Knock-off

Counterfeit consumer goods (or counterfeit and fraudulent, suspect items - CFSI) are goods, often of inferior quality, made or sold under another's brand name without the brand owner's authorization. Sellers of such goods may infringe on either the trademark, patent or copyright of the brand owner by passing off its goods as made by the brand owner.Chaudhry, Peggy E., Zimmerman, Alan. ''The Economics of Counterfeit Trade: Governments, Consumers, Pirates and Intellectual Property Rights'', Springer Science & Business Media (2009) Counterfeit products made up 5 to 7% of world trade in 2013,"Challenging the Counterfeit Connector Conundrum"
''Connector Supplier'', November 4, 2013"The spread of counterfeiting: Knock-offs catch on"
''Economist'' magazine, March 4, 2010 and in 2014 cost an estimated 2.5 million jobs worldwide, with up to 750,000 jobs lost in the U.S. About 5% of goods imported into the European Union in 2013 were fakes, according to the OECD."Global trade in fake goods worth nearly half a trillion dollars a year - OECD & EUIPO"
OECD, April 18, 2016

The colloquial term ''knockoff'' is often used interchangeably with ''counterfeit'', although their legal meanings are not identical. Knockoff products are those that copy or imitate the physical appearance of other products but which do not copy the brand name or logo of a trademark. They may still be illegal under trademark laws if they confuse consumers."Knock-off the Knockoffs: The Fight Against Trademark and Copyright Infringement"
''Illinois Business Law Journal'', September 21, 2009 Counterfeiters can include producers, distributors or retail sellers. Pirated goods are reproductions of copyrighted products used without permission, such as music, movies or software.''The Economic Impact of Counterfeiting and Piracy'', OECD (2008) Exact definitions depend on the laws of various countries.

Growing over 10,000% in the last two decades , counterfeit products exist in virtually every industry sector, including food, beverages, apparel, accessories, footwear, pharmaceuticals, cosmetics, electronics, auto parts, toys, and currency. The spread of counterfeit goods are worldwide, with the International Chamber of Commerce (ICC) in 2008 having estimated the global value of all counterfeit goods at $650 billion annually, increasing to $1.77 trillion by 2015. Countries including the U.S., Italy and France are among the hardest hit, as their economies thrive on producing high-value products, protected by intellectual property rights and trademarks. By 2017, the U.S. alone was estimated to be losing up to $600 billion each year to counterfeit goods, software piracy and the theft of copyrights and trade secrets."Counterfeit Goods Cost the U.S. $600 Billion a Year"
''Inc'', AP, February 27, 2017

General description

According to ''Forbes'', in 2018 counterfeiting was the largest criminal enterprise in the world."Meet The Man Fighting America's Trade War Against Chinese Counterfeits (It's Not Trump)"
''Forbes'', March 29, 2018 Sales of counterfeit and pirated goods totals $1.7 trillion per year, which is more than drugs and human trafficking. It is expected to grow to $2.8 trillion and cost 5.4 million jobs by 2022. According to ''The Counterfeit Report'', "China produces 80% of the world's counterfeits and we're supporting China. Whether or not it's their intention to completely undermine and destroy the U.S. economy, we n the United Statesbuy about 60% to 80% of the products." It states:

The OECD states that counterfeit products encompass all products made to closely imitate the appearance of the product of another as to mislead consumers. Those can include the unauthorized production and distribution of products that are protected by intellectual property rights, such as copyright, trademarks, and trade names. Counterfeiters illegally copy trademarks, which manufacturers have built up based on marketing investments and the recognized quality of their products, in order to fool consumers. Any product that is protected by intellectual property rights is a target for counterfeiters. Piotr Stryszowski, a senior economist at OECD, notes that it is not only the scale of counterfeiting that is alarming, but its rapidly growing scope, which means that now any product with a logo can become a target.

In many cases, different types of infringements overlap: unauthorized music copying mostly infringes copyright as well as trademarks; fake toys infringe design protection. Counterfeiting therefore involves the related issues of copying packaging, labeling, or any other significant features of the goods.

Among the leading industries that have been seriously affected by counterfeiting are software, music recordings, motion pictures, luxury goods and fashion clothes, sportswear, perfumes, toys, aircraft components, spare parts and car accessories, and pharmaceuticals. Counterfeit pharmaceuticals are the most profitable sector of illegally copied goods, with lost revenues up to $217 billion per year. Fraudulent drugs are known to harm or kill millions around the world, thereby damaging the brand names and sales of major pharmaceutical manufacturers."Fighting counterfeit pharmaceuticals: New defenses for an underestimated - and growing - menace"
''Strategy&'', June 29, 2017

Since counterfeits are produced illegally, they are not manufactured to comply with relevant safety standards. They will often use cheap, hazardous and unapproved materials or cut costs in some other manner. These unapproved materials can be hazardous to consumers, or the environment.

