How to Fight Counterfeit and Pirate Goods
March 8th, 2023
Counterfeit goods are products made to look like the real thing, such as fake designer fashion items.
The term “pirate” goods usually refers to things like movies, music, books, video games, and software that may be identical to the original version but which are copied, distributed, and/or sold without the intellectual property owners’ permission.
Counterfeiting is the largest criminal enterprise in the world, according to the US Library of Congress.
As of 2018, domestic and international sales of counterfeit and pirated goods totaled between an estimated $1.7 trillion and $4.5 trillion a year — more than either drugs or human trafficking.
About 80% of these counterfeit goods are produced in China, and 60% to 80% are bought by American consumers.
Sometimes, consumers know that what they’re buying isn’t “real,” like a fake Rolex bought from a street vendor. However, consumers may also unwittingly buy fake goods, sometimes endangering their health and safety.
The Library of Congress report notes counterfeit items can be found in personal care items, automotive, aircraft, and electrical parts, defense equipment, pharmaceuticals, foods, and beverages. Counterfeit Pond’s cream left one woman in a coma and fake vaping products have caused deaths and lung injuries.
The report states that
Research has found that counterfeiting and piracy costs U.S. businesses more than $200 billion a year and leads to the loss of more than 750,000 jobs. Estimates suggest that sales of counterfeit and pirated goods abroad displace sales in the United States, costing the U.S. economy around $29 billion a year.
Counterfeit goods can infringe intellectual property (IP) rights in a variety of ways.
• Copies of physical products can infringe patents and design patents.
• The unauthorized use of trademarks and logos can infringe trademark rights.
• Copyright can be infringed when the pirate work is a copy of a book, song, movie, etc. Copying marketing materials (including photos), manuals, and product text can also infringe copyright.
If your own business has been affected by counterfeiting, what can you do about it?
Various industry organizations fight piracy on behalf of their members. These include the Motion Picture Association, the Alliance For Creativity And Entertainment, and the Recording Industry Association of America. Joining one of these organizations can provide you with resources, information, and other help in fighting piracy.
There are also private anti-piracy companies that use technology to detect infringing content on the web. Other companies investigate sales of counterfeit goods at locations like flea markets and eBay.
Once you’ve learned that someone’s selling fake copies of your products, you can start by sending a cease-and-desist letter. You can either do this yourself or hire a lawyer to do it for you. Sometimes (especially if the letter comes on law firm letterhead) this will be enough to stop the infringing sales.
If the sales don’t stop, the cease-and-desist letter proves that the recipient had actual notice of the claimed infringement. A defendant found to have willfully infringed another’s IP rights may be required to pay up to treble damages, plus attorney’s fees, to the IP owner. If a seller continues to sell infringing products after receiving such a letter, the actions will likely be considered “willful.”
If the recipient of the letter doesn’t stop selling the infringing products, then the next step may need to be a federal lawsuit. Your business can seek an injunction to stop the sales of pirated goods, and you can also seek damages for the harm done to your business.
Very few of these cases go all the way to trial. Most are settled out of court.
When products that infringe patent rights are being sold on Amazon, Amazon’s Utility Patent Neutral Evaluation (“UPNE”) process is intended to be a quick and economical way to help patent owners.
As Amazon explains,
If you are a rights owner with a registered trademark, you may be eligible to enroll your brand in the Amazon Brand Registry. Amazon Brand Registry provides access to powerful tools including proprietary text and image search, predictive automation based on your reports of suspected intellectual property rights violations, and increased authority over product listings with your brand name.
This program only applies to utility patents (not design patents). Each party is required to pay a $4,000 deposit, which is returned to the winner of the dispute. If products are found to be infringing, they’re removed from Amazon.com.
As the National Law Review reported,
Amazon had notified Tineco, a Chinese company that manufactures and sells portable vacuums on Amazon, that Bissell had commenced a UPNE. Tineco then had three weeks to indicate whether or not it wished to contest Bissell’s claim. Tineco apparently ignored Amazon’s e-mail, however, resulting in Amazon automatically imposing “default judgment” against Tineco and removing their accused products. Unlike in Court, either party’s failure to meet Amazon-imposed deadlines in a UPNE results in termination of the proceeding in favor of the other party.
Local, state, and federal governments also get involved in fighting counterfeiting.
Federal government agencies responsible for enforcing intellectual property laws include:
- The U.S. Consumer Product Safety Commission
- The U.S. Food and Drug Administration (FDA)
- The Office of Intellectual Property Rights (OIPR)
- The Federal Bureau of Investigation (FBI)
- The U.S. Customs and Border Protection (CBP)
- The National Intellectual Property Rights Coordination Center (IPR Center)
The Trademark Counterfeiting Act of 1984 establishes that, under federal law, any individual who knowingly distributes, wholesales, or sells counterfeit merchandise faces substantial penalties:
- Imprisonment for the first offense up to 10 years and up to 20 years for repeat offenders
- Fines up to $15 million for corporations and $5 million for individuals who are repeat offenders
- Seizure and destruction of counterfeit merchandise
In August, New York City police confiscated from street sellers fake Gucci, Chanel, and Louis Vuitton bags, sneakers, and glasses with an estimated value of $2 million.
The US Department of Justice has also gone after IP pirates. In 2021, the U.S. Attorney’s Office for the Eastern District of New York announced that four defendants had been arrested in a multi-million-dollar counterfeit goods trafficking scheme.
The defendants allegedly imported generic goods into the US from China and then applied counterfeit labels.
Please contact our firm if you want to know more about how you can protect your IP and brands from counterfeiters.