What Is Brand Piracy?
Brand piracy occurs when a product features a name or logo similar to another well-known brand or product. It is common among products that are easily replicated, and consumers will often mistake a counterfeit product for the original brand name.
Brand piracy occurs because companies attempt to take market share from their more popular competitors. Brand piracy is illegal because the practice infringes on trademark laws.
- Brand piracy occurs when a company copies a well-known brand in some way and features the same name or logo.
- Companies use piracy to steal market share from competitors.
- Brand piracy is a form of brand abuse, a term that refers to an outside party infringing on a brand’s intellectual property to take advantage of its reputation.
- Brand piracy is illegal because the practice infringes on trademark laws.
- Brand protection refers to the process of protecting the intellectual property of companies against counterfeiters, copyright piracy, and other types of infringements.
Understanding Brand Piracy
Companies that commit brand piracy design their products to resemble the original products of other companies to mislead consumers and gain market share. Brand piracy comes in many forms and can be difficult to control.
Brand piracy falls under the umbrella of brand abuse, a term that refers to an outside party infringing on a brand’s intellectual property in order to take advantage of its well-respected reputation.
The impact of brand piracy can be severe. Companies spend years and millions of dollars building and vigorously protecting their brand names. Those who commit brand piracy try to capitalize on this success by stealing the efforts of recognized brands. Knockoffs can also erode and tarnish the reputation of a brand name among customers and partners because pirated goods are typically inferior and of cheaper quality. Well-known and established brands can suffer from a continuous drop in sales, and the costs involved in attending deceived customers and fighting counterfeits can also be high.
On the other hand, brand protection refers to the process of protecting the intellectual property of companies against counterfeiters, copyright piracy, and other types of infringements.
According to data released in the June 2021 report by the Organisation for Economic Co-operation and Development (“OECD”) on counterfeiting and international trade, based on customs seizure data, counterfeit and pirated goods totaled an estimated USD $464 billion in world trade in 2019, which translates to approximately 2.5% of total world trade in 2019.
Types of Brand Piracy
There are three main categories of brand piracy: outright piracy, reverse engineering, and counterfeiting:
- Outright piracy: Here, a product is exactly the same as the brand name and uses the same trademark. Unlike the original, the trademark is false.
- Reverse engineering: In this type of piracy, the product’s construction and composition are copied, manufactured, and then sold on the market, often at very low prices. This happens primarily in the electronics industry.
- Counterfeiting: This is one of the most common types of brand piracy. In this case, a counterfeit product imitates the product from an authentic brand, but it's made unofficially and by external sources, and the quality is altered even though the same logo and trademark are on the label. "Knockoffs" are made without permission from the authentic brand in order to deceive customers.
Brand Piracy and the Law
Brand piracy and counterfeit merchandise are illegal and a federal offense, as they are an infringement on trademark laws. There are laws in place that apply to both the counterfeiter and those who knowingly sell any counterfeit merchandise. The Trademark Counterfeiting Act of 1984 establishes that, under federal law, any individual who knowingly distributes, wholesales, or sells counterfeit merchandise faces substantial penalties:
- Imprisonment for the first offense up to 10 years and up to 20 years for repeat offenders.
- Fines up to $15.0 million for corporations and $5.0 million for individuals who are repeat offenders.
- Seizure and destruction of counterfeit merchandise the wholesaler or distributor has in their possession.
- Civil lawsuits brought by the owner of the trademark under federal trademark law to recover from damages, profit losses, attorneys’ fees, and get other injunctive relief.
Why Do Consumers Buy Pirated Goods?
Many consumers believe that buying pirated goods is harmless. In fact, the reverse is true. Piracy is against the law and can erode the profits of major companies and their brand names. So why do consumers buy them?
Some consumers like the idea of a brand name but don't want to pay the high price for the genuine product. Other consumers don't realize they are buying a pirated product. In some cases, only an expert can identify a pirated product from the real thing.
Brand piracy causes the market to be flooded with cheaper goods. The explosion of e-commerce during the COVID-19 pandemic has created a perfect market channel for counterfeit goods.
Fighting Brand Piracy
The best way to identify a pirated good is to examine the product's packaging, quality, and construction. Some vendors may forgo charging sales tax as an incentive for consumers to purchase their goods. Therefore, authorities suggest making purchases at authorized retailers.
There are many ways that people can help fight brand piracy. Consumers who have discovered an online retailer selling pirated goods, or have bought counterfeit products over the Internet, can report the suspected goods and vendors to one of these U.S. Government agencies responsible for enforcing intellectual property laws:
- The U.S. Consumer Product Safety Commission
- The U.S. Food and Drug Administration (FDA)
- The Office of Intellectual Property Rights (OIPR)
- The Federal Bureau of Investigation (FBI)
- The U.S. Customs and Border Protection (CBP)
- The National Intellectual Property Rights Coordination Center (IPR Center)
On Aug. 13, 2012, the Federal Bureau of Investigation (FBI) announced that any copyright owner may download and use the FBI Anti-Piracy Warning Seal. Previously, the use of the seal was limited to members of five entertainment and software industry associations that had entered into formal agreements with the FBI. Now the seal can be attached and used on all copyright content, including personal websites, without violating federal law. Copyrighted works can include films, audio recordings, electronic media, software, books, photographs, etc. The purpose of the anti-piracy warning seal is to remind media users of the serious consequences of pirating copyrighted works.
How to Protect Your Brand
There are a number of preventive measures that brands can take to avoid being a victim of brand piracy.
Getting a patent to register your intellectual property should be the first step for protecting your brand. You can register a trademark for your brand name and any logo, slogans, or designs associated with your brand by submitting an application with the US Patent and Trademark Office (USPTO). It's also highly recommendable to include an intellectual property clause in your terms & conditions.
Tale advantage of intellectual property management software that helps you track trademarks, copyrights, patents, and other intellectual property. This software scours the internet for potential matches with your brand and reports back the results.
Building a strong social media presence can help your business establish an authentic and genuine brand. There are social media analytics tools that can help you track your social presence on different platforms and detect any suspicious activity. By monitoring and analyzing your social media you can detect potential infringements on your intellectual property.
Finally, you can help your customers recognize the differences between your products and potential counterfeits. Also, by creating awareness of the severe effects that brand piracy can have on a legitimate brand, your customers will be less likely to buy counterfeit products.
There are many examples of pirated brands including clothing, handbags, electronics, and toys. Even everyday items like batteries and flashlights are counterfeited by manufacturers. Luxury handbag makers, such as Hermès, Burberry, and Coach, are often the victims of piracy. Because there is such a high demand for these luxury brand names, counterfeiters will often produce cheaper purses and wallets that can be easily mistaken for the original, which is the whole idea.
What Are the Effects of Brand Piracy?
For the original brands and companies, the effects of brand piracy can be devastating. These include, among others, the loss of sales and revenue (that can reach billions of dollars depending on the brand) and the damage to the reputation. The costs involved in monitoring and fighting counterfeits can also be high. Brand piracy can even result in damage to people's health due to the poor quality of the products used or the manufacturing process.
Are Pirated Goods the Same as Counterfeit Goods?
Technically speaking, "pirated" refers to goods (usually movies, music, books, or other copyrighted works) that are used, duplicated, distributed, or sold without permission from the copyright owner. "Counterfeit" refers to goods manufactured to look like the real thing and sold as such; in other words, fake goods.
What Industries Experience the Most Piracy?
According to a June 2021 report by the OECD, the following are the industries more affected by counterfeiting and brand piracy: footwear, clothing, articles of leather (example: handbags), and watches.