The New Normal in Intellectual Property Cases - Mass Production and Baseless Claims Towards Online Sellers

Thursday - June 22 2023, 01:50 UTC - 1 year ago

Sun, an e-commerce company owner, experienced a new type of lawsuit comprised of a mass intellectual-property case along with many other Amazon sellers due to one of her products that had air-filled bumper cushions at the edges to protect the phone. These mass-produced lawsuits are a lucrative business for the plaintiffs and their law firms in the US and are designed to protect IP holders from counterfeiters, who are harder to trace and hold accountable in the e-commerce age.

Sun Qunming had no idea that the word "airbag" could be trademarked. Sun, who owns an e-commerce company of 13 people in Shenzhen, China, has been selling phone cases to Amazon buyers in Europe and the US since 2016. But last year, her business ground to a halt. One of her products has air-filled bumper cushions at the edges to protect the phone. When she listed it on Amazon in November 2021, she named it—in the typical e-commerce fashion of piling up keywords to attract search traffic—"Samsung Flip 3 Case, Galaxy Flip 3 Case with Ring, Built-in Airbag Protective Case for Samsung Galaxy Z Flip 3 5G 2021, Black." What she didn’t know was that in the same month, the word "airbag" when used in the context of electronic device accessories had been trademarked by another phone case vendor, PopSockets. A few months later, the company sued Sun and more than 160 other online sellers for trademark infringement. Sun’s two Amazon seller accounts were restricted and her account balances, totaling $60,000 at the time, were frozen.

Over the next three months, Sun says, she spent $20,000 in legal fees to respond to the lawsuit. The account suspension was dropped in June 2022, but the damage to her business was done: a new phone case typically sells well for about a year until the next-generation phone comes out, and she missed the window. "I had plans for my life, like how my career would grow in a few years," Sun says. "But when they did that to me, I felt like my whole plan had been disrupted. And I didn’t know what to do." .

What Sun experienced was not an accident, but a relatively recent development in the world of cross-border e-commerce. US law firms, particularly a handful based in Chicago, have been putting together mass intellectual-property cases like this one, suing hundreds of sellers on Amazon or other platforms at the same time for selling counterfeit goods. It’s a new form of lawsuit—so new that it doesn’t have an official name yet. One thing they have in common is that multiple defendants are sued at once, and the defendants’ identities are kept hidden.

These cases are designed to protect IP holders from counterfeiters, who are much harder to trace and hold accountable in the era of e-commerce. But in the US, these lawsuits have also become a lucrative business for the plaintiffs and their law firms. Lumping so many defendants together saves plaintiffs time and money when filing cases in federal courts. The approach is so streamlined and structured, lawyers told MIT Technology Review, that firms can mass-produce the lawsuits, reusing filing templates and suing batch after batch of sellers. These practices are not unlawful, but some lawyers and academics believe they amount to taking advantage of the IP protection system.

"It started as a normal way to defend intellectual-property rights," says Ning Zhang, an attorney in the US who has represented Sun and other sellers in similar situations. But over the years, Zhang says, she has witnessed the IP violation claims getting increasingly baseless. "It doesn’t matter if [the claims] have any merits—you can just sue [the sellers], freeze their accounts, and for most of them, that will be the end." .