United States: Tips For Safeguarding Your Products From Fakes

Last Updated: August 16 2019
Article by J. Derek Mason

Attorney advises on how to defend your firm's IP, and what to expect when you try to fend off product pirates.

Manufacturers need to protect products they produce from counterfeits, says J. Derek Mason, partner with Oblon, a Virginia-based law firm. In the Q&A below, Mason tells manufacturers how they can shield their products from foreign knock-offs. He explains how manufacturers can defend their firm's intellectual property (IP), and what a manufacturer can expect when it tries to fend off those who violate patent and IP regulations.

Oblon is one of the largest law firms in the U.S. focused exclusively on intellectual property law.

Is it important for U.S. manufacturers to safeguard their products from foreign knock-off products?

J. Derek Mason: Absolutely. One of the big issues facing U.S. manufacturers is the importation of cheap foreign knock-off products, often made using labor that is much less costly. This can be a problem for high-volume retail goods as well as for commodity chemicals, such as certain commodity polymers.

How can manufacturers defend their firm's IP?

JDM: The first step in defending your firm's IP is to establish a strong IP portfolio, including any or all of patents, trademarks, trade secrets/know-how, trade dress, and copyrights. The second step is to establish a monitoring program to detect possible infringers that are violating your IP rights. Once an infringer is identified, the company has a choice of how to handle the issue.

A non-exhaustive list of options includes (1) informal discussions between the company and the infringer in an attempt to resolve the issue; (2) sending a formal "cease-and-desist" letter to the infringer; or (3) filing a lawsuit against the infringer. Each of these options has pros and cons with respect to costs, risks, and benefits, and the choice of the path will depend on who the infringer is, and what the desired outcome is. Additionally, there are many variants and combinations of these options that can be chosen.

Such decisions should be made in conjunction with an IP attorney, who can assist the company in assessing the risks and benefits associated in light of who the identified infringer is and what outcome is desired in the long run.

With respect to option (3), if the infringer is located overseas and is importing the infringing goods (or importing goods made by an infringing process), it is a good idea to consider the possibility of filing a lawsuit in the International Trade Commission (ITC), either instead of or combined with filing of a lawsuit in U.S. District Court. The legal remedies available differ between the ITC and U.S. District Court litigation, and any decision should be made in conjunction with the company's IP attorney.

Do manufacturers need a secure patent strategy to safeguard intellectual property? Do you have any tips on how U.S. manufacturers can safeguard their product innovations from copycats?

JDM: U.S. manufacturers need to establish a secure intellectual property, including patents, trade secrets (or know-how), trademarks, trade dress, and in some cases, copyrights. By using these available intellectual property protections, particularly patents, a U.S. manufacturer has the ability to stop importation of infringing goods through enforcement in the U.S. district courts and/or in the International Trade Commission (ITC).

Under U.S. patent law, the importation of a product that infringes a patent claim is an act of infringement. Additionally, the importation of a product made outside the U.S. using a process patented in the U.S. is also an act of infringement. Accordingly, it is possible to enforce both product and process patents to stop importation.

Remedies for infringement can include injunctive relief (stopping the importation) and monetary damages. One thing I counsel clients to consider before embarking on a patent portfolio development program is whether their product or process can be readily reverse-engineered. If reverse engineering would be fairly simple for one in the industry, then the company should strongly consider obtaining one or more patents.

However, if reverse engineering would be very difficult, the company can consider keeping aspects as a trade secret. The risk of a trade secret, however, is that once it gets discovered and/or disclosed to the public, it is lost.

The most important advice is that before launching, selling, or disclosing publicly (such as marketing or offering for sale) a new product or process, any patent application(s) should be prepared and filed, since disclosure starts a one–year time clock in the U.S. within which any patent application needs to be filed. Otherwise the company may lose the ability to obtain a patent for the disclosed material.

Further, such disclosure, sale, or offer for sale can completely block attempts to obtain foreign patents covering the product or process, as most other countries have an absolute novelty requirement to obtain a patent (compared to the 1-year grace period noted above for the U.S.).

What can a manufacturer expect when it tries to fend off those who violate patent & IP regulations?

JDM: A manufacturer can expect a range of responses from accused infringers, depending on how aggressively the manufacturer pursues the matter. If the manufacturer makes the accused infringer feel that they will be sued for infringement or misappropriation of IP rights, one potential response by the accused infringer is to file a preemptive declaratory judgment action in U.S. District Court (or state court depending on the rights being asserted), asking the court to declare that the accused either does not infringe the asserted IP rights, or that the asserted IP rights are invalid.

Of course, the risk here is that the accused infringer selects the venue in such a situation and the manufacturer may be fighting a lawsuit in an undesired location.

If the manufacturer files suit first against the infringer, it is a near certainty that the accused infringer will file one or more counterclaims seeking a finding of non-infringement and/or invalidity of the asserted rights. A further possibility is that an accused patent infringer may attempt to file a post grant proceeding in the U.S. Patent and Trademark Office (USPTO) seeking to have the asserted patent found invalid by the Patent Trial and Appeal Board (PTAB) in the USPTO.

One thing to remember is that a large majority of IP lawsuits eventually settle and do not go to trial. While any planned legal action to assert IP should be entered into with the expectation of going all the way through trial, there is a strong likelihood that the case will settle prior to trial. Such settlements frequently end up with a license (and other business deals) being entered into by the parties, permitting each party to continue in their business in a mutually agreeable manner, typically with payments from the accused infringer to the manufacturer for past infringing activities and running royalties for such activities going forward.

Of course, if the manufacturer is seeking to have the accused infringer stop their infringing acts and does not want to grant a license to the accused infringer, it is most likely that the case will have to proceed through trial, and possibly through appeals, in order for an injunction to be granted stopping the infringer.

Is it important to get advice from an IP/patent attorney?

JDM: It is crucial to consult an IP/patent attorney to discuss potential coverage options. The choice of filing one or more patent applications, along with potential trademark coverage if desired, must be planned to obtain the most effective coverage, including not only in the U.S., but elsewhere in the world. We live in a global economy, where many companies conduct their business internationally. Accordingly, international patent coverage should at least be considered to determine whether it is right for the particular company and their intended market.

Can trade groups offer assistance?

JDM: While trade groups certainly can help in dealing with issues common to a particular industry or trade, in patent matters, the patents are often directed not only at foreign importers, but also at domestic competitors. The strategic use of intellectual property can provide a company with exclusive rights that can be, and are, enforced against domestic competitors to gain a business competitive advantage.

Accordingly, where trade groups often can help an entire industry with respect to certain legal issues, in the realm of intellectual property, the trade group may have difficulty staking out a position that does not act to the detriment of one or more parties in the trade group. One area where trade groups can assist is in lobbying efforts for more effective patent laws from an enforcement perspective, as well as lobbying efforts to try and strengthen laws against international economic espionage.

Originally Publish by Industrial Equipment News

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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