Big Brands and Online Retailers Unite in Fight Against Online Counterfeiting

Over 30 major brands and online retailers have signed a memorandum of understanding to work together in the European Union to combat the sale of counterfeit goods on the internet. The signatories include the major e-commerce retailers eBay and Amazon, as well as the likes of Burberry, Louis Vuitton, Nike, adidas, Microsoft, Lego, Nokia, Procter & Gamble and Unilever.

WHAT’S IT ALL ABOUT?

The sale of counterfeit goods online, particularly through auctions sites such as eBay, is a major problem for brand-owners. It has been estimated that, between 2000-2005, only 5% of all “Tiffany” jewellery products sold through eBay were genuine, while only 2% of “Louis Vuitton” products sold online were legitimate.

Under the law as it stands (in the UK and most of the Western world), e-commerce providers are not liable for the sale by third parties of counterfeit goods through their platforms. They are only likely to become liable if, having been informed by a rights owner that a particular product offered for sale through their platform is counterfeit, they fail to remove that product. Most major e-commerce providers therefore operate a “take down” policy – i.e. they remove the counterfeit product upon notification from the rights owner. However, this places an unworkable burden on rights owners to police auction websites and notify the provider of each and every counterfeit product they find. As soon as one product listing is removed, another is likely to replace it.

WHAT DOES THE MEMORANDUM DO?

The Memorandum places the following obligations on e-commerce providers:

• Offer a quick and efficient “take down” procedure, (most e-commerce providers already do this).
• Upon being notified of sellers who are “generally engaged” in the sale of counterfeit goods, take more wide-ranging action against that seller - for example, by completely suspending their accounts, and by seeking to ensure that a seller does not simply re-register that account under a different name.
• Take measures to “pro-actively” identify counterfeit goods – i.e. do more than simply remove individual listings at the rights owner’s request.

Rights owners in turn must:

• Take care not to make incorrect allegations that sellers are offering counterfeit goods.
• Provide e-commerce providers with a list of keywords commonly used for the sale of counterfeit goods – in order to enable e-commerce platforms to more easily identify counterfeit goods.

It is important to note that the Memorandum is only concerned with counterfeit goods – i.e. those which were never produced by the rights owner. It is not concerned with “grey market” goods – i.e. goods which were produced by the rights owner but which were intended to be sold in a different jurisdiction.

Interestingly, the Memorandum provides for the disclosure by the e-commerce provider to rights owners of the identity and contact detailers of sellers of counterfeit goods; such information would enable the rights owners to take legal action directly against the sellers. However, there is the important caveat that seller’s details will only be disclosed “in compliance with local law, including data protection laws”. The practice in the UK is that Internet Service Providers will only disclose subscriber details to rights holders if a court order is obtained ordering them to do this. This is unlikely to change.

All of the signatories to the Memorandum agree not to sue each other over matters it covers. This will be very welcome to the e-commerce provider signatories, in particular eBay. eBay has been on the end of several law suits over the last couple of years (both in the EU and USA) from brand owners alleging that it is jointly liable with sellers for the sale of counterfeit goods over their platforms, on the basis that it makes a profit each time an article is sold.

COMMENT

The Memorandum is effective for one year until May 2012. Then, the signatories will meet with the European Commission to evaluate its effectiveness.

Ultimately, the Memorandum is a statement of intent: it is not legally binding. Effectively, this means that the other signatories have no redress if one signatory acts contrary to the Memorandum’s terms.

However, it is welcome as an attempt by brand owners and e-commerce providers to co-operate in the fight against online sales of counterfeit goods. Hopefully, the effect of the Memorandum will be to persuade many of the e-commerce providers – including those which are not signatories - to introduce more effective take-down procedures and to take a more pro-active approach to dealing with the vast quantities of counterfeit goods sold through their platforms. The Memorandum will be a real success if it results in the easy identification, and removal of the accounts, of large scale sellers of counterfeit goods.

If you would like to find out more about the Memorandum or anti-counterfeiting generally, please contact Peter Nunn on +44 20 7440 7437 or by e-mail.