Imagine walking through New York Times Square and you’re invited over to view a collection of “Louis Vuitton” handbags, “all authentic!” he adds. At quick glance they look right, with all the classic styles – the Neverfull, Speedy and Keepall – and sporting the classic LV monogram. But, being a trained eye, at closer look you notice inconsistencies in the stitching and the material feels fake. You purchase it anyways at a steal of $85 after haggling it down from $150. COUNTERFIET.
Now, down the rabbit hole in shopping online you see an LV monogramed Neverfull bag that you’ve had your eye on for forever but haven’t pulled the trigger because of the $1,500 price tag. It is listed as “brand new Louis Vuitton” for a steal of price of $250. You snag it. It arrives in the mail, and immediately the quality seems off and you notice there’s no date code. COUNTERFIET.
Counterfeit products are (1) non-genuine goods, (2) unauthorized to be produced, (2) distributed and sold through unauthorized channels, and (3) use the brand’s intellectual property (i.e. trademark and signature designs). Because counterfeit goods are produced outside of the brand’s authorized factory there are usually quality, construction, and brand signature flaws that signal it’s a fake.
Counterfeit products intentionally deceive customers, exploit the brand name of others, and, often times, the proceeds are used to fund criminal activity.
It is illegal to manufacture and sell counterfeit products. Violators may be prosecuted civilly under the federal Lanham Act (15 USC § 1051) and the Tariff Act (19 U.S.C. § 1526); and criminally under the federal Trademark Counterfeiting Act 1984 (18 USC § 2320).
In criminal action, Tory Burch, Louis Vuitton, Michael Kors, Hermes and Chanel saw a victory in the Department of Justice of the Eastern Division of New York criminal action charging 22 foreign defendants for illegally smuggling millions of dollars worth of Chinese manufactured counterfeit goods into the U.S.
In civil action, Tory Burch won $164 million in a counterfeit lawsuit against Yong Sheng International Trade Co. Ltd. along with 39 other defendants based in China, for engaging in the production and sale of counterfeit goods and cybersquatting, selling fake Tory Burch apparel and shoes through 232 websites they operated including ToryBurchMall.com and WholeSaleUsLive.com. These sites lifted images and product descriptions directly from Tory Burch’s website and claimed to be selling authentic Tory Burch products.
Other mechanisms, such as online take-downs, cease and desist letters, and engaging law enforcement, are available to help combat illegal counterfeit activity.
U.S. Customs and Border Protection (“CBP”) lends enforcement aid by targeting and seizing imports of counterfeit and pirated goods. Individuals or companies known to be peddling counterfeit goods can be reported to the CPB, who will pursue an investigation and, if needed, confiscation and arrest. In 2019, CPB arrested 256 individuals and seized and estimated $343 million dollars worth of counterfeit apparel and accessories. Which is up from the prior year.
At The Revury, we have a zero tolerance policy for counterfeit goods. Repeat offenders are reported to the CPB and their products are confiscated.
Your best friend is vacationing in Italy and found this “guy” who can get you that LV bag you’ve been dying for at half the price, only $700! Telling you, “It’s literally straight from the factory!” You cave and Venmo her the money to grab you one. She returns with the bag, it’s in a branded duster with no receipt. Looks legit. GREY MARKET GOODS.
On Amazon, you see a seller advertising “LV monogram Canvas Neverfull MM” for a steal of $1,000 – that’s almost $500-$600 off retail! Too good to be true, you read the description: “Imported, Made in France, 100% Authentic and Brand New, original packing” Sounds legit, no spelling errors. . . keep scrolling. . . you see, “Factory direct” Sounds right, you pull the trigger. Package arrives and it looks legit, you revisit the link and the product is still for sale. Confused, you forget about it and move on with the day satisfied with your purchase. GREY MARKET GOODS.
At Costco, you see an Omega watch – normally, it runs for $2,000 – but Costco is selling it for $1,300. What a deal! You had no idea that Costco sold Omega watches! Deciding to get your hubby an early birthday gift you purchase it, still amazed at what you can find at Costco! GREY MARKET GOODS.
Grey Market Goods are (1) a genuine good (created in the brand’s factory), (2) distributed and sold through unauthorized channels, and (3) use the brand’s intellectual property. Often times, Grey Market Goods manifests as the “third shift” whereby rouge employees will manufacture extra products that they peddle through back-door channels. Another vivid example: unaccounted for products produced in the factory that “fall off the truck” in distribution to land in unauthorized channels of sale. Or lastly, it can take the form of authorized distributors undercutting the market by selling to unauthorized retailers.
Because Grey Market Goods are created within the brand’s own factory it can be almost impossible to distinguish it from its authorized counterpart. Likewise, because it isn’t sold through authorized channels, Grey Market Goods are unaccompanied by a receipt from the brand or an authorized reseller. Often times, Grey Market Goods can be flagged through language in the listing like: “Factory Direct” & sellers will justify their prices or sourcing methods by saying they have a direct “relationship” with the factory.
