Copyright: the key to revealing the identity of infringers on Amazon and eBay

Most product marketers and distributors have likely had to deal with counterfeit products being sold on e-commerce platforms such as Amazon and eBay, among others.  Although some counterfeit goods and knockoffs are obviously fake, others use the original product’s copyrighted images and trademarks, making it hard for consumers to distinguish a fake from the original. As a result, the product owner can suffer serious economic harm, as many consumers turn to these sites to purchase products.  The good news is, most of them, including Amazon and eBay, have systems in place for reporting and subsequently removing infringing listings.  The bad news is, these systems are somewhat ineffective for permanently removing serious, repeat infringers.

When dealing with infringement on Amazon and eBay, the process usually goes something like this: you search for your product on the platform and find an unauthorized listing (or oftentimes, several) that displays your trademark and images from your product website. You (or your attorney) fill out the infringement report provided by the platform, and typically within 48 hours you receive the notice that a reported listing has been removed.

Unfortunately, in many instances, the listing goes right back up because the seller is not prohibited from relisting a product after being reported and removed for infringement.  Thus, takedowns become a frustrating game of whack-a-mole until it ultimately becomes apparent that the infringer is not giving up.

In these situations, copyrights become the product owner’s greatest intellectual property asset.  If the infringer is using images, videos or text from the product website or infomercial, you can request a subpoena from the clerk of any United States district court for the identification of the infringer, without filing a civil action.  Although this may seem like a tedious process, it can be much more efficient than continuously reporting the same infringers.

Digital Law Group has takedown experience on Amazon, eBay and Alibaba, and has issued subpoenas for seller information.  Please Email us if you have any questions or concerns regarding the content above.

Trimming the fat

Right about now you are likely feeling a bit plumper after indulging on a Thanksgiving feast and all of those beloved leftovers. If, like some of us, you are looking for a way to shed a few pounds prior to the next wave of holiday goodies, we recommend the traditional methods of diet and exercise rather than “miracle” weight loss supplements, as many of these companies are feeling the burn after getting their gooses cooked by the FTC.

Some businesses involved in the “Pure Green Coffee” scheme have reached multimillion dollar settlements with the FTC after making false claims regarding the effectiveness of the product.  The defendants marketed the dietary supplement using fake news sites, footage from The Dr. Oz Show, supposed consumer endorsements, and “clinical proof” that dieters could quickly lose weight without diet and exercise.

Additionally, the FTC recently sent out warning letters to 20 unnamed sellers and marketers of weight loss supplements.  The letters warn that Commission staff has reviewed their weight-loss claims and that they could be misleading. They also detail what type of scientific evidence the FTC says is needed before making weight-loss claims and using consumer testimonials.  Despite the warning, if the products are making money, some of the letter recipients may ignore the warning.

While some companies can afford to lay it on thick when it comes to their product claims, others cannot risk an FTC investigation and potential monetary judgments against them.  If you are selling a nutraceutical, we recommend doing your research before you blur the line between clever and deceptive advertising.

Digital Law Group has experience in reviewing product claims as well as representing companies in governmental investigations.  Please Email us if you have any questions or concerns regarding the content above.

‘Tis the season to be knocked off…

Holiday shopping is getting into full swing as we are only days away from Black Friday, and perhaps more importantly, Cyber Monday.  This season, Digital Law Group wants to make sure consumers are buying YOUR products, and not counterfeits or knockoffs from third party sellers on e-commerce and auction websites.

Sales platforms such as Amazon, eBay and Alibaba are great channels to sell products to the masses; however, unless monitored on a regular basis, these sites enable third-party sellers to capitalize on counterfeit, and in some cases, damaged or expired goods, leaving your profits and reputation on the chopping block.

The Alibaba platform should be of particular concern for many distributors because counterfeit goods are sold on such a colossal scale.  For example, consumer electronic sellers easily have tens of thousands of counterfeit listings on Alibaba.  This not only makes it difficult for consumers to identify who the underlying seller is and whether the product is legitimate, but it also makes it difficult for you to know whether your authorized distributor is responsible for the listings.

