The document summarizes several reports that have quantified the economic impact of counterfeiting. It outlines that: 1) Reports by organizations like OECD, OHIM, and UNODC provide data on the estimated financial losses caused by counterfeiting globally and in specific industries like cosmetics, clothing, and how it affects employment and tax revenue. 2) This data can be used by governments and rights holders to enhance awareness of counterfeiting's harms and shape anti-counterfeiting strategies by indicating which markets, sectors, or regions require more focus. 3) Effective strategies require understanding whether counterfeiting in a country is domestic or imported and if consumers are unwittingly or knowingly

1. Anti-counterfeiting
A Global Guide
2016
The economic impact of counterfeiting: strategies
to secure sustainability
Drakopoulos Law Firm
Michalis Kosmopoulos

3. Drakopoulos Law Firm
Author
Michalis Kosmopoulos
• explains how such data reshapes the
strategies of both rights holders and
government anti-counterfeiting agencies.
Economic studies and reports
The Organisation for Economic Cooperation
and Development (OECD) was the first
international organisation to review and
analyse the impact of counterfeiting and
piracy on international trade. In its 2007
report The Economic Impact of Counterfeiting
and Piracy, the OECD attempted an initial
economic analysis of the phenomenon. This
milestone report has become a reference for
all subsequent studies.
The OECD estimated that the impact
of counterfeiting on international trade
(excluding domestically produced goods
and digital products) amounted to $200
billion in losses in 2005. This amount was
predicted to climb to $1.7 trillion by 2015,
based on projections made in a 2011 report
by Business Action to Stop Counterfeiting
and Piracy (an initiative of the International
Chamber of Commerce) and the 2012
Iperico study commissioned by the Italian
government. While not always fully
substantiated, such estimates are crucial
for combating counterfeiting: they raise
IP awareness and highlight the economic
impact of counterfeiting on corporate
profits, government budget and consumer
expenditure. Further, they promote the
Intellectual property is key to all stakeholders
in the value chain, from rights holders to
operators in IP-intensive industries to end
consumers. In most cases, IP rights are
the result of inventive activity, innovation,
allocation of human and other resources,
investment and production. Counterfeiting
thus comes as a blow to IP-intensive
companies, depriving them of valuable
resources that could have been allocated
to research and development, product
development and branding. In the public
sector, counterfeiting harms government
budgets and the integrity of public
administration by favouring the development
of illegal labour, unreported employment, tax
and tariff evasion, corruption and criminal
activity. Consumers of counterfeit products
run the risk of health and safety issues, since
counterfeiters rarely comply with health
and safety regulations. Understanding all of
these perspectives is crucial for assessing the
economic consequences of counterfeiting
and planning appropriate and effective anti-
counterfeiting strategies for both government
agencies and rights holders.
This chapter:
• outlines a series of economic studies and
reports on counterfeiting undertaken by
various organisations and institutions;
• presents the data collected in these reports
relevant to strategic anti-counterfeiting
planning; and
Industry insight
The economic impact of
counterfeiting: strategies
to secure sustainability
www.WorldTrademarkReview.com Anti-counterfeiting 2016 – A Global Guide | 53

