Detecting Counterfeit Goods With Help From Customs With The WCO’s IPM Platform
Conor Stuart／IP Observer Reporter
Counterfeit Von Dutch trucker hats for sale on Khao San Road, Bangkok; Photo Credit: cce.
What happens when you notice a slump in sales of a popular product line despite apparent customer satisfaction? Although it’s the big data era, if you’re a small or medium-sized company with limited resources, it can be difficult to assess which data source will allow you to address the problem effectively. One possible reason for the slump in sales might be the increasing availability of counterfeit products, but what SME or established brand has the manpower to police online shopping websites and to take legal measures if a take-down request is ignored?
The estimated economic value of counterfeiting has grown from US$600 billion in 2014 to US$1.7 trillion according to the International Chamber of Commerce and 70% of seizures of counterfeit goods are made by customs officials on the ground.
Chinese e-commerce giant Alibaba has taken a lot of flak for the amount of counterfeit products offered on its online store. The firm has taken steps to respond to these accusations with the roll-out in July of the ‘IP Joint Force System’, an online counterfeit reporting system, which was announced shortly after the company was ejected from a US-based anti-counterfeiting alliance at the urging of several prominent international brands.
The IP Joint Force System has four main tenets, as shown in Figure 1.
Figure 1: An outline of the IP Joint Force System; Source
This is an expansion of the firm’s good faith takedown system which was launched last year following the launch of the AliProtect reporting system in 2008 (See Figure 2) and the Innovation Protection Platform (IPP) in Chinese in 2013. The English-language version of IPP was also launched last year. This now facilitates rights holders in registering their IP with national IP agencies in China as well as enabling them to upload IP rights documentation. The company has also addressed sales of counterfeit items on its C2C unit Taobao, with a 3 strike rule for banning store owners introduced in 2015.
Figure 2: The AliProtect reporting system; Source: AliBaba.com
Big data has also been harnessed to flag potential infringing products automatically, following the guidelines listed in Alibaba’s response to a letter from trade groups including the Union des Fabricants, the Anti-Counterfeiting Collaboration of Nigeria, and the French Federation of Leather Goods:
We routinely screen for listings offering “branded” products that we know are not actually made by the brand owner, and we proactively remove these listings and even close down stores depending on the situation.
We block publication of listings that contain red-flag keywords (such as “replica” and “imitation”) used by counterfeit sellers to attract customers.
We employ big-data technology to screen out deceptive listings that use familiar brand names in headlines to advertise unrelated products.
We use Optical Character Recognition (OCR) technology to detect if product photos contain certain keywords such as brand names or inappropriate text.
We use characteristics of previously identified illegal photos to proactively detect and remove other photos that have similar characteristics. If text appearing in photos is disproportionately large (a trick used by counterfeiters) our system automatically flags these items for additional review.
In Alibaba’s 2015 report on the protection of intellectual property rights[1], the firm stated that as of April 2016, there were 3,518 suspected active counterfeiting operations across China, as shown in Figure 3.
Figure 3: Distribution of suspected counterfeiting groups across China; Source: Alibaba IP Protection Report 2015
Alibaba also worked with the Zhejiang Provincial Leading Group on the Fight Against IPR Infringement and Counterfeiting and leading brands to launch the three-month ‘Operation Cloud Sword 2015’ last year, which targeted counterfeiters in 11 local cities in the province. Alibaba provided 385 leads for prosecutors, which resulted in the arrest of 300 people and the closure of 244 illicit sales premises, including the destruction of 46 illicit manufacturing facilities. The goods seized were valued at RMB¥401 million (US$58 million), with the total value of the cases thought to be RMB¥816 million (US$118 million) (See Figure 4).
Figure 4: The results of Operation Cloud Sword 2015 which acted on tip offs from Alibaba; Source: Alibaba Intellectual Property Report 2015
As of the end of 2015, 80,000 international rights holders from around the world have already signed up for Alibaba’s intellectual property protection platform, according to their 2015 report. Alibaba states that it deleted almost 10 million links to products after tip offs from rights holders reporting suspected infringement. Not all of these products were counterfeits as shown in Figure 5.
