How to fight back against counterfeit sellers on Amazon
December 30, 2020
Here’s a glimpse of what you’ll learn:
- How Randy Hetrick balances the sales opportunities on Amazon with the costs incurred of protecting his brand
- Chris McCabe talks about how Amazon has changed over the last 10 years in terms of protecting the brands on its platform
- Rich Goldstein’s thoughts on the role intellectual property plays in a brand’s efforts to build meaningful assets on Amazon
- How Randy deals with competitors that try to violate his patents and lodge complaints against him for counterfeits
- What can Amazon do to better vet fraudulent sellers and protect legitimate sellers?
- Randy and Rich provide a look into both the Amazon litigation process and the neutral patent evaluation process
- Chris explains what startup brands should do when dealing with false IP claims from competitors
- The importance of IP protection in China and how to stop IP-violating products from entering the US
- What brands need to know about IP protection when selling in different countries
- Why you should be actively looking for counterfeits of your product on Amazon
- How Amazon’s Transparency program and Project Zero help sellers deal with counterfeit products
- The best way to remove knock-offs from Amazon
In this episode…
If you’re a brand selling on Amazon, you’ve probably had to deal with the tough and time-consuming litigation process that occurs because of intellectual property infringement. Many legitimate sellers have experienced a loss of sales and business due to fraudsters on the Amazon marketplace that violate patents and lodge false IP claims. So how can you better prevent and deal with these violations?
According to Amazon consultant Chris McCabe, Amazon seller Randy Hetrick, and patent attorney Rich Goldstein, there are many preventative measures brands can take to protect their listings on and off of Amazon. They believe that it’s never too early to be thinking about IP protection, especially if you are a growing business.
In this webinar by Buy Box Experts, host James Thomson talks with Chris McCabe, Randy Hetrick, and Rich Goldstein about their strategies for fighting back against counterfeit sellers on Amazon. They discuss the many ways brands are affected by patent violations, how IP plays a key role in protecting legitimate sellers, and the best ways to remove knock-offs from the Amazon marketplace. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Chris McCabe on LinkedIn
- Randy Hetrick on LinkedIn
- Goldstein Patent Law
- Rich Goldstein on LinkedIn
- The ABA Consumer Guide to Obtaining a Patent by Rich Goldstein
- Amazon’s Transparency Program
- Amazon Project Zero
Sponsor for this episode
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Welcome to the Buy Box Experts podcast we bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
I’m James Thomson from Buy Box Experts. Thank you for joining us today for the webinar on how to fight back against counterfeit sellers on Amazon. I am joined by three panelists. I will briefly introduce and then we’ll get into our discussion. I have Chris McCabe, who is a former Amazonian who helps sellers with Amazon, protect and save their businesses. Chris’ company, ecommerceChris, was the first company founded by a former Amazonian designed specifically to help suspended marketplace sellers. Chris teaches sellers how to think like Amazon, protects their accounts and appeal listing restrictions and suspensions. Chris is also heavily versed in the world of counterfeits on Amazon and I’m delighted to have Chris join us today.
Today, we’re also joined today by Randy Hetrick, the founder and co-chairman of TRX, one of the world’s leading brands in health and fitness. Prior to TRX, Randy spent 14 years as a commando in the US Navy SEAL’s team with an operational career that culminated as a squadron commander for the SEAL’s elite special missions unit. Randy’s formal entrepreneurial career began in his garage transforming the crude invention of necessity he had created in the field into TRX’s suspension trainer that we all love, know and use today. In addition to his role as co-chairman of TRX, Randy is also an investor and advisor to early stage businesses, and a speaker to organizations around the world including leadership and entrepreneur at his alma maters of USC and Stanford.
We’re also joined today by Rich Goldstein, a US patent attorney who works with Amazon sellers to develop strategies to protect their brands and innovate products as well as grow their businesses around the topic of IP. Since founding his firm, Goldstein Patent Law, more than 25 years ago, Rich has attained more than 2000 patents for his clients. He is the author of The American Bar Association’s Consumer Guide to Obtaining a Patent.
Gentleman, I want to thank you all for joining us today. The topic of counterfeits on Amazon is a very complicated one. Let me start by asking you, Randy, you’ve been selling your brand TRX on Amazon for many years, and you’ve seen firsthand how broadly fraudsters can use this low friction Amazon platform to their advantage. How do you balance the sales opportunity that Amazon presents with the policing costs that you incur as a brand in order to protect your brand on this platform?
Randy Hetrick 2:51
Well, first it’s nice to be with you, James. Thanks for having me. Yeah, I’ve been on Amazon. Since really Amazon started selling anything other than books way back in about a week, as I recall. And back then there weren’t the kinds of problems that there are today because I think, you know, it was a brave new world where legitimate operators were trying to figure out how to play in that space, and how to optimize, you know, the merchandising of our products and, and understand Amazon’s rules. The the channel is such a powerhouse, obviously, that it’s almost impossible for a brand these days to, you know, not participate in it, I suppose you could, but you’d be foregoing a pretty massive, you know, marketplace. And the way that I kind of look at it, James at this point, and I’m sure we’ll dig in a little deeper, but it’s, you know, it’s become a piece of business like marketing, right, like hiring accountants, yes. like paying insurance. That might be the best The best metaphor, right who likes paying insurance? Nobody. But if you don’t pay insurance and you have a catastrophic you know outcome of some sort, it is truly catastrophic all the way through the organization and that’s sort of how I view brand protection on Amazon. It’s it’s a an evolving, but critical investment if you want to do business there.
