Mass Counterfeiting Whack-a-Mole | Above the Law


Some of my favorite assignments as a young associate related to anti-counterfeiting work. I was employed by a firm (Greenberg Traurig) that had (and continues to have) a robust anti-counterfeiting practice, which meant that I would sometimes be asked to join a litigation team as another set of hands on an anti-counterfeiting matter. To someone who was primarily staffed on patent cases, there was a whiff of the exotic on the anti-counterfeiting front, with its cases involving brand name (literally) clients, international intrigue, private investigators, and, on occasion, physical raids of warehouses. The latter component was most exciting, whereby together with law enforcement and other lawyers on the team, we would enter a warehouse housing counterfeit goods — brandishing our court orders and seizing computers, files, and, when present, the goods themselves. Exhilarating work, with the added benefit of helping to chop yet another head off the hydra of international criminal elements that are behind most of the counterfeiting that continues to plague brand owners and unsuspecting customers worldwide.

For all the visceral excitement of a raid, or even obtaining a TRO and seizure order in advance of one, a significant amount of investigative work was the necessary foundation for any successful anti-counterfeiting project. From working with the brand owners and private investigators to get evidence of the infringing products’ manufacture, transport, and sale, to poring over seized financial documents and shipping manifests — anti-counterfeiting work was a collaborative, as well as expensive,  time-consuming endeavor. The cost considerations were significant, which led to a roster of clients mostly composed of large, multinational brands, despite the fact that counterfeit goods were (and continue to be) a problem that did not discriminate based on brand size.

With the perspective of some distance from my limited (but fondly remembered) time in the trenches on the anti-counterfeiting front, I realized that I retained an interest in that type of work. Thankfully, the rise of Amazon and other e-commerce marketplaces have made the global local for U.S. customers, which has led to a recent rise in anti-counterfeiting type work for our firm on those platforms. At the same time, I know that brands of all stripes continue to deal with counterfeiting on a global scale, despite the increasing awareness worldwide that strict legal treatment of counterfeiters is a necessary corrective to a problem that has run amok. Even the Chinese, long the source of (brazen) counterfeiting issues for brands, have at least started to pay lip service to reining in the problem. But the issue primarily remains one for IP counsel and brand owners to confront, often in the face of great expense and uncertainty about whether those efforts are having an impact beyond the immediate results of a particular case.

While challenges remain, I was interested in seeing what legal approaches are finding favor in terms of addressing counterfeiting. To that end, I was fortunate to have assistance from Rachel Bailey, a former trademark litigator and legal data expert at Lex Machina, who was very helpful in providing me with data from Lex Machina’s robust databases about a particular subset of anti-counterfeiting actions — mass counterfeiting cases. Lex Machina defines those types of cases as ones that “allege counterfeiting and meet one of the following criteria: 1) there are 20 or more defendants, 2) the case has only anonymous Doe defendants, or 3) the defendants are listed on an attached schedule.” WIth that definition in mind, let’s look at the data. First, filings in such cases have increased significantly over the past decade. 2019 was a banner year, with over 400 cases filed, a significant percentage of the nearly 2,000 mass counterfeiting cases filed over the course of the decade.

It seems safe to assume that these cases have been at least marginally successful for filers, considering the increased uptake of this type of legal proceeding. Indeed, Lex Machina’s data shows almost 80% of the filed cases resolved either with a default judgment against the counterfeiters (69%) or a voluntary dismissal (11%), suggesting settlement. Again, it makes sense that opportunistic counterfeiters would choose to close up shop rather than fight, considering their extremely limited set of viable legal positions in civil cases. At the same time, the data on the most prolific filers of mass counterfeiting cases continues to suggest that it is a game for the wealthy to play, with the roster composed of luxury brands like Chanel and Louis Vuitton, as well as mass-market brands like Deckers and Oakley, to name four of the top five filers.

Who represents them? The mix of firms bringing these types of cases includes small firms, some Biglaw firms, and even some solo practitioners — evidence that this is a niche practice area. It is also understandable, of course, that a brand that commits to pursuing this type of case would lean toward using a firm with experience in the area.

What about remedies? Interestingly, Lex Machina’s data suggests that most of these cases result in damages awards of between $50,000 and $1 million per defendant. Considering that many of those awards are on default, however, it is not very clear how much a plaintiff could expect to win in the unlikely event that one of these types of cases was contested through trial, for example. Also interesting, but not surprising considering how important e-commerce has become, is that cybersquatting claims arise in many of the filed mass counterfeiting cases, suggesting that the brand owners also hope to have infringing domains either shut down or transferred as part of their filing objectives.

Ultimately, it is important for IP litigators to at least have a passing familiarity with the different types of IP cases that are being filed around the country. Thanks to the data available from Lex Machina and others, it is easier than ever to quickly get a snapshot of litigation activity across the IP spectrum. With that data in hand, it is easy to extract lessons that are of potential use to our clients. Here, any IP lawyer that represents a brand suffering from counterfeiting would do well to consider how the rise of mass counterfeiting cases may present them and their clients with yet another avenue for legal redress. Because the anti-counterfeiting whack-a-mole promises to continue, it is best to have as many mallets in hand as possible. If you want to win for your clients, at least.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.


Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.





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