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Cyber Counterfeiting: The New Age Challenge

Issued: November 01 2011

The internet has brought about significant change in the way people engage in commerce. While the internet is an incredible tool for promoting and extending brands, it also serves as a potent platform for engaging in a wide range of fraudulent activities including trading in counterfeits, damaging brand equity through disparaging activities, cyber squatting, domain hacking and various related unauthorized and illegal practices.

Counterfeiting has emerged as the foremost problem faced by brand owners, posing serious financial and non-financial consequences for corporations and customers alike. Providing flashy images of products at a heavily discounted price is the most common way counterfeiters are able to attract customers. The sophistication of these counterfeits makes detection of fakes even more problematic, leaving brand owners in a predicament.

Counterfeiting has a threefold effect on any commerce as it affects the trade and industry at large by causing loss of revenue. It affects the brand owners and their brand’s good will as consumers who are deceived into buying fakes condemn the original manufacturer when the products do not deliver. It also affects the consumers who are at the receiving end of this vicious chain.

The counterfeit market thrives on the popularity and reputation of brands on a directly proportional basis, i.e. the more popular a brand is the more it is susceptible to counterfeiting. Leading companies have recognized the threat of counterfeiting vis-à-vis their brand value and have put into action full-fledged anti-counterfeiting policies.

In the sea of counterfeit products, a comprehensive brand protection programme is essential to combat the online sale of counterfeit before they can cause greater harm to a brand. This can be achieved by developing effective strategies for fighting the sale of online fakes. Although counterfeiting affects the whole of the economy, the entity most affected is the brand owner. Broad strategies for countering the counterfeiting challenge are pointed out below:

Recognizing and estimating the problem: It is essential that every brand owner recognizes and accepts the menace of counterfeiting. As the internet offers anonymity and fewer chances of tracking down the source, it is easier for brand owners to turn a blind eye rather than investing large sums in tracking and monitoring the problem. Any company with a well-known, valuable brand should assume that its brand is already being counterfeited. Although it is impossible to assess and calculate the true extent of monetary losses – as well as the loss of goodwill suffered – it is essential that brand owners make an approximate assessment of their revenues lost to counterfeited goods in order to effectively combat counterfeit goods. Understanding the problem will assist in budgeting and planning a proactive and/or offensive strategy.

Regular monitoring and identification: A regular watch must be kept on the internet by all brand owners as different concerns arise for each. It is important for every brand owner to understand the scope and depth of the issue before implementing strategies to curb the problem. Through regular monitoring, brand owners will be able to identify key sectors of counterfeit goods, sites where bogus goods are sold and how these goods are brought into the market. Once these problems have been recognized and large sectors and sellers are identified, brand owners can effectively adopt comprehensive investigative techniques to identify the source and the possible actions that may be initiated against the defaulters.

Collaboration with Government Agencies: Brand owners must unite in the fight against counterfeiting. There are national and international organizations dedicated to combating counterfeiting, and brand owners must actively involve themselves with these organizations as they serve as sources of information and contacts for brand owners and act as mediators between the government and the brand owners while advising the government and lawmaking agencies on new policies for addressing the issue of counterfeiting.

Law enforcement: Counterfeiting increases the costs of brand owners in protecting their IP as they are forced to be involved in costly investigations and litigation when combating counterfeiters. The best way brand owners can reduces their costs is by contacting law enforcement agencies as soon as possible after detection of potential crimes before the menace spreads and it becomes impossible track down the source.

Creating awareness: No one knows a child better than his or her parents. Brand owners should create awareness about their products, including distinguishing elements such as unique holograms, product packaging details, supply chain and distribution network details, and details of duly-authorized vendors of niche and high end luxury products. Awareness should be spread not only to customers and whole sellers but also to public officials, customs and law enforcement agencies. This kind of education is designed to increase the effectiveness of investigative efforts and prosecutions, and to discourage consumers from buying counterfeited and pirated goods.

Due diligence: Brand owners must set up in-house investigation bodies that can perform background inquiries on proposed distributors and suppliers before accepting them into the supply chain. Regular checks should also be carried for wholesalers, distributors and importers as they are susceptible entry points for counterfeit products.

The shift the internet has brought to counterfeiting cannot be disregarded by brand owners. There is a growing need to devise new methods and strategies to curb brand corrosion on the cyberspace. Through premeditated and well-coordinated actions between brand owners and law enforcement agencies, trademark owners can achieve significant progress in protecting their consumers and brands.

Krishna & Saurastri
K.K. Chambers, 1st Floor,
Sir P.T. Marg, Fort,
Mumbai 400 001, India
T: +91 22 2200 6322
F: +91 22 2200 6326

About the Author

Anshu Srivastava is an associate at Krishna & Saurastri. Her practice areas include trademark prosecution, opposition, infringement, passing off and IP licensing. She advises clients on the registrability and registration procedures of trademarks and trademark protection strategies and handles matters pertaining to copyright, domain names, and counterfeiting.


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