Catching Counterfeits: Customs Recordation and IP Enforcement

Edited by: Catherine Holland

U.S. Customs and Border Protection (“CBP”), the primary federal agency responsible for securing America’s borders, is also charged with the protection of intellectual property rights and guarding against the infringement of U.S. copyrights and trademarks.

In the interests of protecting the U.S. economy, as well as the security, health and safety of American consumers, CBP is legally authorized to exclude, detain and/or seize imported goods, including counterfeit and pirated goods, which violate intellectual property rights in the United States. Such enforcement efforts have been steadily increasing, offering copyright and trademark owners, including fashion and beauty brands, a strategic tool for enforcing their rights against infringing products.

Counterfeiting by the Numbers

In Fiscal Year 2016, the number of intellectual property right seizures increased 9% to 31,560 from 28,865 in FY 2015. The total estimated manufacturer’s suggested retail price (“MSRP”) of the seized goods, had they been genuine, increased to $1,382,903,001 from $1,352,495,341 in FY 2015.

Of the seizures that occurred in 2016, 53% involved the seizure of fashion-related products, including wearing apparel, accessories, footwear, watches, jewelry, handbags and wallets. Had these products been genuine, the estimated MSRP would have been over $1.05 billion. 16% of the 2016 seizures involved pharmaceutical or personal care goods, including beauty products, amounting to an estimated MSRP of $73.7 million.  Based on MSRP value alone, counterfeit watches and jewelry made up 47% on the total MSRP value seized, up 4% from 2015.

These seizures led to the arrest of 451 individuals by CBP, leading to 304 indictments and 272 convictions related to intellectual property crimes.

With over $1.3 billion in infringing goods seized last year in the U.S., one can only imagine the value of the counterfeit and pirated products that managed to make it through our borders and ports. It is impossible for CBP to inspect each of the over 11 million maritime containers arriving at U.S. seaports, the 10 million containers arriving by truck, and the 3 million containers arriving by rail.  Nor can customs monitor each of the over quarter billion more cargo, postal, and express consignment packages arriving each year by plane.

The import of such goods has a direct negative impact on brand owners and the U.S. economy.

U.S. Customs Recordation

In view of the increasing number of infringing goods entering into U.S. commerce, an important, but sometimes overlooked, tool for brand owners is the recordation of federally registered trademarks and copyrights with CBP.

Once recorded, the trademark and copyright information is uploaded to the national CBP database and available at all ports of entry. Based on this information, CBP will detain, seize or exclude infringing goods and notify the rights owner if CBP discovers a suspect shipment.  The rights owner will be provided with the date of importation, port of entry, description and quantity of goods, country of origin and names and addresses of manufacturer, exporter and importer.  Such information is highly valuable in preventing further infringement and in future enforcement actions.  In some cases it may be possible to request photographs of the seized goods to verify if they are counterfeit or genuine.

CBP allows for the recordation of trademarks registered by the U.S. Patent and Trademark Office on the Principal Register, and copyrights registered by U.S. Copyright Office. CBP also allows for the temporary recordation of unregistered copyrights, with proof of a pending application to register the copyright with the U.S. Copyright office.

The recordation process is straightforward and cost effective. The trademark or copyright owner will need to provide (1) its name, business address and citizenship; (2) the registrations to be recorded; (3) a point of contact; (4) the place of manufacture of the genuine goods; and (5) a list of authorized licensees or other authorized users or importers of the relevant goods.

For trademark recordation, the fee is $190 per mark per each class of goods the trademark owner wishes to record, and $80 per class for each renewal. For copyright recordation, the fee is $190 per copyright, and $80 for each renewal. The term of the recordation is concurrent with the duration of the underlying trademark registration, and 20 years for copyright registration, unless ownership of the recordant expires before that time. If the trademark or copyright registration is cancelled or revoked, the recordation will no longer be in effect.

Effective border enforcement requires more than just recordation. It requires the active participation of rights owners. Once trademarks and copyrights are recorded, rights owners should consider preparing product identification guides, conducting product training at high risk ports of entry, and providing further information on suspected infringers via CBP’s online allegation reporting system. These proactive strategies will increase the likelihood that CBP may identify infringing products and take enforcement action against such products.

Customs Recordation Worldwide

The import and export of infringing products occurs and threatens brand owners not only in the U.S., but also worldwide. While the modern economy allows businesses to offer their goods internationally, it also allows counterfeiters and unauthorized distributors to expand the reach of their infringing products.

Luckily, the U.S. is not the only country that offers customs recordation and enforcement. Brand owners who hold trademark and/or copyright registrations in foreign countries may be able to record their registrations with the customs agencies in those countries. Although the requirements and process for recordation may vary, the general enforcement mechanism is the same – the customs agency will seize, detain or exclude infringing goods, which it is able to identify through a recorded registration database.

Registration in China can be a particularly valuable tool as, unlike most customs agencies, Chinese customs will examine goods being exported from China.  As China remains the number one source country for counterfeit products, registration with Chinese customs authorities could prevent counterfeit goods from entering the U.S. and other markets.

Thus, customs recordation in the U.S. and foreign countries can reinforce a brand owner’s enforcement strategy on both a national and global scale.

Insights for Trademark Foreign Filing Strategy

CBP seizure statistics are also helpful in fine tuning foreign trademark filing strategies. There are three general categories of jurisdictions in which to seek foreign protection – (1) where sales of goods occur, (2) where goods are manufactured and (3) where infringement or counterfeits are expected. Customs recordation provides insights on the third category.

First, CBP seizure statistics reveal where counterfeiting occurs and what products are most counterfeited.  For example, 52% of the goods seized by CBP in 2016 were from China, and 36% from Hong Kong. The statistics shown above reveal that fashion apparel/accessories and personal care products were among top categories for types of goods counterfeited.  CBP seized 2% more shipments of footwear in 2016 than in 2015, and seizures of handbags in 2016 was up 3% from 2016.  Interestingly, in 2016 India overtook Singapore as the third source economy for counterfeits based on MSRP value, while Cambodia, Pakistan, Bangladesh, and Colombia joined the top 10 (based on MSRP value).

In view of this information, fashion and beauty brand owners would be advised to file trademark applications in China and Hong Kong. Equipped with trademark registrations, the brand owners can not only take enforcement actions against infringers in those hotbed countries, but also record their marks with local customs agencies. This would be particularly helpful in China where the customs agency takes action against exported goods, as well as imported goods.

Second, as discussed above, the seizure of counterfeit goods through customs recordation reveals important information, including the goods’ country of origin and the names and addresses of the unauthorized manufacturer, importer and exporter. Thus, brand owners will be able to determine where and by whom their products are being counterfeited. This information is highly relevant in determining where to obtain trademark registrations, and allows brand owners to more effectively enforce their rights against present and future infringers.

Takeaway

Customs recordation is but one tool that brand owners can use to protect their intellectual property. However, it can provide meaningful and cost effective protection against infringing products and insights on global enforcement strategies.