How much do counterfeits cost? For the first time, a study by the Organization for Economic Cooperation and Development (OECD) has provided concrete figures on this question. The total value of world trade in fake goods that infringed Swiss intellectual property (IP) amounted to as much as CHF 7 billion (USD 7.02 billion) in 2018, equivalent to 2.3% of all Swiss genuine exports. Among Swiss counterfeit products, watches are by far the most targeted product for counterfeiting. Other Swiss products commonly faked include clothing, leather products and footwear. Those consumers that demand genuine “Swiss made” goods, but instead receive sub-quality fakes, suffer damage calculated at more than CHF 2 billion in 2018. But the impact on the Swiss economy is significantly higher. In 2018, the total lost sales of Swiss IP rights holders due to trade in fake goods infringing their rights amounted to almost CHF 4.5 billion. But that is only the tip of the iceberg. According to the study, Swiss enterprises could have offered over 10,000 more job positions in 2018 if the counterfeiting industry did not exist. And lower sales due to counterfeiting mean lower revenues for the Swiss Government from corporate income tax, personal income tax and social security contributions. So the overall "loss" for the Swiss economy is significantly higher.
This is not surprising, and probably the numbers for 2019 and 2020 will even be higher. Criminal networks have reacted very quickly to the Covid-19 crisis and adapted their strategies to take advantage of the shifting landscape. The sale of pirated products shifted significantly towards online trade, even more so under the pandemic - which in the past years lead to a significant increase in the number of individual orders and consignments containing counterfeit goods which enter Switzerland day by day. Simultaneously, this also lead to a significant increase of the workload of the Federal Customs Administration (FCA), which, upon the right holder's request, inspects and seizes counterfeit goods. The FCA has to withhold more and more suspicious goods that enter the country by air, land or water, and destroy them if the buyer does not expressly object to their destruction. The current customs seizure procedure - which involves many steps which in the hindsight often turn out to be unnecessary - is burdensome, costly and time-consuming – for both the FCA and the right holders.
But there is some light at the end of the tunnel: The proposed Federal Act on the Introduction of a Simplified Procedure for the Destruction of Small Consignments in Intellectual Property Law, which is currently being discussed on legislative level. With the introduction of the new and simplified customs seizure procedure proposed by this Act, which (hopefully) will pass and enter into force soon, the administrative effort can be reduced significantly, and the FCA will be given additional authorities when checking small consignments containing counterfeit products. Small cases then can be settled more efficiently. In a nutshell, the purchaser would still be informed when a suspicious consignment is withheld, and be granted the right to object to the destruction. The FCA would, however, neither inform the right holder, nor send the right holder samples or pictures of the allegedly infringing goods, unless the purchaser indeed objects to destruction - which is the case in less than 5% of cases today. This will save time and cost, for both the FCA and the right holders, and allow resources to be allocated more efficiently in the fight against counterfeits.
Of course, introducing the new simplified procedure will not solve the general issue of counterfeit Swiss products, but it is one further step into the right direction. To tackle the problem at the root, and uncover and disrupt the practice of counterfeiters in a more targeted manner, the Swiss Federal Institute for Intellectual Property (IPI) announced to advocate even more intensively for minimum standards for the enforcement of intellectual property rights in free trade agreements. Likewise, it is important to raise the awareness - and in their press releases the IPI and Stop Piracy, a non-profit organization which works to educate and raise awareness among consumers as well as promote cooperation between the business community and the authorities, already announced further campaigns. Let's fight this together!
Counterfeits are costing Switzerland dearly – a new OECD study concludes