Claim: During the October 3 Senate IP Subcommittee hearing on the SHOP SAFE Act, Matthew Schruers of the Computer & Communications Industry Association (CCIA) claimed that by charging platforms — rather than brands — with the responsibility of vetting counterfeit items and sellers, the bill would harm small businesses.
Correction: While it is true that the SHOP SAFE Act would place the onus on platforms to identify and intervene against bad actors, it would not leave brands free from responsibility. The act would require brands to provide contact information and advance notice of their intellectual property to platforms, enabling the latter to implement effective preventative measures against counterfeit goods.
Additionally, holding platforms accountable for sales of counterfeit items that they facilitate would offer multiple significant improvements over the status quo. Platforms have a greater ability than brands to take action preventing the sale of dangerous items. Online marketplaces serve the same function as physical retailers, which are regulated under existing law in order to prevent the sale of counterfeit products. Holding platforms liable would provide a way for brand owners who have been harmed to obtain compensation for damages even when they are unable to take legal action against the seller itself, thereby incentivizing the platform to keep consumers safe.
Together, these factors would benefit — not harm — small businesses, which are often the original owners of the intellectual property that counterfeit sellers infringe. Currently, small businesses are forced to monitor platforms for fakes of their products, taking up extra resources and personnel that they cannot afford. More generally, when third parties illegally produce and sell counterfeit products based on another business’s intellectual property, the resulting sales detract from that business as well as harm its reputation in terms of safety and quality. These setbacks are particularly difficult to overcome for small businesses, which are usually still trying to build up brand recognition and have fewer legal resources compared to large corporations. The overall effect is a massive loss for the economy. According to a National Association of Manufacturers estimate, counterfeit items were responsible for over $130 billion in economic damage and the loss of 300,000 jobs in 2019.
In short, the claim is wrong in multiple key ways. The SHOP SAFE Act’s inclusion of liability for platforms would result in more effective safeguards against counterfeit items, protecting consumers and small businesses alike. With online counterfeit products affecting a quarter of Americans, the importance of the SHOP SAFE Act’s reforms cannot be overstated. Robust and economically beneficial innovation relies on a strong U.S. patent system.
Bottom Line: This claim is false