Protecting Your Intellectual Property in the U.S. and Abroad from New Forms of Online Infringement and Brand Attacks

Below is the transcript of my January 26, 2012, webinar presentation sponsored by the International Executive Resources Group focusing on protecting intellectual property here and abroad from new forms of online infringement and brand attacks. But first a word of warning. My talk runs for about 45 minutes and therefore this is a long post. Here is a quick overview of what I cover.

Outline of Talk

I begin by discussing three reasons why global infringement is a growing and what governments and copyright holders are doing here, in Europe and China to combat it.

I then focus on some self help steps that brand owners can take in whatever country they may be in to deal with brand attacks and Internet infringement. I suggest that brand owners practice the three C’s when faced with a justified brand attack or a legitimate copyright or trademark infringement complaint.  I then give two examples of the consequences other brand owners faced when they did not follow this approach. Next, I list some questions you should ask  before responding to infringement and also suggest some low cost and creative ways to deal with infringement. I further give some suggestions about how you can monitor the web for infringement and finally end with some guidance on selecting a domain name.

Now to the talk:

Reasons for the Growth of Infringement Globally

There are several reasons for the growth of infringement across the globe. The first is that an increasing segment of the population, especially those 18-30, believes that what’s available in the digital marketplace is free for the taking. In other words, they believe that free music and movies are their natural-born rights.

One U.S. study in 2011 estimated that nearly 24% of all global Internet traffic was infringing. And infringers in Europe have gained some political power. The International Pirate Party born in Europe advocates that copyrighted works should be freely shared online. That Party now controls 15 of the 130 seats in the German Parliament. Further, Sweden has recognized the file sharing culture that party advocates as an official religion.

Inability of Some Countries to Combat Infringement

Infringement is also on the rise because a number of countries across the globe are unable to combat this problem. The United States Trade Representative annually issues a Priority Watch List of countries where significant infringement and counterfeiting is taking place. In 2011 the USTR, after reviewing 77 trading partners, placed 42 countries on that list.

America’s two largest trading partners, Canada and China, remain on the Priority Watch List from the year before. Also included on the 2011 list were Russia, Algeria, Argentina, Chile, Indonesia, Israel, Pakistan, Thailand and Venezuela.

Ease of Infringement and Resilience of Infringers

A third reason for the spread of infringement is the ease with which it can be achieved, the anonymity of those who engage in it and the resilience of the infringers. Infringers can copy and paste copyrighted works with the click of a mouse out of sight of others. Rogue or pirate sites targeted in one country can move to new servers in a more hospitable country in a day or so did the notorious infringing site Pirate Bay. Infringers and counterfeiters can just as easily switch domains. For instance, if a U.S. prosecutor obtains a court order seizing a .com domain, the infringer can move to an .org domain.

 Efforts by Copyright Holders to Combat Infringement

What’s being done to combat this problem? Governments and copyright holders are doing quite a bit but with limited success.

Megaupload

Here are some examples. On January 19, 2012, the U.S. Justice Department announced that a grand jury indicted Megaupload in one of the largest criminal copyright cases ever brought. Megaupload is a public content storage site or cyberlocker that allows users to upload files and share them with others.  Megaupload had 50 million daily visitors and 150 million registered users. The government accused it of running an international criminal enterprise responsible for worldwide online piracy of copyrighted works generating more than $175 million in criminal proceeds and causing copyright owners more than half a billion dollars in harm. The indictment has had a ripple effect prompting two other public content storage sites, FileSonic and FileServe, to shut down their file sharing services.

The Motion Picture and Recording Industry Associations have also been fighting infringement globally for the last decade. Beginning in approximately 2003 the Recording Industry accused more than 18,000 persons in this country, including many college students, of uploading and downloading music without authorization. In response many of the persons targeted agreed to make small payments to the recording companies. But critics complained this legal offensive did little to stem the tide of illegally downloaded music other than create a public-relations problems for the industry.

SOPA and PIPA

The media and entertainment industries have also attempted most recently to combat foreign piracy by lobbying Congress to enact legislation that would have given the government and copyright holders increased powers to fight online trafficking in copyrighted works and counterfeit goods. The proposed legislation was called Stop Online Piracy Act (SOPA) in the House and the Protect Intellectual Property Act (PIPA) in the Senate. Under the legislation a rights holder could have taken steps to shut the foreign pirate site off from several vital channels — search engines, ad networks, even Internet service providers. But on January 20, 2012, in response to a firestorm of consumer protests, including a day-long blackout of Wikipedia, and heavy lobbying by the information and tech industries, the House and the Senate withdrew the bills for further study effectively killing them for this legislative year.

 Enforcement Efforts in Europe and Asia

Globally, the media and entertainment industries have been slightly more successful in convincing foreign governments to enact legislation to curb illegal music downloading and in convincing some governments to prosecute infringers. Here is a brief overview of some legislative and enforcement efforts in Europe and China.

