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Fighting Fakes

The theft of intellectual property is an ongoing theme within the industry – however, it is certainly not a problem that one is powerless against. Many industry players undertake great efforts to protect their ideas and products against copies and fakes – and sensitise the market.

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According to the European Commission, the authorities detained 35.5 mil. individual items of fake or counterfeit goods in 2014. The confiscated items had an overall total value of over 617 mil. Euros. According to the estimates of the International Anti-Counterfeiting Coalition (IACC), the trade with counterfeit products and fakes (please see the information box for the definitions thereof) makes up a share of between 5% and 7% of the world trade and around 2.5 million jobs are lost every year due to product and brand piracy. There is hardly an industry that is not affected by product piracy – everything that can be sold lucratively is copied. Since only an extremely small amount of the illegal products are confiscated and taken off the market at the border controls, numerous counterfeits and fakes find their way onto the market. For example, recently at the consumer goods fair, Ambiente, where 20 employees of the German Customs Office were busy at work for two days, 197 suspected counterfeits were confiscated. “There is no specific season or frequency for copies, in fact, there is only one rule with the counterfeits: when a product starts to become popular, copies to under-cost it start blossoming everywhere,” explained Laurent Olivier, President of the French USB specialists, Pixika. “The more popular a product is, the more rapidly and numerously the copies arise.” There are many attractions for the plagiarists: It is relatively simple to sell illegal products via the online trade and the profit margins are in some cases higher than those that ensue from the drugs business – which is among others due to the fact that the product pirates save many of the costs that the brand companies or quite generally the original manufacturers are faced with.

High damages

The koziol bag Taschelino: The original (l) and a copy.

The koziol bag
Taschelino: The
original (l) and a copy.

Market success, especially at international level involves a significant investment up front. “We invest high sums in product development, production, marketing and of course in design protection – ultimately all of these investments involve a high risk for new products, after all it is not certain whether a product is going to be a market success. A counterfeiter exclusively invests in the production costs and these are, of course, much less expensive in comparison to all of the investments that we have to make as German manufacturers,” stated koziol’s CEO, Stephan Koziol. The damage suffered by the companies that have been copied on the other hand is enormous. “Year after year, we suffer damages of between 10 and 15 million Euros as a result of product piracy,” estimated Koziol. “At least ten of our products are copied every year. The first fakes of particularly successful items frequently appear after just a few months, in other cases it sometimes takes years – we are in any case definitely watched very closely and the product pirates permanently have their sights set on us.“ One example particularly highlights how brazen the approach of the plagiarists is: “We know of one case where a company presented our original products at a trade show after having filed the logo off,” reported Koziol. “After he had collected enough orders at the show in order to finance having the items produced cheaply, he had a mould built.“

The German brand manufacturer reisenthel has also been fighting against counterfeiters, who particularly target the successful reisenthel product, the carrybag. Countless fakes of the shopping basket are confiscated by customs every year. “There have been hundreds of fakes since the carrybag was launched in the year 2003, which are predominantly found in retail outlets and online,” explained the founder and owner, Peter Reisenthel. “The resulting damage amounts to millions. As a comparison: Depending on the design, our carrybag costs 40 Euros on average. The average price for a fake is 13 Euros.“ “Plagiarists not only make money out of our intellectual property, but also damage our image,” added Koziol. “Real fakes – i.e. copies that bear a koziol logo – are indeed rare, but even counterfeits damage one’s reputation as a highquality manufacturer.“ This also applies for promotional products manufacturers and importers that are not wellknown retail brands, but who instead primarily sell their products on the B2B market – such as for example the Swiss writing instrument brand, Prodir. “The major damages caused are reputational and image damages,” stated Sales Coordinator, Rossana Porotti. “If an end user buys a product and thinks it is a Prodir product and he receives a copy of low quality – and normally all copies of our products are not high-quality copies – he won’t speak well about that product.” The more time, energy and creativity the industry invests into the field of product development in order to strengthen the company’s image and distinguish it from its fellow competitors, the higher the number copies of self-reproduced items that appear in the catalogues of their rivals all of a sudden. “We are the official distributor of the French memory device company called Lacie. They created one of the most innovative Flash drives on the market: a key-shaped design,” reported Olivier. “Almost all promotional product suppliers have offered an exact copy of this model in their range.” “We systematically take legal action against violations of our industrial property rights, whereby the number of unrecorded cases is presumably still very high,” reported Günter Schmidt, Sales Director and authorised representative at Fare, the umbrella specialists. “It is difficult to put an exact figure on the amount of damage. In this connection one also has to take into consideration the fact that we lose orders if we have produced samples of a product, which is subsequently copied in the Far East.“

Industrial property rights

On the left, the Victorinox Rescue Tool, on the right a fake.

