Fighting Against Online Solicitations Of Counterfeits

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Fighting Against Online Solicitations Of Counterfeits

  1. 1. Fighting Against Online Solicitations Of Counterfeits A Reflection Paper
  2. 2. About the Author of this Report eBay is a broad platform for European eCommerce, with websites serving the entire European Economic Area, which makes eBay one of the most significant information society service providers in Europe. Globally, eBay has a local presence in 39 markets with 86.3 million active users worldwide. The gross merchandise volume of transactions carried out using eBay’s services in 2008 was $ 59.649 billion globally.
  3. 3. About this paper Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 I. Counterfeiting: a global disease with offline and online symptoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 II. Why the symptoms of counterfeiting are more visible on the internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 eBay provides online marketplaces that demonstrate many of the significant benefits of using the internet for commerce, namely choice, selection and value. eBay is not a retailer. Instead, eBay hosts content for third III. Counterfeiting harms rights owners, consumers, economies and internet companies . . . . . . . . . 15 parties selling goods totalling millions of euros on a daily basis. eBay is committed to promoting confidence in the internet, as the success of eCommerce depends on trust IV. eBay’s commitment and contribution to fighting counterfeits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 between sellers and buyers. eBay is therefore determined to fight against any abuse of its services, including attempted sales of counterfeits. Potential counterfeits represent only a miniscule proportion of total listings A. Prevention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 on our marketplaces. Nonetheless, eBay remains dedicated to combining its efforts with other responsible B. Detection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 stakeholders to fight aggressively and effectively against counterfeiters. C. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 This paper focuses on counterfeits, defined as non-authentic and non-genuine goods. To fight counterfeits effectively stakeholders must focus on the scale and focal points of the problem. They should not be confused with separate issues concerning wholly legitimate and authentic goods, such as parallel imports or selective V. How eBay’s measures can in part influence the supply and demand of counterfeits . . . . . . . . . . . . . 30 distribution. These important subjects can be discussed in separate forums and should not be allowed to cloud A. Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 efforts to promote effective measures against counterfeits. B. Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 eBay’s paper seeks to give further impetus to ongoing anti-counterfeit discussions, particularly the European Commission’s recently created Anti-Counterfeit Stakeholder Platform. Given our experience of successfully VI. How the EU’s anti-counterfeiting laws provide a strong antidote against counterfeiters . . . . . . . 36 fighting counterfeits on our platform over the last ten years, we believe eBay is well-positioned to make recommendations in this area. VII. eBay’s recommendations to address counterfeiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 The paper has the following structure:  Define the issue of counterfeiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 I. Counterfeiting: a global disease with offline and online symptoms Define the size and the scope of the problem objectively  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 II. Why the symptoms of counterfeiting are more visible on the internet  Establish more cooperation between interested parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 III. Counterfeiting harms rights owners, consumers, economies and internet companies  Establish more cooperation between interested parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 IV. eBay’s commitment and contribution to fighting counterfeits  Increase consumer awareness to stem demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 V. How eBay’s measures can in part influence the supply and demand of counterfeits VI. How the EU’s anti-counterfeiting laws provide a strong antidote against counterfeiters VII. eBay’s recommendations to address counterfeiting eBay remains a committed participant in stakeholder discussions and trusts that this document will be a useful contribution to those multi-stakeholder efforts.
