Final Report

Threat of Counterfeit
Brands

Done by:

Souradyuti Choudhury - 20BCE1115

Sajal Verma - 20BCE1041

Sanjay R R - 20BCE1537

Karthik G - 20BCE1021

Shreyaa Raghavan - 20BCE1321

INDEX:
1. ABSTRACT ………………………………………………………………………………………….…………..2

2. OVERVIEW………………………………………………………………………………………………………..3

3. OVERVIEW OF INDUSTRIES AFFECTED BY COUNTERFEITING………………....5

4. GEOGRAPHICAL SPREAD OF COUNTERFEIT PRODUCTS………………………….13

5. IMPACT OF COUNTERFEITING………………………………………………………………..……..14

6. PROTECTION AGAINST COUNTERFEITING…………………………………………………..17

7. POLICY INITIATIVES………………………………………………………………………………………...20

8. ANTI-COUNTERFEITING ORGANISATIONS……………………………………………….…..22

9. REFERENCES……………………………………………………………………………………….…………...27

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 1. ABSTRACT

Counterfeiting is considered as a serious threat to the global economy. Counterfeit goods

not only cause loss to the nation but also affect the employment growth by closing down small
and medium industries. Right from handbags, jewelry and shoes to brake pads, electric cords,
and pharmaceuticals and health care supplies, counterfeiters leave no product category
untouched. This paper gives an overview of counterfeit brands market scenario and explains how
it affects the economy. The goal of this paper is to provide a comprehensive review of
counterfeiting of luxury goods, demand and supply side of counterfeiting, various research works
carried out in areas of counterfeiting and need for study towards luxury brands counterfeiting in
Indian and worldwide context.

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 2. OVERVIEW

Counterfeit consumer goods are goods, often of inferior quality, made or sold under another
brand name without the brand owner's authorization. Sellers of such goods may infringe on
either the trademark, patent or copyright of the brand owner by passing off its goods as made by
the brand owner.

Counterfeiting is ultimately an infringement of the legal rights of an owner of intellectual

property

Counterfeit consumer goods are goods, often of inferior quality, made or sold under another
brand name without the brand owner's authorization. Sellers of such goods may infringe on
either the trademark, patent or copyright of the brand owner by passing off its goods as made by
the brand owner.

According to Forbes, in 2018 counterfeiting was the largest criminal enterprise in the world.
Sales of counterfeit and pirated goods totals $1.7 trillion per year, which is more than drugs and
human trafficking. It is expected to grow to $2.8 trillion and cost 5.4 million jobs by 2022.
According to The Counterfeit Report, "China produces 80% of the world's counterfeits and we're
supporting China. Whether or not it's their intention to completely undermine and destroy the
U.S. economy, we [in the United States] buy about 60% to 80% of the products."

Irrespective of the countries or regions, Counterfeiting has become so widespread that many now
consider it a serious threat to the global economy. A recent study conducted by Business Action
To Stop Counterfeiting and Piracyindicates that the global value of counterfeit and pirated goods,
currently $650 billion. In recent years, the range of counterfeit goods has expanded significantly
and no industry has been spared. Buying of fake products at lower prices and lower quality has
grown significantly worldwide and has become a serious subject of global concern . Right from
handbags, jewelry and shoes to brake pads, electric cords and pharmaceuticals and health care
supplies, counterfeiters leave no product category untouched. India is not new to counterfeiting.

A report by the United States Trade Representative (USTR) has named Nehru Place and Palika
Bazaar in New Delhi, Richie Street and Burma Bazaar in Chennai, Manish Market, Heera
Panna,Lamington Road and Fort District in Mumbai, and Chandni Chowk in Kolkata as markets
that need to be watched out for this high-volume trade. India, in fact, continues to be on the
“priority watch list” of the USTR’s “Special 301” report,

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An important effect of these illegally imported goods is that they are not only cause loss to the
national exchequer but also force small and medium industries to close down their operations
thereby affecting employment growth.It is estimated that the government loses in excess of Rs
2200 crore (as per ACMA) a year due to sales of counterfeit auto components. This figure is just
for one sector, this problem of illicit trade prevails in every sector; be it Pharmaceuticals,
Cigarettes and Tobacco, Printer Cartridges, Alcohol etc.
According to the Report of the FICCI-National Initiative against Piracy and Counterfeiting:

• Share of fake/counterfeit medicines is estimated at 15-20%of the total Indian market. As per
some estimates, spurious drugs worth Rs. 2500 crores annually are thrown into the market ; for
soft drinks it 10%

• Fake cosmetics, toiletries and packaged foods at 10-30%

• 74%of the software and 21.5%of cigarettes sold in India are counterfeits

The continuing problem of buying and selling counterfeit products poses threats to brand owners,
retailers,and end users (i.e., consumers). Unlike counterfeit automotive parts, drugs, or
pharmaceutical products, counterfeit fashion products do not cause any physical harm to its
consumers. However, they tarnish companies’ valuable and intangible assets such as “intellectual
property” and “brand” by erosion of the equity, reputation, and positioning in the market. This
erosion results in the loss of consumers’ trust and confidence in the company.

