Abstract
BRIDGE Project
The basis of this project is on the technical challenges facing (Electronic Product Code) EPCglobal Company in the implementation and support of the Radio Frequency Identification (RFID) based solutions regarding enriching and transferring information along with trade networks. The EPCglobal Company is entitled to Building Radio Frequency Identification for the Global Environment (BRIDGE).
One of the major problems faced by the company is the issue of encountering product counterfeits and illicit trades along the process of implementing global networks. Bearing in mind that the company has been tendered and funded to research, develop and implement RFID in Europe (BRIDGE, 2009), this paper is an analysis of the problem of “product counterfeiting and illicit trade” that RFID faces and application of a plan to encounter it.
There is an urgent need to resolve these barriers to the implementation.
The implementation of radio frequencies and identification for the global environment consists of a series of business activities, technical developments, and other parallel activities. This means there is a need for support from other European and Asian countries especially on the issues regarding “Hardware development, look-up services, supply chain controls, security, manufacturing, reprocessing, products tagging, and labeling, dissemination tools, educational materials and policies recommendations.”
The paper contains only the intended and hypothetical strategies, practicalities, or developments for encountering counterfeit products and not trading and licensing documentation or approved agreements for official delivery of services.
Introduction
Counterfeiting or piracy of products is a serious expanding problem in many businesses because it limits the growth of the legally managed business and the owners of the intellectual property rights. The problem of counterfeiting affects wide subject matters and various sectors including the music or video industries, software programming fields/companies, pharmaceutical industries, automobiles, fast-moving luxury or consumer goods industries among others. In line with the international chamber of commerce and industries (ICC, 2004), The Anti-Counterfeiting Group (ACG) is a trade union and representative of over two hundred global producers and distributors of branded products who indicated that the issue of counterfeiting continues to become more sophisticated and wide as technology advances.
This has a huge negative impact on the social and economical advancements for the private sector, governments, organizations, consumers, non-governmental/profit organizations, and many other businesses.
Alongside the technological measures of encountering the counterfeits, proper campaign strategies ought to implement to serialize and enlighten the public over changing the way they manage the products information and product identification through the net. One important strategy is the high level of information granularity where corporal security of merchandise assures unique identifiers of these products sent over the net. The government ought to put in place and ensure all anti-counterfeit techniques utilize in fighting graft and illicit trades via the net.
The EPCnework RFID ought to have well-equipped anti-counterfeiting and anti-fraud techniques that are recognizable to consumers. Even though the existence of a silver bullet solution may be impossible, research indicates that the most promising countermeasure regarding illicit trade is mass serialization.
Incentives and goals of the report
Illicit trade analysis has many different elevations and literature but complete systematic analysis that takes control of all the features involved does not exist. The foundation of this report is on specific aspects regarding the problem such as terminologies, structures, and extent of the problem behind such trade to enhance better understanding.
Methodology
The report will adopt a methodology of critical analysis of the available or already existing literature based on counterfeit products and illicit trade. Secondly is the re-examinations of experts’ observations regarding the topic especially those who are directly involved with the implementation procedures. The examination can take the form of unstructured interviews via the net of face-to-face. A good analysis involves the most affected industries.
Plans for the communication campaign
Potential problems counterfeit poses
Counterfeit products are goods that do not have any bearing or registered trademark to identify, validate or authorize their transactions. Some goods are a copy of the main products that bear the authorization mark and referring to aspirated products. Making of third products is without the consent or authority of the owner and thus is an infringement of the copyright law.
The illicit trade is a breach of contract for trade through involvement in black market activities and therefore it is a fraud involving all other counterfeit crimes and contracts. Generally, the term counterfeit refers to trademark infringement through imitation and unauthorized production/distribution.
Some of the distinctive differences regarding the Intellectual Property Rights infringements include but are not limited to the factory overruns, where a company produces more than required and therefore even though it bears the trademark, produced against authorization. Secondly are goods such as music piracy infringes the trademarks and copyrights laws. Research on consumer behavior emphasizes the importance of differentiating perceptive (non-descriptive) and non-perceptive (deceptive) counterfeits. The perceptive nature indicates that the consumer is aware of the infringement while the non-perceptive counterfeiting is unintentional, thus the consumer commits the offense innocently.
