Counterfeiting is by no means a new threat to brands, manufacturers, and consumers, but it is a growing global problem. With statistics showing that counterfeit goods cost the global economy more year on year, it’s essential to be aware of the scale of the issue, the impact of counterfeiting, and ways we can tackle this modern-day scourge on society. This informative guide will provide you with essential facts, new industry information, and the steps you can use to reduce counterfeit consumer goods.
Before we proceed to examine the ins and outs of counterfeiting, it’s useful to define this concept and get an in-depth understanding of what it means. A counterfeit product is an item created with a will to deceive the buyer. Counterfeit goods are usually made from low-quality materials and components, and they are available at a lower price than original, authentic, branded products. However, many counterfeit goods look so close to the original that it can be challenging to spot the difference between a genuine product and a fake version.
Counterfeit products are often known as knock-off goods or rip-off versions. While counterfeit items and knockoffs are similar, there is a significant difference in their definitions. Knockoffs are cheap imitations of branded goods, often luxury items. They’re sold as lookalikes, and consumers know that they’re not buying a real labeled product. Counterfeit items are often more sophisticated, and they are designed to lure consumers into the belief that they’re buying an authentic, branded item. Counterfeit products feature the brand’s logo and global trademark. An example that has become incredibly commonplace in markets and stalls all over the world of late is the Michael Kors handbag. A knock-off version will have a similar design or print and be the same shape and size as the original, while a counterfeit will look exactly the same and feature a fake version of the brand’s logo. A shopper might knowingly choose to buy a knock-off to keep up with trends at a low price, but there is also a risk that they could unwittingly purchase a fake from a counterfeit seller when they intend to buy the real thing.
Counterfeit goods tend to infringe upon the trademark, patent, and copyright laws. Retailers, distributors, manufacturers, and producers can all be involved in counterfeiting. We usually focus on luxury, branded goods when discussing counterfeiting, but there are other divisions. For example, piracy is linked to the production or reproduction and sale of copyrighted materials without permission, including music, movies, TV programs, and software. It’s very common for counterfeiting to tick several boxes and for infringements to overlap. Pirated movies and music, for example, usually break copyright and trademark laws.
It is possible to buy counterfeit versions of almost any product imaginable in this day and age. The Organization for Economic Co-operation and Development (OECD) definition of counterfeit encompasses any items protected by intellectual property rights that are mimicked or copied without the brand’s permission. Counterfeit products are designed to fool consumers and lull them into a false sense of security. They line the pockets of people and companies that flout trademark and copyright laws. According to a senior economist at the OECD, Piotr Stryszowski, the problem’s scale is now so vast that anything that carries a logo can become a target.
Most of us will have seen counterfeit items at some point in our lives, but the scale of the issue is often underestimated. The Global Brand Counterfeiting Report 2018 published that the global sales of counterfeiting goods equaled a total of $1.2 trillion in 2017, with the amount expected to rise to $1.82 trillion by 2020. In the US alone, losses directly associated with counterfeiting reached $323 billion in 2017.
According to the OECD, between 2.5% and 5% of goods that are traded globally are counterfeit. The value of these products is estimated at a staggering $461 billion. In the United States, US Customs and Border Protection (CBP) seized over $1.4 billion (based on MSRP) of counterfeit goods in 2018, up from 1.2 billion in 2017, and numbers are expected to rise as counterfeiting becomes more lucrative and more and more consumers are duped into buying fake products online.
Counterfeiting is a growing problem, and the consequences are widespread. A report by the International Chamber of Commerce highlights the effects of counterfeiting. As well as contributing to substantial economic losses, counterfeit trade also impacts employment. In 2013, net job losses associated with counterfeiting reached between 2 and 2.6 million, with this figure set to rise to 4.2-5.4 million by 2022. As sales are moving away from legitimate producers, they will not need to hire additional employees.
Additionally, when consumers unknowingly purchase counterfeit products, they may find them inferior, and their confidence and brand loyalty decreases. Consumers may choose to no longer purchase from the producers because of these issues in the future. These, along with other reasons, will affect the creation and retention of jobs globally.
Although counterfeiting is a global issue, there is a handful of countries that have been hit hardest by the proliferation of this form of criminal activity. Nations, including France, the US, and Ital,y are particularly susceptible to the effects of counterfeiting, as their economies rely on high-value goods, which are protected by legal trademarks and intellectual property rights. The Global Brand Counterfeiting Report 2018 suggests that luxury brands lost over $30 billion through Internet sales alone. Forbes stated that counterfeiting was the most expansive criminal enterprise in the world in 2018, generating a higher income than human and drug trafficking.
According to the Commission on the Theft of American Intellectual Property, China, including Hong Kong, is the most significant contributor to global counterfeiting, with 87% of counterfeit goods seized upon entry into the USA made in China.
The latest statistics from the OECD suggest that these are the most common types of counterfeit products:
Footwear was by far the most commonly seized counterfeit product in 2016, accounting for 22% of the total value of captured fake products.
Brand name luxury products tend to be the most popular target for counterfeit producers, retailers, and distributors, but this is a problem that is impacting multiple sectors. From handbags and clothing to cosmetics, car parts, toys, sports equipment, and music recordings, nothing is sacred.
One of the most concerning avenues of counterfeiting is pharmaceuticals. The most profitable type of fake products, pharmaceuticals, contribute to losses worth $217 billion per year. While any counterfeit goods can pose a risk to human health and safety, medications are particularly dangerous. This is because counterfeit medicines are not produced to the same standards as genuine drugs. Fake medicines pose severe risks as a result of the following factors:
The World Health Organization estimates that counterfeit medicines account for up to 30% of drugs bought in developing countries and 1% in developed nations. The consequences of taking counterfeit drugs include side-effects and complications, ranging from minor stomach upset and headaches to fatal symptoms.