Due to rapidly growing counterfeiting crimes, brand owners and manufacturers are trying to seek
different ways to deal with this issue to prevent the huge losses in business profits, brand
reputation and consumer trust. Thus it can be said that counterfeiting is considered a social
problem as it affects consumer confidence in original products and destroys brand equity . It is
also considered an economic problem as it puts a company at risk of future investment in
research and development due to unfair competition with counterfeited products present in the
market and losses in revenues. Rapid diffusion of technology for manufacturing goods has
improved the ability to produce duplicate products in an easy, quick, and inexpensive fashion.

2.1 Related Activities:

A number of activities, such as parallel trading and factory overruns, are treated as
counterfeiting by trademark owners but not by enforcement agencies.
“Parallel trading” refers to situations where products are legitimately bought in one territory and

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diverted for sale to another territory without the consent of the right holder in the receiving
territory. It is facilitated by two principles that limit the rights of an IPR owner: i) the principle of
territoriality, i.e. the IPR protection is valid only for specific countries or regions; and ii) the
principle of exhaustion, i.e. the right owner has very limited rights to prevent further distribution
of a product that is put on the market with his consent.

Parallel trading, or grey-market trade, is now well established and operates side by side with the
“authorised” market. Prior to the Trademark Directive of 1989, several Member States of the
European Union applied the doctrine of international exhaustion which implies that the rights are
considered to be exhausted as soon as the goods have been sold in any territory. The doctrine
limits the function of Trademark Law only as a guarantee of the authenticity of the commercial
origin of the goods and restricts further control by the trademark owner (Khur, 1997). However,
the 1989 Trademark Directive has narrowed the exhaustion to the territory of the European
Economic Area (EEA).

A related problem for trademark owners is the unauthorised production by legitimate suppliers.
In some sectors, such as toys and spare parts, it has become the practice for suppliers to produce
“over-runs” – extra quantities of products which they do not account for – and sell them on the
black market. The trademark owner again considers the goods to be counterfeits but finds it
difficult to take action. Courts and enforcement agencies treat over-runs as a breach of contract
rather than as a trademark infringement.

3. OVERVIEW OF INDUSTRIES AFFECTED BY

COUNTERFEITING:

On the impact of counterfeiting, many figures are cited. Unfortunately, only a handful of them
are supported by solid research, owing to the difficulty of obtaining precise statistics in this
sector. Some estimates come from trade organisations, while others come from journalists.

Few of the data have changed in the last two years, which calls into question their accuracy.

Governments are being informed and persuaded to take action using statistics and intelligence.
The Business Software Alliance (BSA), the International Federation of Phonographic Industry
(IFPI), and the Motion Picture Association (MPA) in the United States have been pioneers in this
field. The loss estimates are intriguing, but they should be viewed with caution because they may
be excessive.

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3.1 Software

Piracy is almost entirely related to packaged software, which is created in a standard format, bulk
produced, and sold as a commodity "off-the-shelf" product. The majority of software developers
are based in the United States, which has earned a reputation for fighting piracy for good cause.

The industry has collected systematic information on the extent of counterfeiting. A number of
reports on global software piracy have been commissioned, the latest being by the International
Planning and Research Corporation The IPR report encompasses the sales and piracy of
packaged business-related software world-wide. It quotes somewhat different statistics from a
previous report by Price Waterhouse

The Business Software Alliance (BSA) was formed by the leading software companies in 1988
as a direct response to the piracy problem. Its aim is to increase the legitimate market for
software and discourage abuse of copyright-protected work around the world. It is active in 60
countries and works with government officials and industry groups to improve enforcement of
IPR and educate the public on piracy.

3.2 Music Industry

Modern technology has enabled unprecedented levels of production, reduced piracy costs, and
increased the quality of pirate copies, according to the music industry. A number of emerging
countries are thought to be saturated with pirated recordings, posing a hurdle to legitimate
manufacturers importing their products. Furthermore, the music organisations claim to have
discovered evidence that the manufacturing and distribution of pirate CDs has evolved into a
large-scale, global criminal enterprise.

The bulk of all record manufacturers in the world are represented by the International Federation
of the Phonographic Industry (IFPI). It lobbies for effective enforcement of copyright-protected
works and coordinates the music industry's anti-piracy efforts around the world. It works with
governments to pass appropriate legislation and enforce it, gathers data on music piracy, and
advises members on technology ways to combat piracy. IFPI has also assisted its members in the
preparation of prosecutions in a number of investigations into the trading of pirated CDs and
tapes.

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3.3 Film Industry

Service providers and providers of pre-recorded cassettes are both part of the motion picture
market. Public performances, broadcast television, and online video are all part of the service
provider market. cable/satellite. It is governed by statutes that require compulsory licencing and
is overseen by governments. royalties, as well as international organisations that collect and
distribute royalties. However, there is a widely used approach. Signal theft, or the unauthorised
interception of cable and satellite signals, is a tactic utilised by pirates in this sector. Individuals
or commercial venues such as hotels, pubs, and restaurants can send out signals.