  4. 4. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS Executive Summary In this paper, eBay outlines the issue of • Statistics demonstrate that the internet remains a The harmful effects of counterfeiting threaten limited in their effects to the online world, counterfeiting, insofar as it is relevant to significantly less prominent channel for the sale and legitimate online businesses as much as legitimate specifically to just the eBay marketplace. eBay anti-counterfeit policy discussions and distribution of counterfeits than more established offline businesses. cannot remove illegal goods from circulation or initiatives that impact our business. We offline channels. prevent counterfeiters from using other distribution • Online service providers have a clear business explain eBay’s motives for responding channels to sell their counterfeits, either on- or • The fight against counterfeiting needs a coordinated incentive to act against attempts to use their seriously to attempted abuse of its offline. and global approach. Governments must work services to sell counterfeits. Counterfeits destroy marketplace and illustrate our commitment together with stakeholders in order to eradicate consumer trust and damage legitimate business. • Working with rights owners and law enforcement, to continuing and enhancing our efforts as the roots of counterfeiting across all aspects of the to provide data that assists investigations or necessary. Furthermore, we detail how our • The notion that eBay profits from counterfeits sold counterfeiting supply chain. testimony to aid legal proceedings, are key extensive actions, whilst de facto limited in on its marketplace does not correspond to the commitments of eBay. their impact to the online marketplace we reality of the direct costs deployed by eBay against provide, give rise to cooperation with other II. Why the symptoms of counterfeiting are counterfeits, nor the significant lost revenues from • Cooperation is a fundamental weapon in the fight stakeholders that facilitate their own actions more visible on the internet the overall damage to our business, including our against counterfeits and the cornerstone of any against the perpetrators. eBay believes this • The same unique features of the internet that make brand. effective anti-counterfeit strategy. is an impressive example of the effect of it such a popular and transformational technology positive and constructive cooperation. for society – its global footprint, easy access and IV. eBay’s commitment and contribution to V. How eBay’s measures can in part influence On the basis that eBay’s authority is limited reliance on intermediaries – appear to magnify the fighting counterfeits the supply and demand of counterfeits to the matters with which we work each day, counterfeiting problem on the internet. • eBay employs a three step approach to reduce • Only by disrupting the cycle of supply-and-demand this paper does not seek to be an exhaustive • This accessibility and visibility, at the same time, are counterfeits – prevention, detection and will the spread of counterfeiting be curtailed rather list of all the issues, but instead attempts to opportunities. It has never been easier for rights enforcement – that eBay continues to develop than just hidden from view. Only rights owners provide an additional perspective for policy owners to monitor a distribution channel for both according to technology advances and the data and law enforcement agencies have the expertise, discussions. To this end, we have outlined lawful trade in their goods and the unlawful trade available about attempted abuses of its platform. the resources and the legal tools to attack the the following key considerations and main of counterfeits, thanks to the technological means illness before it spreads. Internet companies like recommendations. • Despite heavily investing in its anti-counterfeit available in the online world. eBay can and do support this, particularly by efforts, eBay’s ability to detect infringing listings is • The global nature of the internet and its technical sharing intelligence, but they cannot be the main necessarily limited. eBay cannot be an expert on the I. Counterfeiting: a global disease with offline structure require an even more cooperative responsible actors in curtailing counterfeits. staggering number and variety of products offered and online symptoms approach in fighting unlawful activities than is across its marketplaces. It needs the cooperation of • The 2008 OECD Report illustrated that there are • Counterfeiting predates the internet and needed in the offline world. rights owners to detect infringements. eBay offers some very important factors on the supply side comprehensive anti-counterfeit strategies must rights owners best-in-class services for observation for counterfeits, upon which the internet and eBay prioritise the fight against offline production of III. Counterfeiting harms right owners, and notification to allow effective policing of their in particular have little or no influence. For other counterfeit goods and accompanying logistical consumers, economies and internet companies brands on the eBay marketplace. factors only a cooperative approach can help to operations by the counterfeiters. influence them effectively. • Counterfeiting affects every part of society. • eBay’s anti-counterfeit measures are necessarily 6 7
