Thwart Counterfeiters to Save Brands | A Metropolitan Corporate Counsel Interview


Kristen McCallion and Natalie Arbaugh discuss emerging trends in brand protection and anti-counterfeiting, and how consumer products companies can protect their valuable brands from trademark infringers and counterfeiters in an interview with Metropolitan Corporate Counsel.
MCC: You both have very interesting trademark practices that complement each other very well. Can you tell me a little bit about what you do and how you work together to help clients protect their brands?
McCallion: A significant part of my practice is devoted to helping clients clear and adopt strong trademarks and maximize the value of their trademark portfolio through registration, proper trademark use and policing. Together with my clients, I develop global filing programs, securing registrations around the world as needed to develop comprehensive portfolios. Our approach is very proactive, with a focus on fortifying brand strength and reducing the costs associated with domestic and foreign trademark disputes. I also regularly counsel clients on a broad spectrum of copyright matters, including infringement, registration, licensing and fair use, and I formulate both offensive and defensive strategies in copyright disputes.
Arbaugh: I am primarily a trial lawyer who represents plaintiffs and defendants in a variety of industries—including luxury fashion, consumer products, entertainment and others—in state and federal courts throughout the country in complex and often high-profile business and intellectual property (IP) disputes. I counsel clients on strategies for developing, enforcing and protecting their trademarks and other IP. On the trademark enforcement side, I have led many clients' national anti-counterfeiting campaigns, including handling over 100 trademark infringement matters for leading luxury fashion designers and other companies. Kristen and I work together regularly because our practices and experiences complement each other in a way that enables us to provide the best value to our clients. While Kristen's practice is more heavily weighted toward our clients' prosecution strategy, my practice is more heavily weighted toward enforcement and litigation strategies. Together, we can solve any client's problem in the most creative and efficient way possible.
MCC: Natalie, you have led a significant number of anti-counterfeiting campaigns for leading luxury fashion designers. What is the most interesting case you've ever handled?
Arbaugh: The most interesting case I've handled was representing a leading luxury fashion designer against a massive supplier of counterfeit jewelry. The infringer had placed over a million pieces of counterfeits into the marketplace and supplied hundreds of wholesalers, distributors and retailers throughout the country with the counterfeits. After receiving complaints from my client, the infringer fraudulently obtained a trademark registration with the U.S. Patent and Trademark Office (USPTO) by creating and submitting false specimens to support its trademark application. During the course of the litigation, the infringer not only counterclaimed my client for abuse of process and other claims but also defrauded the court by committing perjury and manufacturing, altering and spoiling evidence to support its positions in the lawsuit. After methodically building a case to show the defendant's fraudulent conduct, we were able to obtain sanctions against the infringer, a finding that the infringer committed fraud on the USPTO and the court, and a summary judgment in favor of our client, which included a trebled damages award of $38 million.
MCC: Kristen, you've also handled a number of very interesting and high-profile cases for clients. Which ones stand out for you?
McCallion: I recently defended a trade dress case brought against a family-owned importer and distributor of baby feeding products. The plaintiffs filed an incredibly broad suit, alleging trade dress infringement of over a dozen different shapes of sippy cups, feeding bowls and the like. We were successful in dismissing the plaintiff 's federal and trademark dilution claims on a 12(b)(6) motion, staying a design patent claim and negotiating a dismissal with prejudice of all claims against the client concerning nine of the original products at issue. After that, we prevailed on a motion for partial summary judgment when the court found that two of the remaining products at issue were generic "common shapes frequently used in the sippy cup industry" that do not warrant trade dress protection under the Lanham Act. On the plaintiff side, I was successful in shutting down an infringer's copying of a client's copyrighted translations of ancient religious Greek texts. The First Circuit published a significant opinion in that case on many interesting copyright issues, including that translations are copyrightable works and that the art of translation is a creative process that involves artistic choices.
MCC: How big a problem is counterfeiting to consumer products companies, and are some categories, like fake drugs and foods, which obviously pose potentially serious health risks to consumers, an even bigger issue?
