The purpose of obtaining IP protection is to protect the investment that has been made in the development of the brand identity, the design and feel of the brand, and the products and the various marketing materials that support the brand development.
We know that one of the biggest threats to the commercial success of branded products is that of counterfeit goods. The threat posed by counterfeit goods has evolved over time as consumers become increasingly aware of counterfeits in the marketplace. Many years ago, it may have been the case that the main threat posed by counterfeit products was that consumers bought them thinking they were the genuine article. Once they had possession of the counterfeit goods, consumers could be either disappointed by the lack of quality of the product or, much worse, injured by an unsafe product that did not meet the requisite safety standards adhered to by the genuine products. Today, many consumers know that they are purchasing counterfeit products and do so as a deliberate decision, often to allow them to access to “designer” products that would otherwise be out of their price range. There has been increase in the availability of such counterfeit products with the growth of online marketplaces including “shops” on various social media platforms, and the supply of products from factories based in China and other territories.
The presence of counterfeit goods on the market damages a brand’s reputation. In the past, consumers unknowingly bought poor-quality counterfeits. Now, even though many knowingly buy counterfeits, the risk to a brand's reputation persists in a myriad of ways.
Firstly, customers may be less willing to pay full price for genuine products if widespread fakes make them seem less exclusive. Burberry famously suffered from this when the market was swamped with counterfeit products bearing the renowned Burberry check print. They were forced to take action to disrupt the counterfeiters, and to show consumers what they were doing to try to stop the flow of counterfeit products onto the market. The Burberry check has been protected by trade mark registrations in the UK since the first application was filed in 1994 and registered in 1997.
Secondly, if a brand uses licensees to extend its range of products and the licensees pay a royalty for the right to produce products bearing the brand, then the presence on the market of counterfeit products can be an issue. Licensees are likely to demand that the brand owner takes steps to deal with counterfeits on the market so that their sales of genuine products are not impacted by the sale of counterfeit goods. This is particularly problematic where the licence agreement has minimum royalty obligations, which are very common. In most brand licence agreements, there are obligations on the brand owner to enforce IP rights against infringers, including counterfeiters, and so the brand owners must honour this obligation or face the risk of a breach of contract claim.
It is therefore vital for brand owners to draw up a strategy to deal with counterfeit products. We set out below the steps to go through to develop such a strategy.
Enforcement strategy step 1: Watching services
The cornerstone to any enforcement strategy is strong IP rights. It is vital that once a brand owner has secured the best IP protection they can get for their brand elements, they maintain those rights so they are robust when needed to be used for enforcement purposes. To do this, best practice is to set up a watching service to alert you at an early stage to third parties that try to apply for trade marks that trespass on your rights. Typically, this means that a company receives a list of filed trade mark applications, which could be considered confusingly similar to its own marks. While it would be unusual for counterfeiters to apply for trade marks in their own name it is not unheard of. The filing of such applications generally indicates the entities in question are planning to use the mark in some way, and if third parties apply for similar trade marks it can narrow the scope of a brand’s protection if this goes unchecked. A watching service literally “watches” trade mark registries and notifies brand owners of applications filed which include certain names and logos in respect of goods and services in particular classes. You can tailor the watching brief to your needs and consulting with a trade mark specialist will help you to design the most effect watch for your budget.
It is possible to extend the scope of your watching service to include other, non-IP registers. Monitoring company registers (e.g., Companies House in the UK) can be a useful exercise to alert you if a company is incorporated with a name that includes your brand elements, helping you identify potential infringing activities. We have seen counterfeiters incorporating a company under the brand name to try to add legitimacy to their offering when trying to find trading partners, importers and to try to assist them in placing counterfeit products on ecommerce sites. Being notified of such incorporations allows a brand owner to investigate the suspicious activities at a very early stage. As will become clear from the advice set out below, when dealing with counterfeiters, getting in early and nipping the activity in the bud is the most effective way of dealing with the issue.
