Scope of Global Counterfeiting

• Organisation for Economic Cooperation and Development (OECD) concluded in a 2007 study that about 2% of world trade, with a value of about 176 billion (USD), is counterfeit

• This number exceeds the Gross National Product (GNP) of entire economies such as Argentina (173 billion USD), Ireland (167 billion USD), Israel (129 billion USD) and Venezuela (128 billion USD)

• Some authorities argue that counterfeits make up much more than 2% of world trade.

Counterfeit Goods

The spread of counterfeit goods (commonly called "knockoffs") has become global in recent years and the range of goods subject to infringement has increased significantly. Apparel and accessories accounted for over 50 percent of the counterfeit goods seized by U.S Customs and Border Control.

Counterfeit Goods

• According to the study of Counterfeiting Intelligence Bureau (CIB) of the International Chamber of Commerce (ICC), counterfeit goods make up 5 to 7% of World Trade, however these figures cannot be substantiated due to the secretive nature of the industry.

• In November 2009, the OECD concluded that the share of counterfeit and pirated goods in world trade had increased from 1.85% in 2000 to 1.95% in 2007.

• That represents an increase to US$250 billion worldwide.

Counterfeit Seizures

Scope of Global Counterfeiting

• A very high percentage of counterfeit goods originate in China

• Counterfeit products infiltrate legitimate supply chains

• New technologies, including the internet, have given counterfeiters access to new channels of distribution

• Counterfeit products are bought and sold in virtually all economies

Scope of Global Counterfeiting

• Counterfeiters constantly alter their trafficking routes

• Customs authorities are overwhelmed with the scale and scope of counterfeiting

• Free trade zones are used to ‘sanitize’ manifests as to the origin of counterfeit goods

• Free ports are transit points that enable counterfeiters to conceal distribution

Factors Behind Counterfeiting

1. Freer trade – relaxed border controls2. Long distribution chains; parallel trade; trading of

pharmaceuticals by brokers as commodities3. Economic motive – poverty, and looking for “bargain”

products4. Lax enforcement – low prioritization to

counterfeits5. Loose distribution systems outside pharmacies6. New element -- the Internet7. Weak intellectual property protection8. Not recognized as an international threat

Effects on Supply Chain

• Intellectual Property (IP) rights owners require more protection to safeguard their brands.

• Counterfeiting affects distributors, retailers and other suppliers throughout the distribution chain.

• The cost of combating counterfeiting is growing.

Effects on Consumers• Consumers are cheated out of quality products and are exposed to health

and safety risks

• Safety issues are prevalent in many sectors, including: Food and beveragesPharmaceuticals Automotive and machinery Electrical components, including:

• Relays and contacts• Timers, circuit breakers and fuses and• Wiring accessories and batteries

• Substandard items can cause property damage, illness, injury and death

Intellectual Property

Intangible creative work—not necessarily the physical form on which it is stored or delivered.Given legal protection in the form of copyright, patent, trademark, and trade secret laws.Copyrights are granted for a limited, but long, time. Fair-Use Doctrine

– Permission to use the work is not required.– Allows uses of copyrighted material that contribute to the

creation of new work and do not significantly affect sales of the material, thus depriving copyright holders of their income.

– Allows some research and educational uses as well as news reporting and critiquing.

– Guidelines for determining Fair Use are found in law.

Ordinary Items Now Counterfeited

With the market in fake goods expanding, shoppers need to know the warning signs -- not only to avoid wasting money but because such products can carry health and safety risks.

Shoppers in the market for designer handbags know to be wary of the too-cheap-to-be-real "fauxch" -- that is, faux Coach bags -- just as those looking to cut their prescription bills can assume that the emails in their spam box for discount Viagra are, at best, offering sugar pills. But experts say even scam-savvy consumers may unwittingly buy some of the newest counterfeits popping up in unexpected categories.

Perfume

In December 2011, police in Monroe, Ohio, seized more than 500 bottles of fake perfume from local flea markets, with mimicked scents ranging from $85 Chanel bottles down to $40 Beyoncé scents. What's inside a replicated perfume bottle is anybody's guess. At best it is a perfume, but one that smells nothing like a designer scent and may have been watered down. Fakes more often contain chemicals like antifreeze, cleaning solutions or human urine, any of which may cause a rash or other skin problems.

