Intellectual Property Crime Report 2007
IP
CRIME GROUP
IP
CRIME GROUP
Intellectual Property Crime Report 2007 IP Crime Group
The UK Intellectual Property Office The UK-IPO is the lead administrative body and is responsible for the Government’s overall IP Crime Strategy. This report by the IP Crime Group is produced by the UK-IPO as part of the office’s role as secretariat to the Group. The National IP Crime Group (IPCG) is facilitated by the UK-IPO and is a multi agency structure of Working Groups involving Government, enforcement and industry sectors. The IPCG offers a means of collating knowledge and information so that decisions can be made about how best to deploy and co-ordinate resources to ensure that best practice strategies and lessons are developed and spread across the IP community. The UK-IPO acknowledges the generous assistance provided by the following organisations through the provision of photography and images: The Federation Against Copyright Theft (FACT) The Organised Crime Task Force (OCTF) Whitenoise Design Limited Essex County Council The Industry Trust for IP Awareness The Alliance Against IP Theft 2
Intellectual Property Crime Report 2007 Contents
Contents Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 IP Crime Group Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Chapter 1 Why fighting IP crime matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Chapter 2 The challenges we face . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Chapter 3 Responding to the threat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Chapter 4 Statistical charts and comments . . . . . . . . . . . . . . . . . . . . . . . . .73 Contact details for IP Crime Group members . . . . . . . . . . . . . . . . . . . . . . .83
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Intellectual Property Crime Report 2007 Foreword
Foreword The Government considers IP crime to be a serious threat both in criminal terms and to the wellbeing of the UK economy. Government is committed to ensuring that the value of creativity and innovation is maximised for the benefit of the UK. To this end, the biggest recent development is the extension of enforcement powers to Trading Standards for copyright counterfeiting and piracy. Government underlined this commitment with funding of £5million this year, and £7.922 million next. I am delighted that changes in the Fraud Act, Serious Crime Bill and the Enterprise Act will add new weapons to our efforts to tackle IP crime. Whilst the national IP Crime Strategy is beginning to have a positive effect on the level of IP crime there is still a lot of work left to do. The biggest hurdle to overcome is to educate the general public that a “bargain” does not always mean they are getting a good deal. There is also the need to reinforce with the public that IP crime can have a direct impact on their children and their local communities by providing the demand for illicit goods. Industry organisations are making valuable contributions in the fight against IP crime particularly in raising awareness. There is the continuing need for coordination of these campaigns to avoid duplication and wasted resources. There should be no doubt that I am committed to ensuring that the effects of counterfeiting and piracy are taken seriously, and I will continue to champion the cause of creativity and innovation in tackling this crime. I am pleased by the strong progress demonstrated in this report on greater co-operation and intelligence sharing between enforcers and industry.
However, gaps in evidence and understanding of the full range and scale of IP crime continue to hamper efforts to tackle counterfeiting and piracy. Nonetheless, it is heartening to see that the greater focus and prioritisation that the IP Crime Strategy has brought since its launch in 2004, has lead to a significant increase in enforcement action and successful prosecutions climbing from 600 to over 1000 a year. Criminals beware. My thanks to all the members of the IP Crime Group for their efforts in driving the national IP Crime Strategy forward I appreciate your commitment to the cause. A special mention should also go to the Editorial Board who assisted in the production of the IP Crime Report.
Lord Triesman Parliamentary Under Secretary of State for Intellectual Property and Quality
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Intellectual Property Crime Report 2007 Executive Summary
Executive Summary Intellectual property crime (IPC) is the counterfeiting and piracy of trade marked and copyrighted products and services. Fake products abound in almost all industry sectors including designer fashion, luxury goods, electrical equipment, audio visual, toys, games, drinks, cigarettes, pharmaceutical products and automotive parts. The IP Crime Report reveals that the range of goods being copied and illegally reproduced is growing, extending to such diverse products as counterfeit razor blades, motorbikes and crane spare parts. The aim of the IP Crime Report is to provide an overview of the impact on the UK of IP crime by drawing together information provided by the contributors. This Report will be used to inform Government, local authorities and the wider law enforcement and criminal justice organisations about the problems the UK faces. This threat extends to organised crime and has a serious impact on the economy, harms consumers and local communities. The information contained in this Report will also be used to set and review priorities for the future work of the IP Crime Group and its members. Whilst a wide range of enforcement agencies, IP rights holders and industry have been invited to contribute, in some sectors the returns were low, and in some cases there was a nil response. This is disappointing. Although there has been an improvement in the level of sharing of intelligence between enforcement agencies, IP rights holders and Government departments there are still significant gaps. There is however strong evidence to show that there is significant improvement in awareness raising, training and collaboration between industry and enforcers. Scottish trading standards service and police have, for example, had some major success in joint enforcement operations. The South Wales Police Regional Intelligence Unit
and the British Phonographic Industry are also enjoying a fruitful partnership.
The harm caused by IP crime This Report highlights that IP crime has a multitude of undesirable effects throughout the UK. There is the immediate consequence of a serious threat to consumer safety, where goods have not undergone product safety testing. Indeed, the Medicines Healthcare Products Regulatory Agency (MHRA) has recalled five different pharmaceutical products in the UK in 2007. These items ranged from toothpaste to drugs used in treating cancer. The secondary consequences are no less important but perhaps are not recognised as having the same immediate impact as the consumer harm problem. Both the UK economy and businesses are suffering. The seriousness of this impact should not be underestimated. In Chapter 1 the Report seeks to illustrate the Harm generated by IP crime and includes an example (page 29) from 2006 outlining the liquidation of Apollo Video Film Hire Ltd which had over 100 rental shops. It was reported that the impact from piracy and illegal downloading were amongst the principal reasons leading the firm to cease trading. There is also the impact on local communities. Within the Report there are examples of a growing association between dishonesty and damaging social trends. People are selling fake goods whilst also engaged in defrauding the benefits system. Evidence provided for this Report also shows that criminals are using illegal immigrants to sell pirated goods. Criminals are also shown to be exploiting children and grooming them into a criminal lifestyle. There appears to be a general acceptance in parts of the population that IP crime is an easy way to gain an affluent lifestyle. These activities are, in the main, driven by the consumers who demand a bargain. 7
Intellectual Property Crime Report 2007 Executive Summary
There is also the loss of revenue to Government in taxes. This is difficult to quantify, but tax losses range from corporate tax to VAT and excise duties on alcohol and cigarettes. In 2006 Her Majesty’s Revenue and Customs reports that an estimate of 2 billion cigarettes were counterfeit and that the total trade of 18.5 billion non-UK duty paid cigarettes cost the taxpayer £2.9 billion.
Scope and scale This Report identifies trends in IP crime from seizures by the enforcement agencies and the work of industry sectors. The true measure of the level of IP crime within the UK is unknown, but this report sets out the evidence available and shows that the problem remains significant. The Organisation for Economic Cooperation and Development also encountered similar difficulties when trying to establish a true measure of the problem in their June 2007 study entitled “The Economic Impact of Counterfeiting and Piracy” (the full report from Phase 1 of which is still to come). In their Executive Summary published in June 2007 they indicated that in 2005, the “international trade in counterfeit and pirated products could have been up to US$200 billion” which referred only to such products seized by Customs at national borders. What is clear from this Report is that IP criminals are continuing to develop new ways to make money from crime. Criminals are being driven into more underground, diffuse methods, such as
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the internet, to reduce the risk of detection. The internet has also become an important, alternative market and a way to supply fakes on demand. The increased use of the internet has put many enforcement organisations under pressure to gain additional resources, develop new expertise and evidence securing methodologies.
Enforcement action Trading standards services continue to be on the frontline. As trends for links to other criminality develop, and in particular organised criminality, the police are becoming more active. The Serious Organised Crime Agency has a growing role and is building its knowledge capability to reduce the harm caused to the UK by serious organised crime. It also has a duty to support others in law enforcement in the UK. Ensuring front line enforcers are fully equipped continues to be important, with industry and government working together to deliver training. A nationwide training program for trading standards officers, following the recent enactment of Section 107A Copyright Designs and Patents Act in April this year, has been completed by The Mechanical Copyright Protection Society and the UK-IPO. This Report highlights the increasing efforts of industry and government to tackle counterfeiting and piracy. It highlights the scale of the problem and sets out a number of practical steps for the IP Crime Group to take forward in the coming year.
Intellectual Property Crime Report 2007 IP Crime Group Recommendations
IP Crime Group Recommendations Chapter 1 Why fighting IP crime matters Recommendation 1
Page 13
UK - IPO in conjunction with the new Strategic Advisory Board for IP policy (SABIP) to enhance the coordination of IP related research.
Recommendation 2
Page 16
The Government (the UK-IPO) should work with IP Crime Group members to agree an accurate national standard measure of the level of IP crime, including industry revenue loss, industry profit loss, criminal market size and criminal gain.
Recommendation 3
Page 16
The Government to agree that the UK-IPO records the seizures of counterfeit and pirated goods from all enforcement authorities and publish the results of prosecutions and Proceeds of Crime actions on an annual basis.
Chapter 2 The challenges we face Recommendation 4
Page 36
The use of the Proceeds of Crime Act and Financial Investigators to be encouraged when prosecuting IP criminals.
Recommendation 5
Page 37
Members of the IP rights owning community should be encouraged to provide training and share expertise with enforcers to improve their technical knowledge and understanding of IP.
Recommendation 6
Page 39
The UK-IPO to facilitate a continuing national program of awareness raising within enforcement authorities and officials within the judicial process, with the assistance of brands and trade associations where appropriate.
Recommendation 7
Page 40
UK-IPO to develop and host a secure web-based resource that allows access by enforcers to counterfeit product identification guidelines and a contacts database listing brand protection departments and rights holders representatives’ details for use by the IP community.
Recommendation 8
Page 43
Achieve the wider dissemination of expertise and knowledge pertinent to internet investigations through delivery by the IP rights owning community across enforcement agencies and the IP Crime Group membership.
Chapter 3 Responding to the threat Recommendation 9
Page 60
UK-IPO to engage at corporate level with UK businesses, to ensure an understanding of the responsibilities and work programme being progressed by the UK-IPO / IP Crime Group.
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Why fighting IP crime matters
Why fighting IP crime matters Scope and scale, nature and potential harm . . . . . . . . . . . . . . . . . . . . . . . .11 How big is this? - the global picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 The difficulties of economic assessment . . . . . . . . . . . . . . . . . . . . . . . . . . .13 What’s being done to understand the threat . . . . . . . . . . . . . . . . . . . . . . . .13 The view from the ground . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Where IP crime occurs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 The internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Digital piracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Physical products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Where is it all coming from? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 The harm it does . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Threat to public safety and negative social consequences . . . . . . . . . . . .23 Exploitation of children and young persons . . . . . . . . . . . . . . . . . . . . . . . .27 Effect on the UK economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Impact on tax receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Impact on businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Impact on innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Criminal gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Organised criminality and links to other criminality . . . . . . . . . . . . . . . . . .30 Illegal people smuggling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Dishonesty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Tools of the trade - how do the criminals work? . . . . . . . . . . . . . . . . . . . . .32
Chapter 1
Chapter 1
Intellectual Property Crime Report 2007 Why fighting IP crime matters
Why fighting IP crime matters Scope and scale, nature and potential harm ‘Intellectual property’ refers to the legal rights owned by individuals and organisations in inventions, designs, goods and other creations, produced by intellectual activity in the industrial, scientific and artistic fields. These rights are to protect the creators and ensure that they will benefit from their originality and effort. Just like physical property, intellectual property (IP) can be stolen. ‘IP crime’ is committed when products are copied and marketed for profit without the consent of the rights holder. This is a double-edged crime, as it also defrauds and threatens the consumer.
> Photo caption
There are two categories of IP crime‘counterfeiting’, which involves branded goods (protected by trade marks) such as clothing and footwear and pharmaceuticals, and ‘piracy’, which involves other kinds of products such as music, film, computer games and software (protected by copyright). The two can often overlap, with both trade marks and copyrights involved in a given product e.g. software. Intellectual property crime (IPC) involves the counterfeiting and piracy of trade mark and copyrighted goods and materials, including • Consumer products
a high financial return from a relatively low investment and a low risk of law enforcement attention.
• Luxury goods
Fighting IP crime matters because:
• Fashion-wear, clothing, footwear, sportswear and equipment
- it causes economic, social and physical harm to individuals and local communities,
• Electrical equipment • Audio visual media • Toys, games and gadgets
- it is a low-risk ‘soft’ crime, linked to other types of organised crime.