Counterfeit drugs are not just hazardous to consumers. They also undermine manufacturers’ credibility and reputation that produce, store, distribute, and sell medicines legally.
Organizations, like the OECD, have been working with police forces and governments across the world to try and clamp down on the movement of counterfeit goods. Still, the truth is that this is an increasingly difficult problem to monitor. This is due primarily to the rise of the Internet.
Despite the United States CBP’s best efforts, the number of seized goods in the US increased by approximately 32% between 2012 and 2018. Technology is advancing, and teams have high-powered means of tracking counterfeit operations. Still, the sheer scale of the problem means that those charged with the responsibility of tackling counterfeiting are only dealing with the tip of the iceberg.
The USA has been hugely critical of China and its role in promoting the trade of counterfeit goods. Almost 90% of fake products seized on the US borders originate from China, and many ministers have accused Chinese officials of actively encouraging intellectual property theft. In 2017, President Donald Trump signed an executive order to enhance protection against counterfeit goods. This order directs the director of Homeland Security to step up seizures and implement a strategy and plan to combat violations of laws. In 2019, Trump also released a “Memorandum on Combating Trafficking in Counterfeit and Pirated Goods,” asking government departments to provide him a plan on combatting third-party counterfeiting on marketplaces. They highlighted eBay, Amazon, and Alibaba in the report and said they did tests on four categories of frequently counterfeited goods. Based on sampling from the marketplaces, they found that more than 40 percent were counterfeit.
The most apparent consequence of counterfeiting is economic loss. Still, there are additional concerns to bear in mind — counterfeiting results in genuine brands and businesses losing out, which has a broader impact on the economy. Business makes the world go around, and if the economy suffers through actual activity being stifled, this means that there is likely to be less funding available for public services and investment in innovation. Counterfeiting can also affect Foreign Direct Investment (FDI). The International Chamber of Commerce estimates the value of lost FDI to counterfeiting at $111 billion. Counterfeiting is also a criminal activity, which fuels the cost of wider criminality. Counterfeiting is no longer confined to street-corners and flea markets. The problem has intensified to staggering levels, as shown by a recent Organization for Economic Cooperation and Development (OECD) report, which details a 154 percent increase in counterfeits traded internationally — from $200 billion in 2005 to $509 billion in 2016. Similar information collected by the U.S. Department of Homeland Security (DHS) between 2000 and 2018 shows that seizures of infringing goods at U.S. borders have increased 10-fold, from 3,244 seizures per year to 33,810.
Buying counterfeit products can also contribute to health and safety concerns. When you purchase an item from a store, you expect it to meet specific quality standards. With counterfeit items, low quality, cheaper components, materials, and ingredients are often used to keep prices down. Buying counterfeit products can put your health at risk and even cause death.
One of the most significant dilemmas facing brands, manufacturers, policymakers, and law enforcement teams is the Internet’s growth. Online shopping is becoming more popular year-on-year. It’s much more challenging to police retailers and platforms that market and sell products on the web. In 2018, GAO figures revealed that almost 80% of Americans had purchased a product online. This trend is set to continue as more and more consumers embrace the ease, speed, and convenience of buying online. The trouble with shopping on the web is that it’s more challenging to ensure that you’re purchasing exactly what you think you are. As a consumer, you rely on a retailer to provide you with accurate information and images, and there’s a degree of trust required. GAO investigations found that counterfeit items were rife across major selling platforms and marketplaces, including Amazon, eBay, Walmart, Sears, and Newegg. In fact, a report commissioned by the office showed that up to 40% of the products sold on these sites were counterfeit.
According to the World Trademark Association, there are several reasons why counterfeit producers and retailers prefer to operate on the web. These include:
Despite the crafty tricks and ploys used by retailers and counterfeit rings, many buyers are aware of fake goods’ prevalence. Over a third of consumers admitted to unknowingly buying counterfeit products, while over 10% said they had been scammed more than five times. The difficulty for shoppers and brands is that it’s not easy to do something about the problem, even when you’re aware that you’ve bought a counterfeit item, or a bogus outfit is ripping off your brand.
One of the main problems for shoppers and brands that use sites like Amazon is that the operator is not legally responsible for selling fake items (based on the Digital Millennium Copyright Act). If you buy a product from Amazon that you believe isn’t genuine, you can raise the issue and go through the motions to have the product withdrawn, but this takes time, and the same person or people may be selling the same products under a different name. Ordering online provides a straightforward means for counterfeit sellers to generate profits. Once an order is processed, a retailer can send a package directly to the customer’s door without any checks. The majority of people might not even notice that the product that has come sailing through the door is fake.
Different countries are approaching the issue of counterfeiting in different ways. While the Department of Homeland Security has clamped down on illegal websites and sellers operating in street markets, some politicians have suggested introducing fines for those who buy counterfeit goods. In France, ministers have introduced stricter measures for sellers and buyers, with penalties and punishments ranging from fines to prison sentences. Several companies and border patrol services have also cracked down on imports from China.
In 2011, the Stop Online Piracy Act was introduced and subsequently pulled by US Representative Lamar. S. Smith. At the time, the bill was hugely controversial, as many felt that it threatened privacy and freedom of speech.
Since 2011, measures have been introduced to try and stem the rising tide of counterfeiting. President Trump signed an executive order in 2017 to protect businesses, brands, and buyers from counterfeit products. More recently, the president signed a memorandum aimed explicitly at retailers including Amazon, eBay, and Alibaba. The paper laid out plans for the Department of Homeland Security and the Commerce Department to work with federal groups to create a strategy to reduce counterfeits’ prevalence by holding major marketplaces accountable. The forces tasked with this job will be collecting and analyzing data in a bid to encourage platforms to tidy up their act and combat counterfeiting.
