Brand owners are keenly aware of how quickly counterfeiters can adapt their tactics to continue their illicit business of selling fake goods. Perhaps one of the biggest impacts on counterfeiting in the last decade is the ubiquity of online retailers and the difficultly in fighting back against companies selling counterfeit goods online. Major online retailers have been addressing this issue and are taking steps to remove counterfeiters from their websites. For instance, Amazon has invested more than $400 million to fight fraud and, as a result, had three billion suspected illegitimate listings removed from its platform in 2018 and one million bad actors’ accounts stopped before they published a sale. Efforts like these are incredibly important and highlight the challenges that companies continue to face in this sector.
From our experience, having a robust brand protection plan and working with law enforcement are critical to successful defense against counterfeiters.
So how do you stay ahead of the counterfeiters?
Brand owners need to shift their perspective from viewing brand protection initiatives primarily as cost centers to viewing them as essential mechanisms that reduce and mitigate financial and reputational damage. There are several areas where brand owners should focus their investment to avert major counterfeiting incidents that end up costing far more than the preventive measures.
Product security technology. One of the biggest security concerns for brand owners is former employees who steal sensitive information when they leave the company. A robust information security program that tracks the location of and access to proprietary data, formulations, or product specifications is key to keeping such information protected from theft and counterfeiting. Former employee theft also underscores the importance of technology that addresses both the digital and physical movement of data. This includes having technology that can monitor the movement of data within your company, limit the number of people who have access to it, and raise flags when it is moved outside of certain specified areas—printed from an employee laptop or copied to an external storage device, for example.
Monitoring and alerts. It should go without saying that for security technology to be effective, a company must have robust monitoring and alerting systems in place. A company’s brand protection department must have a wholistic view of who has access to different types of data and develop specific parameters for flagging potential issues. For instance, a significant decrease in the quantity of products sold could indicate that another resource is providing that product to market, e.g., a counterfeiter or diverter. By monitoring a product’s production and sales life cycle, a brand protection team will be able to spot these types of changes and assess whether they point to a deeper problem. In addition, performing a regular electronic audit to assess how data is moving throughout the company, and who is working with it, is a vital component of an ongoing monitoring program.
Consumers can often be one of the best resources for identifying counterfeiters and they need to be given a proper channel to alert a company to issues. A simple tip line or online forum will provide a company with invaluable real-time feedback on potential issues caused by illegitimate products.
Proactive investigations to assist law enforcement. Along with preventive measures and ongoing monitoring, it’s necessary to investigate proactively before collaborating with law enforcement. Most federal prosecutorial offices have small teams and limited resources devoted to counterfeiting and tend to prioritize products with a health and safety component, including obvious items like pharmaceuticals and cosmetics, but also items like batteries and auto parts. Brand owners can help generate interest by doing as much proactive investigation as possible before bringing a case to law enforcement, to identify the following:
- Have the counterfeiters penetrated legitimate e-commerce or brick and mortar stores? If so, to what degree, and with what products? Is there evidence that bad actors within the organization are assisting in the counterfeiting?
- Who is behind the counterfeiting companies and is there evidence suggesting that they are working with others? If so, with whom?
- Has the brand made or documented undercover purchases from the counterfeiters, and has it given thought to sharing what it has learned with competitors in an effort to broaden the reach of anti-counterfeiting efforts?
- Has the brand had any covert conversations or made test purchases from suspected counterfeiting companies or gray market distributors to get a better understanding of the company’s business practices?
Protection from counterfeiting is a process that entangles itself within all aspects of a company’s business operations, but many companies may not have the in-house resources to implement brand protection mechanisms in a comprehensive manner. Recruiting experienced experts in counterfeiting and intellectual property theft during the preventive and investigative phases provides the additional, targeted resources needed to monitor for issues and prevent major damage to a company’s brand and bottom line.