Chanel and The RealReal Both Nab Wins in Latest Round of Ongoing Counterfeit Lawsuit

The RealReal and Chanel have each scored a few wins in the highly-watched trademark-centric lawsuit that the famous French brand waged against the resale giant for allegedly selling counterfeit goods, and using the Chanel name to “deceive consumers into falsely believing that [it] has some kind of approval from or an association or affiliation with Chanel [when it doesn’t] or that all CHANEL-branded goods sold by The RealReal (“TRR”) are authentic.” In response to the motion to dismiss that the San Francisco-based resale site filed last year, a New York federal court has agreed to toss out a number of Chanel’s claims, while enabling three to remain intact.
On Monday, Judge Vernon Broderick of the U.S. District Court for the Southern District of New York granted TRR’s motion to dismiss in part, agreeing to toss out Chanel’s claims of trademark infringement, and false endorsement and unfair competition, as well as the Paris-based brand’s claims under New York State General Business Law on that basis that TRR’s “use of Chanel’s genuine trademarks is not likely to cause customer confusion, and because Chanel has not adequately alleged injury to the public at large.”
At the same time, the judge refused to dismiss Chanel’s trademark counterfeiting/infringement and false advertising claims, and similarly kept its common law unfair competition claim in play, as well because Chanel “adequately alleges that TRR marketed and sold counterfeit Chanel products, and because [TRR’s] advertising regarding the authenticity of the products it sells is literally false.”
In the recently-released opinion and order, Judge Broderick looks first to Chanel’s claims of trademark infringement, false endorsement and unfair competition, which he says Chanel “does not plausibly allege … based on [TTR’s] use of genuine Chanel trademarks” in connection with its sale of authentic Chanel products, as the Lanham Act – the federal statute that governs trademarks and unfair competition – “does not prevent one who trades a branded product from accurately describing it by its brand name, so long as the trader does not create confusion by implying an affiliation with the owner of the product.”
Here, Judge Broderick asserts that Chanel fails to successfully make its claims because it is “highly unlikely that a customer buying a secondhand Chanel product from [TRR]—which unambiguously holds itself out as consignment retailer in a luxury market— would confuse the nature of [TRR’s] business, the source of its products, or its affiliation—or lack thereof—with Chanel.”
To be exact, the judge points to the following factors as examples of why consumers are not likely to be confused about the source of the goods in question or be misled into believing there is an affiliation between TRR and Chanel given TRR’s use of Chanel’s trademarks: 1) “Chanel’s trademarks are incredibly well-known, recognizable, and prevalent in the luxury fashion market;” 2) “As Chanel makes clear in [its complaint], [it] does not sell secondhand or vintage Chanel goods, and in that sense, [TRR] does not directly compete with Chanel;” 3) “Chanel has identified no evidence of actual customer confusion, or that [TRR] has adopted the genuine Chanel trademarks in bad faith;” and 4) “the luxury fashion market is a relatively sophisticated market that … commands top-dollar prices.”
The judge similarly states that “Chanel has not plausibly alleged facts suggesting that [TRR] ‘stepped over the line into a likelihood of confusion by using [Chanel’s] mark[s] too prominently or too often, in terms of size, emphasis, or repetition,” and thereby, diminishing the merits of a nominative fair use defense. “Chanel has identified no facts suggesting that The RealReal displays Chanel-branded goods ‘more prominently than other luxury-brand goods,’” Broderick asserts, and “has offered no non-conclusory allegations to suggest that [TRR] inaccurately depicts its relationship with Chanel or Chanel’s products and services.”
This is particularly true, according to the court, given the disclosure on TRR’s website that “[b]rands identified on [its website] are not involved in the authentication of the products being sold, and none of the brands sold assumes any responsibility for any products purchased from or through the website,” and that “[b]rands sold on the [website] are not partnered or affiliated with [TRR] in any manner.”
With those claims out of the way, Judge Broderick states that Chanel does, in fact, “plead sufficient facts to plausibly allege a cause of action for trademark infringement based on [TRR’s] advertisement and sale of counterfeit Chanel products.” And while the resale site is “involved neither in the manufacture nor the affixing of [Chanel’s] trademark to [any counterfeits], its sale of the [counterfeits] [is] sufficient ‘use’ for it to be liable for the results of such infringement,” Broderick declares, due to the nature of its model.
As distinct from the Second Circuit’s finding in Tiffany Inc. v. eBay Inc., in which eBay was let off the hook for the counterfeits sold on its site, Judge Broderick says that TRR may be liable for infringement in connection with the sale of allegedly counterfeit goods because it “retains the power to reject for sale, set prices, and create marketing for goods, and unlike eBay is more than a platform for the sale of goods by vendors.”
“By adopting a business model in which [TRR] itself controls a secondary market for trademarked luxury goods, and by curating the products offered through that market and defining the terms on which customers can purchase those products, [TRR] reaps substantial benefit,” according to Judge Broderick. “As a result of this business model, [TRR] must bear the corresponding burden of the potential liability stemming from its ‘sale, offering for sale, distribution, [and] advertising of’ the goods in the market it has created.”
In terms of the alleged counterfeits sold by TRR, the court states that “Chanel has adequately averred that its own investigation revealed that [TRR] marketed and sold counterfeit Chanel products, and Chanel has also alleged that [TRR’s] own customers have complained about the receipt of counterfeit merchandise,” which is “sufficient to plausibly allege that [TRR] directly infringed Chanel’s trademark.”
Finally, as for Chanel’s false advertising claim, the court sides with the “iconic” fashion brand, determining that TRR’s “advertisements regarding the authenticity of the products it sells, considered in context, are literally false.” For instance, TRR’s statement that it “ensures that every item on [its site] is 100% the real thing” is an “unambiguous representation of fact,” per Broderick, which stands in contrast with “Chanel’s allegations that certain products advertised and sold by [TRR] are counterfeit.” As such, this “suffices to establish a plausible allegation of literal false advertising based on [TRR’s] representation that all the products it offers have been authenticated and are 100% the real thing,” thereby, enabling Chanel’s claim to move ahead along with Chanel’s unfair competition and counterfeiting/trademark infringement claims.
Chanel made headlines when it first filed suit against The RealReal in November 2018, accusing the popular resale site of “selling counterfeit CHANEL handbags,” despite its claims that it “ensure[s] that every item on[its site] is 100% the real thing.” The fashion brand went on to claim that while “there is no nor has there ever been any approval by or association or affiliation between Chanel and The RealReal …. the RealReal understands that the value of its CHANEL-branded inventory and attraction for consumers is enhanced if consumers believe that Chanel has a business relationship or affiliation with The RealReal.”
From the outset, The RealReal has vehemently denied Chanel’s claims, characterizing the brand’s suit as “nothing more than a thinly-veiled effort to stop consumers from reselling their authentic used goods, and to prevent customers from buying those goods at discounted prices.”
oa here

