The Hobby Games Industry Needs to Up Its Game to Fight Counterfeiting
Intellectual Property News
Like many industries, the hobby games (HG) industry suffered from unprecedented counterfeiting problems in recent years. Despite steadily rising popularity, until recently HGs were not much affected by piracy and counterfeiting. As a result, creators of HG have traditionally relied on limited and low-cost forms of intellectual property (IP) to protect their creations, specifically common law trademarks and unregistered copyrights. This article explains why reliance on common law trademarks and unregistered copyrights is no longer adequate to protect creative investment in HGs, and explains simple and cost-effective ways to improve IP protection of HGs.
I. Takedown Procedures and Brand Registries: First Line of Defense
Among the methods available for enforcing IP rights, perhaps none is more cost effective than the use of non-governmental takedown notices and brand registries. Both systems facilitate the removal and/or prevention of online postings of counterfeit goods. Brand registries are preventative and reactive, whereas takedown notices are only reactive. Both are low cost and generally (but not universally) effective. Brand registries require IP registration, while takedowns benefit from them.
There are two kinds of takedown notices: those controlled by the Digital Millennium Copyright Act (DMCA) and notices controlled by online retailers’ own policies.
The DMCA created a non-judicial system in which a website host can legally protect itself from copyright infringement liability, if the host honors a request from the copyright holder to remove the copyrighted material. The DCMA does not relate to other forms of IP, such as trademarks or patents. A DCMA takedown notice itself is simple and inexpensive to prepare. The notice is simply a letter to the host making certain legally required statements. If the host removes the material in question, it is immune to liability for infringement. The person who posted the copyrighted material has a right to object; if that happens, the copyrighted material is replaced on the website, and the copyright owner has the burden of pursuing legal remedies. However, in practice only a small fraction of takedown requests are ever contested by the poster. The copyright may be unregistered for a DMCA takedown notice.
Online retail website hosts have set up web-based forms for requesting takedowns of content. These include other forms of IP, such as trademarks and patents. This makes the hosts’ own system more useful, especially when brand piracy is occurring. The hosts’ system generally requires registration numbers for the copyright, trademark, or patent involved. This provides assurances that the requester’s rights are legitimate, preventing the frivolous use of the system to harass competitors. If the requested information is provided, takedowns can occur surprisingly quickly, and at no cost to the requestor. Whereas a DMCA takedown notice does not require registration, it only pertains to copyright. In contrast, the hosts’ own systems cover a wider array of IP, but generally require that the IP be registered. Online retailers respond more quickly and reliably to takedown requests using their internal systems than to DMCA requests. Furthermore, Chinese online retailers are more responsive when the IP is registered in China.
Some online retail websites (notably Amazon) maintain “brand registries.” A brand registry is a list of trademarks, each associated with one or more authorized sellers. If a trademark is listed on a brand registry, the host will monitor sales listings for unauthorized use of the mark and provide the trademark owner with special tools for detecting unauthorized use. If unauthorized use is detected, the sales listing will be suspended and the trademark owner will be contacted. Brand registries generally require that the trademark be registered. Use of brand registries has the advantage that the host may prevent or take down an infringing listing on its own initiative. It is not foolproof, as counterfeiters are known to actively attempt to evade the hosts’ brand search algorithms. The trademark owner is also expected to police the site for its marks and inform the host of infringement.
II. Customs: A Strong Second Line
As virtually all counterfeit goods are imported, U.S. Customs and Border Protection (CBP) plays an important role in controlling counterfeiting by impounding shipments at port if counterfeit goods are found.
CBP looks for unauthorized trademarks and copyrighted materials that are listed on CPB’s registry. To record a trademark or copyright with CBP, the owner must first register that trademark or copyright with the USPTO or the Library of Congress, respectively. CBP does not enforce rights in unregistered IP or patents. The IP owner must include a list of authorized importers (or a statement that there a no authorized importers). Additional information may be included; CBP encourages IP owners to include any information that could be useful to them in intercepting counterfeits. CBP registration is very inexpensive and enlists a large federal agency in preventing counterfeits entering the U.S. Once the trademark or copyright has been recorded with CBP, there is no further burden on the IP owner. Although interception rates are low (about 5 percent), in the aggregate a huge amount of counterfeit goods are intercepted every year.
