ICE Anti-Counterfeiting Role, 'Fad' Brand Protection Focus of Howard IP Conference

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IP theft poses a significant economic and health safety threat to the United States and threatens the nation's critical infrastructures, a U.S. Immigration and Customs Enforcement official said at a March 10 symposium sponsored by the Institute for Intellectual Property and Social Justice at Howard University School of Law.

Other speakers at the conference focused on an effort to restore identity rights to former college athletes, and on the challenges of protecting trademarks of such “fad” brand products as Silly Bandz, Crocs, and Beanie Babies.

How to Find and Stop Counterfeiters.

Richard Halverson, a unit chief at the ICE's National Intellectual Property Rights Coordination Center, warned that organized crime groups “ are now moving into stealing IP to help fund their other illegal activities.” Products such as pharmaceuticals are sold through websites that may look legitimate and offer incredible discounts, but those goods are often made in India, packaged and shipped from China, with the money going to someone in Russia, Halverson said. With pharmaceuticals especially, he said, one has no idea what is going into the product and what dangers exist.

Halverson said that ICE's program for targeting internet movie piracy--“Operation in Our Sites”-- has already led to the seizure of domain names for more than 140 websites selling pirated films and to the voluntary shut-down of more than 80 other websites. Under that operation, he said, movies and music websites were targeted last June (80 PTCJ 343, 7/16/10), domain names for technology sites were seized on the post-Thanksgiving “cyber Monday” (81 PTCJ 139, 12/3/10) (81 PTCJ 139, 12/3/10), and domain names for sites publishing hyperlinks to unauthorized sports video streaming were seized around the time of the Super Bowl (81 PTCJ 469, 2/11/11). A more recent Valentine's Day crackdown--“Operation Broken Hearted”--led to addition seizures of domain names selling fake watches, handbags, and jewelry, he said.

To find and shut down counterfeiting websites, the IPR Coordination Center goes to the infringing websites, purchases counterfeit materials (whether they be hard goods or a download), confirms that the product is pirated or counterfeit, moves to the U.S. Attorney and then a magistrate judge to obtain a federal seizure warrant. After it has seized a website domain name, the IPRCC puts up a banner on the site direct users to its own website.

What Can Companies to Do Protect Themselves?

Philip Furgang, a partner at Furgang and Adwar, New York, said that software manufacturers annually lose $2 billion to piracy, with various business organizations projecting that, by 2020, there will be over a trillion dollars worldwide lost to counterfeiters.

Although trying to stop counterfeiters often feels like “playing whack-a-mole,” Furgang said, the goal at his law firm is to “make life as miserable as possible for the counterfeiters so they will leave our clients alone.” He said that traces using credit card purchases are a great way to halting counterfeiters and infringers. Further, he suggested that companies should send threatening e-mail messages and post their anti-piracy policies on their websites.

William J. Morris III, counsel for the apparel company Under Armour, said that his company has people who “troll the internet” for counterfeiters and that consumers actually help a lot in that process. Counterfeit Under Armour are obvious to many because of their shoddy materials or bad stitching, he said. Working with enforcement agencies such as the ICE has made his company's fight against counterfeiting easier, he added.

The ICE's Halverson recommended that companies with products overseas also take the time to protect themselves in the foreign environment. This means obtaining a trademark registration in China if a company is selling a product there, he said. Without such protection,“you are going to get ripped off,” he said.

Halverson said that some IP thieves abroad “hijack” American marks, then make the U.S. mark owners pay them off to obtain the rights to use the mark in the overseas market. “We cannot do a lot to stop that,” he admitted, adding that such trademark enforcement “is really up to private industries.” However, the ICE and other government agencies have “worked hard with our foreign counterparts” to help curb the problem of counterfeiting, according to Halverson.

Seeking Justice for Ex-College Athletes.

During another panel discussion addressing the rights of athletes, Michael D. Hausfeld of the Hausfeld law firm, Washington, D.C., described his firm's current class action relating to the identity rights of former student athletes.

Hausfeld that, from his point of view, the rights at stake for college athletes are “fundamental rights” and thus his firm's effort represents a social justice action.

He labeled the college athletic system as “one of the last bastions of plantation operations,” as aspiring athletes arrive at educational institutions hoping only for the opportunity to play.

“They don't get a real education … they don't really get a career … they don't get health insurance,” Hausfeld said, emphasizing that many of them live the rest of their lives suffering from injuries sustained during their college playing days.