10 Key Takeaways from Homeland Security's New "Combatting Counterfeits" Report

On Friday, the Trump administration released its highly-anticipated report on the massive global trade in counterfeit goods. A 54-page document drafted by the U.S. Department of Homeland Security (“DHS”)’s Office of Strategy, Policy, and Plans, and signed by Acting DHS Secretary Chad Wolf, the report, entitled, “Combating Trafficking in Counterfeit and Pirated Goods,” follows from Donald Trump’s April 2019 memo calling for “action in the U.S. Government’s fight against a massive form of illicit trade that is inflicting significant harm on American consumers and businesses.” 

The newly-released report is aimed at helping “develop a deeper understanding of how e-commerce platforms, online third-party marketplaces, and other third-party intermediaries facilitate the importation and sale of massive amounts of counterfeit and pirated goods,” while also identifying “appropriate administrative, statutory, regulatory, and other actions, including enhanced enforcement measures, modernization of legal and liability frameworks, and best practices for private sector stakeholders.”

Ten key takeaways from the report are as follows … 

1. E-commerce has contributed to a shift in the sale of counterfeit goods in the U.S. 
 Consumers are increasingly purchasing goods online and counterfeiters are producing a wider variety of goods that may be sold on websites alongside authentic products. While e-commerce has supported the launch of thousands of legitimate businesses, e-commerce platforms, third-party marketplaces, and their supporting intermediaries have also served as powerful stimulants for the trafficking of counterfeit and pirated goods. 

The scale of counterfeit activity online is evidenced as well by the significant efforts e-commerce platforms themselves have had to undertake. A major e-commerce platform reports that its proactive efforts prevented over 1 million suspected bad actors from publishing a single product for sale through its platform and blocked over 3 billion suspected counterfeit listings from being published to their marketplace. 