Arbaugh: Counterfeiting is a huge problem with consumer products, and an even more concerning problem in the drug and food industries, where the biggest threat is not necessarily the revenue hit that legitimate brands take as a result of the counterfeiting but the danger to public health and safety. While some consumers knowingly purchase counterfeits (especially in the fashion industry), the unknowing purchase of counterfeits in the food and drug industry is frequent. Detection of counterfeits is extremely difficult because so many are distributed and sold online. Our clients are advised to stay alert, track the problem so that it can be addressed and support anti-counterfeiting regimes with proper resources.
MCC: Do you see an increase in companies going after counterfeiters and why?
Arbaugh: Companies are definitely fighting counterfeiting as much as ever, but some industries and brand owners are more active than others. The problem with fighting counterfeiting is that it can be extremely difficult to obtain true deterrence and eradication without the backing of a hefty budget. On the other hand, if a brand owner does nothing, the problem only multiplies and can quickly spiral out of control. We help clients develop and implement anti-counterfeiting policies and programs because policing and enforcement are critical to protecting a business these days, and maintaining the company's brand strength and goodwill with its consumers and prospective consumers is an absolute imperative.
MCC: What are the inherent challenges in going after infringers in China? Do you have any creative suggestions for brand enforcement in China?
McCallion: China frequently proves difficult because it is common to face challenges in procuring a trademark registration before even getting to the point of going after infringers. This occurs in other countries too. In China, we advise our clients to be proactive and to register both their trademarks and copyrights there. These registrations will hopefully reduce the common challenges we face in going after infringers in China, where registration is very important. With certain logos, for example, copyright law also may be employed to further enhance and protect a brand owner's IP rights, which is a creative way to amplify a client's registration portfolio in China. Copyright law can provide relief against infringement of logos in a country where a brand owner may not be able to take advantage of trademark law. Importantly, there is no "use in commerce" requirement for copyrights, making it more likely to secure relief in countries where trademark owners often get bogged down with the technical requirements for compliance with local trademark law when pursuing cases against infringers. In addition, the Berne Convention enables cross-jurisdictional enforcement of copyrights so that logo owners may deter and prevent copyright infringement abroad without obtaining a copyright registration before filing suit. In China, there has been a growing trend to rely on a copyright registration as evidence of a "prior right" that is successfully asserted in trademark opposition proceedings. The Ritz Carlton lion and crown design, the Tesla T design, the Illinois Tool Works ITW logo, and other logos that contain sufficiently distinctive designs have all been recognized as a "prior right" under Article 31 of the China Trademark Law. So using copyright law—in addition to trademark—is one creative solution in going after infringers in China, at least in an opposition proceeding where priority is a critical factor.
MCC: If a company thinks someone has hijacked its mark or is producing counterfeit products, what is the first thing it should do?
Arbaugh: Make sure you have all your ducks in a row and methodically build your evidence against the counterfeiter. Then act quickly by, among other things, deciding whether any further investigation needs to be done to establish the full scope and extent of the production and sales, whether you need to seek injunctive relief and have the products seized, whether an initial cease-and-desist letter may work to stop the sales of the products, and whether you need to sue immediately. There is no one-size-fits-all approach to this because it is very case specific. While you need to act quickly, you should not act so quickly that you haven't established the evidence you need to support your next move.
MCC: What are the most important brand management strategies that companies should be executing right now to head off future problems in both counterfeiting and in their general brand protection overall?
McCallion: Setting up a global trademark watch service is something we always recommend. The more common watch services monitor the trademark registers, but common law watches are also available in certain situations. Consistently monitoring online retail and social media sites is also critical. Domain watches are helpful for some clients, particularly if the client owns a mark that is likely to be included in a URL to attract unwary purchasers. Registration is also very important to brand management. And if a client sells products through distributors overseas, communications about proper trademark licensing and use by these distributors is always important. This will hopefully prevent a distributor from "mistakenly" obtaining a trademark registration in their local jurisdiction for the brand owner's trademark. This scenario can lead to some very tricky situations that are best avoided from the outset. Companies should also consider registering their trademarks and copyrights with the U.S. Customs and Border Patrol to help government officials identify and seize counterfeit goods that enter the U.S.