• Automotive parts
There has been a global shift towards greater innovation and creativity and as a result intellectual property has grown in value and has unsurprisingly attracted criminals who follow economic trends.
IP crime is extensive and profit margins are potentially huge. Moreover, penalties have been regarded as being low compared to other serious trans-national crimes. As a result IP crime can be attractive to organised criminals; it offers
The result has been a threat to businesses and the general public. There are growing concerns about the rise of fake alcohol, household and pharmaceutical products and in particular the exploitation of children.
• Cigarettes • Pharmaceuticals and medicines
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
How big is this? – the global picture
Ideas are expensive to make, but cheap to copy. Gowers Review of Intellectual Property December 2006 Whilst the seriousness of counterfeiting and piracy is clearly established, like many other forms of crime it is difficult to reliably determine the nature, scale, and negative consequences. This presents enforcers and policy makers with considerable challenges. A comprehensive study is still in preparation by the Organisation for Economic Co-operation and Development (OECD) entitled, “The Economic Impact of Counterfeiting and Piracy”. An Executive Summary was published in June 2007, with the detailed report still to come. Based on data from customs seizures in OECD countries, it estimates that counterfeit and pirated goods seized across national borders may have totalled around US$ 200 billion in 2005. The total value in trade in counterfeit and pirated goods, including products made and sold inside the same country, may have been several hundred billion dollars higher, and this estimate also excludes the value of products distributed via the internet1. The European Commission reports annually on the seizures of infringing goods made by customs in the EU. The statistics for 2006 show that the number of cases taken by customs involving goods infringing intellectual property rights, as well as the number of infringing articles seized, have increased dramatically since the previous year. In 2006 customs intercepted more than 128 million counterfeit and pirated articles involving over 37,000 cases. This compares to 2005 figures where customs seized 75 million articles involving around 26,000 cases. The report’s findings illustrate an enormous increase in the
amount of goods seized and highlights enhanced EU customs activities in this area2. • The EU records that almost 60% of articles seized in 2006 were cigarettes. In addition to the economic consequences for brand holders, this illicit trade in excise goods has enormous consequences on national revenues. • The amount of other goods seized has increased by more than 25% compared to 2005. This is a reflection of the trend towards diversification in the products that are subject to counterfeiting and piracy. • More specifically the Customs Union statistics indicate an increase in fake medicines and products for personal care. Alongside this the more traditional sectors of clothing and luxury goods continue to be vulnerable and reveal large increases in 2006. This is best illustrated by a huge seizure of sport shoes by the German customs administration, where more than 100 containers were seized in Hamburg in a single operation; clearly highlighting the continuing interest of fraudsters in this area of counterfeiting. Alongside these statistical reports the UK Threat Assessment produced by the Serious Organised Crime Agency (SOCA), defines Intellectual Property crime as a “serious organised criminal activity”. It states that “Criminals at all levels are involved in IPC. Serious organised criminals are particularly involved in the manufacture and distribution of counterfeit products.
Organisation for Economic Co-operation and Development The Economic Impact of Counterfeiting and Piracy – Executive Summary-June 2007 2 EU Directorate General for Taxation and Customs Summary of Community Customs Activities on Counterfeit and piracy - Results at the European Border 2006 1
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Chapter 1
Chapter 1
Mainland Chinese organised crime groups are heavily involved in the distribution of counterfeit DVDs and exploit illegal immigrants or asylum seekers to sell them on the streets in the UK”3.
Intellectual Property Crime Report 2007 Why fighting IP crime matters
best practice and create a pool of knowledge that will establish a solid base for future assessments and action.
Recommendation 1
The difficulties of economic assessment
UK - IPO in conjunction with the new Strategic Advisory Board for IP policy (SABIP) to enhance the coordination of IP related research.
Many UK rights holders and their representative bodies declare candidly that they are at a loss to estimate the size of the problem they are facing.
What’s being done to understand the threat?
In the measurement of loss of profit, income and market share the difficulties of determining amounts are acknowledged by many to be even greater. Often rights holders and representative sectors use diverse methods and this inevitably makes it difficult to calculate the damage. In
Whilst counting the number of goods seized provides a relatively easily measurable starting point for further work they only represent part of the picture. To build a better understanding of the scale of fake goods, seizure levels must be supplemented by a range of other indicators, such as consumer surveys and sampling. The Tobacco Manufacturers’ Association (TMA), the International Federation of the Spirit Producers UK (IFSP UK) and the British Phonographic Industry (BPI) have all made progress in this area. Each makes use of contemporary data and conducts market research/surveys in their sector.
addition differing price assumptions can also confuse matters. For example the use of full retail prices in relation to fake goods is considered to have little creditability as an indicator of revenue or profit loss. Many sectors have sought to remedy the situation and have funded and commissioned specific research. Such work is to be congratulated and it is increasingly important to ensure that such studies are shared, to help develop
The TMA monthly survey is a complementary technique used to assess the level of the non-UK duty paid cigarette market. It involves the collection of cigarette packs through face-to-face interviews, discarded cigarette pack collections at sporting and leisure facilities and also statistical modelling work. This monthly survey has been running since the late 1990s and has been used, in conjunction with other research, to estimate the scale of and trends in nonUK duty paid cigarette consumption. It differs from HM Revenue and Customs (HMRC) records and other seizure data in that it provides an estimate of what is consumed after any interceptions by HMRC and other enforcement agencies.
The United Kingdom Threat Assessment of Serious Organised Crime 2006/7- Serious Organised Crime Agency
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
Based on their surveys the TMA estimate that of the 67.5 billion cigarettes smoked in the UK in 2006 around 3% were counterfeit - around 2 billion cigarettes. However, counterfeit cigarettes represent a small part (11%) of the total volume of non-UK duty paid consumption- 18.5 billion in 2006. The reports from the IFSP UK seem to parallel that of the illegal cigarette trade; in localities where enforcement is regular and/or intensive the problem of illegal sales diminishes. However, the trend reverses and the level increases as soon as the pressure on the criminals appears to reduce. Trade continues at high levels in areas which are not subject to regular checks. This 'bounce back' effect has specifically been observed in NW England and in the South. The largest group of offenders appear to be independent restaurants, followed by licensed public houses. Cardiff Trading Standards note a similar phenomenon in relation to their ‘zero tolerance’ policy at major venues in the city. When the levels of trading standards attendance fall, infringements rise. Alongside the TMA and the IFSP (UK), the BPI uses reports from the International Federation of Phonographic Industries (IFPI) to augment its home based data. They believe this is a reliable means of assessing the UK music industry’s exposure to piracy. During 2006 the British music industry released new piracy figures, based on the purchasing behaviour of the buyers of fake CDs. The figures projected, the industry's losses from commercial music piracy and suggest that physical music piracy in the UK lost the industry 16.5m in sales - approximately £165m in retail value. The Publishers Association (PA) are also active in trying to establish the size of the criminal market in the UK which they
Fourth Annual BSA and IDC Global Software Piracy Study- May 2007
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report to be worth over £30 million per annum, corresponding to over £150 million in retail value. In addition to these reports a recent survey conducted by the Federation Against Software Theft (The Federation), highlighted that 48% of the organisations that responded openly admitted that they would have difficulty proving that all their software was legal. Over recent years one of the most established measurement systems has been developed by the Business Software Alliance (BSA). Its 2006 Global Software Piracy Study, shows that rates of illegitimate software use within the EU remain around 36% with losses to industry of around $1billion (£500million). This rate has dropped since 2003 from 37%. The attainment, in recent years, of a stable piracy level reflects positively on the effectiveness of enforcement and education initiatives undertaken by the BSA in the EU. Unfortunately, the BSA reports that “losses are still significant and software piracy remains a serious economic threat to local and national IT markets- from start-ups to established businesseswithin the Union”4. The Entertainment and Leisure Software Publishers Association (ELSPA), the representative body for the games industry, highlights the fact that accurate assessments are difficult to achieve. ELSPA indicates that some strategies, by their nature, preclude the possibility of accurate assessments being made of the size of their problems. For instance, targeting problem areas for criminal trading, to facilitate enforcement action, means that an exaggerated picture of general levels of counterfeiting and piracy may be gained. Moreover, the nature of criminal operations, both in terms of covering their tracks and the increasingly diffuse methods, highlights the need for deeper intelligence driven analysis.
Chapter 1
Chapter 1
Intellectual Property Crime Report 2007 Why fighting IP crime matters
2006 Global Sofware Piracy Study: Europe - released May 2007 2006
Piracy Rates 2005 2004
2003
2006
Losses ($M) 2005 2004
2003
WESTERN EUROPE Austria
26%
26%
25%
27%
$147
$131
$128
$109
Belgium
27%
28%
29%
29%
$222
$257
$309
$240
Bulgaria
69%
71%
71%
71%
$50
$41
$33
$26
Cyprus
52%
52%
53%
55%
$12
$13
$9
$8
Czech Republic
39%
40%
41%
40%
$147
$121
$132
$106
Denmark
25%
27%
27%
26%
$183
$199
$226
$165
Estonia
52%
54%
55%
54%
$16
$18
$17
$14
Finland
27%
26%
29%
31%
$149
$156
$177
$148
France
45%
47%
45%
45%
$2,676 $3,191
Germany
28%
27%
29%
30%
$1,642 $1,920 $2,286 $1,899
Greece
61%
64%
62%
63%
$165
$157
$106
$87
Hungary
42%
42%
44%
42%
$111
$106
$126
$96
Ireland
36%
37%
38%
41%
$92
$93
$89
$71
Italy
51%
53%
50%
49%
$1,403 $1,564 $1,500 $1,127
Latvia
56%
57%
58%
57%
$26
$20
$19
$16
Lithuania
57%
57%
58%
–
$31
$25
$21
$17
Malta
45%
45%
47%
46%
$7
$5
$3
$2
Netherlands
29%
30%
30%
33%
$419
$596
$628
$577
Poland
57%
58%
59%
58%
$484
$388
$379
$301
Portugal
43%
43%
40%
41%
$140
$104
$82
$66
Romania
69%
72%
74%
73%
$114
$111
$62
$49
Slovakia
45%
47%
48%
50%
$47
$44
$48
$40
Slovenia
48%
50%
51%
52%
$36
$33
$37
$32
Spain
46%
46%
43%
44%
$865
$765
$634
$512
Sweden
26%
27%
26%
27%
$313
$340
$304
$241
United Kingdom
27%
27%
27%
29%
$1,670 $1,802 $1,963 $1,601
TOTAL EU
36%
36%
35%
37%
$11,003 $12,048 $12,151 $9,786
$2,928 $2,311
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
Recommendation 2 The Government (the UK-IPO) should work with IP Crime Group members to agree an accurate national standard measure of the level of IP crime, including industry revenue loss, industry profit loss, criminal market size and criminal gain.
The view from the ground Consistent with previous assessments, submissions to the 2007 IP Crime Report evidence the widespread availability of fake goods throughout the UK. However, the level of contributions to the Report is not consistent across all respondents generally. It is clear that there is a need for more robust and cohesive assessments. To achieve this it will be necessary to develop an agreed verifiable methodology to govern the valuation and calculation of the IP crime market. The UK-IPO intends to explore this area further, with the appointment of an economist, and has already discussed this project with the Home Office. This is a key area for further development and crucially must satisfy the requirements of both policy makers and rights holders. In addition, extrapolating observations from a small number of traders, who may be part of or are supplied by organised criminal groups, is extremely risky. Therefore, establishing the scale of regional, national and international networks is imperative and will be a much stronger indicator of total scale. To achieve a robust assessment it will at least be necessary to define reliable data on: • Industry revenue loss • Industry profit loss • Criminal market size • Criminal gain 16
Recommendation 3 The Government to agree that the UKIPO records the seizures of counterfeit and pirated goods from all enforcement authorities and publish the results of prosecutions and Proceeds of Crime actions on an annual basis. In most cases the reported trend is of greater activity and increasing workloads, both amongst enforcers and with the rights holders and their representative bodies. In terms of understanding the issues there is no doubt that most enforcers have a regular and first hand knowledge of the counterfeit and piracy issue. Whilst there are obvious gaps in data, many enforcement bodies have highly developed perspectives of the problems they face. Essex Trading Standards Service is a notable example. They reported that using a single factor is often an unpredictable indicator. For example, seizure levels are influenced by a range of variables, including the level and effectiveness of resource usage, criminal modus operandi and statistical variations. This all means that seizure figures cannot be considered on their own to be a reliable indicator of
Chapter 1
Chapter 1
enforcement performance or the magnitude of IP crime. The contributions to this report from trading standards departments indicate significant variations. Wales Heads of Trading Standards (WHoTS) report no change or increased incidents of IP crime, whilst areas such as Hull are experiencing high and rising levels. Others such as Suffolk Trading Standards agree with Hull in reporting higher levels of complaints from the public.
