Jul 2022

Managing cross-border anti-counterfeiting

Introduction

What follows is a global look at combatting counterfeiting and how public institutions can carry out their roles abroad, essentially through diplomatic networking.

What is meant by “counterfeiting” and how is it perceived?

Counterfeiting is the process of making and marketing a forged version of a protected product. It is an ancient phenomenon that alters the rules of the competitive market, damaging companies that operate legally and representing a danger to the safety and health of consumers.

As stated recently during a session of the Italian Parliamentary Commission investigating this serious problem: “counterfeiting…is a transverse phenomenon that is intimately connected to tax evasion, the exploitation of illegal labor and assisting illegal immigrants, against a backdrop of money laundering and the reuse of the proceeds of crime, closely linked to organized crime”.

Criminal organizations, through their widespread distribution network and evolved illegal business model, have demonstrated, once again during the current pandemic, an extraordinary ability to respond to the market and adapt to changes in the national and international context, including through the diversification of their activities, between the management of illegal activities and the reinvestment of capital into the licit economy, and the related expansion of sources of funding and control over the ground. (See EUIPO: Why do countries export fakes?)

Tackling the problem

Intellectual property rights (IPR) are important drivers for the competitiveness of businesses, especially in the context of an economy increasingly based on the enhancement of intangible assets.

Trade in counterfeit goods is a key source of income for organized criminal groups. The import and export trade in counterfeits is part of a wider trade in smuggled illicit goods, which is prevalent in China and Southeast Asia (SEA), as well as a grey economy problem of non-compliance with regulations and non-payment of tariffs and duties.

The involvement of Chinese organisations as one of the most active groups in the transnational organized crime in counterfeiting is, with no doubt, deep.

To understand the reasons of this significant involvement, it should be remembered:

  • China’s entry into the World Trade Organization (WTO) in 2001 and the lifting of ceilings on import quotas in 2005 under the Multifiber Agreement, uncovering details related to the low costs of manpower and of products manufactured in that country; and
  • the decision of many Western producers to proceed in a “commercial conquest” of China by delocalizing their manufacturing operations to exploit the extremely attractive factor of low cost of production.

Despite significant advances in terms of the adoption of formal Intellectual Property Rights (IPR) protection, enforcement of and compliance with IPR regulations remains a contested issue in one of the world’s major contemporary economies.

In the last few years China’s “party-state” has been practicing an industrial policy that mobilizes resources to develop strategic industries, protecting them from global competition while enjoying the openness of the global market (G.Wen, 2019). Gabe Lipton (2018) wrote that “China has embraced a sort of à la carte globalization, adopting the rules and standards it finds most useful – like the ability to expand its companies and investments abroad – while discarding those that threaten its unique political and economic model”.

Research conducted by UNICRI (the United Nations Interregional Crime and Justice Research Institute) on behalf of Italy’s Ministry of Economic Development revealed that Customs agencies, in some “sensitive” ports of entry into the European Community, cannot control all the goods entering and leaving the ports and departure points, as this would cause a blockage of commercial traffic. Therefore, counterfeiters can operate with relative ease: altering the documentation in order to hide the true origin of the goods to avoid suspicion of the contents of the shipment; hiding the goods in a double-bottomed container / truck; or transported together with authentic items or "cover goods” shipped in the same container and, with false documents, declaring to Customs the lower fiscal value of the imported products. The study-research corroborated a series of elements and related arguments previously made about counterfeiting management.

As an example, in the AB case (counterfeited footwear in Naples), investigations conducted by the Italian Economic and Financial Police revealed that the illegal traffic began in China, where production took place, and then moved to Italy where the goods were trans-shipped or cleared through Customs by concealing part of the materials and using false documentation in breach of fiscal regulations, and in some cases by bribing the officials. 

The organization relied on international connections, which, sometimes, allowed it to store the goods temporarily in Greece, Spain and Hungary, where the lower number of Customs inspections, or the more relaxed approach of inspectors facilitated the import process. The goods were then sent to Italy, apparently as intra-Community imports, thus evading more accurate controls. Some of the goods and materials were imported directly from China through a vast organization and direct and indirect contacts with the Asian manufacturers who were mainly working in the Zhejiang region. At the same time, and to meet the considerable demand level, the group also used a network of collaborators working for various factories scattered around Campania region. 

Usually, sale price is determined by the level of reproduction exactness/quality of the item: whether approximate (lesser price) or identical (higher price), a fact confirmed by wire taps recorded during investigations. 

As for East Asian products, very often the items were produced in the same factories in China that produced the original brand. During the day the legal production took place and, during the rest hours, the same facility was used to produce the illegal copies. It can be impressive how high the level of similarity between the true and the false is, thanks to the availability of the same machinery, methods and often raw materials of the genuine product.

