Indiana Leading the Way Forward in Criminal Anti-Counterfeiting
Criminalization of Trade Dress copying, Theft of Intangible Property and Clarity on Criminal Territorial Jurisdiction – All get extended coverage by the Indiana Supreme Court in a landmark ruling issued today.
A resounding victory for IP owners was issued by the Indiana Supreme Court today.
Three key issues were given extended attention and clarity.
AN-HUNG YAO AND YU-TING LIN v. STATE OF INDIANA
First (1) came an analysis of the state’s jurisdictional reach for criminal cases and an affirmation that criminal territorial jurisdiction is both separate from and more expansive than it’s civil counterpart.
Then, (2) the court moved on to two issues of even greater significance to IP owners – clarification of Indiana’s 1) counterfeiting and 2) theft statutes. The importance of these two issues to IP owners cannot be understated.
The court’s reading of both Indiana’s counterfeiting and theft statutes is an unambiguous endorsement of IP owners’ rights and the statutory foundation for the state to prosecute a broad range of counterfeiting, including copying of what, in the civil context, would be considered trade dress.
The criminalization of “trade dress violations” is articulated in the Court’s analysis of Indiana’s counterfeiting statute. The entirety of Indiana’s counterfeiting statute is attached and the following excerpt is particularly relevant:
“A person who knowingly or intentionally makes or utters a written instrument in such a manner that it purports to have been made . . . by authority of one who did not give authority commits counterfeiting, a Class D felony.” IC 35-43-5-2(a).
Critical to the application of Indiana’s counterfeiting statute is the definition of “written instrument”. Defendants argued for a narrow interpretation of “written instrument” but, taking legislative intent and prior case law into consideration, the Court opted for a more expansive view.
“At first blush it seems intuitive that ‘written instrument’ must at least consist of a document of some kind. But we agree with the Jacobs court that the Legislature broadened the scope and definition of ‘written instrument’ to include more than just documents, paper, and other instruments containing written matter. Instead the definition includes ‘other objects or symbols of value, right, privilege, or identification.’
It seems clear enough to us that a handgun or rifle – just as an unsigned Monet’ painting, Remington sculpture, or Tiffany vase – could be subject to counterfeiting. To require actual writing or markings on a replica in order to bring it within the reach of the counterfeiting statute would defeat the purpose of the statute and eliminate a very wide range of items. We are not convinced the Legislature intended such a result.”
By bringing “other objects or symbols . . . of identification” within the reach of Indiana’s counterfeiting statute, the Court recognized that goods can be counterfeit even if they are not emblazoned with a trademark owner’s name or logo. This is a nuanced, thoughtful and completely correct recognition of the fact that counterfeiting, especially in the 21st Century, comes in many forms and prosecutors must be armed with the appropriate tools to properly address the mercurial threat of counterfeiting.
In addition to counterfeiting of trade dress, the Court also tackled the conceptually difficult issue:how intangible property can be “stolen,” Indiana’s theft statute applies to intangible property.
Defendants argued that: (1) trademarks and/or markings or symbols do not constitute property; and (2) it is not possible to exercise unauthorized control over (a key component to theft) trademarks, symbols or markings.
Here too, the Court’s application of the theft statute was thoughtful, articulate and unambiguously supportive of intangible property’s value. Looking to the entirety of the theft statute, rather than just accepting a common understanding of what is and is not a theft, the Court concluded that, at the very least, counterfeiting “encumbers” a trademark right. That “encumber” is included as one of the ways that control may be exerted over property in Indiana’s theft statute paving the way for the Court to conclude that the theft statute may be applied to intangible property such as trademarks.
In other words, (1) trademark owners can be victims of theft if their rights are encumbered even though they are not fully divested of their ability to use their trademarks; and (2) counterfeiting encumbers a trademark right.
In a final coda to its decision, the Court also cast off defendants’ assertion that counterfeiting is an issue that should be contained within the civil arena. Should the facts satisfy the elements of the crimes being charged, the Court concluded, combating counterfeiting through the criminal process is perfectly appropriate.
Reading between the lines it’s easy to infer that, Prosecutors have the right, if not the duty, to protect intangible property in the same manner and with the same authority that they protect real or personal property.
