Tag: Intellectual Property

The other shoe has dropped! At least it has in the world of counterfeit pharmaceuticals. Since early in the pandemic, the US has faced a significant and still ongoing wave of counterfeit PPE entering the country from abroad. A recent Wall Street Journal article confirms what had been feared for months; a rise in the availability of counterfeit Covid-19 vaccines.  Albeit the counterfeit doses were found in Mexico and Poland, it does not portend well for the efforts to reign in the pandemic around the world.

To understand the situation, we must look at a fundamental truth when it comes to counterfeits. It is one that has been repeated for years by the brand owner community; counterfeiters are not modern-day Robin Hoods. They line their own pockets with no regard whatsoever for public health and safety. This sad fact remains true now more than ever.

Let’s look at the fundamentals of the equation, counterfeiters trade upon the success of trusted brands regardless of commodity or category.  Their sole purpose is to monetize that success and the public’s desire or need to their own profit. In this instance, the public worldwide is seeking vaccinations from pharmaceutical brands which have held clinical trials and vetted the product through national safety agencies. In order to slow or stop the pandemic, the detrimental impact on healthcare systems and subsequent high mortality rates, vaccines have to be trusted and effective. Unfortunately, the counterfeiters have thus far met the need for vaccines with vials full of anti-wrinkle solution or distilled water.

The counterfeit vaccines both give the public a false sense of security when administered and undermine public trust in the overall vaccination process.  The combined efforts of brand protection teams and law enforcement led to the seizure of the counterfeit products, however not before some doses were distributed in Mexico.  Obviously, it is important that both law enforcement and the pharmaceutical companies continue to monitor the situation on various platforms and throughout the nether world of counterfeiting. The seriousness of the situation has not escaped anyone as this cooperation has become paramount to avoid mass vaccinations utilizing ineffective and possibly dangerous counterfeit vaccines.

We too have a role to play to keep the counterfeit vaccines from being sold and distributed anywhere in the US. If you come across a solicitation or offer for sale of vaccine, report it immediately to law enforcement. In the US, the National IPR Center is leading the fight on Covid-19 related fraud and continues its pro-active enforcement efforts. If you see vaccine available outside the normal channels, report it. If you come across vaccine that appears to be stored improperly or outside standard storage methods, do not be afraid to report it. World governments are racing to provide the vaccine at no cost to their citizens; someone offering vaccines at a $1,000.00 per dose is more interested in their own gain rather than the health and safety of entire populations.  Never underestimate the callousness of counterfeiters to trade upon fear and misery. Our future depends on a new, better informed understanding of the implications of counterfeiting on us and the world.

The INFORM (Integrity, Notification, and Fairness in Online Retail Marketplaces) Consumers Act was introduced on the Senate floor on March 23, 2021.

This bill would require greater accountability and transparency from the e-commerce marketplaces that act as intermediaries between buyers and sellers.

The legislation requires online marketplaces to disclose to consumers basic information about high-volume third-party sellers, including the seller’s name and address, email address, telephone number. Violators would be subject to civil penalties.

High-volume third-party sellers are defined in the Act as vendors who have made at least 200 sales totaling at least $5,000 over a 1-year period.

In addition, the proposed legislation requires online marketplaces to provide customers with a hotline to report spurious activity i.e.: the sale of counterfeit, stolen or otherwise dangerous merchandise.

The Federal Trade Commission is charged with implementing the requirements of the legislation.

The Act is supported by the brand-owner community and viewed as a positive step in the fight against counterfeiting.

What’s On the Horizon for Brand Owners

The INFORM Act is the latest in a series of efforts to combat online counterfeiting. Bipartisan bills have been introduced in both the House and the Senate. As we previously reported, the SHOP SAFE Act of 2020 also incentivizes e-commerce platforms to adopt best practices to reduce the presence of counterfeit products on their sites. E-commerce sites that fail to adhere to the steps would be held liable.

As more brands increasingly transition from traditional brick and mortar to online retail, we will continue to see an increase in the sale of counterfeits goods online. Combating counterfeit sales is timely and costly for brand owners. While e-commerce platforms have started to implement policies to manage counterfeit sales, contributory liability puts the burden of responsibility on the both the counterfeit seller and the platform. These practices will begin to create incentives for online retailers to be more diligent and proactive.

Gibney will continue to monitor developments on this legislation. For questions, email info@gibney.com.

As we are on the cusp of gaining some control over the pandemic and regaining a focus on the new normal, it seems to be an opportune time to think about what the post-pandemic world of IP enforcement will look like. While admittedly focusing only on the world of counterfeiters, this brief overview offers some food for thought into other aspects of intellectual property matters.

