Calculated Choices: Why Playoff Brackets and Shopping Carts Deserve More Attention This Season
Tyler Armstrong, Lucy Ching and Tori Curtis, 2021
**With March Madness upon us, we want to ensure your safety and awareness when shopping online for team merchandise. Check out our second edition of the Front & Center bulletin below on licensed team apparel!
Sincerely, Jeff Rojek, Director of MSU A-CAPP Center and Steve Francis, Director of National IPR Center
Where Is Your Money Going?
We are approaching one of the most highly anticipated sporting events of the year: March Madness. While arenas won’t be jam-packed with fans this year, team spirit will not be diminished as Zoom watch parties will take their place. Before shopping for the newest jerseys or drink koozies representing your favorite teams, consider where you are buying them from. Although purchasing sports memorabilia and apparel on Facebook or from that link on Reddit may tempt you, your safest bet is to buy directly from the source, be that a store or site directly related to the team or a very reputable site. Counterfeiters are counting on you to choose their goods in the final rounds of your online shopping.
Why are licensed goods more expensive, though? You probably want the best deal. Legitimate sellers of licensed goods, also known as licensees, are held to a higher standard than those who choose to use trademarks illegally. They must follow manufacturing guidelines as well as pay royalties to the school and team whose brand is on the product. Not only does the team lose profits from unlicensed sales, but when you purchase counterfeit goods, that decision can have a real impact on your health as well as the schools and teams who own the trademarks. As a fan, keep yourself safe and support your team or school by purchasing genuine licensed products.
Teaming Up to Address Counterfeits
These issues are not just a challenge for major universities, however; trademark counterfeiting impacts all professional sports leagues. For example, in 2012, New Era Caps, the exclusive manufacturer of Major League Baseball (MLB) caps, cited losing an estimated $300 million in annual sales to counterfeiters. In an effort to address these problems, the National Intellectual Property Rights Coordination (IPR) Center, Homeland Security Investigations (HSI), and Customs and Border Protection (CBP) have coordinated with several major league sports organizations and the NCAA to form Operation Team Player which functions as a collaborative effort to seize unlicensed sports-related goods. In 2019, a total of $24.3 million worth of counterfeit products were seized. The year 2020 boasted a 400% increase with authorities seizing over 176,000 illicit items, totaling an estimated $123 million. While the 2021 Super Bowl season consisted of mostly online merchandise sales, Operation Team Player still resulted in around $45 million worth of seized products in Tampa before the game.
Counterfeiting is illegal in all 50 states. The many negative impacts of counterfeits speak for themselves. First, product counterfeiting “creates and perpetuates a marketplace of inferior and unsafe products”. This is because, as previously mentioned, counterfeit manufacturers are not held to the same safety standards as licensed manufacturers. The lack of standards often results in low quality and the presence of dangerous toxins in products that are cheaper to use in manufacturing. Second, product counterfeiting hurts workers and American manufacturing. Workers, usually in foreign countries, can be exploited by counterfeiters trying to cut corners without any labor laws governing how counterfeit manufacturers operate. American trademarks are being taken by counterfeiters overseas for cheap illegal production. While official licensees may use foreign labor as well, they are subject to higher standards and labor law. In short, exploitative business practices hurt legitimate businesses and negatively impact your favorite teams.
Product counterfeiting is destructive at the collegiate level as well. Outside a 2012 college football game in Atlanta, a vendor selling unlicensed goods revealed that he planned to sell $1500-$2000 worth of counterfeit product in one day before he was caught, and his superior made nearly twice as much after their cut. But, who was his superior? There is evidence that counterfeiting is often not a stand-alone crime. It is often a supplementary crime for criminal organizations to launder money. Alixe Holcomb, the Trademark and Licensing Director at the University of Arizona explained that in Tempe, Arizona, Mexican drug cartels have been connected with counterfeit t-shirts being sold as a money laundering operation. Immigration and Customs Enforcement (ICE) has been working in close partnership with the University of Arizona due to the seriousness of the counterfeit operation associated with their licensed sports merchandise. She was advised not to check these stands alone due to safety concerns. It is not just the product to be cautious of, it is also the seller and their organizations.
