A common enforcement tactic regarding websites offering copyright or trademark infringing content involves preparing a formal Cease and Desist notice to the site explaining that they are infringing and detailing the specific instances of infringement found on the site. This tactic can and does work in many cases. But what happens when that notice goes unanswered and the site continues to infringe? This is particularly true of sites operated by individuals in jurisdictions that may not respect the laws of the country in which the content owner operates and from which the notice is sent. It seems that litigation may be the only recourse.

But litigation is expensive, time consuming, and does not always result in the complete cessation of infringement. Fortunately, another tactic exists that rightsholders can use: Go after the intermediaries (or 3rd parties) that are supporting the operation of the site. And by “go after” we mean send them notices that their customer is using their service(s) to infringe your rights, and request that they stop allowing this. Of course, successfully convincing intermediaries to cease doing business with a customer does not necessarily mean that customer can’t find other intermediaries. But the point is to make it as difficult as possible for recalcitrant operators of infringing websites to continue to infringe.

So, who are these intermediaries? An answer to that question will, no doubt, vary from site to site but, generally speaking, intermediaries include the following:

Hosting Providers

Websites are typically hosted by 3rd parties whose business is built, in part, upon the revenue generated from the hosting services provided to their customers. Without some kind of hosting provider, websites would not be accessible to Internet users. Thus, hosting providers offer crucial services and serve as a single point of failure for website operators. That is, if they lose their host, they lose their ability to continue to infringe.

Payment Processors

Websites whose business model consists of selling pirated goods, such as infringing eBooks, movies, music, software and/or games, typically do so using some kind of payment processor. These comprise 3rd parties who process payments on behalf of their customers’ ecommerce sites generally in exchange for a percentage of each transaction. Convincing them to cease doing business with the infringers removes an essential part of their business, i.e., the ability to collect payments for the sale of their infringing goods.

Search Engines

Websites commonly generate more revenue when they generate more traffic. And more traffic comes with increased visibility. Search engines have long been a vital resource for operators to increase the chances that users will visit their websites. This is also true for the operators of infringing websites. Fortunately, most of the well-established search engines will remove listings from their indexes when provided with sufficient evidence establishing that the listings lead to infringing content.

Advertising Providers

Generally, infringing websites generate their revenue in two distinct ways: By placing advertisements on their sites for which advertisers compensate them and/or by placing advertisements on 3rd party sites seeking to drive traffic to their site. In either situation, 3rd parties support the activity and are generally amenable to processing notices of infringement.

Domain Name Registrars

While domain name registrars truly count as 3rd party intermediaries, their liability is somewhat limited when it comes to the content of websites. On the other hand, if there is a trademark dispute regarding a domain name, content owners may use the Uniform Domain-Name Dispute-Resolution Policy (commonly known as the UDRP) to force registrars to turn over the infringing domain name to the content owner. While this will not force the website itself offline, it will take away its domain name, which is a key ingredient in advertising, search engine optimization and, to an extent, payment processing.

Background

Faced with a surge of counterfeits flooding online marketplaces, a group of the world’s leading educational publishers relied on BCGuardian to develop a custom solution to remove the counterfeits from circulation and provide the evidentiary basis, not just for litigation and enforcement, but for outreach to channel partners, distributors, and online marketplaces.

Solution

BCGuardian’s team of experts devised a multi-pronged enforcement program centered around the collection of evidence at scale, building the infrastructure and developing the resources necessary to purchase, inspect, and process thousands of units each month of what purported to be our clients’ goods.

Results

The evidence, research, and reporting generated by BCGuardian have fueled our clients’ anti-counterfeiting enforcement efforts with marketplace storefronts, wholesale distributors, retail distributors, and foreign manufacturers.

BCGuardian’s efforts also enabled our clients to align much of the ecosystem in the fight against counterfeits, contributing to the development and wide-spread adoption of a series of anti-counterfeiting best practices, removing thousands of counterfeits and pirate sellers from the marketplace along the way.

