Protecting What's Yours: Taking Precautions Against Knock-Offs

February 2004

The Licensing Book

Not generally given to garrulous discourse, Larry Lexus the Licensing Lawyer was positively animated when I met with him during the week prior to Toy Fair. "My friend", he began "I have been presented with an unusual opportunity. By referral from a current client, I have been contacted by the President of a fledgling toy company, whose initial product offering is quite exciting. Refreshingly, the company's management shows remarkable foresight and willingness to take precautionary steps to ensure that the product line is afforded effective legal protection. In contrast to being called in to recapture the horse after its escape from the barn, I have been asked to develop anticipatory preventive measures.

Unusual Opportunity

"As the President has explained to me, his management team comprises industry veterans whose unanimous belief is that the product line has the earmarks of enduring success. Recognizing its limited financial resources, the company nevertheless desires to put itself into a strong position to fend off the seemingly inevitable knock-offs that follow successful product launches in its industry. I have, therefore, been engaged to render advice and assist in the procurement of fiscally responsible legal protections."

I asked, "Larry, has the product line been disclosed outside the company? Have trade resentations been made already?"

Outside Disclosures

"Excellent questions, my friend. In fact, there have been no disclosures other than on a confidential basis to select and reliable outside providers of technical and creative services, each of whom has been required to execute appropriate non-disclosure agreements prior to receipt of information. As a result, I have an unusual opportunity to create the fabric of enduring protection beginning with the 'whole cloth'."

"Are you at liberty to discuss the nature of the product line?" I asked.

"Certainly, my friend. I know that I can rely upon your discretion, and I will appreciate your confirmation that I have been comprehensive in my approach.

The Product Line

"By way of background, the product line is the brainchild of a collaboration between the President of the company and his second-in-command. Both are corporate employees and have agreed to assign ownership to the company.

"In simplest terms, the products comprise a line of action figures and accessories. Each of the figures incorporates unique aesthetics and an electronic device by which the figures may be functionally interactive and may influence the operation of other figures as well as such accessories as vehicles and playsets.

"The electronic device in each figure is housed within a distinctive emblem and the emblems are unique to groupings of the figures in the nature of 'teams' or 'armies'. That is, the members of each team of figures can communicate through their respective emblems with their teammates creating team-oriented activity. Thus, the emblems are functional as well as aesthetic identifiers of the teams.

Patent Protection

"Larry, I am certain that you have considered patent protection for the various operating mechanisms."

"Yes, my friend, that was my first thought. Fortunately, since the client had not made non-confidential disclosures of the concept, I was able to fashion a broadly defined, yet sufficiently detailed, Provisional Patent Application which is already on file in the United States Patent and Trademark Office. Had prior non-confidential disclosures been made, only United States protection would be available, but fortunately we have preserved the client's ability to obtain international protection by having filed this provisional application prior to such disclosures.

"As I mentioned, the client is fiscally conservative, and has elected the 'provisional' approach in order to defer much of the expense of filing its full Non-Provisional Utility Application until trade feedback has been received through the upcoming Toy Fair presentation. Thus, all opportunities for patent protection are preserved while current expenditures are minimized.

Copyright Protection

"The aesthetic characteristics of the product line offer further opportunity for protection through copyright. As you know, my friend, under the current United States Copyright Act, protection by copyright is created simultaneously with fixation of an original design in tangible form. The original designs of the figures created by the company were thus protected by copyright as soon as they were rendered. The three dimensional sculptural interpretations of the renderings were subject to copyright protection as soon as the sculptures were created. As a result, a copyist would be guilty of infringement without further action by the company.

"Nevertheless, prompt copyright registration is advisable for a number of reasons: First, copyright registration is mandatory prior to launching an enforcement action in court. Second, the law incentivizes the copyright proprietor to be diligent in seeking registration by making 'statutory damages' and the recovery of attorneys' fees available to a plaintiff who has the foresight to register its copyrights prior to publication of the copyrighted work. Since statutory damages can be assessed in amounts up to $150,000 per infringement, and since a plaintiff's attorneys' fees can also be substantial, the enhanced recovery available to a diligent copyright owner is obviously beneficial.

"Furthermore, the cost of obtaining copyright registrations is quite small and turnaround is prompt. Therefore, I have advised my client to seek copyright registrations for the aesthetic designs of its action figures, and this activity is being completed by paralegals in my offices even as we speak.

Trademark Protection

"Of course, we have filed 'Intent to Use' trademark applications covering the umbrella brand by which the product line will be designated, as well as the names of the individual figures and 'teams', both in block-letter form as well as in the stylized logos appearing on packaging. However, we have gone one step further and have filed Intent to Use applications for the distinctive designs of the emblems which incorporate the electronics into each of the respective figure teams. Despite the 'functional' nature of the electronics, the emblems which house them are expected to become quite well known as distinctive identifiers for the respective teams, much in the same fashion as each team's name.

"The company believes that a competitor might unfairly compete with it by marketing a line of figures under a different brand but incorporating similar symbols as a design element of the competing product line. Doubtless, a number of consumers could be deceived by this activity. Since symbols, as well as words and logos, can function as trademarks, protection is available to the company for these emblems as well.

U.S. Customs Enforcement Opportunities

"My final piece of advice to the client at this point, my friend, is that it take all steps necessary to involve the United States Customs Service in the protection of its valuable product line. As you know, the Customs Service can be diligent and quite effective in policing copyright and trademark violations, and the enforcement opportunities offered by the Service are both highly effective and extraordinarily economical to the legitimate intellectual property rights owner.

"Upon detection of a possibly infringing shipment of products, the Customs Service can seize and impound the entire shipment pending resolution of the infringement issue. Both the owner of the registered copyrights and trademarks as well as the owner of the seized shipment are notified, and a subsequent procedure is pursued under which a final determination is made whether an infringement has occurred or not. If the determination is one of infringement, the impounded shipment and all similar shipments will be barred from access to United States commerce. The process for determination is abbreviated and much less costly than litigation in the courts, and hence, highly preferable to the party seeking protection.

"The threshold requirement for such enforcement by the Customs Service is the prior existence of copyright or trademark registrations as well as their recordation with the Customs Service. This is yet another incentive to the company to diligently pursue the protection of its copyrights and trademarks through the registration process, without waiting for the occurrence of an infringement. Because most toys are manufactured outside the United States, interdiction by the Customs Service at the various ports of entry can effectively eradicate a knock-off threat to an original product line in short order."


"Larry, I believe that you have covered all the bases. It certainly appears that your client is taking appropriate steps to enhance protection of its domestic launch. You have also laid the foundation for strong international protection through extension of the various rights which you are establishing in the United States. Of course, patent, trademark and copyright protections are territorial in nature and equivalent filings will have to be undertaken in the respective foreign jurisdictions. However, your client will have the opportunity to assess initial trade and consumer reactions in the United States before committing to the additional expenditures."

"Thank you, my friend. Your confirmation is indeed gratifying. It is all too rare that one has the opportunity to structure carefully planned protections on behalf of such a circumspect client. It is the unfortunate reality that many manufacturers consider these protections only after receiving positive feedback from trade or consumer, or worse, after the appearance of knock-offs. At that point, many of the protections described above are no longer available, or are at least more difficult and costly to obtain and enforce."