Remarks delivered at Fighting Counterfeits in a Pandemic: The Impact and Solutions for Manufacturers
Director of the U.S. Patent and Trademark Office Andrei Iancu
July 23, 2020
As prepared for delivery
Good morning, and thank you for inviting me to talk with you on the important topic of counterfeiting. Congratulations to the National Association of Manufacturers (NAM) on the release of its white paper, “Countering Counterfeits: The Real Threat of Fake Products.”
As the NAM paper says, counterfeiting is not a new problem, but it is getting worse. And, again as the paper says, the COVID-19 pandemic has shown just how dangerous inaction can be.
It wasn’t so long ago that most counterfeit goods were primarily sold in venues such as swap meets, flea markets, and even card tables set up on the corner of 17th and K, right here in Washington, D.C.
Now, the lion’s share of counterfeit transactions has shifted to online platforms.
E-commerce is appealing to consumers because of the convenience—folks can look at and compare more products in 30 minutes online than they could in a day out battling traffic and parking lots and sweaty malls. Especially during this challenging time, the appeal of contact-free, front door delivery is undeniable.
There are certainly a lot of benefits to this, but also increased dangers, especially the increased prevalence of counterfeits. We must fight counterfeits sold on such platforms, or anywhere else.
For example, we don’t want to unwittingly buy any of the 240 counterfeit brand name face masks that were seized on May 30 by CBP—Customs and Border Patrol. Or the thousands of unapproved or counterfeit coronavirus medications, test kits, and hand sanitizers seized by CBP. Or the fake test kits police seized at a 7-11 in Connecticut.
It is nothing short of grotesque that in the middle of this pandemic—the worst international health crisis in a century—criminals are taking advantage of scared and unsuspecting consumers. Frankly, the last thing our first responders should worry about is whether their PPE is real. Our health and welfare depend on the legitimacy of the products we buy.
To help consumers navigate these challenges, the USPTO launched the COVID-19 Response Resource Center, which includes, among other things, resources to help the public identify and report instances of fraud and counterfeiting related to the COVID-19 outbreak. For example, we teach folks what we call the “four P’s”: Place—are you buying from a trusted source? Price—is the price too good to be true? Packaging—is the packaging “off” or poor quality? Product—does it look right?
Addressing this issue is more important now than ever. Health risks posed by counterfeits are immediate and personal, especially right now. And so are the economic consequences. The cost of counterfeiting is difficult to quantify, but it is clearly high. In 2019, for example, CBP seized counterfeit products valued at over $1.5 billion.
CBP also reports that over 90% of all counterfeit seizures occur in the international mail and express environments. This is an important trend, since counterfeits shipped in small packages are overwhelming in sheer quantity and harder to detect, and the seizure of one package presents a reduced risk of loss to the seller.
Meanwhile, the International Chamber of Commerce forecasts that the value of domestically produced and consumed counterfeit and pirated goods could range from $524 billion to $959 billion by 2022.
While dollars lost to industry or the general economy may not resonate with all consumers, another number may strike closer to home: The International Chamber of Commerce also projects net job losses of 4.2 million to 5.4 million by 2022.
And this problem is international in scope. Nobody is spared. The Director of the European Observatory on Infringements of IP recently provided a stark and compelling data point: The tax revenue lost to counterfeits in 2016 would have been enough to build 33 full-fledged hospitals for 500 persons in the EU.
Bottom line is this: Counterfeiting is a scourge on the economy and international trade.
By the way, it won’t surprise you that 92% of counterfeits seized by CBP came from China and Hong Kong.
This must end. We must fight the supply of fakes. And, we must also fight the consumer demand for fakes.
INTA, the International Trademark Association, published a global study last year with some interesting numbers. For example, according to the INTA study, 93% of Gen Z respondents have “a lot of respect for people’s ideas and creations,” and 74% “think it’s important to buy genuine products.” At the same time, 79% of Gen Z respondents report having purchased at least some counterfeit products in the prior year.
There clearly is a gap between wanting to do the right thing, and actually doing the right thing. This gap, which we must fight to close, is a demand problem. So when we fight counterfeiting, we have to look at both sides—supply and demand.
And on both fronts, we have the strong support of the entire Administration. On April 3, 2019, President Trump issued a Memorandum on Combating Trafficking in Counterfeit and Pirated Goods, in which he stated: “It is the policy of my Administration to protect American businesses, intellectual property rights holders, consumers, national and economic security, and the American public from the dangers and negative effects of counterfeit and pirated goods, including those that are imported through online third-party marketplaces and other third-party intermediaries.”
In January of this year, the Department of Homeland Security issued a follow-up report developed as a collaborative effort by all relevant agencies, including the Department of Commerce and the USPTO. The report addresses the problems of counterfeiting, the challenges of preventing it in the e-commerce setting, and ways forward to reduce its prevalence.
The action items recommended by the report address both supply and demand. On the supply side, seeking to stop counterfeiting at its source and at the border, we have action items for government agencies, such as analyzing and improving enforcement resources.
In addition, the report sets out 10 best practices for online platforms, including “significantly enhanced vetting of third-party sellers.” In other words, choose your partners carefully. Just as governments need to choose their trading partners carefully, and businesses must choose their manufacturing, distribution, and sales partners carefully, online platforms must choose their vendor partners carefully. Given the quantity of counterfeit goods coming into the U.S. through online platforms, this single element—significantly enhanced vetting of third-party sellers—has a most prominent role to play in choking off supply.
And as I said, we must also reduce the demand. Without demand, supply withers. And for that, education is critical. We must teach folks how to recognize fakes, and once they recognize them, not to buy them.
In addition to our COVID educational resources, the USPTO is proud to be a leader in many types of IP education for consumers. We are pleased to partner with the National Crime Prevention Council, the people who brought you McGruff the Crime Dog®. With the NCPC, we are conducting a public awareness outreach campaign against trademark counterfeiting. Our partnership went live last month with the “Go for Real” campaign, which aims to help young teenagers and their parents understand that counterfeiting is not a victimless crime.
This is only part of the story: We are also working to establish a national consumer awareness campaign that goes well beyond our partnership with NCPC. A national public-private campaign should involve platforms, rights holders, government agencies, and other stakeholders to provide education for consumers regarding the risks of counterfeits, as well as the various ways they can spot counterfeit products. A creative, collaborative, and ambitious public-private partnership can harness the particular strengths and reach of the partners undertaking this important work.
Working together—industry and government in a systemic and sustained manner—we can make a real difference. Together we can eliminate this scourge on the American economy.
Thank you to NAM for putting together this excellent event and issuing your white paper. And thank you all for being on this program—it has been an honor for me to be with you.