An ERA Member Takes a Stand Against Counterfeiting and Infringement

By Patrick Cauley

Growing up, only the coolest kids were able to sport Oakley sunglasses during summer vacation. The rest of us had to settle for cheap imitations. Some of us-those who’d visited the streets of the Big Apple-took it one step further. We were able to get our hands on fake Oakleys, or as we called them, “Foakleys.” Everyone who’s been to New York knows the scenario, the vendor with a garbage bag full of fake items sold at cheap prices is all too familiar.
Bags of goods on a New York street are one thing, but with the prevalence of the Internet, these “knock-offs” and counterfeits are now a click away for anyone, anywhere in the world.

That’s what ERA member the Sylmark Group has learned regarding its hit product, the Walkfit® shoe orthotic. The Walkfit was designed to restore natural foot function and eliminate posture problems, foot pain and leg pain. But as soon as the product began to gain popularity, the infringement troubles began. “It’s tragic, because someone else rides on your coattails and your investment in a product. Right when you are realizing the benefits of your hard work, you have to share it with the counterfeiters,” says Kathy Mojibi, Sylmark’s vice president, intellectual property.

A GLOBAL EFFORT
Sylmark, however, has been aggressive in fighting the counterfeiters, and has been successful in shutting down a number of copycat operations overseas. In the Netherlands, it obtained a court order restraining a company from selling counterfeit goods and fining them 5,000 euros per day of non-compliance. In China, it secured an order to raid Luster International Trading Ltd., seizing counterfeit products and other evidence. In Hong Kong, it obtained an Anton Piller order allowing it to raid TeeVee Brand International, seizing imitation products and related evidence.

Within the United States, Sylmark has been equally active. It has filed suit versus a website, Wonderfulbuys.com, for allegedly selling knock-offs that infringe the patent and trade dress rights of the Walkfit.

Wonderfulbuys.com would come up as a “hit” when people searched for the word Walkfit online. Once at the site, these potential customers would indeed see the Walkfit product for sale, but they also would see a link right beside it offering them an orthotic that looked exactly like the Walkfit. That look-alike was listed not only as a “related product” to Walkfit, but also with a red “As Seen On TV” logo, and was, of course, offered at a lower price. Wonderfulbuys allegedly would also “bait and switch” the consumer by having its telephone operators inform those who had ordered the Walkfit that they were out of stock, and suggest that they buy the look-alike instead.

To handle the Wonderfulbuys lawsuit, the Sylmark Group brought in intellectual property litigator Greg Sater, also an ERA member. Sater knew he had to act fast to quell the damage to his client, so he filed suit and then immediately asked for a preliminary injunction to halt all advertising and sales of the alleged copycat product until a final verdict was reached in the case. “With IP [intellectual property], you need to do that. You can’t wait around for a year until you get to trial,” explains Sater.

Although Wonderfulbuys.com denies liability, it now is subject to the injunction, pending trial. Should Sylmark ultimately prevail at trial, the injunction would become permanent, and the company also will be able to recover damages.

Consequently, Sater has been pursuing Walkfit knock-offs on the Chinese website Alibaba.com, repeatedly forcing that website to disable and take down the infringing offers of seemingly countless Chinese companies that post their knock-offs for sale on that site.

KNOCK-OFFS VS. COUNTERFEITS
Sater explains that a knock-off is like a fraternal twin of a brand-name product: it looks a lot like the real thing, but has minor differences in name or appearance. It is close enough, however, to create a “likelihood of confusion” with the authentic product, leading to infringement. A counterfeit, Sater explains, goes one step further. It is more like an identical twin. It looks almost exactly like the real thing, and shares the same name or a name that is “substantially indistinguishable.”

In either case, the harm to the public is the same: the consumer thinks that he or she is buying the authentic product, when, in fact, it is only a cheap copy, a la Foakleys. It was frustrating for Sylmark to receive products returned from unsatisfied customers only to learn that the returned items are not even Sylmark’s, but are knock-offs or counterfeits. Mojibi adds that it’s not only the loss of sales that is bothersome, but also the potential loss of future business; when there is infringement in the market, a company’s reputation can be eroded through no fault of its own. This is why Sylmark believed it was time to take action, both in the U.S. and abroad.

When asked if it was all worth it, Mojibi pauses, contemplating the double-edged sword. “We consider it a cost of doing business. It’s just one of the costs we have to incur to keep our brand name respectable and profitable.” Sater agrees, “If you just tolerate this, and don’t enforce your IP rights, you are going to lose business.” Sater elaborates that while ignoring the problem would have saved the company some money in legal fees, the loss of control over its reputation and goodwill would have been far worse.

Now, when the Walkfit infomercial is aired on television and consumers then go on the Internet to find it, Mojibi (and the consumers) can rest assured knowing that it’s the real product that they’ll be purchasing, Sylmark’s reputation intact.

Patrick Cauley is assistant editor of Electronic Retailer magazine. He can be reached at [email protected].