Every year the International Trademark Association convene for their annual meeting. This year’s conference was held for the first time in Hong Kong with over 8,500 trademark and patent attorneys, brand holders and intellectual property advisors gathering to talk about the global trends and more importantly, how to deal with the increasing threat of intellectual property infringements. Brand damage is a worldwide issue, affecting every geographical region, every market sector and the vast majority of businesses, ranging from the start-up to the established global multi-national. The fact that this was one of the most attended INTA conferences in their history underlines that the problem of IP infringement is getting worse every year.
The pace of technological development has opened up brand new global markets for even the smallest company. The Internet offers opportunities that businesses even ten years ago could have only dreamed of. An online shop window that is open 24 x 7 and thanks to our thirst for Social Media, a marketing tool that costs virtually nothing to advertise to the four corners of the world. However, it also acts as a platform for those bad actors who are intent on infringing on existing brands both in terms of reputation all damage but more worryingly, criminal activity.
Whilst a number of sessions at the conference focused on the expanding threat landscape for brand holders, the question many attendees were asking were related to what practical steps a business could take to mitigate the risks that intellectual property infringement and brand abuse has on their customers, their website traffic and ultimately their profits.
The agenda of the INTA meetings has changed more in recent years due to the impact the Internet has had on global business. The conference in Hong Kong, the 135th annual meeting since the organisation was formed in New York City in 1878 by a group of 17 tradesmen and merchants, has always focused on the problem of counterfeiting. Back in the nineteenth century it was stock and currency. Today the threat is more menacing. In recent years the ever-increasing problem of cybercrime has risen to the top of the agenda and in Hong Kong, a province that has its fair share of counterfeit hotspots, infringements was the hot topic. The irony this year was this was the first time the conference had been held in the Far East, a region where many brand holders were suffering major headaches in terms of IP infringements.
As the patent attorneys, IP lawyers and Brand Protection specialists were discussing the issues in air conditioned luxury at the Conference Center, a few miles away the world famous markets were selling all shapes and sizes of major global branded goods for a fraction of their true cost. 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. In 2012 Hong Kong was responsible for 12% of the total counterfeit goods seized in the world by authorities! Second only to China.
Gone are the days where fakes and forgeries could be easily spotted by the naked eye due to design faults such as spelling mistakes (anyone interested in a Tag Huer watch or a Chelsea football shirt?). In addition, buying online has the additional risk of not seeing, feeling, smelling, hearing or tasting a product. It is often impossible to determine whether an item is counterfeit online, especially if misleading pictures are used. Counterfeit detection usually takes the form of the four P's. Price, packaging, place and of course product. However, more often than not you need the physical product to determine its legitimacy or not.
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 could find the full spectrum within the stalls in the Ladies market, and in most other similar markets, in Hong Kong, right under the noses of the brand holders. 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 small, localised sellers. Their efforts need to 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 both online and offline.
Brand holders also now have to fight the good fight on tracing legitimate items being sold in an illegal manner – the grey market. Online markets, such as Alibaba and TaoBao offer bulk purchasing for a number of goods. The majority of these will be supplied by genuine sellers who are helping to fuel the fastest growing economy in the world. But some sellers, and unfortunately this number is growing by the month, offer goods that are either counterfeit (black market) or being sold through unlicensed sales channels (grey market). Factories that are licensed 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.
The days when counterfeits could be easily spotted from its poor packaging and spelling mistakes is slowly disappearing. 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 but that still doesn't stop the goods being offered for sale online.
Whilst the value of seized counterfeit goods continues to rise ($1.26 billion in 2012 ), the sheer number of websites being identified and taken down has actually fallen as many rogue traders ignore enforcement notices or simply replicate content across a huge number of websites to mitigate against the risk that one site will be taken down.
Many major brands are now taking a different approach to brand abuse. By educating their consumers on counterfeit goods and the dangers they bring, they are hoping to increase the intrinsic value these brand ambassadors can deliver. In the US, electronic consumable brands including Canon, Lifeproof and Griffin Technology have set up dedicated webpages to help customers determine whether a product they have bought is a fake (and also giving them a mechanism to report where they bought said products). The market they operate is one of the most infringed, second only to pharmaceutical infringements, estimated globally to cost brand holders over $169 billion per annum.
Organisations such as NetNames have been working with brands for a number of years, providing a range of brand protection and anti-counterfeiting solutions that not only detect where fake items are being sold online but also work with brand holders to enforce the removal of their products from the internet.
The messages from the conference were clear. A brand protection strategy is more important than ever for organisation that 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. One thing is for sure, the issue of online brand infringements will be top of the agenda when the audience reconvenes in Seattle in May 2015 for the 138th annual meeting.
Written by Stuart Fuller, Director of Commercial Operations and Communications, NetNames.