Mike Candore – BCGuardian

Challenges Bred by the Modern Model of Counterfeit Sales

Gone are the days when the threat posed by counterfeit goods was confined to the reach of the street corner vendor. Infringing merchants today rely on an increasingly sophisticated patchwork of otherwise legitimate third-party intermediaries to promote and enable their unlawful activity. This modern online sales and distribution model presents three core challenges for rights owners to understand and navigate.

Challenge No. 1: Increased visibility enables pirate sites to compete directly with rights owners and legitimate distributors like never before.

Third-party services have made it easier than ever for infringing merchants to promote their illegitimate goods across some of the most trafficked websites and marketplaces on the web. These services enable bad actors to purchase and place advertisements for infringing products side-by-side with legitimate products and promote their listings to the top of search engine or online marketplace search results.

The lower cost structure associated with the sale of counterfeit products can make it difficult for rights owners to compete, as bad actors can commit larger bids to compete in online advertising while simultaneously offering lower product prices. In an environment where ad placement is granted to the highest bidder, infringing merchants can capture a disproportionate share of voice, increasing the threat of sales erosion and indirectly increasing rights owners’ advertising spend.

Challenge No. 2: Platforms and tools built around merchant anonymity enable bad actors to hide in plain sight, or worse, create the veneer of legitimacy.

Some marketplaces and platforms are built around merchant anonymity and even compound the challenge by offering supplemental services to promote or incentivize customers to buy from anonymous sellers. For independent pirate sites, the deployment of a complementary suite of third-party services can provide a polished customer experience with little-to-no development required on the part of the pirate site. Taken together, these services make it very difficult for a customer to understand from whom they are buying and may lead customers to believe they are purchasing legitimate goods. Along with the threat of sales erosion, this increases several other risks such as brand dilution and consumer product safety concerns.

Challenge No. 3: Barriers to re-entry are commonly low and subject to limited controls, enabling infringing merchants to reappear after enforcement or hedge enforcement by operating multiple outlets simultaneously.

The analogy of IP protection as a game of whack-a-mole may historically be associated with digital anti-piracy efforts, but as counterfeit hard goods are increasingly sold online, the parallels become apparent. With the proliferation of competing online intermediaries in the value chain, it has never been easier for bad actors to maintain a revolving door of service providers that will enable them to temporarily evade detection and enforcement.

More challenging is the intermediary which enables bad actors to hedge against enforcement by operating numerous outlets simultaneously or which does not perform due diligence during account creation, thereby allowing the same bad actor to create a new account following initial detection and enforcement. This challenge perpetuates Challenge Nos. 1 and 2 as it subverts effective and meaningful IP protection.

The news is not all bad, however. Many intermediaries are household names in online search, e-commerce, payment processing, and web hosting. Most are committed to the removal of infringing and illegal activity from their platforms and have stated policies for intellectual property infringement. Some have committed significant resources to the development and management of streamlined enforcement channels for rights owners. Learning how to leverage and integrate the tools made available to rights owners should be at the core of an effective brand and content protection program in today’s online ecosystem.

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Six Reasons to Register Your Copyrighted Content

Mike Candore

While copyright protection is established upon a work’s creation, registration of the work with the U.S. Copyright Office adds significant value for rights owners. Most advantages to registration stem from enhanced protection and recourse should the copyright be infringed, but there are also compelling business reasons in support of registration.

We outline the top six reasons to register a copyrighted work with the U.S. Copyright Office.

1. Registration Allows Rights Owners to bring Infringement Actions in Federal Court

The most valuable benefit of registration is the rights owner’s ability to bring an action to protect its copyrighted work from infringement. If the rights owner’s copyright is violated, it may seek recourse by filing litigation for copyright infringement in federal court only if the work has been registered with the U.S. Copyright Office.

2. Registration Grants Eligibility to be Awarded Statutory Damages and Attorneys’ Fees in an Infringement Proceeding

When timely registration is completed – within three months of a work’s publication – the rights owner may pursue statutory damages for infringement of its copyright. The option to pursue statutory damages relieves the burden of proving actual damages related to the infringement of the work, which is increasingly difficult to do in today’s complex digital economy for content.

The ability to leverage the possibility for large statutory damages may also position the rights owner favorably in pre-litigation settlement discussions or serve as an outright deterrent to infringement in the first instance.

What’s more, should the rights owner prevail on its claim of copyright infringement, it may seek remuneration for attorneys’ fees if the work is registered with the U.S. Copyright Office.

3. Registration Grants Presumption of Ownership and Validity

When a work is registered with the U.S. Copyright Office within five years of its publication, the registration certificate provides evidence of ownership of the underlying work and validity of its copyright. Should the rights owner seek to enforce its rights in court, the burden of proving ownership and validity in the absence of a copyright registration will often be significantly more difficult and costly.

