3D Printing: Protecting brand owners against counterfeiters

BY Li Zhu

Since their meteoric rise last year, 3D printers have captured the imaginations of consumers and businesses alike. 3D printers work like inkjet printers on steroids — rather than depositing a single layer of ink, 3D printers spin out successive layers until a final product is created based on a computer-aided design (“CAD”) blueprint.

Technological advances, coupled with the expiration of a number of patents covering foundational aspects of 3D printing technology, have driven the price of 3D printers down each year. As a result, consumer 3D printers are infiltrating homes across the country, and enterprise-class models will likely drop below $2,000 in 2016. The number of 3D printers is set to double every year, from 244,533 this year to more than 5.6 million printers in 2019.

But there is also a dark side to this technological revolution: 3D printing may soon flood online marketplaces with freshly-printed counterfeit items. 3D printing may eventually become the counterfeiter’s best friend as hardware becomes cheaper and capabilities improve — counterfeiters need only download the CAD blueprint, load the necessary raw materials, and let their 3D printers go to work. Experts predict that 3D printing will result in more than $100 billion in intellectual property (“IP”) losses each year by 2018. Certain industries, such as consumer electronics and fashion, where there is already pervasive counterfeiting of high-end brands, are especially vulnerable to this trend.

E-commerce companies should seize this opportunity to create a comprehensive strategy for dealing with 3D printed counterfeits. Robust countermeasures can prevent IP issues, weakened consumer confidence and brand loyalty, and the erosion of goodwill. Further, having a proactive strategy can elevate an e-commerce company above its peers, and help build lasting relationships with brand owners. Here are some measures to consider:

1. Revamp Brand Monitoring
E-commerce companies experienced in dealing with traditional counterfeiters know that brand monitoring begins with assessing their own marketplaces for counterfeit goods. Companies should scrub listings for possible infringement using data analytics (such as metrics based on price, listing information, and seller profile) that help distinguish counterfeit items from legitimate goods. E-commerce companies should pay special attention to listings from “cybersquatters” using the same or a similar seller name without proper authorization.

Brand monitoring also presents a unique opportunity for e-commerce companies to go above and beyond their monitoring obligations, and thereby develop stronger relationships with brand owners. For example, companies and brand owners can work together to identify potential counterfeit sales channels that link to listings on the marketplace. This is because counterfeiters often use the same techniques as legitimate businesses to promote their counterfeit goods.

Common venues for counterfeit activity include social media, private websites with names similar to the legitimate business, and e-mail traffic with spam advertising. E-commerce companies can therefore set themselves apart by helping to identify these channels and removing related listings from their marketplace — listings which would presumably violate the marketplace’s Terms of Service.

The tactics above used in traditional brand monitoring also apply to monitoring for 3D printed counterfeits. E-commerce companies can proactively work with brand owners to monitor online communities that share CAD blueprints and incorporate the relevant data into existing algorithms used to flag suspicious listings. For example, a blueprint that has been downloaded many times may prompt the marketplace to flag for review the corresponding product on the marketplace.

2. Streamline Takedown Procedures
E-commerce companies should also make sure they have robust takedown procedures that allow brand owners to report counterfeit listings. Complaints should be reviewed and processed quickly. Efficient communication can preserve the integrity of the online marketplace and protect valuable relationships with brand owners.

3. Securing CAD Files and Design Documents
CAD files are the proverbial keys to the empire, and they can be immediately distributed to an unlimited number of users once disclosed. Forcing would-be counterfeiters to independently recreate an exact blueprint can delay 3D-printed counterfeit goods from hitting the market for weeks or even months, which is key for rapidly-changing markets such as the fashion industry, where today’s fad might be old news by next season.

E-commerce companies can therefore advise brand owners on the importance of implementing reasonable safeguards against counterfeiters. This means securing CAD files behind industry-standard security measures such as comprehensive firewalls, up-to-date antivirus and monitoring software, penetration testing, limiting access to certain employees, and strict vetting of employees with access. These protections are especially important if the brand owner decides to protect certain information as a trade secret. Under the law, failing to take appropriate measures to guard information may sacrifice the ability to designate that information as a trade secret in the future.

4. Fight Tech with Tech
E-commerce companies looking to protect brand owners should also familiarize themselves with emerging technologies that may help combat counterfeiting. Several groups have recently developed methods for tagging products with unique markers to set them apart from counterfeit goods. Some markers are hidden and others cannot yet be replicated through 3D printing, making them perfect for authenticating legitimate products. Online marketplaces can distinguish themselves from the competition by becoming familiar with and advising brand owners about practical technologies that may help protect their brand.

5. Engage the Experts
Trustworthy experts can provide significant advantages in the fight against counterfeiters. E-commerce companies can refer brand owners to technical consultants to identify hidden security gaps that may jeopardize the brand owner’s intellectual property.

Referring brand owners to outside legal counsel can streamline internal processes for dealing with counterfeiters and help craft an enforcement strategy that makes sense for the company’s business objectives. The company should pick and choose its battles wisely because of the difficulty of enforcing IP rights against counterfeiters who can simply shut down and start anew. Options range from sending takedown notices to asserting a Lanham Act trademark claim or filing an ITC action.

The future is now — 3D printing presents unique challenges for e-commerce companies and brand owners alike. E-commerce companies who develop a comprehensive IP strategy for dealing with 3D printed counterfeit goods can distinguish themselves from the competition, and build lasting relationship with brand owners.

David Martinez is co-chair of the retail industry practice group at Robins Kaplan LLP. Seth Northrop is a principal at Robins Kaplan LLP. Li Zhu is an associate at Robins Kaplan LLP.


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