Unlike typical copyright infringing websites that provide content for free and are supported by advertising revenue, infringing eCommerce sites are supported by the sale of infringing goods. When those infringing goods are digital – such as eBooks – the cost of acquisition is far less than for traditional hard goods counterfeits. The operator only needs to acquire a single copy of the infringing content from which free copies are made to fulfill subsequent sales.

A further damaging aspect of illegal eCommerce sites lies in the fact that they cater to the buying consumer, as opposed to the consumer on the hunt for free content (more on that in an upcoming post). This means loss analyses are much more straightforward, as each sale arguably represents more of a lost sale of the legitimate product.

Infringing eBook eCommerce sites typically sell illegally copied DRM-free PDFs (we have also seen some providing EPUB and Mobi formats as well). Traditionally, these sites take two forms:

Standalone websites that either deliver content directly or from a third party hosting provider andMarketplace storefronts set up on eBay, Bonanza, or others, that may also directly deliver content or use third party hosts.

Each has its advantages and disadvantages for the operator. While setting up a standalone website in a recalcitrant jurisdiction provides insulation from being shut down, the challenge of drawing the consuming public to the site remains. On the other hand, using an established marketplace such as eBay offers plenty of eyeballs (and an air of legitimacy), but at the increased risk of being shut down.

Recently, we’ve begun seeing an uptick in a sort of hybrid of the two, sites seeking to solve the dilemma of stability vs. visibility. Some sites now use Google Ads (formerly Google AdWords) for visibility and the air of legitimacy. In fact, the construction of some of these sites includes no native search or browse function, so search engines cannot effectively index them, meaning that traditional SEO is out the window. But these sites don’t need SEO, as long as the ads appear above organic search results.

One component of an effective enforcement strategy against these sites, therefore, must include the collection of the URLs for the infringing ads for subsequent referral to Google. Once that groundwork is laid, approaching Google to help address the problem more globally will be much easier.

On January 24th, the U.S. Department of Homeland Security issued a report to the president in response to the White House’s April 2019 Memorandum on Combating Trafficking in Counterfeit and Pirated Goods, which we discussed in an earlier post.

While largely critical of e-commerce platforms and third-party marketplaces, DHS calls for strong government action to combat counterfeiting activity, outlining 11 immediate actions and recommendations to be taken by the United States Government. DHS also puts forward the elements of recommended private sector best practices.

This post overviews the immediate government actions and recommendations proposed by DHS. A discussion of DHS’s proposed private sector best practices will follow in a subsequent post.

Ensure Entities with Financial Interests in Imports Bear Responsibility

The Idea in Brief:

Calling attention to the need for a modern enforcement framework that adapts to the reality of the modern e-commerce landscape, DHS aims to increase the accountability of stakeholders in the e-commerce value chain. This includes by increasing the accountability of domestic warehouses and fulfillment centers frequently used by merchants operating on online marketplaces.

Under the DHS recommendations, CBP would treat domestic warehouses as the consignee for imports not sold directly to a consumer. Such treatment may allow CBP to identify and claw back counterfeits from bad actors that were not inspected or were missed during customs clearance. Operators of fulfillment centers will further be encouraged to coordinate with rightowners on the inspection and destruction of infringing goods discovered through this channel.

High-risk shipments, as determined by the declared contents and port of origin, will also be subject to additional scrutiny, extending even to shipments that would have otherwise qualified for duty-free or informal entry. In order to mitigate against the likely resultant surge of falsified manifests, CBP will pursue and make public information regarding customs violations of the False Claims Act.

Increase Scrutiny of Section 321 Environment

The Idea in Brief:

Section 321 offers tax and duty exempt importation of goods valued at less than $800. Given the lower declared value of Section 321 shipments, it follows that these shipments are more likely to be direct order fulfillment and thus only one step removed from the infringing seller.

To improve transparency in the Section 321 environment, DHS proposes the clarification of statutes and administrative practices related to Section 321 eligibility. DHS would see all Section 321 shipments require data sufficient to identify the transacting merchant and the nature of the good.

