Anti-Counterfeiting Strategies for Luxury Retail Brands - Stefanini

Anti-Counterfeiting Strategies For Luxury Retail Brands

The rise of internet channels has coincided with a surge in the sale of counterfeit. In the luxury sector alone Certilogo shows that one in four products sold today is a fake, and if this trend persists counterfeiters will take a third of the Fashion and Luxury market to the detriment of brands, of their customers and of sustainability initiatives.

Furthermore, the sale of counterfeit luxury goods only represents a portion of the illicit trade. For consumers, counterfeit products are often of low quality and hazardous; for companies, such products usurp market share and can damage a firm’s reputation. These strategies are essential for brands looking to combat counterfeits, protect their consumers and defend their IP.

What’s the economic impact of counterfeiting on luxury brands? Click here to find out.

Legal History of Brand Protection Measures

Counterfeiting is defined as the unauthorized manufacturing of products masquerading as genuine products by copying certain features and it remains harmful to both consumers and companies alike. While we normally think about counterfeiting in terms of major international brands and luxury goods with extensive brand portfolios, smaller brands can also be targets and victims of this crime, with potentially substantial short and long-term costs.

The sale of counterfeit goods boomed in the aftermath of the COVID-19 pandemic, making it more critical than ever to defend customers through brand protection measures. Consumers are turning to online shopping to buy all their essential and non-essential needs. This economic transition opens up more opportunity for counterfeiters to profit from rising demand.

The Lanham Act (codified at 15 USC Section 1051) and the Trademark Counterfeiting Act of 1984 are two federal statutes that govern anti-counterfeiting enforcement in the United States (codified at 18 USC Section 2320). The Lanham Act provides civil remedies for fighting against counterfeiting and trademark infringement, while the Trademark Counterfeiting Act makes certain violations of the Lanham Act’s anti-counterfeiting provisions federal offenses. While there are other state and federal laws that impose civil and criminal liability for counterfeiting, these two statutes provide the foundation for most anti-counterfeiting enforcement proceedings.

A counterfeit mark, according to the Lanham Act, is “a spurious mark that is identical to or substantially indistinguishable from a registered mark” (15 USC Section 1127). A successful trademark-counterfeiting claim under federal law requires the ownership of a valid US trademark registration. In addition, this definition necessitates a greater degree of similarity between the marks than the ‘likely of confusion’ criterion used in most trademark infringement cases. The mark must be substantially similar to or virtually indistinguishable from the registered mark to be considered “counterfeit.” Consequently, grey market items are not considered counterfeit, and their distributors and dealers are not subject to prosecution.

Additional remedies to combat counterfeiting are possible under this more strict threshold, in addition to those available for trademark infringement. For example, firms can engage in legal actions, invest in training and technology, or vertically integrate their retailers.

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What are Anti-Counterfeiting Strategies?

There is no single solution for brand protection measures. Beyond the ease with which counterfeiters can copy digital assets, often the very feature that define brand make them targets for illegal imitation. Louis Vuitton, for instance, remains on the top targets of counterfeiting in the luxury sector as the brand has changed relatively little since its inception 150 years ago.

Companies that want to protect their clients and brand during this crisis should take a comprehensive approach that includes anti-counterfeiting and brand protection measures customized to their specific demands in the marketplace, such as the tactics listed below.

  • International Counter-Claims: Even if a counterfeiter is located outside of the United States, certain US legal mechanisms may be accessible to resolve case-related issues in the United States. A US court may have jurisdiction over counterfeiting activities if the counterfeiter uses a US-based intermediary (i.e., a payment processor, financial institution, Internet Service Provider [ISP] , e-commerce site, or domain registrar) (including by freezing any US-based accounts).
  • John Doe Countersuits: In the United States, trademark owners can also sue counterfeiters whose identities are unknown, referring to them as ‘John Doe’ defendants in a lawsuit. This enables the trademark owner to conduct discovery in order to determine the counterfeiter’s identity. This could involve third-party intermediaries who the counterfeiter has worked with (i.e. ISP’s, domain registrars and shipping companies).
  • The Digital Millennium Copyright Act: DMCA and US trademark case law both provide a safe harbor shielding certain online intermediaries whose facilities are used by infringers from contributory liability if those intermediaries follow a notice-and-takedown procedure for responding to rights holders’ infringement reports. To take advantage of these safe harbors, ISPs and e-commerce companies with major US contacts will normally delete infringing content after receiving an infringement notification from a rights holder. The safe harbors do not apply if the intermediary is involved in the counterfeiting activity directly or is aware of it but chooses to disregard it.
  • Domain IP Infringement: When a counterfeiter sells counterfeit goods on a rogue website with an infringing domain name, the trademark owner can ask for the domain name to be transferred or cancelled through litigation (under US law) or arbitration (relying on the UDRP or similar mechanisms). In criminal enforcement programs like the National Intellectual Property Rights Coordination Centre’s Operation in Our Sites, domain names may also be taken by US law enforcement.