Piracy rates for this sector are not available in most countries, but sporadic data show the
prevalence of motion-picture piracy around the world last year. The Motion Picture Association
(MPA) reports a broadcast TV piracy rate of up to 50 per cent in Greece, Russia and the Ukraine,
while the former Yugoslavia had a level above 80 per cent. Cable and satellite piracy dominate
the market in Russia, Bulgaria and Yugoslavia, with a piracy rate higher than 80 per cent.
Interestingly, MPA reported high levels of cable and satellite piracy in some countries one
wouldn’t have suspected, such as Finland (40 per cent), Germany (50 per cent), Norway (20 per
cent), Spain (20 percent) and Switzerland (10 per cent). A piracy level of 50 per cent in public
performance was found in Hungary, Portugal and South Africa, whiles Cyprus, France, Italy and
Norway had a level of more than 20 per cent

The market for pre-recorded video cassettes is more difficult to control since it comprises a large
number of small players. Furthermore, it is relatively easy to duplicate a video cassette and to
lease or sell it. Basic technology enables videotaping of television for commercial purposes, film
to tape transfers of current cinema releases, and duplication in general of video cassettes. Piracy
rates are bluntly recorded at about 100 per cent in many countries, particularly in Africa and
South America. The piracy rates for Western European countries vary significantly between 30
per cent in Italy followed by 27 per cent in Ireland, 25 per cent in Greece and Cyprus, 22 per cent
in Germany and the Netherlands, 15 per cent in Switzerland, 12 per cent in France and the
United Kingdom, etc. Russia, with a piracy rate of 85 per cent, has been overtaken as a problem
area by Turkey which reports a level of 95 per cent. It is widely believed that most of the pirate
recordings found in Europe are imported from Turkey.

It will be interesting to see whether the soon-to-be-launched Digital Video Disks (DVDs) will
have any effect on the piracy levels. DVDs employ the same principle as CDs but can store 30
times more data – enough for a digitised video of a film. Manufacturers are concerned about how
easy it is to copy CDs and are incorporating a number of security features to prevent piracy. It is
impossible to say in advance who will win the battle – the manufacturers or the pirates.

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The United States clearly dominates the world film industry, both as producers of films and
victims of piracy. The loss in potential revenue from piracy to the US film industry was
estimated to be more than US$2.3 billion in recent years. The two main organisations combating
the problem of film piracy are the Motion Picture Association (created in 1945) and the Motion
Picture Association of America (created in 1922). Both organisations work closely together in a
similar way since the MPA represents the world-wide film industry while the MPAA, as the
name suggests, represents the US industry.

3.4 Luxury goods and fashion clothes

The most heinous form of thievery in the fashion industry is the theft of unique ideas. Innovating
original designs and developing a trademark takes a lot of time and effort. Despite this, law
enforcement authorities frequently regard counterfeiting of luxury products as a "soft" crime.
Some customers buy phoney luxury things knowingly and would not be willing to pay the full
price for the real thing. There is also the view that counterfeits aid in the marketing of a brand
while generating no major financial damage.

This relaxed attitude could be contributing to the rise in luxury goods counterfeiting in Europe.
Counterfeit fashion apparel has become particularly well-known in the United Kingdom and
Italy. When UK customs officers busted a £4.25 million counterfeit designer label operation, it
revealed significant proof of the pattern. Ralph Lauren, Calvin Klein, and Timberland were
among the brands represented in the batches. The labels were most likely sewed into cheap
fashion clothing made in the United Kingdom, such as shirts, jeans, and T-shirts.

Importing plain clothing in one batch, producing labels on-site or importing them in another
batch at a later date, and then attaching the labels overnight near to the point of sale is a popular
approach. This makes detecting fakes while they are still in high enough quantities to warrant
action much more difficult.

Counterfeit clothing is getting increasingly difficult to combat, notably in Italy. Previously, a

counterfeit garment would typically come apart or lose colour after the first wash, but the quality
of fakes has significantly improved. Frequently, the fakes are created by the same company that
is hired to make the actual things. As a result, the duplicates are indistinguishable from the
genuine article, but they are sold for less than half the price. For the trademark owner, these
"overruns," as they are known, are impossible to halt.

There is no international trade association for the fashion clothing industry. Most luxury brand
owners employ in-house anti-counterfeiting officers and are members of national pan-industry
anti-counterfeiting associations, such as the Comité Colbert and the Union des Fabricants.

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3.5 Sportswear

Counterfeit sportswear is relatively easy to produce for a number of reasons. First, international
trade in counterfeit clothing is relatively straightforward since the counterfeiter can import plain
clothing and attach logos close to the point of sale. Another method that is becoming
increasingly common, is to use grey-market channels. It is not uncommon for parallel traders to
send genuine samples to the importer and mix the consignment with counterfeits.

Second, the selling of fake sportswear is intimately linked to major sporting events. Concerts,
competitions, and other significant events frequently draw organised counterfeiters who set up
shop in the vicinity of the sites. Because the merchants are mobile and carry limited inventories,
police action is ineffectual. In Europe, police investigations have uncovered evidence of
international rackets specialising in the sale of counterfeit goods at huge events.

Third, counterfeit sportswear's major target market is young people, who are the most eager to
acquire knockoffs. According to a recent research on public attitudes about counterfeiting in the
United Kingdom, 40% of consumers intentionally purchase for fakes, with more than half of
these being between the ages of 15 and 24.

Large-scale counterfeiters of sportswear usually target only a few well-known brands, such as
Adidas and Nike. Counterfeiting is dealt with in-house at these businesses.

While there is no explicit agreement within the industry to work together to combat
counterfeiting, there is a lot of informal information sharing among the companies.

