illicit trade – intellectual property (ip) infringement & counterfeiting · 2017. 1. 23. ·...

Illicit Trade – Intellectual Property (IP) Infringement & Counterfeiting

19 January 2017 | Private sector related corruption risks and illicit trade

analyticalalternatives.com

http://www.analyticalalternatives.co.uk/

Illicit Trade – Intellectual Property (IP) Infringement & Counterfeiting

AAL - Introduction

Global counterfeit overview

Myanmar counterfeit overview

Impacts of counterfeiting

Summary



AAL - Introduction

Formed in 2002, AAL is a Global Security consultancy operating in many industry sectors.

AAL’s evolution has been driven directly by requests from its clients to address Brand Protection issues.

Custodian Solutions: Evidence Manager | Investigation Manager | Legal Manager

“The most successful new platform for anti-counterfeiting evidence capture, management and enforcement” – Global Anti-Counterfeiting Award for Technology 2016 Winner

Operational standards: we act in strict accordance with UK, European and US Laws.

Disclaimer: Nothing herein constitutes legal advice or guidance.


Vorführender

Präsentationsnotizen

AAL is a Global Security consultancy – we gather the information, manage investigations and provide solutions to clients worldwide. Key focus area is Intellectual Property protection & Anti-counterfeiting Brand Protection. Primary Sectors: pharmaceutical, alcohol, automotive, agrochemical and FMCG. Operating model, developed over the last 15 years on every continent is to work closely with local information sources, Legal Enforcement Agencies and legal partners to understand the particular cultural and geo-political context to brand protection threats. My background Pharma and Computer industries – working with AAL since 2007 – first visited Myanmar in 1997 - lived in Yangon since 2012 but operated widely throughout the region- conducting due diligence assignments and investigations into a variety of counterfeiting & IP infringements. Operational standards: UKBA, FCPA, Criminal Justice Act (2003), Police and Criminal Evidence Act, European Convention on Human Rights, Data Protection Act - Operating to these standards broadly means we can exceed any local requirements anywhere in the world.


Likelihood of confusion…..

Intellectual Property Definitions - Trademark


Vorführender


2 cans of cola – one a well known brand name – the other similar visually - but clearly not the original product. TM infringement – packaged to confuse the consumer – a look or sound-a-like product All images used are either open source or in the public domain – I am not infringing anyone's rights by using them.


Intellectual Property Definitions - Counterfeit

Vorführender


Rolex – one of the most commonly Counterfeited brands – the one of the left perhaps $100/200 – the original on the right perhaps $8000. Counterfeit, copy, fake or imitation - the criminal objective is a perfect copy – the intention to deceive – however if you buy a $100 Rolex on the street I guess you know what you are buying.

Imitation is the sincerest form of flattery…….

Charles Caleb Colton (1780-1832)(English cleric, writer - well known eccentric)

Counterfeiting – a victimless crime?


Vorführender


Charles Caleb Colton was an English cleric and writer- this was his response to someone copying some of his work. Perhaps imitation is the sincerest form of flattery and in that context counterfeiting really does no harm?– the big brands make too much money, a fake watch, handbag, wallet - doesn’t hurt anyone – there’s no threat to individuals, companies and economies. So is counterfeiting like our harmless little friend on the right - or is counterfeiting a deadly threat like the big guy on the left? We’ll see that counterfeiting is an insidious threat to global trade and development – it has grave consequences and will increasingly impact Myanmar as the economy develops. IP plays a key role in growing the economies of developed and developing countries; it benefits consumers through innovative, competitive products and services. The failure to enforce and properly protect IP can undermine these benefits, discourage innovation, weaken competitiveness and reduce the levels of foreign direct investment. A lack of strong IP enforcement can result in significant job losses, expose consumers to dangerous products and open the door to Transnational Organised Criminal Groups who play a prominent role in counterfeiting and piracy.


Value and Impact of Counterfeiting and Piracy globally is difficult to quantify.

Many types of products affected.

Asia is a key area for the production of counterfeit goods.

