6 Jul
2020

How to take counterfeiters down (cheaply) during a pandemic

Lewis Roca Rothgerber Christie LLP

The economic crisis following covid-19 has pushed rights enforcement down company agendas, while unwary online consumers in lockdown make easy prey for counterfeiters. With litigation slow, costly and unlikely to succeed, there are quick and easy ways to thwart the fakers.

In a perfect world – particularly from a trademark attorney’s perspective – brand protection and IP enforcement programmes would have unlimited budgets. Most businesses appreciate the benefits of investing in brand development and policing the use of confusingly similar marks to avoid the loss of their trademark rights. This may even extend to an obligation. In the United States, a duty to police one’s mark is rooted in the analysis of likelihood of confusion, which requires a consideration of the strength of the mark, or whether third-party use has diminished the mark’s ability to provide source identification in all districts, the USPTO and the Federal Circuit. In this hypothetical perfect world, cease and desist letters, often followed when necessary by district court litigation, would be used to keep the slate clean and brands as strong as possible.

In 2020, as we face the covid-19 global pandemic, the economic landscape is far from perfect, and the reality is that brand protection is fairly low on most companies’ priority list. Meanwhile, consumers under stay-at-home orders are now doing the bulk of their shopping online and have no opportunity to inspect products before making a purchase. As personal budgets have been affected, consumers are searching for discounts and deals, and they may be less likely to question an advertisement for sales at significant markdowns. This has provided a golden opportunity for counterfeiters, who have seized on the vulnerabilities of consumers and rights holders. Moreover, counterfeiters are rarely responsive to cease and desist letters, and are usually willing to take the risk of litigation.

But all hope is not lost for brand owners on tighter budgets that need quick results. A variety of lower cost alternatives to full cease and desist letters (and litigation) can often be used to effectively erase counterfeiters from the Internet, protecting the brand and consumers.

Social media and third-party marketplace enforcement

Counterfeiters seeking to trick consumers into buying knock-off products, often at deep discounts, frequently use Instagram, Facebook and Twitter. Social media accounts are a popular choice for offering counterfeit products as creating a social media account costs nothing other than the time spent doing so. Counterfeiters devise creative usernames (often incorporating a variation on a company name or trademark), adopt company logos as their profile pictures and use hashtags to drive consumers to their accounts. Fortunately, these social media platforms have mechanisms for reporting trademark and copyright infringements and tend to act quickly on infringement reports.

The basic requirements for submitting infringement reports are:

  • registered trademark rights in the pertinent jurisdiction (if the location of the user is unknown, trademark rights in any jurisdiction are often sufficient for an infringement report – if the geographic location of the infringing account can be determined, social media platforms typically require proof of trademark rights in that jurisdiction);
  • a link to an example of the trademark owner’s use of its own mark online;
  • links to the offending posts or account on the social media platform;
  • an explanation of the infringing use; and
  • a verified statement that the use is not authorised by the trademark owner, the information in the report is accurate and the person submitting it is authorised to act on the owner’s behalf.

Trademark reports are only available where the identified account is used for commercial purposes. A personal account displaying images of a product that they purchased but not offering the product for sale would not give rise to an action. Trademark reports often result in the disabling of an entire account, as opposed to the removal of individual posts, particularly where a trademark appears in a username or profile picture. A report including links to multiple postings of counterfeit products will also often result in removal of an account for repeated violations of the platform’s terms of use.

Copyright infringement reports do not need to show commercial use, but they often result in the individual post being removed as opposed to suspension of an account, and therefore may require additional follow-up with the platform, as users may find it easier to repost images that have been taken down after a report. However, if the user simply reposts the images, multiple reports of violations will often result in suspension of an account as noted above. Copyrighting creative logos may provide trademark owners with another powerful anti-counterfeiting tool. While this is not favoured by the US Copyright Office, sufficiently creative logos are eligible for protection, and the costs of filing an application for copyright protection are low.

Third-party marketplaces, such as Amazon, Walmart and eBay, often have similar infringement reporting mechanisms for brand owners to submit infringement reports. Before submitting an infringement report, a discreet purchase of the products offered for sale is often required to confirm that the product is counterfeit and not a resold genuine product.

