Brands have been warned to develop detailed strategies to tackle online counterfeiting as forgery continues to hit sales and brand image in the ecommerce boom.
Last month, young fashion brand Lipsy accepted a five-figure sum as compensation from Worcester-based etailer WantThatDress.co.uk, after the website allegedly sold fake copies of the brand’s designs. Also in June, womenswear brand Karen Millen revealed it had prevented the sale of £2.6m of fakes after working with marketplaces to tackle fraudulent sellers and targeting factories making counterfeits. It removed 23,000 items from marketplaces and 38,000 URLs from search engines.
Statistics for the scale of the problem are difficult to find, but campaign group Anti Copying in Design (ACID) estimates 10% of global trade is counterfeit. The European Commission reported last year that in 2013 36 million articles were detained by EU customs, with the value of the equivalent genuine products estimated at more than €768m (£546m). Clothing comprised the largest proportion at 12%.
Gavin Llewellyn, a senior associate at law firm Stone King, which advises ACID, tells brands to keep an audit trail of designs from inception to sale, retaining “everything from preliminary scribblings on the back of an envelope to CAD drawings” to prove ownership.
To identify the scale of counterfeiting, brands can conduct in-house searches or appoint brand protection firms like MarkMonitor, NetNames or Thompson Reuters, that can provide regular reports on counterfeiting activity affecting the company.
Haydn Simpson, commercial director for Western Europe at NetNames, explains some counterfeiting originates in the UK but much of it comes from the Far East, with rising levels from South America, India and Russia. “These countries are seeing huge demand from consumers for branded goods and the counterfeiting market is fuelled by that local demand. Once it’s been made locally they then look to export it as well.”
A brand protection officer at Lipsy says the label finds infringements through staff tip-offs, customers who have purchased counterfeit goods, online searches and private investigator monitoring of online and high street offenders.
They add products “featuring a celebrity, are often targeted”, while “many offenders use popular online marketplaces like Amazon or eBay to sell their goods”.
To tackle counterfeiting via marketplaces, brands can use these sites’ established anti-counterfeiting programmes, such as eBay’s Verified Rights Owner (VeRO) scheme, by writing to them and requesting they remove listings.
In October, luxury brand house Richemont set a legal precedent enabling labels to force internet service providers to block websites selling fakes where the brand has a registered trademark. However, where the brand does not have this the fakes can still be sold.
Websites can also be reported to Trading Standards, which can take criminal action, or the Met Police, which launched a cyber crime unit in October that will automatically block websites proven to sell fakes.
If those behind the forgeries are UK-based and can be identified, legal cease and desist letters can be sent, leading to the signing of a legal undertaking that the brand will not sue if the counterfeiters promise not to do it again. Sarah Wright, partner and head of trademarks at law firm Olswang, which advised Lipsy, explains many fraudsters will be individuals who when challenged will move away from that brand to focus on another.
“But if you want to make a noise you can issue legal proceedings and require the defendant to pay compensation. If they don’t have the money to pay, you have the option of commencing contempt of court proceedings and/or making them bankrupt. Taking that kind of action sends a very strong message that you won’t tolerate counterfeiting,” she adds.
Tracking down counterfeiters abroad is a harder task; legal action will only be effective in the country where the defendant is based or has assets.
Given the volume of counterfeits that originate in China, Wright recommends all brands obtain trademarks in China and register their marks with Chinese customs officials, who can then stop counterfeit goods being exported. Brands can also contact HM Customs & Excise to prevent imports from counterfeit websites.
Finally, Simpson warns many counterfeiters create social media profiles mimicking official brand distributors that direct shoppers to counterfeit webpages to buy product, so brands must be aware of this.