Assessing the Global Threat

Source: UNODC analyticalalternatives.com

Vorführender


Counterfeit trade routes – dotted blue line at the bottom (medicines) and the solid blue line at the top (consumer goods) Global counterfeiting – due to its very nature – Transnational organised criminal groups & associated underground activity is difficult to estimate – values often disputed - figures from credible sources such as the OECD and International Chamber of Commerce (ICC) suggest a global value in the range of US$650billion to US$1.77 trillion in 2015. More widely accepted are that: 5% of all world trade is counterfeit – OECD 170,000 deaths each year due to counterfeit medicine – International Policy Network The ICC states that: approx. 2.5 million jobs have been destroyed by counterfeiting and piracy. (2008) OECD and the EU’s IP Office reported in 2013 that most of the counterfeits originate from China and that goods from CN accounted for over 60% customs seizures between 2011 and 2013. 2nd-biggest producer of fake goods is Turkey – then SG – TH & IN complete the top 5 producers. Whether we accept $650billion or $1trillion + - counterfeiting is a major threat to legitimate trade and the ICC sense threat is increasing year on year…


Commonly counterfeited products


Vorführender


Food - Rice – counterfeit rice from CN reported in VN and ID in 2015, plastic rice is made with an industrial resin, sweet potatoes – 3 bowls equivalent of eating 1 plastic bag - 5 container of cf rice seized in SG Nov 2016. Coffee mix – late 2016 in TH – baby formula scandal in CN - public health issue Apparel - Clothing, handbags, wallets, pursues etc – perhaps the most counterfeited product of all – sweatshops, forced & child labour – human rights abuses Car parts – late 2016 case of cf air bags being sold in the UK – last week in Abu Dhabi – 21 lorries of fake car parts were seized – US$4million – all major manufacturers – over 50% of the parts were Toyota – commonly we see brake pads, discs, steering track rods – product of unknown quality – potential severe consequences Electronics – iPhone 10 years old this year – launched June 2007 not long after I was in Shenzhen in CN at a notorious market and found a smaller, dual sim version. Counterfeit product does enter legitimate supply chains -in 2010, the U.S. military unknowingly purchased 59,000 counterfeit Chinese microchips that allegedly could have been hacked and used to shut down the country's missile defense system. Pharmaceuticals – contain incorrect, contaminated or frankly unknown ingredients - public health, patient safety issue with severe consequences. Cigarettes – they may well kill you – counterfeit ones perhaps quicker Agrochemicals – perhaps 60% of MM population are employed in AG – this contributes 40%+ to GDP – cf chems may be toxic, affecting farmers health, could damage crops & result in lower yields – directly affecting the rural population's livelihoods Cosmetics & Alcohol – no QC – unknown content - public health issue – reports of cf perfume with urine content, fake vodka killed 72 people in Russia in Dec 2016 and there were warnings in the UK media as regards CF vodka at Xmas Footwear – very common – same issues as clothing as regards labour issues, human rights abuses FMCG – shampoo, washing powder – both have produced and sold in Myanmar Sunglasses – buy these for 2500Kyats not far from here Counterfeiting is a global issue – it presents a low risk/high-profit opportunity for Transnational criminal groups who are not constrained by rules and regulations of legitimate business


Illicit Trade Environment Index

Factors Evaluated

Intellectual Property

Trade & Transparency

Customs Environment

Supply & DemandSource: Economist Intelligence Unit

Vorführender


2016 Report by the Economist Intelligence Unit – analyses 17 Asian economies and the extent to which they enable illicit trade – evaluated 4 pillars: including IP, Trade and Transparency, Customs Environment and Supply and Demand. CN is estimated to be responsible for over 75% of the worlds counterfeit goods production – although recently considered to be performing better than its reputation would suggest. Overall in the index, Australia, New Zealand and Hong Kong – top 3. The second tier included Japan, Malaysia, Taiwan - scores in the 70s or high 60s. CN, along with IN, TH, VN, the PH and ID 3rd tier. The worst performers were Cambodia, Laos and Myanmar is last. The Economist stated : there are increasing opportunities for illicit trade in the region as it continues to integrate, additional concerns that illicit trade will move to and increase in poorer Southeast Asian countries such as Laos and Myanmar as labour costs rise in China and manufacturers look for cheaper production sources.

