It should not come as a big surprise that counterfeiters have expanded their focus beyond luxury brands.  Counterfeiters are shrewd business people and clever marketers and have a good pulse on what is happening within the marketplace and inside the heads of their potential buyers.  These fraudsters have already demonstrated that they have mastered the art of distributing and promoting their goods via online channels such as paid search.  Now, they have also proven that they are insightful and agile enough to respond to a tough economic market and appeal to an evolved, cost-conscious buyer.

Brand owners beware.  Whether you sell luxury or not, you are probably not immune to the growing counterfeiting problem.  The supply of knockoffs is virtually infinite as today’s counterfeiters have proven that they can easily and effectively replicate just about anything.  Therefore, as a brand owner, in addition to building programs that attempt to reduce the supply of counterfeit goods, it is just as critical to supplement that program by implementing automated mechanisms to patrol and interrupt the online promotion and distribution of those counterfeit goods as well.

Fogg’s discussion struck accord with me as I thought about various hot triggers that are put in front of me each day. Case in point: When Facebook sends me emails stating I’ve been tagged in a photo, I usually immediately logon to check it out, and I end up spending more time than planned on the social networking site. In other words, I’ve been triggered. So, how does this all relate to brand protection? The concept of tying social sciences to marketing is nothing new as brand owners spend a lot of time, money, and resources to drive customers to their brands. But what about the bad guys? Don’t scammers do the same thing?

Let’s take the example of counterfeiters. These scammers know that low prices motivate people and use heavily discounted prices as their “hot trigger” to manipulate user behavior. (Yes, humans are fairly predictable) With that in mind, they propagate this to all forms of their scamming strategies. For example, just as legitimate marketers do, online scammers invest in paid search but do so by deceitfully leveraging brands in a paid search text ad or keyword buy. Think, how many times have you clicked on an online ad that touted authentic luxury bags at unbelievably low prices but instead of a great deal, you were presented with a counterfeit. Counterfeiters also use the psychology of persuasion to produce a desired outcome, which is to intercept traffic that is searching for a legitimate brand and lead consumers to counterfeit goods.

Technology is always changing, but human psychology remains the same. Just like brand owners and marketing professionals, scammers also study psychology in tandem with technology to recognize how to achieve results in the most effective way. Understanding hot triggers from a scammer’s perspective is important as it allows us to see what types of deceptive online marketing techniques are being used, so we can quickly identify online brand abuse. They often use “hot triggers” to divert customers away from legitimate websites, stealing your traffic and potential revenue. So, how about it? Do you have your finger on the hot trigger when it comes to tracking down scammers who abuse your brands?

Chanel also takes the opportunity to warn current and would-be counterfeiters by posting a copy of a lawsuit in progress on the websites named in the lawsuit. The lawsuit against Liu Zhixian and other unidentified defendants filed on April 10, 2010, for example, is posted on 11 websites, including chanel2u.com. Chanel has provided updates on subsequent orders and injunctions on these sites to let fraudsters know that Chanel is indeed serious about identifying these individuals and making them accountable while simultaneously sending a signal to other counterfeiters not to hijack its brand.

On the consumer front, Chanel creatively uses the recovered domains that now point to chanelreplica.com to educate consumers on why buying fakes is harmful to society as a whole (i.e., by supporting criminal and terrorist activity) and what risks they take on themselves (i.e., receiving poor quality goods with no chance of a refund or repair services). As a result, any consumer who may have visited these sites in the past now knows without any uncertainty that the products were fake, and will maybe even rethink buying fakes in the future. Chanel also takes aim at warning consumers about the downside of buying fakes online at fakechanel.com.

While its fight against counterfeiters is not yet over, Chanel is taking an innovative approach of leveraging past infringing websites to fight the fight. What impact this will eventually have is still to be determined, but if all fake counterfeit sites contained similar messages, counterfeit buyers and sellers alike would likely think twice about engaging in this illegal trade.

So, what qualifies as consumer confusion? According to the ECJ whose opinion applies to all 27 EU member countries, the search ad can be found to be confusing if it makes it “impossible, or possible only with difficulty, for average internet users to establish from what undertaking the good or services covered by the ad originate.” More simply put, if an average internet user cannot tell from the search ad whether the goods or services advertised come from the trademark owner or not, then the ad is considered to be confusing. This goes to the core of what trademarks are all about in the first place: to guarantee consumers the origin of the goods or services.

The ECJ also said that determining whether consumers are likely to be confused by the ad copy of search ads is a matter for the national European courts to decide on a case by case basis. Consequently, this decision is likely to initiate a number of trademark infringement cases between brand owners. On the positive side, the threat of lawsuits alone could discourage some advertisers from buying and misusing competitor’s trademarks and may even mean potentially lower keyword costs for brand owners, as fewer advertisers may be bidding on their brand names. Or, it could mean business as usual with rivals outbidding each other for popular branded keywords.

