Economic Impact of Counterfeiting

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1 Economic Impact of Counterfeiting Why current practice makes it so difficult to assess economic impact and steps toward a solution Alexander A Theil, M.A. Transatlantic IP Collaboration Conference April 27, 2009, Washington D.C.

2 FORMULA There is no easily available formula to assess the economic impact of counterfeiting. Most attempts focus on a) Loss to the brand owner b) Illegitimate profit of the counterfeiter Whatever formula one uses seizure figures will always be one (often the only hard ) variable. To value seizure figures requires: collecting seizure data, analyzing seizure data valuing seizure data

3 Collecting Seizure Data Seizure Data can include Finished Products Semifinished Products (bearing trademarks) Components (bearing trademarks) Packaging (bearing trademarks) Labels (bearing trademarks) Instruction Manuals (bearing trademarks) Paper Documentation Sales records Production records Warehouse stock records Orders Invoices etc. Computer hard drive communication Etc. However, in the vast majority of cases only the first (and maybe the second) are seized!!!

4 Analyzing Seizure Data Sales Documents: Genuine

5 Valuing Seizure Data Ex-Factory Price of Counterfeit Product? Retail Price of Genuine Product? In which Market? (Counterfeits are sold globally and prices vary considerably from market to market) What Value for semi-finished Products? What Value for Packaging? What Value for Labels?

6 THE METRICS TRAP For lack of better metrics most in-house staff are evaluated and incentivized by seizure figures They (and the service providers they use) therefore focus primarily on obtaining high seizure figures Falsification of seizure figures and other fraudulent activities to increase seizure figures are endemic in the anti-counterfeiting industry

7 Copy reported to brand owner Enforcement Copy

8 THE METRICS TRAP Trap Orders service providers place an order of counterfeit products, then seize it (this might include teaching an innocent manufacturer how to make counterfeits) Fake raid actions No raid action happens at all seizure lists are freely invented Old Photographs of previous cases are recycled to make up a nice report

9 TYPICAL SERVICE PROVIDER SET-UP General Manager Client Communication Report Writers Enforcement Team Investigations Team The person talking to Client Investigations Manager South Investigators Investigations Manager East Investigations Manager North Local Informants Local Informants The person doing the work Investigators Investigators

10 WHAT WOULD BE REQUIRED TO GET A BETTER GRIP ON EVALUATION GOVERNMENTS: Routine seizure of paper documentation and electronic data in criminal and administrative cases. Disclosure of above to brand owner INDUSTRY: Develop a qualitative evaluation process which puts anti counterfeiting measures into a relationship with sales figures, advertisement spending, etc. etc. Upgrade anti counterfeiting function to an appropriate level in order to develop the above Develop operational anti counterfeiting processes which do not encourage fraud and corruption

11 THANK YOU Alexander Theil

Counterfeit Medicinal Products. FINLAND Roschier, Attorneys Ltd.

Counterfeit Medicinal Products FINLAND Roschier, Attorneys Ltd. CONTACT INFORMATION Mikael Segercrantz Robert Hagelstam Roschier, Attorneys Ltd. Keskuskatu 7 A 00100 Helsinki, Finland 358.20.506.6000 mikael.segercrantz@roschier.com