3.6 Toys

Traditional toys and electronic toys are the two segments of the toy industry, with the latter being
the fastest growing. Traditional toy manufacturing is dominated by a few large producers who
also serve as distributors. Toy counterfeiting differs from "regular" trademark infringement in a
few ways. It is common for a product's design to be copied and sold under a similar, but not
identical, trademark. For trademark owners, this is more difficult to combat, especially in Asia,
where design protection is not as strong as trademark protection.

Toy counterfeiting, whether through unlawful copying or the manufacture of near-identical

reproductions, is becoming a growing challenge for the industry. Not only does it result in
financial losses, but it also puts tiny children's health and safety at risk. Counterfeit toys are
estimated to account for 12% of the European toy market. China is the primary source of
problems for the toy business. The majority of toy producers have concentrated their operations
in a few areas of China. These areas are becoming a source for both genuine and counterfeit toys.

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Another country to be concerned about is Turkey, which produces fewer real toys and more
counterfeits.

Toy Industries of Europe (TIE) was founded in 1990 to promote the interests of the European toy
industry to the European institutions. TIE works mainly as a lobby group and has taken an active
part in refining the intellectual property laws within the European Union.

Electronic toys, particularly computer games, are one of the toy industry's fastest growing
categories. The majority of these games' manufacturers are headquartered in Southeast Asia and
the United States, and this market blurs the lines between the computer and traditional toy
industries. The computer industry believes that counterfeiting costs the game industry in Hong
Kong (China) US$90 million per year in lost revenue. The manufacture is thought to be done in
China, and the CDs are then smuggled into Hong Kong (China) and placed in pre-printed sleeves
at stores. Due to their small size and versatility, CDs are extremely easy to smuggle.

Nintendo, the largest producer of video game products, claims that China, Chinese Taipei and

Hong Kong (China) is the largest source of counterfeit video games in the world. Trade in
pirated software is said to be carried out through cartels with connections in all three countries
and the United States.

3.7 Aircraft components

Despite the fact that the supply of spare aircraft parts is subject to strict restrictions, there have
been a number of incidents of plane disasters caused by counterfeit parts.

A huge number of small businesses produce aviation components such as washers, bolts, nuts,
and screws. In principle, the supply chain is carefully supervised by Defense Departments and
non-governmental trade associations, but in practise, counterfeit components have found their
way into the supply chain on several occasions. This has the potential to cause major issues
because each aeroplane contains thousands of parts, and it only takes one phoney component to
produce a disaster.

Industry experts believe that up to 10 percent of spare parts in the US are Suspected Unapproved

Parts (SUPs). This includes parts that are either counterfeit, stolen or, as in the majority of cases,
lack the right paperwork. The US Department of Transport has estimated that there could be up
to US$1 billion worth of “unapproved parts” in the warehouses of US airlines and parts
distributors. The bogus spares industry is believed to attract criminals because of its high profits
and low risk. Whilst a genuine nut is costly to produce and may sell for US$400, a counterfeit

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can be manufactured for a fraction of the amount and sold on the black market for a high profit.
The black market for aircraft parts in the United States is virtually unregulated and includes more
than 5000 brokers.

The FBI has identified four basic fraud schemes involving SUPs:

· Affixing a yellow FAA airworthiness tag, which certifies a part has been rebuilt or

overhauled, to a used part on which no work has been done.

· Making a part based on manufacturer specifications but with inferior material, so it

resembles the genuine item without meeting flight specifications or having been tested.

· Buying, then reselling, production overruns from part makers that supply major aircraft

manufacturers. Such parts may be airworthy, but they can also be factory rejects.

· Obtaining parts that are fatigued, worn or damaged to the point of being unworkable and

selling them as refurbished.

3.8 Spare parts and car accessories

Car mats, wheel trims, lamps, mud flaps, and electrical parts are among the items that have been
counterfeited. In general, counterfeiters target short-duration items, off-the-shelf parts that may
be fitted to a variety of models, and parts with cheap per-unit prices since they are less likely to
contain any security features.

The motor industry estimates that it loses US$12 billion from sales in unauthorised parts,
including counterfeits, of which the United States accounts for US$3 billion and Europe for the
largest share of the remaining US$9 billion. General Motors believes that the company and its
suppliers lose some US$1.2 billion annually from lost sales to counterfeit parts. In France,
Peugeot claims to lose FF 400 million, and Renault estimates losses of between FF 600 and 900
million per annum.

Italy, Spain, and Portugal in Europe, as well as Turkey, Chinese Taipei, Singapore, and Iran, have
been identified as the primary production areas.

There is no established organisation in the business dedicated to preventing counterfeiting. Ford

in Germany and the United Kingdom, GM in the United States, and Peugeot-Renault in France

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are all quite active and have their own anti-counterfeiting programmes in place. Other
automobile makers are investigating options.

3.9 Pharmaceuticals

Counterfeit pharmaceuticals have far-reaching public health implications and have therefore
attracted considerable concern from public bodies, in particular from the World Health
Organisation

The products may include correct ingredients in incorrect quantities or composed according to a
wrong formula, non-active substances all together, toxic substance, or correct content but in fake
packaging.

Developing countries with lax drug regulatory control and enforcement are disproportionately
affected. Scarcity and/or erratic supply of basic medicines, uncontrolled distribution chains, large
price differentials between genuine and counterfeit medicines, lack of effective intellectual
property right protection, disregard for quality assurance, and corruption in the health-care
system are all contributing to the problem.

