What is counterfeiting?
Counterfeiting is first of all the imitation of a product and unauthorized use of another’s trademark (registered brand name, logo, scent, design, etc.). The counterfeit, identical in appearance, gives the impression of being the genuine product from the real manufacturer. Of course a knockoff is only meaningful if the genuine article is well known and in demand. Therefore, most knockoffs are of luxury goods carrying a well known trademark. They are a deliberate attempt at deceiving consumers into thinking they are buying products made by a reputable manufacturer when they are, in fact, purchasing inferior copies.
The counterfeiter sets out to make money by deception… deliberately assuming the identity of an established, reputable manufacturer. Thus, he saves the normal capital investment required to produce a genuine, high quality product. The counterfeiter doesn’t have to invest in expensive quality materials or quality control since he is producing an inferior product. He has no need to spend money on research & development or advertising & marketing since he is riding the shirt-tails of a manufacturer who has already invested heavily in developing and promoting their brand. So, his overall costs are low in comparison with those of the genuine manufacturer, allowing him to sell his product copies more cheaply.
Is imitation really the sincerest form of flattery?
Counterfeiting deceives the consumer and tarnishes the reputation of the genuine manufacturer. Brand value can be destroyed when a trademark is imposed on counterfeit products of inferior quality?hardly a form of flattery! Therefore, prestigious companies who are the targets of counterfeiters, have begun to battle an industry that copies and sells their merchandise. They have filed lawsuits and in some cases have employed private investigators across the nation to combat the counterfeit trade. A quick search of the Internet brings up dozens of press releases from newspapers throughout the country, all reporting instances of law enforcement cracking down on sellers of counterfeit goods by confiscating bogus merchandise and imposing fines.
A look at trademark laws:
The basic rules for resolving disputes over who is entitled to use a trademark starts with determining who owns the trademark registration for the products in question. A federal registration gives nationwide effect to the owner of the registration. If a dispute is not settled based upon a simple registration review, the resolution is likely to come from federal and state courts’ decisions. These rules usually favor the business that first used or registered the mark when the second use would be likely to cause customer confusion. A number of additional legal principles used to protect owners against improper use of their marks are derived from federal statutes known collectively as the Lanham Act (Title 15 U.S.C. 1051-1127).
In addition to laws that specifically protect trademark owners, all states have laws protecting a business against unfair competition. These include the use of a name in a context likely to confuse customers. Under federal and state laws known as “anti-dilution statutes,” a trademark owner may go to court to prevent its mark from being used by someone else if the mark is famous and the later use would dilute the mark’s strength?that is, weaken its reputation for quality (called tarnishment) or render it common through overuse. The Federal Trademark Dilution Act of 1995 expanded the scope of rights granted to famous and distinctive trademarks under the Lanham Act.
President Clinton signed the Anti-counterfeiting Consumer Protection Act of 1996 (Public Law 104-153). This law, which had the International AntiCounterfeiting Coalition (IACC) behind it, was drafted to make counterfeiting a more heavily penalized crime. Under this law, trafficking in counterfeit goods can result in the imposition of criminal penalties found in the RICO (Racketeer Influenced and Corrupt Organizations) Act. The RICO Act permits increased jail time, higher fines and asset forfeiture. The Act also allows greater involvement by all federal and local law enforcement in fighting counterfeiting, including enhanced authority to seize counterfeit goods.
What about knockoffs without labels?
A strict reading of the law instructs that counterfeit goods are those that bear marks that are identical to or substantially indistinguishable from the registered trademark. This has the advantage of making counterfeiting civilly and criminally actionable as a form of trademark infringement. A Supreme Court case, Wal-Mart v. Samara Brothers, established that although a product’s design is distinctive, it is protected under law only if the knockoff version features “any symbol or device likely to cause confusion as to the origin.” These include the signature Gucci “G” and the “Kate Spade New York” tag on the front of each bag. When the imitator uses a trademark that is confusingly similar to that of the original product (such as; Kade Spade instead of Kate Spade), it is trademark infringement. However, if the trademark is entirely different from the original or somewhat similar, but not confusingly so, then trademark law may offer no basis for intervention. These cases may have to be dealt with under the rules of unfair competition. Lastly are the products, sold mainly on the Internet, most commonly referred to as “inspired by” replicas. They do not bear any counterfeit labels or trademarks?the imitator doesn’t hide behind the original manufacturer, but trades under his own name. They are usually easily distinguishable from the genuine product and the Websites include disclaimer statements explaining that they do not represent their products to be originals or exact copies. This keeps them on the right side of the law in regards to trademark infringement.
What’s the harm in selling or buying knockoffs?
In addition to the important issues of safety hazards and economic harm, let’s consider some of the more “everyday” fallouts. You’d think that everybody knows these “too good to be true” bargains are fakes, but some people are not as well informed. As proof of this, most handbag manufacturers report receiving dozens of counterfeit purses weekly from persons requesting warranty repairs. Unaware consumers later find their “deal of a lifetime” was manufactured using inferior components and shoddy workmanship. Their fantastic bargain barely lasts a season because the one thing lacking in counterfeits is QUALITY! They probably paid close to $100 for an item that would have sold for $15 or $20 if it didn’t carry that name brand label. Paying for a “label” only to discover that it’s bogus adds insult to injury! In addition, counterfeit merchandise originally sold in a market where the first-time buyer knows they are not getting the genuine product, can later be passed on as the genuine article.
Is it really illegal?
Yes, allowing counterfeit items to enter the market place is illegal. Some people mistakenly believe that if counterfeit merchandise is identified on the sales tag as being “fake” it’s alright to buy or sell it. Not true . . . a counterfeit is still a counterfeit and it’s still illegal. You can find them for sale on street corners in major cities, at house parties, out of the trunks of luxury autos or perhaps “from behind the counter” or “under the table” at legitimate stores. Let’s be clear, it’s still trademark infringement and it’s illegal. Counterfeiting is punishable by fines, confiscation and prosecution, so protect yourself and don’t buy or sell any goods that you suspect may not be genuine.
source: 2005 National Association of Resale & Thrift Shops.