Practice Tips for Combating Counterfeiters: An Action Plan for Brands, Manufacturers and Retailers

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP

The harm caused to brands by counterfeiting goes far beyond loss of sales or profits.  Fake goods jeopardize public health and safety when a brand’s trademark is applied to a sub-standard and potentially harmful product.  This is especially hazardous for counterfeit medical items, mechanical parts, and food products, to name a few.  What is more, the reputational damage inflicted by low-quality products can be devastating.

The Lanham Act defines ‘trademark counterfeiting’ as producing or selling a product bearing a false trademark that is an intentional copy of a genuine trademark (15 USC §1127).  Even if an identical trademark is not used, a knock-off product may infringe trade dress or patent rights where it is made to copy the protected appearance, details and construction of a well-known product in order to mislead consumers as to the source of the product.

If a consumer is injured by a counterfeit product, anyone who manufactures or distributes the product may be liable under tort law. Retailers may also face liability for selling fraudulent, poor quality and potentially unsafe goods.  In addition, they may be liable for defective counterfeit products even if they did not manufacture them.

There are several strategies for protecting your brand and your business ranging from quick and inexpensive actions such as cease and desist letters, to district court and International Trade Commission (ITC) litigation.  Note that the Lanham Act authorizes recovery up to $2 million per counterfeit item for willful counterfeiting.  In one case, luxury brand Cartier was awarded $18 million in statutory damages against a complex and willful criminal counterfeiting enterprise.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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