UK: Combating The Counterfeiters: A Practical Guide

Last Updated: 26 January 1999
What is a "counterfeit"?

To most people the term "counterfeit" means an identical copy. The shorter Oxford English Dictionary, however, provides a broader definition: "to counterfeit" it says, means to "imitate with intent to deceive". This would cover all cases of intentional passing off, even those cases where the imitator includes a number of differences - not enough to alert the unwary consumer, but enough to give the imitator the guise of innocence.

You might think that the counterfeiter would not usually have a close connection with the producer of the original. The producer of a counterfeit banknote, for example, is unlikely to have much contact with the Bank of England. In today's commercial world, however, the counterfeiter is often a licensee or ex-licensee of the producer of the original product. Take the example of a licensee who is authorised to produce 1000 items, but instead produces 1500. The extra 500 are identical in all respects to the first 1000, but they are unauthorised and are therefore counterfeit. Think also of the ex licensee who retains the moulds, raw materials and know-how, and continues to produce the goods despite the termination of its licence. The end product may be substantially identical to the previously authorised product, but is counterfeit.

Counterfeiting is all pervasive. According to recent press reports, both Sainsbury and the National Health Service have been accused of dealing in counterfeit "grey" merchandise. To those with experience of anti-counterfeiting, these reports come as no surprise. Historically counterfeiting and parallel importing have gone hand in hand. The "grey market" by passes the ordinary business channels, making it difficult for the ultimate purchaser to check on the authenticity of the product - an ideal situation for the counterfeit to exploit.

While counterfeiting is commonplace, few brand owners have a formal strategy for dealing with the problem. Most deal with counterfeits on an ad hoc case by case basis - an inefficient, expensive and time consuming response if your brand is a regular target for counterfeiters. It is better by far to have a coherent strategy for dealing with the problem.

All anti-counterfeiting strategies are rooted in one fundamental principle: make the copying of your product more trouble then it is worth. Like all crooks, counterfeiters are looking for an easy profit. Take away the opportunity, and they will have to move onto something else.

In devising an anti counterfeiting strategy, you should first put yourself in the shoes of the would be counterfeiter. Try to identify the counterfeiting opportunities, for example those parts of the World where demand for the genuine product exceeds ready supply, thereby providing a market for the counterfeit. Investigate the pricing and packaging of your product. In some places, these may be so variable -perhaps as a result of discounts, special offers, parallel imports, seconds etc - that the counterfeit's price and imperfect packaging won't raise any suspicions in the market.

After going through this exercise, you may be able to eliminate opportunities for counterfeiting - for example, by improving distribution of your product and rationalising pricing. At the very least, the exercise will have alerted you to areas of vulnerability. You will now be in a position to construct an anti-counterfeiting plan.

Preparation and Decision Making;

You must be able to detect the counterfeiting promptly. This may mean incorporating special features in the packaging of the genuine product. In the late 1970's when JOHNNIE WALKER was suffering a spate of counterfeiting, the patented bottle cap defeated the counterfeiters. It incorporated a "bulge" which was readily visible to those who knew what to look for and it was difficult to replicate cheaply.

It may be necessary to employ investigators, but there is plenty of scope for self-help. Remind your staff and all others associated with the brand to keep their eyes open for anything unusual in the marketplace. Many brand owners have derived help from trading standards officers. Once briefed about what to look for, they will operate as another source of information and a means of enforcement. Th Anti-Counterfeiting Group provides a useful forum for meeting representatives of the law enforcement authorities and other companies facing similar problems.

Detecting the counterfeit is only half the battle. The next stage is deciding what to do about it. This task should be given t a team drawn from operating and support departments - a team equipped to take quick decisions I response to reports from the market place. The team members must be senior people. This is not just for reasons of "clout." The handling of counterfeit problems requires extreme sensitivity to the broad commercial picture, especially when it comes to publicity. As Dunlop once discovered, it is not wise to let others know that the counterfeit is so good that it is almost indistinguishable from the original.

The team must decide, among other things whether to jump in straight away against the first suspect identified or whether to hold back in the hope of catching the prime-movers behind the operation; whether or not to court publicity; whether to go the civil route or the criminal route or, maybe "mix and match".

Criminal Remedies: Practical Problems

The investigative powers of Trading Standards are enviable. Trading Standards Authorities are usually extremely helpful in evidence gathering and reporting on sightings of counterfeit products in markets, boot sales etc. However, they have limited resources and are restricted in what they can so outside the boundaries of their own administrative area. They also operate in the public interest, which may not always coincide with the private interest of the brand owner. In a recent anti-counterfeiting campaign in the Midlands, we found that the relevant local authority could not allocate an officer to follow a suspect shipment over night. It would have meant paying an officer overtime and none of us knew the ultimate destination, save that it was unlikely to be in another authority's area. As a result, the authority preferred to prosecute the minnows in their own area rather than trace the powers behind the scene elsewhere. Our client pursued the civil route, caught the main conspirators and recovered all its costs - and all before a prosecution got off the ground.

Even if you survive the technicalities of the criminal route and obtain a conviction you may be faced with a magistrate who is unwilling to impose anything more than a derisory penalty. The civil route is often perceived to be more expensive, but it is quick, effective and the cost to the defendant is usually a far higher penalty(and therefore a greater deterrent) than a fine from a criminal court.

The team must be properly resourced, enabling it to stay ahead of the game. It will research and keep under review developments in security printing and packaging. It will meet regularly to ensure that procedures are being maintained and that nothing is being missed. Crucially, it will ensure that the information coming is collated on an intelligently-designed database. This will show the connections between seemingly unlinked pieces of evidence. In some parts of the World, traditional methods may therefore consider joining forces with others in lobbying the powers that be.

Where functions are being outsourced to lawyers and investigators, they should attend team meetings when necessary. It often pays to make them part of the team. It is crucial however, that senior commercial people take responsibility and keep closely involved.

Burner Bubble Golf Clubs:

If you act quickly it doesn't take long for the word to spread that counterfeiting your brand spells trouble. A recent campaign by Taylor Made, the golf club manufacturer, shows what can be done.

Four years ago, Taylor Made introduced their revolutionary and highly distinctive Burner Bubble golf clubs. A year later, the annual golf industry exhibition at the NEC was overwhelmed by lookalikes from Taiwan. There were dozens of different lookalike manufacturers exhibiting there. The product was of such significance to Taylor Made's health, that they decided to launch an uncompromising campaign of litigation against the main dealers in the offending products. This was accompanied by a publicity campaign educating trade and public alike as to the fraudulent nature of the trade and the dangers of becoming involved in it, whether as a dealer or end user.

After two and a half years of litigation in America and the UK against importers, wholesalers, retailers and the occasional club professional, the market dried up. This years exhibition was "clean". Traders in the offending product came up to appreciate that they would almost certainly be detected and sued. They also became aware that litigation in the UK is costly and that, in addition to having their stocks confiscated, they would be responsible for those costs. If the cost of a trade outweighs the income, it rapidly comes to a close.

Although this was principally an anti lookalikes exercise, the same principles apply to anti-counterfeiting. After all, counterfeiting is simply an extreme form of trade mark infringement, copyright infringement and passing off. And an anti-counterfeiting strategy is nothing more than an IP protection and enforcement strategy should embrace everything described in this article. At its heart will be a ream of senior people (not just lawyers) with a commitment to the long-term interests of the brand, a broad remit and a realistic budget.

The content of this article is to provide only a general information on the subject. Legal advice should be sought for any specific circumstances.

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