4. Registration Establishes a Public Record of Ownership

A public record of ownership makes known the rights owner’s claim to its registered work and may also provide the means for interested parties to contact the rights owner to lawfully license content.

5. Registration Offers Additional Protection by U.S. Customs against Imported Counterfeits

Owners of a registered copyright may submit notice of the registration to U.S. Customs and Border Protection in order to receive increased scrutiny during screening of goods imported into the U.S. This is of particular value to owners of content distributed across a physical medium with a known susceptibility to counterfeiting, such as printed books, CDs, and DVDs.

6. Registration Demonstrates Commitment to the Protection of Creative Expression, Scholarly Endeavor, and Technological Progress

Whether a visual work of art, a recorded album, a written work of fiction or non-fiction, or innovative software or technology, a rights owner that commits to the registration of its copyrighted works demonstrates its commitment to the protection of intellectual property.

For publishers of content, a demonstrable commitment to the protection of intellectual property may contribute to competitive advantage in signing artists, authors, and other producers of content. This is particularly true in royalty-bearing situations where copyright infringement erodes value from not only the publisher, but also from the content creator.

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Rights owners should develop a copyright registration strategy that weighs the benefits to copyright registration with the internal and external costs of registration. Where the content is actively monetized or represents an asset with expected future cashflows, the scales should tip heavily in favor of registration.

BCGuardian has significant experience developing and implementing registration strategies and programs for rights owners. Contact us to find out more about how we may be able to help protect your content through fully managed copyright registration programs.

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Product Authentication Tools: Are They Right for Your Brand?

Mike Candore

As brand owners evaluate options for combating counterfeit goods, one area in which they may address the problem is through product authentication tools. There are many solutions in this arena, ranging from simple holographic tags to highly technical integrated ERP solutions that serve both an anti-counterfeiting function and provide increased visibility through the supply chain.

We discuss here some of the considerations brands should assess when conducting a cost-benefit analysis in evaluating the need for and the potential effectiveness of product authentication tools.

Benefit: Deterring Counterfeits

The primary function of product authentication tools is to prevent the introduction of counterfeit products into the market. This goal is achieved by introducing yet another variable potential counterfeiters will need to consider in their reproduction of the underlying good. The absence or poor reproduction of an authenticity or security tag can be a clear red flag to consumers. Additionally, some solutions provide functionality (track and trace, ink detection, QR, etc.) that is difficult to replicate properly by counterfeiters.

Benefit: Adding Value to Other Business Units

Some functionalities, such as track and trace technology, provide data and information that is useful to business functions other than anti-piracy. Track and trace can provide insight into the supply chain and identify particular areas of risk. Utilizing functionality that benefits multiple business units may help a brand to rationalize the expenditure on these more robust product authentication solutions and provide a more comprehensive approach to securing the firm’s supply chain against previously unforeseen threats.

Benefit: Consumer Engagement

More advanced product authentication tools may also serve a sales and marketing function. Brands may be able to leverage scans of authentic products by end users as an opportunity to introduce similar or complimentary products that the consumer may find appealing or to collect valuable consumer data. For example, brands can encourage consumers to scan authentication tags on their purchased goods using their own smartphones (perhaps by offering the opportunity to win a prize). The scan will lead the user to a page that authenticates the product and requests their email address or other contact information, thereby contributing both to future marketing efforts as well as helping to alleviate any perceived stigma around the authentication tool.

Cost: Higher Landed Costs

Needless to say, the addition of product authentication tools will increase unit production costs and final landed costs. Brands must evaluate the feasibility of absorbing these costs in their margins. It is said that the cure should not be worse than the disease, so it becomes important for the brand to assess the potential impact product authentication tools will have on legitimate sales through targeted testing and/or pilots with at-risk assets.

Additional Consideration: Viability

Outside of production cost considerations, it is also important to determine whether the selected product authentication tool fits with the profile of the brand and its distribution model. Several questions that may guide these decisions are:

Who will ultimately be utilizing the functionality?

Licensed distributors may be better equipped to utilize specific solutions or identify potential counterfeits. Certain authenticity or security tags may require resources that can only be made available to select distributors as opposed to all end users, who may lack the education or platform to effectively utilize the solution or identify potential counterfeits. Conversely, as discussed above, a brand may seek to drive consumer engagement by encouraging end users to interact with the authentication tool.

Is there a secondhand market for the brand’s products?

Resale of goods through a secondhand market can limit the effectiveness of authenticity or security tags. The tags may be removed or discarded prior to the secondary sale, which could create confusion regarding the authenticity of the product. Additionally, certain functionality (track and trace, RFID, etc.) can be rendered ineffective if the tag is damaged or altered in any way.

Overall, product authentication tools can provide a meaningful impact for a brand’s anti-piracy efforts. However, it is important to conduct a thorough cost-benefit analysis of each solution to ensure that it meets the needs of the organization.

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