The shadowy business of counterfeits has taken over the globe to become a $1.2 trillion industry. Despite extensive – and expensive – enforcement efforts by nearly all luxury and fashion brands, the counterfeit trade is positively booming with estimated losses incurred by brands due purely to counterfeit clothing, textiles, footwear, handbags, cosmetics, and watches amounting to $98 billion as of 2017, up significantly from the year before, thanks to the $450 billion market for counterfeit garments, accessories, and footwear.
The following article is the first in a series of posts, entitled, “Counterfeiting: The Impact on the Fashion Industry,” which endeavors to examine the state of counterfeiting in 2018 in the United States and beyond in connection primarily with luxury and high fashion products. This introductory post sets out some of the more widely misunderstood and misused vocabulary associated with the practice of counterfeiting and sets the stage for a broader look at how the fake fashion trade has evolved over time and how it effects fashion in 2018.
In order to get a handle on the footprint of the counterfeit trade, it is essential that we distinguish the term from those with which it is commonly used interchangeably, including but not limited to “knock off,” “infringement,” and “copy.” The distinction here is critical, because, as unlike these terms, counterfeits represent a particularly egregious form of copying and as a result, are held to a specific standard legally.
So, what is a counterfeit, exactly? Well, there are a few key elements (all of which must be met for something to be deemed a counterfeit) at play. (These elements are set forth in 18 U.S.C. § 2320(d)).
First of all (and most importantly), the counterfeit product at issue – let’s say it is a handbag – must include another party's federally registered trademark or one that is “substantially indistinguishable” from the other party’s actual trademark. (A trademark, remember, is a specific word, name, symbol, design, or color (as we saw in Louboutin v. YSL and other cases) or any combination thereof).
Second, the counterfeiter is knowingly and deliberately using the other party’s trademark without the authorization to do so, and this use is almost always paired with the company's intent to deceive the consumer by presenting itself as the trademark holder by way of the fake logo, fake tag, etc.
Third, the trademark that is being counterfeited must be federally registered with the U.S. Patent and Trademark Office, and must be currently being used by trademark holder.
Fourth, the goods that the counterfeiter is making/selling must be the type that are covered by trademark holder’s trademark registrations; trademarks are registered by “class of goods,” remember. Clothing and footwear, for instance, is included in Class 25.
Finally, the use of counterfeit mark is "likely to cause confusion” among average consumers as to whether the counterfeit article to be a legitimate good or that it is in some way connected to/endorsed by the trademark holder.
In short: Trademark counterfeiting – or simply counterfeiting – refers to when a registered trademark is used on a product or in connection with service that is not one of the legitimate products/services offered by the trademark owner.
As previously noted, a counterfeit is distinct from a trademark infringement because the requirements from counterfeiting are higher. For example, a counterfeit includes marks that are largely identical to the real mark. Infringements include marks that are similar but not identical to the genuine mark. Moreover, while counterfeits require the mark to be used on the same types of goods as those included in the trademark holder’s registration, that is not required in order for a use to be considered an infringement.
Stay tuned. We will be looking at how counterfeiting effects the fashion industry from various angles and providing insight as to how brand owners and consumers, alike, can most effectively approach this $500+ billion industry.