Consumers are Exposed to Extreme Risks from Counterfeit Products

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Some consumers may view offers of brand name goods from sellers not within the manufacturer’s regular distribution chain as just a way to “get a good deal.”  But those offers can result in purchasers receiving counterfeit products, which are no bargain and can expose unknowing consumers to some of the worst risks imaginable.

At the very least, counterfeit products are frauds – they are not from the manufacturer whose trademark appears on the product, so the consumer is cheated out of the quality that the brand represents.  But in reality, the consumer has absolutely no idea what the contents and construction of a counterfeit product may be – it is a product of unknown origin, regardless of whether the consumer purchased from a known reseller.  Because virtually any product a consumer can purchase can be counterfeited, consumers can be placed in great danger from unknowingly purchasing substandard products.  A couple of recent events in the news highlight the extreme risks of counterfeit products.

In April 2018, the Los Angeles Police Department announced that it had raided sellers of supposedly discount brand name cosmetics, and seized $700,000 of counterfeits.  Consumers had complained to the brand manufacturers that makeup products they purchased were causing rashes and bumps on their skin.  The products were determined to be counterfeits that tested positive for high levels of bacteria and animal waste.  This is undoubtedly because the counterfeits are not manufactured with any quality controls or regulatory oversight – they are the result of a black market, pirate operation.  LAPD Detective Rick Ishitani was quoted in the press as saying, “Those feces will just basically somehow get mixed into the product they’re manufacturing in their garage or in their bathroom — wherever they’re manufacturing this stuff.”  One of the brands asserted to be counterfeit was Kylie Cosmetics. Kylie Jenner’s sister, Kim Kardashian West, tweeted:  “Counterfeit Kylie lip kits seized in LAPD raid test positive for feces. SO GROSS! Never buy counterfeit products!”

The risks to consumers of counterfeits unfortunately do not stop even there.  An even more extreme case of product counterfeiting hit the press a few days later.  Tragically, famed rock artist Prince died in April 2016.  It was soon determined that he had died from an overdose of fentanyl, an extremely powerful and dangerous synthetic opioid.  But in April 2018, local prosecutors announced that Prince had consumed the fentanyl by taking tainted counterfeit Vicodin, a brand name medication of AbbVie, Inc.  There was no determination as to how Prince obtained the counterfeit Vicodin pharmaceuticals.  “In all likelihood, Prince had no idea he was taking a counterfeit pill that could kill him.  Others around Prince also likely did not know that the pills were counterfeit containing fentanyl,”  Carver County, Minnesota Attorney Mark Metz was quoted as saying at a news conference.

Some believe that counterfeits can be identified by the price alone, and warn against buying brand name products at steep discounts.  While an inexplicably low price is certainly a red flag of a potential counterfeit, in fact counterfeit products are often sold to consumers at prices very close to those of the brand name product.  This is often because many intermediaries have handled the product, taking a profit with each transaction, in the course of a murky gray market distribution process.

The popularity of online sales make the risks even worse for consumers, as it is nearly impossible for the consumer to inspect the product before purchase and delivery, and it is often very difficult for consumers to determine who is actually selling the product online.  For example, many popular online sellers act as marketplaces for innumerable third party sellers, and a purchaser cannot always determine which seller will actually deliver the product purchased.

If you are a consumer, you really need to exercise great caution when considering purchases of brand name products from sellers who are not in that manufacturer’s authorized distribution channels.  It generally matters little whether the seller is known to the consumer – it only matters where the seller obtained the product.

If you are a brand name manufacturer or trademark holder who suspects that unauthorized parallel market sellers may be offering counterfeit products, you are well advised to promptly contact counsel well-versed in the issues and methods of enforcement of your intellectual property rights.

