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A-CAPP Backgrounder

REVISITING THE SHOP SAFE ACT
AFTER MARKUP

Kari Kammel[1], 2021

In 2020, Congress initially introduced a series of bill designed to help stem the sale of trademark counterfeits by third party providers on e-commerce platforms, including the SHOP SAFE Act, INFORM Consumers Act and the SANTA Act.[2]  While a comprehensive multi-faceted approach to combat counterfeiting is vital,[3] one of the most important tools in this approach is an applicable legal structure for intellectual property owners to be able to protect their trademarks in this case. 

The current framework of secondary liability for trademark counterfeiting was established by a series of cases in the US in the brick-and-mortar setting, but it did not translate similarly to the online e-commerce environment,[4] a phenomenon that was described as law disruptive technology, where e-commerce has disrupted the current application of law to this new space of selling.[5]

THE SHOP SAFE ACT

After the original introduction of SHOP Safe in 2020 by the House Judiciary Committee,[6] the bill was reintroduced in May of 2021.[7]  It was also introduced into the Senate on May 26, 2021 becoming a bicameral and bipartisan bill.[8]  A hearing was held on May 27, 2021, where I testified that this is an important piece of legislation that addresses the current imbalance of the sale by third party sellers of counterfeit on e-commerce with the state of secondary liability for trademark counterfeiting under the Tiffany standard.[9] 

Some significant edits on the bill have been changed since the original introduction based on the May hearing as well as stakeholder meetings and roundtables.[10]  Several important points from my testimony included:

01

Clarification of the health and safety designation

02

Not limiting the bill to technological means

03

Requiring a consumer reporting mechanism for counterfeits.[11]

The language of health and safety was not removed;[12] however, I would argue that with the current reading of the language that it would, and should, broadly apply to any good, with a counterfeit mark or genuine mark, and the majority of counterfeits do implicate this.[13]  Another possibility that has been noted is that this could tie in product liability laws, given the language of health and safety, into the Lanham Act,[14] while others have noted that causes of action exist right now against e-commerce platforms for allowing the sale of counterfeits by third parties under the Lanham Act.[15] For example, Josh Malone’s LinkedIn post notes that

“Amazon faces a massive liability under the Lanham Act for peddling pirated goods on their platform. Under the SHOP SAFE Act, Amazon can avoid liability for trademark infringement by merely pointing the finger at their Chinese suppliers with fake ID’s, bogus addresses, and false representations.  Today Amazon claims they have implemented most, if not all, of these so-called “best practices”. The SHOP SAFE Act would grant Amazon immunity – a “safe harbor” – so that they cannot be sued for trademark infringement under the Lanham Act. ”[16]

Despite the above claims,[17] there is no cause of action against e-commerce providers available under the Lanham Act for secondary liability, only primary liability; hence the current state of caselaw surrounding secondary liability.[18]  Additionally, SHOP SAFE is not a grant of immunity to e-commerce platforms to be sued under the Lanham Act, and this misunderstands the intent of the bill and the current law.  Under the current state of law, platforms have minimal requirements to avoid secondary liability; essentially, they are only required to respond reactively to a notice and takedown request under Tiffany, the knowledge requirement[19] and the current law seeks to balance the obligations between platform and brand more appropriately in regard only to secondary liability for trademark infringement.

Regarding product liability law, I do not believe it merges product liability law into the act, as it does not create a cause of action for the injured consumer,[20] but extends a cause of action for the mark owner against the platform for secondary liability for trademark counterfeiting.[21] 

Including technology, but not only technology

One change that was made was not limiting the requirements of e-commerce platforms to use only technological means, but means that would include technological means, which allows platforms to pursue effective measures that can evolve as appropriate with advances, size and profits of a company or other relevant factors.[22]

Consumer reporting mechanism

Finally, one of my recommendations from my testimony was creating a reporting mechanism for consumers in order to give those purchasers of counterfeits a way to report to brands and e-commerce platforms[23] and addressing one of the corners of the opportunity triangle mentioned in our discussion on secondary liability.[24]  This is a positive addition to the bill.[25]

Other Issues: Small Business Impact and Hurting E-Commerce Platforms?

Additionally, there has been discussion that this bill would negatively impact small business owners.[26]  In my opinion, this is no more burdensome, and perhaps less so, than any paperwork that might be required for a small business to operate in a brick-and-mortar setting and in the long run can protect a small business, particularly with just a few product lines or trademarks whose business line could be destroyed very quickly by counterfeits. 

Finally, some argue that this bill would hurt e-commerce platforms by giving trademark owners “absolute control over online marketplaces”.[27]  The current state of law for brick-and-mortar stores, malls, and flea markets requires that those making profit and creating a space for third party sellers have to exercise some responsibility toward their structures and marketplaces that they have created,[28] SHOP SAFE extends a similar and appropriate framework on e-commerce providers, not giving them control, but requiring them to have reasonable response for the safety of consumers.