  5. 5. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS • On the demand side, internet intermediaries such the five following recommendations for future action • Last, but not least, stakeholders can help stem as eBay can play an important role in end-user to address counterfeiting: demand by raising consumer awareness of the education, by leveraging the reach they have to negative impacts of counterfeiting and of the ways • There needs to be a clear definition of counterfeiting, consumers. But it remains the rights owners, along that consumers can protect themselves against i.e. that counterfeits are non-authentic, non- with support from governments, who are best buying fakes. genuine goods. This will avoid parties being adept at developing the adequate messaging. sidetracked by disputes concerning genuine goods and their distribution. eBay looks forward to continuing its commitment to VI. How the EU’s anti-counterfeiting laws • To enable the most effective employment of multi-stakeholder discussions where our expertise is provide a strong antidote against counterfeiters resources, it is desirable to define the size and valuable. As stated throughout this paper, eBay has • European anti-counterfeiting legislation is robust, characteristics of the problem objectively. The developed its expertise on the basis of what can and can be effective. The institutions working planned EU Observatory on Counterfeiting and be done to fight against the abuse of our services. within this framework are cooperating at European Piracy may play an important role here, if it involves Combined with the complementary expertise from and international levels and already concentrate on all relevant stakeholders and ensures workability many constructive stakeholders among rights owners the sources of the problem. by focusing on the most salient issues. and law enforcement authorities, eBay is able to play its part in addressing the issue (i) where it directly • European frameworks for law enforcement • More cooperation between interested parties can involves our services and (ii) to the extent that our cooperation, such as Europol and Eurojust, already be established by fostering open, constructive and input can facilitate others’ pursuit of appropriate exist and have made counterfeiting an appropriate broad-based stakeholder dialogues, by supporting action against counterfeits and counterfeiters. priority issue. the exchange and definition of best practices and by creating a European IP Network that pools and Such cooperation is invaluable in the fight against the • EU Institutions have set out various policy centralises resources and existing instruments for use of the internet to facilitate the spread and sale initiatives that clearly recognise the need to cross-border judicial cooperation. of counterfeits. Likewise collaboration is invaluable pursue anti-counterfeit measures. Accordingly, in the various offline initiatives that focus on the it is the implementation and enforcement of • Stakeholders should be supported in eradicating production and logistics of counterfeit items. eBay existing legislation and commitments upon which counterfeiting at production and throughout implores all responsible stakeholders to engage in stakeholders should concentrate. the whole supply chain by facilitating their respective, complementary roles to focus on the information-sharing between stakeholders and underlying target – the elimination of the production, by ensuring that rights owners are enabled VII. eBay’s recommendations to address supply and demand of counterfeits. to effectively remove counterfeited goods counterfeiting from circulation and to permanently prevent Based on the analysis in this paper and acknowledging counterfeiters from continuing their activities. the need for a global and holistic approach to the fight against counterfeiting with a clear focus on a better enforcement of existing laws, eBay presents 8 9
  6. 6. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS Venienti occurite morbo – Confront disease at its onset Aulus Persius Flaccus (AD 34 – 62) Counterfeiting is a global disease that requires governments and stakeholders to concentrate on its major causes, rather than concentrating on its visible symptoms. A focus limited to combating the symptoms of this disease - such as individual street vendors or online solicitations - will fail. Instead, we must tackle this problem at its source. Responsible online and offline stakeholders should cooperate with one another, rather than fighting each other, both to educate consumers and detect and prosecute counterfeiters, disrupt their supply chains and uproot their organisations. The 2008 OECD report estimates that globally counter- What are the main feiting may be a $200 billion a year industry.(III) distribution channels Notably, in 1994 testimony before the Judiciary for counterfeit goods? I. Counterfeiting: a global disease Committee of the US House of Representatives, the former President of the International Trademark with offline and online symptoms Association, Catherine Simmons-Gill, cited a 1993 report in Forbes magazine that likewise estimated Mobile traders / Markets that counterfeiting was a similarly-sized $200 billion Retail The roots of counterfeiting goods; they always exist in the physical world along a year industry. Counterfeit sales are a serious global with points of manufacture and physical distribution. problem that therefore predates the commercial use Wholdesale Counterfeiting is a global disease. The Organisation of the internet. for Economic Cooperation and Development (OECD) Counterfeit solicitations that appear on the internet, Internet launched a project in 2005 to assess the impact and therefore, are just a reflection of a wider and more Counterfeiting exists wherever commerce exists – magnitude of counterfeiting and piracy. As part of this pervasive offline problem that will continue to grow i.e., wherever there is supply and demand for goods, Other project, the OECD published a report in June 2008 on until it is tackled at its source. This is not to say that whether online or offline. Whenever something the Economic Impact of Counterfeiting and Piracy.