Enforcing Laws Through Private Regulatory Regimes: The Case of Trademark Infringement

Natasha Tusikov, October 2011 Regulatory Institutions Network, Australian National University

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ENFORCING PUBLIC LAWS THROUGH PRIVATE REGULATORY REGIMES:

THE CASE OF TRADEMARK INFRINGEMENT NATASHA TUSIKOV1

Since the mid-1990s, industry and intellectual property (IP) groups have strategically

transformed trademark infringement from a commercial concern into a public security

problem on the grounds that it threatens states’ economic integrity and poses

serious health and safety concerns.2 This privately constructed ‘public’ security

threat is addressed by a non-traditional security institution, a transnational private

regulatory regime3 largely comprised of brand owners (e.g., Gucci) industry

associations, private security companies and public law enforcement agencies.

These private regimes challenge notions of traditional, state-centric security

institutions and clear demarcations between public and private regulatory

responsibilities. As this paper observes, these regimes encompass a broad array of

regulatory structures, activities, types of authority, and interactions among

regulators, regulatees, and beneficiaries of regulation.

This paper examines how private institutions use civil and criminal law, as well as

non-legal strategies such as educational campaigns, to counter trademark

infringement. It builds upon studies of the private regulation of copyright and patent

infringement4 to address significant gaps in the criminological and policing literatures

regarding the enforcement of trademark law.5 Furthermore, the paper aims to

contribute to our understanding of how transnational private regulatory regimes

enforce public laws. Its exploration of trademark infringement raises critical questions

of how to balance public-private interests and how this affects the private

enforcement of publicly set laws.

1PhD candidate at the Regulatory Institutions Network at the Australian National University. 2See Peter Drahos and John Braithwaite, Information Feudalism: Who Owns the Knowledge Economy? New York: The New Press, (2002). 3For an excellent discussion of these regimes, see Colin Scott, ‘Private Regulation of the Public Sector: A Neglected Facet of Contemporary Governance’ (2002) 29(1) Journal of Law and Society, 56-‐76; Colin Scott, Fabrizio Cafaggi and Linda Senden, ‘The Conceptual and Constitutional Challenge of Transnational Private Regulation’ (2011) 38(1) Journal of Law and Society 1-‐19; and Fabrizio Cafaggi, ‘New Foundations of Transnational Private Regulation’ (2010) 53 European University Institute, Robert Schuman Centre for Advanced Studies <http://cadmus.eui.eu/handle/1814/15284> 1-‐40. 4See, especially, Peter Drahos, ‘Securing the Future of Intellectual Property: Intellectual Property Owners and Their Nodally Coordinated Enforcement Pyramid’ (2004) 36(1) Case Western Reserve Journal of International Law, 53-‐77; and Scott, above n 3. 5Scholarship on trademark infringement primarily focuses on how firms can detect counterfeits, deter their manufacture, and dissuade consumers from purchasing them. Notable exceptions focusing on enforcement include Simon Mackenzie, ‘Counterfeiting as corporate externality: intellectual property crime and global insecurity’ (2010) 54 Crime, Law and Social Change, 21-‐38; and David S. Wall and Joanna Large, ‘Jailhouse Frocks: Locating the Public Interest in Policing Counterfeit Luxury Fashion Goods’ (2010) British Journal of Criminology, 50 1094-‐1116, 1113.


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‘Regulation’ here refers broadly to the means that guide any activity, individual or

institution to behave according to formal or informal rules.6 Regulatory regimes,

whether public or private, focus on setting standards, monitoring compliance, and

issuing sanctions for non-compliance.7 Private regimes can derive their power from

statutory or contractual mandates, or if they lack such a mandate, they can wield

power through their wealth, organisation, information or authority.8 Regulatory actors

may undertake a range of different or overlapping responsibilities in the regulation of

trademark infringement. While some actors wield coercive power, others use a

variety of persuasive techniques, such as shaming or educating, to protect

trademarks.

This paper is divided into six sections. After an introduction of the concepts of

intellectual property and trademark infringement in the first section, the second

section argues that the conceptualisation of trademark infringement has shifted from

that of a commercial dispute to that of a serious crime affecting the public, but which

is addressed primarily through private enforcement. The third section explores the

concept of transnational private regulatory regimes and discusses how the network

of mostly private institutions dedicated to trademark infringement comprises such a

regime. The fourth section describes enforcement activities in terms of the

‘regulatory pyramid’.9 This pyramid is an appropriate concept for a discussion of

private regimes as it enables regulators to progress from using ‘soft’ tools at the

base of the pyramid (e.g., warnings) to more coercive, ‘hard’ tools at its apex (e.g.,

incarceration).10 Analysis in the fifth section focuses on the role played by private

security companies in the investigation of this issue on behalf of brand owners, a

critically under-examined area in the criminological and policing literatures. The

paper concludes in the sixth section with a reflection on how transnational private

regulatory regimes challenge our understanding of security institutions, particularly

the division of regulatory responsibilities among actors and the balance between

private interests and public resources.

6Sol Picciotto, ‘Reconceptualising Regulation in the Era of Globalisation’ (2002) 29(1) Journal of Law and Society 1-‐11, 1. 7Peter J. May, ‘Regulatory regimes and accountability’ (2007) 1 Regulation & Governance 8-‐26, 9. 8Scott, above n 3, 62. 9Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate, Oxford: Oxford University Press (1992). 10Ibid.


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I. INTELLECTUAL PROPERTY

Despite the entrance of copyright and patents into the mainstream of academic and

public debate, intellectual property, which includes trademarks, remains a highly

specialised and often-misunderstood subject. It is therefore important to clarify

trademarks’ functions and characteristics. Trademarks — a type of ‘industrial’

intellectual property along with patents, industrial designs and trade secrets11 — are

intended to identify the commercial origin of goods (e.g., Nike) and enable

consumers to distinguish specific goods from other similar offerings in the

marketplace. They consist of words, numerals, symbols, colours, audible sounds,

fragrances, three-dimensional shapes, pictures, or a combination of these or other

characteristics.12 Copyright and patents expire after certain period (e.g., for

copyright, often a minimum of life of the author plus 50 years). Trademarks have no

expiry date. They can be renewed indefinitely so long as they are used and

defended against infringement.

