IP-Enforcement Programs: Optimizing the Program
The Importance of Intellectual Property in Optimizing Enforcement Programs
This is the sixth 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. In this post, we discuss ways to optimize the program using metrics.
In the previous posts, we discussed quantifying the harm (monetary or otherwise) currently being suffered to establish a baseline against which the IP-enforcement program can be measured (Step 1), we marshaled all the IP assets and possibly registered new ones to be used in the program (Step 2), and finally, we prepared our initial design of the program based on the predefined “wins” and a series of thought-provoking questions (Step 3) and begun implementation (Step 4).
Before we discuss how to optimize 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.
Primary Objective: Do not be an Attractive Target
By Step 5 (our 6th post in this blog series), we are deep into the mechanics of IP-enforcement programs. So it is important to not lose sight of our primary objective: do not be an attractive target to would be infringers and other bad actors. One way to achieve this objective is to remain vigilant and assertively enforce IP rights. These steps will make the company a less profitable endeavor to infringers than potentially other companies that are susceptible to counterfeiting and knockoffs. In other words, we want the bad guys to find softer targets through a reputation of vigorous enforcement.
Data Driven Success: What are Your Enforcement Program Numbers?
Because program wins and metrics were determined in the design stage, we can use the data generated in the campaign to monitor successes and uncover bottle necks. Often, one of the program stages is most responsible for driving program success. For example, in the luxury goods counterfeiting example discussed throughout this series, obtaining the sales audit information could be the keystone stage. Put another way, the quicker this stage is achieved, the greater the chance of satisfactory resolution. By isolating the critical stage(s), a program’s effectiveness can be enhanced. Because stopping counterfeiters is a dynamic problem, the critical stage could evolve over time. Careful data monitoring will provide guidance on this.
As time passes, infringers may change strategies, which may require registering additional IP to plug gaps. This should be considered as part of a “continuous quality improvement” commitment. Additional steps can include registering IP with Customs and Border Protection and registering brands with Amazon Brand Registry and other online marketplace enforcement tools. For businesses that sell through distributors, comprehensive agreements should be drafted to prevent unauthorized resellers from selling “gray market” goods.
“Moneyballing” the Enforcement Program
The Pareto principle holds that 20% of the inputs yield 80% of the results. While this may not be literally true, it is surprisingly accurate in predicting results. Armed with the data discussed above and stepping back from the program to get a big-picture view, the Pareto principle can be used to “Moneyball” the program to improve results by focusing on the critical drivers. Tracking each action in the program as well as program-level metrics can provide insights into what is working and what is holding performance down.
In one of our programs, through maintaining annual data for years, we were able to determine that 10-20% of actions yielded the vast majority of results. That lead to the conclusion that certain smaller actions had low return on investment (ROI) for both the client and our team. We were able to improve the bottom line by concluding small, straggler actions more quickly, thereby freeing us up to devote more attention to the few actions that generated the biggest results.
You can also “Moneyball” unsuccessful actions to reverse engineer better processes for dealing with difficult infringers and/or their outside counsel. By examining several of these, new solutions can be employed. For example, some counsel are notoriously difficult to negotiate with since they have created a business model about being difficult. One approach to undermine this strategy is to make a settlement demand and file suit quickly after they become difficult. A settlement letter under FRE 408 can be sent to the counsel explaining that his/her past dilatory tactics on other actions necessitated the filing of suit since the negotiations were not believed to be conducted in good faith, based on past experience. The counsel then is ethically required to share the settlement communication that recites his/her past actions. While this counsel has created a business model of being difficult, his clients will soon learn that they will likely be sued because of this behavior.
Continuous Quality Improvement Commitment
Because of the significant profit potential, infringers are generally committed to continuous quality improvement. Is your enforcement program? As a program matures and unexpected situations arise, we have an opportunity to improve our forms, processes, staffing, meeting pulse, and software tracking. Investing in these improvements likely results in a high ROI for the company and outside counsel. This commitment is one of the reasons I believe that the compensation arrangement for outside counsel should reward efficiency.
Thwarting Future Infringements
Even though the enforcement program may be firing on all cylinders and exceeding expectations, it is highly likely that new bad actors, new forms of infringement, and new marketplaces to perpetuate infringement will arise in the future. Therefore, it pays to be diligent regarding all these topics. Obviously, some forms of infringement are here to stay. For example, counterfeit luxury goods have been around for hundreds of years. But as technology has evolved so have the marketplaces to commit the infringement: individual sales on the sidewalk, flea markets, online marketplaces like eBay and Amazon, social media “flash sales,”and counterfeit websites. While we do not know what the future holds, you can pretty much guarantee new forms of infringement will occur.
Next Step – Growing Future Market Share through Proactive IP Strategy
Now that we have a program running effectively and efficiently to provide the predetermined “wins,” we turn our attention to the future. Infringers typically do not stand by and watch their business model die. As we discussed in the beginning of this post, one of the key principles of IP-enforcement program design is for the IP owner to not be an attractive target. Put another way, if the bad actors, like the Vikings a thousand years ago, perceive easy money is to be made by knocking off a company, infringers are sure to arrive—and potentially more troubling, return for more money. In our next post, we will discuss creating a proactive IP strategy to ward off these problems. See our post IP-Enforcement Programs: Growing Future Market Share Through Proactive IP Strategy for a discussion of the next step in the process.
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:
8 Steps to Structure Effective and Efficient IP Enforcement Programs
Protecting Brands From Infringement and Knock Offs - Part II Advanced Techniques
Brand Gating on Amazon: A Way to Help Prevent Counterfeiting
Does Your Amazon Package Include Counterfeit Goods? Preventing Organized Retail Crime
Counterfeit or Unsafe Product on Amazon: Unauthorized Seller Tactics
For more information about IP-enforcement and anti-counterfeiting programs, see our Anti-Counterfeiting and Luxury Brand pages. You can access additional information on our Brand Protection Strategies and Resources page.
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