Fighting Fakes: International IP and ‘Superfakes’

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Synopsis:

This article examines the phenomenon of “superfakes” and examines the role of consumers, intermediaries, and governments in fighting the problem of “superfakes.” The article closes with brief recommendations broken into the categories of legal reforms, technological innovations, and stakeholder cooperation.


Introduction

In a world where authenticity is often overshadowed by deception, the rise of “superfake” products presents a menacing challenge to the very essence of intellectual property, especially on the international stage. These high-quality counterfeits blur the lines between genuine and imitation, forcing us to question the limits of legal protection. As far as products are concerned, three of the main reasons that consumers invest in luxury goods are (1) investing in a lifestyle, (2) a sense of status, and (3) a sense of exclusivity. In fact, studies show that consumers are willing to spend at least sixty percent more for products made by their favorite brands. As such, when counterfeit versions of those brands’ products become available for purchase at such a discounted price, albeit through illicit channels, the value of luxury goods is diminished. 

From a brand perspective, counterfeit goods can cause loss of profits and reputational damage. From a government standpoint, counterfeit goods can cause damage to economies of nations producing luxury goods, such as the United States (“U.S.”). The rise of superfake products poses a threat to international intellectual property rights, challenging the existing frameworks of international intellectual property law and creating an imminent need for a global response that includes: (a) legal reform, (b) technological innovation, and (c) cooperation between governments, trademark holders, and consumers to protect the integrity of intellectual property on a global scale.

What are Superfakes and Why are they Bad?

Counterfeiting is a crime involving the unauthorized use of someone else’s trademark or trade dress in order to unfairly profit from that person’s reputation. In the United States, counterfeiting is a big market, with the U.S. Department of Homeland Security seizing “over 26,000 shipments of counterfeit goods valued at over $1.3 billion at U.S. borders” in 2020 alone. In 2022, the total retail price of seized goods was close to $3 billion. The top two economic segments of the seized goods were handbags/wallets and watches/jewelry, making up a combined total of 68.8% of all counterfeit goods. Despite the detrimental effect of counterfeit goods, one can typically discern them from authentic ones based on quality, limiting their pervasiveness. Superfakes, however, are much more deceptive than typical counterfeit products.

Superfake products differ from traditional counterfeit in several important ways. First, the quality of materials is much higher; in fact, many superfake producers purchase materials from the same suppliers as luxury brands to create an exact replica of their products and because luxury fashion is such a high-margin sector of the economy, they can charge lower prices and still make significant profits. For example, a Birkin bag, which can retail for upwards of $20,000, costs approximately $800 to produce. Second, the channels through which superfakes are bought and sold are not the cash-only New York street vendors that one typically imagines. Instead, these are sold using entirely digital channels, with hashtags and online groups being a main channel for circulation. Finally, the target market of superfakes is much broader than that of traditional counterfeit goods. Where the obvious inauthenticity of traditional counterfeited goods would drive away the status-oriented consumers, superfakes sacrifice nothing on quality, making them a viable option for those who seek the same status symbols for a more accessible price. In examining potential legal remedies for the superfake problem, it is important to consider not only United States trademark laws such as the Lanham Act, but also international treaties on intellectual property and law regulating the global exchange of goods.

Important Legal Frameworks for Analyzing the Superfake Problem

United States Regulations

While brands can protect their marks through various avenues of intellectual property law, one key protective measure for luxury brands is trademark law. In order to be eligible for trademark protection under the Lanham Act, a mark must be distinctive and used in commerce. In order to establish a trademark violation under this statute, the plaintiff must demonstrate that (1) the plaintiff has a valid and legally protectable mark; (2) the plaintiff owns the mark; and (3) the defendant’s use of the mark to identify goods and services causes a likelihood of confusion. In 1992, the Lanham Act was expanded to include trade dress, which is defined as “[t]he overall commercial image of a product or service[,]” which “may include the design or configuration of a product . . . [and] such elements as [the] size, shape, color” or overall consumer impression of a product, “to the extent [that] such elements are not functional.” Trade dress is divided into the categories of product packaging and product design, and in order to establish a trade dress infringement claim, the court applies the same test as a likelihood of confusion analysis. This test, however, focuses on the look and feel of the goods and services as a whole rather than a specific word or design element.