Lastly, the high-quality counterfeits are those closely identical to the original product to a point of deceiving the professionals while low qualities are poor imitations.
The Organization of Economic Co-operation and Development (OECD, 1998) indicated that the estimated cost of counterfeit in the world is between five to seven percent with a probability of a rise. However, there is no substantial cumulative data analysis regarding such statistics. The figures although highly used to portray the seriousness of the scenario and support arguments, they are not used for managerial decisions.
There are no proper methodologies indicating estimates of counterfeits in terms of quantity, brands or categories. A show that there is no proper measures of basing the counterfeits analysis in monetary terms. The anti-counterfeit campaigners may however want to base their arguments on the exaggerated figures to emphasize on the significance of the problem.
The conclusion to the statistics would indicate that he problem is out-growing its cocoon and not based on a specific or particular product but diversifying as technology advances. The European Union (2005), commissioner Kovács statistics indicated that counterfeits are only as a tip of the iceberg. In relation to custom statistics, the primary source of counterfeit products is Asia with majority of the products found in Europe. (EU, 2006)
The “U.S. Food and Drugs Administration” (FDA) investigations over counterfeit drugs indicated an increase of over twenty percent on average since the year 2000. The counterfeited Swiss luxury commodity, (2004) increases drastically. In line with World Trade Union and the International Chamber of Commerce and Industries (2006), the trade on counterfeits goods is outgrowing the worldwide Merchandise Trade. Today counterfeiting is a world recognized problem affecting virtually all the industries but it is specific on different sectors. The European Brands Association (AIM, 1999) provided some different industrial estimates regarding the sectors in relation to total turnover. Counterfeit statistics were measured up to the total turnover and illustrated in a percentage as indicated below.
The computer software, which trades virtually via the net, were evidently the most counterfeited sector.
Factors contributing to counterfeiting
Advance in technology
The advancement of technological matters paves way for counterfeiting with more considerations on software, which has high technological and fascinating mechanisms. The better the technology gets, the better the counterfeit manufactures also get. The chance of seizing counterfeits minimizes the quality of products. Better quality of the counterfeited goods translates to higher prices and therefore improved profits.
Increased internationally networked trade
The economical growth has integrated regional trades such as the European Union Trade flair and this has equally translated to wider dismantled boarders thus complicated controls measures are required to ease international trade counterfeit.
Emerging markets
Some centrally planned economies are being changed to become free markets and because of missing intellectual property rights and attitude of the consumers. This is the loophole for counterfeited products. The shares of free world trade increases counterfeit production along the genuine products.
Growing demand for the branded products and luxury goods is among other factors identified by the Commission of the European Communities, which promote trade of counterfeit products. These products are on high demand and thus are highly targeted by counterfeiters due to their elevated profit margins. It is difficult to control complex supply chains, which influences high demands of outsourced services.
The internet remains as the biggest distribution channel that is difficult to control and therefore the easiest way for the fraudsters. With this kind is setting, there seem to be high profits and low risks in majority of the countries. This is due to the high expectations on returns, these situations would definitely translate to more production and selling of the counterfeit products although some severe penalties cases may applies on to manufactures. To many, the risk is worth taking considering the returns one gets.
Professional growth is another contributory factor. The counterfeiters often use modern technology and equipments to produce and deliver the products. In line with European Brands Association (AIM, 1999), there is concern over inadequate enforcement and registration of laws for protection of IPR.
Defined goals/objectives and strategies for the campaign against counterfeiting
Individual brand owners may not be in a position to control counterfeiters but it is important for them to understand the problem. To increase the risk-profit ratio counterfeiting solution, there is need to collaborate with customs. “There is also urgent need for advanced professionalism and networking to enhance anti-counterfeiting efforts.”
One of the potentials for the RFID technology of the EPCnetwork is to contribute in achieving this goal of encountering counterfeiting. The trademark owner must be engaged in the process to mitigate these negative effects. They are mostly aware of the existence of the problem but avoid getting involved because of the publicity it depict over their products. They would not wish to discuss such matters in public with competitor less they expose loopholes over trading. Possibly the public awareness of the product’s benefits outweighs negative publicity.
