Product copies

The brand protection software provider Sentryc GmbH conducted a qualitative survey in 2022, in which companies from the IT sector, construction and mechanical engineering, the automotive industry and the financial services sector participated.

The annual damage caused by counterfeits is usually between one million and 50 million euros. More than 60 percent reported that copies of their products had already been in circulation, posing a potential danger to end customers. The good news: Thanks to the active use of brand protection software, victims discovered a significant portion of the plagiarisms.

Four trends under observation

In 2023, the real and digital world are expected to merge even further. This exposes consumers to an increasing number of online spaces. However, the further development of virtual shopping also opens up new avenues for plagiarists. This challenges brand manufacturers, industry, and stakeholders in trademark law. The following four essential developments and resulting approaches to action summarise the trends identified by Sentryc GmbH.

Trend 1: Creators with Counterfeits: Fakes in Social Commerce

With the increasing popularity of social networks like Facebook, Instagram, and Facebook, businesses are increasingly selling their products directly through these channels and implementing dedicated social commerce strategies. Hyped products promote their own shopping dynamics. Coveted products promoted via social media attract counterfeiters. The accounts of the product pirates – controlled by software algorithms called social bots – use the same hashtags as the original sellers to draw attention to their fake products and fake shops. Even superapps like WeChat or Aliplay provide room for imitators. Besides messenger functions, these apps cover e-commerce and payment features. Because of their almost closed system including payment processing, they serve as a rewarding platform for counterfeit products. Pirates exploit the complex and opaque structure of these apps for their purposes. Superapps are so far primarily found in the Asian region, but the path to the German market is already being paved. To support this from a political side, the EU is planning a new law with the Digital Services Act (DSA). The regulation obliges platform providers to determine the identity of dealers and to ban illegal, reported products. It calls on manufacturers to take targeted measures themselves to protect their brands in all relevant countries. Brand protection software, which monitors social media and reports suspicious products, assists them.

Trend 2: Fakes and Brand Abuse in 
the Metaverse

By now, many brands are pushing into Web 3.0 and establishing appearances on different platforms. The metaverse offers brand manufacturers enormous sales potential, but the new design spaces must be explored legally, regulatorily and socially in part for the first time. In terms of cybercrime and fraud, they are more vulnerable and prone to damage than other digital platforms. Closing security gaps is of great importance. How can the next level of the Internet be secured sustainably? Intellectual property owners should definitely seek legal advice on whether they should register their brands for virtual products and services. Likewise, monitoring of online environments for violations is recommended. Because monitoring different platforms involves considerable effort, far-sighted companies are setting aside a legal budget for Web 3.0 in addition to a marketing budget.

Trend 3: Conscious buying decisions 
for counterfeits

A recent study suggests that particularly 26-32-year-olds would buy counterfeit products. The reason: the lower price. By buying counterfeits, consumers accept lower quality. Even if knowledge of a purchased counterfeit is present, the complete knowledge about the phenomenon of plagiarism rarely plays a role in the purchase decision: From the supply chain to the procurement of raw materials to distribution, people and the environment suffer from precarious conditions, and end consumers ultimately experience qualitative and health consequences. In order to counter the violation of human rights, climate protection and health and to bring about change, extensive information educates buyers. Legally, the responsibility lies with the manufacturer and brand owner. Therefore, they should incorporate detailed information about the consequences of counterfeit products into their brand communication. The information is spread through press work, articles on websites and partner online shops.

Trend 4: Risk management will play a larger role in business

In the risk field between cyber incidents, loss of reputation and fraud, brand rights violations play an increasingly large role. Companies know that counterfeits and brand abuse affect turnover. In order to avoid entrepreneurial misjudgments of risk, internal company transparency is gaining in importance. The following assumption applies here: As soon as a product is in demand on the market, there is an economic interest in copying it. Therefore, from the production stage, it is important to use a multitude of possibilities, of a technical, mechanical and procedural nature, to make counterfeiting more difficult. Distributing the manufacturing steps to different production sites, unique identification features such as watermarks, as well as software- and AI-supported monitoring of marketplaces and sales markets represent part of the methods. Companies should check whether they are doing everything in terms of security and due diligence to prevent fakes, and critically question their risk management and preventive measures. Legal departments should also increasingly focus on this topic in the future.

Conclusion

To prevent losses from counterfeits, manufacturers and brand owners must actively combat counterfeits. In-house legal departments or filed criminal complaints help in retrospect, but by then the copy is already on the market. As the results of the study mentioned at the beginning show, a rethinking is currently taking place in the review of the market situation and in the enforcement of product and brand rights. Now it’s about continuously monitoring the online market and new channels to stay one step ahead of plagiarists.