Conversely, even some relatively inexpensive products such as toothpaste, shoe polish and shampoos are attractive to the counterfeiter.
This is because with such items, which are eminently branded and recognized globally, their packaging holds more value than the contents, and since both contents and packaging are often easy to replicate they come under attack.
Hidden product value is therefore embedded in promotion costs in this instance, since the cost of building a successful global brand for toothpaste or shampoo relies on heavy advertising and investing in networks and distributors who also add cost to the product.
Of course counterfeiters do not have these costs to bear; they also have access to sources of cheap and often child labor so not only can they undercut the official holders of the brand, they can also make a tidy profit too.
Such undercutting practices, which are illegal in most countries that respect and oversee intellectual property (IP) law, require a systematic approach to enforcement and a coordinated response from a number of key players to ensure that counterfeit distribution is detected and discouraged.
In most developed countries trading standards are monitored by teams of lawyers and investigators who work under a number of banners. The Bureau of Consumer Protection in the USA and Trading Standards in the UK are illustrations of these organizations which have their counterparts elsewhere in Europe and other parts of the world.
The primary responsibility of these organizations is to ensure that individuals and businesses comply with national consumer protection laws and weights and measures.
These organizations have been established in order to provide consumers with a point of reference should they need to report an unfair or illegal trading practice such as counterfeiting, refilling or dilution frauds. They also periodically inspect and check goods in the consumer market in order to ensure they comply with legal trading guidelines and regulations.
In many cases brand owners work with local consumer protection teams in order to ‘police’ the market and investigate and prosecute anyone found selling fake products through any of the various routes to market. This covers street markets, flea markets, car boot sales in the UK, car trunk sales in the USA and sales through internet auction sites such as e-Bay and Alibaba.
Counterfeit goods also find their way into legitimate supply chains, so it is quite possible to purchase counterfeit products in local stores, on Main Street or even in supermarkets. Indeed there have been many recorded cases of counterfeit clothing, liquor, pharmaceuticals and cigarettes being sold through these ‘official’ channels through nationally and internationally recognized retail chains.
Figure 2.1 - Counterfeit headphones and purses openly on sale at a street market in Spain (2014)
Mostly the traders concerned are unaware that they are selling fakes since these have entered the legitimate supply chain without their knowledge and ‘upstream’ of the distribution network. It is also possible to find fake products within established, legal industrial supply networks distributing chemicals, automotive parts and electronic components as well as an alarming number of other products.
The diagram (Figure 2.2) illustrates how the legitimate market for branded authentic products can be infiltrated by counterfeit goods.
Figure 2.2 - The routes taken to market for authentic, parallel trade (gray) and counterfeit consumer products
Included in this schematic are a number of outcomes, that include satisfied customers who purchase authentic products through the bona fide channel (GREEN) and unwilling victims who unknowingly purchase counterfeit products thinking them to be genuine (ORANGE).
Of course there are many consumers who readily recognize they are purchasing counterfeit goods because they are involved in purchasing product at highly discounted prices on the street or from a flea market (BLACK).
Brand owners are of course keen to ensure that all distribution channels are monitored and as much counterfeit product is seized or removed from the supply chain before it reaches the market.
This simplified schematic also shows how legitimate gray market goods (also known as parallel traded products) find their way to market via unauthorized channels.
The flow chart (Figure 2.2) can be further complicated by the fact that criminals can attempt to disguise the infiltration of counterfeit goods into legitimate channels by mixing authentic and fake goods within the same batch.
Furthermore, the distribution channel for industrial products and components also provides an attractive target, and follows a similar pattern to that illustrated for consumer goods. Whilst companies may source materials and components directly from the manufacturer, many depend upon wholesalers and stockholders for their supplies of components and tooling.
These items are just as likely to be targets for copycat products as those within the domestic consumer channels.
At this point the complexity of the problem of fake products entering the supply chain for consumption by manufacturer and consumer alike will become unmistakable. The risks too are severe, especially for goods that require safety certification or are required for medical purposes or human and animal consumption. Remember here that counterfeit veterinary products as well as pharmaceuticals are involved in this illegitimate trade.
The problem of reducing or eradicating counterfeit products from the supply chain is shared by a number of stakeholders.
Firstly brand owners have a critical interest in protecting their reputation as well as their profits. Governments are keen to ensure that they do not lose out on revenue from taxable goods, and law abiding distributors must ensure that the products they sell are legitimate and they are safe from exposure to any IP infringement or warranty claims.
This last point returns our focus to intellectual property (IP) and its importance in establishing and protecting the rights of a manufacturing brand owner. (IP rights are common too in the service industry but this sector is not affected by what can be termed ‘hard product’ fraud, neither is it a consumer of packaging).
THE MARKING OF INTELLECTUAL PROPERTY IN ORDER TO DETER COPIES
Intellectual property covers a number of fields. Briefly this encompasses the power of the IP holder to enforce his right to use registered designs and processes in order to protect a brand against unfair competitive trading such as copy attacks and the theft of proprietary recipes/formulas and manufacturing methods and procedures1.