Successful trademarks acquire significant commercial value. Top global brands,

such as Coca-Cola and IBM, are each worth billions of dollars,13 making their illicit

appropriation (i.e., infringement) a profitable activity. Goods that infringe trademarks

(i.e., counterfeit goods) are defined as

any goods, including packaging, bearing without authorization a trademark

which is identical to the trademark validly registered in respect of such goods,

or which cannot be distinguished in its essential aspects from such a

trademark, and which thereby infringes the rights of the owner of the

trademark in question under the law of the country of importation.14

Traditionally, the protection of intellectual property rights occurred within what can be

termed a ‘classical’ model of enforcement. Within this model, trademark infringement

was understood as a private commercial concern for which a resolution was

11The other category of intellectual property refers to copyright and related rights granted to the authors of literary and artistic works, and the rights of performers, producers of phonograms and broadcasting organizations. 12Agreement on Trade-‐Related Aspects of Intellectual Property Rights, opened for signature 15 April 1994, s 2, art 15(1) (entered into force 1 January 1995) (‘TRIPS’). 13See Interbrand, Best Global Brands 2010 <http://www.interbrand.com/en/best-‐global-‐brands/Best-‐Global-‐Brands-‐2010.aspx> at 19 August 2011. 14TRIPS, opened for signature 15 April 1994, s 4 art 51 14(a) (entered into force 1 January 1995).


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generally sought through civil remedies.15 Infringement was understood to cause

primarily financial losses to the affected company and possibly reputational damage

to a specific company and brand.16 Infringement was addressed by a small network

of private actors, specifically, the affected brand owner, in-house legal counsel or

legal firms specialising in intellectual property rights, and, depending on the size of

the affected firm and the nature of the infringement, private investigators.17 Public

authorities played a limited role in tracking down offenders or infringing goods.

II. RECONCEPTUALISING TRADEMARK INFRINGEMENT

The shift away from this classical model to one that conceptualises trademark

infringement as a serious crime against the public occurred through the 1995

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).18

TRIPS officially set the stage globally for the securitisation of intellectual property

infringement by requiring member states to criminalise trademark and copyright

infringement and to adopt both civil and criminal penalties.19 In doing so it became

the first multilateral IP regime to incorporate enforcement mechanisms.20 Through its

global standards for IP protection, it also simplified enforcement efforts along one

common (specifically, U.S.-led) line. As the agreement applies to all members of the

World Trade Organisation, TRIPS established a global IP protection baseline, or

‘floor,’ that all other trade agreements21 would subsequently ‘raise’ in terms of

stronger enforcement mechanisms and tougher penalties against infringement.22

This global floor constrains states’ options relating to intellectual property

infringement, imposing a relatively rigid system of enforcement and penalties

15For a historical perspective of IP protection, see Peter May and Susan Sell, Intellectual Property Rights: A Critical History, Boulder, Co.: Lynne Rienner Publishers (2005). 16Counterfeiting is not a modern phenomenon. For centuries, swindlers have deliberately passed off imitations of a wide array of goods as genuine, some of which were dangerous or toxic. Unscrupulous manufacturers also peddled toxic or shoddy products under their own brands. See Bee Wilson, Swindled: The Dark History of Food Fraud, from Poisoned Candy to Counterfeit Coffee Princeton: Princeton University Press (2008) and Benjamin G. Paster, ‘Trademarks—Their Early History’ (1969) 59 Trademark Reporter 551-‐572. 17Gregor Urbas, ‘Criminal Enforcement of Intellectual Property Rights: Interaction Between Public Authorities and Private Interests’ in Christopher Heath and Anselm Kamperman Sanders (eds), New Frontiers of Intellectual Property Law: IP and Cultural Heritage – Geographic Indications – Enforcement – Overprotection, Portland, Oregon: Hart Publishing (2005) 303-‐322. 18TRIPS, opened for signature 15 April 1994 (entered into force 1 January 1995). See Drahos and Braithwaite, above n 2. 19TRIPS, opened for signature 15 April 1994, s 5 art 61 (entered into force 1 January 1995). 20Susan K. Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights Cambridge: Cambridge University Press (2003). 21Such as the Anti-‐Counterfeiting Trade Agreement, opened for signature 1 October 2011 (not yet entered into force) (‘ACTA’). ACTA was signed by the United States, Australia, Canada, Korea, Japan, New Zealand, Morocco, and Singapore. 22See Drahos and Braithwaite, above n 2 and Susan K. Sell, ‘The Global IP Upward Ratchet, Anti-‐Counterfeiting and Piracy Enforcement Efforts: The State of Play’ Program on Information Justice and Intellectual Property, Research Paper no. 15, American University Washington College of Law, Washington, D.C. (2010) <digitalcommons.wcl.american.edu/research/15/> at 10 May 2011.


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standards.23 However, it gives IP owners more legal avenues (i.e., both civil and

criminal remedies) through which to pursue infringement claims.24

TRIPS was the result of lobbying by key U.S. industry officials who successfully

argued that unfair foreign trading practices were endangering U.S. economic

hegemony.25 Intertwined with this powerful narrative were claims of rampant and

rapidly increasing rates of infringement.26 TRIPS itself explicitly refers to “the

international trade in counterfeit goods”27 as one of the key reasons for its existence.