It is not just a rise in the volume of counterfeits we are witnessing. The Government Accountability Office notes that counterfeiters are increasingly producing a “wider variety of goods that may be sold on websites alongside authentic products.”

2. Consumer attitudes towards counterfeits are changing. The sale of counterfeits away from so-called “underground” or secondary markets (e.g. street corners, flea markets) to e-commerce platforms is reshaping consumer attitudes and perceptions. Where in the past, consumers could identify products by relying on “red flag” indicators – such as a suspicious location, poor quality packaging, or discount pricing – consumers are now regularly exposed to counterfeit products in settings and under conditions where the articles appear genuine or otherwise more enticing than they would be if presented in other settings.

While the risks of receiving a counterfeit may have been obvious to a consumer purchasing items on street corners, with the rise of online platforms, it is not so obvious anymore. For example, it is unlikely that anyone would set out to purchase a counterfeit bicycle helmet given the potential safety risks; however, such items are readily available to unsuspecting consumers on e-commerce websites. 

3. The rise in consumer use of third-party marketplaces significantly increases the risks and uncertainty for U.S. producers when creating new products. It is no longer enough for a small business to develop a product with significant local consumer demand and then use that revenue to grow the business regionally, nationally, and internationally with the brand protection efforts expanding in step. Instead, with the international scope of e-commerce platforms, once a small business exposes itself to the benefits of placing products online – which creates a geographic scope far greater than its more limited brand protection efforts can handle – it begins to face increased foreign infringement threat. 

Moreover, as costs to enter the online market have come down, such market entry is happening earlier and earlier in the product cycle, further enhancing risk. If a new product is a success, counterfeiters will attempt, often immediately, to outcompete the original seller with lower-cost counterfeit and pirated versions while avoiding the initial investment into research and design. 

In other words, on these platforms, the counterfeit and pirated goods compete unfairly and fraudulently against the genuine items. While counterfeit and pirated goods have been sold for years on street corners, alleys, and from the trunks of cars, these illicit goods are now marketed to consumers in their homes through increasingly mainstream e-commerce platforms and third party online marketplaces. 

4. Counterfeiters have taken full advantage of the aura of authenticity and trust that online platforms provide.
E-commerce models have enabled counterfeiters to easily establish attractive “store-fronts” to compete with legitimate businesses. In a common scenario, third-party marketplace websites contain photos of the real product, fake reviews of the counterfeit product, and other such disinformation designed to mislead or fool the consumer into believing the legitimacy of the product. 

The proliferation of such disinformation is the hallmark of the successful online counterfeiter. Such deception not only provides counterfeiters with an enormous competitive advantage over their brick-and-mortar counterparts; legitimate sellers on the internet are harmed as well.

5. Certain products and brands are more prone to being targets of counterfeiting than others. 

Apparel and other types of accessories, along with footwear, top the list of intellectual property seizures by U.S. government bodies at 18 percent and 14 percent of seizures, respectively. Commonly counterfeited items in these categories include brand name shoes such as Nike and Adidas, as well as NFL jerseys. 

Watches and jewelry follow at 13 percent of total seizures. During one particular operation on August 21, 2019, for example, U.S. Customs and Border Patrol (“CBP”) officers seized counterfeit Rolex watches valued at over $1.4 million. Handbags and wallets represented nearly 11 percent of all seizures, including counterfeits of luxury brands such as Louis Vuitton, Michael Kors, and Gucci. Consumer electronics represented 10 percent of seizures, including products such as iPhones, hover boards, earbuds, microchips, and others. 

6. Selling counterfeit and pirated goods through e-commerce is a highly profitable activity. For counterfeiters, production costs are low, millions of potential customers are available online, transactions are convenient, and listing goods on well-known platforms is inexpensive and provides an air of legitimacy. They minimize the need for incurring significant – and costly – research and development expenditures by stealing intellectual property, technologies, and trade secrets. Moreover, the popularity of social media also helps reduce the costs of advertising counterfeit products. 

In the case of apparel, such as running shoes, employees from a legitimate branded company may leave the company and set up their own facility. These employees have the expertise to manufacture identical-looking shoes; but they will typically do so with cheaper, inferior components. The result: the shoes may fail during activity, injure the user with an inferior insole, or, at a minimum, wear out faster than the real product. Moreover, technological advances in modeling, printing, and scanning technologies such as 3D printing, have also significantly reduced the barriers for reverse engineering and the costs of manufacturing counterfeit products. 

