A Thin Line Between Rich and Poor

Recently I attended the INTA conference in Hong Kong where over 8,500 trademark and patent attorneys, brand holders and intellectual property advisors gathered to talk about the good, the bad and the ugly of their respective markets. Global infringement is a worldwide issue, affecting every geographical region, every market sector and the vast majority of businesses, ranging from the sole trader to the global multi-national. And despite the millions that is spent on preventative measures, the problem is getting worse.

Technology has made the detection of counterfeit items, brand and trademark abuse and digital piracy significantly easier, but it has also enabled the criminals to stay one step ahead in many cases.  A number of sessions at the conference focused not only on the threat landscape and how it was evolving but also on what practical steps a business could take to mitigate the risks brand abuse has on their customers, their website traffic and ultimately their revenues.

During the four day conference, expert speakers talked about new protection strategies that would help win the battle if not the war against the criminals.  The INTA meeting has taken place every year since the organisation was formed in New York City in 1878 by a group of 17 tradesmen and merchants, and counterfeiting has been on the agenda since day one.  In recent years the ever-increasing problem of cybercrime has risen to the top of the agenda and this year’s conference was no different.  The irony of the fact that this was the first time the conference had been held in the Far East, a region where many brand holders major headaches were happening right at the very moment they were discussing what could be done to stop the problem.

The situation in Hong Kong, a Special Administrative Region of the People’s Republic of China gave everyone who attended the conference a visualisation of the issue major brands face when trying to expand into one of the world’s fastest growing economies.  In the Pacific Plaza Mall just a few hundred yards from the conference centre, every major luxury brand has a store. In addition, luxury Chinese brands have outlets including one that was selling “fine Chinese artwork”. Inside humidified glass cases with security men strategically placed were statues and ornaments carved out of the finest materials and using gemstones such as Onyx and Jade.  These items ranged in price from a few thousand US dollars to one piece that was priced at $5.1 million.  On the way to the conference centre from the mall you could walk past car showrooms for such brands as Bentley, Rolls Royce and McLaren.  Hong Kong is certainly now a global economic hub.

But just a few streets away from the air conditioned luxury of the gold-plated shopping centres are the markets, which are almost a bigger draw for the visitors to the territory.  The Ladies Market in Kowloon is one of the most visited tourist attractions in Hong Kong, a street with over 100 stalls selling all kinds of products, from goldfish to gold earrings, and of course hundreds of different products from every major brand in the world.

Gone are the days where fakes and forgeries could be easily spotted by the naked eye.  Today you can find a variety of copycat items ranging from items that would take an expert using forensic methods to determine it was counterfeit to those that are almost laughable. You can find the full spectrum within the stalls in the Ladies market, and in most other similar markets, in Hong Kong.  The sellers will of course swear blind they are genuine items and drive a hard bargain, but never has the latin saying of “caveat emptor”, or “let the buyer beware” been so true.  Brand holders rarely have the resources or the energy to take action against these end sellers.  Their efforts should be directed further up the chain, at the distributors and sellers who produce and ship hundreds of thousands of counterfeit goods on a weekly basis.  Cheap raw materials, cheap labour and a rising social requirement for us all to be seen as users of global brands simply fuels the counterfeit fire.

In addition to the problem of counterfeiting, brands now have to fight the good fight on tracing legitimate items being sold in an illegal manner – the grey market.  Factories that are licenced to manufacture goods on behalf of brand holders may “overproduce” items for instance that are moved out of the back door whilst the official shipments are being driven away through the main factory gates.  These unofficial, or grey, products have the same raw materials or components, often made to the same specification as the real thing although may not be branded as such.

One way that many brands can determine counterfeit goods is through the packaging, which may be made of poor materials, contain spelling mistakes or simply look wrong.  However, this too is now subject to a rising number of counterfeit issues.  Many criminals source genuine packaging or authentic security measures such as holograms that they then use for counterfeit items.  Such practices are becoming easier to track through physical detection methods, such as test purchasing items online and tracking the distribution networks used.

Many major brands such as Canon, Lifeproof and Griffin Technology have set up dedicated webpages to help consumers determine whether a product they have bought is a fake (and also giving them a mechanism to report where they bought said products).  In addition, companies such as NetNames provide a suite of brand protection and anti-counterfeiting solutions that not only detect where fake items are being sold but also work with brand holders to enforce the removal of their products from the internet.

The message from the conference came across loud and clear.  Prevention through a brand protection strategy will at least reduce the issue.  The cure, unfortunately, is much more complex, driven by our consumer-appetite for having branded goods at all costs.

Written by Stuart Fuller, Director of Commercial Operations and Communications, NetNames.