Protecting consumers and your company's brand identity is more important than ever as counterfeit products surge in the shadow of the COVID-19 outbreak. In this time of social distancing, consumers are beginning to rely more heavily on e-commerce platforms to purchase essential products, such as personal protective equipment and food, as well as non-essential products like cosmetic and personal care commodities, household products, work-from-home tools, fitness equipment, entertainment technology, and children's toys. This economic shift creates additional opportunities for unscrupulous individuals to take advantage of this increased demand.
With the global outbreak of COVID-19, criminals are seizing on an opportunity for fast cash by taking advantage of the high demand for personal protection and hygiene products by flooding the market with counterfeit facemasks, substandard hand sanitizers, and unauthorized antiviral medication. Just earlier this month, police, customs, and health regulatory authorities from 90 countries took part in a coordinated action to seize over 34,000 counterfeit and substandard masks, "corona spray," "coronavirus packages," or "coronavirus medicine." According to INTERPOL, this seizure "reveals only the tip of the iceberg regarding this new trend in counterfeiting."
U.S. Customs & Border Protection (CBP) is also seeing an uptick in counterfeit products at U.S. ports, including surgical masks, test kits, and medical supplies, as well as consumer household products, such as hand sanitizer and disinfectant wipes.
Even sales of legitimate products are a concern, as third-party sellers have been selling high-demand products on e-commerce platforms, such as Amazon or eBay, with significant price increases. This type of extreme price gouging not only takes advantage of consumers at a financially vulnerable time, but it can also create backlash for brand owners, leading consumers to mistakenly believe the brand owner (not the third-party seller) is benefiting from the crisis.
This increased presence of infringers and price gougers has led U.S. officials, including the Centers for Disease Control & Prevention (CDC), to warn business owners and consumers to monitor products online, as counterfeit goods can harm consumers who may unwittingly turn to lower-quality products with unknown manufacturing standards. Given the spike in consumer demand, and the corresponding shortage of supplies from legitimate sources, it is imperative that businesses take proper steps to protect consumers from the proliferation of scammers and infringers that seek to take advantage of the COVID-19 crisis.
What Your Business Should Do
The COVID-19 pandemic is ongoing, evolving, and changing on a daily basis. Counterfeit goods and services will continue to expand during this crisis, cutting into your market share and creating consumer confusion that damages your reputation and brand loyalty. By inundating the market with low-cost (and low-quality) products, counterfeiters are effectively getting a free ride on the research, development, and marketing that your company has carefully cultivated over the years.
There will be no "cookie cutter" solution to brand protection challenges during these trying times. Companies that seek to protect their customers and brand throughout this crisis, however, should consider a holistic approach that incorporates anti-counterfeiting and brand protection measures that are tailored to meet their specific needs in the marketplace, including the following strategies.
1. Conduct an internal brand protection audit.
- Companies must assess how well their key brands and products are secured in terms of legal protection, including an assessment of contracts for management of supply chain and distribution channels.
2. Register key intellectual property rights.
- Combine and layer intellectual property rights where appropriate. Make sure to register and update all key intellectual property rights in countries where your products are sold, manufactured, and assembled. For many e-commerce sites and online marketplaces, registered intellectual property is a prerequisite for enforcement programs or to take down a fraudulent listing.
3. Routinely monitor unauthorized use of your brands and establish surveillance of your distribution channels. This can include both internet monitoring and physical monitoring.
- Online monitoring – It is critical to perform structured internet searches for evidence of infringing activity. Make full and regular use of the procedures offered by e-commerce sites and online marketplaces to de-list or take down infringing listings or websites. Many companies take advantage of outside vendors, which can save money in the long run.
- Physical monitoring (to the extent possible) – Companies should have structured programs to 1) monitor trade shows and swap meets; 2) monitor major retailers (both online and brick-and-mortar); 3) oversee the auditing and investigation of manufacturing facilities; 4) purchase products from seemingly legitimate sites to determine whether customer orders are being fulfilled with authentic products; and 5) monitor products that are returned to determine if they are authentic and trace their source(s) if they are fakes.
4. Increase engagement and collaboration with industry, government, and nongovernment organizations.
- U.S. Customs & Border Protection – Companies should record their intellectual property with U.S. Customs & Border Patrol. Owners of recorded IP can work with CBP to develop anti-counterfeiting strategies so that officers at Ports of Entry will be able properly identify infringing goods.
- U.S. International Trade Commission (ITC) – Given the advantages and proven effectiveness of the ITC, companies should consider this forum when choosing where to allocate enforcement dollars. The ITC can be a great value compared to federal district court enforcement efforts intended to curtail the same imports.
- Federal Court – To the extent counterfeiters can be traced back to the United States, companies can seek redress using litigation in Federal Court. With registered intellectual property and the evidence gathered through the above investigative techniques, a company can go into court and secure emergency injunctive relief through a temporary restraining order and/or a preliminary injunction, which can facilitate the seizing and destruction of counterfeit goods, the take-down of infringing websites, the discovery of counterfeiting and financial data, and the eventual recovery of monetary settlements or judgments.
5. Targeted enforcement.
- Work with legal counsel experienced in the handling and management of intellectual property and brand enforcement programs that reduce the impact of counterfeiting, illegal price gouging, fraud, or other infringing activities.
- Work with counsel to send cease and desist demands to infringers. If cease and desist letters do not remedy the problem and as specific counterfeiting activities are identified, various levels of enforcement should be considered. Specific enforcement activities generally include much more in-depth investigations that trace counterfeits back to their source, for subsequent individual and government action.
6. Educate your customers.
- Notify your consumer base on what they should be looking for and how they can confirm that the product they are purchasing comes from a legitimate source. This is a great way to protect your consumers while also building upon your customer loyalty.