Costco: it’s a magical place where one can buy copious amounts of wine, socks, and batteries in bulk all while eating a $1.99 slice of pizza. Apparently it also happens to be the destination for inexpensive engagement rings–or, counterfeit ones.

A U.S. judge determined that when Costco decided to sell engagement rings out of jewelry cases labeled with the word “Tiffany” it willingly infringed on luxury diamond behemoth Tiffany & Co’s trademarks, and the rings were counterfeit as a result.

Tiffany filed the lawsuit in 2013 on Valentine’s Day, claiming that “hundreds, if not thousands, of Costco members bought engagement rings they wrongly believed were authentic Tiffany products.” They were initially tipped off in 2012 when a person shopping at a Huntington Beach, California, Costco complained to Tiffany that she was disappointed to see Tiffany items on sale in the store. That’s when Tiffany did some investigating and found that the location did indeed have display cases labeled with the word “Tiffany” and “that a salesperson there referred to them as such.”

Costco’s lawyers filed a countersuit arguing that the word “Tiffany” was merely a generic description for a ring setting style, but U.S. District Judge Laura Taylor Swain disagreed stating,

Despite Costco’s arguments to the contrary, the court finds that,based on the record evidence, no rational finder of fact could conclude that Costco acted in good faith in adopting the Tiffany mark.

And it’s easy to see why. Costco’s “style argument” would be the same as me preparing a bunch of burgers resembling Big Macs and then displaying them in a case with the word “McDonalds.” It’s just not rational.

Costco has reportedly already contacted customers who bought the rings and offered a full return to anyone who was dissatisfied with their purchase. However, that doesn’t get the company off the hook.

With this verdict, Tiffany is now able to take big box giant Costco before a jury to assess damages, “including a recovery of Costco’s profits from the sale of the diamond rings and punitive damages.”

According to Reuters Tiffany General Counsel Leigh Harlan welcomed the ruling in a statement saying,

[It] further validates the strength and value of the Tiffany mark and reinforces our continuing efforts to protect the brand.

Costco has yet to respond, but needless to say it learned its lesson when it comes labeling its products–don’t put anyone else’s name on it but your own.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

The post Judge Rules Costco Sold Counterfeit Tiffany Engagement Rings appeared first on Law Street.

Counterfeit drugs pose both domestic and global threats, presenting serious health risks worldwide. Although the issue is most prevalent outside the United States, Americans aren’t immune to the illegal market’s reach, as there have been far-reaching counterfeit drug cases in the U.S. As a result, there’s been a large effort to combat the problem in America. Read on to learn more about the proliferation of counterfeit drugs, and what’s being done to stop them.

What are counterfeit drugs?

According to the World Health Organization (WHO):

Counterfeit medicine is one which is deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient active ingredients or with fake packaging.

The issue was first addressed in the 1995 WHO Conference of Experts on Rational Drug Use in Nairobi, Kenya. Since then, the market has expanded, but preventive measures have also multiplied. Most counterfeited drugs consist of antibiotics, hormones, analgesics, steroids, and antihistamines. In all, counterfeit drugs are divided into six categories: products without active ingredients (32.1 percent of counterfeits), products with incorrect quantities of active ingredients (20.2 percent of counterfeits), products with wrong ingredients (21.4 percent of counterfeits), products with correct quantities of active ingredients but with fake packaging (15.6 percent of counterfeits), copies of an original product (1 percent of counterfeits), and products with high levels of impurities and contaminants (8.5 percent of counterfeits).

The FDA believes the growth in the counterfeit drug market may be due to the escalating costs of prescription drugs, advanced technologies to develop counterfeit drugs, and the anonymity and ease of the internet.

Health Risks

The severity of the risk factors for any specific counterfeit drug will vary. Generally, they can actively cause unexpected side effects, an allergic reaction, the worsening of the existing medical condition, and/or prolong treatment periods.

A counterfeit drug that substitutes an inert substance for the active ingredient will not improve a person’s medical condition. For example, the main ingredient in Lipitor (a commonly counterfeited drug in the U.S.) is atorvastatin. Its purpose is to lower high cholesterol and triglyceride levels, and therefore reduce the risk of stroke and heart attack. If a patient believes he/she is taking atorvastatin, but in fact is consuming an inert substance, the consequences could be deadly. Even worse, in some cases, not all substituted or added substances are inert, but are instead hazardous.

 U.S. and Global Statistics About Counterfeit Drugs

The international counterfeit drug market amasses $200 billion a year. Internet sales make up $75 billion of that market. Most counterfeits are made in China and India. In the United States, 80 percent of counterfeit medicine is brought into the country from outside.

