Daimler AG Sues Amazon for Selling ‘Hot’ Wheels

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Mercedes alleges Amazon lacks adequate procedures for preventing sale of counterfeit goods

Caveat Emptor is the Latin term meaning “let the buyer beware.”
Many believe Amazon has long held this attitude toward the millions of consumers who purchase goods on its website. Consequently, lawsuits alleging trademark infringement and counterfeit goods are nothing new to the world’s largest internet-based retailer, which boasted revenue of $136 billion in 2016.
  • In November 2013, Johnson & Johnson stopped selling some of its products on Amazon.com, accusing the online retailer of not doing enough to prevent third-party merchants from selling subpar or expired J&J products.
  • In July 2016, German shoe maker Birkenstock decided to step away from Amazon, due to scores of counterfeit sandals being sold there for $79.99, $20 below the retail price.
  • In February 2017, Chanel filed a lawsuit alleging the e-commerce giant sold counterfeit products bearing its trademark, which caused confusion among consumers and damaged the French company’s reputation.
Amazon and similar sites were let off the hook from these types of claims after the court in Tiffany (NJ) Inc. v. eBay Inc. found eBay not liable for contributory trademark infringement related to the sale of inauthentic Tiffany products by third-party retailers. But this lack of liability could change in the future, depending on the results of a recently filed lawsuit..
In October, Mercedes-Benz parent Daimler AG filed a lawsuit alleging trademark infringement and counterfeiting. Daimler AG v. Amazon.com, Inc. revolves around the sale of counterfeit Mercedes-Benz wheel-center caps by 10 distributors, which Daimler says is not only an issue of intellectual property rights, but also of product quality and consumer satisfaction.
Daimler allegedly notified Amazon of the infringement on several occasions, but the company hasn’t remedied the situation. Amazon claims it is not responsible for infringements made by third-party sellers, but the company makes a guarantee that it ships and sells the infringing items on the product page, and has done little or nothing to create a system that detects and deters infringement, court documents claim.
Similar to other such lawsuits failed against Amazon, the Daimler case alleges the online retailer is selling counterfeit goods by third-party marketplace sellers on the site, which buyers incorrectly assume that Amazon has vetted as authentic. But the bigger issue at stake is an allegation that Amazon itself is selling counterfeit goods, a result of a lack of effective regulation among its “ships from and sold by Amazon.com” products.
For its part, the online retailer denies the allegations. “Amazon strictly prohibits the sale of counterfeit goods and any supplier that violates our policies will be held accountable,” a company representative said in an emailed statement.
According to Chicago trademark attorney Kevin Thompson, the case focuses on Amazon’s responsibilities as a seller, as opposed to merely as an intermediary. “The question to be decided is whether the claim ‘ships from and sold by Amazon.com’ is a warranty, “ he said. “The phrase is being used to affirm the belief that Amazon is the seller, and thus warranting the quality of the goods.”
Amazon.com offers more than 350 million products on its website, more than 12 million sold directly by Amazon. More than two million independent sellers currently use Amazon’s platform. According to the Daimler complaint, “Amazon sells and/or facilitates the sale of an exorbitant number of counterfeit and infringing goods, as highlighted by recent press coverage and lawsuits filed against Amazon and its sellers….Because of the ‘lack of effective regulation’ on Amazon.com, copycats with access to very nimble manufacturing capabilities are able to rapidly duplicate products and put them right out on the Amazon marketplace, eventually displacing the sales volume of the originals.” This activity is in direct conflict with the retailer’s own anti-counterfeiting policy.
The Daimler lawsuit also alleges the process required for copyright holders to prove Amazon has listed a counterfeit item for sale is burdensome and less than proactive. Amazon does not actively attempt to prevent infringement; rather, the company uses an “after the fact” system that shifts the burden of proving infringement onto the rights holder and off the third party who is selling the counterfeit goods.
Amazon will remove an item only after the trademark holder takes steps to prove its lack of authenticity, typically by buying one or more of the products in question to confirm that they are not authentic and then submitting a Report Infringement form. Daimler says it purchased and inspected multiple wheels to confirm they were indeed counterfeit.
So how can consumers ensure the goods they purchase on Amazon.com are vetted and authentic? According to Thompson, if the seller is not Amazon, they should read their reviews. “Beyond that, it is hard for consumers to ensure the goods are authentic,” he said. “If a consumer knows the regular price and the price is really low, chances are it’s not authentic.” The consumer advocacy group, The Counterfeit Report, has allegedly sent over 32,000 notices to Amazon regarding counterfeit items that have been reported to them, and has removed 22.1 million fakes from e-commerce websites like Amazon.com, eBay and Facebook.
Thompson says companies like Amazon are able to get away with allowing the sale of counterfeit goods with impunity by claiming they are not liable for direct infringement since they do not have actual knowledge that the goods are counterfeit. Rob Holmes, founder and CEO of IPCybercrime, a boutique firm that has been investigating intellectual property theft on the web since 1995, says Amazon is simply not motivated to change. “In my experience, Amazon cares more about profits than others’ rights,” he said.
Holmes says Amazon contacted him in March 2017, requesting a proposal to assist in detecting counterfeits on their website. He suggested the “Red Team” approach, in which an independent team tests a system by attempting to post counterfeit items and commit other violations on the site in order to grade their detection process. 
“This not only would help Amazon improve, but it would also demonstrate their commitment to the brands. They came to me for ideas and this is what I proposed,” said Holmes. “But they said they were going to go ‘in a different direction.’ Go figure.”
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