Intellectual Property Crime Report 2007 Why fighting IP crime matters
traditional marketplace and on-line, to the theft and illegal distribution on-line of digital content such as films, music, games and software.
The internet There is little doubt that the internet has facilitated a startling growth in volume and breadth of illicit trade. The types of goods for sale cover a huge range of consumer products from home and abroad.
At our borders, HM Revenue and Customs (HMRC) record a 40% rise in live applications received for trade mark protection over the year. Monitoring of a basket of measures has led HMRC to describe illegal cigarette and tobacco trafficking as a large and steadily growing problem for the UK. The mobile phone sector reports fewer incidents of trading standards seizures of their products in 2006. Despite this, HMRC seizures of counterfeit parts, accessories and handsets increased by more than 100% from 48,000 items in 2005 to over 100,000 in 2006. Cardiff Trading Standards report the prevalence of counterfeit vodka being produced locally by a foreign workforce. This product has been found to be distributed through licensed premises and amongst crowds at major events in the city. In 2006, the Publishers Association reported a significant increase in the volume of counterfeit works being offered for sale in the UK - particularly audio, scientific, technical or medical books. They estimate that visible profits for the more successful illicit traders range from £6,000 to £20,000 per month (each). Given the high value of the product, loss to the industry is significant- in one case a trader was caught selling discs containing over £2,000 worth of product.
Where IP crime occurs IP crime manifests itself in various ways; from physical product being sold in the
On-line theft is conducted through file sharing networks, pirate servers, websites and hacked computers. A single file pirated via the internet can result in millions of illegal downloads and corresponding losses of revenue. Film and music product are increasingly being copied, purchased and sold illegally, in a black market that at times handles no physical product. Alongside clothing, this is the sector most vulnerable to internet based crime. As a result of the increase in trade on the internet, the OFT launched a major new study into internet shopping in June 17
Intellectual Property Crime Report 2007 Why fighting IP crime matters
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20075.The report showed that internet sales were worth more than £21 billion in 2005. The report highlighted the public concern at internet based crime, largely concerning fraud. However, it also highlighted concerns about the sale of fake goods over the internet. The report noted that North Yorkshire Trading Standards, found 11,298 counterfeit video titles being offered for sale by 269 different individuals across the UK. It also showed that the issue most likely to need investigation by Trading Standards Services was counterfeit goods.
massively increased capacity to access large digital downloads and data transfers. The music, film, games and software industries have recognised the continuing need for training and education to keep pace with the increased threat posed by the internet.
Trading standards services’ responses confirm that advances in technology have
Despite this some enforcers and brand representatives have mixed outlooks for
More than half of UK households had broadband by March 2007. Ofcom - Communications Market Report August 2007
Counterfeit goods Cancellation and refunds Faliure to provide information on cooling off period False description of goods/services Misleading advertisements Faliure to provide business address Difficulties in contacting trader Non provision of goods or service Misleading price indication Faulty goods or services Delays in delivery Difficulty and cost of returning goods Fraud or deception Cross-border/international issues Unsolicited advertising (e.g. spam) Under-age sales Breach of privacy or personal data 0%
10% Often
20% 30% 40% 50% 60% 70% Sometimes
Rarely
80% 90% 100%
Never
The chart illustrates the respondents concern in respect of each of the categories.
Internet Shopping - An OFT Market Study- June 2007.
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on-line trading. Many companies report that they have carried out little monitoring of the internet to protect their products. Similarly, the majority of trading standards departments currently only monitor the internet on the receipt of specific complaints or intelligence. In parts of Scotland, trading standards have identified that the made-to-order/ ‘cottage industry’ sector of the trade in illicit digital media is 'female-led'; the first time this phenomenon seems to have been noted by enforcers. eBay Counterfeiter Jailed A 38-year old woman from Penrith, Cumbria was given a six month jail sentence at Penrith Magistrates Court today 14th November 2007 having pleaded guilty to 18 charges of breaching trade mark and copyright law, in a case brought by Cumbria Trading Standards. The court heard that the defendant was copying films and selling them to order over the internet, initially using eBay to advertise but then also using direct email selling to her existing client base. The matter came to light as a consequence of enquiries undertaken by the Federation Against Copyright Theft [FACT] Internet Investigations Team. Cumbria Trading Standards, accompanied by officers from Cumbria police, executed a search discovering two copying towers for making counterfeit discs, 600 'master' film discs, over 33,000 MP3 music files and over 5,000 CD and DVD cover artworks. Phil Ashcroft, Head of Cumbria Trading Standards, said: "I hope that the sentence imposed today will act as a deterrent to others who are tempted to think that copying film or music discs is a quick and easy way to make money. ”The penalties available to the court are substantial and custodial sentences are increasingly imposed by the courts in the battle against counterfeiters."
6
Intellectual Property Crime Report 2007 Why fighting IP crime matters
The Society of Chief Officers of Trading Standards in Scotland (SCOTSS) reports a high level of computer literacy demonstrated by illicit traders on auction sites. A growing tendency amongst auction site traders appears to be redirection of customer bases built up through auction sites to personal websites. SCOTSS also report that the experience of its 32 authorities has been that internet counterfeit and piracy trading is often hosted abroad; particularly in the Far East and Eastern Europe. The MCPS corroborate this fact and they have worked internationally, through affiliate organisations, achieving interventions and takedowns on their behalf. Whilst individual companies have sometimes been slow to monitor the internet a number of key industry groups such as The Federation Against Copyright Theft (FACT), the BPI, ELSPA, the Mechanical Copyright Protection Society (MCPS) and the Federation Against Software Theft monitor the web continually, and the development of inhouse expertise has been rewarded with some notable successes. ELSPA embarked upon an internet investigation into suspects who were alleged to be offering pirated games for sale over the internet which included advanced electronic devices and chips to allow counterfeit gaming to be played on almost every current console. In June 2007 they teamed up with trading standards officers from two Local Authorities and officers from a Police Economic Crime Unit and a local police service to raid three premises in connection with the internet investigation. ELSPA reports that “This Operation is the outcome of a scrupulously planned six month investigation involving all strands of enforcement authorities, teaming up for unprecedented cross boundary activity.”
Digital piracy Peer-to-peer6 is an unconsolidated network of loose association. Peer-toPeer and other digital transfers of
A peer-to-peer network enables computers to connect directly to each other in order to distribute and copy files. 19
Intellectual Property Crime Report 2007 Why fighting IP crime matters
electronic information are important avenues into which IP criminals are increasingly moving. It is a nebulous area with no physical product and offers the advantages to the criminal of the inherent anonymity and worldwide marketplace of internet trading. Download times for a feature film or tv programme are dramatically decreasing and take up a fraction of available virtual space. Individual offenders are small scale and possibly mixing legitimate and illegitimate exchanges, in an indiscriminate fashion on a need-to-have arrangement. It has become clear that the IP crime underworld is networking more to source its goods; master copies, made to order goods, luxury labels and wares, their packaging and the markets in which to trade. The contest between criminal and enforcer is not just one of keeping ahead technologically, but of staying ahead of the game in co-operative and cohesive actions and deployment of resources.
Physical products Alongside technological advances, fakes continue to be sold in conventional ways at car boot sales, markets, pubs and workplaces. Unfortunately, there are also reports of occasional seepage into the legitimate distribution chain. Outlets for the sellers of counterfeit and pirated products appear to be remaining for the most part unchanged. The Scottish trading standards authorities continue to raid or to intervene at market stalls, offices and homes, workplaces and licensed premises, as well as on the streets. Hull Trading Standards also reports that it faces major problems in the area of IP crime and notes some social factors which create a market for fake goods. The city has areas in which economic deprivation and the predominance of low income families ensure counterfeit goods are avidly sought after. The availability, throughout the Hull region, of a wide
20
range of illicit commodities is sustained by criminal groups. Small, family or one-man-band, cottage industry continues to be prevalent. Individual criminals may be dependant upon organised criminals operating regionally and nationally, for the supply of stock. These smaller criminal enterprises usually exploit the products of the Creative Industries; music, film, games and software. The presence of sophisticated criminal networks in lucrative illicit enterprises are reported UK wide highlighting, in particular, Chinese immigrants selling fake film product. Midlothian, Moray, Stirling, Cardiff, South Ayrshire and a number of other local authorities report repeated interventions against such groups. Many appear to be illegally immigrants, speak no English, are without visible support and a fixed place of abode. On a wider scale, the IFPI reports that the music industry suffers from two physical problems, infringing optical disc production on an industrial scale and the use of recordable discs, such as CDR/ DVDR, to record or sell infringing content. They report that infringing optical discs are known to have entered Europe from the Asia Pacific region and Eastern Europe. The IFPI have reported occasions when optical disc plants in some jurisdictions have purposefully produced infringing material, and cite economic hardship as one of the reasons for such conduct. Such perceptions that cutting corners with the law is acceptable need to be tackled to ensure that IP crime is not seen as socially or economically acceptable. The IFPI note examples where brokers or individuals have delivered repertoire to optical disc plants with false contract details or licence agreements. Similarly, several optical disc plants have, through poor management or lack of sufficient
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controls in rights management and verification of repertoire, produced counterfeit or pirate discs containing the repertoire of IFPI members.
From DVDs to Daleks! CDs to Crane parts – the alarming diversity in IPC goods Reports from the IP community have revealed a startling array of new types of products that have fallen victim to the pursuits of the IP criminal. Wales Heads of Trading Standards (WHoTS) report seizures in Wales of lanyards, posters and disturbingly, mineral water. Whilst in September 2007 Cardiff Trading Standards seized a fake Dalek from an illicit trader in the city. In September 2007 Bristol City Council obtained a confiscation order of £174,513 following the prosecution of a Lancashire based firm for supplying fake Yamaha motorbikes. The bike, a Chinese copy of a Yamaha Virago, was one of a consignment of over 200 motorbikes. Northamptonshire Trading Standards Service has similarly reported a seizure of 300 quad bikes in one operation in 2006. At the other end of the spectrum they also report fake food blenders. In February 2007 Metropolitan Police officers working with Transport for London (TfL) arrested a number of suspects believed to be linked to the wide scale counterfeit fraud of Bus Saver tickets for the capital’s transport system. It was believed that counterfeits had penetrated at least 10% of the red Bus Saver ticket circulation. To prevent the exploitation of passengers from ticket fraudsters TfL launched a new blue ticket in April 2007 which contains a number of covert and overt anti-counterfeit measures.
and the worrying shape of things to come… In July 2007 a warning was issued by a US based crane manufacturer who had 7
Intellectual Property Crime Report 2007 Why fighting IP crime matters
identified companies, in Asia, using counterfeit components parts to construct unlicensed sections of their cranes. Reports suggest that none of these counterfeit parts are available in Europe and the manufacturer has created a Task Force to tackle the problem and raise awareness of the dangers with their customers. A spokesman for The Union of Construction Workers, Allied Trades and Technicians was reported as saying “This latest information is very disturbing to anyone concerned with crane safety. The issue of counterfeit crane sections shows potential problems for the future.” A recent research project by Ledbury Research (commissioned by Davenport Lyons) involved a survey of 2,000 consumers alongside a number of focus groups. One of the areas that this research investigated was the location of purchases of fake luxury goods. Just under half of those surveyed (47%) had purchased goods at a market stall, 45% had confessed to making purchases whilst ‘traveling in Europe’ and 29% had bought a fake ‘on eBay in the UK’7. West Lothian Trading Standards note that there has been no change in the exploitation of the products they encounter. They have detected fake products suspected to be produced in the UK and from as far away as China.
Where is it all coming from? There is no doubt that counterfeiting and piracy are global phenomena. A European Commission report on seizures made by Customs in 2006 affirms this through figures that suggest that at the EU borders, 79% of all articles seized originate from China. The British Phonographic Industry (BPI) too has reported that whilst most of the product they encounter is ‘home’ produced, a small percentage of high grade counterfeit music products are manufactured in genuine CD plants.