The WHO estimates that up to ten percent of the drugs sold internationally are counterfeit. In some countries this number can reach up to 50 percent. Developed countries that have strict regulations and institutions like the FDC, are estimated to sell less than one percent of counterfeit drugs. However, the United States has seen its share of highly publicized cases. With a few exceptions, the United States counterfeit market is generally focused on “lifestyle” drugs like diet, erectile dysfunction, and hair growth pills.

The counterfeit market is growing in the U.S. In 2014, an estimated 60 various Pfizer products were being counterfeited compared to just 20 in 2008. One of the most popular counterfeited pharmacy items is ChapStick. China reported holding 1,300 alleged counterfeiters and confiscating $362 million worth of counterfeit product in 2013.

According to the WHO, an estimated 200,000 people die a year due to “ineffective, fake, and substandard malaria drugs” that don’t eliminate parasites from a person’s system. To make matters worse, the fake drugs often contain a smaller dosage of the active ingredient than necessary. Thus the fake drug cures symptoms without curing the disease and fuels drug-resistant strands.

Counterfeit Drugs in the U.S.

A counterfeit maker of Avastin, a cancer drug, accessed the U.S. supply chain in 2012. This was the first major exception to the notion that counterfeits in the U.S. were limited to lifestyle drugs. Undetected, doctors and purchasing managers for oncology clinics “bought and administered the counterfeit medicines to their patients.”

In May 2012, a counterfeit version of Teva Pharmaceutical’s Adderall 30 mg tablets entered the market. The FDA labeled the counterfeit “unsafe, ineffective, and potentially harmful.” The counterfeit version did not contain the active ingredients dextroamphetamine saccharate, amphetamine aspartate, dextroamphetamine sulfate, and amephtamine sulfate. Instead, it contained ineffective ingredients tramadol and acetaminophen. The original product is orange and peach in color with markings, while the counterfeit is white and devoid of any markings. Entering the counterfeit market for Adderall was probably seen as a lucrative opportunity, as Adderall is on the FDA’s drug shortage list, which means that it is dispersed only when available.

The drug Procrit, used to treat anemic patients with “cancer and other serious diseases,” had a large counterfeit scare in 2013. FDA investigators found three fake batches bearing three different lot numbers and expiration dates. The fake medicines contained a clear liquid with no active ingredient and two life-threatening strains of bacteria. Not only was patients’ anemia going unchecked, but already-weak patients were consuming potentially deadly bacteria. The FDA dispersed a warning to the public and provided ways to check the authenticity of the product.

Precautions to Avoid Counterfeit Drugs

There are ways to help ensure that patients and customers purchase legitimate prescription drugs. Most counterfeited drugs are sold through the internet. The National Association of Boards of Pharmacy investigated 10,000 pharmaceutical sites and found that only three percent of the sites appeared “to be in compliance with pharmacy laws and practice standards.”

Internet sites to be avoided include those outside the United States; those that don’t offer a physical address; those that don’t display a license by the applicable state board of pharmacy;  those that don’t provide a licensed pharmacist to answer questions; and sites that don’t require a prescription. Consumers should also look for the Verified Internet Pharmacy Practice Sites (VIPPS) seal. There are over 30 online pharmacies that display this seal, which was created by the National Association of Boards of Pharmacy to combat sites selling counterfeit drugs.

Consumers must also be cautious when inspecting the packaging of their product by looking for altered or unsealed containers or any physical differences in the appropriate packaging or product appearance. A change in taste and side effects could signal counterfeits as well.

 Actions Against Counterfeit Drugs

In 2012, the United States and 110 other countries participated in INTERPOL’s Pangea sting operation. The operation resulted in:

11,000 illegal online pharmacies being shut down, the removal 19,000 ads for fake drugs on social media sites, the seizure of 9.4 million doses of phony medicines…Google agreed to spend $50 million annually over the next five years to crack down on advertising for illegal online pharmacies.

Pharmaceutical companies also have their own internal investigations to fight against counterfeit medicines. For example, one method is similar to fingerprinting. Pfizer designed an infrared spectrometer that analyzes a product’s chemical bonds. Every drug has unique “reflected and absorbed wavelengths.” A graph will produce peaks and valleys–like a fingerprint–depending on the ingredients and their quantities. Those in the Pfizer lab can superimpose fake “fingerprints” over the real ones on the computer and note the differences. Further testing with X-ray diffraction can show exactly what ingredients the fake is composed of.