Counterfeiting is a subset of trademark or trade dress infringement, in that all counterfeit marks are infringements, but not all infringements involve counterfeited marks. Counterfeiting is the process of “placing a false trademark on a product, often of inferior quality, in order to make the product superficially indistinguishable from the genuine article.” Under 18 U.S. Code section 2320, counterfeit marks are those that are spurious, or inauthentic, identical or substantially indistinguishable from a plaintiff’s mark that is currently in use, and are applied to the same category of goods as the plaintiff’s mark. Additionally, the use of the mark must be unauthorized, and the counterfeit mark must cause confusion. 

International Protection of Intellectual Property

Early multilateral agreements on intellectual property included the 1883 Paris Convention for the Protection of Industrial Property (the “Paris Convention”), which created a Union of countries who policed domestic trademark registries on behalf of prominent trademark owners in other member countries.  Soon thereafter, the 1891 Madrid Agreement Concerning the International Registration of Marks (the “Madrid Agreement”) expanded on the provisions of the Paris Convention by creating a single registration scheme for trademark owners in member countries. 

In 1967, the World Intellectual Property Organization (“WIPO”) was founded to facilitate cooperation between the Paris Convention member countries, and in 1989, the terms of the Madrid Agreement were updated and codified in the Madrid Protocol (the “Protocol”), which ensures “continued protection of marks registered through WIPO within the territories of all countries who join the [Madrid] Protocol.” Similar to the Madrid Agreement, the Madrid Protocol provides international trademark protection for marks registered in any member country. Finally, the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights, or the TRIPS Agreement, was passed as a further expansion of the Madrid Protocol, adding obligations for member countries to prevent infringement. 

Inadequacies of the Current Framework

While the current intellectual property framework has evolved over time, it has much room for improvement. For example, the Lanham Act strives to encourage competition, prevent consumer confusion, and protect the goodwill of businesses, but does little to address the digital marketplace, leaving questions of intermediary liability unanswered. In terms of international law, the Madrid Protocol and its predecessors failed to create a comprehensive enforcement mechanism outside of domestic courts. These gaps in the legal system call into question the effectiveness of the current framework of international intellectual property law and necessitate a reform to account for the ways in which the internet is antiquating current regulations.

E-Commerce and Intermediary Liability

As of 2023, sixty-six percent of the global population are internet users and sixty-two percent are social media users. In the United States, ninety-two percent of the population are internet users, and of those users, almost every person has at least one form of social media. The impetus of the internet has created a complex web of international legal issues. Every country has different laws to regulate online privacy and activity, which has created ambiguity over who regulates what digital activity. The addition of intermediaries like Google further complicates the assignment of liability for digital infringements.

In the past two decades, the international counterfeit market has increased ten-thousand percent, due in large part to the inception of the internet and boom of e-commerce. Superfakes are sold primarily through digital channels, such as Amazon, eBay, and Etsy. However, under United States and European Union law, intermediaries are typically free from liability in trademark and trade dress infringement cases. The lack of uniform global regulations on e-commerce places an undue burden on intellectual property owners, leaving them to tediously track down infringements one by one after they occur. While privacy is an important facet to the digital world, technological reforms placing more responsibility on intermediaries to block the channels through which counterfeit goods are traded would create more barriers to trademark infringement and better protect intellectual property owners.

