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The Luxury Counterfeiting Market Is Growing. Are IP Laws Powerless to Stop It?

Counterfeiting luxury goods is a growing problem for holders of intellectual property in the United States. Current laws and regulations are powerless to stop its growth.

The Luxury Counterfeiting Market Is Growing
The Luxury Counterfeiting Market Is Growing

Counterfeiting luxury items used to mean grabbing a knock-off bag on a bustling street corner in a hurried transaction so the seller could scurry away before police stumble upon their makeshift operation. The buyer would receive a purse with less-than-stellar craftsmanship but bearing a high-end designer logo. Such operations are still widespread, but the con is increasingly sophisticated – and valuable. According to a March 2019 report, counterfeit merchandise accounts for 3.3% of global trade. That figure is rising with no end in sight.

There are a number of reasons for this growth. Newer crops of fake goods are increasingly well-made, making it more difficult to distinguish authentic from knock-off. Demand too has grown, providing an endless audience of shoppers. Most importantly though, the widespread adoption of online shopping has given the imitation-industry an immeasurable boost. The largest market for these goods lies in China, whose e-commerce markets are infamous for posting knock-off clothing, shoes and accessories. During one investigation, it was found that only 37% of designer pieces on one popular retail site were authentic.

Most affected by these actions are US-based companies whose brands, designs and ideas are most likely to be stolen. These luxury pieces grace the covers of fashion magazines, red carpets and style blogs, making them highly recognizable to trend-conscious consumers. The increased pilfering of this type of intellectual property is particularly challenging for these types of businesses, whose branding and reputation are carefully crafted and thoroughly marketed. Industry experts call IP theft the largest threat to the fashion trade.

Major brands have long tried to battle the groups behind these crimes. One luxury name employs dozens of lawyers and spends $17 million per year in an attempt to quell knock-off sales of their products. The fight is a difficult one, as digital sellers across the globe market knockoffs, some of which match so closely that they fool even avid fans of the brand.

The act of creating or selling counterfeit goods is illegal, as it infringes upon the original creator’s IP. In fact, guilty parties can expect fines or even jail time. The trouble is, enforcing such laws is near impossible in an online environment. In earlier years, the Department of Homeland Security played a vital role in this fight by confiscating imitation pieces at the border. In 2013 alone they captured over $1.7 billion worth of goods. Web policing becomes more difficult as sites and sellers can quickly shut and re-surface under a new name. Because the burden is on the IP owner, tracking and contacting each party can become an exercise in futility.

Like many forms of legislation, rules can trail far behind fast-paced technology growth. Pursuing a legal suit against a single infringer can be costly for the brand and may not yield results. Plus, the anonymous nature of e-commerce makes it difficult to track those who distribute these items and prevent them from repeating the offense somewhere else.

For their part, China’s new anti-counterfeiting law took effect in early 2019. It aims to tackle digital sellers who currently profit from stolen IP. Platforms too have taken measures to rid themselves of such merchandise through data analysis. Still, some legal experts call for a more global approach, since the problem spans national borders. For now, brands can only hope that newer initiatives will at least curb some copycats.