ERA Counterfeiting Fact-Finding Program: FAQ

By Sieglinde Friedman

Launched in September during ERA’s 16th Annual Convention, ERA’s Counterfeiting Fact-Finding Program is now a membership requirement. If you didn’t have an opportunity to attend the “Kicking Out the Counterfeiters - Practical and Proven Solutions” educational session in Vegas or missed the article outlining the program in the September issue, you probably have a number of questions about the program, what it is and how it affects you as an ERA member.

This informational article will provide you with the information you need to know. Read it carefully, as there is a quiz at the end to test how well you understand this new initiative.

WHY A COUNTERFEITING FACT-FINDING PROGRAM NOW?
In response to growing concern over counterfeiting, both among and outside its membership, ERA has taken initial steps to highlight counterfeiting as an illegal practice in its policies and procedures, as well as to offer a remedy for counterfeiting complaints by and against ERA members.

Purpose of Program

• Improve consumer confidence and industry credibility
• Demonstrate that ERA members follow international law and association policies regarding counterfeiting
• Provide a quick and efficient review process

Benefits to ERA Members

• Create a culture of fairness and transparency
• Ensure that counterfeiting is not tolerated in the industry
• Increase credibility and lawfulness

WHAT IS COUNTERFEITING?
Counterfeiting is the deliberate attempt to deceive consumers by copying and marketing goods bearing well-known trademarks, generally together with packaging and product configuration, so that they look like they are made by the true manufacturer-rights holder when they are, in fact, inferior copies. Counterfeiting is simply an extreme form of trademark infringement, copyright infringement and passing-off.

WHO WILL ADMINISTER THE PROGRAM (WILL IT BE INDEPENDENT?)
ERA has partnered with the American Arbitration Association (AAA) as an independent and neutral evaluating provider. This partnership offers an inexpensive and informal Fact-Finding Program, which is part of the ERA membership agreement as of September 18, 2006. This process is not arbitration, but rather a mechanism by which the complainant (member who alleges counterfeiting) will have his or her case investigated to determine the facts. This program is an expedient and affordable instrument. The results of the Fact-Finder’s determination shall be a judgement that is binding in terms of ERA membership, but that does not create any type of legal decision that would be binding in a court of law. However, the Fact-Finder’s report may be subpoenaed in a legal case. This program also would not preclude members from seeking other remedies, such as legal action or arbitration.

HOW THE PROGRAM WORKS - HOW TO SUBMIT A CLAIM
Should an ERA member wish to attribute counterfeiting practices to another ERA member, the first party would alert ERA in writing and include a check for $3,000, made out to the American Arbitration Association (AAA).

Upon receipt, a submission form would be sent to the first party. ERA would then contact the accused party to ascertain how the accused party wishes to proceed.

If the accused party agrees to participate in the Fact-Finding Program, the accused party would complete a submission form and attach a $3,000 check, made out to the American Arbitration Association.

Upon receipt of the two submission forms and the two checks for $3,000, AAA will appoint a Fact-Finder from a list of ERA-approved Fact-Finders. If the accused ERA member agrees to stop the counterfeiting activity, AAA will send a confirming letter to the accused ERA member and a copy of the letter to ERA. ERA shall terminate the accused ERA member’s membership in ERA for one year. If the accused ERA member continues to engage in counterfeiting activity, termination of membership shall be extended for an additional three years. Should the accused party refuse to cooperate with the Fact-Finding Program, the refusing party’s membership in ERA would be terminated. Through AAA, a Fact-Finder would be selected. AAA Fact-Finders have been reviewed by the ERA Counterfeiting Task Force in order to ensure their understanding of and familiarity with electronic retailing.

Both parties would then forward appropriate documents for review. If an accusation is found by the Fact-Finder to be unsupported, the accuser will pay all fees, including that of the accused. This serves as a very important deterrent on the intentional making of false accusations (and potential loss of $3,000+ by an innocent accused).

For the program to work, both parties must agree to provide the Fact-Finder access to all relevant information and documents. The parties also are expected to cooperate by making themselves and persons over whom they have influence and control available, if necessary, to answer questions posed by the Fact-Finder. This information gathering process will be done via an exchange of documents.

Should the counterfeited product and its associated documentation be presented in any language other than English, both parties must agree to have all aspects of the documentation translated into English by a bona fide independent translator (a list of such independent translators shall be available) and the costs for such translation services shall be absorbed by the parties. If deemed necessary by the Fact-Finder, telephone interviews or joint telephone conferences may be required.