TRIPS thus formalised a fundamental re-conceptualisation of trademark infringement

as a serious crime. Once it was understood as such, many researchers ranked it

alongside other serious transnational crimes, such as illicit drugs and weapons

smuggling.28 Others argued that some cases of infringement are linked to

transnational organised crime and possibly even terrorist networks, though evidence

for these linkages is generally weak.29 Following its transition from a commercial

dispute to a serious, transnational crime, IP associations and some governmental

agencies repeatedly linked trademark infringement to significant health and safety

problems.30

Trademark infringement provokes rather conflicted regulatory responses. Industry

and IP groups are powerful lobbies for the continual ‘ratcheting up’ of protection of

intellectual property.31 They generally argue that greater public resources should be

dedicated to countering trademark infringement because it threatens economic

integrity and creative activity, has linkages to organised crime, and is a prohibitive

cost for brand owners to enforce alone.32 However, some brand owners are reluctant

23See Sell, above n 22, 8 and Peter Drahos ‘Thinking strategically about intellectual property rights’, (1997) 21(3) Telecommunications Policy 201-‐211, 202-‐203. 24Sell above n 22, 8. That TRIPS would strongly tilt the balance of intellectual property protection in favour of intellectual property owners is not surprising since the agreement was the outcome of intense lobbying by a small number of U.S. industry representatives, see Drahos and Braithwaite, above n 2. 25See Drahos and Braithwaite, above n 2. 26See the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy, <http://www.bascap.com/> at 15 August 2011 and the Global Congress Combatting Counterfeiting and Piracy, < http://www.ccapcongress.net/> at 12 August 2011. 27TRIPS, opened for signature 15 April 1994, Preamble (entered into force 1 January 1995). 28See, for example, Serious Organised Crime Agency, The United Kingdom Threat Assessment of Organised Crime (2010) <http://www.soca.gov.uk/threats> at 19 September 2011. 29See Frank Padavan, The Counterfeit Connection: The Counterfeit Goods Trade, Intellectual Property Theft and Terrorist Financing, New York State Senate Majority Task Force on Immigration (2005) 1-‐108 <http://www.nysl.nysed.gov/scandoclinks/ocm64225740.htm> at 7 September 2011. 30See the Global Congress Combatting Counterfeiting and Piracy reports on the first to sixth Global Congresses, <http://www.ccapcongress.net/archives.htm> at 11 May 2011. 31See Sell, above n 22. 32Urbas, above n 17, 305.


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to admit publicly that their goods are being counterfeited and appear ambivalent

about enforcement efforts.33 Some public authorities voice concern about using

public resources to counter what they view as an industry problem,34 while others

attack counterfeiting with apparent zeal.35 However, any public enthusiasm for

addressing counterfeiting in a strategic, concerted manner is generally dampened by

arguments that investigations are often complex and lengthy with low prosecution

success rates and low penalties.36 As a result, public-sector involvement in

counterfeiting cases varies widely. Thus, while the regulation of this (public) security

threat is largely private, it shifts somewhat uneasily between the public and private

sectors as each argues that the other should take up more of the regulatory burden.

III. TRANSNATIONAL PRIVATE REGULATORY REGIMES

The broad network of mostly private institutions involved in regulating trademark

infringement is comprised of brand owners, intellectual property associations, law

firms, anti-counterfeiting associations, dedicated regulatory bodies, private security

companies, governmental and non-governmental agencies, and public law

enforcement agencies.37 This network can be understood as constituting a

transnational private regulatory regime. Transnational private regulation involves a

“body of rules, practices and processes, created primarily by private actors [. . .]

exercising autonomous regulatory power or implementing delegated power,

conferred by international law or by national legislation.”38 Private regulatory regimes

comprise “the full set of actors, institutions, norms and rules that are of importance

for the process and the outcome of [. . .] regulation in a given sector”.39 The principle

33See Mackenzie, above n 5 and Wall and Large, above n 5. 34For example, high-‐level U.S. government officials have reservations about policing intellectual property infringements, as demonstrated in a 2008 letter obtained through a Freedom of Information Act request. In this letter, Stewart Baker, the Assistant Secretary for Policy at the Department of Homeland Security complained to the Office of the United States Trade Representative about ACTA, saying the “cost of enforcing private rights, such as trademarks, can reasonable be placed on the beneficiary” and that ACTA could limit the ‘discretion’ that customs agencies have in enforcing intellectual property rights. Nate Anderson, ‘Unhappy Mounties sick of being private copyright cops’, ars technica, 4 May 2011 <http://arstechnica.com/tech-‐policy/news/2011/05/unhappy-‐mounties-‐sick-‐of-‐being-‐private-‐copyright-‐cops.ars> at 13 May 2011. 35For example, the U.S. Immigration and Customs Enforcement (ICE) conducts ‘Operation In Our Sites’ in which rights-‐holders refer allegedly infringing websites to ICE which seizes the domain names pursuant to federal warrants and then redirects the sites to display a seizure notice. See <http://www.iprcenter.gov/reports/fact-‐sheets/operation-‐in-‐our-‐sites/view> at 25 October 2011. This operation is controversial with U.S. Senator Ron Wyden (D-‐OR) arguing that the “domain name seizure process does not appear to give targeted websites an opportunity to defend themselves before sanctions are imposed.” Nate Anderson, ‘Senator: domain name seizures ‘alarmingly unprecedented’’ ars technica 2 February 2011 <http://arstechnica.com/tech-‐policy/news/2011/02/senator-‐us-‐domain-‐name-‐seizures-‐alarmingly-‐unprecedented.ars> at 25 October 2011. 36Urbas, above n 17, 306. 37See Drahos, above n 4 in which he explores the public and private institutions focusing on IP as a nodal pyramid. 38Fabrizio Cafaggi, ‘The Architecture of Transnational Private Regulation’ (2011) 12 European University Institute, Department of Law 1-‐19 <http://cadmus.eui.eu/handle/1814/18256?show=full> at 15 September 2011. 39Eberlein and Grande 2005, 91 cited in Scott et al., above n 3, 7.


