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Pending Congressional Bill Would Create Potential Liability For E-Commerce Sites Selling Certain Dangerous Counterfeits

A recently-proposed bipartisan federal bill (SHOP SAFE Act of 2020) would create contributory liability for e-commerce platforms that fail to take steps to limit third-party sales of dangerous counterfeit products.

See SHOP SAFE Act of 2020 here.

The exponential growth of online shopping shows no signs of slowing. Experts predict that global e-commerce sales will exceed $4 trillion in 2020, approximately 15% of total retail spending. But, consumers are not the only ones that benefit from the convenience of online shopping. Counterfeiters have learned that it is easy to use third-party online platforms to appear reputable while advertising and selling knockoff goods, many of which are dangerous.

The problem is not new, and most large and reputable e-commerce platforms already have implemented anti-counterfeiting policies and best practices. Yet, despite those efforts, consumers continue to unknowingly risk their money, health, and even lives making online purchases of harmful counterfeit products.

Counterfeiters typically use aliases, are based outside the US, and disappear as soon as their schemes are detected. The law is not always clear and consistent as to if and when online e-commerce operators can be contributorily liable for the third party counterfeit products sold on their platforms.

The SHOP SAFE Act of 2020 seeks to address that issue by incentivizing e-commerce platforms to adopt certain best practices intended to stop the sale of any potentially harmful counterfeit products. Those best practices include:

  • screening and vetting sellers and goods,
  • requiring sellers to consent to the jurisdiction of the US courts,
  • penalizing repeat offenders,
  • providing a counterfeiter’s information to brand owners, and
  • ensuring that consumers have the best and most accurate information when they make online purchases. 
     

In exchange for compliance, the online platforms will benefit from a safe harbor against a contributory infringement claim.

Given that the bill is still pending and could create affirmative legal obligations as well as provide a safe harbor against certain liability claims, it is important that operators of online platforms monitor legislative developments with the SHOP SAFE Act. This monitoring should be part of an overall strategy to combat counterfeiting and mitigate liability from any third party sales of dangerous products.

See a previous Alert for more information on the US’s other efforts to crack down on online counterfeit goods.

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