A “W” in Court May Still Be an “L” for Brand Owners
If you know March Madness, you know Duke. In early 2019, Duke University joined the entities responsible for protecting the registered trademarks of the NBA, MLB, NHL, and NFL in a lawsuit against a group of counterfeiters responsible for operating “fully interactive commercial websites and online marketplaces.” Relying on both federal and Illinois state statutes, Duke and the other plaintiffs secured a default judgment against the counterfeiters. The court order prohibited the sellers from using any of the plaintiffs’ registered trademarks in the future and required each defendant to pay the individual plaintiffs $50,000. What sounds like a victory to most may be just the first step. While judgments may be granted, recovery of damages across international borders can be a challenging undertaking.
Aside from challenges in recovering money damages, trademark owners are often plagued by how quickly and simply counterfeiters are able to resurface their elicit operations, even after having their seller accounts and domains deleted from the internet. While submitting product take down requests and sending cease and desist letters can be effective, brand owners can, like Duke, seek monetary damages by building relationships with local law enforcement and prosecutors. As the issue of product counterfeiting is felt at both the state and federal levels, brand owners can work jointly with police to enforce intellectual property rights and uphold the law, says Bruce Siegal, Senior IP Attorney at Taylor English and former Senior VP/ General Counsel for the Collegiate Licensing Company (CLC).
COVID-19 Impacts on the Sports Industry
COVID-19 hit universities hard. Since the beginning of the pandemic, United States universities have estimated their lost revenue from the pandemic and costs to reopen campuses at $120 billion. For example, Michigan State University (MSU) alone reported a $54 million decline in revenue from 2019-2020, with an estimated loss of $25.3 million in ticket sale revenue to sporting events, based on MSU’s 2018-2019 data. With no in-person sporting events, colleges are estimated to lose at least $14 billion in ticket sales, making every sports season lost even more detrimental. These losses magnify the financial struggle for universities during the COVID-19 pandemic and will ultimately impact every college differently, but are particularly painful for athletic programs.
Even the professional sports industry could not avoid the financial hit of the COVID-19 pandemic. A combined report from the MLB, NBA, and NFL noted an estimated combined total loss of $13 billion in 2020 alone. To break this down, the NFL estimated losses of $5.5 billion or 38% of total revenue, and the NHL estimated that each of their 31 teams would lose $1.31 million, a total loss of $40.61 million, in 2020. These significant losses may have lasting impacts on the industry.
Such losses in revenue mean that both university and professional sports industries will be looking to maintain their revenue from sources outside of ticket sales and stadium operations, likely leaning on merchandise sales for added stability. Holcomb also explained how the pandemic has created various complications in supply chains. Canceled and reduced orders, debt for retailers, losses of sales, and inventory holds have pressured the industry to adapt and innovate. Additionally, the COVID-19 pandemic has changed the landscape of how consumers purchase merchandise, with online sales increasing by $39 billion or 36% over the last year. One would think that because people are shopping more online, the merchandise revenue would at the very least stay the same or even increase.
Unfortunately, when consumers shop online, they are more likely to come across counterfeit products than if they were shopping in person, making them more likely to buy counterfeits during the pandemic. While the risk for consumers purchasing counterfeit products has increased, counterfeits in the sports industry have also increased, but by 110% and at a rate two times faster than any other industry during the pandemic. Counterfeiting is an added pressure for the sports industry, but consistent revenue from royalties could help the industry stabilize until in-person sporting events are back in full swing.
In 2015, Homeland Security Investigations joined with the Collegiate Licensing Company (CLC), the official licensing agent of the NCAA, to spread awareness about the high probability of counterfeit products circulating around March Madness. We echo their statement: “[l]arge sporting events are prime targets for counterfeiters, many of whom travel the country with the sole intention of scamming innocent sports fans.” Though many of us will be cheering on our teams from home this year, the threat of counterfeit activity is just as prevalent. Counterfeiters post their listings all over the internet, but you don’t have to fall for their trap. Buying merchandise from official university or league websites is your best bet to ensure your favorite team and players get the royalties they have worked hard for and deserve from your purchase. After all, purchasing a jersey is not just about the piece of clothing itself. Rather, it is a physical representation of support and loyalty for that university, team, or player.
