Fake Brands Cost $210 Million in 2005: Counterfeit & Piracy Report

Wednesday September 14, 2005 — Calgary, Canada — Based on worldwide counterfeit enforcement activity (investigations, raids, seizures, arrests, charges, convictions, sentences, civil litigation) for the first 6 months of 2005, as reported through the DOPIP Security Counterfeit Intelligence Report, 1,690 incidents valued in excess of $3 Trillion (US Dollars) were analyzed from 89 countries.

The top 10 countries reporting incidents of intellectual property violations:

1. USA, 158 incidents, $119 Million (USD) seizures and losses.
2. India, 51 incidents, $2.6 Million.
3. UK, 31 Incidents, $27.7 Million.
4. Philippines, 17 incidents, $16.0 Million.
5. Canada, 16 incidents, $2.3 Million.
6. Malaysia, 12 incidents.
7. China, 11 Incidents, $5.0 Million.
8. Italy, 7 Incidents, $7.4 Million.
9. Malta, 9 Incidents, $2.5 Million.
10. Nigeria, 7 incidents.

The top 20 countries pursuing all forms of counterfeiting and pirate activity (documents, identification and intellectual property):

1. USA, 745 incidents, $222 Million (USD) seizures and losses.
2. India, 229 incidents, $15.0 Million.
3. UK, 136 incidents, $41 Million.
4. Malaysia, 63 incidents, $8.5 Million.
5. Canada, 50 incidents, $80.0 Million.
6. Philippines, 37 incidents, $3.0 Trillion.
7. Australia, 34 incidents, $3.3 Million.
8. China, 31 incidents, $70.0 Million.
9. Japan, 31 incidents, $4.4 Million.
10. South Africa, 28 incidents, $21.3 Million.
11. Pakistan, 19 incidents.
12. Russia, 16 incidents, $124 Million.
13. Italy, 15 incidents, $25.0 Million.
14. Malta, 13 incidents, $2.5 Million.
15. Thailand, 10 incidents, $2.4 Million.
16. Ireland, 10 incidents.
17. Nigeria, 10 incidents.
18. Czech Republic, 9 incidents.
19. Indonesia, 8 incidents, $6.0 Million.
20. Bangladesh, 8 incidents, $1.3 Million.

For more information: http://www.goldsec.com/Security_Research.htm

The most popular items to counterfeit:

1. Financial Instruments, 661 incidents worth $3.0 Trillion seizures and losses.
2. Entertainment & Software, 312 incidents worth $185 Million.
3. Identification, 286 incidents worth $88.8 Million.
4. Other Documents, 128 incidents worth $7.7 Million.
5. Clothing & Accessories, 114 incidents worth $163 Million.
6. Drugs & Medical, 43 incidents worth $13.9 Million.
7. Food & Alcohol, 31 incidents worth $8.5 Million.
8. Industrial Goods & Supplies, 25 incidents worth $14.0 Million.
9. Cigarettes & Tobacco Products, 22 incidents worth $108 Million.
10. Computer Equipment & Supplies, 16 incidents worth $9.3 Million.
11. Electronic Equipment & Supplies, 15 incidents worth $27 Million.
12. Other Goods, 11 incidents worth $123 Million.
13. Jewelry & Watches, 10 incidents worth $5.7 Million.
14. Perfume & Cosmetics, 8 incidents worth $2.5 Million.
15. Toys, 5 incidents worth $4.7 Million.

The top brands counterfeited:

Cigarettes & Tobacco Products

1. Marlboro.
2. Newport.

Clothing & Accessories

1. Louis Vuitton.
2. Nike.
3. Gucci.
4. Adidas.
5. Burberry.

Computer Equipment & Supplies

1. Canon.
2. HP.
3. Oki.
4. AMD.
5. Epson.

Drugs & Medical

1. Viagra.
2. Cialis.
3. Durex.
4. Lipitor.

Electronic Equipment & Supplies

1. Sony.
2. Bosch.
3. Duracell.

Entertainment & Software (including game software)

1. Microsoft.
2. Sony.
3. Adobe.
4. Autodesk.
5. Macromedia.

Automobiles & Parts

1. BMW.
2. GM.
3. Honda.
4. Toyota.

Jewelry & Watches

1. Chanel.
2. Rolex.

Golf Equipment & Supplies

1. Titleist.
2. Callaway.

In summarizing the activity for the first half of 2005, Glen Gieschen, Managing Director of Gieschen Consultancy stated "Counterfeiting in the first 6 months was focused in four primary areas, financial instruments, goods & services, identification, and other documents. Financial instruments account 39% of the incidents which include currency, bonds, checks, credit and debit cards. Goods & services account for 36%, which include brands (trademarks) and copyrighted goods such as CDs, DVDs, handbags, shoes, shirts, medication, alcohol, vehicle parts, cigarettes, etc. Identification represents 17% of the incidents such as passports, drivers licenses, birth certificates, social security cards, etc. The final area of concern is other documents and packaging which accounts for 8% and includes event tickets, certificates of authenticity, books, degrees, transit passes, etc.

The largest area of growth has occurred in intellectual property theft which accounts for 23% of all incidents such as pirated works (copyright infringement) and fake goods (trademark infringement). Given the magnitude of the problem, more than 355 brand and copyright owners choose to track down the counterfeiters, build cases for prosecution, and assist law enforcement personel in raids. Due to the significant resources used in these investigations it is not surprising that they yield significant seizures of goods, 40 million items in the first half of 2005, and detail descriptions of the operations past sales, 802 million items sold valued at $210 Million.

The market for counterfeit and pirated goods is also increasing as a result of the Internet which provides a number of advantages over traditional sales and distribution channels. Through the use of spam, internet auctions, retail sites, chat rooms, and peer to peer file sharing services, any type of item can be sold. One of the greatest advantages the Internet provides is anonymity, whereby the buyer has little or no means to verify the legitimacy of the seller. The next problem occurs when the quality of the goods and authenticity of the items is questioned, usually when the items are delivered. Another challenge is ability of the seller to move the site quickly or set up a new one under another name and domain. All of these factors spell frustration for brand enforcement personnel who need to first locate these sites, verify the items are counterfeit, then identify the entities and individuals involved. For example, a search on Google for "Louis Vuitton" yields 3.5 million hits which is nearly impossible to sift through. In this situation, investigators use automated software to search and spider the Internet for sites which sell counterfeit items. However in many cases, it is not cost effective to pursue small retailers or individuals who are posting a single or small number of items on sites such as eBay. In this manner, the Internet varies greatly with physical locations selling to individuals, such as flea markets, boot sales, and street vendors who sell their goods directly to the consumer and in the vacinity of other vendors. A raid of the entire area of Canel street (New York), Silk Alley (China), Newark Market (UK), or Luzhniki market (Russia) can search 20 - 50 vendors, large and small in a matter of hours, yielding Millions in counterfeit goods. Unfortunately, the ability to investigate and raid a number of vendors in cyberspace is more difficult and costly."

About Gieschen Consultancy

Gieschen Consultancy, provides counterfeit intelligence analysis and security research relating to documents, products and intellectual property. Gieschen Consultancy educates clients regarding counterfeiting issues, and assists in developing anti-counterfeiting, brand protection and enforcement solutions.
For more information visit http://www.gieschen.com/.

About DOPIP SCI Reports

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As a member of the DOPIP Security Counterfeit Intelligence group, you will be supporting a global education campaign to raise awareness of counterfeiting and piracy issues.

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Contacts

Glen Gieschen
Managing Director
Gieschen Consultancy
Glen@Gieschen.com
Phone 403-256-5680
Calgary, Alberta Canada