Preventing Piracy Payoff

Published: June 30, 2006, By Yolanda Simonsis, Associate Publisher/Editor

Editorial

Just having returned from a whirlwind tour of Italy, I was exposed to counterfeiting everywhere we traveled. A “Rolex” watch here, a “Louis Vuitton” bag there, a “Fendi” this, an “Armani” that. The list was extensive—and disturbing. Worldwide, piracy payoff represents billions of dollars. Preventing it is no easy task, but it’s one from which our industry stands to gain.

While the market for counterfeit goods is tremendous, in a special report, AWA Alexander Watson Assoc. says, “Passage of the Stop Counterfeiting in Manufactured Goods Act…is proof of the [US’s] strong commitment to beating the counterfeiters.”

Just how committed a pro-business, Republican-dominated legislature is to passing the Act remains to be seen. It’s a delicate balance. It may mean putting the brakes on questionable business practices. For example, Reuters reported Fendi is suing “Wal-Mart over sales of fake handbags.” Charges allege Wal-Mart is “selling counterfeit handbags and passing them off as genuine at its Sam’s Club warehouse stores.”

One could assume, should the Act pass and be enforced, it will result in higher prices. How will the consumer—who ultimately decides what merchandise will be purchased—respond?

One reason Wal-Mart may be so successful is because consumers have decided what price they will pay. Kathleen Parker reviews a book by Charles Fishman, The Wal-Mart Effect, posted on townhall.com, which she titles “Attention, Wal-Mart shoppers: Let your conscience be your guide.” Parker says “the Wal-Mart effect first changes our expectations, then changes the quality of merchandise, which is cheap, because it isn’t always well or ethically made.”

Parker questions whether ethics even matter. “Wal-Mart listens to ‘voters.’ If shoppers say they won’t buy…until Wal-Mart insists on higher standards from suppliers, then Wal-Mart will make those demands. Incentive is the engine that drives the company that promises low prices—‘always.’”

When it comes to the manufacturing origin of some counterfeit products, another perspective was offered at China Pack, an Intertech Pira conference held last May in Chicago. Speaker Catherine Sun, Esq., intimated that in Chinese culture, stealing an intellectual creation isn’t a “big deal.” In fact, unless intellectual property (IP), including register rights, patents, trademarks, and copyrights, are registered (in Chinese and English) within China, there is little to protect IP owners should they choose to bring suit in federal court for infringement.

Another China Pack speaker, Jasemine Choy Chambers of the US Patent & Trademark Office, Office of International Relations, awed attendees with some recent statistics: In 2004 trademark infringement and counterfeiting cases numbered 51,851, with 5,494 cases involving foreign right holders at an average fine of $620 per case. Of these, 96 cases were referred for criminal prosecution. As for copyright infringement, there were 9,691 cases with 158 involving a foreign right holder. Of these, 102 cases were referred for criminal prosecution.

Still more statistics indicated Chinese courts handled a total of 11,468 IP-related civil cases in 2005 (January–November). Copyright cases totaled 5,240; patent cases totaled 2,491; and trademark cases totaled 1,482.

There is no question brand security and authentication are increasingly at risk worldwide. Effectiveness of addressing piracy and counterfeiting issues will require a multilevel approach if there is to be any success.

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