Counterfeiting is seldom discussed in popular culture, but as a crime it is one of the most lucrative, eclipsing even the drug trade. In 2017, counterfeiting was responsible for almost $1 trillion in illegal sales. Incredibly, counterfeiting accelerated during the COVID-19 pandemic. That was caused in part to a change in the habits of consumers resulting from the pandemic
What You Need to Know:
- A large amount of purchasing decisions moved online since 2020 and that does not appear to have changed into the third year of the pandemic.
- It was not uncommon for businesses to furlough and lay off their anti-counterfeiting and brand protection personnel as non-essential staff, and government interest in policing counterfeiting seems to have decreased over the last two years.
- There are strategies that companies should use, including well-established ones, such as the implementation of SOPs, and a renewed focus on external outreach efforts and educating the public about the dangers of counterfeit goods.
Counterfeiting is a sophisticated form of online fraud, and when shopping online at a retailer such as Amazon (for example), consumers are almost never aware of the source of what they believe are branded items. Determining the genuineness of goods is even more difficult when buying them online from a third-party seller. Counterfeiters are often adept at making products that will pass a simple visual inspection and consumers cannot be sure whether what they’re buying is the genuine article or a well-presented knockoff. Positive reviews on items can be bought or encouraged through rebates and promotions provided in the item once it is received. The images used to advertise a product are frequently stolen from the manufacturer to lend the goods authenticity.
The pandemic dramatically increased the use of e-commerce, due initially to the various restrictions that were at one time placed on brick-and-mortar retail outlets, and then by people’s reluctance to be among crowds at major retail centers. Consequently, a large amount of purchasing decisions moved online and that does not appear to have changed into the third year of the pandemic. Consumers relied on the safety and quickness of online retailers to stock up on various items related to the pandemic.
Complicating matters, it was not uncommon for businesses to furlough and lay off their anti-counterfeiting and brand protection personnel during the pandemic as non-essential staff. Similarly, government interest in policing counterfeiting seems to have decreased over the last two years. The reduction in public and private resources dedicated to combatting counterfeiting also contributed to its growth during the pandemic. Counterfeiters took advantage of the situation and flooded the market with fake goods that were of inferior quality and effectiveness, including medications, masks, hand sanitizers, and the like. The question then becomes, how businesses continue to combat counterfeiting in light of the above and while still navigating through the pandemic.
What can your business do to prevent or minimize counterfeiting?
There is no one-size-fits-all approach to preventing counterfeiting, and many of the same strategies that were used to fight combatting prior to the pandemic should still be utilized. The pandemic has reinforced the notion that a multi-pronged approach is necessary to mitigate against this ever-increasing crime. The attorneys at Saul Ewing Arnstein & Lehr can advise you as to which approaches would be most beneficial to you and your business.
An effective anti-counterfeiting strategy should include the following steps that were important prior to COVID-19:
- Ensure that all relevant intellectual property rights are registered, valid, and current. These rights must be evaluated in each country where your products are sold, made, or assembled. Many online vendors will not assist in enforcement of rights for fraudulent listings unless these rights are lawfully registered.
- Monitor use of your brands and create mechanisms to surveil your distribution channels, both online and physically. Online monitoring includes regular internet searches for your product for unauthorized activity and utilization of take-down protocols provided by online vendors to de-list counterfeit goods. Physical monitoring includes, when possible: monitoring trade shows, major retailers (physical and internet), manufacturing facilities, purchasing from known legitimate sites to verify product authenticity, investigating product returns to determine their authenticity or trace their source if found to be counterfeit.
- Perform internal brand protection audits to identify potential weak points in product channel security. Companies should assess the legal protection for their products, including supply chain management and distribution contracts.
- Implement SOPs that clearly identify what to do when a company receives information that its products are being counterfeited, including processes for seeking to identify the source of the knockoffs and preserving evidence for future litigation and enforcement of intellectual property rights.
- Work with attorneys with expertise in management of intellectual property programs and brand enforcement, which may include sending cease-and-desist letters, and deeper investigations that can identify the source(s) of counterfeit goods.
The pandemic has made educating the public about the dangers of counterfeit goods more necessary than ever. A comprehensive anti-counterfeiting strategy will include external outreach efforts. For instance, public awareness campaigns designed to educate consumers on this issue through educational materials with nationwide or global distribution (as appropriate for your market), and that are directed to the key demographics for your products. The educational materials would include your logo and/or other relevant marks.
Similarly, virtual customs training can be used to educate law enforcement officials on identifying counterfeit goods. The same video can be translated into multiple languages, allowing for economical distribution to target areas that see the highest counterfeit activity. Virtual training allows brands to reach ports they might not otherwise have access to, whether for budgetary or travel restriction reasons.
Public-private and industry collaboration is another cooperative strategy, particularly for combatting online counterfeiting where companies can combine their resources. In the United States, one such public-private partnership was the successful Operation Stolen Promise, conducted by ICE’s Homeland Security Investigations (HSI) in February 2021 to stop COVID-19-related fraud and focusing on counterfeit goods. From March 2021, there have been at least 2,054 COVID-19-related seizures with a value exceeding $47 million and including 265 arrests. This operation featured analysis of over 78,000 domain names to combat the online sale of fraudulent goods.
Other public partners or partnerships include:
- Working with U.S. Customs & Border Protection (CBP) to provide officer training in counterfeit identification.
- U.S. International Trade Commission (ITC) to enforce import bans in a more cost-effective manner as compared to federal courts.
- Federal court to secure injunctive relief, restraining orders, preliminary injunctions, all of which can aid in ceasing the counterfeit activity, seizing the fake goods, and recovery of monetary damages and settlements.
The COVID-19 pandemic has reinforced the notion that counterfeiting is a significant problem and one that continues to grow as counterfeiters adapt to a world where more people than ever before make their purchases online, and that shows no signs of changing. In view of the significant challenges outlined above, brand protection professionals should use every strategy at their disposal to combat persistent and growing counterfeiting efforts.
Some of the more sophisticated tools include:
- Identify potential suspects and document their activities, aggregate data on potential suspects, conduct open source intelligence (OSINT) exploitation, and develop an investigative plan.
- Develop suspect dossiers with gathered intelligence to provide to law enforcement officials to increase the likelihood of an investigation being initiated.
- Consider engaging with the A-CAPP Center, the International Trademark Association, and the International Anti-Counterfeiting Coalition and leveraging their resources.
- When available and appropriate, consider purchasing e-commerce data to identify patterns of behavior and potential counterfeit channels.
- Develop mobile applications to foster brand loyalty and provide additional channel information.