Counterfeiters also benefit from the speed at which they can steal intellectual property through e- commerce, which can be very rapid. If a new product is a success, counterfeiters may attempt to immediately outcompete the original seller with lower-cost counterfeit versions – while avoiding research and development costs. The result: counterfeiters may have a significant competitive advantage in a very short period of time over those who sell trusted brands. 

7. The risks associated with selling counterfeit and pirated goods through e-commerce are generally low.
Not only do counterfeit sellers benefit from greater anonymity on digital platforms and websites, when sellers of illicit goods are in another country, they are exposed to relatively little risk of criminal prosecution or civil liability under current law enforcement and regulatory practices. In many cases, American enterprises have little recourse aside from initiating legal action against a particular vendor. Such legal action can be extremely difficult. Many e-commerce sellers of infringing products are located outside the jurisdiction of the United States, often in China; existing laws and regulations largely shield foreign counterfeiters from any accountability. 

All the while, in many cases, counterfeiters hedge against the risk of being caught and their websites taken down from an e-commerce platform by preemptively establishing multiple virtual store-fronts. The ability to rapidly proliferate third-party online marketplaces greatly complicates enforcement efforts, especially for intellectual property rights holders. Rapid proliferation also allows counterfeiters to hop from one profile to the next even if the original site is taken down or blocked.

The same is true for social media, where counterfeiters promote their products by creating multiple accounts so that if one account is identified and removed, they can simply use another.

8. In 2019, CBP initiated Operation Mega Flex.
 In response to the alarmingly high rates of contraband uncovered by DHS and a request from the White House Office of Trade and Manufacturing Policy, the CBP operation uses enhanced inspection and monitoring efforts to identify high-risk violators that are shipping and receiving illicit contraband through international mail facilities and express consignment hubs. 

Among the discrepancies uncovered by Operation Mega Flex were 1,061 shipments of counterfeit products. These counterfeits range from fake name brand items, like Louis Vuitton bags to sports equipment made with faulty parts. Other contraband included drug paraphernalia, deadly opioids, and counterfeit drivers’ licenses. In all, counterfeits constituted more than one of every three discrepancies uncovered by inspectors.

9. Fakes are slipping through the cracks. Foreign entities that traffic in counterfeits understand how to leverage newer distribution methods better suited to e-commerce than the traditional trade paradigm (i.e., imports arriving via large cargo containers with domestic distribution networks). Today, mail parcel shipments, including through express consignments, account for more than 500 million packages each year. Seizures in the small package environment made up 93 percent of all seizures in 2018, a 6 percent increase over 2017. From 2012 to 2016, the number of seizures from express consignment carriers increased by 105 percent, and the MSRP of those seizures had a 337 percent increase. In contrast, seizures from cargo decreased by 36 percent from FY17 to FY18. 

10. Government action alone is not enough.
In order to bring about the needed paradigm shift and ultimately stem the tide of counterfeit and pirated goods, all relevant private-sector stakeholders have critical roles to play and must adopt identified best practices, while redoubling efforts to police their own businesses and supply chains. 

Foremost among these best practices is the idea that e-commerce platforms, online third-party marketplaces, and other third-party intermediaries such as customs brokers and express consignment carriers must take a more active role in monitoring, detecting, and preventing trafficking in counterfeit and pirated goods. oa here

Trump Administration Expected to Crack Down on Marketplace Sites in New Counterfeit-Centric Memo

Almost 10 months after Donald Trump signed a memo aimed at combatting the import of counterfeit goods into the U.S., with an emphasis on “third-party online marketplaces,” including “Alibaba, Amazon, and eBay,” and less than two weeks after reports that the $1 trillion behemoth that is Amazon will do more to prevent the sale of fakes on its sites, the Trump administration released its official plan to cut down on the ever-increasing counterfeit trade. 

A booming industry, the total trade in counterfeit and pirated goods tops $1.5 trillion across the globe, according to the International AntiCounterfeiting Coalition. Counterfeit and pirated goods, as well as trade secret theft, cost the U.S. economy, alone, as much as $600 billion a year, or 3 percent of the U.S. gross domestic product, Steve Shapiro, the unit chief for the FBI's intellectual property rights unit told CNBC.