(I) the online symptoms of counterfeiting should not has a particular value attributed to it, people have n=27 0% 10% 20% 30% 40% The report made clear that counterfeiting presents a be addressed. eBay, as this report explains, already historically tried to copy it – coins, for example, were Multiple answers possible challenge both in the physical world and the online invests heavily in the fight against counterfeits. counterfeited more than two thousand years ago. Excerpt from the Ernst&Young study, “Pirates in the 21st century”, 2008, p.23 environment. The comparison between counterfeiting Simply put, the internet has not created the problem However, the greater visibility of counterfeits online and piracy shows that there is a significant difference of counterfeit. Indeed independent research indicates has led some commentators to focus on the internet between the two. Piracy has significantly changed Not only do offline channels play a much larger role in that the vast majority of counterfeited products are as one of the major drivers in the alleged growth as a consequence of digitisation, which allows the the distribution of counterfeits, but the manufacture, traded offline. of counterfeits. Yet eCommerce represents a very production of exact copies of a protected work and its production and demand for all counterfeited goods Statistics indicate that the internet has not small part of overall commerce, presently accounting distribution by electronic means in the virtual world. also have their roots in the offline world. substantially increased the scale of the counterfeiting for just 4% of global retail commerce.(IV) Even in its This is in contrast to counterfeit goods – whether largest markets, eBay accounts for barely 20% of This does not mean we should ignore the internet: far solicited online or offline – which are never virtual issue; rather, it has simply changed some of the the value of this eCommerce – which is less than one from it. But it does demonstrate the need to tackle patterns of counterfeiting. percent of the overall retail market in these markets.(V) counterfeits across all distribution channels and that we need to address the problem from both a supply Counterfeits occupy the online channel far less side and a demand side perspective. than many other offline channels. A recent study commissioned by the German Trademark Association, Spread across borders Markenverband, revealed that the internet as a “So what we’re seeing on the net is a reflection of the society that we live in... Like all diseases, counterfeiting does not respect channel for counterfeits ranks only fourth, after But you know, when you have a problem in the mirror, you do not fix the mirror, you national boundaries. The 2008 OECD report mobile traders/offline markets, traditional retail fix that which is reflected in the mirror.”(II) concluded that counterfeits are produced and outlets and wholesale trade.(VI) consumed in virtually all economies. Manufacturers Dr. Vint Cerf, understand that fake goods are often produced in considered one of the founding fathers of the internet one country, distributed into other countries and 10 11
  7. 7. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS Online-shops Traditional Offers via Street markets / “offline” retail spam mails Street vendors 37% Online 41% Online / marketplaces eCommerce 33% Rights Customs / Owners Law Enforcement II. Why the symptoms of counterfeiting are more visible on the internet. The internet’s powerful effect on society The internet is a recent but highly visible symptom Offline channels continue to play of the counterfeit problem despite the relatively a larger role in the distribution of small amount of counterfeits sold online. The reason Logistics & Distribution counterfeits. The internet is an integral element in the lives of the for this somewhat distorted image of a huge online Production majority of Europeans: communication, information, counterfeit problem lies in some characteristics of entertainment and shopping are regular online the internet itself. The same unique features of the activities. One third of the population in Europe shops “OFFLINE” internet – such as a global footprint, easy access online and finds an unparalleled choice of products and reliance on intermediaries - that make it such a and services at competitive prices. Consumers enjoy popular and transformational technology for society, then finally sold into yet more countries. The fight Overall, counterfeiting is a long standing global the convenience and privacy of shopping from their appear to magnify unjustly counterfeit problems on against counterfeiting therefore needs a coordinated problem that is more prevalent in the offline than own homes, or anywhere else. the internet. and global approach involving government, industry online world. It is the goal of this paper to illustrate The low fixed and marginal costs of building an and law enforcement to address every point in the what internet companies can do to help advance the • Global footprint: eCommerce operation have opened up exciting new counterfeiting supply chain. Each stakeholder has fight against counterfeiting. opportunities for Europe’s businesses. This is especially The internet is global. This allows consumers and things they can do individually. But it is