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The cost of counterfeit: Concerns grow over fake goods and IP theft in global supply chains
PMAC
The growing threat of counterfeit products in the supply chain is
drawing a lot of attention from the Canadian government lately, and it’s also a burgeoning concern for PMAC. Counterfeit products—which are found in a range of sectors, from auto parts, fashion and household appliances to pharmaceuticals—received widespread media focus recently after counterfeit toothpaste was found on store shelves in Canada.
In addition to the counterfeiting of trademarked products, intellectual property (IP) theft involving the piracy of copyright products such as software has also been in the headlines.
Counterfeiting is a serious problem for supply chain professionals. The complexity of global supply chains coupled with advances in technology and the increasing sophistication of those perpetrating fakes is compounding the challenge. Canadian Manufacturers & Exporters estimates the economic impact of these activities to be between $20 and $30 billion a year, but given their black market status, it’s hard to know the true price. According to Industry Week Magazine, in 2006, about 81 per cent of counterfeit goods seized in the US originated in China.
PMAC members recognize both government and the private sector must take steps to better secure supply chains and reduce the impact of counterfeit and pirated goods on consumers and businesses.
Canada is particularly vulnerable to counterfeit goods because of weak laws and an IP enforcement system that lags behind those of other countries including the US and the UK.
“While intellectual property (IP) crime can lack, for some, the social stigma of many other criminal offences, this illegal activity is a drain on the economy and is responsible for loss of employment, a reduction in tax revenues for governments, and poses serious
consumer health and safety risks due to the poor quality of products
and sometimes hazardous nature of the fakes,” states A Roadmap for Change, a March 2007 report on counterfeiting and piracy in Canada, by the Canadian Chamber of Commerce and the Retail Council of Canada.
Tougher policies required
Two federal government committees, the House of Commons Standing
Committee on Industry, Science and Technology and the House of Commons Standing Committee on Public Safety and National Security,
held hearings earlier this year into counterfeit goods in Canada. In their respective reports, tabled in Parliament in June 2007, they made numerous recommendations to the government to adopt a much tougher approach to those engaged in the manufacture, sale, importation and exportation of counterfeit goods.
Among the committees’ recommendations:
• Provide the Canada Border Services Agency (CBSA) and law enforcement officials with the express authority to target, detain, seize and destroy counterfeit and pirated goods on their own initiative. The CBSA should also implement policies promoting the
detection of such goods, such as mandatory reporting of brand information with shipments.
• Provide RCMP, Department of Justice, and Health Canada officials with adequate resources to address counterfeiting and piracy.
• Enact legislation that defines trademark counterfeiting as a specific criminal offence under the Trade-marks Act and amend the Trade-marks Act and the Copyright Act to formally prohibit the
importation of counterfeit and pirated products into Canada.
• Establish an Intellectual Property Crime Task Force composed of police officers, customs officers, and federal prosecutors to work with IP business leaders to guide and coordinate anticounterfeiting
and anti-piracy efforts.
• Encourage prosecutors to seek more significant penalties for counterfeiting and piracy violations, including imprisonment.
• Strengthen civil remedies for counterfeiting and piracy infringements.
• Impose personal liability on the directors and officers of a corporation that engages in counterfeiting or piracy, and shareholder liability if it is a shell corporation.
For its part, PMAC has sent letters to key federal ministers as well as the chairs of both committees expressing support for measures to combat counterfeit goods in Canada. The association also intends to address this issue in its submission to the House Finance Committee during the government’s pre-budget consultation process. As in all of PMAC’s government relations efforts, we seek to increase understanding of supply chain management and shape government policy to support our members in their work.
PMAC believes government plays an essential role in establishing the legal infrastructure to protect copyrights and trademarks and enforce intellectual property laws to deter and, whenever necessary, punish fraudulent activity.
We agree equipping authorities with the tools to deal with counterfeit and pirated items in the supply chain is an essential pre-condition for success. b2b
The above column, and the French translation on page 36, were provided by the Purchasing Management Association of Canada. See www.pmac.ca.
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