International Counterfeit Trade Worth Hundreds of Billions, Report Says

Counterfeit and pirated products are being produced and consumed in “virtually all economies” and online, with Asia emerging as the single largest producing region,” the report said. Govts. and companies need to “keep the Internet from becoming an even more prominent distribution channel for counterfeit and pirated products,” the report said: “The Internet has provided counterfeiters and pirates with a new and powerful means to sell their products via auction sites, standalone e-commerce sites and e-mail solicitations.” Deception, anonymity, flexibility and an unlimited market inspire Internet piracy, the report said. Piracy harms economies by undermining innovation, filling criminals’ coffers, stifle investment and increasing unemployment, the report said. And illegal goods aren’t taxed, it said.

The report noted that “most economies appear to have the legal and regulatory mechanisms … to combat counterfeiting and piracy” but “enforcement is viewed as weak.” With limited resources, govts. may need to consider focusing on “operations which will have the greatest impact” such as “place of manufacture” or “point of importation,” the report said. Raising consumer awareness also needs “to be pursued vigorously,” it said. The report also noted that “a number of companies are developing technologies” to distinguish fakes from the real thing. - Alexis Fabbri

Practising Law Institute Seminar Notebook…

Momentum is building behind state bills that would make companies allowing data breaches liable to financial entities for cleaning up the resulting messes, lawyers said Mon. at a Practising Law Institute seminar in San Francisco. Minn. passed a law making breached companies responsible for expenses such as those for notifying account holders of breaches, closing and reopening accounts and covering fraudulent use of the stolen information, the lawyers said. “The merchants are going to have to make the financial institutions whole,” said lawyer Stephen Wu. Bills to the same end are pending in Mass. (H-213), home to TJX, a retailer that had a huge breach, and in Cal. (AB-779), which led the charge for breach notification laws that about 2/3 of the states have joined. -- LT

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A Supreme Court decision Mon. may deprive consumers of the benefit of the one federal law that has helped them in data-breach lawsuits, according to a San Francisco lawyer’s analysis. The high court ruled unanimously in favor of a restrictive definition for the “reckless disregard” of the Fair Credit Reporting Act that a plaintiff must prove to get statutory damages, according to news accounts. That would undercut the private right of action created by the 2003 Fair & Accurate Credit Transactions Act (FACTA), which amended the Fair Credit Reporting Act by outlawing inclusion on credit- card receipts of full account numbers or expiration dates, lawyer Denis Rice said at the Practising Law Institute seminar in San Francisco, before he had heard the case outcome. About 100 suits seeking class-action status have been filed since Dec. 2006, when the provision was extended to cover all merchants, including online, he said. A U.S. district judge in L.A. affirmed in March that the law creates a private right of action, and in Chicago federal courts alone in April at least 9 cases seeking class action status were filed, he said. Under other federal laws, like the Telecom Act and the Electronic Communications Privacy Act, offering private rights of action, courts regularly have held data breaches not to give rise to actual damages needed to win suits, Rice said. This was illustrated in suits over the big CardSystem and ChoicePoint breaches, he said. FACTA authorizes statutory damages of $100-$1,000 per transaction processed, so the potential award in class-action cases is “fairly enormous,” Rice said, and applies to online as well as brick & mortar transactions. But no matter what the Supreme Court does, the market probably is bound to eliminate FACTA’s unique utility, he said: Credit-card companies are cracking down hard on merchants to make merchants comply. So state privacy and breach laws, and especially older state law doctrines like breach of fiduciary duty and intentional infliction of emotional distress, will be even more important to plaintiffs than they have been, Rice said.