Many private equity funds may be overlooking a relatively easy and cost-effective way for their portfolio companies to protect their valuable trademarks. For many companies, policing and enforcing the unauthorized use of trademarks by overseas licensees, manufacturers, former business partners and other third parties has proved a difficult task. U.S. Customs and Border Protection (Customs) procedures can assist trademark owners in meeting this challenge by offering portfolio companies the ability to record trademark registrations in a special database that Customs officials can access when they receive a suspicious shipment of goods at a U.S. port of entry. Further, the database allows Customs to share information about potentially infringing products with trademark holders.
For items originating in countries where overseas enforcement of trademarks may be difficult, the Customs review process allows companies to monitor products when they enter the U.S. market. Once Customs receives a suspicious shipment, the officer may detain it for up to 30 days. During this period, the officer will check to see if a registration for the trademark appearing on the suspicious goods has been recorded with Customs. If so, the officer will contact a representative of the trademark owner to determine if the product is legitimate. This initial contact is typically via e-mail and includes pictures of the suspicious goods. If the trademark owner can provide Customs with information that the goods are not legitimate, Customs will seize the shipment and send a letter to the trademark owner reporting the seizure.
Upon receipt of seizure letter, the trademark owner can request a sample of seized goods for testing. The seizure letter also provides additional information regarding the specific parties involved in shipment (the importer, exporter, etc.). This additional information allows the trademark owners to initiate further investigations into the source of the counterfeit goods and/or the U.S. importer, and it typically provides enough data to bring a trademark infringement/counterfeiting lawsuit. Customs may also work with the trademark owner to fine the companies involved in the importation of counterfeit goods.
Customs focuses its efforts on certain types of goods, including the following:
- Goods that can threaten consumer safety (pharmaceuticals, toys, electrical equipment, medical devices, etc.)
- Critical infrastructure components (networking equipment, semiconductors, software, etc.)
- Goods that threaten international safety (anything with potential military use)
- Luxury brands (counterfeit shoes and other accessories)
The recordation process is relatively inexpensive (the government fee is only $190 per mark and per class or category of goods) and can be completed online. Portfolio companies must provide the following information (if reasonably available) to Customs:
- Ownership of trademark registration
- Place of manufacture of goods bearing mark
- Identity of foreign licensees or subsidiaries permitted to use mark
- Description of goods authorized for importation into United States
After it has recorded the trademark registrations, the private equity funds should have its portfolio company prepare a product identification training guide to help Customs identify counterfeit goods. These guides are confidential and should provide more detailed information, including the following:
- Company information (including list of trademarks and brands)
- Contact information for company representatives (or outside counsel) who can provide immediate assistance if Customs has questions about a shipment
- Descriptions of physical characteristics of genuine articles (and packaging), including pictures comparing genuine articles with unauthorized goods
- Information on approved manufacturers, licensees, importers and channels of distribution
- Information about known violators, infringers or other past issues with counterfeit goods
Once the guide is created, officers of the portfolio company typically schedule a meeting with Customs at select ports to introduce the guide and discuss any specific questions or concerns with the officers.