Counterfeiting is cheap for consumers but expensive for luxury brands. LVMH, a luxury conglomerate home to 75 distinguished brands, including Louis Vuitton, Loewe, Fendi, Dior, and Givenchy, spends about $17 million a year on anti-counterfeiting legal actions.
However, their efforts are not paying off. The global counterfeiting industry continues to grow. In 2019, a joint report by the European Union Intellectual Property Office (EUIPO) and Organisation for Economic Co-operation and Development (OECD) revealed that fake goods amounted to $509 billion — a drastic increase from $461 billion in 2013.
As a result, luxury houses have resorted to innovative measures to prevent counterfeiters from profiting from their trademarks.
Counterfeits vs. Knock-Offs
Despite the rigor of luxury houses, there’s only so much they can do. Counterfeiting is a lucrative business, attracting countless schemers. Many people are deceived by or even knowingly buy counterfeits because they’re drastically more affordable than the real thing.
Regulations are not as stringent. Moreover, people are careful to skirt the law, walking the thin line between counterfeits and knock-offs.
For a product to be considered a counterfeit, it must contain the following elements:
- The fake goods must contain a trademark that is indistinguishable from the federally registered trademark of the company. Trademarks are usually filed by the company’s trademark attorney to protect the intellectual properties of the company.
- Absence of Authorization. The counterfeiter must deliberately use the trademark without authorization.
- The trademark must be federally registered with the U.S. Patent and Trademark Office, or with the intellectual property arm in the jurisdiction.
- The fake goods must belong to the same class as the one covered by trademark protection. Trademarks are registered by class of goods. For instance, a company is a trademark holder for Class 25 (clothing and footwear). To be considered a counterfeit, the fake product must belong in Class 25.
- Ill Intent. There must be a high chance of confusing or deceiving a buyer.
In essence, counterfeiting is illegal. Knock-offs, on the other hand, are subject to lower legal standards. They look just like the original item, but not completely identical. More importantly, knock-offs don’t carry the registered trademark.
A knock-off of a luxury handbag, for instance, may have the same structure and handles, but if it doesn’t have the monogram the real item is known for, it may be considered a knock-off. These kinds of items are not illegal, but they can still be challenged in court.
The explosive growth of e-commerce has enabled the counterfeit industry to flourish. In the past, counterfeit luxury items were only accessible to a handful of people. Now, sellers have countless shopping platforms to use. Anyone can purchase a counterfeit within minutes.
Additionally, counterfeiters are savvy in choosing the locations of their factories and warehouses. They also pick their banks and online platforms with care. These precautions make it even more difficult for luxury brands to track them down.
Response from Luxury Houses
Luxury brands have used different ways to battle counterfeit goods.
Investing in Anti-Counterfeiting Technology
Some brands have resorted to DNA tracking, which uses the DNA embedded in the garment to authenticate the product. This traces the product far into the supply chain — even as far as the animal that provided the materials for the apparel. Synthetic DNA, according to some luxury brands, assures the provenance of the garment.
Additionally, companies may use digital tools that track online counterfeit sales. Stringent monitoring helps companies spot fakes and remove them from auction portals and shopping websites.
Emphasis on Quality
The counterfeit industry is only as powerful as the demand for counterfeits. An article published in the Harvard Business Review argues that to dissuade consumers from buying fake items, luxury houses must put emphasis on the quality and provenance of their items.
After all, anyone can slap a trademark on an item. However, excellent craftsmanship — often by local artisans from a region known for that specific art — is not easily replicated.
Maintain Intellectual Property Rights
Companies can’t fight for their trademarks if the trademarks are not properly registered. It’s important to maintain relevant intellectual property rights in key locations.
Companies should raise awareness about counterfeits and their economic and social consequences. Luxury houses must equip their followers with the skill to spot fake items and report suspicious products. They may also incentivize this program to encourage more customers to participate.
The battle against the counterfeiting industry is far from over, but diligent houses know that with proper planning and execution, they will win, one case at a time.