cooperation true for entrepreneurs and small and medium sized businesses to access markets across the world at that helps each stakeholder be more efficient in how enterprises (SMEs), which are traditionally more little or no cost. A single user from a single location they deploy their resources and in ultimately reducing nimble and explore new opportunities to penetrate can identify counterfeit solicitations all around the problem. established markets and pioneer new ones. The the world on high profile sites. This can have the internet’s benefits and advantages are universally effect of concentrating and unduly magnifying the acknowledged across the EU. appearance of counterfeiting in one place whereas, all studies indicate, counterfeiting is a global multi- No stakeholder would deny that these newly created Counterfeiting: channel problem. opportunities can also be abused for a wide variety a global disease with offline and online symptoms of unlawful activities, including the distribution of • Easy access: counterfeits – mirroring historical experience with Key considerations: The internet makes content more visible and all offline commerce. Societal and policy discussions accessible and eCommerce provides sellers with • Counterfeiting predates the internet and comprehensive anti-counterfeit strategies must recognise that the internet reflects the offline world access to a wider range and type of consumers. prioritise the fight against offline production of counterfeit goods and accompanying logistical with the same unfortunate examples of abuse There are an estimated 182 million websites – thus operations by the counterfeiters. that may appear to undermine its overwhelming providing a staggering freedom of communication • Statistics demonstrate that the internet remains a significantly less prominent channel for the positives. However, as illustrated above, the internet and commerce. Again, this allows an individual sale and distribution of counterfeits than more established offline channels. is not the only and, as statistics indicate, not even from one computer to access on her/his screen the major source of counterfeit physical goods. • The fight against counterfeiting needs a coordinated and global approach. Governments must hundreds of potentially illegitimate businesses, work together with stakeholders in order to eradicate the roots of counterfeiting across all across the world, in a way that prior to the internet aspects of the counterfeiting supply chain. would have been impracticable, if not impossible. 12 13
  8. 8. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS • Reliance on intermediaries: These specific characteristics of the internet create unparalleled new opportunities for commerce and III. Counterfeiting harms rights owners, consumers, The structure of the internet, relying on many technical intermediaries, allows everyone to view societies – which can then be abused by wrongdoers. economies and internet companies The very same characteristics also appear to magnify all websites from all access points and to build the problems, because all information and actions a website or connect to internet users without on the internet become more easily accessible and, making technological investments of their thus, more visible than they would be in the physical own. As a result it means that these technical world. CUSTOMER SURvEyS REvEaL THE HaRM Of intermediaries, such as those who provide search engines, provide access, caching and/or hosting Accessibility and visibility, at the same time, are Like all diseases, counterfeiting affects every part of COUnTERfEITED GOODS TO COnSUMER TRUST (VII) services, are forced to “handle” information from opportunities. It has never been so easy for rights society: from the very poorest working on €1-a-day all sources. To accept the colossal benefits of the owners to monitor a distribution channel for both wages in illegal factories to the very richest billion internet’s structure of intermediaries is also to lawful trade in their goods and unlawful trade in euro companies who own the copied brands – and accept that those intermediaries in most cases counterfeits, thanks to the technological means nearly everyone in between. are not in a position to distinguish whether the available in the online world. Brand owners face a deterioration of their brand information they hold, host or pass on is good image, a potential loss in revenues and high costs The global nature of the internet’s structure and its or bad. This is not a matter of resources and for enforcing their trademarks. Production of technological characteristics require an even more technological limitations, it is first and foremost counterfeited goods may involve child labour and cooperative approach than exists in the offline world. Bad Financial Personal Consideration Pricing a matter of expertise and unavailability of environmentally harmful production methods. The split between the actual actors using the internet experiences Bad Limits Financial Personal Consideration Pricing information: Intermediaries cannot be an expert of Consumers – when unwittingly buying counterfeits and the providers of its technological services not experiences Limits all the products on a marketplace, cannot speak all – are defrauded and get less value for money. Even only enables more participation but also leads to languages or know the details of every law, and the knowing purchase of a counterfeited good can Reason for Leaving a separation of knowledge, expertise, spheres of they have neither access to additional information Reason for Leaving influence and powers. These must