United States: multi-pronged approach is desired to deal with counterfeiters on line

Lawful framework

Anti-counterfeiting enforcement in the United States stems largely from two federal statutes: the Lanham Act (codified at 15 USC Segment 1051) and the Trademark Counterfeiting Act 1984 (codified at 18 USC Part 2320). The Lanham Act delivers civil remedies for trademark infringement and counterfeiting, even though the Trademark Counterfeiting Act criminalises selected violations of the Lanham Act’s anti-counterfeiting provisions, producing these offences federal crimes. While there are extra state and federal legislation that impose civil and legal legal responsibility for counterfeiting, most anti-counterfeiting enforcement actions are derived from these two statutes.

The Lanham Act defines a counterfeit mark as “a spurious mark which is equivalent to or significantly indistinguishable from a registered mark” (15 USC Segment 1127). Ownership of a legitimate US trademark registration is therefore a prerequisite to a productive trademark counterfeiting assert less than federal legislation. This definition also requires a greater diploma of similarity amongst the marks than the ‘likelihood of confusion’ common used in a typical trademark infringement case. To qualify as ‘counterfeit’, the mark should be similar to or substantially indistinguishable from the registered mark. Below this far more stringent standard, additional cures are out there for trademark counterfeiting beyond those people obtainable for trademark infringement.

Grey sector goods do not qualify as counterfeit thus, distributors and sellers of grey marketplace items are not subject to legal penalties. However, legal rights holders might have other claims towards such distributors and sellers based on other mental house or deal legal guidelines.

Border measures

US Customs and Border Protection

US Customs and Border Defense (CBP) is the primary federal company accountable for addressing counterfeit products at the United States border. All persons, baggage and items coming into the United States are matter to inspection by the CBP (19 CFR Portion 162.6) and the CBP has authority to exclude, detain and seize counterfeit products at any port of entry into the United States. In excess of the previous numerous many years, the CBP has noted major raises in the selection of seizures executed for each 12 months. In 2019 and 2020, it documented the initial decreases in the range of seizures due to the fact 2014 on the other hand, the total seizure figures continue to be higher, with 26,503 seizures representing a monetary price of over $1.3 billion in 2020.

The CBP depends on information offered by trademark proprietors to identify counterfeit items and it maintains its own searchable, on line database of recorded IP legal rights for this objective. Trademark house owners may possibly history their US trademark registrations with the CBP making use of the agency’s Intellectual House Legal rights e-Recordation program. The charge to report a trademark is $190 for each course of items for the comprehensive term of the fundamental registration. Over and above this recordation, trademark entrepreneurs may perhaps also present the CBP with extra data and materials to guide in identifying counterfeits. Rights holders frequently offer product or service identification guides (eg, listings these as hallmarks authenticating the products, widespread indicators of counterfeit products and solutions, authorised licensees and importers, recognised counterfeiters and get hold of facts for the legal rights holder) and conduct in-individual merchandise trainings for CBP personnel. Legal rights holders may possibly also offer information about suspected infringers by way of the CBP’s e-allegation tool.

On pinpointing suspected counterfeit items at a US port of entry, the CBP may well detain the products and, at its discretion, provide sure restricted info (together with the import day, the port of entry, the nation of origin, the description of the products and their quantity as presented in entry documentation, and redacted visuals of the products) to the trademark owner, to assist the CBP in its perseverance.

The CBP will inform the importer (and the trademark proprietor, if not previously notified) of the detention inside of five company days, following which the importer has seven business enterprise times to give evidence that the goods are not counterfeit. If the importer does not react or offers inadequate evidence that the goods are not counterfeit, the CBP may well release extra information and facts, such as unredacted photographs of the items, to the trademark proprietor (19 CFR Portion 133.21). Because it can be extremely challenging for the trademark owner to establish the authenticity of the merchandise from confined details and redacted photos (which conceal determining data this kind of as universal product codes, serial numbers and names and addresses of the maker, importer and exporter), the CBP’s means to launch unredacted visuals to the trademark proprietor just before expiry of the seven-day waiting around period is a hotly contested issue. Because company advice on this difficulty is in a state of flux, trademark entrepreneurs have claimed extensively disparate encounters with CBP officers’ willingness to disclose information and facts and the timing of these types of disclosures.