III. Litigation: A Net for Only the Biggest of Fish
Ultimately, any legal claim can be heard by a court. Federal courts have jurisdiction to enforce patents, registered trademarks, unregistered trademarks, registered copyrights, and trade secrecy rights. State courts have jurisdiction over enforcement of unregistered trademarks and trade secrecy, but not copyright, federally registered trademarks, or patents. Like the other mechanisms described above, courts can order sales listings to be taken down and order the impoundment of counterfeit imports, as well as award monetary damages. In short, courts’ powers are broad, both in terms of the kinds of rights they can enforce and the kinds of remedies they can grant.
Courts enforce patents, and games can be patented through the use of design patents. Design patents are less expensive than the more common utility patents, but only protect the appearance of the game. Any aspect of the game with aesthetic appeal can be protected by a design patent. Although designs can also be protected by copyright and “trade dress,” design patents have the distinct advantage of protecting types of subject matter that cannot be protected under either copyright or trade dress. For example, no aspect of a product that adds value to the product can be considered trade dress, and nothing functional can be protected by copyright. Design patents have no such limitations.
The disadvantages of court proceedings are well known: They are extremely expensive (often running into the millions of dollars) and extremely slow (taking years). The value of the infringement must be in the millions to warrant this step, and the offending party must have the ability to compensate for its harm. Thus, litigation is only worthwhile against a very large entity that has engaged in extensive counterfeiting or other infringement. The cost of litigation can be reduced by either retaining counsel that will accept a percentage of the monetary award as payment, or by obtaining litigation financing from a third party (a loan that is repaid by part of the award). Small companies can sometimes band together in class action suits to pursue large infringers, sharing the costs and splitting the award.
IV. Simple Steps Can Control Routine Counterfeiting
As explained above, there are multiple levels of protection provided by various approaches to protecting IP. Some are proactive, others reactive. Each covers specific types of IP. They afford different kinds of relief. Any HG company with a popular game can benefit from registering the trademarks associated with the game. This enables the use of cost-effective prevention measures, such as use of brand registries and CBT registration. It also usually enables the use of site providers’ takedown systems, which are low cost and generally effective.
The same benefits can be realized by registering the copyright in a game, which will allow action to be taken if the visual or textual aspects of a game have been intentionally copied (even if it is not falsely sold under an infringing trademark).
In addition, design patents can be used to protect the ornamental appearance of game parts. They are enforced by many takedown systems run by online retail website hosts, and can be enforced by federal courts.
Significant protection from counterfeit imports can be obtained in four simple and inexpensive steps:
- Registering at least the most prominent trademarks used on the game in the U.S. and China.
- Registering the copyright in the game in the U.S. and China.
- Recording the U.S. registrations with CBP.
- Listing the mark on one or more brand registries run by online retail platforms.
- Optionally, design patenting the distinctive components of particularly valuable games or paraphernalia.
Such steps will result in CBP watching for counterfeit imports and online retail platforms watching for unauthorized use of your mark. Having a registered copyright, trademark and/or design patent will also enable the use of takedown systems maintained by online retail platforms in response to attempts to sell counterfeit goods online.
Although enforcing IP rights through the use of the court system has a justifiable reputation for high expense and slow progress, the use of non-judicial methods can be used to stem the tide of counterfeiting at a low cost and with little effort. However, the first step is the traditionally neglected step of IP registration.
Although there was a time when HG counterfeiting was so unusual that there was little reason to register IP in HGs, that time is now in the past. Thanks to changes in technology and HG popularity, counterfeiting is now widespread. Thanks to changes in the law and good faith efforts of online retailers, IP protection is also simpler and less expensive. Those in the HG industry should take advantage of these changes in the law to control counterfeiting, as have others in creative industries.