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"An Analysis Of Anti-Counterfeiting And The Fashion Industry" by Amelia Wong

An Analysis Of Anti-Counterfeiting And The Fashion Industry

by Amelia Wong

Counterfeiting has been a trend that has plagued corporations endlessly. The fashion industry specifically has taken big hits due to the legal problems of counterfeiting. A fashion law professional recently described counterfeiting efforts as "fighting a losing war,"because a fashion brand's name is diluted once the counterfeits are accessible to the public. This is exemplified by a stroll down Canal Street where street hustlers attempt to appeal to the public by yelling "Louis, Gucci, Rolex" at passersby, scoping potential buyers into side alleys or hidden upstairs rooms. Cheap prices for knock-off expensive designer goods seem to pull young buyers into the counterfeit markets. The average buyer probably wonders, "What is the problem with buying cheaper bags that look the same? I still look good."

The answer is that counterfeiting is a domino effect. Counterfeit bags seem almost harmless to the average young consumer, who fails to consider the problem on a large-scale level. Consider counterfeit trucks, wheels, and subway trains. Now the average consumer begins to worry a little.

A few years ago when the New York City Metropolitan Transit Authority unknowingly bought counterfeit wheels and subway trains, large-scale transportation problems began to occur. The low-quality counterfeit trains fell off the tracks. The low-quality wheels burned through themselves. How about the food and drug industries? Expanding counterfeits to food and pharmaceutical drugs could drag in a whole slew of health problems. Consider if a pill marked Tylenol no longer contained Tylenol and if jugs of milk were filled with white paint instead. From a large-scale view, counterfeiting can cause major problems and potential risk of death. If consumers believe it is okay to buy a counterfeit bag, consumers are setting themselves up for an acceptance of a counterfeit market that can be expanded to create danger and harm in industries that are considered "safe".

The Anti-Counterfeiting efforts have been fighting back against the counterfeit market. In Washington, DC, the International Anti-Counterfeiting Coalition has been established. International fashion corporations such as Louis Vuitton and Chanel have established counterfeiting departments to specifically target the problem. Other fashion companies have established brand enforcement departments, realizing how important it is for a brand name to be protected.International organizations such as the International Trademark Association (INTA) have been established to support trademark and intellectual property protection to protect consumers and promote fair and effective commerce. See INTA, Overview, INTA, available at http://www.inta.org/About/Pages/Overview.aspx.Lawyers have also gotten involved, working with the New York Police Department and U.S. Customs to assist workers in identifying counterfeits, perform investigations, and lobby for greater standards involving enforcement.

Heather McDonald, a partner at Baker & Hostetler and a pioneer of anti-counterfeiting litigation and intellectual property enforcement, was one of the first attorneys on the scene of this issue. She worked on lobbying for new laws at the federal and state levels to make the sale of counterfeit goods a crime and to increase the penalties of those convicted of this crime. Ms. McDonald also achieved litigation of third-party liability actions against landlords, holding landlords liable for the sale of illegal goods in their property, exemplifying how lawyers could get involved in anti-counterfeiting efforts on both a litigation basis and a legislation basis.

Anti-counterfeiting efforts have strongly focused on third-party liability. Due to Ms. McDonald's work, 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. Emily Kubis, Coach Inc. Sues Murfreesboro Store Over Knockoffs, THE TENNESSEAN, Mar. 26, 2013, available at http://www.tennessean.com/article/20130326/NEWS03/303250061/1969/NEWS?nclick_check=1. Coach alleged that Popular Fashions had been selling Coach imitation bags and is demanding $14,000,000 in damages. Id. 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. Id. The investigators had made purchases, verifying the items as counterfeits. Id. 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. Id.

