According to a recent report released by the UN Office on Drugs and Crime, from 2008 to 2010 almost 70% of all counterfeits seized globally came from China.
“While dedicated counterfeit factories have been detected in large numbers, production is often decentralized, making use of networks of specialists,” said the report, Transnational Organized Crime in East Asia and the Pacific. The report indicates that key players in counterfeit markets are brokers and logisticians who connect supply and demand.
“Following production, the counterfeit goods are concealed, frequently through false customs declarations or disguised with lesser-known logos. Circuitous routes are used to transport the goods, often through free-trade zones. The primary modes of transport are through direct post to the consumer, or through containerized shipment of larger volumes. In both the US and the EU, maritime shipments comprise the bulk of the value of counterfeits seized. Upon arrival at the destination, ethnic networks are often important for receipt and distribution of the goods. Expatriates from South Asia, East Asia and West Africa are particularly key, notably in street distribution.”
China is the largest source country for counterfeit goods seized in the US, and apparel and accessories are the largest category of merchandise. Counterfeiting is not restricted in the fashion industry, says Robert Youill, senior managing partner at business advisory firm FTI Consulting in Hong Kong. Instead, it happens everywhere in China.
Intellectual property lawyers in the region say that the amount of counterfeiting in China is increasing.
“To combat counterfeiting is more difficult now, as the counterfeiters use legal loopholes, such as obtaining registration for marks foreign companies have not yet registered in China, and the Chinese law is becoming more difficult to work with for foreign companies,” says Chiang Ling Li, a partner at law firm Jones Day in Hong Kong.
The whole IP industry has been developing dramatically in the past 10 years in China, says Gloria Wu, partner at Kangxin Partners in Beijing, adding that public awareness, legislation, enforcement, professional capability of attorneys and judges are major changes.
Though seeing positive changes, Wu says the biggest challenges to China effectively combatting counterfeiting are a series of factors, including China’s large geographic size, which increases the difficulty and cost of enforcement. Public awareness of counterfeiting has improved significantly in large cities, but remains unsatisfactory in many rural towns and villages. Fast-growing online shopping platforms have brought new challenges for investigation and enforcement as compared to traditional shops.
“There are a variety of factors that contribute to counterfeiting in any country, including the US,” says Dan Plane, a director at Simone IP Services in Hong Kong. “I would say these are primarily high demand for ‘cheap’ – fake – goods. Particularly in harder economic times, people are always looking for bargains, even if they know or suspect they might be buying fake goods.”
Plane says that the ease with which fake goods are accessible, through companies such as Aliexpress and Alibaba, makes buying fakes very easy and that it is increasingly difficult to stop the shipment of counterfeit goods into the destination country. “With so many sales of fakes now being made to individual buyers as opposed to wholesalers/retailers, it’s almost impossible for authorities and brand owners to verify and stop all individual shipments of fakes.”
Counterfeiting occurs in all sectors, says Plane, and no brand that is even slightly popular with consumers goes without being targeted by counterfeiters. “That being said, luxury goods, high-end electronics (iPhones and other hi-tech gadgets), and generally desirable products with a higher sticker price are more likely to see consumers willingly buying fakes, or ignoring the little voice that warns them goods might be fake and a given deal is too good to be true.”
Wu adds sectors such as fashion and luxury goods, food and beverages and tobacco are most targeted by counterfeiters.
Counterfeiters are getting more and more skillful and strategic in hiding themselves and the possible evidence, especially the source of production. Some counterfeiters also try to register a trademark which is the same or similar to the real brand, which increases the complexity, Wu adds.
“Counterfeiters are very legally savvy, and are better and better at exploiting loopholes and/or weaknesses in China’s IP system to frustrate efforts to halt their activities,” says Plane.
Online counterfeiting poses unique challenges to law enforcement, brand owners and online service providers seeking to prevent this illicit trade. Chinese lawyers say the fast transmission speed and invisibility make fighting online counterfeiting more difficult.
“For example, authorities are much less willing to aggressively raid counterfeiters, even in clear cases, as they fear being sued by infringers for abuse of administrative authority. As well, online counterfeiting is rampant, and Chinese authorities still haven’t figured out, or committed themselves to, effectively controlling the sale of fakes online,” says Plane.
An example would be Alibaba. The biggest e-commerce company is aggressively expanding shipments overseas, In September, Alibaba’s logistics arm and the United States Postal Service agreed to develop enhanced shipping solutions for cross-border e-commerce.
“As cross-border e-commerce grows rapidly, it is critical that we evolve shipping services to the next level, with shorter delivery times and easier methods to track a shipment," Cainiao vice-president Wan Lin said at the announcement of the deal. “Today’s announcement is a key part of Alibaba’s globalization strategy, and our vision to enable consumers around the world to enjoy the convenience and benefits of e-commerce.”
The deal is said to include assistance from the USPS in developing Alibaba’s worldwide shipping capabilities, particularly in South America. Alibaba had earlier forged cooperation agreements with Singapore Post and the Spanish postal service.
Critics, however, note that Alibaba is frequently accused of hosting sales of counterfeit goods. Youill says Alibaba has made efforts to intervene, but that online transactions involving counterfeit goods are difficult to stop.
“There are substantial concerns among brand owners that expanding Alibaba’s AliExpress platform will result in a very significant increase in the sale of counterfeit and otherwise infringing goods,” unless more safeguards are imposed, said Paul Kilmer, a Washington-based partner at Holland & Knight and founder of the Trademark Working Group, a collective of US companies and organizations.
By Lily Zhang
Asia Cargo News | Hong Kong
