online counterfeiting and infringements: pursuing trademark...

Online Counterfeiting and Infringements:

Pursuing Trademark and Design Patent InfringersMonitoring Social Media Sites, Identifying Legitimate Goods With Registries

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THURSDAY, DECEMBER 20, 2018

Presenting a live 90-minute webinar with interactive Q&A

Darin Klemchuk, Managing Partner, Klemchuk, Dallas

Monica Riva Talley, Director, Sterne Kessler Goldstein & Fox, Washington, D.C.

Steven J. Wadyka, Jr., Shareholder, Greenberg Traurig, Washington, D.C.

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privileged and confidential © Sterne Kessler 2018

Online Counterfeiting and Infringements

• Scope of the problem

• Moved beyond flea markets, e-commerce

• Counterfeiters don’t stop, just change strategies

• Social media

• Matching with direct sales/messaging apps: (What’sApp, WeChat, Messenger, Telegram, Line, Kik, Viber)

• Nextdoor

• Groupon

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Scope of the Problem

2017: Customs made 34,143 seizures of counterfeit goods = $1,206,382,219 MSRP value

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• 89% of all IPR seizures – international and express mail

• 260 million packages shipped through the mail annually

• China and Hong Kong – 87% of all customs seizures

• Health, Safety, Security:34% personal care31% sunglasses6% consumer electronics4% pharmaceutical

© 2016 Klemchuk LLP

Intellectual Property Enforcement and Special Considerations for 2019Darin M. Klemchuk

Klemchuk LLP

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❯ Setting up an Enforcement Program

❯ Enforcement Strategies for 2019

❯ Tactics and Special Considerations for Enforcement

Discuss Three Big Picture Topics for IP Enforcement in 2019:

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1. Quantify the harm being suffered from the infringement

2. Set goals for the program - defining the win

3. Determine benefits and costs of the enforcement program

4. Identify and register the IP

5. Ensure the program is staffed effectively

6. Monitor, analyze, and improve the program

7. Look for new forms of infringement

8. Leverage success as a deterrent

Setting up an Enforcement Program

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Quantify the harm being suffered from the infringement

– Could be lost sales, diverted leads, customer confusion, increased pay-per-click costs

– Need to quantify costs on the front end to design program

– Costs are also needed to determine whether a win is achieved and to justify the investment in the program


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Set goals for the program - defining the win

– Second part of the cost-benefit analysis

– Includes setting objective metrics such as reducing frequency of infringement in organic Internet searches

– Attempt to eliminate subjectivity


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Determine benefits and costs of the enforcement program

– Direct monetary benefits such as settlements and judgments

– Indirect benefits such as stopping infringement and unknown sales diversion or confusion

– Costs include initial program set up, filing registrations, and on-going program expenses

– Consider different billing arrangements with lawyers such as hybrid flat fee and hourly arrangements

– Run a trial period to determine costs


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Identify and register the IP

– Seems obvious, but sometimes overlooked

– Verify chain of title to IP

– Consider new registrations to stop infringement


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Ensure the program is staffed effectively

– IP enforcement programs often run linearly

– These programs lend themselves to being “systematized” through processes, forms, and best practices

– Software or databases can enhance efficiency

– Team = “program architect,” “project manager attorney,” and detail-oriented admin


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Monitor, analyze, and improve the program

– Keep focus on the program “win”

– “Program architect” is responsible to make improvements to the program – processes, best practices, and forms

– Recommend an “operations manual” for each program

– Consistent reporting on program metrics key to success


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Look for new forms of infringement

– Infringers never quit, so be vigilant

– New technology results in new forms of infringement– domain name squatting and typosquatting

– website copy, meta tags, source code, title tags

– pay per click

– social media

– Paradox of a successful infringement program is that it drives infringers into new activities – hopefully away from your client


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Leverage success as a deterrent

– Problem of diffused infringement – expensive to chase all the infringers

– Deterrence can be achieved through public relations, social media, Internet, and education campaigns

– Settlements should include a right to publicize

– Consider terms in the settlement broader than liability

– Agreed judgments are another deterrent


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Strategies for 2019 IP Enforcement Programs

❯ Social Media Platforms

❯ Using Copyrights to Stop Counterfeits

❯ Stopping Gray Market Goods

❯ Pay Per Click Advertising

❯ Pre-Suit Depositions to Uncover Infringement Chain

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Social Media Platforms

– Best to proactively register usernames, brands, and trademarks – much less expensive than takedowns

– Have a monitoring system in place for infringement and knock offs

– Parody usage is particularly difficult to address akin to www.company-sucks.com

– Take an active role in social networking sites

– Use social media company takedown policies

– Analyze enforcement strategy

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Using Copyrights to Stop Counterfeits

