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Fashion Law

Fashion LawA Guide for Designers,

Fashion Executives, and Attorneys

Edited by

Guillermo C. JimenezFashion Institute of Technology

Barbara KolsunStuart Weitzman LLC

Fairchild BooksNew York

Executive Editor: Olga T. KontziasAssistant Acquisitions Editor: Amanda Breccia

Editorial Development Director: Jennifer N. CraneDevelopment Editor: Sylvia L. Weber

Associate Art Director: Erin FitzsimmonsProduction Director: Ginger Hillman

Associate Production Editor: Andrew FargnoliCopy Editor: Christine D’AntonioCover Design: Erin Fitzsimmons

Text Design: Andrew Katz

Copyright © 2010 Fairchild Books,A Division of Condé Nast Publications, Inc.

All rights reserved. No part of this book covered by the copyright hereon may be reproduced or used in any form or by any means—

graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems—without written permission of the publisher.

Library of Congress Catalog Card Number: 2008940704ISBN: 978-1-56367-778-6

GST R 133004424

Printed in the United States of AmericaTP09

v

Contents

Extended Contents viiPreface xvAcknowledgments xviii

I Introduction

1 Fashion Law: Overview of a New Legal Discipline 3Guillermo C. Jimenez, Fashion Institute of Technology

II Intellectual Property Issues

2 An Introduction to Intellectual Property Protection in Fashion 35George Gottlieb, Gottlieb, Rackman & Reisman, P.C.

Marc Misthal, Gottlieb, Rackman & Reisman, P.C.

Barbara Kolsun, Stuart Weitzman LLC

3 Fashion and Apparel Licensing 81Barbara Kolsun, Stuart Weitzman LLC

Kristin B. Kosinski, Cislo & Thomas LLP

4 Counterfeiting 105Barbara Kolsun, Stuart Weitzman LLC

Heather J. McDonald, Baker Hostetler

III Commercial Operations and Expansion

5 Starting the Business and Launching the Line: How to Choose the Right Business Structure 133

Thomas M. Pitegoff, Pitegoff Law Offi ce PLLC

vi Contents

6 Selling and Buying: Commercial Agreements in the Fashion Sector 160

Donald L. Kreindler, Phillips Nizer LLP

7 Employment Law Issues in Fashion 175Elise M. Bloom, Proskauer Rose LLP

Carole P. Sadler, Coach, Inc.

8 Marketing, Advertising, and Promotion 221Ashima Dayal, Davis and Gilbert LLP

Vejay Lalla, Davis and Gilbert LLP

William Jelinek, The Estée Lauder Companies

9 Retail Leasing for Fashion 263Steven R. Gursky, Olshan Grundman Frome Rosenzweig & Wolosky LLP

Mitchell B. Stern, Olshan Grundman Frome Rosenzweig & Wolosky LLP

IV International Aspects

10 International Development of the Fashion Business 287Michael F. Colosi, Kenneth Cole Productions, Inc.

Paul A. Friedman, Kenneth Cole Productions, Inc.

11 Import and Customs Issues in Fashion 319Frances P. Hadfi eld, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP

About the Contributors 347Index 348

vii

Extended Contents

Preface xvAcknowledgments xviii

I Introduction

1 Fashion Law: Overview of a New Legal Discipline 3Guillermo C. Jimenez

1.1. Introduction 31.1.1. Defi ning Fashion Law 31.1.2. The Need for Fashion Law 51.1.3. Analogies to Entertainment Law 12

1.2. Fashion 101 for Lawyers 121.2.1. The Structure of the Business 121.2.2. Production Processes 141.2.3. Fashion Seasons 151.2.4. The Realities of Knocking Off and Counterfeiting 161.2.5. The Role of Licensing 171.2.6. International Aspects of Fashion Law 18

1.3. Fashion Law and the Life Cycle of the Fashion Firm 201.3.1. Entrepreneurship Phase: Start-Up Issues 201.3.2. Expansion: Growth Issues 221.3.3. Large Corporation Issues 24

1.4. The Elements of Fashion Law 251.4.1. IP Protection in Fashion, Textiles, and Apparel 251.4.2. Anticounterfeiting 271.4.3. Fashion and Apparel Licensing 271.4.4. Legal Structure of the Company 281.4.5. Selling and Buying Fashion Products:

Commercial Agreements 281.4.6. Labor and Employment Issues 29

viii Extended Contents

1.4.7. Marketing, Advertising, and Promotion of Fashion: Legal Issues 30

1.4.8. Real Estate 301.4.9. International Business Issues 301.4.10. Customs 31

1.5. Conclusion 321.5.1. Fashion Education and Fashion Law Schools 321.5.2. Fashion Law Research 32

II Intellectual Property Issues

2 An Introduction to Intellectual Property Protection in Fashion 35

George Gottlieb, Marc Misthal, and Barbara Kolsun2.1. Introduction 35

2.1.1. Scope of IP Law 362.1.2. Finding the Right IP Attorney 38

2.2. IP Protection of Fashion and Apparel in the United States 382.2.1. Trademarks 392.2.2. Trade Dress Protection 492.2.3. Copyright 522.2.4. Design Patent Protection 592.2.5. Utility Patent Protection 622.2.6. Trade Secrets 66

2.3. International Protection 672.3.1. International Protection of Trademarks 692.3.2. Protecting Copyrights 692.3.3. Protecting Registered or “Industrial” Designs 702.3.4. Protecting Patents 70

2.4. Resolving Disputes in IP 712.4.1. Strategies to Protect Your Company’s Rights 712.4.2. The Value of a Legal Opinion: The Opinion Letter 722.4.3. What to Do If You Receive a Cease and Desist Letter

or Are Sued 732.4.4. Strategies to Avoid Infringing on IP Rights 742.4.5. Understanding the Stakes in IP Litigation 752.4.6. IP Litigation in General 752.4.7. Copyright Disputes 772.4.8. Trademark and Trade Dress Disputes 772.4.9. Patent Disputes 772.4.10. Settlement 78

2.5. Conclusion 78Appendix: Researching IP Issues: Links and References 79

Extended Contents ix

3 Fashion and Apparel Licensing 81Barbara Kolsun and Kristin B. Kosinski

3.1. Introduction 813.2. What Is a License? 813.3. Why License? 823.4. Negotiating a License 84

3.4.1. Pre-Preparation 843.4.2. Preparation 843.4.3. Post-Preparation, Pre-Negotiation 86

3.5. Key Terms 873.5.1. Licensed Products/IP 873.5.2. Additional Trademark Considerations 903.5.3. Term and Termination 913.5.4. Compensation 923.5.5. Quality Control and Advertising and Promotion Minimums 963.5.6. Sales and Product Delivery Deadlines and Schedules 983.5.7. Representations and Warranties and Risk Controls 993.5.8. Miscellaneous Terms 101

3.6. Conclusion 104

4 Counterfeiting 105Barbara Kolsun and Heather J. McDonald

4.1. Introduction 1054.1.1. What Is Trademark Counterfeiting? 1054.1.2. The History of Counterfeiting and Anticounterfeiting 1064.1.3. “The Crime of the Twenty-First Century” 1074.1.4. Identifying a Counterfeit: An Overview 1084.1.5. A Growing Problem and the Governmental Response 1084.1.6. Not a Victimless Crime 1104.1.7. Anticounterfeiting Today 113

4.2. Nature of the Counterfeiting Problem 1134.3. Agents in the Effort 114

4.3.1. Management 1144.3.2. Preliminary Action Plan 1154.3.3. In-House Counsel 1154.3.4. Outside Counsel 1164.3.5. Federal Law Enforcement 1174.3.6. Border Enforcement 1184.3.7. State Law Enforcement Offi cials 1194.3.8. Private Investigators 1204.3.9. Trade Organizations 121

4.4. Criminal Enforcement 1214.4.1. Enforcement under Federal Criminal Statutes 122

x Extended Contents

4.4.2. Enforcement by State Criminal Statutes 1234.5. Civil Enforcement 124

4.5.1. Civil Seizure Actions 1244.5.2. Third-Party Liability Actions 1244.5.3. Cease and Desist Letters 1264.5.4. Foreign Matters 126

4.6. Enforcement on the Internet 1264.6.1. Websites 1284.6.2. Auction and “Listings” Sites 128

4.7. Conclusion 130

III Commercial Operations and Expansion

5 Starting the Business and Launching the Line: How to Choose the Right Business Structure 133

Thomas M. Pitegoff5.1. Introduction 1335.2. The Business Entity 134

5.2.1. Sole Proprietorship 1345.2.2. Partnership 135

5.3. Forming the Entity 1365.3.1. Why Form an Entity? 1365.3.2. Financing and Securities Laws 1385.3.3. Which Entity? 1395.3.4. Which State? 1445.3.5. Transfer Restrictions 1465.3.6. Comparing Forms of Ownership 147

5.4. Launching and Expanding the Business 1485.4.1. The Brand 1485.4.2. Manufacturing the Products 1495.4.3. Licensing 1495.4.4. Distribution 1505.4.5. Franchising 1515.4.6. Other Sales Arrangements 1535.4.7. Buying a Business 1545.4.8. Other Laws 1565.4.9. International Expansion 157

5.5. Conclusion 159

6 Selling and Buying: Commercial Agreements in the Fashion Sector 160

Donald L. Kreindler6.1. Introduction 160

Extended Contents xi

6.2. The Sales Contract between the Fashion Company and Its Retailer Customers 1616.2.1. The Importance of Agreements to Sell and Buy 1616.2.2. The UCC: What the Law Provides Absent a Written