On the left, the
Victorinox Rescue Tool,
on the right a fake.

The first measure taken against the theft of intellectual property is to obtain comprehensive legal protection (see box on the most important protection rights). “As soon as we have developed our own design, we have it protected. This occurs for almost every new product and all of its components that are worth protecting such as the handles, for example. Product development involves a considerable financial investment,” explained Schmidt. Protection rights can be applied for and registered with the respective office on both a national and international level (see box). Olivier: “We register the designs in Europe, China, Hong Kong and the US, but it is very costly to maintain and difficult to enforce. As a matter of fact, we spend more on intellectual property protection than on research and development.” Of course, trademarks, registered designs and patents don’t automatically provide protection against counterfeiters – especially since they are often very devious, as Porotti explained: “Nowadays copycats do not copy the product 1:1 as they did in the past, but manufacture products that are 95% similar to the original instead. These differences often make it impossible to win legal proceedings, even if we protect our products with patents at least in the major countries. In some cases there is nothing we can do to avoid a copy being on the market.” It becomes even more difficult when the copiers are based in the Far East, where the lion’s majority of the copies and fakes are still produced. “China is still far away from Europe, especially in terms of culture and marketing practice,” noted Olivier. “Most copies appear after European companies distribute product pictures or samples in Asia for their sourcing purpose. Producers in China very rapidly pick up on trends when they see rising interest, i.e. from the number or seriousness of the inquiries they receive.” Importers are recommended to legally protect the products in Chinese as well, even if the chances of winning court proceedings in China are rather slim.

“You need to dedicate a lot of time, use local lawyers and you can’t expect to stop the piracy, just try to limit it,” said Olivier. “We try to focus on the easiest of the counterfeit cases we identify and sue the company to serve as an example to others, since a lot of manufacturers and traders operate in networks. This is the best way to limit counterfeiting.” In this respect, the importers shouldn’t bank on receiving much support from the Chinese legislation, as Olivier elaborated: “The Chinese governmental bodies and judiciary system don’t undertake much effort when it comes down to protecting the intellectual property of foreign companies. On the contrary, we find it extremely frustrating that the EC bodies in charge are so easily lured by the official line of conducts and laws put forward by the Chinese authorities on subjects related to intellectual property. In real life, we have experienced that there is very little chance of obtaining a positive ruling, even when it is a very strong case.”

Contracting parties in the EU

The legal possibilities become effective at the latest as soon as a product has crossed the EU borders. “We take massive measures against fakes,” reported Reisenthel. “A specialised law office commissioned by us does random checks at trade fairs, in shops and carries out extensive internet research. Our sales representatives are also sensitised on the theme and report fakes straight away. Furthermore, we take advantage of the opportunity to have fakes directly confiscated at the border by the customs.“ One thing should always be kept in mind: Although most of the fakes are produced in the Far East, the contracting parties are frequently located in Europe. The production markets are widely accessible, it is no longer an asset for the importers to know the producers. The distributors and industry customers also know sources where they can have products copied. The price pressure that is applied by the industry customers further aggravates the situation. Schmidt: “It is order of the day that in the case of bids for tender our brand product is shown with the additional comment ‘or a comparable product’. This doesn’t automatically mean that the user is animating companies to copy products, but often enough that is precisely what happens: Our product is copied, directly imported and offered at a cheaper price. We have in the past already discussed projects with distributors and industry customers in detail which were subsequently copied.” “The legal framework conditions vary from country to country,” commented Koziol. “Whereas for instance in France or Belgium it is very easy to take legal action against counterfeiters, in some cases here in Germany we have to take it to the highest authority. However, one must also add that we frequently come to outof- court settlements – both in the retail and B2B segments.” Schmidt confirmed: “If we discover that there has been a violation of the copyright of Fare products, we usually react by taking legal steps. Often the matter is settled out of court. The first step is a hearing – in other words a lawyer requests a statement from the violating party. Here, our lawyer contacts the individual that has distributed the product. This is frequently the end customer. In most cases, the latter is not aware that he has unlawfully distributed a counterfeit product. In such cases, a cease-and-desist declaration is signed. Depending on the individual case in question, an amount of compensation is agreed upon and a settlement is reached.”

koziol targets plagiarists in an amusing way with a mobile exhibition.

koziol targets plagiarists in an amusing way with a mobile exhibition.