If the CBP decides that the detained items are counterfeit, the products will then be seized and forfeited. The CBP may also impose a civil monetary penalty against the importer.

Global Trade Fee

The CBP also enforces exclusion orders issued by the US Global Trade Commission (ITC), a quasi-judicial federal company staffed by administrative legislation judges. A US trademark owner may well search for an exclusion get from the ITC below Section 337 of the Tariff Act 1930 (19 USC Portion 1337) and the ITC will carry out a ‘337 investigation’ into the trademark owner’s allegations of unlawful import of counterfeit items into the United States.

With a several essential discrepancies, 337 investigations functionality extremely equally to federal court docket proceedings. Whilst an ITC criticism can be primarily based on both of those registered and unregistered (typical regulation) trademark rights, only a company with adequate domestic industry exercise may avail by itself of the protections of the ITC. More, as opposed to federal courtroom proceedings, the ITC’s jurisdiction is not personal to the accused infringer, so the resulting exclusion get might utilize to all infringing imports entering the United States, irrespective of the importer’s id. Both equally the trademark proprietor and the accused infringer take part in the proceedings as they would in federal litigation, and the ITC also appoints an investigating lawyer to represent the community fascination. If the ITC finds a violation of Section 337, it may perhaps issue possible injunctive reduction in the sort of an exclusion order barring additional importation of infringing products, and/ or a cease and desist get towards respondents with commercially sizeable US functions or infringing inventory within the United States. The ITC lacks authority to award financial damages on the other hand, it could impose fines of a minimum amount of $100,000 per day for every single day that an entity violates an ITC cease and desist buy.

ITC exclusion orders are enforced by the CBP and may be used to infringing imports of unique respondents (confined exclusion orders) or to all infringing imports no matter of resource (common exclusion orders). Stop and desist orders are enforced by the ITC and, if required, by means of federal litigation initiated by the ITC.

Criminal prosecution

Counterfeiters may perhaps be subject matter to prison prosecution by point out or federal legislation enforcement organizations (18 USC Area 2320), which offer various felony penalties for the intentional trafficking of counterfeit goods. For an personal, the standard penalties consist of up to 10 years’ imprisonment and a wonderful of up to $2 million for a initial-time offender and up to 20 years’ imprisonment and a high-quality of up to $5 million for a repeat offender. Organizations and other entities may possibly be fined up to $5 million (for 1st-time offences) or $15 million (for repeat offences). The prosecution may perhaps request improved penalties, together with the chance of lifetime imprisonment, where by a defendant recklessly or knowingly causes or attempts to lead to serious bodily damage or loss of life in connection with the act of counterfeiting or in conditions involving counterfeit military goods or products and services or counterfeit medications.

In addition to these penalties, convicted counterfeiters are also requested to pay out restitution to their victims, such as the trademark owners (even so, the restitution total is frequently much less than a trademark owner would acquire in a civil motion towards the counterfeiter). Further, the counterfeit merchandise at challenge, together with any devices, storage services, cars or other house utilised in the commission of the crime, and any proceeds derived from the crime, will be matter to forfeiture to the governing administration and achievable destruction on a effective conviction.

Legislation enforcement authorities count on experiences and other cooperation from trademark entrepreneurs in their investigations and prosecutions of counterfeiters. A successful prison prosecution ordinarily demands evidence and testimony from the trademark owner, to verify the validity of the trademark rights at issue and the absence of authorisation for the defendant’s use of those logos.

Civil enforcement

Due to the fact trademark house owners have minor regulate about the timing and other elements of legal anti-counterfeiting enforcement, lots of trademark house owners like to request reduction via civil litigation in addition, or as an choice, to felony prosecution. In a civil situation for damages, the trademark owner elects both a jury trial or a bench (non-jury) demo. Juries typically award bigger damages, but a trademark proprietor may well favor bench trials in scenarios with sophisticated issues or info.

Private investigations

The to start with phase in a civil scenario is ordinarily a personal investigation initiated by the trademark proprietor. This normally requires arranging investigative purchases of the suspected counterfeit items, accumulating item samples and other evidence, confirming that the items are in point counterfeit, and figuring out potential defendants. The trademark proprietor may possibly use evidence collected all through this investigation to support a ask for for specific varieties of emergency reduction, such as a non permanent restraining purchase, an asset freeze or a preliminary injunction.

