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 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. Novagraaf's Gerard van Hulst sets out some advice on where to begin.
STEP 1: The business case
Budgeting for anti-counterfeiting activity can be a challenge for IP heads because it can be hard to find up-to-date and consistent data to estimate the threat. What is clear, however, is that the threat is growing. A 2017 study by the EU's European Economic and Social Committee estimated that the global trade in counterfeit and pirated goods represented 5-7% of world trade, roughly €600 billion a year. The study looked only at counterfeits traded across 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 a product 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.
STEP 2: Measuring the threat
Nonetheless, it’s crucial to start identifying the threat to your business, your consumers and your bottom line before beginning any action.
Where are the counterfeit products being sold (on- and offline)? Who is manufacturing them – and where? How are they being transported and through which ports? What are the types and volume of products affected, estimated damage to your business and desired benchmarks for reducing the impact? 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.
Even by tracking the web for a short time, you’ll be able to get an idea how many fake versions of your products are being sold.
STEP 3: 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 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.
STEP 4: Measuring ROI
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. Try to avoid knee-jerk 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. 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.)
STEP 5: 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 you when taking your first – or next – step towards building an effective and measurable strategy for action.