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Counteract Counterfeits

By: Rick Van Arnam, Esq.
Posted: August 26, 2008, from the October 2007 issue of GCI Magazine.

The fact that counterfeiting is a global problem comes as no surprise to anyone involved in worldwide production or distribution. As an “industry,” counterfeiting has graduated from the regional distribution of designer goods to a global behemoth knocking off just about any type of consumer product for sale anywhere in the world—including cosmetics and personal care goods.

To illustrate, in April 2006, Australian customs intercepted 30,000 bottles of fake perfume with a street value of US$2 million. In April 2007, police in Moscow seized 1.2 million bottles of bogus perfume and eau de toilette worth $5.7 million. A May 2007 report stated that Doho, Qatar was flooded with counterfeit perfume. And closer to home, a joint enforcement initiative by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement resulted in the June 2007 seizure of over 950 shipments of a variety of counterfeit goods, worth approximately $700 million dollars, if the goods were authentic.

The Scope of the Problem

Just how big is this problem worldwide? In a June 2007 report issued by the Organization for Economic Cooperation and Development entitled “The Economic Impact of Counterfeiting and Piracy,” illicit cross border trade in “hard goods” is estimated to reach $200 billion. This number is believed to grow to several hundred billion dollars when domestically produced and consumed hard goods and non-tangible goods, such as film and music, are included.

Many factors exist in the ongoing value growth of counterfeit goods. For personal care and cosmetics companies, a key issue is the ongoing consumer desire to have luxury name goods regardless of their authenticity. Organized crime and terror groups have also become active players in this lucrative field, and the traditional methods of interdiction, such as seizing counterfeit products, may be ineffective in the age of the Internet, where products and ideas may be moved or reproduced digitally.

Further, enforcement efforts are hampered by ineffective national policies in many countries, poor coordination among law enforcement, and fines and penalties so small that they fail to provide a deterrent and are viewed by counterfeiters as simply a cost of doing business.

Steps to Safeguarding Intellectual Property and Brands

Given the scenario above, what steps can a company take to help safeguard its valuable intellectual property and protect valuable brands? Experts recommend eight straightforward and effective measures.

1. Register all your trademarks and patents in all the countries in which you do business, plan to do business or could conceivably do business—either selling or sourcing.

This should be a standard counterfeit prevention practice. The trademark laws of each nation are territorial, so merely filing in the U.S. or the EU will not safeguard you in other countries. You can help prevent trademark pirates from beating you to the trademark office in a country you now decide to do business in through foresight as to which markets you could potentially enter and registering your marks in those countries.