Enforcement strategy step 2: Monitoring and enforcement at physical borders
A vital stage in the enforcement strategy is the monitoring of physical borders. In most cases, counterfeit products will have to be exported around the world from the point of manufacture to the main markets for the products.
A key aspect of enforcement is intelligence gathering and communication. It is important to engage customs authorities, law enforcement bodies, employees and partners/distributors to be vigilant and gather intelligence on fakes in the market and communicate this information internally and externally
Registration of IP rights with customs
It is possible in many countries to register your intellectual property rights (trade marks, designs, copyrights and patents) with customs authorities. In the UK and EU this is done by filing an Application for Action, known as an AFA, with customs. The AFA enables customs authorities, like Border Force in the UK, to monitor, intercept, detain and potentially destroy counterfeit goods at the border, preventing them from getting onto the market. In 2023, Border Force seized almost 1 million counterfeit items worth approximately £200 million.
Without an AFA registration, customs may not be aware of a brand’s rights and may miss counterfeit goods passing through customs’ checks. In addition, as part of the application process for an AFA, the brand owner is asked to provide any information it has on genuine products and known, or suspected, counterfeit products. Information can relate to the nature of the goods themselves – sizes of products, packaging, security details on the packaging, use of the trade marks on the products; or to the manufacture and distribution of the products – manufacturing location, name of the exporter, port of export, ports of imports etc. Information on the counterfeit goods should cover all the same points to the extent that the brand owner is aware of the details. Once filed, the AFA lasts for a year but can be renewed annually. Over the course of the year, the brand owner can add to the information that has been filed on the counterfeit products as they become aware of it. It is also possible, and important, to file details of any licensees or distributors that are authorised to manufacture and/or import products into a territory. This should help to ensure that genuine product made by licensees will not be erroneously seized by customs.
Once you have an AFA in place, if customs officials become aware of a shipment of products that they consider could be counterfeit, they will seize the shipment and notify the brand owner of their suspicions. The brand owner usually has 10 days to complete a declaration that the goods are counterfeit. During the 10 days, the brand owner can ask for details of the importer of the shipment and for photographs of the products. They can also ask to arrange for an inspection of the products. If needed, the brand owner can ask for an extension of 10 additional days to complete their assessment of the shipment and complete the declaration.
If the goods are deemed counterfeit, customs will continue to detain them. If the importer challenges the claim that the products are counterfeit, then the brand owner will have to issue a claim at court to sue the importer for infringement of its IP rights. Customs will arrange for the storage of the goods until the time of the court proceedings. When you apply for the AFA, you must indemnify customs for the costs of storing the goods in this situation. If the importer does not dispute the claim that the products are counterfeit, then customs will arrange for the destruction of the goods. In most cases where the products in question are counterfeit then the importer will usually not dispute the seizure, and the goods will be destroyed.
Sometimes, customs will become aware of goods that they suspect are counterfeit and for which no current AFA has been filed. This can occur when the suspected goods are part of a mixed shipment with other branded goods and the other brands do have an AFA in place. In these cases, customs can detain the suspect goods and notify the brand owner (usually by contacting the representative for the trade marks on the trade mark register) and ask them if they think the goods are counterfeit and if they want to file an AFA in order for the goods to be seized and then destroyed. This can be a helpful process to catch counterfeit goods but operates on a much more ad hoc basis and does not give customs the relevant information that they need to increase their chances of being able to identify counterfeit goods in the first place. It is much better to have the AFAs in place as part of an anti-counterfeiting strategy, as this will improve the efficiency of the seizures. This is borne out by the statistics seen in an EUIPO report from 2022 that states that 96.5% of customs seizures made in Europe were made in relation to IP rights which were the subject of an existing AFA.
