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In the year In 2020, the apparel sector lost about $27 billion in annual sales to counterfeiting, an illegal trade that caused huge losses to both products and buyers. According to the 2022 Intellectual Property Crime Risk Assessment report, clothing, accessories and luxury goods are the most popular product items for counterfeiting. But the problem doesn’t start and end here: the explosion of digital content has also given rise to a number of digital counterfeiters.
Image Credits: MarqVision (Opens in a new window) Under license.
MarqVision has built an AI-powered intellectual property (IP) protection platform that monitors both e-commerce marketplaces and digital content, automatically identifying and eliminating counterfeit products from online sales and distribution. And now, the startup has raised $20 million in Series A funding to continue expanding its platform.
The company, which is based in Los Angeles and was originally founded at Y Combinator, said its clients — which include fashion labels such as Ralph Lauren and Kangol, LVMH, crystal icon Baccarat, as well as media behemoth Pokemon — use MarqVision to scout the locations of their brands. It may be abused.
These include the top 1,500 online marketplaces worldwide, as well as popular social media platforms for trading, NFT forums, gaming websites, and other places where fake products can be seen. He says the technology is driving more than 20,000 executions every week. The founding team claims its roots in Asia – specifically Seoul – and the largest IP enforcement platform in the region, a point that 90 percent of counterfeit sales worldwide go back to Asia.
DST Global Partners and Athenaeum Investments led the latest round of funding, along with existing backers SoftBank Ventures, Bass Investment and Y Combinator. The Series A funding brings the total raised to $25 million in 2021, including $5 million in seed funding. The company is not disclosing its valuation.
The challenge MarqVision is facing is the speed and volume of counterfeit sales.
Millions of imitations are traded instantly, and the opportunity, so to speak, is vast: it affects both small and large brands and sales platforms. Companies like Amazon have developed extensive IP protection strategies over the years to proactively monitor and take down counterfeit goods, but the argument here is that even this is not enough (and that’s not to mention the thousands of platforms smaller than Amazon… managing this on their own).
In other words, like any digital challenge, the problem of counterfeiting—whether it’s products or content—is so massive that it’s difficult, if not impossible, for one person to tackle alone.
Mark Lee, along with startup CBO DK Lee and friends from Harvard and MIT, founded MarqVision in 2020. (Mark) Lee first presented the problem from a legal perspective when he was a Harvard Law student. Interested in the field of IP, he realized that counterfeiting is the world’s largest criminal enterprise, with an annual turnover of $3 trillion. New digital innovations such as the growth of e-commerce marketplaces – which give third-party sellers ways to reach new customers more quickly – and new ways to distribute content such as app marketplaces have all accelerated the experience.
MarqVision uses artificial intelligence and machine learning technology that its founders originally developed at MIT: its approach is to detect and report illegal use. Those hard-to-identify uses are in turn classified by humans, but that’s not the case with all MarqVision scanners. About half of the company’s files for online marketplaces, for example, are automatically generated using AI and software that doesn’t need to go through human oversight, co-founder and CEO Mark Lee told TechCrunch. It claims the technology has 97% accuracy, meaning that for every 100 items it delivers, the company can download 97.
“In today’s digital world, creative assets are under attack, with content owners largely unprotected as consumers purchase counterfeit goods and NFTs through sophisticated counterfeiters,” Lee said. “Unlike our competitors who are forced to perform manual reviews in time-consuming processes, MarqVision’s end-to-end process is largely automated.”
This is something that other companies in the industry have not been able to do, Lee argued. “Other brand protection companies employ thousands of employees (or what they call analysts) to manually search and report online,” he said. “Typically, the most time-consuming part of the process is product matching and documentation.”
Matching the product, he continued, “is a very laborious process if done by hand.”
Documents and reports represent another type of problem, an almost robotic process automation.
Basically, when a product is found to be counterfeit, it must be reported to the marketplace. Each marketplace, according to Lee, “requires a different set of documents, verifications and reporting templates to define reporting purposes. MarqVision has automated all of this. “Typically when you report a product list, it takes about an hour to prepare a full report,” he said. Now we can process thousands of reports every hour.
It is important to note that much of the IP technology being developed by third parties today is also currently being used by rights holders for MarkVision. For that, the funding here is used to promote that particular line of business. MarqVision plans to use the proceeds to launch a new and comprehensive IP operating system to enable brand owners to manage, protect and monetize intellectual property, all in one place, Lee said.
That’s not to say platform operators haven’t made an effort either.
Amazon, as one example, has spent years building a strategy to combat IP theft, working with authorities to identify and then prosecute bad actors. But it was a difficult problem for marketplaces in general. On the one hand, their priority as a business is to enable as many transactions as possible, which in the past has led to accusations that being weak in anti-counterfeiting is to their advantage (which means less sales!). On the other hand, this is bad form, it’s illegal, and no trading site wants to have an untrustworthy reputation for either buyer or seller, so it’s definitely in the interest of the forums to address this.
Critics, however, believe that the horse was unable to control IP theft earlier – so brands had an opportunity to build technology that they could use to defend themselves more directly.
As Lee sees it, there’s another issue that prevents marketplaces from building or offering the tools he (or his direct competitors like Red Points and Brandshield, among others) offer:
Lee believes that “most marketplaces want to maintain their position as an intermediary, just a link between buyer and seller. They don’t want to take direct responsibility for anything sold on their marketplace, otherwise they deserve a lot of liability. Therefore, most marketplaces are willing to deal with fake issues.” take, and that goes as far as investigating and taking down reported items. While they want to actively monitor and take down counterfeits, there are millions of products listed and sold every day, so using their resources effectively isn’t about running an anti-counterfeit program on a large scale. In contrast, “MarqVision is helping brands with a strong desire to protect their brands and their customers.” It focuses on collection, so we can be more accurate and efficient.
Markvision will also use some of the funding to open a new operation in Paris this fall, which will become the startup’s European base. Paris is a good place to start because many of their existing clients are European luxury brands, Lee told TechCrunch. MarqVision won the LVMH Innovation Award in June 2022 and is participating in LVMH’s accelerator program La Maison des Startups.
“No one else is doing this advanced remote work, and it’s largely because of Mark’s background as not only a respected technologist and startup founder, but also as a lawyer specializing in trademark, copyright and patent laws,” said Cheuk Kim, Managing Director of Athenaeum Investments. He understands the pitfalls they are exploiting and is paving a new way forward.”
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