Amazon recently showed a renewed interest in protecting intellectual property (IP) rights of its third-party sellers, likely due to the dramatic growth in their numbers on the platform. Amazon CEO Jeff Bezos recently revealed in a letter to shareholders that the majority of the ecommerce giant’s gross merchandise sales are now made by third-party sellers. In 1999, third-party sellers were responsible for just 3% of sales, but that number has grown to 58% today.
With this increase of small business sales in recent years, many of the largest ecommerce sites are now having to address a rise in intellectual property (IP) infringement claims like Amazon. For example, Alibaba, which carries products directly from Chinese manufacturers, has promised to quickly de-list counterfeit products, and remove offending sellers. New data-modeling shows that nearly all infringement claims received are handled within a day, according to Alibaba. The company said 83% of sellers who filed a dispute were able to get the infringing listing taken down. A variety of other sites have seen an increase in infringement disputes as well, including Shopify, eBay and more. All kinds of ecommerce sites are now scrambling to help users easily report counterfeits and receive expedited responses.
Recently, Amazon has been developing new systems to more effectively respond to counterfeits and IP infringement. The site is preparing to implement four major changes:
1) A new system for resolving seller disputes is being introduced to the site;
2) A new program called Project Zero, which allows qualifying merchants to directly remove infringing listings themselves.
3) Requirements for trademark applications are changing for applicants outside of the U.S.;
4) Finally, requirements to qualify for Amazon Brand Registry is being updated, which should help brands protect their product listings;
To avoid being caught off-guard by competition, it is vital that Amazon sellers are proactive in adapting to these significant changes.
RESOLVING INFRINGEMENT ON AMAZON
Amazon has long-struggled with IP disputes between competing sellers. On the one hand, they want to provide sellers with protection from knock-offs and counterfeiters. On the other hand, Amazon doesn’t have the authority of a courtroom, and can’t adjudicate often complex patent and trademark disputes.
As a solution, and to help streamline the process, Amazon has introduced a new program which allows a neutral, Amazon-appointed patent attorney to arbitrate these IP disputes. The program has these steps:
- When a patent holder initially files an infringement claim, the alleged infringing seller is informed that they have 21 days to challenge the claim. To contest the accusation, the seller provides $4,000 to the Amazon-selected patent attorney. However, if the seller does not respond to the allegation, the listing will simply be removed.
- In the case where the seller challenges the allegation of infringement, the patent owner must also provide $4,000 to proceed with the arbitration.
- All information will be reviewed by the Amazon-appointed patent attorney (usually over a period of two months), who will notify both parties of the final decision. Depending on the practitioner’s decision, Amazon will either leave or remove the listing. The “loser” of this evaluation will forfeit their payment, which will cover the costs of the dispute resolution. The “winner” of this evaluation will be refunded their $4,000 payment.
IP holders selling on Amazons should welcome these reforms which will help new product developers expose counterfeiters and maintain profit margins on their Amazon products. Of course, sellers should be aware of other factors when attempting to increase ecommerce sales.
These changes serve to further emphasize how critical it is to stay abreast of IP regulations within the Amazon marketplace. Most experts predict that new patent filings will become even more numerous within the increasingly competitive marketplace. Consequently, neophyte and established sellers alike will seek to insulate themselves from infringement claims. As sellers more frequently use their patents offensively, established sellers will also file patents in defense, which is part of why it is so critical to manage the IP of your business.
AMAZON’S PROJECT ZERO
Amazon sellers who are qualified for Amazon Brand Registry (“ABR”) have the opportunity to participate in a new program called Project Zero. At the current time, Project Zero is an invitation-only program, but there is a waitlist signup here. To qualify for the program, a seller must provide relevant data which indicates ownership of IP, such as a registration for a U.S. trademark. Once verified, the Project Zero system can serve as a powerful tool for finding and reporting counterfeit listings. Some of these removal tools are automated, but there is also a self-service tool available to qualified sellers, so that they may directly remove counterfeit listings instead of requesting a takedown from Amazon.
Finally, Project Zero enables a process known as “product serialization” in which a seller applies a unique serial number to each individual unit distributed. This helps to quickly detect counterfeits that are not correctly coded. This serialization method could serve as a powerful tool for those who wish to prevent knock-offs of their goods on Amazon.
FOREIGN APPLICANTS FILING A U.S. TRADEMARK
Recently, the U.S. Patent and Trademark Office (“USPTO”) has been struggling to combat a rising volume of fraudulent IP filings, many of which are received from counterfeit artists overseas. Until now, trademark applicants have had the option of filing a trademark application themselves, to reduce costs. However, in effect August 3, 2019, the USPTO has ruled that a U.S. Attorney must represent all foreign domiciles (applicants residing outside of the U.S.) who wish to file a trademark application with the USPTO.
It is highly advisable for Amazon sellers based outside the U.S. to solicit the services of a reputable attorney who is licensed in the U.S. to file and prosecute registrations with the USPTO. Many common issues like delayed registration, ABR requirements not being met, etc. will be avoided with the help of a qualified, in-country attorney.
UPDATES FOR AMAZON BRAND REGISTRY
Most Amazon sellers are aware of how critical it is to have ABR and are concerned with maintaining their qualification for the program. Primarily, ABR enables sellers to better control their product listings and associated brand information. For example, a seller who has obtained ABR has the option to edit their product titles and descriptions, upload more images (including video), and additional options. Other benefits of ABR include access to advanced search-and-report tools, as well as certain automatic protections against fraud. Applications for Amazon Brand Registry can be submitted here.
Previously, a seller could obtain ABR by submitting a trademark registration from any international trademark office. However, the rules for qualification have recently changed. Now, to obtain ABR for any given country, a seller must have a registered trademark in that same country. Since the USPTO is updating its requirements for foreign domiciles, Amazon sellers applying for ABR must hire a U.S. attorney to obtain a U.S. trademark on the Principle Register. Additionally, the mark may only be either a text mark or an image mark (such as a logo). Other forms of trademark registration are not accepted.
Those with foreign registrations would be well-advised to file such trademarks with the USPTO as soon as possible. It normally takes 8-12 months to receive a registration for a U.S. trademark, and a seller may need to spend time researching their trademark to ensure it doesn’t conflict with existing U.S. registrations, or even with “common law” rights in the U.S. An entity with “common law” trademark rights is using a trademark in commerce in the U.S. but has not filed to register it with the USPTO, so their name would not come up in a search of the trademark database.
This process is time-consuming and could potentially reveal previously unknown trademark conflicts, so it is vital that sellers start the trademark application process as soon as possible so they don’t lose qualification for ABR. Learn more about becoming an Amazon seller here.
CONCLUSION
In this fast-paced global economy, intellectual property is more essential to business than ever. Before launching a product, any trademarks should be investigated and filed, as well as any possible patents for design and/or unique utility features of the new product. These filings will then give sellers the much-needed edge to protect their brand from knock-offs, counterfeits, and other types of infringement. Sellers then have a greater chance of maintaining healthy profit margins on the new product, and benefit from their development and design efforts. Fortunately, Amazon is providing these important new tools to assist sellers in these endeavors.
