Amazon Takes Counterfeit Sellers to Court

TRX and Forearm Forklift

Amazon Inc. filed both suits with the Superior Court of King County, State of Washington, on 14 November 2016.

The first lawsuit targets a group of sellers for infringing on TRX athletic training equipment developed by Fitness Anywhere (Case Nr. 16-2-27556-7). Fitness Anywhere joined Amazon as plaintiff.

The second lawsuit was filed against sellers of fake versions of Forearm Forklift products that are trademarked and patented by Above All Co (Case Nr. 16-2-27563-0). The product is a strap used for lifting and moving heavy equipment (www.bloomberg.com of 14 November 2016: Amazon Files Lawsuits to Keep Counterfeit Goods Off Website).

Amazon alleges in both suits breach of contract – the contract between seller and Amazon – and false advertising. In the TRX case Fitness Anywhere claims, in addition, trademark infringements and unfair competition. Amazon asks the court to be permitted to permanently ban the defendants and their employees from selling on Amazon websites. Amazon argues that broad bans are necessary as knockoff sellers, when first being caught, hide their identities (fake names and fake addresses) and change regularly their seller accounts and payment methods.

Issues with Counterfeit Sellers

The issue of counterfeit sales in e-commerce and, in particular, on the Amazon platform is not new at all (the dark side of e-commerce and, in particular, the sale of counterfeit products, was the main topic of our XBorder E-Commerce events 2016, see BR-News of 3 October 2016).

Businesses regularly voiced concerns regarding knockoffs on Amazon platforms. Counterfeit products are reducing the profits of businesses selling the original items on Amazon. Furthermore, counterfeits may endanger the customers and tarnish the reputation of the product brand and the brand owner (www.cnbc of 15 November 2016: Amazon takes counterfeit sellers to the court for the first time).

So far, it was on the brand owners to send cease and desist letters to the counterfeit sellers and to file injunction suits. Furthermore, the brand owners could send take down notices to Amazon. Taken the sheer number of products listed on the Amazon websites, this approach is kind of a Sisyphean task (www.cnbc.com of 15 November 2016: Amazon takes counterfeit sellers to court for the first time).

Taken the facts and figures, it is obvious that Amazon may not „duck and cover“ with respect to the issue of counterfeits. Amazon generates approx. 80 billion USD per year with the platform service. Half of revenues stem from third-party sellers. Amazon mentioned in the complaints that „when customers purchase counterfeit goods, it undermines the trust that customers, sellers, and manufacturers place in Amazon, thereby tarnishing Amazon’s brand and causing irreparable reputational harm.“ It is clearly in the interest of Amazon to take on the fight against counterfeit sellers.

It must be emphasized that Amazon was not ignoring the issue so far. Amazon is already investing in the counterfeit prevention on its platform. It invests substantially in developing and deploying technology to detect and exclude counterfeit sellers. Now that Amazon is also taking counterfeit sellers to the court, it may deter counterfeit sellers even better. It must, however, be seen on whether the numbers of counterfeit sellers can significantly be reduced.

Businesses complain that Amazon could and should do more than filing lawsuits against counterfeit sellers. Businesses argue that Amazon should better cooperate with brand owners by responding to take down notices faster, by systematically removing counterfeit products and by suspending the respective sellers.

Still, the lawsuits are a first step and they demonstrate that Amazon has understood its own business interest in fighting counterfeit sales. Providers of e-commerce platforms often argue that they are not directly responsible for the behavior of users on their platform. That may legally be correct. Nonetheless, and Amazon mentioned it in the suit, bad behavior of users tarnishes the reputation of the platform and the platform provider.

Further information:

• Case Nr. 16-2-27556-7 Complaint dated 14 November 2016 (TRX)
• cnbc.com of 15 November 2016: Amazon takes counterfeit sellers to the court for the first time
• cnet.com of 14 November 2016: Amazon sues alleged counterfeit sellers
• bloomberg.com of 14 November 2016: Amazon Files Lawsuits to Keep Counterfeit Goods Off Website