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elements of an effective regulatory regime — rule setting, monitoring, and

enforcement — are not necessarily located within a single organisation, and roles

may be divided amongst different actors.40

One can distinguish among various private regimes by examining who establishes

the rules, the type of mandate the regime operates within, and who oversees and

performs enforcement duties. Rules or standards can be set publicly, privately, or be

some combination of the two. The protection of trademarks, for example, is based

upon publicly set standards, such as TRIPS or the U.S.-led 2010 Anti-Counterfeiting

Trade Agreement (ACTA),41 though private actors have been instrumental in shaping

those standards.42 Privately set standards, such as codes of corporate social

responsibility adopted by individual firms or by corporate associations, can regulate

non-state institutions. These standards can also be applied to states, such as credit-

ratings agencies that use private standards to rank state’s fiscal health. Public and

private standards can build upon one another. For example, some animal welfare

organisations, such as the Royal Society for the Protection of Animals, set private

standards that over time are adopted by governments as they become widely

accepted.

The nature of a private regime’s mandate, whether statutory, contractual or lacking

formal authority, is also an important characteristic, particularly in reference to the

source and type of authority that permits the regime to act.43 Private regulators may

have a statutory mandate for monitoring or enforcing civil or criminal laws, or

undertaking specific duties such as inspections or audits.44 For example, the private

security company Serco operates immigration detention facilities in Australia on

behalf of the Australian Department of Immigration and Citizenship. The regimes’

mandate may be contractual, such as a self-regulatory advertising standards

association, or it may offer certifications, such as those provided by the International

Standards Organisation.45 Private regulators may also lack a formal mandate and, as

a result, instead conduct regulatory activities through public-interest litigation (e.g.,

40Scott et al., above n 3 and Scott, above n 3, 60. 41ACTA opened for signature 1 October 2011 (not yet entered into force). 42Drahos and Braithwaite, above n 2 and Sell, above n 22. 43Scott, above n 3, 62. 44Ibid. 45Scott, above n 3, 62.


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the American Civil Liberties Union), dissemination of information (e.g., credit rating

agencies) or organising individuals into direct-action campaigns (e.g.,

Greenpeace).46 Absent a legal mandate, organisations in this category can be highly

influential by using their wealth or resources, their possession and distribution of

information, and their capacity to sway the public or policymakers’ opinions.47

A The Private Regulation of Trademark Infringement

The transnational private regulatory regime regulating trademark infringement is

comprised of an array of firms, trade associations, and non-governmental

organisations (e.g., the International Anti-Counterfeiting Association). Public

institutions overall play a relatively minor role.48 Some associations formally or

informally act as a ‘voice’ for multiple other IP-related associations49 in order to

coordinate lobbying efforts. The regime represents a broad array of industries,

ranging from electronics, apparel and accessories, pharmaceuticals, cosmetics and

perfumes to tobacco, food and the automotive sector, with the objective of protecting

and strengthening trademark rights.

The private trademark regime lacks a legal mandate or contractual power, which

means that it must use existing public standards (i.e., civil and criminal law) to

counter trademark infringement.50 Actors within the regime are extremely influential

in using an array of activities, namely lobbying, litigating, shaming and educating to

regulate trademark infringement and these strategies will be explored in more detail

below. The regime’s actors regulate states by lobbying for enhanced protection and

shaming for inadequate provisions. They also regulate specific firms or industry

sectors that may be asked institute a specific response to deter infringement, such

as the International Trademark Association’s ‘Best Practices for Addressing the Sale

of Counterfeits on the Internet.’51 The regime’s members also target individuals,

46Ibid. 47Scott, above n 3, 66. 48Although the regime is transnational, organisations and agencies from the United States dominate the setting of standards and rules that are then disseminated internationally, see Drahos and Braithwaite, above n 2 and Sell, above n 22. 49For example, the United Kingdom-‐based Alliance Against Intellectual Property Theft represents multiple trade and enforcement organisations including the Federation Against Software Theft, the Business Software Alliance, and the Motion Picture Association. See <http://www.allianceagainstiptheft.co.uk> at 1 September 2011. 50See Scott, above n 3. 51See the International Trademark Association, Best Practices for Addressing the Sale of Counterfeits on the Internet <http://www.inta.org/Advocacy/Pages/Anticounterfeiting.aspx> at 28 September 2011.


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firms, organisations and states that its members suspect of committing or facilitating

trademark infringement, such as websites that provide access to counterfeit goods.52

IV. THE (PRIVATE) REGULATORY PYRAMID

Transnational private regulatory regimes are therefore relatively complex, particularly

when they involve multiple regulatory stakeholders and regulatees, and a range of

regulatory strategies, as is the case with trademarks. These regimes are also often

of a hybrid nature, containing an amalgam of hard- and soft-law instruments and

cooperation (and competition) between governmental and non-governmental

actors.53 Given this complexity, the next

section draws upon the concept of the

regulatory pyramid (see Figure I) to

explore and visualise how this regime

operates and to discuss its regulatory

strategies in detail. This pyramid, which

recognises the involvement of non-

governmental actors in regulatory

activities, is a useful way to analyse

these regimes.54

A Persuasion

At the base of the regulatory pyramid for trademark infringement there are a range of

strategies, particularly lobbying, shaming and educating, that can be influential in

changing behaviour.

1 Lobbying

52This regulation is intended to benefit the private-‐sector firms, associations and agencies that are comprise this regime through the deterrence or prosecution of trademark infringement. The general public can also be considered a beneficiary if the regulatory efforts decrease the health and safety risks from dangerous or toxic counterfeits. 53Scott et al., above n 3, 11. 54See Drahos, above n 4 and Peter Grabosky, ‘On the interface of criminal justice and regulation’ In Hannah Quirk, Toby Seddon and Graham Smith (eds) Regulation and Criminal Justice: Innovations in Policy and Research, Cambridge: Cambridge University Press (2010) 72-‐100.


