Counterfeiters tend to innovate new ways of getting fakes past customs, but they could be said to lack imagination when it comes to the brands they knock off.
That’s because most stateside seizures of ersatz fashion feature the same laundry list of notable names, concentrating counterfeit conundrums in the hands of a few of the industry’s power players. The issue, of course, boils down to the most capitalist of quandaries: supply and demand. What people want—and the coveted goods out of reach for many—will drive the bulk of items where counterfeiters sharpen their focus.
Nike sneakers, luxe Louis Vuitton handbags and other must-have fashion routinely show up in shipments nabbed in customs enforcement busts. They also tend to correlate with the items consumers most search for on a range of platforms. Lyst cited Nike’s Dior collab as among its hottest men’s products in Q3, while a Rebag report documents the strong resale value for LV cross-bodies, satchels and the like, meaning many shoppers are happy to nab the tony totes at palatable prices.
And the United States Annual Intellectual Property Report for 2020 largely concurs, while detailing the actions the Trump administration has taken to protect and promote the nation’s intellectual property—both domestically and abroad.
While much of the report from United States Intellectual Property Enforcement Coordinator (IPEC), Vishal Amin, focuses on the protection of emerging innovative technologies relating to artificial intelligence, energy, quantum information science, communication and networking, semiconductors, military, and space from piracy and patent infringement, it also outlines severe IP impacts to the soft goods industries, too, like footwear and apparel—namely, counterfeiting.
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The report highlighted ongoing legal actions or resolutions related to previous seizures of goods in cases of large-scale commercial counterfeiting. Throughout the administration, a number of actions have been taken against individuals and trafficking rings attempting to traffic fake luxury goods like footwear and handbags from China, the nation’s most threatening IP competitors. Sports memorabilia, in addition to sneakers and premium accessories, is among the frequently duped categories.
One of the most significant apparel counterfeit seizure operations took place early last year. Between Jan. 25 and Feb. 3, 2020, ICE’s IPR Center enacted “Operation Team Player,” a sting targeting the importation and trafficking of counterfeit sports merchandise related to Super Bowl LIIV that seized approximately 2,884 fakes, like jerseys, hats and accessories, with an estimated MSRP value of $6,354,589, arresting six traffickers in the process.
In Oct. 2018, Xiao Xia Zhao, a New York woman accused of smuggling more than $3 million in counterfeits, including Nike shoes and Louis Vuitton handbags funneled through the Port of Newark, was sentenced to 18 months in prison. Less than one month later, a Queens, N.Y., resident, Su Ming Ling, was sentenced to 30 months imprisonment and ordered to pay nearly $13,000 in restitution for one count of fraudulent importation and transportation of goods and one count of conspiracy to traffic in counterfeit goods. Ling participated in a scheme to import more than 200 shipping containers filled with counterfeit goods like Nike shoes, Ugg boots and NFL jerseys. Had they been sold as genuine products, the items would have retailed for an estimated $297 million.
The following October, five defendants pleaded guilty in Manhattan Federal Court to a counterfeiting scheme that involved bringing hundreds of thousands of athletic shoes from China into the United States from the period of Jan 2016 through July 2018. Defendants Miyuki Suen, Jian Min Huang, Kin Lui Chen, Songhua Qu, and Fangrang Qu imported at least 42 shipping containers with more than 380,000 pairs of sneakers during that time, and once the shoes arrives, they added the trademarked logos that rendered them counterfeit.
“The estimated loss attributable to the defendants’ efforts amounts to more than $70 million,” the department wrote. In December of 2019, 15 defendants pleaded guilty to smuggling millions of dollars-worth of fake Louis Vuitton and Tory Burch handbags, Michael Kors wallets, Hermes belts and Chanel perfume through ports on both coasts from China on 40-foot shipping containers.
Amid these investigations and their subsequent resolutions, the department has enacted new training programs for law enforcement agencies to help them spot fakes and identify criminal enterprises. But “global IP crime, from the manufacture and worldwide distribution of counterfeit goods, to the sprawling online businesses designed to reap profits from the distribution of copyrighted works, continues to grow and change in an effort to stay ahead of law enforcement,” the report stated. The department is actively working to develop training programs to assist other countries in enforcing IP laws and reducing trafficking before counterfeits make their way to U.S. soil.
Be like Mike—just don’t mess with his IP
The Chinese government recently intervened on behalf of U.S. interests, when Michael Jordan was vindicated after a near decade-long battle with China’s Qiaodan Sports Co. The Chinese activewear dupe had been using the former basketball star and Jordan Brand namesake’s surname (Jordan approximately translated into “Qiaodan” in Chinese) without permission for years.
The Shanghai Second Intermediate People’s Court ruled Dec. 30 that Qiaodan’s unauthorized use of the Jordan name—which included similar visual branding—was unlawful, and the company was ordered to pay $46,000 for emotional damages as well as $7,600 for incurred legal expenses. Jordan, the plaintiff, did not seek monetary damages, so Qiaodan was only forced to pay for emotional damages.
In addition, the company was ordered to immediately cease using the Qiaodan name and issue an apology—both in print and online—clarifying that it is not affiliated with Michael Jordan.
“The actions that we have taken to protect American intellectual property have helped set the United States on a path to remain not only an economic leader, but a powerhouse of innovation, invention, and creativity for decades to come,” Coordinator Amin said upon the report’s release. “From day one, the administration has had a singular focus on strengthening and growing our nation’s innovative economy.”
According to Amin, the growth of e-commerce has led to “an exponential increase in the volume of cargo being sent as small packages, a significant percentage of which is counterfeit or illicit.” As the pandemic has confined shoppers to their homes, they have chiefly relied on online channels and marketplaces for everyday tasks like ordering groceries, as well as buying clothes and shoes.
What’s more, the report argued that foreign countries, like China, have benefitted from Universal Postal Union (UPU) laws that “insulate postal shipments from full application of national customs laws” and allow for fast, cheap delivery to the U.S. “For example, a small package is charged less to be shipped by air from China to the United States than when it is shipped entirely within the U.S.,” the report stated. The administration announced in 2018 that it was submitting a notice of withdrawal from the UPU as a means of mitigating the issue.
In the face of the “immense challenge” posed by an influx of packages ordered by individuals from overseas, customs officers have been diligently “monitoring, targeting, and seizing illicit and counterfeit goods at our international mail facilities and other ports of entry,” the report said.
During the 2020 fiscal year, U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) made 26,503 intellectual property rights-related (IPR) seizures. The total estimated manufacturer’s suggested retail price (MSRP) of the seized goods, had they been genuine, amounted to about $1.3 billion.
By the end of 2020, the FBI was actively working on 136 pending IPR investigations—the most common concerning the theft of trade secrets (52), but followed closely by copyright infringement (47) and trademark infringement (16). The bureau instigated 38 new investigations, made 14 arrests, garnered seven convictions and prompted forfeitures totaling $11,341,164. ICE’s Homeland Security Investigations initiated 449 IP-related investigations leading to 203 arrests, 125 indictments, and 98 convictions.
And trademark holders will soon have access to expanded protections under the law. The Trademark Modernization Act of 2020, which will go into effect on Dec. 27, is a part of the Covid-19 relief legislation signed into law by President Trump last month. It provides relief to trademark owners looking to combat fraud by creating a small claims tribunal system for copyright infringements, and creates a simpler process for trademark registrants to receive injunctive relief. New methods for challenging the use of trademarks will also be made available, with the intent to help combat fraudulent applications and registrations.