Growing problem

It was estimated by the OECD that in 2013 counterfeit goods accounted for about $461 billion, or about 2.5% of total world trade. That estimate did not include either domestically produced and consumed products or digital products sold on the internet."Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact"
OECD, April 18, 2016 That estimate rose from 1.8% of world trade in 2007. The OECD concluded that despite their improved interception technologies, "the problem of counterfeit and pirated trade has not diminished, but has become a major threat for modern knowledge-based economies."

In the U.S., despite coordinated efforts by Immigration and Customs Enforcement and Customs and Border Protection (CBP) to stem the influx of counterfeit goods into the U.S, there was a 38% increase in counterfeits seized between 2012 and 2016."U.S. Customs Needs To Share More Info on Counterfeits With Online Retailers"
''Nextgov'', March 6, 2018 In a test survey by the GAO of various items purchased online of major brands, all of which stated they were certified by Underwriters Laboratories, the GAO found that 43% were nonetheless fakes.

The approximate cost to the U.S. from counterfeit sales was estimated to be as high $600 billion as of 2016."IP Commission Report"
The National Bureau of Asian Research, 2017 A 2017 report by the Commission on the Theft of American Intellectual Property, stated that China and Hong Kong accounted for 87 percent of counterfeit goods seized entering the United States, and claimed that the Chinese government encourages intellectual property theft."Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market"
''U.S. Government Accountability Office (GAO)'', January 2018 Utah Governor Jon Huntsman, who had served as U.S. ambassador to China, stated, "The vast, illicit transfer of American innovation is one of the most significant economic issues impacting U.S. competitiveness that the nation has not fully addressed. It looks to be, must be, a top priority of the new administration." In March 2017 U.S. President Donald Trump signed an executive order to, among other things, ensure the timely and efficient enforcement of laws protecting Intellectual Property Rights holders from imported counterfeit goods.

An '' Outside'' magazine article in 2016 discussed the psychology of sales, and the role of gullible consumers, perhaps blindly ignoring warning signs of a "killer deal", somehow justifying buying an item they know is a fake.

Types

Online sales

In a report by the U.S. GAO in 2018, approximately 79 percent of the American population had bought products online. They found numerous products which were sold online by Amazon, Walmart, eBay, Sears and Newegg were counterfeit. For 2017 it was estimated that online sales of counterfeit products amounted to $1.7 trillion."One-Third of Online Shoppers Victims of Counterfeit Sales"
''24/7 Wall St.'', December 18, 2017 Pew Research Center states that worldwide such e-commerce sales are expected to reach over $4 trillion by 2020. CBP has reported that with e-commerce, consumers often import and export goods and services which allows for more cross-border transactions which gives counterfeiters direct access to consumers.

Internet sales of counterfeit goods has been growing exponentially, according to the International Trademark Association, which lists a number of reasons why:

Buyers often know they were victimized from online sales, as over a third (34%) said they were victimized two or three times, and 11% said they had bought fake goods three to five times. While many online sellers such as Amazon are not legally responsible for selling counterfeit goods, when items are brought to their attention by a buyer, they will apply a takedown procedure and quickly remove the product listing from their website."Amazon May Have a Counterfeit Problem"
''The Atlantic'', April 20, 2018

In buying counterfeit goods directly from other smaller sellers, location is becoming less a factor, since consumers can purchase products from all over the world and have them delivered straight to their doors by regular carriers, such as USPS, FedEx and UPS. Whereas in previous years international counterfeiters had to transport most counterfeits through large cargo shipments, criminals now can use small parcel mail to avoid most inspections.

Apparel and accessories

Ray-Ban, Rolex, Supreme and Louis Vuitton are the most copied brands worldwide, with Nike being the most counterfeited brand globally according to the Organization for Economic Co-operation and Development (OECD). Counterfeit clothes, shoes, jewelry and handbags from designer brands are made in varying quality; sometimes the intent is only to fool the gullible buyer who only looks at the label and does not know what the real thing looks like, while others put some serious effort into mimicking fashion details.

Others realize that most consumers do not care if the goods they buy are counterfeit and just wish to purchase inexpensive products. The popularity of designer jeans in 1978, spurred a flood of knockoffs.

