by Perpetua Mwangi

Sept-03-12-Kenyan-Counterfeit-Phones-for-Dar Gado

It is said that the highest/greatest/sincerest form of flattery is imitation. Wanting to be like someone/something else indicates great admiration for that sought to be imitated. However, in the world of Intellectual Property (IP) it is certainly not flattery rather IP theft/counterfeiting/illegal depending on one’s conceptual underpinnings.

Counterfeits /knock offs/pirated/infringing goods on the first part and illegal/prohibited goods on the second part are some key words used interchangeably in Kenya in reference to goods/products that infringe on another’s IP rights. On the second part the definition may vary depending on the interpretation offered by law or by a school of thought. At times, the two parts also converge or overlap.

It cannot be over emphasized the perilous as well as economic loss caused by counterfeiting and trading in illegal goods to any economy. Trade in such goods is obviously no new phenomenon. Today, counterfeiting has become so apparent to an extent it appears as if the goods/products are about to or have achieved a degree of legitimacy. For instance perfumes/colognes/fragrances are sold in varying “grades” depending on one’s pocket size.

Incidentally, certain manufacturing companies engage in production of counterfeit goods because there is a huge market for such goods. Similarly, traders openly admit to consumers that they have stocked both genuine and counterfeit goods and it is upon consumers to make a judgment call on which of the two goods to purchase.

Counterfeiting involves the manufacturing of goods often of a low quality and selling under a recognizable brand without the authorization of the brand owner. Usually the main aim of counterfeiting is to ride on the reputation and goodwill of well-known brands to market inferior goods/products. Whereas trademark infringement or the common law action of passing off is the use of confusingly similar trademark/service marks or get up on or in association with the same or similar products or services.

Illegal/prohibited products/goods are those that do not fulfill a stipulated standard of production/manufacture or such production/ manufacture is prohibited by law. The use of similar or same brand is not the primary concern of such producers/manufactures rather the defiance of law and/or the circumventing of standards of production/ manufacturing so as to maximize profits. A good illustration that puts to perspective illegal goods is the recent destruction of second generation alcohol in Kenya. A significant quantity of those products were not riding on any popular brand rather were being cheaply and illegally manufactured. Such do not care to meet any standard of alcohol manufacture/ production hence the harmful effects upon consumption.

In the old town of Mombasa, the Pest Control Products Board office in Coast impounded counterfeit pesticides estimated to be worth Kshs 500 million. The officers seized various counterfeit pesticides claimed to have been smuggled into the country from the neighbouring Uganda and Tanzania and which were suspected to cause health complications when used in homes.

In Ghana, the public was cautioned by the Food and Drugs Authority (FDA) about the distribution and sale of counterfeit Vermox tablets. The drug is used to treat worm infestation. The FDA released batch numbers of Vermox drugs which contained no active ingredients.

In Europe, a European Union (EU) observatory report on infringement of Intellectual Property Rights (IPRs) estimated that the sale of counterfeit clothes, shoes and accessories in the EU amounts to 9.7% of the sector sales which equates to annual losses to the industries of €26.3 Billion and loss of 363,000 jobs in the EU.

In China, reports emerged that a factory that had made up to 41, 000 fake Apple iPhones had been shut down. Hundreds of workers had been found repacking second hand smartphone parts as new iPhones for exports. The counterfeit phones produced were worth $19 million. Still in China, it was reported that the police busted a major counterfeit scheme. The Louis Vuitton brand, very popular in China is being shunned by citizens in high end cities due to increased presence of counterfeit Louis Vuitton branded products.

From the foregoing, it is apparent that fast moving consumer goods are most prone to counterfeiting. These include pharmaceutical products, electronic goods, cosmetics, apparels and other accessories. It was interesting to learn that luxury car brands including Mercedes, Ford, Range Rover and Mini coopers are also not immune to counterfeiting.