Policing the sale of your goods online can be a daunting and time consuming task if your product is being heavily infringed upon. It also doesn’t help that each marketplace has a different system (some more user friendly than others) for reporting and ultimately removing counterfeit goods and storefronts.

Don’t be a turkey this holiday season; make certain consumers are buying from you or your authorized sellers.  Digital Law Group has extensive take-down experience and knows how to most efficiently navigate each platform’s reporting system.  Gobble, gobble.

 

Licensing Agreements: Factoids for inventors

We all know that securing a licensing agreement from a distributor can mean big money for an inventor. What inventors may not know, is what to expect in a licensing deal.  Here are a few things you should know before assigning your product rights.

Royalties.  You may be surprised to learn that royalties on direct response sales (tv, web), if offered, will likely be nominal.  DRTV is no longer a money maker for direct response marketers, as media is expensive and most consumers now purchase “as seen on tv” products at retail.  So, although you should not be shocked to see little to no royalties on DRTV sales, there is almost always room to negotiate.  As for royalties on wholesale sales, depending on how developed your product is, look for numbers ranging from 5-10%.  For example, a patented, trademarked product that is molded and packaged can command a higher royalty percentage than a product with just a provisional patent.

Patents & Improvements.  The patent, and in some instances, a trademarked name, is the heart and soul of the licensing agreement.  After all, without the intellectual property, what is there to license?  What you may not know is that a product’s patents may change and evolve from the time a licensing agreement is signed to the time the agreement expires.  Oftentimes, large product distributors will find ways to tweak a design to improve the product, or to allow for cheaper manufacturing.  When these improvements are filed by the licensee, they become the property of the licensee, and the original inventor is no longer the inventor of the patent.  This is why grant-back provisions are so important.  Make sure the rights to all improvements made to the patents during the term of the licensing agreement are granted/assigned back to you, the original inventor, upon termination of the agreement.

Property Protection.  First of all, trust no one.  This may seem a bit harsh, but it is solid advice nonetheless.  While many product marketers play by the rules, some do not.  As such, you should have a strong non-compete agreement in place prior to licensing out your product. Additionally, be sure that all of your intellectual property rights are valid.  Missing deadlines for both patent and trademark submissions can result in the loss of your intellectual property rights. This can lead to loss of revenue opportunities and open the door for others to register your now invalid intellectual property.  Until you have your IP protection in place, avoid showcasing your product at trade shows or inventors corners to minimize the possibility that you will be knocked off.

Overall, while licensing can be a lucrative option, it is wise to consult with someone who can help you maximize your opportunities.

Manufacturing in China – is it really saving you money?

Made in China – it’s on almost every product we buy.  Most marketers and distributors assume that manufacturing in China is the best option for their bottom line; and, if you strictly consider the manufacturing costs, it usually is.  However, there are many “hidden fees” that come with manufacturing a product in China.
Intellectual property protection and enforcement.  Although reform is slowly happening, China is severely lagging in intellectual property protection.  Product leaks (sometimes by manufacturer employees) and subsequent infringement continues to be rampant.  A winning product is likely to be knocked off and selling on Alibaba and Amazon before it even hits the shelves.  While large distributors typically have the resources to monitor and enforce their IP rights abroad, smaller companies could end up losing their ability to compete; particularly if knockoffs are being sold at a lower cost.
Quality Control Issues.  Unless you have a representative on the ground overseeing operations, you will be at the mercy of a factory that may or may not produce a quality product. Consumer packages with missing pieces and/or defective parts are not uncommon.  These errors can result in unhappy customers and negative press on social media.  Even if your contract with the factory provides methods of recourse such as free replacements or discounts for late fulfillment, it may be too little, too late.
Some things to consider when choosing a manufacturer: 
  • Factory reputation – do your research before selecting a company
  • High turnover rates for engineers and senior management – can be related to product leaks
  • Time frames and length of supply chain – make sure your delivery expectations can be met
  • NAFTA – Canada, Mexico and the USA have a limited tariff trade agreement with multiple protections including IP rights and lab standards
Hidden fees and potential negative consequences can outweigh the direct benefits of manufacturing in China.  Digital Law Group can help you select the best country to manufacture your product by identifying the pros and cons and evaluating the potential impact of hidden manufacturing fees.