James Thomson 4:21
Thank you, Randy. Chris used to be a seller performance investigator and Amazon dealing firsthand with bad characters and their actions impacts on other sellers. What has changed on Amazon over the last 10 years when it comes to Amazon’s efforts to protect brands?
Chris McCabe 4:39
quite a bit. And thanks for having me today. By the way. I like this topic because every successful brand needs to expect that somebody is going to try to counterfeit their items is as obvious as that sounds. They understand much better now than they did 10 years ago, even five years ago how to kind of game In the system, they understand how these teams operate. Unfortunately, sometimes they even know how some of the tools, the internal team tools work and are used. And they they exploit those loopholes, and they weaponize those to accuse each other of counterfeit. There’s a lot of anti competitive behavior. So that wasn’t, you know, if I go back to 2010, when I was working on this stuff every day, that wasn’t as much of an issue. There were a few bad actors, fraudsters, you know, sometimes they’re really sloppy about how they attacked each other and we could trace it back and discipline the right people. But I mean, the sophistication level of and the awareness of the loopholes, the sophisticated strategies use now. Unfortunately, it’s become something that’s difficult for Amazon itself, to adapt to and cope with.
James Thomson 5:52
When you have so many sellers, so many listings, and so few eyes within Amazon even with Amazon’s own technology. You know this this constant game of cat and mouse. We’ll talk more about this in a few minutes. But it really is hard to keep on top of all of the the approaches that some of these sophisticated fraudsters come up with. And you know, this this really this really does. The problem is only going to get worse as Amazon becomes more and more of a shopping destination for more and more consumers more and more brands. Rich. I started working at Amazon about 13 years ago, and we rarely had discussions about protecting intellectual property. Because Amazon saw itself merely as a sales channel rather than a place where all sorts of characters would congregate to make honest and dishonest opportunities around making money. How do you see intellectual property playing into brands efforts today to building meaningful assets on the Amazon channel?
Rich Goldstein 6:51
Great, great question, James. And thanks for having me here. So first of all, I think that the the path towards how Having effective IP protection having an effective IP asset is similar to the path to succeeding these days on Amazon, which is that you want to focus on differentiation. So, a lot of times people come out with me two products, and meet two products have a lot of challenges these days in terms of fighting against other products and having to spend money on Pay Per Click to, to be able to get sales really so. So essentially, the strategy these days by most successful sellers is to focus on differentiation. And then the way IP plays into that is that you then want to protect the differentiation you want to protect what’s different. So if you’re differentiating based upon a brand, then you want to protect that brand. If you’re differentiating based on product features, you have a feature which truly is unique, then you might be able to patent those features and obtain that asset Which then backs up your competitive advantage on on Amazon.
James Thomson 8:06
So Randy, you you do have patents, you do have all sorts of trademark set up at this point. Talk, talk us through a little bit about how competitors are still able to violate your patents and use Amazon systems to file complaints about you selling counterfeit products of your own. Talk to us a little bit about the kinds of things that you’ve had to deal with, and how you’ve approached this process of trying to protect that IP that you’ve so carefully invested in.
Randy Hetrick 8:36
Yeah, well, we fortunately, you know, one of the early decisions I made which early on was a dubious one to spend all this money, right to to shore up the unique innovative elements of my invention with IP and back in the day, right. design patents, you know, IP Lawyers would dismiss them as as you know, it’s a waste of time because you just work around them. Right? And that was true enough in the old world, but in the New World, right? It turns out to be the one thing that most of the online platforms, including Amazon will enforce because it’s easier to enforce, you know, design patents, like a picture, more like a picture and less like an intricate, intricate, mechanical engineers schematic, and then with that overland a bunch of legal language that has to be interpreted. So Amazon’s taken the position in the past that hey, we’re not a court. We don’t have I mean, I’m one of the only fools that you’ll probably ever meet who has litigated all the way to the mat, maybe not the worst. But But you know, very few people go all the way through litigation with intellectual property, generally it settles and I know why, because the one you know, utility patent and trademark case that we pursued to the mat to Three years in about two and a half million bucks. And that is just not something that most brands can, you know, can endure. And so the bad guys prey on two things. One they prey on what really began to James, to your point. Amazon created this unbelievable, frictionless marketplace, right. And I think if Amazon’s to be, you know, indicted for one thing, it’s probably the naivete of not having realized that there’s a there’s a bad element of human nature that’s gonna take a frictionless environment and try to bend it to their will. So you know that that’s the reality and and the challenges are twofold. One, the expense, right of getting and prosecuting intellectual property. That’s one of the things the bad guys prey on. They know that most, most vendors just can’t afford what I just described. And too, they know that Amazon is a much bigger jungle than is actually populated with humans. In other words, it is a it is a technology based jungle that you know, the humans who can exercise judgment are few and far between in the jungle relative to the number of vendors, you know, the number of basins and all of the technology so they prey on that. And the challenge really is that you even with great intellectual property and we’ve built a a multi layered cake of protections, you know, starting with trademarks, going through utility patents, design patents, trade dress, and copyrights. But the bad guys don’t care. They just copy you know, they keep changing the the data that allows Amazon to identify them and they keep opening new stores. And so what they do is it’s a war of attrition. Right, and we can get into, you know, some of the ways that we’ve more or less successfully battled, you know, that war as we as we go on with our conversation.
