The UGG Boots Story: How Recording Your Registered Trademark Can Lead to a Jail Sentence

At the end of September 2017, Shi Wei Zheng, 42, plead guilty to one count of trafficking in counterfeit goods. During a five-month period, Zheng trafficked over 15,000 pairs of counterfeit UGG boots, with a total estimated retail value of over $2.5 million.

Yet Another Reason to Record your Trademark or Copyright with U.S. Customs and Border Protection (CBP)

Co-Authored by Jennifer Diaz and Kristina Hernandez-Tilson, an attorney in Miami, Florida, practices in state and federal court, litigating matters of civil and administrative law.  

Whether you are importing goods to the United States, or are a U.S. trademarks or copyright owner, there is a new law on the books that should be of interest to you, the Trade Facilitation and Trade Enforcement Act of 2015 (TFTE), which was signed into law on February 24, 2016.  TFTE, a bipartisan piece of legislation, is comprehensive in scope. In this Article, we will look specifically at Sections 302 through 311, the section on “Import-Related Protection of Intellectual Property Rights” (IPR). The TFTE highlights the fact that CBP treats IPR as a priority trade initiative. 

In this previous article, we explained the benefits of taking the extra step of recording your registered trademark or copyright with U.S. Customs and Border Protection (CBP), instead of relying solely on registration of the intellectual property with the U.S. Patent and Trademark Office (USPTO for trademarks), or the U.S. Copyright Office (for copyrights). Initial registration with the USPTO or the U.S. Copyright Office provides only public notice of ownership of the trademark or copyright, whereas taking the extra step of recording that registered trademark or copyright with CBP transforms the intellectual property into one that is now eligible to receive protection from CBP at over 327 U.S. Ports of Entry. Thanks to TFTE, this protection will now be more robust.

Prior to the passage of this Act, CBP was authorized, pursuant to section 818(g) of the 2012 National Defense Authorization Act (NDAA), but not required, to share unredacted images and samples with right holders if CBP suspected a product of infringing an IPR. According to House Report 114-114 – Part 1, which comments on TFTE, giving this discretion to CBP resulted in implementation of section 818(g) of NDAA that did not provide effective enforcement for trademark and copyright holders, and by replacing 818(g) of NDAA with section 302 of TFTE, the Committee intends for CBP to implement the latter in a manner that ensures effective CBP enforcement of IPR. This means greater protection for U.S. right holders, but also more of a need for pre-compliance for importers. 

Pursuant to section 302, when CBP suspects merchandise that violates a domestic copyright or trademark is being imported into the United States, it is required to provide the U.S. right holder with certain information, so as to facilitate the right holder in conducting his or her own examination and testing of the merchandise. Specifically, CBP must provide information that appears on the merchandise and its packaging and labels, including unredacted images of the merchandise and its packaging and labels. However, it should be noted that this requirement only kicks in if CBP determines that the examination or testing of the merchandise by the owner of the trademark or copyright would assist CBP in determining if the merchandise is being imported in violation of the IPR. In other words, CBP is still allowed to exercise some discretion. CBP is also permitted to use its discretion in determining whether or not it wants to provide the right holder with actual samples, unredacted, of the merchandise. 

As a result of this new law, CBP now has even more power to protect against IPR infringement to assist in identifying and seizing goods that violate U.S. IPR holders. During the recordation process with CBP, a right holder has the opportunity to train CBP on how to detect and identify infringing merchandise. Now, section 308 of the TFTE will ensure that CBP officers are trained effectively to catch the infringers. If counterfeit merchandise is seized and forfeited by CBP, CBP can also impose a penalty of the MSRP value of the infringing goods under the authority found in 19 U.S.C. 1526(f), and discussed in CBP’s own “FP&F Mitigation Guidelines”. The catch however, is that only those companies or individuals whose trademarks have been recorded with CBP enjoy this added benefit. This reinforces our prior advice in the “Top 10 Tips When Importing”, that all who have registered trademarks or copyrights take the extra step of recording those rights specifically with CBP. Only then will right holders enjoy the new protections afforded by TFTE.

It should also be noted that pursuant to subsection (d) of 302, all these requirements and discretionary powers now imposed on CBP are subject to security interests of the United States. CBP may not provide information, photographs, or samples to a right holder if providing such “would compromise an ongoing law enforcement investigation or national security.” 

Lastly, it is important to note that TFTE affords these enhanced protections not only to right holders, but even to those who have “submitted an application for registration under Title 17, United States Code, with the United States Copyright Office, to the same extent and in the same manner as if the copyright were registered with the Copyright Office.” Section 304. 

Are you now ready to record your registered trademark or copyright with Customs?

NEW CBP Pilot Program Focuses on IPR Pre-Compliance

CBP is currently taking volunteers for a brand new Intellectual Property Rights (IPR) voluntary pre-compliance program.  The Journal of Commerce reported on the new pilot program here. Do you agree with my comments?

