The Three Biggest Challenges for Brand Owners

G20 Executive Talk Series

Branded Story / International Trademark Association

In 2017, governments face many conflicting economic priorities. But the key priority as ever for the economy is to drive growth and maintain low unemployment. We believe placing brands and brand protection at the core of any economic policy will enable them to do that. Without the ability to build and protect a strong brand, businesses cannot invest for the long term.

At the International Trademark Association (INTA) we believe that there are three main threats that brand owners should prioritise for the next 12 months – counterfeiting, internet governance and expansion, and restrictions on the rights of brand owners. The key role government can play in all three areas is to be at the centre of the debate – to convene all the stakeholders and push for progress that has the rights of brand owners at its heart.

1. Building a global anticounterfeiting network
Counterfeiting is the most critical IP issue facing brand owners and consumers today. It directly affects national security, the global economy, and poses significant health and safety risks for consumers and their communities.

The growing economic impact presented by counterfeiting is highlighted in the findings of a series of recent key research studies. Ten years ago, in 2007, worldwide counterfeiting was valued at an estimated US$250 billion and accounted for 1.8% of world trade. Last year, a 2016 report by the Organisation for Economic Co-operation and Development (OECD) estimated that in 2013, these numbers rose to US$461 billion and 2.5% respectively. A 2017 report (commissioned by INTA and the International Chamber of Commerce–Business Action to Stop Counterfeiting and Piracy (ICC-BASCAP)) forecasts that international trade in counterfeiting will more than double over the next few years to US$991 billion by 2022.

These studies underline a simple fact: Counterfeiting is a profitable, low-risk, high-reward business. Counterfeit goods can often be sold for ten times the amount it costs to manufacture, and the risk is low as the penalties imposed for counterfeiting rarely includes long prison sentences. The internet has also made it much easier to reach and deceive consumers and while avoiding detection by using multiple websites.

In an increasingly integrated global economy, the task of combating counterfeiting rests with all stakeholders in all corners of the world, and with the active players at all stages of the supply chain.

Governments must play their part. Shipping and customs agents control key access points where goods enter their countries, including counterfeit goods. Customs is often a country’s the first line of defence against counterfeiters. It is estimated that the value of counterfeit products imported into the EU was US$90.9 billion in 2013. However, in that same year, the European Commission reported that EU Customs authorized seized goods valued at US$821 million. The challenge for customs officials at all borders is enormous and we believe governments should prioritise increasing the seizure rate and providing support for customs inspectors around the world.

In an increasingly integrated global economy, the task of combating counterfeiting is one that rests with all stakeholders in all corners of the world, and with the active players at all stages of the supply chain.

Anticounterfeiting advocacy and other proactive combative measures involve many players, including rights holders, customs officials, law enforcement, legislators, the IP offices, intermediaries, and consumers. To address this challenging issue, and combat the complex and global counterfeiting network, government needs to help establish a multi-stakeholder anticounterfeiting network that includes:

Coordinated law enforcement across jurisdictional boundaries;
Cooperation with intermediaries: search engines, shippers, payment providers, registries; registrars, online marketplaces and social media;
Judiciaries imposing substantial penalties, and more criminal penalties on counterfeiters and those that help facilitate the counterfeiting activities;
Rights holders working together, as they do in industry and trade associations;
Partnership between the private and public sectors; and
Industry helping government to understand the practical implications of policy and legislative decisions.

Only by working together can we weaken the criminal networks currently profiting from counterfeiting. We aim to work with governments to convene these stakeholders, open communication channels between them, and foster meaningful collaboration among them.

2. Dealing with the online threat
While counterfeiting is arguably the greatest threat to brand owners, grappling with the issues of internet governance and the expansion of the domain name system can also be extremely challenging.

In 1995, less than 1% of the world’s population had an internet connection. Today, more than 3.5 billion people are online, and it is estimated that 10 more people come online every second! In 2012, global business-to-consumer e-commerce surpassed $1 trillion. By 2015, it more than doubled to $2.2 trillion. Consumers in the Asia-Pacific region are responsible for more than half of online shopping, followed by North America, accounting for around a quarter, or $644 billion, of all business-to-consumer sales in 2015.

The Internet Corporation for Assigned Names and Numbers, widely known as ICANN, is responsible for managing the domain name systems. INTA, through its Internet Committee, is playing a key role in ensuring that ICANN fulfills its obligations to maintain a secure, stable, and resilient Internet.

In 2012, ICANN launched the new Generic Top-Level Domains program (gTLDs). Over nineteen hundred applications were received for new domain strings which included dot brands, dot generic terms and Internationalized Domains. The first new gTLD string in non-roman script was delegated to a Chinese character string for “games” in October 2013. Today, more than 1,200 new names have been delegated. This programme has enabled some brand owners to launch their own domains, but has also increased costs for others, who need to ensure that their own trademark is not infringed in all the new domain names that are being launched (such as .sucks)

Governments need to ensure that trademarks receive the same protection on the internet as they do in the brick-and-mortar world, and that consumers can make safe, reliable, and informed choices about the products and services they seek online.

3. Dealing with restrictions on brand use
The growing restrictions on brands and trademark use present a threat to all business owners. Much of the focus recently has been on plain and standardized packaging on tobacco products as a means to deter people from smoking. As a result, governments have justified these brand restrictions as a public health issue, without regard for trademark rights. However, a dangerous precedent has been set and brand restrictions are increasingly being applied to non-tobacco products such as baby formula and on fast-food, including pizza. These restrictions often dictate what images or logos may be applied to labels for these products.

Despite a pending WTO case, a number of countries, primarily with advanced economies, have enacted plain packaging legislation for tobacco products and others are rapidly moving in that direction. This issue is being through legal challenges, but the situation looks dire for brand owners.

INTA’s Board approved a resolution in 2015, reinforcing the Association’s long-standing position on the issue of plain and standardized packaging and citing violations of various international treaties regarding IP rights; and calls for governments to reject or repeal such legislation, and to use less drastic alternatives to address health and safety goals, such as public education campaigns. INTA has filed submissions on this issue with governments in more than 22 jurisdictions across Africa, Asia, Europe, and the Americas.

Since this issue first appeared, INTA has pressed governments to take a balanced approach in this area. This means considering the public health while also ensuring the integrity of their IP systems as a means to promote investment and economic growth and protecting the rights of brand owners.

Looking Ahead
Over the next 12 months we remain ready to work with governments to lead on these issues and combat the threats posed by counterfeiting, online infringement and restrictions on brand owners’ rights. We can only succeed if we work together.

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