Counterfeit Merchandise: They’Re Not Just Doing It for Sport
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G THE B IN EN V C R H E S A N 8 8 D 8 B 1 AR SINCE WWW. NYLJ.COM VOLUME 247—NO. 8 THURSDAY, JANUARY 12, 2012 Outside Counsel Expert Analysis Counterfeit Merchandise: They’re Not Just Doing It for Sport ounterfeit consumer prod- through retail stores, flea markets and ucts have penetrated vir- on site at the events—particularly tually every segment of the during major sporting events like the U.S.C economy. With the advent of the World Series or the Stanley Cup— Digital Age, and despite the recent sophisticated counterfeiters rely on the efforts of the U.S. Immigration and anonymity of the Internet to market Customs Enforcement (ICE), the largest their counterfeit products to sports fans investigative arm of the Department By And year-round. of Homeland Security, working with Louis S. Matthew T. A study released last year by the brand the other member agencies of the Ederer Salzmann protection company, MarkMonitor, National Intellectual Property Rights provides a disturbing glimpse into Coordination Center (IPR Center), the loyal fans, wittingly or not, are turning the prevalence of counterfeit sports influx of counterfeit consumer goods to counterfeits to express their team merchandise on the Internet (see continues to grow. In fiscal 2010 alone, spirit. Likewise, consumers shopping MarkMonitor, Brandjacking Index, ICE and U.S. Customs and Border for sports equipment, particularly golf Sports Apparel Online (Special Protection (CBP) made nearly 20,000 clubs and other golf-related products, Edition 2011), available at https:// seizures of counterfeit goods, with are being bombarded with counterfeits www.markmonitor.com/resources/ an approximate retail value of $1.4 on the Internet. brandjacking-index.php). The three- billion. This article will address recent month study, focusing on five major Although the Internet provides a developments in the area of counterfeit sports brands (which, although not safe haven for counterfeiters of all sports merchandise, and some of the identified in the report, include the types, many consumers still believe measures professional league and NBA and NFL), identified over 6,000 counterfeiting is primarily limited sporting equipment brand owners are retailers selling an estimated 1.2 to luxury goods, such as high-end taking to attack the problem. million counterfeit jerseys and shirts. handbags and timepieces. While luxury It is believed the revenue achieved on goods represent a significant percentage Jerseys and Other Apparel these sales exceeded $25 million. The of counterfeit consumer goods, large majority of these counterfeits was unsuspecting purchasers continue to be The massive popularity of professional sold on roughly 1,300 e-commerce surprised at the breadth of counterfeit and college sports has created a websites, nearly all of which were products being made available. One booming market for counterfeit team affiliated with a Chinese registrant or segment that has been hit particularly merchandise. ICE enforcement efforts registrar. With the help of sophisticated hard is the sporting industry. With in the weeks leading up to the last four search engine optimization and other popular authentic professional and Super Bowls provide a snapshot of the promotional techniques, it is estimated collegiate team merchandise often problem—during those four discrete that these 1,300 sites alone attracted 56 demanding sky-high prices, some time periods, ICE seized more than million visitors annually. 66,000 counterfeit NFL-brand products What can be done about all this? It is from stores and street vendors, with clear the professional leagues and those LOUIS S. EDERER IS A PARTNER AND MAttHEW T. SALZMANN a retail value of nearly $6.4 million. holding legitimate collegiate licenses IS AN ASSOCIATE AT ARNOLD & PORTER LLP, IN THE NEW While counterfeit professional sports are faced with the same problems YORK OFFICE. merchandise has long been available as every other brand owner that falls THURSDAY, JANUARY 12, 2012 victim to counterfeits. Civil litigation and NBA, for example, have been equipment online. In fiscal 2010 alone, has become an effective tool only when successful in using site orders at some ICE and CBP made 786 seizures of the target is known and judgments can of their most popular events. The NHL, counterfeit golf equipment. According be enforced. All professional leagues on the other hand, often works directly to the U.S. Golf Manufacturers Anti- and collegiate licensees continue to with local law enforcement to combat Counterfeiting Working Group, an work with law enforcement and CBP counterfeiting at events like the Winter organization comprised of five well- on seizures and various criminal Classic—an annual NHL event