Stakeholder Negative effects

Consumer Health and safety risks – patient safety, low quality goods, increased total cost of ownership

Business Lost jobs, sales and brand value, increased IP protection costs, loss of consumer confidence

Government Lost tax revenue, increased enforcement costs, and risks to supply chains with national security or safety implications

Economies Lower growth and innovation, declining trade with countries having weak IP rights enforcement

Impacts of Counterfeiting by Stakeholder


Vorführender


Consumer – patient safety – medical need for medicine due to an illness – at best counterfeit med doesn’t work at worst – patient gets worse, illness prolonged or dies. Consumer goods - low priced – consumer thinks they are getting a deal – in fact the quality is low - lifecycle is short and they end buying it again Business – loss of market share, reputational damage – counterfeiters trade on the brand name and benefit from advertising spend –the consumer loses confidence when unknowingly buying counterfeit - reduces brand equity - negatively affects sales, which affects jobs Governments – increased enforcement costs – they have a duty to protect citizens – particularly if we consider products which are a threat to public health –medicines, alcohol, cigarettes, agrochemicals - counterfeiting can allow organised criminal groups to gain a foothold in the country, causing further social and economic issues Economies – Investors prefer a robust IP protection mechanism – a Roland Berger report on Myanmar’s Prospects for 2017 - published Jan 2017 stated that 49% of their surveys respondents were significantly concerned about lack of IPR - counterfeiting and weak IP protection undermines investor confidence – lack of investments, impacts jobs, development, economic output…..


Myanmar & main border countries

China – 2,129km

India – 1,468km

Thailand – 2,416km


Vorführender


China is considered to be the largest producer of cf goods (OECD&EU IPO) – TH and IN are numbers 4&5. So Myanmar has borders with 3 of the top 5 counterfeit producing countries in the world – the threat to global brands and local business in terms of cross border illicit trade in counterfeits is very real – MM has long porous borders with these countries – not easy to police a 2000km border with rugged terrain. Transnational criminal groups can develop their own supply routes circumventing recognised trade routes - there is also a lack of land border customs capacity – being increased in 6 states - as announced by Ministry of Commerce in Aug 2016. Myanmar’s borders, customs capacity & OCG’s ability to operate without constraints - these factors combine to provide opportunities for counterfeiters. In recent years as mobile phone use increased Myanmar citizens have been increasingly exposed to global brands via the internet and social media - the demand for aspirational global brands will only increase – such demand - presents further opportunity for counterfeiters.


Myanmar Counterfeit cases


Vorführender


Scotch Whisky – raid in Mandalay 2015 – widely publicised on social media – very typical methodology for a counterfeiter – collect recycled bottles, cartons - clean up, recycle - re-label as required – put in new individual bottle cartons – we often see counterfeit and original product mixed in boxes – 6 fake, 6 original - threatens public health & compromises brand reputation Burma Pharmaceutical Industry (BPI now MPI) – raid in September 2016: 44 different types of medicines were seized - US$2.2 million counterfeit drug seizure – both Counterfeit and expired drugs with labels reprinted to change the expiry date. A Member of the Myanmar Medical Association – a Doctor and pharmaceutical distributor - buys BPI medicine for 5500Kyats – wholesale – same product for sale in Mingalar Market for 1500Kyats – no-one can have any idea on the content and possible effects. Pharmaceutical sales in Myanmar are estimated to have been growing at 11-12% per annum and were thought to be in the region of US$800 million in 2016 - $1 billion forecast for 2018 – the bigger market the bigger opportunity for Transnational Organised Criminal Groups. Around 85 per cent of Myanmar's western medicines are imported from China, India & Thailand (securing industry) – a concern considering these 3 countries are in the top 5 counterfeit producers globally. Ink cartridges – late 2015 - media report of 4 outlets selling cf 2 x Naypyidaw & 2 x Pyinmana – The manufacturer stated they would not set up a Myanmar production facility until IP laws are enacted and robustly enforced. Slippers/sandals – well known international brand registered its TM and published a cautionary notice to its use in. A businessman registered the same TM 3 months later and used on slippers sold in Mandalay. When challenged in court it was ruled that he had unlawfully registered and used the mark, he ceased use and settled with the brand owner. Counterfeiting is widespread in Myanmar and certainly goes beyond the products mentioned here - the impacts are negative for consumers, business, government and the overall economy


How to protect your IP in Myanmar?


