Commercial trademark counterfeiting costs legitimate businesses billions of dollars annually, with experts broadly anticipating continued growth in the criminal counterfeiting industry. At Sullivan & Carter, LLP, we take the threat posed by counterfeit products seriously, and we are committed to helping our clients develop targeted anti-counterfeiting strategies that address their core product lines and customers. Call (929) 724-7529 today to set up a consultation with a member of our team.
While the general public may be most inclined to think of counterfeiting in terms of the unauthorized printing of currency, business owners whose financial success depends on the value of their brands know that the global market in counterfeit goods – that is, products labeled with a company’s distinctive trademark but not actually made, sold, or authorized by the company that owns the trademark – can be an even bigger problem, with the Organization for Economic Co-Operation and Development (OECD) putting estimates of the global sales volume in the hundreds of billions of dollars annually – money that is diverted, at least in part, from the balance sheets of the legitimate businesses that own the trademarks applied to counterfeit goods.
The cost differential that often exists between authentic and counterfeit goods means that there may not be a one-to-one correlation between illicit transactions and legitimate sales missed, particularly for non-essential items (in other words, consumers might not always make the purchase at the higher price point, so the number of transactions legitimate businesses have missed may not be fully equal to the number of transactions actually made involving counterfeit goods). Given the immense sales volumes involved, however, even a fraction of the total number of transactions could make a substantial difference in a company’s annual sales, whether measured by number of transactions or by total revenue.
In a report published in January 2023, the OECD also noted that counterfeiting represents an especially pernicious threat to small- and medium-sized enterprises (SMEs), which make up the majority of the businesses in OECD member nations and the overwhelming majority of businesses in the United States, according to the United States Small Business Administration (SBA) Office of Advocacy. These businesses, as the OECD report notes, are often in a difficult position with respect to effective trademark monitoring and enforcement, and may not have the expertise or the resources needed to designate “in-house” personnel for that work.
The work, however, is important. In addition to the economic challenges counterfeiting presents for businesses of all sizes, the global trade in counterfeit goods constitutes an ongoing security risk, at home and abroad. A 2021 economic working paper published by the World Intellectual Property Organization (WIPO) found that the presence in the global marketplace of counterfeit goods suppressed corporate investment in research and development (R&D) worldwide and in almost every product category examined, with a commensurate negative effect on net sales. These suppressive effects on the sale of legitimate goods and in corporate willingness to invest in R&D are accompanied by a brisk trade in goods illegally branded with a legitimate company’s trademark. As the National Intellectual Property Rights Coordination Center (NIPRCC) points out, the profits from the illicit sales of counterfeit products are often used to fund additional criminal activities, making counterfeiting an important component of an active, organized, and highly predatory criminal ecosystem.
The range of threats posed to the public by trademark counterfeiting operations at the level defined by the United States Trade Representative (USTR) as “commercial-scale” extend beyond the chance, or even the probability, that profits from illegal sales of counterfeit products will be funneled to benefit criminal or even terrorist enterprises. There are more mundane risks, as well.
As many business owners are already aware, the damages caused by counterfeiting are not limited to the dollar amounts of the total transactions involving the sale of fraudulently trademarked goods. Many of the most pernicious and lingering harms caused by counterfeiting relate to reputational damage – more difficult to track and quantify than sales volume or transaction numbers, but absolutely crucial to the long-term success of many brands. While some counterfeit goods may be virtually identical to their legitimately-designated counterparts (a circumstance that raises its own set of difficulties for enforcement), there is always the risk that a party unscrupulous enough to attempt to pass off their own goods as the products of another business – thereby capitalizing on the legitimate company’s good name – will also be ready to put up for sale items that have been produced and packaged without proper quality controls, and without due regard for consumer safety. Depending on the type of good in question, these nefarious actors may even endanger public health by presenting – under the trademark of a trusted company with a well-earned reputation for quality – adulterated formulas and products made with cheap materials that may be not only flimsy, but actually hazardous to human health.
The amount of reputational damage that can be inflicted when public trust is compromised and consumers begin to associate a brand’s trademark not with the high standards for quality the trademark owner has set for the company’s products, but with the “knock-offs” that are at best disappointing and at worst actually dangerous, becomes almost incalculable. In the event of trademark litigation, an unfortunate part of an intellectual property (IP) lawyer’s job is to perform precisely those calculations necessary to arrive at a reasonable estimate of the total losses the client has experienced and will continue to experience as the brand seeks to rebuild a deserved reputation for excellence that has been weakened by bad actors. At Sullivan & Carter, LLP, we are always ready to make these calculations and present our estimates to a court if necessary – but we much prefer anti-counterfeiting strategies that save our clients from ever incurring the damages that make time-consuming and potentially costly trademark litigation necessary.
