How to win the war on counterfeit goods

Are rights holders starting to win the fight against counterfeiting? Ben Mark, legal director at RPC, considers the latest developments in the area of counterfeiting and how businesses can take effective action.

What's been happening in the world of counterfeiting in the past five years?

The internet has become an increasingly important channel of trade for those dealing in counterfeit goods—it offers anonymity, a wider target audience and a greater opportunity to mislead consumers into believing that they are buying the genuine article.

The past five years have seen important developments in relation to IP infringement online, specifically in relation to counterfeit goods.

In 2014, the High Court granted an injunction against internet service providers (ISPs) requiring them to block access to websites in which counterfeit goods were sold or advertised (Cartier International AG and others v British Sky Broadcasting Ltd and others (No 3), Note [2014] EWHC 3915 (Ch), [2015] IP & T 320 known as the Richemont case). These orders are well established in copyright cases (involving the piracy of films, TV shows and video games), and it will no doubt be a quick and effective way for brand owners to protect their trade marks and prevent ‘look alike’ or fake products from being advertised and sold online.

In addition, European legislation has been introduced in recent years to enhance the powers of customs authorities to detain counterfeit or pirated goods that are on their way into the EU. Customs authorities must now arrange the destruction of small consignments of the counterfeit goods as long as the importer has not objected to the destruction within ten days of detention. Also, there is now no requirement to commence infringement proceedings before destruction.

Despite the changes, there are still large challenges to overcome. Some reports suggest that the value of counterfeit goods in the global market is around half a trillion dollars.

To what extent can due diligence assist UK businesses in the battle against counterfeit goods?

Due diligence in the context of counterfeit goods effectively requires companies to become more aware of what causes counterfeiting, and to monitor their brand portfolios and product production lines. It acts as a key tool in responsible supply chain management (RSCM). To this extent, due diligence is a necessity in assisting UK businesses in the battle against counterfeit goods.

Utilising due diligence techniques can allow businesses to fully understand the context in which manufacturers and distributors operate. In many cases, it is the manufacturers that produce counterfeit products either by reverse engineering or using damaged/tainted goods or simply by selling off excess product. The brand owners are often completely unaware.

By carrying out thorough due diligence on their manufacturers, brand owners can better understand what is actually happening on the ground. For example, by understanding the conditions in which manufacturers work, what incentivises/deters manufacturers to counterfeit or refrain from counterfeiting, and the procedures for disposing of damaged goods. In this way, brand owners can undertake comprehensive audits and ensure that each stage of the production line runs efficiently with the risk/opportunity of counterfeiting reduced.

How can UK businesses use RSCM to tackle counterfeiting and piracy?

As discussed, due diligence and audits are effective RSCM tools that can be used to tackle counterfeiting.

In particular, UK businesses can use RSCM to tackle counterfeiting in the following ways:

  1. implementing traceability policies—traceability policies can include using QR codes or holograms on products to indicate that they are genuine (QR codes are easily scanned by smartphones and it is even possible to combine them with shopper marketing)
  2. working with local authorities to educate and train management and workers of production sites about the dangers of counterfeit products—such training can focus on the safety risks associated with counterfeit goods and on the criminal sanctions counterfeiters are exposed to, and
  3. carrying out initial due diligence to gain specific data on a manufacturer before entering into manufacturing agreements—in particular, analyse data on timing, plant production capacity and capability and financial and operational records

Are there any examples of how corporate social responsibility (CSR) and RSCM have reduced counterfeiting and IP infringement?

CSR and RSCM can be used by brand owners across a wide variety of sectors. One key sector which has targeted CSR and RSCM techniques in its battle with counterfeiters is the spirits industry.

Premium alcohol brands are especially vulnerable to counterfeit goods with infringers either recycling genuine bottles before filling them with alcohol that is not fit for human consumption, or using cheap alcohol and manufacturing fake bottles and creating ‘lookalike’ labels and packaging. Of particular concern is the evident health risk to consumers.

In response, the spirits industry has clubbed together with major players to form the International Federation of Spirits Producers (IFSP). By forming an alliance, these companies have benefited from pooling resources and generally increasing efficiency. Together they tackle the whole supply chain from the labelling and packaging, to manufacturing of the alcohol and bottles, to the distribution and retail of the final products.

Over the past five years the IFSP (and its members individually) has successfully combined criminal and civil causes of action against infringers. A significant contributing factor has been the positive manner in which they have incorporated RSCM into their CSR policy documents. The focus has been on consumer safety, quality of genuine products and working conditions at manufacturing sites.

What is next on the horizon? What can lawyers advise their clients?

In June 2015, the final compromise texts of the new EU Trade Mark Directive 2008/95/EC (the Recast Directive) and revisions to the Community Trade Mark Regulation (EC) 207/2009 were published. The Recast Directive will provide that counterfeit goods in transit will now infringe a trade mark regardless of whether they are intended to enter the EU (unless the importer can prove that the trade mark owner would not be able to prevent the sale of goods in the destination country). This reverses the current position that such goods only infringe a trade mark once they are in free circulation in the EU, intended to be released in the EU or are directed at EU consumers.

The new trade mark legislation on counterfeit goods will complement broader strategies for brand owners who should ensure that they have a comprehensive registration strategy for their IP rights. Design rights for packaging etc should be appropriately registered as should the trade marks affixed to them in all relevant territories, particularly the manufacturing countries. It is important that these portfolios are regularly audited and expanded to ensure comprehensive protection.

Interviewed by Diana Bentley. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

This article is republished with kind permission of WIPIT’s sister site, Lexis®PSL IP & IT. For a free trial click here.

 

Area of Interest