Counterfeiting is big business, with estimates putting the value of counterfeit goods sold annually at between £1.3 and £3.5 trillion. Brands operating in the clothing, footwear, cosmetic, and toy sectors are among the most heavily impacted, losing millions of pounds of revenue each year to fraudsters. Counterfeiters do not discriminate; any goods that offer a profit source are fair game. Protecting your brand and mitigating the potentially disastrous impact of counterfeits is vital.
In this article, our intellectual property solicitors discuss the impact of counterfeit goods on business owners and what legal action business owners can take to stop counterfeiters.
Contents:
- What are counterfeit goods and how do they impact brand owners?
- Where are counterfeit products typically sold?
- How can brand owners identify counterfeit goods?
- How can you protect your brand from counterfeits?
- What legal action can you take against counterfeiters?
- What are the challenges in pursuing legal action against counterfeiters abroad?
- Summary
What are counterfeit goods and how do they impact brand owners?
Counterfeit goods are those sold under someone else’s name, without their permission. Counterfeiters often use a brand owner’s intellectual property (IP), including trade marks and copyright, to pass their goods off as genuine.
The impact of counterfeits on brand owners can be catastrophic. Examples of just some of those adverse effects include the following:
Reduced profitability
Counterfeits can have a devastating impact on a brand’s profitability. Consumers who may otherwise have saved to purchase the real thing may decide a fake will be good enough, despite the often-significant differences in quality. Consumers may be put off from purchasing goods from a heavily imitated brand because they fear their purchases may be mistaken for copies.
Reputational damage
Counterfeit goods’ impact on a brand’s reputation can be severe and difficult to reverse. Luxury brands, in particular, rely on an air of exclusivity to set them apart from competitors. When the counterfeits of a brand are prolific, its exclusivity is compromised, eroding consumer loyalty and affecting its ability to attract new customers. Some consumers may unwittingly purchase counterfeit goods believing they are genuine and be disappointed by their quality or performance. Worse still, the goods may be unsafe and injure the user.
Impact on licensing
Despite its intangibility, intellectual property can be commercialised in the same way as any other property. Effective commercialisation requires a strong brand. When your intellectual property rights are infringed, its value drops, and you may struggle to attract investors. Similarly, since licensing arrangements involve the licensor paying for the right to use your intellectual property, there can be little incentive for them to do so when the market is flooded with fakes.
Where are counterfeit products typically sold?
E-commerce and social media platforms offer counterfeiters the opportunity to reach a global audience and sell their goods on a massive scale.
E-commerce platforms
E-commerce platforms enable consumers to purchase goods from anywhere in the world at the click of a button. They are easy targets for counterfeiters, who take advantage of the ease with which they can set up shop and the anonymity online activity facilitates.
Social media platforms
The potential reach of social media platforms is colossal. Since each user is also a potential consumer, it’s unsurprising that counterfeiters flock there to sell their wares. Users’ privacy is paramount on social media, but the platforms’ efforts to protect their users’ personal data afford counterfeiters the perfect opportunity for complete anonymity. There is nothing to prevent fraudsters from creating any number of fake profiles linking to their e-commerce stores offering counterfeit products. For example, a search of ‘#Gucci’ on Facebook returns over 10 million results, with several posts made by counterfeiters showcasing their goods and directing users to their websites.
How can brand owners identify counterfeit goods?
The first step in tackling counterfeit goods is identifying them. Luckily, brand owners have various tools at their disposal to assist them in doing so.
Online monitoring
Given the extent to which counterfeiters use online sites to sell their goods, effective online monitoring is crucial in identifying fake goods circulating in the marketplace. Advanced technology enables brand owners to scan the internet for images, logos, brand names, and other distinguishing features, and compare them to genuine products to assess their authenticity.
Training staff
Your workforce is among your most valuable assets, and their combined efforts in identifying counterfeit products and bringing them to your attention can be invaluable. By training employees on the issues caused by counterfeits, including reduced profitability and potential job losses, and encouraging them to take ownership of the problem, you can significantly improve your anti-counterfeiting efforts.
