Counterfeiting – The challenge to Brand Owners and Manufacturers
1. The Problem
Manufacturers and brand owners strive to keep introducing their products to new regions. Hand in hand with this expansion of global commerce, an increase in counterfeiting has become a major challenge facing the industry.
Much of this is being propelled by the “borderless” internet which offers a simple platform on which to advertise fake goods and distribute them before they can be physically inspected by customers prior to purchase. The internet also provides a hiding place allowing counterfeiters to locate themselves in what they view as relatively safe jurisdictions (e.g. China, offshore jurisdictions), whilst they direct their advertising and sales to the EU or the US.
Indeed, the economic costs of counterfeiting and piracy are thought, even by conservative estimates, to exceed U.S. $100 billion dollars per year (World Intellectual Property Organisation (WIPO) 3rd Global Congress on Combating Counterfeiting and Piracy, Tuesday 30 January to Wednesday, 31 January 2007).
In addition to the economic loss that counterfeiting can cause, it can also damage the reputation which a company may have spent considerable time, effort and resource building up.
2. What tools can legitimate manufacturers and brand owners use to tackle unscrupulous counterfeiters?
Manufacturers and brand owners have the ability to create value in their products by utilising intellectual property rights (“IPR”). By having a sound IPR strategy, they can use the law as a tool against counterfeiters to enforce their rights in their products, designs, inventions, know-how and brands.
The main IP rights manufacturers and brand owners need to consider are:
- Trademarks
- Patents
- Copyright
- Design rights
- Confidential information and trade secrets
It is important to understand the distinctions between each of these IP rights. One must think of the territorial scope of such IP rights and certain IP rights have to be registered on a territory by territory basis (e.g. trademarks, patents, registered design rights). Other IP rights do not necessarily have to be registered and instead one should look to create an evidence trail which can then be used to establish exclusive rights which may be enforced against third party counterfeiters.
As a starting point, it might be worth carrying out an audit, together with input from legal advisors to establish what rights you have and what further steps can be taken to increase or extend your bundle of rights (e.g. registering trademarks across your most important commercial territories).
Investing in setting up, administering, registering and policing your IP rights will undoubtedly pay off in the long term as it will not only maximise your ability to enforce your rights against unscrupulous counterfeiters, but also increase the IP asset value of your company.
3. What should you do, if you suspect that your rights have been infringed?
In the first instance you should consider what your enforcement goals are. In the short term you may want to stop the known infringers immediately and maximise the amount of damages you can recover.
In the longer term, you may also want to create a deterrent effect by taking swift and firm action to prevent the dilution of the value of your brand and ultimately to reduce the number of fake goods being sold across various territories.
4. What other steps should manufacturers and brand owners take to counter IPR infringement?
Once you have set up your IPR protection platform and carried out the steps suggested above then the further following strategies should be considered:
- Set up global trademark watching services and oppose any potential third party applications which are identical or similar to your brand. Similarly, police and if necessary, oppose any third party applications for patents which may encroach upon your patent rights. The policing of brands and patents will help prevent the dilution of your rights in such intellectual property and send a strong message to would-be infringers.
- Establish global networks of legal, investigative and technical specialists who can use their collective resources and expertise to coordinate enforcement strategies across a number of different jurisdictions. This will ensure that quick and efficient action can be taken to detect, deter and publicise infringements by counterfeiters and in the rest of the counterfeit supply chain: the manufacturers, importers and retailers.
- Use technological measures to ensure that manufacturing and distribution can be tracked.
- Work with customs officers and trade bodies to stop the distribution of counterfeit goods across international borders and within local jurisdictions.
- Use third party investigators to collate your evidence and build up your case against any would-be or actual counterfeiters.
- Use the media to ensure that infringers are aware that their infringements are being tracked and that appropriate enforcement action will be taken against them.
- Work with your lawyers not only to enforce your intellectual property rights but also to obtain disclosures from suspected counterfeiters or other third parties who may have relevant information thus providing you with information on those involved in infringement of your intellectual property.
For further details on this topic please contact Tahir Basheer.
Issued April 2008.
