US Takes New Steps to Combat Counterfeit Products

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On January 31, 2020, the White House issued an executive order outlining several new steps to address the ongoing and growing issue of the sale of counterfeit goods through e-commerce platforms over the internet, which harms both manufacturers and sellers of authentic products and the consumers who purchase the fake (and sometimes physically harmful) products. Estimates show that the annual value of counterfeit goods traded internationally rose from $200 billion in 2005 to $509 billion in 2016. U.S. Customs and Border Protection reports 27,599 shipment seizures stemming from intellectual property violations in fiscal year 2019. Those most commonly affected by the sale of counterfeit goods include the personal care, apparel, electronics, luxury goods, software, entertainment and media, and automotive industries.

Several agencies, including CBP, the Department of Homeland Security, Immigration and Customs Enforcement, and the U.S. Postal Service are involved in the anti-counterfeiting efforts. New steps include (1) the revocation or suspension of Importer of Record numbers for those caught importing counterfeit goods; (2) requirements for consigners, carriers, hub facilities, and customs brokers to notify CBP of any importers known to be dealing in counterfeit goods and to cease transacting with such parties, with increased scrutiny and penalties for noncompliance; (3) the creation of a task force between the CBP, DHS, and USPS in order to determine permissible ways to prevent and deter the transport of counterfeit goods through the postal system, including the targeting of particular international posts (for example, the Chinese postal system) for repeated violations; (4) the periodic publishing by DHS of information relating to seizures and violations; (5) DHS and CBP recommendations of best practices for e-commerce platforms and third-party marketplaces; and (6) the prioritization by Federal prosecutors of offenses involving counterfeiting or piracy.

Importantly, per DHS reports, CBP will “treat domestic warehouses and fulfillment centers,” like ones operated by e-commerce giant Amazon, “as the ultimate consignee for any good that has not been sold to a specific consumer at the time of its importation.” As such, e-commerce platforms that store violative products, even if those products are technically in the possession of third-party sellers while they are being stored, will have a “greater responsibility” to cooperate in the identification and removal of such products, and “greater liability” for failure to cooperate. This could potentially benefit private litigants as well – if e-commerce stores have a greater responsibility to inspect, identify, and address counterfeit products, the threshold for a finding of willful or knowing infringement, which can lead to damage multipliers and attorney fee awards, could be reduced. Even the prospect of such increased penalties can create powerful leverage for settlements beneficial to infringement plaintiffs.

Conkle, Kremer & Engel has extensive experience helping product manufacturers and distributors investigate and enforce their rights to stop and remedy counterfeiting, parallel importation, gray market and other trademark- and intellectual property-infringement claims. CK&E attorneys are well-versed in the careful initial steps that should be taken promptly when sales of illicit products are suspected. CK&E keeps abreast of the latest laws and techniques that permit manufacturers and distributors to identify, prevent, and report counterfeiters and other IP violators. Stay tuned for additional CK&E blog posts as we monitor important developments relating to e-commerce counterfeiting.

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The Conkle Firm Presents at Personal Care Product Council’s Emerging Issues Conference in Marina del Rey

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Zachary Page and Eric Engel being introduced for PCPC Emerging Issues Panel on Product Counterfeiting and Brand Protection

Conkle, Kremer & Engel attorneys Eric S. Engel and Zachary Page presented to beauty industry professionals on hot and developing legal issues in brand protection, grey market and product counterfeiting at the Personal Care Products Council’s November 20, 2019 Emerging Issues Conference. The Conference was held on the 10th Floor of the Marina del Rey Marriott, with a spectacular view over the nearby marina and beach.

Among the topics covered by Zach were issues of registering U.S. trademarks for CBD products, and other previously unregisterable brands. The 2019 U.S. Supreme Court decision in Fourth Estate Public Benefit Corp. v. Wall-Street.com put new importance on registering important copyrights well in advance of their need for infringement claims, and Zach discussed the close relationship with the Digital Millennium Copyright Act’s “DMCA Clock” to takedown infringing online publications. Trends toward false advertising claims based on “natural” and “organic” labeling were also discussed, as were the dramatic increase in medical claim class action and other lawsuits. Zach also briefed the gathered industry experts on the various issues that affect uses of models and others without adequate documentation of consent, which can raise serious right of publicity as well as copyright concerns.

Eric addressed grey market and counterfeiting case development, including the importance of creating “materially different” packaging for U.S. and foreign products. Simple and low-cost ways to help DHS/CBP protect brands against importation of foreign-labeled versions of their own products, as well as counterfeits, was outlined. Also outlined were cost-effective techniques such as recording trademarks online with CBP’s IPR e-Recordation system, Lever Rule Protection, providing CBP with effective Product Identification Training Guides (PITG), conducting IPR Webinars for CBP distribution, and posting e-Allegations online. On combating counterfeiting, Eric addressed Amazon.com specifically because it now accounts for more than half of U.S. online consumer sales, and more than half of Amazon’s online sales are on behalf of third parties in its “marketplace.” Amazon acknowledges no responsibility for sales in its marketplace, beyond closing seller accounts and refunding its customers’ money when they can show that they were sold counterfeit and defective products. Eric discussed the developments in Amazon’s selling and fulfillment practices and in the law of counterfeiting and products liability that suggest that Amazon’s currently-strong denials of responsibility for third party’s products and sales practices may be less compelling in coming years.