In Kenya, the Anti-Counterfeit Act defines “counterfeiting” to mean taking the following actions without the authority of the owner of intellectual property right subsisting in Kenya or elsewhere in respect of protected goods—
(a) the manufacture, production, packaging, re-packaging, labelling or making, whether in Kenya or elsewhere, of any goods whereby those protected goods are imitated in such manner and to such a degree that those other goods are identical or substantially similar copies of the protected goods;
(b) the manufacture, production or making, whether in Kenya or elsewhere, the subject matter of that intellectual property, or a colourable imitation thereof so that the other goods are calculated to be confused with or to be taken as being the protected goods of the said owner or any goods manufactured, produced or made under his licence;
(c) the manufacturing, producing or making of copies, in Kenya or elsewhere, in violation of an author’s rights or related rights;
(d) in relation to medicine, the deliberate and fraudulent mislabelling of medicine with respect to identity or source, whether or not such products have correct ingredients, wrong ingredients, have sufficient active ingredients or have fake packaging:

Whereas the Copyright Act defines “infringing copy” to mean –
(a) a copy, the manufacture of which constitutes an infringement of any rights protected by this Act; or
(b) where imported, a copy the manufacture of which would have constituted an infringement of such rights if manufactured in Kenya by the importer.

This menace is fast expanding in emerging markets particularly in African countries. The situation stems from the huge and growing market for such products. There is also a thirst among consumers in these markets for popular brand products.

Counterfeiting has taken various forms:

• Counterfeits are sometimes manufactured in legitimate manufacturing plants. It is alleged that after legitimate products have been made, counterfeits are then made in undercover operations and later dispatched unscrupulously.
• Counterfeits are sold in both brick and mortar establishments and online platforms;
• Some of these platforms stock both genuine and fake products;
• Some customers are duped into buying fakes while others are aware the products are not genuine;
• Counterfeit and trademark infringement sometimes occurs at the same time: this takes place when a manufacturer produces inferior products and also uses a confusingly similar mark: Example Gucci/ Guggi; Roberto Cavalli/Roberto Gavalli among others.

Some options averting the counterfeit menace include: international registration of trademarks is a matter of necessity for popular brands. Upon registration, such companies ought to continue monitoring their brands.
In the US, the Customs and Border Protection (CBP) a bureau of the Department of Homeland security maintains a trademark recording system for marks registered with the USPTO. These helps to prevent the importation of goods that infringe on registered marks. The bureau examines cargo entering the country to ensure that the importation does not infringe on someone else’s IPRs. All the ports have access to this database and when port personnel see or suspect an importation that they suspect may be an infringement they can stop it. In 2005, CBP was automated by introducing the IPRs e-Recordation system.

Kenya’s Customs Services Department ought to borrow a leaf from the CBP by having in place a board/department that maintains a database of registered IPRs. This will help to curtail the huge number of counterfeit goods/products that pass through the various border points. This will greatly curb counterfeit products in the larger Eastern and Central markets which heavily rely on Kenya’s entry points.

Another option for brand owners would be to look into licensing the so called clandestine manufacturers who have managed to cater for the untapped markets. Big cosmetic, apparel and accessory brands particularly are losing a huge market on the African continent. Cosmetic power brands such as Mac, Black Opal and many others are losing customers who have been duped into buying fakes as well customers who knowingly settle for fakes. Fake it till you make it! It is opined that such power brands should revisit their marketing and distribution strategies so that they can tap into the growing market for their brands as well as retain the customer base that is on the verge of losing brand confidence and loyalty.

The use of technology could also prove to be an effective means of dealing with counterfeits. It was reported that the Kenya Seed company introduced an SMS service to track fake seeds. Consumers are advised upon purchase to SMS a code to 2011 and information will be relayed back on whether the pack of seeds is genuine or not. Whereas this method is ‘after the fact’, it is hoped it will help farmers avert a bad harvest from use of fake seeds. East African Cables also has an SMS-based system in its anti-counterfeit campaign dubbed ‘Zinduka’ to verify authentic cables.

Other companies can take to this technological strategy as a method which its consumers can use to confirm whether the goods/products are genuine or not.

Finally, educating the public on the moral, legal, social, economic harm and health risk of consuming counterfeit goods/products can go a long way in averting this menace. This is an initiative that can be undertaken jointly by the public and private sectors.

It is hoped that with continued efforts and progressive strategies, counterfeiting will be curtailed significantly in Africa and in turn the respect of IPRs.