Bogus Buys: Trade marks and Counterfeiting

by Lisa D. Rhooms

Counterfeiting comes in many forms, and is nothing new in business or in the law of Intellectual Property. However, where counterfeit goods are becoming nearly imperceptible, they pose a real risk to the owners of the goods being “knocked off”, and the buyers who believe they are getting the real thing. In a recent press release from the Organization for Economic Cooperation and Development[1] about their new report[2], they found that:

“nearly one in five mobile phones and one in four video game consoles shipped internationally is fake, as the growing trade in counterfeit IT and communications hardware weigh on consumers, manufacturers and public finances…”[3]

Counterfeiting however, does not begin or end with IT or communications goods, as nearly every good can, and probably has been counterfeited.

Counterfeiting and the Trade mark- Confusion and Passing Off

Whether under United States (US), United Kingdom (UK) or European law, counterfeiting of a mark, particularly a famous trade mark, affects the mark, though the degree or harm may vary. The case of Hermes Intern v Lederer de Paris Fifth Avenue., Inc.[4] spells out skillfully, the harms that can arise where there is confusion because of the similarity of marks and goods, one counterfeit and one real. The judgment states:

“a loss occurs where a sophisticated buyer purchases a knock off and passes it off to the public as the genuine article, thereby confusing the viewing public and achieving the status of owning the genuine article at a knock off price… the creation of confusion in the post sale context can be harmful in that if there are too many knockoffs in the market, sales of the original may declines because the public is fearful that what there are purchasing may not be an original… the purchaser of an original is harmed by the widespread existence of knockoffs because the high  value of originals, which derives in part from their scarcity, is lessened.”[5]

This case looks at the harm in a post sale context, including the harm to owner of the mark, in terms of reduced sales, the fear of the prospective consumers that the goods they may be purchasing are fake, and the actual loss to owners of the goods due to a lack of scarcity. This case helps to illustrate the multifaceted harm counterfeiting can cause.

In the United Kingdom, even an unregistered trade mark is protected against counterfeiting by the law of passing off because of the harm it can cause to a trader. This is demonstrated in the case of Reddaway v Banham[6], where the judgement made clear that “nobody has any right to represent his goods as the goods of somebody else”[7]which is a clear shot at counterfeiting, as where there is passing off, there is harm, and when a trader commits passing off, he for all intents and purposes steals another trade’s patron and his reputation.

Counterfeiting and the Trade mark- Dilution

Another problem with counterfeiting is that it may cause dilution, which is a concept found in the US, UK, Europe and elsewhere. In the US, sections 43(c)(2)(b) and 43(c)(2)(c) of the Lanham Act relate to dilution by blurring, and dilution by tarnishment respectively. Dilution is a concept in respect of a famous trade mark, and dilution by blurring arises where the marks are so similar that the distinctiveness of the famous mark is impaired by the other mark. Cases such as Levi Strauss & Co v Abercrombie & Fitch Trading Co.[8] have determined that there need not even be an identity or substantial similarity of marks for there to be blurring, so a counterfeit item, intended to be a replica, would almost certainly cause dilution by blurring. Dilution by tarnishment arises where there is a similarity of the marks which gives rise to an association between the marks, and which harms the reputation of the famous mark. Thus, in the case of V Secret Catalogue inc, v Mosely[9], the court found that there was a rebuttable presumption of tarnishment where the famous mark was connected with sex products. Another scenario where tarnishment is possible is where the product, similar to one bearing the famous mark, is of poorer quality. Counterfeits are generally cheaper and of poorer quality than famous more expensive brands, and thus, a counterfeit good could very easily cause dilution by tarnishment. Again, in the UK, unregistered marks are protected by passing off, and dilution is a category of harm under passing off.

Conclusion

Counterfeiting is a sin against a genuine good as it can steal, kill and destroy. A counterfeit good can steal a customer from a trademarked brand, kill its reputation and destroy the business of the holder of the trade mark. Intellectual Property law, trade mark law in particular must therefore take serious steps in addressing counterfeiting through the policing of brands, bringing action against counterfeiters, and imposing other sanctions including heavy fine, and imprisonment. Trade mark law must be very careful, but also unyielding in disallowing bogus buys from hindering genuine products, and the resources which have gone into engineering them.

Lisa Diana Rhooms

Assistant Editor, QMJIP

[1] http://www.oecd.org/gov/trade-in-counterfeit-ict-goods-9789264270848-en.htm

[2] OECD (2017), Trade in Counterfeit ICT Goods, OECD Publishing, Paris.
DOI: http://dx.doi.org/10.1787/9789264270848-en

[3] Ibid 1

[4] 55 U.S. P.Q 2d 1360 (2nd Cir. 2000)

[5] ibid

[6] [1896] AC 199

[7] ibid

[8] 633 F.3 1158 (9th Cir. 2011)

[9] 605 F.3 382 (6th Cir. 2010)