CK&E attorneys regularly give presentations to personal care product industry professionals to help them understand and proactively address the latest legal concerns that affect and can inhibit growth of their businesses.

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Making Your Mark in the Craft Beer Business, Part One – Identifying and Protecting Your Trademarks

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According to the Brewer’s Association there were over 6,000 craft breweries operating in the United States at the end of 2017. In an increasingly crowded market, how do you ensure that the craft beer consumer is able to distinguish your brewery from your competitors? You should begin by identifying your trademarks.

A trademark is any word, phrase, symbol or design that uniquely identifies the source of one company’s goods from those of other companies. While the law in the United States recognizes a broad range of “source identifiers” as trademarks, most companies focus their intellectual property protection efforts on brand names, slogans and logos. Especially at the early stages of your business, it is important to focus your protection efforts on the essential elements of your brand. For example, your brewery may have a dozen regular varieties of beer, plus several small release or seasonal brews throughout the year. Seeking trademark registrations for each of your beers may quickly deplete your legal budget, and so a more focused approach is usually the best course of action. For most breweries, their primary protection efforts should focus first on their brewery name and logos, and then on the names of one or two of their flagship beers.

In the United States, a brewery’s trademark rights arise at the time it starts using the mark in commerce. This means that the first person to begin using a trademark in connection with the sale of beer owns that mark, and may be able to prevent others from using confusingly similar marks on beer and beer-related goods and services. That is, a registration with the United States Patent and Trademark Office (USPTO) is not necessary to own a trademark. However, these “common law” rights are limited in that they can only be applied to the geographic area in which you are selling your beer. Any business that is serious about protecting its brand should seriously consider applying for registration of the essential names and logos.

Some of the benefits that federal trademark registration provides to the trademark owner include:

(1) Preventing infringement problems before they begin by making your marks easy to find in a search of marks registered with the USPTO;

(2) Getting the USPTO to do a degree of enforcement on your behalf by preventing the registration of other marks found to be confusingly similar by the USPTO’s examiners;

(3) Giving you nationwide priority when your marks might otherwise be limited to the geographic area in which you are using the mark;

(4) Putting other companies on notice of your trademark rights so that they cannot claim that their subsequent use of your mark was in “good faith;”

(5) Creating a presumption of validity and ownership of your mark in the event that you need to sue another company for infringing your trademark rights;

(6) Providing the ability to recover treble damages and attorney’s fees in “exceptional” cases of trademark infringement;

(7) Providing the ability to recover statutory damages in cases involving counterfeiting;

(8) Giving you the ability to file for “incontestability” after five years of registration, which severely limits other companies’ ability to invalidate your trademark;

(9) Empowering Customs and Border Protection to block imports that infringe your trademark rights, including counterfeit products, once you record your trademark registration with Customs; and

(10) Granting you the right to use the ® symbol in connection with your beer, further putting your competitors on notice of your trademark rights.

Even if you’re in the planning process, and have not begun selling your beer yet, you may apply on an “intent-to-use” basis, meaning that you have concrete plans to begin using your mark in connection with the sale of beer. An intent-to-use application allows you to claim priority over other companies who might begin using your mark or a confusingly similar mark in the period between your application date and the date you start actually using the mark.

Keep in mind that you may not be able to establish exclusive trademark rights in a mark that is generic or descriptive of your products. For example, if you’re selling an IPA called “Hoppy IPA,” you will likely be unable to stop other breweries from using the name “Hoppy” in connection with their hop-forward beers. The “Hoppy” mark would be deemed descriptive because it describes a characteristic of the beer. The only way to establish trademark rights in a descriptive mark is to show that consumers associate the mark with your company. In the “Hoppy IPA” example, that means that consumers who hear “Hoppy” would need to immediately connect that term with your brewery.

On the other hand, you can reference a characteristic of your beer with a suggestive mark that requires consumers to use some imagination to connect your mark to the product. For example, consider Deschutes’ “Fresh Squeezed” mark for their IPA brewed with Citra hops, which alludes to the citrus notes in their beer. Stronger still are arbitrary names that have no direct connection to your beer or its characteristics (think “Stone Brewing” or “Rogue Ales”) or fanciful names you made up that have no literal meaning (like “Mikkeller” or “CANarchy”).

Stay tuned for Part Two of our brewery-focused trademark posts, in which we will discuss considerations regarding coexistence agreements.

Conkle, Kremer and Engel has assisted its clients in securing and protecting their trademarks for over thirty years. Whether you’re in the planning stages or already operating your brewery, contact Zachary Page or CK&E’s intellectual property team for help identifying or protecting your trademarks.

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