If back in the day, having on your dinner table a pineapple was the ultimate symbol of luxury and wealth, nowadays owning a Patek Philippe tells the rest of the people cues about who you are, your socio-economic status and so on. Pineapple was a novelty to Europeans and most importantly, it was scarce, similar in many ways to the Patek Philippe watches. It might seem like the comparison makes no sense, but it does, if one looks at it creatively. Pineapple was incredibly exclusive and only a few royal courts could have access to it, just like a Patek Philippe Grandmaster Chime watch. Pineapple is a collective fruit made up of 100 to 200 fruitlets that fused together on a central axis, while a Patek Philippe is made up of over 200 individual parts. So, as it was centuries ago, luxury products are still consumed by customers that want to ensure social distinction and despite their exclusivity and enormous profits, even the luxury market is facing major challenges that disrupts the way business is conducted.
Why are luxury brands targeted?
Counterfeiting is a very profitable business for organizations operating outside the law throughout the world, a business that is striving and constantly developing its manufacturing techniques and range of products, both offline and online. It has become one of the four horsemen of today`s challenges faced by luxury brands for it dilutes the scarcity and exclusivity elements, that besides quality, is the main selling factor. Luxury brands market themselves through their functionality, just like all other brands, however, they also sell a dream, which in turn makes them even more appealing. So, when the dream is unattainable, counterfeit manufacturers make it attainable.
Luxury powerhouses like Chanel, Louis Vuitton, Prada, Fendi, Gucci and Dior were amongst the most counterfeited brands in the world, according to the same Global Brand Counterfeiting Report. So, the more known a brand is, the more chances are that it will fall prey to trademark infringement like the LV logo of Louis Vuitton, the back-to-back C`s from Chanel or the shape or design of a Patek, Rolex or Cartier as they “speak” the social language of the consumers.
There is also a paradox in all this. If Burberry`s Haymarket check or Christian Louboutin`s red sole shoes were recognizable trademarks, immediately associated with wealth and exclusivity, with the rise of counterfeit and pirated good market, similar products were available to buy from a back alley at an extremely low price and/or quality. These examples display what marketing research has shown so far, meaning that for brands to be counterfeited they need to have an incredible notoriety and global awareness, and some might even go as far as to argue that when a luxury brand is counterfeited it means it has reached its pinnacle. While for some luxury brands having their products counterfeited translates into advertising, others argue that the phenomenon affects their promise to the customer, so if someone unknowingly buys a product that is not genuine, might end up doubting the premium experience the brand vowed to offer and be dissatisfied with the brand.
Intellectual property vs. counterfeiting
Luxury brands have probably become as recognizable as national flags. At their core stands that very capacity to produce and monetize a recognizable and distinctive brand. As per WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), “counterfeit trademark goods” refer to goods – packaging included – bearing an unauthorized trademark that is identical to the one registered and that infringes upon the rights of the trademark owner. Usually, brands make sure that they trademark the whole range of trademarkable elements, from combination of words, letters, numerals, drawings, the shape of goods, symbols, colours, and the list can go on. Yet, that does not mean that they are protected, as counterfeiters managed to produce goods of high-quality looking almost like the genuine ones, described by jargons such as “AAA”, “1:1” or “mirror” products. That means that for buyers it is much more difficult to differentiate between a genuine and a counterfeited product. In fact, they are so well manufactured that the differences might lay in small details, like the stitching sewed differently by few millimeters, the font or colour used.
OECD found that the most seized counterfeit luxury goods include watches, leather goods, perfumes, and accessories and companies most affected by this are primarily registered in the US, France, Switzerland, Italy, Germany, Japan, Korea, and the United Kingdom, countries where luxury brands are based. It is thought that the counterfeit and pirated goods market would have reached a staggering $1.82 Trillion by 2020, with an estimated loss of around $32 Billion in 2017 due to online sales only, being rather difficult to estimate the amount lost by luxury brands in the offline markets, according to the Global Brand Counterfeiting Report. Studies show that more than 80% of those goods seized by EU customs only, originating from China, followed by India, Russia, Turkey and Ukraine as shown in a recent European Commission working paper.
However, sometimes even having a registered trademark is not enough. Louis Vuitton`s Damier check pattern created in 1888 was challenged for being too generic and thus unable to be protected by trademark law, Christian Louboutin`s red sole also had trademark issues and was challenged on grounds that it was devoid of distinctiveness and that the red colour could no be trademarked. They won the given cases, but what is striking is that even though they are powerhouses, they still face the burden of going through lengthy legal proceedings.
The global trends seem to indicate that counterfeiters are using much more sophisticated technologies and manufacture high quality products that have a relatively stable market in developing countries. With such goods being sold in back alleys, flea markets and all over the internet, it is difficult to go after all trademark infringers, so it is much more likely that a luxury brand will sue a counterfeiter that makes high quality products rather than go after the poorly manufactured. The counterfeit craze makes it tough for high-end business to maintain the scarcity and exclusivity feature of their products without diluting their image on the market, and for that protecting their intellectual property, including copyrights, trademarks, trade secrets and patents – where applicable – becomes more than imperious.