Facebook Liable for Ads Selling Counterfeit Goods?

Social networking is a relatively new and integral part of the fashion/designer/consumer experience. Twitter gives us daily updates on preparations for fashion week, a look back at a particular brand’s history, or some personal anecdote about a designer that makes us feel closer to the process. Designers and fashion houses alike also utilize Facebook to reach customers and give them an inside look at the designs. But the joining of a designer and social networking is not always a good thing. On Facebook, for example, I have recently noticed that every time I login, I find advertisements for counterfeit goods along the side of my Newsfeed, primarily for handbags of the Louis Vuitton variety.

This has me wondering, does Facebook have any accountability? We all know that those selling the counterfeit bags are breaking laws. And that, when discovered, a litigious fashion house, like Louis Vuitton, will waste no time sending a cease and desist letter or going to court, if necessary. The problem, as we’ve mentioned a time or two before, is that these sites are typically generated overseas and tracking down the culprits often proves impossible, and the unfortunate truth is that another site will replace the one shutdown in no time at all. So, perhaps looking to Facebook could provide some form of palpable enforcement (and even some damages, as the lawsuits against Chinese counterfeiters very rarely result in monetary gains for design houses).

Let’s start with Facebook’s guidelines to advertisers. Per the social networking site’s advertising guidelines, “Ads and Sponsored Stories may not promote or facilitate the sale of counterfeit goods.” Yet, we know counterfeit items are making the advertising cut. A spokeswoman for Facebook recently made clear that users are integral to combating counterfeit ads, saying: “We have a team dedicated to investigating ads and user complaints, and we will remove ads that users bring to our attention if they violate our ad guidelines," and that they “offer the ability for users to provide immediate feedback on our ads and encourage them to report anything they find offensive or misleading.”

For many, though, this is not enough. One such person is Eric Feinberg, who founded Fans Against Kounterfeit Enterprise, or FAKE, which calls for the U.S. government to require sites to review ads before they go up and to make sure that consumers aren’t tricked by bad advertisements and also serves to educate users about the ads.

But are there laws supporting Mr. Feinberg’s objective? Under the Digital Millennium Copyright Act (DMCA), website operators that post unauthorized copyrighted works of others may be liable for copyright infringement, and that includes advertisers. However, a safe harbor is provided under the DMCA to online service providers that take steps, such as registering a copyright agent that receives infringement complaints and establishing a notice and take-down procedure.

The DMCA safe harbor does not apply to trademark infringement claims, though. Two cases offer direction with respect to trademark infringement and the liability of the websites offering the infringing goods. In Tiffany Inc. v. eBay, Inc.Tiffany ultimately wanted the 2nd Circuit court to hold eBay liable for direct and contributory trademark infringement because of the counterfeit items that were being sold on eBay’s website. The court found that it was Tiffany’s responsibility to police its brand and that liability would only be premised on specific knowledge of infringing goods. Worth noting is the fact that eBay removed a counterfeit seller from its site every time Tiffany sent notice to eBay. On the other hand, in Louis Vuitton Malletier v. Akanoc Solutions, Inc., a subsequent 9th Circuit case, LV came out on top because Akanoc, a web-hosting company that owned and operated several servers, had been notified many times by LV about counterfeit goods and did nothing.

I guess the takeaway is this: a brand is primarily responsible for protecting its brand (not a novel concept) and that social networking sites would be well-advised in taking notices of counterfeit and/or infringing advertisements seriously.

Laws aside, Facebook, on paper, at least, seems interested in limiting the sale of counterfeit goods via its advertisements. Facebook is a founding member - along with Google, Twitter, AOL and the Interactive Advertising Bureau - of the Ads Integrity Alliance, a group desiring to set industry standards on how to deal with ads featuring counterfeit goods.

For the time being, the age-old warning that if it seems too good to be true, it probably is, extends to those annoying and sometimes distracting little advertisements that bombard your Facebook page.

Jennifer Williams is a recent law student grad, who writes about fashion, the legal avenues available for protecting it, and the ways in which the laws are falling short.