Fake Apple Stores Highlight Importance of Anti-Counterfeiting Strategies1 Aug, 2011 By: Elissa Brockbank Reese, Roger A. Colaizzi, Jeffrey D. Knowles, Venable LLP’s Advertising
The war against counterfeiting is a global one, and nothing makes the point more clearly than the recent exposure of fake Apple computer stores in China. The story was uncovered by an American blogger living in Kunming, China who a few weeks ago was surprised to find a brand new Apple store in her neighborhood.
The store was filled with Apple products, displayed Apple-branded promotional materials, embodied the classic minimalist look and feel of the brand’s stores, and even had employees donning t-shirts with the Apple logo and chunky plastic name tags. As the blogger noted, either it “was a genuine Apple store or just the best rip-off we had ever seen.” Not only was the store a fake, but also it was not the only one. Thus far, officials have located five fake Apple stores in that region of China.
According to the United States International Trade Commission’s May 2011 report, U.S. businesses incurred losses of approximately $48.2 billion, resulting from intellectual property rights (“IPR”) infringement in China during 2009 alone. The report suggests that an improvement in China’s IPR protection could increase U.S. exports and affiliate sales to China by an estimated $107 billion.
Media coverage of the counterfeit Apple computer stores shined a bright light on China’s already conspicuous IPR problems. Over the past several months, China has made significant commitments to heighten its enforcement of IPR. In October, China launched a special campaign aimed at combating a host of IPR violations including: infringement over the Internet; the sale of pirated CDs and DVDs; infringing software; and trademark infringement, particularly concerning counterfeit mobile phones, automobile parts, bulk commodity exports and pharmaceuticals.
The 2011 Special 301 Report issued in May by the Office of the U.S. Trade Representative still lists China at the top of the priority watch list for countries with rampant counterfeiting problems, but notes that “[China’s] Special Campaign has produced regulatory and judicial changes, as well as strengthened enforcement activities.”
The phony Apple stores comprise merely one example of the overwhelming IPR enforcement problems in China, which plague businesses the world over. Yet, there are numerous avenues by which companies can help protect their brands and bottom lines against counterfeiting and piracy in all its forms and wherever it takes place.
Developing a comprehensive anti-counterfeiting strategy is a vital component of any successful business. At a minimum, this strategy should include: registering and protecting intellectual property rights in the U.S. and key foreign countries; training U.S. and foreign customs to recognize and stop fakes going both directions at the borders; establishing a comprehensive online policing program that includes utilization of website “take-down” procedures; maintaining distribution controls on resellers; and seeking prompt relief such as asset freezes and temporary restraining orders through litigation in U.S. courts to combat counterfeiters. As the recent counterfeiting examples in China make clear, businesses must remain extremely vigilant in safeguarding their brands.
Jeffrey D. Knowles and Roger A. Colaizzi are partners and Elissa Brockbank Reese is an associate in Venable LLP’s advertising, marketing and new media group. Knowles is chair of the group. They can be reached at jdknowles@Venable.com, racolaizzi@Venable.com and ebreese@Venable.com, or at (202) 344-4000.