Protecting innovation: cracking down on IP crime

June 2020  |  FEATURE  |  INTELLECTUAL PROPERTY

Financier Worldwide Magazine

June 2020 Issue

Intellectual property (IP) is often the most valuable of a company’s assets – making it a natural target for threat actors bent on appropriating the fruits of others’ labours.

By way of definition, an IP crime is committed when someone manufactures, sells or distributes counterfeit or pirated goods, such as such as patents, trademarks, industrial designs or literary and artistic works, for commercial gain.

According to 2019 figures compiled by the Organisation for Economic Co-operation and Development (OECD) and the European Union Intellectual Property Office (EUIPO), fake goods are now worth $509bn, equating to 3 percent of world trade. Furthermore, around 7 percent of European-imported products are now counterfeit (corresponding to €121m per year), with 37 percent of these products posing a danger to consumers. Helping to identify these products are EU-wide RAPEX alerts from member states, which show that 97 percent of recorded counterfeit goods pose a clear health risk.

In the UK, a 2019 joint report by the UK Intellectual Property Office and the OECD revealed that the overall UK market in fake goods is now worth £13.6bn. “Counterfeit goods are 3 percent of all UK imports and the total value of lost sales from products smuggled into the UK is £9.2bn,” says Phil Lewis, director general of the Anti-Counterfeiting Group (ACG). “This equates to £11bn in lost sales, 60,000 job losses and £3.1bn in lost taxes. The overall result is a reduction in UK public revenue of £4bn.”

In the view of IP experts, large-scale counterfeit networks will underpin IP crime in 2020 and beyond, due largely to advances in technology. “Given reverse engineering techniques, faster, quicker and more precise 3D printing and software-driven manufacture, copying has never been easier,” observes Liz Ward, founder and principal at Virtuoso Legal. “The problem lies in detecting counterfeit products and closing down both providers and sellers of such goods. Counterfeit goods are often made by the same manufacturer who makes the genuine ones. Therein lies the dilemma. These goods are often the same as the branded ones but are made available at a lower cost by the manufacturer.”

Unfortunately, in many cases detecting such practices still relies heavily on traditional investigative techniques, such as private investigators and test purchasing. These offline strategies, although important, ideally need to be augmented with sophisticated online tools.

Protecting IP

With IP the lifeblood of many companies, identifying, selecting and implementing an effective means of protecting innovation is essential.

“To help combat this growing form of criminality, companies need to invest in a wide range of technology, such as systems to identify counterfeiting supply chains,” suggests Mr Lewis. “Pedigree systems are used in some industries to record the movement of authentic products from manufacture to sales.”

Technologies, such as data analytics and artificial intelligence (AI), play an increasing role in detecting counterfeiting. “These tools help track down copyright images and text used to sell goods online,” explains Ms Ward. “This means that with the right monitoring, detection is swift and takedown notices can be applied straight away on third-party platforms.

“However, it has also never been easier for counterfeiters to cover their tracks by using domains or platforms that are difficult to trace and outside the usual prosecution jurisdictions,” she continues. “It is also much easier to keep the door closed to infringement, rather than pursue a galloping horse once counterfeit products hit the market.”

Evolving IP threats

With the nature of IP theft becoming ever more sophisticated, developing effective detection and protection strategies remains a priority for companies under threat.

“The key takeaway should be to look at the source of the problem, operate with the right manufacturers and third parties and ensure the security of goods via the supply chain,” suggests Ms Ward. “It is always better to prevent than to find yourself after individual counterfeiters – many of whom can easily slip through the net.”

In Mr Lewis’s view, IP crime is a global issue best tackled through multi-agency and interdisciplinary partnerships. “A true response cannot be accomplished unless we are truly inclusive,” he says. “In short, alongside operational partnerships, businesses enforcement and government agencies need to build and use even wider ranges of information and intelligence to help develop more joint public-private sector planning. It is vitally important that we produce better evidenced and compelling narratives to build more understanding about existing and growing IP threats.”

The impact of COVID-19

In recent times, another threat dynamic has emerged to challenge IP practitioners in the form of coronavirus (COVID-19). “There will be lots of counterfeit and fake goods that spring out of the COVID-19 crisis, concurs Ms Ward. “Where there is demand, there is a crook willing to exploit people with either useless testing kits, which have flooded the market, or poor quality hospital kit.”

In the view of Mr Lewis, at a time when counterfeiters are making COVID-19- related remedies and equipment, protecting IP has never been more important. “Counterfeiters know that people are becoming more interconnected with e-shopping and are stockpiling, while enforcement is being forced to shelve their brand protection services,” he concludes. “It is a sad time when predators have the advantage.”

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BY

Fraser Tennant