be recombined in cause inadvertent harms, including potential health nor the legal competence to claim it from third and safety risks. Furthermore, the loss in potential a cooperative approach to effectively fight unlawful parties with reliable expertise. legitimate trade impacts all involved businesses’ activities. revenue and will mean tax losses for states. The harmful effects of counterfeiting threaten legitimate online businesses as they do legitimate why the symptoms of Counterfeiting are more visible offline businesses. Fake goods destroy trust, the on the internet linchpin that holds together commerce. Trust is just as important, indeed arguably more so, in an online Key considerations: environment. Traditional brands have had decades to Bad Financial Personal Consideration Pricing experiences Limits Bad Financial Personal Consideration Pricing • The same unique features of the internet that make it such a popular and transformational develop consumer trust, whereas internet companies experiences Limits technology for society – its global footprint, easy access and reliance on intermediaries – have developed comparably valued brands in a appear to magnify the counterfeiting problem on the internet. much shorter time. Consumers, though, might be Reason for Buying Less less dedicated and more subject to abandon online Reason for Buying Less • This accessibility and visibility, at the same time, is an opportunity. It has never been easier for brands as a consequence of a negative experience. rights owners to monitor a distribution channel for both lawful trade in their goods and the Source: eBay Top Buyer Lapse/Decline Research - June 2006 unlawful trade of counterfeits, thanks to the technological means available in the online world. eBay’s marketplace provides a useful example of the 86% damaging effect of counterfeits on online businesses. • The global nature of the internet and its technical structure require an even more cooperative 70% 86% approach in fighting unlawful activities than in the offline world. 70% 14 15
  9. 9. Bad Financial Personal Consideration Pricing experiences Limits FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS Reason for Leaving Bad Financial Personal Consideration Pricing experiences Limits Reason for Buying Less CUSTOMER SURvEyS REvEaL THE HaRM Of • eBay does not profit from illegal activities: eBay and most legitimate online businesses suffer Counterfeits erode consumer trust: COUnTERfEITED GOODS TO COnSUMER TRUST (VII) financially, if sellers seek to abuse their services by eBay refunds fees paid to eBay by sellers when eBay’s business model is built on trust. All online offering counterfeits for sale. Thus, online service listings are removed for violations of eBay’s rules businesses and eBay especially, need to convince providers have a clear business incentive to act and policies prohibiting the sale of counterfeits and users that their services are safe vehicles through 86% against this abuse. other illegal items. So despite hosting content in which to purchase items without needing to first 70% good faith, eBay voluntarily reduces its revenues eBay would certainly prefer that counterfeiting is meet the sellers. If goods bought online turn out when that content is removed. Moreover, bad halted before it reaches the internet – but eBay is to be counterfeit, this is a negative experience for sellers are far more likely to never pay fees or use realistic enough to know that it cannot achieve that consumers, which drives them away from using fraudulent methods to avoid fees owed to eBay. result without cooperation from brand owners. The the eBay marketplace or the internet in general for next section of this paper explains in more detail commerce. Survey data in 2006 clearly indicated that • In addition, the eBay-owned online payment eBay’s comprehensive set of safety measures and its a user who is defrauded into purchasing counterfeit service PayPal offers buyers protection by three-step approach to fighting counterfeit listings merchandise is unlikely to return to eBay.(VIII) reimbursing the sales price if an eBay transaction appearing on its sites. It shows where cooperation is Loss of Negative was paid for using PayPal and the purchased business / word of mouth needed to further increase the efficiency of the fight, goods were either not delivered, or if what Counterfeit listings damage honest sellers: decrease in spend especially by attacking and eradicating the roots of was received is significantly different from that counterfeiting in the offline world. Any counterfeit that manages to make its way onto described in the listing. This generally covers the What did you do after this bad experience: eBay damages the attractiveness of the marketplace case where an item turns out to be a fake.