The trademark owner ought to be in full control of the outsourced manufactures. Outsourcing creates a huge risk because the manufactures have all the requirements for production and have the ability to over-produce or continue producing long after the revoking of licences or expiry of contracts. It is easy for a legal out-sourced manufacturer to change to an illegal/counterfeit manufacturer with the aim of making more returns since they have control over workforce, knowledge and machinery. In such situations, the counterfeits will be probably closer to the original quality product, latest design or updates. In most cases, the trademark owners should update the designs of products immediately they revoke contracts and should invest in publicizing the new product’s outlook.
The trademark owner also has the obligation to check or arrange for random inspection procedures in the permitted distribution outlets since they can be channels for counterfeits to take advantage of their status. Most customers would prefer to have their products from approved selling points and counterfeiters would possibly aim at taking the advantage over such consumer reactions.
The qualified distribution channels should be committed to quality, safety and guarantee, therefore the players at this point can have a major role in the anti-counterfeiting approaches in the supply chains especially those that enables to automatic identification technologies.
The main organization in the fight against the counterfeits ought to be the customs, their main role being that of seizing such products at the boarders. They collaborate with the trademark owners to protect products against fraudsters but these calls for a lot of commitment from the owner. Custom authorities are entitled the task of facilitating international trade, which might conflict the anti-counterfeit measures of a state because it only inspects few products due to limited resources.
Lastly, the consumer behaviours are very important. Despite the compromise on quality, some people buy counterfeit perceptively due to their low costs or better bargains, thus increasing their demand for instance the luxury goods. (Davenport, 2006)
A wise consumer should guarantee health, security and safety by demanding for more authenticated products especially regarding the origins. A consumer ought to understand that counterfeiters are seeking bigger profits and this is never compromised, therefore they will not take liability of any dangers involved on production of poor quality goods such as food or medicine and at times will use their ruthlessness or malicious measures to deceive consumers.
Key tactics to be utilized in the campaign
The principal ways to fight or prevent counterfeits involve fist the establishment of some legal actions against players. There are laws governing establishment of industries, manufacturing/producing and distributing products. Secondly is the enforcement of counterfeit private investigators and collaborators with existing agencies among trademark owners. Collaboration involves parallel trading where legal aspects of different countries regarding the vice need establishment to explain size, laws and permission limit in various states or countries. The enhancement of consumer awareness or education is equally essential to enhance good consumer behaviours. Lastly is the establishment of counter measures, based on technology mainly the online, and offline technical approaches. These are essential measures used to make counterfeits hard to manufacture because of he distinctive nature compared to the originals. The secure authentication measures of a product involve insertion of unique security labels, which exclusively identifies the product, and make it very hard to duplicate.
Key stake holders
Key stakeholders in the campaign include the Anti-counterfeiting and trademark safeguarding organizations such as:
- ACC: International Anti-Counterfeiting Coalition, www.iacc.org
- “GACG: Global Anti-Counterfeiting Group, www.gacg.org”
- “ACG: Anti-Counterfeiting Group, www.a-cg.com”
- “AIM: European Brands Association, www.aim.be”
- “INTA: International Trademark Association, www.inta.org”
- “ICC: International Chamber of Commerce, www.iccwbo.org”
The Information and Communication Technology should grow outrageously because of its notable stable rising growth. In relation to the IBM (2003) and OECD (2006), the internet related investment is evident worldwide especially with regards to the network servers, storage digital devices Personal Digital Assistants (PDA) and variety of portable consumer products.
The IT industry is equally very prone to counterfeit products as witnessed today in the microchip storage devices. “Counterfeit electronic devices such as cell phones or MP3-players, contain modified chips; counterfeit versions of high-value parts like FPGAs (Field-Programmable Gate Arrays) or microprocessors may turn out to be inoperable, cheaper parts have the original package marking removed and replaced with markings from a high-value device”. (Fraser, 2006, 1) The Nokia Company, (2003) has been faced with counterfeit problems over their batteries and mobile phone equipments and Maxtor as indicated by Del Nibletto (2005, 1) were faced with counterfeit of hard disks. According to Seivold (2006) most of these companies are struggling to fight already suffered counterfeited products, distribution channels and other infringements.