According to the investigations, it was also revealed that the manufacturers and the wholesale customers (“permanent customers”), who were fully aware of what they were buying, confirmed that they were all part of the same criminal plan. This arrangement often constitutes the lifeblood of a criminal alliance. (See UNICRI: Counterfeiting and UNICRI: Report on Counterfeiting and Organized Crime, The Italian Case.)

Who enforces laws and regulations?

To support both national and international companies in the fight against counterfeiting the institutions have refined and continue to refine sensitivity, skills and legal instruments. A lot has been done by the international community of stakeholders over the years, but companies do not always have awareness and knowledge of the means at their disposal to protect themselves. (See European Commission: Enforcement and protection.)

Before filing a lawsuit, you should denounce the infringement to the local police. If you must go to court, you will need to know which local authority/ies deal/s with IPR infringements and how you must lodge a formal complaint and follow it up.

Industry and right holders in general must help authorities. The fight against counterfeiting and piracy can only be won if both the right holders and the authorities cooperate closely.

Without the knowledge of the right holders, the ones who know best what rights they have and what the market for their products and services looks like, authorities cannot be efficient and effective in their action. The authorities are the only ones that can actively fight criminality. (See UNICRI/INDICAM: Dangerous Liaisons.)

In this regard, it could be highlighted as a good example what has been done in Italy in terms of regulation, prevention and enforcement, thanks to strong institutional commitment and public-private collaboration. 

Italy’s "Anti-Counterfeiting System" brings a renewed approach to the fight against counterfeiting by making the legislative framework more robust, creating a more responsive institutional structure, and reducing red tape.

The Ministry of Economic Development (MISE) and the National Council for the Fight against Counterfeiting and Italian Sounding (CNALCIS), with the support of the Secretariat (Directorate General for the Protection of Industrial Property – Italian IPO/UIBM), play an essential role, implementing strategic coordination required by law and promoting the necessary operational response cooperation among different governmental agencies, as well as between public and private stakeholders. (See Italian Ministry of Economic Development and Consiglio Nazionale per la Lotta alla Contraffazione e all’Italian Sounding.)

The MISE also strengthens its commitment in the fight against offline and online counterfeiting thanks to a strong and proven partnership with the Guardia di Finanza, the Economic and Financial Police, which has the core mission to fight against so called “white collar crime”.

The Guardia di Finanza also operates abroad through its network of officers located at the main Italian Embassies, with a diplomatic status, aiming to enhance any kind of informative cooperation with local counterparts and facilitating the sharing of experiences and mutual assistance in the same operational matters.

Agencies and tools for the fight against counterfeiting

A global phenomenon of such complexity and scope requires a response that integrates and coordinates different competences at national and international level.

This means, as part of an overall strategy, that improvement of customs effectiveness is extremely important in order to prevent all kinds of illicit trade, partnering with organizations that are also seeking to stop human, wildlife, narcotics, contraband and other trafficking.

Such issues are borderless and require joint efforts to formulate solutions. 

The role of the World Trade Organization (WTO), headquartered in Geneva, Switzerland, is essential in the international landscape of commerce and relationships, serving as a forum where countries can engage in formal discussions and resolve disputes on any number of trade-related issues. (See What is the WTO?.)

In this framework members countries can also negotiate trade agreements to resolve disputes and any related problems that arise. 

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, established during the “Uruguay Round”, is the main legal framework for conducting trade involving intellectual property, aiming to create “more order and predictability” and to settle disputes “more systematically” in the global economy. 

(See WTO, Intellectual property: protection and enforcement.)

We can say that the World Trade Organization and TRIPS have been successful when we see how much international awareness there is now among its membership regarding IP and related issues.

The formation of the World Customs Organization (WCO) has further served in its role as a platform of exchange for the international community. 

The WCO helps member countries dealing with trade related issues like counterfeiting. It is a space where any issues and concerns can be discussed, which acts as a reinforcement for TRIPS obligations. WCO’s members can count on the Customs Enforcement Network (CEN), a “web-based communication system” where custom officials can securely exchange information in “real time”. 

(See World Customs Organization.)

In their cross-border business, companies looking to combat counterfeiting globally can also access the following EU resources:

  • The network of the EU IP Helpdesk (see www.iprhelpdesk.eu), which offers a broad range of informative material, a Helpline service for direct IP support as well as on-site and online training. Their main goal is to support IP capacity building along the full scale of IP practices: from awareness to strategic use and successful exploitation. 
  • At EUIPO, the IP Enforcement Portal (IPEP), an interactive, reliable and user-friendly tool for EU intellectual property rights (IPR) enforcement, that serves as a secure communication tool between all related parties: rights holders (and/or their legal representatives), EU enforcement authorities, the European Commission and the EU delegations around the world. IPEP is the integration of the Enforcement Database (EDB), the Anti-Counterfeiting Intelligence Support Tool (ACIST) and the Anti-Counterfeiting Rapid Intelligence System (ACRIS). These once independent tools are now modules within a single portal:
    • report detentions (ACIST); 
    • exchange information (EDB); 
    • report non-EU cases (ACRIS).