James Thomson 11:58
So Randy, you You still with all this protection, you still face situations where you will get a customer complaint that you’re selling counterfeit, and Amazon will take down your listing for a period of time. And you’re having to fight the fight to say, hang on a minute, I am the brand I have all this patent protection and yet, I’m being falsely accused of selling something that is fact not what I’m selling. How do you factor these products becoming available falling out of availability? Because, quite frankly, there’s there’s this noise that you’re having to deal with. How do you deal with that?
Randy Hetrick 12:36
Well, I mean, one of the ways we deal with it is we employ a really great agency to help us monitor right these, these asons because when you have a, you know a broad set of products on Amazon, it’s difficult to to monitor them all in real time, and particularly on big days, which you know, there’s a lot of big days now on Amazon, but this is in the past to Chris’s point. The you know, the bad guys will come in, they understand they learn. I mean, these are not, you know, a bunch of dimwits, as I think a lot of a lot of folks wrongly assume that you’ve got some clumsy, you know, guy that’s running a sweatshop factory over over in China. And he’s the guy that’s the strategist there. That’s not the case. They are running factory direct stores on Amazon. And they’ve got very smart, very digitally savvy people working for them. So they learn everything Amazon does. It’s like chess, right, can be viewed as both a protection and an opportunity if you’re a bad guy, right? Because there’s a way to gain that system. So yeah, they’ve been, you know, they file takedown notices against the rights owners. And because it’s an automated process, yes. Often what happens is the brand gets taken down. You then have to go back through the the legitimate, you know, ways to redress a problem. And by the time you get to a human, they then go Oh, so sorry, we’ll fix it. But But you may have lost three days during a peak holiday season right for that skew. And meanwhile, the bad guys product was up and selling. And that’s that’s sort of how they view their side of the equation, right? It’s just poker crook.
James Thomson 14:23
So Chris and Rich, you both are familiar with section 230 that Amazon has as a form of protection from the federal government. Talk me through what Amazon could be doing differently in order to vet whether whether it’s that more of the legitimate sellers or vet more of the illegitimate sellers, how do you put protections in place on either side, protecting the guys that have done the hard work and making sure they don’t get unfairly taken down versus making sure that the bad guys don’t get any traction with some of these processes that Amazon already has a Place
Unknown Speaker 15:03
Unknown Speaker 15:05
Go ahead, Chris. All right.
Chris McCabe 15:08
So a couple a couple of things Brand Registry needs to get back to its mission statement in terms of helping brands protect themselves against baseless groundless claims. Often Brand Registry morphs into generic language teams that just sort of created ticket for you. And copy and paste some standard language in there that doesn’t really help you resolve a situation or even help you find out how long it’ll take for you to deal with. Somebody selling a counterfeit version of your product or somebody who’s abusing your brand and the multitude of ways that are available to the fraudsters now, so Brand Registry and then also the notice claim of infringement teams. They didn’t have Brand Registry at all back when I was there, but I mean, we worked on the notice claims in a more competent, responsible way than you see these days. You get a lot of generic answers. And the first step I think that Amazon has to take is to understand, like Randy was saying there are savvy people out there exploiting these loopholes, who understand the system and how to game it. So that means Amazon needs to up their game on on how they process incoming IP claims instead of just, well, you know, here’s the acent here’s the complaint, ID. You guys talk to each other and figure out what’s real and what’s fake. I think Amazon needs to step in and assist a little bit more.
James Thomson 16:34
Rich, what’s your take on this?
Rich Goldstein 16:37
Yeah, I totally agree with Chris. I mean, first of all, I haven’t seen any direct application of Section 230 on these situations. And I mean, mostly, I’ve worked with sellers who’ve had a listing shut down. They’re looking for an effective path, to get it reinstated. Then Looking to litigate against Amazon, they’re not looking to change, you know, change the world, so to speak about how Amazon deals with complaints, they just want to get themselves reinstated. And, and you know, as Chris notes, it’s kind of like, there needs to be better procedures, better standards, I’d say more clear standards. It’s nearly impossible to get any guidance from Amazon as to what they’re looking for how they’re even considering the IP disputes, and I think it’s been pretty haphazard, it’s been pretty inconsistent. They’ve made steps towards creating procedures, but then they still don’t provide universal access to them, like the neutral evaluation procedure that they created for utility applications. It’s not available to everyone. And there are some significant problems with it. But something like that is a step in the right direction and that it’s you know, it’s Doing something other than having some employee and a foreign call center or who knows how they handle it, to adjudicate your listing, which could be costing you, you know, five figures a day by having it be shut down unfairly.
James Thomson 18:19
I think I think Randy can can talk to, you know, the cost of a takedown, an unfair takedown. I mean, as you mentioned, Randy, if the takedown happens during a critical time of the year, you could lose hundreds of thousands of dollars of sales in a matter of a couple of days. Can you tell us a little bit more about what actual litigation or litigation with Amazon looks like? You’ve been down that path when you’re actually having to do the lawsuit, the long expensive lawsuit. How could you see that process? Based on what you know now? How could you see that process working for smaller sellers who don’t necessarily have have the stomach to be able to deal with With that kind of timeframe to getting a problem resolved?
