Fighting counterfeiting in a changing political world
This is an Insight article, written by a selected partner as part of WTR's co-published content. Read more on Insight
The political landscape in the United Kingdom, Europe and across the globe changed greatly in 2016 and many leading commentators believe that in 2017 the world will become even more unpredictable. In Europe, one of the main uncertainties is how UK and EU politicians will act as they seek to negotiate in preparation for the United Kingdom’s exit from the European Union.
The political landscape in the United Kingdom, Europe and across the globe changed greatly in 2016 and many leading commentators believe that in 2017 the world will become even more unpredictable.
Brexit on the agenda: how will it affect IP rights enforcement?
In Europe, one of the main uncertainties is how UK and EU politicians will act as they seek to negotiate in preparation for the United Kingdom’s exit from the European Union.
A ‘hard’ Brexit position could result in the United Kingdom leaving the single market and potentially losing some – or even far-reaching – access to the world’s largest trading bloc. On the other hand, a more flexible departure might maintain access to the single market, but this would likely result in some agreement on the free movement of people. To many in the United Kingdom who voted to leave, this would be particularly undesirable.
The UK government’s negotiation strategy on Brexit is not yet clear and is often shrouded by the use of terms that range from ‘hard’ to ‘grey’ and even ‘red, white and blue’ exit approaches. In the end, it is possible that the starting position on how the United Kingdom will leave the European Union may change considerably as a result of its economic situation. In simple terms, if the UK economy grows, the UK government may take a hard line in its discussions. However, if the country experiences an economic downturn, it may need to adopt a softer approach.
Numerous models already exist which the United Kingdom could follow in its planning process. For example, like Norway, it could join the European Economic Area through the European Free Trade Association. This effectively allows members to access the single market; however, non-EU member states must still adhere to EU rules and regulations and have no real rights in how those rules are developed and introduced.
Alternatively, the United Kingdom could follow the model adopted by Switzerland, which allows access to the single market through a range of bilateral treaties. However, after almost eight years, there are still tangible difficulties between Switzerland and the European Union as a result of policy differences.
Whatever the plan, it is clear that negotiations will not be easy. The United Kingdom will be seeking to find the most positive exit position in its discussions with EU representatives, who in turn will be advised by the main EU institutions – the European Council, the Council of the European Union and the European Commission. All will have a role in agreeing the European Union’s negotiating stance.
While the political negotiations and turf wars on the European Union have been taking place, Anti-Counterfeiting Group (ACG) members face uncertainty about how they will continue to protect and enforce their IP rights in the European Union. The availability of EU-wide protection for trademarks and registered designs has had significant benefits, particularly for companies that trade across the European Union, and it remains unclear whether these rights will continue to extend to the United Kingdom. On the back of this, ACG members are expressing growing concerns about enforcing their rights in the face of an exponential rise in counterfeiting.
Counterfeiting on the rise
In April 2016 the EU Intellectual Property Office (EUIPO) and the Organisation for Economic Cooperation and Development (OECD) published a defining study about the damage being done by counterfeiting and piracy. It revealed that the trade in fake goods amounts to 2.5% of all world commerce. In financial terms, this equates to $461 billion, which is equivalent to the gross domestic product (GDP) of Austria or the combined GDPs of Ireland and the Czech Republic.
This paints an even bleaker picture than the previous OECD report, which was published in 2008 and estimated that counterfeit and pirated goods accounted for 1.9% of world imports (around $200 billion).
The new report also established that 5% of all goods imported into the European Union were fake and that the European Union is a clear target for organised networks of criminal counterfeiters. Moreover, the data confirms that the range of counterfeit products has continually expanded, with machines, chemicals, auto parts, toys, pharmaceuticals, cosmetics and foodstuffs joining the more traditional high-end consumer fakes (eg, watches, perfumes and leather goods).
It will be no surprise to rights holders and their representatives that the EUIPO and OECD findings also reveal that counterfeit and pirated products originate in most continents, but that China and Hong Kong are comfortably the largest producing economies. However, the customs data used in the study also flags up that many other countries are contributing to the problem. These include Afghanistan, Greece, Lebanon, Malaysia, Mauritius, Morocco, Pakistan, Panama, Senegal, Serbia, Singapore, Suriname, Syria, Thailand and Turkey, to name a few.
The overriding conclusion is that the worldwide trade in counterfeit and pirated goods has not diminished since the previous OECD report; instead, it has become an even greater threat for modern knowledge-based economies. All this and more can be found in the detailed report, which is available at www.euipo.europa.eu.... .
EU Customs confirms many of the EUIPO/OECD results in its most recent report on IP infringements, which was published in September 2016. The European Commission’s figures show that in 2015, more than 80,000 detention cases were registered by Customs and over 40 million articles were detained. The total value of detentions in relation to equivalent genuine products was estimated at just over €642 million.
As already confirmed, China continues to be the main source country from which infringing goods are being shipped to the European Union. However, for certain product sectors, other countries are key originators, such as:
- Benin for foodstuffs;
- Mexico for alcoholic beverages;
- Morocco for other beverages;
- Malaysia for body care items;
- Turkey for clothing;
- Hong Kong for mobile phones and accessories, memory cards, computer equipment, CDs/DVDs and lighters;
- Montenegro for cigarettes; and
- India for medicines.
