Counterfeiting and the high performance automotive aftermarket
The clients on behalf of whom the Blakeslee Law Firm designs and executes anti-counterfeiting initiatives are primarily manufacturers, importers, and distributors in the high performance automotive aftermarket. The products sold in this market are highly specialized, high-dollar, discretionary items, and the counterfeits of these products are manufactured outside of the United States, typically in China. Most sales of this counterfeit merchandise are made over the internet. A far smaller part of these sales is made from brick-and-mortar establishments located within the United States. For an anti-counterfeiting campaign to benefit the client, it must be not only effective but cost-effective.
Thus, litigation against the manufacturers and sellers of counterfeits, whether brought in the United States or in China, is rarely cost-effective, usually protracted, and, in our view, should always be the enforcement option of last resort.
The most cost-effective anti-counterfeiting campaign is one built around a) removing counterfeits from the internet and b) having a governmental agency take action against the counterfeiters’ shipments and inventories, either in the United States or in China or both.
Internet enforcement can be targeted solely at e-commerce platforms that sell internationally (Alibaba.com, AliExpress.com, DHGate.com, Made-in-China.com, etc.) or it can also target the large platforms – TaoBao.com, 1688.com, etc. – that ship only to customers in China. TaoBao.com is one of the largest shopping sites in the world and, according to a recent article in the Wall Street Journal, by one estimate 20% to 80% of the products on TaoBao.com are counterfeits. It is unlikely that all of the high performance automotive counterfeits sold to buyers in China remain there, so it is important to consider including enforcement against the China-only websites as an important element of an anti-counterfeiting campaign.
The largest group of Asian-based websites carrying substantial quantities of counterfeit merchandise are those of the Alibaba Group, which include Alibaba.com, AliExpress.com, 1688.com, and TaoBao.com. Since 2013, driven by U.S.-based Yahoo’s 2102 acquisition of a 23% share in the Alibaba Group and by Alibaba's 2014 IPO on the New York Stock Exchange, Alibaba has substantially upgraded the effectiveness of its intellectual property enforcement mechanisms, AliProtect and TaoProtect (or qinquan.com). In the recent past, intellectual property enforcement on the Alibaba platforms was an endless game of Whack-a-Mole. Today, for the first time effective intellectual property enforcement on the Alibaba websites – and on other major Asian e-commerce platforms, including DHGate and Made-in-China.com – is possible. Intricate, attended by many unwritten rules and arbitrary denials, but demonstrably possible.
Governmental agency action against counterfeiters’ shipments and inventories
A company plagued by counterfeits can record its U.S. trademarks and copyrights with U.S. Customs and Border Protection, which will watch for and interdict counterfeits destined for the U.S. A company can also record its Chinese-registered patents and trademarks and any copyrights, no matter where registered, with Chinese Customs, which will interdict counterfeits being exported from China. The rights-holder can then provide Customs with any available information on the identities and practices of the traffickers, enhancing Customs’ ability to interdict contraband shipments. While such Customs enforcement is never fully effective standing alone, it is an important – and inexpensive – adjunct to other enforcement measures.
If an inventory of counterfeit merchandise is identified within the United States or within China, it is possible to have a law enforcement agency raid the premises and seize the merchandise.
Developing a strong intellectual property portfolio
All of the above enforcement options are dependent on the rights-holder holding the intellectual property rights registrations, since without such registrations neither e-commerce platforms nor law enforcement agencies will take action against counterfeits. Thus, the prerequisite to an anti-counterfeiting campaign is strategically building up the company’s intellectual property portfolio. With the appropriate intellectual property registrations, an anti-counterfeiting campaign using the elements outlined above can be highly successful in clearing the market of counterfeits of a company’s products.
An important, related issue is the following: If a company manufactures any of its products in China, there is the risk that a trademark-squatter could register its trademarks in China, which has a first-to-register trademark regime. With the registration of your trademark in hand, the squatter could register the mark with Chinese Customs and prevent you from exporting your products – until you had paid a substantial sum to retrieve your mark. Thus, for many in the high performance automotive aftermarket there is an additional reason to build up a portfolio of intellectual property registrations in China.
RELEVANT PUBLICATIONS AND PRESENTATIONS
The Latest Tools, Tips and Tricks to Counter Counterfeits and Knock-Offs, seminar presented at the 2012 annual trade show of the Specialty Equipment Manufacturers Association, Las Vegas, NV, Oct. 31, 2012 (panelist).
Building and Enforcing an Intellectual Property Portfolio, seminar presented at the 2011 annual trade show of the Specialty Equipment Manufacturers Association, Las Vegas, NV, Nov. 2, 2011 (panelist).
Protecting your Intellectual Property Rights in the International Arena, presented at seminar entitled GLOBAL IP ACADEMY ON GENERAL INTELLECTUAL PROPERTY ENFORCEMENT, U.S. Patent and Trademark Office, Washington, D.C., February 3, 2011.
Coping with Threats from China's Manufacturing Sector to the Intellectual Property Rights of U.S. Companies: A Case History, presented at seminar for U.S. Government personnel working on international intellectual property issues entitled INTELLECTUAL PROPERTY ISSUES IN CHINA — EXPLORING A ROADMAP FOR THE NEW ADMINISTRATION, Global Intellectual Property Academy, U.S. Patent And Trademark Office, Washington, D.C. (Aug. 19, 2009).
Protect It or Lose It! Techniques for Enforcing your Intellectual Property Rights against Infringers, presented as part of a seminar entitled FROM REGISTRATION TO LITIGATION: HOW TO SAFEGUARD YOUR COMPANY AGAINST ILLEGAL KNOCKOFFS AND COUNTERFEITS at the 2008 annual trade show of the Specialty Equipment Manufacturers Association, Las Vegas, NV (Nov. 3, 2008).
Sourcing Your Products from China without Losing Your Shirt, Your Intellectual Property, or Your Customers, THE SEMA NEWS (Dec. 2007 & Feb. 2008).
Protecting your Company’s Intellectual Property from Infringement, presented as part of a webinar entitled DEVELOPING STRATEGIES TO PROTECT YOUR INTELLECTUAL PROPERTY broadcast to the membership of the Specialty Equipment Manufacturers Association (Apr. 7, 2008).
Why Your Company’s Intellectual Property Is a Valuable Asset and What to Do to Protect It from Infringement, seminar presented at the 2005 annual trade show of the Specialty Equipment Manufacturers Association, Las Vegas, NV (Nov. 2, 2005); also presented as a webinar broadcast to the membership of the Specialty Equipment Manufacturers Association (Sept. 14, 2005).
Protecting American Trademarks Against Infringing Imports: Customs Seizures, Exclusion Orders, Monetary Damages, seminar presented at the 2004 annual trade show of the Specialty Equipment Manufacturers Association, Las Vegas, NV (Nov. 3, 2004).
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