In 2014, Eli Lilly, an Indianapolis-based pharmaceutical company, invested $110 million in creating traceable, unique stamping codes for all of its products sold globally. The stamping codes will allow the company to trace each product from manufacturing facility to patient, and combat fakes.

The Legal Side of Drug Counterfeiting

The Prescription Drug Marketing Act of 1987 (modified in 1992) effectively closed off the United States supply chain. The law directly aimed at protecting American consumers and avoiding counterfeit drugs by providing legal safeguards. It “provides that prescription drug products manufactured in the United States and exported can no longer be reimported, except by the product’s manufacturer.” It also provides uniform standards for all distribution channels including hospitals and wholesalers.

The Food and Drug Administration Safety and Innovation Act was enacted in July 2012. It granted the FDA new and enhanced powers to regulate prescription drugs and combat counterfeit drugs in the U.S. The FDA, for example, can now “administratively detain drugs believed to be adulterated or misbranded, and the authority to destroy certain adulterated, misbranded, or counterfeit drugs offered for import.”

The 2013 Drug Quality and Security Act “outlines critical steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” Pharmaceutical companies must implement a tracking system by 2015 and tag serial numbers to each singular unit sold in the U.S. by 2017.

Conclusion

The counterfeiting of medicines is not a problem secluded to developing countries. Without proactive enforcement, counterfeit drugs could erupt in the United States. It is a highly lucrative industry for the black market. Pharmaceutical companies and consumers alike need to be responsible with prescription drugs, as the potential health risks can be deadly. This is a global problem that requires global cooperation.

Resources

Primary

FDA: Counterfeit Drugs, Questions and Answers

CDC: Counterfeit Drugs

FDA: Counterfeit Drugs

Additional

Nova Next: Cracking Down on Counterfeit Drugs

CBS News: Your Anemia Drug May Be Fake

Fierce Pharma: Lilly Steps up War on Counterfeits With $110M Serialization Program

HRF: 20 Shocking Counterfeit Drug Statistics

Medscape: Counterfeit Version of Adderall Unsafe, Ineffective, FDA Warns

PhRMA: Counterfeit Drugs

National Center for Biotechnology Information: The Prescription Drug Act of 1987

Jessica McLaughlin

Jessica McLaughlin is a graduate of the University of Maryland with a degree in English Literature and Spanish. She works in the publishing industry and recently moved back to the DC area after living in NYC. Contact Jessica at staff@LawStreetMedia.com.

The post The United States Isn’t Immune to Counterfeit Drugs appeared first on Law Street.

Happy Couture Week, my fellow fashion law-istas! On Tuesday while we were just dodging the Snowmageddon here in New York, Karl Lagerfeld threw a garden party in Paris for Chanel’s Spring ’15 Haute Couture show. Things haven’t been all sunshine and daisies, however, over at the Haus of Chanel as it filed a counterfeiting suit just last month.

Chanel is suing online e-tailer Shop Jeen not only for copying its goods but also its way of doing business. Shop Jeen produced imitation Chanel iPhone cases and allegedly marketed them in the same way as the couturier. According to The Fashion Law, Chanel claims that Shop Jeen’s actions have cost it irreparable damage and “the Defendants have been unjustly enriched.” Chanel is demanding $2 million “for each counterfeit trademark used and product sold,” in addition to attorney and investigative fees.

As you know, I’m all for designers defending their own intellectual property, but I’m not so sure about their ability to sue someone for stealing the way they do business. If a product is already a knockoff, wouldn’t it come with the territory that it is advertised in the same way as the original? If it were any other company but Chanel this might not really fly as two separate charges, but I’m sure the kaiser Karl Lagerfeld will be able to get away with it.

It’s cases like this that make fashion law so much trickier than most other intellectual property and trademark lawsuits. The only thing fashion attorneys have to go off of is prior cases. Then again, this is the Haus of Chanel we’re talking about here. Lots of clothing and accessories can be seen as inspired by or imitating the brand that basically defines classic. Yet as far as I can tell, it looks like Chanel’s got this lawsuit in the (2.55 chain strap) bag.

Katherine Fabian

Katherine Fabian is a recent graduate of Fordham University’s College at Lincoln Center. She is a freelance writer and yoga teacher who hopes to one day practice fashion law and defend the intellectual property rights of designers. Contact Katherine at staff@LawStreetMedia.com.

The post Can Chanel Sue For Stealing Its Style of Doing Business? appeared first on Law Street.