The excessive burden on trademark owners of policing infringement of their marks is evident in Tiffany & Co. Inc. v. eBay Inc., where Tiffany & Co. brought suit against eBay when seventy-five percent of the “Tiffany” goods sold on the site were counterfeit. The Court ruled that eBay had used the trademark in good faith and was therefore excused from liability as an intermediary. Since the Tiffany decision, it has been exceedingly difficult for brands to establish claims against intermediaries because they will generally not be found liable in the absence of intent to infringe. In copyright law, intermediaries have a “statutory obligation to block infringing material,” but trademark owners are expected to detect and investigate infringements after they have already occurred. E-Commerce exponentially increases the possible channels for buying and selling counterfeit goods and provides a shield of relative anonymity for buyers and sellers. This, combined with a lack of culpability for intermediaries, makes the digital landscape a hotspot for widespread trademark infringement.

The Role of Stakeholders in the Superfake Problem

Perhaps equally as problematic as e-commerce and its lack of intellectual property regulations is the complacency of consumers. In the European Union (“EU”), ninety-six percent of consumers value intellectual property protection for designers and brands, yet, eighty percent report having purchased a counterfeit product at least once. Ultimately, for consumers, status and value considerations outweigh concerns for trademark owners. This attitude shift is led in large part by Gen Z; those born between 1997 and 2012. With the rising prices of authentic luxury goods, improved quality and availability of superfakes, the stigma of purchasing superfakes among Gen Z consumers is significantly less than earlier generations. But despite the perceived positives of superfakes for these Gen Z consumers, counterfeit is not a victimless crime, and consumer complacency in fueling this problem increases the burden on trademark owners to protect their intellectual property.

Similar to consumers, governments of the countries producing these counterfeit products are complacent in the problem. For example, China, which is the biggest producer of counterfeit goods, lacks motivation to stop their production because of benefits to the local economy, and because China’s relationship with Western countries is becoming increasingly strained. Additionally, some countries allow “trademark squatting,” which allows an individual to “steal another’s mark” and register it in his own country despite knowing that it belongs to someone else. Trademark Squatting is prevalent in China due in part to its first-to-file system, and the fact that arbitrary and fanciful marks lack a direct equivalent translation to Chinese. For that reason, transliterations which mimic the brand name in its original language and have a meaningful Chinese translation are often used. For example, the transliteration of Coca Cola is “Ke Ko Kelu,” which mimics the sound of Coca Cola and translates to “delicious happiness.” This widens the range of possible infringements and forces trademark owners to be that much more vigilant in detecting and stopping infringements.

Recommendations

As the global issue of superfakes continues to escalate, urgent action must be taken to protect intellectual property rights from production to consumption. These actions, as discussed below, will need to come in the form of legal reforms, technological innovation, and cooperation between trademark owners, governments, and consumers.

Legal Reforms

The current international framework for regulation of trademark infringements is inadequate for the digital age. Proposed bipartisan legislation in the United States aims to reform e-commerce and stop counterfeiters by (1) establishing trademark infringement liability for e-commerce platforms that fail to implement best practices, (2) requiring trademark owners to provide e-commerce platforms such as eBay and Etsy with their protected mark and a point of contact so the platforms can implement proactive protective measures, and (3) providing a safe harbor for platforms that vet sellers and remove counterfeit listings and their sellers. While the proposed legislation, the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (”Shop Safe”) Act, would still place a burden on trademark owners to provide platforms with notice of their trademarks, it would offset the burden of policing infringements to digital platforms.

In the EU, various states are imposing their own reforms on intermediaries interacting with consumers in their countries. For example, in Cartier International AG v. British Telecommunications Plc., a landmark case in the United Kingdom, the High Court imposed liability on “intermediaries whose services are used by a third party to infringe an intellectual property right,” and held that “[intermediaries] have an essential role in these infringements, since it is via the [intermediaries’] services that the advertisements and offers for sale are communicated to ninety-five percent of broadband users in the UK.” Cartier represents a modernization of intellectual property law, and will no doubt form the basis of further judicial decisions that will help curtail infringements.  

