All that Glisters is not Gold

When William Shakespeare penned these famous words, he would have had no idea that some 500 years later, they would be used, so appropriately, on the topic of counterfeiting. Ray Parry, CEO of Crimeproofing Ltd, looks back at the problem of counterfeiting and offers some timely advice on brand protection.

Described by the US Federal Bureau of Investigation as ‘the crime of the 21st century’, counterfeiting is estimated to have a negative impact on world trade at a rate of 5-8% and rising. But why does counterfeiting have such a hold on international trade, and what can brand owners do about it?

Ancient history records several instances of counterfeiting. It certainly included ancient coins, along with the forging of documents (particularly historical records to suit political or religious agendas). But the best examples are provided by more recent history. During the American Civil War, it was estimated that one-third of all currency in circulation was counterfeit. In the Second World War, both the Allies and Germany actively sought to print each other’s currency in fruitless bids to destroy their respective economies.

These days, however, it isn’t just currency that attracts the counterfeiters. Some 30 years ago, an instance was reported in Australia of a counterfeit Rolls Royce. Counterfeit Ferraris have been reported several times. Children’s toys are not immune – fake Barbie dolls are commonly sighted around the world. In India, more ‘Scotch’ whisky is drunk in a year than the entire annual output of Scottish distilleries. While, in 1998-89, when the invention of Viagra was announced, the fake version actually hit the market weeks before the real thing!

Over the past 10 years at Crimeproofing Ltd, we have handled counterfeiting cases that have included: wines and spirits, football-related merchandise, aircraft and car parts, pharmaceuticals, hi-tech equipment, lighters, cheques, credit cards, CDs, computer games, perfumery and designer clothing. Alarmingly it is the items posing health and safety risks – such as pharmaceuticals, wines and spirits and the spare parts industry – together with CD and DVD piracy, which are appearing to show the greatest increase.

Protecting your products
To properly safeguard your products, professional brand protection strategies must contain three major elements: the proper use of criminal and civil law; comprehensive intelligence gathering and investigation; and defensive products and systems. Each is as important as the other. To rely on just one or two of these elements is, in my experience, foolhardy. The proper use of criminal law acts as a deterrent both in terms of the sentencing and the financial recoveries it allows to the injured party. Civil law also acts as a deterrent thanks to the financial damages and negative publicity it also brings. Meanwhile, intelligence gathering and investigation provides the evidence needed to proceed at law, and can act as a deterrent in its own right.

Protective products and systems act as a deterrent when ‘overt’ (such as in the use of holograms), and as a means of detection when ‘covert’ (in the use of hidden intelligence gathering, for example). Larger companies looking to produce overt deterrents should aim to follow the example of Microsoft’s ‘Certificates of Authenticity’. At last count, these certificates contained more than 10 anti-counterfeiting protective product features. They are produced at great cost under ultra-high security (at one of the world’s major currency manufacturers). But for a brand owner such as Microsoft, the returns are well worth the investment.

The public-at-large generally view counterfeiting as a ‘Robin Hood’ type misdemeanour that does not count as theft.

Counterfeiting is theft
The public-at-large generally view counterfeiting as a ‘Robin Hood’ type misdemeanour that does not count as theft. Any brand protection strategy, therefore, must use any promotional avenues open to them (eg advertising) to change this perception.

But it isn’t only the public that we need to educate. Generally speaking, law enforcement authorities around the world have neither the time, resources, skills nor training to involve themselves in anti-counterfeiting. And even when they do, as in most modern maintenance of the law, it is invariably of a ‘reactive’ rather than a ‘proactive’ nature.

There are signs, however, that governmental attitudes towards the problem are changing. In the UK, for example, the Patent Office has recently established the IP Crime Working Group, which is composed of various law enforcement entities and individuals, as well as representatives of both brand owner groupings and industry specialists. As a member of this group, I see in it the hopeful beginnings of what could prove to be the long overdue, national governmental and perhaps even international, coordinated IP brand protection resource capability that we currently need.

SIX PRINCIPLES OF PROTECTION
Six principles are commonly accepted as representing the best practice and ideals of brand protection. They are known as the six ‘D’s:

Deterrence
As with most cases of protective law, deterrence represents the prime objective, but it is difficult to achieve. Proactive, deterrent counter-measures aim to encourage would-be-violators at best to refrain from their activities altogether. At the very least they will choose less well-protected items instead. Only by publicly showing that you properly police and protect your products will you deter would-be infringers.

Detection
Detection is more reactive in its approach. It relies heavily on aggressive, purpose-specific, information-gathering by intelligence and investigation specialists, which includes the use of covert human intelligence sources (CHIS), database-management, Internet-sweeping, publications-vetting, pretext-purchasing, surveillance, statistical analysis, freight-tracking and substantial law enforcement liaison (in the UK, usually customs, trading standards and police).

Depth
Protection must always be in-depth and despite many claims to the contrary, there is no single solution.

Detail
Counter-measures must always depend on the specific detail of the problem identified for each particular brand.

Depletion
You should constantly review the counter-measures you employ for their ongoing effectiveness and, therefore, depletion.

Dollars
Finally, the cost-effectiveness of any counter-measures employed remains a major consideration. But no matter the original outlay, brand protection strategies generally result in the recovery of the money laid out to set the system in place.

Ray Parry is CEO of Crimeproofing Ltd of Devizes, Wilts, IP Protection specialists. He is a certified fraud examiner, a member of the Association of British Investigators and editor of Brand & Product Protection magazine

This article first appeared in IP Review, issue 11