In general, most developing countries have a local production of generic drugs that infringe on
patents owned by international pharmaceutical companies simply because intellectual property
protection is not available for pharmaceuticals in these countries. Italy, the Lebanon, India,
Pakistan, Argentina, Mexico and Brazil have, furthermore, been pointed out as sources of
counterfeit drugs distributed internationally.

Counterfeiting of drugs has only been reported since the beginning of the 1980s and gained press
coverage only in this decade. The WHO has a team devoted to improving protection in the
developing world and intelligence gathering. However, companies are reluctant to release
information on incidents of counterfeiting of their products for fear of undermining sales of, and
confidence in, their legitimate products.

The main industry action in this field is the Pharmaceutical Security Initiative (PSI). It was
created in 1996 and operates from Rome.

Estimating the financial impact of counterfeit pharmaceuticals is very difficult. The total losses
for the legitimate chemical and pharmaceutical industry have been estimated in excess of US$17
billion. Developing countries account for the largest shares, with up to

60% of all medicine sold in some African countries is fake. In Nigeria, for example, only a
quarter of some 500 samples purchased from street vendors appeared to be genuine.

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 4. GEOGRAPHICAL SPREAD OF COUNTERFEIT PRODUCTS

As observed by France (17%), Italy (15%), Switzerland (11%) and Germany (9%), the United
States is the worst victim of counterfeit goods, 24% of confiscated counterfeit goods are
associated with a brand or patent. A growing number of groups are located in Singapore, Hong
Kong and emerging economies including Brazil and China. Most of the counterfeit items found
at

Customs are from mainland China and Hong Kong. Various important founding factors include
the United Arab Emirates, Turkey, Singapore, Thailand and India.

Small parcels sent by post or express courier are a major channel for counterfeit goods
distribution and are growing. Small parcels accounted for 69% of total customs seizures (57% by
post, 12% by courier).

China was a major supplier of IP infringing goods in terms of value, while South Korea ranked
first in terms of seizures. In 1996, there were only 105 seizures in China, totalling more than $5
million. The United States confiscated 645 cases from South Korea in the same amount. In 1997,
the total of 250 items seized in China was 14.5 million dollars, and the total of 460 items seized
by South Korea was 3.6 million dollars.

Transport operators remain intermediaries providing critical services against abuse within the
counterfeit supply chain. Sea and land transportation is still the preferred method for shipping
large volumes of counterfeit goods. Although imports and exports declined during the pandemic,
online shopping and direct-to-consumer delivery increased significantly even before the
pandemic. E-commerce, which includes small package deals that are purchased online on retail
websites or a third of third-party markets and sent through specific or global postal services, has
been heavily used by traffickers in illicit trade. Goods transported using oversized shipping
boxes, ground shipping, and small parcels delivered via courier or postal services continue to
have significant vulnerabilities. Due to the volume of boxed cargo and the movement of
counterfeit goods, the nature of the delivery is blurred by fake office work, making it difficult to
demonstrate delivery.

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 5. IMPACT OF COUNTERFEITING

5.1 The costs

5.1.1 Costs to the right holder

Every year, counterfeiters cost the global economy billions of dollars. These expenses have a
variety of consequences for victim countries. Industries that compete directly with counterfeiters
incur a direct loss of sales. Indeed, counterfeiters have taken over some markets, erecting barriers
to entrance for real product makers. Today's counterfeit goods are often of superior quality and
compete directly with real goods.

Furthermore, buyers who are duped into believing they purchased a genuine item when it is in
fact a fake blame the genuine product's manufacturer when it fails, resulting in a loss of
goodwill. Even cheaper and obvious copies that are bought in good faith represent a serious
threat to the company that wants its brands associated with quality and exclusivity.

Third, aside from direct sales and goodwill losses, the cost of protecting and enforcing
intellectual property rights should not be overlooked. When dealing with counterfeiters, the right
owner becomes embroiled in costly investigations and litigation, and may also be forced to spend
additional funds on product protection. Anti-counterfeiting budgets are rarely clearly delineated
within an organisation, but they often span numerous departments, including marketing, human
resources, product development, and legal.

5.1.2 Costs to countries where counterfeiting takes place

Both tangible and intangible losses are suffered by such countries. First, reputable overseas
manufacturers are wary of producing their goods in nations where counterfeiting is rampant
because they cannot rely on the enforcement of their intellectual property rights. As a result, such
countries lose not only direct foreign investment but also foreign know-how.

Second, if many products from such countries, including legitimate ones, develop a reputation
for poor quality, export losses will result, resulting in job losses and a loss of foreign cash. It may
be argued that the counterfeiting sector produces jobs, but these occupations are sometimes
low-paying, involve bad working conditions, and occasionally employ children.

Third, the existence of a legal structure that protects entrepreneur rights and promotes fair
competition is essential for new business creation in a country. The presence of counterfeiters in

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a market hinders innovation in that country by discouraging honest producers from investing in
new items and market development.

Tax losses are another direct cost for governments of nations that become havens for
counterfeiters, because counterfeits are typically marketed through underground channels, and
counterfeiters are generally unwilling to pay tax on their ill-gotten riches. Enforcement agencies
are increasingly justified in taking action because of financial losses.

5.1.3 Costs to countries where counterfeits are sold

Countries that advocate for stricter enforcement of intellectual property rights around the world
have a compelling case to make. Job losses, missing sales opportunities, and lost tax revenues are
among the economic implications of counterfeiting for such "victim" countries.

