Fake Encounters

Fakes are forever. Once Charlie Chaplin went to a fancy dress party where the invitees had to come dressed as Chaplin. Chaplin got the third prize, beaten by two other fake Chaplins. Recently, famous Indian painter, M F Hussain, mistook three copies of his works as originals. So much for the ingenuity of fakers!

Most successful brands in the world are victims of Intellectual Property Right (IPR) abuses. Though the concept of counterfeiting is not new, it has gained an international scale. Today counterfeiting accounts for around 5-7 percent of the world trade. The International Intellectual Property Alliance reported that in 1996, US copyright-based industries lost US $ 10.7 million because of piracy in other countries. Counterfeiting not only harms the markets of genuine manufactures, but also poses dangers for consumers. The range of counterfeited items is huge: clothing, software, currency, credit cards, CDs, drugs, motor spare parts, wines-you name it and you have fakes. Fakes are everywhere.

In India too, counterfeiting has become a major problem. Take the case of fast moving consumer goods (FMCG), cosmetics, drugs, and industrial products in India. The statistics are staggering. Nearly 40 percent sales on automobile spare parts are in counterfeits. Nearly 30 percent of the FMCG market and 20 percent of the tobacco market is counterfeit. Alarmingly,
15-40 percent of medicines sold are fake. On aggregate, the Indian industry loses an estimated Rs. 30,000 crore to counterfeits every year.

The implications of IP theft are far reaching, not only for industries but also for the government and society. The industry loses substantial revenue, goodwill and consumer loyalty. Government loses revenues by way of sales tax, excise duties, and income tax. On the other hand, illegitimate business leads to corruption and criminality. Also, the consumer who buys a fake is not only cheated but also falls victim to dangerous consequences especially in case of spurious drugs and food products. In India, for example, 14 patients died after taking contaminated glycerin.

Till now counterfeits were seen as a law enforcement issue. Now the Industry has realized that it is also a brand protection issue and a health hazard, especially in the cosmetics and pharmaceuticals sector. While companies are working hard to sell every additional unit in a sluggish market, wrestling market share from counterfeits is a critical issue.

The main reason behind the proliferation of counterfeits is the huge gap between the manufacturing cost and the retail price. Also, the counterfeiters have easy access to basic manufacturing and packaging technology. Faster take off, rural penetration, and the trade being hand-in-glove with the counterfeiters helps the practitioners of illegal trade. The top management also must give attention to the issue. The companies would do better if they tried to wrest control of the counterfeit’s market share instead of wasting money on fighting with their competitors.

There is a need to treat IPR violations as serious crime and combating the elements of organized crime in this sector. There are about 5000 reported cases of IPR violations but not a single conviction. Conviction in cases of IPR infringement would act as deterrent to the counterfeits. Unfortunately, the law enforcers are not well aware of the offences related to IPRs. There is a need to train the police and the judiciary to understand its import for businesses.

The industry should co-opt the consumer in the fight to curb piracy. The consumers could serve as the largest police force for genuine manufacturers and brand protectors. It is imperative for the industry to mount a campaign to educate the public on the danger of copyright theft. Every industry in India must set about proactively in protecting their brands. There is need to form associations covering the entire industry. The music industry has successfully done so. The industry should appoint its own investigators who would fill the vacuum in the enforcement process. Hindustan Lever Ltd. had already appointed trademark investigators all across India.

A total integrated solution approach should be used in the new paradigm, which would include customer education, technological innovation, and a stricter enforcement regime. Firms need to invest in technology to make copying difficult. Some companies are already experimenting with innovative packaging. A big spare-part manufacturer has decided to have a hologram with a peel off sticker on its packages. As the customer peels off the sticker, the hologram will completely destroy itself and a stamp declaring the product as genuine will emerge. A bidi maker has decided to have special invisible markings that only a specially designed device can highlight. The device will be available with the local paanwalla. One doesn’t know how far these measures would succeed given the ingenuity and technological sophistication of the imitators. However, the idea is to package the product with as many as 9 or 10 ten layers of overt and covert marks that would make counterfeiting difficult.

However, the fact remains that as long as there are good brands, there will be fakes. It is a good sign that the Indian industry is coming together on a platform to fight the pirates. Yet until the consumers, who are the real owners and patrons of brands, are co-opted in the anti-counterfeiting drive, industry is not going to see much success.