At The Revury, if we have a suspicion that your product may be a Grey Market Good, we will ask for proof of purchase from an authorized seller.
In courts, Grey Market Goods have received varying treatment, however, as it applies to the apparel industry Grey Market Goods are generally treated as unlawful depending on how egregious the offense is, what contract rights the brand has against the factory, and relevant international import/export considerations.
Aside from criminal offenses, brands can seek civil action against the factory based on contract rights if producing the additional products violated a provision of their agreement. Otherwise, brands can seek relief at law under unfair competition, intellectual property infringement and false advertising claims.
For example, Omega (the famous watch brand) won an intellectual property infringement case against Costco for selling their watches below market price in the U.S. after Costco purchased the watches from an overseas distributor who acted without authorization from Omega.
Again, you’re online and you see an ad for “Neverfull Replica”, it doesn’t have the LV monogram, but it looks a lot like the LV Neverfull bag that you’ve been wanting. Reading the description, “coated canvas with natural leather handles and lining” – just like the real LV bag! You don’t see the name “Louis Vuitton” used and you’re not sure whether its affiliated with LV or not, but you like the style so you press “Buy”. REPLICA
Replicas are not per se illegal, however, it can quickly tread into unlawful territory if the replica infringes on intellectual property rights of the brand. Consider whether the bag uses the brand’s trademark, copyright monograms or prints, or protected trade dress?
Under trademark law, if the replica creates a “likelihood of confusion” causing the consumer to believe the replica is authentic (or affiliated with the brand), then then brand will have a legal cause of action against the Replica. Likewise, the brand can take action against the Replica for violating copyright or trade dress rights held by the brand
Take for example, Converse, who filed claims against 22 major retailers including Skechers, Walmart, Tory Burch, New Balance, and H&M, to name a few, for infringing trade-dress intellectual property rights of their iconic Chuck Taylor All Star sneakers claiming they were “confusingly similar.” Most defendants settled prior to trial. Take a peek, can you tell which one(s) are Converse?
*1. Walmart; 2. Keds PF Flyers; 3. Converse; 4. New Balance
After a long procedural history, the U.S. International Trade Commission made an initial determination on October 9, 2019, that defendants, Skechers, Highline, and New Balance did not infringe because Converse’s trade dress was not a valid mark at the time these companies first began using similar designs. However, Converse trade dress became a valid mark after it was registered as a federal trademark and the remaining defaulting defendants in the case did infringe those rights by creating confusingly similar sneakers. USITC Inv. No. 337-TA-936 (U.S. Intern. Trade Com’n), USITC Order No. 174, 2019 WL 6307490).
Another good example is Patagonia, who won a temporary restraining order, asset freeze and seizure order against Chelsea International, Inc., a Chinese lead company, on the basis on trademark and copyright infringement actions under the Lanham Act for selling apparel under a “copycat” logo and “low-quality” identical copies of Patagonia’s staple outdoor vest. Take a look at the logos:
If you were to see that on a black puffer vest at Ross, would you think it was affiliated with Patagonia? Keep in mind, this would constitute counterfeit if OTB used the “Patagonia” name on it’s label.
While window shopping at the mall, from the corner of your eye you see that monogramed Neverfull purse you’re obsessed with, moving closer you see a sign that reads: “BRASS PLUM TOTES NOW 50% OFF” – glancing back at the bag you notice the tan and brown purse has a “TT” monogram. Clearly registering that it’s not an LV bag you point out to your friend how similar it is and move along.
On Instagram, your favorite influencer advertises a pair of “dupe Gucci flats” for $25 on Amazon. Interested, you click the link which reads: “JENN ARDOR: Women’s Mule Flats Shoes Pointed Toe Backless Slipper Slip On Loafer Shoes” The product page never mentions the word “Gucci”, but it has the same horsebit embellishment at top and looks a lot like the Gucci loafer you have at home. Knowing these are clearly not Gucci, you buy it anyways because, heck, it’s $25!
Knock Offs are legal. The key distinction between Knock Offs and Replicas is that the consumer is not confused as to the origin of the product and the product doesn’t infringe any intellectual property rights of the brand.
For example, when looking at the Jenn Ardor mules on Amazon, you, as the consumer know without doubt that you are not purchasing a pair of Gucci mules. Further, no intellectual property rights were violated because: (1) the Gucci name was not used (trademark), (2) no Gucci monograms or branded prints were used (copyright), and (3) the horsebit embellishment would likely not quality for trade dress protection.
Terms Knock Off and Replica are not legally defined terms, like Counterfeit and Grey Market Goods, and colloquially are used interchangeably, however, I find separating the two is helpful when attempting to draw lines between what’s legal given different scenarios. Want more? Watch our video on the subject here!
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