At the very least, you should educate your staff on how to escalate consumer reports of counterfeit goods. You might train them on how to spot fakes and the steps they should take when they do, such as buying an example as evidence or screenshotting the website. You should also ensure they know who to approach with any potential counterfeiting issues.
Work alongside customs
Working with customs offers a cost-effective way of preventing counterfeit goods from entering the UK. ‘Applications for Action’ (AFAs) allow you to notify Border Force of your intellectual property rights, such as trade marks or design rights. Border Force officials will use the information you provide to identify and seize potentially counterfeit goods before contacting you to understand whether the goods are authentic.
Marketing strategies
Marketing strategies are targeted at consumers, so they provide an excellent opportunity to highlight the problems associated with counterfeit products. High-profile campaigns, such as the ‘You Can’t Fake Fashion’ collaboration between eBay and the Council of Fashion Designers of America go a long way towards raising awareness of the issue, but small brands can play their part, too. The opportunities for engaging with your consumers are vast, and channels such as your website, social media channels, in-store displays, and product packaging can all be utilised to spread your anti-counterfeiting message and encourage consumers to bring any potential counterfeits to your attention.
Technology enhanced product security
Intellectual property rights, such as trade marks, are designed to operate as a badge of origin and inform consumers where the goods come from. Counterfeiters have few issues when it comes to intellectual property infringement, and copy branding and designs owned by others at will, often extremely convincingly.
Brands are using increasingly sophisticated technology to identify counterfeits. Some examples include the following:
- Digital watermarks are covertly embedded into digital files and contain information about the authenticity of the product.
- Holograms use complex technology to hold multiple layers of information and can be used to confirm a product’s authenticity.
- Special fibres, which are difficult to reproduce are embedded into the label to confirm authenticity.
How can you protect your brand from counterfeits?
Protecting your brand from counterfeits requires a multi-pronged, dynamic approach. Our intellectual property solicitors will work with you to identify your principal areas of risk and devise a strategy that mitigates those risks as cost-efficiently as possible.
Examples of the types of measures our solicitors may discuss with you include the following:
Register your intellectual property rights
Registered intellectual property rights, such as trade marks and design rights, not only enable you to take legal action against infringements, but can also deter would-be counterfeiters. Intellectual property rights are territorial, so you must obtain registrations in all the countries you do business in as well as in counterfeiting hotspots.
Sign up to Amazon brand registry and other similar programmes
In recognition of the counterfeiting problems on their platforms, many e-commerce sites have introduced measures to combat them and reassure brand owners. A notable example is Amazon’s Brand Registry programme. You need a pending or registered trade mark to be eligible for enrolment. Once you have enrolled, Amazon will proactively monitor listings and take down anything it considers may be counterfeit before it reaches consumers.
Other e-commerce sites offer their own anti-counterfeiting measures. Our intellectual property solicitors will assist you in identifying those relevant to your brand and advise whether you are eligible to use them.
Supply chain
Effective supply chain management plays a key role in anti-counterfeiting. Before doing business with any supplier, you must satisfy yourself that they are reliable and will facilitate you in delivering safe, authentic products in time for distribution.
Regular monitoring and auditing of your supply chain’s intellectual property practices can help identify any weak links. Other measures you might consider include implementing contractual terms obliging supply chain partners to notify you of any potential intellectual property infringements.
Work alongside customs
Customs can stop counterfeits at the borders and prevent them from entering the UK. Brand owners can register their intellectual property rights with customs authorities, who will seize and detain any goods they suspect may be infringing and notify you.
Report the counterfeit goods to PIPCU
The Police Intellectual Property Crime Unit, or PIPCU, is a team of specialist police officers whose remit is to tackle intellectual property crime. Brand owners are encouraged to refer intellectual property crimes to PIPCU, who will review the evidence and undertake a criminal investigation where appropriate.
