INTERNET MARKETING OF COUNTERFEIT GOODS

DEVELOPMENTS, ISSUES AND PERSPECTIVE ON ANTICOUNTERFEITING EFFORTS

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SCOPE OF THE PROBLEM OVERALL, SALE OF COUNTERFEIT GOODS COST US BUSINESSES $250 BILLION AND 750,000 JOBS IN 2007

(OECD)

$133 BILLION IN COUNTERFEIT GOODS SOLD ONLINE IN 2009

ONLINE DISPLAY ADS: $7.6 BILLION SEARCH AD SPENDING: $10.5 BILLION

UP TO 15% DIVERSION FROM AUTHENTIC GOODS AND SITES

EBAY: 100 MILLION LISTINGS; 6 MILLION NEW PER DAY.

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IMMIGRATION AND CUSTOMS ENFORCEMENT STATS

14,841 seizures in 2009

ICE SEIZED MORE THAN $260 MILLION IN COUNTERFEIT APPAREL IN APRIL 2010

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CURRENT PRIVATE ENFORCEMENT EXAMPLES  

TIFFANY/EBAY NORTH FACE & POLO

LVMH/GOOGLE LVMH/ISPS LVMH/EBAY

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TIFFANY/EBAY •  TIFFANY "LOST" AGAINST EBAY IN THE US. (2D CIR.

08-3947 JULY 16, 2009) •  TIFFANY FOUND OVER 70% OF EBAY LISTINGS OF

"TIFFANY" ITEMS COUNTERFEIT. •  EBAY MADE OVER $4 MILLION IN 2004 FROM LISTINGS

WITH TIFFANY IN THE TITLE. •  EBAY SPENDS AS MUCH AS $20 MILLION ANNUALLY ON

TRUST AND SAFETY. FRAUD ENGINE. COMPLAINTS. VERO PROGRAM. EBAY ALSO SUSPENDS SELLERS

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TIFFANY/EBAY • NO DIRECT INFRINGEMENT. EBAY USED TIFFANY MARK TO DESCRIBE ACCURATELY THE GENUINE GOODS OFFERED FOR SALE. NO SUGGESTION THAT EBAY WAS AFFILIATED WITH TIFFANY. • NO CONTRIBUTORY INFRINGEMENT: BASED ON INWOOD (456 US 844). IF A MANUFACTURER OR DISTRIBUTOR INTENTIONALLY INDUCES ANOTHER TO INFRINGE A TRADEMARK OR IF IT CONTINUES TO SUPPLY ITS PRODUCE TO ONE WHOM IT KNOWS OR HAS REASON TO KNOW IS ENGAGED IN TRADEMARK INFRINGEMENT.

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TIFFANY/EBAY • CRITICAL TO AN ENFORCEMENT PROGRAM: INWOOD APPLIES TO A SERVICE PROVIDER WHO EXERCISES CONTROL OVER THE MEANS OF THE INFRINGING CONDUCT. SERVICE PROVIDER MUST HAVE MORE THAN A GENERAL KNOWLEDGE OR REASON TO KNOW THAT ITS SERVICE IS BEING USED TO SELL COUNTERFEIT GOODS. BUT GENERAL KNOWLEDGE OF COUNTERFEITING IS NOT ENOUGH. MUST BE SPECIFIC AS TO INDIVIDUAL SELLERS.

• THIS PROVIDES LEVERAGE AGAINST ISPS AND AUCTION SITES TO PULL DOWN INFRINGING MATERIAL

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TIFFANY/EBAY •  A SERVICE PROVIDER IS NOT PERMITTED TO HIDE ITS HEAD

IN THE SAND. WHEN IT HAS REASON TO SUSPECT THAT USERS OF ITS SERVICE ARE INFRINGING, IT MAY NOT SHIELD ITSELF FROM LEARNING OF THE PARTICULAR INFRINGING TRANSACTIONS. NO WILLFUL BLINDNESS HERE.

•  FALSE ADVERTISING CLAIM WAS REMANDED. TRIAL REQUIRED ON WHETHER THE EBAY ADS SUGGESTED THAT ALL GOODS WERE GENUINE. FLIP SIDE OF NO DIRECT INFRINGEMENT.