Overview of Efforts in Europe and China to Combat Infringement

In the past two years France, Spain and England have enacted legislation to combat file sharing. The legislation in France takes a three step approach. Illegal downloaders are first sent a warning e-mail, then, if necessary, a letter and finally, if their activity continues, they are compelled to appear before a judge who can impose a fine or suspend their access to the Internet. But many question the effectiveness of the three-strikes legislation. The agency in France responsible for enforcing the law, Hadopi, has received a reported18 million complaints in a nation of 65 million persons but has sent very few warning emails. Reports also indicate that infringers in France accused of illegally file sharing have simply chosen to instead stream content.

In Spain the administrators of two file-sharing sites have been sentenced to fines and a year in jail for linking to copyrighted works. In Finland, an Internet service provider was ordered to block access to a website linked with Pirate Bay. And a British court recently ordered British Telecom to block customer access to another infringing site called Newzbin2.

China had some 477 million Internet users in mid-2011 compared with some 223 million in the United States, Baidu is China’s most visited site; and it has also been China’s biggest source of pirated media on the Internet. As a result of pressure from copyright holders and the US government, Baidu in the summer of 2011 entered into a landmark licensing agreement with Universal, Warner, and Sony agreeing to license their new releases and pay these labels on a per song basis for each download.

But there have also been setbacks in global enforcement. In November the European Court of Justice, echoing similar rulings in the US, held that internet service providers like Google cannot be required under European Union law to install filtering systems to combat online intellectual property piracy. And U.S. Customs announced earlier this month that the number of seizures of counterfeit goods in 2011 increased by 24% from the year before with Chinese goods representing the number one source of counterfeits.

Self-Help Steps to Take to Deal with Brand Attacks and Infringement

So with enforcement efforts around the globe difficult, expensive and problematic, what self-help steps should brand owners take to combat new forms of online infringement and brand attacks? Let me give you some suggestions which are applicable no matter in what country your site is located.

The Impossibility of Controlling the Message

First, brand owners must accept the reality that it is impossible to control the online message. In the pre-Internet days a brand had more control. It carefully crafted its message and used the few channels of communication that were available to disseminate it. If a customer had a problem with the brand, there was no way the customer could broadcast the problem to the world. The customer might write to the local better business bureau or chamber of commerce or complain to its local paper but that was about it. In other words, echoing an old Burger King commercial, most brands had it “their way.”

But now we are all publishers. Anyone with access to the Internet can reach a global audience with a two-sentence tweet. That means it is now impossible to control the message. Once the viral attack starts it gets larger. More people embrace it; more people talk about it; in other words, once the genie is out of the bottle it’s gone. And someone else is now in charge of the message. And that someone else can be your enemy really quickly because they can spread the word in milliseconds. If you try attacking the person who started the attack, the response is often worse.

So what should you do if you are faced either with an online brand attack damning the quality of the goods or services you provide or if you are accused online of infringing another’s work?

The Three C’s

You want to follow the three C’s: confirm, confess and correct

You need to first investigate to see whether the attack or the accusation of infringement has merit. If it does, you want to confess and at the same time tell the world that you have corrected the problem.

Here is what you may want to say:

One of customers just posted a message complaining about x. Although we would have preferred that the customer talk with us first about the problem we have investigated and made some changes that will benefit all.

Or you could say:

Someone just posted a message video; although we’re not sure it was aimed at us, we loved it and it inspired us to modify our policies.

And here is how you should respond to a legitimate complaint about online infringement.

One of our visitors just advised us that we are displaying a work that the visitor believes is protected by copyright. We respect the intellectual property rights of others and have taken down that copyrighted work.

Why the Three C’s?

Why the three C’s? The Internet does not let you hide from an attack. So you best try to turn it into a positive and embrace it. Customers will only be passionate about your brand if they feel good about it.

Further, your customers are often your best spokesmen and are trusted sometimes even more than your brand image and your brand marketing message. So if you are able to turn your detractors into your friends with respect and honesty, they may help bolster your bottom line and protect you online next time you are attacked.

Two Examples of Inappropriate Responses to Online Attacks

Let me now give you two examples of inappropriate responses to viral attacks.

The Cooks Source Response

A magazine called Cooks Source published a story about the evolution of the apple pie written by Monica Gaudio. The problem was that Cooks Source simply copied the story from another website without Ms. Gaudio knowledge or consent.

When Ms. Gaudio found out about it, she asked Cooks Source for an apology and to make a small donation to the Columbia Journalism School.

The Cooks Source editor responded:

But honestly Monica [referring to Ms. Gaudio] the web is considered public domain and you should be happy we just didn’t lift your whole article and put someone else’s name on it.

And:

We put some time into rewrites, you should compensate me.

Cooks Source’s response sparked a collective fury on blogging and social media sites or what some called “nerd rage.”

Facebook removed the Cooks Source site because it received so many hits.  Advertisers were urged to withdraw support for the magazine. The messages that bloggers posted can’t be reprinted here.

The three Cs could have diffused this situation. Instead, Cooks Source is now out of existence.

