News & Insights

Late last year, Macpherson Kelley helped a client deal with counterfeit products being sold in another country through online marketplaces.

Unfortunately, the sale of counterfeit products on marketplaces such as Amazon and eBay is a major problem for businesses, as a recent CNN article set out. The impact is not limited to lost sales. The counterfeits are often of poor quality or outright unsafe. This represents a reputational risk where consumers do not realise that their dodgy purchase is a fake.

IP registration is the key

What many businesses do not realise is that IP registration is the key to dealing with such counterfeits. Not only does it allow for infringement proceedings to be brought through the courts, but it also brings considerable additional benefits:

• opening the door to IP rightholder protection programs, which are maintained by many online marketplaces; and
• empowering customs authorities to seize counterfeit or infringing goods at the border, if they are being imported from overseas.

benefit 1: e-commerce IP protection policies

When we recently assisted our client deal with counterfeit products being sold overseas, we were able to identify the manufacturer and obtain a quick capitulation through a letter of demand. However, most of the offending stock was already in the hands of resellers, who were hiding behind online usernames that did not disclose their true identity.

We contacted the third party online sales platforms, requesting that they remove the counterfeit goods from sale. We were able to obtain a swift resolution with two of the platforms; the counterfeit goods were removed from sale within days.

However, two other sites insisted on evidence of our client’s IP registration in their country. The problem was: our client had no registered IP rights there. The counterfeit goods remained on sale.

This recent experience is consistent with our previous experiences of utilising the IP protection policies of major online platforms (such as eBay’s VeRO program):

• existence of registered IP rights, especially in the case of trade marks, is a threshold requirement to utilising the program;
• once the requirements of the IP protection program are met, resolution is normally swift, effective and inexpensive, without having to use the court system.

The CNN article mirrors those experiences.  And while it can sometimes feel like a game of “whack a mole” to deal with the infringers, these protection policies at least provide a cost-effective means of doing so.

benefit 2: customs seizure

An often overlooked benefit of IP rights is the ability to have infringing or counterfeit goods seized by customs.  Customs seizures can be used in Australia to deal with goods that infringe registered trade marks or copyright, at the time that they are imported into Australia.  Even if not every shipment can be intercepted, the infringers’ business model can quickly be disrupted if shipments start being seized.

Importantly, customs seizure can also be utilised in China at the point of either import or export.  This can be used to protect copyright, registered Chinese trade marks or granted Chinese patents.

In circumstances where China is often seen as a source of counterfeit goods, this provides an opportunity to cut off that supply at the source, rather than trying to deal with the goods separately in multiple destination countries. According to IP Australia, as at July 2019 there were 42,851 trade marks, 2,750 copyrights and 2,609 patents recorded with Chinese Customs.

take-away points

There are three key take-away points from this:

• Having registered IP rights is the key to utilising many of the pathways to guarding against counterfeit goods.
• Non-court options can provide fast, effective and inexpensive means to protect the IP rights, even internationally.
• It therefore makes sense to register the IP rights in all markets in which goods or services are being sold.

So when you think “Why bother registering? If anybody infringes, I can’t afford to sue them anyway”, now you know why you should register your IP rights in all key markets.

Our Intellectual Property team is experienced in assisting Australian businesses to protect their IP, through both registration and enforcement.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.