Trademarks: Rights & Risks

August 21, 2014
Categories: Intellectual Property, Intellectual Property Protection, IP Protection

Misuse of trademarks, and unlawful copying of product or packaging design, are often involved when product or component counterfeits or knockoffs appear in the supply chain. These can produce serious product quality and security problems, consumer safety concerns, and financial risks for your business. Good IP and supply chain manage¬ment are particularly well suited to reducing these types of risks.

Trademark violation is typically the core legal problem underlying product and component counterfeits. Counterfeits appear, of course, in many different industry sectors and situations. Most people think of counterfeit luxury goods and watches, but the problem is far wider. Spare parts for automobiles, airplanes, military and security equipment, and other industrial products may be marked as coming from a particular known-brand manufacturer, but, in fact, be poor quality or downright defective items manufactured by someone else.

Counterfeit drugs and medical products, alcohol, food and other consumer products and ingredients likewise may not contain the right formula, or indeed may contain harmful or poisonous material, passed off as the “genuine article” under someone else’s trusted trademark.

Electronic items also can be subject to misbranded counterfeit components that have entered the supply chain in the guise of genuine trademark-branded items. These might be wrongly marked secondhand items, substandard knockoffs, or even compromised items that can open a user’s computer systems to security breaches or data theft.

Trademark misuse does not only occur in the manufacture of products and components, but sometimes also in advertising or marketing activities that unfairly associate a product with some¬one else’s trademarked brand or product name. Design rights violations may also be involved when a product’s appearance or packaging is copied exactly or substantially from someone else’s.

Good IP and supply chain management is particularly suited to protecting against the risks of trademark-infringing counterfeit products and components, and design rights violations

Common Problems with Trademark & Design Rights Compliance

  • Counterfeit components or products passed off as genuine branded materials. This can occur, for example, where unreasonably low-priced items are purchased, the source is not known or vetted, or supply chain management fails to detect counterfeit items. Even legitimate vendors and well-meaning purchasers can find trademark-infringing components have slipped into their supply.
  • Misuse of another’s trademarks in products, services, or communications. Trademark infringement can also arise in advertising, services, and other activities connected with your own or someone else’s business. Trading on someone else’s brand name, or using someone else’s trademark improperly in these kinds of activities, can also bring liability.
  • Knockoff designs of products or packaging. Imitation is not always the sincerest form of flattery. Exact or overly similar copying of someone else’s product packaging, or of the design of their product itself, can unfairly free-ride on their work and wrongly imply a connection, endorsement, or substitutability with the original product, and violate that person’s design rights.

„ Risks

  • Defective products and components, in some cases with safety risks to customers. Defective, mislabeled, or poor-quality counterfeit components and products can fail to work properly and injure consumers, and occasionally result in deaths (e.g., from poisonous food and drink, ineffective drugs, or exploding electronics or security equipment.)
  • Supply or business disruption, returns and warranty claims, legal and financial risks. Product failure or supply disruption due to counterfeits can provoke claims for replacement and compensation, and mean lost business for both the supplier and customer. Any resulting legal claims, damages, contract termination, and other redress can have a substantial negative financial impact.
  • Damage to brand, reputation, and sales. Not only is a trademark owner’s own brand value hurt when counterfeits slip through the supply chain, suppliers and business partners involved in the problem can also find their own business reputation and marketability tainted.

„ Recommended Actions

  • Adequate risk assessment in supplier selection, which takes into consideration a range of relevant factors including country, type of product, public information, historical performance, and presence of management systems.
  • Good supply chain management and monitoring, including regular checks of product and component security and compliance, feedback on customer complaints and returns, and market monitoring.
  • Clear policies, procedures and contracts regarding procurement of counterfeit items and use of trademarks and designs, including internal and supplier policies that prohibit the procurement and use of counterfeits; trademark use procedures and design guidelines; and contractual provisions that cover licenses, use, policies and procedures, and redress related to trademark and designs issues.