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INDUSTRY INSIGHT DRAKOPOULOS LAW FIRM
public awareness strategies and examining
consumer behaviour regarding counterfeiting.
When it comes to numbers and
quantitative analyses, the OECD’s
groundbreaking 2007 report made an
impressive start in the quantification of
counterfeiting. However, the next big step
in IP quantification came from OHIM.
In 2013, OHIM and the European Patent
Office published the joint industry-level
report Intellectual property rights intensive
industries: contribution to economic
performance and employment in the European
Union. This report was not restricted to anti-
counterfeiting, but assessed the economic
significance of IP rights and the need for
their protection, concluding that “[IP rights]-
intensive industries generate more than a
quarter of employment and more than a third
of economic activity in the EU”.
OHIM’s 2015 firm-level report Intellectual
property rights and firm performance in
Europe: an economic analysis showed that
large companies are four times more likely
to own IP rights than small to medium-sized
enterprises (SMEs) (ie, 40% of larger firms
have registered rights, compared to 9% of
SMEs), and that companies that own IP
rights perform better than those that do not.
Apparently, IP ownership is closely associated
with innovation and marketing; further, the
benefits it creates are not restricted to rights
holders, as rights holders generate more
revenue per employee, pay higher salaries
and employ greater numbers.
Sector studies shed more light on the
subject. OHIM’s report The economic cost of
IPR infringement in the cosmetics and personal
care sector estimated that the legitimate
cosmetics and personal care sector loses
approximately €4.7 billion of annual revenue
(ie, 7.8% of sales and 50,000 jobs) due to the
production and distribution of counterfeit
cosmetics and other healthcare products in
the EU marketplace. When knock-on effects
on other industries and government revenue
are taken into account, the costs rocket to €9.5
billion in lost sales, 80,000 job losses and €1.7
billion in lost government revenue.
OHIM’s report The economic cost of IPR
infringement in the clothing, footwear and
accessories sector revealed that the legitimate
mobilisation of resources in the struggle
against counterfeiting by communicating
the urgent need for full commitment against
the problem.
The OECD’s 2007 report explicitly
outlined the impact of counterfeiting in all
its dimensions. Counterfeiting undermines
innovation and employment, deprives
governments of tax income, creates
health and safety risks for end consumers
(especially regarding healthcare products
and pharmaceuticals) and channels profits to
criminal networks, including those trading
drugs and firearms. Further, the United Nations
Inter-regional Crime and Justice Research
Institute published Counterfeiting as an
Activity Managed by Transnational Organized
Crime in 2012 and Europol and the Office
for Harmonisation in the Internal Market
(OHIM) published the Situation Report on
Counterfeiting in the European Union in 2015;
both of these provide valuable information
on the consequences of counterfeiting.
In terms of consumer awareness, it is
key to distinguish between the two principal
counterfeit markets: primary and secondary.
The main characteristic of the primary
market is the deception of consumers, who
unwittingly purchase products believing
them to be genuine. In the secondary
market, consumers knowingly purchase
counterfeits and are fully aware of their
active participation in illegal activities. Such
distinction between markets and consumers
should be taken into account when planning
Data collected from
reports quantifying
the economic impact
of counterfeiting may
be used to enhance
public and government
agency awareness

5. www.WorldTrademarkReview.com Anti-counterfeiting 2016 – A Global Guide | 55
clothing, footwear and accessories sector
loses approximately €26.3 billion of revenue
annually, corresponding to 9.7% of sales
in the European Union. Factoring in only
those counterfeits manufactured within the
European Union, direct employment losses
equate to 363,000 job cuts. Adding indirect
damages, general losses in the clothing,
footwear and accessories sector equate to
approximately €43.3 billion in lost sales
within the European Union, 518,281 job losses
and €8.1 billion in lost government revenue.
Strategic anti-counterfeiting planning
Economic studies and reports assessing the
economic significance of IP rights and the
impact of counterfeiting are valuable not
only for understanding the role and value of
intellectual property in the modern economy,
but also for shaping anti-counterfeiting
strategies and setting goals. The need to
update anti-counterfeiting strategies is
urgent for both government authorities and
rights holders; further, such strategies should
facilitate enhanced cooperation between the
two sets of stakeholders.
In addition to the general assessment
of the value and importance of intellectual
property, economic studies provide data that
is essential for implementing an efficient anti-
counterfeiting strategy, as follows.
International or domestic counterfeiting
Calculations of the economic impact of
counterfeiting often indicate where anti-
counterfeiting efforts and resources should be
focused. If the problem in a particular country
or region is caused by local production, action
should be directed towards manufacturing
centres and exporting networks. However,
if the problem is caused by imported
counterfeits, efforts should be concentrated
primarily on border protection and domestic
distribution networks. Regarding the transit
of counterfeit goods, anti-counterfeiting
efforts should be conducted on the basis of
the available data on the flow of counterfeits,
routes and points of origin and destination.
Primary or secondary counterfeit market
Where evidence-based surveys confirm that
consumer behaviour towards counterfeits is
driven by deceptive practices and misleading
information on the part of counterfeiters (eg,
high prices or fake sales and offers), efforts
should be concentrated on sophisticated
investigations. However, in the secondary
counterfeit market, where consumers
consciously opt to purchase counterfeits,
efforts should be directed towards public
awareness campaigns, through which
consumers should be informed of the
value of IP rights and the negative effects
of counterfeiting.
Economic impact on public finance metrics
Expert reports and studies present detailed
overviews of the impact of counterfeiting
on employment as well as on public finance
metrics such as gross domestic product,
income revenue, value added tax and social
security contributions.
Sectors most affected by counterfeiting
The diversity of counterfeits and the wide
range of sectors affected by them make
DRAKOPOULOS LAW FIRM INDUSTRY INSIGHT
Michalis Kosmopoulos
Partner
mkosmopoulos@drakopoulos-law.com
Michalis Kosmopoulos is a partner
in Drakopoulos Law Firm. He is a
distinguished IP expert and is well known
in the global legal community. Having
dealt with a vast array of IP matters over the
years, Mr Kosmopoulos has gained valuable
experience in serving domestic and
international groups, at both national and
cross-border level. He is also a contributor
to various prestigious IP publications.