Factories that manufacture counterfeit designer brand garments and watches are usually located in developing countries, with between 85 and 95% of all counterfeit goods coming from China. International tourists visiting Beijing, China, may find a wide selection of counterfeit designer brand garments at the Silk Street. Expensive watches are vulnerable to counterfeiting as well.

In Malaysia, Thailand, Vietnam and the Philippines, authentic looking but poor quality watch fakes with self-winding mechanisms and fully working movements can sell for as little as US$20 to good quality ones that sell for $100 and over. Also, some fakes' movements and materials are of remarkably passable quality – albeit inconsistently so – and may look good and work well for some years, a possible consequence of increasing competition within the counterfeiting community.

Some counterfeiters have begun to manufacture their goods in the same factory as the authentic goods. ''Yuandan goods'' (原单) are those fakes that are produced in the same factory as legitimate designer pieces without authorized permission to do so. These goods are made from scraps and leftover materials from the genuine products, produced illegally, and sold on the black market.

Thailand has opened a Museum of Counterfeit Goods displaying over 4,000 different items, in 14 different categories, which violate trademarks, patents, or copyrights. The oldest museum of this kind is located in Paris and is known as Musée de la Contrefaçon.

In fashion, counterfeit goods are called knock offs. These counterfeit goods are usually sold on markets and street corners. Though purchasing goods might be seemingly harmless to those who are purchasing it knowingly, they are actually funding more dangerous organizations. The National Fraud Intelligence Bureau in England, advices people not to buy counterfeit goods for serious reasons.

Intellectual property is a problem that seems to come up when talking about knock offs in fashion. There are a lot of arguments that talk about how it is stealing the brands logo and prints. On the other side of this argument, many designers believe that counterfeiting is a form of flattery. Virgil Abloh of OFF WHITE famously said, "you can’t copy something that isn’t wanted". Many fashion houses try and stop the knock offs from circulating, Louis Vuitton has an entire team that is just focused on stopping counterfeits. Gucci has adapted the counterfeit culture into its designs, changing the spelling of Gucci to Guccy for its spring summer 2018 collection and painting REAL all over the bags.

Consumers may choose to actively dismiss these unclear origins of product when a trendy style is available for little money. The previous French terrorist attack in 2015 at Charlie Hebdo Newspaper has been traced back to being funded by counterfeit product. According to Tommy Hilfiger's Alastair Grey, terrorists bought the guns used with funds gained from selling illegal luxury sneakers. This is more normal than consumers may think. Grey discusses how often sellers will be overlooked by watch-groups as buying fakes from a distributor in China is less suspicious than other, more extreme criminal activity. The cause and effect of this discounting of crime is giving sellers money to partake in terrorism, human trafficking and child labour. These sellers are difficult to track due to counterfeited shipping papers (they can not be tracked by customs) and fake brands masquerading as a non-descript fashion company that is actually full of fake luxury.

Goods have been brought into the United States without the logos adorned on them in order to get past customs. They are then finished within the country. This is due to the increase in seizing of product at borders. The counterfeiters are reactive to the increasing crackdown on the illegal business practice. Stock-rooms have been replaced with mobile shopping vans that are constantly moving and difficult to track.

Companies like Entrupy are determined to eradicate fake goods with an iPhone application and a standard small camera attachment which uses algorithms to detect even the most indistinguishable "super-fake". Online retailers are also having a difficult time keeping up with monitoring counterfeit items.

Companies all over the internet are illegal e-boutiques that use platforms like eBay, Instagram and Amazon to sell counterfeit goods. Sometimes they own their own websites that have untraceable IP addresses that are often changed. Instagram is a difficult platform to trace as sellers on it take WeChat, PayPal and Venmo and typically talk with clients on platforms like WhatsApp. This all makes the transactions seamless and hard to track since payment is done via third party. Listings are also often posted on the story feature, hence they are not permanent. The problem is getting larger according to Vox and is getting more difficult to monitor.

Amazon has recently partnered with company Project Zero to work with brands to find counterfeit objects on the site. This technology has given private users and companies the capability to gauge handbags certification. Within time, this technology will be widely adaptable to larger platforms. Project Zero offers Amazon partners to flag fake listings without Amazon having to step in. Since Amazon has over five billion listings, a computerized element is also crucial for keeping up with getting rid of fakes. This program scans items based on assets and codes that are provided by Amazon partners and deletes fake items.

Electronics

Counterfeit electronic components have proliferated in recent years, including integrated circuits (ICs), relays, circuit breakers, fuses, ground fault receptacles, and cable assemblies, as well as connectors. The value of counterfeit electronic components is estimated to total 2% of global sales or $460 billion in 2011. Counterfeit devices have been reverse-engineered (also called a Chinese Blueprint due to its prevalence in China) to produce a product that looks identical and performs like the original, and able to pass physical and electrical tests.