Strategically using AFAs is clearly an effective way to stop counterfeit products coming on to the market. It is also a useful way to gather information on where counterfeit goods are coming from and how they are being imported into the country. This is information that can be added to the AFA that you have filed with customs which in turn, should make the monitoring of counterfeit products even more effective. It can also be used as part of your wider enforcement strategy against counterfeit goods. In some cases, you may want to take the information on the manufacturer and use it to bring a legal action against them to compel them to cease production.
Many countries have a procedure in place where you can file your IP rights with customs for protection. In most of these countries, the procedure works to monitor products when they are being imported into the territory. A significant and important exception to this is China, where it is possible to register your rights (in China) with customs and they will monitor and seize goods that are being exported from, as well as imported into, China. This is particularly significant given that a substantial proportion of counterfeit products are manufactured in and exported from China. Being able to stop a product as it is exported is very helpful in the campaign against counterfeit products.
China also provides brand owners with a quick, cost-effective and convenient administrative enforcement procedure for tackling counterfeit goods at customs. After China's customs authority seizes counterfeit products and notifies the brand owner, the brand owner will have 3 working days to confirm whether they are infringing products. If it is confirmed, a security deposit will be required. After that, customs will investigate and make an administrative decision within 30 working days on whether to confirm the existence of infringement. If infringement is found, customs will confiscate the infringing goods and then take measures such as destroying the goods and imposing fines on the infringers. If it is found that a crime may have been committed, customs will transfer the case to other authorities for subsequent prosecution. If customs cannot confirm the existence of infringement, the brand owner may continue to lodge an infringement lawsuit at the court.
It is important to remember that not all counterfeit goods come from China. Depending on the industry sector, other territories may be more of an issue. For the EU, many counterfeits in food, clothing and leather goods originate in Turkey. It is possible to record your rights with customs in Turkey.
It is worth noting that in the case of the EU, you can complete one registration of your IP rights to cover you for the whole of the EU if you have EU-wide IP rights upon which to base the application – such as an EUTM or an EU registered design. You can also record these rights with customs across the EU in a single customs recordal application.
Aside from taking the formal steps of recording IP rights with customs and law enforcement authorities, brand owners can boost the value of these measures and increase engagement of law enforcement authorities in seizing goods by offering training and preparing brand guides for law enforcement agencies on how to spot counterfeits.
Other law enforcement authorities and steps to take
Alongside customs, brands could also consider working with other local law enforcement authorities to disrupt the movement and sale of counterfeit goods, which will vary by jurisdiction. For example, there are a number of authorities and organisations in the UK that work to seize goods and disrupt counterfeit networks. Trading Standards have investigative powers and can bring prosecutions against sellers of confirmed counterfeits. Both brand owners and citizens can report fake goods to the relevant local Trading Standards authority. Recent data shows that the most commonly investigated goods by Trading Standards include cigarettes/tobacco, clothing, vaping products, perfume and footwear.
The Police Intellectual Property Crime Unit (PIPCU) is a specialist unit that investigates intellectual property crime in the UK (in particular, serious and organised IP crime). Brands can also refer cases to PIPCU for their consideration, and it is important to include as much information and evidence as possible pertaining to the suspected criminal activity and the parties involved.
Other proactive steps that brand owners can take internally and externally to address counterfeit imports and circulation include conducting physical market surveys with private investigators to obtain information about the source of products and, in some cases, this can be used as a basis for starting private criminal prosecutions against counterfeiters in those territories where it is not viable to engage law enforcement bodies to take action.
Grey market goods
Grey market goods (or “parallel imports”) are genuine products manufactured by, or with the consent of, the relevant rights holder that are being sold through unauthorised channels. Legally, the grey market is very complex and if brand owners are considering taking action in the UK, it would be prudent to seek legal advice to confirm whether the goods in question will be considered infringing (particularly if the goods were first put on the market within the European Economic Area [EEA] with the brand owner’s consent).
