Counterfeiting continues to be a serious problem for United States businesses. While concrete numbers are difficult to obtain, a Library of Congress report stated that global sales of counterfeit and pirated goods are estimated at between $1.7 - 4.5 trillion every year. In 2020, Customs and Border Protection (CBP) seized $1.3 billion worth of counterfeit goods. Fashion items such as handbags, wallets, clothing, accessories, watches, jewelry, and footwear comprised more than 50% of the seized goods. Electronics, health, and safety products are also a significant problem, especially pharmaceuticals. According to the European Union Intellectual Property Office (EUIPO) and Organization for Economic Co-operation and Development (OECD), 38% of counterfeit pharmaceuticals seized globally infringe on the intellectual property of US firms.
Counterfeiting Violates Copyright and Trademark Law
A counterfeit is a product that appears to be identical to another product. Counterfeits can violate both trademark and copyright laws. For example, a counterfeit bag typically infringes the brand owner’s trademark and may also violate copyright in a pattern or design.
The Trademark Act defines a “counterfeit mark” as a counterfeit of a mark that is registered on the principal register for the goods or services covered by the registration. 15 U.S.C. 1116.
The Trademark Act provides for enhanced remedies for counterfeiting. Standard remedies for trademark infringement include defendants’ profits, any damages sustained by the plaintiff, and court costs. In exceptional cases, a court can award reasonable attorney fees. 15 U.S. Code § 1117. For counterfeits, the court is instructed that, absent extenuating circumstances, it “shall” award three times such profits or damages, whichever is greater, and attorney’s fees.
The Trademark Act also permits a counterfeiting plaintiff to elect to recover statutory damages in lieu of establishing actual damages or profits. In such cases, the court can award between $1,000 and $200,000 per counterfeit mark per type of goods or services sold. If the court finds the counterfeiting was willful, it can award up to $2,000,000 per counterfeit mark per type of goods or services sold. 15 U.S.C. 1117(c).
Counterfeiting can also violate the Copyright Act. Courts can award actual damages, any additional profits of the infringer, or statutory damages. Standard statutory damages for copyright infringement range from $750 to $30,000 per work infringed, however, in cases of willful infringement, the court can award up to $150,000 per work infringed. In the case of a counterfeit, a near-exact replica may be sufficient to establish that the infringing imitation was intentionally, or “willfully,” made. Attorney’s fees may also be available provided a timely registration was obtained.
Neither statutory damages nor attorney’s fees is available for infringement of unpublished works commenced prior to registration or for infringement of published works commenced after first publication and prior to registration, unless the registration was made within three months of first publication. 17 U.S.C. 412.
Trademark and copyright counterfeiting can also give rise to criminal liability. Additional issues arise with regard to “gray market” goods, i.e. genuine goods manufactured for sale in one country that are sold in another country without the brand owner’s authorization.
Strategies to Combat Counterfeiting
The best way to proactively safeguard intellectual property is to identify and register your intellectual property with the federal government. This includes:
Registering your trademarks with the Patent and Trademark Office
Registering copyrights with Copyright Office
Recording trademarks and copyrights with Customs and Border Protection
Additional affirmative steps to develop an active enforcement program including ensuring that manufacturing contracts contain appropriate limitations and oversight, monitoring trademark applications, and monitoring brick and mortar and online infringements. Various online tools and services are available to search for online infringements, such as web scrapers, image search applications, and search engines.
When an infringement occurs, potential first steps include:
Sending a cease-and-desist or notice letter;
Sending a DMCA takedown;
Using platform-specific IP rights programs such as the Amazon Brand Registry, Amazon Project Zero, eBay Verified Rights Owner Protection, and the Alibaba IP Protection Platform; and
For small copyright claims, seeking relief under the Copyright Alternative in Small-Claims Enforcement Act (CASE Act).
Should the above methods prove insufficient, litigation may be necessary. In addition to the damages mentioned above, courts can issue injunctions to stop the infringement, seize or destroy the goods, and freeze the infringer’s assets. When injunctive relief may be desired, it is essential to act quickly.
Developing an effective litigation strategy to combat counterfeiting is complex and calls for experienced intellectual property counsel.