June Highlights: Combating Counterfeit Products Online
Weakened IP rights not only put innovators and businesses at risk, they also have dangerous consequences for consumers. This is evidenced by the spread of counterfeit products, which infringe established brands’ trademark rights in order to defraud consumers. These products’ lower standards of quality and safety can be physically harmful to the consumers that purchase them – and the lost sales and reputational damage they cause for legitimate brands inhibit future product development and innovation.
One pending piece of legislation, the SHOP SAFE Act – initially introduced by Senators Chris Coons (D-DE) and Thom Tillis (R-NC) – would help resolve this problem by holding online retail platforms accountable when they facilitate counterfeit sales. This month, the bill was introduced in the House as well, and C4IP has been active in promoting its swift passage:
- C4IP Executive Director Frank Cullen issued a statement celebrating the introduction of the bipartisan SHOP Safe Act in the House of Representatives.
- C4IP also sent a letter to Representatives Darrell Issa (R-CA), Jerry Nadler (D-NY), Ben Cline (R-VA), and Hank Johnson (D-GA) thanking them for their work to protect consumers and brands through the SHOP SAFE Act.
- You can find additional resources on the SHOP SAFE Act here and below:
Additional Coalition Updates
- On June 20, C4IP Co-Chair Andrei Iancu and board member Paul Michel were featured speakers at a USC Gould School of Law conference focused on how strengthening IP rights can promote U.S. national security and strengthen our innovation leadership.
- On June 20, Small Business & Entrepreneurship Council President Karen Kerrigan published an opinion essay in the Buffalo News underlining how the Patent Eligibility Restoration Act (PERA) and PREVAIL Act would reinforce the patent rights that startups need to succeed.
“Both [PERA and PREVAIL] would help startups secure the venture funding needed to bring revolutionary ideas to the marketplace. America’s entrepreneurs are counting on Congress.”
- On June 18, C4IP Executive Director Frank Cullen submitted a public comment to the USPTO’s April 19, 2024, notice of proposed rulemaking (NPRM) pertaining to discretionary denials and other changes to the Patent Trial and Appeal Board (PTAB). C4IP explained that it could not support the NPRM without understanding the full range of changes that the USPTO intends to make to the PTAB, raising concerns in particular about the Office’s failure to address discretionary denials in light of parallel, often duplicative, district court litigation.
- On June 17, C4IP Executive Director Frank Cullen submitted a public comment to the USPTO’s April 16, 2024 NPRM regarding director review and allowing for parties to request such review after institution decisions and final written decisions. C4IP highlighted potential harmful consequences that could result from regular intervention by the Director personally into individual PTAB cases and suggested an alternative approach that would delegate the review function to another part of the Office, similar to petitions practice, thereby avoiding the appearance of political interference in adjudication between private parties.
- On June 12, C4IP Executive Director Frank Cullen sent a letter to Representatives Jim Jordan (R-OH), Jerry Nadler (D-NY), Darrell Issa (R-CA), and Hank Johnson (D-GA) to affirm the importance of third-party litigation funding ahead of the House IP Subcommittee’s hearing on the topic.
- On June 10, C4IP Executive Director Frank Cullen sent a letter to Senate Judiciary Committee leaders Dick Durbin (D-IL) and Lindsey Graham (R-SC) expressing support for the PREVAIL Act and debunking several myths being advanced by its opponents.
- On June 9, C4IP’s comments to the USPTO on the patentability of AI-assisted inventions were featured in an article in IPWatchdog.
On June 5, 3M Chief Legal Affairs Officer Kevin Rhodes published an opinion essay in the Star Tribune emphasizing the benefits that patent reforms like PERA and the PREVAIL Act would create for innovators in Minnesota.”[O]ur Minnesota congressional delegation has the opportunity to strengthen the U.S. patent system and support the most innovative economy the world — and Minnesota — has ever seen. Let’s continue Minnesota’s long and proud legacy of innovation by supporting PERA and PREVAIL.”
- On June 5, C4IP’s comments to the USPTO about proposed adjustments to patent fees were featured in an article in IPWatchdog.
- On June 4, C4IP board member and retired federal judge Paul Michel published an opinion essay in The Hill exploring how proposals to forcibly relicense patents by misusing the Bayh-Dole Act and Section 1498 of title 28 of the U.S. Code would chill innovation across sectors.
“Upsetting our delicately balanced patent system to score political points is shortsighted and dangerous, especially as America’s technological edge faces growing threats from competitors like China.”
- On June 3, C4IP Executive Director Frank Cullen submitted a public comment to the USPTO to express concerns about the USPTO’s April 3 notice of proposed rulemaking on patent fees.
