A Chinese Lesson in Combatting Online Counterfeits: The Need to Place Greater Obligations on Social Media as They Transform to E-Commerce Platforms.

• Date: 01 February 2021
• Author: Wang, Shuyu

TABLE OF CONTENTS I. INTRODUCTION 341 II. SOCIAL MEDIA BRING OPPORTUNITIES FOR BRANDING, ACCOMPANIED BY CHALLENGES TO ONLINE TRADEMARK ENFORCEMENT 343 III. THE UNIQUE ECOSYSTEM OF CHINESE SOCIAL MEDIA BRINGS A DIFFERENT SET OF CHALLENGES FOR LUXURY BRANDS TO ENFORCE THEIR TRADEMARKS 345 A. The "All-In-One " Feature of China's Major Social Media Encourages Embedding In-App Checkout Methods, Which Creates a Closed-Up Environment for Social Shopping 347 B. The Social Media Landscape in China Is More Fragmented Requiring Brands to Exert Greater Efforts to Monitor the Whole Market 350 IV. THE CURRENT LEGAL SCHEMES IN CHINA CANNOT PROMISE A POSITIVE EXPECTATION FOR TRADEMARK ENFORCEMENT 353 A. Traditional Trademark Enforcement Methods Cannot Adequately Adapt to the Context of Social Media 353 1. Raids by Administrative Agencies 354 2. Civil Actions Against Counterfeiters and Trademark Infringers 354 3. Criminal Prosecution 355 B. China's New Cyber Courts and E-Commerce Law Improve Online Infringement Enforcement, Yet They Still Fall Short on Trademark Enforcement on Social Media 355 1. Issue One: Jurisdiction of Cyber Courts 357 2. Issue Two: "Safe Harbor" for E-Commerce Platforms 359 V. CHINA SHOULD AMEND ITS E-COMMERCE LAW TO IMPOSE THE JOINT LIABILITY REQUIREMENT ON SOCIAL MEDIA PLATFORMS THAT INCORPORATE IN-APP SHOPPING FEATURES 361 A. Amending China's E-Commerce Law 361 B. China's Approach as a Lesson for the U.S. to Better Regulate the E-Commerce Market in Light of the SHOP SAFE Act 364 VI. CONCLUSION 366 I. INTRODUCTION

If you use screen time tracking apps or features on your smartphone, it is very likely that you find yourself spending most of your screen time on social media. In 2019, global users spent 50% of their mobile phone screen time on social networking and communication apps. (1) However, social media users these days gradually shift from purely "social" events to more purpose-led activities. While connecting with friends remains the main purpose for using social media, there is a usage trend towards news consumption. (2) In other words, many people use social media to "stay informed." (3)

Today, when we scroll on our news feed, we come across anything and everything--major global events like trade wars, the coronavirus pandemic, the trendiest shows on Netflix, results of an exciting NFL game, and of course, fashion trends for the next season. Social media continue to merge entertainment and commerce, creating a hub for mass consumption that allows users to research and find products to buy. (4) This is especially common among younger generations. A member of Chinese Generation Z, (5) Yifei Du, said that she uses social media to follow up with trends and get shopping tips from influencers. (6) She also sometimes generates content about her own shopping experience. (7)

Social media users' craving for shopping content revived the fashion industry after the 2008 recession. (8) Use of social media by luxury brands began to surge in 2009. (9) Social media offer great interactivity that enables luxury brands to monitor customer reviews more closely, and accordingly build the brand by increasing awareness, involvement, and engagement with customers. (10)

Social media shoppers also value customer reviews more than before. (11) These consumers are wary of one-sided advertisement, and they seek human interaction to develop trust in brands before a transaction. (12) Social media, in this context, offer easy access for consumers to collect authentic reviews from other individuals. Consumers can search postings or tags for a certain brand or product to navigate among brands, informing their shopping decisions along the way. (13)

However, brands and consumers are not the only ones benefiting from the emergence of social media. Social media have become the new battlefield for combating counterfeits. Counterfeiters constantly create new accounts and postings to sell fake luxuries at almost zero cost, which makes taking down online counterfeits merchandise a "whack-a-mole" game. (14) Brand owners have to commit their limited time and resources to monitor their trademarks and continuously seek takedowns of the counterfeit listings. (15)

China, as the world's most populated country and one of the most rapidly growing economic bodies, offers global luxury brands a major e-commerce market. The constant growth in the number of Chinese social media users also sparks new opportunities for global luxury brands to penetrate the market. However, the Chinese social media ecosystem presents a great difference from the one in the Western world and unique challenges to brands. While global brands navigate the distinctive Chinese social media ecosystem, recent legal reforms in China emphasize the importance of regulating e-commerce, including establishing cyber courts and issuing the 2019 E-Commerce Law. (16) This Note will explore whether such reforms provide adequate guidance for global luxury brands to effectively enforce their trademark rights in China.