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NORTH FACE AND POLO • OBTAINED EX PARTE TRO AND SEIZURE ORDER IN SDNY IN MARCH 2010 (10 CV 1630) • 130 WEBSITES SELLING COUNTERFEIT GOODS TO US THRU UP TO 6500 DOMAIN NAMES. • NUMEROUS BRANDS, INCLUDING DIOR, ED HARDY, GUCCI, PAUL SMITH AND ABERCROMBIE. • AS MUCH AS $780,000 PER MONTH IN FAKE POLO AND NORTH FACE. USES COPYRIGHTED IMAGES AS WELL. • PROFITS OF $200 PER WEBSITE PER DAY. • NEW BUSINESS MODEL, MAXIMIZES PROFITS AND MINIMIZES RISK. • ABLE TO TRACK SOME ASSETS THRU PAYPAL AND WESTERN UNION.

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LVMH V. GOOGLE (EU) 

• GOOGLE DID NOT VIOLATE TM LAW BY ALLOWING ADVERTISERS TO BUY KEYWORDS CORRESPONDING TO REGISTERED NAMES. BUT ADVERTISERS WHO BUY SUCH KEY WORDS MUST MAKE CLEAR WHERE THE GOODS THEY ARE SELLING ORIGINATE. SEARCH FIRM CAN BE HELD LIABLE IF IT HAD KNOWLEDGE OF THE UNLAWFUL NATURE OF AN ADVERTISER’S ACTIVITIES AND FAILED TO ACT EXPEDITIOUSLY TO REMOVE OR DISABLE ACCESS TO THE DATA CONCERNED. • SIMILAR RESULT TO TIFFANY/EBAY

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LVMH V. ISPS (CA) 

AUGUST 2009: LVMH AWARDED $32.4 IN STATUTORY DAMAGES IN A CONTRIBUTORY TRADEMARK AND COPYRIGHT INFRINGEMENT CLAIM AGAINST CALIFORNIA-BASED ISP WEBHOSTING COMPANY AKANOC SOLUTIONS INC. LVMH’S INVESTIGATORS PURCHASED COUNTERFEIT GOODS FROM WEBSITES HOSTED BY AKANOC. LVMH DEMANDED THAT AKANOC REMOVE IDENTIFIED WEBSITES THAT DISTRIBUTED COUNTERFEIT LOUIS VUITTON PRODUCTS. AKANOC REMOVED SOME BUT NOT ALL OF THESE SITES.

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LVMH V. EBAY (FRANCE) 

LVMH WON IN FRANCE AGAINST EBAY REPEATEDLY.

JUNE 2008: EBAY WAS ORDERED BY A FRENCH COURT TO PAY LVMH ALMOST €40 MILLION RELATING TO THE SALE OF COUNTERFEIT GOODS ON EBAY. THE RULING ALSO PROHIBITS THE SALE OF LVMH PERFUMES ON EBAY.

NOVEMBER 2009: EBAY FINED TOTAL OF €1.7 MILLION BY A PARIS COURT FOR FAILING TO HALT SALES OF LVMH PERFUMES ON ITS FRENCH WEBSITE.

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LVMH V. EBAY (FRANCE) 

FEBRUARY 2010: COURT FOUND THAT EBAY HARMED THE IMAGE OF LVMH BY PAYING TO HAVE INTERNET SEARCHES THAT INCLUDED MISSPELLINGS SOMETIMES USED TO SELL COUNTERFEIT GOODS DIRECTED TO ITS SITE. A PARIS COURT ORDERED EBAY TO PAY LOUIS VUITTON €200,000 IN DAMAGES AND TO STOP PAYING SEARCH ENGINES TO DIRECT CERTAIN KEY WORDS TO THE EBAY SITE. LVMH WILL ALSO RECEIVE €1,000 FOR EVERY FUTURE VIOLATION, ACCORDING TO THE RULING, WHICH IS APPLICABLE ONLY IN FRANCE.

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DESIGNING A SUCCESSFUL PROGRAM 

•  IDENTIFY GOALS –  STOP COUNTERFEITING ACTIVITY –  FUND THE PROGRAM –  GO AFTER SITES THAT CAN BE SHUT DOWN AND

DEFENDANTS WHO CAN PAY

•  HOW MUCH TIME AND MONEY CAN YOU AFFORD? •  HOW BIG IS YOUR PROBLEM? •  VENDORS V. DIY PROGRAMS

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DESIGNING A SUCCESSFUL PROGRAM • VENDORS SUCH AS MARK MONITOR AND OPSEC • IACC MEMBERSHIP • MANUAL METHODS OF PROTECTION, SUCH AS SEARCH ENGINE QUERIES AND GOOGLE ALERTS • EBAY VERO PROGRAM: ALLOWS OWNER OF REGISTERED IP RIGHTS TO FILE NOTICE OF CLAIMED INFRINGEMENT FORM. EBAY REMOVES WITHIN 24 HOURS. ALSO CANCELS AUCTION OR CANCELS TRANSACTION.

