Knock-off the Knockoffs: The Fight Against Trademark and Copyright Infringement

by Meghan Collins September 21 2009, 09:53

Introduction

Gucci, Fendi, Prada, Coach; Designers most individuals know, but few can afford.  Yet, despite their high prices, countless individuals sport these designer labels on a daily basis.  Chances are however, the majority of these ‘designer duds’, including sunglasses, handbags, electronics, and even drugs, are not authentic.  Over the past few years, this knockoff fetish has become increasingly popular throughout the world, especially with the recent economic downfall.  With a high demand for these items and popular acceptance of this act, few consumers consider the illegality and danger of owning and supporting these unlawful products. 

Throughout this article, the reader will discover the legal process of product copyright and trademark infringement and how counterfeit items directly hinder intellectual property laws.  Additionally, the reader’s awareness of the trouble that these items create within not only the United States, but also worldwide, as well as recommendations on how to counter this rising problem, will be raised.  

Background

In order to protect their product from infringement, designers engage in both trademark and copyright practices. In cases of product design, trademark looks largely at its trade dress or “overall appearance of a product’s packaging or dress." [1] Trademarks assist consumers when individuals take note of the packaging of merchandise, effectively lowering the search cost and providing a reliable guide to finding such items. [2]

When claims of trademark infringement arise, a creator must prove that the supposed infringer’s design is not functional and that their original design is distinctive and has acquired secondary meaning prior to the introduction of the possible infringer’s product to the market. [3] By trying to prove functionality, the purpose of the product and its effect on the marketplace is analyzed; the greater the disadvantage to others in the marketplace in conjunction with exclusivity, the more functional the design becomes. [4] After functionality of the product has been demonstrated, distinctiveness of the design is analyzed through (1) a combination of the design’s elements which identifies the original brand; and (2) that the general public identifies the design of the brand through a variety of factors such as consumer surveys, advertisements, sale records, and unsolicited media coverage. [5] Taken together, this process serves to identify trademark infringement. 

Copyrights on the other hand, encompass rights in the producer’s original work. [6] This includes reproduction, distribution, and future access to generate products from the original source. [7] However, unlike trademarks, “copyrights are not apt to be infringed without conscious duplication of copyrightable subject matter.” [8] Therefore, those who look at a product and reproduce it in a manner similar to the original product would be liable for copyright infringement.

When testing for copyright infringement, there are certain tests the creator can initiate in order to protect their product.  In Van Cleef & Arpels Logistics, S.A. v. Landau Jewelry, the Court found the defendant’s product was an infringement of the plaintiff’s design using the ‘substantially similar’ test. [9] Under this two part test, an individual infringes upon another’s copyright when (1) themes, ideas, patterns, organization, or other details of the product are substantially similar to the original design; and (2) whether an individual outside the case would find the ‘concept and feel’ of the product design to be similar to the original. [10]  Often the difference between copyright infringement and fair use hinges on the minute details of the product. [11] 

Through implementing both copyright and trademark protection, original creators guard their design against possible infringers.  In order to stop individuals from duplicating other’s designs and products, injunctions and sometimes statutory damages are awarded as punishment. [12] Although injunctions and damages do not always prove the best deterrent for infringers due to their lack of rigidity and severity, they serve as the best alternative until stricter laws are enacted. [13] 

Analysis

Counterfeit products would cease to exist if individual consumers’ demand stopped.  However, this impracticality is realized by both lawmakers and companies who analyze why the general public strives to obtain these illegal products rather than purchase authentic merchandise.  This issue is not merely a localized problem, but rather has swept far and wide across the globe. [14]  As companies look to reduce the number of counterfeit purchases, a variety of factors must first be considered.

First and foremost, the recent downturn of the economy has caused less disposable income for individuals to spend on luxury items such as designer merchandise. [15]  In fact, the International Anti-Counterfeiting Coalition found that over the past two decades, intentionally infringing an established trademark has risen over 10,000 percent and accounts for almost seven percent, roughly equally $600 billion, of goods sold globally. [16]  Hence, the belief that consumers value purchase quantity over quality becomes evident. [17]  Many Americans feel that the price of the counterfeit item, be it drugs, movies, or the like, ranks high amongst the factor list, whereas the ability to obtain such items falls below the importance of price. [18]  However, if consumers continue to look out for their own self-interests and remain unaware of the problems that imitation products create, they cease to see the issues that result from the knockoff industry. 