It piles on the injustice when colleges present these naive, eager aspiring athletes with “releases” that give the colleges the license to exploit their names, images, or likenesses “in any form forever and throughout the universe,” according to Hausfeld.

The struggle of student athletes is not just about vindicating their right of publicity, he said. “You don't even have the right to your own name. You own nothing. You are a disposable commodity. When your tenure is complete, you're trash,” he said.

This system constitutes a cartel, he asserted, in that no individual is given the right to reject the right of publicity release that colleges demand..

“Every student in every conference in every university is foreclosed from participating in that license at the time it's made,” Hausfeld said. “It's a group boycott. … Together they're fixing the price at which you can go out and demand a portion of that license fee at zero.”

Hausfeld rejected the colleges' “amateurism” defense in the face of the significant revenue being generated by colleges who use athletes' names on licensed goods and their names and images in films.

“To argue that intercollegiate athletics is amateur is an amateur argument,” he said. “Does anyone here believe that college athletics is not as competitive as professional athletics?” he asked. While educational institutions earn significant revenue, “the players are earning absolutely nothing. That is not to say that the players own everything, but they do own a right to a share of what's being used to exploit their labor. … As a category, I think student athletes have been shortchanged far too long.”

'Fad' Brands Require Special Handling.

Another presentation at the conference focused on efforts to protect trademarks and related rights associated with “fad” brands.

Julia Anne Matheson of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., noted that the phenomenon of the “exploding brand” has become even more complex in the age of viral marketing, in which marketing messages are often passed through the hands of consumers and other individuals not under the control of the brand owner.

Matheson offered as an example the case of Silly Bandz--silicone rubber bands formed into various shapes, such as outlines of animals. In 2008, BCP Imports LLC of Toledo, Ohio, came up with the idea of marketing the bands to children instead of as office novelties as they had been sold before. BCP also eschewed traditional marketing techniques, passing the word through social media, and “spent not a penny on traditional advertising.”

Demand soared, and “as is typical with fad brands, there were tons of copycat products [within] three months,” she said.

By the time BCP began bringing IP actions against competitors two years later, the company found that it had weakened its case somewhat because it had failed to “define the product category.” Competitors were thus able to offer a defense that the term “silly bandz” was the generic name of the product category.

BCP had also chosen a tagline--“Collect 'Em, Trade 'Em, Wear 'Em”-- that was vulnerable to attack as being highly suggestive or descriptive, Matheson said. The brand owner has also tried to assert trade dress rights regarding its packaging, but the packaging--“pillow” packs--is common for many types of products, such as stereo earbuds.

Going back almost 15 years, Matheson then recalled the story of the Furby, a robotic animal toy that was the “hottest” toy in 1998 and was off the market by 2002. The Furby is protected not only by a score of trademark registrations, but also by several utility patents and copyright registrations.

In this case, however, none of these rights was enforced “because the brand wasn't there for long enough” as a result of the manufacturer's failure to “evolve” the brand in order to sustain demand.

The stories of several other fad brands, including Crocs footwear, Ty Inc.'s Beanie Babies, and Ugg footwear, each offered their own lessons, Matheson said.

Ugg was particularly interesting, she said, because the term “ugg” or “ug” had been adjudged the generic term for sheepskin books in Australia and New Zealand, where the sheepskin boots had been popularized by surfers. However, Deckers Outdoor Corp. was able to obtain trademark rights in the United States. A tactic noted by Matheson was that Decker had written to the publishers of the New Oxford American Dictionary and had persuaded them to change the entry for “ugg boots,” changing it from a generic term to a brand name.

As a consequence of its aggressive litigation, however, Deckers became the subject of a 2006 documentary film, The Good, the Bad, and the Ugg Boot, which subjected the trademark holder to significant criticism.

Ty Inc.'s actions to protect its “Beanie Babies” trademark in the 1990s also sparked controversy when it was revealed that Ty had persuaded a defense witness to refuse to testify that the mark was generic.

Matheson's colleague, Douglas A. “Chip” Rettew, reviewed the case of the Crocs, in which Crocs Inc. won a ruling by the Federal Circuit that a design patent defined by a drawing must be judged by viewing the drawing, not by converting the image to a verbal description. Crocs Inc. v. International Trade Commission, 93 USPQ2d 1777 (Fed. Cir. 2010) (79 PTCJ 503, 3/5/10). Thus, this fad brand case represented a key distinction between design patents and utility patents.

By Nathan Pollard and Anandashankar Mazumdar