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.
What Exactly Does Counterfeit Mean?
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.
A Counterfeiting Crisis: The Extent of the Problem
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.
Most Common Counterfeit Goods and The Industries Impacted Most
The latest statistics from the OECD suggest that these are the most common types of counterfeit products:
- Leather items
- Electrical equipment
- Medical products
- Cosmetics and perfume
- Pharmaceutical supplies
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:
- They may contain different quantities of active ingredients or even other active ingredients.
- There may be traces of toxic ingredients.
- They may have been produced or stored in ways that don’t satisfy quality standards.
- They are aimed to deceive consumers by featuring bogus manufacturer logos.
- The information provided by the fake manufacturer may not be accurate.
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.
Seizing Counterfeit Goods
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.
What Is The Impact of Counterfeiting?
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.
The Rise of Online Counterfeit Sales
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:
- The ability to hide IP addresses and remain anonymous.
- Scope to reach global audiences, targeting international customers, and make it difficult for law enforcers and brand owners in countries like the UK and the US to prosecute individuals and groups operating outside of their boundaries.
- The ability to showcase and market real goods and then provide consumers with fake items once the transaction has been processed.
- The option to sell products across a vast network of sites, which makes it challenging to track counterfeits and enables retailers to continue selling, even if a location gets closed down.
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.
Tackling Counterfeit Goods
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.
What Happens When A Counterfeit Product is Reported Online?
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.
Social Media and 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.
What Can Be Done to Combat Counterfeiting?
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:
- Utilizing Social media surveillance and improved policing.
- Improving education and awareness for consumers.
- Using technology to identify trends and identify suspicious behavior patterns.
- Introducing screening for parcels and packages.
- Utilizing anti-counterfeit and anti-theft packaging and features like authentication seals, tags, 2D barcodes, DNA tracking, and security printing.
- Using holograms at the point of sale.
- Implementing features including QR codes, NFC tagging, micro-printing, tamper-evident seals, water indicators, and fingerprinting.
- Using track and trace systems.
- Exploring advanced techniques such as conjugated polymers, specialized markings, and prints that can be detected only under polarized light sources.
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:
- Registering your intellectual property and including registration for intellectual property in China. Even if you don’t plan to sell in China, this will help to avoid being targeted by retailers based in China.
- Monitoring your pages, profiles, and accounts and seeking verification, for example, the blue tick on Twitter.
- Search social media sites for hashtags using your brands to find abusive profiles and posts. Counterfeiters will use hashtags direct consumers to their profiles.
- Monitor profiles that take payment directly from accounts like Facebook Shop or Instagram Checkout.
- Make use of reporting tools to inform the platform about rogue accounts and fake posts.
- Use your social media account to improve your search ranking. This will help to ensure more people visit your links and pages rather than those run by counterfeit retailers.
What are the ‘big 3’ doing about counterfeiting?
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.
Raising consumer awareness
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:
- Trust your gut and live by the mantra that something can be ‘too good to be true’: it is possible to find bargains these days, but it’s unlikely that you’ll pay a few dollars for an item that usually retails at hundreds or thousands of dollars.
- Always buy from reputable sources and sellers: look for reviews, ratings, and authentication certificates.
- Check the website address and look for spelling and grammar mistakes on webpages.
- Look for a vendor with a verified postal address.
- Use https sites only.
- Ask about returns and guarantees before buying.
- Communicate via the platform if you’re buying on a site like eBay or Amazon. Don’t make contact outside of the approved messaging methods. Be wary of people who ask for your phone number or email address.
- Never give out your bank details over an email or send money outside of the payment channels approved and monitored by the marketplace or website.
- Report listings or sites that look fake.
Where Do We Start? Some Initial Recommended starting points:
- Register your trademark in China.Chinese law does protect intellectual property, but only if a trademark is officially registered. Once your trademark is officially registered in China, you can take legal action against counterfeits—but not before. Do not wait until you actually enter the Chinese market. There are Chinese firms that monitor upcoming international products and surreptitiously register their trademarks, so a new Western brand in China may find its trademark already registered and have to give it up or hire lawyers to buy it back. Therefore, register your trademark as soon as possible.
- Register your brand with United States Customs and Border Patrol. CBP can detain and seize imported goods that violate intellectual property rights in the United States. As an intellectual property right owner, you can partner with CBP to help protect your registered and recorded rights. There are several steps you can take, which can help protect your intellectual property.
- Step 1: Read the publications which explain how to work with CBP to protect your intellectual property.
- Step 2: Record your registered intellectual property with CBP. A right holder can begin the recordation process on IPRR. Preview the Trademark application and the Copyright application.
- Step 3: Educate CBP personnel about your intellectual property by developing a Product ID Guide (Training Guide) and producing a Product ID Webinar.
- Step 4: Provide updated information to CBP so that CBP knows about changes to your products, intellectual property, or contact information (IPRS).
- Step 5: Submit any information to CBP that you have regarding suspect shipments or parties through e-Allegations.
- Get a good local lawyer.To guard your IP, a competent, experienced, trustworthy Chinese lawyer is indispensable. Court proceedings and documents are almost all in Chinese, and hearings about IP are especially difficult because arguments about design are tricky, and counterfeiters can be fluent sophists. A good lawyer will help you in court and investigate counterfeiters and propose strategic moves against them before you get there.
- Join forces with the government and e-commerce firms. The Chinese government has, in recent years, improved IP protections, establishing special courts in major cities to handle the growing number of infringement cases. Though the policy has not done much to deter counterfeits thus far, its direction is clear. Likewise, Alibaba formed a special task force in 2016 to identify counterfeits and their manufacturers and distributors through data analysis, which it relays to law enforcement. Luxury brands can work proactively here by tipping off the police and e-commerce firms to counterfeiters.
- Think about Investing in anti-counterfeit technology. QR and RFID schemes can use blockchain technology to prevent fraud and counterfeiting. In order to improve product safety, China’s pharmaceutical, alcohol, and food industries already use QR codes and RFID tags to track products as they move from factory to consumer. The code or tag is a digital product ID that is scanned every time the product changes hands so the consumer can trace its origin and history. Luxury brands can code or tag their products the same way not only to feed their own database but also to share with (and get updates from) all actors in the supply chain. Getting so many parties onboard may be a challenge, but it is a challenge worth taking up with the government and other stakeholders like large e-commerce platforms on your side.
- Change frequently. It takes counterfeiters about a month to reverse engineer a genuine product and bring it to market. A model that changes every month is hard to copy. If your manufacturing and supply chain allow fast model updates and if this is in line with your overall strategy, by all means, use this tactic.
Counterfeits within the Open Marketplace – Channel Compliance Strategy
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:
Reseller, Distribution Agreements & UMAP Policies – Enforcement Documents
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.
Map & Channel Monitoring
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.
Online Seller Investigation
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.
Cease & Desist, UMAP Strike Policy, and Enforcement Demand Letters
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.
Anonymous Product Purchasing
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.