Randy Hetrick 19:03
Well, I mean, I want to give, you know, I’ve got, I’ve got some some criticism of Amazon some of their policies, but I also want to give them credit for some of the stuff that they are doing. And and, you know, in our case, I think we’ve gotten a lot of attention, in part because we’ve been on the platform for so long. And we were we were one of these kind of unusual brands that got counterfeited massively, right out five years in, you know, five years into our presence is we really started to to achieve some visibility out in in the marketplace, we started to be very aggressively targeted, I mean, like on the level of Louis Vuitton and you know, Rolex and Gucci that
Unknown Speaker 19:49
Randy Hetrick 19:50
flattering to you. I’m sure. It was bewildering to me. My mother would put it you know, I couldn’t figure I was like, Look, we can barely sell these damn straps at this point who wants to copy us right? But the reality is we were hitting an inflection point and and, you know, the bad guys figured it out and they came piling in. And so Amazon has done a lot of work trying to help us. In fact, I think we are probably the, the singular inspiration for the neutral patent evaluation process because it got high visibility. You know, we ended up winning the largest award in the state of cow IP award in the state of California in 2017. Of course, the bad guys just defaulted. Right? So it’s not like you collect anything, all right, but but that, that watching that process, really, you couldn’t watch it without thinking this is ridiculous, right? We’re forcing this little company to spend an enormous amount of their of their revenue, frankly, over a three year period to adjudicate a patent, a utility patent which then they bring to Amazon and will enforce That’s just not, that’s not a reasonable policy. And so, you know, so so they put in place a new policy of this new neutral patent evaluation and, you know, Rich may be better equipped to talk about how it’s working for other clients. You know, we’re yet to use it, but I think, you know, we may soon. The other thing that they did is they brought suit on our behalf against a ring, a counterfeit ring. And so we were co complainants in a successful suit successful because, you know, most of the complaint or most of the defendants just no showed right just yet. And then the couple that did show ended up settling because they were so obviously in the wrong and you know, that was a that was a very good show of support, I think, from Amazon. So, on one hand, you know, you’ve got very good, earnest will going on on the side of Amazon, I think, I do think they realize they have a big problem they have to solve. It’s just the scale. So much Massive that how do you put the genie back in the bottle?
James Thomson 22:04
Rich, give us some thoughts on the neutral patent evaluation process. What What have you seen some of your clients be able to use this for? And how has Amazon changed their thinking around this process since they launched it?
Rich Goldstein 22:17
Well, I would say that the, you know, the biggest benefit of the evaluation process is it actually gets someone who knows something about IP to look at disputes, as opposed to being someone who’s looking at IP disputes one day and then the next day they’re dealing with some other like listing hijacking issues and and so now you get an independent patent professional to review whether someone is infringing the patent or not. The problem is, in the real world like outside of the Amazon world, one of the biggest issues that most patents should rightfully face is validity. Like you You might be infringing, but the patents not valid. But you can’t raise that in the in the neutral evaluation process. And
James Thomson 23:11
give us an example what you’re talking about.
Rich Goldstein 23:14
Well, when a patent is when someone applies for a patent, it gets reviewed by an examiner. And basically the examiner decides if the inventors definition of what this patent is going to cover, whether that is reasonable, or whether it might be describing things that already exist, maybe some things from 10 years ago, 20 years ago, 100 years ago, and if and if and if it is describing things that already exists somewhere in the prior art somewhere in the past, then it’s not valid. Now, examiners at the patent office have limited time to make this determination. So what ends up happening is people get patents that are too broad. They cover too much territory. They should not be that broad, and therefore they’re invalid. But now you have someone who knows that patent is invalid, they know that it’s covering too much territory, that they don’t really have a patent on the foam roller. What they invented is a foam roller made out of a certain material with a certain type of opening and the ends, etc, etc. But they have a patent that seems to technically cover the foam roller. And so they’re able to enforce that patent on Amazon. If they went through the neutral evaluation process and said, let’s say my client, you know, knew that there was a patent from 30 years ago for the foam roller, or there was a Sears catalog from 1922 that showed the foam roller. That would be something to invalidate the patent in court in the court of Amazon and the neutral evaluation process. You can’t raise that. And, you know, I have to say that the neutral evaluation process only pertains to you utility patents when it comes to design patents. They can’t use that program. And I have fought a bunch of design patent reinstatements on behalf of clients through Amazon. And I would say 100% of the time, the grounds we went on was making that invalidity argument showing that, okay, both things are, you know, coffee crafts, and yes, my clients looks very close to this other coffee craft. And yes, they have a design pattern. And if you look at the pictures, it looks very similar until you look at coffee carafes from 20 years ago, and then you say, you know what, my clients actually looks closer to the ones from 20 years ago than it does to the one that was the subject of the patent, and therefore, either this patent is invalid, or we can’t be infringing it and, and I’ve won 100% of the time, when I’ve been able to make those arguments. Now. Curiously, And that’s in front of Amazon officials Curiously, in the neutral evaluation process, where you have an actual patent professional, a patent attorney, who’s acting as the arbitrator acting as the judge. I can’t make that argument.
James Thomson 26:15
So let’s shift gears here for a minute. Chris, I want to bring you in here to talk about competitors filing false IP claims. What should brands Be prepared to do when they live in a world where sophisticated folks may play some of these IP claims games? What should you be prepared as a seller or brand to do when it comes to time delays potential cost to solve the problem, potentially bringing in other people take us through that that set of issues
Chris McCabe 26:44
right I mean, have a strategy before you even start dealing with it. Ideally, prepare, be prepared, assemble your you know, dream team of experts, whether it’s your attorneys, make sure your attorneys are IP knowledgeable IP experts, not just attorney attorneys General Business attorneys, but also somebody that understands the ins and outs of how Amazon processes your appeal. If you get false IP claims you get attacked.
