For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Tuesday, 31 August 2010

Fake report stuns EU shoppers

The Telegraph, among other online news services, leads today with a report -- "Fake goods are fine, says EU study".

Right: the EU has authorised the importation of a large consignment of fake Santas to help distribute this year's counterfeit gifts to European consumers.

The piece runs along these lines:
"They are an impulse holiday purchase that many buyers later have second thoughts about – the fake Louis Vuitton bags and Rolex watches picked up for a song abroad.
While shoppers are happy with the price, there are often nagging doubts about the items' quality, their legality and who ends up profiting.

However, such worries are, it seems, over. A new EU-funded report has declared that it is OK to buy fake designer goods. The study, co-written by a Home Office adviser [And therefore at the expense of the taxpayer. Naturally, all traders in fakes pay all their taxes], says consumers benefit from the market for knock-off designer clothes at knock-down prices. It also rejects the complaints of designer companies, claiming that losses to the industry as a result of counterfeiting are vastly exaggerated – because most of those who buy fakes would never pay for the real thing [does no-one buy bags believed to be genuine on eBay and other online sales sites, assuming they're getting the real thing at a bargain?]– and finding that the rip-off goods can actually promote their brands [Sure. "If you like the fake, you'll just love the real thing ..."]. The report adds that the police should not waste their time trying to stop the bootleggers [They won't save much wasted time, since they don't try very hard to stop them anyway].
It disputes claims that the counterfeiting of luxury brands is funding terrorism and organised crime, and argues there is little public appetite for tough law enforcement measures as consumers enjoy the bargains offered by the illegal trade, which has been estimated to be worth £1.3 billion in the UK [If victims are complicit, it's not surprising they have no appetite for tough enforcement. Do people who buy stolen goods or smuggled cigarettes and alcoholic drinks have much of a stomach for tough measures against their suppliers?].
Professor David Wall, who co-authored the report and advises the government on crime, said the real cost to the industry from counterfeiting could be one-fifth of previously calculated figures [there might be a genuine methodological issue here: many have questioned the basis of self-assessment of damage, especially based on the assumption that each fake sold equals one full-price retail sale lost].
"It's probably even less," he said. "There is also evidence that it actually helps the brands, by quickening the fashion cycle and raising brand awareness." [Of course it quickens the fashion cycle -- just as hares have to learn to run faster if they are to escape from the foxes]
He added: "We should be focusing on the trade in counterfeit drugs, dodgy aircraft parts and other stuff that really causes public harm. At a time when there is no more public resources for police, and they are being asked to do more, law enforcement should be focusing on other things." [Is the Kat dreaming, or is much -- if not most -- of the cost of bringing counterfeit traders to book borne by the IP rights owners themselves, since the police are reluctant to put together a case ab initio?]
While the UK authorities target those who trade in fake goods, the government has decided against criminalising consumers who buy them. But tourists purchasing counterfeits in other countries can face prosecution. In France, the maximum fine for buying fake goods is 300,000 euros (£246,000) or three years in jail. During a crackdown in Italy earlier this summer, a tourist was fined 1,000 euros (£825) for buying a fake Louis Vuitton bag for seven euros (£6) from a vendor at the resort of Jesolo, near Venice. [Poor old designer companies: this must do dreadful damage to their brands and their competitiveness, if today's report is to be believed].
Holidaymakers also face having counterfeit purchases seized at ports and airports as they return to Britain, if they are detected by the UK Border Agency.
...
But police and leading designer brands last night rejected the study's findings. A spokesman for Louis Vuitton said: "The sale of counterfeit goods is a serious offence whose revenue funds criminal organisations at the expense of consumers, companies and governments." A representative from Burberry added: "Counterfeiting is taken extremely seriously. Where a case is proved, Burberry will always push for the maximum penalty."
The Association of Chief Police Officers said faking fashion goods was "not a victimless crime". "Businesses, individuals, and the public purse all suffer as a result of such activities," said a spokesman ..."
Merpel says, you silly Kat: can't you tell that this is actually a fake report? The genuine report says that counterfeits aren't actually the best thing in the world and that we should all be responsible shoppers and stamp them out.

By a remarkable coincidence, a forthcoming article in the Journal of Intellectual Property Law & Practice, "Who's deceiving whom? The curious case of the ‘counterfeitee’" by Matthew J. Elsmore, discusses the issue of culpability of the consumer for feeding and stimulating the market for counterfeit products. The abstract of his article reads as follows:
"Legal context: This article seeks to investigate whether consumers ‘getting away with it’? As far as anti-counterfeit rules are concerned, whether the consumer purchases the real trade mark or the fake trade mark on a consumer-facing item, there is no meaningful distinction.
Key points: Consumers consume genuine and counterfeit goods; more and more of the latter it seems. That certain consumers are somehow persuaded to buy fake trademarked goods is a hotly debated and politicized topic as global trade and IP meet. All the subsequent regulatory emphasis and political focus is on the counterfeiter; a target that remains far from grasp. Civil and criminal trade mark liability for the counterfeiter and the obligations for state actors are apparently not deterring professional infringers.

Practical significance: Is a reconfiguration needed? It is clear that the overwhelming majority of counterfeits do not mislead or even confuse consumers as to trade mark authenticity. Is this why the consumer, an important actor in IP law, and especially trade mark law, disappears altogether from the anti-counterfeit radar? Yet trade mark regimes are partly about aligning legal standards with the consumer's perceived level of attentiveness; there appears to be a puzzle here. By first asking whether consumer liability should be addressed, this article airs views for and against a legal status as ‘counterfeitee’. The article seeks open up this aspect of the discussion surrounding counterfeiting with enough gusto for all of us (as IP specialists and consumers) to reconsider our role in the global trade of counterfeit goods".
This article is not yet published in paper format, but subscribers can already access it and read it in full on JIPLP's website here. Non-subscribers who want to purchase short term access to it can click here and scroll down to "Purchase short-term access".

