Amazon Wins U.S. Appeals Court OK to Sell Counterfeits
Decision allows Amazon to disavow responsibility for selling fakes.
May 31, 2017, Los Angeles, CA – In a devastating blow to manufacturers and consumer protection, the U.S. Court of Appeals upheld a U.S. District Court decision by Judge Ricardo S. Martinez excusing Amazon (NASDAQ: AMZN) from liability in the sale of counterfeit items on its website. (Milo & Gabby, LLC. v. Amazon.com, Inc.)
Despite the outcome, Judge Martinez opined;
"[The court] is troubled by its conclusion and the impact it may have on the many small retail sellers in circumstances similar to the plaintiffs. There is no doubt that we now live in a time where the law lags behind technology. This case illustrates that point."
"Under the current case law, Amazon has been able to disavow itself from any responsibility for 'offering to sell' the products at all," he added, calling on Congress, rather than the courts, to explore the issue.”(1)
The Judge also awarded Amazon attorney fees - another devastating blow for the family owned business.
Milo & Gabby’s attorney, Philip P. Mann, explains in a Forbes interview; “the largest Internet-based retailer in the United States runs on-line ads showing not only my client's actual copyrighted products but her own children as well. Amazon collects and pockets money from would-be buyers. It substitutes a cheap knock-off product for the one actually shown. It puts the knock-off in a box clearly marked "Amazon" and delivers it to the buyer in place of the genuine product depicted. And to top it off, my client gets a bad review when the buyer is disappointed in the knock-off.”
The problem is that anybody, anywhere, can sell just about anything on Amazon. About 50% of Amazon sales, which include counterfeit products that may be dangerous or deadly items, come from un-vetted global marketplace sellers. The products appear right next to authentic items conveying Amazon’s endorsement and the illusion they are from Amazon. A transaction fee is charged for each sale, contributing to Amazon's $3 billion in profits.
Most Amazon consumers don’t realize Amazon listings can offer products from any of three distinct sources;
“In Amazon's quest to be the low-cost provider of everything on the planet, the website has morphed into the world's largest flea market — a chaotic, somewhat lawless, bazaar with unlimited inventory” says a recent CNBC Report.
For example, The Counterfeit Report identified and submitted formal infringement notices, authorized by the trademark holders, for 26,170 infringing items offered on Amazon in just the past year. Amazon often claimed infringing listings were removed when they were not, and was caught altering infringing content to allow the counterfeit item to remain.
The Counterfeit Report also conducted dozens of name-brand test purchases from Amazon Fulfillment, and Marketplace sellers, but never received an authentic item. Alarmingly, after being notified of the counterfeit, Amazon does not tell deceived buyers that they may have a counterfeit item, even if it’s dangerous or potentially deadly, like OTC drugs, auto suspension parts or exploding Apple® USB chargers.
If Amazon wants to maintain any consumer trust, they need to cleanse dishonest and fraudulent sellers and close counterfeit loopholes.
Amazon, eBay and of course China's bad-boy of counterfeits, Alibaba, have become the perfect platforms to enable and facilitate criminal activity and benefit from the proceeds of dishonest actions. Even Walmart and Best Buy have opened their websites to third-party sellers. These practices impact jobs, consumer safety and public trust using deception with impunity. Counterfeiting costs U.S. manufacturers over $250 billion, and U.S. workers over 750,000 jobs.
How will consumers and legislators react to Amazon’s practices?
(1) ”However, the Court is troubled by its conclusion and the impact it may have on the many small retail sellers in circumstances similar to the Plaintiffs. There is no doubt that we now live in a time where the law lags behind technology. This case illustrates that point. Amazon’s representative, Christopher Poad, testified that Amazon completely changed the online market place by creating a platform where any seller can offer products to Amazon’s customers. He further testified that Amazon allows sellers to offer their products with minimal effort, by simply filling out an online information form, clicking on an agreement to Amazon’s terms and conditions, and providing certain banking information. Amazon then offers those sellers both payment processing and fulfillment services, all with an asserted interest in providing the best service to their customers. Mr. Poad also testified that when customers cannot resolve problems with a particular seller, Amazon will often step in to make things right. As a result, Amazon enables and fosters a market place reaching millions of customers, where anyone can sell anything, while at the same time taking little responsibility for “offering to sell” or “selling” the products.1 Indeed, under the current case law, Amazon has been able to disavow itself from any responsibility for “offering to sell” the products at all. As noted above, the purpose of “adding ‘offer [ ] to sell’ to section 271(a) was to prevent . . . generating interest in a potential infringing product to the commercial detriment of the rightful patentee.” MEMC Elec. Materials, Inc., 420F.3d at 1376. In this instance, the Court is not convinced that such purpose has been fulfilled. However, that is a subject which must be addressed to Congress and not the courts.” ( OPINION OF THE COURT Case No. C13-1932RSM - Nov 3, 2015)
1 The Court recognizes that Amazon asserts and embraces an interest in preventing counterfeit and dangerous products from being sold through its Amazon.com website, that it reserves the right to unilaterally remove such products from the website, and has created a mechanism by which intellectual property owners can complain about violations of property rights. The Court also acknowledges that Amazon removed the alleged infringing products in this case from the Amazon.com website, continued to monitor and remove those product pages throughout the litigation, and barred the other Defendant sellers from selling at all on Amazon.com.
 |
