The Shop Safe Act is a bipartisan bill introduced in the House of Representatives on March 2, 2020. The official name of the Act is the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce Act. While the bill has not moved much in Congress yet, rumors are that some in Congress are planning to add this Act to the bipartisan Endless Frontier Act, a technology infrastructure bill already passed in the Senate and could become law in the foreseeable future. If the plan to bundle with The Endless Frontier Act succeeds, it could soon create an earthshaking shock to online marketplaces like Amazon, eBay, or the likes.
What does the Shop Safe Act do? It would amend the Trademark Act of 1946 to give certain e-commerce platforms contributory liability when counterfeits are sold. Liability would apply for counterfeit products that pose a health risk. Under the current law, e-commerce platforms are rarely liable for counterfeit products sold by third parties. However, under the Shop Safe Act, if counterfeit products sold by a third-party seller on the platform pose a health risk to consumers, the trademark owner or customer can hold the e-commerce platform liable for allowing the counterfeit. Given the phenomenal growth in e-commerce during the pandemic and growing online counterfeiting problems, e-commerce platforms could soon be hit with overwhelming counterfeit lawsuits and liabilities if they are not adequately prepared for it.
Liability will be huge for e-commerce platforms under the Shop Safe Act. A court can grant statutory damages between $1000 and $200,000 even in a case without an actual sale of the accused counterfeit products. The damage awards could go up to 2 million dollars if the infringement is found to be willful. Given the significant number of counterfeiting products, damages against e-commerce platforms for non-compliance with the Shop Safe Act could rise astronomically in a short period.
The Shop Safe Act does provide a way out for e-commerce platforms if the third-party seller in question is available to be served a lawsuit in the U.S or the platforms do the following:
(1) required the third-party seller to have a registered agent or a verified address for service of process in the United States;
(2) verified the seller’s identity and contact information;
(3) required as a condition of using the platform that sellers agree not to use counterfeit marks and to consent to the jurisdiction of U.S. courts in any claims related to selling on the platform;
(4) implemented policies to remove and ban repeat offenders; and
(5) implemented technical measures to prescreen listings on the platform and remove listings for goods being sold with a counterfeit mark.
Most popular e-commerce platforms are already doing some or most of the steps (1) through (4). What is lacking is Step №5, i.e., implementing technical measures to prescreen listings on the platform and remove listings for goods being sold with a counterfeit mark. Some platforms like Amazon have already implemented some measures to combat the counterfeiting problem. But that effort is mostly manual and Amazon’s effort to combat counterfeit still largely relies on user or seller reporting/complaints of trademark infringement.
Why have no e-commerce platforms implemented a prescreening procedure for online listings yet? Policing hundreds of millions of listings online is a daunting task, even for a technology powerhouse like Amazon. Not only the volume of listings is too big to manage, but online counterfeiters are also getting “smarter“ and more sophisticated. For example, instead of using famous brand names as part of the listing, counterfeit sellers can use images like the one below to make it difficult for a typical keyword search engine to find a counterfeit product. In this example, the complete phrase “Calvin Klein” is nowhere to be found. Instead, the picture only shows “…vin Klein” and “Calvin….” Counterfeiting is apparent to a person looking at this picture but very difficult for a regular search engine like Google to pinpoint.
Huski.ai, a Silicon Valley-based tech startup, has recently launched an AI-powered branding analysis and monitoring service. Its trademark search engine is potent for complex design mark searches and could become a powerful tool for e-commerce platforms to prescreen carefully disguised online infringers. In the example shown below, the Huski.ai search engine was able to search an online store and accurately locate the infringing symbol on a jersey that counterfeits the logo for the NBA Cavalier team.
The Huski.ai search engine is also scalable to handle a voluminous number of online listings and stores. With a powerful tool like Huski.ai, e-commerce platforms can rest assured that no “smart” counterfeiter can get away from infringement with canny techniques. Should the Shop Safe Act pass Congress in the near future, e-commerce platforms can quickly become compliant with the law and avoid getting hit by the enormous liabilities if they fail to root out counterfeiters on their platforms.