Given the jurisdictional issues when it comes to counterfeit sellers (most are located outside of the U.S.) and other practical roadblocks at play, the fight against fakes is a complex one. “Foreign sellers face little risk of prosecution,” an administration official told Reuters. As such, strong U.S. government action "is necessary to fundamentally realign incentive structures." 

Speaking to CNBC on the heels of the signing of Phase One of Trump’s trade deal with China this month, which follows from claims of rampant infringement of American intellectual property by Chinese entities, Peter Navarro, the Director of the National Trade Council at the White House, revealed that as of now, “if you’re an intellectual property rights holder, whether you’re Michael Kors or Louis Vuitton or Pfizer selling prescription drugs, the onus is really on your company to police the internet, where a lot of this counterfeiting occurs.” 

“That’s not right,” according to Navarro, who says that “the Amazons and the Alibabas, Shopify” – which “have been facilitators of the Chinese counterfeiting” – need to act on their “responsibility to police the problem.” He further noted that sites like “Amazon and eBay” are “making a bunch of money … selling this counterfeit stuff,” without “accepting [their] full responsibility,” which is almost certainly a reference to marketplace sites’ recurring attempt to disclaim liability by asserting that they are not the “sellers” in such equations but merely middlemen. This is what Amazon argued in a recent case over the sale of a defective dog leash that a consumer purchased from its site. 

That case – which could have sweeping impacts for Amazon and its vas third-party marketplace – is still underway, with a Third Circuit Court of Appeals hearing en banc expected this year.  

As for the Trump administration’s latest counterfeit-specific plan, on Friday, the Department of Homeland Security’s Office of Strategy, Policy & Plans released a report entitled, “Combatting Trafficking in Counterfeit and Pirated Goods,” stating that at the forefront of the “best practices for private sector stakeholders” is “the idea that e-commerce platforms, online third-party marketplaces, and other third-party intermediaries such as customs brokers and express consignment carriers must take a more active role in monitoring, detecting, and preventing trafficking in counterfeit and pirated goods.” 

An increased focus on the crack down on counterfeits will be a welcome development for fashion and luxury brands, in particular, which is a particularly hard-hit segment of the market when it comes to the scale of the manufacturing and sale of counterfeits. After all, luxury goods are amongst the most commonly affected, with fake luxury products – from logo-bearing sunglasses to fake leather goods and shoes – accounting for “between 60 to 70 percent” of the total sales of counterfeit goods, per Harvard Business Review, “ahead of pharmaceuticals and entertainment products and representing perhaps [the equivalent of] one quarter of the estimated $1.2 trillion total trade in authentic luxury goods.”

With that in mind and given the need for luxury brands, in particular, to maintain the image of exclusivity associated with their valuable trademarks, brands routinely spend tens of millions of dollars each year to police unauthorizes uses of their trademarks. HBR reported in May that LVMH Moët Hennessy Louis Vuitton, the parent company to 75 luxury goods brands, including fashion houses like Louis Vuitton, Dior, Givenchy, and Celine, “employs at least 60 lawyers and spends $17 million annually on anti-counterfeiting legal action.” 

All the while, luxury titans have been busy lobbying governments “to extend enforcement bodies’ powers to seize and destroy fake goods, and to block access to websites that sell counterfeit goods,” per HBR. If the impending memo is any indication, the Trump administration is willing to up the ante. oa here

Fake Allbirds and Glossier Dupes: DTC Brands Are Battling Counterfeits and Knockoffs

Direct-to-consumer brands like Allbirds, Glossier and Rothy’s are battling counterfeiters and copycats. These startups now face a problem even big-budgeted luxury brands can't fix.

A few weeks ago, some Facebook users spotted a rare deal: shoes from Rothy’s, the direct-to-consumer footwear startup, for 50 percent off. The discount, spotlighted via a targeted ad on Facebook newsfeeds, took people to a website that looked like the Rothy’s homepage, where shoppers were able to buy the company’s eponymous Meghan Markle-approved ballet flats for $79.99, instead of $145. Or so they thought.

The ads were a scam, and Rothy’s was inundated with complaints from shoppers whose credit cards were charged several times, without receiving any shoes. Rothy’s took the rare step of posting a warning about the scam and other similar schemes on its social media accounts a few weeks ago.
Counterfeits and knockoffs are nothing new in fashion, though the targets — usually luxury and sneaker brands — typically prefer to keep the problem out of public view. But the problem now dogs direct-to-consumer brands like Allbirds, Glossier and Rothy’s. These companies have found success by cutting out wholesalers and relying on social media to acquire customers. That model has proven wildly successful, but also creates an opportunity for copycats.

