Businesses turn to design patents to fight overseas counterfeits

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Oakley Inc., Fitness Anywhere LLC and other companies are looking at design patents to fight counterfeits crossing the US border.

A slew of patent infringement lawsuits have been filed in recent months against foreign importers accused of selling counterfeit products from China and other countries. The lawsuits target numerous entities – in one case more than 300 – that sell goods in online marketplaces operated by companies like Amazon.com Inc., eBay Inc., and Alibaba Holding Group Ltd..

Multi-defendant complaints are like anti-counterfeiting lawsuits that companies have long filed against trademarks. But lawyers said it was relatively new for companies to use the approach of design patents, which protect a product’s appearance, to combat the threat of counterfeits to their brands.

Businesses are turning to strategy as sellers of counterfeit products become more sophisticated in their own tactics. More and more importers are shipping counterfeits into the country without a logo, increasing the chances of them escaping seizure at the border and making it more difficult to prosecute trademark lawsuits.

“What was previously done under counterfeiting law, brand owners are now looking in new ways,” said Elizabeth D. Ferrill, partner at Finnegan Henderson Farabow Garrett & Dunner LLP in Washington. “One of those ways” is this “multi-defendant prosecution strategy.”

There are obstacles in the strategy. Most important for businesses is how to make the connection required by patent law to join many defendants in a single lawsuit.

Sunglasses, Uggs

Trademark owners typically sue a large number of defendants overseas in a single case and then quickly seek a restraining order. The names of the defendants may be hidden in the lawsuit, so importers cannot move their assets until a court can order their accounts to be frozen.

In some cases, the applicant’s name may even be secret.

Bloomberg law data shows that several hundred trademark lawsuits have followed this pattern in recent years. By comparison, patent lawsuits of this nature were virtually non-existent until about 18 months ago, according to data from Bloomberg Law. Since then, there have been dozens of such cases.

Oakley Inc., the California eyewear maker, has been the most active, filing complaints about patents covering the design of sunglasses. Companies like Fitness Anywhere, which makes the TRX suspension workout, and the maker of UGG Deckers Outdoor Corp., have also adopted the approach.

“Evolutionary game”

Companies selling counterfeit products have developed a sophisticated network, said Adam Kelly, partner of Loeb & Loeb LLP in Chicago, using websites like sellerdefense.cn and chat rooms to stay on the lookout for new lawsuits and share tips on operating multiple seller accounts.

Sellers are also frustrated when importers ship counterfeits that look like the existing product to the United States, but logos and labels that would infringe a trademark are removed, Ferrill said.

Companies including Nike Inc. and 3M Co. supported legislative efforts to allow U.S. Customs and Border Protection to seize goods suspected of infringing design patents. CBP already has this authority when it comes to goods that infringe copyright and trademarks.

“It’s an evolving game,” said John Strand, shareholder of Wolf Greenfield & Sacks PC in Boston. “Each party must continually adapt the tools they use to play the game in their best interests. “

Companies have focused more on obtaining design patents to protect their brands, Kelly said. A highly publicized legal battle between Apple Inc. and Samsung Electronics Co. on design patents have contributed to this trend. The case, which reached the U.S. Supreme Court in 2016, illustrated the potential value of patents.

The number of design patent applications in the United States has increased every year since 2014, according to statistics from the United States Patent and Trademark Office. In 2019, there were almost 47,000 requests, up 23% from five years earlier.

Once companies “have obtained the design patents, their thinking turns to how to monetize or enforce design patents in order to protect their ornamental design,” Kelly said.

Find connections

There may be obstacles for patent applicants in multi-respondent cases.

It is generally not worth taking legal action against a single counterfeit seller, making it essential that companies can consolidate many defendants, lawyers said. The America Invents Act of 2011 raised the bar for the consolidation of multiple defendants into a single patent action.

By law, companies considering patent action must be able to show a relationship between defendants in order to group them together, for example when the products come from the same factory or when a single entity impersonates several. sellers.

“They figured out those connections and now it’s a profitable business to go to district court,” Ferrill said.

Oakley, in a lawsuit filed this month, alleged the defendants were an “interdependent group of counterfeiters” who operated online stores under different aliases. He also cited data showing that counterfeit and pirated products represent billions in economic losses.

The trademark law provides for a clear number of damages: not less than $ 1,000 or more than $ 200,000 per counterfeit mark and per type of product. The cap rises to $ 2 million when the violation was intentional. There are no statutory damages for design patent infringement, so damages must be proven.

Patent holders in numerous cases against overseas counterfeit sellers have obtained default judgments, court documents show. Many cases are resolved within months.

In June, an Illinois federal judge handed down judgment for Oakley and ordered each accused to pay $ 100,000 in damages. The court ordered the freezing of the defendants’ accounts and all the money in them transferred to Oakley.

In the months that followed, Oakley filed notices with the court stating that it had recovered the full price from two defendants.

Trademark lawsuits have not stopped. Oakley and its parent company, Luxottica SpA Group, have filed several anti-counterfeiting complaints this year. Strand Many companies also continue to work with Amazon and other online marketplaces in an effort to reduce the number of counterfeit products on their platforms.

“Companies try to use all the tools in their toolbox to tackle potential counterfeiters,” Strand said.


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