Report reveals scale of counterfeiting in the EU

Counterfeiting is sucking almost €60bn from the EU’s economy every year, a new report based on five years of research reveals.

According to the EU Intellectual Property Office (EUIPO), the eye-watering figure relates to direct annual loses across 13 economic sectors in the EU known to be vulnerable to counterfeiting and intellectual property rights infringements, including pharmaceuticals, smartphones, wine and spirits, and clothing and fashion accessories. Food products, including those with geographic indications, were not included in the analysis.

The findings are based on a series of 12 separate studies that explored the economic impact of counterfeiting on industrial sectors in the EU. This is the first time the findings (the individual studies of which have been covered by SecuringIndustry.com) have been combined and released in one single report.

EUIPO said the €60bn figure corresponded to 7.5 per cent of sales in these sectors, with accumulated losses equivalent to €116 per EU citizen per year.

Furthermore, the combined analysis estimates that around 434,000 jobs are have been directly lost in these sectors as a result of the presence of counterfeits, while governments across the EU have lost nearly €15bn in taxes and social security contributions.

The report, which brings together the findings of research carried out since 2013, intends to tie together various studies on the value of IP, the public’s perception of it, the mechanisms used to infringe IP rights and the economic consequences of infringement in order to provide a coherent picture of the state of IPR and IPR infringement in the EU.

Previous research by EUIPO and the OECD estimated that total imports of counterfeit and pirated products into the European Union were as much as €85bn in 2013, representing approximately 5 per cent of total EU imports.

“The estimates [from the sectorial reports] supplement the joint EUIPO-OECD studies in describing the magnitude and economic impact of IPR infringement in the EU,” the report says. “Aside from the direct economic consequences estimated in these reports, IPR infringement could also have dynamic, long-term effects. If infringement reduces companies’ returns on innovative assets, then investment in innovation may be lower than socially optimal. For all these reasons, counterfeiting is a serious problem that merits attention from policy makers and enforcement authorities.”

The report also pulls together findings from various other studies to give a more comprehensive picture of the counterfeiting business in the EU.

The report notes that the business models adopted by counterfeiters make significant use of the internet to distribute their products and to promote the distribution and consumption of illegal digital content. Two particularly popular techniques include advertising on websites suspected of infringement and the misuse of the domain name system to generate traffic to e-shops selling counterfeit goods.

Another trend noted by EUIPO was that customs data at EU borders indicate that seized counterfeits are increasingly in the form of small shipments, notably seen with the growth of postal seizures, and include greater proportions of spare parts, including replacement car parts and components for mobile phones, such as screens or batteries.

Another method that has gained increased prominence is the smuggling of labels and other packaging separate from the actual goods, with final assembly and other production activities taking place inside the EU.

“In response to these developments the EUIPO, together with public and private partners, is undertaking and supporting a number of actions to meet these challenges,” says the report. “These actions range from providing rights owners with information on the changing infringement landscape, working with Europol on wider responses to IP crime, not least by funding a specialised IP crime unit within Europol, supporting the European Commission (DG Trade) efforts to address the supply of counterfeit goods in third countries, and by providing citizens with information on the availability of legal digital content offers and on the economic impact of purchasing counterfeit goods or accessing illegal content.”

However, the report also emphasises that more needed to be done to address the prevalence if counterfeiting in the EU, adding that EUIPO would continue to monitor and review the evolving counterfeiting landscape.

“Notwithstanding the actions being taken, and despite the volume of evidence demonstrating the scale and impact of IP crime on the EU economy and society, the current approach to the problem still needs to be strengthened… Closer coordination among EU institutions and bodies involved in the fight against IPR infringement, and closer collaboration at the enforcement level are essential elements in the effort to curtail this problem,” it concludes.

António Campinos, executive director at EUIPO, said: “Over the past 5 years, our reporting and research has given, for the first time, a comprehensive picture of the economic impact of counterfeiting and piracy on the EU economy and job creation, as well as intelligence on how intellectual property rights are infringed. Our work has been carried out so that policymakers and citizens can be in no doubt of the value of intellectual property and the damage that arises from its infringement.”

EUIPO plans to publish a report annually.