6. www.WorldTrademarkReview.com56 | Anti-counterfeiting 2016 – A Global Guide
INDUSTRY INSIGHT DRAKOPOULOS LAW FIRM
has on all aspects of public life, including
public finance metrics and employment.
Further, these reports reveal the relationship
between counterfeiting and organised crime,
the impact of both domestic and international
illegal operations and the routes of illicit
distribution channels. They therefore offer
new perspectives and solutions in the fight
against counterfeiting.
Rights holders should likewise consider
the information and analysis in these reports
when shaping their own strategies. The
growing number of reports contain valuable
information on the status of counterfeiting
in different countries, helping rights
holders to focus on the areas that need
the most attention. Further, the adverse
impact of counterfeiting is also making
rights holders more conscious of the need
to address all types of counterfeiting across
the infringement scale, using a proportional
allocation of resources to do so.
Conclusion
A number of reports and studies on the
economic impact of counterfeiting have been
published, providing valuable information
on the issue – including quantification of
its global, industry and firm-level impact.
The information included in such reports
benefits both rights holders and government
agencies in planning and reshaping their anti-
counterfeiting strategies.
the implementation of a uniform anti-
counterfeiting strategy by governments and
agencies practically impossible. Although
rights holders usually focus on one or
two sectors and leverage their extensive
knowledge of the relevant markets to deal
with them, government agencies are called
on to implement a strategy across almost all
industry sectors and product categories.
The idea of a single consolidated anti-
counterfeiting approach is made problematic
by the fact that different products have
different sources, distribution channels,
concealment methods, criminal profiles
and effects on public revenue. An anti-
counterfeiting strategy can be designed
only with extensive research into the most
commonly found counterfeit products and
their effect on different sectors.
Impact on rights holders’ revenue
The proliferation of counterfeits makes
hunting down infringers and their products
a financially crippling operation that most
rights holders cannot afford. As a result,
many companies focus only on key markets
and large seizures, abandoning efforts
in smaller markets. Unfortunately, this
strategy favours infringers, which – instead
of being discouraged – simply readjust
their methods and focuses in line with
the new circumstances.
Challenges
In light of the analysis provided in the
above reports, it is clear that new challenges
have arisen for both governments and
rights holders planning anti-counterfeiting
strategies. The following points should
be addressed through sophisticated and
consistent strategic planning.
Studies on counterfeiting conducted by
prestigious institutions provide governments
with a full set of financial and other data,
which can be further assessed and used in
anti-counterfeiting efforts. For instance,
data collected from reports quantifying the
economic impact of counterfeiting may be
used to enhance public and government
agency awareness, since it highlights the
severe negative impact that counterfeiting
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