California Apparel News

Rogue websites are the next target as the industry battles intellectual property theft.

The Internet has become the “Wild West,” with brands fighting to protect their intellectual property against online counterfeiters and rogue sites selling pirated goods.“The Internet, in the past couple of years, has becomea huge challenge for protecting our intellectual property rights,” said Tom Onda, chief intellectual property counsel at Levi Strauss & Co. “We’ve had to come up with new, innovative ways of protecting ourselves [online].”The company has a dedicated brand-protection departmentthat monitors, verifies and fights intellectual property theft, Onda said. To help educate consumers and deter them from patronizing infringing sites, Levi’s names its authorized suppliers. Others, such as True Religion, publish the names of known rogue sites on their websites.

It’s an uphill battle.

Online counterfeiters have become increasingly sophisticated, intellectual property experts say, building “cybersquat” websites that include brand names in their domain names or mirror branded sites (often using a brand’s own imagery to sell counterfeit goods) and developing back-end operations that make them difficult to trace once they’ve been identified as counterfeiters. While many rogue sites operate domestically, the majority operate offshore—making them harder to track, police and prosecute.

Rogue sites cost the domestic economy $100 billion per year and “hundreds of thousands of lost jobs,” according to backers of a bill that aims to protect intellectual property holders against online infringement. Rogue sites, often based overseas, sell everything from pirated music, sports and movie content to counterfeit consumer goods, such as apparel, shoes, electronics, luxury goods and software.

According to recent report from MarkMonitor, a brand-protection firm with offices in San Francisco, suspected counterfeiters of sports apparel alone attractat least 56 million annual visits to e-commerce sites and sell almost 1.2 million “suspicious” jerseys via e-commerce and business-to-business exchange sites annually. A similar MarkMonitor study that targeted five luxury brands found more than 1,200 rogue sites selling counterfeits of at least one of the brands. Collectively, the suspected counterfeit sites attracted approximately 120 million annual visits to their e-commercesites. One of those sites alone, Handbag.com, clocked morethan 5 million visits annually, MarkMonitor said.

Stepping up policing

Lawmakers and law enforcement are increasingly targeting online counterfeiters.

The Combating Online Infringement & Counterfeits Act was introduced in 2010 and passed by the Senate Judiciary Committee in November but never received a full vote on the Senate floor.

The bill, which is meant to give online intellectual property protection more teeth, was written to authorize the Department of Justice to file a civil action against a rogue website and seek a preliminary order from the court that the domain name is being used in the trafficking of [counterfeit] material.The Department of Justice must then publish notice ofthe action, and it would have to prove to a federal judge that the website meets clear criteria that focus on the site’s substantial role in online piracy and/or counterfeiting.

“Basically, this would mean you go to the Department of Justice [and] the department will work to shut down the most egregious sites,” said Kurt Courtney, the American Apparel & Footwear Association’s government-relations manager. According to the language of the bill, once the court finds that the website is a rogue site, the court could order the seizure of the site if it is in the United States or, if it’s a foreign site, the court could order American businesses, such as Internet service providers and credit card companies, not to do business with that site, thus cutting off its access to the domestic market.

Now, law makers from both the U.S. Senate and House judiciary committees have announced plans to reintroduce the COICA, again touting the hefty financial cost of intellectual property theft, which totals an estimated $600 billion worldwide. “The Internet needs to be free, not lawless,” said Sen. Patrick Leahy, the leading co-sponsor of the COICA bill and chairman of the Senate Judiciary Committee.

The U.S. Department of Justice and the Department of Homeland Security have stepped up efforts to battle online infringement with the 2010 launch of the “In Our Sites” initiative.

In partnership with U.S. Immigration and Customs Enforcement, the “In Our Sites” effort targets websites selling counterfeit and pirated goods. According to Richard Halverson, the unit chief for outreach and training at the National Intellectual Property Rights Coordination Center, the initiative has so far taken down approximately 140 domain names. In November, an “In Our Sites” sweep led to the seizure of 82 website domains selling fake goods, including shoes, handbags and apparel. According to Halverson, a future “In Our Sites” sweep is expected to target online counterfeiters of footwear.

IP’s true value

For most brands, the real danger of rogue sites isn’t the possibility of losing sales to imposters but the toll counterfeits take on a brand’s image.

“Counterfeits and trademark infringements attack the most important asset a company owns—its brand image,”said Dawn Buonocore-Atlas, vice president of enforcementat Calvin Klein and chair of the AAFA’s Brand Protection Council. “Unless controlled, a brand can be destroyed by unauthorized products in the marketplace.”

An intellectual property enforcement executive with a major California-based accessories and soft goods brand agreed. “For us, it isn’t about the money. It’s about the brand’s image,”said the executive, who requested anonymity. “We get calls all the time from consumers that are confused by roguesites or have complaints about defective counterfeit goodsthey’ve purchased online.”

Onda argues that intellectual property is valuable in threeways to a company.

“First, a strong trademark, strong reputation, strong goodwillmeans that your name stands for a lot and makes consumerswant to buy your product,” he said. Second, strong intellectual property allows brands to license their trademarks and generate revenue through royalties. Finally, Onda said, intellectual property can be used as collateral to secure financing for other efforts. “We truly look at our IP as our most valuable asset.”

That’s why industry groups stress that dealing with rogue sites is a huge priority— especially as they become more sophisticated and succeed in duping even savvy consumers.

Increasing options

Brands large and small have options when it comes to fighting rogue sites. “You can’t give up, and doing something is better than doing nothing,” Onda said. “You have to continue to be out there and chip away, and through time and effort, you will make a difference.”

Here are a few suggestions:bull; Take steps to make spotting fakes easier. Deborah Greaves, general counsel of True Religion, said one thing she looks for when hunting counterfeiters is the country of origin. “We produce our products domestically, so if jeans are being shipped from China, for example, it makes the process of elimination easier,” she said. Other brands build in subtle features that counterfeiters often overlook.bull; Be thorough. When looking for online counterfeiters, look for mono-brand and multi-brand rogue sites, auction sites and listings, and business-to-business sites. Also, check daily. New sites pop up every day.bull; Educate your consumers on your own sites. Teach them how to spot a fake and keep a running list of unauthorized sellers and rogue sites on your site.bull; Work with electronic-payment companies and banks to cut off rogue sites. Linda Kirkpatrick, MasterCard’s group head of customer compliance, said the company has a “zero tolerance” policy for dealing with online counterfeiters and will work with brands and banks to cut off counterfeiters’ access to their payment services. Brands that have identified online counterfeiters can contact MasterCard (and other electronic-payment companies) directly. MasterCard, which has a team dedicated to investigating such claims, “is part of the electronic payment system and, as such, has a responsibility and a role to play” in combating rogue sites, Kirkpatrick said.bull; Hire professionals. To save money and be more effective, Levi’s consolidated its splintered intellectual property efforts by building a single dedicated in-house team and keeping one law firm on retainer. Brand-protection firms, such as MarkMonitor, are another option for brands that want to outsource their online intellectual property efforts.bull; Network. There are groups—such as the Intellectual Property Rights Center, the International Anti Counterfeiting Coalition and the AAFA’s Brand Protection Council—thatcan provide research and resources and help with dealing with rogue sites.