Sites like Amazon and eBay claim to battle hard against sellers that market and distribute counterfeit products, but in reality, it’s challenging to remove products and to try and root out every counterfeit item. If you report a fake pair of trainers, for example, you go through a series of processes, providing information about the purchase and proving that you own the trademark that is being ripped off by an individual seller or several retailers. Following an internal investigation, the platform will then take the item down. The trouble is that the items may be sold elsewhere, and the number of studies undertaken doesn’t correlate with the scale of the issue as these studies are only focused on the major marketplace platforms.
A reluctance to take control of counterfeiting online has impacted the relationship between significant brands and selling platforms like Amazon. The CEO of a well-known watchmaker, Swatch, Nick Hayek, told reporters at the Wall Street Journal that the company had clashed with Amazon because the marketplace refused to police the site properly to clamp down on fake versions of branded, trademarked items. Birkenstock’s CEO, David Kahan, also decided to stop selling on Amazon in 2017 as a direct result of the site’s inability to monitor and prevent counterfeiting.
In the last decade, social media has exploded onto the scene, attracting billions of users all over the world. While social media was once predominantly a platform for old friends, family members, colleagues, and roommates to keep in touch, it quickly evolved into a business hub. Nowadays, the majority of businesses have a social media presence, using sites like Facebook and Instagram to promote their products and services and drive sales. It’s true to say that social media offers a wealth of benefits for modern businesses, but there are also risks.
A study released by the British government found that 1 in 5 luxury items tagged in Instagram posts was fake, with 20% of posts featuring counterfeit goods from global sources. Most commonly, counterfeit items that appear on Instagram come from Ukraine, China, Malaysia, Russia, and Indonesia.
In 2016, Instagram identified over 20,000 fake accounts in just three days. These accounts were responsible for more than 14 million posts, which were designed to deceive followers and fans into buying counterfeit designer goods. The most commonly affected brands included Chanel, Prada, and Louis Vuitton, according to a study by the Washington Post.
Instagram has seen a significant rise in counterfeit profiles created. A report by the analytics firm Ghost Data In March 2019 found that active Instagram counterfeit accounts have risen by 171% since their first study in 2016. In 2016 they found 20,892, and in 2019 they detected 56,769 counterfeit accounts. In analyzing posts from 4 million public accounts, they found that posts from counterfeit accounts have grown more than 341%. In 2016 the profiles published 14.5 million posts, while in 2019, they published more than 64 million. In March of 2019, Instagram launched “Checkout” on Instagram, allowing accounts selling products to take payments through their profile automatically. No longer will consumers need to click on their profile link to directing to their websites. They can purchase the product right from the post. It’s currently offered only to businesses and consumers in the US. This process will make it much easier for counterfeiters to sell products on Instagram.
Social media provides a convenient platform for retailers keen to shift counterfeit items. It takes a matter of seconds to set up an account. You can attract followers very quickly and communicate with buyers outside of the platform, making policing complex. As technology evolves and the issue of counterfeiting on social media becomes more visible, social media watchdogs and fraud groups are utilizing sophisticated techniques (including AI, spambots, and new algorithms) to shut down fake accounts, to identify suspicious behavior, and protect buyers. The UK has already implemented legislation to crack down on counterfeiting proliferated by social media.
Counterfeiting is a complex issue, which demands a multi-faceted approach. The World Trademark Review suggests several measures that could be employed to reduce the number of counterfeit items in circulation dramatically:
Social media brand protection
With brands facing a real threat of counterfeiting on social media, it’s wise to consider measures that can be taken to enhance protection. These include:
The growth in popularity of online shopping and social media has undoubtedly fueled an increase in counterfeiting. The vast majority of people are aware of the ‘big 3’ online marketplaces, Amazon, eBay, and Alibaba, and these platforms generate billions of dollars in sales every year. Although there are many perks to shopping on these sites, they are synonymous with counterfeiting. One of the main obstacles that consumers face is the difficulty in separating authentic goods and counterfeit versions. It is increasingly difficult to spot the differences, and this is contributing to buyers unwittingly purchasing counterfeit products. With this problem becoming increasingly widespread, what are the ‘big 3’ doing about counterfeiting?
Amazon is a hugely popular marketplace, but it has been hit hard by accusations linked to counterfeiting and damning reports and stories in the press. To rebuild its reputation and regain the trust of consumers looking to buy high-quality, genuine products, Amazon has announced a raft of measures in recent years. The first is known as Amazon Transparency. It involves brands using a 26-digit code to provide consumers with information about its origins and its journey along the supply chain via the app. Amazon initially launched this feature for its own products in 2017 alongside another initiative designed to battle counterfeiting. The Fulfilled by Amazon scheme enabled companies with genuine trademarks to join Amazon’s Brand Registry and register their trademark and IP.
Most recently, In February 2019, Amazon enhanced its Transparency offering by launching ‘Project Zero.’ Not only can brands continue to use their serialization product, but what’s new is they also provide machine learning tools to scan and remove counterfeit listings, plus they’ve given brand owners the power to delete fake listings. This launch was only available in the US until July 2019, when it expanded to the UK, France, Italy, Spain, and Germany. Currently, it’s accessible by invite-only, but Brands can join a waitlist. Project Zero does not have a cost to join, but if you do want to use the serialization service, there is a cost per unit based on the volume. According to an Amazon.com forum and other news outlets, users of the serialization service have reported it costs between $0.01 and $0.05 per item. When using the serialization service, only products using the codes will be sold (Amazon will scan them at their Fulfillment centers for verification). Consumers can scan the codes once they’re received the products to ensure authenticity.
