Brand owners say counterfeiters will be able to exploit loopholes in EU plans for a proposed overhaul of online marketplaces,as scrutiny committees consider how to respond.
Counsel at a luxury fashion house, the Swedish Trade Federation, watch company Daniel Wellington, and a Finnish anti-piracy group say certain passages of the Digital Services Act (DSA) should be tightened to ensure greater accountability from platforms that host potentially counterfeit products.
One counsel has suggested that if certain provisions are unchanged, the proposals may be outdated before they become law.
The European Commission tabled its DSA proposals on December 16 after several months of discussion.
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Know your customer
The DSA has been billed as a revision of the 20-year-old e-Commerce Directive. Until now, that directive has been the main EU legislation governing online platforms.
Having initially offered mixed feedback on the proposals, including that they did not require enough proactivity from platforms, counsel have now pinpointed specific elements that must change in order to improve the act.
When the proposals were announced in December, some lawyers cautiously welcomed the idea to introduce ID checks for sellers on e-commerce sites.
However, this aspect, referred to as the ‘know your business customer’ provision, has too many loopholes in its current form, counsel warn.
Måns Sjöstrand, global head of IP and brand protection at watch company Daniel Wellington in Sweden, points out that the checks are only required of e-commerce platforms and do not extend to social media sites or domain registrars.
“It’s quite a narrow scope. Marketplaces are not the only platforms that play a wider role in the sale of counterfeits,” he says.
A senior source at fashion house LVMH says the ability to identify sellers should be at the heart of the DSA.
“You could even go one step further and make an exemption from liability [for hosting counterfeits] dependent on being able to identify sellers,” they add.
‘Too narrow’
Reaction to the DSA was also discussed during a virtual meeting for brand owners organised by the Swedish Anti-Counterfeiting Group (SACG) last week.
The meeting, attended by Managing IP, heard from counsel at Finland’s anti-piracy centre, the Swedish Trade Federation and a Norwegian law firm, among others.
Speaking about proposals for ID checks, Jaana Pihkala, senior legal adviser at Finland’s Copyright Information and Anti-Piracy Centre, agreed that they are “far too narrow”.
“This provision should cover all digital services including domain names, hosting providers and app-store operators. Anybody who wants to do business online has to use all of these services,” she said.
Rights owners are not asking for ground-breaking legislation, Pihkala noted. Article 5 of the e-Commerce Directive already requires businesses to identify themselves, she said, but this is rarely enforced.
She added that EU case law on how sellers should provide their contact information is outdated because the concept of ‘address’ is interpreted too narrowly.
She pointed to the Court of Justice of the EU’s (CJEU) decision last year in Constantin Film Verleih v YouTube and Google.
In that ruling, the CJEU found that ‘address’ should be interpreted as a postal address and that platform operators are not required to provide email or internet protocol addresses or the telephone numbers of alleged infringers at the request of rights owners.
Pihkala added: “99% of our actions concern email addresses, not postal.”
One source speculates that if this notion of address were interpreted widely then the idea of asking platforms to reveal details of sellers could be outdated before the DSA has even come into being.
Importers and URLs
The Commission’s proposals are to be assessed by three European Parliament committees – the Internal Market and Consumer Protection Committee (IMCO), Legal Affairs Committee, and Civil Liberties, Justice and Home Affairs Committee.
Danish MEP Christel Schaldemose, IMCO rapporteur, has suggested the option of an “importer responsibility” clause to clarify where liability for illegal sales should lie. She suggested that if platforms are unable to ascertain sellers’ contact details, there should be a way of ensuring the platform is held responsible.
In a statement on the European Parliament website, Schaldemose said: “One of the loopholes is a lack of consumer protection when it comes to dangerous products. I would like to give platforms more responsibility to check sellers before they come online to sell.”
She noted that shop owners in the physical world are responsible for what they sell but that online platforms do not have that responsibility.
Sjöstrand at DW says that Article 14 of the DSA, which stipulates that the URL address of allegedly infringing content should be included when filing a takedown notice to a platform, should also be updated.
“The explicit URL requirement should be removed from Article 14 in favour of a more technology-neutral wording. Will we still be using URLs 20 to 25 years from now?
“Policy makers need to have that time perspective when designing the DSA,” Sjöstrand notes, adding that it has taken two decades to begin reforming the e-Commerce Directive.
‘Unfortunate loopholes’
Speaking during the SACG seminar, Sofia Stigmar, a lawyer at the Swedish Trade Federation but based in Brussels, highlighted two further problems in the DSA.
Pointing to “unfortunate loopholes”, Stigmar said Article 20, which proposes that online platforms suspend users that frequently provide “manifestly illegal content”, should be changed.
The danger, she warned, is that the term ‘manifestly’ can be left open to abuse, particularly if a counterfeit item is very convincing.
The LVMH source adds that there should be an obligation on platforms to inform consumers who have bought products from a seller in the time between a takedown request being filed and the seller being removed.
Jenny Sveen Hovda, partner at Bull & Co in Oslo, said Norway – a non-EU member state but a member of the European Economic Area – will decide whether or not to implement the DSA once EU discussions have concluded.
She added: “Norway has implemented most IP directives, so IP rights are protected on broadly the same level. It is possible to deviate but normally things would be implemented pretty much as they are.”
She noted that there has so far been low engagement from Norwegian right owners in public consultations.
The committee rapporteurs are expected to finalise their draft responses to the DSA in the next month or so. If brand owners’ concerns are not met, the EU may risk subjecting them to another two decades of struggle.