Contract with Inconsistent Provisions 1626.2.3. What Constitutes the Contract between the Fashion

Company and Its Retailer Customers 1656.2.4. VCERP’s Position on Six Key Items of

Vendor–Retailer Relations 1676.2.5 Putting the VCERP Provisions into Practice 168

6.3. The Purchase of Goods by the Fashion Company: Terms and Conditions That Should Apply, and What the Fashion Company Should Do to Implement Them 1706.3.1. How the World Has Changed 1706.3.2. Important Provisions in the Fashion Company’s

Purchase Order 1716.4. The Sales Representation Agreement 173

6.4.1. Authority of the Sales Representative 1736.4.2. Compensation 173

6.5. Conclusion 174

7 Employment Law Issues in Fashion 175Elise M. Bloom and Carole P. Sadler

7.1. Introduction 1757.2. Discrimination Law: An Overview 176

7.2.1. Federal Laws 1777.2.2. State and Local Laws 189

7.3. Wage and Hour Laws 1897.3.1. Fair Labor Standards Act and Related State Laws 1917.3.2. Overtime and Job Classifi cations 1937.3.3. Record-Keeping Requirements 1947.3.4. Other Wage Laws of Concern 1957.3.5. Employee Uniforms 1957.3.6. Anti-Sweatshop Practices 197

7.4. Other Important Federal Laws 1997.4.1. Family and Medical Leave Act 1997.4.2. Fair Credit Reporting Act 2017.4.3. Occupational Safety and Health Act 201

7.5. Contingent Work Force (Independent Contractors) 2027.6. Weight Regulation of Fashion Models: Council of

Fashion Designers of America’s “Health Initiative” 2047.7. Employment Agreements in the Fashion Industry 205

7.7.1. Nature of the Employment Relationship 205

xii Extended Contents

7.7.2. Covenant Not to Compete 2057.7.3. Other Restrictive Covenants 2077.7.4. Arbitration 2107.7.5. Choice of Law 2107.7.6. Return of Property 2117.7.7. Assignments and Successors 2117.7.8. Severability 2127.7.9. Merger and Modifi cation Clause 212

7.8. Immigration Issues in the Fashion Industry 2137.8.1. Foreign Nationals Employed in the Fashion Industry:

Admission to the United States 2137.8.2. General Nonimmigrant Options 2147.8.3. H-1B Visa 2167.8.4. Fashion Models 2187.8.5. O-1 Visa 219

7.9. Conclusion 220

8 Marketing, Advertising, and Promotion 221Ashima Dayal, Vejay Lalla, and William Jelinek

8.1. Introduction 2218.2. What Constitutes Advertising? 2238.3. Engaging Creative Personnel to Create Advertising 224

8.3.1. Contract Basics 2258.3.2. Talent/Model/Spokesperson Contracts 2338.3.3. Union Issues 2358.3.4. Hiring Minors 236

8.4. Creating and Clearing Advertising 2398.4.1. To Own or License Content? 2398.4.2. Clearance of Third-Party Materials in Advertising 245

8.5. Regulatory Issues in Fashion Advertising 2518.5.1. What Is an Advertising Claim? Express and Implied Claims

vs. Puffery 2538.5.2. Performance Demonstrations 2548.5.3. Endorsements and Testimonials 2558.5.4. Other Advertising Claims 257

8.6. Conclusion 258

9 Retail Leasing for Fashion 263Steven R. Gursky and Mitchell B. Stern

9.1. Introduction 2639.2. Selecting the Right Location 2639.3. Making the Offer 266

9.3.1. Purpose of the Letter of Intent 266

Extended Contents xiii

9.3.2. Contents of a Letter of Intent 2709.4. Negotiating Posture 2729.5. Assembling the Team of Experts 272

9.5.1. Selecting the Right Attorney 2749.5.2. Selecting a Retail Leasing Broker 2749.5.3. Choosing Other Professionals 276

9.6. Percentage Rent 2779.7. Exclusives and Radius Restrictions 2779.8. Construction and Architectural Design Issues 2789.9. Signage and Displays 2809.10. Commercial Lease Checklist 2809.11. Conclusion 283

IV International Aspects

10 International Development of the Fashion Business 287Michael F. Colosi and Paul A. Friedman

10.1. Introduction 28710.2. Choosing the Right Partner 288

10.2.1. Expertise and Track Record in the Foreign Market 28910.2.2. Financial Strength 293

10.3. Preparation 29410.3.1. Choosing a Trademark Wisely 29410.3.2. Trademark Rights Are Territorial 29410.3.3. Design Protection Law in Different Jurisdictions 29710.3.4. Knowing the Appeal of Products to

Local Tastes and Needs 29810.4. Types of Relationships 298

10.4.1. License Agreement 29910.4.2. Distribution Agreement 30010.4.3. Franchise Agreement 30210.4.4. Agency/Sales Representative Agreement 30310.4.5. Joint Venture 303

10.5. Considerations in Negotiating and Drafting an International Deal 30410.5.1. Rights Granted 30410.5.2. Design Process 30810.5.3. Retail Rights 30910.5.4. Monetary Allowances for Visits to a Territory 31210.5.5. Pricing Decisions 31310.5.6. Advertising 31410.5.7. Factory Compliance with Human Rights Standards 315

10.6. Conclusion 317

xiv Extended Contents

11 Import and Customs Issues in Fashion 319Frances P. Hadfi eld

11.1. Introduction 31911.2. The Import Process 320

11.2.1. Entry Documentation 32211.2.2. Classifi cation 32411.2.3. Valuation 32611.2.4. Valueless or Damaged Goods 32811.2.5. Country of Origin 32911.2.6. Marking Requirements for Apparel 32911.2.7. U.S. Fish and Wildlife Requirements for Apparel 33311.2.8. Entry of Commercial Samples 334

11.3. Administrative Processes 33611.4. Litigation 33711.5. Penalties for Violating the Customs Laws 338

11.5.1. Seizure and Forfeiture under 19 U.S.C.A. § 1595a 33911.5.2. Liquidated Damages 34011.5.3. Criminal Sanctions 340

11.6. Customs Audits 34011.7. Record-Keeping Requirements 34211.8. Customs-Trade Program against Terrorism 34311.9. Foreign Manufacturing Issues for Importers 34411.10. IP, Trademarks, and Importation 34511.11. Conclusion 346

About the Contributors 347Index 348

xv

Preface

In the twenty-fi rst century, fashion has achieved the status of a truly global in-dustry. Consumers in virtually every country on the planet are now familiar with such mass-market brands as Levi’s, Nike, Adidas, H&M, Zara, and Lacoste. At the same time, the artistic creativity of top designers working for haute cou-ture and luxury brands has made fashion a cultural force. The importance of a fashion- oriented design strategy has thus increasingly become apparent in in-dustries as diverse as automobiles, hotels, and electronic appliances.

Despite the economic and cultural importance of the fashion sector, the le-gal profession has been slow to develop specifi c tools and treatises to serve its fashion clientele. One of the reasons for this is doubtless to be found in the highly fragmented nature of the industry. Until recently, the fashion and apparel complex was characterized by a vast array of small- to medium-sized enterprises. However, decades of consolidation and growth have turned many fashion com-panies today into major international corporations. These companies typically face certain kinds of legal issues and problems on a regular basis. It is therefore the primary objective of Fashion Law to provide a concise but practical guide to the most common legal issues faced by a fashion company as it grows from in-fancy to international stature.

The text is divided into four parts. First is Part I, the Introduction. Chapter 1 provides an overview of the book and the issues covered by fashion law. It de-scribes fashion law as an emerging course of study for students of fashion and a specialized area for law students.

The fi rst problem typically faced by a fashion company is how to protect its intellectual property (IP)—especially its brand name, logo, and other trade-marks. Part II, comprising Chapters 2, 3, and 4, addresses IP issues. Fashion consumers are more likely to purchase a brand they can easily recognize, hence the value of a unique and highly visible trademark. However, fashion is also an unusually imitative industry. Fashion leaders and innovators inevitably fi nd that their ideas are copied by rivals. IP law allows fashion companies to obtain

xvi Preface

some measure of protection, but it is a highly limited protection. As is set forth in Chapter 2, fashion companies can protect logos, images, fabric prints, and jewelry designs, for example, but they generally cannot protect fashion designs.

One of the structural characteristics of today’s fashion industry is a strong reliance on licensing, which is discussed fully in Chapter 3. In licensing trans-actions, the owner of IP enters into an agreement under which another party manufactures branded fashion items pursuant to the licensor’s quality and de-sign standards. Through licensing, a fi rm that has developed a famous brand name can exploit that value in a number of countries or industries where it might otherwise have lacked the capital to operate.

The tremendous growth in the value of fashion trademarks has unfortunately led to a serious business problem, global trademark counterfeiting. Counterfeit-ing is no longer a small problem for many fashion companies. It now represents a serious drain on the corporate treasury with negative effects on consumer goodwill. Many large fashion companies have therefore adopted highly pro-active, collaborative approaches to fi ghting counterfeiting. The elements of a successful anticounterfeiting plan are reviewed in Chapter 4.

Part III, comprising Chapters 5 through 9, deals with the commercial opera-tion and expansion of fashion businesses. Every company needs to be set up ac-cording to a particular legal structure as, for example, in a sole proprietorship, partnership, or corporation. The considerations involved in making this crucial choice are explored in Chapter 5. Later, when a fashion company is in opera-tion, it will enter into a number of business deals with suppliers and customers. The most common of these transactions is the commercial sale of fashion items from a fashion company to a major retailer. The legal aspects of the commer-cial sale transactions are analyzed in depth in Chapter 6.