 

 

 

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Women Make Their Presence Known at Natural Products Expo West

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Conkle, Kremer & Engel attorneys Heather Laird and Desiree Ho attended the Natural Products Expo West in March 2018, where they encountered product trends emphasizing simple recognizable ingredient formulations, and business trends emphasizing strong women’s influences in ownership and management.  Demonstrating the growing consumer interest in natural and organic products, attendance at this year’s Expo was reported to be the largest ever, exceeding 85,000 visitors to more than 3,500 exhibitors.  CK&E attorneys visited clients’ exhibit booths and met with entrepreneurs in the beauty, food, and beverage industries to help them strengthen their brands, navigate regulatory and labeling issues, and grow their business.

Exhibitors showed strong cross-cultural influences, with many products and flavors from around the world, all emphasizing the trend toward fewer and more recognizable ingredients in simple formulations.  Businesses clearly demonstrated they are responding and catering to the adventurous interests and palates of health-conscious, worldly, and informed consumers.  Countless product lines were customized for consumers committed to paleo, vegan, and gluten-free diets.  Another popular trend is toward products and businesses that are dedicated to championing charitable causes, so consumers can use their purchases to support causes they are passionate about and can feel loyal to brands that are as committed as they are.

Mirroring recent cultural trends, women-owned and managed businesses were very notable throughout the Expo.  Many entrepreneurs proudly advertised their Women’s Business Enterprise National Council (WBENC) certifications.  The WBENC certification “validates that the business is 51 percent owned, controlled, operated, and managed by a woman or women.”

In the beauty arena, there were a refreshing number of brands actively encouraging women to maintain an open dialogue with the product manufacturer to address issues they regularly face.  The trend of businesses expending great effort to establish dialogue and long-term relationships with their consumers through social media and direct contacts has become clear.  These overlapping trends resulted in prominent presentation of many products “made for women, by women,” ranging from beautifully packaged feminine hygiene products to natural pre-natal and post-natal products promoted as safe for use by pregnant women and around infants.

CK&E attorneys provide full service to businesses in the beauty, food, and beverage industries.  They regularly attend important trade shows to help their clients stay abreast of trends, new regulations, and developments in the law and the marketplace affecting these industries.

 

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Big Beer, Craft Beer, and Trademark Infringement: Harm to Premium Brands

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As the craft beer market continues to expand in popularity and threaten the market share of older “macrobrewery” giants like Molson Coors and Anheuser Busch, courts have seen increased legal disputes in the beer industry as brands fight for both their independence and the attention of consumers.  Most recently, Molson Coors has been sued in federal court in San Diego by Stone Brewing Co., one of the oldest and largest independent craft brewers in the United States.  In its complaint, Stone Brewing claims that Coors is infringing the “STONE” trademark by rebranding Coors’ sub-premium, low cost “Keystone” brand as “KeySTONE,” with a particular emphasis on the single word “STONE” in packaging and marketing materials.  Because of this, Stone Brewing alleges, Coors is sowing consumer confusion between the two brands.

Keystone Rebranding Comparison from Stone Complaint

Unless there is a swift settlement, one can assume that Stone Brewing will make good on the threat in its complaint that it will move for a preliminary injunction in order to stop the sale of Coors’ “KeySTONE” branded products during the pendency of the lawsuit.  A motion for a preliminary injunction is often a critical juncture in such trademark infringement lawsuits, and Stone Brewing will need to show that it will be “irreparably harmed” if the injunction is not granted.  This showing has in recent years become more difficult, as courts no longer presume irreparable harm when the plaintiff shows that consumers are likely to be confused by trademark infringement, but rather require an additional showing of likely irreparable harm.  “Irreparable harm” (also known as “irreparable injury”) generally means injuries that cannot be readily compensated by money damages, and since money damages are usually available for trademark infringement this standard presents special hurdles for infringement plaintiffs that can be difficult to overcome early in a case.

To show irreparable harm, one argument Stone Brewing will likely make is that its “premium brand” is being tarnished by confusion with Coors’ “value brand.”  This argument is presaged throughout Stone Brewing’s complaint (referring to Keystone’s beers as “watered down” and “fizzy yellow offerings,” as opposed to Stone Brewing’s “bold” and “artisanal” products).  The argument, which has been judicially adopted in relatively few cases, is essentially that the premium or niche brand is irreparably harmed by the association with the value, mass-market brand, which usually is of lesser quality.

