Peter King VR CEO

When you hear the word “Counterfeit”, most people instantly think of someone printing money and trying to pass it off as the real thing. In the franchise world a Counterfeiter is someone who has taken your registered trademarks and changed them ever so slightly with the intent to trade off your good will for financial benefit.

Most people who have travelled to a major city or to a local flee market have seen Rolex watches for $25 and Gucci purses for even less. For luxury brands, counterfeiters erode the status-symbol allure of such goods. Today, brands are striking back with police involvement to crack down on such thieves.

The rampant practice of trademark counterfeiting can cost owners of the marks millions of dollars in the form of lost sales, damage to reputation, and legal costs. But, for owners of federally registered trademarks, and now service marks, there is salvation under the laws of the Lanham Act.

For example, no longer can an ex-franchisee take a logo they formally operated under, change the color and adjust the font and try to mislead the general public. This in fact happened to the author, when our distinctive logo was counterfeited. It was tragic and laughable at the same time. In our case the initials in our name (logo) were kept, the color was changed and the oval that surrounded our initials was rotated 45 degrees and sliced to create the letter “G”. What must people be thinking?

Under the Lanham Act, the term “counterfeit” trademark means a “spurious mark which is identical with, or substantially indistinguishable from, a registered mark”. In a typical case consumers are deceived into buying or using a service thinking they are buying or dealing with the real thing.

Before proceeding with a lawsuit for counterfeiting, the trademark owner must answer a couple of important questions: 1) what are the goals for the bringing litigation? and 2) what enforcement strategy will work best to achieve those goals? In the franchising world, when you combine federally registered trademarks with in term or post term competition covenants, the Lanham Act supplies the necessary substance to help prove and possibly calculate damages.

Counterfeiting litigation generally moves forward very quickly. The complaint, application for relief, brief in support of the application for relief, and the proposed order are all essential. Undoubtedly, the trademark owner will want the counterfeiter enjoined from future counterfeiting. Expedited discovery has the defendant producing documents and/or appearing for depositions quicker than most litigation.

Once the trademark owner can prove the amount of actual damages suffered, and/or the amount of the alleged counterfeiter’s profits, the trademark owner is entitled to treble damages. As a result of recent amendments to the Lanham Act, a plaintiff is now entitled to seek statutory damages as an alternative to actual damages. In cases of willful infringement, the court has the discretion to award up to $1,000,000 per counterfeit mark as statutory damages.