Tech Giants Fighting Fraud
Anastasiya Kryukova is a J.D. Candidate, 2021 at NYU School of Law.
With the growth of the internet and the increasing
prevalence of online shoppers, platforms such as Amazon, eBay, and Alibaba have
become significant players in the current-day marketplace. With the internet
becoming a central, relied-upon hub for day-to-day activities and transactions,
there are an array of problems that tech giants are struggling to address. For
instance, YouTube is focused on addressing hate speech posted by users on its
platform, LinkedIn is working to identify false accounts, and Twitter and
Facebook are working on initiatives for policing political misinformation
across their respective platforms.[1] Online shopping platforms
Amazon, eBay, and Alibaba are likewise fighting their own battles, too, except
theirs notably pertain to intellectual-property protection and enforcement
issues.
On September 30, 2019, Panini
America initiated its second trademark-infringement lawsuit against an eBay
seller of custom-made basketball cards that featured Panini America’s
trademarked phrases.[2]
One Alibaba client recently identified more than a thousand fraudulent listings
on the platform that were either misusing the client’s trademarks or displaying
its patented products without authorization.[3]
These issues have affected the platforms’ business. For instance, believing
that the open marketplace structure of Amazon is jeopardizing genuine brands,
Birkenstock publicly refused to sell its products on Amazon in 2016.[4]
The
problem of counterfeit goods being sold across these online platforms is
difficult to solve for several reasons. First of all, monitoring
intellectual-property rights is particularly challenging online because people
perceive online photographs to be publicly available for anyone’s use.[5] Second, even if a counterfeit
product is identified, identifying the infringing seller is no easy
task, as online marketplaces often permit third-party sellers to use arbitrary
names. Third, the sellers are often not incorporated or residing in the United
States, which creates jurisdictional law-enforcement issues. As a consequence,
enforcing intellectual-property rights through litigation often requires
crossing borders and therefore can be extremely time-consuming and expensive.[6] What’s
more, even once an infringing seller is identified and blocked from a platform,
there is no guarantee that he or she will not create a new seller account under
a different name.[7] The lack of “visibility into the
actual seller account setup process”[8]
gives rise to the “whack-a-mole” phenomenon that has frustrated online
platforms’ account-policing efforts.[9]
Undeterred by these challenges, each
of the three major online shopping platforms have demonstrated a strong
commitment to increasing consumer protections as well as the trademark rights
of its clients. eBay’s Verified Rights Owner (“VeRO”) program allows
brand owners to register their intellectual property, review other sellers’
listings, and, by submitting a so-called “Notice of Claimed Infringement,”
report any listings that involve infringements.[10]
Notably, this is not an automatic service, so the burden remains on the sellers
to discover and report infringements that relate to their own property rights.[11]
Alibaba
has likewise exerted significant efforts to monitor its platform for fraudulent
third-party listings. In 2018, Alibaba referred 1,624 IP-related cases to law
enforcement entities, leading to 1,953 subsequent arrests[12] as
well as the seizure of counterfeit goods totaling $536.2 million in value.[13]
Similar to eBay’s VeRO program, Alibaba’s “Intellectual Property Protection
Platform” provides a streamlined online facility by which users can submit
removal requests. Alibaba’s reporting mechanism seems to be highly effective,
as ninety-six percent of its removed listings were taken down before any
related sales had occurred.[14]
Complementing the function of Alibaba’s Intellectual Property Protection
Platform, its “Anti-Counterfeiting Alliance,” originally founded in January
2017, now has over 130 participating brands, spanning twelve industries, which
“work together [across] six areas: online monitoring and protection, a product
test-buy program, offline investigations and enforcement actions, industry-law
enforcement workshops, litigation tactics and public awareness campaigns.”[15]
Of the three tech giants, Amazon can
be argued to have taken the most aggressive approach to combating these
intellectual-property issues. In its efforts to address intellectual-property
concerns and protect its clients across the platform, in 2018 alone, the
company spent over $400 million, and blocked over three billion suspicious
listings.[16]
Additionally, in September 2019, “Amazon hired former U.S. Patent and Trademark
Office Director Michelle Lee to lead the artificial intelligence unit of Amazon Web
Services, as vice president of its Machine Learning Solutions Lab.”[17]
Amazon has also filed various lawsuits against counterfeiters, including a
recent suit in June of this year against eleven entities that had allegedly
been selling counterfeit smartphone-mounting devices, and last year, Amazon
partnered with Very Bradley and Otterbox in three other lawsuits.[18]
Amazon
sellers have access to tools similar to those provided by eBay and Alibaba.
