Running head: DESIGNER WITHOUT THE PRICE 1

Designer Without the Price: How Counterfeit and Knock Off Products Affect The Economy and

Designers

Reagan N. Bonniwell

First Colonial High School

DESIGNER WITHOUT THE PRICE 2

Abstract

This paper talks about the controversial topic of counterfeit and knock off products of

designer and high end brands. The author begins by explaining the difference between

counterfeit and knock offs and the trouble many individuals and stores go through everyday if

they are caught with these products. The author also explains the negative and positive impacts

on the companies and economy due to the sales of these fake products. There are many ways

authorities and companies can prevent people from going to jail or being sued for producing

counterfeits and knock offs. Finally, the author talks about many recent cases that involved retail

stores being sued for trademark and copyright infringement, and health problems people have

experienced from using certain counterfeit products.

Key words: counterfeit, knock offs, copyright, trademark

DESIGNER WITHOUT THE PRICE 3

Designer Without the Price

Imagine you’re walking through the streets of New York City and you come across

amazing deals on your favorite designer products. People come up to you offering Chanel bags,

Gucci belts, or Tiffany jewelry for around the price of $60. You may think they’re real, you may

think they’re not, but what you may not know is that these products are illegal. The prices of

these products too good to be true because they are not actually made by designers, but criminals

overseas. Counterfeiting is when a product is made that looks exactly the same as a well known

brand. The product is considered to be a counterfeit once the name or logo of another brand is

placed onto the product. The production and selling of counterfeit products is illegal, and if an

individual is caught making or selling the products, they can be charged and prosecuted.

Counterfeiting has been an issue for many years that has just recently started to be investigated.

Clothing and accessories are not the only thing that can be counterfeited. Many high end makeup

products are starting to be copied as well. Counterfeit products are very controversial because

some may not affect the consumer in any way, but some have been known to cause health

problems. It is very difficult for authorities to catch people who make and sell counterfeit

products. While there are some people getting charged and sentenced for adding a brand’s name

to a similar looking product, there are people getting around the law by making products that are

knock offs. Knock offs are products that look similar or include similar aspects to a designer

product, but it does not have the designer’s logo on it. There are still legal issues the producers of

knock offs have to get around, such as trademark laws. Companies will sue other companies for

trademark infringement if they feel one of their products has been copied. Another legal issue

companies struggle with is copyright infringement. Sales of counterfeit and knock off products
DESIGNER WITHOUT THE PRICE 4

do not only affect the designers directly, but it affects the economy as well. While the economy

and designers are getting affected negatively, there are also benefits to counterfeits and knock

offs being sold. Counterfeit products of designer brands hinders designers and their company by

selling products with their logo or similar looking products, which reduces the sales and profit

designers are making.

How Designers are Directly Affected

Negatives of Counterfeits/Knock Offs

Many designers around the world are experiencing a decrease in their sales due to the

production and buying of counterfeit and knock off products. Consumers look at a variety of

factors when choosing between designer and knock off products such as price, uniqueness, and

quality. Counterfeits and knock offs are being sold at a much lower price, which consumers tend

to gravitate towards. Another major factor that determines whether designers will be successful

in sales is whether their product is unique or not. If there are products being sold that look

exactly like theirs and has their logo on it, that means there are more of the same products all

around and people are less likely to buy the designer’s if they can get it at a cheaper price. Some

producers of counterfeits may also make and sell the same product recently after it has been

released in designer stores and this can negatively affect the sales of designers (Muller, 2013).

However, if there a large gap between the time the designer starts selling their product and the

time the counterfeit is sold, profits made by designers are less likely to be affected (Muller,

2013). If the product is in high demand and is on trend, they are most likely going to buy the

product that is less expensive. Over the years, the quality of counterfeit items have improved

dramatically. They used to fall apart shortly after purchasing them, or you could tell the
DESIGNER WITHOUT THE PRICE 5

difference between the material or fabric used. Today, the stitching and material used for bags,

belts, and many other products look very similar, if not exactly the same, as the designer product

(The Fashion Law, 2018).