In the long run, counterfeiting discourages companies from investing in product development
because they will not receive the full value of their effort. Governments in nations where
counterfeit goods are sold will also have to spend more money on police and other investigation
and enforcement operations. Furthermore, legal agencies, such as the courts and the prison
service, must devote additional time and resources to prosecuting and punishing counterfeiters.

5.1.4 Social costs

In the end, the consumer is the one who bears the brunt of unfair competition. When consumers
buy counterfeits, they often assume they are getting a good deal, but the true value of the product
is usually significantly lower. As a result, customers end up paying an exorbitant price for a
substandard product.

Many counterfeits, particularly those connected to health and safety, have had disastrous
consequences due to their poor quality. Counterfeit parts in aircraft and other vehicles which may
cause death and injuries, as well as counterfeit drugs in hospitals, are no longer uncommon.
Workers in factories that manufacture counterfeits are regularly exploited. They frequently work
in unsanitary conditions and are repeatedly exposed to health and safety hazards. Furthermore,
they are frequently underpaid.

Counterfeiting has attracted both organised and minor criminals, who have not only profited
handsomely from the trade, but have also used it to invest and support other illegal activities.

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5.2 Aggregated losses

Counterfeiting is a serious problem, and the general consensus is that it is becoming worse.
However, precise numbers to back up these claims are nearly impossible to come by, not least
due to the illegal nature of the activity. The global costs of counterfeiting are typically estimated
to be between 5% and 7% of global trade. Although there is no major aggregated data to back up
the high percentages, they are now widely recognised and used to demonstrate the scope of the
counterfeiting problem.

The value of international and domestic trade in counterfeit and pirated goods in 2013 was
estimated to be $710 -$ 917 Billion.

5.3 Factors affecting the rise of counterfeiting

While small-scale counterfeiting predates the industrial revolution, large-scale counterfeiting is a

postindustrial phenomena, with the present wave of worldwide counterfeit trade beginning in the
mid-1960s. The fast increase over the previous few decades can be ascribed to a number of
factors:

5.3.1 Technological advancements

New technology has benefited both genuine product manufacturers and counterfeiters. A
photocopying machine, for example, is one of the most important instruments in a counterfeiter's
arsenal. New techniques have also made it possible to counterfeit what were formerly thought to
be "high-tech" products that were too difficult to imitate. Some examples are pharmaceuticals,
electronic components, and rescue equipment. Because his low-cost items have a high
value-added element, the counterfeiter can charge a higher price for them.

5.3.2 Increased global trade

Over the last few decades, international trade, including trafficking in counterfeit goods, has
exploded. Counterfeit products are manufactured and consumed in virtually every locale.
Although expanding border controls might improve the tools available to combat international
counterfeiting, it is unlikely to yield major benefits unless accompanied by an increase in the
resources available to customs officials to devote to anti-counterfeiting efforts.

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5.3.3 Emerging markets and products

A lot of previously restricted economies have evolved into free market economies. Despite the
fact that counterfeiting happens almost everywhere in the world, East Asia, particularly China, is
still identified as the primary source of counterfeits. This region's proportional share of global
trade has increased, reflecting an increase in counterfeit and legitimate product exports. The
proportion of semi-processed and manufactured goods in global commerce has expanded at the
expense of raw material trade. Electronic goods, such as software and audio recordings, are
rarely included in global trade statistics. These are quickly becoming the most vulnerable to
counterfeiting.

6. PROTECTION AGAINST COUNTERFEITING

With counterfeiting currently worth more than $500 billion every year, more and more
businesses are adopting proactive measures to prevent their products from being pirated. It would
be difficult to expect any procedures to completely eliminate counterfeiting, but the goal should
be to make it unattractive for counterfeiters to target the company's goods.

Anti-counterfeiting policies, technologies, and legal enforcement are the three primary
components of private-sector anti-counterfeiting safeguards

6.1 Anti-counterfeiting policy

Counterfeiting has been a concern for most companies who sell their products overseas. Despite
this, many companies have recently developed a rigorous anti-counterfeiting policy in the last
several years.Anti-counterfeiting action is seen as a way to build goodwill, and more and more
businesses are seeing the benefits of publicising their efforts.

6.2 Anti-counterfeiting technologies

Products are increasingly being protected and authenticated using technology. This subject was
previously overlooked, partly due to a scarcity of viable technology and a belief that their
implementation would be prohibitively expensive. However, as more counterfeiting victims
become aware of the possibility of technical solutions and the decreasing costs of applying them,
this pattern is changing.

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The most important prerequisite of any anti-counterfeiting system is to adjust the counterfeiters'
risk-return profile by increasing the risk and lowering the reward. Before engaging in illicit
operations, the counterfeiter will conduct some type of direct or indirect cost-benefit analysis. A
counterfeiter's total cost of crime includes an indirect risk element in addition to the direct costs
of creating and marketing fakes. The risk factor considers the likelihood of being detected, the
likelihood of being convicted, and the harshness of any potential punishments. The danger varies
greatly between countries.

In general, the technology must be cost-effective, compatible with product distribution,

user-friendly, resistant, and long-lasting. For the most part, the only protection that can be built in
is that which will frustrate the counterfeiter for a short period of time. Only by deploying a
combination of diverse product-protection devices can effective product protection be achieved.