Civil seizures

In civil counterfeiting circumstances, a trademark operator may possibly find an ex parte seizure order. The trademark owner requests an ex parte seizure purchase on graduation of the fit, to reduce the defendants from concealing, destroying or usually disposing of the counterfeit items, the instrumentalities utilized to make them, and records of the counterfeiting functions (15 USC Section 1116(d)). Civil seizure is a hugely sought-just after solution in counterfeiting instances since, if granted, it straight away gets rid of the counterfeit merchandise from the industry, preserves the proof of counterfeiting, and can allow for a much more accurate determination of damages. Simply because ex parte seizure orders are granted with out prior see to the defendant, the trademark owner ought to 1st give suitable safety to the court in the occasion of a wrongful seizure and demonstrate that:

• an ex parte seizure order is the only adequate solution
• the trademark owner has not publicised the seizure
• the trademark owner is probably to realize success on the merits of its counterfeiting claim
• the trademark owner will experience rapid and irreparable injuries if seizure is not ordered
• the hurt to the trademark owner outweighs any respectable passions to the defendant whose merchandise will be seized
• the items to be seized are found at the identified site and
• the defendant would ruin, go or hide the merchandise if supplied advance observe of the seizure.

A trademark owner’s civil seizure request need to be supported by affidavits with information from the investigation. When seizure orders are comparatively widespread during the United States, some district courts are much more receptive to granting these types of requests than some others.

Monetary aid

Less than federal law, a trademark operator could find actual damages or an accounting of the defendant’s earnings, as perfectly as attorneys’ fees. For intentional functions of counterfeiting, the courtroom will – absent extenuating situation – award treble damages (a few situations the award of foundation gains or damages, whichever is better), along with realistic attorneys’ fees.

Because evidence of true product sales or profits is often tricky, if not extremely hard, to obtain in counterfeiting conditions, federal legislation permits trademark owners to elect statutory damages in lieu of precise damages. These statutory damages array from $1,000 to $200,000 for each form of superior on which every counterfeit mark is employed, or up to $2 million per sort of great for wilful counterfeiting.

Anti-counterfeiting on line

The increasing availability of counterfeit goods on the web provides a complex surroundings for enforcement, demanding a adaptable, multi-dimensional strategy. For the reason that counterfeiters are typically positioned outside the United States and cover their true identities to customers on the internet, no US legal strategy is by alone enough to deal with their action. Trademark entrepreneurs ought to utilize a wide variety of instruments to proficiently beat counterfeiters online.

US litigation resources

Even in which a counterfeiter is found outside the United States, certain US litigation resources may well be readily available to deal with US-dependent elements of the case. For case in point, if the counterfeiter is using a US-primarily based intermediary (eg, a payment processor, financial establishment, internet service supplier (ISP), e-commerce internet site or domain registrar), a US court docket may well workout jurisdiction in excess of these actions (including by freezing any US-dependent accounts).

US civil course of action also permits trademark entrepreneurs to go after legal action from counterfeiters whose identities are unidentified, naming these entities ‘John Doe’ defendants in a match. This enables the trademark owner to conduct discovery to uncover the counterfeiter’s identification. This discovery can incorporate 3rd-celebration intermediaries with whom the counterfeiter has engaged (eg, ISPs, domain registrars and transport corporations). Further more, a trademark proprietor may possibly demonstrate a counterfeiter’s identity, and/or hook up a counterfeiter’s functions throughout multiple platforms, employing circumstantial evidence (eg, the use of one particular username on numerous e-commerce sites and other counterfeit revenue styles).

Third events who knowingly facilitate the sale of counterfeit goods (or are wilfully blind to this kind of things to do) may well be matter to contributory legal responsibility less than US regulation. This danger of contributory liability, in mix with the harmless harbours explained underneath, gives a robust incentive for on the internet intermediaries to acquire acceptable action in reaction to rights holders’ stories of counterfeit activity in a well timed vogue and in advance of a lawsuit is submitted.

Safe harbours for on the internet intermediaries

US trademark scenario legislation and the Electronic Millennium Copyright Act (DMCA) every present a harmless harbour shielding specific on the internet intermediaries whose amenities are employed by infringers from contributory liability, where by those people intermediaries observe a recognize-and-takedown procedure for addressing legal rights holders’ infringement reports. ISPs and e-commerce web sites with substantial US contacts will typically remove infringing content on receipt of a rights holder’s infringement report in buy to advantage from these safe and sound harbours. The secure harbours do not utilize where the middleman participates right in the counterfeiting action or is aware of the activity but chooses to overlook it.