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DESIGNING A SUCCESSFUL PROGRAM REGISTER TRADEMARKS AND COPYRIGHTS WITH USPTO AND THEN WITH CUSTOMS

MANAGE DOMAIN NAME PORTFOLIO IDENTIFY FULL PORTFOLIO OFFENSIVE AND DEFENSIVE REGISTRATIONS STRATEGIC ACQUISITIONS PRE-LAUNCH

IMPORTANT TO IDENTIFY SITES SELLING COUNTERFEIT GOODS

ALSO MONITOR FOR CYBERSQUATTING, INFRINGEMENT, TRAFFIC DIVERSION AND FALSE ASSOCIATIONS

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DESIGNING A SUCCESSFUL PROGRAM MONITOR EBAY, YAHOO, CRAIGSLIST, AMAZON AND FLEA MARKET SITES, ETC. FOR SALE OF COUNTERFEIT GOODS. • PRICING • COMPARE PHOTOS AND TEXT WITH AUTHENTIC • DISCLAIMER, NO RETURN OR AS IS POLICIES • LARGE LOTS • REVIEW TAGS FOR WRONG COUNTRY OF ORIGIN, COLOR, LOT REFERENCE, SIZE • MAY NEED TO BUY • DETECTION DEVICE

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DESIGNING A SUCCESSFUL PROGRAM WEBSITE REPORTING FORMS TRAIN CUSTOMS AND LAW ENFORCEMENT; USE C&D LETTERS GROUP ACTIONS LOCAL LAW ENFORCEMENT

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BASICS: WHAT IS A COUNTERFEIT?

SECTION 45 OF THE LANHAM ACT, 15 U.S.C. § 1127, DEFINES A "COUNTERFEIT" MARK AS "A SPURIOUS MARK WHICH IS IDENTICAL WITH, OR SUBSTANTIALLY INDISTINGUISHABLE FROM, A REGISTERED MARK."

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WHAT IS A COUNTERFEIT? 

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15 USC § 1116(D)(1)(B) ALSO DEFINES "COUNTERFEIT MARK" (FOR INJUNCTIVE PURPOSES) AS A COUNTERFEIT OF A MARK THAT IS REGISTERED ON THE PRINCIPAL REGISTER IN THE UNITED STATES PATENT AND TRADEMARK OFFICE FOR SUCH GOODS OR SERVICES SOLD, OFFERED FOR SALE, OR DISTRIBUTED AND THAT IS IN USE, WHETHER OR NOT THE PERSON AGAINST WHOM RELIEF IS SOUGHT KNEW SUCH MARK WAS SO REGISTERED; OR A SPURIOUS DESIGNATION THAT IS IDENTICAL WITH, OR SUBSTANTIALLY INDISTINGUISHABLE FROM, A DESIGNATION AS TO WHICH THE REMEDIES OF THIS ACT ARE MADE AVAILABLE BY REASON OF SECTION 220506 OF TITLE 36, UNITED STATES CODE; BUT SUCH TERM DOES NOT INCLUDE ANY MARK OR DESIGNATION USED ON OR IN CONNECTION WITH GOODS OR SERVICES OF WHICH THE MANUFACTURE OR PRODUCER WAS, AT THE TIME OF THE MANUFACTURE OR PRODUCTION IN QUESTION AUTHORIZED TO USE THE MARK OR DESIGNATION FOR THE TYPE OF GOODS OR SERVICES SO MANUFACTURED OR PRODUCED, BY THE HOLDER OF THE RIGHT TO USE SUCH MARK OR DESIGNATION.

KEY POINTS ON COUNTERFEITS

•  GENUINE MARK MUST BE REGISTERED ON PRINCIPAL REGISTER

•  THE COUNTERFEIT MARK MUST BE IDENTICAL WITH OR SUBSTANTIALLY INDISTINGUISHABLE FROM – INTENDED TO PREVENT ESCAPING LIABILITY BY MODIFYING A MARK IN TRIVIAL WAYS, BUT NOT INTENDED TO CAPTURE CASES IN WHICH THE INFRINGEMENT IS ARGUABLE, LESS THAN CLEAR OR MERELY REMINISCENT OF THE PROTECTED MARK.