A counterfeit Rothy's site, Rothstore.com, selling counterfeit shoes for half off. | Screenshot by BoF

Fake DTC products litter Amazon, eBay, Instagram, Facebook and Chinese sites like AliExpress. Then there are the legal knockoffs, with companies like Zara, Fashion Nova and Steve Madden turning to popular start-ups for “inspiration” much like they rely on luxury brands’ runway looks.
“Counterfeiters go where the people go, from flea markets to the streets to stores to websites to social media,” said Maysa Razavi, the International Trademark Association’s anticounterfeiting manager. “Consumers now rely on social media to buy and discover goods, and counterfeiters are fully exploiting that. They are taking full advantage of the technology and beating these [DTC] brands at their own game.”
Fighting copycats can be treacherous and expensive, and most start-ups must take on clandestine counterfeit networks or battle with fast-fashion using a fraction of the resources of their luxury counterparts. Many digital brands are unprofitable, and need every cent of their investors’ cash for advertising, production and logistics, not court fights.

But at a certain point, fighting back ceases to be a luxury and becomes a matter of survival.
“If you’re a design and research-focused company, you absolutely have to be monitoring this,” said Joey Zwillinger, co-founder of Allbirds. “Direct-to-consumer brands have much lower awareness in people’s minds. Most don’t know who they are or what they make, so counterfeits have a better opportunity.”

Why DTC is ripe for knockoffs
The global trade of counterfeit goods nets about a half a trillion dollars a year, according to the Organisation for Economic Co-operation and Development, with industries like clothing, footwear and leather goods getting hit the hardest.
The new wave of DTC brands are particularly vulnerable, experts say. Many rely on a single, easily imitated “hero” product for much of their sales. Their main way to reach customers is online, where fraud is rife (in a statement to BoF, a Facebook spokesperson said that it "takes IP rights, including issues around counterfeiting, very seriously" and that "when we detect an ad that violates our Advertising Policies we disapprove it"). And though many people buy fake Louis Vuitton bags because they can’t afford real ones, the buyer of lower-priced goods like Rothy’s might have otherwise purchased the real thing.
Although a pair of Allbirds Wool Runners or Rothy’s ballet flats aren’t particularly expensive, they are status symbols, making them inviting targets for fakes. Zwillinger said counterfeit Allbirds hit the market within a year after launching in 2016.
“There were people launching knock-offs on Kickstarter, and counterfeiters coming from Korea,” he said. “In Europe, there was even one company that somehow had found old molds we’d use, scraped our names off of it, and put those up on the internet.”
It’s not just profits DTC companies stand to lose. Customers who unknowingly buy counterfeit items, like those that shopped on the fraudulent Rothy’s sites, could badmouth the company.

“Startups depend on word of mouth to build their business and reputations, and poor quality products floating around the internet spread misinformation,” said Razavi with the International Trademark Association.
The DTC model has opened up brands for fraudulent activity. Glossier, for example, limits distribution to its stores and website. That’s fed an entire network of unauthorised sellers who have Instagram shops and websites that claim to sell Glossier products, said Erin Miller, the brand’s head of customer experience. Sometimes the sellers offer authentic Glossier product, but they are often mixed in with counterfeits, something Redditors have noticed is happening on Chinese websites sites like Carousell, and on eBay.

When it’s worth it to go after them
Allbirds pays for MarkMonitor, a company that searches for fraudulent and counterfeit activity. Most of the time, though, the brand won’t go after copycats, said Zwillinger.
“Going after a tiny brand that has no money or reputation that launched a knockoff doesn't do anything and will draw attention towards that brand, so why even bring it up?” he said. “It’s expensive and distracting. Even small ripoffs take a lot of resources.”
Experts say when it’s a big brand doing the copying, more action is required because the distribution of the knockoffs could be widespread enough that customers will eventually forget where the designs originated.
In 2017, Allbirds sued Steve Madden after the footwear company introduced wool sneakers (the two sides quickly settled for an undisclosed amount).
Bluebella, a UK-based DTC lingerie company with a large Instagram following sent cease-and-desist letters to Fashion Nova and Pretty Little Thing in June after noticing both companies had copied two of its best-selling bra styles. Both agreed to stop selling the bras. Fashion Nova and Pretty Little Thing did not respond to requests for comment.
Bluebella spent about £10,000 ($12,200) on the whole ordeal, a significant amount for the brand, which only became profitable last year, after recording about $6 million in sales, according to Brand Director Janet Mudge. But she said the company’s leadership felt they had to take a stand.
“The spending was really painful because that was money we should have put back into our marketing and research, but we felt too emotional not to do something,” she said. “Not only are they stealing designs, they are also undercutting our price point tremendously. If you are a relatively small brand, it’s worth it for you to fight back because the damage to your company could be so much worse.”

