While it is of course illegal to sell counterfeit and otherwise trademark infringing merchandise in the U.S., Amazon has so far been able to skirt liability for this crime by claiming they are merely a venue for the sale of such products, as opposed to being the actual seller. While piles of lawsuits have been logged by numerous parties attempting to refute this position, none have yet demonstrated much promise in court. Until now.
Daimler, the parent company of Mercedes-Benz, may have uncovered the smoking gun that could legally prove that Amazon is a direct seller of counterfeit products, and have taken then e-commerce giant to court over it. A successful ruling could rattle Jeff Bezos and Co. to their very core and set a new legal precedent in the process.
A history of being untouchable
While copyright and trademark laws are clearly being broken en masse on the Amazon platform — which has been shown ad nauseam by media sources, research firms, and even Amazon’s own legal litigations — the company won a landmark lawsuit in 2015 which removed them from responsibility for what third party merchants sell via their platform.
To recap: Milo & Gabby is a local Seattle company that makes specially branded animal shaped pillows who made a concerted decision not to sell their products via Amazon. However, one day the company’s founders stumbled upon an Amazon ad that featured not only their product but a photo of their daughter. How could that be? As had happened with so many other grassroots entrepreneurs and innovators in the U.S., Chinese counterfeiters had discovered their product and began selling it on Amazon — complete with the company’s original promotional photos that were lifted right off their website.
The founders of Milo & Gabby initially thought that a lawsuit against Amazon would be a slam dunk: counterfeits of their trademarked products were clearly being advertised and sold on Amazon, the e-commerce giant was taking a commission from each sale, storing the illegal items in their warehouses, and distributing them via their Fulfillment by Amazon program. In a country that is packed with laws to prevent things like this from happening, how could they lose?
However, they were very, very mistaken. After a legal battle that dragged on for two years, a nine-member jury decided in favor of Amazon on all counts, ruling that “the company was not behind the counterfeit content listed on its site, and had technically not made an ‘offer to sell’ — the legal requirement to hold Amazon liable for the counterfeit goods.”
Amazon took this ruling and ran with it — instantly being removed from legal liability for over 50% of what you see on their site, from bearing responsibility for hundreds of millions of products being sold. So IP-infringing, hazardous, or otherwise illegal goods can be sold on Amazon by third party merchants, stored and shipped by Amazon, with complete impunity for the company — and if these items are being sold across international borders, this protection extends to the seller as well.
However, it must be emphasized here that the Milo & Gabby case was heard in Seattle: a.k.a. Amazon’s backyard, a place that locals have taken to calling “Amageddon,” a place that the Seattle Times has dubbed “America’s biggest company town.” The e-commerce giant occupies over 40 buildings totaling 8 million square feet of office space in Seattle — more than the space of the city’s next 40 biggest employers combined — and is still growing fast, expecting to tack on an additional 4 million feet by 2022, when it will occupy more than 20% of the city’s total office supply. This is more than double the footprint of any other single company in any other American city. Filling all of these buildings are 40,000 employees directly employed by Amazon, and on the periphery are tens of thousands more whose livelihoods are indirectly tied to the company. In this socio-economic context, the possibility of a fair and impartial jury remains a little suspect.
While Milo & Gabby laid the groundwork that has buried many other lawsuits against Amazon for trademark infringement, why the “venue” argument holds up for e-commerce but doesn’t hold for other industries remains a mystery. Peer-to-peer music and file sharing sites tried similar arguments as Amazon but were toasted in court — with some of their founders being thrown in prison. Meanwhile, Jeff Bezos sits secure as one of the richest men on the planet, directly profiting from the counterfeit products that are arguably destroying the American dreams of thousands of smaller entrepreneurs across the U.S.
“Imagine that it’s not Amazon. Imagine that I have a website — we’re going to call it Crazy Don’s Cocaine Emporium. Now, I’m never going to actually have cocaine, but I’m simply going to put buyers and sellers together. You would aggressively pursue me and you know it,” rants Don Myers, a Florida resident whose once-lucrative apparel design business was driven to ruins by counterfeiters on Amazon, recollected a portion of a phone call he had while filing a complaint against Amazon with the FBI, who is technically responsible for enforcing U.S. IP laws.
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