DMCA takedown notices

The Digital Millennium Copyright Act (DMCA) provides another quick mechanism for disabling a website offering counterfeit items for sale. Many counterfeiters are lazy, and they will often clone portions of the rightful brand owner’s website or steal images from it to hawk their counterfeit products. Under US law and for purposes of the DMCA, the brand owner’s website and images on it are all protected by copyright, regardless of whether copyright registration is obtained. And, as mentioned above, brand owners may also seek copyright protection for artistic logos.

The DMCA creates safe harbour provisions that shield service providers from having to pay out monetary damages for their users’ infringements of copyright. However, to benefit from this protection, service providers must comply with notice and takedown procedures that allow copyright owners to quickly remove infringing content. Because the stakes are high, service providers, particularly those in the United States, often respond quickly to DMCA takedown notices.

For standalone websites, a DMCA takedown notice to the service provider (the owner of the IP address on which the website is hosted) often results in speedy disabling of the website or, at a minimum, the removal of any copyrighted images. For unauthorised images on third-party platforms such as Amazon and eBay, DMCA takedown notices sent directly to the platform are highly effective, as the platforms are also susceptible to liability under the DMCA and therefore have an incentive to act on the notice.

Domain disputes

To make a sale, the counterfeiter must first attract users to the product website. Mobile browsing and shopping have made things easier for counterfeiters, which can dupe prospective purchasers with even a nonsensical domain name by relying on click-through advertisements and an expectation that consumers will never see the domain name on their device. Even so, counterfeiters often purchase domain names that are similar to the brand owner’s name or trademarks to make detection of the illegitimate website less likely.

Condensed domain name proceeding disputes, such as the UDRP, are available to seek transfer of a domain name that is confusingly similar to an owner’s mark. The UDRP, which covers the vast majority of domains, requires a mark owner to prove the following:

  • The domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights.
  • The registrant has no rights or legitimate interests in the domain name.
  • The domain name has been registered and is being used in bad faith.

Where counterfeit products are being sold at the subject domain name, the second and third elements are met. The first element may be established if a portion of the domain incorporates the owner’s trademark or a confusingly similar mark (eg, a typosquatting version of the mark).

UDRP proceedings are available for all gTLDs, including ‘.com’ and ‘.org’, and new TLDs, including ‘.biz’, ‘.pro’ and ‘.shop’. A UDRP complaint can be filed with WIPO or the National Arbitration Forum and would typically be resolved in one to two months. Counterfeiters are rarely interested in spending attorneys’ fees to fight a UDRP complaint, so a decision is often rendered based on the facts in the complaint and the domain transferred to the trademark owner.

For domains with ccTLDs that have not adopted the UDRP (eg, ‘.us’ and ‘.de’), many have separate dispute resolution policies governed by their respective registration agreements.

Educating consumers

Brand owners may also want to consider developing campaigns that educate consumers in identifying counterfeits from real products. This kind of ‘look-for’ advertising can prove particularly useful for marks that are not yet registered, and can help to promote brand integrity. Educating consumers on the qualities of products and whether they are sold only through authorised retailers can equip consumers with information to help them avoid purchasing counterfeit products and develop trust in the brand.

Gary J Nelson

Partner

[email protected]

Gary J Nelson is a partner in Lewis Roca Rothgerber Christie’s Los Angeles office and a member of the IP practice group. He handles matters including the prosecution and maintenance of large international corporate trademark portfolios in the fashion, sports and entertainment, food, computer software and hardware, and office supply industries and is involved in the enforcement and defence of trademark, copyright and patent rights for his clients, as well as being an expert in trademark, copyright and patent licensing. Mr Nelson has been lead counsel on over 150 trademark opposition/cancellation proceedings before the TTAB and has filed hundreds of UDRP complaints with the National Arbitration Forum and WIPO to force the transfer of ownership of contested domain names. Mr Nelson is also a domain name arbitrator panellist for WIPO.

Sami I Schilly

Associate

[email protected]

Sami I Schilly is an associate in Lewis Roca Rothgerber Christie’s IP practice group. Her broad practice includes patent, trademark and copyright prosecution and litigation. Ms Schilly has represented clients before the USPTO, PTAB, including inter partes review proceedings, TTAB, district courts and Federal Circuit. She also has extensive experience in internet-based IP matters, including Digital Millennium Copyright Act takedowns and enforcement, and UDRP procedures and domain name portfolio management. Before attending law school, Ms Schilly worked as a design engineer for Chevron, providing plant support for multiple refinery units, including the fluid catalytic cracking unit and the coking unit, where she provided lead mechanical engineering support during multiple partial shutdowns.