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Counterfeit goods are fakes deliberately made to look like the genuine article. Counterfeiting is nothing new, but fake goods are becoming increasingly available and are becoming even harder to spot. Sadly, the public’s attitude to counterfeit goods seems to be changing. For example, many people are now prepared to knowingly buy a counterfeit handbag. However, there can be serious problems with counterfeit goods.

A brief search on the internet will demonstrate how easy it is to access web sites openly advertising fake, counterfeit or replica clothing. It gives the impression that this is a legal or even complementary practise. One web site even tries to justify the practice as follows:

“The sale of fakes, it is felt, endorses the brand. First, the trade names are doing well and gaining status. Others who are imitating are reinforcing the brand name while they are making their own success story. Those who buy the fakes are making their own gains”.

Counterfeiting - The Victimless Crime?

Counterfeiting goods is not a victimless crime. Apart from companies losing money and reputation and governments losing tax revenue, ordinary people lose their jobs, ordinary people suffer violent abuse, the consumers’ and often their children’s health and wellbeing are put at risk while criminals make millions; we shall see how below.

UK Research by Trading Standards Suggests that the Main Goods Affected by Counterfeiting Are:

  • Clothing and footwear, especially a popular brand of fur lined boots
  • Music
  • Toys
  • Sports equipment
  • Fragrances and cosmetics
  • Hair straighteners
  • Medicines
  • Cigarettes
  • Watches
  • Alcohol
  • Condoms
  • Sunglasses

It seems we are most likely to be offered counterfeit goods at a market, by a street trader or on the internet including social networks.

A UK/EU Perspective – Counterfeiters are often Part of ‘Organised Crime’

The link between the trade in counterfeit goods and organised crime such as people trafficking and the drugs trade also is well-established. The market for counterfeit goods in the UK is worth £1.3billion of which £900million funds organised crime1.

Some counterfeiters charge much the same price as that for the genuine item, so that in all respects everything will appear genuine. However, others may not be so devious so if you’re offered goods at well below the price you would normally expect to pay for them, you should be very wary. They’re almost certainly counterfeit.

Apart from Not Lasting as Long, Or not Performing as well as the Genuine Article, Counterfeit Goods can be dangerous.

  • Rogue washing powders that cause skin damage because of their chemical content
  • Unsafe toys with small parts and sharp points and edges, toxic contents and so on.
  • Children’s clothes may be flammable or contain harmful restricted chemicals.


The Law – Ten Days to Act

EU Regulation (1383/2003) authorizes EU member states’ customs authorities, such as HMRC, to detain goods thought to be counterfeit.

The Regulation was implemented into UK law by The Goods Infringing Intellectual Property Rights (Customs) Regulations 2004 and worked well for many years with a procedure that was generally regarded as helpful to rights holders. HMRC would detain suspected counterfeit goods, contact the likely rights holder and the detention continued pending the rights holder’s response.

However, HMRC’s rules, adopted in June 2009, now mean that HMRC will only detain goods for 10 days unless the rights holder takes court action. If the rights holder fails to take action within 10 days (or a further 10 days if requested), HMRC will release the goods.

Recent Action to Disrupt Internet Sales of Counterfeit Goods

Online sales of counterfeit jewellery, watches and other luxury goods over certain websites will be blocked by Britain’s largest internet service providers, following a High Court victory by a luxury brand company.

The decision is the first time that a block has been ordered in the UK based on trademark infringement, rather than copyright infringement and the first time such a ruling has been given in Europe. The High Court ordered that the major Internet Service Providers (“ISPs”) – which collectively provide 95 percent of all UK broadband -- must block a handful of websites that sell fake versions of products made by the luxury brands. The judgment was passed on the basis that the sites are guilty of trademark infringement, in that they use real brand names and logos to appear to offer legitimate product at heavily discounted prices.

After unsatisfactory discussions with UK ISPs, The parent company who owns the luxury brands took the matter to court. The UK-based ISPs are being forced to block what is a mere drop in the counterfeit e-tailer ocean but the luxury brand company has identified many more that it could pursue in future litigation.  More importantly, though, the ruling could set a precedent that will inspire other companies and indeed other countries to take similar action.

Inadvertent Promotion

The judge found in this case that the “ISPs have an essential role in these infringements, since it is via the ISPs’ services that the advertisements and offers for sale are communicated to the vast majority of broadband users in the UK”.

International Clamp Downs

MADRID: Police have smashed Spain’s largest counterfeit clothing ring, arresting 99 people, over the sale of 235 tons of fake designer clothes and shoes. The ring made the counterfeit items in illegal factories in northern Portugal and then shipped them across the border by road to Xinzo de Limia, a city of around 100,000 people in northwestern Spain. Police also closed 10 illegal factories in northern Portugal where the fake goods were made.

UK Trading Standards have Reported a 15 per cent Annual Increase in the Sale of Counterfeit Goods Online

Counterfeit goods harm consumers as well as the economy, communities and legitimate jobs. Their report also highlights the indisputable link between intellectual property (IP) crime and other criminal activity including serious organised crime, money laundering, benefit fraud, drug-dealing and violence.