Counterfeiting Luxury: Exposing the Myths- 2nd Edition Davenport Lyons- June 2007 21
Intellectual Property Crime Report 2007 Why fighting IP crime matters
These products originate largely from Russia. The MCPS reports the fact that criminals are flexible and continually testing our borders. The MCPS liaises with its affiliates in overseas territories such as the Netherlands and Sweden so that enforcement actions can be taken at a local level. However, securing positive collaborations overseas is not always easy due to some political administrations adopting a weak stance towards IP rights and the absence of a strong or widespread enforcement regime. Responses indicate that large quantities of electrical goods as well as designer apparel are frequently entering the UK from the Far East. Americana International Ltd (Bench and Hooch trademarks) have noted that alongside counterfeits of their clothing and product styles, other generic items are being imported in increasing amounts from India, Turkey and Pakistan. On arrival the goods are taken to clothing business areas of Manchester and Leicester where infringing trademarks are attached to increase price and salability. Another key contributor to this report is the clothing sector. The fake clothing market is as notorious as ever and the sector has noted that while low quality copies are still in the majority there is a definite increase in the number of high quality, cheap, fakes being imported from India and Pakistan. Manchester Trading Standards has also reported continued problems with fake clothing. Manchester has historically been linked to the textile industry and the supply of clothing for many years. As has been seen with a majority of trades, labour is cheaper abroad and much of the production process has been relocated outside of the UK. However, Manchester still plays a large part in the distribution of clothing generally. This is particularly true in relation to fake clothing. Many IP rights holders believe 22
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that Manchester is the central distribution hub for the whole of the UK. Clothing is thought to be sold at wholesale level across the city but predominantly in surrounding areas where there is access to channels of importation including airports and seaports. The trade takes place at shops, markets and car boot sales. In July 2007 Officers from Greater Manchester police seized fake goods estimated to be worth over £3million from four business premises on Bury New Road and Jury Street in Manchester. The operation was assisted by trading standards officers and brand managers who identified the illegal goods. This was one of the largest interventions in the region and netted fake sportswear including Adidas, Nike, Timberland, Rockport and D&G accessories. Attention is drawn to the arrest of thirteen individuals by the police using the new provisions available under the Fraud Act 2006. In the medicines sector, India appears to be the primary source, followed by the United Arab Emirates and China. Together these three countries are reported to be responsible for the manufacture of more than 80% of all fake medicines. In wider commodity sectors, other countries predominate, such as the fake food sector where Turkey continues to be regarded as the principle source. In the creative media there have been reports of change. Physical copies of films, music, games and software are Origins as Reported by Respondents by Country of Production: Counterfeit/Pirated Goods 2006 25% Domestic 2% Pakistan 24%
China
2%
Portugal
2%
Europe
2%
Russia
11%
Thailand
2%
S America
9%
Far East
2%
Taiwan
7%
‘Unspecified’
2%
Turkey
6%
Hong Kong
2%
USA
2%
India
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less likely to be imported into the country. Instead, these products appear predominantly to be manufactured in the UK for distribution online and in physical markets.
Intellectual Property Crime Report 2007 Why fighting IP crime matters
have included statins, diuretics, steroids, proton pump inhibitors and blood pressure tablets. These seizures were made during transshipment of the goods through UK airports. All of these goods appeared to be destined for offshore fulfillment centres for sale over the internet with individual customer orders being returned to the UK for final distribution overseas via the UK postal system.
The Harm it does
A new method of distribution which seems to be beginning to dominate in some sectors is the tactic of using a ‘middle-man’. Here, a criminal would operate from a home base and receive orders by email for products which will be subsequently sourced and distributed to the customers from abroad. This business model alleviates the requirement for stock to be held, and is viewed as carrying a low risk of detection coupled with considerable financial rewards. Basic levels of computer literacy and IT infrastructure, which is increasingly affordable, ensures criminals with an entrepreneurial mindset can successfully operate a global enterprise. There is evidence that this methodology is also being employed for the sale and distribution of fake designer clothing. Worryingly HM Revenue and Customs (HMRC) also reports that, for the first time, seizures have been made of counterfeit therapeutic medicines. Previous seizures in this sector have been restricted to erectile dysfunction products but the seizures during 2006
The instinctive reaction in determining the harm from intellectual property crime tends to focus on the financial impact on rights holders. Any assessment of IP crime as victimless is seriously flawed. IP crime has a range of negative consequences which damage the public and society. This chapter seeks to illustrate the elements of harm associated with IPC and its impact on society.
Threat to public safety and negative social consequences The illegal manufacture of fake goods is not subject to the same rigorous safety standards that are applied to genuine product and as such they can pose a significant risk to the public. In June 2006 Sunglasses Giant, a major seller of brand name sunglasses, issued a warning to consumers that buying counterfeit designer eye wear could pose a serious risk to their health. Counterfeits often have substandard materials that are not shatterproof and increase the risk of injury if the glasses break. They also warned that the lack of sufficient, or in some cases any, UV protection in the lenses can lead to eyesight damage. In a joint report by HM Treasury (HMT) and HM Revenue and Customs (HMRC) which deals with tobacco smuggling strategies8, results of an independent laboratory test conducted on a representative sample of counterfeit
New responses to new challenges: Reinforcing the Tackling Tobacco Smuggling Strategy- HMT/HMRC 2006
8
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
cigarettes showed that they contained up to: • 160% more tar; • 80% more nicotine; and • 133% more carbon monoxide than their genuine counterparts
Recently HMRC and Cardiff Trading Standards raided an illegal alcohol manufacturing plant in the city and recovered samples of a spirit purporting to be vodka. Analysis of the sample under the Food Safety Act 1990 revealed that it contained 38 times more than the permitted level of methanol and “possessed the chemical composition of a diluted industrial methylated spirit which, if consumed, would be injurious to human health.” The vodka has been discovered in a number of other authorities including Bridgend, Newport and Torfaen.
Counterfeit medicines – UK overview The Medicines and Healthcare products Regulatory Agency (MHRA) is an Executive Agency of the Department of Health and its primary aim is to safeguard public health through the regulation of medicines on the UK market. This is achieved through a system of licensing and inspection, which ensures that licensed medicinal products and their distribution conforms to internationally agreed standards of quality, safety and efficacy. A worrying development is the infiltration by counterfeited product into the drinks market. There have been multiple reports during 2006 and 2007 of the discovery and seizure of fake spirits. The International Federation of Spirit Producers UK (IFSP UK) reports that the alcohol used in the production of illicit and fake spirits tends to have excessive levels of poisonous methanol and warnings have been issued by the Food Standards Agency to this effect. An illicit vodka called ‘Vodka Russia’ caused the death of a woman in Scotland in March 2003 and another, Valkonov, put a woman in Manchester in a coma for 11 days in October 2002.
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Counterfeit medicines present a direct threat to members of the public. The UK Government has recognised that the tackling of counterfeit medicines is an important issue and is therefore reflected as one of the key objectives of the MHRA. Counterfeit medicine is a truly global phenomenon, at first thought to only affect developing countries, now known to impact upon developed countries. The World Health Organisation (WHO) estimates that up to 1% of medicines available in the developed world is likely to be counterfeit. This figure rises to 10% globally, although in some of the developing world WHO estimates that one in three medicines are counterfeit. Over the last few years counterfeiters have targeted the most lucrative markets,
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copying high value, high turnover, high demand medicines. The UK is not typically a manufacturer of counterfeit medicine, however, the UK is a transit point and end user market. There have been nine recalls of counterfeit medicines in the UK, since 2004, where the counterfeits had reached pharmacy and patient levels (fig 1). A further five cases were discovered at wholesaler level before they reached the mainstream market (fig 2). Counterfeit medicine available in the UK originally focussed upon ‘lifestyle’ medicines, such as those used to treat erectile dysfunction and weight loss. Counterfeiters are now also focusing on ‘lifesaving medicines’ including cancer, schizophrenia and heart medicines (as seen in the UK in May 2007). No fatalities have been attributed to counterfeit medicine in the UK, although numerous fatalities have occurred around the world. This is a reminder that there is no room for complacency which is why this issue is taken seriously by the UK Government and the MHRA operates a multistakeholder, multi-agency AntiCounterfeiting Strategy (which will be formally published in November 2007). Counterfeit medicines found in the UK that are designed to deceive pharmacists and patients are frequently very difficult to detect through visual examination and only laboratory analysis reveals the counterfeit nature of the product. These fakes typically contain a reduced amount of the active pharmaceutical ingredient, although the wrong ingredient or no ingredient at all have been seen. Counterfeit medicines are also available to consumers via on-line pharmacies – WHO estimates that 50% of medicines available from sites which conceal their physical address are counterfeit.
Intellectual Property Crime Report 2007 Why fighting IP crime matters
UK counterfeit recalls to patient level through national healthcare system Year
Product
Batch(es) and Expiry Date
Therapeutic Category
1
2004
Cialis 20mg
A031410 – Jun 2006 A041410 – Jun 2006
Erectile dysfunction
2
2004
Reductil 15mg
65542 – Jan 2007
Anti-obesity
3
2005
Lipitor 20mg
004405K1 – Nov 2007
Cholesterol reduction
4
2006
Lipitor 20 mg
004405K1 – Nov 2007
Cholesterol reduction
5
2006
Lipitor 20 mg
067404K3 – May 2007
Cholesterol reduction
6
2007
Zyprexa 10mg
A200127 – Feb 2009 A216454 – Mar 2009 A229505 – Mar 2009
Bi-polar disorder/schizophrenia
7
2007
Plavix 75mg
3098 – Aug 2008 6Y098 – July 2009
Anti-platelet, blood thinning
8
2007
Casodex 50mg
65520 – July 2011
Prostate cancer
9
2007
Plavix 75mg
3103/1-3103/20 – Jul 2009 Anti-platelet, blood thinning
Fig 1
Fake Sensodyne Toothpaste In addition, in July 2007, MHRA issued a Drug Alert with regards to fake Sensodyne toothpaste (a medicine). The fake toothpaste products appeared in combined Arabic with English livery packs and had been sold in unauthorised markets and discount shops. The fake toothpaste presented a potential danger to public health as tests indicated that the products contain Diethylene Glycol at levels which could be toxic to young children and anyone with impaired liver or kidney function. UK counterfeits that did NOT reach pharmacy or patient level through national healthcare system Year
Product
Therapeutic Category
1
2005
Cialis 20mg
Erectile dysfunction
2
2005
Lipitor 40mg
Cholesterol reduction
3
2005
Celebrex 15mg Rheumatoid Arthritis
All counterfeit medicines are dangerous.
4
2006
Propecia 1mg
Male pattern baldness
Further information can be obtained from the MHRA web site at www.mhra.gov.uk
5
2007
Plavix 75mg
Anti-platelet, blood thinning
Fig 2
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
Public safety The mobile phone sector is also under increased pressure and reported that during 2006 they continued to see what they describe as counterfeit safetycritical items in the UK market such as batteries, chargers and car kits, despite the sophisticated authentication devices that are contained on their genuine products. Panasonic have also reported worrying cases of fake camcorder batteries, which do not contain the correct thermal fuses present in genuine ones, have led to violent explosions. Fortunately, no injuries have been caused to consumers but most fake batteries just don’t perform very well or at all, which damages brand reputation. Fake items such as these also pose environmental problems when recycled. The constituents of a genuine battery are known by the makers and as such can be safely dealt with when recycled and disposed of. Fake products can contain any number of unknown and illegal constituents and cannot be recycled effectively. In August 2007 HMRC seized counterfeit cigarettes which were believed to be destined for sale in Leicester. The packaging was reported to be indistinguishable from the genuine product but when tested the cigarettes were found to contain far higher levels of tar, arsenic, nicotine, carbon monoxide and lead. Jennie Kendall- spokeswoman for HMRC: “Fake cigarettes can often seem like an attractive offer to people, lured into purchasing them at what seem like bargain prices. The startling truth is these unregulated cigarettes contain a seriously unhealthy mix of cancer-causing chemicals, including arsenic, cadmium, benzene and formaldehyde.” In August 2007 a warning was issued by trading standards officers in Scotland 26
regarding fake cigarette lighters. The fake lighters, which were understood to have been imported from China, contained a faulty flame control mechanism that was feared could result in serious burn injuries to users. In May 2007 South Ayrshire Trading Standards and Strathclyde Police seized over 2,000 fake razor blades from two market stalls at Ayr Sunday Market. They had been alerted following a complaint by a member of the public who had purchased the blades and sustained wounds when using them. South Ayrshire Trading Standards- “These blades are not tested to the same degree as genuine blades. Potentially they could break and injure the user. Since the place or method of their manufacture is unknown there can be no guarantee that the blades are sterile thus potentially exposing users to risks of infection.” April 2007 - Lambeth Trading Standards report the seizure of fake goods during routine inspections of shops and businesses since January. The haul included illegal skin lightening creams, counterfeit medicines and soap containing mercury. In many cases it was found that the goods were being directly imported from the Far East and the businesses had failed to ensure that the goods complied with UK or EU legislation. The fact that fake goods and especially illegal digital media have not been passed through the same certification safeguards as genuine product affects both physical and digital products. The Mechanical Copyright Protection Society (MCPS) report a large number of sites dealing in music products and downloads which also sell and distribute adult titles which are either ‘R18’9 classified or nonclassifiable. The result is that there are no restrictions on the sale of items such as pornography to children and young persons. Many trading standards services including Derbyshire have also reported
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seizing DVDs that include those with pornographic content that have been on sale and display. The explicit covers of these films are able to be seen by anyone of any age.