Figure 5: Stated reason for deletion of product link on C2C site Taobao; Source: Alibaba 2015 Intellectual Property Protection Report
On Alibaba’s C2C platform, only 19.3% of deleted product links were attributed to counterfeits, while other trademark infringement comprised 22.4%, pirated products comprised 3.3%, other copyright infringement comprised 17.7%, patent infringement comprised 0.9% and other IP infringement comprised 36.4%.
Although this is a step in the right direction, Alibaba continues to be criticized for the amount of fakes sold on its e-commerce platforms. The minister in charge of China’s State Administration of Industry and Commerce, Zhang Mao, has repeatedly spoken out against the company, requesting that they take a more active role in resolving IP issues, most recently in August of this year.
Despite the advances listed above the onus is still on the rights holder to invest a significant amount of resources policing websites and flagrant IP right violations may go undetected due to the labor intensive process involved and the language barriers that may make it difficult for the rights holder to detect and report infringement.
This doesn’t even cover sales made over private accounts on WeChat and other social media or messaging platforms which are not always publicly available.
Detecting counterfeit products when they’re being shipped is, therefore, sometimes a more transparent method of detection, but this requires that customs officials can identify your product, are aware of its security features and can distinguish between the real McCoy and knock-offs of increasingly high quality, which could even have been produced by a contract manufacturer without the rights holder’s consent.
Given the scale of the problem, it requires rights holders and security solution providers to work closely with customs to reduce the illicit profit produced from counterfeiting, according to Mariacarmela Vozzo, manager for the private sector for an anti-counterfeiting web platform and app developed by the non-profit World Customs Organization (WCO). The platform is currently used by customs officials in 94 of the 180 WCO member countries around the world, including the US, the UK, France, Russia, Hong Kong, Indonesia, Japan, South Korea, Macau, Malaysia, Vietnam, Cambodia, Thailand, the Philippines and Singapore (See Figure 6).
A decrease in sales isn’t the only thing you have to worry about if your products are victim to counterfeiting. Counterfeit products, whether or not they bear your brand name, could be raising revenue for terrorist organizations around the world. Counterfeit cigarettes, for example, have served as a source of funding for terrorist organizations including the IRA, the Basque separatist group ETA, and Islamic State, while other counterfeit items including veterinary drugs, CDs, DVDs, branded clothing, bags, medicines, oil, mobile phones and false documents have served as sources of revenue for these and other terrorist groups ranging from the FARC in Colombia to Hezbollah, Hamas, Al-Qaeda, Lashkar-E-Taibe in Pakistan and D-Company in India, according to a 2016 Unifab report.
Figure 6: A list of WCO countries that use the IPM platform (excludes Denmark which joined this year); Source IPM presentation by Mariacarmela Vozzo
The platform allows rights holders to upload information about their products into a database that is searchable by customs officers. Customs officers can verify and authenticate goods, and report counterfeits to rights owners, as well as suggesting track and trace solutions and contacting regional rights holders representatives. It also enables customs officers to send alerts to one another.
Vozzo took us through the web interface of the platform below:
Rights holders have to pay a membership fee on a sliding scale (depending on what features you want to access) from €480-€6,500 (US$508-6883).
The IPM platform has been helpful in international operations, such as Operation Biyela across 23 ports in 23 countries in Africa, with 1.1 billion counterfeit items intercepted, including 560 million units of pharmaceutical products and 460 million units of electronic appliances and Operation Gol 14 across 13 ports in seven countries in South America, in which 746,736 counterfeit items were intercepted, including 520,000 units related to sporting goods.
If you’re a customs officer, for example, you can use the phone app to scan a product in any given shipment, and information provided by the rights holder will be shown. This information can range from the basic appearance of the product and in-built security solutions to normal shipping routes.
One customs officer based in Ireland might scan a particular item amid a shipment of mobile phones from China. She could then access information on the packaging to see if the shipment looks as it is supposed to. If it does she could also access information on the route by which the rights holder normally ships its products. If she discovered that the ships are normally only ever shipped from Macau to France, for example, she could look up the rights holder’s contact information and contact him or her, or their local representative, directly via the platform to alert them of the shipment. In this sense, the platform can also alert rights holders of parallel imports, which can inform their sales strategies.
At an IPM presentation in Taipei IPM senior manager for the private sector at the WCO, Bob Peeters, stated that the WCO has recently been trying to court businesses in the Asia-Pacific region to join the platform in order to expand the platform’s reach.
