Current trademark enforcement remedies are insufficient – amending the Lanham Act to create contributory liability for intermediaries that have constructive knowledge infringement is taking place on their sites is key

the University of Maryland Carey School of Law “Debugging the Trademark Laws: The Lanham Act and Counterfeit

Microelectronics,” 31 TEX. INTELL. PROP. L.J. 211 (2023). Hein Online. Accessed via University of Michigan //DH

Counterfeit microelectronics have been a persistent threat for the last twenty years. Counterfeit electronic parts pose serious risks to human health and safety, harm the economy, and jeopardize national security. The Lanham Act provides potent civil remedies for trademark counterfeiting, including injunctive relief, treble or statutory damages, and an ex parte seizure mechanism to preserve evidence. However, an empirical analysis of trademark filings from 2009 through 2022 reveals that manufacturers of electronic parts almost never pursue civil actions against counterfeiters. The lack of enforcement may be due in part to misunderstandings about the scope of coverage; some industry members feel the Lanham Act does not apply to the sale of used or altered items bearing a genuine trademark. The "material alteration theory" does encompass these activities and holds that the sale of used, refurbished, and remarked goods bearing a genuine mark is nevertheless infringing if the altered state of the product is not disclosed to the purchaser. As a result, the lack of civil enforcement must be attributed to other factors such as the high costs of filing suit, concerns about damage to brands and impact on stock value, lack of necessary evidence, and inability to reach anonymous counterfeiters (often in other countries) who sell fake products through online marketplaces. The article concludes that, to incentivize microelectronics manufacturers to bring trademark actions against counterfeiters, Congress must amend the Lanham Act to recognize contributory trademark liability by intermediaries, including e-commerce platforms and others, that facilitate infringement when they have constructive knowledge that infringing activities are taking place on their sites.

Introduction

Air Force First Lieutenant David Schmitz died tragically on June 30, 2020 when the ejection seat in his F-16 Fighting Falcon malfunctioned during a failed nighttime landing.1 The seat was ejected 130 feet into the air above his fighter plane, but the parachutes failed to deploy. First Lt. Schmitz slammed into the ground seven seconds later, still strapped into his seat, and died on impact.2 He was 32 years old. An investigation by the Air Force Research Laboratory determined that the digital recovery sequencer3 in the malfunctioning seat contained at least 10 counterfeit electronic parts, including several transistors, an accelerometer chip,4 and four flash memory chips.5 The Air Force report simply concluded, “Counterfeit components in [Department of Defense (DoD)] inventory has been an ongoing problem over the past few decades. . . . The DoD is aware of this problem and is working to eliminate these components from supply chains.”

The problem of counterfeit electronic components is not limited to the Department of Defense and other government agencies, however. Recent reports have disclosed the presence of counterfeit parts in U.S. nuclear plants,7 automobiles,8 commercial airliners,9 and other critical infrastructure. Counterfeits pose serious threats to human health and safety. In addition, they harm the economy, waste taxpayer dollars, compromise product reliability, and jeopardize national security. Efforts to combat counterfeit electronics have been half-hearted at best, and the chip shortages attributed to COVID-19-related supply chain disruptions have only made the problem worse.10