Nike, 3M Seek New Weapon in Battle Against Counterfeit Goods

(Bloomberg) -- Nike Inc. and 3M Co. are pressing Congress for more power to block imports of knockoffs at the U.S. border.

The companies are backing draft legislation that would give U.S. Customs and Border Protection the authority to seize goods believed to infringe patented designs. The proposal would extend to design patents the same protections given copyrighted and trademarked goods.

Currently, patent owners have to go through a trial at the U.S. International Trade Commission to get an import ban. That can be slow and expensive, particularly for smaller companies or those involved in the fast-changing fashion industry, said Beth Ferrill, vice chair of the industrial design committee of the Intellectual Property Owners Association, which backs the proposal.

The measure has the backing of North Carolina Republican Thom Tillis, chairman of the Senate Judiciary Committee’s intellectual property subcommittee; and Delaware’s Chris Coons, the top Democrat on the panel. Other Senate co-sponsors include Republican Bill Cassidy of Louisiana and Democratic Senator Mazie Hirono of Hawaii.

The proposed legislation is slated to be introduced Dec. 5, according to Adam Webb, spokesman for Tillis.

The trade in fake goods is estimated at 3.3% of all global commerce, according to a report by the Organisation for Economic Co-operation and Development. Brands from U.S.-based companies were the most copied, while China was the biggest source of counterfeit goods, the group said earlier this year.

Footwear, toys, and medical equipment, which can all be protected by design patents, were among the leading categories of seizures of counterfeit goods, the OECD study found.

Owners of copyrighted or trademarked work register their products with Customs, and, if they’re smart, educate workers at the checkpoint on ways to identify what’s real and what’s fake.

The problem, Ferrill said, is “we’re starting to see more sophisticated counterfeiting” at the U.S. border.

The importers will ship in the products separately from the trademark, and then attach the logo after they’ve entered the country, said Ferrill, a patent lawyer with Finnegan law firm in Washington.

In some instances, the containers are labeled as holding other types of goods. Nike sued a customs broker and shippers who had brought in containers listed as holding ceramic tile, but really held tens of thousands of knockoff Nike shoes. A judge last year found in Nike’s favor, but the case is still pending.

Design patents cover the non-functional appearance of a product. Some examples could be the outline of Apple Inc.’s iPhone or the tread on a pair of shoes or a tires. Unlike with a utility patent, which covers covers products such as technology and drugs, a design patent depends on the overall look of a product and doesn’t require a technical review comparing internal components.

Design patents have generated some controversy, particularly in the area of auto parts. Ford Motor Co. and General Motors Co. have been aggressive in using their design patents to block placement parts for items such as the molding, tailgate or bumper of their vehicles. Efforts to ease the rules when it comes to replacement parts have languished in Congress for a decade.

With impeachment hearings likely and an election next year, it’s doubtful anything will become law in this Congress but “we think it’s an important issue,” Ferrill said.

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