No small amount of credit is due to the Indiana prosecutors who initially brought these charges against defendants and who saw this case through interlocutory appeals, adverse appeals court rulings and on to the decision that the Supreme Court issued today. Chief among them was Huntington County Prosecutor Amy Richison and Indiana Attorney General Gregory Zoeller. Ms. Richison was first to charge defendants for importing counterfeit products into the state of Indiana which she concluded bore the requisite “markings and symbols of identification” of another person. In this case the products were Airsoft pellet guns and the owner of the “markings and symbols of identification” was famed German small arms manufacturer Heckler & Koch (“H&K”). Defendants’ products, while not incorporating the name or logo of H&K, did copy almost every other element of H&K’s firearms. Ms. Richison deemed this to be an unauthorized copying of H&K’s “markings and symbols of identification” and brought charges against defendants for violation of Indiana’s forgery and theft statutes as well as charges predicated upon “Indiana’s Corrupt Business Influence statute”.
In its ruling today, the Indiana Supreme Court affirmed Ms. Richison’s reading of the forgery and theft statutes and remanded this case to the trial court so that the prosecution of defendants may proceed.
In summary: This is a landmark decision. It affirms the notion that a corporation’s identity is comprised of elements that are more broad and complex than a simple name and logo. This decision further recognizes the fact that counterfeiters who attempt to evade prosecution by simply not affixing an IP owner’s name or logo to a product have not insulated themselves from criminal liability.
All in all, this decision represents a paradigm shift in how counterfeiting is policed and we hope that prosecutors and courts throughout the U.S., especially in those states whose laws track Indiana’s, follow the lead that Indiana has taken on this issue today.
To learn more about how Continental Enterprises can help you protect your intellectual property or to discuss your specific needs please click here.
Question: We saw our product for sale online. We did not authorize this. How can we stop it?
The power of the Internet to organize individuals and provide them with increased market share for their products and ideas has had some downsides for intellectual property (“IP”) owners. Nowhere are these downsides more obvious than online auction websites and e-commerce sites on which user generated designs make up the product base. IP owners cannot ignore these sites because they play an important role in giving birth to new infringements and providing an anonymous dumping ground for illegal products. Continental Enterprises (“Continental”) has developed a comprehensive brand protection strategy that effectively and efficiently addresses such sites through routine monitoring and taking immediate action against infringements.
The popularity of online auction sites is unquestionable. From an IP protection standpoint, these sites merit attention for four major reasons.
- They are dumping grounds for unlicensed and counterfeit goods. Reducing the availability of counterfeit products requires shutting down online auctions for those products.
- They provide a trend-spotting function by acting as a microcosm of the marketplace as a whole. If you want to know how infringers are abusing your IP and to what extent, online auction sites provide insight into those issues.
- They are more than just an “online yard sale.” Sophisticated online businesses that carry substantial inventories and generate significant income are now as common on these sites as the casual sellers. Identifying and taking action against these businesses can have a real impact on the counterfeit market.
- They can reveal the true source of infringements. Casual sellers on these sites are often conduits to larger, more organized sources of counterfeit products. Taking action against these sellers can provide valuable leads into larger counterfeiting networks.
To address IP problems associated with online auctions and user-generated designs, Continental has established monitoring programs that significantly reduce levels of infringement and counterfeiting. When available, we work with preexisting policing methods in order to have the infringing sales shut down. In situations where the sites do not have policing procedures, or their procedures are inadequate, we communicate directly with site management to remove infringing content. When appropriate, we conduct individual investigations into infringers on these sites and use more aggressive enforcement tactics to remedy the issues. By monitoring these sites and regularly taking action against violations, we have been extraordinarily successful in eliminating infringements from the marketplace.
Someone is marketing a product that looks almost exactly like ours. What can we do about it?
Question: Someone is marketing a product that looks almost exactly like ours. What can we do about it?
While brand saturation is a common goal of many intellectual property (“IP”) owners, lax enforcement can quickly lead to rampant and uncontrollable misuse of a trademark. Continental Enterprises (“Continental”) can and has reversed this trend, recovering intellectual property thought to be lost to the public domain. Our innovative approach has converted profitless sales of non-licensed products into income-producing assets.
Our approach seems somewhat counterintuitive in that we focus on distribution chains instead of large manufacturers. Stopping retail sales of unlicensed goods eliminates the ability of manufacturers to distribute their products. Thus, when negotiations with manufacturers take place, the demand for their unlicensed products has already begun to dry up. This results in a decisive negotiating advantage for our clients as we reassert their IP rights. Using this approach has allowed us to obtain compliance and recover damages from once-recalcitrant foreign manufacturers without resorting to litigation.
The effectiveness of this strategy is a function of our ability to accurately triage cases and manipulate economic forces to our clients’ advantage. We begin at the periphery of the problem and establish a consistent record of enforcement. This reinforces the strength of the mark, opens the marketplace up for legitimate goods, and paves the way for an assault on the core of the problem.
