Trevor Little

New research from the Organisation for Economic Co-operation and Development (OECD) has revealed that counterfeit information and communication technology (ICT) products account for 6.5% of overall ICT trade, with almost 43% of seized counterfeits infringing the IP rights of US companies. Worryingly for those tasked with protecting brands in the sector, it is estimated that almost a quarter of video game consoles and controllers shipped internationally are fakes.

The Trade in Counterfeit ICT Goods report draws on data-sets pertaining to customs seizures over the period 2011-2013 (for instance, it drew data from The World Customs Organization, The European Commission's Directorate-General for Taxation and Customs Union and The United States Department of Homeland Security). We recently reported on research conducted by the EUIPO and International Telecommunication Union, which revealed that an estimated €45.3 billion ($52 billion) in revenue is lost annually to counterfeit trade in smartphones. That study estimates that the counterfeit trade in smartphones represents 12.9% of total sales. In this latest research, which looked at units shipped internationally, it calculates that almost one in five mobile phones (18.8%) is fake.

Other headline findings include:

  • The value of global trade in counterfeit ICT goods stands at $143 billion as of 2013, based on data from nearly half a million customs seizures across 2011-13;
  • On average, 6.5% of global trade in ICT goods is in counterfeit products (compared to previous 2.5% estimates of the average share of global trade taken by fake goods);
  • Of the different industry segments, video games consoles and controllers was the most impacted segment, with 24% of shipped products estimated to be fake;
  • Almost 43% of seized fake ICT goods infringe the IP rights of US firms, followed by 24.7% for Finnish, 12.2% for Japanese, 5.4% for Korean and 3.6% for German companies.

For brand protection professionals in the sector, the report is worth a read not just for the sobering statistics on the prevalence of fakes (which may prove useful when communicating to senior management the scale of the challenge faced), but also for the intelligence it provides on how counterfeiters get product to market. This intelligence falls into two camps – geographical and delivery methods.

To start with the latter, almost two-thirds of counterfeit ICT goods were found to be shipped by express and postal services – between 2011 and 2013, an average of almost 66% of the total number of customs seizures of counterfeit ICT products concerned posted parcels, while 27% concerned air shipments. Sea (5%) and road (3%) transport lagged far behind.

Of course, the predominance of postal shipments means it is harder to stem the flow of fakes. With shipments of fewer than 10 items accounting for about 52% of the total number of shipments, it is clear that brand protection counsel have to initiate more and more seizures to have any hope of making a dent in illicit trade. Yet identifying small parcels likely to contain counterfeits is time-consuming, costly and complex. While the study identifies where efforts should be focused, turning this knowledge into effective results is a whole other challenge.

In this regard, the study’s insight into the geographic flow of counterfeit ICT goods is important, as it narrows the possible target areas.

The report notes that a large range of developing and developed economies can be the provenance of counterfeit ICT products, and identifies the top ten provenance economies in terms of a GTRIC-e score (which indicates whether an economy has a high propensity to be a source of fake ICT products, either in absolute terms, or as a share of world imports). These are, in order, China, Hong Kong, Canada, United Arab Emirates, India, Korea, Turkey, Germany, Serbia and Sweden.

The term “provenance economy” refers to an economy detected and registered by any reporting customs agency as a source of any item that has been intercepted for violating an IP right. That can include both economies where the production of infringing goods is taking place and those that function as ports of transit through which infringing goods pass. Both, however, should be on the radar of anti-counterfeiting specialists.

The report’s release is timed to coincide with this week’s 2017 OECD Global Anti-Corruption & Integrity Forum, which brings together policy professionals as well as those from the private sector, civil society organisations and academia. While primarily aimed at a government and policy audience, the 94-page document is one that trademark and brand protection professionals in the ICT sector should scrutinise – even if it does make for depressing reading. 

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