Fashion companies are often obliged to employ a large number of personnel. These employees are covered by a complex web of legal protections. The vari-ous state and federal laws covering employee rights are reviewed in Chapter 7.

As anyone who has ever perused a fashion magazine knows, print advertising is tremendously important for fashion fi rms. Today, however, new forms of ad-vertising, particularly through electronic media, are also becoming important. A recurrent issue faced by fashion companies is the clearance of images used in their advertising. Images may be owned by photographers or other parties, and the people portrayed in those images may have additional rights. In addition, fashion advertisers may need to enter into agreements for the use of props or the right to shoot images at particular locations. The ways to obtain legal clearance for all aspects of the use of images in advertising is discussed in Chapter 8.

Despite the growth of e-commerce, most apparel sold today is still sold through retail stores. The fashion company needs to carefully negotiate the

Preface xvii

lease or purchase of space for its stores. The key aspects of commercial lease negotiations are set forth in Chapter 9.

Part IV, which includes Chapters 10 and 11, covers international aspects of the fashion industry. When a fashion company has begun to achieve inter-national recognition, it will inevitably be demanded be consumers in other countries. The best and safest ways to grow internationally are discussed in Chapter 10.

Apparel manufacturing today is a complex, global process. A single garment may involve elements from a half-dozen different countries. It is absolutely vital for fashion companies to be able to move products across national bor-ders in a timely, effi cient, and cost-effective manner. Proper customs and duty- management procedures are therefore mandatory for the sophisticated apparel company and are discussed in Chapter 11.

To introduce fashion students and industry professionals to these legal aspects of working in the fashion business, this text relies on the expertise of contribut-ing authors who specialize in fashion law, either in law partnerships or as inside counsel to fashion business fi rms. Although designers and fashion executives are encouraged to turn to legal counsel to ensure that they are conducting their business in the most advantageous way that complies with the law, a basic un-derstanding of fashion law can make their relationship with their legal advisors more productive. Several features of the text help to make legal concepts acces-sible to the lay reader. Boxes provide summaries of court cases and other real-life examples of the role of law in the fashion business. Templates for agreements illustrate the provisions that owners and managers of fashion businesses should include in these documents. Sample Clauses familiarize readers with the legal language that covers the rights and responsibilities of the parties to agreements. Practice Tips discuss legal issues that should be considered as fashion designers and executives establish procedures for conducting their business.

Law students who are contemplating a specialty in fashion law will learn about applications of business law and IP protection to the particular, some-times unique, conditions and practices that occur in this fascinating industry.

xviii

Acknowledgments

This book was written by a team of highly experienced attorneys and legal ex-perts, and it is therefore fi tting for us to thank our contributing authors fi rst: Elise M. Bloom, Michael F. Colosi, Ashima Dayal, Paul A. Friedman, George Gottlieb, Steven R. Gursky, Frances P. Hadfi eld, William Jelinek, Kristin B. Ko-sinski, Donald L. Kreindler, Vejay Lalla, Heather J. McDonald, Marc Misthal, Thomas M. Pitegoff, Carole P. Sadler, and Mitchell B. Stern.

We would also like to thank our tireless research and drafting assistants, Lauren Allen, Ashley Corwin, Cara Joy David, Stephen Fletcher, Shannon Hedvat, Megan Heeter, Jean Kim, Whitney Meers, and Tina Mepani.

We are grateful to the following reviewers, selected by the publisher, for their helpful recommendations: Jean K. Dilworth, Eastern Illinois University; Elena Karpova, Iowa State University; Mary Littrell, Colorado State University; Erin Parrish, University of Alabama; and Jack Rose, Johnson & Wales University.

Finally we would like to thank our highly supportive and professional pub-lishing team at Fairchild Books, especially our editors, Olga Kontzias, executive editor; Jennifer Crane, director of editorial development; Sylvia Weber, develop-ment editor; and Andrew Fargnoli, production editor; and our art director, Erin Fitzsimmons.

Guillermo C. JimenezProfessor, Fashion Institute of Technology

Barbara KolsunGeneral Counsel, Stuart Weitzman LLC

105

CounterfeitingBarbara Kolsun and Heather J. McDonald

4.1. Introduction

Trademarks are the most valuable commodities in the fashion industry. Fash-ion companies rely on their trademarks so consumers can identify a particular brand’s products easily, which in turn has a bearing upon whether the consumer elects to purchase the product. Since copyright protection for fashion designs is limited, fashion companies must rely on their trademarks in order to help distin-guish their products from those of their imitators.

Trademarks have the ability to stimulate consumer demand for products globally.1 This is particularly true given the advent of the Internet. Marks indi-cate that a particular product is associated with a certain reputation, and that, by buying another product with the same mark, consumers are purchasing items of the trademark owner’s standard of quality. With the increased demand for certain trademarks, counterfeiters have realized the benefi t of copying such IP. Counterfeit products can be created at a relatively low price and can be sold for great profi ts (Figure 4.1).

4.1.1. What Is Trademark Counterfeiting?

Trademark counterfeiting is the act of manufacturing or distributing a product or service bearing a mark that is identical to or substantially indistinguishable

4

Whitney Meers, Cardozo Law School, Class of 2009, and Cara Joy David, Cardozo Law School, Class of 2010, provided additional research.

1 Curtis Krechevsky, INTA and the Battle against Counterfeiting, 93 Trademark Rep. 145 (1996).

106 Intellectual Property Issues

from a registered trademark.2 Simply put, trademark counterfeiting is theft of someone’s IP. People who copy legitimate products not only reproduce the trademark owner’s original patterns and designs, but they also decrease the value of the original products in the marketplace by making exclusive products seem as though they are available at mass-market prices. This practice harms the trademark owner, who seeks to maintain the exclusivity of the brand in the marketplace, while at the same time it allows counterfeiters to capitalize off the established goodwill and reputation of the trademark owner.

4.1.2. The History of Counterfeiting and Anticounterfeiting

People have attempted to associate brands with their products for hundreds of years.3 For as long as people have created objects of value, they have attempted to protect the marks that they have attached to those products.4

Fig. 4.1. These counterfeit handbags were seized from a New York City ware-house before they could be sold on the streets as designer merchandise. (Courtesy of Fairchild Publications, Inc.)

2 15 U.S.C. §§ 1116(d)(1)(B)(I), 1127 (2008).3 Jed S. Rakoff & Ira B. Wolff, Commercial Counterfeiting: The Inadequacy of Existing Remedies, 73 Trade-

mark Rep. 493 (1983).4 Id.

Counterfeiting 107

In 1946, Congress enacted legislation to protect trademarks5 that enabled trademark owners to enforce and protect their trademarks through civil ac-tions. However, these early laws did little to protect trademark owners against counterfeiting.6 In 1983, brand owners again lobbied Congress for criminal penalties against trademark counterfeiting.7 By then, the problem of counter-feiting had escalated far beyond the trademark owners’ control,8 and the issue was reaching crisis proportions.9 The legislature amended the 1946 statute in 1984 to criminalize trademark counterfeiting and included stiffer penalties for counterfeiters.10

4.1.3. “The Crime of the Twenty-First Century”

Theft of IP, particularly trademark counterfeiting, is often referred to as “the crime of the twenty-fi rst century.”11 As technology advances, so does the ability of criminals and infringers to copy the trademarks of others, with the hopes of easy profi ts. Much of today’s counterfeiting problem is linked to China,12 al-though Russia represents a major problem, and smaller issues are present in such places as Argentina, Belize, Brazil, Egypt, Indonesia, Israel, Lebanon, Paraguay, Turkey, Ukraine, and Venezuela. In Latin American countries, the biggest problems come from domain name pirates and counterfeiters claiming to be distributors for U.S. companies.

China’s unprecedented economic growth has been accompanied, unfortu-nately, by rampant counterfeiting.13 Professor Peter Yu has written that

. . . the culprit behind the Chinese piracy problem is the Confucian beliefs in-grained in the Chinese culture, the country’s socialist economic system, the leaders’ skepticism toward Western institutions, the xenophobic and nationalist sentiments of the populace, the government’s censorship and information control policy, and the signifi cantly different Chinese legal culture and judicial system.14

5 Lanham Act, 15 U.S.C. § 1041 et seq.6 Krechevsky, supra note 1.7 Rakoff & Wolff, supra note 3.8 Krechevsky, supra note 1.9 Id.10 Trademark Counterfeiting Act of 1984, 18 U.S.C. § 2320 (2008).11 Dubbed as such by James Moody, former Chief of the Federal Bureau of Investigation’s Orga-

nized Crime/Drug Operations Division.12 Daniel C.K. Chow, Counterfeiting in the People’s Republic of China, 78 Wash. U. L.Q. 1 (2000).13 Id.14 Peter K. Yu, From Pirates to Partners: Protecting Intellectual Property in China in the Twenty-First Century,

50 Am. U. L. Rev. 131, 206 (2000).


Professor Yu suggests that China’s reluctance to embrace IP laws is due to the perception that these laws protect only foreigners and not citizens of China, and to the impression that such laws were adopted as the result of pressure to comport with Western IP laws, which creates further hostility and reluctance to abide by such laws.15

On June 20, 2006, European and U.S. offi cials joined forces in the form of a joint task force to fi ght counterfeiting. The “EU-US Action Strategy for the En-forcement of Intellectual Property Rights” provided a framework in which the E.U. and United States could identify and act on common projects with indus-try support. China and Russia were the main focus of the joint action plan.

