Companies take action against Internet piracy

As Internet use has risen, so has the number of counterfeits out to deceive you on the Web. Although some companies are not sitting back and letting themselves be taken advantage of. These infringed-upon businesses are increasingly deciding to prosecute third parties, such as Internet service providers and pirates' business associates.

Internet counterfeiters may be becoming more sophisticated, but companies are likewise amping up their tactics. While it’s clear that in today’s digital world, fashion brands need a strong Web presence, the commerce advantage is balanced out with the disadvantage of the explosion of sites vending fake products.

The numbers may surprise you: Research firm ComScore reported U.S. e-commerce sales totaled $227.6 billion last year, while U.S. Immigration and Customs Enforcement estimated the global counterfeit market at $600 billion for 2010.

The Internet has turned into a hotbed of piracy, cyber squatting and counterfeiting, as “legit” companies. Thus making the apparel and beauty industry lose sales. Companies being affected by this are after solutions – and retribution.

Some popular combative strategies are sending out cease-and-desist letters and litigating in court. But tracking down the perpetrators can be a difficult task, due to the Internet’s fabled anonymity and geographical distance constraints. Vendors offering counterfeits could be based in, say, China, but ship products from Italy to create an appearance of legitimacy. And how do you find the true location of websites?

“Before, counterfeiters needed money, import and export skills, manufacturing contacts and language skills,” Scott Gelin, shareholder at Greenberg Traurig, at which he practices trademark and copyright law, said to WWD. “Now, all you need is an Internet connection.”

The Internet appears to be the preferred venue for counterfeit vendors, with 80 percent of fakes sold through the Web. The downside isn’t just companies losing traffic, but also has some serious ramifications.

“Counterfeiting supports child labor, most of all, terrorism and drug cartels,” Valerie Salembier, Harper’s Bazaar senior vice president and publisher, said to WWD.

Counterfeiters go after any popular item: beauty products, sporting goods, designer collections, pharmaceuticals and more. Few industries are immune. However, a great deal of groundbreaking cases have centered on luxury brands.

One example is Louis Vuitton Malletier SA, which in 2007 filed suit against Akanoc Solutions Inc. for contributory trademark infringement liability, maintaining that it permitted several websites it hosted to vend items that violated LVMH’s copyrights and trademarks. The federal jury sided with Vuitton, granting it more than $32 million in damages – enough money reportedly sufficient to put the defendants out of business.

The case is regarded by some to have made “inroads” regarding third-part liability, reports Brian Brokate, a partner at Gibney Anthony & Flahert.

The suit put muscle in the hands of the brands, allowing them both to hold someone accountable for selling fake goods on the Web and to collect money from a valid entity. One case, North Face and Polo’s lawsuit against counterfeiters, even granted $78 million to the plaintiff – the greatest total of damages ever seen in an Internet counterfeiting case.

“No more will these cases be just against the infringer,” Brokate said. “Plaintiffs will look deep within, be it at Web hosts, landlords, transportation companies … It’s much easier to get payments from them than from a counterfeiter.”

Heather McDonald, a partner at Baker Hostetler, reports that while the bulk of fake selling is found on the Web, labels are using all kinds of measures to stop counterfeiting.

“If there’s no demand, there will be no supply,” she said, while admitting the huge task of eradicating fakes. “I think the solution really is public education. As long as people are going to buy counterfeits, someone is going to sell them.”

One problem is that fakes are becoming more and more difficult to discern, presenting an obstacle to public education. Companies selling knockoffs are able to suck consumers in with better tagging and quality materials. They have even resorted to upping their prices to deceive customers that their product is just a good deal, and not a fake.

Do you think you have ever been taken in by a fake?

Tagged in: louis vuitton, web, internet, fake, counterfeiters, piracy, counterfeit, pirates,

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