Amazon also has an anti-counterfeiting policy, which sets out a series of requirements for sellers wishing to use the marketplace to promote goods. The policy states that the sale of counterfeit products is ‘strictly prohibited’ by Amazon and sets out criteria for listing and selling on the site. Vendors must provide records to confirm the authenticity of their products, maintain up to date inventories, and avoid selling illegal and fake items at all costs. This relates to any products or materials that are protected by intellectual property rights. The policy also highlights penalties for sellers that flout the rules. Any seller that is found to be selling counterfeit products will have their account temporarily or permanently shut down, and sellers will be required to cover the cost of destroying counterfeit items, and payments are likely to be withdrawn.
To protect consumers and reduce the number of counterfeit listings on its platform, eBay introduced eBay Authenticate. This new service was trialed on handbag sellers. According to TechCrunch, eBay sells a handbag every 13 seconds. To ensure that consumers were exposed to authentic listings, eBay sellers that participate in the Authenticate scheme use a pre-printed label and ship their item to be independently verified. Subsequently, the listing is posted with an authentication badge. When the consumer makes a purchase, the certificate is sent to the buyer. If there’s a mistake, eBay offers a 200% money-back guarantee, and the seller is required to pay eBay 20% of the sale fee. The initiative covers a host of designer bag brands, but demand from consumers is likely to contribute to more brands and more categories being covered by the guarantee in the future. Currently, eBay only accepts bags valued over $500 and from the following companies: Louis Vuitton, Hermès, Chanel, Gucci, Céline, Fendi, Christian Dior, Prada, Goyard, Balenciaga, Valentino, Burberry, Chloé, Bottega Veneta, and Saint Laurent.
Finding sellers’ contact information is very valuable for investigations or sending cease and desist letters. Seller contact information can be challenging to request from eBay except in cases of counterfeiting. Brand owners can request seller contact information from eBay through the VeRO platform when there is a counterfeit violation. Other seller information requests for non-counterfeit items require a court order or are at eBay’s discretion to provide that information.
Warranty VeRO enforcements on eBay are rarely used but represent an excellent reason for removing suspicious listings that otherwise may not have another IP violation. In many situations, sellers may not have the right to state the products they’re selling have a warranty based on the brand owners’ warranty policies. A review of your warranties or updating them with specific statements could provide a useful tool to remove suspicious listings.
In 2017, Alibaba, a Chinese e-commerce corporation, released a statement saying that it had formed the Alibaba Big Data Anti-Counterfeiting Alliance (AACA). The alliance was created when Alibaba teamed up with 30 high-profile brands and luxury businesses, and the aim was to work together to collect and analyze data to block and remove fake listings. By the end of 2017, Alibaba had closed down around 240,000 counterfeit stores, taking out over 380 million products from the Taobao.com marketplace. Alibaba has been heavily criticized for not doing enough to stop counterfeiting, but co-founder Jack Ma stressed that the company is stepping up the fight against fakes, having formed its own task force to crack down on counterfeit sellers. The task force is responsible for carrying out spot checks on around 100,000 products per year. Samples are sent off to copyright holders or independent authentication experts. Those who fail the authentication process are removed from the marketplace, and vendors face the possibility of having to close their stores.
By 2019 Alibaba’s AACA program has over 130 members, and removal requests have decreased by 32 percent because of their proactively removing listings and working with their brand members. In Alibaba’s 2018 Intellectual Property Rights Protection Annual Report (released May 2019), they state the 96 percent of their listings never had a sale due to their quick removal using “state-of-the-art technology.” Alibaba has also been using its data to work with law enforcement across China. Their report states that “during the course of the year, Alibaba referred 1,634 IP-related leads to law enforcement, which led to the arrest of 1,953 criminal suspects and the closure of 1,542 facilities. These cases involved goods worth an estimated RMB 7.9 billion.” Alibaba has also worked hard to remove listings faster. In 2018, 96 percent of the listings enforced were removed in 24 hours or less.
Modern retailers and producers of counterfeit goods use cunning, clever ways to dupe consumers, and it’s increasingly difficult to spot warning signs, especially when buying online. While brands and manufacturers must be aware of counterfeiting risks, raising awareness among consumers is also vital. The City of London Police Force recommends the following steps to lower the risk of buying fake goods:
Open marketplaces can be a frustrating, time consuming, challenging, and – at times – an alienating endeavor for brands. Counterfeit or unauthorized entities using your brand name to redirect traffic to an unauthorized seller, competitor, sell counterfeit or stolen goods and misrepresent the intentions and business ethics of your company can have a lasting impact on your bottom line. If left unchecked, or if the resolutions are mishandled, the damage can be severe and, in some cases, permanent.
Having more than 20 years in the industry, I have seen the full spectrum of infringements and the wide variety of proposed solutions; this experience has led us to discard the ineffective strategies and methodologies. Using a combination of current technologies, proven strategies, and tested methodology, we can successfully and effectively protect your good name.
To begin, one needs to understand the following:
Who is going to be the primary point of contact? Who is going to head up or take the point for what department or concern? We will need these points of contact information and pertinent details. This will allow one to create an efficient communication strategy, as communication is critical for time to cure these illicit offerings.
Next, one will need to take inventory of what credentials and intellectual property that you possess and what documents we might need from you. Examples of this might be: current reseller and distribution agreements, reseller policies, authorized resellers and distributors, currently owned domains, current trademarks/patents and where registered, in process trademarks, legitimate company entities and subsidiaries, and any sanctioned company assets or contacts that we need to be aware of prior to enforcement. This will allow one to work with your team to obtain access to any technology services to review current reporting methodology.
