Counterfeit goods, piracy, and theft of trade secrets cost the U.S. economy hundreds of billions of dollars annually.1 And there is an increasing number of media reports about notorious online marketplaces where abundant infringers undermine small U.S. businesses that originally came up with the innovations.2 Here I share a story of how a startup brand can grow into a global brand despite the abundant infringements that thrive around the world in today’s fast-paced, electronic business landscape.
July 01, 2018 Landslide
An Inside Look at a Rising Brand’s Global Fight against Infringers
By Charles Chen
The company, HICKIES Inc.,3 sells footwear accessories that transform the look of your shoes and the way you tie your shoes. HICKIES launched its first product, a lacing system that uses special elastic straps to turn any shoe into a slip-on, on Kickstarter in 2012.4 Within days, HICKIES exceeded its fundraising goal and the product was backed by over 3,000 people from around the world.5
On the Kickstarter platform, HICKIES presented a video about the story of its creation and many images of the design renderings and technical diagrams of how the product works. The video also explained the different types of people and shoes that this product could be useful for. Fortunately, before embarking on the Kickstarter campaign, HICKIES had filed for patent and trademark protections. The founders took these steps because even before HICKIES produced its product, Chinese infringers started to copy and steal HICKIES designs and images. HICKIES is one of those Kickstarter project stories that infringers took advantage of.6 However, HICKIES is also a story that highlights brand protection is possible and that there is hope for a brand to fight and grow. Then, HICKIES was dealing with thousands of infringing listings on Alibaba. Today, we have seen a large decrease of infringing listings on Alibaba.
When I joined HICKIES in 2013, about a year and a half after its Kickstarter launch, I remember browsing through hundreds of infringing listings on some online marketplaces. I got the sinking feeling that there was no end to the number of web pages that sold products that infringed HICKIES intellectual property (IP) in all its forms—copyright, trademarks, and patents. Back then, I was manually removing thousands of infringing listings and learning about different IP resolution processes across various online social media and online marketplaces such as Alibaba, Amazon, eBay, Facebook, YouTube, and countless others. I was learning about this across multiple languages since each one had different ways to report violations, or had different IP rights you can use.
Before sending out cease and desist letters, I was conducting many online investigations such as ordering test purchases and sometimes making purchases in brick and mortar stores. For brick and mortar operations, HICKIES knockoffs could be found anywhere from small flea markets to large chain stores such as Toys “R” Us. We persisted in fighting infringers as aggressively as possible through continued large volumes of online removals, court injunctions, and custom seizures. In the background, online marketplaces evolved in changing their online policies and increasing their penalties against infringers, which helped a lot to hold infringers accountable.7
Throughout these battles, HICKIES continued to grow each year, and now HICKIES is selling its products in over 45 countries. This is not a story where all infringers are nonexistent, or at least not yet. Brand protection is a constant work in progress. However, I found three things that worked for a rising brand that wants to effectively disrupt infringers.
File IP Rights
The first and highly recommended priority is to proactively file IP rights to build tools to fight infringers. At HICKIES, we are lucky to have a forward-thinking founder, Gaston Frydlewski, who strongly believes in IP rights. He also drafted HICKIES very first utility patent.
One of the most important countries to file IP rights with now is China. Studies have shown that 87 percent of infringing goods come from China (including Hong Kong). Whether you are filing first or not, Chinese infringers can be filing for rights to intellectual property that you created. Thus, it is better to be first and to at least have the earliest priority rights since China recognizes rights on a first-to-file basis. To those who find Chinese courts ineffective to provide damages, consider filing as a tool to fight at the source of where many infringing goods are created. And there are recent cases of Chinese courts showing improvement in finding in favor of foreign companies.8 Beyond the Chinese courtroom, being able to prevent Chinese infringers from selling in different countries on Chinese online marketplaces can be highly disruptive and effective for your enforcement program. Certain Chinese online marketplaces such as Alibaba are unique in that they accept patents, and not merely design patents but also utility patents. In contrast, taking down patent infringers on online marketplaces in North America such as eBay and Amazon is rare. For eBay, its takedown policy requires a court order for eBay US to recognize U.S. utility patents. In some ways, Chinese online intermediaries have more protective IP policies than U.S. online intermediaries.
As a startup, we have limited resources, so we try to think outside the box and file the most effective IP applications. For trademarks, a good valuable right is the European Trademark (EUTM, formerly known as Community Trademark (CTM)), because it covers over 20 European Union member states in one filing. For copyright, the U.S. Copyright application is beneficial because of international treaties that the United States has with many bilateral countries that recognize U.S. copyrights. For patents, depending on the jurisdiction, design patents or industrial design rights are effective. These rights are more generally accepted and recognized by online marketplaces, and are the fastest and cheapest to obtain among the various type of patents, such as utility model patents or utility and invention patents. For example, eBay and Amazon, depending on the jurisdiction, recognize design rights. Some online intermediaries find design rights are easier to recognize and make the judgment to assist with takedowns.
