Birkenstock takes a bold step

Global consumers are doing more and more of their shopping online. However, with this perk of the personal technical revolution comes with it ever-increasing opportunities for the advertising and sale of counterfeits.

Consumers need to stay alert to the risk of purchasing counterfeit products when intending to purchase genuine branded products, but is there anything brands can do to eradicate or limit this illegal activity?

In July this year sandal maker Birkenstock decided to remove its products from Amazon in the US in an apparent protest against its “unacceptable business practices” which, Birkenstock stated, jeopardised its brand.

From January 1, 2017, the German-based footwear company will no longer supply its products for Amazon to sell online and, in addition, will not authorise any third party merchants to sell on the marketplace section of the online retailer.

It is not entirely clear whether Birkenstock has singled out Amazon as having a unique problem with counterfeit sellers, although Birkenstock made reference to its attempts at policing the activity in partnership with Amazon as “impossible”.

Broadcaster CNBC News previously reported that Amazon’s problems with counterfeiters had grown exponentially following its ever-closer working relationship with Chinese companies.

CNBC noted, in particular, that Amazon’s working practices, such as mixing all inventory from distributors at its fulfilment centres, can lead to authentic products and fakes being mixed together.

Fake reviews can also contribute to the problem. Although this practice is nothing new across the spectrum of all online retailers and is prohibited, it is of course something counterfeiters look to exploit. This can lure even the most sceptical of customers into an infringing transaction at the thought of making a significant saving on well-known brands.

In 2014, the European Commission’s “EU Customs Enforcement of Intellectual Property Rights: Results at the EU Border” report revealed that, in 2012, the customs authorities at the external borders of the EU seized more than 39.9 million counterfeit articles with a market value of almost €900 million ($1.01 billion), and that the authorities in the UK seized more articles than in any other EU member state.

Further, the commission also observed that the top six categories of goods seized were all of a kind that are often shipped by post or courier after an order is placed online.

The opportunities presented to prospective counterfeiters by online marketplaces leads to the question of what brands can do to protect themselves and their customers.

In a decision handed down in July by the English Court of Appeal [Cartier and Others v BskyB and Others] Lord Justice Kitchin made it clear that the court has wide-reaching powers as to the granting of injunctions where websites openly infringe a brand owner’s trademarks.

“Counterfeiters will not be easily deterred and can simply resurface on the marketplace using a different name but with an identical inventory.”

However, in this specific case, the injunctions were sought against the internet service providers (ISPs) to force them to block websites that were wholly responsible for the marketing and sale of counterfeits.

The difficulty with websites like Amazon is that the vast majority of their business is genuine and offers a lawful service to consumers.

It is unlikely, in my view, that a court in the UK would grant a ‘blocking injunction’ against ISPs to block wholesale consumer access to bona fide online retailers, such as Amazon.

The main reason for this is that the court, in applying the balance of convenience, is unlikely to conclude that the brand owner would be entitled to a blocking injunction.

Unless and until the technological and practical issues of separating lawful and unlawful elements within the relevant online marketplace is achieved, it is likely that such a wide-reaching injunction would be considered to be disproportionate and the court would be extremely hesitant to exercise its discretion to grant such relief. That is not to say that blocking injunctions are not an important tool in the armoury of brand owners, however, and the court has made it clear that they are willing to assist in certain circumstances.

Protective strategy

There are various steps that a brand owner can take to protect and improve its position when selling products on large worldwide online platforms.

The first step is to sign up to the takedown protocols on the relevant platform. Amazon, eBay, Alibaba and others all have a procedure for takedown services which can prove effective, at least in certain circumstances. Procedures generally work well but require regular monitoring.

Counterfeiters will not be easily deterred and can simply resurface on the marketplace using a different name but with an identical inventory. One takedown notice in, say, the UK relating to a particular product can spawn many new infringing sites. Earlier this year, Amazon removed an entire sale catalogue of several hundred thousand listings of counterfeit products following a takedown request from a UK-based trade body.

Of course, in addition to the specific targeting of online retailers, there are more general areas of good practice that will make it more difficult for the counterfeiters to succeed. It is important to have a robust IP portfolio from the outset coupled with an effective enforcement strategy. Brand owners should consider carefully the territories in the world which provide the biggest threat from counterfeiting to their business and ensure that trademarks and, where applicable, copyright are registered to allow enforcement authorities to assist with taking action.

As mentioned above, monitoring and analysing sales via online markets is important.

According to analysis by MarkMonitor, just ten online marketplaces account for approximately 80% of all marketplace traffic. Brand owners should identify those marketplaces which are most likely to affect their sales in any given territory and target their monitoring strategy accordingly.

The main message is to be proactive. Birkenstock has clearly thought about its position and made a clear and decisive move to protect its brand.

It remains to be seen whether others will be so bold as to stand up to the global powerhouses in online marketplaces; only when the brands combine forces will we see a much anticipated shift in momentum.

Martin Ochs is a senior associate in the commercial disputes and intellectual property teams at  Hamlins. He can be contacted at: mochs@hamlins.co.uk

This was first pubslished on  Trademarks & Brands Online.