Trade Marks are a recognized method of protecting a brand since they link a product to a known manufacturer and provide an established warranty of provenance and quality. Trade Marks can be likened to ‘badges’ inasmuch as they remain relatively constant over time in order for them to be readily recognized.
Trade Marks may also involve discrete typography, logos, color or combinations of all of these attributes. They are recognized through the use of the TM symbol.
Figure 2.3 - The very first image to be registered as a UK Trade Mark was by Bass Brewery of Burton on Trent (1876)
Registered Designs cover the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colors, shape, texture or materials of the product or its ornamentation.
Registered design® also includes, in particular, packaging, get-up, graphic symbols, typographic type-faces and parts intended to be assembled in such a way that they display a uniqueness attributable only to that product, label or pack.
Patents provide the exclusive right of manufacture and sale of an invention for a prescribed number of years. These rights are delivered through patent offices worldwide and require a detailed analysis of the uniqueness of an invention or innovative step in process or manufacture before they are granted by a government and registered through its IP offices.
Before a patent is granted it requires detailed examination to ensure that it does not breach any previously published patents. This work is carried out by qualified patent attorneys. It is usual to mark all patented products with the word ‘patented’ and its applicable granted reference number.
Copyright© is a legal right of protection against copying and is applied to creative work in the form of writing, design and musical or visual performances.
Most countries recognize copyright of any completed ‘artistic’ work without registration. Since copyright becomes relevant as soon as any artistic work is completed any copies made after this date will infringe the creator’s right and therefore will become actionable. This publication is copyright and was protected as soon as it was completed.
It has been necessary to heavily abbreviate these definitions but they illustrate a number of important legal rights that are available to brand owners who find themselves exposed to counterfeit versions of their products in the market place.
Legal remedies exist in the form of injunctions; interim seizure orders, compensation, recall, disclosure and the publication of judicial decisions and all these are designed to ensure that infringers of IP may be called to account for their actions. Retribution is usually granted as financial damages and these can be costly for a defendant, such as a counterfeiter, if they are found to have breached any of these rights.
It should be recognized that legal cases that involve IP fraud can be very expensive to bring to court and that the burden of proof always resides with the prosecution. Often there is a very fine line drawn between the visual differences of a fake and an authentic product.
Any evidence given in a legal case will depend on proving a counterfeit is in fact what it is, a fake. It is only through examining differences between the authentic product and the fake that evidence can be shared in order to establish culpability.
In most cases this will require expert analysis and it is often more practical to rely on deviations to the packaging and labeling of counterfeits than say minute examination of the product itself. In illustration of this point imagine trying to prove that medication in the form of a tablet or capsule is counterfeit depending upon visual appearances such as shape, color or weight. In reality forensic evidence is needed and this can be impracticable and costly to acquire.
Similar problems exist with frauds involving liquids such as liquor and granulated products such as fertilizers.
These facts draw us to another important conclusion when it comes to identifying fakes anywhere in the supply chain. Unless you are the brand owner or an expert in recognizing fakes within any particular category, how can you tell the difference between a fake and the real thing?
This is not just a difficult decision for the public at large, but also for customs officers and legal investigation teams working at pinch points in the supply chain in order to identify fake products.
Since brand owners often have limited investigative staff resources, they employ specialist investigation teams and the help of the World Customs Organization to examine consignments of goods on their behalf. Protecting the brand is an essential part of upholding brand value and reputation as has been revealed before. The high costs relating to IP supervision and protection are mostly carried by legal action and investigation.
These can often be reduced by a little forthought and planning.
Figure 2.4 - Packaging and labeling have an important role to play in identifying counterfeits
SECURITY RELATED PRINT – THE ROLE OF LABELS AND PACKAGING IN PRODUCT PROTECTION
Since most products at risk from counterfeiting are packaged and labeled, these components offer a common point of reference across a whole variety of different merchandise. It is often more cost effective to teach those tasked with defending the brand to note . and easily identify . security features present in wrappers and decals, than it is to provide coaching in the intricacies of inspection for minute differences in product fabrication.
Therefore packaging and labeling have an important role to play in product protection since they offer a useful method of preventing unauthorized opening (tampering and refilling) as well as providing a bellwether of authenticity, since if expertly designed they can offer similar anti-counterfeit devices to those found on banknotes.
Security related print in the labels and packaging market has been largely driven over the last three decades by some of the design and security features found on banknotes.
Since banknotes have an intrinsically high value they are attractive to the counterfeiter. In order to deter and detect counterfeit attack the financial sector has developed a variety of security devices that can be useful in both prevention and discovery of fake currency.
At this point it would be useful to examine the strategy and tactics deployed in anti-counterfeit banknote design.
Initially, banknotes are required to meet two primary objectives. They should be easy to authenticate but difficult to reproduce or copy.