Additionally, in October 2007, the U.S. Trade Representative announced the launch of the Anticounterfeiting Trade Agreement to establish common stan-dards for anticounterfeiting enforcement among numerous countries.

4.1.4. Identifying a Counterfeit: An Overview

Some counterfeits are easier to spot than others. For example, a counterfeit handbag purchased in a fl ea market will usually be of very poor quality, with loose seams and stitching. The difference in quality between the counterfeit and an original will be visible to the ordinary consumer. However, many coun-terfeiters today are capable of producing extremely precise imitations of famous branded products. Such counterfeiters can mimic everything from a particular stitching method to precise thread coloring.

Because of the diffi culty in identifying such counterfeits, some companies have incorporated product-securing devices in packaging or into the product itself, such as thread in a label identifying the product as authentic.

Brand owners must be prepared to train investigators and law enforcement offi cials, such as customs offi cers, in how to spot counterfeit products. Also, trademark owners should review their counterfeiting prevention measures from time to time in order to ensure that the measures are up-to-date, since counter-feiters are constantly becoming more sophisticated in their methods.

4.1.5. A Growing Problem and the Governmental Response

The International AntiCounterfeiting Coalition (IACC) estimates losses to U.S. companies due to trademark counterfeiting to be between $200 billion to $250

15 Id.

Counterfeiting 109

billion annually.16 Globally, counterfeiting is approximately a $600 billion a year problem.17 In 2005, Congress also noted that counterfeiting costs legitimate employers thousands of potential job opportunities, owing in part to lost profi ts and in part to the companies’ competition with illegal operations that do not comply with national employment standards.18

In a survey conducted by the IACC, Fortune 500 companies reported that they spend an average of between $2 and $4 million per year to combat coun-terfeiting. Some reported spending up to $10 million.19

According to the November 2004 report of New York City Comptroller Wil-liam C. Thompson, Jr.,20 counterfeiting accounted for $380 million lost in New York City sales taxes, $290 million lost in New York City business income taxes, and $360 million lost in New York City personal income taxes.21 The Los Ange-les County Development Corporation reported that counterfeiting had deprived state and local governments of at least $483 million in 2005.22

In recent years, Congress has taken a more proactive stance in the fi ght against counterfeiting. In passing anticounterfeiting laws, Congress now recog-nizes the importance of IP to the national economy. Laws now exist that allow trademark owners to enforce their rights and that allow both federal and state authorities to protect the consuming public (Box 4.1). Agencies such as the Fed-eral Bureau of Investigation, Secret Service, and Customs Service (now part of the Department of Homeland Security) monitor and establish trade regulations, patrol the borders, and monitor the Internet in order to locate and prosecute counterfeiters. Under federal laws, counterfeiters may be fi ned up to $2 million and ten years in prison per infringement. Further, as many as two-thirds of the states in the United States have adopted laws criminalizing trademark counter-feiting. Many of these laws include felony penalties, prison terms and fi nes for those convicted of crimes associated with trademark counterfeiting.23

16 See International AntiCounterfeiting Coalition, http://www.iacc.org/counterfeiting/counterfeiting.php (last visited July 3, 2008). However, it is important to note that it is diffi cult to come up with a precise fi gure because so much of the counterfeiting industry is below the economic radar.

17 Id.18 S. 1984, 109th Cong. § 1 (2005). See also International AntiCounterfeiting Coalition, Facts on

Fakes, available at http://www.iacc.org/resources/Facts_on_fakes.pdf (last visited Mar. 19, 2008).19 See International AntiCounterfeiting Coalition website, http://www.iacc.org (last visited May 28,

2008).20 William C. Thompson, Jr., Bootleg Billions: The Impact of the Counterfeit Goods Trade in New York

City (Nov. 2004), available at http://www.iacc.org/resources/IACC_WhitePaper.pdf (last visited May 28, 2008).

21 Id.22 Gregory Freeman, Nancy D. Sidhu & Michael Montoya, A False Bargain: The Los Angeles County

Economic Consequences of Counterfeit Products (Feb. 2007), available at http://www.laedc.org/consulting/projects/2007_piracy-study.pdf (last visited Dec. 14, 2008).

23 18 U.S.C. § 2320.


Trademark owners also have at their disposal various civil remedies to pro-tect their trademarks. Under existing laws, companies have the ability to seize counterfeit products, permanently enjoin the manufacture and sale of such items, remove such items from sale on the Internet, and seek monetary dam-ages.24

4.1.6. Not a Victimless Crime

A common misconception is that counterfeiting is a “victimless crime.” It is not. Beginning with the large corporations at the top, trickling down to the low-wage workers who slave in barely inhabitable sweatshops, and ending with the con-sumers of counterfeit products, counterfeiting has countless victims.

People who purchase counterfeit products often do not realize the harms that are associated with purchasing such products. They generally just assume they are getting a good deal for something that looks substantially similar to a brand name product. But in reality, there are high costs, including harm to the economy, danger to consumers’ health, and substantial funding for orga-nized crime.

Purse Parties: U.S. v. Ohri

In big cities, counterfeit vendors are part of everyday life. For instance, New York City’s Chinatown is a popular spot for tourists to purchase counterfeit products. However, in suburban areas, consumers might attend “purse parties,” parties that serve food and drinks and sell counterfeit goods. Purse parties are more diffi cult to discover and to police than retail outlets because such parties are held in pri-vate and by invitation only.

But there are success stories. In U.S. v. Ohri, an anonymous tip from an at-tendee at a purse party led to the arrest of a man and his son, who were later tried for selling counterfeit handbags bearing the marks of nine different designers, including Prada and Louis Vuitton. Federal agents found 30,000 knockoff bags in a warehouse in Fairfax, Virginia. The arrest also connected the defendants to others involved in the counterfeiting ring.

Source: U.S. v. Ohri, WL 150799 (E.D. Va. 2007).

Box 4.1

24 Id. § 1116.

Counterfeiting 111

4.1.6.1. Harm to Trademark Owners

From the trademark owner’s point of view, the obvious harm done by counter-feiting is lost sales. People who would have elected to purchase an authentic product either are deceived into purchasing or willingly purchase a fake.

If people who have innocently purchased counterfeits believe that the prod-ucts are authentic but simply of poor quality, they may have reservations about purchasing the mark owner’s products in the future. Therefore, the mark owner is harmed not only by the fact that the person has purchased a non-genuine product, but also by the fact that the consumer may choose not to purchase gen-uine items from that trademark owner in the future. The money that companies lose when people purchase counterfeit products, coupled with the money that corporations spend to fi ght such counterfeiting efforts, signifi cantly increases operating costs.

4.1.6.2. Harm to Consumers

Consumers also lose when they purchase non-genuine products. Counterfeiting is successful because counterfeiters fi nd ways to take shortcuts in manufacturing. This poses a substantial threat to the health and safety of consumers because of a lack of quality control. Counterfeiting operations often work below the radar of international standards and therefore do not comply with minimum public safety requirements. For products such as clothing, this means that garments may be washed in substances that are toxic or that are proven skin or eye irritants. Coun-terfeit sunglasses may not be shatterproof or protect eyes from ultraviolet rays.

It is essential to get the message out to consumers. One highly effective public relations strategy is for a group of fashion companies to launch a major public awareness campaign. For instance, the hair-care company Paul Mitchell had television commercials stating that its products are sold only in salons and that products purchased elsewhere are not guaranteed by the company and may be dangerous. For several years, Harper’s Bazaar has devoted one issue a year to an-ticounterfeiting, and this has become a popular venue for fashion companies to place anticounterfeiting ads. There are also lower cost alternatives. For example, a company should designate a place on its website where consumers can report counterfeiters. If possible, labels should also clearly state “only sold in. . . .”

4.1.6.3. A Drain on Law Enforcement

Counterfeiters generally run all-cash businesses and avoid keeping records or paying taxes. This is problematic on many levels. Cash-only operations leave no


paper trail, a situation that can make large-scale counterfeiting operations dif-fi cult to investigate. It also allows counterfeiters to easily hide their assets once they are tracked by law enforcement.

Because they have no records, it is impossible to ascertain whether coun-terfeiters are complying with international human rights health and safety standards in their factories. The likelihood is that most of them are not in com-pliance, because it costs money to comply with such standards.

Organized crime and terrorist organizations are increasingly involved in counterfeiting operations.25 Counterfeiting has become big business, with or-ganized criminal enterprises establishing manufacturing and distribution net-works in the United States, Europe, and Asia. Many of these criminal groups ship counterfeit products through the same sophisticated routes that they use for narcotics trade.26 Congress recognized the correlation between organized crime and counterfeiting when it enacted federal criminal copyright and trademark piracy laws under the Racketeer Infl uenced Corrupt Organizations (RICO) Act.27 At the International Conference on IPR in Lyon, France in 2001, hosted by Interpol, the relationship between counterfeiting and funds for terror-ist activities was discussed.28 Some of the groups that the government has en-countered through its anticounterfeiting operations include al Qaeda, Hamas, Hezbollah, and the Irish Republican Army.29 In fact, Interpol states that coun-terfeiting is not merely a single source of funding for such organizations, but that it is becoming the preferred method of funding for these groups.30 The FBI compiled evidence of a direct link between the sale of counterfeit merchandise in the streets of New York and the terrorists who bombed the World Trade Center in 1993.31

25 See generally Maureen Walterbach, International Illicit Convergence: The Growing Problem of Transna-tional Organized Crime Groups’ Involvement in Intellectual Property Rights Violations, 34 Fla. St. U. L. Rev. 591 (2007).

