A few posts ago, we spoke about avoiding online trademark infringement and how counterfeiting starts with awareness. Now we will take a more in-depth look at online trademark infringement and counterfeiting over a three-part series that covers: 1) an introduction to online trademark infringement and counterfeiting, 2) a victim’s possible solutions and options for recourse, and 3) recent trends, new cases, and an overall conclusion on how to deal with online trademark infringement and counterfeiting. The Internet’s inexpensive access costs coupled with its expansive global reach has made online trademark counterfeiting an incredibly profitable field. Today online methods are eclipsing more traditional means of trademark infringement. Moreover, the explosion of mobile applications and the increasing popularity of retail “flash sales” have also contributed heavily to the rise of online trademark counterfeiting. As a result, counterfeiters today can utilize a variety of different methods when it comes to passing off counterfeit goods.

Among the most popular forms of online trademark infringement are online auctions. Online auctions present an easy distribution channel for counterfeit goods, generally using the bait and switch approach. Typically, the seller will list an item for sale on the auction website, making sure to prominently display a famous brand’s mark on the goods listed at a well-below market price. Then, upon securing payment from the unassuming buyer, the seller may send a much cheaper counterfeit good in its place, or in some cases, nothing at all. By the time the buyer realizes his mistake, the seller has already disappeared from the site. This leaves the buyer without recourse while the seller is able to start the scheme anew under a new username.

Although online auction sites generally attempt to avoid liability from these types of transactions in their Terms and Conditions or through User Agreements, most sites do not enforce the terms or are simply unable to keep up with the sheer volume of counterfeit goods being trafficked.

The seminal case concerning online auctions is Tiffany’s v. eBay, 576 F. Supp. 2d 463 (S.D.N.Y. 2008). Here, the famous jewelry company, Tiffany’s, alleged that hundreds of thousands of counterfeit silver jewelry items were being offered under their name for sale on eBay. Tiffany sued eBay, inter alia, for direct and contributory trademark infringement as well as for direct and contributory trademark dilution.

The court dismissed all trademark infringement claims against eBay, holding that the responsibility for policing the mark fell upon the trademark owner and not upon online auctions websites like eBay. Simply having the knowledge that trademark infringement may be occurring on their website was not enough to hold eBay liable. Key to the court’s analysis was also the fact that eBay was able to demonstrate that they had genuinely attempted to curb the infringing behavior of counterfeiters through the implementation of their Verified Rights Owner (VeRO) program. eBay’s VeRO program guarantees that suspicious listings will be taken down within twenty-four hours of a complaint upon a finding that the listing has infringed upon a mark.

Other popular methods of online trademark infringement deal with the trafficking or registration of domain names associated with famous marks. Known as cybersquatting, this describes the process where an infringer registers, traffics in, or simply uses a domain name with a malicious intent to profit off the goodwill associated with the mark. Typically what happens is that the infringer will purchase a domain that is identical (or significantly similar) in spelling to that of a famous mark. The registrant may then try to sell the domain to the mark’s actual owner at an inflated price. Often, such registrants will also put links to a competitor’s website or post inappropriate content to further pressure the mark’s owner into a quick purchase. If the registrant cannot successfully pressure the mark’s owner into purchasing the domain, or if they simply do not want to sell it, they may instead hold onto the domain and profit from the increased ad revenue derived from visitors who mistakenly land on their page instead.

To learn more about online trademark infringement and counterfeiting, stay tuned for next posting’s in-depth look at solutions available to victims of online trademark infringement.

Sources: Tiffany’s v. eBay, Inc., 576 F.Supp. 2d 463 (S.D.N.Y. 2008): eBay’s VeRO Program: http://pages.ebay.com/help/community/vero-aboutme.html Anticybersquatting Consumer Protection Act: http://www.gpo.gov/fdsys/pkg/BILLS-106s1255is/pdf/BILLS-106s1255is.pdf

For more information, please visit our trademark service page.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the IP law firm and its IP law attorneys may be found at www.klemchuk.com.

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