The Fact-Finder shall not divulge confidential information disclosed by the parties or by witnesses in the course of the fact-finding. Nor shall the Fact-Finder be compelled to divulge documents or to testify in regard to the fact-finding in any adversary proceeding or judicial forum. The finding will consist of a single sentence: “Name of Member (did/did not) engage in counterfeiting as defined by ERA in its membership policies and procedures.”

WHAT IS THE TIMEFRAME AND COST?
The goal of the program would be, depending upon the complexity of the documentation, a 60-day turnaround. The program’s cost would average approximately $3,000 per party with the understanding that fees may become higher should the Fact-Finder require additional materials or conversations. This includes AAA finding the appropriate Fact-Finder ($1,500 per party) and the cost of the Fact-Finder’s time (approximately $1,200-$2,000/8 hours). The parties shall reimburse the Fact-Finder for expenses incurred, if any. In most cases, fact-finding will be done via an exchange of documents. Again, should the counterfeited product and its associated documentation be presented in any language other than English, the parties must agree to have all aspects of the documentation translated into English by a bona fide independent translator (a list of such independent translators shall be available) and the costs for such translation services shall be absorbed by the parties.

WHAT ARE THE RULES?
ERA members, by virtue of their membership in ERA, will comply with the Fact-Finding Program. Should an ERA member refuse to participate, membership will be terminated. During the fact-finding process, membership benefits shall remain intact.

IS THER AN APPEALS PROCESS?
Should the finding point to counterfeiting, the AAA Fact-Finding Process permits appeals and such an appeal is built into the program. The appeal must be launched within a period of 10 days of the original finding. In order to commence the appeals process, the member who the finding determines is guilty would alert ERA in writing and include a check for $6,000 (the appellant pays all fees), made out to the American Arbitration Association (AAA). Upon receipt of the appeal and the check for $6,000, AAA will appoint a new Fact-Finder, from the list of ERA-approved Fact-Finders, to begin the 60-day process. During the appeals process, the member accused of counterfeiting could not sell the product in question; however, ERA membership continues and no limit on sales or distribution of other products would be required. Should the second Fact-Finder overturn the initial finding or agree with the decision, the appeal finding is final.

IF FINDINGS CONCLUDE COUNTERFEITING HAS OCCURED, WHAT IS THE MEMBERSHIP TERMINATION PERIOD?
If the Fact-Finder’s rulings conclude that counterfeiting has occurred, the offending member’s membership in ERA shall be terminated and shall not be released from their obligation to pay to the association all such dues and charges accrued up to the date of such termination. A one-year period of termination will take effect before reconsideration of membership. During that time, the member whose membership has been cancelled may participate in ERA activities as a non-member. Should the party continue counterfeiting behavior, termination would be extended for three years.

Detailed information on the ERA Counterfeiting Fact-Finding Program can be found at www.retailing.org in the “Member Resources Section” of the website under policies and guidelines.

And the Answer Is . . . ERA Counterfeiting Fact-Finding Program Quiz

Below are 10 questions about ERA’s Counterfeiting Fact-Finding Program. Take the quiz and test your knowledge of this new membership requirement. Answers are at the end (no peeking). Good luck!

1. What is counterfeiting?
A A knock-off
B A normal consequence of doing business
C Simply an extreme form of trademark infringement, copyright infringement and passing-off
D Don’t know

2. Why is counterfeiting a big deal?
A Counterfeiting leads to lack of consumer confidence
B Counterfeiting lines the pockets of terrorists and organized crime
C Counterfeiting is harmful to all ERA members
D All of the above
E None of the above

3. Why do we need a Counterfeiting Fact-Finding Program?
A To give members a revenge tool
B Demonstrate that ERA members follow international law and association policies regarding counterfeiting
C Provide a quick and efficient review process
D To improve consumer confidence
E B, C and D
F None of the above

4. Who will administer the Counterfeiting Fact-Finding Program?
A Electronic Retailing Association
B American Arbitration Association
C Lawyers on the ERA Ethics Committee
D ERA members

5. How will I know that the Fact-Finder understands my business?
A Fact-Finders are members of ERA who have volunteered to review cases because they understand the industry
B AAA Fact-Finders, independent and neutral, have been reviewed by the ERA Counterfeiting Task Force in order to ensure their understanding of and familiarity with electronic retailing
C Fact-Finders have been selected at random