Incidents involving counterfeit ICs has led to the Department of Defense and NASA to create programs to identify bogus parts and prevent them from entering the supply chain. "A failed connector can shut down a satellite as quickly as a defective IC," states product director Robert Hult.
Such bogus electronics also pose a significant threat to various sectors of the economy, including the military."The Serious Risks From Counterfeit Electronic Parts"
''Forbes'', July 11, 2012 In 2012 a U.S. Senate Armed Services Committee report highlighted the risks when it identified approximately 1,800 cases of suspected counterfeit parts in the defense supply chain in 2009 and 2010.

Counterfeit electronic parts can undermine the security and reliability of critical business systems, which can cause massive losses in revenue to companies and damage their reputation.Tehranipoor, Mark. ''Counterfeit Integrated Circuits: Detection and Avoidance'', Springer (2015) p. 5 They can also pose major threats to health and safety, as when an implanted heart pacemaker stops,"Counterfeit Products On The Rise"
Robert J. McGuirl Law Firm an anti-lock braking system (ABS) fails, or a cell phone battery explodes.

In 2017 the OECD estimated that one in five (19%) of smartphones sold worldwide were counterfeit, with the numbers growing."New Tricks Needed to Stop the €45 Billion Counterfeit Smartphone Market"
''Developing Telecoms'', November 9, 2017 Alibaba founder Jack Ma said "we need to fight counterfeits the same way we fight drunk driving." In some African countries up to 60% of smartphones are counterfeit. Unfortunately, it is nearly impossible for most consumers to spot a fake since telling the difference requires a higher than average level of technical knowledge. Counterfeit phones cause financial losses for owners and distributors of legitimate devices, and a loss of tax income for governments. In addition, counterfeit phones are poorly made, can generate high radiation, contain harmful levels of dangerous elements such as lead, and have a high chance of including malware.

Media

Compact Discs, videotapes and DVDs, computer software and other media that are easily copied can be counterfeited and sold through vendors at street markets, night markets, mail order, and numerous Internet sources, including open auction sites like eBay. In some cases where the counterfeit media has packaging good enough to be mistaken for the genuine product, it is sometimes sold as such. Music enthusiasts may use the term ''bootleg recording'' to differentiate otherwise unavailable recordings from counterfeited copies of commercially released material.

In 2014, nearly 30% of the UK population was knowingly or unknowingly involved in some form of piracy, either through streaming content online or buying counterfeit DVDs, with such theft costing the UK audiovisual industries about £500m a year. Counterfeits are particularly harmful to smaller, independent film-makers, who may have spent years raising money for the film. As a result, the value of intellectual property becomes eroded and films are less likely to be made. In 2018, U.S. agents seized more than 70,000 pirated copies of music and movies from a home in Fresno, California. Although it was a relatively small portion of all imported counterfeits, according to one expert:

China has been targeted by the Motion Picture Association of America (MPAA) for distributing pirated movies and television shows. A selection of websites, internet newsgroups, peer-to-peer online networks and physical locations renowned for sharing illegal content, were presented to officials. Other countries were also listed as sources, including Russia, Brazil, Canada, Thailand and Indonesia. In August 2011, it was reported that at least 22 fake Apple Stores were operating in parts of China, despite others having been shut down in the past by authorities at other locations. The following month, also in China, it was discovered that people were attempting to recreate the popular Angry Birds franchise into a theme park ( see here) without permission from its Finnish copyright/trademark owners.

3D printed products

Counterfeiting of countless items with either large or relatively cheap 3D printers, is a growing problem. The sophisticated printing material and the ever-expanding supply of digital CAD designs available online, will contribute to a black market in counterfeit goods. The Gartner Group estimated that intellectual property loss due to 3D printer counterfeiting could total $100 billion by 2018."Illegal, Immoral, and Here to Stay Counterfeiting and the 3D Printing Revolution"
''Wired'', February 20, 2015 Among the technological fields that can be victimized by counterfeits will be auto and aircraft parts, toys, medical devices, drugs and even human organs. According to one intellectual property law firm:

Along with making illicit parts for almost any major product, the fashion industry has become a major target of counterfeiters using 3D printing. The OHIM in 2017 found that approximately 10% of fashion products sold worldwide are counterfeits, amounting to approximately $28.5 billion of lost revenues per year in Europe alone. Industry leaders feared that budding counterfeiters would soon be creating bags, apparel and jewelry at a lower production cost after gaining access to pirated blueprints or digital files from manufacturers.

