Shop Safe Act Senators Say They Can Amend Language, but Want to Act

The Senate co-sponsors of the Shop Safe bill, recently reintroduced, said that they want critics of the bill to give specific feedback, rather than try to kill the bill.

Sen. Chris Coons, D-Del., chairman of the Intellectual Property Subcommittee of the Judiciary Committee, hosted a hearing on the bill Oct. 3, with three proponents and one opponent, from the Computer & Communications Industry Association (CCIA). He asked stakeholders to "sharpen and shape the bill into something worthy of enactment."

The CCIA opposes the bill because it believes that online platforms don't deserve to have liability for counterfeit goods sold on their websites, as long as those platforms respond to take-down notices from brands that spot infringing products.

Sen. Thom Tillis, R-N.C., the ranking member of the subcommittee, said the takedown model doesn't work. "I wish that it could," he said. He said he is looking for a "reasonable legislative fix" that can address concerns of both platforms and brands. "I hope this hearing gives us additional information to get the stakeholders together so we can come up with a reasonable compromise," he said. "I hope those who are out there to kill this bill, need to understand I want you at the table to make it better. If there’s anyone out here that thinks that they're going to slow this down, then they probably need to think again," he added.

While all witnesses agreed that they don't want products that are hazardous -- such as lithium batteries that catch fire, bogus medicines or engine parts -- to be sold, they disagreed about the scope of the problem.

Daniel Shapiro, senior vice president, brand relationship and strategic partnerships at Red Points, spent eight years at eBay in brand protection before joining Red Points, which offers software to brands looking for counterfeits. His company sends 300,000 to 400,000 take down notices a month for its roughly 1,200 customers, and examines 35 million new listings a day.

He also said that with eBay having 1.7 billion listings, and Amazon two to three times that many, and Alibaba, in China, even more, it's impossible for brands to monitor it all. Still, he wrote in his written testimony: "Some platforms have made commendable strides in enhancing their anti-counterfeiting efforts by employing advanced algorithms and technology to detect and remove infringing listings promptly."

Shapiro told the senators that Red Points' discovery of infringing listings has doubled in the last year.

CCIA President Matt Schruers said the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce Act, or Shop Safe, is framed as a safe harbor for platforms that prevent counterfeits from being listed, but "it is in fact an unsafe harbor," he said.

In his written testimony, he called it "a highly flawed proposal that is widely opposed by industry and dozens of civil society groups, companies, associations, and trademark scholars, most of whom opposed a virtually identical bill last year."

Schruers said that brands, not platforms, have the information to detect counterfeits, and that requiring e-commerce platforms to examine the postings at the Patent and Trademark Office is backwards.

"At the end of the day, we need cooperation, we need brand owners and platforms working hand in glove," he said.

Sen. Marsha Blackburn, R-Tenn., broke in, and said, "And I think we need platforms to be more diligent in pulling things that they suspect are counterfeits."

Schruers responded that "there is a very small sliver of bad actors out there that we need to take action against." He said the "vast, vast majority" of sales online are lawful commerce.

Senators who attended the hearing sided with other witnesses who say the problem is significant and growing. Tillis said both he and his daughter had made purchases online that turned out to be such low quality they knew they were counterfeit. Coons said he, too, has had family members end up with counterfeits after online purchases.

Schruers argued that Congress should wait to see the results from the Inform Consumers Act, which required platforms to vet high-volume sellers, before acting again.

Senators were skeptical of that argument, and Tillis asked him, even if the Inform Consumers Act exceeded expectations, would it stop counterfeits?

Schruers replied, "This problem will never be solved."

"There are a variety of strategic, economic, health and safety reasons why we need to be attacking this, China being first among them," Tillis replied.

Coons, in his closing remarks, also disagreed that there is no legal framework that would create better incentives to police counterfeits. "It’s exceptionally rare to go into a mall, walk into Dick's Sporting Goods, and buy a bicycle helmet that is fake, and that doesn’t actually protect you. That almost never happens."

American Apparel and Footwear Association CEO Steve Lamar, whose organization is a major supporter of Shop Safe, argued that if the bill becomes law, it would restrict the ability of counterfeiters to offer their goods to consumers. He argued that not only is it unfair that counterfeiters avoid the costs that legitimate manufacturers have to expend monitor their supply chains for ethical work standards, they also neglect product safety standards.

The trade group studied 47 counterfeit shoes, clothes and accessories, and found that 36% had high levels of dangerous chemicals like cadmium, lead and phthalates. He said there are other safety issues, such as buttons coming off or faulty drawstrings that are associated with injuries.

Schruers complained that the definition of health and safety in Shop Safe is so broad it would cover most consumer products.

Sen. Mazie Horono, D-Hawaii, said she also has concerns about how broad the health and safety language is.

Kari Kammel, director of Michigan State University's Center for Anti-Counterfeiting and Product Protection, thinks the definition should be broad. She said the center conducted a survey of online consumers, and found 13% said they'd had a negative health effect after using a counterfeit product, and about 15% said they were injured.

Tillis asked the witnesses if there's another country doing a better job regulating e-commerce and counterfeits, and Schruers said the current U.S. policy is the right balance.

"The thriving e-commerce sector is located in the United States," he said. "That’s not an accident. It's quite possible an ill-considered policy decision could dry up that marketplace."

Tillis responded, "That’s right and nobody wants that."

He later said, "I don’t like heavy regulation. I don't even like regulations. I’ve probably been responsible for repealing more regulations than I’ve ever voted for ... but the industry needs to find a role to play here, and it can’t be that, 'Let’s wait for the Inform Act and maybe we’ll come back with feedback on the next front,' it's not safe. We need industry-led solutions and collaboration."

He said that not addressing counterfeits more meaningfully "is costing us economically, and I actually think it's costing us in terms of health and safety. My door is wide open. Let’s come up with the leanest, most effective approach to protect consumers and hold the historic counterfeiter, which I think is China, accountable."