As Online Sales Rise, Brands Push Washington to Act on Counterfeits

Retailers are expecting to see the Biden administration and Congress clamp down on what the industry sees as the proliferation of counterfeits in the online shopping boom during the ongoing COVID-19 pandemic. 

President Joe Biden has given indications that his administration will continue to ramp up trademark protections, starting with a move last month to raise the bar for products advertised as “Made in the U.S.” The measure, part of a raft of the new president’s initial round of executive orders, would scrutinize products that involve overseas manufacturing.  

In addition, Biden’s public remarks on the issue over the past two decades indicate that his administration would continue to address counterfeits the way his predecessors have, said Olivera Medenica, partner at Dunnington Bartholow & Miller LLP and chair of the firm’s trademark practice group, speaking at the Federal Bar Association’s Fashion Law Conference, which began Monday. Panels for the conference are scheduled throughout the week. 

“By pledging to crack down on these companies that falsely advertise their products as made in America, I think the Biden administration demonstrates a strong interest in protecting American intellectual property,” Medenica said at the panel.

As far back as 2002, when Biden chaired the U.S. Senate Committee on Foreign Relations, he has emphasized the U.S. government’s role in prosecuting intellectual property violations. 

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“If we want to protect American innovation — and, by extension, American jobs — we need to maintain a vigilant stand against intellectual-property theft. American intellectual property is of immense value, perhaps our most valuable resource,” Biden said in a 2002 Senate hearing. 

Over the past year, government agencies and Congress have set the ball rolling on new measures to target counterfeits that industry watchers expect will continue to have traction in 2021. 

Last year, two measures were introduced in Congress to address counterfeit sales and the obligations of online platforms: The Shop Safe Act, which had focused on potentially hazardous products sold online, and the Inform Consumers Act, which called for more transparency in online sales, and would have required online platforms to gather more information from their third-party sellers. 

“The argument being that consumers should really know who they’re purchasing these products from when they’re shopping on online platforms, because right now, it might not be that apparent to consumers when they shop on some of these major e-commerce marketplaces who they’re actually buying products from,” Christina Mitropoulos, manager of brand protection and manufacturing initiatives at the American Apparel and Footwear Association, said at the panel. 

Those two bills didn’t advance much last year, but they are expected to be reintroduced in the coming months, Mitropoulos said at the panel. 

“There is an appetite in Washington, D.C., to explore legislation,” she said. 

An ongoing question for brands in these cases is also that of civil liability. When counterfeit versions of their products are sold on online platforms, it’s not necessarily the case that the platform will be held liable for the sale, unless the platform had clear and specific knowledge of the counterfeit products at issue, experts said during Monday’s discussion. 

The question takes on another dimension when it comes to the issue of third-party authentication either by luxury resale sites or third-party services, said Cheryl Wang, counsel, IP and brand enforcement at David Yurman Enterprises LLC, where she oversees the management of the company’s trademarks, copyrights and patents worldwide.

“And that leads to the issues of third party authentication, which is, who are these experts, who are the ones behind the scenes?” said Wang at the panel. 

“Consumers might feel a little more comfortable buying from a platform because they see there’s an authentication process, but what’s behind that process?” she said. 

Meanwhile, brands looking to team up with one another to save costs and share resources in their quest against potential counterfeits should be cognizant of the antitrust implications of sharing information with one another in the process. 

“There are a lot of reasons why one might want to work with their competitors to address counterfeiting,” said Jonathan Lasken, senior trial counsel in the Federal Trade Commission’s bureau of competition, where he oversees antitrust cases.

“They don’t, writ large, raise antitrust concerns, but you have to be careful,” he said at the panel. 

“When you have those conversations, they’re more likely to be challenged than vertical agreements, like between a manufacturer and a distributor.”  

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