14.06.2012
A form of consumer fraud: a product is
sold, purporting to be something that it is
not;
 Typically an organized group activity:
manufacturing of goods takes people,
time and its goal is the profit.


UN Convention against Transnational Organized Crime (The
Convention of Palermo) definition of OC:
“Organized criminal group” shall mean a structured group of three or
more persons, existing for a period of time and acting in concert with the aim
of committing one or more serious crimes or offences established in accordance
with this Convention, in order to obtain, directly or indirectly, a financial or
other material benefit;
“Serious crime” shall mean conduct constituting an offence punishable by a
maximum deprivation of liberty of at least four years or a more serious
penalty;
By the society:
as a victimless crime,
but the risk for
consumers is more
iminent, due to the
possible health and
safety hazards
resulting from
products of inferior
quality.

By the criminals:
As having a low risk of
prosecution with light
penalties, related to
the large profits to
be achieved.


Everything can be counterfeited : branded clothings, spirits,
ciggarettes, toys, computer games, DVDs, CDs, car parts, fashion
accessories, pharmaceuticals, foodstuffs, electrical equipments, etc.

They costs less than the real thing, are always inferior and may be
less durable, unsafe and dangerous, since the counterfeited goods
are not subject of a safety check.

Case 1: Electronic equipment: After its introduction in October, 2001,
Apple`s iPod has become one of the most popular consumer electronic
products ever. As of January 2008, more than 140 million units have been
sold. The first counterfeit case became public in April, 2006. These
counterfeited iPods were very close to their counterparts, carried the Apple
logo and were labeled with serial numbers. The differences to their
counterparts are not-standard headphone jacks located on the lower –right
and missing dock connectors. The packing was quite convincing, but had
the words “Digital Music Player”, which the original does not. The devieces
did not meet the quality of the original ones (weaker sound and battery limit)
but they were working and it was very difficult to make the distinction. In fact,
many owners will believe that they have an original product and will blame
the producer for the poor performance of their device. This example shows
that illicit actors are capable of producing even sophisticated goods, and
that some of their products may even fulfill the basic needs of their
customers.

Fast moving consumer goods:
In June, 2007, the Colgate-Palmolive
company warned that toothpaste falsely packaged as “Colgate” has been
found in several stores in New York, New Jersey, Pensylvania and Maryland.
The product did not contain the expensive active ingredient fluoride, but it
was contaminated with the harmful substance Diethylene Glycol. People
reported headaches and pain after using the product. Similar incidents
occurred in Spain. The packages of the phony product had many misspeling
like “isclininaclly” etc.
This case is interesting for two reasons:
it shows that well-known fast moving consumer goods are an attractive
target even when the selling prices per volume and weight are low;
for counterfeiters it seems to be sufficient to produce something that is
similar to the original. Even goods where the brand is a sign for quality (not
for the social status) may carry obvious hints of their phony nature and still
make it into otherwise licit stores.

Pharmaceuticals: when avian flu was a major topic in
2005, countries around the world were stockpiling the antiviral
Tamiflu, patented and manufactured by the Swiss
pharmaceutical company Roche. The concerns among US citizen
created an additional demand for the medication, which even
caused some shortages in supply. I n November, 2005, customs
seized the first counterfeit articles in a post office in South San
Francisko. The pills did not contain the promised active ingredient,
were shipped in small quantities and were sold over the Internet.
How many pills made it to the consumer is unclear as only a fraction
of such small shipments were inspected by customs.
The case made it clear that illicit actors can very quickly leverage
shortages in licit supply.

On behalf of EC, the Taxation and Customs Union, publishes annual report on
the community of customs investigations into counterfeiting and piracy on
the European boarder. Provided are the number of cases and the number of
the articles seized within different product categories, here shown for the
year 2006.

Product type________ No of cases______%of total_____ No of articles____
%of total
Foodstuffs and beverages
54
0.1%
1 185 649
0.9%
Perfumes and cosmetics
1093
2.9%
1 676 409
1.3%
Clothing and accessories
24297
65.1%
14 361 867
11.2%
Electrical equipment
1 342
3.6%
2 984 476
2.3%
Computer equipment (hardware) 543
1.5%
152 102
0.1%
Media(audio,games, software)
2880
7.7%
15 080 161
11.7%
Watches and jewellery
3969
10.6%
943 819
0.7%
Toys and games
678
1.8%
2 370 894
1.8%
Cigarettes
300
0.8%
73 920 446
57.5%
Medicines
497
1.3%
2 711 410
2.1%
Other
1682
4.5%
13 28 7274
10.3%
______________________________________________________________________________________________________
_Total_:_________________________________37 334_________100.0%___________126 631 295___________100%

Truly alarming is the number of
potentially dangerous products, as
foodstufs, electrical equipment and
medicines. A high number of them is
seized every year, but many more pass
the bording without being inspected.
Lucrative crime – organized crime activity and terrorism funding
(Vietnamese leader of the “Born to kill” gang, paramilitary
groups in Northern Ireland, WTC bombing).
Major criminals control the trade in fakes, using the profit to fund
other serious organized crime, including terrorism.

IP Crime is counterfeiting or pirating of goods for sale, where
the consent of the rights holder has not been obtained;

It represents one aspect of the “black market” or informal
economy which operates in parallel to the formal economy

Other activities within informal economy:
trafficking illicit drugs, trafficking stolen cars, counterfeited credit
cars, etc.


1 kg CDs is worth
3000E
A computer game
costs 0.20E to
produce and 45E to
sell


1 kg of cannabis
resin is worth 1000E
Cannabis resin costs
1.52E per gram and
sells at 12E
In France:
Counterfeiting: 2 years
imprisonment and
150 000 E fine;

Drugg trafficking: 10
year-terms
imprisonment and
750 000 E fine
In Macedonia:
Smuggling
counterfeited goods:
up to 4 year-term
imprisonment;
Drugg trafficking: 3-10
years imprisonment
and at least 5 years if
an organized activity
(usually it is)

5-7 % of the value of global trade
 EU, 2001:
95 million items seizured
2 billion US$ damage
losses 100 000 jobs per year
 FBI, USA:200-250 billion US$

Global in its scope and scale generating
significant amount of illicit profit;
 IPC is a low risk/high return activity
 IPC has many in common with
functioning of organized crime groups







To develop strategies and programs
To raise awareness of IP crime and its links to
terrorism and serious crime
To facilitate and improve the exchange of
information and intelligence on IP crime
More collaboration to share learning and
experiences and to identify new solutions of
the problem
More aggressive law enforcement
New laws and stricter penalties.
1.
2.
3.
Thorsten Staake, Elgar Fleisch: Countering counterfeit trade:
illicit market insights, Best Practice Strategies and
Management Toolbox, Springer, Switzerland, 2008;
Adam Jolly, Jeremy Philpott: A handbook of intellectual
property management: protecting, developing and
exploiting your IP assets, USA and GB, 2004
Frank Shanty: Organized Crime: from trafficking to terrorism,
Volume 2, 2007