Actually I am very glad that people can buy

Armani - even if it's a fake. I like the fact

that I'm so popular around the world-
Giorgio Armani
Counterfeiting
The process of fraudulently manufacturing, altering,
or distributing a product that is of lesser value than the
genuine product

The spread of counterfeit goods (commonly called

"knockoffs")

Most commonly applies to currency and coins

Knockoffs account for 7 percent of world trade

Effects
Crowded out markets

Squeezed profits

Dullens incentives to innovate or invest

Commonly counterfeited items
 Medicines
 Operating systems
 Footwear
 Sneakers
 Clothing
 Sports Jerseys
 Consumer electronics
 Batteries
 Cellphones
 Handbags
 Watches
 Top counterfeiters
China
 Russia
 Argentina
 Chile
 Egypt
 India
 Israel
 Lebanon
 Thailand
 Turkey
 Ukraine
 Venezuela
Prevalence of counterfeiting in China
Two-thirds of the counterfeits in the world come from
mainland China

Ascendance as an economic power

Due to huge investment of technology and capital

Its economic evolution from communism to free

markets has also contributed to a surge in illegal
activity
FACTS
China accounts for up to 80% of all
counterfeit goods in the global marketplace

The U.S. Customs Service reported that it seized

counterfeit and infringing goods valued at $93 million
in 2005 (China (69%) and Hong
Kong (6%))

Brand owners estimate that between

15-20% of all well known brands in China are
counterfeit
Counterfeiting is now estimated to account for 8% of
China’s gross domestic product

 Many municipalities and towns in China depend

upon counterfeiting to sustain their local economies

There are millions of people, perhaps tens of millions

of people, involved in counterfeiting in China

And hundreds of thousands of people involved in

anti-counterfeiting.
Some facts
• In the United States, in fiscal year 2004 the Department of
Homeland Security seized almost $140 million in goods that
violated intellectual property rights; goods from China (and Hong
Kong) made up almost 70 percent of the haul.

• In 2003, Brooklyn prosecutors charged six men with importing up

to 35 million counterfeit brand cigarettes from China. The
smugglers allegedly hid the goods in shipping containers behind
kitchen pots.

• China's Shenzhen Evening News, a government-owned

newspaper, wrote that some 192,000 people died in China in 2001
because they consumed counterfeit medicine.
Three major operations
Legitimate factories that have licenses to produce goods
on behalf of brand-name companies

Joint ventures between a multinational and a Chinese

partner

Underground facilities that make items such as cigarettes

Actions taken by China
 China's membership in the World Trade Organization in 2001 forced the
country to beef up its observance of intellectual property rights
 Due to this , has been subject to the Trade-Related Aspects of International
Property Rights (TRIPS) agreement
 Section 5, Article 61 of the TRIPS agreement states that,

“Members shall provide for criminal procedures and penalties at least in

cases of wilful trademark counterfeiting or copyright piracy on a
commercial scale. Remedies available shall include imprisonment
and/or monetary fines sufficient to provide a deterrent”

 Chinese authorities are working more cooperatively with other countries on

intellectual property issues
 China is a part of international agreements to protect intellectual property
(including WIPO, Bern Convention, Paris Convention, among others)
Private Sector’s effort
The private sector really supplements what government
does

E.g. Nike sends inspectors to the border to work with

Chinese customs officials, showing them how spot fake
sneakers

Other companies hire private sector companies like

Holmes’ IP Cybercrime identify and locate
counterfeiters and turn them over to the Chinese
government.
Hindrances faced by China
 Its large population ( Approx 1.4 billion )

 Provincial Structure

 Police to population ratio is roughly 1 : 833

 Local police are prohibited from crossing province lines to shut

down counterfeiting

 Many provinces, dependent on the tax revenues from

counterfeit companies, turn a blind eye to counterfeiting
The Fine for counterfeiting
Criminal prosecutions are only leveled on
counterfeiting offenses where the damages total more
than $6,000 for individual counterfeiters and $18,000
for corporate violators.

 “Usually the fine is just a cost of doing business for

first time offenders“
Tracking down counterfeiting.
Novartis case study

The case.

Fight back.

The Novartis strategy.

Ways to protect yourself from
Counterfeiting
 Scrutinize labels, packaging and contents

 Seek authorized retailers

 Watch for missing sales tax charges

 Insist on secured transactions

 Seek quality assurance in the secondary market

 Report questionable span and faulty products

 Be vigilant when buying abroad

 Warn your kids ,family and friends about counterfeits