'Tis the season to beware fake goods

How big a problem is the counterfeit goods market?

It’s an ever-increasing problem. It is estimated over £1.3 billion is lost in profits and taxes through counterfeiting every year. However, there have been great strides to try and combat counterfeiting in UK. The Police Intellectual Property Crime Unit (PIPCU funded by the UK Intellectual Property Office) was established in 2013 and specialises in IP related law enforcement and NCA (National Crime Agency) has a dedicated department dealing with IP crime. PIPCU is a department of the City of London Police, and is based close to our London office, which is also in the City of London.

To what extent do fraudsters use online marketplaces like eBay, Amazon, etc?

Some online sites are a huge source of counterfeit goods entering the UK marketplace. Many of the counterfeits originate from China and are exported to UK where one of the easiest ways to sell is online. The ability to remain anonymous and reach a global custom base make these markets places very attractive indeed for criminals.

How do the scams work?

Sales online don’t allow the customer to actually physically touch the product. The pictures on these sites often don’t represent the product being sold. Often ‘genuine product receipts’ are provided with the product delivered but these are in themselves fake. Even a seller who has imported counterfeit goods may not be aware that they are infringing third party rights or that their activity is a criminal offence. Some online sites may sell both original products as well as counterfeits in an attempt to look more legitimate.

What is the impact on the brands involved?

Often the quality of the goods is poor. This will have a detrimental effect on the brand reputation with purchasers refraining from buying the product again. Often the purchase price is much cheaper which affects purchasers’ perception of the value of a brand.

What is the impact on the reputation of the retailer?

The sale of counterfeit goods leads to a loss of sales and damage to a business. Even if the quality is OK the counterfeits takes unfair advantage of the brand riding on the hard earnt reputation built up by the owner. The Counterfeit products dilute the owner’s goodwill in its brand. Such goods in the health and safety industries can have devastating consequences leading to an immediate reduction in reputation even if subsequently the goods are shown to be fake.

Who is accountable?

Everyone involved from the manufacturer of the counterfeit product to the importer and/or exporter, anyone storing such goods, the distributor and finally the seller. Unfortunately often the purchaser knows they are buying a fake product so finally the purchaser may be accountable as well.

What is the law covering this area and is it sufficient or employed correctly?

Trade Mark law (Trade Marks Act 1994). This allows owners to register trade marks. Such registered rights help PIPCU and the NCA, as well as the courts, to take quicker and more cost effective action against infringers. Copyright, Designs and Patents law (Copyright, Designs and Patents Act 1988). Patent and design rights are enforced in the same way as trade marks. Copyright is an automatic right in original works and is useful in combating fake DVDs and CDs in the film and music industry and copying of computer software.

What measures are in place to combat this kind of fraud?

Owning Intellectual Property rights is essential, whether that is a patent, a trade mark or a design. Wynne-Jones IP has a long tradition of helping companies protect their IP rights. These rights all help the courts allow enforcement by the owners against infringers. The rights are also essential when requesting Amazon and eBay to close sites selling infringing products. Often without such registered rights Amazon and eBay will refuse to take any action. Rights are also used by Customs and Excise in controlling the boarders.

Are the sites doing enough to protect consumers and brands?

If one is able to produce documentation of registered intellectual property most online marketplaces will act to prevent infringement. Without registered rights the sites are reluctant to act and often refuse to as they claim not to have the resource to check all products being sold. It is up to the rights holder to advise of fake goods being sold.

What more, if anything, can be done?

UK authorities can continue to liaise with foreign law enforcement agencies to try and prevent fake goods being manufactured and/or exported. Wynne-Jones IP offers a registration service allowing recordal of registered IP rights with UK Customs and Excise to help them identify potential counterfeits. This service extends to EU and China Customs bodies helping prevent exports to UK Trading Standards are also active in removing fakes from the marketplace. However, they are very busy and it is often difficult to obtain their help without obvious and serious offence being established. The onus is still with rights holders to inform the relevant agencies and or website owners of details of its rights for the necessary actions to be taken. 

What should consumers who want to avoid fake products look out for?

Price, packaging, quality and where the goods are on sale. Unofficial sites are always a good indication. As are online auction sites. But eBay and Amazon are still main targets for counterfeiters as if one site gets closed down another can be set up shortly after.

What should brands do if they spot fakes online?

In order to facilitate the interception of counterfeit goods at the point of entry, UK customs operates a so-called Application for Action (“AFA”) system that allows IP rights holders to register rights with UK customs.  This system is intended to help customs authorities identify and seize counterfeits.  Currently an AFA can be filed in the UK and take effect throughout the EU.  After Brexit, separate AFAs will be needed in the EU and the UK.  Wynne-Jones IP will be able to do this through our European IP firm, AIPEX.  Customs registration is an important part in the armoury against counterfeiters, but it is worth remembering that customs officers are very busy and it is often difficult to get their help unless it can be established that an obvious and serious offence has been committed. The onus is still with rights holders to inform the relevant agencies and or website owners of details of its rights for the necessary actions to be taken.