Jack Ellis

A report released by the US Chamber of Commerce’s Global IP Centre (GIPC) this week indicates that as much of 86% of the world’s counterfeit goods originate from China. While there have been positive developments on the IP enforcement front in China over the past few years, the GIPC figures stand as a stark reminder that there is still a massive – and perhaps insurmountable – problem with counterfeiting in the country.

The GIPC report – ‘Measuring the Magnitude of Global Counterfeiting’ – analyses the incidence of physical counterfeiting in relation to the 38 economies that feature on the 2016 edition of its annual International IP Index, which rates the relative strength of each territory’s IP systems.

To achieve this, the report’s compilers have approached the research from two angles: first, by examining the estimated value of seized counterfeit goods using data from the 38 sampled territories and the World Customs Organization; and second, by modelling estimates for a particular territory’s propensity for counterfeiting, by considering factors such as the strength of IP protection and the prevalence of corruption.

Based on seizure data collected from EU, Japanese and US customs authorities between 2010 and 2014, the report estimates that ‘mainland’ China is the source of 72% of the world’s counterfeit goods, with Hong Kong – which, as a special administrative region of China, constitutes a separate legal jurisdiction – accounting for a further 14%. Taken together, the trade in counterfeit goods exported from mainland China and Hong Kong (a combined 86% of the total) is thought to be worth $396 billion each year. That recent research from the Organisation for Economic Co-operation and Development and the EU IP Office values the global counterfeit trade at $461 billion goes even further to show the extent of China’s problem.

On top of its 86%, the other 37 economies in the GIPC IP Index sample represent a further 8.76% of the global share of trade in physical counterfeits. Excluding China and Hong Kong, Ukraine comes out on top (with neighbouring Russia placed third). Still, it accounts for just 0.43% of the world’s physical counterfeiting industry (worth just shy of $2 billion) – the gulf between it and China demonstrating just how dominant the latter is in terms of the market in fake products.

Four Asia-Pacific economies feature among this top ten. India is ranked after Ukraine, with 0.38% of the world’s physical counterfeiting trade, amounting to $1.8 billion; sixth, seventh and eighth spots are occupied by Thailand (0.36%; $1.7 billion), Indonesia (0.35%; $1.6 billion) and Vietnam (0.33%; $1.5 billion) respectively.  

But the real story here is China, and the astounding scale of the counterfeiting problem it presents. Anecdotally, many trademark counsel will tell you that there have been significant improvements in the country’s enforcement ecosystem in recent years; while customs statistics on the seizure of fake goods are also suggestive of progress.

On the other hand, opinion on China’s handling of trademark rights still tends very much towards the negative. Respondents to World Trademark Review’s 2016 benchmarking survey rated the efficiency and accessibility of China’s customs procedures in the bottom third of assessed jurisdictions, while its court system also ranked in the bottom half on measures of value for money, judicial scrutiny and the speed of proceedings.

Nevertheless, even if the Chinese authorities were to further increase the resources devoted to fighting counterfeits, even by a colossal degree, the figures seem to indicate that it would have still have an uphill struggle on its hands. All that can be said for sure is that, for the foreseeable future, China looks to remain the focal point in terms of workload for a great many trademark and brand protection professionals.

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