(IX) item was listed as genuine, but was actually a fake. to the vast and overwhelming majority of sellers who sell genuine goods. Their listings may appear more expensive compared to the fake listings, thereby Source: eBay Top Buyer Lapse/Decline Research - June 2006 reducing the attractiveness of the legitimate sellers’ listings, which in turn reduces the honest sellers’ revenues. Counterfeiting harms right owners, Consumers, eConomies and • Investment in technological and human internet Companies. resources: Counterfeits damage eBay: Counterfeiting produces significant costs for online Key considerations: The damage to the eBay marketplace for its user markets and intermediaries. Services, such as those • Counterfeiting affects every part of society. The harmful effects of counterfeiting threaten bases – sellers and buyers –, caused by counterfeit provided by eBay, are at a risk of becoming less legitimate online businesses as much as legitimate offline businesses. listings on the site, decreases the success of the eBay attractive to consumers. Online markets must make business model. The allegation that eBay “profits” significant investments in human and technological • Online service providers have a clear business incentive to act against attempts to use their from sales of counterfeit items on its site is wrong. resources to pursue potential counterfeit postings services to sell counterfeits. Counterfeits destroy consumer trust and damage legitimate There are huge direct costs for eBay’s business and restore trust and reputation. The cost in extra business. because of the appearance of counterfeit listings. customer support alone far outweighs any nominal • The notion that eBay profits from counterfeits sold on its marketplace does not correspond to extra revenue derived from counterfeiters. eBay the reality of the direct costs deployed by eBay against counterfeits, nor the significant lost alone invests tens of million euros every year in its revenues from the overall damage to our business, including our brand. anti-counterfeit efforts. 16 17
  10. 10. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS A. PREvEntIon Prevention has two elements: First, users have to be educated against seeking to offer IV. eBay’s commitment and contribution as well as knowingly or unknowingly buying counterfeits. Second, measures enhancing transparency and other safeguards against abuse can deter wrongdoers from misusing to fighting counterfeits the marketplace. eBay is itself a major intellectual property rights owner activity on our sites. As explained earlier, eBay takes and is committed to combating infringing or otherwise these steps not only as a responsible corporate citizen, eBay sets clear rules eBay educates fraudulent or illegal activity committed by users on but also because its business will be more trusted and, its sites. Consistent with our legal obligations - in fact in turn, more profitable if counterfeiters are eliminated eBay has implemented clear policies prohibiting eBay educates users with online tutorials and going well beyond them - eBay has implemented many from its marketplace. the listing of items that infringe upon intellectual eBay’s online “Security Centre” which provides measures to minimise and, ideally, eliminate such property rights or are otherwise prohibited from guidance on buying, selling, and paying for items being offered for sale on eBay. These policies, which on eBay. Additionally, eBay has newsletters aimed ban not just counterfeit items but also, for instance, at both consumers and high-volume sellers known guns, are posted on eBay’s website and apply to all as “PowerSellers” that, among other things, users, who must agree to abide by them as part of provide information on trust and safety eBay’s User agreement. an explicit policy clearly issues. Also, eBay educates its users about prohibits the sale of counterfeits, unauthorized additional third-party, government, and N D replicas, unauthorized items or unauthorized copies. law-enforcement resources addressing IO That policy further advises sellers that if they are the specific needs of these T ET EN EC selling a product bearing the name or logo of a parties. PREV TION company, but that product was not made or endorsed by that company, the sellers may not list the items on eBay. eBay warns that violations of this policy may result in a range of sanctions, including listing cancellation, limits to account privileges and account EN suspension. Examples of eBay’s policies in relation FORCE M ENT to counterfeits and authenticity are displayed below. Statutory eBay Framework Policies Example of eBay Anti-Counterfeit Campaigns and Information Pages eBay’s three-step-approach to reduce counterfeits in UK and France eBay’s three step approach to reduce to prevent counterfeits appearing on eBay’s sites by counterfeits both education and additional safety measures; eBay attempts to detect counterfeits at the earliest possible Excerpt from eBay’s policy on eBay has developed a three step approach to prevent Replica, Counterfeit Items and stage and enforce and act expeditiously against counterfeits that have already been manufactured and Unauthorised Copies in the UK (X) potential violations. distributed from then being visible on eBay. This aims Excerpt from eBay’s “Guidelines for Creating Legally Compliant Listings” on eBay.co.uk (XI) 18 19
  11. 11. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS eBay cooperates with rights owners informational/advertising platform for them. Sellers eBay’s systems act as a deterrent eBay employs additional safety measures in that have listings removed from eBay are directed to specific areas As part of education, eBay also encourages rights eBay has a number of systems and processes to make the relevant rights owner’s “about Me” webpage for owners to create an “about Me” webpage on the eBay it an unattractive place to sell counterfeit goods. For areas that have historically been targeted by information about why their listings were removed website to inform eBay users about their products, eBay cannot dissuade users from selling counterfeits counterfeiters, eBay has developed additional and how they can avoid posting listings of infringing intellectual property rights, and legal positions. The entirely. It is the role of rights owners, governments innovative solutions to deter counterfeiters from items in the future. content of these pages is the sole responsibility of and other stakeholders to fight counterfeit goods abusing the eBay marketplace. First, listings for items the rights owners. In effect, eBay provides a free and counterfeiters in all channels and down to traditionally favoured by counterfeiters are delayed the roots of the problem. However, eBay is already before either becoming visible to the general public The About Me Page an inhospitable marketplace for counterfeiters in or accessible with our search engines, to allow fraud of Toys “R” Us comparison to the offline world and most other parts detection algorithms and teams more time to detect of the internet. abuse.