligation to verify the vendors’ qualifications.

How can marketplaces sell counterfeits?

In the U.S., the Digital Millennium Copyright Act (DMCA) provides protection to e-commerce companies from intellectual property infringement by their sellers by being an “intermediary” linking buyers and sellers, while complying with the “notice and takedown” procedures which allow for the removal of allegedly infringing content.

Amazon, for example, has millions of sellers. Sellers on Amazon can add products to existing listings and offer Fulfillment by Amazon (FBA), which makes their products appear as if they were vetted by Amazon. Still, Amazon operates as an intermediary between buyers and sellers and is not responsible for the authenticity of the goods offered on its platform.

In the EU, a similar intermediary shield is in place if an online marketplace doesn’t take an active role in the sale or promotion of counterfeits. However, explains Lexology.com, online marketplaces whose services are used by a third party to infringe upon another party’s IP rights are not exempt from liability if they are aware of illegal third-party infringements, and have control over the information. In this case, the intermediary must act to end the infringement. It is up to individual countries’ courts to determine the measures to be taken to make an intermediary end infringement(s).

What is done to protect IP in online marketplaces?

Various initiatives and organizations work to try and create a change on e-commerce marketplaces to better protect IP rights.

WIPO, World Intellectual Property Organization of the United Nations, for example, offers services, policies, and information, see: https://www.wipo.int/portal/en/.

The US Trade Representative (USTR) releases an annual report on Intellectual Property Protection and Review of Notorious Markets for Piracy and Counterfeiting [see here].

Among other things, this report makes a blacklist of online marketplaces from all around the world that are known for IPR’s infringements. For example, the report released on April 2019, lists carousell.com, a mobile e-commerce platform based in Singapore and popular throughout Southeast Asia. According to the report, “a high percentage of branded goods sold on this network of platforms—between 40% and 80%—are counterfeits.” Another example is DHgate.com from China. This is a business-to-business e-commerce platform that features over 40 million product listings from small- and medium-sized businesses in China. Although the report recognizes the steps taken by DHgate.com to address IP concerns, it also recognizes the challenges right owners have in combatting counterfeits on the marketplace. Other known examples are Pinduoduo.com, the third largest e-commerce platform in China by number of users, and China’s largest e-commerce platform, taobao.com, owned and operated by parent company Alibaba Group.

What are the policies regarding counterfeits on marketplaces?

For years brands have been complaining about marketplaces, such as Amazon and eBay, allowing the sale of counterfeit goods via their platforms. In recent years, eBay, Amazon, Alibaba.com and other marketplaces have made changes to address the counterfeit problem. These include having policies and procedures to take down counterfeit products and sellers for the purpose of trademark enforcement. See, for example, our blog on How to Report Trademark Infringements on Amazon.

However, marketplaces have no general obligation to monitor illegal activities, and they don’t generally vet the products or the sellers, but instead react to claims by IP owners.

How can I protect my IP rights?

In the digital environment, it is much more effective to approach the intermediary than the infringer. Registered IP rights, such as trademarks, copyright, and patents, are an important tool for brands who wish to approach marketplaces and make takedown requests. So, if you ask how to protect a brand, we suggest that you start by registering the brand’s name and logo as a trademark.

When it comes to online marketplaces, monitoring and reporting counterfeits and other IP infringements lie mainly with the authentic brands. This is a heavy burden, especially given the number of online channels and the number of listings and sellers. In addition, removing a listing does not solve the problem, because infringers can simply open a new one. This makes continuous monitoring critical.

To protect your brand online, you need brand protection strategy. We suggest you consider professional online brand protection services. Wiser Market is an online brand protection agency dedicated to helping brands fight counterfeits, trademark violation, copyright infringements and more. Our anti counterfeit solutions include advanced monitoring technology, team expertise and proactive enforcement to help you fight against brand infringement with quick, effective results. We apply all takedown measures to achieve full IP protection.

With Wiser Market, your brand will have a complete intellectual property protection solution, tailor-made to your intellectual property protection needs.

Our IP protection services result in over 90% success rate in taking down counterfeits.

Is Your Brand protected? Contact us for a FREE brand review

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