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Joint Strategic Plan on Intellectual Property Enforcement Piracy continues to evolve with technology, and illicit actors have adapted to continue to evade law enforcement tactics, subjecting artists and the creative communities to economic losses and other harms. As technology continues to advance, new and different forms of digital piracy will likely emerge, generating more problems for copyright owners and creating new technological and legal issues unless appropriate and agile strategic actions are commenced. 40 2. Schemes Employed to Facilitate Illicit Trade in Counterfeit Goods. Whether the intellectual property right at issue is a trademark, copyrighted content, a patented invention or design, a trade secret, or a combination of one or more rights, the illicit trader seeks to misappropriate another’s right and investment by producing and/or selling products as if they were genuine (e.g., originating from the rights holder or otherwise authorized, such as by a license agreement). Along with the advent and many benefits of new technologies, advanced methods of manufacturing and distribution, and the rise of e-commerce, these developments have also enabled counterfeit and pirated goods to become increasingly sophisticated, prevalent, and hard to detect. 41 Counterfeiters invest their resources in high-value products, affecting everyone along the supply chain, from manufacturer, to distributor, to retailer, and ultimately to the consumer. Products from every industry—from food to personal care products, automotive parts to medicines, electronics to footwear, extension cords to sunglasses, software to jewelry—are being counterfeited today. 42 The U.S. Department of Homeland Security (DHS) seizes counterfeit products in more than 600 different product categories (FIG.10). Everything that can be faked is being faked, and consumers are often helpless to discern legitimate products from illegitimate ones based on photos on e-commerce sites, or even with the product in hand in traditional brick-and-mortar stores. FIG. 10: Diversity of Counterfeit Products in the Marketplace. SECTION 1 26
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) SECTION 1 27
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ACKNOWLEDGEMENTS With thanks to, an
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