Universities Can Tackle Online Bad Actors
In addition to enforcement and other legal action, universities can take proactive steps to combat counterfeits online. One example is found in the unique partnerships between Michigan State University Licensing and the Center for Anti-Counterfeiting and Product Protection (A-CAPP), where the latter employs student interns to search e-commerce for counterfeit MSU goods. The program increases the ability of the university to identify online counterfeit vulnerabilities while at the same time providing interns with knowledge and hands-on experience related to online counterfeit schemes and trademark infringement. By utilizing the International Anticounterfeiting Coalition’s (IACC) MarketSafe® program, student interns at the A-CAPP Center have been able to remove thousands of counterfeit listings.
This season it is especially important to be safe and responsible while shopping for sports team merchandise. Buying authorized licensed goods will ensure products have passed all safety regulations, will bolster American manufacturing, and will truly support the schools and teams you love. The COVID-19 pandemic has hit schools and sporting teams hard. With the loss of most ticket sales, they rely much on the profit from team merchandise to stay afloat.
Schools like Michigan State have taken the reins with the MarketSafe® program to remove listings of counterfeits infringing on MSU’s registered trademarks. Unfortunately, schools and teams have trouble fending off counterfeiters as the people behind the operation are usually untraceable online. Victories in court may result in empty promises of damages and cease and desist letters that yield no results. It is up to us as consumers to do our part to stop them. Keep in mind some CLC tips in the graphic while shopping for licensed sports goods. (See right)
Do your best to cheer on your team responsibly and as you buy team merchandise, let more than your team chants be a real contribution to your favorite team! Those of us at the A-CAPP Center and the National IPR Center hope that you will safely enjoy the festivities this year. Construct your brackets, and your shopping carts, wisely.
 See Apparel Licensing Agreement: Everything You Need to Know, Upcounsel (November 5, 2020), https://www.upcounsel.com/apparel-licensing-agreement#:~:text=November%205%2C%202020%3A-,An%20apparel%20licensing%20agreement%20is%20a%20deal%20between%20the%20licensor,to%20manufacture%20and%20sell%20merchandise.
 James Fink, New Era Battles Counterfeit Cap Makers, Buff. Bus. First (Sep 21, 2012), https://www.bizjournals.com/buffalo/news/2012/09/21/new-era-battles-counterfeit-cap-makers.html
 ICE HASI, CBP Operation Seizes Record-Breaking $123 Million of Fake Sports Merchandise, U.S. Immigr. & Customs Enforcement (January 30, 2020), https://www.ice.gov/news/releases/ice-hsi-cbp-operation-seizes-record-breaking-123-million-fake-sports-merchandise.
 ICE HSI, NFL Partner to Prevent Fake Sports-related Merchandise from Reaching Fans Ahead of Big Game, U.S. Immigr. & Customs Enforcement (Feb. 3, 2021), https://www.ice.gov/news/releases/ice-hsi-nfl-partner-prevent-fake-sports-related-merchandise-reaching-fans-ahead-big.
 See 18 U.S.C. § 2320.
 Mary Sprecher, Merch Madness: Counterfeiters vs. Customs Agents at the Super Bowl, Sports Destination Mgmt (17 Jan. 2020), https://www.sportsdestinations.com/management/economics/merch-madness-counterfeiters-vs-customs-agents-sup-17803.
 See Combating Trafficking In Counterfeit and Pirated Goods: Report to the President of the United States, Dep’t. Homeland Security 1, 16-18 (January 24, 2020), https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf.
 Kristi Dosh, Cracking Down on Counterfeit Apparel, ESPN (Jan. 8, 2012), https://www.espn.com/blog/playbook/dollars/post/_/id/224/cracking-down-on-counterfeit-apparel-2.
 Jay Kennedy, A-CAPP Center Product Counterfeiting Database: Insights Into Converging Crimes, A-CAPP Paper Series (Jan. 2019), https://a-capp.msu.edu/wp-content/uploads/2019/01/Converging-Crimes-FINAL-1.pdf.
 Complaint at 40, NBA Properties, Inc. et al.v. P’ships and Unincorporated Ass’ns Identified on Schedule “A,” 2019 WL 7042342 (N.D. Ill. 2019) (No. 1:19-cv-01731).
