If Something Is Advertised As A Knockoff Product... Is It No Longer Counterfeiting?

from the likelihood-of-amusing dept

People throw around a variety of terms that sometimes need to have more specific meanings. When talking about physical goods, when people talk about "knockoffs" or "counterfeits" they're usually referring to a trademark issue. And, in some sense, this is what trademark is supposed to be about. For many years we've argued that trademark should not be lumped in with patents and copyrights, as the concept, purpose, intent, and even Constitutional underpinnings are entirely different. It's extremely frustrating to see people lump in patents, copyrights, and trademarks as "intellectual property" as if they were all similar. They are not. And trademarks are especially different.

Indeed, we've always said that (unlike with the other two) trademarks are mostly a consumer protection law, so that you know who is actually making the things you're buying, and you know the origin of it. That is, we let Coke have a trademark on the Coca-Cola branding so that consumers don't get tricked into buying something that isn't Coke, while believing it is. This is why a key part of trademark law has always been the "likelihood of confusion." If there's no likelihood of confusion, than there isn't a trademark violation.

But here's an interesting question: if someone is making a counterfeit product... is it still violating trademark laws against counterfeiting if buyers know it's counterfeit? A recent 9th Circuit Court ruling suggests... perhaps not. The case is not about this issue directly, but is about two separate companies who each (independently it appears) came up with products called "Eye Dew." One, Arcona, created an eye cream that in a tall cylindrical silver bottle. Arcona registered a trademark on the name. Around the same time (or even possibly a bit earlier), a different company, Farmacy Beauty, developed its own eye cream, also named EYE DEW. The packaging of the two products looks very, very different:

The ruling in the case finds that because the Lanham Act requires there to be a likelihood of confusion, and people are unlikely to be confused between these two products, then there's no counterfeiting claim. The court notes that while it has been recognized that a pure trademark infringement claim requires a likelihood of confusion, the 9th Circuit had never ruled directly on the question of whether or not a counterfeiting claim does, even though both stem from the Lanham Act. However, noting that everyone agrees that trademark claims require it, and the plain language of the statute says so, the court confirms:

We thus hold that a counterfeit claim requires a showing of likelihood of confusion under Section 1114.

And while the case is not about this, it raises a somewhat fascinating question first posed by law professor Mark Lemley. He notes that under this ruling, brands may not be able to go after obvious knockoffs if the knockoffs don't confuse anyone:

This is interesting on a few levels. First off, we've highlighted many studies showing that the vast majority of people buying knockoff products know they're knockoffs, and they buy them aspirationally -- knowing they can't afford the real thing, but wanting to build themselves up to buying the real thing, by first buying a knockoff. We've used those studies to question the common wisdom (often used by customs and border patrol and ICE) about the "dangers" of counterfeits. If no consumers are fooled or harmed, then what's the issue? And that's especially true if they weren't going to purchase a legitimate version in the first place.

But this raises an even more interesting question to me: under this ruling, could a company not just make cheap knockoffs of a famous brand's products, but then avoid some level of liability by clearly advertising them as knockoffs? I wouldn't suggest doing that without a huge legal budget, but a strong argument can be made that if you made it abundantly clear that your fake Louis Vuitton handbag was a fake Louis Vuitton handbag, and that buyers could not buy it without understanding that fact -- then there might not be any claim. There would be no likelihood of confusion. There would be no harm.

It's such an intriguing idea, I'm now kind of hoping that someone (again, someone with fantastic trademark/counterfeiting lawyers, and a large legal war chest) tests this out. If you do, send me some sample counterfeit merchandise as a thank you.

Filed Under: 9th circuit, consumer protection, counterfeit, counterfeits, eye dew, fake goods, lanham act, likelihood of confusion, trademark
Companies: arcona, farmacy beauty