The acceleration of e-commerce activity during the coronavirus pandemic has increased the risk of counterfeit goods being sold online, with luxury brands needing to take urgent steps to ensure their brands are protected on digital platforms.
That was the key message of Claire Jones, a trademark director at leading European IP law firm HGF, speaking at the recent Luxury Law Summit in London, which took place at The British Museum on 22 September.
“All brands should have a robust e-commerce strategy that guides your business through the types of platforms and the opportunities available there, and some of the pitfalls you will find with those platforms as well,” she added.
Take Amazon, for instance. Through the platform’s brand registry, brand owners can access various mechanisms designed to safeguard brands on its site and deal with any IP infringements. One mechanism includes a gating facility that allows brands to limit what third parties can sell branded products on the platform.
Another mechanism is Amazon Project Zero, a new anti-counterfeiting tool that uses artificial intelligence (AI) to scan the platform looking for potential counterfeit goods and enabling brand owners to remove counterfeits without having to report them to Amazon.
“That all sounds great in theory, but there are obviously some constraints to the approach, mainly because Amazon is taking a bit of a hands-off attitude and putting quite a lot of the onus for protection onto the brand owners themselves,” Jones said.
Amazon has very limited liability for IP infringements committed on its platform unless it has taken an active role, Jones added. That is in stark contrast to Chinese e-commerce giant Alibaba, which can be held legally responsible for counterfeit goods sold through its platform.
“Over recent years Alibaba has really stepped up protection and really knuckled down against bad actor accounts on the site and infringing listings, especially during the pandemic,” said Jones. “A lot of this stems from the increasing pressure from the Chinese government and various regulatory crackdowns they are undertaking to improve the image of China and counterfeits.”
Contrary to popular perceptions, 80% of products sold on ebay are new
E-commerce marketplace ebay is also ramping up its efforts to tackle IP infringements, not least because almost a fifth of e-commerce fraud in the UK last year took place on the platform. Contrary to popular perceptions, 80% of products sold on ebay are new, not second hand. One initiative ebay has launched is its authenticity service, where certain branded goods can’t be sold unless they are certified by an approved authentication partner.
“At the moment ebay is the one that determines which products are sent for authentication and if you sell those products on the platform you don’t have any choice but to send them through to the authentication system,” Jones said.
Brand owners also need to be aware of social media and those platforms being used to market counterfeit goods, said Jones.
“It’s not always necessarily the counterfeit that’s sold through the platform, it can be advertised and then consumers are led off-site,” she said. “The policies in relation to brand protection on social media platforms are much less mature than the traditional retail ones, and that’s partly because they weren’t really set up for retail, but each platform does have its own takedown process to remove infringing content.”
Yael Shalem Givon, a senior IP solicitor at HGF, said: “More and more platforms realise if they are notified of IP infringement on their site and they do nothing about it then they are more likely to be found liable, so we see that even smaller platforms have set processes or online forms to report IPR infringement and then they have internal processes to deal with those.”
Givon said that given the scale of dealing with online infringement can be challenging for brand owners, a new industry has emerged where third-party providers use AI-based technology to scan and monitor the internet to identify IP infringements and report them to the brand owners, which could run into hundreds of thousands of potential cases. Brand owners then have to review and prioritise the infringements that need dealing with—and what has to be ignored.
“There is also a question on the other side because some [of these third-party providers] are not 100% legit and are not legally trained people, so as a brand owner you do have to make sure that any type of IP infringement that you file has a real legal basis, otherwise you’re opening yourself up to liability on unjustified threats and you don’t want your brand associated with threatening the little people,” said Givon.
The growth in upcycling, which has been driven by trends around sustainability and the circular economy, is also creating potential issues for brand owners.
Jones said there are two cases that brands should be aware of: Vortic Watch Co vs Hamilton and Rolex vs La Californienne. In the Vortic case, the company took second-hand Hamilton watches and put new straps on them to resell, while in the Rolex case, La Californienne modified old Rolex watches, such as painting the watch face, and resold them. The courts found there was no infringement in the Vortic case, while there was in the Rolex case.
“These two cases show where the line is – a watch strap isn’t necessarily seen as impairing the product, but painting the watch face and then reapplying the Rolex name probably is,” Jones said.
Claire Jones is a trademark director and Yael Shalem Givon is a senior IP solicitor at HGF's London office. Click here for more information about HGF