Taking the latter point first, any attempt to reproduce a banknote should be made as tough as possible for the counterfeiter who has a number of options open when launching a copy attack.
Firstly, a counterfeiter can attempt to photocopy a banknote and in order to prevent this happening, banknote designers have deployed special inks and intricate design mechanisms so that any copy is immediately recognizable as such and can be easily spotted.
Figure 2.5 - A few of the publically (overt) accessible security features found on a banknote (illustration courtesy of ECB)
Secondly, a determined counterfeiter can try to scan or photograph a banknote using high resolution scanners or cameras. From that initial scan it is then possible to recreate a copy using digital printers in order to replicate the scan any number of times. The risks of scanning and photography attacks are avoided through the use of special inks and also anti-scan screens that either throw up a visible warning on any replication of the scan, or block out the use of the scan on a desktop printer or photocopier through currency anti-copy software that is inbuilt into the printer by the hardware provider.
Finally, it is always possible to attempt to recreate a banknote from scratch using origination software and traditional printing equipment. This type of attack is neutralized through the use of restricted materials and processes that make it next to impossible for a faker to obtain access to proprietary design software and security papers and inks that are used in the official production of currency by national banks and dedicated security printers.
Since currency counterfeiting is an ever present and persistent threat, it follows that any anti-counterfeit features that are deployed in order to reverse the trend be constantly updated as they become at risk of compromise.
This provides a ready source of print related security devices that may be useful in brand protection applications since they are already established in daily currency verification and recognizable as such by the public at large and also those tasked with protecting the brand.
RECOGNIZED PROCEDURES FOR IDENTIFYING COUNTERFEITS
The recognized procedures for authenticating currency initially involve a number of human senses since handling banknotes is designed to be quick and uncomplicated.
A series of tests have evolved over time that provide a primary assessment of substantiation. These involve both sight and touch, mostly incorporating features such as watermarks, color changing inks, holograms and raised printing that can be sensed when running a finger over certain areas of the bill. Over time frequent users of paper currency such as shop assistants and bank tellers become accustomed to the ‘feel’ of authentic banknotes since they differ considerably from the paper that is available for use by a printer of counterfeit notes.
These initial tests are referred to as ‘overt’ or ‘primary’ practices where overt can be described as what can first be established and is obvious to a quick five or ten second check.
If an item of paper currency does not pass this first stage of certification and thereby becomes suspect, a second series of tests are available to establish legitimacy.
Such tests involve ‘covert’ or hidden features that reside with a banknote and can only be discovered by using some form of apparatus such as a loupe or other high magnification tool. The use of this device will reveal security techniques such as micro-printed lines of type and the use of fine line-work rather than screens (dots) for color rendition and shading.
Covert tests can also include validation pens that are used to check banknote paper and inks that change color under specific frequencies of non-visible light such as those found in the ultra violet or infra-red part of the spectrum.
Finally, if none of the previous tests deliver conclusive results a third ‘forensic’ level of challenge is bought into play. Forensic testing as its title implies involves scientific procedures that can be used to establish the genuineness of a banknote beyond all doubt. Examinations will include the observation and presence (or not) of chemical markers, biological markers (DNA) and other proprietary features within the currency that can only be extracted through laboratory processes and examination using technology such as spectral analysis or microscopic scrutiny.
The labeling and packaging industry has now learned, through the advice and knowledge of the security related printing industry, to include difficult to copy security features taken from the fiscal market and include these as counterfeit deterrence mechanisms in their products.
During the past decade a wide variety of other innovative methods have been developed to detect and deter counterfeit attacks on branded goods.
Preceding paragraphs have mentioned that security features embedded in print and packaging can be useful to establish provenance. It is far easier to train distributors and security staff in cursory inspection techniques than teach them how to check for differences in manufacture or to examine label and packaging for minor defects in print and spelling errors that often accompany fake pharmaceutical and other products such as wines and spirits.
The presence of a security feature such as a hologram also acts a deterrent to counterfeiters, since it displays an awareness that be brand owner is investing in protection mechanisms and most likely has deployed other non-visual safety devices in order to back up any legal response that may become necessary.
It should also be noted that legal action in isolation to IP abuse is often very expensive and often comes too late in the day to deliver a proactive line of attack. Much better tactics utilize a holistic approach that incorporates a strategy that includes on-pack and in-product security features, together with inspection through the whole supply chain and invited customer participation through educating the end-user in checking techniques that establish authenticity at point of purchase.
From this point forwards, focus will be made on the ability of the print and packaging industries to provide innovative solutions to the problems related to product fraud.
This is a much simplified definition of IP and should not be taken out of context
Figure 2.6 - Excise duty labels are useful tools in the fight against custom duty fraud and are affixed to at risk products either as self-adhesive stamps or as wet glue decals
Figure 2.7 - Refilling is an ever present danger in the high value liquor market