Director, Center for Anti-Counterfeiting and Product Protection and Professor, School of Criminal Justice, Michigan State University
In 2015, the Center for Anti-Counterfeiting and Product Protection produced the Brand Protection 2020 report. This represented a collection of short articles from authors across the brand protection community, including brands, law enforcement, service providers, and academia focused on issues influencing the global risk and response to product counterfeiting, which were in need of prioritization and response in the next five years. The issues identified across the articles highlighted persistent challenges to include security technologies, strengthening investigative and enforcement efforts, illicit supply chains, and harm posed by counterfeits. Now standing in 2020, we revisit some of the issues identified in the report as a basis for looking to the potential challenges in the next five to ten years.
In this gaze, we narrow the focus to discussion in the 2020 report that centered around what has now been coined as “law disruptive technologies” (Sowers, 2019). This concept refers to emerging technologies that have significant social and economic impact that do not fit in current legal frameworks. The 2020 report gave considerable attention to e-commerce, as well as mention of 3-D printing, both of which could fall into this technology classification. (Sowers, 2019; see also Kammel, Examining Trademark Counterfeiting Legislation, Free Trade Zones, Corruption and Culture in the Context of Illicit Trade: The United States and United Arab Emirates, forthcoming 2020 in Michigan State International Law Review). These technologies have provided enormous social and economic benefit and further potential, but have simultaneously been rightly identified as including considerable counterfeiting risks.
In the case of 3-D printing, while reflecting a clear risk of replication of trademarks (Campbell and Cass, 2013), its large-scale impact on counterfeiting has yet to be realized. Alternatively, e-commerce has shifted the landscape of trafficking and sales of counterfeit products. The authors contributing to the 2020 report were already witnessing the exponential growth in counterfeit activity in e-commerce. While reliable estimates on total sales of counterfeit goods online are lacking, it is reasonable to assume that as the estimated global retail e-commerce sales have grown from $1.5 trillion in 2015 to $3.5 trillion in 2019, (E-commerce Worldwide, 2019 ), there has been an accompanying growth in online counterfeit trade. In line with the law disruptive technology classification, counterfeiting continues to expand in the gaps created by lack of uniform and strong legislation, clearly defined enforcement procedures, and cross-national harmonization of legal standards.
The brand community and related partners have not sat watching this expanding threat idly. Brand interest in combating counterfeit exposure online has spurred the growth in third party service providers that search for infringing sellers and aid in takedowns and other enforcement activity, which is increasingly supported by reporting and enforcement services of online marketplaces. The 2019 U.S. Presidential Memorandum on Combatting Trafficking in Counterfeit and Pirated Goods and the recently released accompanying report by the Department of Homeland Security focus on increasing counterfeiting enforcement in the online environment and potential legislative efforts needed to support this effort. Moreover, there have been a number of cases brought at the United States District Court level and State Courts exploring the liability of e-commerce platforms as it relates to injury from counterfeit goods.1
Collectively, the above actions suggest there is movement to square existing e-commerce technology with legal and enforcement boundaries. The forward-looking question to ask is: where will the counterfeit trade move to avoid this growing pressure to stop it? This question parallels the traditional criminological concern of displacement. For example, when local police focus their resources on specific locations with high levels of crime, criminal actors will move to other areas to engage in their activities. The research suggests the movement of crimes is not a one-for-one trade, where the reduction of each crime in the original location will simply be dispersed to another location. Some individuals will reduce their criminal activity because they are deterred or have lost their opportunity, while some portion of motivated offenders will simply set up shop somewhere else.
It is logical that a similar process will occur as enforcement of counterfeiting grows in the online environment, particularly on responsible e-commerce platforms. E-commerce platforms, large and small, have operated as easy outlets for counterfeiters to find consumers. As the counterfeiters increasingly get removed from platforms, they will need to find a new conduit. This displacement is already being observed with the reported growth of counterfeit activity through social media sites. (Stroppa et al, 2019;EUIPO, 2019). With successive generational increase in use of smartphones, social media, mobile banner, and video ads may be this consumer link. This creates greater complexity to the landscape of counterfeiting and challenges as is relates to emerging legal frameworks and enforcement efforts, as most of this activity is currently geared toward the e-commerce platforms.
Beyond e-commerce, blockchain represents another law disruptive technology in general, and specifically in the context of counterfeiting and brand protection. Blockchain has gained attention in the last few years as a potential solution for improving supply chain security. (BPP, December 2017).
At the same time, blockchain also represents an emerging technology with little in the way of legal boundaries that has nefarious utility as well, facilitated by its cryptographic foundation.The role of cryptocurrencies in illicit trade and money laundering has been highlighted by government officials and academics, (Virtual Currencies and Money Laundering: Legal Background, Enforcement Actions, and Legislative Proposals, 2019 ; Dyson, Buchanan and Bell, 2019), and thereby represents the risk of facilitating the illicit trade in counterfeit goods. Whether blockchain will have broader applications that manifest into other risks for brand protection is unknown. However, it is important to acknowledge that just as this technology can provide security for brands, it may provide security to the communications and transactions of those that act against them.
Artificial intelligence (AI) has similar implications for counterfeiting and brand protection. AI has been presented a solution to counterfeits in e-commerce, reflecting automated and learning search processes that can quickly adjust to shifting strategies of counterfeiters. It also holds the broad capacity to do this on e-commerce marketplaces and other venues counterfeiters use to connect with consumers (e.g. social media ads and the like). However, this technology has also emerged in an environment where law has not developed to regulate its application, and it is unknown to what extent AI can be regulated if the intent is to use it maliciously. Concerns have already been raised about the ability of AI to increase the quality of counterfeit goods to make them near indistinguishable from the targeted brand good. (Tarantola, 2017). AI also holds the potential of being nimble at identifying system vulnerabilities and adjusting to countermeasures, (Brundage, 2018), which could pose a challenge to growing online counterfeiting enforcement efforts. Of course, the potential scale of impact of these threats still remain speculative.
These considerations are not meant to undermine the value of the above technologies, as each has provided and/or holds the potential for important social and economic impact. Moreover, emerging technologies are not the only context where a lack of law and regulation is posing challenges to brand protection, as exemplified in concerns over the role that Free Trade Zones play in facilitating the trade in counterfeit goods. (OECD, 2018). However, what is unique about these technologies is that they emerge and diffuse at a rate that outpaces the ability of law to keep up, and in the case of blockchain and AI there may be questions as to how much regulation the law will be able to provide. Operating under the assumption that the lucrative trade in counterfeit goods will continue to produce motivated offenders, the brand protection community and their partners need to look creatively at the risks posed by emerging technologies in order to counter them before the point of crisis.
As we move through the next few years and technology continues to exponentially advance, we will need to be aware of how jurisdictional frameworks will continue to shift, and how those looking to protect intellectual property and the consumers who use it can break down barriers in order to work together for the common good.
1State Farm Fire & Cas. Co. v. Amazon.com Inc., 407 F. Supp. 3d 848 (2019); State Farm Fire & Cas. Co. v. Amazon.com, Inc., 390 F. Supp. 3d 964 (2019); State Farm Fire & Cas. Co. v. Amazon.com, Inc., 390 F. Supp. 3d 964 (2019); Steiner v. Amazon.com, 120 N.E. 3d 885 (Ct. App. 9th Ohio 2019).
THE BRAND PROTECTION PROFESSIONAL | MARCH 2020 | VOLUME 5 NUMBER 1COPYRIGHT 2020 MICHIGAN STATE UNIVERSITY BOARD OF TRUSTEES