26. Anna-Liisa Jacobson, The New Chinese Dynasty: How the United States and International Intellectual Property Laws Are Failing to Protect Consumers and Inventors from Counterfeiting, 7 Rich. J. Global L. & Bus. 45 (2008).

27 International AntiCounterfeiting Coalition, The Negative Consequences of International Intellectual Property Theft: Economic Harm, Threats to the Public Health and Safety, and Links to Organized Crime and Ter-rorism Organizations (Jan. 2005), available at http://www.iacc.org/resources/IACC_WhitePaper.pdf (last visited May 28, 2008).

28 Kathleen Millar, U.S. Customs Today, Financing Terror: Profi ts from Counterfeit Goods Fund Terror-ist Attacks (Nov. 2002), available at http://cbp.gov/xp/CustomsToday/2002/November/interpol.xml (last visited Dec. 14, 2008).

29 Id.30 Public Testimony of Ronald K. Noble, republished in The Links between Intellectual Property Crime

and Terrorist Financing, 108th Cong. (July 16, 2003), available at http://www.interpol.int/Public/ICPO/speeches/SG20030716.asp (last visited Mar. 20, 2008).

31 Willy Stern, Why Counterfeit Goods May Kill, 36 Bus. Wk., Sept. 2, 1996, at 6.

Counterfeiting 113

4.1.7. Anticounterfeiting Today

18 U.S.C. § 2320 prohibits traffi cking in counterfeit labels, patches, and medal-lions bearing a copy of a registered trademark that are unattached to any goods. Mark owners are currently pushing legislation that, in the case of a “famous” mark, would remove the burdensome requirement that the spurious mark be used in connection with goods or services identical to those for which the genu-ine mark is already registered.

4.2. Nature of the Counterfeiting Problem

The Unites States Code defi nes a counterfeit as “a spurious mark that is identi-cal with or substantially indistinguishable from the original registered mark” in 15 U.S.C. § 1127, 15 U.S.C. § 1116(d)(1)(B)(i), and 18 U.S.C. § 2320(e)(1). Under 19 C.F.R. § 133.21(a), this standard is reached when the “copying or simulating mark or name” is either “an actual counterfeit of the recorded mark” or “is one which so resembles it as to be likely to cause the public to associate the copying or simulating mark with the registered mark or name.”32

All counterfeits are infringements, but not all infringements are counterfeits. Counterfeiting is narrower in scope than trademark infringement and applies only to marks made to look identical to the actual mark. (The “confusingly sim-ilar” standard for infringement is a lower threshold to reach.)

If Company X, which makes shoes that look exactly like, or very close to, Company Y’s shoes and also bear Company Y’s trademark, then Company X is engaging in blatant counterfeiting. Company X is attempting to capitalize off Company Y’s name and brand. However, if Company X creates a pair of shoes with a pattern and trademark similar to Company Y’s, but not exactly the same, then there is less likelihood that this product will be considered counterfeit. It may, however, be found to infringe Company Y’s trademark because consumers may fi nd the products “confusingly similar” when they look at the products in the marketplace.

Ultimately, the differences between counterfeiting and infringement are important because they lead to different consequences. Infringement gener-ally results in an injunction, a legal remedy that prohibits the defendant from manufacturing and selling the product, and sometimes in monetary damages. Counterfeiting, on the other hand, may not only result in an injunction and

32 Montres Rolex, S.A. v. Snyder, 718 F.2d 524 (2d Cir. 1983).


monetary damages, but also can result in criminal penalties, such as fi nes and imprisonment.

A further defi ning aspect of trademark counterfeiting is that in order to con-stitute a counterfeit, the mark must be used on the same type of goods or ser-vices as are covered by the mark owner’s registrations according to 15 U.S.C. § 1116(d)(1)(B). Generally, companies that manufacture products must fi le trade-mark registrations specifi cally defi ning which types of products their marks will be used on. For example, most countries use the International Classifi cation of Goods and Services. Under this system, “Class 25” covers clothing, which includes clothing, footwear, and headgear.33 If Company X has a valid trade-mark registration for Class 25 products, then it has the exclusive right to place its mark on such products. However, a person who wishes to put Company X’s mark on a toy, which is covered by Class 28,34 may not be guilty of trademark counterfeiting, although there may be a trademark infringement or copyright infringement issue in doing so under the doctrine of related use.35 Box 4.2 de-scribes another situation in which the determination of the type of infringement of IP rights is at issue.

4.3. Agents in the Effort

It is the responsibility of trademark owners to protect their trademarks and en-force against the unauthorized use of those marks. This includes taking initia-tive to protect their trademarks against counterfeit products.

4.3.1. Management

Trademark enforcement begins at the top. Management must be aware of the problem of counterfeiting and drive the company’s enforcement efforts. Man-agement must cooperate with in-house and outside counsel and law enforce-ment to designate contacts for various needs that may arise, including the production of affi davits of authenticity, the identifi cation of counterfeit goods, providing testimony where necessary, and supporting civil litigation.

Not only is executive management integral in the counterfeit fi ght, lower-level business and sales personnel must also be cognizant of the problem. Those in sales are usually closest to the marketplace and are often the best suited to

33 http://www.wipo.int/classifi cations/fulltext/nice8/enmain.htm.34 http://www.uspto.gov/web/offi ces/tac/tmfaq.htm#Application018.35 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Comp. 17:15 (4th ed. 2008).

Counterfeiting 115

see or hear about counterfeit products. Other business personnel may be par-ticularly well-placed to notice differences in importing patterns and can help the legal team determine where to direct its efforts.

4.3.2. Preliminary Action Plan

Trademarks and domain names should be registered in all countries where the trademark owner sells, manufacturers, or distributes products or components. In addition, it is often wise to register trademarks in advance in large markets like China and Russia, in order to avoid problems when the brand becomes known.

4.3.3. In-House Counsel

In-house counsel plays an important role in the battle against counterfeiting. Such counsel should determine an appropriate anticounterfeiting strategy,

The Gray Market: Zino Davidoff SA v. CVS Corp.

Products that are authentic but sold through illegal channels of distribution, commonly called gray market products, blur the line between counterfeits and authentic items. Because prices for products will often vary substantially from country to country, transporters will purchase products legally from authorized dealers in countries where the products are less expensive and will transport them without authorization to retailers in other countries where the products are more expensive. In legitimate trade, the difference in price is usually attributable to shipping prices, taxes, and quality-control standards.

In the recent case of Davidoff SA v. CVS Corp., Davidoff, alleging various Lan-ham Act and state law trademark claims, moved to enjoin CVS from selling gray market Davidoff perfumes. CVS argued that it should not have to stop selling such products because it had purchased the perfumes from authorized dealers.

Because an injunction will be granted only where there is a likelihood of suc-cess on the merits of the claim, the court addressed whether Davidoff had appro-priate monitoring efforts in place to make its products protectable against gray market perfumes. The court found that Davidoff’s UPC monitoring system was suffi cient, and that, since UPC codes had been scraped off, such absence of UPC codes constituted a “material difference” from an authentic product, allowing an injunction under the Lanham Act. The case is now on appeal.

Source: Zino Davidoff SA v. CVS Corp., 06 Civ. 15332 (S.D.N.Y. 2007).

Box 4.2


maintain close contact with outside counsel and investigators hired to conduct anticounterfeiting operations, and work directly with investigators and law en-forcement to monitor anticounterfeiting progress. In large companies, in-house counsel’s duties may consist solely of combating counterfeiting operations.36 However, in most corporations, anticounterfeiting involves only part of such counsel’s responsibilities.37

Experienced in-house counsel can assist investigators in formulating appro-priate procedures to conduct local sweeps in targeted geographic locations.38 A program administrator at the paralegal level will be instrumental in helping the corporation throughout the process.39 It is important for that person to be able and willing to work with law enforcement to determine the authenticity of prod-ucts and to track the chain of custody of counterfeits.40 This person should also be trained to identify counterfeit product.41

One of the most important functions of in-house counsel and related staff is maintaining an evidentiary chain of custody. It is imperative to have fi les on each civil and criminal action related to maintenance of the brand mark. In-cluded in these fi les should be a chain of custody form and the affi davit discuss-ing the counterfeit product in question, with details about how it was discovered and how it differs from the authentic product. If all the necessary documents are in one place, they can be easily accessed by, or forwarded to, the party deal-ing with enforcement.42

4.3.4. Outside Counsel

In many cases, in-house counsel must turn to outside counsel for assistance in fi ghting counterfeiting. The role of outside counsel varies with the type of case involved and the amount of responsibility taken by in-house counsel. Generally, outside counsel becomes a key player when civil litigation is involved because, in many states, corporations cannot represent themselves in court.43

It is generally ideal for in-house counsel to retain control of the anticounter-feiting program because they can help set the parameters of such a program and

36 Barbara Kolsun & Nils Victor Montan, “Building a Comprehensive Counterfeiting Program,” in Trademark Counterfeiting in the United States, at 7 – 6 (Brian W. Brokate & Dawn Atlas, eds., Interna-tional AntiCounterfeiting Coalition 2008).

37 Id.38 Id.39 Id.40 Id.41 Id. at 7 – 742 Id.43 N.Y. C.P.L.R. § 321(a) (2008).

Counterfeiting 117

help shape its overall strategy.44 In-house counsel should carefully consider the qualifi cations of any outside counsel chosen to represent the company.45 For in-stance, many law fi rms involved with copyright and trademark registration and licensing know little about how to successfully combat counterfeiting. Further, pricing should be considered in selecting a law fi rm to work with, as mark en-forcement can become extremely expensive. Some law fi rms will charge hourly rates, but it may be more cost effective to establish a fl at fee for cease and desist letters, affi davits, and other matters preliminary to litigation.