Government Rundown
House Judiciary Committee, Subcommittee on Courts, Intellectual Property, and the Internet Hearing: The U.S. Intellectual Property System and the Impact of Litigation Financed by Third-Party Investors and Foreign Entities:
On June 12, the House IP Subcommittee held a hearing to discuss the impact of IP litigation financed by third-party investors and foreign entities on America’s innovation economy and national security. Former Representative Bob Goodlatte, Associate Provost Victoria Sahani of Boston University, Professor Donald Kochan, and Visiting Fellow Paul Taylor of George Mason University testified as witnesses. (House Judiciary Committee, 6/12)
USPTO Event: Proud Innovation 2024: Getting your products to market:
On June 12, the USPTO hosted an online event to highlight LGBTQIA+ entrepreneurs who successfully utilized intellectual property rights to build their businesses and bring products to market. The event’s panel discussion featured founders of brands such as Gay Pride Apparel, Dapper Boi, Flipstik Inc., and Akeem Shannon Inspires, Inc. (USPTO, 6/12)
House of Representatives, Introduction of SHOP SAFE Act:
On June 11, Representatives Darrell Issa (R-CA), Jerry Nadler (D-NY), Ben Cline (R-VA), and Hank Johnson (D-GA) introduced the SHOP SAFE Act in the House of Representatives. This important legislation, which was previously introduced in the Senate by Senators Chris Coons (D-DE) and Thom Tillis (R-NC), would penalize e-commerce platforms that facilitate the sale of counterfeit products in order to protect American consumers. (House of Representatives, 6/11)
Fact Check
The SHOP SAFE Act, which was introduced in the House of Representatives by Representatives Darrell Issa (R-CA), Jerry Nadler (D-NY), Ben Cline (R-VA), and Hank Johnson (D-GA) on June 11, is an important bill that would help protect consumers and businesses from harmful counterfeit products by making e-commerce platforms responsible for vetting products’ legitimacy. Despite this, some have argued that the bill is not necessary and would do more harm than good for consumers.
A policy analyst at the Center for Data Innovation made several claims along these lines after the legislation was initially introduced in the Senate. However, those claims about the bill do not hold up to scrutiny.
| Claim: “Provisions in the SHOP SAFE Act would make online shopping more of a hassle [for consumers].” |
| In reality: This claim is nonsensical. The reforms in the SHOP SAFE Act would make online shopping easier for consumers by requiring third-party e-commerce platforms to play a part in ensuring consumers’ safety. Currently, the high prevalence of counterfeit goods in the marketplace burdens brand owners and consumers with determining whether a given product is legitimate, which can be a daunting task given that counterfeiters often copy images, product descriptions, and other copyrighted material to present their products as authentic. Under the SHOP SAFE Act, e-commerce sites would be required to provide consumers with key information about sellers’ legitimacy, reducing this research burden on the part of brand owners and consumers and reducing part of the stress of online shopping. |
| Claim: The SHOP SAFE Act is not necessary because “[p]rotections outlined in [it] already exist.” |
| In reality: The Center for Data Innovation’s statement identifies the INFORM Act as a piece of legislation whose provisions make SHOP SAFE redundant. While the INFORM Act does include measures to increase transparency on the part of online sellers, the SHOP SAFE Act’s establishment of liability for platforms that facilitate counterfeit sales would create stronger incentives for e-commerce platforms to actively prevent counterfeiters from taking root on their websites. This would benefit not only consumers but also businesses, who would be able to focus their resources on new product R&D instead of hunting down trademark infringers. Additionally, continuing high rates of counterfeit sales demonstrate the inefficacy of existing laws aimed at preventing them. One recent study found that nearly seven in 10 global consumers had unknowingly purchased a counterfeit item within the past year, while dangerous counterfeit products such as airbags and Ozempic continue to make headlines. This is proof that more stringent measures are required to stem the flow of counterfeits. |
| Claim: The SHOP SAFE Act would “ultimately reduc[e] consumers’ options for online shopping.” |
| In reality: This claim is based on the fact that the SHOP SAFE Act would establish stricter requirements for e-commerce platforms to vet third-party sellers, which could in theory reduce the number of active online marketplaces. However, this is highly misleading, as what matters for consumers is not the total number of e-commerce sites but rather the number of safe, reliable sites. SHOP SAFE would increase the latter number by requiring sites to take basic preventative measures, such as providing relevant information to consumers, and would grant a safe harbor to any site complying with its requirements. Additionally, SHOP SAFE would ultimately help expand product offerings for consumers by strengthening the enforceability of IP rights. Counterfeit sales detract from the sales of legitimate businesses and can cause reputational damage to those brands if products prove to be dangerous or defective. Preventing counterfeiting would ensure that businesses that develop useful, quality products earn the revenue they need to continue investing in product innovation. |
Celebrating American Innovation
Inventor Spotlight
This month, C4IP is celebrating Jaap Haartsen, whose invention of Bluetooth wireless technology has helped integrate electronic devices seamlessly into our daily lives.
- Haartsen was born in 1963 in The Hague, Netherlands and began his career at Siemens and Phillips before earning his Ph.D. from Delft University and moving to Swedish company Ericsson.
- His first breakthrough in Bluetooth came in 1994, while he was working to develop technology for short-range radio connections.
- After making several improvements to the technology, Ericsson finally applied for a patent for Bluetooth in 1997.
