The COVID-19 crisis has accelerated the growth of online shopping and sales. But, says Milton Springut, this leads to increased counterfeiting with an accompanying dilution of brand value.
A recent survey, Impact Of Covid-19 On Ecommerce Sales, shows that 58% of consumers expect to increase online shopping because of the crisis, buying everything from virus-related goods such as face masks and sanitizers, to cosmetics and personal items, to office supplies.
But the increase in e-commerce brings with it a further danger: more counterfeits. Counterfeiters, like the notorious bank robber Willie Sutton, go where the money is. Increased demand means increased counterfeiting.
A popular model of N95 face masks manufactured by 3M has already been the subject of extensive counterfeiting. A recent raid seized 900,000 units of counterfeit product, and offerings of such counterfeits abound on the internet.
So, consumers have good reason to be worried. The same survey shows that 68% of consumers are concerned about counterfeit or poor-quality products sold online.
This has a direct impact on brand image; if consumers come to believe that a particular brand presents a heightened danger of counterfeiting, that could well negatively affect sales, including legitimate ones. Negative brand image may continue to harm the brand long after the current crisis is resolved.
What can brands do now to protect themselves? And, how do they do so without busting the budget in a time of heightened economic uncertainty?
First Step: Inventory Your Rights
The first step is to review what legal rights you have in support of your brand. Hopefully, the brand has a robust portfolio of trademark registrations covering its marks and designs. In some cases, copyright registrations might also support the brand’s position.
Don’t overlook common law rights. The COVID-19 crisis in some cases has spurred some brands to branch out into new product lines (e.g., clothing manufacturers who have begun manufacturing face masks). While the brand may not yet have registrations for these new product lines, registrations that cover existing lines might be used to assert rights in new lines as related goods.
In some cases, a product or packaging design, if closely associated with the brand, may be a basis to claim rights to “trade dress,” which can even be registered as a trademark. The requirements of such rights are beyond this article but may be worth looking into.
Second Step: Investigate Online
The next step is to monitor and investigate your brand online.
Usually, the first place to start is online selling platforms such as Amazon, Alibaba, and eBay. A search for your brand will provide a quick snapshot of how many sellers are using your brand. Online searches using Google and other search engines, will also reveal less known and stand-alone websites offering product. This search should give a high-level picture of how many sellers, authorized and not, of your brand there are in the marketplace. If prices or quantities offered look too good to be true, they probably are, and may well suggest a counterfeiting problem.
If the problem appears extensive, the brand may wish to engage an outside monitoring firm or law firm to do a more thorough job to catalog just how many unauthorised sellers there are. Experienced firms are adept at researching connections between what may appear to be unconnected sellers, but actually are the same operation using different identities.
Once a list of suspected counterfeit listings has been compiled, the next step is to ascertain whether the items are counterfeit. Sometimes this can be done just on the face of the listing, based on photographs or statements. More often, however, test buys will have to be made, and the item(s) then analyzed to determinate authenticity.
Test buys should generally be done by an outside investigator or a law firm personnel. Each step of the transaction should be documented, and all packaging and shipping documents inventoried and archived. These provide both valuable intelligence and important evidence should the matter ever reach court.
Third Step: Enforce
The least expensive enforcement tool is the takedown notice. Most platforms have procedures to report counterfeits and demand takedowns. Depending on how many suspected counterfeits there are, this might be most efficiently done internally, through a third-party vendor, or by a law firm. Some platforms have specialised tools, such as Amazon’s Brand Registry Program, which requires registered marks.
While takedowns can be efficient where the counterfeiting problem is limited, where more extensive they often turn into a “whack-a-mole” exercise, where the same sellers simply return under a new identify. In those situations, it is more cost-efficient in the long run to engage an outside vendor or law firm, who are experienced at tracing the problem to its source.
Where the counterfeits are offered on less well-known websites, then the brand is often well-advised to use cease-and-desist letters, directed to the website and demanding removal of all infringing listings. While these can come from in-house, they have generally provided more effective results if outside counsel sends them.
If enforcement efforts meet with resistance, then they may need to be directed to secondary actors, such as ISPs and payment processors, each of which have, in some cases, faced liability for continuing to provide their services to known counterfeiters. That needs to be emphasized in a letter tailored to that kind of service provider. The goal, of course, is not to commence litigation, but to achieve a quick cessation of the counterfeiting.
The tool of last resort, because it is, of course, the most expensive tool, is litigation.
That will almost always be done through outside counsel, who will advise of the most effective way to proceed and which may need to do additional investigation. While often brands will view this as beyond their means, it is important that they take into account the effect of continued counterfeiting on their brand image, and ultimately their bottom line.
Fourth Step: Consumer Education
Brands should also not overlook consumer education. Consumers want to be reassured that the product with their preferred brand is genuine and maintains the same quality they are used to.
On one level, counterfeiting can be considered a good sign. Counterfeiters only go after hot brands, not duds, so the fact that the brand has extensive counterfeiting is a sign that the market views the brand as a having strong selling power. That is a positive.
The negative, of course, is that counterfeiting is an attempt to exploit that market power, and that parasitic activity can, in the long run, suck the life out of the brand.
But brands can turn the lemons of counterfeiting into the lemonade of brand support. Consumer education should emphasize that the brand is making efforts to enforce its rights, thereby maintaining brand equity, and reassuring the consumer.
Brands might also want to emphasise that the best way for the consumer to assure themselves that they are purchasing genuine items is to look to authorised channels, rather than off-price sellers. One may also wish to remind the consumer of the old adage that if it appears too good to be true, it likely is.
Brand equity is often the most valuable asset a company has. That value has to be protected from brand pirates. As the COVID-19 crisis drives more and more consumer demand online, so to do brands need to focus their protection efforts online. In times of economic stress, brands have to balance the costs of enforcement against diminution in brand value. Doing nothing is not an option; what brands should strive for is achieving the maximum protection in the most cost-efficient manner.