– Consider using a copyrighted image on a product to prevent copying

– Registration pre-infringement is essential

– Image likely needs to be noticeable to be enforceable

– Design patents may also work

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Stopping Gray Market Goods

– Legitimate products are sold outside the intended channel

– Solid agreements with vendors is first line of defense

– Quality control measures included with the product that voids the brand such as instructions can be used to create infringement liability

– Pre-suit depositions are very helpful with gray market goods

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Pay Per Click Advertising

– Majority opinions are that inclusion in PPC is not trademark use

– Prove other infringement/liability

– Use other terms to include prohibition in settlement agreement

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Pre-Suit Depositions to Uncover Infringement Chain

– Texas and Florida allow for mini-proceedings to obtain pre-suit depositions and possibly documents

– Helpful to identify infringers and supply chain

– Not removable in Texas (copyright, trademark, patent cases)

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Website Audits and Compliance

– Helpful to uncover unregistered IP

– Minimize risk of third-party use

– Ensures proper marking

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Tactics and Special Considerations for Enforcement

Social Media and Online Marketplace Takedowns

❯ TM Infringement Complaints

– Hosting Company for Domain

– Domain Owner

❯ Copyright Infringement Complaints

– DMCA Agent

– Hosting Company

– Domain Owner

❯ Report Abuse

– Registrar of Domain

– Hosting Company for Domain

– Privacy Company for Domain Owner

– Domain Owner

❯ Takedown Requests

– Registrar of Domain (URLs)

– Hosting Company for Domain (Content)

– Privacy Company for Domain Owner

– Domain Owner

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For Domain name infringement in which the domain name includes trademark or is confusingly similar to a trademark:

❯ UDRP– To get domain taken from domain owner

– To get domain transferred to trademark owner

❯ Litigation

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Trademark Monitoring ❯ Effective monitoring should include a

combination of the most important channels of trade for a particular business:

– Website/ Domain Names– Meta Data– Confusingly similar domain names

– PPC Advertising/ Paid Ads– TM use in ad URL extensions– TM use in ad text– TM use in keyword ads

(controversial whether considered infringement)

– Online Marketplaces– Use of logos/ images in seller

accounts– Referring to third party brands– Unauthorized resellers– Minimum Advertised Pricing (MAPS)

agreements

– Social Media– Social Media Handles– Social Media Market Places– Parody Accounts– Photo sharing/ Article Sharing

– Mobile Apps– Business Listings– Internet Articles with Affiliate Links– Enforcement of IP rights

– Dilution– Loss of Rights

» Non-Use» Improper Use» Failure to Police

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Domain Name Monitoring

❯ Confusion and unfair competition can be created through domain name use and/ or domain holding. – Divert Traffic

– Domain Squatting/ Cybersquatting

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Vendors for TM & Domain Name Searches & Monitoring ❯ CompuMark

– Trademark Watches– Domestic Applications/

Registrations

– International Applications

– Web Monitoring– Domains

– Trademarks

– Comprehensive Trademark Searches

– U.S. Federal

– State

– Internet/ Online Presence

❯ MarkMonitor– Comprehensive Online Brand

Management– Website/ Domain Name

Infringement

– PPC– Social Media– Online Markets– Mobile Apps

– Anti-Counterfeiting

– Fraud Prevention– Anti-Piracy

» Digital Media» Live Streaming

– Anti-Fraud» Phishing» Malware» Dark Web

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Darin M. KlemchukManaging Partner

Klemchuk LLP

Campbell Centre II

8150 North Central Expressway, 10th Floor

Dallas, TX 75206

Office (214) 367-6000

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G R E E N B E R G T R A U R I G , L L P | A T T O R N E Y S A T L A W | W W W . G T L A W . C O M

©2015 Greenberg Traurig, LLP. All rights reserved.

Online Counterfeiting & Infringements

December 20, 2018

Steven J. Wadyka, Jr. | [email protected] | 202.331.3105

Anti-Counterfeiting WorkshopGreenberg Traurig, LLP | gtlaw.com

Today’s Agenda

> Preparing the case and the role of private investigators

> Federal court actions

> Subpoenas to foreign banks

> Liability of third party intermediaries

> Post-judgment remedies

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The Scope of the Counterfeiting Threat

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Preliminary Investigative Work


Preliminary Investigative Work

> Develop a Complete Picture

– Where is the product made?

– How is the product imported?

– Who is the product sold to?

– Follow the money – who is profiting?