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As part of their broader lobbying strategies for enhanced protection for intellectual

property in general, many IP associations also campaign specifically for stronger

enforcement mechanisms. For example, the Global Congress on Combatting

Counterfeiting and Piracy, the International Trademark Association, and the

International Chamber of Commerce’s Business Action to Stop Counterfeiting and

Piracy (BASCAP)55 use their networks to advocate for strengthened enforcement at

both international and domestic fora. They advocate for more coordinated and

effective partnerships between law enforcement agencies and the private sector,

particularly in terms of data sharing, intelligence sharing, and training, demand more

public resources to counter, and lobby countries to place a higher priority on these

issues. Associations like these act as an umbrella representing multiple trade and

anti-counterfeiting bodies, thus amplifying the associations’ ability to present a

relatively unified voice on issues of enforcement and enabling them to lobby more

effectively and with greater intensity. They also link the largest and most powerful

brand owners and their industry associations to key intergovernmental organisations

with a role in intellectual property enforcement, such as Interpol (IP Rights

Programme), the World Customs Organisation (Enforcement and Compliance), the

World Intellectual Property Organisation (Advisory Committee on Enforcement), the

United Nations Inter-regional Crime and Justice Research Institute and the European

Observatory on Counterfeiting and Piracy.

2 Shaming

Intellectual property rights groups operate campaigns intended to shame states (and

individuals) involved in trademark infringement.56 For example, BASCAP launched

the campaign ‘Fakes Cost More, I Buy Real!’57 Two United Kingdom-based groups,

the Alliance Against Intellectual Property Theft and the Anti-Counterfeiting Group,

respectively operate ‘Real Deal: Working Together to Ensure Fake-Free Markets’

and ‘Get Real…Say No to Fakes’ to encourage the sale and purchase of genuine

55The Global Congress, convened in 2004 by the World Customs Organisation, INTERPOL, and the World Intellectual Property Organisation who then invited representatives from the International Chamber of Commerce/Business Action to Stop Counterfeiting and Piracy, and the International Trademark Association, holds global meetings on a near-‐annual basis comprising representatives from industry and their peak bodies, inter-‐governmental agencies, and security and policing organisations. 56Of course, the most influential governmental effort to shame states for their treatment of intellectual property rights is undertaken by the Office of the U. S. Trade Representative (USTR) through its Special 301 Process. Each year, the USTR ranks countries with problematic records toward IP protection as “Watch List” or the more serious “Priority Watch List.” 57See <http://www.ibuyreal.org/> at 1 October 2011.


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products.58 Brand owners expend significant effort trying to understand consumer

attitudes and behaviours toward counterfeiting and, more importantly, modify

unwanted behaviour.59 Despite these campaigns, however, research indicates that a

sizeable percentage of the general public continues to purchase counterfeit goods,60

meaning that brand owners must continue to fight an uphill (and perhaps ultimately

futile) battle against consumers’ preferences.

3 Educating

IP associations use estimates costing the consequences of trademark infringement

to shape a narrative arguing that this issue threatens state’s economic integrity. For

example, Frontier Economics, in a study commissioned by BASCAP, estimates the

combined domestic and international trade to be worth as much as US$650 billion

annually with projections, if growth continues at a rate of 15% annually, of US$960

billion by 2015.61 While counterfeiting is certainly responsible for economic losses to

industry brand owners, there is considerable debate regarding the extent of losses

and how they should be valued.62 Moreover, this narrative often conflates trademark

infringement with dangerous counterfeit goods although not all counterfeit goods

pose safety problems. Counterfeit ‘safety-critical’ goods, such as pharmaceuticals,

medical equipment or aircraft parts, pose a far greater risk than counterfeit luxury

apparel. Thus, brand owners and intellectual property associations play a powerful

role in shaping how trademark infringement is conceptualised and how it should be

enforced.

B Civil and Criminal Penalties

58See <http://www.allianceagainstiptheft.co.uk/downloads/campaign-‐pdfs/real%20deal.pdf> and <http://www.a-‐cg.org/guest/pdf/GetRealeaflet2008.pdf> at 15 August 2011. 59For example, see BASCAP, 2009, Research Report on Consumer Attitudes and Perceptions on Counterfeiting and Piracy, sponsored by ICC BASCAP (Business Action to Stop Counterfeiting and Piracy) and carried out by StrategyOne. <http://www.iccwbo.org/uploadedFiles/BASCAP/Pages/BASCAP-‐Consumer%20Research%20Report_Final.pdf> at 11 August 2011. 60For example, see Jason Rutter and Jo Bryce, ‘The Consumption of Counterfeit Goods: ‘Here Be Pirates?’’ (2008) 42(6), Sociology, 1146-‐1164. 61This study is based on 2008 data. See Frontier Economics 2011, Estimating the global economic and social impacts of counterfeiting and piracy, A Report Commissioned by Business Action to Stop Counterfeiting and Piracy (BASCAP), Frontier Economics Ltd., London, United Kingdom, February 2011 <www.iccwbo.org/uploadedFiles/.../Global%20Impacts%20-‐%20Final.pdf> at 4 May 2011. 62For example, see United States Government Accountability Office, Intellectual Property: Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods (2010) Report to Congressional Committees, GAO-‐10-‐423, 12 April 2010 <www.gao.gov/products/GAO-‐10-‐423> at 18 September 2011. This report noted that it was difficult to quantify the economic effects of intellectual property infringement and argued that existing estimates are methodologically problematic. See Wall and Large, above n 5.


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Moving up the pyramid from the strategies described above, regulators have more

coercive options at their disposal. Acting on behalf of brand owners, actors within

private regimes can pursue civil remedies for trademark infringement in isolation of

public law enforcement agencies, for example, undertaking civil litigation. However,

as the private regime lacks a formal mandate for its enforcement, its regulatory

activities do not stretch to the top of the pyramid. If private actors within the regime

wish to seek criminal prosecution in relation to trademark infringement, public law

enforcement agencies must agree to provide assistance.63 Lacking this cooperation,

the private regime does not have access to the most coercive tools at the apex of the

regulatory pyramid.

