Aug 7, 2019 in Case Study

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Executive Summary

The problem of counterfeit products does not cease to be relevant for many reasons. This paper describes the violation of intellectual property rights and copyright infringement on the example of the international business community, the legislation on counterfeit goods on the Internet as well as the example of the Tiffany Company’s lawsuit against eBay Inc. The paper stresses the importance and urgency of the problem, answers many crucial questions, for example, why the producers do not want to fight against counterfeiting. All this leads to the conclusion, applying the theory and the reality. The paper also focuses on the current state of the international business community, its development and function in today’s economy. Furthermore, the paper describes the factors that influence the decision of companies to ignore counterfeiting of their products. In addition, the paper depicts the development of counterfeit goods on the Internet, as well as the impact of the Internet on legislation on counterfeiting.

The research also concludes that the complete destruction of counterfeit goods is not possible in the near future because in many cases the consumer is interested in buying cheaper products under the guise of well-known brands. The paper contains the clear conclusion, which refers to the possible solutions to this problem. Furthermore, it also emphasizes the importance of the participation of all elements of turnover in solving this problem. However, the use of a systematic method for solving this issue will lead to the elimination of violations of this kind. It will require common efforts of manufacturers, distributors, and buyers.

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Introduction

The problem of counterfeit goods nowadays is widely documented and recognized by governmental and nongovernmental organizations. Theft of intellectual property, including proprietary technology, trademarks, and copyrights, is a major problem in the global trade market. The laws to protect intellectual property are written and constantly improved throughout the world. However, they do not stop manufacturers and traders from producing counterfeit goods. Around the world, there is a growing number of products with counterfeit trademarks often not marked by logo brand trademark and containing a slightly mutated name or mark.

Counterfeiting carries not only a violation of intellectual property, but health risks for the buyers. They suffer because of unfair competition with most manufacturers of counterfeit medicinal and electrical products, auto parts, clothing, accessories, and alcohol. This paper describes the status of counterfeiting worldwide, focusing on digital communications, the Internet, and on the controversial case between Tiffany Company and EBay.

1. Do you think that the international business community is being too lax about the abuse of intellectual property rights? Are international companies simply afraid to speak out for fear of jeopardizing access to attractive markets?

The problem of growth of counterfeit products is more relevant than ever. Today, the international business community implements and constantly improves the laws on intellectual property protection. Nevertheless, such policies do not stop manufacturers and traders from counterfeiting numerous products. I believe that the efforts of the international business community to stop or diminish the development of counterfeit products will be a success, but not immediately. The efforts are not effective right now because the producers of counterfeit products can “adapt” to the updating of legislation, just as insects adapt to new types of herbicides. In addition, the consumer is interested in buying fake brands because the goods look like branded, and the cost is much less expensive. We cannot say that the business community is weak in the fight against counterfeiting, but if to take into account the increase in counterfeit products around the world, it is confident to assert that the laws should be tightened. Only a systematic approach in the fight against counterfeiting, in which the beneficiaries will be both producers and retailers and consumers, will solve the problem on a national scale.

Of course, companies of any level (international or domestic) are afraid of disseminating any information on counterfeits of their products (Positronic, 2014). For example, brands like Samsung or Panasonic are unlikely to speak openly about the fact that their products are falsified worldwide, which I consider the right thing. If the user becomes aware of any cases of counterfeits of products, sales will fall immediately. And even coming to a store with a good reputation, the buyer begins to doubt the genuine products. If the user does not notice the difference between the original products of a particular brand or fake, the fight against counterfeiting will be simply impossible. After all, the manufacturer cannot control the hundreds of thousands of retail outlets where they sell their goods. It can be done only in alliance with customers to motivate them to fight against counterfeiting.

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2. Increased digital communication may pose a threat to intellectual property because technology allows people to create perfect clones of original works. How do you think the Internet is affecting intellectual property laws?