The intermediary’s recognize-and-takedown mechanisms could provide only short term aid – if an accused infringer chooses to post a counter-notification objecting to the intermediary’s elimination of the infringing components, the intermediary may well reinstate the taken out products unless a lawsuit is filed. Also, a effective takedown will result in removal of the infringing articles from a web page, but the infringer can simply swap to a new ISP or develop a new internet site.

The DMCA also supplies a particular style of subpoena that can assist legal rights holders study the identities of counterfeiters operating online. Exclusively, the DMCA enables a copyright owner to serve a subpoena on an ISP for “information enough to discover the alleged infringer” from the ISP’s enterprise data (17 USC Part 512(h)). The subpoena may possibly be served on the ISP at the same time as the takedown recognize. The copyright proprietor will have to post a request to the courtroom that incorporates:

• a duplicate of the DMCA observe
• a proposed subpoena and
• a sworn declaration that the function of the subpoena is to uncover the counterfeiter’s identification and will be used only to that end.

Offered the request satisfies the DMCA’s prerequisites, a courtroom will problem the subpoena with out necessitating that the copyright proprietor file an true complaint. The subpoena have to be processed by the clerk of court docket in the district court docket the place the ISP is located. It is readily available only in counterfeit circumstances involving infringement of the trademark owner’s copyrighted components.

Domain name solutions

The place a counterfeiter is offering counterfeit goods on a rogue website with an infringing area title, the trademark owner may possibly look for transfer or cancellation of the area identify by way of litigation (relying on US regulation) or arbitration proceedings (relying on the UDRP or equivalent mechanisms). Domain names may well also be seized by US legislation enforcement in prison enforcement initiatives these kinds of as the Countrywide Intellectual Assets Legal rights Coordination Centre’s Operation in Our Web pages.

Middleman terms of support

Trademark house owners may possibly seek voluntary cooperation from on the internet intermediaries with no resorting to litigation. Just after obtaining a trademark owner’s report of counterfeit activity, some intermediaries will voluntarily terminate solutions to the counterfeiter dependent on violations of their phrases of assistance agreements (which typically prohibit the use of middleman companies for illegal routines). For example, a trademark proprietor could report a counterfeiter to the credit score card providers and payment processors marketed on the counterfeiter’s site, and individuals intermediaries could elect to terminate the counterfeiter’s merchant accounts, so that the counterfeiter can no for a longer time system payments for its revenue. These payment intermediaries could also evaluate large fines for the counterfeiter’s violations of the conditions of support. This enforcement method is significantly productive, for case in point, exactly where the counterfeiter operates a big community of rogue internet sites, but processes payment as a result of only a couple of merchant accounts, as merchant accounts have a tendency to be considerably additional precious to a counterfeiter than its person websites and area names.

Preventative steps and approaches

An successful, multi-dimensional method to anti-counterfeiting features specific preventative measures. First, the trademark owner ought to register vital trademarks and copyrights (eg, for merchandise packaging) with the USPTO and the US Copyright Place of work, respectively. These logos and copyrights must also be recorded with the CBP.

Trademark house owners need to also:

• monitor (or utilize a seller to monitor) critical on the net marketplaces and platforms, as very well as at-possibility bricks-and-mortar places, for suspected counterfeit items
• create and manage contacts with essential legislation enforcement offices and personnel (eg, the suitable CBP Centre of Excellence for the trademark owner’s field, the National IPR Centre and the White House Intellectual Assets Enforcement Coordinator)
• offer products identification guides to the CBP and on a regular basis update these resources
• give in-person coaching and other assistance to the CBP and other critical legislation enforcement agencies
• link with other rights holders and rights holders’ organisations to collaborate in law enforcement trainings and prison raids
• put into practice correct packaging and solution characteristics to guide in product authentication, and look at utilizing monitor-and-trace technology to check the authentic source chain and
• foster relationships with genuine suppliers, distributors and customers to support anti-counterfeiting goals.

Kristina Montanaro Schrader, Maia T Woodhouse

Adams and Reese LLP