Anti-Counterfeiting and your intellectual property rights

Simon Miles, Head of Edwin Coe’s Intellectual Property team provides a useful guide for businesses dealing with intellectual property crimes or looking to safeguard their IP rights against future infringements. Use the Download buttons on this page for a shareable PDF copy of this legal guide.

Introduction

IP crime, in the form of brand and identity theft, is now at the very centre of organised crime. The UK Trading Standards Survey published on 31 July 2023 emphasised two trends. The published report stated:

“At the same time as IP criminals exploit developments in online technology through identity fraud and online fakery; traditional networks – through shops and markets, selling commonplace counterfeit items like cigarettes, clothing and jewellery – remain significant threats to honest traders and consumers. The war against IP crime has become a complex operation, combining insights into transformative online technology and age-old investigative techniques acquired through experience on the streets.”

Effective anti-counterfeiting action requires a co-ordinated strategy underpinned by appropriate IP rights including trade marks, designs and copyright (the UK legal framework for the rights is set out in the Annex in page 9) and backed up by the use of technology.

The rights-owner’s priorities, its resources and the extent of the counterfeiting activity will determine the preferred course of action. Possible action that can be taken includes:

• Border measures by customs authorities
• Civil Court action
• Criminal proceedings and working with law-enforcement authorities
• Private prosecutions
• Targeting websites and ISP’s to take-down online counterfeit goods and illegal grey market goods.

Border measures by customs authorities

UK law provides processes to prevent counterfeit goods finding their way into the UK. Rights-owners should record relevant trade mark and design registrations with UK Customs officials – ‘Border Force’ – which has the power to detain and destroy goods at the point of entry into the UK. A similar procedure applies in the EU.

In Europe, customs administrations are typically well-resourced and benefit from robust laws. Similarly US customs are effective at seizing goods bound for the US market or which are transiting to Central or South America.

In the UK the rights-owner should prepare and file an Application for Action (AFA). Detailed information needs to be provided which includes the IP rights relied on, the contact details of relevant legal and technical experts, and as much information as possible setting out how to identify genuine products.

Border Force will monitor consignments for goods infringing those rights, including counterfeit goods. If suspected counterfeit goods are detected Border Force follows a set procedure which involves contacting the rights-owner and the owner of the goods (“the offender”) in order to ultimately determine whether the goods are infringing and should be destroyed or released.

The better the information provided to Border Force and the greater the level of cooperation with the rights-owner, the more likely it is that unauthorised goods will be seized.

Sensible steps to take are:

• Educate the authorities about priority products, tell-tale signs for spotting counterfeits, and who to contact if they have concerns. Additionally, you should build and update a database of detailed information about those dealing in counterfeits.
• Report information about those dealing in counterfeit goods to Trading Standards (in the case of wholesalers and retailers) and Customs (in the case of importers and suppliers).
• Adopt broader protection measures in countries known for manufacturing counterfeits (such as China) and in transit hubs such as Dubai and Hong Kong. India has customs border legislation although the recordal process is currently very slow, taking several months to complete.

Civil Court Action

Trade marks (registered and unregistered), copyright and design rights infringement are the typical rights relied-on in civil legal proceedings. It is preferable to own registered rights (trade marks and designs) but non-registered rights under copyright, design right and passing off can also be utilised.

Unless urgent court relief is necessary, it is usual to write to the offender before commencing proceedings in order to try and agree a commercial solution in accordance with the requirements of the UK Civil Procedure Rules. Care must be taken not to fall foul of the UK provisions protecting non-primary actors from unjustified threats of infringement proceedings. Injured parties can apply to the court for an order that the threats are unjustified, an injunction preventing the continuance of the threats, and damages.

Additionally, there could be circumstances where you should not write to an offender in advance of taking joint action with law enforcement authorities in order to avoid putting the offender on notice of enforcement action.

There are several specialist IP courts in the UK which will hear cases in relation to counterfeit goods. Actions typically take 12-18 months to get to court, although urgent applications can be brought before the court within weeks.

A wide range of remedies are available such as:

• urgent ‘interim’ injunctions (which can be filed without notice to the offender)
• freezing injunctions
• search orders
• delivery up of infringing products
• disclosure of supplier information
• an injunction against ongoing infringement
• the payment to the rightsholder of damages or an account of profits made, and
• the payment of legal costs incurred from taking action in relation to the counterfeit goods.

Civil proceedings can be expensive although the availability of urgent injunctions is often attractive for rights-owners. The case must be proved on the balance of probabilities and it does not matter that the offender did not know they were infringing someone else’s rights. Lack of knowledge is not a defence to infringement.

Criminal Proceedings and Working with Law-enforcement Authorities

An offender may face criminal sanctions under a range of UK legislation including:

Section 92 of the Trade Marks Act 1994 (TMA)
It is necessary to prepare evidence proving beyond reasonable doubt that an offender has committed an act of trade mark infringement. It is a defence to the offences in section 92 TMA for an offender to prove that they believed on reasonable grounds that use of the relevant trade mark was not an infringement of a registered trade mark. Proof of such belief may require an offender to make enquiries about the infringing goods (and exercise its own judgment if the goods are obviously counterfeit).

