“A Coordinated Global Approach: Customs Recordation and Border Protection Program”
Global Trade Magazine 02/14/21 Lori S. Meddings
Counterfeiting is a global problem. And although the source of most counterfeits is China, in many cases, sellers and wholesalers outside of China are the driving force behind counterfeit goods. Developing and implementing a centralized and globally coordinated program is key to a successful anti-counterfeiting and brand protection effort.
Legal teams are well-positioned to identify the jurisdictions where anti-counterfeiting and brand protection efforts can have the greatest impact and value, and appropriately allocate resources that align with where the business is most profitable and has the most growth potential. They must carefully balance whether to target wholesalers and large distributors or shut down large and influential counterfeiting networks by sacking both suppliers and manufacturers. The former provides immediate relief, but the latter eradicates some of the most egregious culprits in the counterfeit supply chain.
Without global coordination, legal or business teams in disparate markets may act incongruously and duplicate efforts, using scarce resources while gaining limited value. Multinational manufacturing companies that maintain a lean legal team and a smaller intellectual property (IP) team realize multiple benefits and profit potential when following a centralized brand protection program.
Depending on the region, there are vast differences in the type of evidence needed, which IP rights must be asserted and the role proactive recordation with customs plays. Without coordination, this alone may cause self-inflicted harm to a business organization. A centralized and coordinated approach also empowers a business to “forum shop” and take advantage of the most favorable legal actions and jurisdictions available worldwide, such as ease of coordinating with law enforcement, strength of position in an administrative or court action, timeline, cost of legal services, nature and extent of remedies and potential damages.
Advancements in technology and software capabilities have made new, more efficient tools available for IP owners at a fraction of the cost. Examples include brand protection services that involve a single service provider for global monitoring of trademark applications and domain names and monitoring counterfeits and other IP infringements by third parties online. Many such services conduct large-scale takedowns of online infringement worldwide, which sends a strong warning to relevant online marketplaces and sellers. These services also lend insight into infringement and counterfeit trends (e.g., identifying the most targeted goods, destination markets and most popular marketplaces), making necessary and timely adjustments to brand protection programs.
A coordinated program provides higher quality data to evaluate the loss caused by counterfeits and infringing activities while tracking the impact on overall market share and sales globally. An effective coordinated anti-counterfeiting and brand protection program should provide immediate relief to a business globally and provides a better system for strategizing, implementing and evaluating anti-counterfeiting and brand protection enforcement efforts.
An effective customs recordation and border protection program is vital, as the real impact on any bottom line comes from coordinated and consistent efforts at the borders.
A common dilemma is that counterfeiting activities do not appear to subside despite increased resources and legal fees. Legal teams manage the tremendous transactional volume of enforcement actions, but business teams often fail to appreciate the outcomes and rarely buy in fully to brand protection efforts. The traditional approach of playing “whack-a-mole” with countless small and micro-sized factories located in China and other countries is not a viable long-term solution.
Fortunately, border intervention methods provide a better answer. When counterfeits and infringing goods are seized at borders, the risk of infringement and the impact on business can be measured because the counterfeits and infringing goods directly correlate to lost sales, harm to consumers, decrease in brand loyalty, and product liability risk.
When a legal team activates border intervention methods, it cuts off channels of trade for counterfeits; sets up roadblocks to importation and exportation; and amplifies legal and economic risks to wholesalers and distributors of counterfeits. Border intervention success means the costs of disseminating counterfeits go up, and so does the price of the counterfeit goods. We call this cycle the “bottleneck” approach.
Customs are best-positioned to disrupt the movement and transportation of counterfeits. Although it is practically impossible for customs to detect and seize all infringing products, most if not all customs programs have employed some form of risk modelling to improve both the success rate and accuracy of identifying and locating counterfeits.
The importance of customs recordation and seizures to a brand protection program’s success also makes it the ideal starting point for building up a globally coordinated brand protection program.
Start by following the money. Identify the most profitable and high potential destination markets of a business. It is essential to identify the jurisdiction and to understand the specific challenges at work within the market.
One common mistake is for brand owners to record too many trademark and IP rights. Instead, by focusing on the largest problems in each market, customs seizures may produce significant ROI.
If China is the primary source of counterfeits, it is necessary to record with Chinese customs. Unlike many jurisdictions, Chinese customs focus on inspection and seizure of outbound infringing goods. In recent years, over 90 percent of customs seizures concerning IP infringement were conducted against goods exported from China. Another reason to record with Chinese customs is that over 90 percent of IP related seizures were based on ex officio actions.
Centralized management of customs recordation and border protection actions begins with a holistic audit of trademarks and IP assets necessary and important for border protection; a standardized process to conduct customs recordation, training, authentication and seizures; a channel for timely sharing of information and knowledge; a mechanism to conduct coordinated releases and seizures globally for strategic reasons; and a system to evaluate the effectiveness of border protection efforts.
Customs recordation and seizures are an important part of anti-counterfeiting and brand protection efforts, but they are not independent of business operations, other legal functions and enforcement actions. Certain policies and procedures may elevate the performance of a coordinated customs and border protection program, including a global trademark and online infringement watch, a coordinated global approach to all enforcement actions, and a centralized and independent budget for anti-counterfeiting and brand protection.
Trademark and online infringement watch services are other tools to alert IP owners to new infringing trademark filings, domain registrations, and online offerings of infringing products. These services help IP owners take down counterfeits on the internet cost-effectively and efficiently.
With e-commerce sales of counterfeit goods, it is most efficient to tackle it with online brand protection services that provide digital solutions to automate monitoring, reporting, and takedown of counterfeit and infringing activities. This segment is proliferating, and prices are no longer prohibitive.
In conclusion, businesses should take a global approach to anti-counterfeiting and brand protection, specifically to customs recordation and border protection efforts. Mapping out markets and problems further identifies waste and adds value, and a brand protection program provides data for evaluation and further improvement while building a stable.