The most commonly used technologies are optical, electronics, biotechnology and chemical
technologies.

6.3 Public-private partnership

Cooperation between the private sector and law enforcement agencies must be strengthened. In
order to identify goods that infringe on a company's intellectual property rights, police and
customs personnel lack the necessary skills. Infringers use a variety of tactics and are quite
creative. Both corporate and government leaders have realised that the internationalisation of
fraud, its increasing volume, and the skill of infringers make it impossible for any corporation to
effectively handle the problem on its own.

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Countries where most counterfeiting takes place:

Sales losses due to counterfeit goods:

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 7. POLICY INITIATIVES

7.1 National policy initiatives

Intellectual property (IP) protection might be confusing for some copyright owners. applicants
must go through an extensive filing process for protection, pay expensive renewal fees to retain
their exclusive rights, and defend their rights in case of infringement. Although some countries
have criminalized counterfeiting to relieve some of the burden on rights holders, in most
countries IP enforcement is still considered a self-help problem. In order to initiate enforcement
action, copyright holders must show interest and be active in protecting their rights.

Most of the numerous national anti-counterfeiting organizations around the world have been
created in the last 20 years, but some are much older, the oldest of which is the Manufacturing
Coalition established at the end of the last century. The activities of the national
anti-counterfeiting organization include posting information about damages to members resulting
from intellectual property theft. Governments should be requested to add language to their
national IP strategic plan to increase awareness of the dangerous consequences of counterfeiting
and piracy, and to enforce stronger to tackle counterfeit trade.

7.2 Private or industry initiatives

The association publishes regular statistics on the impact of counterfeiting and piracy on
industries, promotes appropriate legislation and enforcement, assists members in investigating
counterfeit goods, and conducts public education campaigns. The ICC Counterfeiter Intelligence
Agency made attempts to persuade victims of counterfeiting to share information. The main
problem is that all companies want more information, but few want to contribute.

7.3 Stopping the supply of counterfeit products

There should be stronger laws on equipment or fines that apply in different situations for
copyright infringement. This includes relevant sections of the Trademark Act, the Press
Management Act, and the Press and Registered News Act. The effectiveness of the good and
strict laws depends highly on location. It would be helpful to see efforts at the national level to
ensure the consistency of the national implementation.

At the highest levels of government, give political priority to intellectual property crimes through
the Declaration of National Importance. Provides additional funding for existing state-level IP
cells. Work with provinces to prioritize enforcement issues among the enforcement infrastructure

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in selected jurisdictions. Increases existing funds, bonuses and rewards systems by encouraging
police officers to take an interest in economic crime.

Implementing effective solutions to complex problems such as counterfeiting, smuggling and

piracy requires close collaboration and innovation between government and industry.

To stop the flow of counterfeit goods, it is important to consider every aspect of the counterfeit
supply chain, from components and materials to finished products. A whole approach to cope
with enforcement problems must recollect raw material resources, production and distribution
channels in India, and the import, domestic manufacturing, use and export of counterfeit items.

It is widely recognized in the industry that a major problem with anti-counterfeiting arises from
the lack of effective border controls. Free trade allows counterfeiters to import counterfeit goods
through poorly controlled ports and then transport them anywhere within the Union without risk
of being caught.

Government should give more priority to anti-counterfeiting. The tangible measures to

strengthen the Intellectual Property Act, the strengthening of the enforcement of the law, and the
strengthening of penalties will help convince legitimate business owners and consumers that the
government is serious about protecting intellectual property. will help strengthen support for
government policy. Moreover, the strengthening of India's intellectual property system will
signal to criminal networks that such activities will no longer be tolerated.

7.4 Public initiatives

7.4.1 United States

The United States also has an extensive border control system. The Copyright Act and
Trademark Act require customs authorities to prevent counterfeit goods. Accordingly, counterfeit
goods caught at the border are subject to seizure and seizure, and Customs is obliged to destroy
the goods if the copyright holder does not agree to other uses. In 1997 alone, US Customs
authorities confiscated 4,444 items worth $54 million (US Customs, 1998).

7.4.2 European Union

Especially in the case of the European Union (EU), due to the freedom of the internal market, it
is highly likely that trade will increase as member countries are integrated into a single market.
Other factors tend to match consumer preferences.

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European Union countries show signs of improving soon for IP protection and enforcement.
Over the past decade, many Member States have harmonized IP legislation considerably, and the
European Union is also increasingly concerned about counterfeiting, with people currently
working on a green paper to address these issues.

8. ANTI-COUNTERFEITING ORGANISATIONS

Some of the organizations combating counterfeiting and protecting brands:

NAME TYPE DESCRIPTION GEOGRAPHIC

FOCUS

ACG International Acts as an international Global United Kingdom

(Anti-Counterfei Association voice of business, shaping
ting Group) an effective way to
combat counterfeiting.

WTO (World Inter-Governmen Administering WTO trade Global

Trade tal Organisation agreements, forum for
Organization) (IGO) trade negotiations,
handling trade disputes,
monitoring national trade
policies, technical
assistance and training for
developing countries,
cooperation with other
international
organizations

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CACN International Coalition of individuals, Canada
(Canadian Association businesses and
Anti-Counterfeit (Canada) associations that have Global
ing Network) united in the fight against
product counterfeiting,
fraud and copyright
piracy in Canada and
abroad.

