Professional Documents
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Brief Introduction
Online trading activities are carried out in places such as the following:
1
Wellman, Chapter 1: Online Marketplaces, in Practical Handbook of Internet Computing, M.P. Singh,
ed. (CRC Press LLC: 2004) p. 5, available at http://ai.eecs.umich.edu/people/wellman/pubs/phic04.pdf
2
Gain Control Over the Vast Unknown: Curtailing Distribution of Counterfeit and Gray Market Goods,
Market Monitor White Paper (September 2007), p.3, at http://www.markmonitor.com/download/wp/wp-
gaincontrol.pdf.
3
Ibid.
4
Ibid.
5
Ibid.
6
Ibid.
7
Online Marketplaces, id, at p. 7.
8
Id.
Page 2 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
Music, video and software pirates used to be the counterfeiting big shots
in the heyday of file-sharing networks such as Audiogalaxy, Napster and
Grokster. Nowadays, however, the faking of goods is no longer limited to luxury
goods and apparel related products. 9
The listings on eBay and other online auction sites are as varied as the
persons who transact on the site. On eBay, for example, product categories
include Antiques, Art, Books, Business & Industrial, Cameras & Photos,
Cars, Boats, Vehicles & Parts, Computers & Networking, Consumer
Electronics, DVDs & Movies, Jewelry & Watches, Music, Video Games,
Real Estate and even Everything Else.
9
International Anti-Counterfeiting Coalition (IACC) White Paper: The Negative Consequences of
Intellectual Property Theft: Economic Harm, Threats to the Public Health and Safety, and Links to
Organized Crime and Terrorist Organizations, p. 2 [January 2005]. http://www.iacc.org
10
Term used in Gain Control Over the Vast Unknown: Curtailing Distribution of Counterfeit and Gray
Market Goods, Market Monitor White Paper (September 2007), supra.
11
Ibid, pp. 2-3.
12
Gain Control Over the Vast Unknown, supra note 2 at p. 2.
Page 3 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
Dove, Olay, LOreal, Neutrogena and other personal care items are sold in
individual pieces or in multi-piece lots. Mobile phones and accessories share
pride of place with computer games, software, and other electronic wonders
while bags, shoes and clothing bearing exclusive marks are suddenly available at
prices as low as a tenth of what the genuine items would cost.
Legal 500 points out that the top five (5) most counterfeited brands in the
world are Nike, Microsoft, Louis Vuitton, Adidas and Prada, and that the internet
now accounts for around thirteen percent (13%) of incidents when counterfeit
and pirated goods are sold.13 Pharmaceutical products have also alarmingly
jumped up the must-have-stocks list of counterfeiters.
The internet's anonymity and global nature make it an ideal medium for
dealing in counterfeit goods.14 However, it is exactly these characteristics which
make it so hard to protect against internet counterfeiting and enforce trade mark
and other rights against those who choose to infringe in this way. 15
The same Legal 500 report that enumerated the top five (5) counterfeiters
delights also points out the features that attract infringers to online marketplaces
like bees to honey:
13
Faking it: Internet Counterfeiting Knows no Bounds, Field Fisher Waterhouse (March 2007) at
http://www.legal500.com/index.php?option=com_content&task=view&id=2874&Itemid=93
14
Ibid.
15
Ibid.
16
Ibid.
17
Ibid.
18
Ibid.
Page 4 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
1. Unemployment;20
2. Price/margin erosion leading to reduced values for distributors and
retailers, as well as warranty issues for products they did not place
in the channels of commerce;21
3. Unrealized duties and tax revenues22; and
4. Health and safety risks.23
Since the counterfeiters gain is the right holders loss, it is no wonder that
legitimate manufacturers and distributors, not to mention intellectual property
owners, are becoming quite vocal in condemning the growing online trade of
fakes and gray market products.
Tiffany & Co., Inc. sued online auction giant eBay in 2004, alleging that it
had failed to control the trade of counterfeits in its forums. Other companies such
as Louis Vuitton and Christian Dior have joined Tiffanys call to hold the site liable
for infringing activity in the past three years, but no ruling has been handed down
to determine if eBay is liable for the sale of counterfeit goods on its site.
