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Three ways to beat counterfeiters

Frustrated with traditional approaches, some brand owners are succeeding with new anticounterfeiting strategies. James Nurton spoke to Jennifer Hamilton of Major League Baseball about three recent developments.

Your client’s brands are being infringed, with factories in Asia shipping thousands of counterfeit goods to customers in the U.S. and Europe. You’ve sent cease-and-desist letters, worked with customs to detain infringing goods and even conducted some daring raids in China. There’s not much more you can do, right?

Wrong, says Jennifer Hamilton of MLB Properties, who has put together today’s panel on alternative approaches to combating counterfeiters. She argues that brand owners are being more creative in tackling the menace of counterfeits sold on rogue websites and distributed by mail worldwide. “Brand owners have found the standard approaches were not enough,” she says, pointing to the scale of the problem, the ease of distribution and the low penalties. “It’s become difficult to deal with that and it’s like Wack-a-Mole: more and more keep popping up.”

Tomorrow’s session will therefore look at three new techniques used by brand owners in the battle against counterfeits. It will feature a brand owner, a government representative and outside counsel, each of whom will discuss a recent successful anticounterfeiting effort.

ITC action

The first strategy discussed will be the use of the International Trade Commission (ITC) to block infringing goods being imported into the U.S. While the ITC is well known as a forum for patent disputes, particularly in the high-tech area, it also hears cases involving other IP rights.

There have been about five recorded trademark final determinations at the ITC, all of them general exclusion orders. Most recently, Red Bull won a general exclusion order barring grey market RED BULL energy drinks from entering the U.S.

On March 5 this year, the ITC issued an initial determination recommending a general exclusion order against counterfeit Louis Vuitton products. The company had filed a motion for summary determination of a Section 337 (intellectual property) violation naming several respondents based in China, and requested a general exclusion order barring all goods in violation of eight of the company’s trademarks for its Toile Monogram marks (used on the company’s handbags, luggage and accessories).

Chief Administrative Law Judge Charles Bullock granted the request, saying that because a pattern of Section 337 violations has been identified and it is difficult to determine the source of the infringing products, a general exclusion order—as opposed to the more common limited exclusion order, which offers remedy against infringing goods made by the named respondents only—is appropriate. The ITC order is an initial determination and must be upheld by the full Commission. This is however likely as all of the respondents in the case have so far failed to turn up.

Valérie Sonnier of Louis Vuitton/LVMH Fashion Group in France will discuss the case today, and Hamilton said she is looking forward to hearing about it: “Louis Vuitton is very much at the forefront of trying new ideas and are leading the way. Valérie will explain how they brought the case, how it was conducted and what other brand owners can learn.”

The 150-paddle game

The second strategy to be discussed today will be working with payment providers to shut down websites selling counterfeit goods and then seize the infringer’s revenues. In some cases, brand owners have been able to shut down more than 100 domains with one action, and seize the proceeds stored in PayPal accounts. While individually these may not amount to much, collectively they can raise more than enough to pay for the cost of enforcement. Scott Gelin of Greenberg Traurig, will discuss this trend in tomorrow’s session.

Hamilton says this approach is a cost-effective way for brand owners to tackle the problem of online counterfeit sales, and cumulatively such cases can have an impact: “Every time you disrupt the counterfeiter’s chain and increase its cost of doing business it just makes it that much more difficult.” The problem of counterfeiters simply setting up new sites remains, but mass actions shift the balance of power to the brand owner. “It’s still playing Wack-a-Mole but with 150 paddles instead of one,” she adds.

The panel will also discuss how best to work with payment providers and whether a system similar to eBay’s VeRO can be implemented.

Government actionThe third and equally important part of the counterfeiting counter-attack is the role of government and that will be addressed by Rana Saoud, of the National Intellectual Property Rights Coordination Center.

The IPR Center has been active in tackling so-called rogue websites over the past two years, and has been able to seize more than 700 of them. However, as with private actions, the problem has often been that the counterfeiters simply use a new domain.

But in a landmark case last month, U.S. authorities seized nearly $900,000 from bank and PayPal accounts used to store the proceeds from selling counterfeit sports jerseys. The seizures, obtained following a court order, came against domain name operators in China whose sites had been shut down in 2010 but who had simply set up new domains. The investigation was conducted by the Intellectual Property Rights Coordination Center and ICE’s Office of Homeland Security Investigations.

Follow the money

“These have all been really positive developments and should have some impact,” says Hamilton. She adds that they show that the anticounterfeiting battle is most effective when it goes beyond simply taking down websites and hits the infringers in the pocket: “When you get to the money, that’s when you have the most impact.”

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