Conkle, Kremer & Engel, which has experience in both trademark litigation and issues specific to beer production, distribution, and marketing, has succeeded in making this premium-vs.-value argument in federal courts in California.  For example, in Moroccanoil, Inc. v. Zotos International, Inc. (230 F. Supp. 3d 1161 (USDC C.D. Cal. 2017)), a 2017 trademark infringement case with similarities to the dispute between Coors and Stone Brewing, CK&E represented the manufacturer of Moroccanoil Treatment, a luxury oil-infused hair care product sold in distinctive packaging.  The defendant Zotos, part of a large personal care products conglomerate, had created a low-cost “value” hair oil product called “Majestic Oil” that, in addition to its similar name, used packaging that was a close likeness of Moroccanoil’s trade dress.

CK&E, in its successful motion for preliminary injunction, argued that sales of low-cost “value” Majestic Oil products would erode Moroccanoil’s carefully-built premium image.  The presentation included evidence establishing that once a product is no longer perceived by consumers as “premium,” it is difficult or even impossible for the seller to regain that perception.  The court agreed with CK&E and Moroccanoil, finding a likelihood of irreparable harm and granting a preliminary injunction against further sale of the Majestic Oil products.

Preliminary injunctions can be dramatic turning points in infringement cases.  In Moroccanoil’s case, the court’s preliminary injunction prevented Zotos from any further sales, advertisement or distribution of its infringing products, and required Zotos to recall all of its infringing products already in the market.  As could be predicted, the case settled swiftly thereafter and Zotos made permanent substantial changes to its product name and packaging to avoid infringing Moroccanoil’s intellectual property rights.

Click here to learn more about CK&E’s Moroccanoil v. Zotos matter or contact CK&E attorneys who work on beer industry matters, such as the brand protection that can make or break participants in the crowded craft beer market, including John Conkle, Evan Pitchford and Zachary Page.

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The Conkle Firm Addresses The Future of Fashion

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On January 30, 2018, the USC Gould Law School presented “The Future of Fashion,” a panel discussion co-hosted by the IP & Technology Law and Art Law Societies at USC.  Conkle, Kremer & Engel attorney Aleen Tomassian was one of the expert panelists invited to discuss the current state of intellectual property law as it affects the fashion industry, and to discuss how recent court decisions affect the future of the industry.

USC Panel – Aleen Tomassian (Center)

A major point of discussion involved the impact of the Supreme Court’s recent Varsity Brands v. Star Athletica decision, a copyright case that concerned design features on cheerleading uniforms.  Historically, articles of clothing have not generally afforded copyright protection because they are considered “useful articles.”  But the Supreme Court held that the design features of the uniforms in issue were protectable because they were works of art which could be imagined separately from the useful article into which they were incorporated.    Many have suggested that the holding in Star Athletica signals that broad copyright protection would be available for articles of clothing.  But the USC panel discussion made  clear that Star Athletica affirmed that copyright protection is available for design elements as distinct from “useful articles,” and the recognized protection is not available to clothing in general.

