Does Crime Pay?

Counterfeit goods erode brand values and product integrity, says Toe Su Aung, general counsel at BATMark Ltd, and chair of the International Trademark Association’s anti-counterfeiting & enforcement committee. So why isn’t more being done to educate the public?

Counterfeit goods account for around 7-9% of world trade and rising, representing a significant threat to consumer health and safety. No branded goods are safe nor any country immune, yet the public-at-large generally view goods counterfeiting as a ‘Robin Hood’ type of misdemeanour that does not count as theft. Indeed, it is often the perception that big business is simply acting as a sore loser because the public is profiting from cheaper access to popular brands. The reality is that the consumer is being duped and sometimes very dangerously so. Counterfeit products cause injury and defraud both governments and the general public. In many cases, consumers who buy counterfeit goods are unwittingly helping to fund international organised crime, as are those governments that are not doing enough to stop counterfeit and illegal trading.

Counterfeiting is theft
Counterfeiting erodes brand values and product integrity, and damages a company’s market share for genuine brands. As a result, companies need to be vigilant in defending the integrity of their trademarks, and urge regulators to enforce IP protection laws vigorously. Alarmingly, it is the items posing health and safety risks – such as pharmaceuticals, alcohol, auto parts, electrical switches, toys and food products – together with CD and DVD piracy, that appear to be showing the greatest increase in counterfeiting activity. Produced without rigorous quality control, and often with illegal ingredients, these counterfeit goods clearly expose consumers to added dangers.

Industry is co-operating with governments to explore new methods for detecting counterfeiting activity, including those focusing on the supply chain

In the tobacco industry, the trade in counterfeit goods plus the smuggling of legitimate cigarettes across borders to avoid taxes and duties continues to grow. Annual losses to governments around the world are estimated by British American Tobacco (BAT) to represent £9.3 billion and by others, £25-30 billion. In the UK alone, the flood of counterfeit tobacco is thought to run to billions of cigarettes annually, with the illegal profit on a single container load of fake brands, estimated at as much as £1.5 million. Within the BAT Group, we have a specialist company, BATMark, to protect, maintain and enforce BAT’s IP Rights, and work directly with law enforcement and trade policy officials in countries where trademark protection problems may arise. Where we find a problem, our approach is to engage constructively with local officials in discussion about the importance of protecting our marks, and seek their help through enforcement of domestic obligations and shutting down counterfeit operations. These efforts, however, can only stem the tide. There is an essential need for both industry and government to organise themselves internally and to co-operate more effectively.

Working together
Many industries face similar issues, and various national and international bodies exist to co-ordinate opposition to the trade in fakes. Industry is co-operating with governments to explore new methods for detecting counterfeiting activity, including those focusing on the supply chain. In the case of BATMark this includes the exchange of information and joint enforcement actions and support for customs and other bodies through the provision of training and specialist equipment. These have been found to be very effective in building relationships and achieving results.

Despite the progress we have made in the area of anticounterfeiting and the enormous size, sophistication and experience of our companies, we need to do so much more in organising ourselves more effectively, both internally and collectively, to address the problem. Strong legislation should be complemented by effective enforcement, and this requires government investment in people, systems, equipment and training – something that is lacking in many parts of the world. We need to put together appropriate organisational structures and dedicate resources – and governments need to do the same.

It is important that governments and businesses improve consumer understanding of the situation and of the hidden risks they are taking. Jointly, we need to work together to enhance consumer awareness.

This article first appeared in IP Review, issue 15