Last week I told you about the $22 million counterfeit operation busted in Queens. So now you might be asking yourself: If getting your “designer” handbags from Canal street is such a big no-no then where should I get my holiday gifts at a reasonable price? Never fear, it’s almost 2015 and there is now a plethora of consignment sites to get your second-hand designer goods. But as great as sites like Ebay, Amazon, and the new Alibaba are, sometimes sellers aren’t always honest when they claim their items are authentic. So to make sure that you don’t get duped (like my poor brother did when he ordered those fake Nikes from China) I’ve put together a handy guide on how to spot a fake. Whether you’re giving or getting one this season, here’s all you need to know about how to properly authenticate a designer handbag.

Chanel

Remember when I told you that I’ve had family members gift me fake bags in the past? When I was in high school, my aunt gave me a Chanel Grand Shopping Tote. I thought it was cool until I found some irregular stitching and a defect in the “leather.” However, there are a few other tell-tale signs aside from the obvious ones. When it comes to the flap bag, the quilting should properly line up when the bag is closed. The biggest giveaway can also be simply the leather itself; the lambskin should feel buttery smooth and not waxy. Also, every bag made after 1985 should have a label with a specific serial number inside.

Hermès

The most coveted bag in fashion history, people will do anything to get their hands on an Hermès Birkin bag. With a retail price of up to $150,000, the Birkin bag has a high resale rate, so it only follows that there are a lot of fakes floating around out there too. The easiest thing to look for is the bag’s lock spindle, as it should turn around smoothly, and should not be bumpy or grainy. The logo should also read Hermès-Paris with a dash, as opposed to an underscore. In the video below, Tammy Flehr-Gates from Michael’s consignment shop on the Upper East Side gives more tips on how to spot a fake Birkin.

Louis Vuitton

For any Vuitton bag, I reiterate the importance of checking that the leather is dry because if it’s waxy, sorry, but it’s probably not even leather to begin with. More specifically, the Neverfull’s strap should be exactly 3/8″ in width. Any larger is a sign that the bag is made of poor material, so it needs a thick strap to withstand any weight. Vuitton is also famous for its various collaborations, like with Japanese artist Takashi Murakami. The infamous multi-colored Speedy features exactly 33 colors, so any less and it’s cheap, lazy imitation. The cherry blossom Speedy also has a sneaky feature that an amateur counterfeiter would never know about; the inside should say “Made in Japan.” Although Vuitton bags are typically made in France, this particular collaboration was made in Japan. If it says “Made in France” on a cherry blossom Speedy, it probably wasn’t made there, or even in Japan for that matter.

Balenciaga

My personal favorite, the City Bag, is pretty easy to authenticate. Since it features so much metal hardware, the first thing you should check for is if they’re heavy and not hollow-feeling. The O-rings on all the zipper pulls will also be soldered closed. Rivets have two rectangular notches in them and the straps should be smooth with absolutely no bumps. Also you won’t ever find your average YKK zipper on a Balenciaga, as they only use Lampo zippers on their bags.

Katherine Fabian

Katherine Fabian is a recent graduate of Fordham University’s College at Lincoln Center. She is a freelance writer and yoga teacher who hopes to one day practice fashion law and defend the intellectual property rights of designers. Contact Katherine at staff@LawStreetMedia.com.

The post Holiday Gift Guide: How to Authenticate a Designer Handbag appeared first on Law Street.

It’s been a busy winter in East Rutherford, NJ. Rex Ryan signed an extension with the New York Jets. Metlife Stadium just hosted the Superbowl. And the New York Giants are being sued for defrauding sports collectors. That’s right, folks, impropriety among famous New Jersians doesn’t just happen in Fort Lee. According to the civil complaint filed in Bergen County, NJ, the Giants’ owners, equipment staff, and even Eli Manning were all part of a memorabilia scam that disguised Giants’ gear as “game worn” to generate higher profits when sold.  But to understand why plaintiff Eric Inselberg is so pissed at the Giants, we have to backtrack a couple years.

In 2007, Mastro Auctions held a sports auction in Cleveland where a Michael Jordan practice jersey from UNC was sold for $11,000. Several days later, Memorabilia Evaluation and Research Services concluded that the jersey was not worn by Jordan, but rather most likely by the less-heralded Tarheel, Ranzino Smith. One of the names that surfaced in the ensuing investigation was Eric Inselberg, a New Jersey collector who was claimed to have purchased the jersey as a Smith original, not as a Jordan.

Although no Federal charges were filed in connection with the Jordan jersey fiasco, the FBI kept a close eye on Inselberg and the exchange of high-priced sports memorabilia.  A few years later, they were led to the New York metropolitan area, where numerous New York Giants items were being sold as game-worn. Subpoenas were issued, a grand jury was summoned, and criminal charges against Inselberg were sought (read the Indictment here).

