Someone knocked off your product. Congratulations! You have a successful product that’s selling — so much so that other people have taken the time to copy it.
However, you’re now losing money that should be in your pocket. To top it off, your new competitor has copied your product with low-quality goods and slapped your branding on the product, tarnishing the reputation you’ve worked hard to establish.
What’s the appropriate way to respond?
Let’s look at the process of how you should deal with counterfeit goods.
How Do I Find Out If My Product or Process Was Knocked Off?
Unfortunately, you won’t know someone is trying to knock off your successful product until the fraudulent products are already in circulation.
In our experience, most companies find out that there are counterfeit goods in the marketplace by seeing the counterfeit or infringing products for sale on popular online retailers. Often, a potential purchaser will reach out and inquire why a product is being sold at a discount in another location. At that point, the client knows that they are competing with low-cost, low-quality counterfeit goods.
Should I Worry About My Product Being Knocked Off?
Most of the time the answer is YES! Other times, however — and this might be tough to swallow — you might not want to worry about a knockoff.
For example, perhaps you see that someone has knocked off your product in a country you have no plans to enter. With a large expense involved in removing the counterfeit products from the market, you may decide it is financially prudent to save the enforcement expense in this country at this time and use those funds it to shore up your sales and/or protection in the markets you’re currently selling within.
In such an instance, you’re comfortable having a larger expense in dealing with the counterfeit products at a later date when you decide to enter that market.
When dealing with counterfeiters, taking a page from the playbook of luxury brands like Louis Vuitton, Coach, and Yves Saint Laurent may be prudent. These brands, among others, have been dealing with knockoffs in foreign countries for decades. Though these worldwide brands do choose to frequently enforce their rights in numerous jurisdictions, they also understand it’s not worthwhile to sue every independent retailer and manufacturer.
With the proper marketing, sales, and customer education, customer loyalty can be instilled to a level where customers know the difference between a counterfeit and a genuine product and seek the real thing, even if that means paying four times (or more) the price of a lesser-quality knockoff.
Savvy ventures also know that if they spend all their time trying to prevent knockoffs from entering the market, they’ll be pulled away from what they do best: creating and selling high-quality products that their current customers and yet-untapped new customers desire.
The bottom line here? Know when it’s worth your time to pursue legal action. If it is, then make sure you…
Get It Right From the Beginning
If you have the right protections in place from the beginning, you can limit the effect that counterfeit products will have on your bottom line.
IP Protection: Patents, Trademarks, Copyrights, and Trade Secrets
Decisions on whether or not to pursue intellectual property (IP) protection on your products should occur during the product development phase. Understanding how your product differs from your competitors’ products and why your customers will choose to purchase your product instead of another product helps to identify the IP you should be protecting.
If it is determined that the product has IP that needs protection, a discussion with an intellectual property attorney should occur to determine what types of protection you should seek. Oftentimes, this discussion will aim to identify functional and aesthetic aspects of the product ripe for patent protection. Any patent protection should be sought prior to publicly disclosing the product.
If a decision is made to protect the product by seeking trademark protection on the brand and/or logo the product will be associated with, there’s a bit more leniency as to when protection must be sought. However, once a mark has been properly vetted, protection of the trademark should be pursued promptly to ensure the ability to secure future protection of the mark in foreign jurisdictions, should the need arise.
Copyrights may also be used to protect specific products. For example, software can be protected through copyright. Although copyright protection is frequently obtained upon creation, registering your copyrightable works should be part of your protection strategy.
Trade secrets — like the recipe for Coca-Cola or how the Google algorithm works — are a little more difficult to enforce because they require maintaining reasonable efforts to secure the continued secrecy. Also, if the confidential information is disclosed through violation of an agreement or through reverse engineering, the trade secret is effectively dedicated to the public. However, trade secrets may be a viable option to protect your product or system before launch.
There are numerous other protections that should be taken into account. Non-disclosure agreements (NDAs), securing web domains, and entering into non-competition agreements with key employees are just a few options companies can use to protect their products from the beginning.
OK, great, you sought legal protection from the start. So…
When Do I Take Action Against a Copycat?
Immediately.
Whether or not you are currently dealing with a knockoff issue, you should always develop a product protection strategy. Included in this strategy should be a process to address knockoffs.
This can entail using third-party providers to manage brand enforcement. Then, when that knockoff product comes out, you won’t be blindsided and can work with your IP attorney to implement your process to address the situation.
Will I Always Have the Right To Take Action?
You can always take action, but the prudent step is to determine should you?
For example, with trademarks, even if you might own a registered mark, if someone else used the same or a similar trademark first, their right may actually supersede your own. This is a unique situation, but highlights the need to conduct a thorough review of each situation before, for example, negatively blasting the other party via social media.
For those doing business in China, if you never registered your trademark with the Chinese government, you’ll have issues preventing Chinese companies from using your brand because trademark rights are only granted through official Chinese registration.
Speaking of China, knockoffs are a significant problem there for consumer goods. So, it’s vital you have protection in place to prevent the manufacture and sale of products in China and the shipment of products from China.
Yes, it can be expensive. But losing your business is worse.
Can I Handle a Knockoff Problem By Myself, Without a Lawyer?
In (not-so) strict legal terms: kinda-sorta.
For example, if someone is selling copycat devices with your trademark on Facebook in Ohio, you may be able to contact them directly with a demand to cease use. I recommend my clients take on these first initial contact when they are frequently dealing with counterfeit goods. I can provide them with the text to place in a general cease-and-desist communication to the infringing party.
More often than not, the infringement stops right away and the client has saved some legal fees. Over the course of time, these savings can be significant.
Clients can also internally handle the take-down processes involved with ensuring infringing activity is removed from online retailers.
If, however, the initial contact does not elicit removal of the infringing goods or the entity selling the knockoffs is a larger entity, a properly drafted cease-and-desist letter sent from your attorney may be the best course to ensure prompt action is taken by the opposing party.