Foreign Manufacturer

US Distributor

“Retailers”

> Consider active monitoring

> Speed matters

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Elements of the Investigation

> Prove the product is counterfeit

– Employee declaration

– 3 “indicia” of counterfeiting

> Identify potential seizure locations

– Company Employees, Investigator or Law Enforcement

> Willfulness

– LEO Interviews, Depositions

> Assets

– Public Records and Discovery

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Identify Potential Defendants and Assets

> Use public records searches

> Corporation and Partnerships (search by address)

> Real Estate

– Residence

– Business Assets

> Vehicles

> UCC Filings

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Asset Searches – Read Between the Lines

> No assets uncovered, but counterfeiter caught with 7 figures in counterfeit goods

> Many assets, highly leveraged

> Is cash flow picture sustainable?

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Preliminary Investigation Examples

> Counterfeit electronics

> Almost certainly manufactured in China

> Look for jurisdiction over Chinese manufacturer

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Example of Genuine Trademark as Displayed on Goods

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UL Certification Mark

“LISTED”

Control or Issue Number

Product Identity


Example of Counterfeit Trademark

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ImproperUL Certification

Mark

“Abble Japan”Instead of

“Apple Japan”

Designed by “Abble” instead of “Apple”

Black Color

When Apple only has White



> Counterfeit Luxury Goods

> Higher volume

> Consider deterrence as primary goal

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> Counterfeit packaging and labels

> Method of avoiding Customs detection

> Labels / Packaging typically applied in U.S.

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> Fake returns

> Unknown source of sophisticated fakes

> Returned to manufacture in exchange for genuine

> Nationwide distribution

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Do’s and Don’ts of Working with Private Investigators and Law Enforcement to Develop the Case


Do Integrate Your Entire Team

> Team Members:

– In-house counsel

– In-house clients

– Private investigator

– Law enforcement

– Outside counsel

> Determine your role on the team – lead or support?

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Do Discuss Appropriate Civil Enforcement

> Advantages of Civil Lawsuits

– Follow-up discovery requests

– Computer Forensics

– Wider discovery relating to assets

– No 5th Amendment for Corporations

– Money damages may be greater deterrent than jail time

– Flexible injunctions

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Do Respect Time Invested By Others

> Investigator / LEO invests substantial time in persuading a prosecutor to take the case

> Understand at the outset that you cannot control results

> Difficult to keep a prosecutor interested if you seek same remedies against same parties in civil suits

> Build Trust

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Don’t Defer Entire Investigation

> Law Enforcement can lose interest

> Investigators get busy

> Other (legitimate) priorities can stall your investigation for years

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Don’t Start an Investigation Without Due Diligence

> A single name, email address, or rumor is unlikely to get an investigation started

> Actively support investigators and LEOs

> Beware gray market goods and disgruntled business partners

> Follow up with new information

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Federal Court Actions


Pre-filing considerations

Are the proper parties identified? Are there upstream or downstream suppliers/distributors?

Have “test buys” been done? How many?

Who will serve as witnesses?

Is there documented proof that the goods are counterfeit? Who can attest to this?

Have the defendant’s bank accounts and other assets been located?

Is there an ongoing law enforcement investigation?

Is the client prepared to post a bond?

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Before the Case is Filed> Pre-filing considerations (cont’d)

– Should you seek ex parte relief? TRO and/or PI?

In 9th Circuit, be aware of heightened standards for proving irreparable harm (Herb Reed Enterprises)

– Do the judges in your district have experience with counterfeiting cases?

– Has local law enforcement been notified?

– Has chain of custody of the evidence been properly preserved and documented?

– Is the defendant using domain names consisting of the client’s trademarks?

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Before the Case is Filed

> Develop asset picture from beginning of investigation

> Advise client of potential assets

> Consider an asset freeze if appropriate

> Have a plan for obtaining further information on assets

> Move quickly

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Filing the Case

> Seek an asset freeze if appropriate

> Always seek expedited discovery

> Draft and serve discovery with Complaint

> Issue subpoenas as soon as possible

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Managing Discovery Efficiently

> Include financial discovery in every request to every party

– Third party customs brokers, shippers, freight companies will have records revealing Defendants’ bank accounts

– Real estate records often reveal names of banks holding mortgages

– Usually only need one or two “seeds” of information

– But shotgun approach can work as well

> Rarely need to know location of every last dollar

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Obtain an Enforceable Judgment

> Consent decree and public settlement agreement

> Explicitly provide for collection of unpaid judgment amount

> Record judgment as soon as it issues

> Citations to discover assets

> “Irrational” pressure points:

– Vehicles

– Real Estate

– Third Parties

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Subpoenas to Foreign Banks


Subpoenas to Foreign Banks

> Counterfeiters move money out of US to foreign bank accounts

> Subpoenas can be used to follow the “money trail”

> Gucci v. Bank of China case

– Gucci sued counterfeiters in US federal court

– Subpoenaed Bank of China for bank account records

– BOC argued that compliance would violate Chinese banking secrecy laws

– Court enforced subpoena; imposed $50K/day fine

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Lessons from Gucci v. Bank of China

