Dealing with Listing Hijacking and Counterfeiting on Electronic Commerce Sites
How to determine if your electronic commerce site listing has been hijacked and what to do if it has been
IntroductionAmazon, eBay, and other Electronic Commerce sites have drastically increased the amount of material sold online and facilitated the rise of small retail companies with a global reach. Now even a mom and pop shop can have a global retail reach. This global reach, however, comes at a cost.
In the past only large companies with intellectual property worth millions of dollars needed to worry about counterfeit products. Times have changed. Online marketplace sellers report rampant product counterfeiting and trademark infringement . A recent Government Accountability Office study discovered that almost half of the items sold online were counterfeit. In fact half of existing brands are losing money due to counterfeiting, and 1 in 3 are losing more than 10 percent of their revenue. Counterfeit goods cost the U.S. economy $600 billion a year. Now all companies, not just Disney, Nintendo, and other behemoths must worry about counterfeit products.
Products sold on electronic commerce sites like Amazon and eBay are particularly vulnerable to counterfeiting. The arguably anemic response by many electronic commerce site operators to the problem has not helped matters. Forty percent of companies have seen an increase in trademark and brand infringement, and the increase can largely be traced to the expansion of e-commerce. Amazon and other online marketplaces are aware of the problem but take the position the seller is responsible for policing infringement. Amazon has in fact been accused of engaging in counterfeiting itself. In my personal experience, online marketplaces will only respond to counterfeiting claims if a federally registered trademark exists. Even the strongest Common Law trademark rights are not good enough.
Most online marketplace intellectual property infringement stems from listing hijacking. In listing hijacking a seller unaffiliated with a branded product copies exactly or almost exactly a branded products listing. Consumers looking for the branded product mistakenly buy the counterfeit product. Let us take a look at how this usually occurs.
Many electronic commerce sites have a default seller for each product. This default seller is often not the original listing poster. Someone who copies your listing but sells at a lower price, as counterfeiters often do, could become the default seller of the item. This is called winning the Buy Box or listing hijacking. When your listing is hijacked, customers no longer buy from you even if they click on a listing using your picture and description. Generally anyone who can convince the electronic commerce site they are selling the same product can use your pictures and description to sell their product.
Preventing Listing HijackingTrademarking your logo and company name is one of the best ways to prevent listing hijacking. Someone selling a product under your brand name without your permission, is then committing trademark infringement and can usually be stopped. Online marketplaces tend to take infringement of federally registered trandemarks seriously. Informing them of infringement usually leads to the listing being removed.
Copyright can protect the artistic aspects of product photos and descriptions. This isn't nearly as useful as trademark protection as someone can simply take their own picture of the product even if it looks remarkably similar to your photograph. Since copyright only protects artistic expression making sure your product descriptions and photographs are "artistic" is helpful. Perhaps add a company logo to your photograph as a watermark. Consider arranging the product in a pleasing way or beautifying the picture in post processing. Still as copyright is weaker protection trademarking is still your best bet.
Amazon and some other electronic commerce sites have set up a brand registry. To participate in the brand registry, a federally registered trademark is usually required. You also must be able to verify yourself as the owner or the authorized agent of the federally registered trademark’s owner. If you have the trademark registered to a corporation, be prepared to identify yourself as an agent of that corporation.
MAP contracts between the manufacturer and retailers set a minimum new item selling price. Since most listing hijackings involve selling the same item at a lower price, theoretically MAPs can prevent listing hijacking, but most electronic commerce sites do not enforce MAPS as these are contracts between retailer and manufacturer. You would need to research and individually respond to each MAP violation yourself. This is time consuming, and expensive.
To avoid this expensive proposition, consider not having any authorized resellers. If no one other than you has first sale rights on your products, MAPS are irrelevant.
Manufacturing in the United States helps prevent the most common cause of counterfeiting -- a leaky supply chain. Manufacturing plants can make extra product and sell it on the side. American manufacturing plants are less likely to pirate your products, and suing an American company is less complicated and expensive.