6. How will the Fact-Finder review my case?
A The fact-finding shall be done through in-person visits
B The fact-finding shall be done via an exchange of documents
C The fact-finding shall be conducted through interviews

7. Are the program’s findings confidential?
A The program’s findings will be announced and publicized
B The Fact-Finder shall not divulge confidential information disclosed to any Fact-Finder by the parties or by witnesses in the course of the fact-finding
C I don’t know

8. Does this program cost a lot and take a lot of time?
A The program costs $10,000 and takes one year
B The program costs $3,000+ and takes approximately 60 days
C The program is free and will take as long as it takes

9. If I am a member, do I have to participate?
A No, I can choose to ignore this program
B I don’t believe in the program so I will not participate
C ERA members, by virtue of their membership in ERA, will comply with the Fact-Finding Program. Should an ERA member refuse to participate, membership will be terminated. During the fact-finding process, membership benefits shall remain intact.
D I don’t know

10. Is there an appeals process?
A Yes, if the finding is argued by the accused party, an appeal may be launched
B No, there is no appeals process in place
C Only in some cases would an appeal be permitted

Answers:

1) Answer C - Counterfeiting is the deliberate attempt to deceive consumers by copying and marketing goods bearing well-known trademarks, generally together with packaging and product configuration, so that they look like they are made by the true manufacturer-rights holder where they are, in fact, inferior copies.

2) ANSWER D - Counterfeiting is considered illegal, both in the United States and internationally and serves only to diminish consumer confidence and dilute brand integrity.

3) ANSWER E - The Counterfeiting Fact-Finding Program has been put into place in response to growing concern over counterfeiting, both among and outside its membership. ERA has taken steps to highlight counterfeiting as an illegal practice in its policies and procedures, as well as to offer a remedy for counterfeiting complaints by and against ERA members to increase consumer confidence, provide a quick and efficient review process, and to ensure all ERA members are not partaking in counterfeiting practices.

4) ANSWER B - ERA has partnered with the American Arbitration Association (AAA) as an independent and neutral evaluating provider. This partnership offers an inexpensive and informal fact-finding program, which is part of the ERA membership agreement.

5) ANSWER B - In concert with the AAA, ERA’s Counterfeiting Task Force reviewed the backgrounds of a number of different Fact-Finders to ensure that they not only are familiar with the industry but also are multi-lingual.

6) ANSWER B - Both parties would then forward appropriate documents for review. For fact-finding to work, both parties must agree to provide the Fact-Finder access to all relevant information and documents. The parties also are expected to cooperate by making themselves and persons over whom they have influence and control, available, if necessary, to answer questions posed by the Fact-Finder. The fact-finding shall be done via an exchange of documents. If deemed necessary by the Fact-Finder, telephone interviews or joint telephone conferences may be required.

7) ANSWER B - The fact-finding report will summarize the facts found by the Fact-Finder. The report will not recommend a remedy, but the report will include credibility determinations. In the report, close questions of credibility may be identified and explanations included as to the circumstances that make them close questions. This program is intended to be an expedient mechanism for determining facts.

ANSWER B - The goal of the program would be, depending upon the complexity of the documentation, a 60-day turnaround. The program’s cost would average approximately $3,000 per party, with the understanding that fees may become higher should the Fact-Finder require additional materials or conversations. This includes AAA finding the appropriate Fact-Finder ($1,500) and the cost of the Fact-Finder’s time (approximately $1,500-$2,500/8 hours). The parties shall reimburse the Fact-Finder for expenses incurred, if any. In most cases, fact-finding will be done via an exchange of documents.

9) ANSWER C - ERA members, by virtue of their membership in ERA, will comply with the Fact-Finding Program. Should an ERA member refuse to participate, membership will be terminated. During the fact-finding process, membership benefits shall remain intact.

10) ANSWER A - Should a Fact-Finder’s conclusive finding point to counterfeiting, the AAA Fact-Finding Process permits appeals and such an appeal is built into the program. The appeal must be launched within a period of 10 days of the original finding. This would entail hiring a second Fact-Finder (all fees paid for by the party disputing the initial findings) and going through the same process a second time with a new Fact-Finder. During the appeals process, the member accused of counterfeiting could not sell the product in question.

During the appeals process, membership continues and no limit on sales or distribution of other products would be required. Should the second Fact-Finder overturn or agree with the initial finding, the appeal determination is final.

Sieglinde Friedman is ERA’s vice president, board, international committees and councils. She can be reached at (703) 841-1751.