The panel addressed the unique intellectual property issues that the fashion industry faces.  There was a broad discussion about the economic and moral impact of “copycat” designs on society and the effects of “knockoffs” on innovation.  Since fashion designs are not specifically protected under U.S. law, the conversation highlighted how attorneys skilled in fashion law use a combination of available forms of protection, including copyright, trademark, trade dress and design and utility patents.  A recent example is the pending case of Puma SE v. Forever 21, Inc., USDC Central District of California Case No. 2:17-cv-02523, in which Puma asserts that it has distinctive shoe designs in a line called Fenty Shoes that is promoted by singer Rhianna.  Puma contends that Forever 21 engaged in deliberate copying of some of its Fenty Shoes designs, notably the popular “Creeper”, “Fur Slide” and “Bow Slide” models.  To protect its designs, Puma alleged infringement of design patents, trade dress and false designation of origin under the Lanham Act, and copyright.  Puma’s copyright claims attempt to leverage the Star Athletica decision by contending that certain elements of the Fenty Shoes “can be perceived as a two- or three-dimensional works of art separate from the Fenty Shoes” and “would qualify as protectable pictorial, graphic, or sculptural works – either on their own or fixed in some other tangible medium of expression.”   Under the Star Athletica standard, to allow this type of copyright infringement claim, the court will have to determine that “the separately identified feature has the capacity to exist apart from the utilitarian aspects” of the shoe.  “If the feature is not capable of existing as a pictorial, graphic, or sculptural work once separated from the useful article” – the shoe – then it is a utilitarian feature and not subject to copyright protection.

The attorneys at Conkle, Kremer & Engel have years of experience navigating the complex legal and intellectual property issues faced by clients in the fashion industry.  Our attorneys help clients protect their brands to ensure their continued success in this demanding and fast-paced industry.

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The Conkle Firm’s “Spa Weekend” at the International Salon and Spa Expo

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On January 27th and 28th, 2018, attorneys from Conkle, Kremer & Engel attended the International Salon and Spa Expo (ISSE), which is hosted annually by the Professional Beauty Association (PBA).  At ISSE, CK&E attorneys met with clients and other beauty professionals to help them expand their business frontiers and address concerns about intellectual property, regulatory compliance, and  contractual relations.  CK&E attorneys also relished the opportunity to observe first-hand the latest trends and exciting new spa and cosmetic products.

Sheet masks and other Korean beauty products continued to be as popular as they have been in the past few years. But more palpable this year at ISSE was the recent movement towards “inclusive beauty,” emphasizing a range of culturally enlightened products that appeal to a wider range of consumers of different ethnicities, ages, genders and abilities.  Exhibitors displayed a wide range of products intended for people with all skin and hair types and colors.  Many brands showcased hypoallergenic and natural products with few ingredients, suitable for use on consumers with allergies or medical conditions.  There were also more personal care products geared towards men than there have been in previous years.

ISSE offered a wide array of complimentary educational programs related to the beauty industry, including classes regarding the importance of social media presence for artists and brands.  CK&E attorneys remain ready to provide their clients with legal assistance in the ever-changing world of social media by keeping up to date on developments in social media.  At ISSE, attorneys Evan Pitchford and Desiree Ho attended “Getting It Right On Instagram,” a seminar hosted by long-time beauty industry executive and social media guru Gordon Miller, CEO of Hairbrained, an online community for craft hairdressers and colorists to connect and share their work.

For next year, PBA has already announced that it will launch STYL on January 26-28, 2019, a new event that PBA promises is not an expo or convention, but rather “STYL is an experience where the leaders, learners, students, owners and the beauty industry come together from across the country.”

CK&E is proud to be a member of the PBA and other professional beauty organizations, and is delighted to be in its third decade of helping domestic and international businesses of all sizes grow and evolve to meet their goals in an efficient and cost-effective manner.

Desiree Ho, Glen Pacek, Karl Sweis and Evan Pitchford at Sweis Moroccanoil booth

CK&E attorneys Mark Kremer and Amanda Washton sample industry trends at ISSE

Gordon Miller (far right) of Hairbrained moderates Instagram panel

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The Conkle Firm Trending At Indie Beauty Expo

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Conkle, Kremer & Engel attorneys Amanda Washton and Desiree Ho attended the Indie Beauty Expo in Los Angeles to take note of emerging trends in the beauty industry.  More than 100 brands exhibited their products at  this event, many of which recognized a key trend in the beauty market – consumers are becoming increasingly attentive to what is in their products and where their money is going.  Countless brands touted business practices such as sharing profits with charitable causes, as well as product features like “vegan,” “natural,” and “organic.”  The simpler the ingredient list, the better.  The product packaging and displays reflected this gravitation towards simplicity – minimalist typography, clean lines in the artwork, and monochromatic color schemes.

