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Sandler, Travis & Rosenberg, P.A.

"The Secret of Life Is Honesty and Fair Dealing - If You Can Fake That, You've Got It Made"1
Melissa Miller Proctor, Esq., Sandler, Travis & Rosenberg, P.A.


No, the focus of this article is not on the great comedians of yesteryear, but rather on the protection of intellectual property rights - specifically, the safeguards that can be taken by the owner and importer to protect their investments and avoid dealings in counterfeit and infringing ("fake") merchandise. Intellectual property (or "IPR) is the manifestation of one's intellect or creative efforts whereby the creator is granted an exclusive right to utilize and profit from his or her design. Trademarks in particular are any kind of design, logo, or other tangible expression that allows consumers in the marketplace to identify and recognize the owner's business, products and/or services. Trade dress refers to the visual appearance or design of a product (i.e., size, shape and/or color configurations), which allows consumers to associate the item with its source. Trademarks, service marks and trade dress are all legally protected in the United States by the Lanham Act,2 the federal statute that prohibits infringement of a trademark, service mark or trade dress and seeks to prevent the public from being confused or deceived into purchasing counterfeit goods that fraudulently imitate other products. Infringement occurs when a competing mark is so similar to another that is it likely to cause confusion among consumers. It occurs when a mark or trade dress is copied by an unauthorized user in a form that is confusingly similar to the original.

Safeguards that Can Be Taken by the IPR Owner

In the United States, trademark and trade dress owners can first protect their IPR from unauthorized use by competitors through formal registration with the U.S. Patent and Trademark Office ("USPTO"). In order to be registered, the mark must be distinctive or must have acquired distinctiveness through established and exclusive use by the mark's owner. The unauthorized use of registered marks or dealing in counterfeit goods is subject to both civil and criminal remedies.

 

Secondly, given the global marketplace in which goods are designed, manufactured, sold and marketed around the world, IPR owners can and should take steps to prevent the entry of counterfeit goods and products bearing infringing marks into the United States. Like the USPTO, U.S. Customs and Border Protection ("CBP") plays a crucial role in this regard. In fact, preventing the importation of counterfeit merchandise and protecting IPR have been designated as priority trade issues by CBP. For example, CBP has developed national IPR enforcement policies, targets shipment of counterfeit merchandise, performs audits of importers who have violated the Lanham Act, and provides in-depth training on IPR protection to the various ports around the country. Trademark owners can avail themselves of the protections offered by CBP by first ensuring that their marks are registered with the USPTO,3 and then recording those registered marks with CBP through its Intellectual Property Rights e-Recordation ("IPRR") online system. This system allows owners to provide detailed information about their registered IPR to CBP so that infringing and counterfeit goods can be quickly identified and seized by CBP officers upon their arrival in the United States.

After IPR have been recorded, CBP will be on the lookout for potentially infringing goods, and will detain and seize counterfeit merchandise at the border.

Protecting the Importer's Investment

Of course, there are many instances in which unwary importers unknowingly purchase goods from foreign vendors that infringe upon another company's registered and CBP-recorded IPR. Typically, upon the goods' arrival at the port of entry, CBP will detain and ultimately seize the infringing merchandise. If the importer is lucky, the company will be notified by CBP that the goods are being detained because of a suspected IPR violation; however, on many occasions, CBP merely provides the importer with a cryptic or vaguely written Notice of Detention that merely states that there are admissibility issues associated with the shipment that are being reviewed.

Upon detaining a suspected shipment, CBP will contact the IPR owner, provide information about the infringing goods, and ask the IPR owner if it will agree to allow the goods to enter the United States. Almost undoubtedly, the IPR owner's response will be to block the goods from being imported into the United States. A Notice of Seizure will be issued directing the importer either to export or destroy the merchandise under CBP's supervision - in some cases, the IPR owner and CBP will allow the infringing merchandise to be donated to charities, but the importer will in almost all cases be deprived of its investment. The importer has few options here. Nine times out of ten, the importer will incur significant costs associated with the storage of the detained or seized goods, the loss of the goods themselves, and the possible imposition of a civil penalty by CBP. How can importers avoid these types of scenarios?

First, importers should take the steps necessary to confirm that the products they intend to purchase are not subject to any third party-owned IPR. This can be accomplished thru a review of the online resources afforded by both the USPTO and CBP. If the goods are found to be subject to a third party's IPR, the importer will need to enter into a licensing agreement with the owner authorizing it to deal in the merchandise and market it in the United States. Formal letters of authorization or other written agreements executed by the IPR owners should be obtained and maintained by the importer. Company personnel responsible for arranging for the importation of goods subject to third party-owned IPR should have access to detailed descriptions of the goods identifying the marks in question, any applicable royalty or licensing agreement, and copies of the letters of authorization from the IPR owners - all of which may need to be provided to CBP to head off a detention or seizure. Specifically:

  • Importers should establish formal processes for ensuring that letters of authorization from the IPR owners have been obtained. Where the foreign vendors hold the authorization letters or have entered agreements with the IPR owners, importers should regularly verify that such authorizations or agreements are still current and valid for the time period of the importation. A process should also be rolled out whereby company personnel involved in the design, sourcing and importation of products subject to third-party IPR are promptly notified when the IPR owner terminates its license to the company.
  • Importers should also review any agreement to pay royalties or license fees related to the use of third party-owned IPR, confirming whether they are to be included in the dutiable value of the imported goods.

Finally, importers should take steps to implement a formal process for expeditiously responding to cease and desist orders from a third party IPR owner, CBP detention or seizure with the hopes that such procedures will never need to be utilized.


[1] Quotation attributed to Groucho Marx.

[2] The Lanham (Trademark) Act (Pub.L. 79-489, 60 Stat. 427, enacted July 6, 1946, codified at 15 U.S.C. § 1051 et seq. (15 U.S.C. ch. 22)).

[3] It is important to note that CBP enforces both recorded and non-recorded trademarks and copyrights; however, enforcement of recorded IPR takes precedence over those that are not recorded with CBP.


Melissa Miller Proctor is a Member of Sandler, Travis and Rosenberg, P.A. and the Firm's Export Practice Leader, resident in the Scottsdale, Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 305-2110 or via e-mail at mproctor@strtrade.com.

 
 
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