The EUIPO will continue to develop tools and studies to support the fight, exploring all possibilities including disruptive technologies such as Blockchain and artificial intelligence (AI), and to foster contacts between law enforcement authorities, rights holders, intermediaries and EU and international organisations involved in trade and IP. (See European Union Intellectual Property Office.)

E-Ambrosia database, the EU geographical indications register of the names of agricultural products and foodstuffs, wine, and spirit drinks that are protected across the EU. (See European Commission, eAmbrosia.)

Data sharing is fundamental to properly address the issue. Data collection and analysis is one of the best tools for optimizing the efforts to build global intelligence on IP crimes. This has become increasingly common, with research noting its use across a range of core state functions, including crime control, counterterrorism, taxation, and regulatory issues ranging from the environment to financial markets.

International cooperation, at a progressive enforcement level, is conducted through INTERPOL, the international police organization based in Lyon, France. This is a global organization, which helps law enforcement authorities across the world to improve their capacities by the exchange of information and best practices. INTERPOL is also known for its red notices (a wanted fugitive is on the run) and yellow notices (alert for a missing person).

Europol, headquartered in The Hague, Netherlands, sets up and coordinates cross-border operations against the most dangerous criminal groups in the EU. This European institution facilitates direct communication between investigators from national law enforcement authorities. Europol analysts and experts support investigators in real-time, and often on-the-spot, while taking an active part in complex operations. In other words, they make cross-border investigations more efficient. As the criminal information hub for law enforcement organizations, Europol is also playing its part in supporting law enforcement authorities in the EU Member States to counter threat actors that are using disinformation campaigns and deepfake content to misinform the public about events, to influence politics and elections, to contribute to the perpetration of extortion, fraud, disruption of financial markets and to manipulate shareholders in a corporate context.

Many countries, worldwide, and in the EU have made considerable efforts to pursue an effective campaign to combat counterfeiting in its various forms, including counterfeiting relating to the agri-food sector, so important to countries with significant Geographical Indications, with a strategy that has been supported on the ground by the excellent work of the law enforcement agencies.

(See UNICRI, Strategies for technical-juridical training and awareness-raising on counterfeiting.)

As in many other countries, Italy’s Ministry of Foreign Affairs and International Cooperation (MAECI) is mandated to oversee Italy’s relations with international organizations through its network of embassies around the world.  It also can offer assistance to economic operators abroad or anyone else dealing with counterfeiting issues through the action and expertise of the Italian Trade Agency offices overseas.

Within a process that, at the national level, sees numerous institutional and private actors working together, the role of the governmental sector of Foreign Affairs has become fundamental.

The institutions and agencies which may facilitate access to foreign markets for businesses in their country, attract foreign direct investment (FDI) to them and monitor international rules to serve their countries national interest (inward and outward), according to the well-known conception of “economic diplomacy”: the diplomatic activity that promotes the state’s economic interests, using the best resources to achieve a specific foreign policy objective.

(See Italian Ministry of Foreign Affairs and International Cooperation.)

Current trends include increasing collaboration between state and non-official agencies, and increased importance given to WTO issues, the negotiation of free trade and preferential trade agreements, double taxation avoidance, and the like. 

In this context, it is very important that the figure and the role of the Ambassador/Head of Mission, the person heading an official outpost composed of generalists and specialists, also acts as a brand manager for their country, including dealing with the matter of protection of intellectual property rights. 

What can I do if have a problem with counterfeiting abroad?

Embassies and Consulates are a “port of entry” for anyone dealing with IPR matters or seeking useful information regarding a future case of counterfeiting, having knowledgeable staff and experts providing information and support on cases of infringement of IPR of goods and services in relation to national interests.

In many Embassies or Consulates, within the confines of the provisions of the Vienna Convention of 1961 regarding the duties and functions of a diplomatic officer abroad (no investigation allowed, neither give legal advice or intervene in judicial cases, provide law enforcement services, and so on), anyone can count on the presence of:

  • the Economic and Commercial Affairs Office/Section headed/managed by an experienced diplomat who can provide information and assistance; and/or
  • a LO (Liaison Officer/Police Attaché) of a Law Enforcement Agency, with diplomatic status, who has tools to gather and exchange “intelligence” and information with local LEA counterparts, aiming to enhance the cooperation in the fight against any potential case of illicit trafficking.

It is worth noting that “intelligence” qualifies significant information or potentially significant for an enquiry or potential enquiry, an “information which has been evaluated and analysed and which had been identified as being of material value or potential material value”.