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Preventative Brand Protection Measures and Strategies

Certain preventative actions are part of an effective, multi-dimensional anti-counterfeiting strategy. To begin, the brand owners should register key trademarks and copyrights with the United States Patent and Trademark Office and the United States Copyright Office, respectively. The U.S. Customers and Border Control (CBP) should be informed of trademarks and copyrights. Brand owners should continuously provide these agencies with additional information to ensure they can adequately determine a product’s authenticity.

In addition, trademark owners should do the following:

  1. Conduct an internal brand protection audit.
    • Companies must assess how well their key brands and products are secured in terms of legal protection, including an assessment of contracts for management of supply chain and distribution channels.
  1. Register key intellectual property rights.
    • Combine and layer intellectual property rights where appropriate. Make sure to register and update all key intellectual property rights in countries where your products are sold, manufactured, and assembled. For many e-commerce sites and online marketplaces, registered intellectual property is a prerequisite for enforcement programs or to take down a fraudulent listing.
  1. Monitor important online marketplaces and platforms, as well as high-risk brick-and-mortar locations, for suspected counterfeit products or hire a vendor who can do the same. This can include both internet monitoring and physical monitoring.
    • Online monitoring – Structured internet searches for evidence of infringing behavior are crucial. Use the processes provided by e-commerce and social media marketplaces to de-list or remove infringing listings or websites on a regular basis. Many businesses use third-party vendors, which can save money in the long term.
    • Physical monitoring – while these efforts should remain within reason, companies should have structured programs to determine whether customer orders are being fulfilled with authentic products and monitor products that are returned to determine if they are authentic and trace their so-called origins. Here are a few examples of sites companies should monitor:
      • Trade shows and swap meets.
      • Major retailers store locations.
      • Supervise the audit and investigation of manufacturing facilities.
      • The purchase products from seemingly legitimate sites.
  1. Increase engagement and collaboration with industry, government, and nongovernment organizations. Maintain communication with key law enforcement offices (i.e. relevant CBP, the National IPR Centre, and the White House Intellectual Property Enforcement Coordinator).
    • U.S. Customs & Border Protection (CBP) – Companies should record their intellectual property with U.S. Customs & Border Patrol, particularly the Center of Excellence for each trademark owner’s industry. Brand owners can work with CBP to develop anti-counterfeiting strategies like product identification guides that are updated on a regular basis or in-person training so that officers at Ports of Entry will be able properly identify IP infringing goods.
    • U.S. International Trade Commission (ITC) – Companies should think about the ITC when deciding where to spend enforcement money because of its proven effectiveness. When compared to federal district court enforcement actions aimed at reducing the same imports, the ITC can be a great value.
    • Federal Court – Companies can seek remedy through action in Federal Court if counterfeiters can be traced back to the United States. A company can go to court and obtain emergency injunctive relief through a temporary restraining order and/or a preliminary injunction, which can facilitate the following:
      • Seizure and destruction of counterfeit goods.
      • The removal of infringing websites.
      • The discovery of counterfeiting and financial data.
      • The eventual recovery of monetary settlements or judgments, using registered intellectual property and the evidence gathered through the above investigative techniques.
  1. Targeted enforcement by collaborating in law enforcement trainings and criminal raids with other rights holder organizations.
    • Collaborate with legal counsel who has handled and managed intellectual property and brand enforcement initiatives to decrease the impact of counterfeiting, illegal price gouging, fraud, and other infringements.
    • Collaborate with lawyers to send cease-and-desist letters to infringers. Various levels of enforcement should be considered if these efforts do not resolve the matter, or as particular counterfeiting operations are detected. Specific enforcement actions usually entail far more in-depth investigations to track counterfeits down to their source, with individual and government action taken as a result.
  1. Educate your customers.
    • Due to the ease with which counterfeiters can steal digital assets and copy brand features, consumers may not realize they are purchasing fakes. Inform your customer base about what to look for and how to verify that the goods they are buying are authentic. This is an excellent approach to safeguard your customers while simultaneously increasing client loyalty.

Enable your Brand Protection Strategy with Stefanini

There is no single solution for stopping counterfeiters. Building robust anti-counterfeiting strategies demands a systematic review across both physical and virtual sales locations.

Stefanini brings innovation and co-creation to everything we do. We’ll help you unlock the potential of AI and automation to enable expansive brand protection and winning customer experience strategies. Speak with an expert today!

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