Unfortunately, we can all agree that the counterfeiters were out of the gate immediately when it came to taking advantage of the pandemic. Not only did they have their trade routes established, they were able to pivot into new areas of ‘expertise’ before legitimate manufacturers could ramp up production. The scope of the counterfeiters abilities are still being seen today with almost daily seizures of bogus PPE at the border by CBP. Add to those factors the cuts in enforcement budgets and staffing to create the perfect storm.

Now brand enforcement personnel have to pick up the pieces and address new issues and developing problems. The profound, and some say permanent, change to online shopping is only part of what needs to be addressed. Let’s take a brief look at some of the issues.

Data is king. But the key remains knowing what to hone in on and harnessing it to address the counterfeiting issues. Something as simple as tracking, and possibly taking action on, Customs seizures offer a low cost way to address bulk importations. Maintaining databases and availing oneself of information is a way to spot trends and develop ways to address them. Talk to other brands about ways to implement strategies using readily available data. Everyone does it differently and it pays to be open to new ideas. There are a lot of metrics available; be judicious in selecting and using them.

The pandemic had an adverse economic impact on many brands. Income went down and, in turn, enforcement budgets were cut or whole brand protection departments eliminated. It will take time to reach a point where enforcement staffing is commensurate with pre-2020 levels. This then raises the question of how best to address emerging online threats. Do you make do and cover what you can with limited personnel? Do you look at bringing in outside vendors to provide previous in-house functions even if only for a limited time? With brand protection often viewed as an expense that fails to add to the bottom line, the trick is to utilize limited resources in the most effective way possible.

How do you address the brick and mortar aspects of the trade in counterfeit goods? If you ignore it, it will continue to flourish. Enforcement has to be seen as a 360 degree effort of multiple types of enforcement that are in a constant state of re-calibration. How do you justify allocating resources and to what extent given online issues? It is not an easy call, but one way may be to make better use of resources for training and engaging law enforcement so they may look at the most egregious sellers and enter into investigations where costs may be shared among brands. The adaptation to the use of technology used on LiveStorm or Webex and others is a way to take training programs where they have not gone before. Certainly it is hard to replicate the connection made at in person trainings, however, remote trainings allow knowledge to be shared in a low cost and effective manner for the time being.

It goes without saying that social media has become a double-edged sword. It is a way for a brand to promote itself and its values across multiple platforms to a full range of current and potential customers. However, sometimes influencers do run amok as evidenced recently on platforms where the influencers suggested buys were actually disguised counterfeit goods from which they profited. Sadly, counterfeiters have always been better at monetizing new technology/platforms faster than the developers. Here the challenge is to maintain vigilance, not just on well-known platforms, but also being on the look-out for any new platforms (and scams) that emerge to push the sale of counterfeits.

If the only constant is change, brand owners have to be ready to anticipate, adapt and aggressively address issues before they mutate into serious problems and become harder to eradicate. Enforcement in a post pandemic world has to be viewed as an opportunity to take a broad look at all enforcement efforts and further fine tune them based on experience, budgetary limits and a wary eye on the variables of the future.

Shortly before midnight on December 21, 2020, Congress passed a 1.4 trillion omnibus spending package in order to avoid a federal government shut down. Included in the 5,593 page legislation were significant alterations to the intellectual property landscape.

Trademarks: 2020 Trademark Modernization Act

The Presumption of Irreparable Harm. A Lanham Act plaintiff seeking an injunction now has a rebuttable presumption of irreparable harm upon a finding of a violation or a likelihood of success on the merits, depending on what type of injunction is being sought. Prior to this amendment, brand owners were required to present evidence of irreparable harm which can be difficult at the preliminary injunction stage.

Fraudulent Trademarks. Through various amendments, the Act seeks to address fraudulent trademark registrations with updates to the examination process and ex parte proceedings. First, it allows for third parties to submit evidence during the examination of a mark regarding its registerability. Second, the Act also provides a new ground for cancellation and ex parte expungement where a mark has never been used in commerce on or in connection with some or all of the goods or services cited in the registration.

Copyright Law: The CASE Act

For copyright owners, Congress passed the Copyright Alternative in Small-Claims Enforcement (CASE) Act. This Act establishes a Copyright Claims Board within the Copyright Office. The Board will be staffed by “claims officers” that have the authority to adjudicate copyright infringement claims under $30,000.