The alleged imitators don’t always back down. Rothy’s sent a cease-and-desist order to Steve Madden in early August for selling shoes that it says closely resemble its Point flat. Steve Madden responded by suing Rothy’s.
“Rothy's is claiming exclusive rights to common elements of a ballet flat used by competitors and non-competitors,” Steve Madden Vice President and Deputy General Counsel Lisa Keith said in a statement. “Our company has been making this silhouette since the 90's, since before Rothy's even existed.”
Steve Madden took a different approach with Greats, another DTC footwear brand. Earlier this month, the company acquired the start-up.

Other ways brands can fight back
Many DTC brands have cultivated communities of devoted customers — a free army of sorts that can quickly smoke out copycats, said Stéphane J.G. Girod, a professor at the IMD business school in Switzerland
“Brands that don’t have a lot of resources should be using their loyal customers to be the ears and eyes of the internet to help them monitor the situation,” he said.
Miller said Glossier customers flag fraudulent products and unauthorised Instagram resellers to the company, which then informs the accounts that they have violated Glossier’s terms of service. Glossier said it also works directly with platforms like Instagram to shut down fake accounts.
Though shoes and makeup can be copied, a unique brand experience can't, said Renée Richardson Gosline, a research scientist at MIT’s Sloan School of Management who’s studied the counterfeit industry.
“Brands should be looking at all opportunities and touchpoints beyond the functionality of a product to stand out,” she said. “Louis Vuitton handbags are the most counterfeited item in the world but the real products are still in high demand because the customer experience cannot be replicated by counterfeiters.”

This is an advantage a brand like Glossier has leveraged. The brand’s stores frequently have lines outside. Shoppers eagerly wait to try out the beauty products because they want the shopping experience and millennial pink-hued selfies as much as the Glossier product itself.
Allbirds sees widening its distribution as a way to fight counterfeiters — if anyone can buy the real thing, they won’t need to resort to fakes. In February it opened a store in Shanghai, and it also teamed up with Chinese e-commerce giant Alibaba to sell its footwear on the Tmall platform. Previously, the only Allbirds available via Alibaba were fakes or from unauthorised sellers.
“Being in China helps and hurts,” Zwillinger said. “Any success will mean there will be plenty more counterfeits because there’s more of a counterfeit industry in Asia. But … we are creating brand awareness and are able to serve Chinese customers who want the real deal.”
Ultimately, the best way to fight counterfeits is to stay ahead of them. In this, DTC brands have the advantage over luxury brands, because they are typically faster at designing and releasing new products.
“Speed is on their side,” Girod said. “Launch new products, faster, and shape the trends. Make them keep coming.”


 oa here

Huge LAX Bust Stops Smuggled Counterfeit Hermes, Louis Vuitton, Gucci Products From Entering US

 

Thousands of counterfeit items that would be worth millions --if they were genuine -- were seized in an LAX bust. The items included fake brands like Gucci, Hermes, Louis Vuitton and more Aug. 14, 2019. 

Customs inspectors recently prevented thousands of counterfeit items from being smuggled into the country from Hong Kong through Los Angeles International Airport, including products falsely labeled as being produced by Hermes, Louis Vuitton, Gucci and other companies, officials said Wednesday.

The 5,300 items that were seized in recent weeks would have had a retail value of more than $3.4 million if genuine, according to Jaime Ruiz of U.S. Customs and Border Protection.

Among the seized items were 1,242 counterfeit Gucci belts, 678 pairs of counterfeit Nike shoes, 531 counterfeit Louis Vuitton handbags, 230 counterfeit Hermes handbags, 192 counterfeit Casio Shock watches, 144 counterfeit Ferragamo belts and 100 counterfeit Versace belts.