 See Jake Satisky, Duke Joins Pro Sports Leagues, Other Universities in Fighting Counterfeit Goods, Chronicle (July 29, 2019), https://www.dukechronicle.com/article/2019/07/duke-university-nba-nfl-mlb-nhl-counterfeit-goods-lawsuit.
 Counterfeiting: A Game of Whack-a-Mole, License Global (Apr. 06, 2018), https://www.licenseglobal.com/magazine/counterfeiting-game-whack-mole.
 Kery Murakami, Colleges: Financial Toll of Coronavirus Worse Than Anticipated, Inside Higher Ed (Sept. 29, 2020), https://www.insidehighered.com/quicktakes/2020/09/29/colleges-financial-toll-coronavirus-worse-anticipated.
 Samuel L. Stanley, Jr, Oct. 14, 2020: Update on MSU’s Financial Situation, MSU (Oct. 14, 2020), https://president.msu.edu/communications/messages-statements/2020_community_letters/2020-10-14-financial-update.html.
 Michigan State University: 2018-2019 Budgets, i, vi, MSU Planning & Budgets (2020), https://opb.msu.edu/functions/budget/documents/2018-19Budgets.pdf.
 Jasmine Harris, In the Name of ‘Amateurism,’ College Athletes Make Money for Everyone Except Themselves, Conversation (April 5, 2019), https://theconversation.com/in-the-name-of-amateurism-college-athletes-make-money-for-everyone-except-themselves-114904#:~:text=As%20noted%20in%20the%20report,going%20back%20to%20participating%20schools.
 Brandon Kochkodin, U.S. Pro Sports Prove Big Enough to Handle $13 Billion Sales Hit, Bloomberg (Nov. 5, 2020), https://www.bloomberg.com/news/articles/2020-11-05/u-s-sports-leagues-facing-nearly-13-billion-in-covid-losses#:~:text=MLB%20will%20have%20operating%20losses,interview%20with%20Sports%20Business%20Daily; see also Tommy Beer, Report: NBA’s Bubble Prevented $1.5 Billion In Losses, Forbes (Oct. 20, 2020), https://www.forbes.com/sites/tommybeer/2020/10/20/report-nbas-bubble-prevented-15-billion-in-losses/?sh=21febb393823.
 Mike Ozanian, The Stadium Revenue Each NFL Team Will Lose If Games Are Played Without Fans, Forbes (May 18, 2020), https://www.forbes.com/sites/mikeozanian/2020/05/18/the-stadium-revenue-each-nfl-team-will-lose-if-games-are-played-without-fans/?sh=2b353bcb691a.
 Christina Gough, Estimated Potential Loss of Revenue for NHL Teams Per Home Game Due to the Coronavirus (COVID-19) Pandemic as of March 2020, Statista (Jun. 18, 2020), https://www.statista.com/statistics/1104159/coronavirus-revenue-loss-nhl/#:~:text=COVID%2D19%3A%20potential%20revenue%20loss%20for%20NHL%20teams%20per%20game%202020&text=It%20is%20estimated%20that%20each,canceled%20due%20to%20the%20coronavirus.
 Online Sales Ignite in Corners of the World Late to the Ecommerce Revolution, Digital Commerce 360 (Jan. 26, 2021), https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/#:~:text=In%20the%20U.S.%2C%20online%20sales,of%2036%25%20year%20over%20year.
 Jonathan Walfisz, Sports Counterfeits Spike During Pandemic, but Hope for Rights Holders as Battle Goes Online, World Trademark Rev. (Aug. 21, 2020), https://www.worldtrademarkreview.com/anti-counterfeiting/sports-counterfeits-spike-during-pandemic-hope-rights-holders-battle-goes-online.
 ICE, CLC Warn Fans About Fake Tickets, Merchandise Ahead of NCAA March Madness Games, U.S. Immig. & Customs Enforcement (March 27, 2015), https://www.ice.gov/news/releases/ice-clc-warn-fans-about-fake-tickets-merchandise-ahead-ncaa-march-madness-games.
 See MarketSafeⓇ Project Partnership Report 2020, MSU A-CAPP Ctr. 1, 4 (2020), https://a-capp.msu.edu/wp-content/uploads/2020/07/FINAL-2020-Marketsafe-Report.pdf.
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