How does this ruling impact Google’s AdWords trademark policy for EU member countries? As of now, it doesn’t. Currently, Google does not allow third parties to purchase the trademarks of others as keywords or use them in the ad text in all EU countries, except in the UK and Ireland. (In these two countries, third parties can bid on others’ trademarks as keywords but cannot use them in the ad text of the search ads.) Given this ruling, however, it is not unlikely that Google may modify its policies impacting most EU countries to be consistent with the policies for the UK and Ireland and possibly even consistent with the Google’s US policy, which permits third parties to use others’ trademarks in both keywords and in the ad text, as long as certain criteria are met. In Google’s own blog posting, the search engine did not tip its hand to what its next move may be based on this ruling, but mentioned it was awaiting a series of decisions by the ECJ involving search advertisers and brand owners.

The good news is that Google already provides a formal complaint procedure for reporting search ads that violate its region-based trademark policies. Google even has a separate complaint procedure for reporting advertisers that are selling counterfeit goods. While the ECJ ruling did not specifically address the issue of search ads promoting the sales of counterfeit goods, its clarification on what constitutes trademark abuse in search ads for all practical purposes stymies counterfeiters leveraging brand names in their ads.

To wrap things up, who came out ahead? In a sense, both parties came away with some wins, although the general consensus is that Google walked away with more. One outcome is clear, though; the onus is on brand owners to continuously monitor for the misuse of their brands in search ads, report abuses to Google and potentially go after infringing competitors on a case by case basis.

*Note: the ruling applies to other search engines as well, including Yahoo! and Bing.

According to a recent article in WWD (subscription required), the joint lawsuit uncovers one of the largest counterfeit cases ever in terms of the size, scope and sophistication of an online operation. The online counterfeit network identified in the lawsuit is comprised of 130 Chinese websites selling counterfeit goods through up to 6,500 domain names, most of which trace back to a single website, B2Bsharing.com. At least some of the sites involved in the online ring are cybersquatted — such as polo4sale.com and outletnorthface.com.

B2Bsharing.com is reportedly operated by Fujian Sharing Import & Exchange Ltd., however an actual address for the business in China is unknown. 15 other individuals were also named as co-defendants in the lawsuit, all of which have unknown addresses. This just goes to show how easy it is to run a complex online counterfeit operation without being easily traced.

The dollars generated by this counterfeit operation are as staggering as the scope of its online network. The two fashion giants claim that the ring of counterfeit Web sites generated as much as $780,000 per month in fake Polo and North Face goods — that’s up to $6,000 per month for each of the 130 Websites. And that’s just on the Polo and North Face brands; other brands offered by the alleged counterfeiters include Dior, Ed Hardy, Coach, Gucci, Paul Smith and Abercrombie & Fitch.

Finally, to make matters worse, many of the affiliate sites involved in the ring use copyrighted images from the sites of authorized resellers to create a sense of authenticity with customers.

So, there you have it. A sophisticated, complex counterfeit operation leveraging many brandjacking schemes — including cybersquatting, copyright infringement, and affiliate linking strategies — to amass major profits at the expense of legitimate brands. However, the battle is not lost. Brand owners can connect the dots between the owners of multiple domain names and websites — as Polo Ralph Lauren and VF Corp. have elegantly done — and begin to uncover the intricate relationships mentioned above. Understanding the scope and nature of the problem online is indeed the first step in taking actions against these highly sophisticated brandjackers.

So, what did we find? Roughly 17% of the paid search ads for popular consumer products – such as designer handbags and shoes, music, movies, and hi-tech gadgets – led to sites likely offering counterfeit or pirated goods. This number gets even higher for certain categories, such as “designer handbags,” where an eye-opening 32% of the paid search ads led to sites appearing to sell fake handbags.

Another way to stir up more ads for counterfeit or pirated goods is by adding terms like “cheap,” “discount” or “wholesale” to a product name or category. Across all 20 product searches, for example, the share of paid search ads linking to sites selling counterfeits increased from 17% to 19% when these terms were added. In the designer handbag example, the share of paid search ads linking to suspect counterfeit sites jumped from 32% to 49%.

From these results, it is evident that counterfeiters have mastered the art of targeting buyers looking for unbelievable deals. As such, consumers need to be that much more vigilant if they’re seeking authentic products at good prices. Brand owners also need to be cognizant of the strategies employed by fraudsters and monitor not only for the use of their trademarks or product categories as keywords, but also in conjunction with terms signaling counterfeit or pirated products.

What may be lesser known is that many major online marketplaces – including business-to-business changes – also have a decent track record for removing infringing listings.  Based on our own research of the major auction and exchanges sites accounting for roughly 75% of all marketplace traffic (as measured by Alexa), the overall compliance rate of over 170,000 de-listing requests between June and July 2009 was 83%.  

