The Naughty List
UK government figures show that the annual loss to the economy through counterfeiting and piracy is at least £9 billion, as well as 80,500 job losses.
EUIPO research estimates that counterfeits such as bags, clothing and electrical goods cost the EU upwards of €60 billion, as well as 434,000 job losses each year.
Lower sales due to the counterfeits market in the UK mean lower revenues for the UK government from VAT, corporate income tax, personal income tax and social security contributions. In 2016, forgone tax revenues from the retail and wholesale sector amounted to £3.1 billion.
Legitimate companies face competition from counterfeiters who steal their intellectual property and don’t pay taxes or comply with quality standards. This damages the brand’s reputation, profit and workforce.
Counterfeits Are Coming To Town
In December 2020, we reported on upcoming changes to EU Applications for Action (AFA) post Brexit. We noted that rights holders would need to file a separate AFA to cover the UK, and EORI numbers became mandatory in both jurisdictions.
Less predictable were the practical effects that Brexit and the COVID-19 pandemic would have on customs activity. For example, 2020 saw an 18% increase in seizures of counterfeit antiviral medications. The volume of counterfeits entering the UK has increased due to the shift to online shopping during the pandemic, and since Brexit the UK no longer has direct access to COPIS, an EU-wide intelligence database used by customs services and companies to alert authorities to counterfeiters. Although HMRC has a UK equivalent, it is claimed that the system is not as comprehensive and leaves the UK vulnerable.
In recent months we have seen a notable tightening of restrictions on goods entering and leaving the UK. Many headlines reported the UK driver who had ham sandwiches confiscated at the Dutch border under a new restriction banning meat and dairy products from countries outside of the EU, but there has also been a major clampdown on counterfeit goods entering the UK. In November, a police raid focused on fake designer goods being sold on London’s Oxford street, while September saw “the biggest ever police operation against counterfeit goods” involving over £500m worth of goods seized from Manchester storage facilities by Police, Trading Standards, Border Force and Immigration Enforcement.
These clampdowns have also involved the creation of new enforcement groups. A new taskforce, the North West Police Intellectual Property Crime Unit, has already seized £1.7m worth of fake goods in the Greater Manchester area including clothes, electricals and fireworks. The Unit has ongoing investigations with an estimated potential loss to the industry of £2.3m.
3 French Hens
The 12 days of Christmas didn’t mention counterfeit goods (although who knows where he got those 5 gold rings appraised), but this year French law offers companies a welcome Christmas gift, in the form of a radical shake-up of legislation for counterfeit seizures. French law proposition no.704 outlines a new customs procedure, which includes:
A fixed fine of €200 (which may be reduced to €150 or increased to €450) for any offence in relation to the possession of counterfeit goods;
An option for right holders to request the deletion of domain names or social network accounts that infringe their trade marks;
Amendment of the Customs Code to allow customs officers to implement a graduated procedure encouraging Internet intermediaries to be more responsible;
Aims to use blockchain technology to guarantee and identify the origin of products and services.
These measures will help French authorities deal with counterfeiters swiftly and cost-effectively. Other UK and EU countries welcome this major modernisation which, it is hoped, will soon be more widely adopted by governments. This may be a space to watch, as the outcome of the novel measures may impact future UK adoption of a similar system to combat counterfeits.
A-FA La La La La, La La, La, La!
For customs assistance in the UK, rights holders can rely on the AFA, online monitoring, Trading Standards, Police, Border Force and other authorities for tackling counterfeit goods. Under a UK AFA, authorities will:
Detain the goods for ten working days (three working days for perishable goods) and notify the IP rights holder and goods owner;
Provide an opportunity for the rights holder to confirm whether the goods are counterfeit and request destruction or release; and
Destroy the goods provided no objection is raised by the owner of the goods (the consignee).
However, you can ensure your brand continues to be protected against counterfeiting by taking additional steps such as educating national customs officials, monitoring national domains, or including unique identifiers on your products. For a comprehensive list of the steps to protect your brand, see our previous article, or if you have any concerns or queries, please contact Rachel Harrison or your usual Kilburn & Strode advisor.
Kilburn & Strode’s anti-counterfeit experts can help protect your brand and bullet-proof your strategy against potential threats on your IP. We’re an active member of the ACG (The Anti-Counterfeiting Group). The ACG works relentlessly with UK, EU and international Governments and law enforcement agencies to shape an effective deterrent to counterfeiting, to protect business and consumers from the increasing dangers.