Toys

Counterfeit toys leave children exposed to potentially toxic chemicals and the risk of choking. An estimated 10 to 12 per cent of toys sold in the UK in 2017 were counterfeit, with the influx of counterfeit goods coming primarily from China. Trading Standards, a UK safety organization, seizes tens of thousands of toys every month to prevent children coming into contact with them, according to the British Toy and Hobby Association (BTHA).

Australian toy manufacturer Moose Toys have experienced problems with counterfeiting of their popular Shopkins toys in 2015. In 2013, five New York-based companies were accused of importing hazardous and counterfeit toys from China. Merchandise seized included knockoff toys featuring popular children's characters such as Winnie the Pooh, Dora the Explorer, SpongeBob SquarePants, Betty Boop, Teenage Mutant Ninja Turtles, Power Rangers, Spider-Man, Tweety, Mickey Mouse, Lightning McQueen? and Pokémon. In 2017, the U.S. Customs and Border Protection seized $121,442 worth of counterfeit children's toys that arrived into port from China and was destined for a North Carolina-based importer. The shipment was found to contain multiple items bearing trademarks and copyrights registered to Cartoon Network, Saban Brands, and Danjaq, LLC.

Pharmaceuticals

According to the U.S. FBI, the counterfeiting of pharmaceuticals accounts for an estimated $600 billion in global trade, and may be the "crime of the 21st century." They add that it "poses significant adverse health and economic consequences for individuals and corporations alike." The World Health Organization (WHO) estimates that over 30% of pharmaceuticals in developing countries are fake, stating that "Anyone, anywhere in the world, can come across medicines seemingly packaged in the right way but which do not contain the correct ingredients and, in the worst-case scenario, may be filled with highly toxic substances."

About one-third of the world's countries lack effective drug regulatory agencies, which makes them easy prey for counterfeiters. Globally, more than half of counterfeit pharmaceuticals sold are for life-threatening conditions, such as malaria, tuberculosis, HIV/AIDS, and cancer. An estimated one million people die each year from taking toxic counterfeit medication.

With the increase of internet sales, such fake drugs easily cross international boundaries and can be sold directly to unsuspecting buyers. In September 2017, Interpol, after a 10-year investigation, took down 3,584 websites in various countries, removed 3,000 online ads promoting illicit pharmaceuticals, and arrested 400 people.

The majority of online pharmacies taken down did not require a prescription to order the medicines and most sold potentially dangerous bogus versions of real drugs. One target for the operation was the illicit trade in opioid painkillers, especially fentanyl, which is 50 to 100 times stronger than morphine. Counterfeit versions of other narcotics like OxyContin and Percocet also contain fentanyl as a key ingredient. Online pharmacies had flooded the US market and contributed to the opioid epidemic,"Latest Interpol-led Pangea op nets rogue pharmacies"
''Securing Industry'', September 26, 2017 with the Centers for Disease Control and Prevention (CDC) claiming that sixty-six percent (66%) of the 63,600 overdose deaths in 2016 were caused by opioids, including fentanyl. The Drug Enforcement Administration (DEA) found that "customers can purchase fentanyl products from Chinese laboratories online with powdered fentanyl and pill presses" which are then shipped directly to buyers via regular mail services such as USPS, DHL, FedEx, and UPS."Combatting the Opioid Crisis: Exploiting Vulnerabilities in International Mail"
Report of the Committee on Homeland Security, January 24, 2018

Buyers are attracted to rogue online pharmacies since they pose as legitimate businesses. Consumers are motivated by lower prices, and some are attracted by the ability to obtain prescription drugs without a prescription. Of the drugs bought online, however, 90 percent are found to come from a country different from one the website claims. A 2018 report by the DHS

The U.S. Food and Drug Administration (FDA) defines counterfeit drugs as those sold under a product name without proper authorization:
:"Counterfeiting can apply to both brand name and generic products, where the identity of the source is mislabeled in a way that suggests that it is the authentic approved product. Counterfeit products may include products without the active ingredient, with an insufficient or excessive quantity of the active ingredient, with the wrong active ingredient, or with fake packaging.""Counterfeit Drugs Questions and Answers"
FDA

According to ''The Economist'', between 15%-30% of antibiotic drugs in Africa and South-East Asia are fake, while the UN estimated in 2013 that roughly half of the antimalarial drugs sold in Africa—worth some $438m a year—are counterfeit. In early 2018 29 tons in counterfeit medicine were seized by Interpol in Niger

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