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  Fake Out - Can Brands Stem the Counterfeit Tide?   Fake Out - Can Brands Stem the Counterfeit Tide?  Barry Silverstein  
The Organization for Economic Cooperation and Development estimates that between 2001 and 2007, fake brands doubled in value to about $250 billion. By 2008, the market in the U.S. alone was thought to be about $200 billion annually. In January 2008, the New York Times reported that about 7% of the world’s goods were estimated to be counterfeit.
The Organization for Economic Cooperation and Development estimates that between 2001 and 2007, fake brands doubled in value to about $250 billion. By 2008, the market in the U.S. alone was thought to be about $200 billion annually. In January 2008, the New York Times reported that about 7% of the world’s goods were estimated to be counterfeit.

But that’s just the proverbial tip of the iceberg. In 2010, phony brands were running rampant. Here’s a sampling of the stories we covered:

• In December 2009, fake bags and watches worth $1 million were seized in New York City.

• LVMH, owner of Louis Vuitton, brought a suit against Google, claiming that Google was infringing on its trademark and promoting the sale of counterfeit products by selling brand name search terms. In March 2010, the European court case was decided in favor of Google, although the French Supreme Court didn’t agree.

• In May, Versace won a $20 million suit filed against more than 100 people and 70 retail shops in the U.S. charged with selling fake Versace goods.

• Also in May, Christian Louboutin launched its “Stop Fake Louboutin” website in an effort to expose counterfeiters of its shoes and handbags.

• In June, the European Union gave brands the legal means to pursue e-tailers who are illegally selling a brand’s goods or misrepresenting a brand’s name.

• We reported in October that counterfeit Burberry, Chanel, Gucci, Ralph Lauren Polo, and other branded items are being sold openly in Bukit Bintang, the shopping district of Malaysia’s capital, Kuala Lumpur.

• In November, the U.S. Supreme Court sided with eBay in a case brought by Tiffany against the online auction site, which Tiffany says includes as much as 75 percent phony Tiffany goods in its sales listings.

• Also in November, the U.S. government shut down 82 websites as part of “Operation In Our Sights 2” by U.S. Immigration and Customs Enforcement, a program designed to stop the online sale of counterfeit goods and copyright infringement.

• In December 2010, more than $350,000 worth of phony merchandise was seized in Las Vegas as part of “Operation Fire Sale,” a U.S. program targeting intellectual property crime in major cities.

All of this illicit activity distracts a brand owner from marketing its brand and, more importantly, undermines the brand’s integrity.

One of the notable factors in 2010 was the reality that brand counterfeiting took a deep dive into non-luxury brand territory. Before this year, expensive luxury brands were the ones primarily being knocked off, but 2010 saw a significant rise in mid-range counterfeit goods., a consumer protection service made possible by the National Science Foundation, reported at the end of the year that the number one counterfeited brand was UGG, whose boots sell for under $200.

It’s easy to see the magnitude of the problem. The question is, what can brands really do about it? As demonstrated in some of the cases mentioned above, brands seek to vigorously protect their intellectual property by educating the public and taking legal action against counterfeiters. Clearly, law enforcement agencies can play a key role by conducting sweeps and stings in an effort to get phony products off the street. These actions serve to stop sales of items once they’re already available.

The underlying issue, however, is harder to address: How do you prevent fake goods from being made and sold in the first place? In reality, there is a healthy black market for counterfeit goods; if consumers weren’t buying fakes, the sellers wouldn’t be prospering.

In large part, that black market is being supplied by Chinese manufacturers. In early December, LVMH, a French conglomerate that represents more luxury brands than any other company, filed a complaint with the U.S. International Trade Commission to block U.S. imports from China of Louis Vuitton look-alikes. The company said in the complaint that, “through a systematic copying of Louis Vuitton product lines, bag styles and overall identity,” several Chinese companies are infringing on its trademarks.

It gets worse. “What is really damaging to the U.S. and Europe is technology theft. We’ve seen infringement move from trademark infringement to more complex patent infringement,” said Elliot Papageorgiou, an intellectual property lawyer at Rouse Legal in Shanghai, in an article that appeared on December 8 in The Times, a South African newspaper.

For its part, the Chinese government claims it is interested in combating counterfeiting. According to the article, “Chinese Vice Commerce Minister Jiang Zenwei last week pledged ‘concrete results’ from the latest operation to combat counterfeit goods, a six-month crackdown that began in November and targetss mostly counterfeit books, music, DVDs and software.” Note, however, that luxury brands are visibly absent from that list.

Still, not everyone believes making fakes is such a bad thing. Some data even points to a startling conclusion: that counterfeits are beneficial. A September 2010 study, cleverly titled “Jailhouse Frocks,” was funded by the European Union and appeared in the British Journal of Criminology. It suggested that counterfeit goods may actually promote the brands they’re trying to copy, and that people who buy them “would never pay for the real thing anyway.”

Professor David Wall of England’s University of Durham, co-author of the study, said about counterfeiting that there is evidence “it actually helps the brands, by quickening the fashion cycle and raising brand awareness.” Wall also suggested that law enforcement should focus on counterfeit drugs and other items that could do the public harm instead of fake designer goods. As might be expected, neither British law enforcement nor the brands being counterfeited were in agreement with Wall’s assessment.

So, even as legitimate marketers are hopeful that 2011 will bring more sales of branded items, they know they will have a difficult if not impossible time shutting off the worldwide spigot of phony branded goods. For the present at least, coveted brands are being faked out by their counterfeit counterparts.    



Barry Silverstein has been a frequent brandchannel contributor since 2007. He has thirty years of advertising and marketing experience and is currently a freelance writer and marketing consultant. He founded and ran his own direct marketing agency and held executive positions with Epsilon, a leading database marketing firm and Arnold, a major ad agency. Silverstein is the author of three marketing books, including the McGraw-Hill book, The Breakaway Brand, which he co-authored with Arnold CEO Fran Kelly.

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