Inselberg maintained his innocence, arguing in part that the evidence which led to the criminal charges was unreliable because one of the witnesses who testified before the grand jury was lying. Seems like a hail mary thrown by his attorneys, right? Well on April 18, 2013, the Federal government dismissed its own indictment  “in light of some new facts that were pointed out by defense counsel.”

According to Inselberg, the fact pointed out to US Attorney Michael Love was proof that Giants staffers lied in their grand jury testimony on behalf of the Giants’ organization. Consequently, his criminal indictment was simply the result of an organization finding a simple scapegoat to take the blame for systemwide fraud.

One important question remains: Why the hell would a multimillion dollar professional football organization put its sterling reputation on the line to peddle fake memorabilia? As a Patriots fan, I’ve longed to see Eli Manning thrown behind bars. But is he really commanding equipment managers to defraud sports collectors? Seems a bit far fetched. This may be a case that stops with the Giants’ equipment manangers, Joe and Ed Skiba, who are also featured names in Inselberg’s Complaint. It may also be telling to see whether the Justice Department files any more charges in the matter. After all, lying to a Federal grand jury is perjury, and unlike past cases, this may be a situation the government can actually convert. Stay tuned.

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Andrew Blancato (@BigDogBlancato) holds a J.D. from New York Law School, and is a graduate of the University of Massachusetts, Amherst. When he’s not writing, he is either clerking at a trial court in Connecticut, or obsessing over Boston sports.

Featured image courtesy of [Guian Bolisay via Flickr]

Andrew Blancato

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Counterfeit products: the items that your empty wallet hates to love. Well, it seems as though the number of counterfeit products rotating the black market is dropping this season. A couple of weeks ago, six New Yorkers were charged with trademark counterfeit and conspiracy. They have allegedly sold more than $13 million worth of Lacoste, True Religion, and Ralph Lauren’s Polo clothing to distributors throughout the nation. Those are some serious allegations, Artful Dodger.

The NYPD found more than 2,000 boxes of the counterfeit trademarked clothing in Queens last summer. In addition to these dubious activities, the criminal group has caught the eye of the NYPD Intelligence Bureau. Ray Kelly, the NYPD Commissioner, stated that the covert operations were particularly concerning because of “indications that proceeds were sent to areas in southern Lebanon.”

Well, there isn’t much left to interpretation here. Trademark counterfeiting is a crime under the Lanham Act, and people should face penalties for engaging in such activities. A little bit of background: trademark counterfeiting is the creation of an identical or discernibly the same image as a federally registered mark. Counterfeiting is a crime under Lanham, while infringing a mark is a civil suit. Counterfeit is a form of infringement, but infringement does not equate to counterfeit.

Enough of that — what I’m more concerned with is the composition of the counterfeit marks. I’ve seen a fake Fendi or Gucci bag in my day, but I’ve never been exposed to a fake Lacoste logo, for example. Is the crocodile turned to the right instead of the left? Is the tongue pink instead of red? Is the fake mark visually indistinguishable? And unfortunately, I couldn’t find a picture.  BUT, I wanted to compose some visuals and brief background information of a few trademark counterfeit cases throughout IP history.

In 2008, Nike alleged that two defendants manufactured and sold counterfeit footwear bearing the Nike trademarks over the internet. Read more here. Courtesy of Richard IJzermans via Flickr.

Last September, Several Atlanta residents were accused of “promoting and otherwise advertising, distributing, selling and/or offering for sale counterfeit products, including at least handbags and wallets, bearing trademarks that are exact copies of the Chanel Mark” for goods of a lesser quality. Read more here. Courtesy of Wen-Cheng Liu via Flickr.

In May 2006, Rolex Watch USA, Inc. discovered the watchreps.com website and shut it down through the website’s Internet Service Provider. However, the company discovered that the site had been reactivated three years later and was redistributing counterfeit Rolex watches. Read more here. Courtesy of Charlie J via Flickr.

For more information on trademark counterfeiting, see the International Trademark Association’s website.

Gena.

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Featured image courtesy of [Eric Skiff via Flickr]

Gena Thomas

Gena Thomas, a recent graduate of Howard University School of Law, was born and raised in Lafayette, Louisiana. A graduate of The University of Texas at Austin, she enjoys watching scary movies and acquiring calories from chocolates of all sorts. Contact Gena at staff@LawStreetMedia.com.

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