Counterfeiting: it's time to step up the fight

Most brand owners will know of the threat to their business of counterfeiting and piracy. The challenge comes in quantifying that threat in order to act against it, both proportionately and effectively.

If you don’t know the extent to which your brands and products are being targeted, or where those knock-offs are being produced, transported or sold, how can you target your action, measure its effectiveness and justify the budget? With what can seem like such a mammoth task ahead of them, it’s little wonder that many brand owners choose to put off for tomorrow what they could or should be doing today.

Preparing the business case

Budgeting for anti-counterfeiting activity can be a challenge because so little data seem to exist on the topic. The most recent figures issued by the European Commission in its April 2013 ‘Too good to be true?’ campaign estimate that counterfeit activity represents more than €200 billion ($266 billion) in losses for the world economy each year.

This statistic is based on seizures made at international customs borders, and the figure is likely to be considerably higher when you take into account instances of domestic piracy, not to mention damage to brand reputation—a value that can be particularly difficult to quantify.

Knock-offs used to be immediately recognisable to prospective buyers due to the poor quality of the product—a typo in the brand name here, a design flaw there—its low price or the trading location (eg, a dodgy market stall). But counterfeiting has become so much more sophisticated in recent years and, these days, many consumers are being tricked into buying products at close to recommended retail price believing them to be the real deal.

If you’ve ever received a complaint from a consumer about one of your products and then had to break it to them that they’d actually been sold a fake, then you’ll already know the damage that this can cause—particularly if that fake had entered your legitimate supply chain prior to sale.

Measuring the threat

Nonetheless, it’s crucial to start quantifying the threat to your business, your consumers and your bottom line before beginning any action. There are a number of services that can help in this respect, for example, web-scanning software that will identify unauthorised use of your brand names and trademarks online. Even by tracking the web for a short time, you’ll be able to get an idea how many of your products are being sold via unofficial channels.

How are the counterfeit products getting there? Who is manufacturing them—and where? How are they being transported and through which ports? The good news is that many brand owners have asked these questions before you, and there are definite patterns in their findings that will help you to tailor your efforts.

Targeting and costing action

You can’t find or stop every instance of counterfeiting; it would swallow up all your time, budget and resources. Instead, concentrate on identifying and mapping the biggest threats and the most common channels, for example, manufacturing sites (typically, China, Hong Kong, India, Turkey, the UAE, or home soil) and their distribution routes (generally, major transit hubs and international trade ports).

Recording your trademark rights with customs in your home country and relevant overseas countries will help officials spot and detain shipments that infringe those rights. For the best results, be as proactive as possible in your efforts to educate those officials about your priority products, telltale signs for spotting counterfeits and details of who to contact if they have concerns.

To tackle the manufacturers themselves, you’ll have to find the factories before you can coordinate enforcement action. This can be harder in some countries than others, but a good start would be to look at those factories where you are manufacturing your products officially, as often these can be the source of fakes too. Ensure your agreements make it clear that unofficial copies will not be tolerated, and conduct regular spot-checks to check for breaches.

If the counterfeits are being produced overseas, you’ll need to liaise with local agents in order to investigate the source, and involve local police and authorities. It’s generally easier and more cost-effective to work with a specialist IP firm to coordinate such action; especially as you progress towards a factory raid or legal action.

We know from our time representing clients in factory shutdowns in China, that it’s important to have the right people on the ground to make sure that any planned action isn’t leaked in advance to the counterfeit organisation, or that the necessary paperwork doesn’t sit for too long on the desk of the relevant local authority.

Measuring return on investment

There is, of course, a cost involved with legal actions and raids. Similarly, different countries have different procedures and requirements when it comes to seizing counterfeit products, so it’s important to check in advance which costs or actions are required.

"Continue to act against the source and you will find eventually, that the counterfeiter will decide that it's just easier to move onto something else."

Try to avoid kneejerk reactions when instances of counterfeit activity are identified; you’ll have spent time researching, mapping and prioritising your strategy for action, so it’s important to remain proactive and targeted in your approach.

You have to be realistic about the likely results, too. You may succeed in a factory shutdown or seize a massive batch of fakes, but that won’t be the end of the story. It takes prolonged action (and consumer education) to make a real dent against this type of organised crime.

Shut down a factory in one city and it will likely pop up somewhere else; seize products at one customs port and the counterfeiter will try to find another route. But, continue to act against the source and you will find, eventually, that the counterfeiter will decide that it’s just easier to move on to something else.

Other techniques can be brought into play. Routinely modify the design or packaging of your products, for example, and the counterfeiter will find it hard to keep up. (This also makes fakes easier for customs authorities and consumers to spot.) New technologies can also help, such as stamps featuring holograms that are costly to replicate.

Getting the right support

Finally, it’s important to work with a partner that understands the challenges that brand owners face in their battle to hunt down and act against counterfeit products. Make sure any provider you choose brings a clear and proven strategy, and expertise on the rules and requirements in key jurisdictions, the current threats and common channels for trafficking, and the costs and process involved at each stage of enforcement.

The right IP provider will know, from experience, where you should start and end your anti-counterfeiting efforts, so use that knowledge to guide and assist you when taking your first—or next—step towards building an effective and measurable strategy for action.

Pauline Verheijen is a managing consultant at Novagraaf. She can be contacted at: anticounterfeit@novagraaf.com