Meena Alnajar is an IPilogue Writer, IP Innovation Clinic Fellow, and a 2L JD Candidate at Osgoode Hall Law School.
On July 26, 2021, the fashion brand ‘Fear of God’ publicized that they had filed a trademark and counterfeit lawsuit in Illinois in early July against several e-commerce sites operating in China. The complainant alleges that websites are mimicking the appearance of legitimate resale and wholesale websites to sell counterfeit products infringing on the ‘Fear of God’ trademark. With all things moving virtually, we are starting to see new strategies for the counterfeit market. Electronic-commerce, or ‘e-commerce’, is an expedient way for businesses to establish themselves online and create a fruitful marketplace, but it could also act as new vehicle for concealing the counterfeit industry.
Counterfeiting involves fraudulently creating products or money with the intent of using them as valid trademarked items, such as fake merchandise from a well-known brand like, in this case, Fear of God. Online retailers have noted an uncontrollable surge in counterfeit products, with some sources stating that as many as 1 in 5 products sold online are fakes. In Canada, the punishment for someone convicted of counterfeit is up to $1,000,000 or imprisonment for up to five years. However, e-commerce makes conviction trickier in the case of Fear of God’s suit. Web designers can effectively imitate popular online retailers or claim to be resale sites authorized to sell the trademarked items, promoting uncertainty as to which sites are counterfeiters. Fear of God’s claim is driven by the fact that the defendants have concealed their identity and constructed a “counterfeit network” with fake seller profiles. Fear of God’s complaint states that the matter can be amended, if “defendants provide additional credible information regarding their identities.”
While launching lawsuits may be an effective long-term approach, they may not act fast enough to resolve online counterfeit. Counterfeiters can continue to create e-commerce sites selling counterfeit goods under different addresses and owners. By 2017, major e-commerce site Amazon had nearly half its products sold by marketplace listings of outside sellers, some of which may be counterfeiters. Amazon has already admitted defeat to the e-commerce counterfeit craze, stating in their ‘Risk Factors’ section: “Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise… we also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated or stolen goods” and accepts possible criminal liability for counterfeit sales. Although Canada has a Combating Counterfeit Products Act in place, legal experts have outlined that the crime requires extensive evidence to warrant a conviction. Federal agents also perform thorough investigations of alleged counterfeit crimes. In the time it takes to obtain evidence and wrap up an investigation, the seller has probably transformed into another web address or online persona.
If the law cannot act fast enough against e-commerce counterfeit, what can? Two avenues may tackle e-commerce counterfeit more expediently. The first is requiring a person behind the e-commerce. India is significantly changing its e-commerce policy to require e-commerce platforms to have a ‘nodal person of contact.’ This nodal person of contact denotes an alternate authority or legal department that can assure proper implementation of all the country’s consumer regulations and e-commerce policy. With a legal source to verify the platform’s content, it may be easier to flag illegitimate or counterfeit sellers in the future. Another avenue is fighting e-commerce with what feeds it: technology and big data. E-commerce giant Alibaba announced the Alibaba Big Data Anti-Counterfeiting Alliance in 2017 and harnesses artificial intelligence (AI) and big data to keep the platform free of fake sellers. The company disclosed that the Alliance’s technological strategy successfully seized USD$207.2 million worth of fake goods in 2016. Perhaps fighting e-crime with e-stop-and-seizure is optimal to limit counterfeit products in the online space.
Counterfeit can deteriorate brands as consumers cannot be certain what they are purchasing, but the fight against counterfeit may never stop. Regardless of how counterfeit is combatted, be it through legal action or AI, creating new online businesses, even for unethical purposes, has never been easier.