Product Counterfieting

Abstract

Intellectual property rights and product counterfeiting is a problem of growing concern. Companies not only lose profits from potential sales and market saturation; their reputations are often tarnished because of inferior quality. While the economic impacts are easily measured, the social impact is often overlooked. Counterfeit medications may result in injury or loss of life. Many consumers knowingly purchase counterfeit products simply because of the lower price and social status of a brand. There are numerous laws and international agreements that target intellectual property rights. The main issue experienced with enforcement is the true global nature. Laws differ in various countries and are often not consistent with Western standards. Strategies such as monitoring of supply chain and distribution channels, establishing government relations, and packaging innovation assist in mitigating infringement but do not prevent the problem.

Introduction

Product counterfeiting is a global issue that affects industries in all consumer arenas. The most notable industries affected by infringement are pharmaceutical, fashion, and electronics. Studies estimate companies lose approximately $200 billion a year to intellectual property infringement and continues to increase each year (Chaundry, Cordell, & Zimmerman, 2005). Counterfeiting has developed into a global problem for consumer product companies. Counterfeiting not only affects the profits and reputations of companies but also has major impacts on consumers. The most egregious examples are in the pharmaceutical industry where counterfeit medications can cause serious injury or death. One example is the discovery of 13 anti-malaria medications across West Africa that potentially results in the loss of millions of lives (Kubic, 2011).

Counterfeiting is generally classified into two categories, deceptive and non-deceptive. Deceptive, as defined by Nicholson (2008), process confusion for the consumer. The product is thought to be genuine. In non-deceptive counterfeiting, the consumer is likely aware the product is not genuine (Nicholson, 2008). Nicholson (2008) cites the example of purchasing Rolex watches in New York City for $10.

The question often looms as to why consumers purchase counterfeit goods. Price and quality are generally the two determinants discussed when explaining why consumers knowingly purchase counterfeit goods (Poddar, Foreman, Syagnik, & Ellen, 2012). In addition, social status of brand names is a factor in why consumers purchase counterfeit goods.

The economic impact of intellectual property infringement is not only through the loss of sales but affects a company’s reputation and potential spending on research and development (R&D). Nicholson (2008) believes intellectual property protections allow