Eyes on the spies

General counsel need to keep a close eye out for unscrupulous anti-counterfeit agencies looking to take their companies for a ride. By Harsh Aggarwal and Roma Arora

The trade in counterfeit and pirated goods worldwide has been rising steadily in the past few years. Statistics from reliable sources peg the value of such illegitimate trade into hundreds of billions of dollars, and at 2-3% in volume compared to legitimate trade. In parallel, the anti-counterfeit services (ACS) industry is also growing and making loads of hay in the shining sun.

A typical ACS agency/team is an amalgam of: (1) on-the-ground informers who are generally freelancers; (2) retired police or intelligence agency personnel who mobilize the enforcement machinery; (3) the front-end face of the organization, who possess good business development and marketing skills; and (4) backend office support, who are good at report writing, data analytics and presentations. In most cases, the “owner” of the ACS agency will belong to category (2) or (3).

With people from such varied backgrounds coming together to provide services to brand owners, it is quite often the case that the brand owners get taken for a ride at the hands of some of these ACS agencies.

As in-house counsel, the authors have protected valuable brands of varying vintages and presences in diverse geographies, and this decade-long journey of dealing with ACS agencies has left us with a mixed bag of experiences that can be described as some sweet, some sour and some bitter.

In this article, for an ease of understanding, we have categorized issues that are common across jurisdictions in the Indian and African sub-continent, as well some country-specific issues.

Misuse of power of attorney

ACS agencies generally make contact with brand protection teams or business heads or senior management/owners (depending on the structure of the organization, as to the person calling the shots) stating that they have come across “huge” quantities of fakes and they can take quick action. As issuance of an authority letter by brand owners to ACS agencies is necessary/indispensable, they ask for such authority letters from the brand owner for conducting enforcement on their behalf.

After obtaining the authority from the brand owner, whether the ACS agency is able to perform the promised action or not, authority letters obtained on such pretexts are generally used by these agencies to support their credentials, experience, and list of clients to be shown to new and prospective clients.

It is most likely that when brand owners do a diligence of the ACS agency, and ask them about their past experience and other clients, most ACS agencies will refer to popular brands as their existing/past clients. This is irrespective of whether these agencies have carried out any enforcement for those brands. Brand owners need to remember while dealing with ACS agencies that self-praise is no recommendation.

Harsh Aggarwal is general manager of legal, and Roma Arora is the joint general manager of legal at Havells.