How can brands protect their intellectual property rights from counterfeit goods?

Brands have an almost unlimited way of reaching consumers these days, whether that be through sponsored advertising on social media or the use of influencers to endorse a product. Even though their brand communication may have evolved over the years, they still face an age-old problem: counterfeit goods. This is particularly so for the high-end/luxury sphere of clothing and accessories but is also true for the cosmetics and pharmaceuticals industries. As more and more goods are available from online sources, it has become particularly complex for brands to keep track of infringers and take action against them.

In this article, our IP partner Lucy Harrold outlines the strategies companies can use to address these issues and mitigate any damage caused.

Protection of IP rights

The central plank of any anti-counterfeit policy is the protection of a company’s IP rights. Many companies do this by registering and enforcing trade marks to help protect their logo, brand name, and other distinctive elements.

Copyright (which arises automatically in the UK for original artistic works) is also an added layer of protection against the reproduction of packaging and logos. Brands often use very precise packaging designs that incorporate hidden markers to assist in identifying counterfeit packaging and taking enforcement action against infringers. Packaging may incorporate holograms, 2-D barcodes or radio frequency identification. There are also anti-counterfeit seals used, in particular, by the pharmaceutical and cosmetic industries which can contain information to help brands track their products and also reassure consumers that what they have purchased is a genuine product that has not been tampered with.

Some brands go a step further and seek to obtain registered design rights or patents for unique and innovative designs which can also be enforced against manufacturers and sellers of counterfeit goods.

It is advisable for a company to ensure regularly that it has a clear chain of title to its IP rights; for example, checking there are written copyright assignments in place with any design companies so that, if it needs to take urgent legal action, it has all the necessary documentation.

Penalties for selling counterfeit goods

If there is a case for IP infringement, legal action can be taken against the counterfeiters to stop the manufacture and sale of the counterfeit goods. Brands sometimes find that manufacture is taking place abroad and dual action is required both in the country of manufacture and the country where the counterfeit goods are being sold. There will often be a long chain of companies involved in the counterfeit sales, which means brands have to work hard to identify the chain and take action against every part of the chain. Sometimes, a decision is taken simply to act against the ultimate seller. For example, Gucci has recently launched legal action against three US retailers for their alleged involvement in selling counterfeit Gucci products.

In the UK, action can range from letters of claim to legal claims in the small claims track of the Intellectual Property and Enterprise Court of the High Court “IPEC” (if the claim is worth under £10,000), in the IPEC multi-track if it is worth between £10,000 and £500,000, and in the High Court if the claim is worth more than £500,000. There is also a Shorter Trials Scheme in the High Court which can be useful in straightforward counterfeiting claims because it involves a simplified procedure and claimants may be able to secure an earlier trial date than is available in the very busy IPEC. Cases typically take approximately 12 months to get to a first-instance decision on liability, before there is a second stage to determine the quantum of the claim, although cases often settle at this stage.

Claimants can usually recover some of their costs (the level of recovery depends upon which court they are in) and crucially obtain an injunction against anyone found to have infringed their IP rights, as well as damages for any losses they have suffered.

It is also a criminal offence under the Trade Marks Act 1994 to sell counterfeit goods, and sometimes councils will prosecute people, such as a case brought by South Gloucester Council in 2015 against someone selling fake high-end luxury goods including Christian Louboutin designer shoes, Mulberry and Jimmy Choo handbags and purses, and Mac and Dior cosmetics from her Facebook account and in person.

AI and counterfeit goods

Investing in AI can be a helpful weapon to brands seeking to protect themselves from IP infringement. Through the use of anti-counterfeiting platforms, blockchain technology and image recognition technology, many brands may be able to combat IP infringement and protect the counterfeit of goods.

AI-powered image recognition technology can compare authentic product images with those circulating online. This helps identify counterfeit goods by analysing visual characteristics, logos, and other distinctive features. If a brand implemented blockchain in conjunction with AI technology, they could trace the entire production and distribution process, making it more challenging for counterfeit goods to infiltrate the supply chain unnoticed. Therefore, raising alarm bells at an early stage and preventing any dispute from escalating.

Anti-counterfeiting platforms can also be used to monitor and detect counterfeit goods across various online and offline channels. Taught by specific algorithms, these platforms continuously improve their ability to identify new counterfeiting techniques. AI tools can also be used to scan social media platforms for any mentions of the brand and potential counterfeit goods. These accounts can then be flagged and reported, and the counterfeit goods removed from the website. However, with the increasing rate of spam accounts being set up on social media, companies need to be extra vigilant and consistently check social media platforms for their products which can be time-consuming and costly.

Online infringement issues

Once online infringements have been identified, companies can use various platforms’ take- down procedures (such as eBay’s Verified Rights Owner (VeRO) programme) to try to remove listings of counterfeit goods. If a complaint is successful and listings removed, this is a cost-effective approach to online infringements. For other websites that are not resellers, a website blocking order may be obtainable from the Hight Court, as the Supreme Court confirmed in Cartier International AG and others v British Sky Broadcasting Ltd and others [2014].

Consumer education

Many brands rely on their reputation for selling their products, particularly those selling luxury goods. By engaging with their customers through social media, companies can educate them about the risks of purchasing counterfeit goods, emphasising the quality and authenticity of their genuine products and providing guidance on how to identify genuine items.

As counterfeit goods become more convincing, and with many more opportunities to sell these goods, brands will need to consistently review and adapt their strategies to protect not only their IP but also their reputation.

If you have concerns about protecting your brand or goods from IP infringement, please contact Lucy Harrold.