This article was originally published on World Trademark Review.
As has been widely noted, online trade grew significantly in 2020. Confined to their homes, consumers relied on the internet for buying food, household products, medical supplies, children's toys and games, and electronic goods. In response to the increased demand, online marketplaces expanded their range of suppliers. Meanwhile, trying not to lose their traditional customers, offline businesses rapidly moved into the online space.
The meteoric shift to online consumerism proved to be fertile ground for counterfeiters for various reasons, including:
- The importance of online shopping: online trade is based on the remote selection of goods without the possibility of a more thorough view and inspection. Therefore, shoppers mainly rely on descriptions of products, their images, and the reputation of the retailer. At the same time, some counterfeit products can only be identified by noting very small discrepancies. Disparities in the design of labels, or in holograms or serial codes, are often very hard to detect while shopping online.
- Consumers chasing best prices: the pandemic led to an economic slowdown and a fall in real incomes. As a result, many shoppers prefer the cheaper options instead of familiar ones. Unfortunately, middle- and low-price categories are traditionally attractive for counterfeiters offering better prices.
- Non-contact delivery: in an effort to reduce the spread of the virus, many retailers launched non-contact delivery options. Typically a courier leaves a parcel on the doorstep of a house or apartment while maintaining a safe distance and notifying the client of its arrival. This type of delivery is generally only possible through online prepayment. The main drawback in the exchange is that the consumer is deprived of the opportunity for inspecting the goods and for immediately expressing any doubts about their authenticity to the courier. This presents an obvious opportunity for counterfeiters.
- No "return" options: as soon as the customer suspects that a product is counterfeit, it is a challenge to arrange its return or request compensation from the online platform. In many countries, the pandemic led to strict government restrictions, including prohibitions against leaving home without a critical need. As a result, bad-faith sellers can indicate that a return is possible only by an in-person visit to the sales office or by sending a written complaint to a company's registered address.
For those reasons, the rise in counterfeiting during the pandemic imposed new challenges for brand owners and forced them to re-examine their brand protection strategies. Some are following traditional brand protection solutions, while others are testing more innovative approaches.
However, it is not just typical consumer goods that have seen a rise in fakes. Interpol has highlighted that criminals have used the covid-19 crisis to intensify their sales of counterfeit medical products as the pharma and PPE sectors became ripe targets. The black market for fake covid-19 vaccines, vaccination cards, and passports is growing. The first cases of the distribution of counterfeit Pfizer–BioNTech vaccines were confirmed in Mexico and Poland, while authorities in Mexico have also seized a batch of fake Sputnik V vaccines.
At present, counterfeit vaccine shots are relatively easy to identify. The legitimate ones are typically distributed by government agencies and/or certified medical centers, so any online sales or distribution in bulk containers by non-medical organisations should be considered suspicious. However, this situation may change if vaccinations become a more routine process in the future.
Pfizer offers an example of being well prepared to fight vaccine-related counterfeiting. The company proactively worked for years on preparing a comprehensive brand protection strategy. This includes maintaining anti-counterfeiting laboratories; working with wholesalers, pharmacies, customs offices, and law enforcement agencies; providing brand-protections training; and running counterfeit awareness campaigns. The brand owner's online resources support customers in identifying fake products and helping them to understand the possible risks of taking counterfeit medicines. Its website also carries instructions for reporting potential counterfeiting cases.
The 3M Company has also provided another example of effective anti-counterfeiting preparation. With its N95 mask, it remains one of the key players in the fight against covid-19. However, that role meant fakes quickly became problematic, and led to 3M actively interacting with law enforcement authorities. According to its website, it has investigated more than 14,700 potential cases of counterfeiting globally; filed 37 lawsuits; seized over 51 million counterfeit respirators; and removed more than 22,400 false or deceptive social media posts, 22,900 fraudulent e-commerce offerings, and 335 deceptive internet addresses. Additionally, it developed a portal dedicated to fighting respirator fraud, counterfeiting, and price gouging, and also established hotlines around the world to help end-users and purchasers properly identify authentic 3M respirators.
A proactive brand-protection strategy and close cooperation with enforcement authorities is always crucial for successfully combating counterfeit goods. For example, DuPont de Nemours Inc, a manufacturer of protective garments, has worked with authorities to train them how to identify counterfeit PPE. It also educates customers on how to choose authorised distributors, sends alerts on possible infringements, and invites purchasers to contact the DuPont brand protection team in any cases of concerns about potential counterfeit products. More recently, the company announced a favorable court decision against counterfeiters in Morocco, wherein it was awarded the approximate equivalent of €9,200 and ordered that the fake garments be destroyed.