James Thomson 27:11
So Randy spent all this money up front with with patents and IP protection. When you talk to small startup brands today, what do you suggest they do? I mean, how much is enough to get started on Amazon versus potentially exposing yourself to problems down the way when your brand gets much more much more traction?
Chris McCabe 27:33
Yeah, I mean, most of the conversations don’t revolve around the entire cost of end to end litigation. Smaller brands that are just starting out, should at least have a contact who’s a reliable IP attorney that they can get this stuff set up with to make sure it’s set up properly. For starters, that doesn’t necessarily cost a lot. If you’re already paying not just you know, for an attorney, if you’re paying the monthly fee for an account manager, maybe wouldn’t be a smaller brand. But if you have any relationship, I mean, also use the resources at your disposal that, like Randy was saying Amazon does make available to you sometimes to help you out. They’re not always, you know, hands off, they do have account managers, I mean, get those people involved, if you have a relationship with category managers, through your account manager or on your own, get those people involved in resolving these things faster if you need somebody to create an internal escalation, because the ticket you created with Brand Registry or the escalation to Brand Registry or through any other channel isn’t going anywhere, it’s stuck. And when you follow up, you get generic grants, right? You know, understand how to pull those levers. And you know, obviously, if you don’t understand how internal teams work, I’m always around to help you understand that for strategy, but it’s good to bake that strategy into your budget and into your planning. Before you get to the point where you’re selling the stuff like hotcakes and then somebody takes an interest in you and that’s it. To try to copy you,
James Thomson 29:01
if you used to be the case on Amazon, you could go in, you could look at the best sellers in any category. And I think back to seven, eight years ago, if your brand made it to the top 100 list in a particular category, you could assume you had a big fat target on your back. And people would figure out either how to make a private label version of your product, right, or potentially an IP violating copy of your product, to take us through how things have changed with regards to access to data and being able to synthesize all sorts of sales data within Amazon to be able to find not necessarily a top 100 best selling product, but still one that’s big enough, it’s worth going after.
Chris McCabe 29:40
I think anything that sells well is a possible target. It used to be just the bigger stuff that sold really well. And that’s not the world that we live in anymore. The people who are copying things the people who are aware that you have trouble controlling your distribution or an inability to prove that somebody else is counting fitting your product using Amazon’s tools and systems. Those people are performing at a high level at trying to benefit from everything you’ve created and built. So anything that sells remotely Well, you should have a strategy put in place before it starts selling well, ideally, yeah. If you start seeing people jumping on your listings, instead of just opening tickets with seller support or pursuing these paths with a lot of waiting, a lot of downtime and not a lot of work on Amazon side, understand how to escalate these things early and quickly. Knowing that there’s going to even take beat some time built into it for an escalation to go through as opposed to just you know, spinning your wheels or looking at seller forums posts or, you know, I know there’s a lot of generic content out there from people who say they understand these processes, but make sure you vet them for their real knowledge and you assess that before you even get to the stage that somebody is trying to copy your product. because by then it can be kind of too late.
James Thomson 31:05
Rich. And, Randy, I want to ask you both a question about getting Chinese trademarks, Chinese patents, US custom protection? Well, given that so much of this product is coming out of China, whether it’s authentic source product from Chinese manufacturers, or its counterfeit product also coming out of China, how do you think about IP protection in China? And how do you think about what customers in the US can do to help prevent IP violating products from entering this country?
Randy Hetrick 31:35
Well, Rich, I’ll take a stab first, and then you can weigh in as the lawyer the good, you know, we have we’ve extended almost all of our, our intellectual property into China. And, you know, I think that our experience has been that it’s occasionally useful if we want to if we want to do a factory takedown, but those those really are So much work and they take so long and by the time you get it done, you know that it’s a very porous intelligence system over there to say, yeah, yeah. So you know, other than occasionally as a symbolic sort of gesture, which I think is valuable if you have the resources. The Chinese IP up until this point has played a secondary role. I think that customs we spent a lot of time educating customs and customs was very responsive at counterfeit, but it but the the rub James is that most of the nice guys again, are sophisticated. And so, you know, most of them that we were dealing with pivoted most of the counterfeiters, they figured out that hey, customs will seize counterfeit. Yep, Amazon was pretty aggressive. In my experience I’ve been enforcing counterfeit once you bring it to their attention. So what the bad guys did is they pivoted to being becoming knockoffs. Which the distinction there is you know they’re they’re copying all your patents yes patients but they’re not slapping your trademark on it and that was a you know was a smart pivot on the bad guys side because it suddenly made enforcement much more complicated you know customs is looking at it and they don’t they don’t they can’t adjudicate or they’ve got an officer that’s just looking for counterfeit the the system at Amazon was designed to to maybe enforce against counterfeit but certainly not against against you know, nuanced patent claims. And so the you know, the the knockoff guys all preyed on that they realized it, they realized, ah, we’ll get rid of them. It’s really funny. We, we’ve started enforcing against counterfeits and what happened was, these guys pulled back cut off the labels and for a period of time they were selling the you know, the and then they took the took the counterfeit materials dropped it into a plain white box. And then came came on the attack again and the stuff started getting through. And it was like What the You know, and we would do a test by and we would actually find the thing that had the label cut off of it. And so that’s, you know, that makes for a pretty challenging enforcement environment at all levels, customs, Amazon and is the brand
James Thomson 34:21
Rich additional thoughts on this?
