Intellectual Property

Amazon’s Silk Road: A Brand’s Best Friend?

Amazon continues to experiment with IP policing solutions that can be used to protect both established and nascent brands that sell on its site.

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Anyone who has been lucky enough to visit the Middle East can picture the scene. Whether it is Cairo’s Khan El’Khalili or Istanbul’s Grand Bazaar, these markets continue a centuries-old tradition of one-stop shopping for all manner of goods. Historically, goods would flow to these markets from as far as the eastern reaches of Asia across the Silk Road, making the famous bazaars of populous Middle Eastern capitals true representations of global economic activity. While these markets still function — if primarily as tourist traps — their ethos has been replicated online, primarily in the form of America’s favorite digital merchant, Amazon. In fact, both Amazon and the grand bazaars of yore have and still serve as platforms for showcasing goods from the major Asian countries, most notably China.

There is no doubt that one of the factors fueling Amazon’s growth as the digital equivalent of an ancient grand bazaar has been the ability of American shoppers to buy goods directly from Chinese brands. Take a simple consumer staple, a jacket, for example. Just a decade or two ago, if an American shopper wanted a jacket, they were likely to purchase one during a visit to their local mall, from a department or specialty store. Or they could order one from a catalog. Either way, if that jacket was made in China, for example, it was likely imported to the U.S. by a wholesaler, who marked up the price when selling it to a retailer, who marked it up again when selling it to the end customer. Now, in contrast, you can buy a jacket from a China-based brand directly via Amazon, and have it shipped directly to you — in two days via Prime and with free returns to boot.

A big part of what makes this all possible is Amazon’s willingness to allow foreign merchants to sell on its platform. Sellers based overseas now have access to Amazon infrastructure that allows them to “sell directly to Amazon shoppers in the West,” thereby accelerating Amazon’s growth “and helping its total revenues to blaze past the $100 billion mark for the first time” according to a recent post on The Fashion Law blog. One major beneficiary of Amazon’s greasing of the commercial skids is Chinese brand Orolay, a clothing purveyor that had a major hit this winter with its “Thickened Down Jacket.” Almost unbelievably, the company generates almost all of its U.S. revenue through Amazon sales, and in January alone sold in the range of $3mm+ of this one hit jacket.

In short, Amazon can singlehandedly create and support the sales of hit products from overseas, instantly creating valuable brands in the process. Unlike famous fashion houses, however, the brand strength of these overnight Amazon sensations is often done without investment in traditional advertising, as word of desirable products is spread over social media — with Amazon’s robust infrastructure making purchases as easy as possible for interested consumers.

Orolay’s example presents an interesting set of circumstances for IP lawyers to consider. On the one hand, luxury brands have at best been skeptical of Amazon sales, preferring to rely on their own e-commerce platforms and sales through their high-end department store customers. Just look at the reviews of this one supposed Canada Goose coat for a sense of the difficulties Amazon customers encounter in terms of determining whether a luxury item is authentic. Things would be easier if Canada Goose itself maintained a verified Amazon storefront, but brands like Canada Goose continue to insist on going through their own distribution channels. Which helps nascent brands like Orolay, especially as customers are increasingly willing to buy “Amazon” brands for their lower price point and respectable-enough quality, whether those brands are true Amazon private-label ones or China-based startups like Orolay. On the other hand, the inconsistent and opaque application by Amazon of IP takedown requests has made policing Amazon a thankless — but necessary because of the sheer volume of infringing products for sale — chore for many brands.

Add in the fact that Amazon’s scale makes it easier for infringement of all kinds to occur — while leading to immediate sales for the infringer, with corresponding lost sales for the IP owner and their retail partners — and it is no surprise that Amazon needs to do its part to reassure brands that it is safe to do business on its platform. To that end, Amazon continues to experiment with IP policing solutions that can be used to protect both established and nascent brands that sell on its site. Sharing its name with NYC’s ongoing effort to cut down pedestrian deaths (by making it even more impossible to drive in the city), Amazon’s Project Zero aims to encourage larger brands to make sales on its platform by giving them the ability to veto third-party sellers that don’t meet their standards. What remains missing, however, is an effective way for a brand like Orolay to use its Amazon sales success as a springboard towards being able to implement and manage a sophisticated IP approach on the platform. One which would allow Orolay to not only police those hoping to infringe on their IP, but also to have a robust and predictable mechanism for addressing any complaints brought against them by other IP owners — in a way that doesn’t impact too greatly on the consumer’s Amazon experience or lead to increased distrust of the authenticity of goods in the world’s leading online bazaar.

Ultimately, there are no easy answers when it comes to managing IP issues on Amazon or similar grand-bazaar-style online emporiums. Brands and IP owners of all types must continue to work with Amazon to develop workable solutions to IP infringement issues, in a way that doesn’t compromise the Amazon seller or customer experience any further. And customers must do their part to behave online just as they would in the real world. Which means recognizing that when a deal is too good to be true, it is one best avoided. Even when shopping for a winter jacket on Amazon.

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Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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