Exploitation of children and young persons Children and young persons are reported to be increasingly exploited as sellers / runners in the distribution and sale of fake products across parts of the UK. This activity constitutes grooming young persons into the acceptability of a criminal lifestyle and typically includes exposure to hard core pornography and other offensive material. Criminals exploit children in this fashion to attempt to distance themselves from the crime and therefore to minimise their vulnerability to detection and prosecution.
Intellectual Property Crime Report 2007 Why fighting IP crime matters
had revealed that the youths were operating under the control of a DVD seller. This ringleader was subsequently arrested. Operations such as this emphasise the ease with which criminals may lure children into illegal activity. Strathclyde Police, the Federation Against Copyright Theft (FACT) and the British Phonographic Industry (BPI) are all alert to this issue and have worked collectively to tackle the problem.
Effect on the UK economy The Executive Summary of the OECD study on counterfeiting and piracy (2007)10 suggested that the international trade amounts to about US$200 billion. This represents about 2% of world trade in terms of goods, imports and exports. Establishing the impact of the black economy in general and the trade in fake goods in particular has been the subject of continued debate in recent years. The scarcity of accurate data causes difficulties both internationally and from a comprehensive range of industries and means that any estimates rely on significant extrapolations. Whilst estimates vary, it is clear that the order of the criminal economy is a significant problem internationally.
The exploitation of vulnerable young persons is particularly evident as a tactic employed by counterfeiters operating within the Barras Market, Glasgow. In May 2006 a group of youths, all aged under 16 years, were witnessed selling fake product and arrested. Surveillance
“Creative industries, such as publishing, music, film, software and arts, are a powerful generator of economic growth and employment in both the developed and developing world. These industriesheavily reliant on copyright- contributed more than E1.2 trillion to the EU’s economy, produced added value of E450 billion, equalling 5.3% of the EU’s GDP, and employed 5.2 million persons in 2000”. Turku School of Economics and Business Administration, prepared for European Commission, Directorate General, Internal Market, The Contribution of Copyright and Related Rights to the European Economy, 20 October 2003.
The British Board of Film Classification R18 certificate applies to films containing consensual adult pornography that are only available in licensed sex shops. 10 The Economic Impact of Counterfeiting and Piracy- Executive Summary- June 2007- Organisation for Economic Co-operation and Development (OECD) 9
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
As part of the Gowers review11, evidence was presented that suggested that the criminal gain in the UK might be around £1.3 billion per annum. The Rogers review12 took up this figure as evidence that action against counterfeiting and piracy needed to be a key part of the fair trading national enforcement priority because of the huge economic damage caused and the impact on individuals. It is acknowledged that the evidence supporting industry claims of economic impacts has in some sectors improved dramatically over the last two years. The application of sound methodologies and reputable external consultants has provided reliable and sound data. This has provided a clear insight into consumer attitudes and improved the appreciation of economic consequences for industry.
Impact on tax receipts Counterfeiting and piracy are key components of the black market. As a result taxpayers lose out across the board – often from higher insurance rates, unpaid corporate profits and taxes, to uncollected value-added taxes when items are purchased. HMRC produces annual estimates of the revenue loss to the Exchequer from the consumption of cigarettes and hand rolling tobacco that are counterfeit or smuggled. In the latest ‘Measuring Indirect Tax Losses- 2007’ report, HMRC estimate that the loss in 2005/06 was within the range of £1.6 billion and £3.2 billion- money that would otherwise be funding schools, hospitals and other important public services. The scale of revenue loss from counterfeit tobacco is hard to quantify but it is undoubtedly significant. In 2005/06, HMRC seized 2.0 billion illicit cigarettes, with over half of all large seizures13 of cigarettes believed to be counterfeit. It is thought that only a small proportion of
counterfeit tobacco goods are actually seized, the figure for counterfeits which are not seized and are therefore traded in the informal economy could be many times greater.
Impact on businesses There are a number of factors which exacerbate the scale of IP crime from a business perspective, so whilst the criminal may be gaining, legitimate business is losing more. At the simplest level, fakes are likely to be sold at below the retail price so even if a rights holder is able to successfully pursue litigation against a counterfeiter or pirate, it is unlikely that the business will be able to recover its loss. However, the impact goes much further, with sales damaging the reputation of brands, and damaging volumes across the supply chain, which will reduce the ability of companies to garner economies, and build profits across the board. Industry research on the losses is often based on statistical surveys of consumer habits and makes an assumption that a proportion of this claimed frequency will translate in to legitimate sales which is questionable, particularly in relation to luxury items such as handbags and watches. “In the UK alone, the Treasury lost £191bn to tobacco smugglers in the five years to 2005, Jan du Plessis, the Chairman of British American Tobacco told shareholders yesterday. He warned the company’s annual general meeting while the investors would be reassured by BAT’s performance against its peers, “you may be looking in the wrong direction” “One of our biggest global competitors today, now in fourth place behind Philip Morris, ourselves and Japan Tobacco, is a growing body of criminals who are turning the illicit trade in tobacco products into a lucrative global industry”. Jan du Plessis, BAT Chairman Illicit trade in Tobacco costing billions The Guardian - April 2007
Gowers Review of Intellectual Property – December 2006 National Enforcement Priorities for Local Authority Regulatory Services- Rogers Review- March 2007 13 From April 2006-October 2006, seizures over 250,000 sticks, from October 2006 seizures over 100,000 sticks. 11
12
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The rise in IP crime also has an effect on our local economies with the closure of legitimate high street retailers who can not compete with the loss of business that is diverted to the purchase or free acquisition of fake goods. It has been reported that piracy and internet downloading are amongst the factors that have adversely affected the market for hiring films from the high street. Respondents saw the liquidation of Apollo Video Film Hire Ltd which ran over 100 rental shops and the Music Zone chain closure as being partially the result of piracy. This loss of local businesses irrevocably changes the landscape of our towns and cities. The Alliance Against IP Theft described intellectual property theft as “the biggest threat to the prosperity and development of the creative industries”, with illegal copying, filesharing and other illicit uses of copyright material “growing exponentially”, and counterfeiting and piracy becoming increasingly attractive to organised criminal gangs. Piracy can and does erode business models: Ingenious Media told us that, without copyright, it would be difficult to create a sustainable and consistent flow of investment into the sector. The British Screen Advisory Council described piracy as “not just something which is a threat to current assets, balance sheets and current revenues but threatens innovation and ultimately UK competitiveness”; and it predicted that levels of piracy would increase in line with broadband usage levels and speeds. House of Commons Culture, Media and Sport Committee New Media and the Creative Industries Fifth Report of Session 2006-07
Impact on innovation Businesses are likely to be affected by civil infringement of IP rights by other businesses and copying by individuals, but the impact of criminals and particularly organised criminals can rapidly affect businesses’ profits and even viability. This may mean that businesses choose not to invest in the
Intellectual Property Crime Report 2007 Why fighting IP crime matters
creation and development of new products and services. 23% of SME (Small to Medium sized Enterprises) survey respondents considered that their business was affected significantly and a growing proportion felt that the problem was likely to get worse in the next five years. The effect on the workforce stemming from loss of business due to IPR abuse mirrors the reported loss of sales, with about 20% of SME survey respondents estimating that the loss of jobs had been 5% or more during the previous financial year. The mechanical engineering sector found that 30% of German companies suffered losses of 5% or more due to counterfeiting (VDMA, 2006), while in the SME survey just over one-fifth of companies reported that the loss of sales had been greater than 10%. According to a Spanish study of the toys industry, counterfeiting was responsible for lost sales of almost 11% in Spanish companies, rising to just below 50% amongst a group of very small companies (Miguel Hernandez University, 2003). This demonstrates that, in extreme cases, the loss of the intellectual property on which a business depends may call into question the viability of the company as a whole. Effects of counterfeiting on EU SMEs and a review of various public and private IPR enforcement initiatives and resources – TECHNOPOLIS Study
Further evidence of the negative effect that IP crime has on investment is offered by the New Media and the Creative Industries report. It states “In terms of investment climate, the UK may not be in such a favourable position.” Mr Patrick Bradley, speaking on behalf of Ingenious Media, a major investor in the new media sector, said that unless the UK could get it right, investment would flow elsewhere, and he warned against complacency. A report by the International Chamber of Commerce published in August 2005 indicates that IP crime has an impact on investment and technology transfer. The report states that, “Businesses are less 29
Intellectual Property Crime Report 2007 Why fighting IP crime matters
likely to transfer advanced technology, or invest in production or R&D facilities in countries where they are likely to have their products copied or technology stolen. This is particularly true of industries where intellectual property plays a key role, such as IT, biotechnology and pharmaceutical sectors, which many countries aspire to develop”14.
Criminal gain The criminal economy created as a result of intellectual property crime is highly lucrative for the criminals. Throughout 2006 there have been many reported examples of criminals accruing considerable economic gain through counterfeiting and piracy. The scale of the financial rewards associated with IP crime is clearly a primary motivator and ensures increasing numbers of criminals and those individuals with an entrepreneurial inclination are drawn to the crime type. Equally enforcers utilising the provisions of the Proceeds of Crime Act have achieved notable success throughout the year in recovering money and other assets in addition to securing convictions. In order to assess public attitudes to crime and the recovery of assets The Northern Ireland Office, on behalf of the Assets Recovery Agency, commissioned questions in the Northern Ireland Omnibus Survey in January 2006. A similar on-line survey was carried out by YouGov in the same month and the results compared in the Research and Statistical Bulletin 6/2006 published by the Northern Ireland Office.15 One statement contained in the survey where respondents were asked to indicate their agreement was: “I would be angry and concerned if I found out that someone has moved into my immediate neighbourhood and had wealth
that had largely come from the proceeds of crime” In the Northern Ireland Survey 87% agreed with this compared to 90% of those in the YouGov survey. In a case referred to the Assets Recovery Agency by Swansea Trading Standards, the Agency secured a confiscation order in June 2007 for £475,000 against an offender who had been convicted of 35 trade mark and copyright offences in relation to the sale of counterfeit clothing. The offender received a 12 month custodial sentence following conviction for the offences and, following the confiscation hearing, was given 6 months to pay back the monies or face a further 5 years in prison for default. This is one of a number of cases where the legislation governing proceeds of crime has been used to good effect.
Organised criminality and links to other criminality There can be no doubt that many groups involved in IP crime are legitimately defined as serious and organised criminals operating beyond local and regional boundaries and extend to national and international networks. Such organised crime16 networks may have turned to IP crime perceiving it to be a more profitable
Intellectual Property : Source of Innovation, Creativity, Growth and Progress- International Chamber of CommerceAugust 2005 15 Public attitudes towards crime and recovery of assets by the Assets Recovery Agency in Northern Ireland: Findings from the January 2006 Northern Ireland Omnibus Survey- Research and Statistical Bulletin 6/2006 Statistics and Research Branch of the Northern Ireland Office 14
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and less risky crime type. Such networks are able to use sophisticated criminal methods in the manufacture, distribution and sale of illicit goods. In August 2007 in Lewisham, a joint operation between Lewisham Council, local police and FACT led to a raid that yielded a significant seizure of counterfeit DVDs as well as counterfeit money and fake National Insurance documents.