Also included in Monday’s legislation was the Protecting Lawful Streaming Act. The Act would give the Department of Justice the authority to charge commercial, for-profit streaming services with felony copyright infringement. Prosecution under the Act includes fines and imprisonment up to 10 years if the infringement is found to be willful. The law does not apply to individuals as casual internet users.

On October 13, 2020, President Trump signed a “Memorandum on Stopping Counterfeit Trafficking on E-commerce Platforms Through Fines and Civil Penalties” to combat trademark counterfeiting by taking aim at the e-commerce marketplaces that act as intermediaries between buyers and sellers.

This builds on the previous Executive Order issued on January 31, 2020 which aims to impose a greater threshold of responsibility on express consignment operators, carriers, hub facilities and licensed customs brokers in preventing the sale e-commerce counterfeit goods.

The new Memorandum instructs the Secretary of Homeland Security to:

• Seize counterfeit goods imported into the US in connection with a transaction on an e-commerce platform
• Impose the maximum fines and civil penalties permitted by law on any e-commerce platform that directs, assists with or is involved in the importation of counterfeit goods into the US
• Develop a legislative proposal to promote the policy objectives of the Memorandum in conjunction with the Attorney General within 120 days

What’s On the Horizon
The Memorandum is the latest effort in a series of new efforts to combat online counterfeiting. Bipartisan bills have been introduced in both the House and the Senate.

As we previously reported, the SHOP SAFE Act of 2020 incentivizes e-commerce platforms to adopt best practices to reduce the presence of counterfeit products on their sites. E-commerce sites that fail to adhere to the steps would be held liable.

The INFORM Consumers Act aims to require online marketplaces to disclose certain verified information regarding high-volume third party sellers of consumer products to inform consumers.

Over five months ago, we entered one of the darkest periods of recent memory.  The safety of family and friends became paramount as priorities changed and numerous activities simply stopped. Our online world became our reality as we were cut off from connections and activities.  Now may be a good time to take a quick peek at where enforcement against counterfeit products stands.

Looking at border actions, we continue to see a significant number of seizures and inquiries from U.S. Customs and Border Protection (CBP) as the work of protecting trademarks and the economy from the entry of counterfeits of all types and especially those that impact public health and safety continues. It is difficult to get a true sense of where we stand year to year due to the lag time between seizures and notices. The sense is that there has a been a dip but the scope will not be known for a few more months.

As to where the counterfeit goods are, we are seeing significant activity on the stand alone sites, mass merchandise platforms and close in/neighborhood sales sites. Amazingly enough, we have been kept busy with takedowns and buys throughout the last few months on the latter. While arrests depend on law enforcement availability, we are working with a dedicated group of local investigators who have the necessary contacts and resources.  Much more is taking place online than it was last year. Just as legitimate online retail commerce has increased, so too have the counterfeiters come to rely on web-based sales. When tourists and local buyers are missing, counterfeiters must find a way to sell or perish. This does not mean, however, that brick and mortar options have disappeared, rather they are evolving and still pose a threat to brands.  We have been able to take a few cases to arrest against retail vendors as well as those on Craigslist, OfferUp and LetGo.  While there are limitations, law enforcement’s interest in IP remains strong.

Speaking of law enforcement, we have been very fortunate that Homeland Security Investigations (HSI)  and CBP acted immediately to address the importation of counterfeit PPE and Covid related products. Under the code name Operation Stolen Promise, HSI is leading a coordinated effort to not only seize violative products and funds, but to make arrests and build cases for criminal prosecution. In that regard, anti-counterfeiting work has taken on new urgency and the federal law enforcement agencies have risen to meet the challenge.

One of the greatest impacts has been on the brand protection departments of trademark owners. Entire departments have been eliminated or culled as the severe economic ramifications from the closing of stores worldwide have impacted the brands’ ability to develop and fund anti-counterfeiting strategies. Those personnel and budget cuts are especially painful as we see friends and colleagues leave brands that they have dedicated years to protecting. With brands facing a multitude of counterfeiting issues, it is important to retain some form of enforcement strategy especially in the online space. The number of threats and sites seems to grow exponentially and has to be addressed to the extent possible. Success comes from dedicated specialists interacting with peers, collaborating to stretch resources and working with law enforcement contacts on meaningful actions.

How are we doing five months later? We are still sorting through this as Covid-19 convulses society and the economy. With resources stretched thin and counterfeiters persisting in their efforts, enforcement in the age of the pandemic requires doing more with less and maintaining brand value and integrity for a post-pandemic world of enforcement where the altered landscape will present unique challenges.