Section 107 of the Copyright Designs and Patents Act 1988 (CDPA)
An offender may face criminal sanctions if they deal with (for example, by selling, importing or distributing) an infringing copy of a copyright work which they know or have reason to believe is an infringing copy. Again, the rights-owner must be able to prove their case beyond all reasonable doubt.

In order to be convicted of a criminal offence the offender’s act must also comprise a civil infringement.

Typically, counterfeit cases will also amount to offences under the Fraud Act and the Proceeds of Crime Act.

National Trading Standards provide enforcement of IP rights services nationally and locally. They can bring prosecutions for trade mark infringement, copyright infringement or for breach of the Consumer Protection from Unfair Trading Regulations 2008. Using Trading Standards can provide an inexpensive and effective way of getting counterfeit goods off the market. However, for maximum impact it is preferable if those higher up the manufacturing and distribution chain are targeted, though getting the goods out of online and brick and mortar retailers is also important.

Similarly, the Police Intellectual Property Crime Unit: (PIPCU) can bring similar prosecutions but they will require clear evidence of infringement before referring a case for prosecution. PIPCU will consider the particular criteria of each matter and will have in mind in particular:

• the extent of the underlying organised crime
• whether there is ongoing criminal activity
• the harm and loss caused
• the likelihood of recovering assets, and
• the likelihood of a successful prosecution.

PIPCU will not investigate cases involving counterfeit pharmaceuticals, foodstuffs or tobacco.

A convicted offender is liable upon a summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding statutory maximum, or both. On indictment, fines are not limited or imprisonment for a term not exceeding 10 years, or both.

Law enforcement authorities work within budgets and as such must prioritise their efforts. Therefore, if the authorities are not able to assist, or if you wish to assert greater control over an action it might be preferable to bring a private prosecution.

The effectiveness of targeted enforcement activities by law enforcement authorities is illustrated by the success of Manchester City Council’s “Operation Vulcan” which started in October 2022. Vulcan targeted the criminal networks which affected the Strangeways and Cheetham Hill areas of the city under a long-term approach bringing a number of enforcement partners together.

206 outlets in the targeted area were said to have been selling counterfeit goods at the start of the operation. In under a year very few outlets selling counterfeit goods remained. Over 110 ‘shops’ were closed down, and an estimated £1.34 billion of counterfeit goods were taken off the market. Trading Standards estimated that this amounted to the equivalent of over 914 tonnes of goods and caused a loss to the criminals of £134 million pounds. There have also been 162 arrests, including many for trade mark offences

Private prosecutions

Operation Vulcan is a good example of private and public enforcement partners working together. Indeed, Trading Standards officers often collaborate with businesses to combat counterfeiting, and this can involve the sharing of data and resources. Private funding can assist with activities by Trading Standards and ensure that appropriate enforcement action is taken by the authorities. However, anyone has a right to personally bring a private prosecution and recover reasonable costs from public funds.

Private prosecutions are not as widely used as civil actions but the results can be very effective. The threat of a prison sentence for an offender can be a real eye-opener. Actions are usually cheaper and quicker than civil litigation and are suitable if the suspected offender is known to be involved in counterfeiting or other criminal activity, or where you want to go after the prime-mover behind an operation.

Online anti-counterfeiting

Both opportunistic and organised offenders regularly seek to sell counterfeits through online marketplaces such as eBay, Taobao, IndiaMart and AliExpress. Monitoring online activity (either in-house or through an outsourced third party provider) will help rights-owners gather information and take action against the advertising and sale of counterfeit goods.

Most online marketplaces have specific procedures which allow rights-owners to report infringements to the website operator. eBay, for example, has its well-known Verified Rights Owner (VeRO) Programme.

Additionally, social media platforms are now routinely being used by offenders to advertise and sell counterfeits. Instagram, X and Facebook all have policies which can be used against counterfeits and which require the rights-owner to submit an online complaint form setting out the basis for a complaint.

Whilst effective at getting goods taken down promptly, the procedures do not prevent the subsequent offer for sale of the goods elsewhere of course, so the use of online complaint procedures should be seen as comprising only one strand of an anti-counterfeiting strategy.

Internet service providers (ISPs) have an obligation to deal with requests to take down infringing items expeditiously under the E-Commerce Regulations in the UK and under the original and equivalent directive in the EU. In our experience whilst ISPs will take such action promptly, they are reluctant to release precise details identifying the offender, typically on the basis that the information is confidential, would breach the ISP’s contract with its customer, or would breach data protection legislation.

However, it is possible to compel the release of necessary information by obtaining a court order – in the UK this is done under what is known as the Norwich Pharmacal jurisdiction.

In the context of civil court remedies for online infringements one can obtain injunctions not only against individuals but also against ISPs.

An action against ISPs to block access to websites advertising and selling counterfeits has been available for some time in relation to copyright infringements but the case of Cartier International -vs -British Sky Broadcasting [2014] EWHC 3354 (Ch), 17 October 2014, extended the principle to counterfeits which infringed registered trade mark rights. This remedy is useful because it can cut access to a substantial number of online sales channels in one go.

