Changes to law and software bring hope for brand owners fighting forgers
Counterfeiters - so rife online - are the bane of brand owners. But lawyer Sian Croxon says there's now a better chance than ever of catching pirates and bringing them to justice.
As most already know, a huge percentage of goods sold on internet auction sites are counterfeits.
Last December the Metropolitan Police's e-crime unit closed down 1,219 websites operating scams or selling counterfeit goods, including counterfeits of Ugg Australia boots and Tiffany & Co. jewellery.
The alarming rise in counterfeit activity is putting increased pressure on brand owners, who face a tremendous financial burden due to loss of revenue, damage to reputation and cost of enforcement.
Bringing legal claims against counterfeiters selling online is a challenge. It is often difficult to determine the true ownership of such sites, as well as identify an appropriate (and supportive) jurisdictional forum in which to bring them.
Furthermore, such claims do not guarantee a lasting resolution for brand owners. Although sometimes shut down, more often than not these websites reappear within a few hours. In this context, the situation for brand owners looks bleak.
Brand owners need to consider legal and practical ways to combat counterfeiters, and there are tools available. Two significant measures are worth exploring.
Firstly, despite the fact that Customs face challenging resourcing problems, their powers to seize goods entering the United Kingdom remain a key enforcement tool. Up until now, when counterfeit goods were seized, brand owners had two options: they had to initiate legal proceedings to establish that the goods were fake or have consignees agree to abandon the goods.
The difficulty of legal proceedings is that, unless there is a large consignment of counterfeit goods, the cost of initiating proceedings is simply too expensive. Since goods sold over the internet often come into the country in small but frequent quantities, this requirement was practically and financially unjustifiable for brand owners.
The other option for brand owners was to contact consignees and request that they abandon the alleged counterfeit goods. The difficulty of this for brand owners was that, in the event the letters actually reached the consignee, they would generally be ignored.
A recent change in UK law...
...which has resulted from sustained lobbying from a range of interested parties, will make a real difference to enforcement. Shortly, HMRC will be able to treat counterfeit goods as "having been abandoned", where the intended recipient of the goods has been notified of their seizure and potential destruction, and has not come forward to object or claim them.
[This comes from Statutory Instrument No. 324 of 2010, The Goods Infringing Intellectual Property Rights (Customs) (Amendment) Regulations 2010. This bill is currently being amended by Parliament but should come into effect shortly.]
In these circumstances, brand owners will therefore no longer have to start legal proceedings or obtain a positive statement of abandonment to prevent counterfeit goods being released onto the market.
Secondly, there are an increasing number of sophisticated software packages available that compile detailed intelligence about online traders, and can initiate automated enforcement procedures. These systems can monitor auction sites for key terms, images and trademarks, after which they can provide automated evidentiary packages.
Once sellers, locations and sales quantities have been identified, the systems can put sellers on notice of a brand owner's rights by generating Cease and Desist letters. They can also go as far as automatically requesting the removal of illegitimate products and track these items after notifications have been made.
This level of automation effectively allows brand owners to take action against multiple small-scale vendors - a process which, if done manually, would represent a heavy drain on resources.
By being able to identify large-scale traders and their location, brand owners can concentrate their resources on targeted action against individuals peddling counterfeits - particularly when situated in territories with supportive legislative regimes. This technology is likely to improve and become even more cost effective for brand owners with tight enforcement budgets.
Each of these options give brand owners a practical and relatively inexpensive mechanism for tackling counterfeits in the challenging online environment. Together, they allow brand owners to challenge counterfeiters at the point of (electronic) sale, and at the point of (physical) delivery.
While brand owners will have to remain vigilant against the threat of continued online sales of counterfeits, these are very useful weapons in the brand owners' arsenal.
Sian Croxon is a partner in the intellectual property and technology group at law firm DLA Piper.