Sensitising the market

Everyday practice shows that in many cases, a lot of trouble, costs and effort on both sides can be avoided if all of the market participants were better informed about the legal situation and the theme of “intellectual property”. This is why not only koziol is certain that “Sensitisation and explanations are more important than criminal prosecution.” For this reason, the company came up with the idea of an attention-grabbing, mobile exhibition that shows the original and fake in direct comparison (see box). Koziol: “There is a need for more explanation. We use our exhibition to inform people about product piracy for example at trade shows and underline that we are the original and as such are the ones, who make the investments.” Reisenthel: “We actively support the Plagiarius initiative to inform the public about the theme of fake products. The more the theme is addressed, the better.” The Plagiarius initiative that was founded in 1977 by the German designer, Rido Busse, has been fighting against the theft of intellectual property for many years. The most important tool here is the annually conferred and internationally well-known negative prize, the Plagiarius, which is “awarded” to particularly brazen imitators. The trophy and trademark of the “distinction” is a black dwarf with a golden nose, which symbolises the profits made with fake products. The aggrieved parties, who have nominated copies or fakes for the Plagiarius, regularly include well-known companies from the promotional products industry – like koziol. And, of course, many “awards” go to companies from the Far East, where they don’t interest anyone, or where they are misunderstood. For example, a few years ago a manufacturer from Taiwan proudly hung up the Plagiarius certificate on the wall of his offices.

Still, first and foremost it is the European importers and distributors, who have to start rethinking the whole matter. The market has already become much more sensitive over the past years, as Porotti reported: “We can certainly say that our distributors are sensitive to this problem and our major partners even help us by keeping their eyes open on the market. It must be said, however, that the situation depends from country to country.” “High-quality manufacturers have to continue clearly communicating the features that their products display,” maintained Schmidt. “We are a BSCI member, the large majority of our umbrellas are TÜV-certified. Many of them are equipped with real DuPont® Teflon and with frames made of 100% fibreglass and are thus 100% windproof – all of these are advantages that fakes or counterfeiters rarely offer. Design prizes underline the difference. For us it is important that the buyers or decision-makers place high value on the observance of the requested features and insist upon these when the product is manufactured. In this case the counterfeiters’ chances of success are significantly reduced and the customer actually receives the originally desired quality.” Companies that have to withdraw a fake from their line-up have to bear high costs – and inferior quality is not only bad for the image, but can indeed also be dangerous. However, those who buy an original, purchase a high-quality product that was produced under controlled conditions and which satisfies strict safety requirements. If one calculates all of these factors, the original is ultimately much cheaper than an allegedly cheap copy – and on top of that one has a clean conscious too.

Definitions and intellectual property rights

A counterfeit good is an unauthorised imitation of a branded good. Piracy consists of making an unauthorised exact copy – not a simple imitation – of an item covered by an intellectual property right. Trademarks are marks that serve to differentiate the goods or services of one company from those of other companies. In addition to the words trademarks and picture trademarks, there is the possibility of also registering sound trademarks, colour trademarks, three-dimensional trademarks and odour trademarks. A design patent protects the outward form, the aesthetically effective design of patterns and models. In this case, it is irrelevant whether the design is two-dimensional (a pattern) or three-dimensional (a model). An EU design patent is applied for from the EUIPO (European Union Intellectual Property Office, formerly Harmonization Office) in Alicante. Patents protect technical inventions and processes. An invention is thus something intellectual, a technical idea, which the inventor has presented in an object or using a process. An invention should be reported to the respective national office as well as to the European Patent Office (EPO). In many countries there is also a utility model, a “small patent”, with a shorter term and less stringent patentability requirements. Works of literature, science or art enjoy copyright protection. However, this does not only include the pieces generally understood by the general public to be subject to copyright – such as books, music or films – but also, for instance, an advertising graphic or a particularly unique piece of furniture, as well as computer programs.

Competition Law

Competition law does not protect any individual interests, but instead the fairness of competition. Competition law disputes can be based, for instance, on deception in price specifications, the exaggerated luring of customers, product imitation, comparative advertising or exploitation of another´s reputation.

(sources: Plagiarius initiative, EC, EUIPO)

photos: Plagiarius campaign;  koziol

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2016-12-19T10:43:44+00:00 April 20th, 2016|