Counterfeit Goods, Real Consequences

We recently covered World Anti-Counterfeiting Day. Now in its 22nd year, the event draws attention to the scourge of counterfeit goods to help inspire the fight against them.  

As the day came and went, each news cycle since has shown what an uphill battle we face. Counterfeiting operations are littered across the globe, taking new shapes and targeting new industries. This includes everything from the alcohol industry to the Women’s World Cup -- not to mention those people literally printing money in their hotel room.

Fortunately, news coverage is often in the context of these operations being discovered and shut down by law enforcement, with the people behind them punished accordingly. In the United States, counterfeiting is deemed a felony, paired with up to 10 years in prison and a $2 million fine for first-time offenders.

Online retailers like Amazon are working hard to stop fake goods from getting out and report the people behind them, while big-name brands are investing in state-of-the-art defense measures such as blockchain product tracking. Investigating counterfeiters is also an ongoing top priority for the U.S. Secret Service.

Still, the steady stream of news leaves a lot to the imagination: How many counterfeiters are still out there, or yet to come? And who will they target next? As is the case with most crime, bringing justice for some does not always deter others. Based on market estimates, there are millions of counterfeits being made and sold around the world as we speak, and no business or customer base is off limits.

Aside from its financial impact (e.g. $323 billion in losses from online trade of counterfeits in 2017), many counterfeiting scenarios pose a serious health and safety risk to consumers. For instance, alcohol bootleggers are using embalming fluid and jet fuel in knockoff beverages. Though harming people may not always be the first priority for these operations, it is a dark and far-reaching side effect of the crime that amplifies the urgency in fighting against it.

Just recently, the e-cigarette trend became the latest subject of counterfeiting, and government officials are proposing a focused investigation to stop dangerous fakes from hitting the market. Sold on street corners, in convenience stores, and through shady websites, these imposter e-cigs are not only potentially harmful in untold ways, but are all-too accessible by minors.

For a vaping market that is estimated to reach $47 billion by 2025, this means serious trouble, as the demand will drive many to buy and trust hazardous imitations.

In a June 23 news conference, Senator Chuck Schumer highlighted the emerging threat and the efforts that should be taken to stop it in its tracks.

​”​Counterfeit or ‘fake’ Juul pods, manufactured predominantly in China, are being imported to the U.S,” said Schumer. “They’re often made in unregulated facilities and with substandard materials. Ingesting and inhaling these counterfeit products can pose great danger to consumers.”​

“I am urging the feds to get real focused: crackdown on illegal online sales, implement plans to more vigorously inspect and detect illegal shipments, and altogether remove these faux pods from the U.S. marketplace.”

Technology gives and takes. The same digital advancements that make our lives easier or more connected help to facilitate these criminal acts -- from the design of copycat packaging to the sale of fake goods online. This conundrum makes it especially challenging to tackle the problem at its roots. In the age of Fake News and cybercrime, it is exceedingly simple for everyday people to manipulate others for personal gain.

With that in mind, how can we do our part to safeguard our businesses and prevent counterfeiting?

The legal resource Lexology, with help from IP consultancy Novagraaf, assembled the following five strategies to help brand owners fight fakes:

1. IP protection: Register brand product and product names as trademarks and innovative design features as design rights. This is a key first step that enables companies to pursue legal action for unauthorized use or replication.
2. Packaging protection: Invest in complex and unique packaging that is hard to replicate, as well as tags or other markings that help customers identify your legitimate products versus potential ripoffs.
3. Technology: Some examples of worthwhile tech to consider are holographic security labels, shrink sleeves, tamper-evident seals, and security foil. Additionally, tracking your individual assets with LocatorX or similar technology can ensure legitimate products find their way through the supply chain and to the end customer without being tampered -- as well as singling out attempted fakes on the market by their lack of tracking.
4. Consumer education: With help from your marketing and PR departments, detail your brand’s distinguishing features and security measures to customers, vendors/retailers, and law enforcement through the most effective channels possible. Internal training is also essential. Market education can help everyone involved distinguish between genuine and fraudulent products before distributing fake products, completing a purchase or, worse yet, consuming or attempting to use a counterfeit good.
5. Supplier management: In many cases, counterfeit products enter the marketplace when companies engage a subcontractor to produce goods or when the “legitimate” manufacturer produces additional, unauthorized versions of the genuine product. It is crucial to fully vet your production partners and monitor manufacturing plants before and during production. in addition to putting other safeguards in place.

Visit STOPfakes.gov for more information on how to protect your intellectual property, along with details for identifying and reporting counterfeiters. You should also take the time to educate your customers and stay alert when buying products, both for yourself and your company.

This unfortunate breed of crime will not disappear overnight, but guarding your business and its customers is an important step in the right direction. If everyone does their part, together we can counter the counterfeiters once and for all.

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