In addition to individual state reforms, harmonization of international intellectual property law between Madrid Protocol member states is critical. Under the current framework, “the jurisdiction where a case is filed can dictate whether a claim for contributory infringement will be successful,” leading to inconsistent protections for trademark owners across jurisdictions. Therefore, the Cartier decision should be universally adopted to impose liability on intermediaries and harmonize trademark law across Madrid Protocol member states.

Technological Innovation

In addition to legal reform, technological innovation is essential to preventing trademark infringements. Two such technological innovations are (1) blockchain technology and (2) radio-frequency identification and near-field communication technology.

Blockchain is technology that creates a decentralized digital ledger enabling exchanges between multiple parties in a secure database. Due to its provision of a transparent record of the entire supply chain which cannot be tampered with, fraudulent activity can be more easily identified and stopped more proactively. Because origin is one of the biggest hurdles to infringement detection, blockchain technology would provide proof of origin and track the supply chain. 

Radio-frequency identification and near-field communication technology serves a similar function. These one-of-a-kind, impossible to replicate tags allow for real time authentication and tracking. The company that purchases the tags is the only one to have those identification numbers, which can be read and authenticated through smartphone technology.

Cooperation between Stakeholders

Finally, cooperation between governments, consumers, and trademark owners is imperative to tackle the superfake problem. Governments should engage in international partnerships to share intelligence, coordinate policing efforts, and harmonize legal frameworks to create a uniform set of standards for trademark infringements and alleviate the burden on trademark owners. Additionally, they should invest in the creation of an international trademark database to facilitate the sharing of intellectual property data between companies and reduce the burden on trademark owners. Consumers should remember that counterfeiting is not a victimless crime and shop accordingly. Companies should continue to engage in proactive protection, including through implementing more advanced authentication technology as it becomes more available. Collaboration between stakeholders creates a robust, interconnected network of resources and expertise and fortifies global efforts to safeguard trademarks.

Conclusion

The rise of superfake goods puts an enormous strain on international intellectual property rights. From modernizing the legal frameworks that govern international intellectual property rights, to implementing cutting-edge technology, to the crucial role of collaboration between governments, consumers, and intellectual property owners, it is evident that the only solution to the superfake problem is a multi-faceted one.Annotated Bibliography


International AntiCounterfeiting Coalition (IACC), “What is Counterfeiting”

  • The IACC provides a high-level overview of counterfeiting, including definitions, impacts, and strategies for combating it.
  • Available at: https://www.iacc.org/resources/about/what-is-counterfeiting (last visited November 10, 2023).

U.S. Customs and Border Protection, “Intellectual Property Rights (IPR)”

  • This resource from the U.S. Customs and Border Protection outlines the importance of protecting intellectual property rights and offers information on enforcement priorities and measures in place to address intellectual property infringements.
  • Available at: https://www.cbp.gov/trade/priority-issues/ipr (last visited November 10, 2023).

Zach Mayford, Ebrand, “Superfakes: In Pursuit of the Perfect Counterfeit Luxuries”

  • Ebrand explores the rise of “superfake” products, providing an overview of the techniques used and the components involved in producing these high-quality counterfeits, as well as the consumers
  • Available at: https://ebrand.com/blog/superfakes-in-pursuit-of-the-perfect-counterfeit-luxuries/#:~:text=Typically%2C%20fakes%20and%20counterfeits%20give,replicas%20with%20luxury%2Dstandard%20components (last visited November 10, 2023).

The Lanham Act, 15 U.S.C. § 1051

The Lanham Act is a pivotal piece of intellectual property legislation that outlines protections for trademark owners under United States Law.

Citation: 15 U.S.C. § 1051.

  • ARTICLE: Haute Couture’s Paper Shield: The Madrid Protocol and the Absence of International Trademark Enforcement Mechanisms
  • This law review article explores the Madrid Protocol’s impact on international trademark enforcement mechanisms, analyzing the drawbacks of the current legal framework and proposing potential solutions.

Citation: 45 N.C.J. Int’l L. 645.

