by Last month, Damian Williams, United States Attorney for the Southern District of New York, Ivan J. Arvelo, Special Agent in Charge of the New York Office of Homeland Security Investigations. and Edward A. Caban, Commissioner of the New York City Police Department, announced the seizure of approximately 219,000 counterfeit handbags, clothing, shoes and other luxury products.
Williams said the defendants used a Manhattan storage facility as a distribution center and described the seizure as the largest of counterfeit goods in U.S. history. The US Patent and Trademark Office said in 2018 that “counterfeiting is the largest criminal enterprise in the world, with domestic and international sales of counterfeit and pirated products totaling an estimated $1.7 trillion. “4.5 billion dollars a year, an amount greater than any of the drugs.” or human trafficking.”
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In the fashion apparel, footwear and luxury goods segment, retailers and brands work tirelessly to protect their brand, product and intellectual property. Here, Megan Bannigan, a partner at Debevoise & Plimpton LLP, shares her observations on the recent seizure, the counterfeit market in general, and what retailers and brands can do to mitigate the problem.
World Water Day: Can you explain the difference between imitations and fakes?
Megan Bannigan: The term “knockoff” is commonly used in the fashion industry. Their fashion speaks of imitation of another’s product or style. While knockoffs are ubiquitous, they are not always legal. An imitation can copy features of another’s product, but still be different enough that consumers are not confused about the source; may copy enough of another’s product to cause some confusion, in which case it could be considered infringement, or it could identically copy another’s product “stitch for stitch” so that it could be considered a counterfeit.
In the US, while fashion design generally cannot be protected, certain elements of the designs may be protected by intellectual property (for example, design patents, trade dress or trademarks) and the use of that property intellectual property by another person may be an infringement. For example, specific fabric designs, surface designs, or designs that are associated in the minds of consumers with a specific brand may be protected. If those designs are copied (or “imitated”) in a way that may cause substantial similarities or consumer confusion, they may be considered infringement. Similarly, copying a trademark or logo, or using one that is confusingly similar to another person’s trademark or logo, may also be infringement.
“Counterfeit products” are illegal imitations that imitate all aspects of the genuine product, including the name and design of the genuine product, and attempt to pass themselves off as the original; in other words, a “replica” or “forgery.” Unlike infringements, counterfeits are subject to both civil and criminal penalties and, in some circumstances, could pose greater dangers to consumers if they affect health and safety.
WWD: Which categories tend to see the most imitations/fakes/fakes?
MEGABYTE: The reality is that any good can be subject to counterfeiting. Imitations usually appear when the “originals” are expensive or scarce. Some of the categories where we tend to see the most imitations and counterfeits are handbags and wallets, watches and jewelry, consumer electronics, clothing and accessories, medications, personal care and footwear. As online purchases of cosmetics and beauty products have become more common, counterfeits have also increased in the beauty industry.
WWD: How big is the market for fakes/fakes in fashion clothing and footwear?
MEGABYTE: It’s huge. Counterfeits and knockoffs, or “dupes,” as Generation Z frequently calls them, have become part of fashion culture, and seizures of counterfeit fashion clothing and footwear are on the rise. Just this year, the U.S. Attorney for the Southern District of New York and the Special Agent in Charge of the New York Office of Homeland Security Investigations announced the largest seizure of counterfeit goods in U.S. history, consisting of 219,000 items of clothing. clothing, shoes and accessories. with a total estimated manufacturer’s suggested retail price of approximately $1.03 million.
One possible (and problematic) explanation for the proliferation of counterfeits in the fashion industry is the increased demand for counterfeit products. Some consumers see counterfeits as a means to promote accessibility and comment on broader socio-political issues and even go so far as to seek out counterfeit products. For example, the currently private “RepLadies” subreddit is an online community with hundreds of thousands of members who intentionally discuss and trade replica designer products, ranging from Birkin bags to Chanel flats to Cartier jewelry. . Many online forums are dedicated to discussions of “replica” sneakers, such as the r/Repsneakers and r/FashionReps sub-Reddits.
WWD: How can retailers and brands mitigate intellectual property infringement?
MEGABYTE: Combating the spread of counterfeits can be a monumental task. There are reactive and proactive approaches to mitigating breaches. One form of reactive mitigation is to monitor the Internet for online counterfeit listings. However, this approach can quickly start to look like a bit of a “whack-a-mole” as counterfeiters appear in new locations, under new aliases and online storefronts.
On the contrary, proactive measures may be more effective. There are a number of proactive measures retailers and brands can take to mitigate breaches. For example, brands can implement authenticity technologies at the product production stage to make it easier to identify counterfeits in the future. This includes the use of solutions such as unique holograms (often integrated into packaging and labels), RFID technology, near-field communication tags or QR codes that can be scanned to track the “provenance” or path of a product through the supply chain. To more easily detect authentic products, brands can incorporate digital watermarks visible only through the use of special equipment, distinctive packaging that would show evidence of tampering, or other unique chemical or physical markets that would make their products distinctive and difficult to replicate.
There are also new technologies that can help mitigate breaches in other ways. For example, some brands are starting to turn to blockchain technology to better track genuine products. Through a program called “Authentique,” brands like Burberry and Patou have worked with The Orde Group to create unique IDs for luxury items, which can be based on nuanced details of a product’s fabric or construction. Those digital IDs are then recorded on the blockchain to facilitate tracking of genuine products. Brands can also deploy AI technology to identify patterns in counterfeiter behavior, learn from counterfeit identification, and prepare for more efficient anti-counterfeiting work in the future.
Another key step to mitigating violations is to educate consumers. Some of the technologies discussed above can be implemented in ways that allow consumers to confirm the authenticity of products, preventing inadvertent or unintentional counterfeit purchases. Brands like Ugg have provided online educational resources that identify aspects of their products that consumers should look for to detect genuine, non-counterfeit products. In fact, Ugg includes side-by-side photos of authentic and counterfeit products on its website.
World Water Day: Are authenticity technologies useful? How does it work?
MEGABYTE: Absolutely. While authenticity technologies may not perfectly eliminate all counterfeits, they are certainly useful in minimizing sales of counterfeits. Authentication technologies will vary depending on the products in question, the context in which those products are sold, and the resources available to the party applying those technologies. As an example, the authenticity technologies that a brand can implement may differ greatly from those that a resale marketplace or third-party seller can implement, based solely on the resources and information available to those respective parties.
Authenticity technologies can range from visual inspection and “appearance” tests that compare the products in question to genuine products to technologies like those I mentioned above. Ultimately, the effectiveness of different approaches will depend on the context and the exact technology being used. Still, there are some interesting prospects to help combat these problems and protect consumers.
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