It is impossible to know the true cost to legitimate businesses of unauthorized imitations of their products or services, and of the efforts made to fool consumers about the true identities of those who seek their patronage. Not only are sales lost, but immeasurable damage can be done to a trademark owner’s reputation by shoddy knock-offs of licensed products. The invention and steady, geometric growth of e-commerce has given counterfeiters an unprecedented tool with which to ply their trade. No sooner is one unauthorized website closed down than another one is likely to pop up to take its place.

Fortunately, the adaptability of the Internet to such illegitimate uses was foreseen by Congress in 1999, when it enacted the Anticybersquatting Consumer Protection Act (“ACPA”) as an addition to the trademark statutes. Cybersquatting has been coined as the term for a wrongful registration and use of an internet website name which closely imitates the distinctive trademark of a legitimate company, with the intent to make money by exploiting the fame and reputation of the trademark

Among other things, the ACPA makes it possible for a trademark holder to hold liable anyone who:

(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark . . .; and

(ii) registers, traffics in, or uses a domain name that–

(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;

(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or

(III) is a trademark, word, or name protected by reason of [special statutes protecting the American Red Cross and the U.S. Olympics Committee].

In the past several years, the courts have handed down damage awards under the ACPA totaling about $1.1 billion to companies including Polo Ralph Lauren and The North Face ($78 million in September 2010); Tory Burch footwear, handbags and accessories ($164 million in June, 2011); and True Religion Apparel ($863.9 million in March 2012), against 106 unknown counterfeiters discovered to have been operating out of China.

Of course, there is probably no way to collect $863 million from 106 unidentified counterfeiters operating out of China, but that was never the core purpose of taking the case to court. The real victory in all of these lawsuits is that the courts have entered judgments directing that the counterfeit websites be taken down, that their PayPal accounts be “frozen” and that their domain names be legally transferred to the legitimate manufacturers. In the case of the Tory Burch lawsuit, 41 cybersquatting defendants who apparently operated over 230 domain names were affected, which certainly curtailed a lot of future injury. The inability to recover damages but the ability to obtain such injunctions thus makes the ACPA a mixed bag, but certainly a useful tool in the right situation.

The fashion industry, including the American Apparel & Footwear Association, has also worked at times to teach manufacturers about things they can do on a practical level. For example, in a panel discussion in February 2012, one such suggestion was that companies use the Internet to help consumers distinguish between authorized and unauthorized brand retailers. The maker of Ugg footwear, for one, now maintains an online database where consumers can view a complete list of authorized online retailers. Another, rather ironic, tactic is to turn a counterfeiting website (after obtaining it in an ACPA suit) into a forwarding address to the trademark holder’s own legitimate website.

In any and all events, trademark owners and/or licensees should regularly monitor the world of commerce for counterfeiters and thieves of all stripes and methods. To fail to do so is only an invitation for the fox to take up residence in the henhouse without any threat of consequences.

Richard Turyn is a BSBN Partner and the Editor of BSBN Direct. He may be contacted at rturyn@ballonstoll.com.

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