Combating counterfeit goods has become a serious focus of the US government in 2020. This article is the first in an ongoing series about the actions being taken in this fight and the implications for e-commerce platforms and companies seeking to protect their brands from the threat of counterfeit goods.
The US Department of Homeland Security (DHS) recently issued a report to address the rapidly growing e-commerce marketplaces that created new channels for the trafficking of counterfeit and pirated goods. Counterfeit goods are no longer restricted to street corners and back-alley shops; they are now just a click away. E-commerce platforms and online third-party marketplaces created new, easy and profitable channels for trafficking counterfeit goods.
The dramatic rise of this illicit trade drew the attention of the White House last April when President Trump issued a call to action.[1] DHS issued a report in response on January 24.[2] President Trump reacted swiftly and on January 30 signed an executive order aimed at preventing counterfeit goods from being sold on e-commerce websites.[3] While this measure is a step in the right direction, the DHS Report makes clear that “[g]overnment action alone is not enough to bring about the needed paradigm shift and ultimately stem the tide of counterfeit and pirated goods.” Companies selling consumer goods must take an active role in policing and protecting their intellectual property, and e-commerce owners need to establish policies and procedures to prevent the sale of counterfeit goods. The key points from the DHS report and the president’s executive order are summarized below:
1. Counterfeit goods are on the rise
As e-commerce retail sales grow year-over year – a growth of 13.3% in the second quarter of 2019 compared with a retail sales increase of only 3.2% – the amount of infringing goods has similarly increased.[4] In 2018 alone, Walmart’s e-commerce sales grew 40% and Amazon’s third-party sales on its marketplace reached $160 billion. Counterfeit goods have followed the same trajectory, with seizures of infringing goods at the U.S. border having increased tenfold. In 2003, there were 3,244 seizures reported; in 2018, that number rose to 33,810. The domestic value of the seized merchandise reached $1.4 billion in 2018 compared with $93 million in 2013. The rise in counterfeit goods is not just an issue domestically, the Organization for Economic Cooperation and Development, an intergovernmental group consisting of 36-member states that discuss and develop economic and social policies, documented a 154% increase in counterfeits traded internationally, from $200 billion in 2005 to $509 billion in 2016… JDSupra