Online Counterfeiting––Imitation Is By No Means The Sincerest Form of Flattery
The age old fight against counterfeiting has been greatly complicated by the Internet. Online marketplaces create venues in which counterfeiters can easily hide among thousands of legitimate resellers of a brand owner’s genuine goods. Moreover, even when a counterfeit offer has been gleaned from the vast Internet marketplace, it can be maddeningly difficult to find the individuals behind the scam. Without a traditional “brick and mortar” retail location, counterfeiters can strike from afar, taking orders using false names and addresses and otherwise hiding their identities and locations in ways never before possible. Thus, the Internet presents brand owners with the potential for a “death by a thousand cuts” – without a cost effective anti-counterfeiting strategy, the brand owner may find itself spending more to enforce its rights than it saves from stopping counterfeiting.
Trademark Owners, Put On Your Badges—You Are The PoliceCounterfeiting is a crime, both in the U.S. and in nearly every other country. It is not, however, a top priority for law enforcement. Even in the best of times, it would be difficult to persuade the governments to devote more than a small fraction of their limited resources to fighting this type of crime. For the most part, brand owners have to take matters into their own hands, using civil remedies at their own expense.
Failure to take action can have far reaching consequences. In addition to the obvious – lost revenue resulting from diverted sales and diminished goodwill in the brand – trademark owners have a legal duty to “police” their marks, i.e., take steps to ensure that others are not using the mark in an unlawful manner. Failure to do so can diminish the strength of the mark, limiting the scope of the owner’s trademark rights.
Who Is Subject to “Arrest” For Online Counterfeiting?Almost anyone involved in the sale of counterfeit goods online may be civilly liable for trademark infringement and related claims. Accordingly, while trademark owners may pursue the seller, it is often more cost effective to take action against the operators of the website that facilitate the illegal sale of counterfeit goods.
Trademark infringement actions against website operators are typically brought under a legal doctrine called “contributory infringement.” This doctrine says that in order to hold a service provider, such as a website operator, liable for trademark infringement, the trademark owner needs to prove that the operator “intentionally induced another to infringe a trademark” or that the operator “‘continue[d] to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement…’” Tiffany, Inc. v. eBay, Inc., 600 F.3d 93, 104 (2d Cir. 2010).
Best “Policing” Practices for Trademark OwnersIn light of the Tiffany v. eBay decision and cases that have followed it, the lesson for trademark owners is that the contributory infringement doctrine may be of little help when dealing with websites operated by credible companies; rather, it may be better to take a less confrontational approach and work with the site operators. eBay, and other online marketplaces, have well-established policies that trademark owners can use to complain about allegedly counterfeit goods offered for sale on their sites. Many brand owners report that use of these policies can be more effective than litigation and at much lower cost. It is far from a perfect solution, but in many cases it may be the best balance of cost and result.
On the other hand, when dealing with companies that do not have comprehensive mechanisms in place to combat counterfeiting, i.e., those that thrive off of the sale of counterfeit goods and/or willfully turn a blind eye to it, a different approach may be warranted. In such instances, it may be easier for a trademark owner to prove contributory infringement – particularly if the owner is proactive and sends notices to the website operator identifying specific infringement and demanding that the counterfeit products be removed. If the website operator fails to comply, the trademark owner’s case for contributory infringement is strengthened.