| So, you think you have your counterfeiting problem under control. Really?
Counterfeiting is big business. And the bad guys are on a mission to pump as many knockoffs into the market as possible. Through decades of hard work—at a cost of billions of dollars—owners of famous U.S. brands have built enormous goodwill in their trademarks. To counterfeiters, that is an opportunity to steal profits and cause companies to lose customers while risking serious damage to their brands.
Counterfeiters succeed when companies are simply not aware of the extent to which they are being ripped off. Many companies have recorded their trademarks with the United States Bureau of Customs and Border Protection. But this is just a first step. When Customs does make a seizure, most companies erroneously assume that their counterfeiting problem has been resolved and take no further action. In fact, that seizure is simply an indication that they have a much larger problem.
For every container seized by Customs, how many are getting through that you don’t know about?
The math is pretty simple: Customs examines less than two percent of the millions of containers landing in the U.S. each year. Counterfeiters accept occasional losses through seizure as a minor expense of doing business. Having invested in the manufacture and distribution of a specific brand, counterfeiters have every incentive to maximize production and flood the system with dozens, if not hundreds, of shipments, knowing that the vast majority will get through. Seized shipments represent minor “shrinkage” and have little impact on profits and are no deterrent to the counterfeiters.
Moreover, the criminal prosecution of counterfeit importers appears to be a very low priority for both federal and state agencies around the country. Accordingly, the odds are extremely low that counterfeit importers will face criminal consequences for their actions. Given the lack of any serious fiscal or prosecutorial deterrence, it is not surprising that the value of infringing goods seized by Customs grew from $57.4 million in 2001 to more than $270 million in 2008. And this is just the value of the counterfeiters’ shrinkage.
Under these circumstances, trademark owners must take action themselves to protect their valuable brands. To determine the best course of action, they first need to obtain accurate information about the scope of their problem and then conduct cost/benefit analyses of the various potential responses. The starting point is to determine the value of the goods that make it past Customs’ inspectors and into the marketplace. These are the goods that displace sales and thus provide the basis for a valid analysis. Of course, counterfeiting organizations do not keep and make public their sales records. Affected companies must therefore develop this information on their own. But how?
That is where the attorneys at Davis Wright Tremaine can offer their particular experience and abilities. Over the past several years, Sam Watkins has prosecuted more than 30 federal lawsuits against the importers of counterfeit consumer products. As a result, he has mastered the techniques of “auditing” importers identified on Customs’ Notices of Seizure to identify all other shipments those entities have imported into the United States that escaped detection and seizure. By understanding the true magnitude of the problem, Sam helps companies make informed decisions regarding the most appropriate and cost-effective actions to take. |
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