1 Litigation

Brand owners use litigation or the threat of litigation to protect their trademarks from,

for example, use by unauthorised third parties or use resulting in a likelihood of

confusion.64 Owners “have a legal right and an affirmative obligation to protect their

trademark assets from misuse”; this requires the owner to “proactively police the

relevant market and enforce its rights against violators”.65 The owner may serve

cease-and-desist letters to alert the alleged violator of the owner’s rights and, if this

action is unsuccessful, then file a lawsuit. In terms of regulation, such litigation can

serve to address a particular case of infringement as well as developing precedents

for application to other cases.66 However, there is an important balance to be

achieved between the appropriate protection of trademark rights and when

trademark enforcement tactics become unreasonable and abusive. Many brand

owners undoubtedly undertake reasonable litigation tactics. However, critics of what

is sometimes called ‘trademark bullying’ argue that aggressive and abusive litigation

tactics can harm consumers and small businesses that generally do not have the

resources to counter allegations of infringement.67

63Scott, above n 3, 72-‐73. 64TRIPS, opened for signature 15 April 1994, art 16 (entered into force 1 January 1995). Grounds also include alleged ‘brand dilution.’ 65United States Department of Commerce, Report to Congress: Trademark Litigation Tactics and Federal Government Services to Protect Trademarks and Prevent Counterfeiting, Conducted by United States Patent and Trademark Office, 27 April 2011 <www.uspto.gov/ip/TMLitigationReport_final_2011April27.pdf> at 26 October 2011, 6. This study of the extent to which small businesses may be harmed by abusive trademark enforcement tactics was a requirement of Public Law 111-‐146: Trademark Technical and Conforming Amendment Act of 2010, signed 17 March 2010. 66Scott, above n 3, 72-‐73. 67For example, the technology and intellectual property websites techdirt <http://www.techdirt.com> and ars technica <http://arstechnica.com/> both critique cases of abusive trademark litigation. See also Leah Chan Grinvald, ‘Shaming Trademark Bullies’ (2011) 3 Wisconsin Law Review 627-‐688, 642. Grinvald outlines four characteristics of trademark bullying: (1) unreasonable interpretation


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Detecting infringing goods and locating alleged counterfeit manufacturers and

distributors, as well as obtaining evidence can be a time-consuming activity for brand

owners focused on the creation and manufacture of new products. Some brand

owners have in-house security units to scour retail outlets and websites for

infringement while others contract out these services. Private security companies

play an important role as the ‘enforcement arm’ for the private regime. Despite this,

the companies’ activities in investigating and obtaining evidence of trademark

infringement on behalf of brand owners have hitherto been largely unexamined.

V The Long (Private) Arm of the Law

Private actors have performed various security-related duties for centuries. The

contemporary private security industry traces its origins to the eighteen-century

England and France.68 The vast contemporary private security industry includes

such diverse activities as guarding (static or patrol), surveillance, investigation,

intelligence, security and risk consultancy, security technology provision, forensic

services, military support duties, and crime-prevention services.69 In the 1980s and

1990s, the private security industry began to expand rapidly and offer an increasingly

diverse range of security-related services.70 A principle reason for this development

was that many industrialised states, beginning with the United Kingdom and United

States, began shifting responsibility for security from the state to individuals and

organisations.71 ‘Security’ then became a commodity to be purchased by individuals

(e.g., home alarm systems) and corporations (e.g., forensic accounting services), a

shift that clearly benefited the burgeoning private security industry.72 The transfer of

security responsibility from state to individual also contributed to perceptions that the

public police are too under-resourced and over-burdened to respond to all crimes.

of rights, (2) intimidation tactics, (3) the trademark holder is a large corporation, and (4) the accused infringer is a small business or individual. 68The origins of contemporary private security companies are evident in the large-‐scale surveillance and social control policing techniques used by the state in eighteenth-‐century France and by social control entrepreneurs from eighteen-‐century England, see, John L. McMullan, ‘The New Improved Monied Police: Reform, Crime Control, and the Commodification of Policing in London’, (1996) 36(1) British Journal of Criminology, 85-‐108. The most famous nineteenth-‐century precursor to the contemporary private security company is the Pinkerton National Detective Agency in the United States, see Ward Churchill, ‘From the Pinkertons to the PATRIOT Act: The Trajectory of Political Policing in the United States, 1870 to the Present’ (2004) 4(1) New Centennial Review, 1-‐72. 69Jean-‐Paul Brodeur, The Policing Web. Oxford: Oxford University Press (2010). 70See Les Johnston, The Rebirth of Private Policing, New York: Routledge Press (1992). 71See David Garland, The Culture of Control: Crime and Social Order in Contemporary Society, Chicago: University of Chicago Press (2001). 72See Ian Loader, ‘Consumer Culture and the Commodification of Policing and Security’ (1999) 33 Sociology, 373-‐392.


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The globalisation of production and distribution processes, outsourcing, and

significant technological developments, all of which are characteristic of

contemporary industry, facilitated the mass production of counterfeit goods.73 In

response to this flood of counterfeit goods, particularly from China, some brand

owners responded by staffing dedicated in-house security teams within the

company. Companies without in-house security hired private security companies on

contract to detect infringement of their brands worldwide, locate offenders for civil or

criminal prosecution, and seize infringing goods. Private actors have long assisted

businesses in tracking down suspected thieves, fraudsters and counterfeiters. In

perhaps one of the earliest cases in January 1902, a music publisher in London,

England hired a private detective agency to illegally raid a warehouse that was being

used to store pirated sheet music and seize five hundred copies.74 Since those early

raids, the private security industry has expanded dramatically and offers specialised

services to protect trademarks on behalf of brand owners, a practice referred to in

the industry as ‘brand protection’ services.

