1 Strategies for Fighting Counterfeiting William D. Coston & Christopher S. Crook Venable LLP

2 What is Counterfeiting?  Counterfeit goods are phony products offered for sale as authentic.  “Counterfeiting has evolved in recent years from a localized industry concentrated on copying high-end designer goods to a sophisticated global business involving the mass production and sale of a vast array of fake goods.”  “Counterfeiting and piracy diminish the profits of legitimate producers and risk harm to consumers who may purchase fraudulent, potentially dangerous products.” Source - Ambassador Ronald Kirk, 2011 Special 301 Report, Office of the United States Trade Representative (April, 2011)

3 Counterfeiting Poses a Two-Fold Threat To Your Business  By distributing inferior imitations, counterfeiters damage the goodwill and reputation of upstanding companies.  Years spent building your brand are quickly rendered futile when imitators tarnish the quality of your reputation.  By inundating the market with low-cost (and low-quality) products, counterfeiters free-ride on the research, development, and marketing of others.  Indeed, counterfeiters reap profits that rightfully belong to your business.

4 Counterfeiting Statistics  In fiscal year 2010 U.S. Customs performed 19,959 seizures, a 34% increase compared with  Seizures of products that could have harmed consumers, vital infrastructure and national security soared 97% over the previous year, and accounted for 23% of all Intellectual Property Rights ("IPR") seizures.  The total domestic value of the fake goods seized in fiscal year 2010 totaled $188.1 million.  The estimated manufacturer's suggested retail price value of the goods had they been genuine totaled $1.4 billion.  China continues to be the number one source country for counterfeit and pirated goods seized, accounting for 66% or $124.6 million of the total domestic value of seizures.  The top 10 categories of IPR-infringing products seized were footwear, consumer electronics, wearing apparel, handbags/wallets, optical media, computers/hardware, cigarettes, watches/parts, jewelry, and pharmaceuticals. Source – U.S. Customs 2010 Annual Report

5 A New Cost of Doing Business  Counterfeiting is an ongoing problem.  For every counterfeiter that is shut down, many more begin operations.  A dynamic anti-counterfeiting strategy is required to enable companies to respond quickly to new counterfeiting threats and minimize the number of counterfeit products in the marketplace.

6 Anti-Counterfeiter Tools  In-depth Investigations  Locating counterfeit product  Tracing counterfeits back to their source  Government Agencies  Customs Border Protection  Immigration and Customs Enforcement  Office of the United States Trade Representative  United States Chamber of Commerce  Administrative proceedings  ITC  Federal Court

7 Goal: Try to establish whether all of the counterfeits are from a single supply source, or if there are different variants in the market. This could involve:  one supplier of product and one packaging operation  one supplier of product and multiple packaging operations  several independent sources of product and packaging Monitoring and Investigating

8 There are multiple ways to locate counterfeit goods.  Search the Internet for evidence of infringing activity.  Monitor trade shows and swap meets to determine if counterfeit products are being sold.  Monitor major retailers (both online and brick-and- mortar locations).  Oversee the auditing and investigation of manufacturing facilities.  Purchase products from seemingly legitimate sites – including those with which you may have relationships – to determine whether customer orders are being fulfilled with authentic product.  Monitor products that are returned to you to determine if they are authentic and trace their source(s) if they are fakes.  Technological methods allowing Customs to quickly and accurately differentiate fake products from real products (bar codes, RFID chips, holograms, etc.)

9 Once counterfeits are discovered:  Work with investigators and professionals to review the legitimate products to confirm rights, rights ownership, appropriate registration (copyrights and trademarks), and recordation with customs.  Collect information regarding: the location of replication, printing and product completion; identity and location of the business operator arranging manufacture, packaging, export/distribution; the exit points from the source country; and routes to the U.S. (and other relevant markets).  Conduct online research into the availability of counterfeit product on a "wholesale" basis in source country.  Examine the range of counterfeit products themselves for forensic clues as to source. Monitoring and Investigating

10 Monitoring and Investigation Hiring an expert to investigate counterfeit products can save your company money in the long run.  There are a number of companies that specialize in counterfeit product investigations.  These companies have people on-the-ground in various countries known for counterfeiting products around the world.  Professional investigators have developed a network of people with knowledge of the counterfeiting industry and can provide results faster than an investigation independent of these contacts.  Professional investigators are able to keep "chain of custody records" to preserve evidence for use at trial.

11 Government Agencies  Customs Border Protection  United States Customs and Border Patrol ("CBP"), as the primary U.S. border enforcement agency within the U.S. Department of Homeland Security, is a key player in the government's federal interagency initiative called the Strategy Targeting Organized Piracy ("STOP!")   CBP has the authority to enforce U.S. trademark and copyright laws by detaining, seizing, causing forfeiture of, and destroying counterfeit and pirated goods imported into the United States.