In addition, one must determine any credentials that are needed for you to consider adding to your portfolio to enforce your products and brand more effectively.
Knowing that the top priority is to put a stop to the counterfeit unauthorized third-party sales on Amazon, eBay, and other open marketplace sellers. As you are aware, this is not as “prima-facie” of an endeavor as people think; these attacks come from a variety of sources.
Below is a sample strategy to enforce and clean up each type of infringement, including counterfeit:
One needs to review existing or work to create and implement an enforceable Authorized Reseller Program, creating an Authorized Retailer and Distribution List, and lastly, if applicable, creating and implanting a more formal UMAP policy. We also recommend Distribution and Reseller Policy to include “Material Difference” claim and “Intellectual Property” rights usage. We will create enforcement documents to support Trademark, Copyright, Unauthorized seller, warranty claims, and a strike UMAP notices.
One needs to assist in the UMAP and Channel Monitoring system within monitoring technology reporting to pull infringements and make qualified recommendations to initiate the program. This is a key indicator of counterfeit sales.
The investigation process is an aggressive strategy, and knowing online enforcement can be a challenge when the “bad faith seller” is hiding behind an alias or masked data. Sending a demand letter and contacting the bad faith seller in question is usually the first round of enforcement by most tactics, the “Who, What, Where, Why, When & How” as the seller is online and monetizing your IP or products. Attempting to identify who is illegally offering or selling your goods, whether counterfeit or gray market, was until now an uphill battle at best, and outside the ability of most companies’ sphere of operations, and the attention and labor commitment becomes untenable for most businesses internally.This brings us back to the issue of the hidden, masked, or aliased bad faith seller. Based upon some clients need, over the years, I have created a “Virtual” Investigation Process; Third-Party Marketplace Sellers (Amazon, eBay, direct e-commerce, AliExpress, etc.), serial cybersquatters, Asian marketeers, and other assorted hidden identities can be uncovered with a high degree of accuracy and accelerate the enforcement process. This service allows you to get to the individual responsible and hold them personally accountable and begin the aggressive direct enforcement escalation.
While most technology utilizes automated crawling and reporting, all enforcement remains and will always remain a manually reviewed, verified, and authorized process. I recommend one doesn’t subscribe to the “one-size-fits-all” methodology when it comes to enforcement. Brands and products are unique, and to some extent, so are the enforcement challenges. To accommodate this, we recommend a variety of standard yet customized types of letters. For example, if we find a sanctioned entity is selling in an unauthorized manner but is a good seller normally, then we would recommend a “soft” letter, explaining that what they are doing falls outside of the generally accepted company selling rules. The letter would recommend how to comply with company policy and caution against future transgressions. This will be monitored and followed up as needed with a demand letter, then a Cease and Desist. These letters can be sent digitally, however in our experience, a physical letter has more results, and at times an escalated certified or Overnight signature required enforcement letter will be sent. The only way to ensure a high level of compliance is to enforce direct.
One should perform “Stealth Product Buys” of an infringing product under a nebulous and unidentified identity, thereby letting the infringer’s guard down. This type of action can provide a wealth of information past just identification of a counterfeit product, from actual names, company names, addresses, e-mails, phone numbers, production run data, factory data, date code, and loss prevention data. This kind of data can mean the difference between speculation and confirmation.
One should present these findings and actions in a concise, easy to read and manipulate spreadsheet report format. Depending on request and necessity, these are returned with a monthly, bi-weekly, and in some cases, weekly frequency. These infringers can sometimes use domain masking or anonymous identities. Again we will identify these hidden identities. Uncovering hidden Amazon sellers are a particular specialty of ours, and hidden infringers are no longer safe.
Counterfeiting is a global problem with losses of over 1.2 trillion USD that impacts each nation’s economy. Consumers need to become more aware of suspicious products sold online and be vigilant about reading reviews, prices that are too low, identifying suspicious websites, and other identifiers outlined above. Businesses can follow specific guidelines to lessen the impact of counterfeiting and need to do more to educate their consumers about potential threats. While major retailers and giant global marketplaces have adopted measures and policies to try and cut out counterfeiting, this is a problem that is not confined solely to international businesses. Smaller companies and independent brands must be wary of the risks of counterfeiting and draw up effective strategies to protect their brand, deter counterfeit sellers, and ensure consumer trust. Advances in technology can help identify suspicious behavior and provide authentication at the point of sale. Brands can work with other businesses, as well as social media watchdogs, lawmakers, and enforcers, and marketplaces to protect their products and gain safe access to consumers.
If it’s too good to be true, it’s probably a counterfeit.
The fashion industry has been dealing with counterfeiting for over a century but it’s only been in the last decade that online markets and modern manufacturing have made it possible to counterfeit almost anything. And the counterfeiters are out there. If you haven’t found a counterfeit variation of your branded products being sold on eBay or Amazon yet, for many brands it’s only a matter of time. In order to steal business and make a little more money off low-quality no-brand products, counterfeiters are instead printing fake labels and packaging their knock-offs as surplus stock of genuine brand products.
This is even worse than the unauthorized competition created by third-party sellers because at least with the third-parties, customers are getting your actual products. Counterfeiters can effectively drag your brand through the mud when customers don’t realize that their crummy products are not actually produced by your brand. But perhaps the most dangerous part is when customers actually try to use the counterfeit products. Fraudulent companies are counterfeiting everything from software to over the counter pharmaceuticals meaning that people are installing unverified and possibly infected programs onto their computers and trying to use knock-off medicines that could hurt them while bearing your brand name.