By major region, marketplaces hosted in the Americas showed the best enforcement compliance rate of 94%, compared with 78% for European-based sites and 73% for Asia Pacific-based sites.  The compliance rate of individual online marketplaces within each region, however, did vary considerably – from 6% to 100% in the Americas and Asia Pacific where most enforcements were sent.  It is interesting to note, too, that the marketplaces with the largest enforcement volumes have the highest enforcement success rates.  That’s good news for brand owners, as the vast majority of their enforcement efforts are acted upon by the major online marketplaces.

Enforcement Compliance Rates of Major Online Marketplaces By Region* 

*Based on a sample of over 170,000 de-listing requests between June and July 2009.  **Average compliance rate is weighted by percent of enforcements per online marketplace. 

Source:  MarkMonitor.

Under Section 512(d)(3) of the DMCA, “information location tools” such as search engines and directories are not liable for infringement of copyright-protected materials they may link to, as long as they follow the DMCA’s takedown procedures when they receive complaints from rights owners.  These are essentially the same conditions that apply to ISPs who may unknowingly host websites containing infringing copyright content.  However, rather than identifying the infringing copyrighted material itself, rights owners must instead identify the search result or directory page which links to a webpage containing the infringing material.  For example, this would require providing the keyword or keyword phrase used in a search or directory query, plus the URL(s) which point to the infringing websites in the DMCA complaint.

Some search engines make it easier than others to submit this information to them.  Google, for example, requires DMCA notices to be sent via fax or snail mail, with a couple of exceptions;  complaints of copyright infringement found on Blogger can be submitted via an online form, and only brand owners with a prior agreement with Google may submit complaints via email.  Both Yahoo! and Bing allow brand owners to submit complaints via email in addition to via fax and mail; however, it appears that the first submission to Yahoo! and Bing must be submitted by mail or fax so that they have a legal copy of the brand owner’s signature on file.

Once the DMCA notice has been received by the search engines, they will “expeditiously” remove the website listing from its search engine index, although no timeframe is provided.   Anecdotal information suggests that removal takes on average 10 days.  Furthermore, both Google and Bing will provide copies of the DMCA notice to the website owner in case they would like to file a counter notification, whereas Yahoo! may do this at its discretion. 

It is also important to note that both Google and Yahoo! may provide copies of the DMCA notice to Chillingeffects.org, with personal identification information removed, where it may be posted and annotated.  (Apparently, with Google’s Blogger, all DMCA notices are forwarded to Chillingeffects.org.)   Google goes one step further and indicates at the bottom of the relevant search engine page that certain listings have been removed due to copyright infringement and provides a link to Chillingeffects.com for consumers to view the actual DMCA notice. 

Of course, brand owners can always submit DMCA notices directly to ISPs hosting infringing websites to have the copyright content removed or to disable access to the websites.  While this is also effective, brand owners may find themselves sending multiple enforcements to multiple ISPs to cover all copyright infringement associated with their brands.  By submitting DMCA notices to just the major search engines, in contrast, brand owners can effectively block access to 98% of infringing websites accessed through search.  Submitting to Google alone gets you 78% of the way there.  Of course, the one drawback with sending DMCA notices to the search engines is that while links to the infringing content are removed, the actual infringing content remains.

Perhaps the best approach is to take a one-two punch.  By sending DMCA notices to both the major search engines and the ISPs hosting the infringing websites, brand owners can practically guarantee that consumers will not be able to find or – in the case of pirated music, movies, programming content, software and games – download the infringing content.  This applies also to sites leveraging copyrighted product photos or images to sell counterfeit merchandise.  Not a bad place to start for protecting a company’s most valuable asset.

Links to Search Engines’ DMCA Policies:

• Google
• Yahoo!
• Bing

• In the US:  under “certain criteria,” an advertiser can use trademarks in its ad text even if the advertiser doesn’t own that trademark or have explicit approval from the trademark owner to use it. 
• In 188 geographies (mostly non-European Union):  an advertiser can use a trademark owned by another party as a keyword to trigger an ad when searches are conducted on those trademarks.  This new policy is consistent with Google’s trademark policy for 4 other countries, including the U.S. 

A complete list of the 192 countries in which Google will not investigate the use of trademarks as keywords, but will continue to investigate the use of trademarks in ad text, can be found here.  

The U.S. policy change will begin appearing in Google search ads on June 15, 2009.   The trademark policy impacting the 188 countries took effect on June 4, 2009.

HOW DO THE POLICIES DIFFER FROM BEFORE?

Previously in the U.S., an advertiser could only purchase a trademark as a “keyword” to trigger an ad, but the advertiser could not use it in the ad text unless the advertiser was, or had permission from, the trademark owner. 