Positives of Counterfeits/Knock Offs

Production and sales of counterfeit goods helps promote the design of the designer

product. If someone who is able to afford the designer sees the counterfeit product, they are most

likely going to buy the real product and not the fake one. Even if the costumer ends up buying

the counterfeit, they are still advertising the brand when others see them with the product

(Sprigman, 2012). Even though there are jobs being lost for the high end companies, there are

also jobs being created overseas. Individuals in other countries are struggling to find jobs to

support their families, and this gives them the opportunity to work in a factory or selling the

product on the streets all around the world.

How the Economy is Affected

Negatives Effects on the Economy

The United States is not the only country that is being affected by the sales of counterfeit

products. Countries all over the world are experiencing a decline in their economy due to the

production and sales of counterfeits. The sales of counterfeits has led to the sales in Europe to go

down by nearly ten percent (Bain, 2015). There is a decrease in need for certain jobs like

manufacturing and retail in many countries. If sales of counterfeits start to increase, designers

may have to let go of a few of their workers because they are not able to pay them since the

profit they are making is low. This starts a ripple effect in the economy. If an individual loses

their job, they are are going to focus their spending on necessities and are less likely to spend a
DESIGNER WITHOUT THE PRICE 6

lot of money on things they do not need. Businesses are negatively affected if people are losing

their jobs because fewer products are being bought, which means their profit is decreasing as

well (Bain, 2015). The government is being affected by the sales of counterfeits as well.

Counterfeit products are not taxed since they are being sold under the table, which hurts the

government (FindLaw, 2018). Counterfeit products are made overseas in factories where child

labor is promoted and is not illegal. While people of all ages work in these factories, they hire

children in order to keep the number of workers high, which allows production to go by quicker

(Find Law, 2018).

Positive Effects on the Economy

Counterfeit products are being produced overseas in countries that are not fully

developed. Individuals in other countries, that are still developing or not developed at all, are

struggling to find jobs to support their families, and this gives them the opportunity to work in a

factory or selling the product on the streets all around the world. The individuals who are

working in these factories are experiencing poor working conditions and get paid a very small

amount (Shepherd, 2016). When consumers buy counterfeit products, they are contributing to the

money these workers are making in order to provide for themselves and their families. Poor labor

conditions is not something many people want to support, but these workers need to make money

somehow. The sales of counterfeits and knock offs shows the public what is in high demand and

is in trend at the moment (Sprigman, 2012).

The Largest Producer of Counterfeits

China is the known to be the most popular country to make counterfeit goods. All the

products sold in the United States and other countries come from China. The products they sell
DESIGNER WITHOUT THE PRICE 7

vary from shoes,which is the most produced product, designer clothes, jewelry, and other

accessories. They are able to find loopholes around the laws, like copyright, and are able to keep

it under wraps from the law enforcements. They make it hard for the authorities to catch them in

the action of selling the products, which is why the cost of investigations are so expensive. With

their skills of being able to keep under the radar and making a large amount of sales, they are

able to make approximately two billion each year. As the year goes on, it said that their sales and

profit should increase by 25 percent (Proquest, 2009). China is also very successful because they

sell through countries that lack strong security, like Syria, and countries that are big in trading,

like Singapore (Suokas, 2016).

Legal Implications

Trademark Laws

Trademark laws are used by individuals and companies to keep their logos and symbols

safe from other people using them on their products. If an individual is infringing on someone’s

trademark, that means they most likely produced a counterfeit product. This can get people into

some financial and legal troubles if they are caught by the authorities or sued by a company. If

someone is sued for trademark infringement that means they must go to court and argue their

case on why they believe they were not infringing. Many companies will try and make a

counter-suit by requesting the court to remove the other companies trademark.

Getting a trademark on a product is a long process that takes three steps. First, companies

have to make sure the thing they want to trademark is unique to them and not generic. Next, the

companies have to file a form through the U.S. Patent and Trademark Office and pay $375.