The impact of this bill if signed into law should be significant to work toward a better balance of the duties and responsibilities of IP owners and online marketplaces regarding the sale of goods bearing a counterfeit trademark by third party sellers.


[1] Kari P. Kammel, Esq. is the Assistant Director of Education and Outreach, Michigan State University, Center for Anti-Counterfeiting and Product Protection, kkammel@msu.edu. She is an adjunct professor of law at Michigan State University College of Law and is a licensed attorney in Illinois and Michigan.

[2] See John H. Zacharia & Kari P Kammel, Congress’s Proposed E-Commerce Legislation for Regulation of Third-Party Sellers: Why It’s Needed and How Congress Should Make It Better, 21 U.C. Davis Bus. L.J. 91 (2020), available at https://blj.ucdavis.edu/archives/vol-21-no-1/zacharia-and-kammel.html

[3]  Kari Kammel, The Need for a Holistic Approach to Trademark Counterfeiting for the Legal Field, 29 Mich. Int’l Lawyer 3-4 (Summer 2017), available at  http://connect.michbar.org/internationallaw/newsletter ; Rod Kinghorn & Jeremy Wilson, A Total Business Approach to Counterfeiting, https://globaledge.msu.edu/content/gbr/gBR10-1.pdf

[4] See generally, Kari Kammel, Jay Kennedy, Daniel Cermak & Minelli Manoukian, Responsibility for the sale of trademark counterfeits online: Striking a balance in secondary liability while protecting consumers, 49 AIPLA Q.J. 201-258 (2021). https://a-capp.msu.edu/wp-content/uploads/2021/07/AIPLAVol49No2pg201to258.pdf

[5] Kari Kammel, Examining Trademark Counterfeiting Legislation, Free Trade Zones, Corruption and Culture in the Context of Illicit Trade: The United States and United Arab Emirates*, 28 Mich. State Int’l L. Rev. 230-33 (2020); see also Kammel, et al, supra note 4 at 230; William Sowers, How Do You Solve a Problem like Law-Disruptive Technology?, 82 L. & Contemp. Probs. 193. 196 (2019).

[6] SHOP SAFE Act of 2020, H.R. 6058, 116th Cong. (2020).

[7] https://judiciary.house.gov/news/documentsingle.aspx?DocumentID=4566

[8] S.1843 – SHOP SAFE Act of 2021, 117th Congress (2021-2022), https://www.congress.gov/bill/117th-congress/senate-bill/1843/text?r=6&s=1

[9] https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=4567

[10] HR 3429 – SHOP SAFE Act of 2021, current text available at https://docs.house.gov/meetings/JU/JU00/20210929/114092/BILLS-117-5374-N000002-Amdt-1.pdf  

[11] Written Testimony, Kari Kammel, May 27, 2021, Committee on the Judiciary, Sub-Committee on the Courts, Intellectual Property and the Internet, https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=4567

[12] HR 3429, Sec. 2 (F)(iii) (stating “The term ‘goods that implicate health and safety’ means goods the use of which can lead to illness, disease, injury, serious adverse event, allergic reaction, or death if produced without compliance with all applicable Federal, State, and local health and safety regulations and industry-designated testing, safety, quality, certification, manufacturing, packaging, and labeling standards.). 

[13]Kammel, written testimony, supra note 11.

[14] HR 3429 – SHOP SAFE Act of 2021, current text available at https://docs.house.gov/meetings/JU/JU00/20210929/114092/BILLS-117-5374-N000002-Amdt-1.pdf

[15] Josh Malone, The SHOP SAFE Act: A Safe Harbor for Big Tech Counterfeiters, September 28, 2021, https://www.linkedin.com/pulse/shop-safe-act-harbor-big-tech-counterfeiters-josh-malone/

[16] Id.

[17] Id.

[18] See Kammel et al, supra note 4, at 214-236 (discussing caselaw of secondary liability for trademark counterfeiting)

[19] Id.  

[20] See Kammel et al, supra note 4, at 236-241 (discussing products liability and online counterfeiting.

[21] HR 3429 – SHOP SAFE Act of 2021, current text available at https://docs.house.gov/meetings/JU/JU00/20210929/114092/BILLS-117-5374-N000002-Amdt-1.pdf

[22] Zacharia & Kammel, supra note 2, at 121; Kammel, written testimony, supra note 11.

[23] Kammel, written testimony, supra note 11

[24] Kammel et al, supra note 4, at

[25] HR 3429 – SHOP SAFE Act of 2021, 2(ix) (“Provided reasonably accessible electronic means by which a registrant and consumer can notify the platform of suspected use”), current text available at https://docs.house.gov/meetings/JU/JU00/20210929/114092/BILLS-117-5374-N000002-Amdt-1.pdf

[26] See Malone, supra note 15.

[27] https://blog.ericgoldman.org/archives/2021/09/the-shop-safe-act-is-a-terrible-bill-that-will-eliminate-online-marketplaces.htm

[28] See Kammel et al, supra note 4, at 239-240;  Kammel, written testimony, supra note 11

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