Illegal people smuggling An undercover investigation by the BBC, reported in September 2007, highlighted an alleged link between the sale of fake DVDs by Chinese immigrants at a car boot fair at Swanley in Kent and illegal people smuggling. They discovered one offender, already successfully convicted three times for counterfeiting offences, who claimed that snakeheads had smuggled him into the UK. He was said to use the sale of the DVDs to fund his repayment of the £15,000 he was charged to bring him to Britain. This follows a similar case in September 2007 conducted by Hackney Police who raided a flat in the area and seized thousands of counterfeit copies of mainstream film titles together with hard core pornography and bestiality DVDs. Police arrested 7 Chinese males in connection with this raid. A representative of the Metropolitan Police was quoted as saying “People are forced into doing this kind of work, out on the streets selling goods on behalf of organised gangsters.”
South Ayrshire Trading Standards also report incidences of Chinese counterfeit DVD sellers who have confirmed that they are selling the product as a means to pay their illegal passage to the UK. This problem, as stated elsewhere in this Report, is not confined to one region of the UK.
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Intellectual Property Crime Report 2007 Why fighting IP crime matters
Dishonesty Aside from the clear criminal aspects there is an inherent deception and dishonesty characteristic to IP crime. Often goods are sold as genuine and the public are conned into thinking they are getting real bargain. In addition the offenders are free riding on the creativity and investment of others. Often it is a matter of routine for defrauding of benefits and other social payments to be identified as part of the wider anti-social conduct common to IP criminals. In 2006 a Stafford trader received a six month custodial sentence at Stafford Crown Court after admitting trade mark and other related offences. This was as a consequence of an investigation of his market stall trading which uncovered a substantial quantity of counterfeit cigarettes and sports clothing. Further financial investigations undertaken by Staffordshire Police Economic Crime Unit established that the offender’s lifestyle was not sustained by legitimate income. His two children attended a private school and the family lived in an un-mortgaged four bedroom home. In July 2007 a confiscation order for £235,000 was awarded at Birmingham Crown Court. In 2002 the same offender had been subject to an order of £57,121 after he was convicted of benefit fraud. This case highlights the involvement in IP crime of those who see it as one of many illegal means for them to make money at the expense of honest society. A case in Durham in August 2007 resulted in the seizure of £150,000 worth of assets from a couple convicted (in March 2007) of conspiring to defraud the music industry between June 1999 and June 2005. In raids at their home and
A group of two or more persons jointly engaged in continuing significant illegal activities, irrespective of national or other boundaries. The group’s primary purpose is to generate significant profits or other gains. Such a group is capable of defending its members, enterprises or profits using one or more of the following: violence, coercion, corruption or deception (including false identities). 31
Intellectual Property Crime Report 2007 Why fighting IP crime matters
caravan, a large amount of equipment for copying DVDs and CDs had been seized. Both received custodial sentences when convicted by a jury at Durham Crown Court; the male two years and the female nine months which was suspended for twelve months. The couple were also found guilty of benefit fraud as they had continued to claim while making money from their illegal copying activities. In addition the male was found guilty of failing to disclose his earnings to the Inland Revenue and the female of perverting the course of justice in relation to the withdrawal of £13,000 from a bank account within days of the first police raid. The judge gave the couple three months in which to pay the £150,000 confiscation order. A video store owner in Sunderland who was a customer of the couple received a 12 month custodial sentence for his part in the fraud and assets in the amount of £37,983 were ordered to be seized at the same hearing in August.
Tools of the trade - how do the criminals work? IP crime revolves around the exploitation of consumers and commodities. Specifically it is the generation of financial gain or illicit distribution to the economic detriment of the rights holders. The crime lends itself to and can adopt the form of small groups of like minded individuals or localised family structures expanding to networks with regional alliances overlapped by national crime syndicates, many with international dimensions. The diversity of approach and organisation applies equally to the physical distribution of counterfeiting and piracy, and to offences using on-line technology. Travel, communications and transport are continually being tested and used to best effect by IP criminals. Instances of end sellers going abroad regularly to different firms to pick up and pay personally for 32
their stock, are emerging. The individuals and groups involved in this illegal trade employ sophisticated methods and in this way they are making their own contacts and broadening their opportunities in new ways. Some respondents to this report make the point that the apparent quality of manufactured counterfeit items and their packaging is approaching that of the genuine items. These come mostly from abroad, from factories often sited in the Far East. The emergence of ‘super counterfeiters’ is reported by Adidas. These people identify a market or a need in the market and set about sourcing the product for that market. Bedfordshire Trading Standards reports an increase in those counterfeiters operating on such a scale and who view themselves as legitimate businesses. Criminals are increasingly innovative in their approaches. They often involve overseas factories in manufacturing goods which are modelled on brand designs, but unlabelled. Many respondents from the clothing sector have reported this increasing prevalence for clothing ‘blanks’. The items are generic articles to which branded labels are added later. These items continue to come from abroad and once passed Customs points are finished in the UK and sent out for sale. Although the quality is inferior it reduces the risk of detection at entry into the UK. This shift into high quality goods has been encouraged by the criminals’ desire to demand prices equal to that of genuine items. Design details and labelling are copied to high standards of accuracy, and the clothing sector amongst others is being adversely affected. Adidas talks of ‘cloned’ copies but is confident that the extra resource ploughed into anti-counterfeiting measures has paid off as these measures remain undefeated by the counterfeiters. One Scottish trading standards department has noted some fake DVDs
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being imported from China where the accompanying documents did not accurately reflect the goods. However, customs are aware of this ploy. The trend noted in last year’s Report concerning immigrant sellers (mostly Chinese) of DVDs across the breadth of the nation has continued and grown. Many respondents have noted that some of the sellers travel daily from large cities such as London and Leicester with significant amounts of product and only return when they have transformed the DVDs into considerable amounts of cash. These networks are run by organised criminal gangs and there is also evidence, from around the UK, that these sellers have broken into associated crime by offering pornographic and other obscene and offensive material, e.g. dog fighting and racial content for sale alongside fakes. In Cardiff in August 2007 a Chinese national was jailed for six months for selling DVDs that displayed images of bestiality. The man had been stopped by police and found to be in possession of 218 DVDs of Hollywood blockbuster films and pornographic and obscene films. At a search of his home police and trading standards officers found another 2,000 DVDs together with copying equipment. The man, who was subject to a 12 month conditional discharge handed down in 2006 for a similar offence, admitted five counts of possessing fake DVDs and one of possessing an obscene DVD. Luton Trading Standards have reported that some Chinese immigrant sellers have been concerned for their own safety when they have been apprehended. They have clearly felt at personal risk from their suppliers. It is evident that the selling of illicit product extends well beyond IP crime alone and there are links to other criminality. The growing interaction between internet sellers and traditional sellers has been
Intellectual Property Crime Report 2007 Why fighting IP crime matters
notable. Market traders, workplace and pub sellers and others are buying their stocks wholesale from internet traders. An increasing trend is for a criminal to build a client base via an online auction house and then to direct clients to their own website. Traditional, non-virtual traders are reported to be ordering regular small quantities knowing they can depend on continuing uninterrupted internet supplies. This means they are able to carry little stock and top up as needed from internet traders here and abroad. This trade is commonly known as ‘drop shipping’. Drop shipping is employed by UK based internet sellers whose goods are shipped directly from overseas once the order has been placed with them. This is believed to help reduce detection by Customs officials and spreads the risk for the counterfeiter. The sectors which have reported the most use of this emerging trend are clothing, footwear, sportswear and electrical goods. This trend, as well as being noted by the rights holders, has also been widely reported by enforcers in many parts of the UK. One respondent notes the increasing predominance of shipments being transported by air and courier where sea freight and container transport had until now been the norm for counterfeits of their product. Panasonic has reported instances where sellers on an internet auction site carry their logo and the photographs of goods shown on the site are legitimate goods. However when delivered to the buyer they turn out to be fake. ‘Trusted Networks’ also appear to be building. Trusted networks are groups of counterfeiters and pirates who join together to distribute and take delivery of their goods. These networks bypass obvious and open channels of transport and administration, and so are become difficult to identify, infiltrate and disrupt. 33
Intellectual Property Crime Report 2007 Why fighting IP crime matters
These networks use electronic and traditional business channels to build relationships. A luxury goods respondent notes how online sellers are learning to step around simplistic filter and search techniques. They use language to avoid terms which are likely to be ’hit’. They have developed techniques to avoid their auction slots being taken down, for example, by setting up a series of small sites, and playing the field with Internet Service Providers (ISPs), changing frequently from one to the next. They are using SPAM mail effectively and online communications and payment transaction systems which obscure audit trails. This highlights the growing sophistication of IP criminals’ attempts to avoid detection, closedown and prosecution. The Entertainment and Leisure Software Publishers Association (ELSPA) report an increase in criminals’ ability to break the
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security encoding which protects many electronic games from being copied. There are recent examples in the press confirming codes, thought to be undecipherable and attached to new generation games consoles not then on general sale, had been circumvented and fake copies of the games were available to buy. This is not uncommon. The latest film and the final book of Harry Potter were both available on the net and elsewhere before their general release. Indeed, in China the book was available in Chinese translation beforehand! The International Federation of Phonographic Industries (IFPI) report that they have encountered MP3 players preloaded with infringing music for sale during 2007 and this is further evidence of another emerging trend that is facilitated and driven by the rapid development of technology in general.
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The challenges we face
The challenges we face Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Coordinating our efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Supporting our enforcers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 What the brands and rights holders think . . . . . . . . . . . . . . . . . . . . . . . . . .38 What the police think . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Online challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
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Intellectual Property Crime Report 2007 The challenges we face
The challenges we face Resources Many in the IP community perceive themselves to be in an environment where there is competition for resources. This might result in stretched numbers of enforcers, a need for more technical expertise, training, higher budgets, a shortage of equipment or a lack of good intelligence. These views are reflected across the community and affect both their own organisations and others in the IP community such as enforcement agencies and prosecutors. The squeeze on resources of all kinds is often exacerbated by the need to spread them thinly over a large programme of work. Its consequences include a greater need for and use of partnerships and resources offered by colleagues in enforcer organisations. The squeeze is of course linked to perceived and real increases in workloads which may be the result of better intelligence, higher awareness, higher prioritisation, the changing nature of and/or a rise in IP crime. It is clear that work is subject to prioritisation and is reluctantly being passed over. Many respondents state this baldly or else imply it.
In the responses received from trading standards services a high percentage admitted that stretched resources across all enforcement functions generated significant difficulties. Additionally budget cuts in response to local funding 17
priorities, together with conflicting priorities further frustrate their capacity to confront IPC effectively. The emergence of these organisational issues represents a clear impediment to tackling a crime type which is increasing in both sophistication and in the nature of the evidential challenge to be tackled. Indeed the Rogers Review, which reported in March 200717, made specific reference to resource issues and recommended five national enforcement priorities for local authority trading standards. IP crime has been identified within the Rogers Review priority list which deals with Fair Trading; covering trade descriptions, trade marking, mis-description and doorstep selling. These recommendations are intended to better align enforcement throughout England and Wales. By establishing these key priorities, enforcement activity will be better targeted to tackle IP crime and the other key priorities. One of the key outcomes of the IP Crime Strategy, however, has been the elevated profile that IP crime now has amongst all enforcement agencies. At the centre, government has defined IP crime as a key priority in the Rogers review, meaning that individual trading standards authorities should recognise the importance of IP crime and draw up responses to on the ground threats. The Trading Standards Policy Forum, have confirmed that IP crime is a key national threat requiring action at all enforcement levels. On a national level, the Serious Organised Crime Agency include IP crime as a threat in the UK threat assessment, and the Association of Chief Police Officers reflect this in identifying IP crime as a spotlight crime. HMRC also identify IP crime as a top tier threat for frontier detection.
National Enforcement Priorities for Local Authority Regulatory Services- Rogers Review- March 2007 35
Intellectual Property Crime Report 2007 The challenges we face
On a local level, the work of the UK-IPO team has helped to ensure that regional IP fora are developed and that trading standards regions in the UK identify IP crime as a key priority. Amongst the broad range of central and local government priorities, this is significant, and the work involved in getting to this point and in making this work effectively on the ground should not be underestimated. The purpose of issuing a list containing a small number of national enforcement priorities is to give local authorities clarity about what is important on a national level and therefore the policy areas on which they should concentrate their enforcement efforts. In addition they will be able to make a case to their members on what local enforcement priorities will be able to deliver real improvements in outcome at a local level. These national and local enforcement priorities should form the strategic basis for the authorities’ enforcement activities. Local authorities will be able to use the priorities to: • Plan their enforcement activities; • Identify strategic partners to deliver these regulatory objectives; • Identify and implement enforcement approaches that can best deliver the required outcomes; and • Plan their resources accordingly. National Enforcement Priorities for Local Authority Regulatory Services- Rogers Review- March 2007
Nonetheless, the IP community believes that the resource and prioritisation of counterfeiting and piracy is a major challenge. However, despite such limitations there are reports of stronger and developing partnerships. Suffolk Trading Standards talks of the advantages of having rights' holders present on interventions, as does Hull Trading Standards. The warm commendations endorsing co-operative
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associations delivering positive outcomes confirms the multi agency approach as constituting best practice and the way forward. There is undoubtedly an increasing emphasis from enforcement on assets recovery through the Proceeds of Crime Act. Unfortunately, many feel that financial investigation expertise is not universally available throughout the UK. Cardiff, Bridgend, Hertfordshire and Essex Trading Standards have all derived positive benefit in their interventions as a consequence of their co-operation with an accredited financial investigator.
