Counterfeiters beware: It all ends in tiers…

01 December 2021. Published by Sarah Mountain, Partner and Ellie Chakarto, Associate

The UK Intellectual Property Office (IPO) recently published the 2020 – 2021 IP Crime and Enforcement Report (the Report). The Report highlights the current and emerging threats surrounding counterfeiting and is a collaboration between the IPO and the IP Crime Group (which is made up of enforcement agencies and industry representatives). The Report details the work carried out by these organisations, to prevent IP crime.

In the Report's foreword, the Minister for Intellectual Property (IP Minister) explains that whilst the number of new trade mark registrations has continued to grow (with applications up from 55,000 between 2015 - 2016, to 140,000 between 2020 - 2021), purchases of counterfeit goods remain considerable: An estimated 29% of consumers have reportedly purchased a counterfeit item previously, with approximately 17% currently doing so "with some frequency". To safeguard the value of intellectual property rights, the IP Minister states that producers and consumers must be encouraged to "shun" counterfeits.

The Report explains that the most significant impact of the COVID-19 pandemic was to expedite already emerging trends. This includes the shifting of trade from physical bricks and mortar outlets to online. The Report is definitive on this point, stating that the pandemic has "turbocharged" online trade and consequently, online crime. This finding will come as no surprise to many brand owners, who will be all too familiar with the complexities of tackling infringements perpetrated online, particularly following the implementation of the GDPR and the redaction of domain name search results. 

Some notable headline statistics from the Report are summarised below, with the full version available to read here

  • Younger consumers (defined as those aged 35 and under) are more likely to purchase counterfeit goods. However, a large proportion of people said they would be likely to stop purchasing counterfeit goods, if exposed to campaigns explaining the significant consequences of doing so;
  • According to the Organisation for Economic Co-operation and Development, trade in counterfeit, pirated/copied goods is 3.3% of world trade and rising;
  • The top three counterfeit/pirate products investigated by Trading Standards are currently cigarettes/tobacco, clothing and alcohol; and 
  • There is evidence that engagement with IP crime prevention has increased. The IPO reported an increase in submissions to its intelligence hub, with a 13% rise in referrals relating to online crime.

In terms of how to change consumer perception of copyright theft, the Report suggests that focusing on individuals' circumstances, rather than consequences to the industry, is key. The IP Minister states that there is a need to implement strategies that: (1) deter criminals, through apprehension and prosecution; (2) raise consumer awareness to disincentivise demand for counterfeit goods; (3) disrupt illegal supply chains; and (4) disable illegal websites.

The Report was issued shortly before the implementation of new sentencing guidelines, for offenders who make unauthorised use of trade marks (the Guidelines). Published by the Sentencing Counsel on 5 August 2021, the Guidelines came into force on 1 October 2021. In line with risks highlighted in the Report, the Guidelines were introduced to enhance protection for both trade mark owners and consumers, in relation to dangerous and/or substandard goods. 

The Guidelines provide Magistrates and Crown Courts with a structure for sentencing offenders who use trade marks without the proprietor's consent. Whereas the previous 2008 Magistrates Court guidelines only applied to individuals, the Guidelines impose a dual system, which extends to both private persons and organisations. Penalties in the Guidelines for sentencing organisations are purely financial, whereas the penalties that may be imposed on individuals are both financial and custodial.

Counterfeiting offences cover a huge scale, ranging from low-level offences, such as the sale of small quantities of cheap, and obviously fake, products from temporary stalls, to extremely sophisticated and organised operations involving the production of high-quality, lookalike designer goods (i.e. genuine fakes). In acknowledgement of this, the Guidelines introduce a sliding scale of fines, which ranges from £250 to £450,000. 

In determining what level of fine to impose, the courts are required to consider:

  1. Culpability (high, medium or lesser). The applicable level will depend on factors such as the role played by the offender (e.g. leading, peripheral), the degree to which the offence was planned and whether the offender coerced others into participating in the offence or was themself coerced; and 
  2. Harm to the trade mark owner. This involves putting a monetary figure on the offence by reference to the value of equivalent genuine goods and assessing any significant harm suffered by the trade mark proprietor and by purchasers and/or end users of the counterfeit goods.

The Guidelines encourage fines that are "substantial enough to have a real economic impact" and which will "bring home to both management and shareholders the need to operate within the law".

Both the Report and the Guidelines send a strong signal that counterfeiting is high on the agendas of both the IPO and enforcement authorities. It will be interesting to see whether the Guidelines have a meaningful impact and if they provide the deterrent that they are intended to. A detailed assessment will no doubt follow, when the 2021 – 2022 version of the Report is published next year, with authorities and brand owners alike hoping to see a turning of the tide.  

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