- Haartsen formed the Bluetooth Special Interest Group the following year as a way to coordinate Bluetooth implementation among large electronics companies such as IBM, Nokia, Toshiba, and Intel.
- Their success at establishing a shared standard for Bluetooth technology – which endures today among more than 40,000 companies – is a testament to the effectiveness of the free market in managing the licensing of standard-essential technology patents.
- Haartsen’s invention has become a critical part of modern life: Bluetooth capabilities now appear in 98% of all new speakers as of 2023, 90% of new smartphones by 2027, and 87% of new cars.
- The global market for Bluetooth was estimated at over $4 billion in 2022, with almost 5 billion devices shipped annually, and 7.6 billion Bluetooth-enabled devices are expected to be shipped annually by 2027.
- Innovative companies continue to develop new applications for Bluetooth – including acting as a key for cars and homes and tracking everyday items.
(Photo credit: National Inventors Hall of Fame)
What’s Happening in Congress
As Democratic and Republican members of Congress continue to weigh legislative priorities during the 118th Congress, top of mind for those who follow intellectual property policy are:
The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act:
In September 2023, Senators Chris Coons (D-DE) and Thom Tillis (R-NC) introduced legislation designed to protect online consumers from harmful counterfeit products. By establishing trademark infringement liability for e-commerce platforms that allow the sale of dangerous counterfeit items, requiring brand owners to notify platforms of their mark(s) in advance, and providing safety from liability to platforms that appropriately vet and remove counterfeit sellers, the SHOP SAFE Act will protect American families as well as businesses and IP holders. Representatives Darrell Issa (R-CA), Jerry Nadler (D-NY), Ben Cline (R-VA), and Hank Johnson (D-GA) introduced the House companion to this bill in June 2024.
The Patent Eligibility Restoration Act of 2023:
In June 2023, Senators Thom Tillis (R-NC) and Chris Coons (D-DE) reintroduced legislation aimed at restoring patent eligibility for important categories of inventions – including life sciences diagnostics, gene therapies, and computer-implemented inventions – as well as resolving questions regarding the scope of patent eligibility. In so doing, the Patent Eligibility Restoration Act will foster the development of next-generation technologies across innovative industries.
The Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act:
In July 2023, Senators Chris Coons (D-DE), Thom Tillis (R-NC), Dick Durbin (D-IL), and Mazie Hirono (D-HI) – joined by Deborah Ross (D-NC), and later cosponsored by Nathaniel Moran (R-TX), on the House side – introduced legislation that will eliminate redundant patent invalidity challenges and safeguard Americans’ right to participate in a fair and accessible patent system. The PREVAIL Act contains important reforms to the Patent Trial and Appeal Board, which will return the body to its original purpose of providing an efficient alternative to district court litigation, and will curtail the practice by patent infringers of forcing inventors to defend their patents repeatedly and in multiple fora.
The Prohibiting Adversarial Patents (PAPA) Act:
In September 2023, Representatives Scott Fitzgerald (R-WI), Mike Gallagher (R-WI), Darrell Issa (R-CA), and Blaine Luetkemeyer (R-MO) introduced legislation that raises a number of concerns. With the well-intended goal of protecting U.S. national security, the PAPA Act has the potential to trigger significant unintended consequences. These include potential retaliatory moves by China and other nations to suspend or render unenforceable patents owned by American companies, further enabling the theft of American IP overseas. The actions called for by the bill may well violate U.S. treaty obligations, which would in turn embolden other nations to violate IP-related treaties in various ways. In addition, confiscating patents, or rendering them unenforceable, violates basic principles of property, and therefore could weaken the concept of patents as property rights. These and other considerations are of the utmost importance as U.S. lawmakers study the full scope of the PAPA Act. C4IP stands ready to work with Members of Congress to address the threat posed by foreign entities, while maintaining the integrity of the U.S. patent system.
The Improving Efficiency to Increase Competition Act:
In January 2024, Senators Thom Tillis (R-NC) and Chris Coons (D-DE) introduced legislation intended to reduce the administrative burden on universities and other institutions that receive federal research grants so that they can focus more intently on producing new innovations. Specifically, the legislation would direct the Government Accountability Office (GAO) to conduct a study on intellectual property reporting requirements under the Bayh-Dole Act, which vary between federal agencies. Such a study will offer important insights into how the government can make the reporting process more efficient and remove barriers that may have inhibited the development of new inventions.
The Interagency Patent Coordination and Improvement Act of 2023:
In January 2023, Senators Dick Durbin (D-IL), Chris Coons (D-DE), Thom Tillis (R-NC), and Chuck Grassley (R-IA) introduced the Interagency Patent Coordination and Improvement Act of 2023. The bill would create an interagency task force to share patent filing information and technical assistance between USPTO and FDA officials. IP experts warn that interagency entanglement could weaken the patent system by inserting officials from multiple federal agencies – without patent law expertise – into the examination process. They submit that it is premature to implement such substantial changes without conducting a thorough evidence-based study.