So you built a better mousetrap…now what?

We are in the age of the Entrepreneur/Inventor.  News of your average Joe-turned-millionaire by creating a product or an app is omnipresent.  Advertisements by companies promising to help launch your product ideas are everywhere, and television shows like Shark Tank are extremely popular – averaging over 6 million viewers.  With such constant bombardment of entrepreneurial success, it’s no wonder that so many people have become inspired to create the next big thing.

We LOVE innovators and their success stories, but, the reality is, the odds of launching a lucrative entrepreneurial endeavor are slim.  According to leading sources, the average success rate for a new product is only 3%.  With statistics like this, innovating is clearly risky business; however, there are steps you can take to improve your chances of success while protecting your cheese.

  • Do your research.  Is your product or idea unique?  Is there already something just like it on the market?  Before you invest your time and money, make sure you are not just reinventing the wheel.  If you do have a not-so-novel product, is there something that makes it fresh, distinctive or marketable to a particular audience?
  • Get a patent.  In this industry, imitation is the highest form of flattery.  It is also a surefire way to lose out on money.  If you have a new promising product, get a patent.  It may seem like a lot of money at the time, but it will certainly save you down the road if your product is “imitated” by other companies.
  • Build a prototype.  Don’t spend tens of thousands of dollars on inventory.  Whether you are planning to manufacture the product yourself, or license your idea, spend the money instead on a solid prototype that you can put in front of potential investors, distributors or licensees.
  • Beware of invention promotion companies.  There are multiple companies out there that promise to assist you with your product idea.  While some are legitimate, many are not.  Be especially leery of companies that require payment upfront.
  • Know when to walk away.  Sometimes you just need to face the fact that a product is not going to be a slam-dunk.  Too many times we have talked to people who are so committed to making it big, they continue to sink money into an idea that will not pay for itself.  It’s tough to walk away when you’ve developed emotional ties to a business – we know. So, seek advice from industry experts and even friends and family, then use your best judgment.

Digital Law Group can advise you on whether your product is novel by performing patent searches and filings, file your patent and trademark applications and facilitate key relationships with manufacturers, marketers and distributors.

False claims, fake news sites and negative options! Oh my!

Sounds scary, right?  Well no, probably not.  For many of you, this is just another day at the office; however, it is a wicked trifecta according to the FTC.  Case in point, affiliate network LeadClick just got doused with a $12,000,000 penalty for its involvement in creating fake news sites to market weight loss products with unsubstantiated claims. 

 

In a summary judgment ruling stemming from a complaint filed by the FTC and the State of Connecticut back in 2011, a district court determined that affiliate marketers employed by LeadClick made false claims on behalf of its client LeanSpa, LLC, a company selling “miracle” weight-loss products. The affiliates created websites designed to convince consumers that independent news outlets and customers endorsed LeanSpa’s products.  When a consumer clicked through to one of LeanSpa’s websites, LeanSpa used a “free trial” scheme to enroll consumers into its recurring purchase program that charged $79.99 a month per product.  Once enrolled, customers found it very difficult to cancel the monthly subscription. 

 

For its role in misleading consumers and using negative option marketing to collect nearly $25 million from customers, LeanSpa agreed to pay $7 million in January 2014, as the FTC pursued LeadClick and two other defendants for their involvement.  Holding the network responsible in part for the deceptive marketing by its affiliates, LeadClick has been ordered to give up the $12 million it received from LeanSpa for its services.  Additionally, LeadClick’s parent company, CoreLogic, must pay $4 million.  Although no heel clicking is going to get the network out of this one, it will appeal the court’s ruling.

 

It is clear, perhaps now more than ever, that the FTC and state attorneys general are paying attention to the companies behind the curtain.  Every character in the product industry is a viable target for the FTC.  It’s time to wake up and get compliant with state and federal rules and regulations.