Issues with counterfeiting affects countless industries ranging from apparel to medicine to entertainment and even technology.  Companies such as Abercrombie & Fitch and New Balance Athletic Shoe have seen the effect of counterfeiting and now limit consumer purchases as a way to counteract the illegal activity of creating and selling knockoff versions of in-store items. [19]  Although this activity worries some companies regarding their short-term success, the majority worry about counterfeiting’s longevity, which could ultimately bring about company and even industry failure. [20] 

As a method to attempt and counteract the possibility of industry failure, companies such as Tiffany are suing those who facilitate the successful exchange or purchase of these goods.  In the Southern District of New York, Tiffany & Co. sued eBay for the promotion and sale of ‘bogus goods.' [21]  Tiffany accused eBay of being responsible for the sale and encouragement of counterfeit merchandise by suggesting that the items were genuine Tiffany jewelry. [22] If eBay falsely presented the knockoff items as real Tiffany jewelry, an unassuming consumer would be easily confused and mislead, leading to the continuation of the illegality of the act if a purchase resulted. 

The consumer’s misdirection is not the only problem that results from the exploitation of illegal and counterfeit materials.  In fact, health and safety risks, reduction in employment, loss of innovation and profit, funding of terrorism, and United States government tax revenue loss would ensue. [23]  In recent years, technology has also aided this problem.  In fact, the internet “is the Wild West for counterfeiters and pirates because of the anonymity.” [24]   Despite the fact that the internet helps the knockoff industry to reach all corners of the world, the largest problem is still the source of product creation. 

The American movie, as well as software and music, industries estimate that Chinese pirated goods cost the United States industry over $2 billion in sales per year. [25]  In April 2009, more than 100,000 Chinese-made counterfeit items were seized in Bay Bridge, Brooklyn, leading to an arrest and second-degree trademark counterfeit charge. [26]  With items easily shipped out of China to the United States, companies currently have little power to fight this production.  As a result of this outcry from companies claiming that their intellectual property has not been adequately protected, China’s government has pledged to help attack the problem head on. [27]  Following through on this pledge seems questionable; however, because China still serves primarily as a manufacturer rather than a designer, the country would therefore reap little benefit from such action. [28] Until stricter standards are taken with China, it seems as though only a slap on the wrist has been executed.  However, China is not the only country that fails to protect foreign company’s intellectual property rights.  In fact, United States businesses remain leery about putting serious effort into selling and distributing their product in India due to a lack of reliable standards. [29] Before a company feels secure in selling and distributing their product, more stringent intellectual property practices must be arise.  In order for this to be possible, countries must heed recommendations to secure the rights of the original producer. 

Recommendation

After witnessing the effects of intellectual property theft, in 2006 President Bush signed the Stop Counterfeiting in Manufactured Goods Act to allow the government to confiscate both knockoff products as well as any equipment used to make them. [30] Although this bill clearly does not solve the infringement problem, it is a step in the right direction for the protection of designers and creators.  Rather than relying solely on Congress to pass bills further protecting intellectual property rights, companies have begun to take matters into their own hands. [31]   

In fact, companies take greater precaution against trademark and copyright infringers, many typically spending between $1 million to $2 million of their own revenue for extra protection. [32]   Consequently, not only do companies pay experts to help guard their goods, but also try and advertise to consumers to stop buying illegal products. [33]  Through this advertising, companies can warn  individuals about the potential dangers of some knockoff items such as drugs, whose use could lead to serious consequences, or even about the illegality and unethical action of counterfeiting products. [34]  Furthering the source of advertisements, a few years ago, the International Anticounterfeiting Coalition initiated a ‘fight the fakes’ message at Hunter College in New York City. [35]  Although the results of these advertising campaigns might not become clearly evident, if the message is constantly in the media that counterfeit product purchase is unacceptable, companies may save money in the future for protection when sales of knockoffs falter.

After the July 2008 holding in Tiffany v. eBay, a French court rejected L’Oreal’s clam that eBay was profiting off of counterfeit perfume purchases. [36] This Court noted eBay’s good faith efforts in trying to detect the sale of counterfeit items as well as determining that “preventing counterfeits will only be effective through a close collaboration between rights holds and eBay.” [37] Working together may be one of the most important mechanisms in which to foster greater protection for the products and serve as a deterrent to product infringers. 

Conclusion

Counterfeiting products has become a staple in today’s society.  Almost anywhere one goes they are bound to see consumers carrying, holding, or wearing illegally manufactured goods.  What most individuals are not aware of are the problems that these knockoff items create.  With safety risks, decreasing incentives for creators, as well as profit loss, counterfeit products initiate more harm than benefit.  With more industries working together as well as the support of the government, illegally copyrighted and trademarked items will hopefully fade.  Until that time however, consumer awareness serves as the most powerful weapon against such a prominent market.