Continental has employed this tactic to return marks to clients who had all but relinquished them to the public domain. Our trademark reclamation efforts have also been the basis for developing a robust licensing program to supplant markets in which counterfeits dominate. This is a clear example of how a business-focused solution can produce a victory where protracted litigation would likely fail.
We plan to introduce a new product or service. What can we do to ensure our intellectual property is protected?
We plan to introduce a new product or service. What can we do to ensure our intellectual property is protected?
Although common law trademark rights can be acquired through a period of extended use, relying solely on these rights can hinder the growth and protection of your brand. Registering your trademarks both domestically and abroad is essential to the development of your intellectual property (“IP”) portfolio. Proper registrations provide the foundation for efficient and effective management, enforcement and licensing of your brand. Continental Enterprises (“Continental”) can assist with the registration process as well as developing a registration strategy and integrating it into the long-term growth and expansion of your company.
STATE trademarks can be obtained quickly and inexpensively. This is especially useful when a federal registration has not been obtained and you are confronting an infringement problem that has already metastasized. In these situations, you need to protect your IP swiftly and efficiently. State registrations also play a role in some of the unique strategies that Continental can develop for you. For example, registrations in just a few states can make it extremely difficult for national distributors of infringing merchandise to sell their goods. Additionally, a simply state trademark registration activates many state criminal statutes, some of which even have heightened penalties if the mark is registered within their state.
FEDERAL trademark registrations are the gold standard. They provide nationwide coverage and are the most likely to put others on notice of your rights. We recommend you register all major components of your brand identity both individually at the federal level. This can include not only logos and word marks but also all of the other elements that distinguish your products from others and create a connection between you and your customers such as sounds, colors and the distinctive designs and three-dimensional shapes of your products.
FOREIGN trademark laws are quite different from those in the U.S. Many foreign countries, most notably China, only recognize registered trademarks and often follow a “first to file rule.” This means that if another party registers your trademark before you then your rights can be severely impaired. While initial registrations can be relatively inexpensive, attempting to retrieve them from predatory infringers can be quite costly. Fortunately, in most of these countries there is only an “intent to use” requirement in order for registration to take place. We encourage trademark registration in any country where you feel infringing merchandise is likely to be manufactured or significantly compete with your market share. This will ensure that whenever it is detected, you can aggressively enforce your IP rights throughout the world and attack foreign counterfeiting.
It is equally important to register trademarks in the appropriate classes, especially in countries that follow strict registration requirements. A registration in the incorrect class is the same as having no registration at all. For example, an IP owner that registers its trademark in the class for jelly may be surprised to find that infringers can still use that same trademark for jam.
The biggest pitfall when developing and protecting your IP throughout the world is overlooking foreign trademark registration. Continental can provide insightful guidance in effectively protecting your IP throughout the world by using trademark registrations to your advantage. In creating a registration strategy, Continental’s staff will work closely with you to ensure that your registrations will protect your brand and products to the greatest extent possible.
We are losing revenue because someone is making a product that looks exactly like ours. Can we recover the lost money?
Question: We are losing revenue because someone is making a product that looks exactly like ours. Can we recover the lost money?
Historically, IP owners have had to be content with prosecuting only the largest and most egregious infringers. This strategy is typically very costly and time-consuming and feeling its effects can take a long time. Additionally, focusing on a single large infringer can have a minimum impact on the availability of counterfeit/infringing goods in the marketplace. This is because focusing only on major infringers ignores the numerous mid and low-level counterfeiters that are often responsible for the bulk of the violations. While each of these smaller infringers would be insignificant individually, aggregately they are responsible for a major portion of the illegal merchandise on the market. IP owners that do attempt to engage with these lower-level infringers are typically content with simply stopping the illegal activity. This creates an incentive to keep counterfeiting until caught. As part of our Asset Recovery efforts, we demand that counterfeiters and infringers at all levels recompense you for both the profits made from the illegal goods and your costs.
Continental’s aggressive approach to asset recovery allows you to take action against infringers at all levels of production, distribution and sales. This has a significant impact on the market for counterfeit and infringing goods while diminishing the impact on your budget. Our approach to asset recovery allows our clients to recover a significant percentage of their enforcement costs, which greatly expands the amount of IP protection that can be achieved within a given budget.
Continental’s focus on Asset Recovery is in keeping with our business-minded approach to IP protection. Our staff considers investigative costs as a damage incurred by our clients and creatively uses a variety of state statutes to make our clients whole. Protecting your IP must be a viable business decision. On the other hand, infringing on your IP should be one of the worst business decisions an infringer can make. In addition, establishing a reputation as an IP owner that aggressively pursues asset recovery has a significant preventative value.