A Brand Protection Services

Some multinational companies offer these services along with a wide variety of

others (e.g., kidnap protection) in dozens of countries. These companies include

GardaWorld, Gamble Investigations International, Kroll, and Kessler International.75

Other companies specialise in investigating IP infringement, such as the Los

Angeles-based Marksmen Inc. or the London-based Cerberus Investigations Ltd.76

These companies tend to emphasize their investigative reach to counterfeiting

hotspots, such as Filley and Associates, headquartered in San Francisco, with

offices in Guilin, Shanghai, Nanning, and Guangzhou, China.77

Brand protection services encompass a wide range of investigative and enforcement

activities that vary among companies. In general, these companies, acting on behalf 73See Mackenzie, above n 5 and Thorsten Staake and Elgar Fleisch, Countering Counterfeit Trade: Illicit Market Insights, Best-‐Practice Strategies, and Management Toolbox Düsseldorf, Germany: Springer (2008). 74See Adrian Johns, Piracy: The Intellectual Property Wars from Gutenberg to Gates, Chicago: University of Chicago Press (2009) 332. 75Information on the companies’ brand protection services was obtained from the companies’ websites. See <http://www.garda-‐world.com/whatwedo/services/investigation/>, <http://www.gambleinvestigations.com/our-‐services/brand-‐protection>, <http://www.krollconsulting.com/investigative-‐forensic/misuse-‐intellectual-‐property/>, <http://www.investigation.com/intellectual_property.htm> at 5 October 2011. 76See <http://www.marksmen.com/pages/index.html> and <http://cerberusip.com/ip-‐investigations> at 5 October 2011. 77See <http://www.filley.com/en/intellectual-‐property-‐investigation.php> at 5 October 2011.


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of brand owners, locate counterfeit products, identify alleged producers and

distributors, interview witnesses, obtain evidence of infringement, and assist in the

execution of court orders. Identifying trademark-infringing activities can involve

relatively straightforward investigations in which the private security company makes

‘pretext’ or ‘test’ purchases of suspect goods at retail or wholesale outlets or online

to gather evidence of infringement for criminal or civil prosecution. As part of its

investigation, the company may establish ‘front,’ or ‘cover,’ companies supported by

telephone and fax numbers, websites and email addresses, credit cards and bank

accounts to facilitate the confidential purchase of suspected counterfeits. These

investigative activities can also be considerably more complex, involving the covert

surveillance of manufacturing and retail locations suspected of involvement in

counterfeiting to identify offenders, or even placing undercover operatives at all

levels of production and sales within the counterfeiting operation to gather evidence.

Some security companies specialise in systematically monitoring online auction and

trading sites for evidence of trademark infringement given the centrality of the

Internet to the advertisement and distribution of counterfeit goods.78 Examples of

such companies include OpSec Security, Commercial Security International, and

Cerberus Investigations Ltd., all based in the United Kingdom.79 Such companies,

acting on behalf of brand owners, capture images of infringing webpages for

evidence, make test purchases, report incidents of infringement to search engines

for removal of webpages or entire websites and also serve offending sellers with

cease-and-desist orders. Unlike traditional reactive policing which responds after

crimes have been committed, there can be a proactive element to brand protection

services. For example, the Virginia, U.S.-based Cyveillance80 monitors Internet

domain names to ensure that web traffic is directed toward legitimate sites and not

misdirected toward sites selling counterfeit goods.

Private security companies also offer other investigation-related services relating to

trademark protection. For example, Commercial Security International and Cerberus

Investigations Ltd. conduct common law searches to clear prospective trademarks

78Such online auction and trading sites include eBay, eBid, amazon.com, craigslist, alibaba.com, and ioffer. 79See <http://www.opsecsecurity.com/en/brand-‐protection>, <http://comsechq.com/investigations/intellectual-‐property-‐investigations> at 7 October 2011. See also Cerberus, above n 72. 80See <http://www.cyveillance.com/web/solutions/enterprise/solutions/brand-‐protection.php> at 9 October 2011.


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for clients prior to registration, and conduct ‘in use’ trademark verification to

determine the nature of use before a client acquires the trademark. They also

undertaken covert ‘brand exposure’ audits to ensure brands are maintaining their

value and conduct investigations on parallel import trade. They acquire Internet

domain names covertly on behalf of brand owners to ensure lower prices. These

companies also monitor signage (to ensure proper use of trademarks) and trade

fairs, often using front companies, to identify counterfeit products on display, obtain

samples for evidence and deliver, on behalf of brand owners, cease-and-desist

letters.81

B Private Enforcement of Public Rules

As the enforcement arm of the private regulatory regime, private security companies

occupy a key niche in the regulation of trademark infringement. Their activities are

an interesting example of third-party enforcement which usually refers to non-

governmental actors that enforce publicly and privately set rules and laws using

powers granted through legal mandates or contract.82 However, as these companies

lack legal or contractual authority in the context of trademark infringement, they are

limited in the security services they can provide. Private security personnel operating

in private spaces (e.g., a shopping mall or airport) can control access to and

behaviour in certain spaces, require submission to searches and seizures, issue

‘move on’ orders, and temporarily detain people.83 These powers, which derive from

property law, mean that the public accepts certain conditions as a requirement for

entering and using the facility. However, in relation to the investigation of trademark

infringement, private security companies lack a legal or contractual mandate, as

brand owners cannot bestow any particular authority on them. Thus, these

companies can either act in cooperation with public law enforcement agencies at the