Lastly, the trademark office has to make sure the trademark is not already taken or there isn’t
DESIGNER WITHOUT THE PRICE 8

else like it that isn’t trademarked. The process could take up to a year if the file was filled out

correctly, but if it isn’t filled out correctly, it could take longer than a year​ ​(C. Herrick, personal

communication, November 6, 2018).

Copyright Laws

Copyright laws keep an individual’s work safe from being copied by another person. It is

very similar to trademark laws, however the only difference is that copyright laws apply to

artwork. This can still apply to designer companies because they will copyright their designs and

art to make sure other people do not use it without the owner getting compensation. Many people

and companies get into legal trouble because they will print someone’s artwork onto their

product whether they know it was copyrighted or not.

There was an artist who had experienced copyright infringement in the past when Hot

Topic took one of her art designs and included them on their products. While her designs were

not completely copyrighted yet, she was in the middle of the process and still is able to sue for

infringement. She recently is experiencing copyright infringement again when she discovered

another store, Zara, had used her work on some of their products as well. When she goes to court

with these stores she will sue them and have the chance of getting compensation from the sales

of the products that include her designs (Cartwright, 2016).

Prosecution and Fines

If an individual is prosecuted for the production or sales of counterfeit items, their

sentencing and fines vary based on the amount of times they have been prosecuted for the same

thing in the past or the number of counterfeit products they are found with. For the first offense,

the sentencing can be up to a maximum of ten years in prison. The individual can be fined up to
DESIGNER WITHOUT THE PRICE 9

two million dollars. A second offense can lead to twenty years in prison and a fine of five million

dollars (​Trafficking in Counterfeit, n.d.).

Federal Authorities

Catching people who produce and sell counterfeit goods is very difficult for authorities

and expensive. Being able to point out counterfeit products is difficult for many reasons. One

main reason it is difficult to spot fake designer products is that the quality has improved. Along

with the improved production of the products, the packaging has improved as well. For example,

the box a fake Gucci belt comes in looks exactly like the box a real one would come in. Since the

quality of counterfeits have improved and they look exactly like the real product, people buying

these products are not going to turn in the seller. Another factor is that the products are made

overseas and once they are shipped out and received in other countries they are difficult to track.

The factories overseas lack good security, which is used to make sure that the products being

made are legal. Lastly, counterfeit products are not only sold on the streets around the world.

People are now able to sell the products online through websites like Amazon and Ebay. This

allows them to stop selling and delete their account whenever they feel they may get caught.

They are also able to make new accounts to sell on if they delete their original account (Addison,

2018).

Recently, federal authorities have overcome the difficulties and found five people who

have been producing and selling counterfeit goods. They produced over 70 million dollars worth

of counterfeit Nike Air Jordans. The shoes would not have been considered counterfeit products

when they were originally made because they did not include the Nike or Jordan logo. However,

after the shoes went through customs, when being shipped from China, the logos were then
DESIGNER WITHOUT THE PRICE 10

added to shoes which makes them illegal (Sherman, 2018). Another issue involving an individual

selling counterfeit goods took place in Miami, Florida. A undercover detective discovered that a

man was selling counterfeits and kept them in the back of his store. He was selling brands like

Gucci and Louis Vuitton, over a six month period. The worth of the amount of products in the

back room are equivalent to a retail price of almost ten million dollars. The man was arrested and

the products were confiscated (Batchelor, 2018).

Louis Vuitton v. Haute Diggity Dog

In the court case ​Louis Vuitton Malletier v. Haute Diggity Dog​, Louis Vuitton tried suing

Haute Diggity Dog for copyright infringement. Haute Diggity Dog is a company that sells

products for pets, such as dog beds, chew toys, and bags to carry the pets in. The product Louis

Vuitton had a problem with was a chew toy that included a design and pattern similar to one of

the designer’s bag. They also had an issue with the name of the toy, which is “Chewy Vuitton.”