Large Seizure by CBP Highlights High Margins of Counterfeiting, and Necessity of Recordation

Co Authored by Michael De Biase 

One of CBP's latest news releases, dated September 27, 2013, noted that more than 16,000 counterfeit Hermes handbags were seized by Customs and Border Protection (“CBP”) because Hermes took the extra step of recording their intellectual property with CBP.   Not surprisingly, when you analyze the difference between the alleged value of the counterfeit products (reported to CBP) as compared to the suggested retail price of the genuine goods, you have a grave difference. In this case, $295,665 (value of counterfeit goods) compared to $210,785,475 (value of genuine goods).  That’s over $210 million worth of potential profits for the counterfeiters, at the expense of Hermes – a crime in every sense. Because Hermes recorded its intellectual property with CBP, CBP seized this infringing merchandise, and will also have the ability to issue a penalty for the MSRP of the merchandise. Yes, that means a penalty in the amount of $210,785,475 will be coming to the counterfeiters!

Most often, counterfeiters target large luxury brands whose goodwill and name recognition has a certain element of exclusivity.  While some may not sympathize with profitable companies, what they fail to realize is that counterfeiting hurts in a variety of other ways. Counterfeiting hurts consumers who buy products under the false impression that they are genuine, companies whose goodwill is tarnished by the inferior quality of the counterfeit products bearing their brands, and it hurts those who worked hard to build something of substantial value.  In this case, Hermes lost out on, potentially, more than $210 million dollars in revenue.  That is not only felt by Hermes the corporation, it hurts the retail stores and the malls they’re in, the shipping companies, the raw materials developers, and the families of the employees for all of these parties.

Luckily for importers and consumers, CBP recognizes the importance of intellectual property protection and provides assistance in stopping the infringing products at our borders.  CBP’s Intellectual Property Rights Recordation (“IPRR”) system allows holders of registered trademarks and copyrights to record their registration with CBP, so that CBP can police the borders for infringing goods.  Once recorded, it is entered into a online search system named IPRS. According to the news released mentioned above regarding catching counterfeiting Hermes at the border, once intellectual property is recorded with CBP,

CBP officers are trained to identify and interdict counterfeit goods, and this is a great example of how their training and expertise are employed every day in our ports of entry,” said CBP Director of Field Operations in Los Angeles Todd C. Owen

Considering the incentives for counterfeiters along with the potential losses for intellectual property rights holders, companies that import merchandise must consider recordation a necessity. Importantly, when you record your marks, you must go to an expert in this area - as this is your opportunity to train CBP on the methods of policing your mark - and only trained experts can work on this proficiently so you have the best results with CBP, like Hermes did. To learn more about the top four benefits of recording your intellectual property, review this article.

To get started on recording your intellectual property, or if you have any questions on how to best have CBP police your recorded trademarks and copyrights, please contact me.

China Sourcing Fair - How to Solve U.S. Customs Issues When Importing From China

 The rewards of sourcing from China are well known, but succeeding at it is far from simple. With a sluggish global economy resulting in unpredictable market changes, cost-effective sourcing is important.

To help you build or sharpen your China sourcing strategies, I am thrilled to be part of a new series of "How to Source from China" conferences at the China Sourcing Fair (July 10-12, Miami)!

The conferences are led by industry experts, and reveal real-life sourcing risks in China. We will share actionable knowledge at every step as the project moves from concept to delivery, and the conference will offer in-depth insights and practical tips on do's and don'ts of China sourcing. Whether you're a beginner or veteran buying professional, the FREE conference program is your chance to learn how to source efficiently and effectively from the "world's factory".

Register now to enhance your importing skills and knowledge today! Conference seats are limited and are on a first-come, first-served basis.

I will be speaking on "How to Solve U.S. Customs Issues When Importing From China".

Intellectual property rights (IPRs) are a priority trade initiative for U.S. Customs. Most confiscated China imports violated US Customs' IPR laws, which should serve as a reminder when buying from China.

In my seminar, we will look at ways of preventing and dealing with these issues. In particular, we will cover:

• Trademark / copyright violations (What U.S. Customs looks for)
• Top compliance tips in advance of importation (What you need to know before your goods go!)
• Statistics of seizure cases (concentrating on China statistics)
• How cases progress with U.S. Customs

Join this session and you'll leave with a better understanding!

Register now to confirm your seat!

U.S. Customs - Your Personal Policeman at the Border

Many companies mistakenly believe that registering a trademark or copyright with the U.S. Government provides sufficient protection and remedies, and, therefore, do not take the extra step to record those trademarks or copyrights with U.S. Customs and Border Protection (U.S. Customs).

The processes achieve two completely different goals.

Registering a trademark with the U.S. Patent and Trademark Office (USPTO) or copyright with the U.S. Copyright Office gives public notice of one’s ownership of the trademark or copyright. On the other hand, the purpose of recording a trademark or copyright with U.S. Customs is to partner with the agency in preventing the unauthorized importation of merchandise that bears a recorded trademark or copyright. U.S. Customs prevents counterfeit and otherwise infringing products from entering or exiting the United States for registered trademark or copyright holders who have recorded their trademarks or copyrights with Customs.