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The Increasing Menace of Counterfeiting

By Michael Russell

Counterfeit products and materials are knock-off, bootleg, pirated or other illegally produced materials that are produced and sold in violation of the Intellectual Property Rights of others or in a manner that fraudulently represent their quality or origin. Under English Common Law, counterfeiting was referred to as 'palming off'. This was perhaps conceived from the idea that a counterfeiter 'palms off' a counterfeit product as the genuine product by a ruse with regard to the origin and/or content of the product. The counterfeiter, in the process, therefore usurps the goodwill, recognition, niche and brand name of the originator (i.e. owner of the trademark/brand) in marketing and creating a ready consumer for the counterfeit product, which obviously is a fraud.

Although, counterfeiting is often used to describe trademark infringement, it may also involve any/all aspect of Intellectual Property Right (IPR) violation, which includes patents, copyrights, trade secrets etc. The effect of counterfeiting activities has been known to be quite debilitating for the IPR owner, the consumer and the nation at large. This fact is arguable from the perspective that counterfeit goods are generally of lower quality and most often, lower priced. Thus by confusing or misleading the consumer and by providing a lower priced opportunity for what appears to be the same commodity, counterfeiters tend to eat into the IPR owner's market and the value of its Intellectual capacity, while at the same time putting the consumer at health and safety risks, because of the sub standard product being consumed.

The business of counterfeiting has become especially profitable and sophisticated, with the involvement of several organized crime groups in the business. The problem is therefore expanding alarmingly and becoming more pervasive. The range of counterfeit materials and products cuts across a wide range of consumer products. In recent times, almost everything from counterfeit copies of Microsoft Windows, to improperly produced baby formula, pharmaceuticals, aircraft and automobile parts are available in the market. For instance, a report in the American 'Chemical and Engineering News' says, "just a few years ago, Americans could boast with confidence that they had the safest prescription drug supply in the world. Now, they cannot be so sanguine".

Even the FDA acknowledges the growth and spread of counterfeiting as it affects prescription medications and other consumables. This is evident from the four-fold increase in counterfeit drug investigations carried out by the FDA from five times per year in the 1990s to twenty times from 2000. In response to the threat of counterfeit, the Commissioner for Food and Drugs established a Counterfeit Taskforce in July 2003.

The impact of the increasing rate of counterfeiting can be broadly seen from two perspectives. The first, which is obviously the most direct and alarming effect on the populace, is the health hazards and other is personal safety concerns associated with consumption of counterfeit drugs and other consumables. The second direct impact has to do with the reduced customer welfare that accompanies counterfeiting, since a counterfeiter doesn't care what happens to its customers after purchase has been made.

The message here is that despite the improved monitoring and surveillance technology of the developed world, counterfeiting is still a growing menace. The world is not really as safe as you and I would want it. The best we can do is to wake up to the challenge. Be sure you purchase drugs, food items and other consumables from recognized stores; if for whatever reason you doubt the originality of any item, then don't buy it.

Michael Russell is a contributor to an Independent guide to Fraud

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