Countering Counterfeit Menace

In Depth

Countering Counterfeit Menace

Kiran Radhakrishnan | October 2018

Part 1 of a 2 Part Article Series

As per the Global Brand Counterfeiting Report, 2018 the amount of total counterfeiting globally has reached to 1.2 trillion USD and is certain to reach 1.82 trillion USD by the year 2020 which includes counterfeiting of all equipment and products ranging from submarines to clothes. The probable losses due to counterfeiting both offline and online, to fashion industry hover around 98 Billion USD.

The World Intellectual Property Organization (WIPO), which is responsible for the promotion of the protection of intellectual property throughout the world, considers counterfeit as a global threat which has been cutting revenues of both Industries and that of the Government while costing the global economy more than US$100bn a year. the World Customs Organization (WCO), whose mission is to improve the administration of customs, pirated and counterfeit goods account for

Roughly seven to nine percent of global trade and believes counterfeit inevitably becoming an active channel to lead to a diversion of funds to other illegal activities while treating consumers’ health and safety especially in the cosmetics and pharmaceuticals space.

Organization for Economic Co-operation and Development (OECD), the European Union’s Intellectual Property Office, and according to the Counterfeiting Intelligence Bureau (CIB) of the International Chamber of Commerce (ICC), counterfeit goods make up 5 to 7% of world trade and that originates from Singapore, Thailand, India with China topping the list with 63% followed by turkey in the estimated half-a-trillion dollar worldwide imports of counterfeit and pirated goods with India being the fifth biggest exporter of fake goods globally

Authentication Solutions Providers Association (ASPA) believes that the market for fakes in India has grown increasingly and steadily in the organized sector with a colossal share of Rs 40,000 crore, with high penetration into the FMCG sector and as per FICCI-KPMG report the counterfeit FMCG market in 2014 stood at Rs 68,000 crore with a growth trajectory of 10 percent of minimum of 10 percent over last two years causing a recurring and mounting loss of a minimum of Rs 27,500 crore, and roots of these are traced back to Indian metro city especially northern India, while Delhi nearly accounts for 75% of counterfeit goods as it is the hub of counterfeit products in India”.

ACCORDING TO FICCI’S CASCADE REPORT, THE COUNTERFEIT GOODS MARKET CAN BE DIVIDED INTO TWO CATEGORIES;

Deceptive counterfeiting refers to consumers’ purchase of counterfeit products, believing they have purchased genuine articles, whereby counterfeiters earn huge profits on account of the premiums charged for low-cost alternatives.
Non-deceptive counterfeiting refers to consumers knowingly buying counterfeit products, looking for what they believe to be bargains.

USUAL TYPES OF INFRINGEMENTS

Gray Products/Parallel Imports Imports of genuine products manufactured by the original brand owner to India, without permission/knowledge/approval of the brand owner, through illegal channels and means by evading duty.
Duplicate Products Identical products in all respects, that is an exact copy of the original product and often of inferior quality, made or sold under another’s brand name without the brand owner’s authorization
Look Alike Products As explained by British Brands Group, Lookalike or copycat products have distinctive features of a brand’s packaging are hijacked in order to trick shoppers into buying something they believe to be that brand, made by the brand manufacturer or sharing the reputation of that brand.
Refilled Products Refilling or remanufacturing of a product and then selling it with the intention which suggests that it is an original branded product when it is not. The packaging will typically look and feel like a manufacturer’s product. Customers are deceived into paying a significantly higher price believing they are buying the original new and not a refilled/reused product.
Recycling Recycling is a process by which the used components are repackaged and sold as a new product.

How to Identify the Counterfeit

The quality of counterfeit is often lower than that of the original product.
Be wary of unusually low prices, especially while doing online purchases.
Inspect the packaging of the product in detail especially for logos,fonts,and trademarks, in counterfeited products the packaging is always dubious.
Check manual or instruction book, original product will have a manual or instruction book without error while the counterfeit ones would not have the same or will have same but either with some foreign language other than English language or will have the manual or instruction booklet with multiple grammatical errors and mistakes.

Countering Counterfeit Menace

In India, the consumer goods sectors that are more prone to counterfeit trade are alcohol, consumer packaged goods, personal care products, tobacco, mobiles,and mobile components, automobile components, and computer hardware and software, while packaged industry remains the worst affected.

According to a report by the Confederation of Indian Industry and Deloitte, the online retail sector in India will be worth $1 trillion (Rs660 trillion) by 2020 and would be fastest growing and rapidly progressing market with growth trajectory of 40%+ while only 10 percent of this growth would occur offline. However, the online retail sector is not free from its share of hazards as 4-5% of businesses in India lose to fraudsters each year in online shopping. There are a variety of fraudulent activities in the e-tailing business, one such being ‘Fake Products’ under the pretext of originals. According to a report published in the Economic Times, E-commerce accounts for the third-largest number of complaints for fake and counterfeit products, Survey by LocalCircles reveals that 38% of 6,923 respondents have received such products from an ecommerce site in the last one year, hence the potentiality of harm on the internet is much higher as compared to the physical world, due to obscurity and ubiquitous character of internet.

Today for criminals,the counterfeit isa passport to systematized and well-planned business model run by both big and smallcartels from various nooks and corners of different geographies of the world. To be concluded in the next issue.

About Author

Kiran Radhakrishnan

Kiran Radhakrishnan is a skilled negotiator and business law specialist with more than ten years’ diversified experience in providing expert counsel and directing company policy on a broad range of issues. He is currently working with PF Matters as Legal Counsel. He can be reached at [email protected]