Vorführender


Any IP lawyer in Myanmar will advise you Register your TM – company name, brands etc. Standard TM cautionary notices – published in Myanmar Times/Global New Light of Myanmar. Registering your TM gives you a platform from which to act should you uncover a TM or CF issue. If your mark is not registered in MM – you may well be exposed and your ability to enforce your rights restricted. Much has been made of the draft IP law - it has been expected for sometime – we do not know when it will be finalised and subsequently be enacted. Whilst a new law in line with modern principles and international standards is favoured - Robust laws do currently exist and are being used successfully – 1992 drug law – counterfeiters were jailed for 7 years. In addition we have the Penal Code, Consumer protection law, Special reliefs act.


Consider the correct tool for the job

Vorführender


Abraham Maslow was a psychologist fascinated by human behaviour…quote suggests looking for alternatives solutions…brands faced with Counterfeit or TM infringements need to get themselves in an informed position – gather all available information - conduct a Threat Assessment – fully understand the Nature, Scale and Impact of the threat. Decide upon the correct tool to achieve the desired positive outcome: Hammer here could be aggressive Legal action – a push for damages. Alternatively a negotiated settlement and/or increasing awareness in the market about legitimate supply chains – where to safely buy from. Education for consumers, police, customs – in how to identify & the dangers of Counterfeit product is a key component of any successful brand protection strategy. In Myanmar, the current legal environment and lack of IP awareness suggests a considered approach is favoured – brands need understanding as regards the current stage of Myanmar development. All cases are different and must be viewed as such. After many years of isolation – there are challenges in MM as regards enforcement – and there are perhaps more pressing political priorities than enacting the new IP law and the fight against counterfeit goods. - there are challenges globally – and regionally - in ID and VN, TH there are significant enforcement challenges even though well defined IP protection laws exist.

Imitation is NOT the sincerest form of flattery……counterfeiting has significant impacts on:

Public Health Economic development Job growth & security Innovation Investment Organised criminal activity in-country

Counterfeiting – Not a victimless crime


Vorführender


Global value of Counterfeit goods anywhere between US$650million and US$1trillion + – ICC suggest 2.5 million jobs are lost due to CF activity – 170,000 deaths a year are attributed to CF medicines. Counterfeiting is not a victimless crime - imitation is not the sincerest form of flattery. Counterfeit products endanger lives – medicines that make people sick - or worse - car parts that fail – agrochemicals which affect farmers livelihoods & Transnational and local criminal groups who exploit vulnerable people. There are further negative impacts on society, jobs, investment and economic development. Trade in Counterfeit goods is growing annually and there are legitimate concerns that Myanmar will increasingly become both a consumer and producer of Counterfeit products – geographically it is very well placed to do so - as a result Myanmar risks exposure to all these negative impacts. Illicit trade & Counterfeiting will never be reduced to zero – Transnational Criminal Groupd do not play by the rules – they bribe, intimidate, they kill to protect their business – they undermine society with no concern for the consequences. Brands are a victim of their own success and criminals will always look to exploit a well established brands good name for their own illegitimate gain. Companies must look to mitigate their risks to minimise impacts on their business…and governments must implement robust laws and effective enforcement to protect consumers, businesses and the wider economy.


Jeff MooreOperations Director – SE Asia

MM: +95 942 0031609TH: +66 956 486840

[email protected]

Thank you for your kind attention

illicit trade – intellectual property (ip) infringement & counterfeiting · 2017. 1. 23. ·...

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