Outside counsel must become familiar with the in-house counsel’s role in combating counterfeiting in order to establish a cohesive anticounterfeiting pro-gram. This will likely involve regular reports and updates, so that both in-house and outside counsel will be aware of the progress made in investigations and actions.

4.3.5. Federal Law Enforcement

Customs and Border Protection (CBP)46 and Immigration and Customs En-forcement (ICE)47 are two of the most signifi cant allies in enforcing laws against counterfeiting. CPB and ICE conduct investigations at the borders; at major international ports such as Los Angeles, CA, and Newark, NJ; and at various other ports throughout the country.

The FBI also serves an essential role in investigating counterfeiters. Because of the established link between counterfeiting and organized crime, money laundering and terrorism have received increased interest from the FBI’s Com-puter Crimes division.

ICE (Figure 4.2) is the largest investigatory agency run by the U.S. govern-ment.48 ICE agents use a variety of tactics to combat counterfeiting, includ-ing the National Intellectual Property Rights Coordination Center, ICECyber Crimes Center, and ICE Attaché Offi ces overseas. In 2007, ICE and CBP confi scated nearly $200 million in counterfeit or pirated merchandise nation-wide.49

44 Kolsun & Montan, supra note 36, at 7 – 945 Id.46 http://www.cbp.gov.47 http://www.ice.gov.48 U.S. Immigration and Customs Enforcement, Fact Sheet: Border Enforcement Security Task Force,

available at http://www.ice.gov/pi/news/factsheets/080226best_fact_sheet.htm (last visited May 18, 2008).

49 U.S. Immigration and Customs Enforcement, ICE Arrests 4 Illegal Aliens, Seizes $5 Million in Counterfeit Merchandise in Alabama, available at http://www.ice.gov/pi/news/newsreleases/articles/080502montgomery.htm (last visited July 7, 2008).


4.3.6. Border Enforcement

CBP is designed to combat terrorism and to encourage legal trade in the United States. However, CPB can only confi scate products that it knows to be counterfeit.

Trademark owners must record their registered trademarks with U.S. Cus-toms and other relevant customs organizations throughout the world, depending on the scope of the counterfeiting problem. This recordation enables Customs to seize counterfeit goods at the border and stop their entry into commerce. Recordation in the United States is simple, can be done online (see Figure 4.3), and is relatively inexpensive.

In order to maximize the benefi t of recordation with Customs, trademark owners must engage in training agents and inspectors at key ports of entry. The IACC Foundation (http://www.iaccfoundation.org/) has an active training pro-gram through which trademark owners can participate in meaningful and tar-geted training of Customs and other law enforcement entities. These programs are effective and are relatively inexpensive (even cheaper for members in the United States, costing about $250 per session plus travel). Training materials should be short (no more than a page or two), concise, and up-to-date. They

Fig. 4.2. Smuggling or dealing in counterfeit goods is a se-rious violation of the law. Criminal penalties may include large fi nes and prison sentences. (Photo courtesy of ICE.)

Counterfeiting 119

should identify by name, address, phone number, and e-mail a contact that is current, reliable, and expert in identifying counterfeits of the brand’s mer-chandise. Pictures of registered marks, authentic labels, and hardware should be included in this material. Offi cials should be given instructions only about what the trademark holder knows the offi cials can seize. Recordations should be routinely updated. Countries where authentic goods are manufactured often change as do personnel and product styles.

4.3.7. State Law Enforcement Offi cials

Because of shifts in federal priorities, local law enforcement agencies fi nd themselves increasingly involved in enforcement of trademark laws. State law enforcement often deals with local manufacturers, distributors, street vendors,

Fig. 4.3. Trademark owners should record their marks (called recordation) through the U.S. Customs and Border Protection website, as this enables Customs to confi scate counterfeit items. (Photo courtesy of CBP.gov.)


retailers, “house parties,” and others involved in the manufacture and sale of counterfeit merchandise.

State law enforcement offi cials who are willing to tackle small-scale cases are among the most valuable resources for anticounterfeiting programs. Local law en-forcement agents who begin with small seizures can eventually engage in widely visible deterrence efforts. Smaller busts often lead to much larger busts; as with il-licit drugs or weapons operators, each counterfeit vendor has his or her suppliers.

Such offi cials can also provide a network in which local law enforcement can cooperate with the larger federal agencies to help successfully enforce IP rights (Box 4.3).

4.3.8. Private Investigators

Private investigators can help an anticounterfeiting effort in many ways that go beyond routine investigations. Ideally, private investigators will be local because they will know the local law enforcement networks and counterfeiting patterns.

The Local Level: Counterfeiting and the NYPD

Counterfeiting is a rampant problem in many of America’s metropolitan areas. For instance, a single, routine bust in New York City in 2005 led to the discovery of a warehouse fi lled with counterfeit shoes, handbags, and clothing worth up to $2 million. The New York City Police Department has initiated many investiga-tions as the result of a larger plan by Mayor Michael Bloomberg to crack down on counterfeiters. For the program, the Mayor’s Offi ce of Special Enforcement en-gages multiple city agencies including the New York City Building Department, Police Department, Fire Department, Department of Consumer Affairs, District Attorney’s Offi ce, and the local tax authorities in a multiagency program combat-ing landlords who knowingly rent to counterfeiters. In 2007, raids throughout New York City led to the seizure of counterfeit goods reportedly worth $25 mil-lion. During fi ve weeks in early 2008, city offi cials targeted lower Manhattan and confi scated over $1 million in counterfeit goods and closed down thirty-two shops that housed such goods.

Multiagency programs such as the one in New York are a valuable asset to mark owners. Los Angeles now has a similar program in place, and the IACC is working with other cities to adopt this model.

Sources: Ross Tucker, New York Seizes $2M in Counterfeit Goods, Women’s Wear Daily, Sept. 30, 2005; Christine Hauser, City Agents Shut Down 32 Vendors of Fake Items, N.Y. Times, Feb. 27, 2008.

Box 4.3

Counterfeiting 121

Private investigators can act as useful intermediaries between trademark owners and their lawyers and law enforcement. Many private investigators come from the world of federal and state law enforcement and are invaluable resources in building anticounterfeiting investigations.

Private investigators can go undercover to purchase counterfeit goods at retail shops, as well as much more: They have resources that allow them to track coun-terfeiting operations in order to help get to the source of the larger operation. They can troll the Internet, searching for bargains that seem to be “too good to be true.” They can further pose as purchasers from retailers and websites, authenti-cate counterfeit products on behalf of the trademark owner, educate law enforce-ment in these techniques, and assist law enforcement in building their case.

Competent investigators have strong law enforcement contacts in multiple jurisdictions. A well-chosen investigator relieves some of the burden of investi-gation from law enforcement offi cials, who are often overwhelmed with other cases. While hiring a private investigator can be expensive, the benefi ts they offer can be immediate. Like outside counsel, investigators should be chosen based on their expertise in anticounterfeiting cases. The best sources of referrals are other brand owners and the IACC. It is prudent to use a relatively small number of good and cost-effective private investigators to effect criminal actions.

4.3.9. Trade Organizations

There are many trade organizations that unite trademark holders and support their fi ght against counterfeiting. These include the IACC,50 the International Trademark Association,51 the Recording Industry Association of America,52 the Motion Picture Association of America,53 and the American Apparel and Foot-wear Association.54 While this list is not exhaustive, each of these organizations can be of tremendous help to trademark holders who are developing and imple-menting anticounterfeiting strategies and programs.

4.4. Criminal Enforcement

Laws that protect trademark owners from counterfeiting and other infringe-ments may be enforced by federal or state criminal statutes.

50 http://www.iacc.org.51 http://www.inta.org.52 http://www.riaa.com.53 http://www.mpaa.org.54 http://www.apparelandfootwear.org.


4.4.1. Enforcement under Federal Criminal Statutes

Criminal penalties for counterfeiting can be severe. Because counterfeiters usually engage in large-scale operations, they may commit a number of federal crimes in the same enterprise. These federal crimes may include money laun-dering (the act of supplying money to an illegal cause), mail and wire fraud (crimes committed through the U.S. post offi ce or over the wires), and con-spiracy to commit such offenses. In addition, counterfeiters may also be charged with tax evasion and human rights violations. Besides the CBP, ICE, and FBI, other federal agencies, such as the U.S. Postal Service; the Secret Service; the Bureau of Alcohol, Tobacco, and Firearms; and the Internal Revenue Service, can assist with enforcement.

It can sometimes be diffi cult to persuade federal prosecutors to become in-volved with a counterfeiting case. Since the federal dockets are full of other cases involving crimes that are perceived as a greater public threat than “a few fake purses,” federal agents may be unaware of the relatively serious harms of counterfeiting.

Increasingly, federal prosecutors are becoming more aware of the gravity of the problem of counterfeiting. For example, in one recent case, what began as a small bust led to the arrest of four individuals as well as the seizure of more than 20,000 counterfeit products and materials to make up to 50,000 more. The estimated costs of the counterfeit products came to more than $1 million. While the case was initially fi led in state court, authorities decided to move it to fed-eral court when they discovered evidence of the defendants’ funneling money to Texas. Having the case heard in federal court enabled pursuit of more serious (federal) criminal penalties than would have been allowed under state law, as well as allowed the use of federal resources to engage in a more thorough crimi-nal investigation than state resources would have allocated.55

The following federal criminal statutes are helpful in combating counter-feiting:

The Stop Counterfeiting in Manufactured Goods Act (H.R. ▶ 32). This law was passed on March 16, 2006 (Public Law No. 109-181) and establishes prison terms up to twenty years and fi nes up to $15 million. It now adds mandatory forfeiture, destruction, and restitution provisions.