  • 1A Gilson on Trademarks § 5.19 (2023)
  • This secondary source provides comprehensive interpretations of trademark and other intellectual property statutes.
  • Citation: 1A Gilson on Trademarks § 5.19 (2023).

18 U.S. Code § 2320

This statute defines and addresses counterfeit and trafficking offenses and it is a key piece of legislation in United States trademark law because of the impact of counterfeiting on trademark owners.

Citation: 18 U.S. Code § 2320.

  • Statista, “Internet Usage in the United States”
  • This resource provides data relating to social media and internet usage in the United States and globally, providing valuable context for understanding how large the digital landscape has become and what implications that has on international intellectual property.
  • Available at: https://www.statista.com/topics/2237/internet-usage-in-the-united-states/#editorsPicks (last visited November 11, 2023).

NOTE: FASHION FORWARD: THE NEED FOR A PROACTIVE APPROACH TO THE COUNTERFEIT EPIDEMIC

  • This legal note from the Brooklyn Journal of International Law outlines potential solutions to the counterfeit problems and emphasizes the importance of proactivity in protecting trademarks.
  • Citation: 41 Brooklyn J. Int’l L. 875, 877.

Tiffany & Co., Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010).

  • This case in which Tiffany & Co. sued eBay for selling counterfeit Tiffany goods on their platform was a highly precedential case that determines how intermediary liability issues are handled in trademark law.
  • Citation: 600 F.3d 93 (2d Cir. 2010)

Melissa Singer, Sydney Morning Herald, “As easy as ordering pizza: how Gen Z is shifting the debate over fakes”

  • An article from the Sydney Morning Herald that discusses the role that Gen Z plays in exacerbating the superfake problem and provides valuable insight as to the way that societal factors contribute to trademark law. 
  • Available at: https://www.smh.com.au/lifestyle/fashion/as-easy-as-ordering-pizza-how-gen-z-is-shifting-the-debate-over-fakes-20230822-p5dyeu.html (last visited November 11, 2023).

Amy X. Wang, New York Times, “Celine, Chanel, Gucci: The World of Superfake Handbags”

  • This in-depth New York Times article provides an overview of superfake products and uses real experience to highlight the process of obtaining superfakes and how easy it has become to buy them.
  • Available at: https://www.nytimes.com/2023/05/04/magazine/celine-chanel-gucci-superfake-handbags.html (last visited November 11, 2023).

ARTICLE: TRADEMARK SQUATTING AND THE LIMITS OF THE FAMOUS MARKS DOCTRINE IN CHINA

  • This article from the Georgetown Law Review discusses trademark issues that are specific to trademark owners registering in China, but can apply globally. This author talks a great deal about Chinese transliteration and trademark squatting, both of which compound the difficulty of protecting a trademark in China.
  • Citation: 47 Geo. Wash. Int’l L. Rev. 57, 76.

Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, S. ____, 118th Cong.

  • A proposed legislative act aimed at addressing intermediary liability and fostering communication between e-commerce platforms and trademark owners
  • Citation: SHOP SAFE Act, S. ____, 118th Cong.

Julia Powles, The Guardian, “Internet Service Providers Can be Ordered to Block Sites Selling Fake Goods, High Court Rules”

  • This Guardian article is a bit older, but it discusses a monumental British high court ruling which imposed trademark infringement liability on e-commerce platforms for the first time.
  • Available at: https://www.theguardian.com/technology/2014/oct/20/internet-service-providers-fake-goods-high-court-rules (last visited November 12, 2023).

Onkar Singh, Cointelegraph, “An Overview of Fake Product Detection Using Blockchain Technology”

  • Singh discusses the technological advancements that can be used by luxury brands to combat counterfeiting at all levels of the supply chain.
  • Available at: https://cointelegraph.com/explained/an-overview-of-fake-product-detection-using-blockchain-technology (last visited November 11, 2023).