Part II of this Note will lay a foundation for discussing the common opportunities and challenges brought by social media to luxury brands. Part III will demonstrate the unique challenges brought by Chinese social media that place a greater burden on brands to monitor the market and enforce their rights. Part IV will analyze how the traditional enforcement methods in China are outdated by technological development, and how China's recent legal reforms fall short on online trademark enforcement. Finally, Parts V and VI will suggest an amendment to China's E-Commerce Law that includes social media platforms as e-commerce platform operators, with a hope to place a heavier burden on Chinese social media to assist in trademark enforcement. These sections will also suggest that China's experience may better prepare brands for their enforcement on other social media in light of the U.S.' recent efforts to strengthen e-commerce regulation.

2. SOCIAL MEDIA BRING OPPORTUNITIES FOR BRANDING, ACCOMPANIED BY CHALLENGES TO ONLINE TRADEMARK ENFORCEMENT.

   The emergence of social media allows luxury brands to better facilitate the word-of-mouth marketing approach. (17) Today, interpersonal communication about products and services is one of the most influential sources of marketplace information for consumers. (18) A 2018 report highlighted that 40% of luxury purchases are influenced by what consumers see online, which emphasizes the impact of social media and online channels on a luxury brand's visibility and reputation. (19)

   On the other hand, social media provide a powerful tool for luxury brands to survey the market for customer behaviors and trends. The latest fashion events, product launches, or celebrity appearances might spark customer discussions on social media. (20) Hashtags on social media also help luxury brands navigate and filter customer reviews or preferences. Accordingly, brands often use social media to monitor brand reputation via online influencers in order to attract customers that align with certain social values of the brands. (21)

   However, counterfeiters also benefit from the convenience of social media. Social media provide not only easy access, but also an anonymity shield that allows counterfeiters to evade identification. Even when its postings are removed or its account gets blocked, a counterfeiter can easily set up a new account in little time at no cost to continue selling fake products. (22) Furthermore, the sheer volume of counterfeit postings makes timely online monitoring and tracking extremely difficult. For example, it is estimated that Instagram might have as many as 95 million bot accounts posing as real accounts. (23) Many of these bot accounts upload an enormous amount of counterfeit postings every day, leading to chaotic user experiences. (24) These challenges make online trademark enforcement an unwinnable "whack-a-mole" game, where enforcers have limited whacking resources for unlimited moles. (25)

   Brands are exploring ways to identify counterfeiters. Typically, the identities of online counterfeiters are only known by the platform. (26) Yet given user privacy concerns, social media platforms are reluctant to reveal identifying information to law enforcement without a subpoena. (27) Most platforms implement a notice-and-takedown system that allows intellectual property right owners to report infringing conduct to the platforms. Take Facebook as an example. Currently, under Facebook's trademark infringement reporting policy, only a trademark owner can report infringing content to Facebook, and in response, Facebook will take down infringing content and inform the fraudulent poster about the report. (28) The policy does not mention surrendering any poster's information to the trademark owner, and thus fails to provide a mechanism for brands to identify counterfeiters. (29) As a result, brands cannot completely enjoin the counterfeiters from further unlawful activities, so instead they endlessly "whack the moles" by sending infringement reports to infinity and beyond.

   Civil litigation is another available yet imperfect approach. Because many of the most popular social media--including Facebook, Instagram, and Snapchat--are owned and operated by U.S. companies, brands may turn to the U.S. courts for help. Some federal circuits allow a plaintiff to use a fictitious name designation against an unidentified defendant when filing a complaint and then to amend the complaint after revealing the defendant's identity through discovery. (30) Some state court rules also allow such fictitious name designations. (31) In practice, trademark owners often subpoena social media platforms as third-party intermediaries with whom infringers engage. (32) However, even when involved in litigation, social media platforms may enforce their policies by prioritizing user information privacy over trademark owners' needs to enforce their rights. For instance, in...