Counterfeits in the Digital Marketplace; Lexology, November 7, 2018

Goulston & Storrs PC - Andrew J. Ferren and Jessica Carballo, 

Lexology; Counterfeits in the Digital Marketplace

[Kip Currier: Timely article, on this Cyber Monday, and in light of my IP course's lecture last week on IP Piracy and the Dark Web. 

Anybody else noticing how so many goods fall apart or break really quickly these days?! Glazed gardening pots that crack and disintegrate in one season. Designer metal shower hooks that break off in one year. Ear and nose trimmers that conk out after one use. Clothes that fray--sometimes even after just one wash cycle in cold water. And on and on and on...

As this article makes clear, too, it's annoying when some goods aren't what they claim to be and have a built-in obsolescence of about zero. It's downright dangerous when they explode or catch fire, and when they contain arsenic, lead, and other harmful substances that kids and adults are breathing in and coming into contact with. And let's not forget impacts of counterfeit items on animals, whether farm ones or animal companions, in the form of contaminated feed.

The Trump administration and some federal agencies have made some good steps in the past couple of years in better enforcing IP rights and cracking down on counterfeit goods. The U.S. Congress also needs to take more aggressive action, with civil and criminal consequences, to rein in and hold bad actors and entities accountable and ensure public safety and health are paramount. "Caveat emptor" should not and must not exculpate disreputable sellers from facing the ramifications of their amoral actions.]

"Counterfeiting has moved beyond high-priced luxury goods to low-cost everyday items. Many of these fake products pose real dangers: face masks with arsenic; phone adapters that can electrocute you; computer chargers that fry your hardware; batteries that blow up. These counterfeits infiltrate online marketplaces, where they co-mingle with authentic products in warehouses and ship to unsuspecting consumers. With millions of goods leaving fulfillment centers every day, brand owners and consumers must wrestle with a billion dollar problem: how do you police the largest marketplace in the world?

In January of this year, the U.S. Government Accountability Office filed a report detailing the results of a federal investigation in which 47 products were purchased from five online retailers, including Amazon and Walmart.com. All of the products were advertised as new, shipped from the United States, and sold by third-party sellers with customer ratings above 90%. Nearly half were counterfeit.

How does this happen? The five websites investigated have sizable “marketplaces,” virtual storefronts that let people other than the hosting company sell merchandise. For perspective, more than half of the goods sold on Amazon are from these third-party sellers. Anyone with an ID and a credit card can open a virtual storefront; few identifying details are required to set one up, and these details are regularly falsified. Since 2014, manufacturers from China (the world’s largest maker of counterfeit goods) have been able to sell directly to consumers in the Amazon Marketplace. In fulfillment centers, where products are picked up for packaging and shipment, goods from third-party sellers and goods direct from brand owners co-mingle. The resulting product pool is a mix of authentic and counterfeit goods, all sold as the same product and often for the same price."