Rich Goldstein 34:23
Yes, Chinese IP. So, first of all, the the reason why Chinese trademarks Chinese patents, a Chinese IP can be a secondary strategy as Randy is noting is that US Patent prevents anyone from making using or selling the product in the US. So your concern is it could be made in China and then sold here your US Patent can technically be used to stop them. Once they bring the product into the US or it can be seized at the border you can register Your patents, you can register your trademarks with customs and, and theoretically, they would seize the product at the border. In actuality, as Randy points out, they’re much better at picking out counterfeiters, which is where they’re copying your trademarks, where they’re actually trying to pass off the product as TRX brand resists resistance bands, for example, as opposed to just selling resistance bands that embody all of the features that may be patented, but they’re branded differently. So so with that background in mind, sometimes it’s useful to have Chinese trademarks, Chinese patents. It’s an interesting misconception about Chinese patents is that well, as a foreigner, you can’t enforce them. You can’t. If you go to court in China, you will lose because you’re a foreigner. And it’s actually not true. There’s a study that was done of thousands of patent infringement suits and it’s Turns out that foreigners had a foreigner plaintiffs people bringing lawsuit had a slightly higher success rate than even Chinese companies. So, you know, but you do have to be a certain scale for Chinese patents to even be important to consider. Because once again, remember, the US Patent gives you the leverage against making using selling, and therefore that leverage is what will keep it out of major retailers, for example, having the US Patent so it’s useful. But
James Thomson 36:34
yeah, let’s move on China, then. If I plan to sell my product in Europe, I plan to sell my product in Canada, Mexico, you know, how should I be thinking about building IP protections from my product upfront, or at some point down the road? How do I need to think about all this upfront IP protection?
Rich Goldstein 36:53
Okay, great. So let’s get technical and then we can get practical there. So, patents are territorial patent trademarks are territorial, meaning that if you want protection in the US, a US Patent will do. But in Brazil, you’ll need a Brazilian patent or a Brazilian trademark to get protection there. So that theoretically means you need to get patents and trademarks all across the world. But that would be prohibitively expensive, especially for a company at an early stage. And so you need to be strategic about it. And especially you want to look at where you think that there would be a market for the product. You know, again, if a Chinese patent is only important, if you’re worried about there being a huge market in China, to sell your your products. So, so you have to be strategic. And then the practical side, again, is that you want to consider that the US Patent will give you leverage. I mean, it’s like if you have a innovative product, you get a US patent. It’s possible For people to copy it, and sell it in Europe, sell it in China. But if you have a truly innovative product for someone, you know, most of the time people are concerned about bigger manufacturers coming along and copying them. Yes, for that manufacturer to do it, they would need to avoid the US market. Now what makes more sense, counterfeiting a product copying a product, being able to sell it in some other countries, but never being able to sell it in the US or working out a royalty arrangement with the inventor with the with the patent holder. So you know, that’s the other side of is that the US Patent typically gives you leverage in those situations. And ultimately, if you really want a worldwide protection, you have to pay for it. That’s expensive, so you got to weigh those two.
James Thomson 38:49
Randy you you’re selling your product in lots of other countries outside the US. How have you thought about the process of getting IP protection as you’re entering countries in advance of getting into those countries. How do you think about that?
Randy Hetrick 39:02
Well, we’ve done, we’ve done it both ways. I think early on, you know, we really had a lot more IP protection than was smart for a, for a company of our size. I had a, you know, a patent, an IP lawyer who actually wasn’t a patent lawyer, but who was big on filing everywhere. And, you know, we upgraded our representation, and we got to a more sophisticated firm, they’re like, geez, why do you have, you know, patents in the most obscure markets on earth, and it really was dumb. But the, there are a couple of different groupings, right, the Pacific trade conference, European Union, so you can apply for a patent with these large groups that provide coverage in Europe and in the United States and Canada. And so you, you know, it’s a couple of years. Different ways to approach it and rich can certainly talk at greater depth. But I think that that’s an efficient way to do it. There are a lot of countries that, you know, you are better off having, they’re having their local jurisdiction patent as well. But I think that the good advice is starting with the markets in which you see volume, right, likely volume. And, you know, if you can cover them with a membership in one of the, you know, the unions of patents, then that’s a really efficient way to do it. And if you can’t, and you still think that that market is important, then go ahead and apply for, you know, for the local IP, but the maintenance fees are not trivial, either, as you start to extend, you know, I mean, we were spending really millions of dollars a year on on our IP portfolio, the combination of, you know, prosecution, enforcement and mate. And so we’ve we’ve left some of those smaller, niche country. pieces of IP laughs Because they’re covered by, you know, a larger Association patent. And that’s kind of how we’ve, we’ve approached it.
James Thomson 41:06
So going back to the issue of counterfeits being sold on your product, I would think that there is inherently a potential liability that falls back on you, Randy, as a brand owner, having a consumer in some market, actually buy a counterfeit product, potentially get injured by the counterfeit, and turn to your company as somehow responsible for this counterfeit. How do you think about this process of going out actively looking for counterfeits, not just because you don’t want to see somebody making money on counterfeits but you want to reduce the possibility of liability for being sued by consumers who end up acquiring a counterfeit.