This law strengthens U.S. laws against trading counterfeit labels and pack-aging. While it was already illegal to manufacture, ship, or sell counterfeit

55 Shaun Tolson, Prison Time for Peddlers of Phony Purses, The Boston Herald, Apr. 10, 2007, at 4; Shelley Murphy, Cache of Knockoff Bags Triggers Federal Case, The Boston Globe, Nov. 4, 2005, at A1.

Counterfeiting 123

products, this legislation closes a loophole allowing the shipment of falsifi ed labels or packaging, which counterfeiters could then attach to fake products in order to cheat consumers by passing off poorly made items as brand-name goods. It also requires those convicted of counterfeiting to reimburse the le-gitimate business they harmed.18 ▶ U.S.C. § 2320 Traffi cking in Counterfeit Goods or Services Anticounterfeiting Consumer Protection Act of 1996. The relevant text of the statute is included here:

Whoever intentionally traffi cs or attempts to traffi c in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or ser-vices shall, if an individual, be fi ned not more than $2,000,000 or imprisoned not more than 10 years, or both, and, if a person other than an individual, be fi ned not more than $5,000,000. In the case of an offense by a person under this section that occurs after that person is convicted of another offense under this section, that person convicted, if an individual, shall be fi ned not more than $5,000,000 or imprisoned not more than 20 years, or both, and if other than an individual, shall be fi ned not more than $15,000,000.

Other Federal Statutes that can be used to prosecute counterfeiters include:

18 ▶ U.S.C. § 2319—Criminal Infringement of a Copyright18 ▶ U.S.C. § 1961 et seq.—RICO18 ▶ U.S.C. § 371—Criminal Conspiracy18 ▶ U.S.C. §§ 1956, 1957—Money Laundering18 ▶ U.S.C. § 1341—Mail Fraud18 ▶ U.S.C. § 1343—Wire Fraud18 ▶ U.S.C. § 542—Entry of Goods by Means of False Statements18 ▶ U.S.C. § 545—Smuggling Goods into the United States

4.4.2. Enforcement by State Criminal Statutes

Approximately two-thirds of the states in the United States have criminal coun-terfeiting statutes. Other states that do not have anticounterfeiting laws can still prosecute the crime under other offenses, such as fraud. New York, California, and Florida, leaders in the movement against counterfeiters, have enacted se-vere criminal state law penalties for counterfeiting.56

56 N.Y. Penal Law § 165.70 et. seq. (2008); Calif. Penal Law § 350(a)-(g) (2008); Fla. Stat. §§ 831.02 – 034 (2008).


4.5. Civil Enforcement

Civil enforcement of IP rights has advantages and disadvantages. For example, a civil suit can result in a settlement, as well as the seizure of the counterfeiter’s products. Unfortunately, counterfeiters have discovered advanced ways to hide their assets.

4.5.1. Civil Seizure Actions

In cases where counterfeit goods are being sold, trademark owners can seek re-course by fi ling a civil action and seeking an ex parte seizure order, allowing for the seizure of goods.57 An ex parte seizure proceeding is brought by one party in the absence of another (i.e., the trademark owner does not inform the alleged counterfeiter in advance that the trademark owner wishes the judge to order a seizure of the goods). The party seeking the ex parte relief argues that if the counterfeiter were given notice the counterfeiter would be likely to fl ee or de-stroy the illegal goods. In addition to permanent injunctive relief, plaintiffs can often recover profi ts, damages, costs, and attorney’s fees.

There are currently near mandatory treble damages in civil counterfeiting cases.58 Plaintiffs, in lieu of actual damages, which are often very diffi cult to prove, may request statutory damages.59 Damages are $500 – $100,000 per in-fringing mark, and, if conduct is willful, up to $1,000,000 per mark. Plaintiffs cannot, however, request additional attorney’s fees in addition to the statutory damages.60

4.5.2. Third-Party Liability Actions

Retailers and vendors are the easiest targets of a lawsuit. However, they often do not have as many fi nancial resources as others in the operation. Because vendors are often only the point of sale and are not engaged in any manufactur-ing operations, the money damages that can be recovered from them may be minimal. Despite this, lawsuits against vendors can offer effective deterrence. Further, lawsuits against vendors will sometimes result in admissions as to

57 15 U.S.C. § 1116.58 Id. § 1117(b).59 Id. § 1117(c).60 K & N Engineering, Inc. v. Bulat, 259 Fed. App. 994 (9th Cir. 2007) (holding that, in counterfeiting

cases, Plaintiffs cannot recover attorney’s fees in addition to statutory damages).

Counterfeiting 125

sources and locations of counterfeit goods. Therefore, lawsuits against vendors can sometimes lead to effective results.

Trademark owners can also fi le lawsuits against third parties, such as land-lords and fl ea market owners, that rent space to counterfeiters. These targets are attractive candidates for lawsuits because of theories of contributory infringe-ment 61 and vicarious liability.62 For example, a fl ea market owner can be liable for knowingly allowing a vendor to sell counterfeit products on its property. Usually, fl ea market owners and other property owners have greater fi nancial resources, which can effectively increase settlements or money gained from law-suits. Further, this approach may deter property owners from allowing vendors of counterfeit products to sell on their property in the future.63

Even though counterfeiting is a billion-dollar industry worldwide, the people who make the most money are those at the top of the chain. Retailers make just a small portion of proceeds, while the behind-the-scenes distributors may take in millions of dollars. Because of this, mark owners must decide wisely when to pursue litigation against a person or entity that is suspected of selling counterfeit products. For example, a raid at a fl ea market might lead to several arrests, but judgments against the fl ea market vendors may result in uncollectible defaults.

For this reason, third-party actions may be highly useful to mark owners. In a fl ea market case, the fl ea market owner may be held liable on theories of vicari-ous and/or contributory liability if the owner had knowledge of the illegal act and failed to take appropriate steps to stop it from occurring on its premises.

Property owners are attractive candidates for third-party liability actions be-cause they have at least one asset from which the mark owner may be able to collect damages: the property. Lawsuits against property owners can be very ef-fective in helping to cure the counterfeiting problem.

“Vicarious” liability applies when one party induces another to infringe a trademark. This theory is applicable, for example, when a person is supplying a product, knowing that it will be sold on the market as a counterfeit.64

In some cases, landlords may face liability from additional statutes. For in-stance, in New York, landlords can be held responsible for the illegal conduct

61 Contributory infringement occurs when the defendant does not control the direct infringer, but knowingly assists the direct infringer or somehow provides the means for the infringement.

62 Vicarious infringement is when the direct infringer is an agent or business partner of the defen-dant. It must be proven that such a relationship exists.

63 For more information on these cases, see Hard Rock Café Licensing Corp. v. Concession Svcs., Inc., 955 F.2d 1143 (7th Cir. 1992); Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996); UMG Record-ings, Inc. v. Sinnott, 300 F. Supp. 2d 1924 (E.D. Cal. 2004).

64 Heather J. McDonald, Counterfeit Goods on Premises: Third Party Liability Actions Target Owners of Property Where Business Is Conducted, 238 N.Y.L.J., Oct. 29, 2007, at S2, col. 2.


of their tenants when, after being put on notice, the landlords take no action.65 Internet Service Providers (ISPs) that knowingly host websites selling counter-feit goods can also be held contributorily liable.66

4.5.3. Cease and Desist Letters

In combating counterfeiters, the fi rst step may be to send a cease and desist letter. The letter generally will provide notice to the target that the trademark owner is aware of its counterfeiting activities. These letters may stop the prob-lem, for example, when a person claims not to have known the product he or she is selling is counterfeit or when the target is a fi xed location like a retail store. At the very least, such letters will put the counterfeiter on notice, which is proof of willfulness if the conduct continues. A company should have a stan-dard letter on fi le that can be customized for the individual situation (see, e.g., Figure 4.4). Responses from counterfeiters should be replied to immediately in writing, and the company should follow up by visiting the counterfeiters to con-fi rm compliance.

4.5.4. Foreign Matters

Effective anticounterfeiting outside the United States requires the assistance of foreign investigators and counsel. Local experts understand the language, laws, and legal system of the country. Further, in countries where enforcement is dif-fi cult, foreign investigators and counsel will be in the best position to advice on the most expedient and practical way to proceed.

4.6. Enforcement on the Internet

Over the last few years, counterfeiters have taken advantage of the Internet to sell goods on websites, including auction and classifi ed ad sites. Because infor-mation is transmitted so quickly to a large number of people, and it is diffi cult to verify the authenticity of the products until consumers receive them, counter-feiting websites on the Internet have proven to be a problem of unprecedented proportions for trademark owners.

65 N.Y. Real Prop. § 231 (2008)66 Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d 409 (S.D.N.Y. 2001).

Counterfeiting 127

Fig. 4.4. Model cease and desist letter. (Source: Barbara Kolsun & Nils Victor Montan, Build-ing a Comprehensive Counterfeiting Program, in Trademark Counterfeiting in the United States, at 7-62 [Brian W. Brokate & Dawn Atlas eds., 2008].)

via federal express

ManagerFashion Jewelry4321 86th Ave.Brooklyn, NY 10000

Re: [Trademark/Copyright]Our File: NY/97-004

Dear Sir/Madam:

We are writing on behalf of John Doe Jeanswear Company (“JDJC”), owner of the john doe trademarks (the “Trade-marks”), regarding your sale of garments bearing counterfeits of the trademarks described below.