(XII) Second, eBay places additional restrictions on sellers wishing to sell these items, such as requiring verification of their identity through PayPal, placing eBay verifies users volume restrictions on the number of these items eBay recognises the importance of reliably identifying they can sell, elimination of 1-day (and most 3-day) its users and preventing suspended users (those auctions, as well as limitations on cross-border sales. users that eBay has taken action against after a These additional levels of protection have already previously committed or attempted serious abuse achieved positive results with a dramatic decrease of the marketplace) from returning to eBay. Unlike a in infringing listings being reported to eBay by some physical seller on a street corner or in some markets, luxury goods rights owners. eBay sellers must provide the following details: first At the same time, legitimate sellers of these items name, last name, address, telephone, verifiable email have seen their selling prices and conversion rates address, and date of birth together with their bank increase. This is in contrast to the offline world, account and/or credit card details to allow eBay to where, in a market or even a shopping mall, there collect applicable selling fees. For this reason, rights may be no greater restrictions placed on traders who owners usually have no difficulty in identifying an are selling one type of good over another. eBay seller of counterfeit goods, if they contact eBay and ask for those details (in accordance with data protection and privacy laws) – that ease, of course, is itself a deterrent to those unlawful sellers who wish to avoid detection. It is also valuable information to assist rights owners wanting to assert their rights in court. 20 21
  12. 12. FIGHTING AGAINST ONLINE SOLICITATIONS OF COUNTERFEITS User feedback on eBay highlights problem “item as described” criterion which, if rated low, asks sellers the buyer to provide additional information, including whether the item was a counterfeit. The publicity The eBay Feedback system is designed to help created by the feedback system for any bad seller ensure that buyers are transacting with reliable behaviour acts as further deterrence to all potential and trustworthy sellers. The feedback system is not wrongdoers. It is another safety measure consumers required by law, but is a voluntary system that eBay can rely on before making a buying decision. There uses to fight against illicit behaviour on its site. is nothing comparable offline nor in other online Buyers can provide Detailed Seller Ratings enabling distribution channels. them to rate a transaction experience on four specific criteria. Of particular relevance to this paper is the Screenshot of an eBay warning message B. DEtEctIon eBay invests heavily in measures designed to detect illegal activities and makes further attempts to stop such activity. In total, eBay spends tens of millions of euros each year on human and technological resources to reduce the incidence of unlawful listings on its platform. eBay successfully undertakes detection efforts on its own, but there are natural limits to the tools that can be employed when specific, detailed product Screenshot of eBay’s Detailed Seller Ratings process knowledge is required to recognize a counterfeit good. To maximise their effectiveness, eBay’s detection efforts benefit from the cooperation of rights owners, who are in the best position to spot illegal goods. Automatic warning messages guide sellers messages: “Warning: By clicking the submit button below, you are confirming that the item you are Although eBay is not able to ascertain whether an about to list is authentic.” The warning messages also item is counterfeit, eBay attempts to deter the listing Most supposed counterfeit listings are taken to police material posted on their services by third typically include links to relevant eBay policies, such of potentially infringing items through the use of down thanks to eBay’s own proactive efforts parties. Nonetheless, for the economic reasons as those pertaining to the prohibition on counterfeit special warning messages. For example, if a seller described above, eBay undertakes proactive efforts merchandise, and eventually to the “about Me” eBay has no legal obligation to search its website attempts to post a listing on eBay with the online within the limits of eBay’s business model and pages of rights owners on eBay. In the offline world, proactively for infringing activity. Indeed, EU member “Sell Your Item” form and the listing triggers one of technical feasibility, including that checks have there is no such intervention by a third party prior states are prohibited by legislation from imposing the rules in eBay’s anti-fraud technology, a warning to occur in a “real time” environment involving to sale. such a general obligation on internet intermediaries message appears that states, among other possible hundreds of millions of listings. 22 23

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