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May 10, 2017

Legalese: Counterfeit Products Add Injury to Insult

This article originally ran in the May 2017 issue of AVN magazine. Click here to see the digital edition. Pirates, dupers, rip-off artists, counterfeiters, whatever you want to call them, regularly do more than just steal content. They often sell a dramatically inferior product—that appears to be the real thing—besmirching the good name of the manufacturer that has worked so hard to earn a quality reputation. The broad support for anti-counterfeiting laws punctuates the severity of the problem. But by the end of this article, the lesson learned will be that anti-counterfeiting laws provide one more good reason to register trademarks. A hypothetical example is a good teaching tool, so let’s try one. XYZ Video takes pride in its quality product, being sure the number of defectives is low, the reproduction quality is good, and the packaging is first class. Now, assume for the moment that Basement Dude’s abcdef.com website posts snippets of some of XYZ’s quality DVDs on its garden-variety site that steals content and puts it up as its own. What damage has Basement Dude done? Well, maybe none. Basement Dude may not have reduced XYZ’s sales of DVDs by one unit. But Basement Dude has unfairly profited by broadcasting content that XYZ spent thousands to create, and without paying for it. The remedy here against Basement Dude, of course, is found in the copyright law: statutory damages ($750 to $150,000 per title for willful infringement, plus costs and attorneys fees). The judge would decide, based upon perceived XYZ losses and Basement Dude profits, what statutory damages are warranted. Now, consider Basement Dude’s next misadventure, with a DVD replicating machine, a scanner and a color printer. Now, Basement Dude can purchase one copy of XYZ’s hottest selling DVD, a gross of DVD cases, a gross of writable DVDs, and—zap!—Basement Dude has 144 look-alike (albeit lower quality) copies of XYZ’s hottest selling title. Basement Dude is into this for maybe little over $100 for a gross of DVDs, but he can sell them for half of XYZ’s $20 price, netting an easy grand of profit each time. Basement Dude has done exactly the same thing to XYZ with his DVDs that he did with abcdef.com by getting free content, right? Well, yes, but more. Nobody downloading from abcdef.com receives the impression that they are dealing with XYZ. Basement Dude’s DVDs are different. Basement Dude is selling low-quality DVDs that the consumers and retailers will think came from XYZ. In fact, what has been regularly occurring is that disgruntled consumers of Basement Dude’s XYZ knock-offs return them to XYZ, complaining about defective XYZ products. Plus, the consumers who were ripped off by Basement Dude likely will look next time for better DVDs from a different manufacturer. Basement Dude’s knockoffs are defined by a legal word of art, “counterfeits.” Readers of this column who are victimized—both adult video producers and pleasure product manufacturers—are understandably bent out of shape by counterfeiting. However, Congress has come to the rescue. Does this mean Congress was helping adult? Well, perhaps accidentally, but it did. Like copyright infringement, counterfeiting impacts a huge universe of businesses, not just adult manufacturers. There are counterfeit Swiss watches, high-end handbags, designer clothes, along with toys, auto parts and everything else imaginable. Those counterfeit products cause damage to large corporations that have considerable political clout. But the counterfeit products that cause real alarm are things like aircraft parts, pharmaceuticals and medical supplies. How would you feel about boarding a jet knowing that the recently replaced gyroscope that guides landings was made in some Basement-Dude-type operation in China, rather than in the aircraft manufacturer’s factory in Seattle? Not a pretty picture! Because the Seattle gyroscope manufacturer stands both to be held accountable for a plane crash caused by failing gyroscopes and to lose a sale every time a counterfeit one is installed, it is no surprise that the Gyroscope, Incorporateds of the world have worked hard to garner Congress’ ear. And they succeeded when Congress enacted Trade Dress Duplication and the Trademark Counterfeiting Act of 1984. The Counterfeiting Act includes both civil and criminal remedies, although the latter is of little concern to readers of this column, since none of us can imagine an FBI crackdown on counterfeit adult DVDs. But the civil remedies are just as good for porn as they are for pizzas. (That’s right, folks, it is possible to have counterfeit frozen pizzas!) The civil remedies, 15 U.S.C. §§ 1114(1), 1116(d) and 1117(b)(c), include recovery of a choice between statutory damages (of “$2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed”) or treble damages, plus attorney’s fees. Available remedies also allow seizure of the counterfeit goods and the manufacturing equipment, injunctions and other remedies one might expect. Now, here is the rub:  A “counterfeit of a [trade- or service-] mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered ... that is identical with, or substantially indistinguishable from” the relevant trademark.  Important is the “registered” part. And, while beyond the scope of this article, registration of a trademark is not as simple as registration of a copyright, so use of an attorney is almost imperative. It requires application to the Trademark office, approval by an examiner (and examiners always complain about some nit-picky detail), publication for opposition and, finally, issuance. Registrations are subject to upkeep requirements also. Counterfeiters, beware! Clyde DeWitt is a Las Vegas and Los Angeles attorney, whose practice has been focused on adult entertainment since 1980. He can be reached at [email protected]/* */ More information can be found at ClydeDeWitt.com. This column is not a substitute for personal legal advice. Rather, it is to alert readers to legal issues warranting advice from your personal attorney.

 
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