agencies’ discretion, or they operate within the powers accorded to ordinary

citizens.84

81Some of the private security companies are also involved in manufacturing products, such as holograms, intended to make counterfeits easier to detect or more difficult to manufacture, for example, see OpSec Security, above n 75. Trademark infringement has also created a substantial (and profitable) spin-‐off industry of recycling and disposing of counterfeits. See David Blakemore, A Study Relating to Existing Methods of Disposal and Destruction of Counterfeit Goods and Pirated Goods Within the Asia Pacific Region, World Intellectual Property Organisation, Advisory Committee on Enforcement Sixth Session, Geneva, December 1-‐2, 2010, produced 3 September 2010 <http://www.wipo.int/edocs/mdocs/enforcement/en/wipo_ace_6/wipo_ace_6_8.pdf> at 25 October 2011. 82See Scott et al., above n 3, 11 and Grabosky, above n 54. 83See Rick Sarre ‘Private Security in Australian: some Legal Musings’ Journal of the Australasian Law Teachers Association 3(1) 2 2010, 45-‐54 and Philip Stenning, ‘Powers and Accountability of Private Police’ (2000) 8 European Journal on Criminal Policy and Research, 325-‐352. 84For an extensive discussion of the legal rights and powers of private security providers in the Australian context, see Sarre, above n 83.


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Given ongoing corporate campaigns for greater enforcement, the private regulation

of trademark infringement would appear to be a growth industry for the private

security industry. Despite the number of companies appearing to offer brand

protection services, there is surprisingly little information indicating the extent to

which brand owners use these services, which services are most commonly used

and for what types of goods, or their efficacy in terms of addressing trademark

infringement. Questions of authority, oversight and legitimacy in relation to the

private security industry are of growing interest to both scholars and practitioners

alike, particularly given the industry’s rapid expansion and vast array of security-

related services.85 Further research therefore is needed to explore in more detail

how private security companies investigate trademark infringement on behalf of

brand owners, interactions among public-private regulators, the efficacy of this

private regulation, and how these private security companies can contribute to our

understanding of private regulatory regimes.

VI CONCLUSION: BALANCING PRIVATE INTERESTS AND PUBLIC RESOURCES

This paper’s exploration of trademark infringement raises critical questions about

balancing public-private interests. The public benefit of addressing trademark

infringement is clear in cases of counterfeit safety-critical goods (e.g., medical

equipment, food, or pharmaceuticals). However, the benefit is less clear in relation to

non-safety-critical counterfeit goods. The tendency of some industry and

governmental officials to conflate all counterfeits into the category of ‘dangerous’ is

problematic and, more importantly, unhelpful in terms of determining how public and

corporate resources can most effectively be deployed to address trademark

infringement. Moreover, this conflation deliberately obscures patterns of consumer

behaviour in which some individuals knowingly and willingly purchase counterfeit

goods while others mistakenly purchase ‘deceptive’ counterfeits.

The complexity and variety of private regimes requires researchers to determine

empirically the division of responsibilities among actors, their relationships, and each

85See for example, Martin Gill and Jerry Hart, ‘Enforcing Corporate Security Policy using Private Investigators’ (1999) 7 European Journal of Criminal Policy and Research, 245-‐261 and Stenning, above n 79.


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regime’s particular mix of ‘public-ness’ and ‘private-ness’.86 The regulation of

trademark infringement is an interesting case through which to explore how security

institutions intersect public, private and international law and what this interaction

means in relation to the private enforcement of publicly set laws. The private regime

examined in this paper does not establish rules or laws itself, but is a dominant

influence in pushing forward ever-stronger IP laws through multilateral and

plurilateral international trade agreements (e.g., TRIPS and ACTA respectively) and

enhancing civil and criminal sanctions within individual states.87 The regime lacks a

legal or contractual mandate for its protection of IP, requiring it to operate within

existing civil and criminal law within specific states or employ a range of non-legal

and persuasive strategies (e.g., educational campaigns). The regime also

demonstrates a particular type of public-private regulatory interaction or ‘co-

regulation.’ It can undertake civil-law remedies against trademark infringement in

isolation of the state and participate in joint activities, such as coordinated public

education campaigns. However, brand owners and IP associations require the

cooperation of public authorities to pursue criminal-law remedies. Public authorities,

in turn, generally require cooperation from brand owners to confirm infringement for

criminal investigations, a challenge for publicity-adverse brand owners. Thus, one

can observe a complex and shifting interface between public and private actors and

between civil and criminal law.

The paper’s preliminary exploration of the private regime regulating trademark

infringement lays the groundwork for future empirical analysis. Empirical studies of

the regime would help conceptually map its members, clarify their individual and

collective roles and responsibilities, and provide insight into public-private regulatory

interactions. In general, there is an absence of empirical work on the enforcement of

trademark law by either public or private actors and the efficacy of those operations

in reducing trademark infringement or the risk from safety-critical counterfeits.

Moreover, the balance between private interests and public resources in the policing

of counterfeit goods requires further study, as does the public benefit in regulating

non-safety-critical counterfeit goods.

86Jeroen van der Heijden, ‘Friends, Enemies or Strangers? On Relationships between Public and Private Sector Service Providers in Hybrid Forms of Governance’ (2011) 33(3) Law & Policy, 367-‐390, 368-‐370. 87See Drahos and Braithwaite above n 2 and Sell above n 22.


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Future research can build upon this paper’s analysis of the role that private security

companies play in the investigation of trademark infringement. Additional research is

necessary to examine in more detail what brand protection services these

companies provide, how they are delivered and how these companies interface with

other private actors within the private regime and with public law enforcement

agencies. Such research would also contribute to a greater understanding of the

governance of the private security industry, a topic of increasing importance given

this industry’s ongoing problems of legitimacy and accountability. Finally, future

research is necessary to further develop the concept of co-regulation, particularly for

contexts in which private actors who lack legal or contractual mandates undertake

enforcement duties to protect (largely) private interests. A necessary component of

this research entails an examination of the social and legal implications of such third-

party enforcement, particularly in terms of its legitimacy, oversight and benefit to the

public interest.88

88See Scott et al., above n 3 and, above n 54.

Documents

Enforcing Laws Through Private Regulatory Regimes: The Case of Trademark Infringement