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A Look Ahead: Foreign Infringement of Goods

E-commerce sites and other online platforms have long been a staple of consumer shopping habits, and the pandemic has continued to drive more consumers to purchase more of their goods online. Wrongdoers have taken notice. As a result, infringing and counterfeit goods are rampantly being sold on these same online platforms by foreign-based violators. In this article, Patent Litigation & Counseling partner Adam Kelly discusses the challenges in stopping these infringers and what trends we can expect to see in the future.

Adam Kelly is a nationally acclaimed counselor in intellectual property law with extensive experience in the U.S. and abroad. He is a trusted business adviser to a wide range of clients, including industry leaders in agricultural science, biotechnology, electronic trading, golf equipment, green energy, hospitality, medical devices, pharmaceuticals and transportation. His practice focuses on counseling clients on how to competitively use intellectual property to increase market share and revenues by implementing effective strategies addressing branding, corporate transactions, technology acquisitions and patent protection.

Because these infringers are located overseas (often in China), they avoid the reach of federal courts. Plus, enforcement options can be limited in some cases. Please tell us more about this issue.

Normally, when there is a U.S.-based seller of infringing or counterfeit products, they presumably reside in one of the 50 states or U.S. territories and would have to register as a business with their secretary of state and have a physical presence in their state, subjecting them to that state’s court system if they were hauled into court. But when the infringer is an online seller without a physical presence in the U.S., the process of removing infringing products from an e-commerce site and bringing the infringer to court becomes much more challenging because that infringer has no home court.

Some foreign-based sellers are particularly sophisticated—they will sell goods online using a fictitious storefront, but once the online platform takes down the counterfeit or infringing product, the seller will create a new storefront with a new name and resume selling the infringing product. In this way, the infringer is able to evade the online platform’s policing of infringing goods. This catch-me-if-you-can game can be really difficult to play.

The pandemic brought about an increase in online shopping and e-commerce sites. Given this increase, do you expect the counterfeit trend to continue, or do you expect that consumers will start purchasing more in person and less on e-commerce sites?

The issue of online counterfeit or infringing goods will continue to be prevalent. What we’ve learned from the pandemic is that consumer behavior has changed. When most consumers were following safer-at-home guidance, they would purchase items online rather than from traditional brick-and-mortar stores. The ease with which the online purchases occurred will continue to change customer behavior to be more online focused. If they are buying items online, that provides more incentives for foreign-based sellers to sell counterfeit or infringing goods on online platforms. 

What are the solutions? How is the Loeb & Loeb team helping clients who face these issues?

Our team offers a variety of different options to stop the goods from coming into the country, remove them from being offered for sale through online platforms and seize any of the goods that are currently in the U.S. Also important, we assist with freezing the financial accounts that are associated with the infringing sales. Nothing changes behavior like a frozen bank account.

Oftentimes, we work directly with the e-commerce sites, most of which have takedown mechanisms where you follow a set of procedures to remove infringing goods from their site. We also guide our clients as they liaise with the U.S. Customs office, the federal judiciary, and various U.S. attachés and trade representatives when further action is needed.

Are there any other major trends you’re watching in this space?

We are seeing more design patent infringement cases being asserted in federal court against foreign-based infringers. In the past, we observed a significant number of trademark actions in which trademark owners would be asserting their IP rights against these online sellers. And we still do. But design patent protection differs in that these IP rights protect the ornamental features of a particular product. Design patents are typically less costly to obtain than a utility patent, are easy to understand and offer additional protections and remedies where other IP rights may not. Of course, if a rights holder were able to assert both design patent and trademark rights in the same action, then that may signal a stronger case and provide more remedies. 

Now, more innovators are seeking design patent protection and aggressively asserting those patents against foreign sellers in federal court. In these actions, they are often seeking temporary restraining orders and preliminary injunctions that would require the online platform to take down the product, seize the inventory, freeze bank accounts and require the infringers to turn over certain important documents relevant to infringement and damages. 

Often, the online seller doesn’t show up to court, but if they do, they quickly settle. If the seller doesn’t show up to court, as long as you go through the proper channels to serve the lawsuit, ultimately you may convince the court to enter a default judgment and award monetary relief and you may take permanent seizure of the seller’s monetary and physical assets.

What makes your IP practice unique?

We have the experience and relationships. We have experience creatively analyzing all the procedural and substantive issues that are associated with these types of enforcement actions and have established a strong track record of favorable enforcement for our clients that have resulted in real results, such as seizure of goods, shutting down platforms, etc. Plus, we have a strong working relationship with the U.S. government and federal courts. Simply put, we know whom to ask and what to ask for. And our clients sincerely appreciate that.

What makes Loeb & Loeb a leader in intellectual property enforcement?

Our extensive experience with intellectual property, the federal courts, trade representatives and the U.S. Customs office, coupled with our ability to collaborate across offices around the world and leverage our resources to achieve results for our clients, makes us stand out from our competitors. We walk the walk, not just talk the talk.

We also have talented lawyers on our team who are dual citizens and bilingual; they understand the cultural differences and appreciate the mindset of a foreign-based infringer. Those talents go a long way. Whether it’s the defendant or a foreign-based client who has an action here in the U.S., there’s a human element to the matter. Being able to speak to someone in their native language and understand their beliefs and business decision making allows us to develop credibility with all parties involved, including our opponents. This, of course, helps when we’re negotiating a resolution and achieving results for our clients.