The EU customs report also highlighted the threat from fake products intended for daily use, which are potentially dangerous to consumer health and safety (including food and beverages, body care products, medicines, medical parts, electrical household goods and toys). These accounted for over 25% (ie, 29 million items) of the total amount of articles seized at EU borders.
In terms of transport, sea freight remains the main means of shipping fake goods. However, there is a growing threat from the use of air freight and express couriers and the Internet have a major part to play in this.
Consumers and businesses are increasingly ordering more of their goods from the convenience of their offices and homes. In 2015 global market research group Kantar Worldpanel estimated that e-commerce would increase by 47% during 2016 and would account for $53 billion of global sales, with online retail consumers spending on average twice as much as in-store shoppers. UK consumers were also identified as the most regular online shoppers in Europe.
Virtually every conceivable type of product can be bought and sold through the Internet and we are not the only ones to recognise its value and potential. It will thus be no surprise that in this ever-expanding world of opportunity – where the sale of counterfeit goods has risen exponentially – the ACG takes the view that one of the most perilous issues facing consumers is the online sale and distribution of fakes.
Counterfeiters are resourceful and clearly find the Internet irresistible. They like the access that it gives to suppliers, transporters, businesses, buyers and consumers across the world; even more, they love the anonymity that it offers. Operating behind sophisticated sales sites, they use fake trademarks, brands and emblems and bogus certification labels to entice customers into thinking that they are buying genuine, safe products.
Unfortunately, the reality is very different, as the fakers end up shipping nothing more than shoddy, sub-standard and increasingly dangerous goods. EUROPOL’s IP Crime Unit has confirmed this threat through operations that have detected a significant rise in wider-range harmful fake products, including mobile phones and chargers, batteries and defective power tools. Other international enforcement agencies have also raised concerns as a result of detections of counterfeit and sub-standard products procured by governments across the world, including parts intended for military use.
From these reports, it is now clear that dangerous counterfeits exist in many primary sectors and in legal supply chains throughout the world.
ACG at the forefront in the fight against fakes
So what is the ACG doing to combat the problem? In short, we provide active assistance and intelligence to government agencies and work relentlessly to change public perception about counterfeiting by exposing it as an insidious crime that damages economies, destroys jobs and increasingly threatens the health and safety of consumers.
We are at the centre of an international network of information, advice and contacts on all aspects of IP protection and chair a number of prestigious anti-counterfeiting groups, such as the UK National Markets Group. We also have a direct link to UK, European and international anti-counterfeiting authorities and networks.
As such, the ACG is extremely active on the ground. The ACG’s intelligence coordinator acts as a special point of contact and reference for business and enforcement, and regularly facilitates and provides operational support and advice to UK enforcement authorities. In the past year, the ACG has helped to contribute and facilitate numerous operations against counterfeit traders, which have netted over 100,000 fake goods with a street retail value in excess of £5 million.
The ACG is also at the forefront in helping our stretched enforcement partners in the use of alternative procedures and legislation. Working with trading standards authorities and police, ACG members and the National Markets Group have tackled one of the United Kingdom’s most notorious areas for the sale of counterfeit goods. The ongoing operation, driven by Manchester City Council Trading Standards and police, has targeted counterfeiters operating from council-owned premises. This intensive action has been carried out using the Law of Property Act 1925 and has resulted in over 60 notices served on illicit traders, the departure of over 50 traders from their premises and the seizure of thousands of fake goods.
Our operational work also extends to joint intensification exercises alongside Her Majesty’s Revenue and Customs and Border Force officials, in an effort to detect counterfeits in postal traffic at airports and postal hubs. With the support and efforts of Customs, ACG members, the Border Force and the UK IP Office (UKIPO), over 80,000 items were recently detained with a street value of over £3 million.
However, the ACG also plays a key role in advising policymakers on plans, regulations and strategies to improve protection and enforcement on the ground. Our recent manifesto sets out how we believe this should happen and our key drivers. As an example, the ACG’s strategy adviser recently started to work with the UKIPO to identify challenges and opportunities following the EU referendum, in an effort to help to drive a secure plan for IP enforcement that will safeguard our members’ prized IP assets. The ACG has also carried out extensive research and has presented the UKIPO with a comprehensive analysis of directives, regulations, decisions and treaties which currently bind the United Kingdom to the European Union. On the back of this, we are in the process of setting up a wider, expert working group to ensure that our members are properly represented and that their rights are fully recognised, protected and respected during the Brexit negotiation process.
The ACG believes that no single agency can tackle this international problem alone. We need even more effective multi-sector partnerships and approaches, directed by the government but with the complete involvement of business. The creation of joint strategies and plans that set common priorities will ultimately result in better decisions and use of our resources, and the ACG remains committed to being at the centre of the United Kingdom’s fight against the malicious impact of counterfeiters and their deadly trade.
As the world changes, so does counterfeiting, becoming ever more dangerous to national economies and society. Our hope is that governments continue to recognise the threats, and that in the United Kingdom’s search for new trade agreements, the government will maintain its insistence on high levels of protection and enforcement for intellectual property.
The ACG will be using all of its energy and resources to do what it can to ensure that members’ rights continue to be fully respected and protected.
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