Licensing International: The Fight Against Counterfeiting

by Elizabeth Foster

Some of the most innovative work being done by the licensing industry in the past year has actually been focused on preventing sales. That may seem counterintuitive, but it’s crucial for the continued success of the global brand licensing business as part of the ongoing fight against counterfeiting.

In 2022, the Organisation for Economic Co-Operation and Development estimated the total cost of counterfeit and pirated goods would hit $3 trillion globally.

U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement-Homeland Security Protection seized 20,812 shipments containing goods that violated intellectual property rights last year alone. That accounts for nearly 25 million counterfeit goods with an estimated retail price of more than $2.98 billion. As the tools being used by bad actors to sell counterfeit products continue to evolve, the strategies used by brand owners, manufacturers, and retailers must also constantly advance. In recent months, innovations in anti-counterfeiting have focused on fake reviews, artificial intelligence, and new legal strategies.

Five (Fake) Stars

Fake reviews have been particularly frustrating for IP owners. Fraudulent review groups on social media platforms bring in thousands of people to post fake write-ups in exchange for product and small amounts of cash. These reviews are used to legitimize counterfeit items and take advantage of online retailers’ algorithms.

In late 2022, the Federal Trade Commission (FTC) announced it was weighing changes to its Endorsement Guidelines—first adopted in 1980 and amended in 2009—to crack down on fake positive reviews. The FTC also sent letters to more than 700 companies warning it would fine those using fake online reviews or other deceptive endorsements to deceive consumers. Amazon sued an organization it alleged brokered fake reviews. The suit covered around 10,000 Facebook groups, including one named “Amazon Product Review” that had more than 43,000 members.

Beyond the groups for fake reviews, social media platforms are also being used to host secret links to counterfeit products Private groups provide links to seemingly innocuous items on an eCommerce platform—a phone case listed for $15, for example—and then provide group members with a code that lets the seller know the consumer actually wants to purchase a counterfeit item. On the surface, the items for sale look legitimate and completely unrelated to a specific brand, making it harder for IP owners to identify and track the sales of these knockoffs.

The Future of Counterfeiting

In addition to making use of social media platforms, counterfeiters are also working to use artificial intelligence (AI) and machine learning to create and sell their products.

AI—which involves the development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decisionmaking, and translation between languages—is being used by counterfeiters to manufacture better fakes. Machine learning is also being used by bad actors to circumvent the programs designed to detect counterfeits.

Beyond intentional use by counterfeiters, there are also complications around consumer use of AI. When AI is used to make a purchase for a consumer, for example, who is liable if that purchase involves trademark infringement? It will likely take several court challenges to more narrowly define AI’s impact on trademarks.

However, AI also has the potential to serve as a meaningful tool to provide attorneys, judges, and businesses with better insight into trademarks. AI could play a key role in defining the “average consumer” at the heart of trademark infringement proceedings and liability issues, for example, and it is also being used to power programs that search for and identify counterfeit items on a global scale.

Taking Counterfeiters to Court

On the legal front, the licensing industry is using a number of different strategies in the fight against counterfeiting.

For example, many U.S. firms are filing a single Schedule A (Lanham Act) IP complaint against hundreds of online merchants of counterfeit goods. These Schedule A suits start with a complaint and a motion for a Temporary Restraining Order (TRO) and are typically filed under a seal, which means the defendants are not publicly identified or served with a complaint. This is a common process in the U.S. to prevent defendants from moving assets or further evading the law. The judge may also direct that defendants’ websites selling counterfeit goods be temporarily shut down and assets at payment processors like Alipay and PayPal be frozen.

Amazon, meanwhile, filed three lawsuits against bad actors that pretended to be legitimate copyright owners in an attempt to remove licensed products from the Amazon Store. Amazon’s Counterfeit Crimes Unit discovered that these counterfeiters had submitted thousands of false copyright infringement claims against the retailer’s legitimate selling partners in an effort to reduce customer choice and clear the way for their counterfeit goods.

Anti-Piracy Hires

Beyond launching legal action, many companies are creating entire departments or forming partnerships to focus exclusively on anti-counterfeiting efforts.

In 2021, ZAG announced it was opening an anti-piracy division to safeguard the intellectual property rights of its brands, content, and consumer products. Members of this division search online marketplaces and analyze social media worldwide to identify and eliminate counterfeit content and merchandise as well as spearhead legal investigations. One year after its launch, ZAG announced its new division had prevented counterfeit products valued at more than $113 million from entering the global marketplace.

JPatton and kathy ireland Worldwide recently formed an exclusive partnership focused on brand authentication. The partnership will see JPatton’s security label, factory disclosure, and tracking programs provide counterfeit prevention tools, supply chain analysis systems, and marketplace insights to the kathy ireland team.

Collaboration is Key

It’s clear that the global brand licensing industry is at the forefront of the fight against counterfeiting. The innovation being displayed across multiple fronts—including legal efforts and technological advances—will be key to moving beyond the game of Whac-A-Mole and making significant inroads in the battle to stop knockoffs.

To make genuine progress, however, it’s crucial that IP owners, their licensing partners, and retailers continue to not only collaborate, but also share information and insights.

In order to effectively fight against counterfeiters, all parties involved need to be fully informed about each other’s struggles as well as their successes. By understanding what is effective and what needs to be improved, the industry can strengthen its anti-counterfeiting efforts across every category, platform, and territory.

Elizabeth Foster is Director of Content and Communications for Licensing International. She leads editorial planning and development for the organization along with media relations and social media strategy. Based in Toronto, she has more than a decade of experience in journalism, starting her career in newspapers before making the move to magazines.