> US courts will demand production of documents protected from disclosure outside the US

– In Gucci, court was not convinced that there was a credible threat of punishment for violating Chinese bank secrecy laws

> US courts will assert jurisdiction over foreign banks that use correspondent accounts in US to transfer counterfeiting proceeds to foreign accounts

– In Gucci, court ordered BOC to produce documents relating to those accounts, even if they were in China

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Liability of Third Party Intermediaries



> US law recognizes “vicarious” and “contributory” liability where a party

– induces another to infringe a trademark OR

– provides services to another whom it knows or has reason to know is engaging in trademark infringement

> A brand owner can pursue intermediaries where the direct infringer is unknown or not subject to jurisdiction in the US

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> Examples of intermediaries subject to vicarious or contributory liability:

– In “brick and mortar” space: landlords, flea market operators, and customs brokers

Coach’s “Operation Turnlock”

$5.5 million judgment against flea market operator

$8 million judgment against customs brokerage firm

– In online space: marketplaces, search engines, auction sites, web hosting companies, and payment processors

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Effective Use of Post-judgment Remedies


Collecting

> There is where law enforcement cooperation most frequently pays off

> Beginning asset discovery now is much, much more difficult

> Know local collection procedures and exemptions

> Consider re-engaging investigator

> Don’t assume small dollar amounts are not worth collecting (i.e. cars)

> Set client expectations

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Technical Minds. Legal Muscle.

Brand Protection:Alternative Litigation and Enforcement Strategies

Monica Riva Talley

[email protected]

202-772-8688

December 20, 2018


Additional Litigation Strategies

1. Counterfeits

− District Court lawsuits against groups of unknown counterfeit defendants

• Online marketplaces

• Low hanging fruit

–Seize monetary accounts

– Injunction against further sales

–Data for on-the-ground investigations

67



2. Knock-offs

Broader category, and can include products that have a confusingly similar overall appearance to a well-known product, but do not display the product’s trademark(s)

• District court litigation

• ITC

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Knock-offs (con’t)

• Often see after having addressed counterfeiting

• Manufacturers of knock-offs tend to be easier to identify

– Not trying to hide

– They are generally larger targets

• Civil remedies only and you will probably have to commit more resources to filing lawsuits in federal court or at the ITC

• Manufacturers of knock-offs are likely to put up more of a fight

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Knock-offs

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Tools For Expanding Enforcement

• Creating Strong Brands/Other IP Tools:

− Design patents

• Protect the ornamental appearance of a product

• 14 years from issue date

• Registration in U.S. in as little as 2 months

• Can protect part of an article

• Infringement – when accused design shares the substantially same overall ornamental appearance as patented design

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• Apple

Design Patents

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Patent No. US D611,415


• Counterfeit/Knock-off

Design Patents

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• Using Design Patent, Trade Dress, and Copyright in tandem

• Patent prototypes and designs before distinctiveness met

• Use Trade Dress for designs that will be integral to marketing and distinguishing the product, and for those that are established. Bic Corp. v. Arrow Lighter Inc. et al. (EDNY); In the matter of Certain Pocket Lighters (ITC)

• Use Copyright for multiple products with similar design element (register together)

360°IP

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• Partner with Customs• Make sure core marks are registered with Customs.

• Any imported article bearing a counterfeit mark is then subject to seizure by Customs.

• Generally, once Customs has detained a suspect shipment, they will reach out to the owner of the mark to confirm that the goods are counterfeit.

• Once marks are recorded, a brand owner should coordinate Customs trainings in various ports across the US in order to educate Customs agents about your mark and what to look for with regard to counterfeits.

Customs

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• Criminal Prosecution

Brand Protection

• Work with law enforcement where possible.

• Remember you work withthem.

• They have limited resources.

• When you do get their attention, the results can be extremely effective.

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• Control Exposure/Vulnerability

• Authentication technology

Track and Trace

• Bar and QR codes

• Holograms

• Inks/dyes

• Embedded in physical assets, e.g., RFID/smart tags

• Taggant (chemical/physical markers)

Authentication

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Blockchain

• Blockchain

• “Distributed, trusted, transparent, and tamper-proof”

• Decentralized ledger, stores a complete history of transactions on shared database, can trace products as they move around the world

• Transparent and anonymous

• Prove product’s origin

• Trace ownership

• Provide authentication

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Certification & Consumer Engagement

• Certification marks

• Meet the standards of the certifier

• Can include supply chain verification as a requirement

• Consumer engagement

• Mobile technology

• Kate Spade (purse party warning https://www.katespade.com/katespade-customer-service-ks-about-us/ks-counterfeit-warning.html)

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Thank You

Monica Riva Talley

Sterne Kessler Goldstein & Fox

[email protected]

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