Counterfeiting: What Is It and What Can You Do About It?

Whenever I hear the word “counterfeiting” I think about the scene in the desert in To Live or Die in L.A., where they show up to shut down the counterfeiters only to find nothing left but a washing machine.  The far less gritty definition of counterfeiting though, related to counterfeit merchandise and services, is something that impacts many of us on a regular basis.

What is counterfeiting, you ask?  There are many different definitions – this one from Wikipedia is good as any to outline the term:  “…Counterfeit products are fake replicas of the real product. …The word counterfeit frequently describes both the forgeries of currency and documents, as well as the imitations of clothinghandbags,shoespharmaceuticals, aviation and automobile parts, watcheselectronics (both parts and finished products), software, works of arttoysmovies.[1] Counterfeit products tend to have fake company logos and brands.”  Counterfeit goods are copies of your legitimate products.  They are sold by others to trade on your goodwill or other IP rights.  In many cases as the notoriety of your company and your brands increases, so does the temptation for people to copy or trade on the goodwill and value of your IP rights and planning to deal with counterfeit products is one area in which many companies can benefit from the deployment of some resources.

What types of products or services might be copied? Virtually anything – everything from the widely anticipated counterfeit consumer fashion goods such as clothing or the like, through to construction materials, safety products and others (I spoke once to a fellow who found out he had a copycat furnace in his house!).  Services can also on occasion be copied  – for example the copycat Apple store in China in which by reports the staff all thought they were working for the real company.  Appreciating the scope of the counterfeiting problem, you might ask yourself what you can do to minimize or avoid its impact on your business.  As with many IP-related business decisions, the resources you dedicate to awareness and enforcement in the counterfeiting area will vary but a starting point is to understand some of the options that you have at your disposal to detect or fight back against these problems.

Grey market goods are products manufactured by you but which are not authorized for sale in a particular market – for example if a distributor in one country to whom you ship product moves it for sale in another market in which you have another exclusive distributor. The product itself is legitimate, but is not authorized for sale in that territory. There are steps which can be taken to provide the best possible legal scenario to deal with grey market scenarios, although a good measure of common sense and positive working relationships with all your channel partners is often the best way to minimize these situations!

Monitoring:

One of the first key elements for a business seeking to implement an anticounterfeiting program is to establish rigorous monitoring in the markets of interest. The monitoring program can become more complex as the geographic footprint of your business expands into multiple countries. Your staff or local distributors in corners of the market can provide feedback and periodic information about what they see in the marketplace, and in certain cases you may also wish to retain local legal counsel or investigative help to proactively monitor activity or particular parties in the marketplace to identify when counterfeit goods or services are entering the market. The best information possible results in your best ability to enforce your rights.

 A related issue in terms of monitoring or establishing an enforcement framework is to ensure that any contracts that your company enters into with local companies, manufacturers, distributors, agents and the like establish the proper relationship of those companies to assist you with monitoring and enforcement as well as to minimize the ability of those companies to themselves become sources of grey or black market goods in the marketplace.  Establishing this documentary framework is something that you can work on with your counsel, to ensure that the extent possible you have created precedent documents and contract templates that you are using that support your monitoring program. You will also potentially need to rely on local legal counsel in the market of interest to ensure that the contract language which is created is best enforceable Oreos most efficiently drafted for the local legal framework of that country.

Enforcement:

Once you have implemented a monitoring program, or a counterfeit or infringement matter comes to your attention, you next need to develop an enforcement strategy.  You will typically have many different options at your disposal to try to stop it.  Depending upon the jurisdiction and severity of the situation, you may have a civil remedy at your disposal (ie. you could sue the counterfeiter or the vendor of the counterfeit goods for infringement of your IP rights), or in some countries and circumstances there is even a criminal avenue by which a criminal case of counterfeiting can be reported.  In Canada there are civili and criminal options available to consider although most rights holders would at present likely find themselves in the civil route for enforcement of their rights.  You can and should rely on your IP lawyer to give you some help to understand and frame your enforcement approach, since the decision is complicated by the type of business, the country or jurisdiction, the severity of the counterfeiting or infringement, and other factors.  Depending upon the level of enforcement that you elect to undertake as well as the potential geographic dispersion of your market again, you may even wish to leave standing enforcement instructions with your local counsel or representatives so that they can upon detection of the presence of counterfeit merchandise simply proceed with enforcement without the need to delay and hopefully in that fashion most quickly intervene.

Border control:

One of the primary means in many countries to exclude infringing products from the marketplace are customs and border enforcement mechanisms which exist allowing for the seizure or destruction of infringing goods at the national borders by customs officials. Many export markets, including the United States, have such a scheme in place, and they provide one of the simplest means of local market enforcement where available. In order to use these border control mechanisms it is most often the case that you will need to have registered  your trademarks or other IP rights locally, so given the time involved in completing those registration steps it is best to be prepared in advance. Canada does not currently have such a simple border control mechanism in place, but there is currently federal legislation pending.  The availability and accessibility of border control programs varies  and again there is the need to rely on local legal advice to make sure the best possible approach is taken  to interface the governmental border control mechanisms in particular jurisdictions with your own civil or criminal enforcement program.

Copy protection:

Some of the measures which can be taken to minimize the possibility or impact of a counterfeiter on your products and operations include maintaining tight control over your manufacture and distribution channel through appropriate contracts, as well as in some cases copy protection or detection of origin schemes can be implemented, so that with your brand or legitimate products, their source or authenticity can be verified.  There are many different types of copy control or  rights management systems which can be implemented from very simple to very sophisticated. In terms of sophisticated systems, for example, in polymer manufacturing, trace ingredients have been placed in plastic to allow for tracking of the origin of the plastic. In computer software everyone is aware of the various types of digital rights management or license management schemes which are typically implemented with respect to software programs. There is a strong vendor support industry in this area and to the extent that your company wishes to incorporate some type of a copy protection or  control mechanism into your day-to-day distribution plan you can find a lot of good help in this area.

To summarize, there are a number of steps which can be taken to best prepare to deal with possible counterfeit or copycat presence:

  • Ensuring proper distribution or channel contracts, dealing with IP ownership;
  • Registration of selected trademarks, patents or other IP rights;
  • Awareness of local law and requirements for use of customs interdiction or other local enforcement mechanisms;creation and implementation of a internal policing mechanism to detect counterfeit merchandise or services, including building awareness amongst your personnel; and
  • Implementation of copy protection or other schemes to help with identifying original product.

Companies addressing some of these issues in their market development plans will be best positioned to protect, exploit and maximize their own IP positions as their businesses grow. You know what they say about an ounce of prevention…