Counterfeit goods are rampant within our world economy, with the total value of fake goods standing at $509bn in 2016. At first glance, there seems to be nothing wrong with buying a £50 Rolex, or £70 Louis Vuitton handbag; however, looking a bit deeper, the problems become immediately obvious. According to a 2016 OECD report, there were £13.6bn worth of counterfeit goods imported into the UK, costing 60,000 jobs and almost £3bn in taxes. Outside of the obvious economic damage illicit goods cause, there are also health and safety problems resulting from substandard goods, and the worry of who profits from such illegal activities. The question is therefore, since we know about it, why can we not stop it?
Making replicas of branded products constitute an act of trade mark infringement under s.10 of the Trade Marks Act 1994. Trade mark infringement occurs when the vendor has, without permission, used:
An identical design for identical products as the trademark owner; or
An identical or similar design for products similar to those of the trademark owner, where there is a likelihood of confusion, including association, in using the similar design; or
An identical or similar design even for dissimilar products of the trademark owner where the trademark has reputation and the vendor’s use without due cause is detrimental to the trademark
The vendor’s act of infringement has to be during the course of trade and does not always have to be physical – for example promotional content claiming another’s trademark is still infringement. Infringing acts include:
Affixing the sign to goods or packaging
Offering goods for sale or supplying services under the design
Importing or exporting goods under the design
Using the design on promotional material
Like patents, you must register your trademark and once you have done so, it lasts 10 years. Curiously, this system is very different to the one in the United States, where the trademark does not last for an arbitrary amount of years, but instead until the owner stops using it. The punishment for infringing on another’s trademark can range up to 10 years in jail; however, there is one large flaw – many of these vendors have never and will never come to the UK.
As of the same OECD report I previously mentioned, China is the top producer of fake goods, with Chinese goods accounting for 63.2% of customs seizures between 2011-2013. To put this number into perspective, the next five largest producers of fake goods, Turkey, Singapore, Thailand, India and Morocco respectively, account for just 8.6% of seizures. Due to the nature of counterfeit goods, foreign prosecution will be exceedingly difficult and in China it will be impossible: since 2000, China does not extradite its own nationals. Thereby, the British government would have to rely on China to spend extra resources chasing a problem that it does not suffer from at the behest of another country – something that any nation would be loath to do. Even if the vendor is not in China, prosecution does not get much easier. The rise of online shopping and wide availability of cheap labour has lowered the barriers to entry for any ambitious counterfeiters – anybody can become a seller on global marketplaces such as Amazon or eBay. Although Amazon has proven that it will mass ban sellers, something that it has most recently done following Coronavirus-related price gouging, there is no major barrier preventing guilty vendors from setting up another account and continuing their trade. Numbers, addresses and names will all be faked in the name of illegal profit. If Amazon or eBay wishes to shut down one seller, another two will come in its place, eager to pick up the profit that the previous one left behind. Due to the sophistication of vendors and visual quality of lots of replicas, many bona fide consumers will part with their money on the belief that the product they are getting has such a fair price due to a “competitively priced wholesale agreement” or a “supply overflow from the factory”. As a result of online marketplaces’ desire for profits, they will forego rigorous ID processes under the pretence of having a streamlined process to become a seller, or another equally plausible but damaging reason.
As supply chains are relatively difficult to disrupt, the attention then turns to the import market – if production cannot be stopped, surely their introduction into new markets can. Seizures, day raids and other anti-counterfeit procedures are already in effect. The official positions on these issues are not in any doubt – the National Fraud Intelligence Bureau is, as expected, strongly against counterfeit goods. They urge people that their desire for a cheap, knock-off item truly does have a negative effect. They claim that counterfeit goods:
Fund organised crime
Contribute to job losses through genuine manufacturers being unable to compete on prices
Deprive genuine manufacturers of profit
Although criminology professor David Wall disputes their first claim, he is certainly not in favour of counterfeit goods, acknowledging lost tax revenue and awful labour conditions as some of the reasons. It is this attitude that encourages raids and seizures of warehouses. In 2018, $2 million worth of fake Nikes were seized in New York following a 3-month investigation by the U.S. Customs and Border Protection. Another example of a large seizure was when 7000 Rolex watches and the parts for 1 million more, were seized in Philadelphia. The defendant, Binh Cam Tran, was ordered to pay $2.2 million in compensation to Rolex and the seized watches were publicly steamrolled to display the law enforcement’s commitment to protecting American intellectual property rights. Despite the spectacle and sentiment of the public execution of the seized watches, there is little progress made. Rolex and Nike will have both enjoyed a fantastic publicity campaign as a result of the seizures; however, the seizure of their goods does not represent the true picture. Where $2 million of counterfeit goods will be seized, $200 million more will be missed. Where 7000 watches will be steamrolled, another 7000 may have just been bought.
Ultimately, the size of the issue is at a point where there is no single solution for preventing counterfeit goods being sold and the public sentiment of apathy towards such an issue certainly does not help. Despite this, there are some ways to tackle the problem, with the most notable being the introduction of legislation. Although being completely legal to buy in the UK, the purchase of counterfeit goods in France can lead to a pretty hefty €300,000 fine and jail time of up to three years; ten if you are part of an organised group. In 2012, over 10,000 posters were distributed by the French National Anti-Counterfeiting Committee with the rather humorous slogan of “Buy a fake Cartier, get a genuine criminal record”. Similar impositions, although less stringent, exist across Europe – from the Republic of Ireland all the way to Cyprus. Despite the Sisyphean task that preventing the importation and purchase of counterfeit goods seems to be, legislation such as the one in France is certainly a step in the right direction in preventing this $509bn global problem.
Max is a first-year Warwick Law Student from London. He wished to write for The Legal Side in order to dispel the common misconceptions people have of a law degree whilst also producing articles on legal topics he finds interesting, namely intellectual property and data protection. His main hobbies include cooking and fitness.
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