Copyright and Patent Fraud
David Lee Roth
12th hon. Government
January 5, 1998
Today, more than ever before, products, goods, and services
are being provided by businesses of all variations. Fewer and fewer people today are self-sufficient. Practically no one today makes his or her own clothes, and some people do not even prepare their own meals. Today's business world and modern day technology make it possible for people to obtain almost anything and everything they need or want, provided they have the money to buy it. There are gardening, music, painting, moving, clothing, and countless other businesses all around the world. Undoubtedly, there is a business for practically anything one could think of, and many people have gained great success and wealth by finding these needs and filling them.
With all this success and wealth, it is not surprising that
ideas are often stolen by other people in the hopes of gaining great wealth themselves. The success of many of these businesses has caused the copying of many materials. Although many diverse ideas and products are stolen, the biggest problems are clothing and software. The majority of copying and fraud involve software, like CDs, tapes, and computer programs, but there also is a huge market for clothing items like jeans, shirts, and sunglasses.
CD piracy is currently the fastest-growing counterfeiting threat, with China and Bulgaria suspected as the largest of the
counterfeiters, according to Mike Edwards of the International
Federation of the Phonographic Industry. Edwards claims that
worldwide piracy from street bootleggers, to organized crime, robs the recording industry of about 2.5 billion dollars or 6.5 per cent of the industryís annual sales. (Edwards 6)
However, it is not always a product that is being copied. As in one case, Miller Brewing Co. has developed a new beer with a label that appears to be aimed at taking customers away from Anheuser-Busch Co. The problem is that the new brand gives a prominent display of an eagle, like Anheuser's label. Anheuser-Busch is currently the number one brewer in America, but Miller is planning to release a new flagship brand called Miller Beer. This new brew is aimed at taking sales away from the king of sales, and the king of beers, Budweiser. John N. McDonough of Miller claims that this new beer tastes different from anything out there. Miller plans to put some 65 million dollars into promoting the new beer. (Melcher 37)
In another case it is golf clubs and accessories that are being copied. In this case, however, the companies are not
copying each other; rather, they are working together in an effort to stop production of cheaper, copy-cat clubs that are taking away from their sales. There are three main companies involved in this fight against the fakes. The companies are: Cobra Golf Canada Inc. and Taylor Made Canada, both companies based in Montreal, along with Calloway Golf, which is based in Carlsbad, California. (Estok 30)
In one instance, the Taylor Made Burner Driver, the company's top club, is being copied with the name The Tour Made Ruler. This fake club is almost identical to the Burner Driver. The fake club has similar colors, markings, and the same shape as the Burner Driver. In addition to the Burner, there is also Tommy Man's Bumber, which is an apparent knock-off of Taylor Made's Burner Bubble. The Tommy Man's Bumber even comes with similar stylized lettering and red flames. (Estok 30)
Bob Cote, vice-president of Cobra, claims that he has been
battling pirate clubs since 1994. Mr. Cote has even gone to the
extreme of visiting retailers with a bailiff, and seizing imitation clubs off the racks. Once the companies recognize imitations, they report them to a team of lawyers based in Montreal that
sends out cease and desist letters to the stores with the imitation clubs. (Estok 30)
Materials are being copied in many different ways by many
different people ranging from the nice neighborhood man who copies a computer game for a friend of his, to large production factories called sweatshops. Sweatshops are illegal factories in which patent products are counterfeited for a profit. In these sweatshops workers slave to counterfeit expensive, top-quality products which are then sold illegally for high prices.
Company and product logos are another category subject to
copying. A logo is defined as an advertising symbol that represents a product or service or conveys a message about a product or service. Some logos like Coca Cola are known around the world, and symbols like McDonald's golden arches are recognized by people of all generations.
One major component that leads people to recognize products is color, and just recently a Supreme Court decision ruled that the color of commercial dry-cleaning press pads can be trademarked. Justice Stephen Breyer ruled that, Qualitex can
trademark its press pads' 'sun glow' green-gold color because that color has attained a 'secondary meaning,' which in effect distinguishes a particular brand. (Reske 28)
Obviously, ownership of logos and/or symbols can become
complicated and difficult to maintain. For years, orange juice has
been associated with the abbreviation of O. J. Today, because of
the fact that sports celebrity O. J. Simpson has become so famous, (and later infamous, as well), his initials have become the subject of dispute. Recently, Mr. Simpson agreed to share marketing rights of his initials with the Florida Department of Citrus. In turn, the agency that markets Florida's citrus products has withdrawn opposition to his attempt to trademark his initials. According to Clark Jennings, a lawyer for the citrus agency, Mr. Simpson was not paid any money; but Simpson can pursue his interests, and we can use O. J. in connection with orange juice. Simpson wants to control the use of his initials on about 50 products from apparel to toys. (Wells 1)
Logos and products can sometimes be protected from
counterfeiting by filing for a U.S. patent, a document that enables Itís owner to exclude others from making, selling, or using an invention. It is against the law to intentionally copy or imitate a product or logo. Any false products or slogans cannot be used anywhere at anytime without the written consent of the legal owner.