IP attorneys can often play a substantial role in anti-counterfeiting efforts. Broadly speaking, intellectual property lawyers are typically positioned to support the development of anti-counterfeiting strategies in three key areas:
Individual attorneys may work on one or two of these areas. However, the global IP landscape is complex, and the reality is that an astute intellectual property attorney will need to be aware of not only their own clients’ immediate trademark protection needs but also the emerging technologies and criminal counterfeiting strategies that may pose a threat to clients’ interests.
Lay people may not always be aware of the role IP lawyers can play in legal advocacy, but there are numerous opportunities for both legal professionals and members of the general public who take an interest to participate in the discussions that shape public policy. For instance, in 2023 the United States Patent and Trademark Office (USPTO) held a roundtable event to glean and discuss insights on anti-counterfeiting and anti-piracy strategies and emerging tools from stakeholders across a wide array of industry and interest areas. This type of strategy solicitation helps officials to formulate the policies they will propose for public comment and potential legislation or executive adoption. Some intellectual property attorneys even contribute to such initiatives as the WIPO’s standing platform for legislative assistance, contributing advice and perspectives that help to inform the policy directions of WIPO member states.
The area of legal professionals’ anti-counterfeiting work with which business owners may be most familiar relates to the litigation of trademark infringement, and the aggressive enforcement of trademark owners’ IP rights. An experienced trademark attorney operating within the United States will be aware that one of the primary advantages of an active USPTO trademark registration as far as anti-counterfeiting is concerned is the opportunity to subsequently “record” the trademark with the United States Customs and Border Protection (CBP).
Pursuant to a report delivered to the Office of the President in early 2020, the United States Department of Homeland Security (DHS) has over the past few years implemented significantly more comprehensive and aggressive policies for CBP with respect to the identification of counterfeit goods entering the United States marketplace. In the wake of this implementation, IP attorneys who work with any of the many clients whose trademarks are vulnerable to infringement through the bustling international trade in counterfeit goods may wish to protect their clients’ intellectual property rights (IPR) by taking advantage of the CBP’s IPR recordation program to partner with domestic law enforcement to identify counterfeit goods and eliminate them from the marketplace. For similar reasons, and in line with the policy recommendations collected in the DHS report, IP attorneys may develop working relationships with the peers and internal officers at e-commerce retailers who are tasked with vetting third-party sellers and their goods. Partnering with government officials and corporate officers can significantly facilitate non-litigative or pre-litigative efforts to minimize potential damages.
Working with CBP officials and e-commerce retailers to identify counterfeit products and ensure that items reported as counterfeit are promptly removed from online marketplaces can represent an important element in an IP attorney’s role, these anti-counterfeiting strategies rely on responding to counterfeit products that have already effectively entered circulation. Legal action can sometimes be pre-emptive, as when a party anticipating injury petitions a court for injunctive relief – but trademark litigation that seeks an award of damages will typically do so on the basis that the plaintiff (in this instance, the owner of the trademark) has already been injured by the defendant’s infringement (in this instance, the production and distribution of counterfeit goods). In trademark protection as elsewhere it is usually true that preventing damage is better than trying to remedy it after the fact, and so many trademark attorneys will make it a priority to develop a robust trademark monitoring system in place to help identify potential trademark infringements and other threats to their clients’ IPR as early as possible. The most appropriate steps to take for trademark monitoring and enforcement can vary, so consider speaking with an IP attorney in your area who can advise you on your options.
The global trade in counterfeit goods is an ongoing problem with the potential to negatively impact legitimate businesses and trademark owners at every scale and at all points of the supply chain. At Sullivan & Carter, LLP, our passion for IPR management keeps us constantly abreast of the latest anti-counterfeiting strategies, and we work with clients to develop robust systems to monitor for trademark infringement, report potential instances of counterfeit goods, and work with corporate and law enforcement partners to remove from local and global marketplaces items that violate our clients’ exclusive trademark rights. Schedule a consultation with our Chicago-based firm today to discuss your needs by calling (929) 724-7529.
Add your email below to receive the latest news, tips, and information from Sullivan & Carter, LLP.
Add your email below to receive the latest news, tips, and information from Sullivan & Carter, LLP.