Launch public awareness campaigns
When you educate the public on the issues inherent in using counterfeit products, you empower them to make informed choices. For example, the IPO’s ‘Choose Safe Not Fake’ campaign sought to hammer home the dangers of fake health and beauty products, many of which contain carcinogenic ingredients. Some brands incorporate targeted ‘anti-counterfeiting’ pages on their websites, which inform consumers of the realities of buying counterfeit products, educate them on spotting a fake, and explain how they can report counterfeits to you.
What legal action can you take against counterfeiters?
Counterfeiting usually involves some form of intellectual property infringement, so the legal action you can take is the same as in any other infringement matter and includes the following:
Cease and desist letters
Most anti-counterfeiting cases begin with intellectual property solicitors sending a ‘cease and desist letter’ to the counterfeiter. The cease and desist letter will detail the nature of your intellectual property rights and how the counterfeiter’s activities infringe them. They will set out the action you require from the counterfeiter – usually stopping their infringements and paying damages – and state that you will pursue legal action if they don’t agree to your demands.
Sometimes, a cease and desist letter threatening legal action sent from a well-known law firm can be enough to end the counterfeiter’s activities.
Takedown notices
Many e-commerce and social media platforms, such as Amazon and Facebook, will remove counterfeit products upon receiving a takedown notice from the brand owner. Takedown notices can be a quick, cost-effective way of addressing counterfeit products online.
Interim injunction
If the counterfeiter’s activities are causing you significant financial or reputational harm, you may need to seek an interim injunction from the Court. As their name suggests, interim injunctions are a temporary measure that the Court will sometimes implement to preserve the status quo.
Interim injunctions can be a difficult to secure and the Court will only grant them in limited circumstances. Our intellectual property team has vast experience in obtaining interim injunctive relief on behalf of our clients. They will advise you on the merits of your position and prepare a watertight application that fulfils all legal requirements and has the best chance of success.
Litigation
Whilst litigation should always be a last resort, it is sometimes unavoidable to protect your brand’s reputation and profitability. If your claim succeeds, the Judge will likely award you the following relief:
- An injunction prohibiting the counterfeiter from copying your goods going forward.
- Damages or an account of profits. You can choose which financial award you prefer, which can be either damages to compensate you for your losses, or payment by the defendant of the profits they derived from selling the counterfeit products.
- Delivery up or destruction of the counterfeit goods to ensure any leftover stock cannot make its way onto the market.
Our intellectual property solicitors routinely assist brand owners in pursuing Court proceedings against counterfeiters and will devise a litigation strategy that achieves your goals in the most cost-effective way.
Criminal proceedings
Many intellectual property Infringements are criminal as well as civil offences. In serious counterfeiting cases, it may be appropriate to pursue the counterfeiters through the criminal courts. You can work with law enforcement agencies such as Trading Standards to initiate criminal investigations or launch a private criminal prosecution. The threat of a criminal prosecution and the severity of the potential penalties can be a strong deterrent.
What are the challenges in pursuing legal action against counterfeiters abroad?
Tackling counterfeiters abroad poses several unique challenges. Even when you can identify the source of the product, which can be difficult feat in itself, holding them to account through the English Courts is challenging. The English Courts do not have jurisdiction over foreign defendants unless the case falls into a specific category. A foreign defendant who manufactures and sells counterfeit products abroad would not fall into any of these categories, so brand owners need to explore other avenues for stopping counterfeiters abroad.
Summary
Counterfeit goods pose a significant threat to a brand’s reputation and profit margins, so it’s important that you take proactive steps to tackle them. Brand owners have various tools at their disposal, including working with customs, utilising e-commerce platforms’ intellectual property enforcement policies, and pursuing civil and criminal proceedings. The bedrock of any effective anti-counterfeiting strategy is comprehensive intellectual property protection. Our solicitors will audit your portfolios, evaluate the adequacy of your intellectual property protection, and secure any additional rights required. They will then work with you and any relevant foreign agents and law enforcement officials to devise strategies through which to enforce your rights against counterfeiters by any means possible. With counterfeiters becoming increasingly sophisticated, our trade mark solicitors will constantly review your strategies to ensure all bases are covered and that the integrity of your brand is fully protected.
