Almost 10 months after Donald Trump signed a memo aimed at combatting the
import of counterfeit goods into the U.S., with an emphasis on
“third-party online marketplaces,” including “Alibaba, Amazon, and
eBay,” and less than two weeks after reports that the $1 trillion
behemoth that is Amazon will do more to prevent the sale of fakes on its sites, the Trump administration released its official plan to cut down on the ever-increasing counterfeit trade.
A booming industry, the total trade in counterfeit and pirated goods tops $1.5 trillion across the globe, according to the International AntiCounterfeiting Coalition.
Counterfeit and pirated goods, as well as trade secret theft, cost the
U.S. economy, alone, as much as $600 billion a year, or 3 percent of the
U.S. gross domestic product, Steve Shapiro, the unit chief for the
FBI's intellectual property rights unit told CNBC.
Given the jurisdictional issues when it comes to counterfeit sellers
(most are located outside of the U.S.) and other practical roadblocks at
play, the fight against fakes is a complex one. “Foreign sellers face
little risk of prosecution,” an administration official told Reuters. As such, strong U.S. government action "is necessary to fundamentally realign incentive structures."
Speaking to CNBC
on the heels of the signing of Phase One of Trump’s trade deal with
China this month, which follows from claims of rampant infringement of
American intellectual property by Chinese entities, Peter Navarro, the
Director of the National Trade Council at the White House, revealed that
as of now, “if you’re an intellectual property rights holder, whether
you’re Michael Kors or Louis Vuitton or Pfizer selling prescription
drugs, the onus is really on your company to police the internet, where a
lot of this counterfeiting occurs.”
“That’s
not right,” according to Navarro, who says that “the Amazons and the
Alibabas, Shopify” – which “have been facilitators of the Chinese
counterfeiting” – need to act on their “responsibility to police the
problem.” He further noted that sites like “Amazon and eBay” are “making
a bunch of money … selling this counterfeit stuff,” without “accepting
[their] full responsibility,” which is almost certainly a reference to
marketplace sites’ recurring attempt to disclaim liability by asserting
that they are not the “sellers” in such equations but merely middlemen. This is what Amazon argued in a recent case over the sale of a defective dog leash that a consumer purchased from its site.
That case – which could have sweeping impacts for Amazon and its vas third-party marketplace – is still underway, with a Third Circuit Court of Appeals hearing en banc expected this year.
As
for the Trump administration’s latest counterfeit-specific plan, on
Friday, the Department of Homeland Security’s Office of Strategy, Policy
& Plans released a report entitled, “Combatting Trafficking in
Counterfeit and Pirated Goods,” stating that at the forefront of the
“best practices for private sector stakeholders” is “the idea that
e-commerce platforms, online third-party marketplaces, and other
third-party intermediaries such as customs brokers and express
consignment carriers must take a more active role in monitoring,
detecting, and preventing trafficking in counterfeit and pirated
goods.”
An increased focus
on the crack down on counterfeits will be a welcome development for
fashion and luxury brands, in particular, which is a particularly
hard-hit segment of the market when it comes to the scale of the
manufacturing and sale of counterfeits. After all, luxury goods are
amongst the most commonly affected, with fake luxury products – from
logo-bearing sunglasses to fake leather goods and shoes – accounting for
“between 60 to 70 percent” of the total sales of counterfeit goods,
per Harvard Business Review,
“ahead of pharmaceuticals and entertainment products and representing
perhaps [the equivalent of] one quarter of the estimated
$1.2 trillion total trade in authentic luxury goods.”
With
that in mind and given the need for luxury brands, in particular, to
maintain the image of exclusivity associated with their valuable
trademarks, brands routinely spend tens of millions of dollars each year
to police unauthorizes uses of their trademarks. HBR reported in May
that LVMH Moët Hennessy Louis Vuitton, the parent company to 75 luxury
goods brands, including fashion houses like Louis Vuitton, Dior,
Givenchy, and Celine, “employs at least 60 lawyers and spends $17 million annually on anti-counterfeiting legal action.”
All
the while, luxury titans have been busy lobbying governments “to extend
enforcement bodies’ powers to seize and destroy fake goods, and to
block access to websites that sell counterfeit goods,” per HBR. If the
impending memo is any indication, the Trump administration is willing to
up the ante. oa here
