IP-Enforcement Programs: Designing the IP-Enforcement Program to Increase Market Share by Stopping Knockoffs and Infringement

October 10, 2022 Darin M. Klemchuk

The Importance of Intellectual Property in IP-Enforcement Program Design

This is the fourth installment of a 7-part series providing comprehensive analysis of designing, implementing, and optimizing an intellectual property (IP) enforcement program that stops loss of market share and profits due to knockoffs, piracy, and other forms of IP infringement. This program stresses the importance of intellectual property rights in protecting market share.

At Step 1, we discussed quantifying the harm (monetary or otherwise) currently being suffered to establish a baseline against which the IP-enforcement program can be measured. In Step 2, we marshaled all of the intellectual property assets to be used offensively to stop the knockoffs and infringements. Armed with this knowledge, we are ready to begin a preliminary design of the enforcement program.

Before we discuss how to prepare a preliminary design of the program, here’s a short summary of the entire series, which provides step-by-step guidance on developing and implementing an IP-enforcement program:

Step 1: Identifying and Quantifying Losses Caused by Knockoffs and Infringement

Step 2: Marshaling Intellectual Property Assets to Combat Knockoffs and Infringement

Step 3: Designing the IP-Enforcement Program to Increase Market Share by Stopping Knockoffs and Infringement

Step 4: Implementing the IP-Enforcement Program

Step 5: Optimizing the IP-Enforcement Program with Metrics

Step 6: Growing Future Market Share through Proactive IP Strategy

See our initial post, Importance of Intellectual Property Rights: Increasing Market Share Through Stopping Knockoffs and Infringements for a complete overview of the series.

Program Design: Begin with a “Win in Mind”

In Step 1, we quantified the harm and losses incurred by the knockoffs and infringement. Armed with this data, we established preliminary “wins” for the program to achieve to be considered a success. “Wins” may include stopping infringement, correcting false reviews, generating revenue to fund further enforcement efforts, and/or obtaining federal court injunctions to ward off future infringers. In Step 2, we identified and registered the key intellectual property assets to use in the enforcement program. Next, we are going to map out the basic steps we will take to stop the knockoffs and infringers. To keep the program simple and effective, we need to keep the predefined “wins” in the front site.

What will be the Flow of Enforcement Actions and Resolutions?

With a clear view of the program objectives, we next determine the program deliverables and design the preliminary stages. This begins with a series of questions to uncover solutions and design guidelines:

· How do we measure a reduction in infringement? Is this based on a specific measurable such as the count of infringers on the first couple pages of an internet search? Do we measure infringement through the use of third-party search/monitor tools?

· If the program achieves just one result, what is that result? How do we measure it?

· Is the program on-going or aimed at a specific set of bad actors?

· What involvement will in-house counsel and legal team have versus what will be accomplished by outside counsel?

· If recovering money is a program objective, should it be limited solely to the infringers’ profits or also include the IP owner’s losses? If the latter, on what level does the IP owner want to produce information and documents regarding its profits and sales?

· Will the program be self-funding or a budget line item (possible expense)? If outside counsel is hired, how are they compensated? How are their interests aligned with their client?

· What is the IP owner’s willingness to file suit to enforce its rights? Is it willing to risk IP assets to enforce them?

· Is public relations a tool available to enhance the enforcement program or does the IP owner wish to avoid publicity?

· How important is achieving injunctions to program success?

These are just some of the questions to explore. After considering them, we next move to detailing specific actions that will be taken for the program such as demand letters, takedown notices, lawsuits, and other steps. The program design consists of putting these actions together in flowchart like format, developing forms and best practices for these stages, and deciding the staffing for each stage.

An example illustrates how this works. For a simple brick and mortar campaign against trademark counterfeiters of physical luxury goods, the stages could include (i) an initial demand letter, (ii) request for an audit of the sales of the counterfeit product, (iii) request for supplier information, and (iv) a subsequent settlement agreement with a payment based on the audited sales information. At any point in the process, if the counterfeiter becomes non-compliant, litigation or other alternatives can be added as an additional stage. These stages are executed by an attorney plus either an admin or paralegal in conjunction with the client.

For cybersquatters selling counterfeit goods, a UDRP or takedown notice could be added as an additional stage. For infringers of software copyrights, a self-audit of software installations may be requested. DMCA takedown requests can be highly effective against routine copyright infringers placing materials on third-party websites. Amazon’s Brand Protection program can be used to stop counterfeiters on this online marketplace.

The specific stages and their order are highly dependent on the type of infringement occurring as well as the place it occurs (e.g., online marketplace versus physical retail) targeted by the bad actors. Therefore, a fair amount of analysis must be done to determine the enforcement mechanisms available based on the infringement, which can be incorporated into the program design.

How Does Cost Factor into Program Design?

Another consideration for program design is cost. At the outset, a decision should be made whether the program is required to be self-funding — the revenue generated from the enforcement efforts offsets the program costs —or whether the program is viewed as an investment such that enforcement revenue can be less than the program costs. For some legal departments, money recovery is not the driving objective; stopping the infringement is the primary aim. For other businesses, the success of the IP-enforcement program and certainly its longevity are dependent on the economics of recovered losses.

Where outside counsel is hired, several options exist for compensation. The typical hourly and contingent-fee arrangements are common. In between these options are hybrid options such as a flat fee per matter with a success fee kicker, a flat fee per matter, or a combination of flat fees/hourly fees for consulting and a contingent fee for recovery. Regardless of the compensation approach, the best programs align the client’s predefined “wins” with the outside counsel’s compensation. For some programs, the compensation arrangement may evolve with experience. I have found that clients and firms generally due best when the firm has a strong incentive to be efficient in manners that benefit clients.

Next Step – Implementing the IP-Enforcement Program

Now that program is designed, we start with a few initial cases to gain information about infringer behavior and to test the various stages designed as well as try out the form documents. Based on the results of the initial runs, the stages and forms are finalized. The program now begins in earnest. In our following post, we will discuss ways to optimize the program based on metrics. See our post IP-Enforcement Programs: Implementing the Program for a discussion of the next step.

Access the E-Book “Increasing Market Share Through Stopping Knockoffs and Infringement”

We have condensed the six steps into a graphical E-Book that provides a summary of developing effective IP Enforcement Programs along with tips, techniques, frequently asked questions, and mistakes to avoid. You can access a complimentary copy of the E-Book by clicking here.

You may also be interested in the following posts on the importance of intellectual property in enforcement programs:

For more information about IP-enforcement and anti-counterfeiting programs, see our Anti-Counterfeiting and Luxury Brand pages.

About the Author

Through prosecuting over 1,000 intellectual property (IP) enforcement actions, Darin M. Klemchuk advises clients on proactive IP and an anti-counterfeiting programs to stop diverted sales, market place erosion, and other harms faced by businesses. You can learn more about Darin’s practice and view his curriculum vitae at his bio page. If you want to send Darin a message, then visit our contact page.

This post has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company. © 2022 Klemchuk LLP