Your product design can deter listing hijacking, as well. Put your trademark not only on your listing but also on your product and your packaging. It will be very difficult for Amazon to require a picture without visible branding if the branding is on the product. Also, make Also, make sure the branding is visible in the listing picture. This ensures a listing hijacker selling a product without your branding is committing fraud and a listing hijacker selling products with your branding is committing trademark infringement. In your listing give as much information as possible. If your product is only manufactured in the United States, state it explicitly. If you have no authorized resellers, and if your product only ships from your city or state, say so explicitly in your listing
Signs of InfringementMonitoring your BuyBox is one of the easiest ways to spot infringement. If no one sells your branded product other than you, no one other than you should ever own the BuyBox. If someone else gains control of the BuyBox, you likely have an infringer.
Listings selling your branded product below either your listed or your MAP price are another sign something might be amiss. Remember, however, if a contracted retailer is selling below your MAP price, Amazon will take no action. Since the retailer is selling the actual branded product, they are not committing either trademark or copyright infringement. You also need to insure the lower price listing is for a new product. You cannot prevent people from reselling items they bought from you.
Inexplicably bad reviews and sour supplier relationships are the final two ways to spot possible infringement. Bad reviews could be evidence that rather than receiving your product customers are receiving inferior counterfeits. It is also possible that a manufacturing defect exists in your product. Ideally you should randomly test items from each production run.
Finally, as was mentioned above, most counterfeit products are manufactured by your suppliers. The supplier simply manufactures more products than they report and sells the extra themselves. An unhappy supplier is more likely to attempt to sell counterfeit products. If your suppliers are unhappy, be on the lookout!
How to deal with possible infringementFirst buy and test the product. This allows you to inform the online seller if the product is of inferior quality. Once the test buy is completed you should inform the appropriate electronic commerce site of the infringement. Be prepared to provide: (1) the URL and any identifying numbers associated with the infringing product (2) a trademark or copyright registration number (3) proof you own the numbers in step 2 (4) any other additional information such as the quality of the product.
Then you should send a cease and desist letter to the listing hijacker. The hijacker is thus informed you are aware of the infringement and are determined to stop them. An attorney written letter on law firm letterhead citing legal authority and using pictures to point out infringement can be surprisingly effective. The Olive Law Group stands ready to assist in writing cease and desist letters.
Customs and Border Protection can prevent the import of products infringing on federal trademarks, patents or copyrights. Products can be registered at https://apps.cbp.gov/e-recordations/. Be sure to have: (1) appropriate trademark, patent or copyright registration numbers (2) the name, business address, and citizenship of the rights owner, (3) places of product manufacture (4) name and address of anyone other than you with a right to use the intellectual property.
You can also produce product identification guides or host product training sessions to further assist border patrol agents recognition of counterfeit products. This is an expensive proposition however. The Olive Law Group stands ready to help you decide if this step is necessary in your situation.
If you use Amazons Fulfillment By Amazon (FBA) service, you may also want to audit your Fulfillment By Amazon warehouse(s). Like unhappy suppliers, warehouses are common causes of unauthorized sales. A logistics or accounting company can help with this process. If you are not reconciling your Amazon FBA shipments, preferably at least every 45 days, you should be doing so. Mark Faggiano has a good guide on how to do this at https://blog.taxjar.com/reconciling-amazon-fba-shipments-step-step-guide/.
Finally you may want to consider contacting the media. This is unlikely to affect your specific problem, but Amazon and the federal government can be affected by public perception and outcry. This is especially true since, as reported by CNN, Walmart and Microsoft are teaming up to take on Amazon. Shannon Liao of the Verge recently reported on counterfeit products at Amazon as did Wade Shepard of Forbes and Ryan Gaydos of Fox News. These reporters, along with your local news stations, are likely good places to start.