“Brand Registry” is a tool through which sellers can register their brand on
the platform, and “Infringement Reporting” is another tool that allows sellers
to submit issues they encounter directly to Amazon.[19]
Over the past few years, the company has also launched three new initiatives
geared toward accomplishing its ultimate goal of a completely counterfeit-free
user experience. One of these initiatives, called “Project Zero,” which
launched earlier this year, proactively scans listings and removes suspected
counterfeiters. Project Zero has so far proven to be quite effective at
identifying fraudulent listings, with Amazon blocking over four-hundred new
listings for each listing that individual sellers flag.[20] As
a preventative measure, Project Zero also automatically scans new sellers’
information during the registration process, well before they are able to begin
selling their goods in the first place.[21] At
the same time, Project Zero has user-directed functionality that similarly
serves to protect intellectual-property rights and prevent fraud, except
through a process beginning with user intervention. For instance, Project Zero
assigns unique serial numbers for each product and enables users to check a
product’s serial-number authenticity prior to purchase.[22]
Another unique aspect of Project Zero is that selling products on Amazon is not
a pre-requirement for access to these tools.[23]
A
related initiative was launched by Amazon in early 2019: the so-called “Utility
Patent Neutral Evaluation Procedure.” In its absence, patent owners had minimal
recourse against counterfeiters,[24]
since bringing a lawsuit was often expensive and lengthy. The Utility Patent
Neutral Evaluation Procedure offers a low-cost and efficient way to resolve
patent-infringement claims, without needing to engage in discovery or
depositions. This evaluation procedure involves a patent attorney reviewing the
claim and then determining whether the product in question is patent-protected
as claimed.[25]
At the
beginning of October 2019, Amazon launched a so-called “Intellectual Property
(IP) Accelerator” program aimed at providing small and mid-size businesses with
access to legal consultation concerning the trademark registration process.[26]
The IP Accelerator program currently has ten participating U.S. law firms, all who have agreed to provide specified
services for locked-in rates (i.e., “$500 for a trademark search, $600 for a
trademark application, and $1,800 for a comprehensive brand review”).[27]
While a company does not have to be selling their items on Amazon to employ the
services of one of the IP Accelerator law firms, Amazon has also agreed to
provide participating businesses with “brand protection” across Amazon stores
even during the waiting period before the trademark has been officially issued.[28]
In fact, since Amazon has “thoroughly vetted these law firms,” companies that
employ their services may also be more likely to obtain registration of their
marks.[29]
Beyond providing clear benefits for Amazon’s clients, the IP Accelerator program is likely to generate beneficial consequences for Amazon itself. Having more sellers that have registered trademarks on the Amazon platform benefits Amazon by generating an increase in the number of parties that are motivated to partake in rooting out fraudulent listings on Amazon’s marketplace on account of their own trademarked interests. Thus, increasing the number of sellers with trademarks to protect on Amazon’s platform may produce a “scarecrow” effect, deterring counterfeit sales through the appearance of countless policemen.[30] Furthermore, the high level of expertise among the IP Accelerator law firms may increase the quality of the trademarks across the platform as well. Though this program is fairly young, Amazon appears to be on a fast track to eliminating fraud wherever it exists, and it has no plans of stopping. In fact, Amazon has indicated plans to expand the IP Accelerator program’s operations to jurisdictions beyond the U.S.[31]
[1] See Nat Levy, Amazon Responds to Investigation Revealing Thousands of Banned and Unsafe Items on its Marketplace, GeekWire (Aug. 23, 2019), https://www.geekwire.com/2019/amazon-responds-investigation-revealing-thousands-banned-unsafe-items-marketplace/ [hereinafter Investigation].
[2] See Rich Mueller, Panini Files Second Lawsuit Over Trademark Infringements, Sports Collectors Daily (Oct. 1, 2019), https://www.sportscollectorsdaily.com/panini-files-second-lawsuit-over-trademark-infringements/.