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. See Kubis, supra. Coach has brought eleven claims against Popular Fashion involving claims from deceptive practice to trademark infringement. Id. 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 start of the new millennium, the Internet has made it possible to do everything simpler--including everything involving counterfeiting. 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 case of Tiffany, Inc. v. eBay, Inc., Tiffany charged eBay of contributory trademark infringement because eBay had listings of counterfeit Tiffany jewelry. See 600 F.3d 93 (2d Cir. 2010). EBay took down the specific listings that Tiffany brought claims about but did not stop other listings from being posted. See Anne Gilson LaLonde, Supreme Court Denies Cert in Tiffany v. Ebay, MARK MONITOR, Dec. 10, 2010, available at https://www.markmonitor.com/mmblog/supreme-court-denies-cert-in-tiffany-v-ebay/. 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. See Tiffany, 600 F.3d 93. 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. See id.; see also LaLonde, supra. 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 has 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. See Ebay and Council of Fashion Designers of America Advance Anti-Counterfeiting Efforts with the Return of "You Can't Fake Fashion", BUSINESSWIRE, Feb. 8, 2012, http://www.businesswire.com/news/home/20120208006362/en/eBay-Council-Fashion-Designers-America-Advance-Anti-Counterfeiting. "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. "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." Id.

E-Commerce is not the only way to deal with counterfeits online. Corporations have also worked with Google to remove counterfeit listings like "100realguaranteeLouboutin.com" or "GuarantyrealGucci.com" from the first few pages of the search results. Due to targeting technologies, corporations have put their main websites and official retailers on the first few pages of the search and attempted to remove the counterfeit listings from Google's Ads. Although most of the "100GuarantyGucci" websites may never be removed, these sites may be sent cease-and-desist letters and pushed to page 48 or 49 of the Google search results, pages not usually viewed by average consumers.

Although E-Commerce has been the recent focus of counterfeiting, the rise of 3D printing has brought unanswered questions. At Fashion Law Week 2013 in Washington, D.C., keynote speaker Harley Lewin strongly expressed that 3D printing would be the upcoming "new front" focus in terms of anti-counterfeiting. 3D printing is a technology that allows one to "print out" 3D objects from computers. See Christopher Barnatt, 3D Printing, EXPLAINING THE FUTURE, http://www.explainingthefuture.com/3dprinting.html. These printers can now output plastic materials, semi-liquids, cheese, chocolates, concrete, and, most recently, titanium. Id.

Experts have recently been calling 3D printing the "Third Industrial Revolution" because now consumers can choose the color, texture, and design to custom make their items. Experts call 3d Printing "Third Industrial Revolution", TEXTILE NEWS, Mar. 8, 2013, available at http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=122027. Now, the average consumer can hit "make" instead of "print" to create their new products. Id. Terry Wohlers, an independent analyst of the 3D printing sector stated that with 3D printing, consumers "are almost unlimited as to the geometric complexity" of what they can purchase. Id. Although in its infancy, 3D printing will soon be available for printing in homes, according to Massive Dynamics President Oscar Hines. Id.

The fashion industry has been quick to take up 3D printing. At the Mercedes-Benz [New York] Fashion Week, designer Kimberley Ovitz partnered with Shapeways to send 3D printed jewelry looks down the runway for her Fall 2013 collection. See Chandra Steele, 3-D Printed Jewelry's Designs on the Future, PC MAG (Feb. 16, 2013), available at http://www.pcmag.com/article2/0,2817,2415536,00.asp. This year, 3D printed garments hit the runways in both New York and Paris. Jeff Meltz, Dita Von Teese Flaunts Fibonacci-Inspired, 3-D Printed Gown, WIRED, Mar. 5, 2013, http://www.wired.com/design/2013/03/dita-von-teese-3-d-printed-gown/. According to Michael Schmidt, one of the designers of a 3D printed dress, Dita Von Teese wore an entire dress designed on an iPad, refined over Skype, rendered digitally by Francis Bitonti, and printed by Shapeways for a private runway event. Id. The entire dress was printed in 17 parts on a 3D printer EOS P350. Damir Brdjanac, 3D Printers in the Fashion World, DECRYPTED TECH, Mar. 10, 2013, http://www.decryptedtech.com/news/3d-printers-in-the-fashion-world. This concept demonstrates that 3D printers can make garments as well. Id.