•  THE COUNTERFEIT MARK MUST BE USED ON THE GOODS AND SERVICES AS TO WHICH THE AUTHENTIC MARK IS REGISTERED. (ALSO EXTENDS TO LABELS ETC. USED ON SUCH GOODS AND SERVICES FOR CRIMINAL LIABILITY.)(18 USC §2320)

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KEY POINTS ON COUNTERFEITS

•  AUTHORIZED USE IS A DEFENSE. THUS, OVERRUN GOODS ARE NOT COUNTERFEIT.

•  GREY MARKET GOODS ARE ALSO NOT COUNTERFEIT •  REPACKAGED GOODS MAY BE COUNTERFEIT IF PUBLIC WAS

DECEIVED OR GOODWILL WAS DAMAGED (SUCH AS BY PRESENTING FRAUDULENT INFO, LIKE US LOT NUMBERS AND MARKINGS TO SUGGEST FDA APPROVAL)

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CIVIL ENFORCEMENT

MAKING A PROGRAM PAY FOR ITSELF: FIRST, CHOOSE THE CORRECT C&D TARGETS AND DEFENDANTS

STATUTORY DAMAGES WILLFULNESS

RECAPTURE OF PROFITS EX PARTE TROS

TREBLING ATTORNEYS' FEES

PREJUDGMENT INTEREST INJUNCTIONS

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STATUTORY DAMAGES UP TO $ 2 MILLION PER MARK PER TYPE OF GOODS  FOR WILLFUL VIOLATIONS (15 USC § 1117(C), (D))

NON-WILLFUL: NOT LESS THAN $1,000 OR MORE THAN $200,000 PER COUNTERFEIT MARK PER TYPE OF GOODS OR SERVICES SOLD, OFFERED FOR SALE, OR DISTRIBUTED, AS THE COURT CONSIDERS JUST

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WILLFULNESS WILLFUL IS WHETHER DEFENDANT HAD KNOWLEDGE THAT HIS CONDUCT WAS INFRINGING OR PERHAPS RECKLESSLY DISREGARDED THE POSSIBILITY.

NO WILLFUL BLINDNESS: WHEN A DEFENDANT – SUCH AS A WEB HOST OR AUCTION SITE – HAS REASON TO SUSPECT THAT USERS OF ITS SERVICE ARE INFRINGING, IT MAY NOT SHIELD ITSELF FROM LEARNING OF THE PARTICULAR INFRINGING TRANSACTIONS.

15 USC § 1117(E): REBUTTABLE PRESUMPTION OF WILLFUL VIOLATION FOR DOMAIN NAME VIOLATIONS

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RECAPTURE OF PROFITS • IMPORTANT FOR SUCCESSFUL PROGRAM • SPLIT IN CIRCUITS RE: WHETHER WILLFULNESS IS REQUIRED • 15 USC § 1117 (A): WHEN A VIOLATION OF ANY RIGHT OF THE REGISTRANT OF A MARK REGISTERED IN THE PATENT AND TRADEMARK OFFICE, A VIOLATION UNDER SECTION 1125 (A) OR (D) OF THIS TITLE, OR A WILLFUL VIOLATION UNDER SECTION 1125 (C) OF THIS TITLE, SHALL HAVE BEEN ESTABLISHED IN ANY CIVIL ACTION ARISING UNDER THIS CHAPTER, THE PLAINTIFF SHALL BE ENTITLED, SUBJECT TO THE PROVISIONS OF SECTIONS 1111 AND 1114 OF THIS TITLE, AND SUBJECT TO THE PRINCIPLES OF EQUITY, TO RECOVER (1) DEFENDANT’S PROFITS, (2) ANY DAMAGES SUSTAINED BY THE PLAINTIFF, AND (3) THE COSTS OF THE ACTION.