Under the provisions of the Trade Marks Act 1994, and of the Copyright, Designs and Patents Act 1988, rights holders can give notice in writing to the Commissioners of Customs and Excise in respect of grey market goods to request that these are treated as prohibited. Notice must be given in advance and cannot be given once goods have been imported into the UK.
In countries such as China, it is also possible to record genuine authorised suppliers and distributors with customs authorities to help keep supply of products exclusive. Some countries have gone even further (see: Kenya) and made it mandatory to register your right to import goods bearing trade marks if you want to import them. If you are not registered, you will not be allowed to import the goods.
Enforcement strategy step 3: Online monitoring and enforcement
Stopping the import of counterfeit products will go a long way to helping with the problem. However, it is very unlikely that you will be able to stop all counterfeit products and so monitoring and enforcing your rights within a territory is also important.
Global e-commerce sales were worth an estimated US$5.8 trillion in 2023, and Statista predicts that this will reach US$6.3 trillion in 2024. The rise of social media in e-commerce has been widely reported over the last few years and in 2023, sales via social media platforms accounted for approximately 18.5% of total online sales.
The sheer scale of the global e-commerce market presents issues when it comes to anti-counterfeiting strategies, and it can be very difficult to confirm who exactly is ultimately responsible for the manufacture and sale of fake products, and where they are located across the globe. Bad actors are well versed in taking advantage of the anonymity that can be afforded by the Internet, meaning that fake products can be relisted under an unrelated account almost as quickly as brands can remove them from e-commerce sites or social media.
These platforms are used to sell counterfeit goods to retailers and end consumers. There are several subscription-based monitoring services that brand owners can sign up to monitor the listings on various sites. The exact services that are available depend on budget, product sector and territories of interest and are subject to change as the technology is constantly being updated. AI is also being introduced to make the monitoring services more efficient and effective. Working with a trade mark specialist will enable brand owners to design an effective monitoring service to catch listings for counterfeit products on such sites.
Once the listings have been identified then a notification can be filed with the online platform requesting that the offending listing be taken down. Most mainstream e-commerce and social media platforms have counterfeit reporting tools available for rights holders to use. Some of these tools are very advanced – for example, the Amazon Brand Registry and the Meta Brand Rights Protection platform offer automated monitoring and blocking features to reduce the administrative burden on rights holders. Others require more input, such as the X (formerly Twitter) infringement reporting form and the Alibaba IP Protection Platform.
Ultimately, despite the automated features that may be available, there is a risk that some counterfeit goods will still slip through the cracks so it is important to ensure that brands have a strong online anti-counterfeiting strategy, which will require some human input. Counterfeiters can try to evade detection by automated monitoring programmes by, for example, covering part or all of a logo with other images, blurring out logos, misspelling words, or using private selling groups on social media. In some cases, a product may appear to be unbranded in the listing images, but the customer review section will include images of the goods as shipped and received, which are fully branded with registered trade marks.
Many well-developed e-commerce platforms will have a robust notice and takedown policy, and the response should be reasonably swift, and the listings removed. It may be harder to take down listings on platforms that are not so well managed. In these cases, action may have to be focussed on other parts of the supply chain such as customs activity. Brands could consider prioritising mainstream e-commerce sites and social media platforms, then, if budget allows, expanding their policing programme to cover regional platforms where counterfeiting is rife but less easy to regulate. A good reference point for regional platforms engaging in or facilitating counterfeiting activity is the Notorious Markets List, prepared each year by the Office of the United States Trade Representative.
Again, information from listings on these platforms can be fed back to customs authorities to assist with monitoring the importation of the products. This interconnectedness allows for stronger customs registration to address such problematic website listings.
For counterfeit sales on websites operated directly by counterfeiters rather than through third-party e-commerce platforms, filing a complaint with the website host may be necessary to request its removal. If the domain name includes the brand associated with the counterfeit products, a complaint can be filed under the UDRP process to recover the domain. This is an administrative complaint process that can result in the transfer of the domain name into the ownership of the brand owner.