The Nestlé Response to Greenpeace

Here’s another example of an inappropriate response to a brand attack. The environmental group Greenpeace two years ago attacked Nestlé for buying cheap palm oil (a key ingredient of their Kit-Kat bars) from companies that destroy the Amazon rainforest. In response Nestlé got feisty on Facebook. In response to one consumer post, Nestlé pronounced:

Thanks for the lesson in manners. Consider yourself embraced. But it’s our page, we set the rules; it was ever thus.

When the consumer raised a concern about freedom of speech, Nestlé replied:

You have freedom of speech. Here there are some rules we set. As in almost any other forum, it’s about keeping things clear.

The attacker responded:

Your page, your rules true and you just lost a customer. Won the battle and lost the war. Happy?

When news of this and similar interchanges spread virtually, Nestlé went into damage-control mode posting Facebook updates defending its use of palm oil. When that didn’t quell the furor Nestlé reduced its dependence on palm oil and partnered with a non profit that helps businesses develop sustainable forest harvesting practices.

The lesson here is that, when faced with a justified brand attack, you can’t dictate or control the conversation on the Internet and you shouldn’t try.

Responding to Online Copyright or Trademark Infringement

Let’s now shift and talk about how you should respond when others infringe your intellectual property online. Remember the Internet puts you in a fish bowl. Whatever response you take will be broadcast by others. Further, overzealous enforcement can mean loss of goodwill and damage to your reputation and image.

And also keep in mind that trademark owners have to police their marks or their rights to their marks may erode.

Criteria to Consider Before Responding

Mindful of these considerations, here are some criteria to keep in mind when making a decision about how you will respond to infringement.

1. If you are faced with a counterfeit situation, are consumers being damaged by the conduct in question? Babies in the U.S. were at risk a few years ago when counterfeiters imported toys made in China containing lead. In that situation, the U.S. toy industry had to respond.

2. Is your marketing message being eroded by the infringing conduct? In other words, is consumer confidence in your brand being damaged by the knock-offs?

3. Is the infringing conduct costing you money?

4. How valuable is your asset that is the target of the infringement; is the asset or product a key to your success or one that you intend to discontinue?

5. Are there equitable consideration that favor the infringer; for example, is the infringer raising an issue of public importance?

6. Are we dealing with a serial, well financed infringer or one who sees the attack as a passing fancy?

7. Do you need to send out a warning shot to keep others away?

8. People in glass houses should not throw stone; can the same attack you are defending against be made against you?

9. What’s your budget; trademark and copyright litigation is expensive.

10. Does the infringer have a fair use defense?

Dealing with Fan Sites

Let’s now talk about fan sites; how should brand owners deal with them. Here’s an example of an enlightened approach to fan sites.

About 5-6 years ago two young men who really liked Coke started a Coke fan site on Facebook that soon gathered more than 3 million users and became the 2nd most popular site on that site. Coke found out about it. Instead of taking any kind of drastic measures, they invited these two fellows to Atlanta. They welcomed them because they wanted to find out how these were able to attract so much fan support. And Coke said to these fellows “continue, you are doing a great job.” Here’s some product; here’s some special invitations; here are certain things we don’t give to anybody because we want you to continue to do what you are doing. As a result these impassioned Coke fans are even more so to Coke’s benefit.

You need to monitor fan sites especially if they start selling your product at prices below what you want to charge. But in most cases you want fans sites to grow and prosper. Police with a carrot not a stick because happy customers can be your biggest advocate on social media.

Low Cost and Creative Ways to Deal with Infringement

Let’s talk about some low-cost and creative ways to deal with brand infringement?

1.      Set up a victory page;

2.      Use an offending site’s terms of service; it will not cost you anything;

3.      Pay infringers to migrate elsewhere;

4.      Enter into a co-existence agreement;

5.      Consider a gradual name change;

6.      Maybe even license your mark-after you develop some trust with the infringer; and

7.      Be proactive: register domain names for prospective products before you launch them.

Monitoring the Internet for Infringement

With new online sites born nearly every day, how do you monitor them all? It’s not easy. Here are some suggestions.

1. Get to know the sites where infringement is likely to occur

2. Establish relationships with the in-house people at these sites

3. Globally cultivate relationships with the government and the media, especially at the local levels

4. Set up alters with Google and others.

5. Decide who in your client’s company will respond and what your objectives are: take a holistic approach.

6. Have standard responses prepared.

Guidance on Selecting a Domain Name

Finally here is some guidance you may wish to follow when choosing a domain name.

First find out if the name is available by going to the sites that will tell you in an instant, including knowem.com or namechk.com. To check whether your trademark is being used by others on social media sites go to tm.biz.

But even if the name is available you want to be sure your name does not include any more of the trademark of another’s company than necessary to identify the nature of your business. For instance if the name Lexus.com were available (it’s not) you could not use it in most cases because it suggests that the Lexus brand is sponsoring or endorsing your site. But if your business is buy-a-lexus.com or buyorleaselexus.com you may be able to use it because you are truthfully telling consumers by the name you use the nature of what you do. That’s a form of fair use.

Finally with the Internet you can’t just think out of the box. There is no box. Instead, there is a medium of communication that is constantly changing and evolving in response to new technology. So you need to attempt to stay current with change because the shelf life in this space is short.