Cleared for Knock-Off: Counterfeiting at 30,000 Feet

Authored by B. Brett Heavner

Counterfeit aircraft parts wreak serious havoc. The FAA estimated that counterfeit or "suspected unapproved parts" contributed to 174 U.S. aircraft crashes and other accidents between 1973 and 1996, causing 17 deaths and 39 injuries. The FAA also estimates that 2% of the 26 million aircraft parts installed each year (520,000 parts) are counterfeit.

Counterfeiting affects the bottom line, too - the International Chamber of Commerce estimates that seven percent of world trade involves counterfeit goods, resulting in a counterfeit market worth $350 billion. Meanwhile, Pentagon officials continue to worry about the increasing trend of counterfeit aircraft parts entering the U.S. military supply chain, and the FBI is embarking on "Operation Wingspan" - a two-year investigation into the manufacture and sale of counterfeit military and commercial aircraft parts. Moreover, evidence shows that money generated by counterfeit operations funds organized crime and terrorist groups. In short, counterfeit aircraft parts pose an increasing threat to public safety, national security, and industry.

Indeed, counterfeit aircraft parts harm both the brand-owner and the end-user of the parts. On one hand, the brand-owner suffers harm to its trademark rights and associated good will. On the other hand the end-user faces unnecessary maintenance costs, or, as described above, much worse consequences including the loss of human life.

This article summarizes how trademark law can help brand-owners and end-users prevent counterfeiting.

Trademark Law and Counterfeiting

U.S. trademark law provides aircraft-parts brand-owners with certain evasive maneuvers that can help “ground” counterfeits. The federal trademark statute, known as the Lanham Act, defines a trademark as "any word, term, name, symbol, or device, or any combination thereof" used by a person to "identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods" (e.g., ROLLS ROYCE for products and services relating to aircraft engines). Trademarks must be federally registered with the United States Patent and Trademark Office to obtain the full scope of protection of the Lanham Act, including anti-counterfeiting provisions. Once a mark is registered, its owner can sue counterfeiters who knock off products bearing the registered mark and obtain relief, including emergency seizure orders, permanent injunctions, statutory damages, and attorney's fees.

In addition, registering a trademark in foreign countries allows the trademark owner to prevent and address counterfeits that originate abroad. Trademark rights are territorial and must be protected separately in each country in which you do business. As a general rule, trademarks should be registered in any country that is an important market for the trademark owner's products. Typically, registration is worthwhile in countries (1) where annual profit in that country would cover the cost of obtaining a trademark registration there, (2) where the products are manufactured, even if they are not sold there, as discussed below, and (3) where significant future operations are planned. With respect to countries where the products are manufactured, trademark registration can help prevent counterfeiting operations run by rogue factory employees and disgruntled dealers (e.g., dealers who are unhappy with the progress or outcome of negotiations). Finally, trademarks should also be registered in countries that are notorious for counterfeiting, such as China, Taiwan, Thailand, Vietnam, India, and certain Latin American countries.

The guidelines detailed above also apply to "certification marks," which are a special type of trademark. Many trade associations and non-profit organizations offer certification programs that license proprietary "certification marks" to businesses whose products and services meet the relevant criteria, certifying that the products and services are high quality, healthy, environmentally sound, etc. For example, the Aviation Suppliers Association owns the ASA-100 certification mark for quality aircraft parts. Counterfeit certification marks pose problems not only for the manufacturers whose products are being counterfeited, but also for the certifying body who owns the mark. Accordingly, certification-mark owners should be just as vigilant in eliminating counterfeits as the product brand-owner.

How to Spot Counterfeit Parts

A major part of counterfeit prevention is identifying existing counterfeits and bringing those responsible to justice. The following basic tips can help purchasers and end-users identify counterfeit parts prior to installation, preventing significant maintenance costs or far worse consequences.

• Pay careful attention to the packaging. If it is unusually flimsy, discolored, or in a different layout than the product you usually buy, or if the usual insert or instructions are missing, the part may be counterfeit.
• Pay careful attention to the parts themselves. If you experience unusual installation difficulties, or the paint job on the part is sloppy or discolored, the part may be a knock-off.
• To the extent possible, only purchase parts from legitimate, well-known and reputable dealers. Be wary of online sales and unknown sales outlets.
• Pay close attention to parts bought in bulk and parts that need replaced often, which are typically the types of parts targeted by counterfeiters, because they are more profitable than smaller-volume parts that do not get replaced as frequently.
• If the deal seems too good to be true, it probably is. A significantly lower price without explanation is a good sign that the part may be counterfeit.

As explained above, trademark law provides avenues of protection against counterfeiting for brand-owners and end-users. Trademark registration combined with some common sense and vigilance can help preserve the friendly skies and keep counterfeiters on the ground.

Originally printed in BlueSky Business Aviation News (www.blueskynews.aero.com). Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.