E-Commerce’s Counterfeit Threat and the Search for Solutions
The U.S. Senate Finance Committee (SFC) issued its “The Fight Against Fakes” report on Nov. 7, 2019. To some extent, the report repeats what the intellectual property (IP) stakeholder community is familiar with regarding the extent of the problem. The SFC report notes the previously published estimate of international trade in fakes at $509 billion.
However, the SFC underscores its investigation into the counterfeit goods problem and highlights the role of e-commerce, citing e-commerce as a serious problem posing significant challenges to enforcement. The SFC report identifies U.S. laws and regulations as potential barriers to effective enforcement. The report notes that U.S. Customs and Border Protection (CBP) may be hampered by existing laws and regulations that prevent information sharing with the IP stakeholder community.
Moreover, in the report’s “Findings of Fact” section, the SFC acknowledges that e-commerce platforms “have no duty to police counterfeit listings or proactively remove suspected counterfeits from their platform.” The absence of any proactive obligation on e-commerce platforms imposes significant burdens on IP owners and enforcement authorities.
The SFC report states that with over 500 million international mail and express courier packages arriving in the U.S. each year, CBP’s enforcement activities are stretched and challenged in view of the breadth and variety of counterfeits entering the U.S. In testimony before the SFC, a CBP official conceded that the growth of e-commerce has overwhelmed CBP and has hindered its enforcement efforts.
SFC’s report identified some e-commerce platforms that purport to take proactive steps to identify and remove suspected counterfeit goods, using machine learning and other technologies. Many e-commerce platforms use reactive steps that include IP owners’ involvement to identify and remove suspected counterfeit goods. Nevertheless, the recent growth and expected future growth of e-commerce is likely to continue to overwhelm the ability of government authorities to prevent the growing trade in counterfeit goods.
The SFC explicitly encourages “CBP and ICE [Immigration and Customs Enforcement] to pursue innovative programs to work with e-commerce platforms to share data on sellers who trade in counterfeit products.” This, however, may be too narrow and not be as innovative as the enforcement efforts could be. CBP and ICE should not be limited to working with just platforms, but any entity that is part of the overall manufacturing, distribution, transport and sales network.
Senator Grassley, chairman of the SFC, stated just days after the release of the committee’s report that he would use his oversight authority “to look for innovative solutions to protect intellectual property and consumers from the negative effects of counterfeits.” In view of Senator Grassley’s statement, one consideration could be to identify and promote technologies that are proactive in filtering out suspected counterfeit goods before they are exported. For example, a recently issued patent describes a system that combines use of image recognition, machine learning algorithms and rule engine algorithms that can be applied to each item intended to be exported.
The patent further explains that these technologies are applied to appropriate customs rules. While not explicitly stating that the patented technology applies to counterfeits, this is likely due to the fact that the patented technology is not limited to identifying and preventing counterfeits, but also could be applied to rules of other agencies as they apply to importation. The patent’s background information points to IP as one of the problematic customs areas that the patent addresses.
The newly patented technology is proactive, innovative and falls within, or perhaps, goes beyond what the SFC envisioned when it wrote that CBP and ICE need to be innovative when working with or partnering with private sector entities. If suspected counterfeit items can be identified and prevented from export to the U.S., it would drastically relieve CBP of some burdens posed by e-commerce related counterfeits. More importantly, the existence of the technology could eliminate some of the arguments by e-commerce platforms that they cannot do more.
In view of the constant chorus of complaints from the IP community, e-commerce platforms, and government agencies about the constant growth of the trade in counterfeit goods and the burdens arising from the counterfeits, any new technology that has the potential of reducing exports of counterfeits to the U.S. should not be overlooked, but should be considered seriously as providing a solution or partial solution to a global problem.
This post was written by Timothy Trainer, a co-author of Customs Enforcement of Intellectual Property Rights, published by Thomson Reuters. Follow Trainer on Twitter @TTrainerglobal.