Previously in the 188 geographies, if advertisers purchased a trademark they didn’t own as a keyword to trigger an ad, trademark owners could submit a complaint to Google to have it disapproved or disabled.  It should be noted that Google did not proactively prevent ads triggered by the trademarks of others in these countries, but instead was willing to review complaints and take appropriate action.

WHAT ARE THE “CERTAIN CRITERIA” IN THE NEW U.S. POLICY?

The certain criteria that must be met are that the advertiser’s website must:

• Resell the trademarked goods and services
• Sell components, replacement parts, or compatible products relating to the trademark
• Provide information relating to the trademarked goods or services (without promoting or selling competitive offerings)

At the same time, Google’s U.S. policy does not allow ads that:

• Do not lead to a landing page which clearly facilitates the sale of either the trademarked goods and services OR parts or components related to the goods and services corresponding to the trademark
• Are competitive or critical about the goods and services corresponding to the trademark
• Do not lead to a landing page which provides substantive information about the trademarked goods and services
• Sell or promote counterfeit goods

WHY THE CHANGES?

Google claims the U.S. policy change will improve ad quality and the user experience.  For example, a site that sells several brands of sporting goods would now be able to highlight the actual brands they sell in their ad text, rather than generically referring to the goods. 

Google’s other trademark policy change brings most of the world in line with Google’s existing policies to allow keyword buying in 4 other countries:  U.S., Canada, United Kingdom and Ireland

HOW DO THESE POLICY CHANGES IMPACT BRAND OWNERS?

Google’s lifting of policy restrictions places more responsibility on brand owners to police whether their trademarks are being infringed upon in Google search ads.   Many brand owners fear that the U.S. policy change will support more gray market selling – that is, the selling of authentic product through unauthorized sellers – as the policy now will allow any seller to use the names of the brands it sells in Google ads.  If a seller does use the trademark of a brand owner without permission, the brand owner can now only request Google to remediate the ad if the advertisement does not meet the “certain criteria” listed above.

Some brand owners have also expressed concern that the new international policy will create more opportunities for others to inappropriately leverage their brands, as any third party – including competitors – can now use others’ trademarks to trigger ads in these 188 geographies. 

WHAT CAN BRAND OWNERS DO?

Google does provide a complaint procedure that allows brand owners to file a trademark complaint.  Google will then determine whether the ad(s) are compliant with the trademark policy for that geography and take appropriate action, which may include disapproving or disabling the ad and/or terminating the advertiser.  Google has a similar complaint procedure for ads selling or promoting counterfeit goods.

Brand owners can also contact the advertiser directly, such as through a Cease & Desist letter, to remedy a trademark infringement.  Google actually recommends on its website that “trademark owners …resolve their disputes directly with the advertiser” as “Google is not a third-party arbiter.”

Given Google is relaxing its trademark policy, it makes it even more imperative that brand owners proactively monitor sponsored links to ensure that third parties are not abusing their trademarks in search ads.  While Google is lifting restrictions on who can use trademarks in search ads and how trademarks are used, it does not allow ads that are competitive or critical in nature or that sell or promote counterfeit goods.  So, brand owners can – and should – continue to enforce their IP rights on Google search ads.

FOR MORE INFORMATION

Google Updates to U.S. Trademark Policy

Updates to AdWords Trademark Policy

68 Regions Google Will Investigate the Use of Trademarks in Ad Text, in Keywords, or Both

192 Regions Google Will Investigate the Use of Trademarks in Ad Text (but Not in Keywords)

To coincide with “World Anti Counterfeiting Day” (which is June 11^th 2009  for those who may not be in the know), several anti-counterfeiting groups from around the world along with local governments and agencies are running public service ad campaigns to educate consumers about the negative impact counterfeiting has on the global economy and on society as a whole.  The aim is to build awareness around how counterfeiting fuels an underground economy that supports child labor, organized crime and terrorist activities while stifling job creation, innovation and tax revenues.  Counterfeit products are also known to pose serious public safety threats, particularly when it comes to fake drugs, automotive and aviation parts, and electrical equipment.

The International AntiCounterfeiting Coalition (IACC), or which MarkMonitor is a member, is teaming with the Global Anti-Counterfeiting Group, other anti-counterfeiting groups and local governments in running simultaneous public service campaigns tomorrow in NYC and Los Angeles in the U.S. as well as in France, Mexico and Canada.  The NYC campaign, for example, will include the streaming of anti-counterfeiting messages in Times Square at the Reuters Digital Billboard and NASDAQ with the goal of reaching millions of visitors and tourists.

We commend the IACC and other organizations for not only tackling the global counterfeiting problem from the legal and regulatory side, but also for taking steps to reduce the demand for fakes.  For as long as there is demand for too-good-to-be-true deals, there will be a supply.