Cross-industry innovative tools
Positively, financial and transaction services have also joined brand owners in the fight against covid-19-related counterfeiting. For example, PayPal has cooperated with local enforcement authorities against online businesses promoting bogus at-home COVID-19 test kits and immunity tablets.
Manufacturers of more "traditional" counterfeited categories – such as sportswear, luxury goods, electronics, watches, perfumes and cosmetics, jewelry, and toys – expanded their scope in response to the pandemic. For example, US customs officials seized more than 2,000 counterfeit face masks shipped from Vietnam and China bearing the logos of luxury brands. The growth in counterfeiting further led to a rise in remarkable cross-industry collaborations between media platforms and luxury brands. Gucci America and Facebook, for instance, have filed a joint lawsuit in California against an individual for the breach of Facebook and Instagram's terms and infringement of the fashion brand's IP rights by selling fake Gucci products.
Similar joint lawsuits were filed against counterfeiters by Amazon in collaboration with Maison Valentino, KF Beauty, Salvatore Ferragamo, and YETI Coolers. In addition to cooperating with famous brand owners in filing lawsuits against counterfeiters, in May 2021, Amazon released its first Brand Protection Report, in which it revealed it has invested over $700 million and employed more than 10,000 people to protect its inventory from fraud and abuse. Furthermore, it claimed that it has detected, seized, and destroyed more than two million counterfeit products and blocked over 10 billion suspected bad listings. It has also established its own Counterfeit Crimes Unit to interact with law enforcement authorities or to undertake independent investigations or joint investigations with brands and pursue civil litigation against counterfeiters.
Some major brand owners have looked to innovative solutions in their anti-counterfeiting efforts, such as AI and blockchain technologies. In April 2021, LVMH, Prada Group, and Cartier (part of Richemont) announced the formation of the non-profit Aura Blockchain Consortium, promoting the "use of a single global blockchain solution open to all luxury brands worldwide to provide consumers with additional transparency and traceability". This approach may lead to the creation of a digital ID for each product to allow traceability during the entire product lifecycle, and will involve keeping records of every transaction on the product's certificate and providing an authenticity certificate, among other things.
That ambitious project has a precedent. In December 2019, on the brink of the pandemic, Nike was granted a patent for blockchain-tracked sneakers CryptoKicks, allowing for tracking the authenticity and ownership of the shoes.
Furthermore, Chinese e-commerce giant Alibaba also uses modern technologies to combat counterfeits. Its AI-based technology scans logos of luxury brands in 30-50 milliseconds – with the platform containing a database of more than one million logos, covering 500 luxury products categories.
A checklist for post-pandemic brand protection
The rapid growth of online trading during the COVID-19 pandemic clearly points to the need to expand brand-protection campaigns with a focus on online activities. Brand owners should consider traditional brand enforcement steps, as well as innovative approaches. They should include the following:
- The proactive protection of IP rights – as an initial step, it is essential to ensure that all brands and goods are protected as registered trademarks. For apparel and luxury brands, it is worthwhile to include facial or sanitary masks in a list of goods to be ready for immediate action if counterfeit
- Online anti-counterfeiting measures – it is recommended to start with in-depth online monitoring aimed at assessing the scale of a problem and to classify infringers, depending on their legal nature. It may be worthwhile to note the most harmful resources; for example the most frequently visited marketplaces and websites, paying special attention to them during further enforcement activities.
- The submission of warnings, cease-and-desist letters, and takedown notices – as trademark professionals will be aware, online monitoring is usually followed by warnings or cease-and-desist lettersto infringers. If infringers do not comply voluntarily, there is an option to send a takedown notice to the hosting provider.
- Customer care and education – many brand owners already have special brand awareness pages on their corporate websites. It is important to educate customers about counterfeit goods and give them a weapon against the fakes. These brand awareness pages usually contain: general information about the disadvantages of purchasing counterfeit goods; brief guides about how to identify counterfeits; authorised-dealer locators; and a hotline number or other options for reporting suspicious goods
Finally, as has occurred in some sectors already, collaboration between brand owners and cross-industry collaborations appear to be useful for both brands and industries. These joint efforts allow for a more thorough and efficient fight against counterfeiters – and in a post-pandemic world, such cooperation could prove to be invaluable in the worsening fight against fake goods.
Should you have any specific questions about this article or would like to discuss it further, you can contact the authors or a member of our Intellectual Property Group.