Tackling Counterfeit Goods in the Fashion Industry
With a network of IP specialists with specific expertise in anti-counterfeiting, global IP firm, Marks & Clerk responds to the growing counterfeit goods trade, which is costing the UK billions.
Partner John Ferdinand and trainee trade mark attorney Abigail Dews share their thoughts on the increasing scope, magnitude and sophistication of the counterfeit goods trade, particularly in the fashion industry.
Coronavirus and counterfeit goods: impact and lessons for fashion brand owners
John Ferdinand (pictured right) said “The imposition of “lockdown” measures and restriction on opening and use of traditional retail outlets has seen a significant rise in not only online shopping, but also online counterfeit activity. Whilst this has been an issue for some time, the ‘new normal’ of shopping behaviour is likely to be seen as an ever-increasing threat to some fashion brand owners. Through an increase in online sales, their brands risk exposure to more counterfeit goods.
“Research conducted by the Anti-Counterfeiting Group (ACG) published in April 2020 shows that online counterfeiting activity has already increased – figures from 2018 and 2019 show that 24 per cent and 31 per cent of online consumers in these years respectively had made online purchases of counterfeit products.
“This gives a sense of the size of the problem which looks likely only to grow. A recent study by the web-based publisher Redpoints, surveying 1,000 consumers in the US in March, indicated that 58 per cent of consumers were already buying more online than usual, and that trend would only increase as 73 per cent of those surveyed indicated their online shopping would grow even more if the outbreak continues.
“Whilst there have been many reports of bogus sales online of fake or non-existent Covid:19 testing kits, face-masks and hand sanitiser products, the pandemic has also already seen reported growth of counterfeit fashion goods sales, with fraudsters seizing the opportunity to profit from the increased focus on online sales. These opportunities were further enhanced by the pre-lockdown craze of stockpiling, generating increased demand for a range of products.”
Challenges for brand owners tackling online counterfeit goods sales
John explains: “There are several challenges for brand owners in trying to address this form of counterfeit activity. Firstly, partly due to restrictions on holding personal data through GDPR regulations, online sellers are able to operate with a larger degree of anonymity than physical retailers so it is often harder to tell who you’re dealing with.
“Secondly, it is much harder for a consumer to tell if products sold online are genuine or not since photographs and product descriptions used in posts do not always reflect reality. Finally, given the greater reliance on online shopping during the Covid-19 pandemic there is an increase in consumers making online purchases they would not normally make. As such there is potentially greater susceptibility to scams and unintended purchases of counterfeit products.
“As a result, and aside from the need for more consumer awareness around this issue, , there is a requirement for brand owners and those in the online marketplace sector to monitor activity in this area more closely.”
Abigail Dews, Trainee Trade Mark Attorney, goes on to describe steps being taken by the industry and brand owners.
Abigail said “Amazon has in the last few years implemented a “brand registry” to help reduce counterfeiting activity and it recently announced the creation of a new global counterfeit crimes unit to help find and pursue those who attempt to sell fake goods on their platform.
“The group will comprise former prosecutors and investigators who will work alongside Amazon’s existing online complaints team to help tackle the rise in counterfeiting. As many brand owners will be aware, Amazon has a longstanding online take down procedure in place to report infringing listings on their platform. However, such listings often reappear at a later date under a different username/seller details. Amazon’s new counterfeit crime unit focuses on investigating the issue in more detail in the hope of identifying those responsible.
“Raising awareness is another way to help prevent the sale of counterfeit products and highlight to consumers the type of fraudulent behaviour to be mindful of when shopping online. The US Patent and Trade Mark Office recently launched a campaign with the National Crime Prevention Council to raise public awareness about the importance of intellectual property and to decrease demand for counterfeit goods in the United States. This coupled with greater investments in authentication and verification technologies may help consumers to identify and report fake listings found on a variety of online platforms. Brand owners can also play a direct role in this by educating customers and raising awareness of such issues.
“The shift to an online retail model does raise challenges from an anti-counterfeiting perspective, particularly when brand owners rely on general online marketplace platforms to access customers. Just recently, TM Lewin announced the closure of its UK stores with plans to focus solely on online sales going forwards. It is possible that, post pandemic, other retailers may follow suit and restructure their business models due to economic reasons as well as a shift in consumer purchasing habits.
“As a way of maintaining more control of access to their products, brand owners may seek to remove their products from online platforms in an attempt to reduce fraudulent behaviour and easily distinguish fake listings. Nike announced last year that it was removing the sale of its products from Amazon’s platform. However, brands will still need to remain vigilant on online retail platforms to guard against sale of fakes – this in itself will not prevent the sale and manufacture of counterfeit products and smaller brands may struggle to operate alone outside of the online marketplace network. However, using approved and more directly controlled distribution channels may help manage this issue.”
Recommendations for brand owners
John concludes: “Whilst fashion retailers and governments have recognised the growing number of counterfeit products over the past few years, the current pandemic and subsequent rise in online purchases has certainly served as a reminder of the increasing issue.
“A 2019 report issued by the Organisation for Economic Co-operation and Development (OECD) showed that counterfeit and pirated products infringing UK trademarks amounted to as much as £16.2 billion in 2016 (£13.4 billion in 2013), equivalent to 3.3 per cent of total UK manufacturing sales. With predictions for further online sales and a change in the traditional retail landscape, brand owners should look to review their current trade mark portfolios and implement increased measures now to ensure they are prepared.
“Brand owners should look to review and expand their existing IP protection to maximise effectiveness against counterfeits. What’s more, recording IP rights with customs authorities is also a useful and cost effective way of stemming the flow of counterfeit goods through physical detention and destruction of fakes.
“Brands should also register their IP rights and monitor activity on online marketplace platforms to ensure counterfeit listings are reported and taken down promptly and manage complaints and monitor known sellers going forwards. This includes traditional online marketplace platforms, such as Amazon, as well as a number of social media platforms that feature targeted advertisements, such as Facebook and Instagram.
“It is clear that the online retail sector is a prime location for fraudsters to operate in. Its importance to brand owners is growing significantly and the risk of counterfeiting activity in this area only looks set to grow. To deal with this, brand owners need to get the right protection in place and utilise a variety of methods, as highlighted above, to help tackle the problem to protect their reputation.”
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