Organized IP Crime

• Author: H. Jared Doster, Paul J. Reilly
• Pages: 28-33

Published in Landslide® magazine, Volume 12, Number 3, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2019 by the American Bar Association. Reproduced with permission. All rights reserved.

This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Organized

IP Crime

By H. Jared Doster and Paul J. Reilly

Your client, which has a signicant online

retail presence, has a small department

that keeps track of customer reviews for

its products on all major online third-

party platforms, e.g., Amazon, eBay,

etc. Recently, this department reported

to the chief marketing ofcer that cus-

tomer reviews for one of the client’s

highest-margin products, which pre-

viously averaged across all platforms at 4.5 stars out of 5,

recently dropped to 4.1 stars. Other high-margin products

are starting to decline in ratings as well. After a deeper dive,

the department nds that the number of 1-star ratings has

increased exponentially in the last four months, with accom-

panying customer reviews along the lines of the following:

I’ve ordered [the product] for years because I love the qual-

ity . . . it worked every time I used it. But my recent purchases

are way worse quality than before. The construction seems a

lot cheaper and the color is slightly off. I’m guessing [your

client] has changed manufacturers. I don’t know why compa-

nies have to keep screwing up their products like this.

At least one customer review includes a photo showing a side-

by-side comparison of the recently purchased product with a

previously purchased product. That comparison reveals that the

recent purchase is a different color and cheaper quality. Other

1-star reviews are much less informative, such as “total crap, save

ur $40 and spend it elsewhere,” but the message remains the same.

Your client investigates its authorized manufacturers and

determines that the quality and color of their production has

not changed. However, an investigator visits every physi-

cal location in the company’s global supply chain on behalf

of your client, and discovers that boxes of products of below-

grade quality are in warehouses across the supply chain.

Although the client’s authorized manufacturers demonstrate

that these are not from their facilities, the boxes bear legiti-

mate labels and packaging of the authorized manufacturers

with proper return addresses. Further leg work shows that the

counterfeit goods came from an East Asian company, an entity

reportedly connected to organized crime and with ties to terror-

ist organizations.

The client comes to you, an intellectual property (IP) law-

yer, and asks you whether there is any available legal recourse.

How do you respond? The following briey explores the evo-

lution of counterfeiting and some potential avenues of attack.

A Brief History of Counterfeiting

Decades ago, counterfeiters operated only in local markets and

largely focused on counterfeiting high-end luxury goods, boot-

legged movies, and the like.1 Today, counterfeiting is a global

industry that affects practically any product with a brand that con-

sumers recognize: soaps, shampoos, cosmetics, razors, batteries,

cigarettes, alcohol, tools, detergent, lm, light bulbs, insecti-

cides, automobile parts, pharmaceutical drugs, etc.2 In the last two

decades, the rise of online third-party retailers has allowed the

counterfeit goods industry to expand into a global market.

The U.S. government estimates that the global counter-

feit market grew 1,700 percent between 1998 and 2008.3

And the International AntiCounterfeiting Coalition (IACC)

estimates that it has grown 10,000 percent in the past two

decades.4 The estimated size of the annual global market for

counterfeit goods ranges from $200 billion to $1 trillion.5

The large range arises from disagreement as to what consti-

tutes a counterfeit good and the difculty inherent in such

measurements.6 A 2016 report by the Organisation for Eco-

nomic Co-operation and Development (OECD) estimated

that the 2013 global trade of counterfeit and pirated goods

represented 2.5 percent of world trade, which it valued at

$461 billion; this ranks higher than the nominal GDP of most

countries of the world.7

The Role of Criminal Organizations

Since the early 1990s, global trade liberalization has pro-

moted all forms of trade—both legal and illegal. According

to the NATO Economic Committee, the end of the cold war

and subsequent liberalization of global trade opened up new

business opportunities for organized crime, including human