The main challenge facing the Information Technology industry is the lack of proper mechanisms to quickly detect the look-a- likes because of their complicated nature. The small companies acting as solution providers are not in a position of sourcing information from big wholesalers or main distributors because of their limited size of ordering. They are thus forced to acquire them from other sources which are prone to counterfeiting. The greatest infringed products in the IT industry are the software which is normally protected by copy rights.
This analysis indicates that counterfeiters are creative criminals who are determined to break existing security measures. They then invent their own additional security appraises which were inexistence before to claim the quasi-legitimacy over the tactic of deploying unique strategies to by-pass customary laws. These difficulties encountered in controlling the vice call for specific approaches to various industries for the analysis, design and implementation of the distinctive countermeasures. The main notable aspect is that as days pass by, the quantity of counterfeited products is increasing and their quality is equally appreciating in line with advancement in technology.
Conclusion
According to this report, counterfeiting has no boundaries over the production line or industry, it virtually affects all industries, and the quality of these goods keeps rising with rises in the original goods especially in terms of the technology used to control the vice. The numbers of counterfeited products keep rising due to the high profits margins. These trends attributes to weak or little inspections mechanisms and consumer behaviours.
Today the true estimates over counterfeiting remains very tricky to approximate but regardless of the difficulties, indications are that there is high increase on counterfeits production compared to world trades of genuine products. The extent of counterfeiting may be specific on the industries since it infringes the intellectual property right and thus requires a legal approach. Global factors drive the matter partially, which block individual companies from participating in the countermeasures.
The most important principal outlaid by OECD (2006) is to increment of “risk-profit ratio of the counterfeit players”. There is urgent need to address the professionalism portrayed by such players. Dangerous products pose great danger to the consumer because the counterfeiter does not mind the health and safety but to maximize the illegal profit margins. Some of the industrial unions like the “International Anti-Counterfeiting Coalition (IACC, 2005)” have in the past been able to link the acts of malice or arranged crime such as terrorism to a measure of funding illegal activities therefore, “Counterfeiting is not a harmless crime”.
Today the aspect of fighting the illicit trades is not the responsibility of the trademark holder, customers or the intellectual property rights group but a mutual goal among all players including the consumer, distributors, and the private industries.
References
Building Radio Frequency Identification for the Global environment (BRIDGE). 2009. Web.
Davenport, Lyons. 2006. Counterfeiting Luxury: Exposing the Myths. “Research report. Web.
Del Nibletto. 2005. Maxtor gets serious about stopping grey market in its hard drives, p.1.
European Commission. 2006. Community-wide counterfeit statistics for 2004. Web.
European Brands Association (AIM). 1999. Counterfeiting. Briefing Paper. Fraser. 2006. On the trail of counterfeit chips, p. 1.
IBM 2003. “Sam Palmisano Presentation Transcript”. IBM Business Leadership Forum, Web.
International Anti-Counterfeiting Coalition (IACC). 2005. “The Negative Consequences of International Intellectual Property Theft: Economic Harms,” Threats to the Public Health and Safety, and Links to Organized Crime and Terrorist Organizations.
International Chamber of Commerce (ICC). 2004. The fight against piracy and counterfeiting of intellectual property. Policy Statement. Submitted to the 35th ICC World Congress.
Organization for Economic Co-operation and Development (OECD). 2006. OECD’s Information Technology Outlook.
Kovács, L. 2005. European Commissioner, Press conference.
NOKIA. 2003. Nokia Takes Aim at Unsafe, Low-Quality Counterfeit Batteries. Web.
Organization for Economic Co-operation and Development (OECD). 1998. The Economic Impact of Counterfeiting. Web.
Seivold, G. (2006). Companies Find that Fighting Back Against Counterfeit Products Pays Off, in IOMA Security Director’s Report.
Swiss Federal Institute of Intellectual Property. 2004. Counterfeiting and piracy – Anappraisal of the current situation in Switzerland. Survey result.
The International Anti-Counterfeiting Coalition (IACC). 2006. Facts on Fakes. “IACC Briefing paper”.
U.S. Food and Drug Administration. 2004. Combating Counterfeit Drugs – A Report of the Food and Drug Administration. Web.