12 Government Agencies  Customs Border Protection  Record with CBP your intellectual property that previously has been properly registered with the U.S. Patent and Trademark Office and Copyright Office.  Owners of recorded IPR can work with CBP to develop anti-counterfeiting strategies so that officers at Ports of Entry will be able properly to identify IPR infringing goods.  Provide detailed images of the subject registered merchandise  Product specifications (length, width, height, weight, etc.)  Physical samples, if available, of all registered, authorized goods  Physical samples, if available, of infringing/counterfeit products previously imported into the US  Names, addresses and contact information, if available, of any suspected foreign exporters or US importers of the counterfeit or pirated goods to prevent future infringing imports by these companies  After assembling the product identification information, CBP suggests that the importer set up meetings with the relevant Ports of Entry.  In order for these meetings to have the maximum beneficial impact, it is essential that you present as comprehensive a training package as possible to each Port.

13  Immigrations and Customs Enforcement (“ICE”)  The National Intellectual Property Rights Coordination Center (IPR Center) is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy.  The IPR Center is led by ICE's Homeland Security Investigations (HSI) and includes partners from  Customs Border Patrol;  The Federal Bureau of Investigations;  The Department of State;  The Food and Drug Administration;  The Postal Inspection Service;  The Department of Commerce;  The U.S. Patent and Trademark Office;  The Naval Criminal Investigative Service;  The Defense Logistics Agency;  The Defense Criminal Investigative Service;  The Army Criminal Investigative Command;  The General Services Administration;  The Consumer Product Safety Commission;  INTERPOL;  The Royal Canadian Mounted Police; and  The Government of Mexico Tax Administrative Service. Government Agencies

14 Office of the United States Trade Representative  USTR's Office of Intellectual Property and Innovation (IPN) uses a wide range of bilateral and multilateral trade tools to promote strong intellectual property laws and effective enforcement worldwide, reflecting the importance of intellectual property and innovation to the future growth of the U.S. economy.  Key areas of work include:  the negotiation, implementation, and monitoring of intellectual property provisions of trade agreements;  bilateral and regional engagement through such vehicles as the annual "Special 301" review and numerous IP dialogues with trading partners;  multilateral engagement on IP issues through the World Trade Organization (WTO), and other organizations;  implementation of trade policy in support of U.S. innovations, including those in the pharmaceutical and medical technology industries; and  providing interagency trade policy leadership. Government Agencies

15  United States Chamber of Commerce  The U.S. Chamber's Global Intellectual Property Center (GIPC) is committed to creating jobs, spurring economic growth, and advancing American competitiveness by promoting and defending robust IP rules globally, while strengthening enforcement efforts in the United States and abroad.  The U.S. Chamber of Commerce works with Congress, the administration, and the private sector to cut off rogue websites— those dedicated to theft of IP—from the U.S. market. Other Agencies

16 Administrative Proceedings  International Trade Commission (ITC)  The ITC is an independent non-partisan, quasi- judicial federal agency.  Adjudicates cases involving alleged infringement by imports of IPR.  Administers U.S. Trade remedy laws  Provides the U.S. Trade Representative and Congress with independent advice and information on international trade and competitiveness  Administers import injury investigations.

17 Federal Court To the extent counterfeiters can be traced back to the United States, companies can seek redress using litigation in Federal Court.  Send cease and desist letters.  Negotiate settlement agreements enforceable by U.S. Courts.  Go into court immediately and secure preliminary injunctive relief.  Seek orders seizing the counterfeit product.  Seek discovery of counterfeiting and financial data.  Recover monetary settlements or judgments.  Destroy counterfeit goods  Take down infringing web sites.

18 Federal Court The Trademark Counterfeiting Act (“TCA”)  The TCA provides a federal vehicle for anti-counterfeiting enforcement.  The TCA defines a counterfeit as “a spurious mark which is identical with, or substantially indistinguishable from a registered mark.”  The TCA strengthens Lanham Act remedies available to plaintiffs bringing actions against counterfeiters including:  ex parte seizures; and  enhanced damages.  Seizures are carried out by U.S. Marshalls.  Plaintiff must describe the place to be searched and the goods to be seized with particularity.  The government retains possession of the seized goods.  Plaintiff is required to post a bond.  TCA allows for damages  In cases of intentional and knowing counterfeiting, the TCA provides for a mandatory award of attorney’s fees.  The TCA allows Plaintiff to elect statutory damages instead of actual damages.  $1000 – 200,000 per mark  Up to 2,000,000 for willful violations. 15 U.S.C.§§ et seq.

19 Federal Court The difference between Trademark Infringement and Counterfeiting  Trademark Infringement  Plaintiff must show use in commerce.  Plaintiff must show a likelihood of confusion.  Similarity of the marks  Strength of the owner’s mark  Price of the goods  Actual confusion  Intent  Length of co-existence  Channels of trade  Target customers  Relationship of the goods in the minds of consumers  Other factors that suggest the consuming public would think the junior user makes the senior user’s product  Plaintiff can recover actual damages and/or defendants profits.  Plaintiff can be awarded injunctive relief.  Extends liability to the infringer and to third parties via contributory and vicarious liability theories.  Counterfeiting  Plaintiff does not have to show use in commerce.  Plaintiff must show use on goods and services to obtain ex parte seizure and/or certain enhanced damages.  Likelihood of confusion is presumed.  Plaintiff can recover actual damages or elect to recover statutory damages (must show use).  Plaintiff can recover enhanced damages.  Plaintiff can be awarded injunctive relief.  Extends liability to those, who with specific intent provides goods or services necessary to the counterfeiting.

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