[1] “Designer” Jewelry vs. “Inspired-by” Jewelry: Intellectual Property Infringement and Unfair

Competition Consideration, http://saperlaw.com/blog (Sept. 18, 2008). 

[2] Peter B. Maggs & Roger E. Schechter, Trademark and Unfair Competition, 26 (West Group 1950)(2002). 

[3] Id. at 41. 

[4] Designer” Jewelry vs. “Inspired-by” Jewelry: Intellectual Property Infringement and Unfair

Competition Consideration, supra note i.

[5] Id.

[6] Id.

[7] Id.  

[8] Thomas G. Field, Avoiding Patent, Trademark and Copyright Problem, Pierce Law, http://www.piercelaw.edu/thomasfield/ipbasics/avoiding-patent-trademark-and-copyright-problems.php.

[9] Van Cleef & Arpels Logistics, S.A. v. Landau Jewelry, 583 F. Supp.2d 461 (S.D.N.Y. 2008) (quoted in Designer” Jewelry vs. “Inspired-by” Jewelry: Intellectual Property Infringement and Unfair Competition Consideration, supra note i.). 

[10] Designer” Jewelry vs. “Inspired-by” Jewelry: Intellectual Property Infringement and Unfair Competition Consideration, supra note i.

[11] See Id.

[12] Id.   

[13] Id.

[14] Randy Myers, Counter Attack, CFO Magazine, June 1, 2008, available at

http://www.cfo.com/article.cfm/11475740?f=search.

[15] Peggy E. Chaudhry & Stephen A. Stempf, Getting Real About Fakes, Wall St. J., Aug. 17, 2009, available

at http://online.wsj.com/article/SB10001424052970204038304574151703747284822.html.

[16] Myers, supra note xiv.

[17] Chaudhry, supra note xv.

[18] Id.

[19] Id.

[20] Id.

[21] Tiffany Inc. v. eBay, 576 F.Supp.2d 463 (S.D.N.Y. 2008) (discussed in John P. Mello Jr., All That Glitters Isn’t Legit, CFO Magazine, March 20, 2006, available at http://www.cfo.com/article.cfm/5651571?f=search.).

[22] Mello, supra note xxi. 

[23]  See Peggy E. Chaudhry, supra note xv.; See also

Stephen Taub, Bush Inks Anti-Knockoff Measure, CFO Magazine, March 17, 2006, available at

http://www.cfo.com/article.cfm/5649562?f=search.

[24] Myers, supra note xiv.

[25] Sharon LaFraniere, Facing Counterfeiting Crackdown, Beijing Vendors Fight Back, N.Y. Times, March 2,

2009, available at http://www.nytimes.com/2009/03/02/world/asia/02piracy.html?_r=1.

[26] Colin Moynihan, Counterfeiters Favored Nike, and Obama, Too, N.Y. Times, April 25, 2009, available at

http://www.nytimes.com/2009/04/25/nyregion/25counterfeit.html?scp=1&sq=Counterfeiters%20Favored%20Nike,%20and%20Obama,%20Too&st=cse.

[27] LaFraniere, supra note xxv.

[28] Moynihan, supra note xxvi. 

[29] Heather Timmons, Retailer Knockoffs Abound in India, N.Y. Times, July 16, 2009, available at

http://www.nytimes.com/2009/07/16/business/global/16brands.html?adxnnl=1&adxnnlx=1253516554-/ddDBOFOLmNZ51FXCY7iCQ. .

[30] Taub, supra note xxiv. 

[31] Myers, supra note xiv.

 [32] Id.

 [33] LaFraniere, supra note xxv.

[34] See Peggy E. Chaudhry, supra note xv.

[35] Rob Walker, School of Hard Knockoffs, N.Y. Times, Sept. 21, 2008, available at http://www.nytimes.com/2008/09/21/magazine/21WWLN-consumed-t.html?scp=5&sq=rob%20walker%20and%20knockoffs&st=cse.

[36] Tiffany, 576 F.Supp.2d 463 at 527.; Eric Pfanner, French Court Clears eBay in Selling Fake Goods, N.Y. Times, May 14, 2009, available at http://www.nytimes.com/2009/05/14/technology/companies/14loreal.html?scp=1&sq=French%20Court%20Clears%20eBay%20in%20Selling%20Fake%20Goods,&st=csehttp:wwww.nytimes.com/2009/05/14/technology/companies/14loreal. 

[37] Pfanner, supra note xxxvi.

 

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