For every designer bag created, there is someone out there willing to make a knockoff version of it. As such, a market for knockoff bags has grown immensely but there is a fine line between counterfeited bags versus bags that only cause infringement.
What is a Trademark?
A trade is any word or symbol used to associate goods or services with the manufacturer. Trademarks can be brand names like Apple, McDonald’s or Coach; they can also be product names like iPod and Big Mac. Trademarks also extend out to company logos like the Adidas Three Leaf or the Louis Vuitton LV logo. Even company slogans are a trademark such as “I’m lovin’ it” or “What’s in your wallet?”
What is the Purpose of a Trademark?
These are all goods associated with a specific good or service and whether you hear a jingle or see the logo, you as a consumer will know what you are purchasing and what you will receive. The purpose of the trademark is to prevent deception and confusion for customers. Trademarks also protect the goodwill of businesses by not letting others misrepresent their source of goods or services.
What is Trademark Counterfeiting?
Trademark counterfeiting occurs when services are presented or advertised in a way to trick consumers into thinking they come from a legitimate source. An example of this is a manufacturer producing unauthorized goods that closely resemble a brand name good, like a knockoff bag of Louis Vuitton versus a legitimate bag. Some knockoff brands are produced so well that at times consumers may not notice the difference.
What is the Difference Between Counterfeit and Infringement?
It is important to note, trademark counterfeiting is also considered trademark infringement. But not all infringements are qualified as counterfeit goods. A counterfeit mark is a mark that looks nearly identical to an authentic good or service. Whereas infringements include marks similar but not identical to the real mark. If the mark is similar the good or service is more likely to be considered infringement than counterfeit.
What is the Lanham Act?
This act was enacted by Congress in 1946 and provides a national system of trademark registration and protects the owner of a federally registered mark against the use of similar marks if such use is likely to result in consumer confusion.
For trademark violations under the Lanham Act and to establish there was an infringement violation. A prosecution must demonstrate they had a valid and legally protectable mark and they own the mark. They must also prove the defendant’s use of the mark to identify a good or service can also cause a likelihood of confusion.
Defense Against the Lanham Act
In order for the defendant to defend themselves against the prosecution of the Lanham Act it is easy to debunk the criteria one by one. Fair use is something the courts recognize and there are two types.
The first type is, some trademarks consist of a word or phrase. Although that word or phrase is simply being used as a description of an object or process, not the word’s second meaning. For example, in Sunmark, Inc. V. Ocean Spray Cranberries, Inc., during the court of appeals, Ocean Spray determined that the term “sweet-tart” to describe the flavor of the juice was fair use. And that it did not infringe upon Sunmark’s trademark of sweet tart candies.
The second type is nominative fair use, which occurs when one party uses the trademark to identify another party’s product. This occurs mostly in advertisements or on television and we see it all the time, for instance, when Snickers compares its candy bar to Butterfinger to demonstrate the differences between the two.
A parody defense is also available to use and is covered under the first amendment freedom of speech protection. The parody must not overtly tie into commercial use. It is important to note the first amendment does not offer blanket protection against slander or disparagement.
Some other defenses included are; if the prosecution allowed the defendant to use the mark then they cannot claim infringement, as they originally allowed for the trademark to be used. A defendant can also contest the registration of the trademark if the trademark is younger than five years old. They can claim the owner’s right to exclusive use of the trademark had not been developed yet. Also, it is important to note a prosecutor who committed illegal acts or egregious conduct can not assert infringement.
Why is Trademark Counterfeiting a Big Deal?
Brand owners lose significant revenue each year due to counterfeit product sales and the ones who are being targeted normally are successful brands like Ray-Ban sunglasses, Rolex watches, Burberry apparel and even name-brand perfumes such as Chanel. Besides the monetary losses, many brands’ reputations are at risk of being hurt by consumers not knowing they bought counterfeit products.
Misappropriation of the Trademark
There are instances where people on the market affix a brand logo or name to a product that has no association with the actual product. Thus consumers end up buying it trusting it is the same reputable brand they always brought from. Bad reviews of the product can impact a business significantly even if it was no fault of their own.
The misappropriation of trademark rights can cause significant damage to the economics of a business by loss of profits and market share by the brand owner. It also tarnishes the brand name as most counterfeit products are of lesser quality than branded products.
What is the Punishment for Trademark Counterfeiting?
The defendant’s offense charges can vary based on different factors, such as: the total value of the counterfeit goods worth, if the retail value of the item, goods or service is less than $100, it is considered a class C misdemeanor. This is punishable and can possibly include a fine that does not exceed $500.
If the value of the item, goods or service is between $100-$750 then it is classified as a class B misdemeanor and the punishment for this offense is confinement in jail for up to 180 days, fines that do not exceed $2,000 or the punishment can be both.
If the value of the item, goods or service is between $750-$2,500 then it is considered a class A misdemeanor. This offense holds a punishment of jail for up to one year, fines up to $4,000 or both confinement and fines.
As the value of the item, goods or service price increases, so does the punishment for the defendant, if the value is $2,500-$30,000.00 it becomes a state jail felony. This means confinement to the defendant in a state jail for up to two years, but no less than 180 days and fines not exceeding $10,000.
If the retail value of the item, goods or service is between $30,000-$150,000 then it is classified as a third-degree felony. The punishment is imprisonment in an institution for two to ten years, with the addition of fines up to $10,000.
If the value of the item, goods or service is between $150,000-$300,000 it is a second-degree felony. The punishment for this is two to 20 years in prison with the addition of fines up to $10,000.
And the highest offense is, if the value of the item, goods or service is $300,000 or more then this is called a first-degree felony. The punishment for this crime is serving time in prison for anywhere from five years to ninety-nine years with the possibility of fines up to $10,000.
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