[3] Brian Platt, The New Enforcement Paradigm: Using Amazon to Defend Your Invention Rights, Lexology (Oct. 7, 2019), https://www.lexology.com/library/detail.aspx?g=c2be3f98-7c0e-43ee-a1e4-7378b2eaec82.
[4] See Ari Levy, Birkenstock Quits Amazon in US After Counterfeit Surge, CNBC (July 20, 2016), https://www.cnbc.com/2016/07/20/birkenstock-quits-amazon-in-us-after-counterfeit-surge.html.
[5] SeeFrank
Ready, Amazon Wants Sellers to Add
Trademarks to Their Cart, Legal
Intelligencer, Oct. 16, 2019 (National News), at 4 (Attorney Moreira
discussing the difficulties companies face when undertaking the trademark
registration process without counsel).
[6] See Platt,
supra note 3.
[7] See, e.g., Nat Levy, Amazon Sues Alleged International Counterfeiting Ring, Escalating Battle Against Knock-off Products, GeekWire (June 26, 2019), https://www.geekwire.com/2019/amazon-sues-alleged-international-counterfeiting-ring-escalating-battle-knock-off-products/ [hereinafter Amazon Sues] (on “the battle against counterfeiters”).
[8] Tim Santoni, Brand
Enforcement in the Amazon Age: What You Need to Know About Project Zero, IPWatchdog (Aug. 1, 2019), https://www.ipwatchdog.com/2019/08/01/brand-enforcement-amazon-age-need-know-project-zero/id=111793/.
[9] Platt, supra note 3.
[10] Verified Rights Owner Program, eBay Inc., https://pages.ebay.com/seller-center/listing-and-marketing/verified-rights-owner-program.html (last visited Oct. 21, 2019).
[11] See Understanding the eBay VeRO Program, IPWatchdog (Mar. 18, 2016), https://www.ipwatchdog.com/2016/03/18/ebay-vero-program/id=67226/ (discussing how VeRO works).
[12] How Alibaba is Fighting IP Infringement on Two Fronts, World Trademark Rev. (June 28, 2019), https://www.worldtrademarkreview.com/anti-counterfeiting/how-alibaba-fighting-ip-infringement-two-fronts.
[13] Alibaba Anti-Counterfeiting Alliance Seized $536.2 Million in Fake Goods Last Year: WTR Exclusive, World Trademark Rev. (Mar. 28, 2019), https://www.worldtrademarkreview.com/anti-counterfeiting/alibaba-anti-counterfeiting-alliance-seized-5362-million-fake-goods-last [hereinafter Anti-Counterfeiting Alliance].
[14] How
Alibaba is Fighting IP Infringement on Two Fronts, supra
note 12.
[15] Anti-Counterfeiting
Alliance, supra note 13.
[16] Investigation, supra note 1.
[17] Rick Mitchell, Wake Up Call: Amazon Hires Former US Patent Office Chief to Lead AI Unit, Bloomberg Big L. Bus. (Sept. 18, 2019), https://biglawbusiness.com/wake-up-call-amazon-hires-former-us-patent-office-chief-to-lead-ai-unit.
[18] See Amazon Sues, supra note 7.
[19] See Platt, supra note 3 (discussing Amazon’s
enforcement alternatives).
[20] See id.
[21] See Amazon Sues, supra note 7 (on Amazon’s statements in court filings regarding efforts
to proactively identify counterfeiters).
[22] See Nat Levy, Amazon Unveils New ‘IP Accelerator’ to Battle Fraud on its Platform, Help Sellers Trademark Products, GeekWire (Oct. 1, 2019), https://www.geekwire.com/2019/amazon-unveils-new-ip-accelerator-battle-fraud-platform-help-sellers-trademark-products/ (Mehta’s discussion of Project Zero’s automated tools).
[23] See id.
[24] See Platt, supra note 3.
[25] See id.
[26] See Ready, supra note 5.
[27] Robert Ambrogi, With IP Accelerator, Amazon Edges into The Legal Services Arena, Above L. (Oct. 7, 2019), https://abovethelaw.com/2019/10/with-ip-accelerator-amazon-edges-into-the-legal-services-arena/.
[28] Id.
[29] Id.
[30] Ready, supra note 5.
[31] See Ambrogi, supra note 27.