Brooke Unger, The Economist, “The Secret Economics of the Birkin Bag,” 


Endnotes

1  International AntiCounterfeiting Coalition (IACC), “What is Counterfeiting,” https://www.iacc.org/resources/about/what-is-counterfeiting (last visited November 10, 2023).

2 U.S. Customs and Border Protection, “Intellectual Property Rights (IPR),” https://www.cbp.gov/trade/priority-issues/ipr (last visited November 10, 2023).

3  See id.

4  Zach Mayford, Ebrand, “Superfakes: In Pursuit of the Perfect Counterfeit Luxuries,” https://ebrand.com/blog/superfakes-in-pursuit-of-the-perfect-counterfeit-luxuries/#:~:text=Typically%2C%20fakes%20and%20counterfeits%20give,replicas%20with%20luxury%2Dstandard%20components (last visited November 10, 2023).

5  Brooke Unger, The Economist, “The Secret Economics of the Birkin Bag,” https://www.economist.com/1843/2016/07/28/the-secret-economics-of-the-birkin-bag (last visited March 10, 2024).

6  See id.

7  See id.

8  15 U.S.C. § 1051

9  Id. at § 1114

10  ARTICLE: Haute Couture’s Paper Shield: The Madrid Protocol and the Absence of International Trademark Enforcement Mechanisms, 45 N.C.J. Int’l L. 645, quoting 15 U.S.C. § 1051 (hereinafter, Haute Couture’s Paper Shield)

11  See id.

12  1A Gilson on Trademarks § 5.19 (2023) 

13  18 U.S. Code § 2320

14  Id.

15  Haute Couture’s Paper Shield 45 N.C.J. Int’l L. 645

16  Id. at 663, quoting Madrid Protocol, supra note 9, art. 2(1).

17  See id.

18  Id. at 664.

19  Statista, “Internet Usage in the United States,” https://www.statista.com/topics/2237/internet-usage-in-the-united-states/#editorsPicks (last visited November 11, 2023).

20  NOTE: FASHION FORWARD: THE NEED FOR A PROACTIVE APPROACH TO THE COUNTERFEIT EPIDEMIC, 41 Brooklyn J. Int’l L. 875, 877. (hereinafter, Fashion Forward)

21  Id.

22  Id., citing Tiffany & Co., Inc. v. eBay, Inc., 600 F.3d 93 (2nd Cir. 2010).

23  See id.

24  Id. at 896.

25  Haute Couture’s Paper Shield at 666.

26  Melissa Singer, Sydney Morning Herald, “As easy as ordering pizza: how Gen Z is shifting the debate over fakes,” https://www.smh.com.au/lifestyle/fashion/as-easy-as-ordering-pizza-how-gen-z-is-shifting-the-debate-over-fakes-20230822-p5dyeu.html (last visited November 11, 2023).

27  Amy X. Wang, New York Times, “Celine, Chanel, Gucci: The World of Superfake Handbags,” https://www.nytimes.com/2023/05/04/magazine/celine-chanel-gucci-superfake-handbags.html (last visited November 11, 2023).

28  Haute Couture’s Paper Shield at 667.

29  Id.

30  ARTICLE: TRADEMARK SQUATTING AND THE LIMITS OF THE FAMOUS MARKS DOCTRINE IN CHINA, 47 Geo. Wash. Int’l L. Rev. 57, 76.

31  Id.

32  Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, S. ____, 118th Cong.

33  Julia Powles, The Guardian, “Internet Service Providers Can be Ordered to Block Sites Selling Fake Goods, High Court Rules,” https://www.theguardian.com/technology/2014/oct/20/internet-service-providers-fake-goods-high-court-rules (last visited November 12, 2023).

34  Fashion Forward, 41 Brooklyn J. Int’l L. 875

35  Onkar Singh, Cointelegraph, “An Overview of Fake Product Detection Using Blockchain Technology,” https://cointelegraph.com/explained/an-overview-of-fake-product-detection-using-blockchain-technology (last visited November 11, 2023).

36  Id.

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