The global counterfeit market is a multi-billion-dollar industry that continues to grow in scale and sophistication.
In the United States alone, counterfeit goods are estimated to cost businesses over $200 billion annually, posing a significant threat to businesses, not only in terms of lost revenue but also to their brand reputation and consumer trust.
Following the continued growth of counterfeiting, brand impersonation, and IP infringements in online spaces, there has been a huge reaction from legitimate organizations towards combating the online counterfeiting industry.
In this article, we’ll look at how to recover revenue in the United States directly from counterfeiters, lay out the legal framework that makes this possible, review the best states from which to launch these suits, and take a look at some key success cases.
Revenue Recovery in the United States
Revenue recovery allows businesses to launch legal action directly against counterfeiters. By collecting vast amounts of data, strategically targeting counterfeiting networks, working with an expert legal team, and collaborating with courts, businesses can now take their brand protection a step further.
This results in brands being awarded damages totaling hundreds of thousands of dollars, claimed directly from those who have infringed on their IP for years. Along with the financial rewards, revenue recovery allows for criminal charges to be brought against egregious infringers and sends a clear message to counterfeiting networks that brands are refusing to let their IP be appropriated.
Understanding Counterfeiting Laws in the US
In the United States, there have been a number of federal statutes signed into legislation that govern anti-counterfeiting enforcement:
- The Lanham Act (15 USC Section 1051) provides trademark owners with a range of legal remedies against counterfeiters, including injunctions to stop the sale of counterfeit goods, damages to compensate for lost sales and profits, and attorneys' fees.
- The Trademark Counterfeiting Act of 1984 (18 USC Section 2320) criminalizes the trafficking of counterfeit goods and establishes penalties for counterfeiting offenses, including fines and imprisonment.
- INFORM Consumers Act targets online marketplaces that host third-party sellers to combat counterfeiting. It mandates enhanced transparency by requiring marketplaces to collect identifying information from high-volume sellers and disclose seller and product details to consumers, aiming to curb counterfeits sold online.
These statutes lay the groundwork for civil and criminal legal action to be taken against known counterfeiters.
By offering brands a range of legal tools to combat counterfeiting, including injunctions to halt the distribution of counterfeit goods, damages to compensate for lost sales and profits, and attorneys' fees, they make it possible for businesses of any size to seek justice against known infringers.
US Revenue Recovery: Step by Step Process
To combat the issue of counterfeiters infringing on essential IP and illegally taking money from legitimate brands, businesses in the United States are now able to launch civil litigation directly against counterfeiters.
The Revenue Recovery Program turns the tide on brand protection, supporting the systematic takedown of infringing listings and impersonating websites with legal action against the biggest offenders.
Let’s break down this process into four simple steps.
Step 1: Case Building
The first step in the revenue recovery process consists of two main tasks: to identify and target the most promising counterfeiters for legal action, and to gather as much data as possible.
Target identification involves evaluating the likelihood of success in court and the potential financial payout. Popular brands often suffer from counterfeiting coming from many different organizations and using different websites, marketplaces, and other platforms for their operations.
For this reason, choosing the right target can make a huge difference in the final financial payout of revenue recovery. When starting legal action against counterfeiters, the best cases are those with the highest possible value of damages paid back to your business and those with the highest chance of success.
Data collection is a crucial aspect of this process, as it allows the business to identify and target the most promising counterfeiters for legal action. By analyzing data on counterfeit sales, online marketplaces, and distribution networks, businesses can pinpoint the most egregious offenders and prioritize their legal efforts.
This data, collected through meticulous scans and analyses using automated tools, will help in making the case successful by providing irrefutable evidence.
Online spaces used by counterfeiters provide a treasure trove of relevant information, so having a provider that can effectively scan, collect, and analyze this data is an invaluable asset in the revenue recovery process.
Step 2: Freezing Assets
After filing the lawsuit, the business can swiftly take proactive measures to neutralize the counterfeit threat and protect their interests.
By freezing counterfeiters' financial accounts and shutting down their web domains and online marketplace accounts, businesses can effectively disrupt their operations and curtail their ability to generate illicit profits immediately.
This decisive action can put an immediate stop to the biggest counterfeiting threat while also sending a strong message to others that their infringements will not be tolerated.
Step 3: Negotiation and Litigation
At this point, businesses have two options: negotiating with the counterfeiters or pursuing legal action through the courts.
Negotiation offers a quicker and more streamlined resolution. By directly engaging with the counterfeiters, businesses can potentially reach a mutually agreeable settlement, bypassing the lengthy legal process. This approach expedites the recovery of lost revenue and allows businesses to return to focusing on their core operations.
In contrast, pursuing legal action can issue legally binding orders, including injunctions to cease counterfeiting activities and damages to compensate the business for its losses. It is also the route businesses will take if they want the counterfeiters to face criminal prosecution, which can potentially result in years of prison time and fines of millions of dollars.
Step 4: Recovery of Lost Revenue
The end goal is to recover the revenue lost to counterfeiting. Whether the business chooses negotiation or legal judgment, the successful outcome is the same: the counterfeiters are compelled to pay the business a substantial sum to compensate for their actions.
Returning money back to the business’s bank account is the best result, whether the business chooses to negotiate or continue the process entirely through the courts.
Maximizing this amount relies on strategically choosing the right target for civil action, gathering large volumes of relevant data, working with a proven law firm, and, in most cases, negotiating the final financial amount directly with the counterfeiters.
US Counterfeiting Cases Launched Against Counterfeiters
It’s well known that the bulk of the world’s counterfeit products are manufactured in China and sold through Chinese online channels.
However, these products are primarily intended to be sold abroad. So, while launching revenue recovery lawsuits in China is vital to making a lasting impact on counterfeiting, it can be equally effective to focus efforts on counterfeit products sold in the US.
Amazon and its Counterfeit Crimes Unit (CCU) filed two lawsuits against counterfeiters for their involvement in a scheme to sell counterfeit luxury fashion goods on Amazon in September 2023.
The defendants advertised fake goods on social media to sell online, using a "hidden links" scheme to direct users to seemingly generic product listing pages, where they sold counterfeit items disguised to avoid detection. The lawsuits allege that the defendants were aware of Amazon's efforts to remove infringing products and deliberately misled customers.
In another case, Gucci and Facebookfiled a lawsuit against a counterfeiter for selling fake Gucci products on their social media platforms. The defendant allegedly used multiple Facebook and Instagram accounts to promote and sell counterfeit merchandise, violating Gucci's intellectual property rights. The lawsuit was launched in April 2021, with Gucci seeking to permanently halt the defendant's counterfeiting activities and recover damages.