This case was taken to the United States Court of Appeals, and they ruled in favor of Haute

Diggity Dog. The court said that company was not infringing Louis Vuitton’s copyrights in any

way. Also, the sale of the chew toy should not affect the sales of the designer bags in any way.

The chew toys are not counterfeit products that are being sold for a cheaper price. If anything, it

could promote the designer’s brand and possibly help their sales ​(​Louis Vuitton Malletier v.

Haute Diggity Dog, LLC,​ n.d., slip op. at [Page #]).

Forever 21

Forever 21 is a retail store that sells trendy clothing for an affordable price. Many of their

products are inspired by designer brands, which has gotten them in a lot of legal trouble over the

years. They have been sued multiple times for issues like trademark infringement. Their products
DESIGNER WITHOUT THE PRICE 11

are very controversial because they have details that are similar to designer brands, but they also

include details that make it unique. While they have been sued for trademark infringement, they

have fought back hard and requested the courts to dismiss some companies trademarks.

Forever 21 v. Gucci

Gucci had reached out to Forever 21 requesting them to stop using their stripe patterns,

like green-red-green. Forever 21 then took Gucci to court asking for the removal of Gucci’s

trademarks on the stripes. They argued that the stripes were generic and consumers do not

automatically associate them with Gucci. They also argued that the trademark was a monopoly

over the stripes. Gucci argued that Forever 21 was infringing on their trademark. The court ruled

in favor of Gucci, which allows them to keep their trademark on the stripes. However, Forever

21 is still able to sell products with similar stripe patterns because they have small details that are

unique to the product (Fernandez, 2017).

Adidas v. Forever 21

Adidas is known for including three stripes on clothing and other products. Forever 21

has recently been producing garments like leggings with stripes along the side that mimic Adidas

products. Adidas had reached out to Forever 21 stating that they would sue the retail store.

Forever 21 requested the court to explain to Adidas that they were not impeding on any

trademark laws. Adidas then filed a lawsuit on Forever 21 for trademark infringement for the

stripes and argued that there were products, like leggings, that looked so similar to their products

that they could pass as counterfeits (The Fashion Law, 2017). Forever 21 is selling shoes that

include two gold stripes on the side and a gold heel, which is another product Adidas is suing

over because of the similarity to one of their products. Forever 21 then made a counter-suit
DESIGNER WITHOUT THE PRICE 12

arguing to the court that Adidas will sue anyone for trademark infringement for any number of

stripes on an article of clothing. However, they ended up dropping the counter-suit and settled

with Adidas (Matera, 2017).

Puma v. Forever 21

Singer Rihanna came out with a line with Puma and released different style of shoes. One

of many styles that Forever 21 copied was a slide on with satin bows on top. Forever 21 makes

products that look similar, if not exactly the same, to appeal to the consumers looking for a less

expensive product. Puma sued Forever 21 for copyright infringement and design patent. The case

went to the U.S. District Court for the Central District of California (The Fashion Law, 2017).

Forever 21 argued that there are many companies that sell similar looking products. The court

ruled in favor of Forever 21 because there were small details on the shoes that were not included

and there were new details added to the design (Cohen-Nowak, 2017).

Beauty

Counterfeit products are not strictly accessories and clothes. Many high end makeup

brands are being turned into counterfeit products. However, the difference is the quality is

nowhere near the quality of the real product. These products are not as pigmented and have

caused health problems due to the ingredients used to make it. There have been animal feces and

bacteria found in the counterfeit products. Consumers have been experiencing bad reactions like

rashes, to the ingredients put in these products. The people who sell the products are getting

away with it because the products are either being sold online through fake websites and other

websites like Ebay and Amazon. Also, there are streets around the world that are known for

selling counterfeit makeup, but the authorities have not done anything about it (Robin, 20180 .
DESIGNER WITHOUT THE PRICE 13

Kylie Jenner released lip kits in 2016 and has expanded to selling other makeup products.

