The counterfeit lawsuits that scoop up hundreds of Chinese Amazon sellers at once

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…
The counterfeit lawsuits that scoop up hundreds of Chinese Amazon sellers at once

“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 force them to negotiate with you to take their money back.”

Staking trademark violation claims

Chinese products have long been associated with counterfeiting and intellectual-property theft. This is not without cause. In 2022, 60% of the counterfeit goods seized at US borders, by value, came from China. 

But IP rights and counterfeiting have become much blurrier concepts in the age of third-party e-commerce markets. Traditionally, counterfeit goods profit off established brand names by riding on their name recognition. Not all trademarks are recognizable names, though; some just look like descriptive terms.

In November 2020, PopSockets, a US company that designs phone cases and other accessories, applied to trademark the term “airbag” under the category of “hand grips, stands, mounts, and cases adapted for handheld electronic devices.” The company has products that use air-filled components, but examples of the word’s use to describe similar features also existed before the trademark. The application was approved a year later, on November 9, 2021. 

Sun Qunming says she had used the word “airbag” before to describe other phone cases she sold without causing any trouble. And she admits she didn’t check whether it was trademarked this time. “If it’s an uncommon word, we will look it up in the trademark database to see whether it’s registered. But in terms of ‘airbag,’ the reason why I didn’t look it up was because I thought it was just a descriptive term. You see it everywhere,” she says. 

The plaintiff, however, claimed in the lawsuit that defendants like Sun “deceive unknowing consumers by using the POPSOCKETS Trademarks without authorization … to attract various search engines crawling the Internet looking for websites relevant to consumer searches for PopSockets Products.” PopSockets declined to comment for this story.

These sorts of lawsuits first appeared on the radar of Eric Goldman, a law professor at Santa Clara University School of Law and co-director of the High Tech Law Institute, in 2021. A German company that owns and licenses the word “emoji,” he discovered, had sued an estimated total of more than 10,000 e-commerce sellers from 2020 to 2021. Some of the parties sued had simply used the word to describe a product that actually included the image of an emoji. But the court decisions are working in its favor. In one of the dozens of cases, the judge found the copyright claim too expansive but nevertheless awarded the owner $25,000 in statutory damages from each of the 231 sellers being sued. 

Goldman, in a paper published in March, calls this type of lawsuit a “Schedule A Defendants Scheme” (or “SAD Scheme”). When these cases are filed, the names of defendants are put into a document, Schedule A, that is often immediately made confidential at the request of the plaintiff. As a result, the cases can involve hundreds of sellers at the same time, yet the sellers don’t know who else is being sued, and they usually don’t know they are being sued themselves until the court orders Amazon to freeze their accounts.