ACA NGO (Kenya) Combats counterfeiting Kenya

(Anti-Counterfei and prohibit trade in
ting Authority) counterfeit goods through
training, research,
consumer awareness and
co- ordination with
national, regional and
international
organizations in the
effective enforcement of
intellectual property
rights

GBP (Global International Dedicated to Global (Started in US and

Brands Association understanding and Europe)
Protection) meeting today’s
challenging cyber security
threats faced by the
commercial world.

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 React: The International Fight counterfeit trade. Europe and Global
Anti-Counterfeit Association React has a large
ing Network international network
with strategically placed
offices and partners
around the world to
efficiently fight the global
trade in counterfeit goods.

FICCI (Indian International Objectives include: India

Chambers of Association generating awareness on
Commerce and (India) the hazardous impact of Global
Industry) smuggled, contraband and
counterfeit products
amongst consumers and
citizens; Capacity
building of law
enforcement agencies
including Judges, Police
and Customs Officers;
Sharing the best practices
followed globally for
combating smuggled,
contraband and
counterfeit products.

COUNTERFEITING INTELLIGENCE BUREAU: ONE OF THE ORGANISATIONS

TACKLING BRAND AND PRODUCT COUNTERFEITING

Counterfeiting is one of the fastest growing economic crimes worldwide. It threatens the
economies of developed and developing countries alike, undermines trading relations, scares off
vital new investment, and increasingly endangers public health and safety. Counterfeiting has
spread at an alarming rate to electrical and electronic goods and components, machines and
equipment, spare parts of all types, pharmaceuticals and even high technology products.
Counterfeit products account for between 5-7% of world trade. Counterfeiting also destroys jobs

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in the industries on which it preys. Estimated job losses are 120,000 per year in the United
States, and 100,000 per year in Europe over the last 10 years.

PURPOSE OF THE ORGANISATION:

In response to demands from world business, the International Chamber of Commerce formed
the ICC Counterfeiting Intelligence Bureau (CIB) in 1985 as a focal point for industries and
other affected interests worldwide to fight this growing problem. The CIB is unique. It is the first
international business initiative to go beyond political lobbying with practical prevention and
enforcement support for police and customs authorities - a vital element in the campaign against
the manufacture and distribution of counterfeit goods around the world. A non-profit making
membership organisation comprising members from various countries and sectors. The CIB
includes large multinational companies, trade associations, law firms and technology producers.

KEY SERVICES PROVIDED:

• Information on counterfeits and counterfeiting throughout the world.

• Investigations aimed at targeting production and shipments of counterfeits world-wide,

monitoring markets and taking enforcement action.

• Publications - a monthly Confidential Bulletin which deals with all aspects and issues relating
to counterfeiting, including counterfeiting techniques, anti-counterfeiting strategies, legal
developments and anti-counterfeiting technologies. In addition, the annual CIB
Anti-Counterfeiting Directory, as well as Guides and Special Reports on counterfeiting

. • Research and Consultancy Services including market surveys, authentication of documents

and security holograms and devising effective anti-counterfeiting strategies.

• Legal advice - providing legal advice and coordinating litigation in different jurisdictions
against those involved in counterfeiting. Liaising with government departments and law
enforcement agencies in actions against counterfeiters.

• Network access to the Counterfeiting Intelligence Bureau’s Counterforce Network of law firms
throughout the world who specialise in intellectual property and anti-counterfeiting work. In
addition, advice and assistance from the CIB’s Countertech Network who produce technologies
which protect and authenticate products. Countersearch, the CIB’s latest network, brings together
the resources of specialist investigators throughout the world.

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 • Conferences and Workshops - Annual lecture and Conference held annually in London -
providing education and networking opportunities. In addition, an annual intensive work shop in
the United Kingdom

OPERATIONS:

The CIB protects industry from the damage done by international counterfeiting by gathering
intelligence, making undercover enquiries and providing expert advice and training. It conducts
rigorous investigations worldwide into the sources and distribution of fake products. CIB
investigators compile the criminal evidence necessary to enable national law enforcement
agencies, either police or customs, to make arrests and to seize counterfeit goods. In addition, the
CIB organises regular seminars to promote awareness of the problems posed by counterfeiting
and ways in which companies can minimise their vulnerability. As part of its anti-counterfeiting
operations, the Counterfeiting Intelligence Bureau operates the Hologram Image Register (HIR)
for the International Hologram Manufacturers’ Association (IHMA). It also encourages the use
and development of anti-counterfeiting technologies which provide product authentication and
protection. The CIB provides a complete range of consultancy services, including market
research and analysis and market monitoring. The CIB has created three world-wide networks to
assist victims of counterfeiting, “Counterforce”, “Countertech” and “Countersearch.”

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 9. REFERENCES

1. https://www.statista.com/chart/4710/where-the-worlds-fake-goods-originate/
2. https://www.statista.com/statistics/1117921/sales-losses-due-to-fake-good-by-industry-w
orldwide/
3. https://iccwbo.org/publication/economic-impacts-counterfeiting-piracy-report-prepared-b
ascap-inta/
4.
https://iccwbo.org/content/uploads/sites/3/2016/11/Counterfeiting-piracy-and-smuggling-
in-India-Value-of-IP-in-india.pdf
5. https://www.worldtrademarkreview.com/anti-counterfeiting-network

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