As more companies hop onboard the “organic” and “natural” train, beauty brands should be careful about their advertising and labeling to avoid drawing adverse attention of regulators and others policing the market.  Conkle, Kremer & Engel has published multiple blog posts throughout the years concerning “natural” and “organic” product claims.  Selling “natural” products in California can be particularly hazardous without the right guidance – “natural” ingredients may be subject to Proposition 65, as CK&E has explained in the past.  Manufacturers would do well to remember that the California Supreme Court has warned, particularly in claims of organic contents, “labels matter.”

With decades of beauty industry experience helping companies grow and protect their businesses, CK&E attorneys routinely guide clients through the process of complying with Proposition 65 and other complex regulatory schemes.

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Counterfeits Can Take the Joy Out of the Holidays

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As the holiday shopping season reaches peak fervor and consumers seek out the best deals available on hot products, gift-givers are more at risk of purchasing counterfeit products of all kinds.  Recently, news articles have warned of counterfeit Fingerlings – the latest “it” toy – along with fake versions of popular electronics, clothing, personal care products, and many other types of goods.  Government bureaus like the U.S. Customs and Border Patrol regularly release holiday bulletins advising of the escalating volume of phony products entering the United States (for example, https://www.ice.gov/news/releases/buyer-beware-counterfeit-goods-and-holiday-shopping-season).  Counterfeits are far from harmless.  Not only are these counterfeit goods generally inferior to authentic products in both quality and safety, fake products are fraud, theft, and infringements of valuable trademarks and other intellectual property.  Sales of counterfeit products can even be criminal.

As a consumer, what can you do to help ensure you’re receiving the genuine article?  The most obvious method is to avoid unfamiliar sources and to buy directly from the manufacturer’s website or from an authorized retailer whenever possible.  If buying on websites like Amazon and eBay (where products are often actually sold by unrelated third parties), it helps to make sure that the seller of the product is the manufacturer or Amazon itself, not an unknown third party.  Often times, third party sellers do not have the ability or desire to properly perform checks on the goods they are selling, and in many cases the third party sellers never actually possess the products – when they receive your order they simply forward the product from a warehouse they have never even seen.  While outlets like Amazon and eBay have some anti-counterfeiting policies and procedures, experience has shown that not every fake product will be screened out.  Consumers should also check the price of the goods to ensure that it is not abnormally low, and examine the packaging and presentation of the product as depicted on the website to help determine whether the product might be fake or foreign-labeled goods.  Compare the look of the product offered with the same product on the manufacturer’s website – if it’s different, that’s a red flag.  Consumers should also not hesitate to contact the manufacturer if they suspect that they have received counterfeit or foreign-labeled goods – in addition to being the primary victims, consumers are often the first line of defense in the fight against counterfeiting.

As a manufacturer or trademark owner, what can you do when you discover your products being sold in an unauthorized channel, with risk of counterfeiting?  Conkle, Kremer & Engel has extensive experience helping manufacturers and distributors to investigate and, when necessary, litigate counterfeit and other trademark- and intellectual property-infringement claims.  CK&E attorneys are well-versed in the careful initial steps that should promptly be taken when sales of illicit products are suspected.  If the seller is cooperative, litigation can often be avoided.  But if the seller is not, that is a strong indicator that the seller has been selling, and will continue to sell, infringing products unless stopped through litigation.  Whatever you choose to do, consult experienced counsel and decide on your course of action promptly – unreasonable delays can seriously harm your ability to protect your rights.

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The Conkle Firm Attends Cosmoprof North America’s Exhibition in Las Vegas

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On July 9, 2017, the attorneys of Conkle, Kremer & Engel attended Cosmoprof North America’s annual exhibition in Las Vegas, both to assist clients and to observe first-hand the latest trends in the beauty and personal care industry.  Tens of thousands of professionals attended the three-day exhibition, which featured over 1,150 exhibitors from 38 countries. CK&E attorneys attend to connect with clients and others in the cosmetics, personal care, packaging, labeling and professional beauty markets, to help clients secure distribution agreements, and to learn about the newest industry innovations.