Digital technology today presents a real challenge for graphic artists who are trying to protect their creations. The creator must register the copyright in order to sue for Fraud. Images not copyrighted are in the public domain. Also, copyrights expire 50 years after the creator's death. (Baer 163)
Industry officials have estimated that China is the world leader in copyright piracy, another term used for the unauthorized use of another person's or company's product or invention. Officials estimate that Chinese counterfeiting costs U. S. companies about 827 million a year. China exports gray-market, impostor products to the United States with familiar American names and labels that are trusted for quality, dependability, and safety. Some gray-market products like shampoo and toothpaste contain different ingredients than the U.S. versions which sometimes leads to problems with American health and safety regulations. Some leading gray-market cosmetics contain Red
Dye no. 2 which violates U.S. health laws. Other products such as children's toys are not tested for safety and could prove to be safety hazards. (Ludwig and Koenig270)
These gray-market products pose a great threat to the
concept of reliance on brand names as indicators of safety and
performance. For instance, someone who has been buying a certain product for years suddenly falls upon a fake which dissatisfies them in some way, and the original company loses business due to the false impression. Gray market products include thousands of common items ranging from personal care products like soaps, toothpastes, perfumes, pharmaceuticals, and cosmetics, to more expensive merchandise like cameras, watches, and crystals. (Ludwig and Koenig 26)
Many stores that carry gray-market products place the fake
products right next to the real products on the shelf, a clever tactic
which often fools customers into buying the fake product without
even knowing it. Later when the profits are made, the American
company with the actual trademark loses out due to these false
imitations. Another problem which arises is that the gray-market
goods may have worthless warranties, or they may be damaged
because they were not intended to be shipped internationally.
(Ludwig and Koenig 26)
One of the largest counterfeiting industries for the Chinese is
the record industry. Chinese copyright pirates net about 2.5 billion
dollars a year from these fraudulent records. It is believed that, currently, one out of four albums is counterfeit, and the problem probably will not stop there. (Edwards 6)
A Milwaukee court recently ruled that a hog is a Harley-
Davidson Motorcycle and nothing else. Harley-Davidson Motorcycle Company became involved in this lawsuit with a motorcycle parts and repair shop called the Hog Farm in San Jose, California, in 1991. The Hog Farm owners argued that a hog referred to any large motorcycle. In this case, Harley-Davidson filed for a trademark of the nickname hog, and was able to win the case. (Fritz 30)
An article in the Los Angeles Times reports that on July 5th,
1995, Federal agents raided a stuffy yellow warehouse in downtown Los Angeles, where twelve men were cheating the Chanel Clothing Company of large profits. These few men make money by copying Chanel's crossed C logo and selling the fake product with a 500-per cent markup. (Simon A1)
Most counterfeiting products tend to be cheaply made, using
flimsy plastics, inexpensive polyester, or cheap screen printing
machines. However, some products are so real that even the
legitimate business owners can not tell the difference. One particular factory counterfeited Gucci watches that looked so
real, even the actual Swiss experts had a difficult time determining the authenticity of the watches. (Simon A1)
Although investigators have discovered such odd products
counterfeited as soy sauce and doggy chews, (Simon A1) for the
most part, product knock-offs are expensive items like designer
jeans or sunglasses that are easy to make. Counterfeiters take
normal denim blue jeans and slap on a cheap, home-made designer label of an expensive clothing line like Calvin Klein jeans.
Another favorite item to counterfeit is sunglasses. Consumers pay top dollar for designer sunglasses with special lenses to block the sun. As many know, counterfeiters mold cheap plastic frames together, put a sticker on them, and ship them to pawn shops, street vendors, or anywhere else people will buy them.
Most counterfeiters realize that what they are doing is illegal,
but they always say that they are not really hurting anybody. The truth is that aside from the companies with their sales losses, people really are getting hurt. Some counterfeit products can really endanger the public's safety. Over the last 20 years, fake airplane bolts have caused damaged engines, fake birth control pills have caused internal bleeding, and counterfeit brake pads have caused fatal car accidents.
Although there are many serious cases of product fraud, small counterfeiting operations like the one in downtown Los
Angeles are the most familiar. Los Angeles and New York
are considered the nation's counterfeiting capitals. Factory workers involved with the Chanel counterfeiting barely moved their heads when the Federal agents raided the building. They realize the agents are after the person running the factories, and not the workers. They have seen it all before, and they know the drill. (Simon, A1)
Another problem is that when these sweatshops get raided, no one really knows who is in control of them. The boss of the operation stays low key and has someone manage the factory. If one operation gets busted, the boss simply moves on to a new location and product, hires all new workers, and starts all over again.
To combat all this counterfeiting, there are several ways in
which one can protect, or patent a product, slogan, or logo. First, the product or mark should be sent to the U.S. Patent and Trademark Office in Washington, D.C. The product will start with state protection, and then will later be registered for federal protection.
