Defending against brand counterfeiting

As soon as a brand starts to enjoy success, it is imitated: copies appear and multiply. The competitive advantages offered by innovation are short-term only, and this is why today’s brand is built on the continual flow of innovation. Ideas, concepts and products can all be the subject of imitation.

For example, shortly after the launch of a peach-flavoured lowalcohol drink named Carlton, targeting the top end of the range, lower-cost competitors such as Claridge began to appear. Competition is even more intense where it applies to intellectual property: this includes patents and designs, but also trade dress, and even trademarks (the name or pictorial image of the brand). This imitation stems from producers and retailers whose imitation of the leader is the first step towards building a store brand.

It also comes from counterfeiting. Top-of the- range brands such as Nike and Adidas, as well as various luxury brands, are directly targeted in this way. The markets and bazaars of foreign countries are filled with fake Cartier watches and Ralph Lauren polo shirts.

No sooner has a Dior or Chanel fashion show finished than Asian factories begin to reproduce their designs, introducing them into parallel distribution channels even before the brand itself has sent out stock. More dangerous still is the practice of counterfeiting medicines or automobile spare parts, which can often deceive customers and potentially put lives at risk. Lastly, we have already discussed protection against brand imitations conducted by the brand’s own retailers.

Intellectual property must be defended and extended (for example, Harley-Davidson has patented the characteristic sound of its engines, as has Porsche). It is not our intention here to cover in a few lines a subject as important and strategic as trademark laws, particularly since, with the advent of globalisation, it is becoming obvious that not all countries have the same sensibilities when it comes to counterfeiting.

In China, South-East Asia, Morocco and Italy, a considerable number of micro-companies make a living in this way. It is always more or less directly linked to money laundering, and sometimes receives covert government protection. Such divergent attitudes allow brands that could not legally exist in the West (or any country that upholds intellectual property laws) to become established.

Everyone in Singapore, Hong Kong and Shanghai is familiar with the Crocodile store chain, an obvious imitation of the world-famous Lacoste brand, whose symbol since 1933 has been its famous crocodile. The Asian store chain has exploited lax local brand laws to position itself in Lacoste’s slipstream: it even goes so far as to boast in its slogan, ‘Enter the legend’.

The basic precautions to be taken in order to avoid losing protection rights for one’s brand are well known. For example, never use the trademark as a noun, but as an adjective: in other words, we should say a Budweiser beer, not just a Budweiser. Let us also add that if a brand colour is to be protected, it too requires protection within the company. Brand product lines are frequently segmented, which leads to the use of different colours to identify each segment. As a result, it becomes harder to maintain that a brand is characterized by any one single colour.

How should the brand respond to counterfeiting and imitation? First, we should identify the difference between the two types of attack. Counterfeiting is the identical, traitfor- trait imitation of the brand and its identifying components: it is unlawful in the most direct sense, and there is no need to provide evidence of customer confusion. It simply needs to be identified, and legal action taken. However, longer-term work is necessary in a number of countries where it is more than simply tolerated, and indeed often accepted:

  • Joint action aimed at the Ministries of Foreign Affairs and Justice. This works at the level of inter-state relationships.
  • Collective information programmes to improve local laws directed at, for example, world trade organisation.
  • Advertising for the original brand in the country in question.The extent of the phenomenon of counterfeiting in China, where there are no laws over brands, is well known. Chinese culture traditionally praises those who share, and condemns those who do not. Faithful reproduction of the master’s work is a virtue in traditional Chinese education and teaching. Lastly, in the communist economy that dominated the Chinese way of thinking for 50 years, the notion of property itself did not exist, and it was common for all Chinese factories to go under the same name. We should add that counterfeits are the only financially accessible option for local consumers. Lastly, in these countries, after years of deprivation in terms of consumption, people are keen to show their neighbours they have finally ‘made it’. Western brands are familiar to all, but very few actually have first-hand experience of them: they are unaware that what they are buying is a fake. Research has confirmed this point (Lai and Zaichkowsky, 1999): local consumers who choose a counterfeit or an imitation do so because they lack knowledge of the original.
  • Counterfeit-related advertising in tourists’ countries of origin. Western consumers are well aware which products are the originals: imitations and counterfeits are a game for them. Our own qualitative research of the phenomenon reveals five underlying motives for them to buy a counterfeit:
  • The sense of having obtained a bargain.
  • After all, everyone knows that luxury goods and Nike products are made in third-world factories. Such consumers deny there is any difference in quality between the original and the copy: they are therefore getting a bargain. This makes them very discriminating buyers: they will only buy copies of Vuitton bags that are ‘identical’ to the original, and they admire the quality of the copy. It is this quality, combined with the price, that makes it ‘a real saving’ and enables them to wear or carry the copy on a daily basis, even while with friends, who will not spot the difference. A buyer of a fake Bulgari watch – which is of very good quality compared with the genuine article he himself wears – will not hesitate to give it to one of his sons as a fifteenth-birthday present.

Revealingly enough, the buyers themselves often own the original product.

This is what qualifies them as experts and lends status to the copy chosen for the quality of its resemblance. They know what they are talking about.

  • The desire to put a little sparkle into everyday life. Fake Ralph Lauren polo shirts may be only approximate copies, but they are good enough for tasks such as housework, gardening or cleaning the car.
  • An original present. Instead of going to Thailand and bringing back cheap knick-knacks as gifts which will immediately be hidden away in a drawer, a tourist buys friends what is these days a typical item from that country: a good imitation, a counterfeit scarcely distinguishable from the original. It will always surprise the recipient and lead to conversations about how well made (or not) the counterfeit is; furthermore, it is bound to be used.
  • Some consumers willingly buy counterfeits because they cannot or will not pay the price differential for an original.
  • They consider it ridiculous and pointless to pay s60 for a Ralph Lauren polo shirt, because they are not sufficiently involved.
  • Lastly, some buyers of counterfeits are motivated by ‘moral’ considerations.
  • They believe that the price of the original is scandalously high because, considering that it was made in a South- East Asian factory, the cost price of the product is actually infinitesimally small. They consider their actions as just retribution: given that the brand itself has committed theft by selling at a price way above its cost price, it is legitimate to steal it in return.

Preventive action with Western consumers in their country of origin takes the form of education. It needs to be pointed out that counterfeiting is linked to Mafia-style networks and the laundering of drug money. There is also a legal side: a consumer bringing back a counterfeit product is an accomplice, and is thus committing a crime punishable by law.

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