Recommendation 4 The use of the Proceeds of Crime Act and Financial Investigators to be encouraged when prosecuting IP criminals. The trading standards service at Merthyr Tydfil County Borough Council takes the view that the Proceeds of Crime Act (2002) is an important enforcement tool in the fight against IP crime. They have been involved in five Proceeds of Crime actions utilising a financial investigator from outside the Service. These actions have predominantly been taken against criminals at a local level where they find that it acts as a useful deterrent. One of these actions resulted in a confiscation order for £15,000. In 2007 the Service decided to train one of their officers to become an Accredited Financial Investigator. The training, which was provided by the Assets Recovery Agency, involved the perusal of materials relevant to legislation governing such procedures; the Proceeds of Crime Act (2002) and Human Rights Act (1998) for example, as well as detailed rules on dealing with intelligence and casework procedures. This element was followed by an exam to assess the candidate’s suitability for training. An intensive, week long course followed.
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“This not only covered the confiscation processes but importantly the use of financial intelligence in carrying out an investigation. The course was very ‘hands on’ and delivered in an informal manner. Although the majority of students were police officers the tutors were mindful of other agencies and always put a trading standards slant on the presentations. Following successful completion of the course, students have 12 months to submit a Personal Development Portfolio outlining the experience gained in all areas of enforcement. Accreditation follows successful completion of the portfolio.” “Even without the benefits of achieving accredited Financial Investigator status, the skills picked up on this course are of benefit to officers carrying out IP work and I would strongly recommend Authorities consider training an Officer.” Paul Lewis. Senior Fair Trading Officer Merthyr County Borough Council
Coordinating our efforts The diversity in the types of goods and the manner in which they are exploited generate unique challenges for trading standards services. IP crime covers a vast range of commodities. As with previous Reports we have seen the continued trade in illicit DVDs, clothing, etc but 2006 has seen an increase in counterfeit pharmaceuticals. New counterfeit products for sale include Lanyards, Posters, Vinyl Records, and disturbingly, an amount of mineral waters. iPod covers, cufflinks, batteries and vehicle number plates bearing trade marks, food blenders and quad bikes have been discovered as well as ID cards. Many trading standards respondents have reported that their Services feel that they are being hampered by the lack of effective intelligence sharing. The sharing of intelligence between rights owners and enforcers will continue to be essential to an effective response.
Intellectual Property Crime Report 2007 The challenges we face
One trading standards department also cites a lack of commitment from their local police authority as a barrier to dealing with IPC. The crime is not always viewed as a priority and consequently support to tackle it can be variable. Where there is a lack of cohesion by enforcement bodies there is concern that IP criminals might feel immune from robust action.
Supporting our enforcers Trading standards services have also reported a lack of support and adequate response on the part of some trade bodies and brands representatives when asked to supply statements. This has proved to be a barrier to successful prosecution. In terms of operational support there has also been concern expressed at the reluctance of some brand representatives to take part and support interventions. This may undoubtedly be linked to the low resource allocation prevalent in some brand protection departments, for example, in expecting a single representative to provide adequate assistance to interventions that are taking place UK wide. Undoubtedly training plays a part in the ability to tackle IP crime and many trading standards authorities mention a lack of experienced staff with the necessary technical knowledge and understanding of IP. It would appear that there is a genuine need to share knowledge and expertise.
Recommendation 5 Members of the IP rights owning community should be encouraged to provide training and share expertise with enforcers to improve their technical knowledge and understanding of IP. The Court process can also present problems. Court proceedings instigated by trading standards services are often costly particularly in instances where external Counsel needs to be employed. 37
Intellectual Property Crime Report 2007 The challenges we face
This can place a financial burden on a trading standards service and one which they can rarely recoup as costs awarded against the defendant are seldom sufficient to cover those incurred. The contributions to this report also reflect the continued growth of criminal networks utilising Chinese immigrants as sellers of fake goods, mainly DVDs. The majority of these appear to be illegal immigrants and as well as the operational difficulties when dealing with these offenders (problems with establishing identity, translators, etc) they often have no fixed abode and when released on bail they abscond.
What the brands and rights holders think The problems encountered by rights holders, brands and their representatives are, as expected, often similar to those faced by other members of the IP community. Rights holders report insufficient enforcement resources and the variance in priorities of enforcement bodies lead to an inconsistent approach throughout the UK. This inconsistency also appears to extend to procedures adopted by trading standards and some rights owners recommend that many processes need to be formally standardised. An example is the bagging, tagging and evidence handling procedures. The embedding of techniques such as those in the UK-IPO’s “SNIDE” interactive training DVDs would help to ensure that processes conform to professional standards and legal requirements. One respondent from the luxury goods sector reports that the gathering of information about seizures from some trading standards authorities continues to be a problem and impacts on the accuracy of any statistics that they can collect. The information is sometimes repeatedly requested but not supplied by all Authorities. Rights holders would like 38
to see steps being taken to ensure that enforcers are urged to co-operate with them in this area. Contributors have also perceived a gap in enforcement at regional level. They report instances where the trade in illicit goods is too big for the local trading standards to deal with and too small for some police forces, HMRC or the Serious Organised Crime Agency (SOCA) to take an interest. Many respondents feel that low criminal penalties act as no deterrent to stem the flow of IP crime. There is a tangible belief, however, that sentences are increasing to a level that more often meets the severity of the crime and to be a stronger deterrent. Finally, rights holders and the brands perceive an inconsistent approach taken by the Crown Prosecution Service (CPS) in their decisions to launch proceedings. Whilst it is true that the CPS reserve the right to judge each case on its merits and likelihood of securing a prosecution, it is alleged that CPS staff may not be fully conversant with copyright and trade mark legislation. This may lead to the inconsistency noted by rights holders.
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Recommendation 6 The UK-IPO to facilitate a continuing national programme of awareness raising within enforcement authorities and officials within the judicial process, with the assistance of brands and trade associations where appropriate.
What the police think The views and attitudes of operational police officers were acquired through informal discussions. The officers as a group presented varying degrees of exposure to rights holders and experience in IP investigations.
Conclusions UK-IPO engagement with Police Accepting the exceptionally small sampling numbers it is apparent the police community are not generally aware of the specific role and responsibilities of the UK-IPO. Unanimous agreement existed on the imperative of the UK-IPO developing a comprehensive communications strategy. This need was fully illustrated by one attendees comment, “Who are the UK-IPO?”
Intellectual Property Crime Report 2007 The challenges we face
supporting evidence. Facilitating proactive crime interventions leading to attainment of policing objects involving safer neighbourhoods, proceeds of crime actions or dismantling criminal networks provided strong motivation to senior management to authorise and resource anti-counterfeiting operations. Establishing conduits into police intelligence structures was emphasised as a priority issue. It should be noted that this work is already taking place with the recent secondment to the UK-IPO of a Detective with extensive experience in intelligence matters from the South Wales Police. The necessity for UK-IPO engagement with the Association of Chief Police Officers was stressed by the officers as a crucial first step to raising the profile of IP crime within the police service. This engagement has already started with Assistant Chief Constable Giles Yorke, South Wales Police who is the new ACPO lead on IP.
Any initiative to market the UK-IPO within UK police forces should be accompanied with a strategy to raise awareness of IP crime, principally through evidencing links with other forms of criminality and antisocial conduct. Demonstrating positive impacts contributing to safer neighbourhoods or illustrating a public interest dimension were also advocated as beneficial approaches. It was intimated that awareness raising could potentially influence Borough Commanders and lead to an increased profile for IP crime within local policing plans/targets which are derived in consultation with the local community. It was also suggested that one way of increasing recognition of the UK-IPO within the police service was through the provision of intelligence products and
IP Rights Holders engagement with Police. When questioned as to their assessment of the industry’s response to counterfeiting and piracy, a consensus emerged indicating the police did not sense the existence of robust anti39
Intellectual Property Crime Report 2007 The challenges we face
counterfeiting structures being operated by the majority of Brands. The creative industries were viewed more positively with officers acknowledging the capacity which existed within the sector to be of assistance to police investigations. There is a challenge for both the police and industry to improve communications between them. There are instances where personal contacts enable close working relationships but on the whole the police perception is one of lack of interest by industry. It should be acknowledged that industry has in the past worked primarily with trading standards undoubtedly motivated by the traditional stance taken by police to IP crime. However, the increasing involvement of the police with IP crime enforcement dictates a review of the nature and substance of the engagement with police by industry trade associations in conjunction with the UK-IPO. Invited to identify areas for improvement for the industry, police responses centred on brand protection personnel possessing a sound understanding of criminal investigative practice and product knowledge. Equally, the provision of a competent and timely response to requests for assistance, and specifically witness statements, was emphasised as being vital to developing effective co-operation. Accessibility A small percentage of officers were users of the secure on-line database of rights holders contact details maintained by the Anti-Counterfeiting Group. Others, whilst displaying no knowledge of the facility, placed considerable value on the capacity to access such information. The absence of a centralised resource providing contact details for a comprehensive range of rights holders and Anti Piracy Units was considered to constitute a significant impediment to police. Education and Awareness Officers experienced in IP investigations expressed the view that they were content 40
with the level of advice accessible by telephone and indicated some on-line resources are also available. Although they indicated hard copy materials were scarce. Inexperienced officers claimed they had nothing and were reliant on trading standards for information. This view clearly demonstrates the communications deficit which presently exists between the industry and the police, as a wealth of industry produced information is available to those involved in IP enforcement. The officers identified the provision of guidance to aid the identification of counterfeit goods and simplified advice governing evidential “points to prove” as a key initiatives to drive an increase in enforcement levels. This was particularly pertinent to the release of new products. Whilst the accessibility of the internet is promoted as a favoured delivery platform, personal engagement between IP representatives and operational officers was stressed as possessing the optimum potential for raising awareness of products and problems. The ACG road shows were acknowledged as an excellent platform for police to engage with rights holders.
Recommendation 7 UK-IPO to develop and host a secure web-based resource that allows access by enforcers to counterfeit product identification guidelines and a contacts database listing brand protection departments and rights holder representatives details for use by the IP community. Police - Attitude to Intellectual Property Crime The following gaps or areas of difficulty were also identified: • IP crime not properly reflected in national /local policing plans or priority area for local community /political authorities.
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• Internal prioritisation of resources / IPC considered low order crime type • Senior management priorities • Prosecutors - negative attitude • Lack of public complaints • Procedural issues (Use of interpreters time/cost – no crime coding for IP incidents or intelligence) • Legislation - Knowledge gaps Whilst not challenging the validity of the issues profiled the UK-IPO is mindful of the fact police services throughout the UK are actively engaged in or supporting enforcement efforts virtually on a daily basis.