But what is a brand to do in the face of the whack-a-mole environment of suppressing one fraudulent seller only to see two more pop up with new unrestricted usernames and seller accounts? While you can and should put in the effort to quash the counterfeiters at their source, the best way to protect your brand and your customers from the constant onslaught of new scams is with authenticating details. Like the trademark stamp and zipper pulls of an authentic Louis Vuitton handbag, you can start protecting your brand with little details a counterfeiter won’t be able to replicate. Here are five techniques to get you started that can be seen in online product pictures so your marketplace customers will be able to see signs of authenticity for themselves.
Watermarks have been used on US currency for decades to indicate whether or not a dollar is genuine or counterfeit and the technique works equally well for protecting non-federal brands. Watermarks require slightly more advanced printing technology, particularly if you decide to actually emboss them to create a textured difference as well. A detailed watermark will make it exceedingly more difficult for counterfeiters to simply print up fake packaging and labels that appear to bear your brand and packaging design. Embossed images are also particularly useful because they require extra effort and special materials to enact. This can be a great way to prevent counterfeiters from effectively spoofing pharmaceutical bottles.
2. Special Fasteners
An interesting lesson taken from the luxury fashion market and their battle with counterfeiters is how often the fraudsters make their crucial mistake with hardware. The snaps, fasteners, zipper pulls, and the zipper teeth themselves are often the least authentic-looking aspects of a counterfeit handbag. You don’t need every detail of your product to be stamped and gold-plated, but including a few custom choices in your packaging is a great way to trip up careless counterfeiters. A unique chain to attach tags to your product, a special zipper pull, or even just a brand logo stamped somewhere unusual is a great way to add identifiable authentic detail without breaking the bank. Many boxed-software and computer hardware companies have started including special gifts and items inside the box to prove authenticity as well as to delight customers.
Another interesting approach to making your products easily authenticated or proven counterfeit is microtext in your labels and packaging. Counterfeiters often try to recreate your packaging on cheap image editing software which means they will often miss smaller details. This is often seen in using the wrong font or inaccurately replicating the way a company prints its name because they don’t realize the name is a hand-crafted visual asset created by graphic designers. You can trip them up in a slightly different way with microtext, text so small that it can be mistaken for decorative detail instead of actual content. You can then invite customers to zoom in close on pictures of the packaging. If the microtext isn’t copied perfectly, then it’s sure to be a counterfeit. Microtext is particularly useful for boxed products with stylized packaging because it can hide as a graphical detail.
4. Track and Trace Labels
Many brands are taking up the cutting-edge labeling and product tracking technology already in use for eCommerce inventory management as a form of anti-counterfeiting as well. Some brands are embedding RFID chips into their labels, the same way that wave-pay or tap-pay cards work, while others are going with QR codes, 2D barcodes, or holograms with embedded tracking data. When every one of your products has a unique label allowing it to be tracked and identified anywhere, counterfeits are easy to prove if you get your hands on even one false product. Some businesses are even going so far as to include forensic or DNA markings that can be proven with lab analysis to combat more precise counterfeiters.
5. Government & Software solutions
While the previous suggestions have all had to do with what you do with your products, you can and should also take more extensive measures to get counterfeiters shut down for good. The IACC (International Anti-Counterfeiting Coalition) has a software product called RogueBlock that shuts down the merchant accounts of counterfeiters so they cannot accept payments. You can also report counterfeit producers to the government depending on the industry and they can help you get counterfeiters off the market. You can find a wealth of information at stopfakes.gov. Finally, don’t forget that the market is also a legal arena. With the right attorney support, you may be able to push the process through much more quickly.
Counterfeiters are everywhere in today’s eCommerce environment but you don’t have to let them get a hold of your brand or your customers. With a combination of authenticating measures and a comprehensive plan to identify and take out counterfeiters when they are detected, you can protect your brand reputation, customers, and authorized sellers from the rising trend of product fraud. Just be sure to also release a guide for your customers that lets them know which signs to look out for to prove authentic or counterfeit online listings.
E-commerce experts predict that online sales will account for more than $4 trillion of all retail transactions by the year 2020. This represents close to 15 percent of all projected retail sales for that year. As the industry anticipates this explosive growth, online retailers must build up their defenses against unauthorized third-party sellers who undermine the market by disseminating low-quality items disguised as legitimate products.
The struggle between genuine online retailers and counterfeiters is ongoing, and the possibility of abolishing counterfeit sales altogether is slim, given the strength and growth of this illicit industry. However, through monitoring online marketplaces, building a strong trademark portfolio and reacting appropriately to brand infringements, legitimate online retailers can minimize threats from unauthorized third-party sellers and protect their integrity of their brand across all online platforms.
The effects of counterfeit sales on the global marketplace
Selling counterfeit products is a trillion-dollar business, accounting for around 5-7% of world trade. According to an article in the World Trademark Review, one in every four online purchases involves pirated goods. U.S. companies take the brunt of attacks by counterfeiters: one in five “knock off” products are replicas of items manufactured by American companies. Close to 70 percent of all counterfeit goods come from China, but other people from other countries participate in this burgeoning industry as well.
A study by the Organization for Economic Co-Operation and Development (OECD) found that counterfeiters aren’t picky about the products they choose to imitate–everything from luxury products to common household items are fair game for these illicit distributors. Generally, counterfeiters seek out items with high per-unit profits, items that require simple production and distribution systems and items that are easy to replicate. Intangible products, like software or digital forms of intellectual property, are also targets for unauthorized third-party sellers, as are pharmaceuticals, foods and tobacco products.
This illicit commerce is costing legitimate businesses hundreds of billions of dollars annually. While businesses cannot stop criminals from trying to hijacking their brands, they can thwart their attempts and reduce their impact. Combating the sale and promotion of pirated goods is an investment in both time and money. But in many situations, the actual amount will pale in comparison to the financial harm done to brand equity if a business chooses not to act.