Information and intelligence can be obtained/exchanged from/with other international law enforcement authorities, but once a formal investigation is launched by involvement of a prosecutor, the use of a Rogatory Letter is required.

International cooperation through various legal entities broadens global trademark enforcement efforts through the enhancement of information gathering and joint enforcement application. However, barriers still exist connected to culture, seriousness of enforcement and engagement, and technological difficulties that affect the level of enforcement success in deterring intellectual property crimes.

Each Embassy / Consulate usually has its own web portal where you can find the page dedicated to the contacts and addresses of the individual offices.

What information can Embassies and Consulates provide?

Embassies and Consulates can provide information, in relation to the country or territory of interest, on the state of bilateral political relations, on the security framework, on the characteristics of local interlocutors, on the community of compatriots in the country of interest (for example: the presence of Italian subjects abroad such as the Italian Trade Agency offices, Chambers of Commerce, banks, professional firms or Italian consultants, other Italian companies, influential communities of Italian origin), on development cooperation programs and cultural initiatives: all information that can help guide operators in defining their commercial strategies. (See www.ice.it/en.)

What kind of support can be requested from Embassies and Consulates by local Authorities?

By way of example, you can ask the Embassy (Economic and Commercial Affairs Office) or the Consulate (Trade Section) for help in meeting with the local institutional interlocutors (therefore from the first phase of entry into the market), or you can request support for participation in a tender, or even for overcoming any critical issues (for example in the event of disputes of a customs or tax nature, violations of intellectual property or raising of non-tariff barriers).

Can I contact the Embassy and Consulates even if there are no specific problems?

Yes, you can, even if, often, companies decide to contact Embassies and Consulates only when they have encountered a problem. Assistance to companies in resolving disputes or overcoming critical issues that may arise abroad is certainly an integral part of economic diplomacy activities. However, if the Embassies and Consulates are involved only when the problem has already occurred, the effectiveness of their intervention may be reduced.

In countries where, in addition to the Embassy, there are also one or more Consulates, when should I contact the Embassy and when the Consulate?

Consulates exercise their functions in a specific area of the country ("consular district"). Companies that already operate in an area that falls within the consular district or are interested in investing or having difficulty in that specific area can contact the territorially appropriate Consulate directly.

In the case of a company that has interests in a country without reference to a specific area, this can be addressed to the Embassy. In addition, it is necessary to contact the Embassy for contacts within the central authorities of the country, while it is possible to contact the Consulate for contacts within regional authorities.

In the event of uncertainty about jurisdiction, it is always possible to contact the Embassy in the first instance, which might redirect the company to the Consulate.

Are there domestic Chamber of Commerce offices abroad?

From a legal point of view, the Chambers of Commerce are autonomous bodies officially recognized by governments of each country, regulated by public law with functional autonomy for the promotion and, administratively, support to the economic activity. Chambers of Commerce are an essential and credible intermediary between government, business and the public, at domestic level and abroad. 

(See WTR, Anti-counterfeiting and Online Brand Enforcement: Global Guide 2022.)

Once the requested assistance has been received, is it useful to continue to inform the Embassy or Consulate about the development of my business in the country?

It is essential to continue to inform the Embassy or Consulate to report not only any critical issues, but also positive results. Assistance on a specific topic must not to be considered as an end, but as part of a structured relationship that should ideally be maintained over time.

Is the diplomatic network assistance free of charge?

All information, guidance, and institutional support services offered by the diplomatic-consular network to businesses / economic operators / individuals are always entirely free. 

The only paid services that can be requested from companies are those that concern the use of the premises of the Embassies or Consulates for holding conferences, seminars, events or interpreting services intended for non-institutional activities.

Comparative Guide


Contributing Firm


EXPERT ANALYSIS

Chapters

Brazil

Tânia Aoki Carneiro

Canada

Lorne M. Lipkus
Melissa J. Tarsitano

China

Epstein Drangel - IP Counselors Beijing

Greece

Alkisti-Irene Malamis

Israel

Roy Kornick

Italy

Graziana Ercolanelli
Monica Bucarelli

Mexico

Diana Martínez
Roberto Arochi

The Netherlands

Fleur Boom
Gie van den Broek
Iris van der Wal

Spain

Ana Padial
Gonzalo Barboza
Miriam Anidjar Mogeda
Patricia Ramírez Melgen

Ukraine

Alexander Pakharenko

United Arab Emirates

Felicity Hammond
Munir Suboh

United Kingdom

Fiona Lawson
Simon Barker

United States

Ashly E. Sands
Danielle S. Futterman
Gabriela N. Nastasi
Jason M. Drangel
Kerry B. Brownlee

Uruguay

Agustina Viera
Daiana Pereira
Lucia Cantera
Virginia Cervieri