Development of the Internet in general and e-commerce in particular greatly simplified the task of distribution of fakes. Typically, counterfeit misses the network or branded stores. One of the main distribution channels of counterfeit goods is an online store. These facts affect some changes in the legislation relating to counterfeiting. First of all, the development of the Internet has resulted in the emergence of new problems related to counterfeiting and methods to combat this phenomenon later. In other words, the development of the Internet only creates a number of additional challenges for legislators. Although it seems that there are no benefits of the Internet to combat counterfeiting, companies still can inform customers about the dangers of buying counterfeit goods on the Internet. Thus, the organizations can organize some kind of anti-counterfeiting brands. In addition, the fixing of violations of intellectual property rights may be carried out on the Internet.

An excellent example of the impact of the Internet on legislation in the area of counterfeiting is the world’s largest e-commerce China’s Alibaba Group Holding, which spent more than 1 billion Yuan (about 161 million dollars) in the fight against counterfeit goods during 2013-2014 (Reuters, 2014). After all, the presence of fakes may negatively affect the company’s plans for international expansion, in particular, to attract customers, investors, and partners from retailers. In addition, it makes the leadership implement new methods of struggle from the perspective of law.

Thus, we concluded that the Internet is constantly creating new challenges for legislators in the area of counterfeiting. Today, the whole business moves into the network, thereby increasing the number of the intellectual property on the Internet, which provokes many disputes. However, with all this, lawmakers should not forget that most of the counterfeit is carried out owing to a living market, so it also deserves a special attention.

3. Locate information on the Tiffany versus eBay lawsuit mentioned in the case. Identify the arguments of the plaintiff and the defendant and who prevailed. What are the implications of that lawsuit for the sale of counterfeits in online auctions?

Jewelry brand Tiffany accused eBay auction of illegally using the good name of the brand and selling a huge number of Tiffany fakes. The jewelry house Tiffany tries to get revenge for the damage caused by eBay auction for several years as online resource illegally used the brand Tiffany & Co in their advertising campaigns. EBay indicated that that the site customers can buy branded goods Tiffany & Co., and, in fact, the entire eBay hung fakes (United States District Court, 10). The company Tiffany rightly outraged by this circumstance and started an action against eBay.

Tiffany’s principal argument was that the eBay auction damages the reputation of the corporation, selling fake jewelry under their label. The response argument of the eBay auction was that buyers of fakes through online stores are totally powerless and can only make claims to the sellers of the goods, but not to Internet intermediaries. In his 66-page lawsuit, the judge noted that immediately after receiving information about Tiffany and the sale of counterfeit goods, eBay immediately took off with the respective trading lots, but refused to look fake Tiffany jewelry among the unpublished proposals. The judge acknowledged such refusal legitimate. He stressed that the protection of brands should engage rights holders.

According to Brewer-Hay (2010), the court’s decision is a victory of consumers. It confirms that the company acts sensibly and has adequate mechanisms to counter the emergence of counterfeit goods. During the proceedings, the company notes that it had not been able to determine exactly which of the items sold were fakes, and Tiffany did not take sufficient participation in eBay programs to help identify counterfeits. Besides, eBay always stood against counterfeiting and possibly fought with it. However, on the one hand, for eBay it is not possible in real time to monitor all listings of numerous goods. Secondly, the technical staff does not and should not have sufficient expertise to distinguish genuine products from counterfeit.

The case of eBay is crucial for the American justice system. The battle between such well-known companies is not left unattended among sales representatives from around the world, raising the question of counterfeiting to a new level. It will help the courts in deciding on other Internet companies such as Google that is also accused of distributing counterfeit goods.

Conclusion

In conclusion, it should be noted that nowadays, countering the proliferation of counterfeit goods, i.e. goods with illegal use of intellectual property, is transformed into one of the most urgent and priority problems the solution to which is considered an important component of ensuring the economic security of the United States. The most common tool used in the production and sale of counterfeit goods is the deliberate misuse of trademarks, appellations of origin, copyright, and related rights. In addition, with the development of online shopping and auctions it is becoming harder to adjust the regulatory framework due to Internet intermediaries, distributors, and customers. The problem of counterfeiting is one of the most serious economic problems of our time and it needs to be solved like all the other issues.

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