Many people incorrectly believe that simply by incorporating, that they are protecting their company names. However,
incorporating does not mean that they have registered their names within the state or the federal government.(Munro 53R.)
To register for protection, an application must be filled out that requires information about the company or the person registering the trademark. The current application fee ranges from about $245 for a simple database search to about $1,200 for a typical patent office search. (Patents) Persons are entitled to federal registration only if there are plans to use the mark in more than one state. The record search can be done by the business owner or by a specialized trademark lawyer. Next, the application is inspected as to form and substance. It must initially comply with the formal requirements set forth in the Patent Laws and Rules of Practice of the United States Patent Office. (Mandell 24.) If the trademark application is approved, then the Patent Trademark Office will issue a certificate of registration within 15 to 18 months. The certificate issued by the Patent Office is good for 20 years after the filing date, although it must be renewed every five years thereafter. (Munro 53R)(Patents.)
Spending money for trademark protection in a young business may seem expensive to begin with, but will be worth the trouble to avoid litigation in the future. According to Debora H. Shavarese, a trademark attorney in the Dallas office of the
Hopkins & Sutter law firm, The key is to protect your business's mark before you invest time and money in advertising and product development. Protection may seem cost-prohibitive at the beginning, but it's worth it. The whole value of a catchy name is no good if you can't use it. (Maynard 12)
Because the problem of copyright infringement and
counterfeiting have reached such enormous proportions worldwide, there are now organizations that specifically concentrate on fighting these counterfeiters. Serving as copy cops in a way, groups such as the Software Publishers Association (SPA) and the Business Software Alliance (BSA) are winning substantial copyright infringement settlements. These software industry groups are often successful because of tips from laid-off or disgruntled employees who report massive illegal infringement on the part of their former companies.
As an example, in December of 1994, a posse of federal
marshals, attorneys, and software piracy auditors appeared at the
offices of Southern Benefits Consulting in Dallas, Texas.
Representing their plaintiffs Microsoft Corporation and Novell, Inc.,
they conducted a surprise audit of the insurance company's
computers. The on-the-spot audit was allowed by a court order after Microsoft and Novell filed a sealed complaint of massive copyright infringement. In just a few hours, the audit of one
hundred PCs produced sufficient evidence to reap a $110,000 out-of-court settlement. (Alster E1)
Once the SPA has gathered enough evidence to proceed in
any case, it can then move in one of three ways. If the case is small and there is only a small amount of infringement, the SPA will issue a cease-and-desist letter. This letter is usually the only step needed for the infringing company to understand they must stop. The second measure is to confront the company and offer them the option of conducting an audit of all the computers in the company as opposed to litigation. The third and most serious cases usually end up in court immediately without previous warning.
As with every new addition to the modern world there comes both advantages and disadvantages. Currently the Internet is causing many different battles over copyrights, fraud, and creator royalties. A new law was just passed that will in the future let performers receive royalties when their pieces of music are played over the Internet.(web)
Consumer Fraud in America is a tremendous problem, and it is not going away any time soon. People all across the globe are
suffering from fraud of some type, and many are fighting
back. It is going to be a long time, however, before the problem is all resolved if it ever can be. Copy cats now have to watch out because the copy cops are out.
Baer, Marjorie. Making Sure Web Content is Legal: Industry Legal Issue. Macworld October 1996. 163.
Copyright Pirates Raid 2.5 billion From Record Industry Revenue.
USA Today. 27 November. 1995: 6.
Estok, David. The Clone Crackdown. Maclean's 1 July 1996. 30.
Fritz, Sandy. What do you Call a Big Pig? Popular Science. March 1994: 30.
Ludwig, Eugene, and Koenig, Eric. Importing a Fraud: Gray market Products. USA Today (magazine). March 1990: 26-28.
Mandell, Irving. How to Protect and Patent your invention. New
York: Oceana, 1973.Fritz, Sandy.
Maynard, Roberta. Protect your Trademark Before you Start Using
it. Nation's Business September 1993. 12.
Melcher, Richard A. Is it Finally Miller Time? Business Week 12 February 1996. 37.
Miller, Jerome K. Applying the New Copyright Law: A guide for
educators and Librarians. Chicago: ALA, 1979.
Munro, Billie. When you want a 'R' Rating. Nation's Business June 1995. 53R.
Patents FAQ: URL: http://firstname.lastname@example.org
Reske, Henry J. Dye is Cast: Color can be Trademarked. ABA Journal June 1995. 28.
Simon, Stephanie. Brash World of Bogus Goods Thrives in L.A.
Los Angeles Times. July 1995: A1+.
Web of Confusion: URL:
Wells, Melanie. O. J. Agrees to Sell Rights to his Initials. USA Today 22 February 1996: 1.
What do you Call a Big Pig? Popular Science. March 1994: 30.
Word Count: 2932
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