"CBP protects businesses and consumers every day through an aggressive intellectual property rights enforcement program,'' said Carlos C. Martel, CBP director of field operations in Los Angeles. "These seizures demonstrate the high level of skill and vigilance of our officers and import specialists.''

The merchandise arrived at LAX via air cargo from Hong Kong, Ruiz said.

"The quantity and value of counterfeit merchandise seized is a clear indication of the profits that are involved in the illegal trade of luxury goods,'' Ruiz said.

Available on illegitimate websites and sold in underground outlets, counterfeit high-fashion commodities multiply the illegal profits of smugglers and traffickers, Ruiz said.

"Consumers are tricked into believing they are buying an original product at a significant discount, and the money they spend on these types of goods is often used in other forms of criminal enterprises,'' Ruiz said.

Ruiz urged anyone with concerns about whether a product is genuine, or who has any information regarding suspected fraud or illegal trade activity, to report the information via the e-Allegations Online Trade Violation Reporting System, or by calling 800-BE-ALERT.

 oa here

Amazon Admits to Having a Counterfeiting Problem

image: Amazon

Amazon admits that it might have a problem with counterfeits. For the first time ever, the Seattle-based e-commerce giant made mention in its annual 10-K filing of the elephant on its platform: fakes. In a single line in the “risk factors” section of the yearly report it files with the U.S. Securities and Exchange Commission, the Jeff Bezos-owned company stated, “We may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies.” 

The arguably long-overdue admission comes amidst mounting criticism of and a growing number of lawsuits filed against the world’s largest e-commerce platform, most of which have accused Amazon of being “complicit” in the widespread sale of counterfeit goods on its site. These qualms have largely followed from Amazon’s 2014 move to enable China-based entities to sell directly to Amazon shoppers in the West, and in the process, growing its sales by a whopping 20 percent in a single year and enabling its total revenues to blaze past the $100 billion mark for the first time.

To date, Amazon-specific criticism has come from a multitude of sources, including this website, which questioned the merit of its “zero tolerance” policy when it comes to fakes in light of the fact that searches for things, such as “Fake Gucci” bags and “replica Birkin” bags, readily return results for counterfeit goods.

Independent sellers — forced to directly compete on Amazon’s marketplace with scammers who blatantly steal their intellectual property — have spoken out. Casey Hopkins, the founder of industrial design firm Elevation Lab, penned a highly-cited post on his website last year, calling out Amazon for directly profiting from the sale of fakes.

Brands also have not been shy about taking the $1 billion giant to task. Birkenstock, for instance, publicly cut off Amazon, not once, but twice, “terminating  [its] business relations with Amazon” in the U.S. and the European Union, due to Amazon’s alleged failure to commit to “proactively policing its site for counterfeits.”

Still yet, at least one trade group, the American Apparel & Footwear Association, has urged the U.S. Trade Representative to include Amazon’s international arms to its annual blacklist of “Notorious Markets,” asserting that its “members are growing increasingly frustrated with how [Amazon] protects their intellectual property.”

These complaints, among others, have coincided with legal action. Mercedes Benz’s parent company, Daimler AG, filed suit against Amazon in November 2017 on trademark infringement grounds, claiming that in additional to its problematic marketplace, Amazon’s model for labeling products as “Shipped from and sold by Amazon.com” amounts to a “fraudulent business act.” In particular, Daimler asserted that by using the “Shipped from and sold by Amazon.com” model,  “Amazon itself sells infringing items” and “capitalizes upon and profits from Daimler [and other brands’] reputation and goodwill.”

Less than a year after that legal battle was initiated, fashion brand Ella Moss filed a trademark infringement suit against Amazon, alleging that the giant launched a similarly-named private label, Ella Moon, with a similar aesthetic and lookalike designs  in an effort to confuse consumers and steal sales from Ella Moss.

All the while, Amazon’s PR team has been adamant that it “strictly prohibits the sale of counterfeit products and invest heavily – both funds and company energy – to ensure our policy against the sale of such products is followed.”  

According to CNBC, the newly-added acknowledgement of counterfeit goods in its 10-K filing “reflects Amazon’s increased concern over the counterfeit problem on its marketplace, as the words ‘counterfeit’ and ‘pirated’ were never mentioned in its annual filing before.”

ORG HERE