TRUMP’S STRIKE AGAINST E-COMMERCE PLATFORMS TO COMBAT COUNTERFEITING

The rapid growth in the e-commerce sector has transformed the way in which goods and services are traded, allowing the counterfeit and pirated goods to enter and accumulate in large quantities in the market. Fake products trafficked to the consumers via e-commerce websites and through online sources put public health along with the National Security as risk. Due to such counterfeit goods, the manufacturers and the workers are deprived of a healthy competition and their innovations are leveraged against them. The Department of Homeland Securities with the help of the US Government and the private stakeholders are on a mission to combat counterfeits and pirated goods.

On 24th January, 2020, the US President, Donald Trump via The Department of Homeland Securities, issued a landmark anti-counterfeiting report “Combating Trafficking in Counterfeit and Pirated Goods” to curb the growing menace of counterfeits in the country.

The Report was published to effectuate the Trade Policy of the U.S. Trade Representative (USTR), the Department which is responsible for the development and co-ordination of international trade policies with respect to Intellectual Property Rights Protection. Subsequently, a memorandum was passed on 3rd April, 2019 by the US President, throwing light on appropriate administrative, statutory, regulatory or other changes, including enhanced enforcement actions, which would reduce trafficking of counterfeit and pirated goods.

This memorandum addressed the need for analyzing information to develop a deeper understanding of third party market places and intermediaries and the extent to which they are used to facilitate the sale of pirated and counterfeit goods. The memorandum also takes into consideration the views of the stakeholders, namely, e-commerce platforms and private sector entities in order to formulate the policy. Pursuant to the memorandum, this report effectively shifts the liability of sale of counterfeit goods from third party sellers to e-commerce platforms and imposes certain obligations on such platforms to check the sale of counterfeits. This report issued by the Department of Homeland Securities targets the platforms which host the sellers and buyers of such counterfeit goods.

  • This Report also gives the government officials greater power to examine shipments in the U.S. warehouses and fulfillment centers across the country. They will have to notify the e-commerce facilities regarding counterfeit goods, thus identified and urge them to destroy or abandon them and take effective action. The Report advices and encourages the private sector to increase self-policing.
  • No new law has been framed to implement the recommendations of the Report yet. However, the Report does have certain recommendations for other departments and agencies of the Government.

Following are a few of the recommendations of the DHS:

  1. Ensure that any Entities with Financial Interests in Imports must bear certain Responsibility;
  2. Suspend and Debar Repeat Offenders;
  3. Apply Civil Fines, Penalties and Injunctive Actions for Violative Imported Products;
  4. Analyze Enforcement Methods and Resources; and
  5. Establish a National Consumer Awareness Campaign.
  • Similarly, the Department of Homeland Securities also made recommendations for E-commerce platforms and other private entities to fight against this menace. It proposes the following:
  1. To make comprehensive “Terms of Service” Agreement;
  2. Critically examine Third-Party Sellers;
  3. Impose limitations on High Risk Products;
  4. Pre-Sale Identification of Third-Party Sellers;
  5. Establish Marketplace Seller ID to enable rapid notice, takedown procedures and improved post-discovery Actions

 

Impact on the Indian E-commerce business

The report passed by the U.S. will unquestionably have a major influence on the forthcoming Indian e-commerce policy, which is due in March 2020. The Department for Promotion of Industry and Internal Trade (DPIIT) has assured that the coming Policy will contain measures to curb the sale of counterfeit goods and the Report of the Department of Homeland Securities will most certainly impact the drafting of the Indian Policy. The Confederation of All India Trades (CAIT) also responded positively to the policy and wants similar measures to be applied in India.

Conclusion

This Report has taken a positive step to combat trafficking in counterfeits and pirated goods that the country faces and to curb the loss of revenue due to such trafficking. Although this move will prove to be advantageous to the brand owners, implementing it will certainly be burdensome for the e-commerce websites and other private sector entities, like Amazon, Walmart, among numerous others, who will be the target of this operation. The increased formalities they have to bear could affect their profit margins. It could also affect their operating cost structure and their long-term growth strategies. This action, with all its positive potential, can also be interpreted as an act of vengeance by the President against his old nemesis Jeff Bezos. The US government would do well to maintain the delicate equilibrium of checks and balances while imposing obligations on the e-commerce platforms to ensure that such obligations do not stifle e-commerce, which is, otherwise, a healthy economic sector.

Authors:

BRAND DEFENCE CONSULTING

Ojaswini Doshi (IP & Brand Protection Associate)

Prachi Shah (Legal Intern)

Varun Inamdar (Legal Intern)