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Amazon Taps DOJ Prosecutor, Helps 3M, Valentino Fight Fake Goods

July 8, 2020, 9:56 AM

Amazon.com, Inc. is turning to a former federal prosecutor to bust counterfeit product sellers, as the online retailer fends off criticism from Congress and potentially costly trademark lawsuits.

Amazon recently launched a new counterfeit crimes unit to be led by associate general counsel Cristina Posa, who joined the company in March after serving as senior counsel for the Justice Department. In June alone, Amazon has partnered with luxury fashion brand Valentino to sue two alleged counterfeiters and helped consumer goods manufacturer 3M Company remove imitation personal protective equipment listings from the site.

The new counterfeit unit was created months after the retailer was called out by House Energy and Commerce Committee Chairman Frank Pallone (D-N.J.) in a hearing for not adequately addressing counterfeiting in its marketplace.

“It would not be possible for any company, even Amazon, to take on every single counterfeiter, but I think the deterrent effect will be meaningful, and also those actions where Amazon gets involved could act as a nice template,” said Matthew Homyk, a partner at Blank Rome who specializes in intellectual property and technology.

Homyk added that the new unit signals the company is heightening its commitment to protecting Amazon’s brand partners and customers from fraud.

“It’s a whole lot more than they’ve done in the past,” said Helena Steele, founder of clothing and home goods retailer Jessie Steele. She said her company was essentially decimated by counterfeiters and third party sellers on Amazon years ago, and though she no longer sells through Amazon, Jessie Steele products are still listed on the site.

Amazon spent $500 million on anti-fraud efforts and removed around six billion fraudulent product listings last year, according to the company.

Since 2007, intellectual property suits have made up approximately 39% of litigation involving Amazon, according to Bloomberg Law’s review of federal and state court dockets. That includes two trademark lawsuits the company filed against alleged marketing scammers in June, in addition to the Valentino case.

House Hearings

Amazon was criticized for allowing counterfeit goods to be sold on its site during a March House Consumer Protection and Commerce subcommittee hearing. Dharmesh Mehta, the company’s vice president, appeared as a witness.

“A person may think they are buying from Amazon, when they are instead buying from a foreign third party who merely ships through Amazon,” said Pallone in the hearing.

The subcommittee is scheduled to hold another hearing on counterfeit goods and consumer protection in the age of Covid-19 on Thursday, though Amazon will not have a witness at that hearing. The panel is slated to discuss price gouging on hand sanitizer and other personal protective products on Amazon’s marketplace, according to a hearing notice.

It’s difficult for consumers to spot a fake listing on Amazon until they actually receive the counterfeit product, said Bob Barchiesi, president of the International AntiCounterfeiting Coalition, an advocacy group that has worked with the company to combat counterfeiting in the past.

The problem has been exacerbated by Covid-19 “because more people are getting comfortable shopping online,” Barchiesi said.

3M’s respiratory N95 masks were among those products affected by alleged counterfeiting and price gouging. In a lawsuitfiled June 8, the company said it was seeking $2 million in damages from a counterfeiter who sold the masks on Amazon at prices nearly 19 times higher than 3M.

Amazon has not been targeted in that lawsuit. The company successfully blocked the counterfeiters on the platform, 3M said in a statement announcing the legal action.

A Signal

The Amazon-Valentino lawsuit will likely be the first of many future joint cases, Homyk said. Blank Rome has formerly counseled Amazon on legal issues but is not currently involved in any cases.

“It’s particularly interesting that the new program includes folks from the criminal world because most of this has been a civil enforcement effort,” Homyk said, referring to associate general counsel Posa.

Prior to joining Amazon, Posa served as senior counsel in the DOJ’s criminal division, where she focused on computer crime and intellectual property. Homyk said criminal penalties are usually higher than civil ones.

Amazon declined to make Posa available for an interview.

Homyk and Barchiesi said the presence of a former federal criminal prosecutor may act as a deterrent against potential counterfeiters. It it also signals Amazon’s dedication to the issue.

“Every counterfeiter is on notice that they will be held accountable to the maximum extent possible under the law, regardless of where they attempt to sell their counterfeits or where they’re located,” Mehta said in a June 24 statement.

The new unit is expected to work with brands to address potential cases of fraud, according to Amazon’s statement.

Before the creation of the counterfeit crimes unit, Amazon’s brand partners and sellers relied on the company’s brand registry to protect their trademarks. That put the onus on sellers to spot counterfeit listings and report them to Amazon for removal.

Steele said it used to be very difficult to get Amazon’s attention as a small business owner.

“If someone actually answers the phone or answers our email when the word ‘counterfeit’ comes up, then it’s a big step,” she said.

To contact the reporter on this story: Ruiqi Chen in Washington, D.C. at rchen@bloomberglaw.com

To contact the editor on this story: Chris Opfer at copfer@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com

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