How to identify counterfeit sales online
Awareness is the first step toward making significant strides against counterfeiting. In most cases, a bit of training is all that is needed to distinguish a legitimate product from a false one. Identifying unauthorized third-party sellers may take more practice, but normally their online profiles will raise a few red flags. To successfully identify counterfeit sales online, you need to monitor online marketplaces, websites, social media platforms, app stores and Darknet. These points will help you know whether or not you are seeing legitimate products and sellers:
Depending on the site, removal of offending listings can take anywhere between an hour and five days. The vast majority of online marketplaces are happy to help brand owners who request removals.
Effectively Combatting Counterfeit Sales within Online Marketplaces
Counterfeiting is a threat to all businesses, not only entities that sell through online marketplaces. Businesses can approach the issue of counterfeiting from multiple angles, especially if their resources allow for a coordinated and extensive defense system. Counterfeiters target large players as well as small ones, so it is imperative to take the following steps for brand protection:
Register for Intellectual Property Rights (IPR)
Businesses need to register their Intellectual Property Rights (IPR), including patents, trademarks, designs and more, in key markets. The registration process legitimizes claims on these rights and allows businesses to strongly respond to brand threats. It’s easier to remove illicit product listings from a variety of sales channels or take legal action against suspected offenders if a business can prove that a piece of intellectual property is rightfully theirs.
This process varies from place to place, but in the United States, businesses can apply in writing with the U.S. Customs and Border Protection department to record a trademark. Patents are also administered and issued by the government.
Establish a distinctive online presence
Businesses must make it difficult for others to profit from their reputation and online presence. Having a distinctive online profile is part of this process. If customers know where to find an original, high-quality product, it is unlikely that will seek out copies.
A business can establish its online presence with a well-structured domain name portfolio. Going about this properly will mark it harder for a counterfeiter to create a fake website with an original brand name in its domain. The same principle applies to a company’s presence on social media platforms and in app stores. Being clear, consistent and obvious with branding may deter counterfeiters who would rather target poorly-established brands and products.
In the physical world, there are various protective measures that a company can take to brand its products. For example, integrating certain design-specific details into products makes them harder to duplicate. Security labels, such as holograms, are also useful.
On the administrative level, a great deal can be achieved by securing the supply chain and working closely with customs and law enforcement in countries of particular concern.
Recognize online brand abuse
Brand abuse is a trademark infringement that does not amount to outright counterfeiting. Offenders abuse brands to achieve “traffic diversion”. In other words, offenders enhance the profile of their own products in an attempt to draw traffic away from other platforms. The problem is especially serious in large online marketplaces, where similar products compete for visibility and sales, but it occurs in all channels.
Examples of brand abuse include the unauthorized use of logos, images and other marketing materials, the unauthorized use of a company’s name or product in metadata, the use of a company’s name on the website of a competitor and domain name abuse. Again, spotting brand abuse requires consistent monitoring across multiple platforms.
Set up a brand protection team
A business’s brand protection team may consist of one person, 10 people or 100 people. The size isn’t as important as the scope–the brand protection team exists to monitor significant brand threats, to respond to threats that need to be addressed and to beef up a company’s brand security efforts. Brand protection teams can also play a role in ensuring that a company’s supply chain is secure. These teams should coordinate closely with senior management and provide briefings on critical brand concerns.
Preventing criminals from hijacking a brand is certainly an investment in time and money. Businesses must be aware of the fact that counterfeit sales impact revenues, but more importantly they undermine trust, the foundation of any successful brand. Some businesses can address the problem with existing resources, but multi-national businesses with diverse distribution channels and multiple kinds of products may benefit from hiring a firm that specializes in brand protection.
Be proactive about brand protection in China
With 70% of all counterfeit goods originating in China, this huge market represents both a serious challenge and potentially a glittering prize. Intellectual property is a relatively new concept in China–the first patent law came into effect as recently as 1985. In August 2017, U.S. government officials estimated that the theft of intellectual property could be as high as $600 billion.
A business cannot protect its brand in China without a strong intellectual property portfolio. There are processes in the country for filing patents, copyrights and trademarks, and it is highly recommended that brands register their English name, Chinese character name and Pinyin name at the China Trademark Office. In regards to patent registration, businesses can register for multiple kinds of patents–utility model, design and invention–with the State Intellectual Property Office.
It is important to note that local distinctions exist, and and these require separate registrations. Companies can benefit from consulting with a trusted individual or business that knows the ins and outs of intellectual property in China.
Again, monitoring your brand online is crucial. If possible, try to obtain a list of accredited distributors and retailers to simplify this process. The right monitoring tools can generate a great deal of interesting data and provide the basis for an appropriate response to any brand infringements. In regards to China, proper monitoring requires language skills and an understanding of the culture. A person on your brand protection team who is well-versed in the language and customs of China can be an invaluable asset.
Lastly, businesses need to be flexible and creative when it comes to fighting illicit sales in China. Counterfeiters will look for new ways to reach the market, new ways to prevent detection and new ways to avoid enforcement. Businesses have to be abreast of the latest methods in order to fully protect themselves in this quick-paced environment.
Protect your brand on social media platforms
For many businesses, social media is a critical conduit for sales and brand visibility. Although online marketplaces still have the highest sales volumes, illicit sales on social media platforms are growing rapidly, especially with the introduction of marketplace features on Facebook and other sites. A company’s brand protection team should monitor social media platforms consistently to watch for illicit listings and knockoff products.
