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Licensing Law

Counterfeit Seizures Up 10%; Money Not the Issue?

In the U.S., retail sales of consumer goods are up—but so are the instances of counterfeits, according to a report from the U.S. Department of Homeland Security based on data from the Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) agencies.

A record number of shipments that violated companies’ intellectual property rights were seized upon entry into the U.S. in 2017. Those seizures, whose goods would have been worth over $1.2 billion had the products been authentic, represent a nearly 10% jump from the number of fakes confiscated in 2016. As was the case last year, most illicit goods originated from China (48% of seizures) and Hong Kong (39%).

Note counterfeit goods don’t just infringe IP—they make use of another’s trademark in a way “identical to or substantially indistinguishable” from the actual mark and apply it to merchandise in the same classes of goods that the authentic trademark owner’s registration extends to. Even considering those limitations, the CBP enforced trademarks and copyrights pertaining to over 18,209 active recordations, including 2,343 new or renewed.

The merchandise category with the highest number of seizures was, again, apparel and accessories, resulting in approximately 15% of all seizures in 2017. The MSRP value of these goods was almost $75 million. These products included both trademark infringing and counterfeit luxury products, including those posing as Louis Vuitton, Gucci, Chanel, and Hermes. But it’s not just the premium brands that are being targeted.

Hot sportswear brands (like Nike) and trendier, non-luxury brands (such Yeezy, BAPE, Off-White, Supreme, Thrasher, and Vetements) are increasingly being illicitly manufactured due to the high level of demand for these brands and their limited-edition collections and collaborations which commonly exceed supply.

For the first time, the report covered a net category of counterfeit goods: consumer products, which includes insulated drinking tumblers, cell phone and computer accessories, and lights and light fixtures. These goods constituted 12% of all seizures in 2017.

The watches/jewelry category was the most valuable, with a combined MSRP of $460 million having been seized in 2017. Handbags/wallets were the next-most valuable category at $234 million, followed by consumer electronics ($85 million) and tags/labels ($81 million).

Interestingly, home and housewares appeared to be a larger point of concern this year. Seizures of iconic, mid-century, modern design home and office furniture continued to increase for a second year in a row, according to the report. Thirty-eight seizures in all had an estimated MSRP of $15.1 million. And the CBP and the General Administration of China Customs (GACC) conducted a month-long joint operation in April
2017 that focused on household consumer electronics, including lamps, lights, light fixtures, light bulbs, lighted signs, projectors, kitchen appliances, and personal grooming products. That operation resulted in 1,700 seizures.

According to the U.S. data, an increasing number of seizures are occurring as a result of ecommerce sales, with 89% of all IPR seizures taking place in the international mail and express environments. While much of these goods were part of a larger criminal business enterprise, a significant minority of ecommerce orders are thought to be by consumers who actively sought out counterfeit goods.

A study published in the Journal of Economic Sociology, surveying Russian consumers, implies that education isn’t necessarily the key to stemming the demand for counterfeits. The Russian appetite for counterfeit goods is much larger than that in the U.S., of course, extending to pharmaceuticals, electronics, and luxury goods. The demand is so great that over $43 billion worth of counterfeit goods, or almost 10% of the global counterfeit trade, are sold in Russia each year, according to a European Union Intellectual Property Office survey.

The study found that consumption of counterfeit garments and accessories depended less on an individual buyer’s income (or lack thereof, according to a theory that people buy fakes because the real thing is too expensive) than it did on their level of education. In short, consumers with higher levels of education tended to buy more counterfeit goods.

Moreover, the consumers that do purchase counterfeits are not typically duped into doing so—more often than not, they specifically seek out the counterfeit garments and accessories, instead of the real thing. In addition to the higher quality of modern-day counterfeit goods, the study’s author pointed to the impact of the internet (greater anonymity and safety) and social media (fueling greater demand) coupled with brands’ favored tactic of releasing only limited-edition collections and collaborations (lower supply) as fuel for the practice. The reason they’re buying? According to the study, customers are forced to rely on counterfeits in order to get their hands on certain products at all.


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