Build Relationships
Second, be proactive and build relationships. I highly recommend reaching out to organizations that share ideas and best practices on fighting infringers. Two of the most active organizations that are in the brand protection space are the International Trademark Association (INTA) and the International AntiCounterfeiting Coalition (IACC). While the membership price may seem steep for a startup, there are benefits for small and medium-sized enterprises (SMEs) to justify and even outweigh the cost. The ability to gain access to hundreds of compiled country guides, checklists of best practices, and the latest developments in law in different countries’ brand protection is a good reason to pay for membership. This is a relative bargain compared to asking for advice based on an attorney’s hourly fee for only one country. Another useful membership resource is the opportunity to attend meetings to train customs and enforcement officials where infringement is a problem. Still another is the opportunity to connect and meet the IP rights representatives behind online marketplaces and social media. This is extremely valuable, especially when there are times where you feel frustrated with boilerplate answers from an online intermediary and you hear no replies back. Nonprofit IACC rolled out a free program called MarketSafe, partnering with Alibaba.9 Participating in the program allows brands to qualify to enter Alibaba’s Good Faith Program. It is highly useful to experience what Alibaba’s Good Faith Program can do to remove infringing listings swiftly and without hassle.
Embrace Technology
The third recommendation is to constantly evolve and embrace technology. Take advantage of technology because infringers are constantly finding tactics to outmaneuver the authentic brand. This makes it even more important for the brand to be on top of technology to deter infringers. Being tech-savvy by being familiar with the social media policies, e-commerce marketing tactics, or online marketplace IP rights systems allows you to be steps ahead of infringers.
Technology can also be used to monitor infringers. Google alerts is one cost-effective way to monitor and patrol for infringers. Our infringers have certain keywords they often use. Another way is to educate HICKIES customer service department and local distributors to inform and identify infringers for local regions in different languages.
Embracing technology also means not being afraid to partner up with online brand protection vendors that have the software capacity and staff to patrol, analyze, and efficiently remove thousands of infringing listings across different online websites, social media, and marketplaces. HICKIES has partnered with Yellow Brand Protection for almost a year and together have removed thousands of listings each month across the vast online landscape.10 Prior to Yellow Brand Protection, I was the only person handling the online enforcement, and I spent hours gathering and submitting marketplace listings. This was effective at the time, but with technology, we were able to enforce more volume and I gained more time to focus on other brand protection initiatives. Overall, the use of technology allowed our brand protection program to more than double the removals and expand our coverage of online marketplaces from 30 major marketplaces to over 500 marketplaces.
Conclusion
The online landscape is a huge space to monitor and protect. Any startup should realize that it is not alone in the fight. Recently, the U.S. Customs and Border Protection announced it has new efforts to mitigate the influx of counterfeits sold on e-commerce sites.11 China has also recently announced plans to step up in its enforcement efforts.12 There have also been studies on fighting online infringers.13 One of the most interesting places to watch is online intermediaries on what policies and procedures are created, because it is the most fast-paced and fastest growth venue for shopping. INTA launched its updated best practices guide in May 2018.14 So be strategic, stay proactive, and keep fighting.
Endnotes
1. Nat’l Bureau of Asian Research, Update to the IP Commission Report: The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy 7 (2017) (finding that the annual cost to the U.S. economy exceeds $225 billion to as high as $600 billion).
2. See, e.g., Leticia Miranda & Megha Rajagopalan, Small American Businesses Are Struggling against a Flood of Chinese Fakes, CNBC (Apr. 5, 2017), https://www.cnbc.com/2017/04/05/small-american-businesses-are-struggling-against-a-flood-of-chinese-fakes.html.
3. The name HICKIES is from the cheeky term for a mark of affection. The founders believe the world needs more “marks of affection,” and they wanted to leave a mark of affection on everyone’s shoes.
4. HICKIES—Never Tie Your Shoes Again, Kickstarter (Apr. 30, 2012), https://www.kickstarter.com/projects/hickies/hickies-turn-your-kicks-into-slip-ons.
5. Id.
6. See Josh Horwitz, Your Brilliant Kickstarter Idea Could Be on Sale in China before You’ve Even Finished Funding It, Quartz (Oct. 17, 2016), https://qz.com/771727/chinas-factories-in-shenzhen-can-copy-products-at-breakneck-speed-and-its-time-for-the-rest-of-the-world-to-get-over-it/.
7. For example, Alibaba increased its penalties against infringers.
8. See Wayne Ma, Under Armour Wins Trademark Battle in China over “Uncle Martian,” Wall St. J., Aug. 4, 2017; New Balance Wins Record China Trademark Award, BBC News (Aug. 24, 2017), http://www.bbc.com/news/business-41020674.
9. IACC MarketSafe Expansion Program, IACC, https://www.iacc.org/iacc-marketsafe-expansion (last visited June 14, 2018).
10. There are other online brand protection vendors such as INCOPRO, Pointer, and MarkMonitor. Some important factors to consider may be costs, technology, analyst knowledge and experience, and coverage of markets.
11. U.S. Gov’t Accountability Off., GAO-18-383T, Intellectual Property: CBP Can Enhance Information Sharing with the Private Sector to Address Changes in the Counterfeits Market (2018), https://www.gao.gov/assets/700/690467.pdf.
12. China Says Will Strengthen Punishment of Intellectual Property Rights Violations, Reuters (Mar. 12, 2018), https://www.reuters.com/article/us-china-parliament-intellectual-propert/china-says-will-strengthen-punishment-of-intellectual-property-rights-violations-idUSKCN1GP09Y.
13. See, e.g., U.S. Chamber of Commerce, Measuring the Magnitude of Global Counterfeiting: Creation of a Contemporary Global Measure of Physical Counterfeiting (2016).
14. “Addressing the Sale of Counterfeits on the Internet”: Anticounterfeiting Committee Completes Best Practices Guide, 73 INTA Bull., no. 3, Feb. 15, 2018, https://www.inta.org/INTABulletin/Pages/Anticounterfeiting_Update_7303.aspx.