SHOP Safe Act of 2020: Making E-Commerce Companies Liable for Counterfeits

The House of Representatives recently introduced the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce (SHOP Safe) Act of 2020. The bipartisan bill incentivizes e-commerce platforms to adopt best practices to reduce the presence of counterfeit products on their sites. E-commerce sites that fail to adhere to the steps would be held liable.

The SHOP SAFE Act would:

• Establish contributory trademark liability for e-commerce platforms when a third-party sells counterfeit products and the platform does not follow certain best practices
• Incentivize e-commerce platforms to establish best practices to vet sellers, remove counterfeit listings and monitor sellers
• Require e-commerce platforms to take steps to prevent the continued sale of counterfeits by third-party sellers or be subject to contributory liability

10 Reasonable Steps in the SHOP Safe Act:

Steps for e-commerce platforms would include:

1. Verify the third party seller’s identity, principal place of business and contact information
2. Require the third-party seller to verify and attest to the authenticity of its goods
3. Provide contractual requirements that the third-party sellers agrees not to sell, distribute or advertise counterfeit goods on the platform and consents to the jurisdiction of U.S. courts
4. Clearly display the third party seller’s verified principal place of business, contact information and identity, including the country of origin for both the manufacturing and shipping goods
5. Require the third party seller to use images that they own or have permission to use and that accurately depict the actual goods being sold
6. Implement technology to screen goods before posting to prevent counterfeit sales
7. Implement a timely takedown process for the removal of counterfeit listings
8. Terminate any third-party seller that has engaged in more than three instances of counterfeit sales, distribution or advertising
9. Screen and prevent third-party sellers from participating on the platform under a different seller identity or alias
10. Provide the infringing third-party seller’s information to relevant law enforcement and, upon request, the trademark owner

What this Means for Brand Owners

There has been an increase in efforts to help prevent the sale of counterfeit goods that pose a threat to consumer health and safety.

More brands are increasingly transitioning from traditional brick and mortar to online retail. With that transition, we have seen a significant increase in the sale of counterfeits goods online. Combating counterfeit sales can be extremely timely and costly for brand owners.

While e-commerce platforms have started to implement policies to manage counterfeit sales, contributory liability puts the burden of responsibility on the both the counterfeit seller and the platform. If implemented, these practices will create an incentive for online retailers to be more diligent and proactive.

Gibney will continue to monitor developments on this issue.

Author
John Macaluso
Partner, Intellectual Property
jmacaluso@gibney.com