Protecting the Brand: Busting the Bootlegs
By Peter Hlavnicka and Anthony M. Keats
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About this ebook
Protecting the Brand, Volume II: Busting the Bootlegs follows Volume I which provides a unique combination of legal and business best practices related to intellectual property protection.
This second volume showcases U.S. states specific legal statues and examples related to the legal approach to counterfeiting and grey market issues. The primary emphasis is to provide advice to U.S. companies navigating the complex domestic legislation and provide a single source of reference for both law practitioners and those tasked with intellectual property rights enforcement and compliance who need to understand the applicable state legislation.
Both volumes of this book are focused on leveraging trademark enforcement while also commenting on copyright and patent enforcement, establishing a framework for successful brand protection in the future.
Peter Hlavnicka
Peter Hlavnicka is Venture Partner with R3i Ventures and Founder of Phi Ventures specializing in risk management, IP strategy/commercialization, and brand protection. Previous roles include director brand protection APAC (Fitbit), director pricing (Blackberry), director IP protection & enforcement (Dolby Laboratories). Mr. Hlavnicka’s other roles included strategic pricing, ERM, contract management, operations, and SCM (Nortel, Avaya). He is an active speaker, writer, and contributed to numerous publications, including Business Week. Mr. Hlavnicka received his MSc in computer science from the Technical University of Kosice, Slovakia, and his executive MBA from the University of Western Ontario, Richard Ivey School of Business.
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Protecting the Brand - Peter Hlavnicka
CHAPTER 1
State Civil and Criminal Anti-Counterfeiting Statutes
A Parallel System of Trademark Anti-Counterfeiting Statutes
Although the Founding Fathers of the United States considered the need to encourage innovation and protect creativity for limited periods of time through patents and copyrights, they did not give trademarks similar consideration. In fact, although counterfeiting had been taking place in various forms for centuries, trademark counterfeiting has grown exponentially in the modern industrial age. While federal and state governments have recognized the need to protect the consumer from confusion with regard to the source of a product or service, there has also been a significant surge in the value of trademark assets through commercial advertising and sales of branded goods. This has created portfolios of valuable assets for the brand owners as well. The confluence of these two interests has brought about the passage and implementation of state, as well as federal, civil, and criminal anti-counterfeiting statutes.
In the United States, unlike the exclusive federal laws pertaining to patents and later to copyrights, a parallel system of state and federal law developed to protect trademarks. Commercial issues relating to false labeling, forgery, and the like led to the development of various unfair trade practice laws among the states. Almost every state had these types of consumer protection statutes. For example, in 1881, New York’s legislature enacted Penal Code Section 364, which made trademark counterfeiting a misdemeanor.¹ However, as commerce became national in scope and products and services were available throughout the country, consumers needed the same protection everywhere. Unfortunately, many states treated the same harm to the consumer differently.²
Congress enacted the Lanham Act in 1946 in order to provide national protection for trademarks used in interstate and foreign commerce. S. Rep. No. 1333, 79th Cong., 2d Sess., 5 (1946). Previous federal legislation, such as the Federal Trademark Act of 1905, 33 Stat. 724, reflected the view that protection of trademarks was a matter of state concern and that the right to a mark depended solely on the common law. S. Rep. No. 1333, at 5. Consequently, rights to trademarks were uncertain and subject to variation in different parts of the country. Because trademarks desirably promote competition and the maintenance of product quality, Congress determined that a sound public policy requires that trademarks should receive nationally the greatest protection that can be given them.
³
Congress passed the Lanham Act in 1946 to bring a single unified statutory scheme to the treatment of trademarks, similar to that accorded to patents and copyrights before.
Why Is the Parallel System of Trademarks Important or of Value?
Unlike patent and copyright protection, state laws relating to trademarks may be broader than the Lanham Act.⁴ The Lanham Act does not preempt state law.⁵ Both federal and state courts have concurrent jurisdiction over matters arising under the Lanham Act.⁶
From a practical point of view for practitioners involved in enforcement efforts against counterfeiters, the ability to use either federal or state law is of great benefit. A rights holder may be a new company that has only been able to obtain a state trademark registration in its short existence, while its federal trademark application is still pending. The federal Lanham Act requires a federal registration for its anti-counterfeiting provisions to apply.⁷ A mark may not have been registered federally if it was only used in intrastate
commerce. The Lanham Act requires that the federal registration be for the class of goods upon which the counterfeit goods are applied.⁸ For example, a trademark registration for handbags will not permit federal enforcement when it is a fragrance that is the subject of the counterfeiting. Certain states, however, do not require that the trademark registration be for the same type of goods as those being counterfeited.
The Lanham Act defines a counterfeit mark as:
1. A counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use whether or not the person against whom relief is sought knew such mark was so registered; or
2. a spurious designation that is identical with, or substantially indistinguishable from, a designation as to which the remedies of this chapter are made available by reason of section 220506 of Title 36. ⁹
This will differ from the definition of a counterfeit mark provided in certain state statutes. Some states may have a statutory definition that is broader, such as including imitation.
¹⁰ In addition, there are other benefits, ranging from legal presumptions of exclusive rights¹¹ to providing constructive notice of the trademark rights to counterfeiters within the state.¹²
Of greater significance with respect to enforcement of the criminal statutes is the practicality of determining which law enforcement agencies will be interested in receiving a criminal referral, a state department of justice or the Federal Bureau of Investigation (FBI) and the U.S. Attorney’s Office. It will more often than not be the case that criminal enforcement will be a local matter at the state, county, or city level, often only requiring the showing of a state trademark registration at a minimum. The dollar value of the case or whether the subject goods involve health and safety or national security issues will also be factors in considering whether to look to state or federal law enforcement agencies.¹³