Counterfeiting costs the world economy billions, funds extremism, and endangers countless lives.
Here’s how professional investigators can help protect companies and consumers.
Some have called it the world’s second oldest profession. Roman historians wrote of counterfeit coins, and artifacts may have been forged or altered to increase their value as early as the Egyptian and Babylonian empires.
Counterfeiting is theft — an infringement of the legal rights of an owner’s intellectual property. Popular goods such as clothing, purses, DVDs, footwear, CDs, electronics, drugs, and software are manufactured and illegally sold under a brand’s name, without the permission of its owners — a black market that costs the world economy billions.
The Hidden Costs of Counterfeiting
Think counterfeiting is no big deal? Consider this: Selling fraudulent products can have serious economic impact, support organized crime and terrorist activities, and even result in injury or death. Here’s how:
Economic Impact: A brand’s equity is tarnished because its exclusivity is diluted as fakes flood the market. High-end goods are sometimes purchased as a demonstration of a consumer’s wealth. Why buy the brand if others assume that it’s fake?
The sale of counterfeits can further weaken a brand’s image as goods of inferior quality are passed off as the real thing. This reduces the confidence that consumers have in the brand. A brand’s reputation is further damaged, as the fakes don’t live up to the positive brand associations that consumers expect. This leads to negative word-of-mouth, and a decrease in sales.
Brand owners are entitled to the financial benefits from building their products’ reputation; however, it can be difficult for corporations to protect their brand from international counterfeiters who operate in the shadows. Most brand owners don’t know how to police their brand, and legally and covertly gather evidence.
Besides undercutting company profits, black market activity also costs taxpayers, because illegal sales erode a city’s sales tax base. In 2005-6 alone, New York City officials estimated that the counterfeit goods trade cost the city $1 billion in lost sales tax revenue.
Funding Crime and Terrorism: There’s evidence that extremist groups often turn to counterfeit goods sales to fund their activities. New York police commissioner Raymond Kelly claimed that pirated CDs funded the 2004 Madrid train bombings. There’s even evidence that Al Qaeda runs a brisk business in faked body products.
And it’s believed that Hezbollah raises funds by selling counterfeit goods, including pharmaceuticals and, in one odd case, automobile brake pads seized by Interpol. Discovering the connection between counterfeiting and extremism, declared Interpol Secretary General Ronald K. Noble, illustrated “not only the link between terrorist financing and intellectual property crime, but also how intellectual property crime is not a victimless one.” (Pollinger, 88)
For criminal and terrorist groups, counterfeiting is win-win: They can operate off the books and in the darkness at low risk, and profit margins can be as high as 900% for pirated goods such as software.
Danger to Life and Limb: While knockoff designer handbags or “Rolexes” might offer little immediate threat to a buyer’s health, forged pharmaceuticals can harm or kill those they are supposedly intended to cure. The World Health Organization estimates that 10% of the world pharmaceuticals market may be counterfeit, and that proportion is likely much higher in the developing world. The cost? An estimated hundreds of thousands deaths every year, according to the WHO.
How to Uncover Intellectual Property Theft
Counterfeiters have found a happy home selling online, on sites such as eBay, Craigslist, Alibaba, and Facebook groups. Hundreds of thousands of counterfeit items cross international borders every day.
Private investigators have extensive experience navigating these online marketplaces and social media websites, which offer a treasure trove of information. Investigators use a variety of methods for tracking down counterfeit goods.
- police online marketplaces, such as Alibaba and eBay, and find those engaging in intellectual property theft.
- join Facebook groups to determine if the administrators and/or members of the groups are selling counterfeit goods.
- use online intelligence to find information about the infringers, such as their address, phone number and photo.
- identify infringers, then pose as a potential buyer and arrange to purchase the counterfeit items.
- conduct covert surveillance during a buy of the counterfeit items, purchase of the goods, and appearance of the infringers.
- collaborate with law enforcement in seizing counterfeit goods.
Wrapping Up the Case
Ideally, a brand protection case may result in an appearance in court. Private investigators can play major roles in brand protection cases — gathering admissible evidence and bringing knowledge and credibility to a case. PIs can offer testimony and support to legal teams. They can also play a pivotal role in resolving discrepancies that come up during a case.
Because of the high financial stakes involved in creating and protecting a premium brand, companies have become more willing to hire a professional investigator to help. Investigating counterfeit products and intellectual property infringements is an exciting field, one with growing opportunities for professional sleuths worldwide.
Mark Kusic is a private investigator in British Columbia and is president/founder of Kusic and Kusic Private Investigators in Vancouver, B.C. The firm specializes in anti-counterfeiting, litigation support, brand protection, online investigations, video surveillance, business employee evaluations, and boutique security and executive protection.
“Counterfeit goods are linked to terror groups” (International Herald Tribune, Feb. 12, 2007)
“Counterfeit Goods and Their Potential Financing of International Terrorism” -Zachary A. Pollinger, (Michigan Journal of Business, 2013)
“Fighting Counterfeit Drugs with Mobile Technology” -David Zax, (Fast Company, Dec. 6, 2010)
“Protecting Your Intellectual Property Rights” -Chaudry & Zimmerman