(Posted January 2006)
 

PROTECTING TRADEMARKS
ON THE INTERNET
By Angelo Mazza

With E-commerce sites, buying almost any product is just a few clicks away. (Tannen Maury/The Image Works)

With the expansion of e-commerce through auction¹ and stand-alone² Internet web sites that sell a wide range of products, trademark holders in every country face a daunting enforcement challenge. While legitimate businesses can prosper on the Internet, their survival is threatened by unscrupulous rivals who exploit loopholes to gain unfair advantages, pass off counterfeit goods as legitimate, and evade enforcement. Many of these rogue sites, though they appear to be unrelated to each other or to be small operations, easily can achieve gross revenues in the millions of dollars by exploiting weaknesses in current laws and enforcement techniques.

1 Auction web sites allow users to bid for items sold by independent sellers. The sites offer a variety of goods that range from the mundane to the specialized. Examples of such sites include eBay, Yahoo!, Sell.com, and iOffer, to name only a few. 2 Stand-alone web sites are independent retail sites that offer goods for sale via the Internet. While there are many legitimate merchants, there are also many sites that offer only counterfeit goods for sale. The sites offer clothing, medicines, luxury goods, and anything else that can be copied for sale.

An international legal framework to protect legitimate trademark holders on the Internet does not exist yet. As a result, enforcement by the private sector and supportive governments requires persistence and vigilance. Governments and rights holders should be aware that they can take steps to protect their marks in an Internet world filled with round-the-clock sales by sellers from many nations.

We can divide these enforcement strategies into two general areas, one to address auctions sites and another for stand-alone sites. Auction sites present special challenges to enforcement and raise site liability issues. (Site liability refers to the legal responsibility and culpability of the web site.) Since the laws and policies of each country and/or auction site vary dramatically, the topic is too complex for this short article. Currently, however, the preferred approach is to notify the offending auction site and offer an opportunity to cure the violation by removing the offending offers. If the violation continues, responsible site operators close repeated violators' auction accounts.

E-buyer beware: As of yet, there is no international legal framework to protect customers or legitimate trademark holders on the Internet. (AP/WWP)

The private sector must remain committed to pursuing Internet violators, in order to protect both trademarks and unsuspecting customers. (© Francis Dean/The Image Works)

This article will limit itself to a general overview of the issues related to stand-alone sites selling counterfeit products. Focusing on current practices in the United States, we will examine the scope of the problem, outline the steps that need to be taken, review the pitfalls that each type of action brings, and determine what methods may succeed.

The process of dealing with web sites selling counterfeit goods can be very time-consuming and, unfortunately, deprives the rights holder of immediate relief. Success requires persistence and expertise. The Internet presents special challenges for rights holders since, in many cases, the infringing web sites provide false or incomplete "Registrant" information. This lack of accurate information presents a major obstacle to rights holders trying to locate the site and to police the sale of goods on the Internet.

Many legitimate companies employ teams of in-house personnel, specialized software, and outside service providers to locate and track sites selling counterfeit goods. Once a rights holder identifies a site offering counterfeit goods for sale, the holder can begin to collect data, review databases, and gather Whois³; information, so as to identify those responsible for the site.

3 The Whois database provides contact and registration information for domain names.

In almost every instance, the site information gathered from the Whois database is woefully inadequate or completely false. Given the lack of any penalties in the United States for providing false or misleading information to a database, counterfeiters fill their Whois information with periods, dashes, names of dead personalities, and addresses that have them living in Atlantis or other improbable locations. Although there has been talk of amending the applicable U.S. laws to require more accurate information when registering a domain name, those efforts have yet to bear fruit.

Once a site selling counterfeit goods has been identified, however, the rights holder prepares cease-and-desist letters and sends them to the Internet Service Provider (ISP) and to the site itself. In most instances, the site will ignore the letter. However, the site is now on notice of violation and can no longer claim ignorance as to its illegal activities.

Typically, ISPs are cooperative when contacted, although, under the current system, they are not required to verify any of the information they collect. Law-abiding ISPs will remove infringing sites from their servers. However, this is not the case when the site selling counterfeit products becomes its own ISP and ignores all correspondence. In addition, there are instances of rogue ISPs that become safe harbors for infringing sites. The unintentional side effect of cooperative ISPs is that many infringing sites eventually migrate to ISPs located outside the United States, where laws differ and ISPs are often less cooperative.

If contacting the site fails and the counterfeiter engages in a game of moving to alternative ISPs, the rights holder may take additional action. The rights holder may do more research and, in some instances, hire outside investigators to make purchases that may lead to the source of the items or of the site. These investigations often reveal a variety of sources for the counterfeit goods. Although many sites are in English and conduct business in U.S. currency, more often than not they operate outside the borders of the United States. In other instances, they collect money in the United States, but ship counterfeit items to the purchasers from overseas locations. This creates additional enforcement problems for the rights holder, who must retain overseas counsel and investigators to advance the investigation. Now the rights holder faces mounting costs and the peculiarities of enforcement in a foreign jurisdiction.

The rights holder may initiate legal action once enough information is gathered. The legal action allows the rights holder to subpoena ISP records related to the operation of the site in question. Often, the ISP records are outdated or no longer available. If the site is part of a larger series of sites under common ownership, it may merit a referral to law enforcement for criminal prosecution. However, given the lack of resources and specialized cybercrimes units, criminal actions represent a small percentage of enforcement actions. The owners of replica sites⁴ are acutely aware of this lack of criminal enforcement as well.

4 Replica sites openly sell copies of established or widely coveted goods.

The enforcement problems outlined in this article will be reduced only when governments create laws that level and harmonize the Internet playing field and support private enforcement efforts. The private sector, in the meantime, must remain committed to pursuing Internet violators.