The auction site continuously denies liability for counterfeiters trade, but in
2006 it reportedly unveiled its Verified Rights Owner (VeRO) programme that
touts the following safeguards:
19
Ibid.
20
Gain Control Over the Vast Unknown, supra note 2 at p. 4.
21
Ibid.
22
Ibid.
23
Ibid.
24
Ibid.
Page 5 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
1. Sellers who list items falling under eBays anti-counterfeiting list must
become PayPal verified.25
2. eBay will conduct manual seller reviews for sellers who list items
covered by the said anti-counterfeiting list. 26
3. eBay will ban 1-day and 3-day auctions of all items on its anti-
counterfeiting list to allow eBay members and rights-holders enough time
to review items.27
4. eBay will restrict cross-border trade on items on its anti-counterfeiting
list.28
Only the intellectual property rights owner can report potentially infringing
items or listings through eBay's VeRO Programme. 29 The auction giants
Philippines-specific sub-site eBay.ph says, however, that If you are not the
intellectual property rights owner, you can still help by getting in touch with the
rights owner and encouraging them to contact us. 30
eBay.ph also expressly restricts or prohibits the sale on the site of the
following items:
The biggest stumbling block for the quest to remedy this online malady is
the nature of the internet. Decentralization is a defining characteristic of the
Internet, and no State or any single entity is capable of playing its overseer. 31
25
eBay Rolls Out Initiatives to Fight Counterfeits by Ina Steiner, AuctionBytes News Flash Number
1421, 29 November 2006 at http://www.auctionbytes.com/cab/abn/y06/m11/i29/s01
26
Ibid.
27
Ibid.
28
Ibid.
29
http://pages.ebay.ph/help/policies/intellectual-property-ov.html
30
Ibid.
31
OSCAR FRANKLIN B. TAN, THE INTERNATIONAL SHOE STILL FITS THE VIRTUAL FOOT: A
DUE PROCESS FRAMEWORK FOR PHILIPPINE INTERNET PERSONAL JURISDICTION
PROBLEMS, 79 Phil. L. J. 1036 [2005].
Page 6 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
A States jurisdiction is traditionally tied to its territory, and its laws have
no operation outside said territory. 34 But the lines tend to blur where transactions
are cross-border, multi-jurisdictional and possibly multi-party.
(c) Violations of the Consumer Act or Republic Act No. 7394 and
other relevant or pertinent laws through transactions covered by or
using electronic data messages or electronic documents, shall be
penalized with the same penalties as provided in those laws;
The Consumer Act of the Philippines aims to protect the interests of the
consumer, promote his general welfare and establish standards of conduct for
business and industry. 35 In line with this, the law has the following objectives:
(b) protection against deceptive, unfair and unconscionable sales acts and
practices; 37
35
Republic Act No. 7394, as amended, Art. 2.
36
Ibid.
37
Ibid.
38
Ibid.
39
Ibid.
Page 8 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
1. Feedback mechanisms
2. Take down options
3. Suspension or cancellation of user accounts
1. Are illegal, against public order, moral or public policy, or which tends or
aims to violate any law, public order or morals,
2. Violate other peoples right like patent, trademark right, design right and
utility model patent, etc.
40
Ibid.
41
Consumer Act, Art. 4(v).
Page 9 of 10
Special Report on Online Sales of Counterfeits,
Remedies and Liabilities
Rico V. Domingo, Esq.
Anti-Counterfeiting Committee
----------------------------------------------------------
Article 30 of the User Agreement also explicitly states the governing laws for
the site. It provides that the User Agreement between Auction.ph and its
members is governed by the E-Commerce Law and other related laws of the
Philippines. The terms in the User Agreement are also to be interpreted in
accordance with the laws of the Philippines.
Online auction sites and other forms of online marketplaces also usually
provide for the suspension, or even termination of user accounts that violate their
user policies.