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EX PARTE TROS 15 USC § 1116(D)(1)(A): IN THE CASE OF A CIVIL ACTION …WITH RESPECT TO A VIOLATION THAT CONSISTS OF USING A COUNTERFEIT MARK IN CONNECTION WITH THE SALE, OFFERING FOR SALE, OR DISTRIBUTION OF GOODS OR SERVICES, THE COURT MAY, UPON EX PARTE APPLICATION, GRANT AN ORDER UNDER SUBSECTION (A) OF THIS SECTION PURSUANT TO THIS SUBSECTION PROVIDING FOR THE SEIZURE OF GOODS AND COUNTERFEIT MARKS INVOLVED IN SUCH VIOLATION AND THE MEANS OF MAKING SUCH MARKS, AND RECORDS DOCUMENTING THE MANUFACTURER, SALE, OR RECEIPT OF THINGS INVOLVED IN SUCH VIOLATION.

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EX PARTE TROS REQUIRED SWORN SHOWING

• NOTICE TO US ATTORNEY • SECURITY FOR WRONGFUL SEIZURE OR RESTRAINT • CLEAR AND CONVINCING

OTHER REMEDY INADEQUATE NOT PUBLICIZED LIKELY TO SUCCEED IMMEDIATE IRREPARABLE HARM LOCATION OF GOODS TO BE SEIZED SHOWN HARM TO APPLICANT OUTWEIGHS LEGITIMATE INTERESTS OF

DEFENDANT DEFENDANT WOULD SECRET GOODS IF NOTICE GIVEN

• ELEMENTS OF ORDER SPECIFIED BY STATUTE

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TREBLING 15 USC § 1117(B): THE COURT SHALL, UNLESS THE COURT FINDS EXTENUATING CIRCUMSTANCES, ENTER JUDGMENT FOR THREE TIMES SUCH PROFITS OR DAMAGES, WHICHEVER AMOUNT IS GREATER, TOGETHER WITH A REASONABLE ATTORNEY’S FEE, IF THE VIOLATION CONSISTS OF— (1) INTENTIONALLY USING A MARK OR DESIGNATION,

KNOWING SUCH MARK OR DESIGNATION IS A COUNTERFEIT MARK (AS DEFINED IN SECTION 1116 (D) OF THIS TITLE), IN CONNECTION WITH THE SALE, OFFERING FOR SALE, OR DISTRIBUTION OF GOODS OR SERVICES; OR

(2) PROVIDING GOODS OR SERVICES NECESSARY TO THE COMMISSION OF A VIOLATION SPECIFIED IN PARAGRAPH (1), WITH THE INTENT THAT THE RECIPIENT OF THE GOODS OR SERVICES WOULD PUT THE GOODS OR SERVICES TO USE IN COMMITTING THE VIOLATION.

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ATTORNEY’S FEES

UNDER 15 USC § 1117(A) OR (B): A: EXCEPTIONAL CASE B(1) INTENTIONALLY USING A MARK OR DESIGNATION, KNOWING SUCH MARK OR DESIGNATION IS A COUNTERFEIT MARK IN CONNECTION WITH THE SALE, OFFERING FOR SALE, OR DISTRIBUTION OF GOODS OR SERVICES; OR (2) PROVIDING GOODS OR SERVICES NECESSARY TO THE

COMMISSION OF A VIOLATION SPECIFIED IN PARAGRAPH (1), WITH THE INTENT THAT THE RECIPIENT OF THE GOODS OR SERVICES WOULD PUT THE GOODS OR SERVICES TO USE IN COMMITTING THE VIOLATION.

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PREJUDGMENT INTEREST

IN GENERAL AND ALSO UNDER 15 USC § 1117(B)

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INJUNCTIVE RELIEF COURTS HAVE THE AUTHORITY TO GRANT INJUNCTIVE RELIEF UNDER THE LANHAM ACT "ACCORDING TO THE PRINCIPLES OF EQUITY AND UPON SUCH TERMS AS THE COURT MAY DEEM REASONABLE, TO PREVENT THE VIOLATION OF ANY RIGHT OF THE REGISTRANT OF A MARK REGISTERED IN THE PATENT AND TRADEMARK OFFICE OR TO PREVENT A VIOLATION" UNDER SECTION 43(A) OF THE LANHAM ACT. 15 U.S.C. § 1116(A). IN GENERAL, A PLAINTIFF MAY OBTAIN A PERMANENT INJUNCTION IF IT SHOWS (1) "ACTUAL SUCCESS ON THE MERITS" AND (2) "IRREPARABLE HARM." AS TO IRREPARABLE HARM, CASE LAW ESTABLISHES THAT "PROOF OF A LIKELIHOOD OF CONFUSION ESTABLISHES BOTH LIKELIHOOD OF SUCCESS ON THE MERITS AND IRREPARABLE HARM."

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