The war on counterfeits: how much would you spend?

Quoted in a press release today, the UK's Minister of State for Intellectual Property David Lammy has emphasised the Government’s commitment to fighting counterfeiting and piracy with the launch of guidance designed to highlight the Proceeds of Crime Act 2002.

Right: at present the sums lost annually to counterfeits dwarf the sums spent in reducing or recouping that loss.

The guidance leaflet

" ... seeks to raise consumer and market trader awareness of IP crime as well as warning would-be buyers and traders of counterfeit goods of the real cost – not only in terms of economic damage but also the risks to health and safety".

Says David Lammy:

"Counterfeiting and piracy rob our economy of millions of pounds every year - intellectual property crime is worth £1.3 billion in the UK with £900 million of this flowing to organised crime. It affects people in their day-to-day lives presenting not just bad value for money but also posing a real risk to public safety.

"Legislation alone will not combat counterfeiting and piracy. Laws must be fit for purpose but effective enforcement is key. The Proceeds of Crime leaflet sends a clear message that we are all serious about tackling this problem."

The press release adds that developments in technology and communications have led to increases in intellectual property crime over the past decade, with estimates that the international trade in fake goods is worth around $200 billion - higher than the GDP of more than 150 countries.

These figures - an annual loss of £1.3 billion to the UK, and $200 billion worldwide - may be right or wrong, but it is impossible to determine them with any accuracy. Figures that can be determined with some accuracy, however, are the sums of money that are spent by the public sector specifically for the purpose of reducing or recouping this loss. Does anyone have such figures, or at least an estimate of them? Given the loss to the revenue of vast sums in value-added tax , corporation tax and income tax which results from trade in counterfeits and pirate product, it might be expected that the UK government, nationally and locally, would get a decent return on its investment if it spent something like £130 million a year on tackling it -- rather than leaving IP owners to struggle on their own initiative and at their own expense.

EBAY fined £31million for counterfeits

It is not often that an IP related case steals the front page of London's popular free daily Metro paper but Ebay have done just and scooped headlines across the world. The well known auction site eBay has been fined £31million for selling fake Louis Vuitton goods online. The French fashion house took eBay to court for selling a range of fake luxury bags, clothes and perfumes. A Paris court ordered the internet giant to pay damages to Louis Vuitton and barred eBay from selling perfume brands Christian Dior, Kenzo, Givenchy and Guerlain, also owned by Luxury goods firm Louis Vuitton Moet Hennessy. eBay bosses have apparently said that they plan to lodge an appeal. The court also warned eBay that they face a daily £40,000 fine if they run adverts for the perfume and cosmetic brands. French courts have long been in favour of brand holder's rights and a number of brand holders have used the French system to enforce their trade marks and related IP but none it appears on this scale, not only for the potential legal effect of the decision across world but also for the amount of damages awarded. If anyone has a copy of the decision (in English preferably) please send it here.

Damages calculation totalling $4.3 million

Karin Segall of Foley & Lardner LLP writing for World Trademark Report on the recent case of Gucci America Inc v MyReplicaHandbag.com (Case 2008 WL 512789, February 26 2008) highlights that $4.3 million has been awarded by a US Court in a counterfeiting matter. According to Segall:

"The underlying case involved claims by Gucci America Inc, Chloé SAS and Alfred Dunhill Ltd against several defendants for offering a variety of counterfeit products bearing the trademarks GUCCI, CHLOE and DUNHILL."

"In order to determine the amount of statutory damages per type of goods, the court surveyed case law and noted that most judges award well below the maximum on the basis of "per mark per type of goods". Ultimately, the court drew from its own experience in a similar case in which damages in the amount of $100,000 per mark infringed was awarded. Using that number, it awarded $3.6 million to Gucci, as there were six marks infringed and six different types of counterfeit goods (ie, $100,000 multiplied by six marks multiplied by six types of goods). Chloe was awarded $400,000 based on counterfeiting of four marks and one type of product, and Dunhill was awarded $300,000 for three marks and one type of product. Altogether, the defendants were thus jointly and severally liable for a total amount of $4.3 million."