CBP is also currently piloting programs with private sector e-commerce platforms to provide advance data on Section 321 shipments before arrival. CBP is using this data to improve its planning and inspection capacity in an effort to more efficiently target high-risk shipments.

Suspend and Debar Repeat Offenders; Act Against Non-Compliant International Posts

The Idea in Brief:

DHS recommends amending the executive order governing the federal suspension and debarment list to prevent suspended and debarred entities from participating in the Importer of Record Program. The burden to police compliance will fall to consignment operators, carriers, and hub facilities, as access to trusted trader programs will become contingent on their abilities to prevent suspended and debarred entities from utilizing their services to move counterfeit goods into the U.S. market.

DHS also seeks to measure and enforce for non-compliance among international postal operators, though no specific plan of action is outlined.

Apply Civil Fines, Penalties and Injunctive Actions for Violative Imported Products

The Idea in Brief:

DHS has directed CBP and ICE to begin identifying instances where third-party intermediaries have aided in the importation and distribution of counterfeit goods. Along with the Department of Justice, they are to pursue civil fines against such entities.

In the same vein, DHS advocates for greater liability to be imposed on third-party intermediaries that support the distribution of counterfeit goods. Most notably, DHS recommends a regulatory change to allow the government to pursue injunctive relief against third-party marketplaces and other intermediaries.

In the interim and absent such legislation, ICE and CBP will continue to pursue IP related crimes and support rightsowners by sharing information and evidence related to the seizure of counterfeit goods.

As brand owners evaluate options for combating counterfeit goods, one area in which they may address the problem is through product authentication tools. There are many solutions in this arena, ranging from simple holographic tags to highly technical integrated ERP solutions that serve both an anti-counterfeiting function and provide increased visibility through the supply chain.

We discuss here some of the considerations brands should assess when conducting a cost-benefit analysis in evaluating the need for and the potential effectiveness of product authentication tools.

Benefit: Deterring Counterfeits

The primary function of product authentication tools is to prevent the introduction of counterfeit products into the market. This goal is achieved by introducing yet another variable potential counterfeiters will need to consider in their reproduction of the underlying good. The absence or poor reproduction of an authenticity or security tag can be a clear red flag to consumers. Additionally, some solutions provide functionality (track and trace, ink detection, QR, etc.) that is difficult to replicate properly by counterfeiters.

Benefit: Adding Value to Other Business Units

Some functionalities, such as track and trace technology, provide data and information that is useful to business functions other than anti-piracy. Track and trace can provide insight into the supply chain and identify particular areas of risk. Utilizing functionality that benefits multiple business units may help a brand to rationalize the expenditure on these more robust product authentication solutions and provide a more comprehensive approach to securing the firm’s supply chain against previously unforeseen threats.

Benefit: Consumer Engagement

More advanced product authentication tools may also serve a sales and marketing function. Brands may be able to leverage scans of authentic products by end users as an opportunity to introduce similar or complimentary products that the consumer may find appealing or to collect valuable consumer data. For example, brands can encourage consumers to scan authentication tags on their purchased goods using their own smartphones (perhaps by offering the opportunity to win a prize). The scan will lead the user to a page that authenticates the product and requests their email address or other contact information, thereby contributing both to future marketing efforts as well as helping to alleviate any perceived stigma around the authentication tool.

Cost: Higher Landed Costs

Needless to say, the addition of product authentication tools will increase unit production costs and final landed costs. Brands must evaluate the feasibility of absorbing these costs in their margins. It is said that the cure should not be worse than the disease, so it becomes important for the brand to assess the potential impact product authentication tools will have on legitimate sales through targeted testing and/or pilots with at-risk assets.

Additional Consideration: Viability

Outside of production cost considerations, it is also important to determine whether the selected product authentication tool fits with the profile of the brand and its distribution model. Several questions that may guide these decisions are:

Who will ultimately be utilizing the functionality?

Licensed distributors may be better equipped to utilize specific solutions or identify potential counterfeits. Certain authenticity or security tags may require resources that can only be made available to select distributors as opposed to all end users, who may lack the education or platform to effectively utilize the solution or identify potential counterfeits. Conversely, as discussed above, a brand may seek to drive consumer engagement by encouraging end users to interact with the authentication tool.