staged known golf brands, as many as two initiatives. Many also have internal at a major outdoor stadium (this year at million counterfeit golf clubs are programs for identifying counterfeit Citizens Bank Park in Philadelphia)— produced annually, along with millions sales on various Internet sites, and take and the Stanley Cup. of counterfeit balls, bags, gloves and advantage of the available notice and apparel. takedown procedures. But like every Over the past two years, the Anti- other industry impacted by this problem, Sophisticated counterfeiters Counterfeiting Working Group, these measures are like putting fingers rely on the anonymity of working with ICE and CBP, has in heavily leaking dykes. conducted 40 successful raids, seizing In response to what league executives the Internet to market their more than $1 million in counterfeit have described as an “explosion” of counterfeit products to sports golf equipment. In late 2010, ICE counterfeit jerseys, the National Hockey and the IPR Center obtained seizure League has turned to public education fans year-round. warrants allowing them to seize initiatives, recently teaming up with the domain names of five websites the hallowed Montreal Canadiens While on-the-ground, event-day selling counterfeit golf equipment. In franchise and Reebok, an official sales of counterfeit team jerseys and June 2011, the Anti-Counterfeiting provider of NHL jerseys, to combat other licensed merchandise continue Working Group launched a website— the proliferation of these goods. This to present a significant problem for www.keepgolfreal.com—intended to initiative will include radio and other professional and collegiate sports educate consumers about the dangers media advertisements, as well as a quiz brand owners, the volume of such sales of counterfeit golf equipment. on counterfeits that will be displayed pales dramatically in comparison to the While counterfeit golf equipment on the scoreboard of the Montreal robust and ever-growing online market represents a major part of the counterfeit Canadiens’ home arena. The program for these goods. Unlike street vendors sporting equipment market, counterfeit follows on the footsteps of other league who peddle counterfeit goods near exercise equipment is popular as well. and team-led NHL initiatives, including the event venue without the benefit Over the last year, ICE has seized the Vancouver Canucks “Fight the of elaborate and deceptive marketing thousands of units of fake exercise Fake” webpage, which provides tips techniques, online counterfeiters equipment, and courts have handed for distinguishing between counterfeit are able to operate anonymously down stiff sentences to traffickers in and authentic Canucks jerseys. And and mask the counterfeit nature and such equipment. inferior quality of their goods. Indeed, the NHL is not alone—Major League What Can Be Done? Baseball made efforts to educate it is increasingly common for online World Series attendees in St. Louis counterfeiters to market and sell their Trying to stop the flow of their about the problem of counterfeit sports goods through “rogue” websites that counterfeit goods, especially online, merchandise. Indeed, the St. Louis mimic the brand owner’s legitimate without a proper tool box, is like Police Department announced it had site, using images of the authentic playing a high-stakes game of Wac-A- seized 1,100 counterfeit MLB items in products to market and promote Mole. Unfortunately, the outcome of downtown St. Louis just during Game their counterfeits. Most recently, in the closely watched decision in Tiffany One of this year’s World Series. November 2011, in conjunction with Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. Another measure professional sports Cyber Monday, the federal government 2010), holding that Internet hosts and leagues have found useful is the “site announced the seizure of a number Internet Service Providers (ISP) cannot order.” With its origins in the 1970s rock of domain names owned by websites be held vicariously (or otherwise) concert era, this is a court order issued involved in the sale of counterfeit responsible for online counterfeiting, in advance of a major entertainment sports apparel. has only exacerbated the problem. event that allows brand owners, Sporting Equipment In short, the court in eBay found that working with local law enforcement, Whether it is the newest Calloway an ISP cannot be vicariously liable to keep counterfeit retailers away from driver or latest Ping putter, chances are for trademark counterfeiting unless the immediate vicinity of the event, a consumer will run across counterfeits it “knew or had reason to know” that and to confiscate their goods. The NFL when looking to purchase sporting the counterfeiting activity was taking THURSDAY, JANUARY 12, 2012 place. The court