Since she has made such a large profit, many people have started making counterfeit products

from her line in hopes of making a lot of money. Kylie reached out to her fans and buyers of her

products on twitter to let them know that they could only purchase her products through her

website. If any products were being sold on other websites like Amazon that meant they were

fake. The counterfeit products are being made with products that are causing negative reactions.

One woman who bought a fake lip kit experienced a swollen face and blistering lips.

When McLaughlin woke up the next morning, she was struggling to breathe and the

lower half of her face was dramatically swollen."I lost all feeling around the bottom of

my face, and my lips continued to grow bigger from when I first saw them," McLaughlin

told Belfast Live, which originally published images of the counterfeit products affect on

her lips. "It was the scariest experience ever."McLaughlin's family, including her

21-year-old sister, Bronagh, rushed her to the hospital. "We took her to [Royal Victoria

Hospital] on Saturday morning and they took her in straight away and got her seen to as

soon as possible. They gave her extremely strong antibiotic cream for her lips and some

antihistamines," said Bronagh, who wants to help her sister spread awareness about the

potential dangers of counterfeit cosmetics. Bronagh is focused less on how the counterfeit

lipstick affected her sister's appearance and more on how seriously it could have affected

her health. "My aunt is a nurse and she said that if she [Rachael} wasn't young and didn't

have such a strong immune system you wouldn't know what could have happened,"

Bronagh said, urging people not to purchase unverified makeup products (Robin, 2018).
DESIGNER WITHOUT THE PRICE 14

James Charles, a famous youtuber and beauty guru, has experienced similar problems as

Kylie Jenner. He recently came out with a eyeshadow palette in late 2018 and people are already

producing and selling counterfeit palettes. Days after finding out about the fake palettes being

sold, he uploaded a video on youtube of him using one that he had bought. Since the counterfeit

makeup products are not as similar to the actual product like clothing and accessories are, there

are details that prove the products are counterfeit. There were minor mistakes on the packaging

and the names of the color eyeshadows were different. As he tested the products he noticed that

some of the shades were not even close to what the shades included in the real palette looked

like. He did a tutorial using both palettes, using one on each eye. There was clearly a difference

in how they applied to the lids of his eyes. The pigmentation was not as noticeable as the colors

used on his eye from his palette. Since the counterfeit palette has just recently come out, there

has not been any complaints about reactions from using the product. Only time can tell whether

or not there will be any health problems after using the product consistently. James did mention

that him and his legal team will be finding a way to take down anyone selling these fake palette

in the near future .

These counterfeit makeup products are not only hurting Kylie Jenner and James Charles’s

sales but they are hurting the people using it and their self-esteem. Beauty products are made to

enhance girls’ features and make them feel insecure about any blemishes. Counterfeit makeup

products are doing the complete opposite by causing reactions and other health problems. Kylie

and James are not the only people whose products have been copied. High end brands like Urban

Decay and NARS are going through the same thing. Those counterfeit products also include
DESIGNER WITHOUT THE PRICE 15

ingredients that are not meant to be put on the skin and can cause irritation and other health

problems (Jackson, 2018).

Conclusion

Counterfeiting designer brands has been a problem for a while but has increased over the

years. It has gotten harder for authorities to pick out the differences between real products and

the counterfeits because the quality has improved. Many people have gotten away with

producing and selling counterfeit products because the security at customs is very lenient. If the

security becomes stricter it may be easier for authorities to catch people in the act and stop them

before they are able to sell the products. This issued does not only need to be solved for the

purpose of helping designers, but in order to keep those safe from the harmful ingredients used

when making some products. Stricter security would also keep the sales of counterfeit products

from hurting the economy and the risk of people losing their jobs. Another major issue is retail

stores selling products that look very similar to designers but do not include the designer’s logo

on it. These stores have a better chance of not getting into legal trouble, however there are still

some stores who do end up getting sued for trademark or copyright infringement. Their court

cases are now precedents for any similar cases that happen in the future.
DESIGNER WITHOUT THE PRICE 16

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