Positioning trademark portfolios and supply chains to combat counterfeits

Failure to apply for trademarks in applicable areas can result in a window of time where counterfeiters can act with impunity

The regular stories about companies finding themselves in uncomfortable trademark and branding positioning in foreign jurisdictions make for good water cooler talk. “Hey, did you hear about ABC Corp.? There is some guy who registered ABC Corp. in China and now that guy is suing ABC for selling products there.” Or worse, “There is some guy who registered ABC Corp. in China and is now selling products and pretending to be ABC there.” No one wants to be the subject of this type of water cooler talk, and with a little planning you don’t have to be. In the first article in this series we discussed budgeting for anti-counterfeiting programs. The second article in this series will begin to drill down on two worthy recipients of those valuable funds with an eye toward avoiding the above scenario.

Trademark portfolio

A strong trademark portfolio is the backbone of a strong anti-counterfeiting program. Without trademark registrations in relevant strategic jurisdictions, a company may be required to fight counterfeiters with one or even two arms tied behind its back. Companies traditionally conduct a “what, where & when to file” analysis to determine the make-up of a trademark portfolio. While the elements of this analysis are the same when considering anti-counterfeiting positioning, the ultimate decisions may differ slightly.

In the “what to file” category, most companies have at least one trademark, whether it be a company name or a product brand, that is the organization's franchise player. It is the name or brand on which the company's reputation and market recognition is based. These are the flagship marks. Recognizing the flagship marks and understanding the need for protecting them is the first step to optimized security.

Next come the secondary marks. These marks or names are used by the company less frequently but tend to produce some market recognition. Cross-product slogans or names attached to component parts fall in this category.

The last category can be termed, minor marks. These marks include one-off slogans, technical names etc. From an anti-counterfeiting perspective, companies should focus first and foremost on their flagship marks and then cherry pick a few important secondary marks. It is these trademarks which are most likely to be valuable to a counterfeiter.

Next, a company must determine “where to file.” Clearly a U.S. company will want U.S. registrations. However, while a large amount of counterfeit products are shipped to the U.S., most fake products are not made in the U.S. Further, it is important to keep in mind that the majority of the world employs a "first to file" system, whereby the first party to file an application for a trademark is the first who obtains rights to use the mark. The “first to file” system allows enterprising would-be counterfeiters to jump ahead of a sleeping brand holder and register the trademark. The mark can then be held for ransom or used legally to make counterfeit products in that jurisdiction. This is an issue in China in particular where there are regular news stories of brand owners, most recently Tesla, in a heated battle over a trademark which is undisputed in the rest of the world.

When considering “when to file” from an anti-counterfeiting perspective, filings should happen as far out from the actual product launch as possible so as to ensure that registrations have been issued by the time the company/product has achieved market recognition. In most jurisdictions, applications take between six months to two years (sometimes more) to proceed to registration and filed applications do a company no good. A company cannot avail itself of the laws involving trademark infringement or counterfeiting without issued registrations.

There is no one-size-fits-all approach to establishing an appropriate trademark portfolio. Every company’s calculus is different. However, no company wants to be in the position where it does not have the tools to fight counterfeiters when they strike, and a careful consideration of the worst case scenario early on can save multiple headaches and lost revenue later on.

Supply chain

From an anti-counterfeiting perspective, organization of the supply chain is the key to stopping many problems before they start. First, a company should maintain a complete list of all of its manufacturers, distributors and licensees worldwide. Second, the agreements pertaining to those parties should, wherever possible, be uniform especially with regard to the intellectual property provisions. Third, those agreements should explicitly list all sales channels in which the party may operate and in particular specifically discuss online e-commerce platforms such as Amazon, Alibaba and others. Often, these simple precautions are overlooked in the frenetic pace of running a business. In the confusion of a reported counterfeiting problem, companies are unable to confirm whether an alleged counterfeiter is actually an authorized seller of products and further whether that party, even if they are authorized to sell in one channel, are also authorized to sell in the one posing a problem. Simple organization of the information about members of a company’s supply chain and clear terms involving who can sell to who and how can alleviate much confusion and allow a company to focus immediately on the truly bad actors.

Conclusion

Don’t be a statistic. Thoughtful planning both with regard to a company’s trademark portfolio and supply chain organization are keys to a successful anti-counterfeiting program. While it is hard to slow down and devote resources to an issue which is not on the front burner, failure to do so can result in a window of time where counterfeiters can act with impunity.

Contributing Author

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Kelly Phair McCarthy

Kelly McCarthy, an intellectual property attorney at Sideman & Bancroft in San Francisco, focuses her practice on trademark, brand protection and anti-counterfeiting issues. She...

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