Faking hell…the legal loophole that lets counterfeiters walk

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Counterfeiting goods is a $200 billion (£122.5bn) industry, accounting for seven per cent of the world’s trade, says the International Chamber of Commerce (ICC). But loopholes in the current law have been highlighted in a recent court ruling.     

In July, HM Revenue & Customs (HMRC) seized a batch of 400 fake mobile handsets, batteries, manuals, boxes and hands free kits with Nokia branding. Nokia requested HMRC to confiscate the batch but the request was refused.

Under the Counterfeit Goods Regulation, the authorities can only confiscate counterfeit goods if there is evidence the products will be sold in the EU market. In this case, there was no such evidence.

Mr Justice Kitchin’s ruling on July 24 supported HMRC’s actions. But at least the judge was apologetic, indicating changes to the current regulation need to be made.

 “I recognise that this result is not satisfactory. I can only hope it provokes a review of the adequacy of the measures available to combat the international trade in fake goods by preventing their trans-shipment through Member States,” he stated.

Trademark law firm Withers & Rogers attorney Tania Clark suggests the ruling will now open a floodgate for counterfeiters who will be using the UK as a “safe passage” for fake handsets.

Fakes are thriving

The number of handsets and accessories being replicated and entering the EU market will rise significantly by next January because of these loopholes in the current Counterfeit Goods Regulation, lack of Government interest and the public’s appetite for counterfeit products, the Global Anti-Counterfeiting Group (GACG) claims.

Chairman John Anderson argues the fake phone industry is thriving, helped by flaws in UK regulation. “Little things are overlooked in current law. For example, if a stamp hasn’t been stamped in the right place on a document the criminals are let off. The ICC says counterfeiting is worth $200 billion globally a year; I think it’s at least five times that figure. Counterfeiting is a huge black market and a huge source of income for criminals.”

Anderson says it is not in the Government’s interest to eradicate fake goods. “The Government doesn’t see many votes protecting intellectual property. It will do what it can to prevent counterfeiting. But if it removes fake goods from the market, consumer spending will drop.”

A recent MORI survey indicated that 40 per cent of consumers would consider buying counterfeit products, so the public appetite for such goods is there. Unless its attitude changes, counterfeiting will continue.

“People are looking for a bargain, so fakes are attractive.”

The market for fake goods is worth £1.3 billion in the UK, £900 million of which supports organised crime, said the Minister of State for intellectual property David Lammy in a recent report. In the UK, 1,262 counterfeit mobile accessories were seized by Trading Standards authorities between January 2008 and January 2009.

In 2007, around 200,000 knock-off mobiles were found in this country. Anti-counterfeiting agencies say the number is steadily increasing.

Nokia a target

Fakers don’t even have to copy a real product. The Apple ‘iPhone nano’, or ‘mini iPhone’ is the latest handset being produced by fakers. A real version, much rumoured, is yet to be released. Nokia N95, N95 8GB and Arte handsets have also recently been a major target for copycats.

On the accessories front, copies of brand-name Bluetooth kit, chargers and memory cards are being churned out because of the high demand for such products.  For mobile handset recycling company Mazuma, the problem has increased 500 per cent since last year. Managing director Charlo Carabott says counterfeits will cost his company around £6,500 this year in returning fake handsets back to customers.

“The number of counterfeit mobiles on the market is a growing problem. We receive about 8,000 phones a day of which at least five are fakes. It’s not a huge amount, but it’s an increase from last year. We used to receive one fake phone a day, on average. The IMEI used to indicate that it was a fake. But now counterfeiters are using genuine IMEI numbers so copies can be harder to spot.”

Carabott suggests fakes can be identified by the dubious quality of the audio and software. Menu fonts can also be slightly different and graphics not as sharp. But the improvements to the replicas means channel resellers must spend much more time checking handsets are genuine. “In most cases, customers seem genuinely surprised that their phone is a fake. They probably think they got a bargain and didn’t even know their phone was a rip-off,” says Carabott.

 

The full version of this article appeared in Mobile News issue 447. To subscribe, click here

 

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