Fighting Counterfeits: Building Trust in E-Commerce Platforms

Fighting Counterfeits: Building Trust in E-Commerce Platforms

By Mark Chan, Analyst, PS-engage | 13 December 2022

E-commerce is booming throughout the Asia-Pacific region, and most markets in Southeast Asia have yet to hit their full potential. However, increasing access to e-commerce has also allowed counterfeiters to capitalise on the e-commerce boom. The International Trademark Association estimates that the value of counterfeits worldwide will reach US$2.8 trillion this year, putting 5.4 million jobs at risk globally.

Crucially, half of all ASEAN countries were also listed among the top 25 countries for counterfeiting prevalence by the OECD and EU IP Office in 2019. Because of this, ASEAN and the Indo-Pacific region are at risk as both a source and destination of counterfeit goods.

In our view, fighting online counterfeiting is ultimately a ‘team sport’. The rapid change of online counterfeiting trends means that efforts need to be agile. Industry collaboration with governments will become increasingly important in the fight against online IP crime.

  • From the perspective of e-commerce and social media platforms, counterfeiting is extremely detrimental because it causes them to lose trust and loyalty from customers. Additionally, platforms are worried about being burdened by new regulations which do not fully account for industry realities (e.g., China’s threat to outright ban e-commerce companies that break IP laws).
  • For rights holders (such as brands and authorised sellers), they are often overwhelmed by having a large range of actions to perform – ranging from monitoring platforms and issuing take down messages, to filing lawsuits to enforce rights. This is especially difficult for SMEs, who have fewer resources than large brands to defend their IP against high levels of counterfeiting.
  • As for patent and law enforcement officials, online IP crime has evolved to become increasingly harder to detect and investigate – including counterfeit sales on social media and live streaming sites. There are also few existing mechanisms which officials can use to collaborate with online platforms, thereby limiting their ability to adapt investigative and enforcement tactics.

 

Platform Efforts to Assist with IP Protection and Enforcement

E-commerce and social media platforms have started developing multiple approaches to fight counterfeits.

  • Regarding platform-initiated measures: Some platforms have begun using brand protection software, which utilises Artificial Intelligence (AI) to monitor 1,000s of marketplaces, social media portals, search engines and websites for potential infringements and unauthorised sellers (e.g., the Amazon Brand Registry portal). After rights holders upload their IP details to the platform, Machine Learning (ML) is used to find words and images which indicate possible counterfeits. Additionally, some platforms have also utilised blockchain technology to guarantee the authenticity of certain products. Alibaba has piloted this for certain food products from Australia and New Zealand.
  • On working with brands and sellers: Major platforms have also been improving their brand-side IP protection resources, and have made it easier for rights owners to request the removal of counterfeits. For example, Alibaba Group’s IP Protection Platform serves as a one-stop portal to submit and track removal requests. Additionally, Shopee confers ‘Shopee Mall’ status to sellers if they can demonstrate they have 100% authentic products, and offers ‘Preferred Seller’ status to sellers that maintain high sales standards.
  • As for working with multiple stakeholders: Platforms have also begun taking part in collaborative multi-stakeholder industry initiatives, such as Memorandums of Understanding (MoUs). Lazada and Shopee have both signed an MoU with the Philippines’s IP office to build consensus on guidelines and deepen industry collaboration. Other platforms, like Amazon, have established Counterfeit Crimes Units to pursue civil action against criminals, while working closely with law enforcement bodies to facilitate criminal investigations.

Thanks to technology, IP rights can evolve from being costly legal instruments to effective tools for speedy counterfeit removals. As such, e-commerce and social media sites are eager to work with governments to ease the enforcement of IP rights.

 

Regional Developments in IP Rules

Ultimately, vast differences between IP regimes in the Indo-Pacific region still pose a barrier to a collective fight against counterfeits, since brands still need to file patents in each individual country to enjoy IP protection in each jurisdiction. There are some signs of IP regime harmonisation, as demonstrated by the ASEAN IP Rights Action Plan 2016-2025, and the ASEAN Patent Examination Co-operation work-sharing programme.

In the next 5-10 years, the Indo-Pacific region will likely see parallel streams of IP collaboration and standards, due to overlapping US/China trading blocs. ASEAN is hence likely to be a dynamic arena for emerging IP rules, which brands will have to grapple with and adapt to.

Additionally, domestic investigative and enforcement capabilities remain key issues. Better mechanisms are needed to connect brand and rights holders with governments to deter and punish counterfeiters more effectively. IP offices could also be further empowered with investigative powers. While 8 out of 10 ASEAN IP offices can investigate IP violations, only 2 of them can initiate investigations without an initial brand owner complaint. Change is needed to unlock more proactive solutions to IP rights infringement

While IP laws around patents recognition and enforcement will take years to improve, change in the form of closer industry and government collaboration are possible much sooner. Platforms can serve as the middle layer between brand owners and law enforcement, making brand-initiated actions easier, and sharing valuable intelligence with law enforcement.

 

Best Practices

Memorandums of Understanding (MOUs) have been established by several governments to strengthen cooperation and information sharing. In the EU, the European Commission has implemented an MOU among platforms, brand owners and other stakeholders, to promote good practices in the fight against online counterfeits. Thailand and the Philippines have so established their own MOUs, which build consensus on guidelines for efficient notice and takedown procedures.

Governments have also been developing tech applications to detect and act against websites that sell counterfeit items. The EU’s ‘EMPACT’ security initiative is leveraging blockchain to produce “track and trace” solutions which authenticate products and exchange data between supply chain stakeholders and customs authorities.

Additionally, the EU IPR Enforcement Portal allows rights holders and authorities to activate customs seizures of counterfeit goods which infringe IP. The Australian government is also developing a tool that allows consumers to identify sellers of legitimate products, by linking authorised sellers of specified brands to the government’s trademark registry. 

The creation of new collaborative institutions has also enhanced enforcement activity and improved visibility of counterfeit trends. In the U.S., the National IP Rights Coordination Centre brings together actors from various government agencies and the e-commerce world to enhance information sharing on emerging trends and prosecutorial coordination.

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