1 The OECD Study on Counterfeiting & Piracy UNECE International Seminar on Product Safety and Counterfeiting Geneva 5 November 2007 Danny Scorpecci Structural Policy Division OECD The views expressed are those of the author in his private capacity and do not necessarily represent those of the OECD or its Member governments.

2 1. Bring participants up to date on the OECD’s Study on counterfeiting and piracy 2. Discuss some of the major findings and issues that have arisen in the study 3. Touch briefly on possible future action Objectives

3 The problem of counterfeiting & piracy has been growing –both scope and magnitude; –affects firms, consumers, governments and workers There is a broad range of effects –economic, health, safety Concern is increasing –over role of organised crime –about economic implications for economies where there is significant production of counterfeit goods Rationale for the project

4 Phase 1: Counterfeit and pirated products –Scope: Tangible products that infringe trademarks, copyrights, patents or design rights Phase 2: Digital piracy –This has been scoped, waiting for agreement of member governments and industry and funding before moving forward Phase 3: Other IPR infringements –Yet to be scoped and funded and must take account of progress in Doha Development negotiations –If it goes ahead will mostly cover Geographic Indicators Structure of the project >>> Three phases

5 Definition for this study (Phase 1) “ A counterfeit or pirated product is a product that infringes on an intellectual property right (IPR) “ Trademark Copyright Patent Registered design Example: a replacement motor vehicle part, a “generic” medicine or an unbranded spirit called vodka would not be counterfeits unless this requirement is met. What is counterfeiting and piracy?

6 Sectors studied in depth automotive products food/drink products pharmaceuticals tobacco products music recordings motion pictures and other video content electrical components (including batteries) Other possibilities explored luxury goods, perfumes and fashion clothes chemicals and pesticides sportswear and other branded clothing personal care, toiletry and household products books industrial and consumer motor lubricants aircraft components toys computer software Sectoral case studies

7 ► Magnitude of the problem Measurement needs rigorous methodology, but data is hard to find activities are illicit and clandestine enforcement and customs data are sparse, incomplete and inconsistent Analysis suggests that up to US$ 200 billion of international trade could have been in counterfeit or pirated products in 2005 The figure does not include –domestically produced and consumed products –non-tangible pirated digital products If added, the figure could be several hundred billion dollars higher Earlier figure of 5-7% of world trade lacks rigorous foundation and could not be confirmed or disproved

8 ► Extent of the problem Virtually everything can (and probably has) been counterfeited, and is taking place in virtually every economy Analysis confirms counterfeiting of increasingly complex products sophisticated packaging security items (i.e. holograms) Growing trend towards everyday products intended to deceive consumers, many of which may affect public health and safety, eg car parts Pharmaceuticals food/drink Evidence of growing infiltration of legitimate supply chains – an area of interest to organised crime

9 Seizures of imported counterfeit and pirated products from the top 20 source economies Customs seizures

10 Why do people produce/consume C&P?

11 ► Distribution channels Most counterfeited goods are transported through commercial transport services often with appropriate documentation (such as Bills of Lading) Growing use of free trade zones these are used as gateways and way-points where goods can be broken down into smaller consignments sanitise documents to disguise point of manufacture elaborated and repackaged (often only become counterfeits at this point) The internet has emerged as a new and powerful means to sell via auction sites, stand alone e-commerce and solicitation

12 ► Main Effects Counterfeiting and piracy… can impact negatively on innovation and growth may reduce employment can reduce foreign direct investment (FDI) damages sales volume, profits, brand value and capitalisation of rights’ owners, and can lead to potential legal liability can seriously affect health and safety of users can negatively affect consumer confidence reduce tax revenues to governments induce high costs on governments and industry to combat C&P encourages participation by organised crime and can be the cause of corruption

13 Importance vs. Priority Most governments have labelled counterfeiting and piracy as important problems. However, not always matched by priority other illicit activities are being given first call on resources (for example, drugs, people smuggling, gun running) Governments may better respond to these problems if they appreciate the corrosive effects of C&P especially organised crime and effects on health and safety

14 Laws & regulations often ineffective Not properly enforced Insufficient public enforcement resources Low priority in courts Protection of locals Courts often lenient as counterfeiting and piracy are not considered as serious crimes Penalties do not always deter, so high rate of repeat offenders

15 For the attention of policymakers Improve co-ordination amongst domestic agencies Consider having a clear C&P policy Have a clear and enforceable legal and regulatory framework Ensure effective enforcement and measure progress International co-operation, bilateral, plurilateral and multilateral Increase awareness amongst government officials and consumers Enhance co-operation with industry

16 That counterfeiting and piracy is a significant and growing problem that has economic, social, health and safety consequences has been recognised at highest levels:  G8 meeting at Heiligendamm in June 2007 included Intellectual Property generally, and Counterfeiting and Piracy specifically, in its Summit Declaration A Unit has been established within the OECD to steer the implementation of the Heilingendamm Dialogue Process, including the promotion and protection of IP Dialogue will include the “O5” emerging economies: Brazil, China, India, Mexico and South Africa OECD may also do further counterfeiting work on Phase II (digital piracy) and Phase III (other IPR infringements) Where to from here?

17 Counterfeiting and piracy is a significant and growing problem that can affect health and safety Counterfeiters are well organised and adept at establishing distribution channels, and this encourages the participation of organised crime The infiltration of legitimate supply lines, and the potentially harmful effects of many products is of growing concern The very damaging effects on consumers, rights holders and governments are now beyond dispute More priority, co-operation and information collection is necessary to better understand and deal with these problems Snapshot of Conclusions

18 Danny Scorpecci Structural Policy Division Further information available >>> Contact us OECD 2, rue André-Pascal Paris CEDEX 16 France Phone: (331) Fax: (331) Website: