Report should spur brands to develop an anti-counterfeiting strategy

Out-Law News | 16 Mar 2022 | 11:21 am | 3 min. read

Businesses need to develop and implement an effective anti-counterfeiting strategy, experts have said, after a new report from Europol and the EU Intellectual Property Office (EUIPO) highlighted increased counterfeiting risks.

According to the Europol and the EUIPO Intellectual Property Crime Threat Assessment 2022 (51-page PDF/2,4 MB), the distribution of counterfeit and pirated goods increased during the Covid-19 pandemic.

"The health crisis has presented new opportunities for trade in counterfeit and pirated products, and criminals have adjusted their business models to the new global demand," the EUIPO said.

The report is based on Europol’s operational information and data gathered from across the EU. It highlights that piracy and counterfeiting continue to pose a serious threat to the European economy and to the health and wellbeing of consumers.

Imports of counterfeit and pirated goods reached €119 billion in 2019, according to the data collected. This represented 5.8% of all goods entering the EU. In 2020 authorities in the EU seized approximately 66 million counterfeit items. An increasing number of these goods are pharmaceuticals, food items, cosmetics and toys. However, accessories and luxury goods remain among the most popular product categories for counterfeit goods, according to the report, while spare parts and alcohol are also exposed to a high risk.

Sarah Jeffery, who specialises in brand protection at Pinsent Masons, said: "It is clear from the report that counterfeiting increased dramatically during the pandemic and is still on the rise.  Unsurprisingly, the pharmaceutical sector is one of the main victims, particularly around medicines and devices claiming to prevent or treat Covid."

Counterfeit pharmaceutical products can include medicines, personal protective equipment or face masks. The fact that distribution of these products has shifted from physical to online markets during the pandemic facilitates counterfeiting and thus raises public health concerns, the EUIPO said. According to the report, counterfeit pharmaceutical products originate mostly from outside the EU, "but they may also be produced in illegal laboratories within the EU, which are difficult to detect and can be set up with relatively few resources".

According to brand protection expert Gill Dennis, many companies affected by product counterfeiting are not even aware that their trade mark rights are being violated. "The illicit nature of counterfeiting can lead businesses to mistakenly believe that their products and brands have not fallen victim," she said. "The reality is that most businesses that sell products have a counterfeiting problem – whether they know it or not."

The report also highlighted that the production of illicit food and drinks products has become more professional. Fake products are being identified throughout the whole supply and distribution chain. The report warned that counterfeit food and drinks pose a great health risk, since they are often produced under unhygienic conditions and the quality of the ingredients is substandard, sometimes even toxic. Counterfeit cosmetics and toys can contain toxic ingredients as well.

"The costs to brands associated with counterfeiting cannot be underestimated,” said Dennis. “Not only is there a direct impact on the bottom line from lost sales, but there can be genuine health and safety concerns for consumers and a real risk of lasting brand reputational damage. For these reasons, businesses cannot afford to simply ignore this issue."

Counterfeit goods are being sold both online and in physical marketplaces, but the online distribution of counterfeit products has been boosted by the pandemic. According to the report, online marketplaces are the "chief distribution channels for counterfeit goods in the EU". The report suggested that counterfeit products are also increasingly offered on social media platforms, in videos and via adds in instant messaging services. However, counterfeiters do not always rely on online selling. According to the report, they sometimes even manage to infiltrate the legal supply chain with their fake goods.

Online brand protection specialist Tom Nener said: "The report highlights that online sales are the main source of counterfeit goods. Businesses need to monitor the key global online marketplaces – 'takedowns' are a straightforward but effective method of cutting off the key route to market for these products." 

Although the majority of counterfeits in the EU market are produced mainly in Asia, the report outlined that "domestic manufacturing within the EU is an increasing trend". This assessment is based on the fact that the number of counterfeit packaging materials and semi-finished products into the EU has increased.

Brand owners can take action against third parties who misuse their portfolio of intellectual property rights, including registered designs and registered trade marks.

A registered design protects the appearance of goods, including shape and surface decoration. It will be infringed by anyone who makes or sells a product the design of which "does not produce on the informed user a different overall impression". A registered trade mark will be infringed if an identical or confusingly similar mark is used on an identical or similar product, or on a dissimilar product where the mark is sufficiently well known to have a reputation. 

"Businesses need to develop and implement an effective anti-counterfeiting strategy," Nener said. "There are a number of very effective anti-counterfeiting tactics available to businesses that can form part of a bespoke enforcement approach."

Pinsent Masons has developed a brand protection platform, Alteria, which allows businesses to monitor a brand online and enables takedown requests to be made to global online marketplaces and social media platforms at the click of a button.