Shampoo

• It's not just pricey salon brands that are at risk for counterfeiting. Labels found at the drugstore have caught fakers' attention, too. Some are little more than water, fragrance and a thickening agent, but anything that suds -- notably, cheap cleaning solutions -- can be substituted for the actual shampoo.

• Late last year, Beijing police seized more than 2,000 boxes of faux shampoo bottles that were contaminated with sulfur, as well as mercury and other heavy metals. That's too harsh for a product that's going on your scalp and possibly dripping near your eyes. (And shoppers can forget about any label-promised moisturizing, volumizing, color-protecting or anti-dandruff effects.)

Honey

Recent tests by Food Safety News found that 75% of store honey isn't really honey. It still comes from bees, but the pollen has been screened out, ostensibly to keep the honey from crystallizing. Food safety experts say this may also be done to hide the honey's origin, says Andrew Schneider of Food Safety News. Many regulators don't consider the food honey if there's no pollen, but there could be more serious problems, too While shoppers might not notice a taste difference, tests found that a third of the faux-honey imports from Asia were tainted with lead and antibiotics.

Toothpaste

The Food and Drug Administration warned consumers about Chinese-made toothpaste in 2007, saying it contained a poison used in antifreeze. That's still a common adulterant, and one that you don't want to put near your mouth, let alone ingest, Halloran says. Other unsafe-for-consumption chemicals may be used, too, either as a way to make the paste white or to create the right consistency, she says. Pastes may also lack fluoride or can be contaminated with bacteria.

Maple Syrup

Vermont's U.S. senators recently announced they would co-sponsor a bill to make it a felony to sell fake maple syrup as the real thing. Violators could face up to five years in prison. Fakes may be made in part, or entirely, from cane sugar rather than the more expensive maple sugar. The big risk here is financial -- a gallon of real maple syrup can run $30 or more.

Baby Formula

That chalky taste may in fact be chalk, which is commonly used as a filler to give the fake product the right consistency. Of course, fake baby formula isn't likely to have the recommended levels of protein and other nutrients, either. Both factors can be problematic: In 2004, more than 60 Chinese infants died after ingesting fake formula. The Food and Drug Administration warns that infants may be intolerant of such ingredients and could "experience serious adverse health consequences."

Sunscreen

• Fake sunscreen can burn people twice -- first at the cash register, then at the beach. Counterfeits often contain chemical additives, but they can also simply be cheap, all-purpose skin lotion, which provides zero UV protection.

• It's easy for a counterfeiter to make something look like cream without containing the expensive ingredients someone is buying it for. (The same warning holds for anti-aging creams and lotions, which are another common counterfeit category.)

Counterfeit Medicines: A Special Case

• For most counterfeit products, the costs to consumers are indirect – I.e., product development

• Not so for medicines – costs are direct and serious – death, disability, resistance to legitimate drugs

• There is a need for far greater awareness of the hazards to health and a far greater political commitment to international cooperation

• Pharmaceutical companies: not only concerned about loss of revenue but also about the damage to patients’ and physicians’ confidence in legitimate products if ineffective or dangerous copies are in circulation

Counterfeit Medicines: A Special Case

World Health Organization A counterfeit medicine is one which is deliberately

and fraudulently mislabeled with respect to identity and/ or source.

Counterfeiting of medicines can apply to both branded and generic products. Generally, counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with in correct quantities of activities ingredients or with fake packaging

Counterfeit Medicines: A Special Case

“Counterfeit” does not include legal generic versions* of patented medicines: local laws dictate this, consistent within international rules.

*There are issues about generics in connection with the problem of substandard medicines

Why are Medicines a Target?

Medicines represent one of the most regulated sectors of industrial activity. Why do they attract counterfeiters?– They are a relation to their bulk and a fake can be made

relatively cheaply– Many countries, especially in the developing world are

without adequate regulation and enforcement– Even in the industrialized countries, the risk of prosecution

and penalties for counterfeiting are inadequate– The way in which medicines reach the consumer is also

different from other goods: the end-user has little knowledge of the product

Pharmaceutical Counterfeiting

• There is no such thing as a “good quality” counterfeit drug

• Developing countries are the worst affected because regulatory structure is weaker; useful generics counterfeited

• Prices vary widely globally, thus counterfeit medical products are often widely (parallel) traded

• Counterfeiting is not just a “brand” issue: i.e., generics are more extensively counterfeited – especially in poor regions