There are certain requirements which need to be met in order to successfully obtain a blocking injunction against an ISP including that the ISP must have actual knowledge of the counterfeits. Notice will need to be given to the ISPs to satisfy this requirement.

In the same way that ISPs have reporting mechanisms, many online payment providers also have procedures for rights-owners to use which assist with fighting counterfeit goods. Typically, by providing proof of the IP right in question, as well as proof of infringement, the payment provider will disable use of its payment processing systems as a method to pay for purchases on the infringing website. Whilst this can have an immediate practical impact, it will be less effective where the website offers other payment options, and additionally, the counterfeits remain listed on the website.

Grey market goods

This note focusses on counterfeits rather than grey market goods but it is worth setting out a few points in relation to the latter because grey goods can cause difficulties for rights-owners.

Grey goods are genuine goods in respect of which rights-owners might have rights to prevent the onward distribution of the items into the EEA or UK.
The general rule is that if the rights-owner has consented to goods being put on the market in the EEA it cannot object to the further distribution of the goods in the EEA or UK because its rights have been “exhausted”. If the goods are first put on the market outside the EEA, the rights-owner can rely on its IP rights to prevent the subsequent distribution into the EEA.

Discrete rules have built up over the years in relation to certain repackaged goods, for example pharmaceuticals. A rights-owner cannot rely on its rights to prevent an importer from marketing a product which was put on the market in another EEA state by the owner or with its consent, even if that importer repackaged the product and reaffixed the trade mark to it without the owner’s authorisation.

The rights-owner can only oppose the further commercialisation of the goods where there is a legitimate reason for doing so, for example where the condition of the goods has been changed or impaired since they were put on the market.

A change following Brexit is that the IP rights in goods placed on the market in the UK with the rights-owner’s consent may no longer be considered exhausted in the EEA. As such a rights-owner can object to the export of goods from the UK to the EU. Conversely, IP rights in goods placed on the market in the EEA will continue to be considered exhausted in the UK.

It is worth mentioning that a rights-owner can object to certain goods such as luxury goods or technically complex products being sold outside of a selective distribution network. Selective distribution can be justified in relation to products which have an established and valuable trade mark or a “luxury aura” which the rights-owner would not wish to dilute by dealing with certain types of distributor, such as supermarkets or cash and carry outlets.

Take Aways

As ever with the enforcement of IP rights, you should develop a strategy which suits budgeted resources and industry specific aims. Considerations driving an anti-counterfeiting policy could for example be determined by the need to safeguard consumer safety (in relation to fake medicines) and consequential bad publicity. All anti-counterfeiting actions are ultimately about protecting reputation, and the appropriate targets for your efforts will depend on the particular circumstances. The following should be considered as part of an overall strategy:

• Develop and utilise the rights and procedures set out above.
• Identify appropriate targets – large suppliers and exporters will be of high importance because enforcement actions can cut off the supply of the goods to the market. Addressing sales by retailers and smaller venues is important to remove goods already on the market and to gain intelligence to help educate the public what counterfeits look like and that they will not be tolerated.
• Keep records of enforcement victories and publicise them where appropriate in order to evaluate and, where appropriate, to justify the effectiveness of anti-counterfeiting actions internally and to enforcement authorities.
• Budget – keep a record of costs incurred and keep them under scrutiny.
• Keep records of data in order to build up intelligence on prior offenders. This helps to support ongoing action and enables you to react more quickly. If data is shared with law enforcement authorities it can help to build up a rapport with them.
• Build up a bank of precedent documents such as supporting witness statements because this will enable you to act quickly and with less cost.
• Be vigilant and expect offenders to become more sophisticated over time. Will the use of technology assist in limiting counterfeit activity in your products? For example, the use of blockchain permits effective tracing of a product’s history and affords digital proof of the product’s authenticity.

Ultimately, an anti-counterfeiting policy is all about making your business and products as unattractive to offenders as possible, or alternatively more problematic to counterfeit than your competitors!

Annex

The Legal Framework

Trade MarkS Act 1994

1. Section 92: Unauthorised use of trade mark &c. in relation to goods
2. Section 92A: Search warrants
3. Section 97: Forfeiture

Copyright, Designs and Patents Act 1988

1. Section 107: Criminal liability for making or dealing with infringing articles &c.
2. Section 111: Infringing copies may be treated as prohibited goods.
3. Section 114: Order as to disposal of infringing copy or other article.
4. Section 114A: Forfeiture of infringing copies

Intellectual Property (Unjustified Threats) Act 2017

1. Section 2: Trade Marks
2. Section 4: Registered Designs

Private Prosecution

1. Section 6 (1) of the Prosecution of Offences Act 1985
2. Part 2 (Confiscation Orders) of the Proceeds of Crime Act 2002
3. Fraud Act 2006
   1. Section 2: Fraud by false representation
   2. Section 6: Possession etc. of articles for use in frauds

E-Commerce (EC Directive) Regulations 2002 (SI 2002/2013) (E-Commerce Regulations)

1. Regulation 19

Stay informed
If you wish to discuss anything set out above or if you would like a free initial consultation to discuss IP rights, please contact a member of the Intellectual Property team.