Is there a secondhand market for the brand’s products?

Resale of goods through a secondhand market can limit the effectiveness of authenticity or security tags. The tags may be removed or discarded prior to the secondary sale, which could create confusion regarding the authenticity of the product. Additionally, certain functionality (track and trace, RFID, etc.) can be rendered ineffective if the tag is damaged or altered in any way.

Overall, product authentication tools can provide a meaningful impact for a brand’s anti-piracy efforts. However, it is important to conduct a thorough cost-benefit analysis of each solution to ensure that it meets the needs of the organization.

While copyright protection is established upon a work’s creation, registration of the work with the U.S. Copyright Office adds significant value for rights owners. Most advantages to registration stem from enhanced protection and recourse should the copyright be infringed, but there are also compelling business reasons in support of registration.

We outline the top six reasons to register a copyrighted work with the U.S. Copyright Office.

1. Registration Allows Rights Owners to bring Infringement Actions in Federal Court

The most valuable benefit of registration is the rights owner’s ability to bring an action to protect its copyrighted work from infringement. If the rights owner’s copyright is violated, it may seek recourse by filing litigation for copyright infringement in federal court only if the work has been registered with the U.S. Copyright Office.

2. Registration Grants Eligibility to be Awarded Statutory Damages and Attorneys’ Fees in an Infringement Proceeding

When timely registration is completed – within three months of a work’s publication – the rights owner may pursue statutory damages for infringement of its copyright. The option to pursue statutory damages relieves the burden of proving actual damages related to the infringement of the work, which is increasingly difficult to do in today’s complex digital economy for content.

The ability to leverage the possibility for large statutory damages may also position the rights owner favorably in pre-litigation settlement discussions or serve as an outright deterrent to infringement in the first instance.

What’s more, should the rights owner prevail on its claim of copyright infringement, it may seek remuneration for attorneys’ fees if the work is registered with the U.S. Copyright Office.

3. Registration Grants Presumption of Ownership and Validity

When a work is registered with the U.S. Copyright Office within five years of its publication, the registration certificate provides evidence of ownership of the underlying work and validity of its copyright. Should the rights owner seek to enforce its rights in court, the burden of proving ownership and validity in the absence of a copyright registration will often be significantly more difficult and costly.

4. Registration Establishes a Public Record of Ownership

A public record of ownership makes known the rights owner’s claim to its registered work and may also provide the means for interested parties to contact the rights owner to lawfully license content.

5. Registration Offers Additional Protection by U.S. Customs against Imported Counterfeits

Owners of a registered copyright may submit notice of the registration to U.S. Customs and Border Protection in order to receive increased scrutiny during screening of goods imported into the U.S. This is of particular value to owners of content distributed across a physical medium with a known susceptibility to counterfeiting, such as printed books, CDs, and DVDs.

6. Registration Demonstrates Commitment to the Protection of Creative Expression, Scholarly Endeavor, and Technological Progress

Whether a visual work of art, a recorded album, a written work of fiction or non-fiction, or innovative software or technology, a rights owner that commits to the registration of its copyrighted works demonstrates its commitment to the protection of intellectual property.

For publishers of content, a demonstrable commitment to the protection of intellectual property may contribute to competitive advantage in signing artists, authors, and other producers of content. This is particularly true in royalty-bearing situations where copyright infringement erodes value from not only the publisher, but also from the content creator.

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Rights owners should develop a copyright registration strategy that weighs the benefits to copyright registration with the internal and external costs of registration. Where the content is actively monetized or represents an asset with expected future cashflows, the scales should tip heavily in favor of registration.

BCGuardian has significant experience developing and implementing registration strategies and programs for rights owners. Contact us to find out more about how we may be able to help protect your content through fully managed copyright registration programs.

In our post about Illegal eCommerce Websites, we saw how visibility is crucial to the operation of certain infringing eBook sites. Online ads, search results, backlinks and page rank all play a role in driving traffic. While limiting visibility to illegal sites by effective enforcement is not a total solution, it is a necessary component to any online protection program.

