Global Fight Against Counterfeit Goods

Ever since international governments have realised the billions lost in tax revenues due to counterfeiting, new laws and agreements are being designed faster than one can say 'Gucci.'

Counterfeiting, according to WWD, has become pandemic, accounting for an estimated $456 billion, or 7 percent of global trade, in 2003, according to the World Trade Organization. It is well know that the most counterfeit goods originate from China, but even that is changing. Russia is next on the list, producing an estimated 5 per cent of the total of black market goods.

Although the battlefield in the war against counterfeits has expanded, enlisting the help of local governments is slowly paying off. For example, Beijing's infamous Silk Alley - China's best-known counterfeiting spot - was shut down in early January with the Chinese government citing it as a fire hazard. A new mall opened in March, called Silk Street market, located near the old Silk Alley. According to a March 31 report from the newspaper China Daily, more than 300 items were seized there by municipal investigators. About 80 handbags and 220 garments with Boss, Gucci and Chanel logos were taken by officers from the Chaoyang District Branch of the Beijing Municipal Administration for Industry and Commerce.

Penalties for counterfeiting in most countries usually consist of suspended sentences and/or fines. Jail sentences are rare, as are very high fines. Concerns are not so much the level of penalties, but the amount of police resources that governments are willing to invest to deal with counterfeiting cases. Manufacturers are reluctant to reveal how much capital is invested in fighting counterfeiting, but intellectual property lawyers believe some of the larger companies, such as LVMH or Nike, could spend up to $10 million a year.

Burberry, for example, has a global intellectual property department made up of 15 full-time staff members that works with lawyers, investigators and law enforcement to prosecute counterfeiters whenever possible. "In China, we frequently see counterfeit goods being manufactured through the night by a different workforce from the daytime shift," said Stuart Lockyear, Burberry Group's director of intellectual property. "But in China and elsewhere, we also frequently find goods being made in small sweatshops with no regulation on working conditions to prevent child labour."

According to information technology and consulting firm Unisys, global tracking solutions are vital. According to the company, international shipping containers change hands an average 17 times during a journey that can take more than two months. By comparison, domestic containers change hands only eight times on average. And, believe it or not, modern-day pirates still troll the high seas and are getting increasingly active. According to Unisys, 445 "seaborne piracy attacks" occurred in 2003, up more than 56 percent from the 285 reported in 1999.

Customs officials at domestic ports would also be hard-pressed to catch a majority of counterfeit goods. Of the 15 million containers flooding U.S. ports, only 5 percent, or 750,000 containers, undergo a physical inspection.