This year, brands dedicated to “green” products were showcased as consumers continue to be interested in eco-friendly beauty and technology.  Skincare brands also made a strong showing as consumers have been increasingly interested in anti-aging and other preventative products and technologies.  Facial mask and dedicated ethnic products made a particularly strong showing this year.  Globalization of the beauty market is readily apparent – Euromonitor International has an excellent detailed analysis of recent international growth in the beauty and personal care industry on a global scale:  http://blog.euromonitor.com/2017/05/reimagining-growth-in-the-global-beauty-industry.html

CK&E’s attorneys pride themselves on effectively and efficiently assisting clients of all sizes with brand protection and growth and regulatory compliance, both domestically and internationally.  CK&E is an active member of the Professional Beauty Association, and other important industry trade organizations.

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The Conkle Firm Featured Panel of 2017 PCPC Legal & Regulatory Conference

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Conkle, Kremer & Engel attorney H. Kim Sim was on the featured panel of this year’s Legal & Regulatory Conference sponsored by the Personal Care Product Council.  The featured panel, called “California: The Wild, Wild West,” explored the changes and challenges of the new business landscape in California, which boasts an economy that would place it sixth among the world’s nations.  The panel discussion was held on May 10, 2017 at Hilton La Jolla Torrey Pines in San Diego, California.   John Conkle, the CK&E attorney originally scheduled to speak on this panel, was unable to appear due to a federal court trial conflict.

 

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What are “Natural” Products Anyway?

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Personal care products that claim to be “natural”, “all natural” or “100% natural” continue to draw scrutiny from consumer advocates and regulatory agencies such as the FTC. Perhaps surprisingly, there still is no clear definition of the word “natural” for personal care products.  It’s no small concern, as consumers and manufacturers can have different expectations of what “natural” means, which can lead to confusion and accusations of false or misleading advertising.

Despite the uncertainty, “natural” product claims matter to consumers. According to a 2015 Nielsen report, 53% of consumers surveyed said that an “all-natural” description was moderately or very important to their purchasing decision. The worldwide natural products industry is estimated at $33 billion – and it’s growing.  “Naturally,” companies want to capitalize on this trend.

But what exactly is a “natural” product? Is it plant-derived? Is it made from ingredients found in nature?  Is it free of preservatives? Is it made without synthetic ingredients?  There are no FDA regulations regarding use of the word natural. However, the FDA has issued non-binding guidance that states it will not contest food products labeled as “natural” if the product does not contain added color, artificial flavors or synthetic substances. Though this provides a limited understanding of the term “natural”, the guidance is as to food, pertains only to FDA enforcement and is not a legal requirement.

In a recent complaint filed with FTC, California Naturel’s sunscreen was alleged to be not “all natural”, as it claimed, because 8% of it was Dimethicone, a synthetic ingredient. Following the FTC complaint, California Naturel put a disclaimer on its website, which was later ruled as ineffective in a 2016 FTC decision.

Starting in 2015, the Honest Company also found itself in court for false advertising in regard to their “natural” products.  Though the Honest Company markets its products as “natural”, the products contain a number of synthetic ingredients. Consumers argued that their understanding of “natural” was a product free of synthetic or artificial ingredients, and the court held that the Honest Company’s  “natural” claims for its products is misleading.

The current trend is that the surest way to avoid complaints when products are advertised as “natural” or “100% natural” is to make certain they are free of synthetic ingredients.  Next to that, disclosure of what you mean by “natural” as used on your product can be an important measure to avoid consumer confusion.

Conkle, Kremer & Engel attorneys help their clients navigate these tricky currents by staying up to date on developments affecting the personal care products industry.

 

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