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New Game Plan: Nike GC Jim Carter It took almost 30 years of practice for Kevin Brown, assistant general counsel at Nike, Inc., to realize just how little he’d learned in law school. “The rules of Oregon just don’t cut it in Nigeria,” he said recently, speaking from Nike headquarters in Beaverton. In charge of the company’s brand protection, Brown learned the job the hard way. He and his fellow in-house lawyers knew that counterfeit Nike clothing and footwear were being sold around the world. But the conventional wisdom among IP lawyers was that there was little they could do to stop it. For example, Nike employees in China who monitor production (done by subcontractors) were seeing copycat shoes at street markets. There was also a general sense within the company that the Chinese government was unhelpful in rooting out counterfeiters. “At first, when we found counterfeits in the market, we would go to local lawyers and file cases. But we found that [the cases] went nowhere,” says Brown. “We had a difficult time getting factories raided. We just couldn’t get the attention of the appropriate authorities.” NUDGE AND ENCOURAGE After repeated frustrations, Nike started asking its own local employees what they thought the company was doing wrong. The answer — the apparel giant needs to work within the system — came from Nancy Chen, who was running Nike’s Beijing government affairs office. Complaining to the U.S. trade representative every time Nike thought the process was too slow was angering the Chinese authorities. The company would do better, she explained, by doing things the local way. “In China, you nudge, encourage, nourish, educate, and train,” explains Brown. By following the advice of a few local “coaches” (everything at Nike is a sports analogy), Nike lawyers put aside the aggressiveness so prized among Americans and did things the Chinese way — by being patient, polite, and respectful. Says Brown: “We finally concluded, despite the conventional wisdom among our competitors, that the Chinese authorities are eager to work with foreign countries to protect intellectual property. But you need to understand their system.” Now, he says, “we’re getting results that we are completely happy with.” Just recently, that philosophy helped the company win an impressive victory in Vietnam — another country with a reputation for being unhelpful. A few months ago, at the urging of Nike and several other footwear companies, Vietnamese authorities raided a counterfeiting factory, seizing 24 truckloads of counterfeit Nike, adidas, New Balance, and Reebok sneakers. There were almost 22,000 pounds of Nikes alone. “This was a big monster,” says Brown. Usually, Nike’s goal in these situations, says general counsel Jim Carter, is just “to get the counterfeits off the street.” Taking the culprits to court can often be more work than it’s worth, especially in countries where the legal system is less developed or is perceived as biased against foreign businesses. But in this situation a Nike employee based in Vietnam worked with the local authorities and a local lawyer who specializes in counterfeits. In March, the company won an astonishing ruling by the People’s Court in Vietnam. It not only confirmed the illegality of the manufacturer’s conduct, but levied a $9,000 fine and ended with the comforting statement: “We have worked with Vietnam Recycling and Development Center to destroy all fake Nike shoes, components, and logos by grinding [them] into small pieces.” Brown is thrilled. “They’ve done all the right things,” he says. “And given that the official position of the Vietnamese government is that everything is community property,” says Brown, “that’s amazing.” Although Nike only won $333 in damages, it’s unusual for Vietnamese courts to award damages in these situations at all. To Brown, the decision means one thing: “The common wisdom is debunked.” PERIL OF POPULARITY Nike’s anticounterfeiting strategy began in earnest about five years ago. “We looked at all these polls that were commissioned, and consistently, our swoosh trademark came out as one of the ten most-recognized brands in the world,” says Brown. That, in turn, was attracting more counterfeiters. Consumers worldwide wanted the Nike brand, but either couldn’t afford or didn’t have access to the real thing. It was time to step up brand enforcement. At that time, the company’s director of corporate security had started to assume responsibility for enforcement. Brown was personally inspired to change Nike’s strategy when he was working as general manager of Nike Mexico, based in Guadalajara, from 1992 until 1996. He ran into counterfeits all the time but felt powerless to respond. “I was frustrated as a lawyer that we had no formal approach to dealing with [the issue],” he says. As general manager, he didn’t have the authority to enforce the trademarks. In 1997 Brown moved back to Oregon to join Nike’s in-house legal team and put together a business plan for lawyers and the sales and marketing managers. Brown and the director of corporate security convinced the company that its enforcement strategy, rather than being largely reactive, should aggressively analyze the areas where the problems were and look for ways to go after them. But the company soon realized that not every problem has a solution. In some parts of the world, there’s little the lawyers can do. Take Cuba. Nike lookalikes thrive there. But U.S. law prohibits Nike from doing business in Cuba. What to do? “We do nothing,” Brown says. The shoes may be counterfeit, but the company couldn’t get anyone over there to testify to that in court. So it just had to cut its losses. In the countries where there are actions that can be taken, Nike must decide whether it can rely on its own employees or whether it needs to involve local lawyers to represent the company’s interests, often before an administrative agency. “There is no general rule. Every legal system is different,” says Brown. “Every national priority for commercial justice is different.” BACKING OFF In Russia, for example, the problem was sometimes knowing when to leave the counterfeiters alone. “It’s not the wild, violent place it was six years ago,” says Brown, “but there are still some scary people involved in these sort of crimes.” Russia isn’t the only perilous place. Recently in Southeast Asia (Brown won’t say where), the local lawyer hired by Nike received a message from the police that the officers were not going to proceed in the investigation of a counterfeit case. “We don’t know if it was because the defendant was too violent or the authorities were on the take, but in that situation, you just have to let it go,” says Brown. Nike acquired its street smarts largely by hiring local lawyers and investigators to help it navigate each system. “We’ve developed a network of outside lawyers and professional private investigators who specialize in IP defense and focus on protecting the Nike brand,” says general counsel Carter. Local firm lawyers often accompany the authorities on factory raids, for example. “We have law firms skilled at identifying the product and making sure the right procedures are followed in making seizures,” says Carter. Launching that new strategy kept Brown on the road much of the time. “I’ve seen the inside of many more airports than I care to remember,” he says. Five years later, he has cut back to about three or four trips a year, down from about twice that when he started this job. Still, just going through his e-mail can feel a bit like world travel. “This morning I dealt with issues from Bulgaria, France, Holland, and Estonia,” he says. The afternoon took him to problems in Dubai, South Africa, and Angola. Ever the “Just do it” optimists, Nike lawyers like to see their continuing counterfeiting problems as evidence of a job well done. “Counterfeits are a barometer of whether or not the consuming public wants your brand,” says Brown with pride. “It’ s a maddening form of flattery.” Daphne Eviatar is a contributing editor at The American Lawyer, a sibling publication. E-mail:

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