UK Police Speaking at Vietnam Conference on IP Fraud

The International Law Enforcement IP Crime Conference in Vietnam, co-hosted by INTERPOL and the Vietnam National Police, had more than 500 public and private delegates from nearly 70 countries.  During his speech, City of London Police Commander Steve Head called for greater global co-operation and a worldwide day of action to tackle organised criminal networks who are making millions of pounds through IP crime.

Head described a three month pilot, in collaboration with the creative and advertising industries, designed to disrupt advertising revenues on infringing websites. A clear and positive trend has been seen, with a reduction in advertising from major household brands.

A detailed report looking at 61 websites over the course of the pilot, shown to be profiting from advertising and operating without licences from content creators, revealed the following:

  • During the pilot, advertisements from well-known brands decreased by 12 per cent;
  • Advertising that lead the user to sites with explicit adult content or exposed them to malware increased by 39 per cent during the pilot, indicating that site owners may be struggling to maintain their revenue streams when advertisements from established brands are removed;
  • Almost half (46 per cent) of total advertisements on the sites were for unknown or unidentified brands which invited users to click through, often to fraudulent scams.

The police team working in this area feels they have demonstrated how this crime can be disrupted and recommend other countries follow suit and set up their own specialist police teams along similar lines.

Not Limited to Internation Fraud

DERBYSHIRE: A Derbyshire resident sold fake items from high street brands over the social networking site. 

Handbags and clothing were valued at £1,415, there were headphones and speakers worth £2,250. A “proceeds of crime act” hearing at a later date will say the value is as much as  £27,000. Police recovered 57 different lines of items and a further £8,600 in cash from inside her mobile home. The resident told the Court she had bought them on regular visits to a local Market and local car boot sales and would sell them over Facebook to her friends. The Judge said that “The target of your crimes was designer clothes and goods which are expensive items in high demand. The activity serious undermines legitimate traders, putting their livelihoods at risk.

WALES: A sports shop owner was given a suspended prison sentence for selling fake boxing equipment. The counterfeit punch bag, boxing gloves and head guards were worth £7,000 and were marked with well known brand names. David Poole, Cabinet Member for Community and Leisure Services, said: “Not only does the sale of counterfeit items affect legitimate manufacturers selling genuine items, but there is also the very real concern of the items being poor quality and a potential safety risk, particularly items such as the counterfeit head guards in this case. “Counterfeiting is a serious crime which can have a real impact upon our communities, and people should be seriously mindful of the real effects of purchasing counterfeit goods, as such behaviour only continues to fund people that undermine our communities.”

WILTSHIRE: A Wiltshire couple face a series of trademark offences after police and Trading Standards launched a dawn raid on their home in June last year. It is alleged they had fake designer trainers, handbags, T-shirts and bracelets worth thousands of pounds inside the house, a garage and a garden shed and the couple are also accused of concealing criminal property.

Actions Against Counterfeiting

The U.S. Customs and Border Protection agency supports a supplemental registration of trademarks through their Intellectual Property Rights e-Recordation program. These registrations may be supported by brand manuals prepared by, or on behalf of, brand owners. The brand manuals can be used to facilitate the identification of counterfeit goods, including being used as evidence given by trade mark owners to obtain court orders for the seizure of infringing merchandise. Counterfeit consumer goods, unauthorized sales (diversion), material substitution and tampering can all be reduced with anti-counterfeiting technologies. Packages may include authentication seals and use security printing to help indicate that the package and contents are not counterfeit.; These seals also are subject to counterfeiting. Anti-counterfeiting technologies that can be used with packaging include:

Possible it Smart Solutions to Identification and Verification

  • Taggant fingerprinting – uniquely coded microscopic materials that are verified from a database
  • Encrypted micro-particles - unpredictably placed markings (numbers, layers and colors) not visible to the human eye
  • Holograms - graphics printed on seals, patches, foils or labels and used at point of sale for visual verification
  • Micro-printing - second line authentication often used on currencies
  • Serialized barcodes
  • UV printing - marks only visible under UV light
  • Track and trace systems - use codes to link products to database tracking system
  • Water indicators - become visible when contacted with water
  • DNA tracking - genes embedded onto labels that can be traced
  • Colour shifting ink or film – visible marks that switch colours or texture when tilted
  • Tamper evident seals and tapes - destructible or graphically verifiable at point of sale
  • 2d barcodes - data codes that can be tracked

Find information on SGS Services for the Textile & Footwear Industry.

Karen E. Kyllo, Ph.D.
Deputy Vice President, Global Softlines
SGS North America Inc.
t: +1 973 461 7934

Robert Croskell
Softlines Specialist, Global Softlines
SGS United Kingdom Limited
t: +44 1379 668625

Reference:

1 Damian Green, Immigration Minister (UK Government)