Going Global Means IP Theft Risk for Louisiana Businesses

New Orleans sweet shop Sucré is in the initial stages of delving into international territory. Joel Dondis, the co-owner of Sucré, said the business is currently in discussions with potential buyers in China, Japan and Canada to sell and distribute some of its retail products.

Although nothing has been set in stone, Dondis said the company took steps to protect its brand name by trademarking many of its products a long time ago. Registering the products protects the company from other businesses or individuals from profiting from its brand name.

About 32 percent of cases involving intellectual property theft of U.S.-owned and registered products occurred overseas, primarily in China, according to a U.S. Department of Agriculture report from 2010. About 62 percent of these infringement issues involved misleading labeling and advertising designed to make customers believe they were buying American-made products.

Even in the U.S., Dondis said Sucré has come across five other individuals who have attempted to use the business name for their products or businesses.

“That’s considering we did all of the proper work up front and have filed several trademarks within the United States,” Dondis said. “You do the best to protect your name. It’s just the nature of the beast.”

Although businesses new to the overseas market need to be protective of their brand regardless of where they go, countries such as China have looser rules that make it easier for others to appropriate a company’s trademark.

Many operate under the first to file system, which defines who has the right to a trademark or patent. In countries such as China, Thailand and Vietnam, it is especially important for companies to obtain trademark protection early, said Bill Caughman, an attorney with Kean Miller law firm who practices intellectual property law.

A report the U.S. International Trade Commission published in 2010 found that companies involved in the manufacturing, software development and information technology sectors in China experienced the greatest financial loss from trademark infringement. The IT services sector in China reported $26.7 billion in losses for the year.

Trademark infringement cases in Southeast Asia are also rampant among packaged food products, alcohol and fresh fruits, typically in the form of counterfeit labeling and packaging. U.S. brands such as Sunkist, Washington Apples, Jack Daniel’s, Jim Beam and Tabasco have discovered bootleg products from the region and taken legal measures to stop their production.

“A U.S. company can gain traction here, and if they choose to go to a foreign market and haven’t trademarked their name over there, they could find they have given up the rights to sell their product in that country before they even set out,” Caughman said.

“Even if you are a small business entering a foreign market, get the registration in that one country and hire the local counsel that will help you get through the trademark process,” he said.

Jerry Hingle, who runs the consulting firm International Trade Associates, strongly cautions companies to register within the foreign country they intend to sell their products.

“They also should lawyer up as soon as they start gaining traction in those countries,” especially in markets known for copyright fraud and piracy, said Hingle, who left his position as the executive director of the Southern U.S. Trade Association earlier this year.

Even with trademark protection in place, it isn’t always easy for a company to enforce those rules, he said.

“Our advice is go with the assumption that there will be an attempt to counterfeit or mislead your product and take the steps ahead of time to protect yourself,” he said.