With the holiday season upon us, sometimes what you see (and buy) is not necessarily what you get. Holiday retail sales in 2016 grew to over $650 billion dollars spent by holiday shoppers on gifts, and 2017 promises even more retail activity. In fact, some economists have predicted over $680 billion dollars will be spent by holiday shoppers this season. That is a significant amount of retail spending, and sadly, a projection that does not go unnoticed by those seeking to take advantage of such holiday good cheer. I am referring to trademark counterfeiters and the counterfeit products that can sap holiday spirit — and the company coffers — faster than a cold look from Ebeneezer Scrooge.Counterfeiting is a huge problem — approximately $600 billion (yes, that’s $600 billion) in losses from counterfeit goods are estimated to have occurred in 2016 alone, and as of the time of this writing, that number will likely increase for 2017. From apparel and toys to electronics and even drugs, the sale and distribution of counterfeit goods is global, and every market is impacted by it. But what really is a counterfeit? Counterfeits come in many shapes and sizes, and are explained in a general sense as fraudulent imitations of genuine goods. When looked at in greater depth, however, there is far more to counterfeiting than meets the eye when it comes to IP.
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What many practitioners and executives don’t realize is that counterfeiting and trademark infringement are related but somewhat different concepts, and hurt the company in different ways. Trademarks refer to any name, logo or other descriptor used to distinguish one’s goods or services from those of another, and to designate the origin of the goods or services to which the trademark applies. Trademark counterfeiting most commonly occurs where a third-party knowingly and intentionally places the identical mark on its own goods and fraudulently sells such goods as the genuine article (referred to as “passing off’ or “palming off” the counterfeit goods as the real thing). In such instances, the identical mark is used to cheat consumers into thinking that they are purchasing genuine articles from the trademark owner. Make no mistake — this is done with an intent to deceive the consumer.
Infringement, on the other hand, deals with the use of a confusingly similar trademark to that of the trademark owner, for which there may be no intent to defraud. The relevant inquiry from an infringement standpoint is whether there is a likelihood of confusion to the ordinary consumer. As a result, trademark counterfeiting is a type of trademark infringement, but not all trademark infringement equates to counterfeiting. Further, unlike standard trademark infringement, counterfeiting can constitute a criminal offense — federal law actually prohibits certain types of fakes, such as currency and postage stamps to name a few.
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From a human perspective, counterfeiting hits home for consumers far more than trademark infringement. Unlike a third-party using a confusingly similar mark that may confuse consumers as to the origin of the products they see, counterfeiting is up close and personal to them — consumers can fall victim to the purchase of a counterfeit good, touching and feeling it as a genuine article only to be disappointed when they uncover that it is not the genuine product they thought. This problem has been exacerbated by the rise in internet sales, and is especially evident this time of year. In fact, the internet and commerce have helped drive the increase in counterfeit goods sold not only through resale websites (such as eBay), but through fraudulent websites as well. Combined with the ability to place ads and other content on social media to drive consumer engagement, the internet represents a potent medium that counterfeiters have embraced with abandon.
With the holiday shopping season in high gear, companies should not despair. In fact, the holiday season presents an opportunity to hone policing practices and engage counterfeiters on their own digital turf. Here are a few things that trademark owners should consider:
- Be Aware of Fraudulent Websites. Consumers are always looking for a deal, and counterfeiters play off of this desire by creating fake “outlet” and clearinghouse websites to redirect consumers to fraudulent websites thinking they are getting clearance items or simply great “close out” deals. Sadly, this is usually far from the truth. Moreover, social media sites such as Facebook (even Pinterest) are not immune, and should be policed for ads and other content designed to redirect consumers to offending products. Trademark policing should ramp up to include social media sites as well as additional domain names in addition to standard typo squatting techniques.
- Beware Third-Party Sellers Through Respected Online Portals. Most trademark owners do not realize the lengths to which third-party sellers will go to dump counterfeit products, and this includes “laundering” them through portals like eBay and Amazon. Although both eBay and Amazon continue to make strides in this area (such as eBay’s VeRo program and Amazon’s Brand Registry), there is no excuse for trademark owners not actively policing such marketplaces. Combining these efforts with a coordinated education program about counterfeit goods and how to spot them with respect to the company’s products will go a long way.
- Use Technology to Your Advantage. Policing Trademarks in the digital era requires more than just using trademark monitoring services — it requires a technological approach that can scour the internet and find patterns (such as website clusters that redirect large volumes of traffic, etc.) that can help companies investigate and shut down bad actors. Such investigation techniques through qualified providers and enforcement partners can do a great deal of good, and are worth the price.
The holiday season is no excuse to redirect efforts that result in fewer defenses against counterfeiters. In fact, this is the time of year to strike back at such bad actors with an active trademark policing strategy. Don’t let counterfeiters put coal in the company’s receivables this year — with a little vigilance and a lot of patience, you can keep these perennial “naughty listers” at bay and ensure a very prosperous and Happy New Year in the Process.
Best wishes for a very happy holiday season!
Tom Kulik is an Intellectual Property & Information Technology Partner at the Dallas-based law firm of Scheef & Stone, LLP. In private practice for over 20 years, Tom is a sought-after technology lawyer who uses his industry experience as a former computer systems engineer to creatively counsel and help his clients navigate the complexities of law and technology in their business. News outlets reach out to Tom for his insight, and he has been quoted by national media organizations. Get in touch with Tom on Twitter (@LegalIntangibls) or Facebook (www.facebook.com/technologylawyer), or contact him directly at [email protected].