These days, you can’t search for a product online without having to dig through multiple ads from Temu and other e-commerce sites—with prices too good to be true—appearing first over competing retailers. If you watched this year’s Super Bowl, you couldn’t miss the three Temu commercials. Perhaps you even wondered what the company was. While Temu started as an offshoot of a major Chinese e-commerce site Pinduoduo, selling deeply discounted goods directly from their Chinese manufacturers, the company has morphed into an A.I. e-commerce website copying the designs of countless U.S.-based retailers, both large and small. Two class-action lawsuits have recently been filed against Temu, alleging the company failed to safeguard customers’ personal data and misled users. Temu responded to the allegations with a statement of denial and intention to fight the lawsuits, but these legal challenges just scratch the surface of broader concerns for business owners.
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As an inventor, entrepreneur and small business owner with multiple patents, I’ve experienced firsthand the impact of the economic battle we are fighting against Temu and similar foreign companies undercutting domestic businesses due to the U.S. government’s lenient policies. As a creator on TikTok, I have a front-row seat to the behind-the-scenes e-commerce corruption that typically involves unethical practices and fraud. For example, some companies post fake positive reviews to boost their product ratings or negative reviews to harm competitors. Counterfeit or unauthorized replicas of well-known branded products are also common across these platforms. These tactics deceive consumers and violate intellectual property rights, exploiting trademarks, logos, pictures and deceptive pricing strategies.
The U.S. government has fueled economic growth for foreign countries by allowing foreign businesses to steal our intellectual properties to make counterfeit and copycat imposter products without recourse. These companies exploit the differences in legal systems and enforcement between countries, a very expensive issue for small businesses. While domestic businesses can file lawsuits and send cease and desist letters to companies infringing on their patents, it’s often a waste of time and money. Usually, the companies shut down once they receive such a letter. Others rebrand as a new entity and continue infringing on our patents. As this cycle repeats, the copycat companies get richer, and the patent holders continue to lose time, business, sales and profits, as our intellectual property is stolen. Small businesses cannot file cease and desist letters to hundreds or thousands of e-commerce shops. While there are laws for a business to track down these criminals, e-commerce websites or online shops can be a moving target, often backed by large marketing machines. Stronger international IP laws, better enforcement mechanisms and increased cybersecurity measures to track and shut down all infringing e-commerce operations as soon as they open on the web are critical to mitigate this growing issue.
On top of that, shipping prices for foreign businesses can be less than half of what is charged to domestic companies. The current terms of the Universal Postal Union (UPU) Treaty inadvertently created a loophole for foreign companies, especially international e-commerce businesses, to ship from overseas for considerably less than U.S.-based counterparts pay to ship domestically.
For example, international shippers, including those from China, pay $2.87 per package and $3.95 per kilogram (about 2.2 pounds) for shipping to the U.S. As a U.S.-based business, shipping my Liddle Speaker domestically costs between $5.00 and $7.00 for a package that weighs only half a pound. These considerably lower shipping costs give foreign businesses an unfair advantage regarding pricing and, ultimately, business revenue. The U.S. government has implemented fair trade policies to protect domestic industries from unfair competition and ensure a level playing field on big-ticket items like steel and automobiles. However, online e-commerce shopping is where foreign companies can slide under the radar with lower costs and capture significant market share in the U.S., leading to the decline of domestic firms that cannot compete on price. Increased competition from foreign companies can put downward pressure on wage stagnation or job reductions to remain competitive.
The widespread impact on American business owners has been so great that I have met with the United States Patent Office to discuss just how detrimental this issue is to inventors and to work towards a solution. Although we were offered an attorney and reminded that we could file a cease and desist, our case felt swept under the rug. These foreign operations are largely unstoppable, as billions of packages slip under the radar by shipping directly to consumers, evading U.S. customs offices that monitor container shipments rather than individual USPS packages. Foreign companies take advantage by not paying tariffs on their shipped goods and simply rebrand and reopen under a new name if they get caught. The UPU Treaty allows these practices to continue, and A.I. tools further enable the rapid creation of new e-commerce websites and stores. Unfortunately, The UPU Treaty also allows foreign companies to ship copycat products through e-commerce sites like Temu undetected, with no regulation on what is being shipped at discount prices. As technology, especially A.I., outpaces regulatory frameworks, urgent reforms must address these vulnerabilities.
Inventors and business owners cannot win the fight for sales unless we push back on the U.S. Post Office, U.S. Patent Office and Congress to act more responsibly with A.I. and technology. Government leaders need to be educated on how foreign companies exploit loopholes to ship undetected counterfeit products through Temu and similar e-commerce websites.
The U.S. government should strengthen legal frameworks and enforce online corruption by harmonizing IP laws to address the challenges of digital and global e-commerce online marketplaces. Working with international partners to establish robust cross-border IP enforcement mechanisms is crucial. E-commerce platforms should have to verify the authenticity of products and sellers before listing (counterfeit) goods. The U.S. Patent Office should implement cybersecurity measures to protect IP and supply chains from digital threats, using A.I. to monitor and delist a product immediately. Increasing consumer protection and awareness of the risks of counterfeit products is essential. By implementing these recommendations, policymakers can mitigate the threats posed by e-commerce websites infringing on intellectual property and disrupting supply chains, thereby protecting economic interests and fostering a fair and competitive market environment.
