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14.06.2012.  A form of consumer fraud: a product is sold, purporting to be something that it is not;  Typically an organized group activity: manufacturing.

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Presentation on theme: "14.06.2012.  A form of consumer fraud: a product is sold, purporting to be something that it is not;  Typically an organized group activity: manufacturing."— Presentation transcript:

1 14.06.2012

2  A form of consumer fraud: a product is sold, purporting to be something that it is not;  Typically an organized group activity: manufacturing of goods takes people, time and its goal is the profit.

3  UN Convention against Transnational Organized Crime (The Convention of Palermo) definition of OC: “Organized criminal group” shall mean a structured group of three or more persons, existing for a period of time and acting in concert with the aim of committing one or more serious crimes or offences established in accordance with this Convention, in order to obtain, directly or indirectly, a financial or other material benefit; “Serious crime” shall mean conduct constituting an offence punishable by a maximum deprivation of liberty of at least four years or a more serious penalty;

4  By the society: as a victimless crime, but the risk for consumers is more iminent, due to the possible health and safety hazards resulting from products of inferior quality.  By the criminals: As having a low risk of prosecution with light penalties, related to the large profits to be achieved.

5  Everything can be counterfeited : branded clothings, spirits, ciggarettes, toys, computer games, DVDs, CDs, car parts, fashion accessories, pharmaceuticals, foodstuffs, electrical equipments, etc.  They costs less than the real thing, are always inferior and may be less durable, unsafe and dangerous, since the counterfeited goods are not subject of a safety check.

6  Case 1: Electronic equipment: After its introduction in October, 2001, Apple`s iPod has become one of the most popular consumer electronic products ever. As of January 2008, more than 140 million units have been sold. The first counterfeit case became public in April, 2006. These counterfeited iPods were very close to their counterparts, carried the Apple logo and were labeled with serial numbers. The differences to their counterparts are not-standard headphone jacks located on the lower –right and missing dock connectors. The packing was quite convincing, but had the words “Digital Music Player”, which the original does not. The devieces did not meet the quality of the original ones (weaker sound and battery limit) but they were working and it was very difficult to make the distinction. In fact, many owners will believe that they have an original product and will blame the producer for the poor performance of their device. This example shows that illicit actors are capable of producing even sophisticated goods, and that some of their products may even fulfill the basic needs of their customers.

7  Fast moving consumer goods: In June, 2007, the Colgate-Palmolive company warned that toothpaste falsely packaged as “Colgate” has been found in several stores in New York, New Jersey, Pensylvania and Maryland. The product did not contain the expensive active ingredient fluoride, but it was contaminated with the harmful substance Diethylene Glycol. People reported headaches and pain after using the product. Similar incidents occurred in Spain. The packages of the phony product had many misspeling like “isclininaclly” etc. This case is interesting for two reasons: it shows that well-known fast moving consumer goods are an attractive target even when the selling prices per volume and weight are low ; for counterfeiters it seems to be sufficient to produce something that is similar to the original. Even goods where the brand is a sign for quality (not for the social status) may carry obvious hints of their phony nature and still make it into otherwise licit stores.

8  Pharmaceuticals: when avian flu was a major topic in 2005, countries around the world were stockpiling the antiviral Tamiflu, patented and manufactured by the Swiss pharmaceutical company Roche. The concerns among US citizen created an additional demand for the medication, which even caused some shortages in supply. I n November, 2005, customs seized the first counterfeit articles in a post office in South San Francisko. The pills did not contain the promised active ingredient, were shipped in small quantities and were sold over the Internet. How many pills made it to the consumer is unclear as only a fraction of such small shipments were inspected by customs. The case made it clear that illicit actors can very quickly leverage shortages in licit supply.

9  On behalf of EC, the Taxation and Customs Union, publishes annual report on the community of customs investigations into counterfeiting and piracy on the European boarder. Provided are the number of cases and the number of the articles seized within different product categories, here shown for the year 2006.  Product type________ No of cases______%of total_____ No of articles____ %of total Foodstuffs and beverages 54 0.1% 1 185 649 0.9% Perfumes and cosmetics 1093 2.9% 1 676 409 1.3% Clothing and accessories 24297 65.1% 14 361 867 11.2% Electrical equipment 1 342 3.6% 2 984 476 2.3% Computer equipment (hardware) 543 1.5% 152 102 0.1% Media(audio,games, software) 2880 7.7% 15 080 161 11.7% Watches and jewellery 3969 10.6% 943 819 0.7% Toys and games 678 1.8% 2 370 894 1.8% Cigarettes 300 0.8% 73 920 446 57.5% Medicines 497 1.3% 2 711 410 2.1% Other 1682 4.5% 13 28 7274 10.3% ______________________________________________________________________________________________________ _ Total_:_________________________________37 334_________100.0%___________126 631 295___________100%

10  Truly alarming is the number of potentially dangerous products, as foodstufs, electrical equipment and medicines. A high number of them is seized every year, but many more pass the bording without being inspected.

11 Lucrative crime – organized crime activity and terrorism funding (Vietnamese leader of the “Born to kill” gang, paramilitary groups in Northern Ireland, WTC bombing). Major criminals control the trade in fakes, using the profit to fund other serious organized crime, including terrorism.

12  IP Crime is counterfeiting or pirating of goods for sale, where the consent of the rights holder has not been obtained;  It represents one aspect of the “black market” or informal economy which operates in parallel to the formal economy  Other activities within informal economy: trafficking illicit drugs, trafficking stolen cars, counterfeited credit cars, etc.

13  1 kg CDs is worth 3000E  A computer game costs 0.20E to produce and 45E to sell  1 kg of cannabis resin is worth 1000E  Cannabis resin costs 1.52E per gram and sells at 12E

14  In France: Counterfeiting: 2 years imprisonment and 150 000 E fine; Drugg trafficking: 10 year-terms imprisonment and 750 000 E fine  In Macedonia: Smuggling counterfeited goods: up to 4 year-term imprisonment; Drugg trafficking: 3-10 years imprisonment and at least 5 years if an organized activity (usually it is)

15  5-7 % of the value of global trade  EU, 2001: 95 million items seizured 2 billion US$ damage losses 100 000 jobs per year  FBI, USA:200-250 billion US$

16  Global in its scope and scale generating significant amount of illicit profit;  IPC is a low risk/high return activity  IPC has many in common with functioning of organized crime groups

17  To develop strategies and programs  To raise awareness of IP crime and its links to terrorism and serious crime  To facilitate and improve the exchange of information and intelligence on IP crime  More collaboration to share learning and experiences and to identify new solutions of the problem  More aggressive law enforcement  New laws and stricter penalties.

18 1. Thorsten Staake, Elgar Fleisch: Countering counterfeit trade: illicit market insights, Best Practice Strategies and Management Toolbox, Springer, Switzerland, 2008; 2. Adam Jolly, Jeremy Philpott: A handbook of intellectual property management: protecting, developing and exploiting your IP assets, USA and GB, 2004 3. Frank Shanty: Organized Crime: from trafficking to terrorism, Volume 2, 2007


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