Use Copyright Registration to Stop Knock-Offs

Too often, overseas and other low-cost manufacturers are employed to replicate successful products. This can be done by carefully making a mold of the product and then using that mold to make a replication. These knock-offs are imported into the U.S. and enter the stream of commerce through a variety of channels. A more sophisticated infringer will ensure that the product is marketed with a name that does not infringe the trademark. Most likely the name will be descriptive. Assuming that the product configuration/shape is not protectable as trade dress or by design patent and there is no trademark infringement of the product name, it is very difficult for the brand owner to police these knock offs. One strategy is to incorporate a registered copyright into the product. A registered trademark, particularly a logo, similarly can be incorporated. With either strategy, a copier is likely to copy "too closely" picking up the copyright or logo into the mold, thereby including it in the knock-off product. This provides grounds for copyright and trademark infringement claims, both of which support injunctive relief as well as impoundment/destruction of infringing articles (Sections 34, 36 of the Lanham Act, 15 U.S.C. 1116, 1118; Sections 502-03 of the Copyright Act, 17 U.S.C.). The copyright claim (Sections 412, 504, and 505 of the Copyright Act, 17 U.S.C.) also allows for the recovery of attorney's fees and statutory damages if the work is registered pre-infringement.

Protecting Consumables from the Gray Market

Parallel or gray market imports are products marketed by the rights owner, or with the rights owner's permission, in one country and then subsequently imported into another country without the rights owner's permission. Typically gray market goods are sold in the U.S. at a considerable discount, because the importer is able to purchase the products abroad at a lower price. Thus, brand owners are better able to control the prices of their goods when the gray market cannot serve as competition.

Rights owners can take proactive steps in educating the public as to gray market goods and deterring importation of such goods. Rights owners should implement product control and tracking procedures for their foreign manufacturers and distributors to prevent unauthorized "back door" transactions. If goods not authorized for sale in the U.S. continue to find their way into the U.S. marketplace, the rights owner should take necessary action, including terminating ties with the associated foreign manufacturer/distributor. Rights owners may also pursue an exclusion order under § 42 of the Lanham Act when they become aware of gray market goods. Further, monetary relief, including disgorgement of profits, is available under § 32 and § 43 of the Lanham Act.

Additionally, brand owners should take advantage of a potential strategy employing an important exception to the first-sale and exhaustion doctrines, which allow rights owners to enjoy more control over their foreign manufactured products than their domestically manufactured products. These doctrines, which limit a rights owner's control and allow a purchaser to sell or otherwise dispose of a lawfully made copy, do not apply when goods are manufactured abroad. Essentially, a rights owner may seek to protect its consumables from gray market importation by incorporating its registered copyright into the product, without the first-sale and exhaustion doctrine hurdles. A product bearing a registered copyright cannot legally be imported into and resold in the U.S. without permission of the rights owner. Additionally, as stated above, the copyright infringement claim also allows for the recovery of attorney's fees and statutory damages if the work is registered pre-infringement.

Finally, gray market goods can be sold domestically as well. This frequently occurs where a legitimately branded product priced for one market channel is sold by a third party into another market channel. This is often seen with OEM software, which is sold at a deep discount and bundled with a new computer. Third parties will sell that software as a stand-alone retail product, but at the deep discount. Gray market sales also occur with high-end products. These types of sales are controlled through contract and assertion of trademark or copyright rights.

Use Pre-Suit Depositions to Obtain Early Discovery

Texas law is unique in that it allows a litigant to file a petition to seek pre-lawsuit depositions. Under Texas Rule of Civil Procedure 202.1, a person may ask the court for an order authorizing the taking of a deposition for use in an anticipated suit or to investigate a potential claim or suit. This process can be extremely useful in acquiring information regarding the infringement, the parties involved in the infringement, the sales volume, and other useful information that is necessary in order to determine the amount of potential damages and the strategy for a case.

Stopping Infringement on eBay and Social Networking Sites

Although not required by the Digital Millenium Copyright Act (DMCA), eBay has employed a Verified Rights Owner Program (VeRO) that provides a procedure for handling not only copyright disputes, but also claims of trademark and patent infringement. Typically, the property rights owner first registers with eBay and upon knowledge of an infringing article being offered for sale on eBay, the rights owner fills out a Notice of Claimed Infringement (NOCI) form. The seller is given an opportunity to provide a sworn Counter-Notice in response. According to eBay policy, the rights owner will have 10 days to institute a legal action to restrain further sales. If the rights owner fails to take timely action, the listing may be reinstated.

While Facebook, LinkedIn, Twitter, and other social marketing sites provide innovative ways for brand owners to connect to new and existing clients and grow their business, as with any interface that operates on user-generated content, these sites can also be hot spots for infringement. It is important for rights owners to monitor these sites and take action to stop infringement. Sites such as Facebook, LinkedIn, and Twitter all have procedures in place to assist rights owners in handling infringement. It is critical that rights owners take full advantage of these safeguards in order to protect their brand. Similar to cybersquatting, third-party registration of a user name/handle is a common way brand owners trademarks are infringed on social networking sites.

Employing the New PRO-IP Law

To combat copyright and trademark counterfeiting, Congress recently passed the "Prioritizing Resources and Organization for Intellectual Property Act of 2008 ("PRO-IP"). This legislation includes significant enhancements in civil actions. For example, PRO-IP requires courts to award treble damages and attorneys fees where a violation results from the intentional use of a counterfeit trademark, or where one provides goods or services that intentionally assists others in counterfeiting. Also, the range of statutory damages for trafficking in goods bearing counterfeit trademarks was increased to $1,000 - $200,000 per mark. For willful violations, the statutory damage ceiling doubled to $2 million. Additionally, for both civil and criminal acts of counterfeiting, PRO-IP allows for the seizure and forfeiture of: (1) the counterfeit goods, (2) instrumentalities and tools used in the counterfeiting process (which would include, for example, a home computer used in infringing file sharing or copying), and (3) profits derived from the sale of counterfeit goods. The Act also contains a provision whereby, for the first time, U.S. criminal law will explicitly prohibit the transshipment or exportation of counterfeit goods or services, deeming it a violation of Section 42 of the Lanham Act.

Stop Infringement at the Border

Record trademark and copyright registrations as well as trade names with the U.S. Customs and Border Patrol (the "CBP") and upload a Product Identification Guide, if applicable. Once recorded, the CBP will monitor the import of products for these trademarks, copyrights, and trade names. The Product Identification Guide allows field officers to more quickly identify and authenticate counterfeit goods. If discovered, the counterfeit products will be detained and the CBP will inform the rights owner of the attempted importation. If the rights owner does not agree to allow the counterfeit goods to be released, the goods may be seized, forfeited, and destroyed and the importer may be subject to substantial fines. Further, the CBP will provide the rights owner with detailed information about the parties involved in the importation so that the rights owner can pursue legal action against all involved in the counterfeit operation.

With respect to U.S. patents, patent owners can petition the International Trade Commission to initiate Section 337 exclusion proceedings against imported products that infringe on their patent rights.

Conclusion

The above 6 techniques provide an array of tools to protect brands from counterfeiting, knock offs, and trademark infringement. Best practices are to use of multiple techniques to safeguard brands.

See our post Importance of Intellectual Property Rights: Increasing Market Share Through Stopping Knockoffs and Infringements for a comprehensive discussion of implementing effective IP-enforcement programs.

For more information on this topic, please visit our Trademark Protection service page, which is part of our Trademarks practice.

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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