Randy Hetrick 41:44
It’s it’s really a combination. Obviously, we want to protect our customer and our brand first and foremost. But you also have to protect your you. No one would ever innovate. If there was no intellectual property right? It doesn’t make sense you spent a ton of time when An energy creating a great product, building demand for education, educating the marketplace, only to have some late coming opportunists. So Copy that. And I’ll put it, you know, and so I want to get at the heart of the problem in my view, which is like the one really loud criticism that I have of Amazon is the idea that you allow someone to buy at it for a few pennies or a quarter by someone else’s trademark. Right. And then when a customer is searching for that trademark, you allow a competitor to buy placement on that search is insanity to me, and it doesn’t exist anywhere else in the universe outside of online. And I’m convinced it’s because case law just travels more slowly than the speed of the internet. But I think it will eventually become, you know, it’ll be litigated or it’ll be legislated one of the two because that creates the fundamental problem. When when a When an opportunist can bid on, let’s say, my trademark, yeah, which spent 10s of millions of dollars out there in the marketplace, trying to educate, you know, create a brand that’s trusted because brands are really about trust more than anything else. And then some untrustworthy guy who has a product that’s downright dangerous to your home, we’ve actually had deaths occur in parts of the world, from people having a counterfeit that broke fall down, hit their head on the ground, right and, and so then what happens, the chain of liability, you know, runs first to the to the gym, and the case I’m referring to, you know, was in Germany, and it was a gym owner that had a trainer come in with a counterfeit that he’d purchased off of, we don’t know where we never figured out where, fortunately for us, we have unique serial serial numbers on every single product that we make. So that’s our liability protection. We immediately Say No problem, we have insurance just read us the the, you know, unique identifier, and there’s one per strap. And once it’s registered, it’s taken out of it out of the out of the registration. Yep. So that’s how we’ve protected because the liability is massive. But even set that aside, can you imagine the brand damage that happens when a customer thinks they’re buying, you know, an authentic product and they’re buying it trusted source like Amazon, and then they find out after the fact that, you know, they in fact bought a counterfeit that injured them and I’m I’m convinced that that’s one of the reasons why we had success with Amazon as a partner because Amazon realized and you know, if you want to get Amazon’s attention, they really do I believe care about their customer. And so, you know, when they saw this as Wow, wait a minute, that’s a real risk. We have to put some energy on that. And that’s when we started getting some support because it is it is dangerous with some products. When you have you know, an untrustworthy manufacturer knocking off. And that’s
Rich Goldstein 45:01
one of that’s one of the fundamental purposes of trademark law, by the way, is to protect consumer expectations that when they’re buying a branded product, that they know that it’s coming from a certain source. Yeah, I mean, we, we often think about it as being for the manufacturer to prevent someone from cutting into their profit, or from cutting into their market share. But it’s very much also about protecting the consumer expectations that they’re getting the real thing when they buy it.
James Thomson 45:30
Chris, we only have a couple minutes left. I want to ask Chris, that, given what you see Amazon doing today, if I were a brand getting started on Amazon, where would where would you suggest I put my time and efforts around protecting my brand, so that I can minimize the amount of slogging through, you know, false claims that I could potentially get as my product becomes more successful?
Chris McCabe 45:56
Yeah, I mean, and one thing I’d like to say feeding off the last point That unfortunately Amazon cares a lot about preventing counterfeits, but they often have a lot of difficulty deciphering what’s counterfeit and what isn’t until after the fact until after an item’s already sold. And buyers complain, hey, this is fake, hey, this hurt me. This injured me, made me feel not so good, whatever. Not a lot of that work is front loaded, because they can’t open every box scrutinize every item, which like Randy was saying it’s a massive task. So go into any strategy you build understanding that sometimes you will be a brand owner making your own products and you’ll be accused of counterfeiting your own stuff, simply because Amazon’s building in layers of automation and training of investigative teams lags a little bit behind what might be necessary in today’s world to the point where a lot of times they’re unable to tell if it’s a fake claim counterfeit or a genuine claim of counterfeit, so I just wanted to throw that in from the last time To the last part, in terms of going forward, I want people to understand that communication is everything when it comes to resolving these types of issues with these teams. There’s lots of emphasis and sellers kind of thinking the wrong way going down the wrong path. Where do I send this? I wrote something up that explains what’s going on fake IP claims, or which sellers are counterfeiting my product jumping on my listings, where do I send it? Where do I send it? There’s tons of emphasis on where you send things. There’s very little emphasis on what you’re actually writing and what’s sent. Because when people get really worked up and passionate as they should be, this is their, their brand, their baby, probably something they’ve been building for years. There’s a lot of emotion that goes into it. Unfortunately, extraneous content doesn’t communicate well, with Amazon doesn’t travel well, and in most communication that sellers write up so I want people to understand that part of your strategy needs to be enhanced Your communication so that you can do it succinctly, directly, concisely. And not just using buzzwords or templates but crafting it in a way that Amazon will understand they need to do something about the complaint you’re making or the claim you’re appealing. They need to understand it. But you it’s a two way street. They need to do what they need, what you’re asking them to do. You need to hold up your end, which is communicate well clearly understand the law, you know, if you’re not an attorney with that background and have one nearby who understands the law and who can educate you on the law, if you’re the one who’s writing the appeal. Right, right. As opposed to the attorney. So
James Thomson 48:40
I want to open up the the question and answers to to our attendees today. And any questions for our panelists that we can tackle in the next few minutes. Please feel free to submit a chat or question on the q&a tab at the bottom of the page. As we’re as we’re waiting for questions to come in, Chris, tell me a little bit about your thoughts on Amazon’s transparency program, this is a recently launched anti counterfeiting program. What have you seen work or not work well with this particular approach?
