Last month, U.S. Attorney for the Southern District of New York Damian Williams, New York Special Agent in Charge of Homeland Security Investigations Ivan J. Arvelo. and Edward A. Caban, commissioner of the New York City Police Department, announced the seizure of approximately 219,000 counterfeit bags, clothing, shoes and other luxury items.
Williams said the defendants used a Manhattan storage facility as a distribution center and described the seizure as the largest counterfeit goods seizure in U.S. history. The U.S. Patent and Trademark Office said as of 2018: “Counterfeiting is the largest criminal enterprise in the world, with domestic and international sales of counterfeit and pirated goods accounting for an estimated $1.7 trillion to $4.5 trillion annually, accounting for both It is also a higher amount than medicine.” or human trafficking.”
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In the fashion apparel, footwear and luxury goods segment, retailers and brands work tirelessly to protect their brands, products and intellectual property. Here, Megan Bannigan, partner at Debevoise & Plimpton LLP, shares her observations about the latest seizure, the broader counterfeit market, and what retailers and brands can do to alleviate the problem.
WWD: Can you explain the difference between imitation and imitation/fake products?
Megan Bannigan: The term “knock-off” is widely used in the fashion industry. Fashion indicates imitation of someone else’s product or style. Although knockout is ubiquitous, it is not always legal. A counterfeit product may copy the features of another product but still be different enough to ensure that consumers are not confused about the source; may copy another’s product to the point of causing confusion, in which case it may be considered infringement, or may copy another’s product identically “seam to stitch” and be considered a counterfeit.
Although fashion design is generally not protected in the United States, certain elements of designs may be protected by intellectual property (e.g., design patents, trade dress, or trademarks) and the use of that intellectual property by anyone else may constitute infringement. For example, certain fabric designs, surface designs or designs that are associated with a particular brand in the consumer’s mind may be protected. If these designs are copied or “displayed” in a way that causes significant similarities or consumer confusion, they may be considered infringement. Similarly, copying a brand name or logo or using a logo that is confusingly similar to someone else’s brand name or logo may also constitute infringement.
“Copycat products” are illegal knock-off products that imitate all aspects of the original product, including the name and design of the original product, and attempt to look like the original, in other words, a “copy” or “fake”. Unlike infringements, counterfeit products are subject to both civil and criminal penalties and, in some cases, can pose further dangers to consumers if they involve health and safety.
WWD: In what categories do you tend to see the most fake/fake/counterfeit products?
MB: The truth is that any goods can be subject to counterfeiting. Counterfeit products often occur when “originals” are expensive or scarce. Some of the categories where we tend to see imitations and fakes the most are handbags and wallets, watches and jewelry, consumer electronics, clothing and accessories, pharmaceuticals and personal care, and shoes. As online purchasing of cosmetics and beauty products becomes more common, counterfeits are also on the rise in the beauty industry.
WWD: How big is the imitation/counterfeit market for fashion clothing and shoes?
MB: Very big. Counterfeits and counterfeits, or “dupes” as Gen Zers often call them, have become part of fashion culture, and seizures of counterfeit fashion clothing and shoes are on the rise. Just this year, the U.S. Attorney for the Southern District of New York and the Special Agent in Charge of Homeland Security Investigations New York announced the largest seizure of counterfeit goods in U.S. history, consisting of 219,000 items of clothing, shoes and accessories. The total estimated manufacturer suggested retail price is approximately $1.03 billion.
One possible and problematic explanation for the proliferation of counterfeit goods in the fashion industry is the increased demand for counterfeit goods. Some consumers see fakes as a means to promote accessibility and comment on broader sociopolitical issues, even going so far as to seek out fakes. For example, the now-private “RepLadies” sub-Reddit is an online community where hundreds of thousands of members discuss and intentionally trade replicas of designer items ranging from Birkin bags to Chanel flats to Cartier jewelry. Many online forums, such as Reddits r/Repsneakers and r/FashionReps, are dedicated to discussions of sneaker “replicas.”
WWD: How can retailers and brands reduce intellectual property infringements?
MB: Combating the spread of counterfeit products can be a monumental task. There are reactive and proactive approaches to reducing breach. One form of responsive mitigation is policing the internet for counterfeit products being listed online. But as counterfeiters pop up in new locations, under new aliases and online storefronts, this approach can quickly start to feel like “whack-a-mole.”
In contrast, proactive steps may be more effective. There are a number of proactive steps retailers and brands can take to reduce violations. For example, brands can apply authenticity technologies at the product production stage to make it easier to detect fake products later. This includes the use of solutions such as unique holograms (often integrated into packaging and labels), RFID technology, Near Field Communication tags or QR codes that can be scanned to track a product’s “origin” or journey through the supply chain. To more easily identify genuine products, brands may use digital watermarks that are only visible with the use of special equipment, distinctive packaging that will show evidence of tampering, or other unique chemical or physical marks that will make their products distinctive and difficult to counterfeit.
There are also new technologies that can help reduce infringement in other ways. For example, some brands are starting to turn to blockchain technology to better track original products. Brands such as Burberry and Patou have worked with The Orde Group to create unique identities for luxury products that can be based on subtle details in a product’s fabric or construction, through a program called “Authentique.” These digital IDs are then recorded on the blockchain to facilitate tracking of genuine products. Brands can also apply AI technology to identify patterns in the behavior of counterfeiters, learn from identifying fakes, and equip themselves to work more effectively against counterfeiting in the future.
Another important step in mitigating violations is educating consumers. Some of the technologies discussed above can be implemented in ways that will allow consumers to confirm the authenticity of products, avoiding unwitting or unintentional counterfeit purchases. Brands like Ugg have provided online educational resources that describe the features of their products that consumers should look for to spot real products rather than fakes. Ugg actually features photos of original and fake products side by side on its website.
WWD: Are authenticity technologies useful? How does it work?
MB: Definitely. While authenticity technologies cannot perfectly eliminate all counterfeits, they are certainly useful in minimizing counterfeit sales. Technologies of authenticity will vary depending on the products in question, the context in which they are sold, and the resources available to the party applying these technologies. As an example, the authenticity technologies that a brand itself may implement may differ greatly from those that a resale marketplace or third-party seller may implement, relying on resources and information only available to interested parties.
Authenticity technologies can range from visual inspection and “look and feel” testing, which compares the products in question to genuine products, to the technologies I mentioned above. Ultimately, the effectiveness of various approaches will depend on the context and the technology used. However, there are some exciting opportunities to help combat these issues and protect consumers.
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