Fake goods hamper manufacturing market health; call for criminalization imminent

Counterfeit goods trafficking is a global problem that goes far beyond designer handbags and watches. Note the following:

• The World Health Organization estimates fake pharmaceuticals sold globally top $35 billion—or 10 percent of the world total.
• The Federal Trade Commission estimates illegal automotive spare parts siphon $12 billion out of the market—$3 billion in the U.S. alone. That includes critical safety items like brake pads.
• The Federal Aviation Authority estimates 2 percent of the 26 million replacement parts installed on aircraft each year are counterfei

“The growth of counterfeiting in all industries and all markets is alarming,” says Mark Mutterperl, partner the New York law firm Fulbright & Jaworski, which specializes in intellectual property protection. “It's highly profitable—more so than many legitimate businesses, and the chances of going to jail for it aren't very high.”

The consequences go beyond lost profits, Mutterperl adds, citing a 2001 international report indicating 192,000 deaths in China alone resulting from fake pharmaceuticals.

Obviously the issue presents a serious risk to the health and safety of individuals as well as to manufacturers in terms of potential financial damages from product liability claims. Even if a manufacturer dodges a bullet in establishing that a product was counterfeit, the ill effects of bad publicity may prevail.

Fulbright & Jaworski cosponsored The Third Annual Global Congress on Combating Counterfeiting and Piracy last January. More than 1,200 government reps, businesses, and other interested parties from 100 countries attended.

“It was a record number of people coming together to discuss taking back the fake world,” says Mutterperl. “Manufacturers need to be alert and organized. They need to conduct an audit to assess the problems in their industries. They need to look at their supply chain to determine that all vendors are warranted.”

Mutterperl says manufacturers also should pay particular attention to pricing, whether it is reasonable or not. “In this world, if something is too good to be true, it's probably counterfeit,” he maintains.

Companies also must educate their sales staffs, for it is often the sales force that will first encounter a problem.

“If they're alert and know how to report it, it's possible to detect a problem and deal with it before it gets worse,” says Mutterperl.

The same goes for service calls. “It requires an overall effort,” he stresses. “There needs to be increased enforcement of existing laws, new laws need to be enacted, and counterfeiting needs to be criminalized. There clearly needs to be greater international cooperation.”