HOW TO COUNTER THE COUNTERFEITERS

In the age of product piracy, the world’s markets are being flooded with imitation and counterfeit products. Securing today’s increasingly complex supply chains represents a challenge for global companies.

HOW TO COUNTER THE COUNTERFEITERS

$1.8 TRILLION The projected total value of counterfeit products worldwide in 2015.

Product piracy, counterfeits, illegal copies: business in third-party intellectual property theft is booming. In 2011, counterfeiters manufactured products worldwide to the tune of $600 billion. According to BASCAP, the International Chamber of Commerce’s anticounterfeiting initiative, this figure will climb to $1.8 trillion in four years’ time – roughly equivalent to Italy’s current GDP. Luxury goods are the most high-profile counterfeit products.

But apart from fake Rolex watches and Louis Vuitton bags, pirates have also taken over other sectors, including medicines, electronic components, software, and spare parts. Even the US Army has unknowingly bought counterfeit components.

This counterfeit sector is setting the pace of economic development in many emerging countries. In China, illegal earnings accounted, until recently, for almost one-tenth of GDP. This has contributed to the country’s phenomenal growth, but is now leading to a rethink. “China is now making great efforts to combat counterfeiting,” says Hannes Hesse, CEO of the German Engineering Federation. Two-thirds of German engineering companies are measurably affected by product piracy. Most products are copied.

TOP 3 COUNTERFEIT GOODS

MEDICINES One in three malaria tablets is counterfeit. Experts estimate that in a few years all original medicines will have to be marked.

TECH INDUSTRY Components in the tech industry are copied on a massive scale. Counterfeit products - mostly from China - have been delivered to the US Army.

SPARE PARTS Half the cars in India are driving around with fake spare parts. Secure supply routes with individually labeled products could prevent many road accidents.

UNDERMINING PROFITABILITY

When a newly developed machine reaches the market, copies are already available. Most counterfeits come from China and are often of poorer quality, though cheaper than the real thing. But Beijing is now attempting to persuade Chinese companies of the need for industrial property rights. After all, Chinese firms are now enjoying global success, are involved in research, and hold patents.

They now also need to fight against counterfeiting. Fake products cost jobs, ruin companies, and even claim lives. Naturally, counterfeiting and piracy undermine an industry’s profitability and market integrity. Fake and diverted products, in the pharmaceutical sector for example, cost tens of millions of dollars every year – and hundreds of human lives. More than ten percent of all drugs sold worldwide are believed to be counterfeit. “The costs involved with product piracy are huge,” says BASCAP coordinator Jeffrey P. Hardy.

In the G-20 nations alone, counterfeiting and piracy are estimated to cost governments and consumers over $125 billion a year. But the big brand companies are hitting back. Rolls-Royce leases its engines, thus controlling the entire spare parts supply, and no longer needs to be afraid of product liability claims. Other companies are protecting their brand or intellectually property more robustly and mobilizing hordes of lawyers. And many are making their supply chains more secure by investing in robust supply chain security programs.