Also, New Balance has been quick to the 3D printing game to now customize running shoes for athletes. Chris Reidy, New Balance Uses 3D Printing Technique to Customize Track Shoes, BOSTON GLOBE, Mar. 8, 2013, available at ttp://www.boston.com/businessupdates/2013/03/08/new-balance-uses-printing-technique-customize-track-shoes/v0GgY5NN9efZpCWrfq0pTN/story.html.
New Balance's manager of studio innovations Katherine Petrecca stated in an email that "printing will allow us to be incredibly efficient by making products on-demand and eliminating large chunks of a traditional supply chain...we will see significant opportunities to expand our usage and the scale of production." Id. The 3D printing technologies have even been set to launch 3D printing stores in Russia, Ukraine, and Kazakhstan to bring upscale shopping experiences to these places. Brian Heater, Solidoodle 3D Printing Stores Set To Bring "Upscale Fashion Shopping" to Russia, Ukraine and Kazakhstan, ENGADGET, Feb. 28, 2013, http://www.engadget.com/2013/02/28/solidoodle/.

If used properly, 3D printing is said to revolutionize garment making. Customized clothes can now be easily made and sent quickly to the consumer. Factories and manual labor can be eliminated. But if 3D printing falls into the wrong hands, counterfeiting can quickly develop into a big problem. 3D printing can open up an entire can of worms and even completely undermine the entire trademark registration and protection system. 3D printing is soon supposed to be available to the common consumer. If the common consumer desires, he or she can print a pair of red-bottom heels quickly, infringing the Christian Louboutin design. In fact, it would be extremely difficult to enforce trademarks if the consumer had the capability to custom design any clothing, jewelry, or item he or she wanted.

What measures of accountability can be taken when the consumer can quickly design, print out, and go off with the 3D printed item? A potential solution would be to limit the access to 3D printers to corporations by keeping the 3D printing technologies at a higher cost. The corporations could then customize merchandize consumers wanted at an agreed upon cost. However, this would undermine the very notion of allowing the public access to 3D printing technologies. What then, would be an appropriate measure to take to allow the public access to 3D printing and attempting to prevent abuse? Monitors on 3D printers to prevent printing of trademarks registered with the trademark office could be potentially effective. Perhaps with the development of advanced technology to match 3D printing can methods of enforcement be available to protect fashion corporations' intellectual property rights.

Overall, anti-counterfeiting is an up-and-coming legal niche that is being established, especially in fashion law. Anti-counterfeiting is often linked to law enforcement, brand enforcement, and brand protection. However, counterfeiting is important because it is not a small problem that affects only the fashion industry. Counterfeiting has stretched over transportation and potentially the food and drug industries. Preventing counterfeiting is the key. Third-party liability through real estate was one of the first anti-counterfeiting movements, which held landlords liable for counterfeit goods sold on their properties. But the counterfeiting markets spread to the World Wide Web and E-commerce, which spurred the recent lawsuits such as eBay v. Tiffany. In terms of E-Commerce, websites such as eBay and IOffer have been taking action and partnering with organizations like the International Anti-Counterfeiting Coalition and Council of Fashion Designers of America and taking down counterfeit listings. But the new trend of 3D printing raises new trends in relation to infringement and counterfeiting. Although some may argue that counterfeiters will always have the newest technology to sell counterfeit goods, 3D printing is said to be the "Third Industrial Revolution" and able to change the entire garment manufacturing and textile industry. If 3D printing is abused, infringement and counterfeit issues may unravel the entire trademark system. Therefore, with the new 3D printing technology, new methods of enforcement and accountability must be established.

Amelia Wong is a second-year student at American University Washington College of Law. During her first year she attended law school in New York City, where she was exposed to fashion law and trademark. She has since started her own fashion law blog with an intern from Vogue, assisted a professor of fashion law on writing for his fashion law blog, and volunteered for events and as a writer for Fashion Law Week 2013.

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This page contains a single entry from the blog posted on May 10, 2013 1:37 PM.

The previous post in this blog was "Do Awards From Expert Determination And Other Private Summary Dispute Resolution Mechanisms Fall Within The New York Arbitration Convention?" by Marcin Tustin.

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