You are hereby advised that under federal law, only John Doe has the right to use the “john doe” name and trademarks on a wide variety of products, including jeans and T-shirts. These rights are evidenced in the trademark registrations owned by JDJC and granted by the U.S. Patent and Trademark Offi ce, including Registration Number for the trademark john doe.

Use of the Trademarks on merchandise, labels, or tags without the express written consent of JDJC is a violation of both federal and state law. Both making such merchandise and selling it is illegal. Violators of these laws not only face criminal prosecution, but may have their illegal goods, as well as the means of making or selling the goods, and their business records seized. Infringers may also be required to pay damages up to three times their profi ts or three times JDJC’s damages, as well as having to pay our legal fees if we must go to court to stop the illegal use.

You should know that JDJC does everything possible to protect its interests in its name and marks, and seeks all the penalties listed above if we do not receive cooperation from an unauthorized user. You should also know that no one is authorized to manufacture, advertise, offer for sale or sell any products utilizing the Trademarks without the express written permission from JDJC. Any merchandise you may obtain from, or which is offered to you by anyone other than JDJC is most likely to be counterfeit or stolen property.

Our investigator recently purchased from your store merchandise that bears counterfeits of the Trademarks. We hereby demand that you:

1. Immediately cease and desist from further distributing, and/or selling this infringing merchandise bearing the Trade-marks; and

2. Remove from sale all infringing items in your possession or under your control which bear the Trademarks includ-ing jeans, T-shirts, silk screens, promotional items or merchandise of any kind or nature bearing, or items used to manufacture or repro duce the Trademarks. Any sales to the public taking place after your receipt of this letter will constitute intentional and willful violations of our company’s rights. Moreover, each unit of counterfeit or infringing merchandise in your possession or control constitutes evidence of our company’s claims, and seri ous legal conse-quences would result from any failure by you to preserve all such evidence. You may not contact your vendors in writing or orally to return this evidence to your vendors or otherwise dispose of it or inject it back into the stream of com merce.

We also demand:

1. That within 24 hours of our delivery of this letter to you, you provide your written commitment that you have ceased all sales of counterfeit garments bearing the Trademarks or in fringing versions thereof, your store and every other whole sale or retail location owned or controlled by you;

2. That within fi ve (5) days of our delivery of this letter to you, you provide us with copies of all documents, corre-spondence, purchase orders, pro forma invoices, correspondence and all other records of every kind relating to your manufacture, pur chase, distribution, sale and marketing activity with respect to all merchandise bearing counterfeits or infringements of the Trademarks. Such records should include, without limitation, documents refl ecting the purchase price or factory price of all counterfeit products sold by you;

3. That within fi ve (5) days of our delivery of this letter to you, you provide us with a list of every other wholesale or retail lo cation owned or controlled by you in which the counterfeit garments are or have been sold, and list of sources from which the counterfeit goods were obtained; and

4. That within fi ve (5) days of our delivery of this letter to you, you provide to us all information and documentation relating to the number of units of counterfeit merchandise within your possession and control, including any out-standing orders of the counterfeit merchandise, the number of units of such merchan dise heretofore sold by you, whether sold at your store or any other wholesale or retail location owned or controlled by you, or to any other person or entity, and the sales price for each unit sold.

If you do not agree to these demands, JDJC will take the strongest possible legal action. Having received this letter, you now have actual notice of JDJC’s exclusive rights to the use of the Trademarks. Any con tinued sale of such items would constitute a willful infringement of JDJC’s rights.

Nothing in this letter shall be construed as a waiver or relinquish ment of any rights or remedies of JDJC.

Very truly yours,


4.6.1. Websites

One of the biggest challenges in the fi ght against counterfeiting lies in the web-sites that sell products that are clearly counterfeit. These sites, which often look authentic, in reality are not licensed to sell authentic product and are selling counterfeit products. Similar sites purport to sell “replica” merchandise with dis-claimers indicating that they are for “novelty purposes” or otherwise disclosing the fact that the merchandise being sold is not genuine. These types of websites are currently common on the Internet. It is important to know that such sites are illegal, as there is no “replica” or “disclaimer” defense to counterfeiting.

High visibility combined with diffi culty in identifying volume sellers makes target selection and determination of priorities diffi cult. Tactics to fi ght these types of sites include sending cease and desist letters to the site as well as to the ISP hosting the site. Such letters should point out the penalties of contribu-tory infringement and request removal of the site. Advanced tactics allow Web hosts to hide counterfeiters, which Web hosts often list under fake names and addresses and in countries that do not comply with U.S. IP rights standards. If these websites and hosts are found, the most effective remedies are initiated by fi ling civil lawsuits. If a lawsuit uncovers a larger operation, trademark owners may wish to involve law enforcement in their efforts.

4.6.2. Auction and “Listings” Sites

Online auctions and listings websites are notorious for their popularity with counterfeiters. Companies such as eBay and Yahoo! are two of the largest, but there are dozens of others. These sites have become a digital fl ea market for the sale of counterfeit merchandise.

Under current law, the burden is on mark owners to monitor their rights. In order to fi ght auction and listing sites effectively, trademark owners must moni-tor sites and contact them to terminate counterfeit auctions (“Notice and Take Down”). Trademark owners can make use of special utilities provided by the sites to authorized mark owners, such as eBay’s Verifi ed Rights Owner (VeRO) Program, which allows IP owners to quickly report listings that they believe in-fringe their property rights.67 Mark owners may need to designate an in-house employee, investigator, or outside counsel to manage this piece of an anticoun-terfeiting program. Unfortunately, anonymity through defi cient Internet gover-nance and third-party services (proxy service, broker sites) makes investigation

67 See How eBay Protects Intellectual Property (VeRO), available at http://pages.ebay.com/help/tp/programs-vero-ov.html (last visited May 28, 2008).

Counterfeiting 129

very diffi cult and time-consuming. Additionally, international exposure makes establishing jurisdiction problematic and may make enforcement of remedies diffi cult, even once jurisdiction is established (see Box 4.4).

Trademark owners should pressure sites to monitor auctions and listings for phrases that blatantly indicate merchandise is counterfeit (e.g., “replica,” “faux,” “cannot guarantee authenticity”) and cancel them. However, very few products sold are actually advertised as counterfeit. Trademark owners should encour-age online auctions to have notifi cation policies for mark owners when Internet purchasers wish to return products that they believe are counterfeit.

eBay: Limited Gains against a Tremendous Counterfeiting Problem

While eBay’s Verifi ed Rights Owner (VeRO) Program allows mark owners to eas-ily report products that they believe infringe on their IP rights, the sheer number of listings and items for sale via the Internet’s premiere auction site has made removing counterfeit goods seem like a virtually insurmountable and expensive problem. In the United States, courts have frequently taken the position that it is the mark owner who must police the online auction and sales sites. On July 14, 2008, the U.S. District Court for the Southern District of New York ruled against Tiffany & Co, which had fi led a suit against eBay Inc. in 2004, claiming the on-line site had not taken adequate measures to remove imitation Tiffany jewelry from its site. The judge stated plainly that, under current law, the mark owner has the responsibility of protecting its own trademark. As long as eBay did not allow listings from sellers who it knew, or should reasonably have known, were selling counterfeits, the auction site could not be held liable to Tiffany on the grounds of infringement.

While this decision dealt a signifi cant blow to the anticounterfeiting fi ght in America, eBay was the one hit abroad. Just two weeks before this U.S. decision, a French court ordered eBay Inc. to pay LVMH Möet Hennessy Louis Vuitton and sister company Christian Dior SA $63.2 million for allowing both fake and unau-thorized goods to be listed for sale on the site. While it is not the fi rst ruling of its kind against eBay Inc. (earlier that same month France’s Tribunal de Grande Instance in Troyes ordered eBay to pay approximately $31,058 to Hermés for that same reason), it is the most signifi cant and may encourage other major brands to go after the company. eBay, which claims it spends more than $20 million a year trying to remove illegal goods from its site, has said it will appeal the ruling.

Sources: Christina Passariello & Mylene Mangalindan, EBay Fined over Selling Counterfeits, Wall St. J., July 1, 2008; Alexandria Sage, From Handbags to Diamonds, eBay a Target, but Safe, Reuters, July 1, 2008; Katya Foreman, Court Rules for Hermés in EBay Counterfeit Suit, Wom-en’s Wear Daily, June 5, 2008; Tiffany (NJ) Inc. and Tiffany and Company v. eBay Inc., 04 Civ. 4607 (S.D.N.Y. 2008).

Box 4.4


4.7. Conclusion

Counterfeiting is a serious problem that many trademark owners must combat with signifi cant resources. As the value of a brand grows, so too does the likeli-hood of counterfeiting.

Because counterfeiting is a crime, law enforcement offi cials are a trademark owner’s best allies in the battle against counterfeiters. Routine busts can provide inroads into larger counterfeit organizations. Working together with corpora-tions, in-house counsel, outside counsel, and lawmakers, trademark owners can successfully combat the counterfeiting problem evident today.

Through lobbying, trade organizations (like the IACC and INTA), and the U.S. Chamber of Commerce, brand owners must continue to reach out to edu-cate consumers about the dangers of counterfeit products. Consumers also must be aware that when they purchase counterfeit products, they are supporting deplorable factory conditions and fi nancing organized crime operations. Very high costs come with getting a “good deal” on a counterfeit article of clothing or accessory.

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