While each platform will have rules regarding the enforcement of intellectual property rights, brand owners need to have a strong trademark portfolio in order to encourage sites to remove illicit material. With the right documentation, businesses can have success in closing offending accounts on most social media sites.
Reporting Brand Infringements and Counterfeit Listings on Major Online Sales Platforms
All mainstream online sales platforms have some avenue of recourse for reporting fraudulent listings. Below, you’ll find basic guidelines for reporting brand infringements on each major website.
How to report infringements on Amazon
As one of the largest online sales platforms in the world, Amazon has streamlined its infringement reporting process so that intellectual property rights owners and their agents can submit complaints through an online form. Each form can include up to 50 products for the same specific concern. If you have different concerns to report, a separate form is required for each one.
To ensure that the complaint is processed correctly, the complainant needs to provide their website with a statement and their contact details. The URL of the advertisements that include the offending items is also required. Lastly, the complainant needs to categorize the infringement that has taken place by designating it as counterfeiting, trademark abuse, design abuse or copyright infringement.
The link for submitting an infringement report is as follows: https://www.amazon.com/gp/help/reports/infringement
How to report infringements on eBay
Ebay’s reporting process is similarly straightforward. Alleged infringements can be reported to eBay by submitting a Notice of Claimed Infringement (NOCI) to eBay’s Verified Rights Owner program. The VeRO Program allows intellectual property rights owners to ask eBay to remove certain listings that offer items or contain materials that infringe on their intellectual property rights. Be aware that on eBay, anyone can report a seller, whether they are a trademark owner or not. Every listing contains a ‘report’ button.
If multiple listings need to be reported, registering your brand with the VeRO system is the most efficient route. Complainants will need to provide eBay with documents that prove their claims on intellectual rights, such as trademark registrations. Then, they are asked to provide links to the offending listings, a description of the infringement and a classification for the offense (counterfeiting, trademark abuse, design abuse or copyright infringement).
Sellers have an additional avenue for protecting themselves on eBay. The site allows brands to create their own page which communicates key information to buyers and sellers about a brand and identifies the rightful intellectual property owners.
To report a brand infringement on eBay, visit http://pages.ebay.com/vero/aboutme/index.html
Reporting brand infringements on Alibaba, Aliexpress and 1688.com
These platforms have their own effective brand protection system called AliProtect. AliProtect allows brand owners to monitor and handle take-downs of IP infringing products on Alibaba.com, AliExpress and 1688.com.
Initially, brand owners need to register for a free AliProtect account and provide basic information like a company name, email, name, address and telephone number.
From there the brand owner needs to register and upload the IP rights it wishes to protect. Examples include trademarks, invention patents, utility model patents, design patents or copyright information. At this stage a brand owner must also give proof of identity in the form of a business incorporation certificate or certificate of incorporation.
AliProtect takes around three business days to process the application, and brand owners receive an email that indicates whether or not the verification was successful. After approval, brand owners can submit IP infringement complaints immediately under the IPR Complaint section. AliProtect offers two options for reporting a complaint:
Option 1: A complainant can search for and report products directly within AliProtect or
Option 2: A complainant can paste links from the three included websites to listings that contain infringements. During the submission process, a complainant needs to specify the infringement that has taken place.
After the report has been submitted, it takes AliProtect between 3-7 business days to process it. If Alibaba, Aliexpress or 1688.com accepts the report, this result will be stated in the ‘History’ menu option. If rejects the report, they will send an email explaining why. During this process, the seller is always contacted. If the seller knows that they have made an infringement, they will probably accept the take-down. However, the seller can provide a counter-notification to prove they are not infringing on IP rights. Based on this information, Alibaba, Aliexpress or 1688.com makes a decision regarding each listing.
How to report infringements on Taobao and Tmall
TaoProtect is the reporting system for Tmall and Taobao, where the brand owner can monitor and handle takedowns. TaoProtect became available in English in July 2015.
First a brand owner must create an account on TaoProtect, which includes providing information like company name, email, name, address, telephone number, etc. Unlike Alibaba.com, the brand owner has to upload proof of identity in Step 1, in the form of a business license or certificate of incorporation.
After this initial step, the brand owner registers and uploads the rights it wishes to protect, like a trademark, invention patent, utility model patent, design patent or copyright.
TaoProtect takes two business days to validate proof of IPR. After the application is approved, TaoProtect allows brand owners to report infringements under the ‘File Complaint’ section. Brand owners should include links to offending listings and specify the IP rights they are using as protection. After the report is submitted, TaoProtect takes 7-10 working days to respond. If Taobao accepts the report, this result is listed under the ‘Complaint Filing’ history. If the report is rejected, Taobao will send an email. As with AliProtect, the seller is always contacted and may file a counter notification to deny IP infringement. This is then shared with the rights owner, to respond again before a decision is made about taking down the relevant link(s).
The next steps for victims of counterfeiting
If you discover counterfeit sales of your products or learn that your brand is being abused in other ways, we recommend a proven three-step process – regardless of the sales channel – to address the problem: track, analyze and enforce.
Why Businesses Must Act Now
As counterfeit sales continue to grow worldwide, businesses can’t afford to be passive about brand and product protection efforts. Counterfeiters thrive on secrecy–they quietly target businesses that haven’t established strong defenses, strike quickly and then furtively suck away the market share and profits of the legitimate businesses that they copy. The OECD points out that virtually no economy is completely free of counterfeiting, and the consumption of fake products is just as widespread. As counterfeiters become more sophisticated, pirated products are making their way onto the shelves of legitimate stores, and occupying spaces in online marketplaces.
Businesses that act early, swiftly and forcefully are in a better position to respond to brand threats and to minimize the impact of brand infringement. Being informed and taking simple protective measures is critical for businesses of every size.