We tend to divide up the content-consuming Internet public into three broad buckets:

Those looking to acquire content legallyThose looking to acquire content wherever they can find itThose looking to acquire content for free, no matter what

At the end of the day, the issue of visibility really only goes to the first two. Content consumers in the third bucket typically already know where to get their content for free. In any event, it is important to note that consumers in the third bucket are not customers. They will not spend money on your content.

And this raises an important point: consumers in the first two buckets will spend money on your content. This means that each sale of infringing content to one of them corresponds more or less directly to a lost sale of legitimate content.

So, the issue of the visibility of infringing content really boils down to this: We don’t want people who are looking to acquire content by purchasing it to be exposed to illegal sites in the first place. Period. Taking down infringing search results at search engines and disabling advertisements for infringing product across the various ad networks is a crucial component to any enforcement program.

Thinking of this component of an enforcement program in this context helps understand why search engine and ad network monitoring and takedown are so important.

Brands and content owners know too well the process of conducting test purchases to verify and enforce against suspected counterfeit goods. In the modern digital economy, this usually means buying an item based on some combination of risk factors from an anonymous merchant on an online marketplace, verifying the good’s inauthenticity, and pursuing subsequent enforcement. While such ad-hoc test purchasing is a valuable resource in the toolkit to combat counterfeiting, it serves narrow IP protection objectives and enforcement outcomes. We advocate instead for systematic test purchasing at scale.

As we define the two differentiating pillars of this approach, a systematic test purchasing program pursues a larger unified IP protection strategy through a methodical and controlled process of evidence collection. A program that exists at scale includes sufficient purchasing volume to meet the rightsholder’s broader IP protection objectives relative to the scope of the rightsholder’s exposure to counterfeits in the market.

A systematic test purchasing program that exists at scale offers several benefits beyond conventional ad-hoc test purchases. We outline in brief three such advantages here.

Collecting Broad Marketplace Intelligence

Systematic test purchasing at scale provides tremendous insight into the market for a given product or rightsholder’s portfolio of products. Over time, data collected through observations of the market supported by purchases may allow the rightsholder to identify marketplace trends and build models for detecting unusual or unsustainable offers that could suggest the presence of illegitimate goods.

Additionally, such purchasing allows rightsholder to identify potential unforeseen issues within the supply chain, whether parallel importing from international markets or excess availability of sample/trial versions of a product. These instances are rarely reported in listings or offers for the product.

Understanding Counterfeit Reproductions of Your Product

If a product has been counterfeited, there is no guarantee that the exposure will be limited to the identified pirated copy alone. There are networks of counterfeit sellers across the globe, all of which have differing access to materials and resources to pirate a given product. As a result, you may see multiple version or iterations of a counterfeit product which may feature very different traits and qualities. Early identification of these iterations is key as it will inform enforcement efforts and assist with the education of trusted distributors and consumers.

Depending on the product, it may be essential to have a comprehensive understanding of the different iterations of counterfeits. Some counterfeit products, specifically food and/or products that are applied topically, can contain dangerous toxins that are unsafe for human consumption. Being prepared to educate consumers to authenticate products can help to mitigate the risk posed by these counterfeits.

Identifying the Sources of Piracy

The collection of physical evidence at scale not only allows for a greater understanding of the unauthorized sale of counterfeit products, but also allows for connections to be made among networks of distributors of those products. Following inspection of these counterfeit goods, brand owners may notice similarities among both the specific types of products these sellers offer and the specific types of counterfeits the distribute. This may indicate that these sellers have access to a similar source, which is likely to be a more prolific distributor of counterfeit goods.

Once these connections are identified, it becomes possible to potentially review sales/source records “upstream” to identify distributors closer to the source of production. This can be extremely valuable for identifying and ultimately removing distributors responsible for massive infringement.

BCGuardian has significant experience developing and managing systematic test purchasing programs at scale on behalf of rightsholders. Contact BCGuardian to learn how we may be able to protect your brand through such a program!