Chris McCabe 49:11
I mean, in some ways, it works great because I hear from resellers who say, Hey, I got busted for not using transparency codes, which means that you know, it’s being effective. I’m also hearing from the brands themselves saying it’s expensive, they don’t necessarily want to make the investment. A lot of sellers still don’t know about the transparency program, which could be a failing on their side not to stay up to date on trends, but also maybe Amazon needs to educate and communicated a little bit better. And also, it’s not necessarily the easiest thing to implement or execute. We’ve heard sellers complaining, we have to label all our inventory, not just the inventory destined for Amazon. And they don’t necessarily want to do that for a variety of reasons. So it doesn’t it doesn’t fix all day. distribution channel problems, right sellers, whether you use transparency or not still need to control distribution. You can’t go to Amazon and complain to them and ask them to enforce exclusivity for you simply because you don’t have tight control over who’s acquiring your product and reselling it on Amazon and who doesn’t. So, we have a
James Thomson 50:22
question that came in Randy for you regarding Project Zero, Amazon’s Project Zero program, any experience with Project Zero getting counterfeits removed by Amazon.
Randy Hetrick 50:36
You know, I, I should probably know more about Project Zero than I do. I at this point, you know, thankfully, I’m a little further from the flame than then than I used to be. I think that Project Zero is a fairly new new thing as one of the other guys can talk to it for a minute that I can tell you, you know if that if that trigger something in my memory bank, but I think we’ve we’ve basically been, you know, we’ve worked through an account rep. And we’ve, you know, done pretty much everything except we we are still in the process of deploying transparency. I think that’s going to be useful as well.
But I can’t really speak to Project Zero.
James Thomson 51:22
Randy or excuse me Rich or Chris. experience with Project Zero and what it does for helping brands to take down counterfeits.
Rich Goldstein 51:31
Yeah, Chris, do you because I haven’t I haven’t really been involved in that at all.
Chris McCabe 51:35
Well, I mean, so Project Zero, again, is something that I think sellers probably need to learn a little bit more about. There was a article a blog post by Dharmesh metha, who’s in charge of Project Zero, he’s the public face of it, I guess, for Amazon, and he’s spoken publicly about it quite a bit. We read that article, I think it was about a year ago and said, Okay, well now that this is been written and a lot of people understand this is important. And they understand Amazon’s serious and seriousness around enforcement. Everyone’s going to know about Project Zero. We haven’t heard a lot about it being consistently referenced and understood. And I wonder if that’s an education issue. Initially, it was launched to fanfare because we thought this would make counterfeit reporting easier and more effective. But in the last 12 months, we’ve just seen lots of counterfeit allegations being made. There are some valid ones, there are some invalid ones. We haven’t seen enforcement teams change how they execute their processes around establishing validity or not. They seem to sort of shift the burden, either to another Amazon team or to the complainants and sellers themselves to say you figure out who’s gonna work
James Thomson 52:54
it out together. Yeah. We have time for one more question. I think the smelly question start Through you, Randy. In your experience, what are the best ways to remove knockoffs from Amazon? So companies that that are violating your patent but putting it under a different a different brand name?
Randy Hetrick 53:12
Yeah, I mean, I it’s, I think the best honestly, the best protective mechanism these days remains design patents because it’s the one thing that you know, you have to think about what knockoffs trying to do right there if if we could get rid of the ability for, for unscrupulous vendors to buy the trademarks of established brands, you would undercut the entire incentive right for them to to bring products because they’re not they’re not interested in spending money to build their own brand. They’re not interested in doing their own innovations. What they’re interested in doing is copying something that exists. paying a little bit of money for brands to be associated with the brand’s goodwill in the market. It plays out and then they sell cheaper knockoff product. And so but you know, the number one way to prevent it would be disassociating their ability to free ride on on a brand’s goodwill and and trust in the marketplace. The second way would be design patents because the knockoffs usually will try to make their product look as much like the brands as possible to exact copy if they can get away with it. That’s something that a design patents useful, you know, in in enforcing. And then I would say that, you know, beyond that, you really have to kind of saddle up and try the neutral patent evaluation process. If you have a utility patent. I can’t comment on its efficacy yet, but I I believe it’s, you know, it’s earnest will I think that Amazon is attempt to provide vendors a better way than federal court and the three year you know, massively expensive process. Prove that your patent You know, is is, is enforceable. And to Rich’s point earlier, I don’t I don’t think that, you know, I suspected that the cases that he was talking about are the tail ends of the distribution where you have ostensibly legitimate vendors that are arguing about, you know, their IP, I think where the stuff that I’ve seen mostly is not that it’s not other legitimate vendors, it is illegitimate vendors offshore trying to copy to the stitch, right, what we’re bringing to market make it the same color and confuse by our trademarks. Right and then the customer and and so that’s kind of the that’s the most insidious, you know knockoff not it’s not honest, vendors with disagreements, mostly in my experience, and I can’t comment for everybody, but that’s, that’s been my experience.
James Thomson 55:51
We are at our end of our time for today’s discussion. I want to thank Randy and Rich and Chris, for joining us on today’s discussion. Thank you all all of the attendees Thanks for joining today. Appreciate your time. If you have any questions, feel free to follow up with us at Buy Box Experts and we’ll do our darndest to get your questions answered. Thank you, gentlemen, for your time today and goodbye to all. Thanks, guys. Thanks, James.
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