Counterfeiters can capitalize on your work and position themselves as parasites on your reputation.
5 min read
This story originally appeared on Marijuana Venture
If imitation is the highest form of flattery, counterfeiting should be quite the compliment. But in the cannabis industry, like other industries, counterfeiting not only hurts a company’s bottom line but also weakens the value of its intellectual property — plus potentially exposes it to reputation risk and product liability litigation. So rather than taking counterfeiting as a sign of success, cannabis companies must consider swift and decisive action against counterfeiters.
By definition, counterfeiting is the intentional and calculated reproduction of a genuine product or brand with the purpose of misleading the buyer into believing that they are receiving the genuine product. We have seen this in other industries with fake iPhones, DVD movies and pirated copies of software, as well as countless other examples.
But what does this look like in the cannabis industry? For example, let’s say you create a new vape pen branded “MondoVapePen” that functions a certain way, has a high level of quality and offers certain features that make it different from competing products. Your brand name could become known for these qualities. Some people in the industry will believe that when they buy a MondoVapePen branded product with your snazzy MVP logo printed on the side, they are getting the highest-quality vape pen available. As sales of the MondoVapePen products increase, so will the interest of counterfeiters. If they can make a product that will trick consumers into thinking they are getting a MondoVapePen, these counterfeiters can capitalize on your work and make money off your invention.
The bad news doesn’t stop there. In general, counterfeit products end up being inferior copies of the original in order to save money and reduce production time, as well as because counterfeiters may be unable to fully reverse-engineer the original. So as counterfeit products begin to malfunction, turn out to be of substandard quality, prove to be dangerous or otherwise fail to match the standards of your original MondoVapePen product, your reputation is harmed as many consumers may not realize they bought a cheap knock-off rather than a real MondoVapePen. All of your work to build a reputation of a high-quality, unique product could quickly go up in smoke.
And things could get even worse. What if the counterfeit MondoVapePen product explodes in consumers’ faces, overheats and burns them or doesn’t function properly and causes damage? In cases like these, you may be hearing from regulators as well as attorneys representing the consumers hurt by these counterfeit products, who likely believe the purchases were genuine.
The practice of counterfeiting probably isn’t going anywhere anytime soon, but there are steps a company can take to combat it.
Protect your intellectual property rights.
As you are developing your brand and your products, take stock of all the forms of intellectual property rights attached and make sure you enact the proper protections. Patent, trade secret, trademark and copyright protections are your first line of defense to protect your brand, products and bottom line, as well as the long-term health of your company. Without proper intellectual property rights in place, your ability to defend your brand and your products could be greatly limited.
Be on the lookout for counterfeits.
Keep an eye out for counterfeit products, and act quickly and decisively. This may be as simple as a cease-and-desist letter, or it could mean initiating litigation to stop the counterfeiter. The longer the counterfeiting is allowed to continue, the greater the risk to your brand and your company. To spot counterfeiting as soon as possible after it begins, work with an intellectual property attorney to set up a state-of-the-art vigilance watch program. You should also work with your distributors and retailers to obtain reports of any tell-tale signs of counterfeiting, such as defective products.
Make sure your consumers are informed.
Develop ways for consumers to know they are buying your product. This may be as simple as posting a list of authorized retailers of your products on your website and notifying consumers that if they buy somewhere else they aren’t going to receive the genuine product. Additionally, you can utilize unique product coding, blockchain-based solutions or genetic markers for tracing. You can also incorporate hard-to-replicate holograms into your packaging.
Consult with your attorney.
For particular products that are in compliance with the Controlled Substances Act and other relevant laws, work with your attorney to ensure these products are protected by U.S. Customs and Border Protection. In April 2019, Customs and Border Protection seized more than 1,000 counterfeit Juul pods on their way from China to Delaware.
Adopt a proactive stance.
Enforcing your intellectual property rights in court may be the reactive step you take when you discover counterfeiting, but you could be taking proactive steps to prevent the counterfeiting before it starts — steps like registering your patents, trademarks and copyrights; setting up vigilance watches and securing confidentiality agreements that protect your trade secrets.
Without proper protections in the form of patents, trade secrets, trademarks and copyrights, enforcing your rights can become much more difficult and complicated. Counterfeiting is an illicit act of opportunity, and the more challenging you make that opportunity for a would-be counterfeiter, the less likely your products are to be coopied — and the more tools you’ll probably have at your disposal.