| Intellectual property (IP) fraud has skyrocketed over the past ten years due to better access to Internet distribution channels and more criminal networks turning to IP fraud to finance operations, according to the Global Fraud Report (Intellectual Property – January 2008) released today by the global risk consultancy Kroll.
The report cites European Union Customs statistics that show a 1,000 percent increase in counterfeit goods in Europe between 1998 and 2004. The World Customs Organization puts the total figure of counterfeiting and piracy at $650 billion or five to seven percent of world trade. Both consumers and companies are harmed by this trend. Globally 10 percent of prescription drugs are counterfeit according to World Health Organization estimates, while electronic products are illegally copied so fast in China that they often arrive on shelves before the original (i.e. LG’s Chocolate phone). In another telling example, Italy’s Chamber of Commerce estimates that 20 percent of apparel purchased there is counterfeit. The rise in counterfeiting and piracy can be attributed to a number of factors. In many jurisdictions, organized crime has turned to counterfeiting and piracy to finance operations, making a significant contribution to the upsurge in illegal products. Additionally, in corporate IP pipelines themselves weaknesses remain widespread, such as inadequate processes to dispose of defective products and store rejected prototypes. In many emerging markets, effective IP legal protections have yet to even evolve to the point where they can be relied upon. Finally, fraud of this nature has risen due to the increasing sophistication of outlaws’ use of resources such as the Internet, electronic and traditional means to obtain trade secrets, customer lists and other proprietary information. |