Many thanks, Mark Summerfield (Watermark), for drawing this issue to the Kat's attention.

13 comments:

Andrew Robinson said...

If a fake is so bad that nobody would be be convinced by it, perhaps it should fall under an exemption for works of parody?

MTPT said...

Is the Telegraph report of Wall's study that specifically misleading (possibly one for Jack of Kent's "Bad Law" column if so)?

The answer to the IPKat's question ("...is much -- if not most -- of the cost of bringing counterfeit traders to book borne by the IP rights owners themselves, since the police are reluctant to put together a case ab initio?") is surely no - unless I missed the explosion in private prosecutions, and the contributions to police force budgets from the beneficiaries of investigations, raids, etc.

As to the Kat's comments on police action on criminal IP infringement, I'd be interested to see comparative detection rates, let alone costs, for minor (non-violent theft and "technical" robbery) theft from persons, and criminal IP infringement. [The former, as to rates, could be gotten from BCS and police statistics, but not sure how you'd arrive at the latter].

Stripped of moral justifications, criminal enforcement action by the state - as distinct from the maintenance of a system of courts in which legal rights can be enforced - is a combination of purchased service and subsidy to the industries involved. As such, it needs to be economically justified - so I can see why luxury goods manufacturers would be concerned by the existence of robust research which questioned the costs (especially to the state) and overall value of counterfeiting.

(If we're in the general business of criminalising civil wrongs to help business, many in the retail sector would welcome criminal offences of trespass, and could show Home Office and ACPO actual evidence of direct losses arising from trespassing.)

In that context, I'll be interested to see the detail behind Wall's reported finding that people who'll buy fakes wouldn't buy the real thing - cf the (limited) evidence that people who download infringing copies of musical tracks are *more* likely to purchase the original. Does the fact the download is free leave value the downloader is then prepared to spend on music, which is not the case with the purchaser of a fake good?

Overall, it sounds like an interesting piece, albeit not quite interesting enough to justify $25 (!) to access it now, rather than wait for the hardcopy October issue of BJCrim...

Justin Watts said...

Of "the government has decided against criminalising consumers who buy them": if this were a true statement of government policy, then the government has done a poor job in its implementation, since a consumer who knowingly buys a fake product is almost certainly inciting, aiding, abetting and procuring the primary offence. The legislation does not rule out prosecutions for inchoate and secondary counterfeiting and piracy offences, and it is therefore open to prosecute the purchaser for the same offence as the vendor, and with the same penalties attaching.

In reality, secondary infringement is rarely relied upon. It would be a brave brand owner who prosecutes the one-off purchaser given the likely press reaction. Where the purchaser is acting in the course of business it will generally be a direct infringer itself.

Filemot said...

Professor Wall's web page says
The project's supporting stakeholders are: GUCCI and the Chamber of Commerce, Milan. I think he must be GUSSY THE ICECREMANMAN selling fake WALL'S

Anonymous said...

It is clear that the overwhelming majority of counterfeits do not mislead or even confuse consumers as to trade mark authenticity.

Having just returned from holidaying in Turkey, where every other shop is a "Genuine Fake Watches" outlet (to the point of wondering whether this is actually a retail chain!) and most stores advertise their wares and their authenticity in similarly confusing Engrish, I'm inclined to disagree with the above statement ;-p

Anonymous said...

I recall that, before the UK law was changed to address the abuse, market traders found they could avoid prosecution by trading standards officers by openly admitting that the goods they were selling were fakes.

Anonymous said...

"And therefore at the expense of the taxpayer. Naturally, all traders in fakes pay all their taxes."

Should that have any bearing on the conclusions of the report?

Jeremy said...

@Anonymous 1:58pm

Whether illicit traders pay taxes is an important consideration: to the extent that they don't, they're cheating me and other legitimate traders who do. And businesses that remain off-the-radar and therefore don't pay tax are saving themselves a set of overheads that IP originators and their licensees have to bear. No level playing field -- so not so good for competition?

Anonymous said...

Do anyone know where I can find the EU report?

Anonymous said...

While I have not read the report, the Home Office advisor's reported views seem to be markedly at odds with HMG's official information about awareness of IP crime on the Patent Offices website here
http://www.ipo.gov.uk/crime/crime-resources.htm , in particular the contents of the 2009/10 Crime Report http://www.ipo.gov.uk/ipcreport09.pdf as approved by Baroness Wilcox in her letter dated 29 July 2010 here http://www.ipo.gov.uk/crimereport0910-letter.pdf .
Perhaps I am missing something, but it looks like a classic example of the right hand not knowing what the left hand is doing.

MTPT said...

@Anonymous :1208

Or, as with the Advisory Committee on the Misuse of Drugs, an example of government policy owing rather less to evidence than politicians and interest groups might like to pretend.

Adam said...

World Trademark Review has just published a more in-depth look at Wall's research, including the thoughts of Ruth Orchard at the ACG, Stuart Adams at Rouse and Professor Wall himself. He's not happy with the problematic media coverage it has attracted.

http://www.worldtrademarkreview.com/daily/Detail.aspx?g=7b2f752f-2057-4465-abf1-38c7e4f973b2

The article includes links to other media coverage Wall's report itself.

Adam Smith
World Trademark Review

Anonymous said...

Won't be long now until traders in fake goods will advertise their wares to be "as approved by Prof. Walls" ...

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