An Analysis of the Counterfeiting Problem

On March 28, 2013, Suffolk County officials busted five suspects of an international counterfeiting ring.[1]  The ring sold fashion knockoff items of brands such as North Face, Uggs, Coach, Louis Vuiton, Tory Burch, Michael Kors, Oakley, Kate Spade, Nike, Prada, Tiffany, and other brands stored in Queens facilities.[2]  Every imported item, manufactured in China, was a counterfeit.  All five suspects have been indicted on conspiracy and trademark counterfeiting charges.[3]  This recent news event is an example of direct anti-counterfeiting efforts to fight the counterfeit market.  The fashion industry is one of many industries to have fallen prey to counterfeiting, but legislation and action by the courts and law enforcement have directly impacted the effects and attempts of market penetration by counterfeiters.  This is important because counterfeiting, if expanded to a large scale, can create hazards and a destructive environment –such as when the New York City Metropolitan Transit Authority unknowingly bought counterfeit trains from a manufacturer that ended up falling off the tracks.

Anti-counterfeiting efforts have strongly focused on third-party liability.  Due to legislation, third-party landlords are now liable for counterfeit goods sold on their property.  On real estate terms, third-party landlords can no longer pretend to not know about or ignore the sale of counterfeit goods on their property.  This legislation aims at pushing landlords to action to prevent counterfeit markets.  Third-party liability in real estate has been demonstrated by the recent case of Coach v. Popular Fashions.  On March 25, 2013, Coach filed a federal lawsuit in a Nashville District Court against Popular Fashions, a store in Murfreesboro, Tennessee.[4]  Coach alleged that Popular Fashions had been selling Coach imitation bags and is demanding $14 million in damages.[5]  Coach had been aware of the counterfeit sales since June 2012 and sent investigators and secret service agents to gather information about the store’s owners and staff.[6]  The investigators made purchases and verified that the item were counterfeits.[7]  The counterfeit items purchased by the investigators were used for a training session in identification of counterfeit items for Nashville law enforcement in July 2012.[8]  Investigators continued to make purchases at the store until December 2012, when the store was served a warrant and twenty-six counterfeit bags and nineteen counterfeit wallets were found as a result of a search.[9]  Coach has brought eleven claims against Popular Fashion involving claims from deceptive practice to trademark infringement.[10]  Popular Fashion owners and staff were aware of the counterfeits being sold on their property and therefore should be held accordingly liable.  However, real estate is only one of the few markets the counterfeiters have tapped.

One of the biggest recent problems involving third parties is E-commerce.  Due to the rise of the Digital Age after the millennium, the Internet has made counterfeiting simpler.  Sites like eBay and IOffer have been the prime markets for people selling counterfeit goods, allowing access of counterfeits from anywhere in the world.  Now a consumer no longer needs to go down to Canal Street for a counterfeit bag.  With a few clicks of the mouse, a consumer can now have a high quality counterfeit bag delivered to his or her door from China.

Anti-Counterfeiting efforts have aimed to deal with E-commerce by writing the merchants cease-and-desist letters.  Many in-house corporations have specific departments dedicated to drafting cease-and-desist letters, which tend to work efficiently in the removal of the counterfeit goods from the websites.  In fact, due to third-party liability, eBay and IOffer have teamed up with big fashion corporations and anti-counterfeiting efforts.  If notified, eBay and IOffer will remove counterfeit goods from their sites.  Not only are auction sites like eBay and IOffer involved, but also the payment money processing sites.  Third-party sites like Paypal may also be held liable and are working with auction sites to track and prevent counterfeits.

In the Tiffany, Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir.), Tiffany charged eBay of contributory trademark infringement because eBay had listings of counterfeit Tiffany jewelry.  EBay took down the specific listings that Tiffany brought claims about but did not stop other listings from being posted.[11]  The Court held that eBay was not liable for contributory infringement even if eBay had general knowledge that counterfeit Tiffany products were sold on its site.[12]  The Court’s rationale was that eBay did not continue to give its services to those who sold counterfeit Tiffany jewelry knowing that the merchants sold Tiffany trademark infringement products and eBay did not turn a blind eye to ignore trademark infringement issues.[13]  The focuses on contributory infringement involved continued services from third parties to merchants who sold counterfeits and action done by third parties to stop counterfeit merchandise from being sold.

Since the Tiffany case, eBay and other retailers have continued to move forward with anti-counterfeiting efforts.  EBay now has an anti-counterfeiting warning, guides, and a partnership with the International Anti-Counterfeiting Coalition.  Also, EBay joined with the Council of Fashion Designers of America in a “YOU CAN’T FAKE FASHION” campaign to raise awareness against counterfeits to celebrate original design.[14]  “We hope broader awareness will help fight counterfeits and the harm they cause, and eBay is proud to partner with the CFDA on the second iteration of this campaign,” said Alan Marks, eBay’s Senior Vice President of Global Communications.[15]  “Counterfeits not only are illegal, they also damage brand owners, frustrate shoppers and undermine consumer confidence. EBay invests substantial resources to help provide millions of consumers a trusted, confident marketplace experience; this campaign is another example of our commitment to being a leading industry voice in the fight against counterfeits.”[16]

Amelia Wong

Blogger, Criminal Law Brief

Image by: asgw

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[1] http://www.longislandpress.com/2013/03/28/suffolk-busts-trademark-counterfeiting-ring-da-says/

[2] Id.

[3] Id.

[4] Kubis, Emily, Coach Inc. Sues Murfreesboro Store Over Knockoffs, The Tennessean, (March 26, 2013) available at: http://www.tennessean.com/article/20130326/NEWS03/303250061/1969/NEWS?nclick_check=1.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Kubis, Emily, Coach Inc. Sues Murfreesboro Store Over Knockoffs, The Tennessean, (March 26, 2013) available at: http://www.tennessean.com/article/20130326/NEWS03/303250061/1969/NEWS?nclick_check=1.

[10] Kubis, Emily, Coach Inc. Sues Murfreesboro Store Over Knockoffs, The Tennessean, (March 26, 2013) available at: http://www.tennessean.com/article/20130326/NEWS03/303250061/1969/NEWS?nclick_check=1.

[11] LaLonde, Anne Gilson, Supreme Court Denies Cert in Tiffany v. Ebay, Mark Monitor (2010), available at: https://www.markmonitor.com/mmblog/supreme-court-denies-cert-in-tiffany-v-ebay/.

[12] Tiffany, Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010), available at: http://www.lexisnexis.com/community/copyright-trademarklaw/blogs/graygoodfakegoods/archive/2010/06/30/free-download-opinion-tiffany-inc-v-ebay-inc-600-f-3d-93-2d-cir-n-y-2010.aspx

[13] LaLonde, Anne Gilson, Supreme Court Denies Cert in Tiffany v. Ebay, Mark Monitor (2010), available at: https://www.markmonitor.com/mmblog/supreme-court-denies-cert-in-tiffany-v-ebay/.

[14] Ebay and Council of Fashion Designers of America Advance Anti-Counterfeiting Efforts with the Return of “You Can’t Fake Fashion”, Businesswire (2012), available at: http://www.businesswire.com/news/home/20120208006362/en/eBay-Council-Fashion-Designers-America-Advance-Anti-Counterfeiting.

[15] Id.

[16] Id.