As online sales rise and technology advances, counterfeiting of goods is becoming increasingly problematic for many brands.
Counterfeit goods are imitations of branded products, that are manufactured and sold without the brand owner's permission. Counterfeiting has historically been a particular problem for luxury brands, but many more sectors are now affected, with an estimated $1.7 trillion to $4.5 trillion worth of counterfeit products sold worldwide every year (according to a 2020 report by the US Federal Research Division, Library of Congress).
Two of the main impacts that counterfeiting can have on consumer goods brands are:
-
Loss of sales
The presence of counterfeit goods on the market increases competition for products. Counterfeit goods are often cheaper as they are produced using inferior materials, and in countries where the costs of manufacturing are lower. These lower prices may lead consumers to choose counterfeits over genuine products, meaning brand owners can lose out on potential sales.
-
Damage to reputation
Counterfeit goods are often lower quality than the genuine products. They can even put consumers at risk, as there is no guarantee they will have been put through the same safety checks as genuine products are required to. This can be a particular issue for products such as pharmaceuticals, electrical equipment, food and children's toys.
If consumers mistakenly purchase counterfeits believing they are the genuine branded product, and they are dissatisfied, this can damage the brand's reputation.
IP remedies
There are several IP remedies that may be available to
brands that have already experienced counterfeiting, depending on
the nature of the infringement and jurisdiction in which it has
occurred.
For example:
- Injunctions – Brand owners may be able to obtain an injunction, to prevent the third party from continuing to produce the counterfeits;
- Damages or account of profits – If the third party has caused brand owners to lose profits, or if a third party has profited from the counterfeiting themselves, brand owners may be entitled to compensation;
- Delivery up/destruction – In some cases, courts may order for the counterfeit goods to be delivered to the brand owner or destroyed.
In certain circumstances, counterfeiting of goods can amount to a criminal offence, and the party responsible may be subject to fines or even imprisonment.
Preventative measures against counterfeiting
As counterfeiting can have long-lasting and expensive consequences for businesses, brand owners should consider taking preventative measures.
Firstly, brand owners should consider obtaining registered protection for the relevant intellectual property through trade marks, designs and patents. Owning registrations often makes it cheaper and simpler for businesses to enforce their IP against third parties, and can even act as a deterrent to third parties.
IP registrations can also be recorded with customs authorities in many countries. Doing so enables authorities to identify goods suspected of being counterfeits, and prevent them from entering into the marketplace.
A number of e-commerce platforms, such as Amazon and eBay, also allow brand owners to record trade mark registrations in their online brand registries. This enables the e-commerce platforms to automatically prevent suspected counterfeit products from being listed.
There is also now a myriad of online monitoring tools offered by different companies which crawl the internet, social media and other platforms for infringing content and flag it for review, or in some cases take automated action.
Finally, physical measures such as watermarks, holograms and unique serial numbers can be used on products or packaging to try and deter counterfeiters. Heinz ketchup recently came up with a creative way to deter counterfeiters in Turkey, by including colour swatch labels with the exact Pantone red colour of its ketchup on the bottles. This enables consumers to match the colour of the label with the sauce inside the bottle.
Conclusion
Counterfeiting can be extremely costly and damaging to brands. Therefore, brand owners should consider taking proactive measures to try and prevent counterfeiting before it occurs. The effective use of IP is key to any anti-counterfeiting strategy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.