ENFORCEMENT

Office of the Intellectual Property Enforcement Coordinator
Over the past two decades, the supply of counterfeit
goods has proliferated, and shifted away from so-called
“underground” or secondary markets (e.g., street corners,
flea markets) to primary markets, including e-commerce
platforms, corporate and government supply chains,
traditional retail stores, and other marketplaces where
consumers generally pay retail prices and feel confident
that they are purchasing genuine goods. 43 Where
consumers once were able to identify counterfeit
products by relying on “red flag” indicators—such as
suspicious location of the seller, sales condition, atypical
pricing, or poor quality packaging—consumers are now
increasingly exposed to counterfeit products in settings
and under conditions where the articles appear genuine. 44
In the primary market, including within the online
environment, counterfeit goods so closely resemble the
genuine articles that the two are often indistinguishable
to the consumer. 45
Given the complex nature of counterfeiting
operations, successful interdiction of smuggled
counterfeit goods is difficult and takes time. During that
time, the international supply chains are vulnerable. As
bad actors continue to adapt to a changing commercial
environment, counterfeit activity in all sectors poses risks
to industries and governments around the world.
As with the copyright piracy examples discussed
above, entities engaged in the trade of fake goods
similarly employ a range of intricate methods to
drive illicit profits and to attempt to evade detection.
The complexity of the networks involved in the
manufacturing, distribution, marketing, and sale of fake
goods has made IP enforcement difficult. Nonetheless,
the consequences of detection are sufficiently great
that traders of illicit products in the form of counterfeit
goods take calculated measures to reduce risks. Below
is a description of a variety of methods syndicates
use to facilitate the trade of illicit goods in the form of
counterfeit products at various points along the supply
chain, from manufacturing to final sale.
Manufacturing
To reduce the risk of having their contraband seized,
counterfeiters conduct “just in time” production,
minimizing inventories, while storing any finished products
ready for shipment in remote warehouses registered
to front (sham) companies. 46 Counterfeiters and illicit
traders, often with the tacit consent of local government
FIG. 11: Example of False Covering.
officials, take advantage of “safe haven”-like conditions to
manufacture and source a wide variety of fake products.
During manufacture, counterfeit goods are often
disguised by covering over the well-known logo with
a peel-away patch or outer covering in order to make
it look like a product produced by a lesser-known
manufacturer (FIG. 11); by using decoy boxes; or
shipping the “blank” product separate and apart from
the branded labels, hang tags and similar articles, so that
they can be “finished” in the country of consumption,
after clearance through customs. 47
Source/Provenance Economies.
A small handful of “provenance economies” constitute
the largest suppliers of counterfeit products to the
U.S. and European Union (EU) economies. Counterfeit
products originating from the People’s Republic of
China and Hong Kong (often as a transit route for
Chinese goods) constitute 87 percent (by dollar value)
of all goods seized by CBP. 48 Customs authorities
in the European Union have reported similarly high
percentages, with 79 percent of seized goods (by value)
FIG. 12: Fiscal year 2015 IPR Seizure Statistics.
Source: CBP, Office of Trade (2016)
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