Intellectual Property Crime Report 2007 The challenges we face
Online challenges There is no doubt that the internet and the digital era has ensured rights holders are confronted with a huge increase in the scale of IP infringements. Identifying offenders is not always easy. The prevalence of password protected sites for traders and the costs levied by some auction sites to provide rights holders with contact details for the owners of IP addresses, all hamper intervention and enforcement tactics. Contributors report a sense of frustration at some auction and marketplace sites who insist that they are ‘mere conduits’ under the eCommerce Directive, as Internet Society Service Providers (ISSPs) and therefore not involved in the piracy that takes place on their sites. Contributors feel that they should be more proactive and responsible in the way that they act. The Mechanical Copyright Protection Society (MCPS) report that notices under the Digital Millennium Copyright Act (1998) are quite effective but most Internet Service Providers (ISPs) expect a detailed list of all infringements, rather than removing a site if there is a significant/representative sample of works. This is thought to be unnecessarily onerous. The British Phonographic Industry (BPI) reports that a major factor that has influenced their interventions online has been the liaison and good relationship that they have struck up with ISPs that has allowed them to act decisively against peer-to-peer offenders. It is appreciated by all that the nature and potential size of the internet market poses its own problems. However, these problems are not totally unique as it is often the case that traditional sales do not always take place in regular fixed locations. Sales of digital media, tobacco and alcohol may be in various locations including the workplace, residences and streets. Knowing where to mount interventions and enforcement operations is the key. 41
Intellectual Property Crime Report 2007 The challenges we face
British and Dutch police raids shut down the world’s largest pre-release pirate music site London, 23rd October 2007
British and Dutch police today shut down the world’s biggest source of illegal prerelease chart albums and arrested a 24year old man in an operation coordinated between Middlesbrough and Amsterdam. The raids, which were coordinated by Interpol, following a two-year investigation by the international and UK music industry bodies IFPI and BPI into the members-only online pirate pre-release club known as OiNK. OiNK specialised in distributing albums leaked on to the internet, often weeks ahead of their official release date. More than 60 major album releases have been leaked on OiNK so far this year, making it the primary source worldwide for illegal pre-release music. The site, with an estimated membership of 180,000, has been used by many hardcore file-sharers to violate the rights of artists and producers by obtaining copyrighted recordings and making them available on the internet. It is alleged that the site was operated by a 24-year-old man in the Middlesbrough area, who was arrested today. The site’s servers, based in Amsterdam, were seized in a series of raids last week. OiNK’s operator allegedly made money by setting up a donations account on the site facilitated by PayPal. Cleveland Police and the FIOD-ECD SCHIPOL branch of the Dutch police undertook the raids, supported by Interpol, as part of a carefully-planned international investigation with anti-piracy investigators from IFPI and BPI. OiNK used peer-to-peer technology called BitTorrent to distribute music. Torrent sites such as OiNK act as a library for torrent files. BitTorrent is the most popular 42
software for internet file sharing and OiNK was the best-known for pre-release piracy. Jeremy Banks, Head of the IFPI’s Internet Anti-Piracy Unit, said: “OiNK was central to the illegal distribution of pre-release music online. This was not a case of friends sharing music for pleasure. This was a worldwide network that got hold of music they did not own the rights to and posted it online. This operation was a classic example of how the recording industry can work with law enforcement agencies to prove that illegal operations on the internet are not immune from detection.” One contributor outlined that online intervention is affected primarily by three main factors: Territoriality, Technology and Resources. Generally problem sites encountered are based and/or hosted overseas in territories where copyright legislation and/or enforcement are weaker than in the UK. Successful intervention overseas is often reliant on whether trade bodies have an affiliate society based in the territory, the extent of the relationship with that affiliate, and how active/able the affiliate is in terms of internet investigation and enforcement.
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One particular type of such problem sites is the BitTorrent Indexing or Tracking sites. They are hosted overseas and make torrent files available, directing users to infringing content. These sites are funded by click advertising and banner ad advertising, donations and merchandising amongst other income sources. Sites such as Allofmp3 employ third party vendors of 'e-tokens' or gift vouchers on forums, dedicated websites (e.g. www.aom3.org) and auction sites to facilitate payment for downloads where traditional payment systems have been withdrawn by the providers. UK owned versions of download sites are often hosted overseas in territories where there is weaker legislation and/or enforcement, these sites are registered anonymously through proxy registry companies (usually in the US and also the Netherlands). Internet infringement is constantly adapting and advancing. Many respondents within trading standards readily admit that they do not have the necessary expertise to conduct internet investigations effectively. Similarly, rights holders who mount reactive actions against infringers are also in need of specific training.
Intellectual Property Crime Report 2007 The challenges we face
Recommendation 8 Achieve the wider dissemination of expertise and knowledge pertinent to internet investigations through delivery by the IP rights owning community across enforcement agencies and the IP Crime Group membership. Trading standards services also report that their response to IPC on the internet is, in the main, a reactive one, acting only when complaints are received. The reason given for this is a lack of dedicated resource to regularly monitor the internet and the sheer size of the marketplace. This is in line with the reports from the majority of representatives of the brands and creative industries. Only a handful of contributors have a dedicated internet investigation resource. The development of the Netwise project discussed on page 48 and similar efforts in other trading standards regions, such as LOTSA, will therefore be important. However, many trading standards services do already conduct monitoring of on-line sales, for example, Tables showing the levels of reported internet interventions for 2006 are shown in Chapter 4 at page 81.
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Responding to the threat Working in partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Greater intelligence sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Internet investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Developing techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Use of the media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Sharing best practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Education initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Responding to the threat
Training for enforcers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Successes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Cooperation/maximising use of resources . . . . . . . . . . . . . . . . . . . . . . . . .59 IP crime group and the UK Intellectual Property Office . . . . . . . . . . . . . . .62 Successes in law and government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Trading standards powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Enterprise Act 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Assets recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Fraud Act 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 Serious crime act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 The courts and sentencing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
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Intellectual Property Crime Report 2007 Responding to the threat
Responding to the threat Working in partnership Later on we report the year’s ‘Successes’ and numerous references have been made to the growing interest and rewards achieved through partnership working. Most of this interest within the community is fulfilled by IP crime fighting organisations that have teamed up for one off operations. In October 2005 Renfrewshire Trading Standards received a complaint concerning the sale of counterfeit clothing on eBay. Initial enquiries substantiated the allegation and a formal investigation was instigated –Operation Timberwolf. An extensive counterfeit operation was exposed involving many offenders located throughout Scotland; the turnover of the business was assessed as in excess of £1million per annum. A joint operation was instigated engaging the local police, Strathclyde Police Financial Investigation Unit; Glasgow, Inverclyde and South Lanarkshire Local Authority staff. A total of 36 officers were involved. The Paisley Sheriff granted seven warrants and on 30 August 2006 a co-ordinated execution of the warrants took place at five residences and two businesses addresses at which major seizures were made. Two cases are now before the Procurator Fiscal in both Paisley and Glasgow for consideration and a separate proceeds of crime investigation has been launched by the police. Restraining orders have been placed on one offender prohibiting the disposal of assets in property, two vehicles and various bank accounts. There is little doubt that the intense experience of a joint intervention and seizure generates and cements a sense of partnership. The positive result is that, in the longer term, we are likely to see increasing co-operation. The point is illustrated by the willingness of both the International Federation of Spirit Producers UK (IFSP UK) and the Tobacco Manufacturers’ Association (TMA) to initiate action. This has translated into longer term regimes of
prevention and monitoring. Since the mid 1990s a monthly survey, which involves the collection of cigarette packs through face-to-face interviews and discarded cigarette pack collections at sporting and leisure facilities, has been carried out by the TMA. This complements and expands the work the industry is doing to assist HM Revenue and Customs (HMRC) with seizures and operations. The survey offers a durable and reasonably accurate picture of the proportion of cigarettes sold for which UK duty has not been paid (ie both counterfeits and smuggled contraband). IFSP UK is also running long term cooperative exercises with trading standards involving licensed premises and restaurants. This involves monitoring substitution levels and at the same time educates publicans and restaurateurs in how to, and why it is necessary, to spot fakes. To exert regular pressure on would-be criminals, both the tobacco and spirits industries are keenly aware of the need for regular, intensive operations. Following a number of complaints and with support from the International Federation of Spirit Producers UK, Northumberland Trading Standards sent a mail shot to all on-licensed premises (pubs, clubs and restaurants) in 2000 warning them not to refill bottles with cheaper product. Two weeks later inspections were carried out and, despite the warning, problems were found in 5% of outlets. The national rate for substitution of branded spirits at this time was 8%. In one of these outlets three brands; Bacardi, Gordon’s and Smirnoff, were found to have been refilled. 45
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The owners were consequently prosecuted and fined £5,000. Other offenders received written and formal warnings. The prosecution was covered by the local press and inspections continued. As a consequence of this intervention and follow up exercises, at least every two years, the substitution rate in Northumberland is negligible at less than 1% with the current national average at 2%. The IFSP UK also routinely provides the following services: • free authenticity testing kits for screening white spirits • technological advances for screening Scotch whisky • extensive training on Food Sampling • making qualified officers available to support smaller authorities Many other rights holders and their representative bodies are generous in their support of enforcement bodies, offering free expertise and assistance to trading standards departments; police services; the Department of Work and Pensions (DWP); HMRC and private sector bodies. Such services include:
• Storage for exhibits
• Assistance and expert advice
• Training on Copyright & Trade Marks legislation.
• Surveillance • Advice and assistance with test purchasing • Forensic examinations of seized material and computer equipment • Expert witness reports on seized products and provision of technical reports for court • Case preparation assistance • Progression of internet investigations • Assistance and attendance at operations and legal actions 46
This assistance extends worldwide in relation to organisations whose operations take them into the global arena and can be crucial to ensuring the best result. The International Federation of Phonographic Industries (IFPI) reports that continuous partnership working with the World Customs Organisation (WCO), INTERPOL, European Commission and Motion Picture Association (MPA) has impacted positively on the successes that they have recorded this year. There is without doubt a tangible will in both the Public and Private sectors to
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work together and learn from each other. However, in some instances trading standards authorities have been criticised for a reticence to recognise the ongoing need for industry assistance and training. Industry has been keen to ensure that the materials and opportunities are available. IP crime is a moving arena and enforcers constantly need to understand the changes and develop appropriate skills. London will host the Olympic and Paralympic Games in 2012 and the UK Film Council, supported by the audio visual industry and other rights holders, have proposed a campaign which will establish London as a Fake Free Zone by the time of the London Olympics. IP crime would have an obvious negative impact on the income generated from the sale of official 2012 merchandise but more important is the impact that it will have on London’s reputation as the host of the 2012 Games. A proliferation of fake goods will undermine the Olympic experience and the perception of London by a world audience, international visitors and the media. It is this objective that is at the heart of the Fake Free London campaign. The initiative will see a high profile public message campaign to reach multi media audiences and a greater focus by enforcers on counterfeit and pirated goods in every year up to 2012. In Scotland, trading standards authorities from many different areas have worked together with the police; a considerable number have joined with rights holders and representative bodies from a range of sectors. This was evident during Operation ‘Timberwolf’. Consequently, a solid partnership has been established with the Scottish Police and a whole range of incentives have arisen from this. These include the transfer of legal and financial know-how, and a corresponding receipt of understanding and acceptance by the judiciary and police of the situation and duties of Scottish trading standards officers. Unfortunately, to date the reports from the Scottish trading standards authorities
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do not appear to reflect a similar success in teaming up with HMRC. An example of an agency working with multi-partnerships is the Scottish Business Crime Centre (SBCC) which is a non-profit making organisation created in 1996 as part of the Scottish Office Business Crime Reduction Strategy for Scotland. The SBCC established a unique partnership between the police, business community, and Government directed towards the reduction of business crime in Scotland. The main function of the Centre is to provide advice, guidance and best practice in the development of business crime reduction and prevention strategies in a variety of industry sectors, including, retail, electronics, Scotch Whisky, transport and logistics, banking and finance, oil and utilities. The SBCC is well established as a key partner of a number of law enforcement agencies, regulatory authorities, industry bodies, and trade associations, acting as a single point of contact for the receipt of industry based intelligence, crime patterns and other trend information. Working in partnership with these specialist agencies and regulatory authorities, the Centre also acts as a central dissemination point for advice and best practice on specific issues, improving the communication process within targeted industry sectors. Working with its partners, it is a key SBCC objective to raise awareness of the level, impact, cost and scope of all forms of commercial crime, from e-crime and fraud to counterfeiting and piracy, both within industry itself and the wider communities in which they operate. The Centre also works to encourage greater reporting of business crime. This work is best articulated in the SBCC mission statement, which commits to 'reduce business crime in Scotland to create a safe and secure trading environment in which businesses and communities flourish, employment 47
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opportunities are developed and prosperity is encouraged'.
Through this approach they ensure that investigations are intelligence led.
HMRC, LACORS and the Trading Standards Institute are developing a Tobacco Protocol aimed at building on the collective tobacco enforcement efforts of HMRC and trading standards. The protocol will support the delivery of the respective agencies enforcement objectives and provide a framework for greater collaborative working and information sharing.
These, and other initiatives, are further outlined in later stages of this Report.
Greater intelligence sharing Throughout the UK, intelligence sharing is a vital issue and is occurring, albeit sporadically, in many areas. However, the need to share is driving the intelligenceled part of the enforcement community. There are several heartening new developments and a great broadening of interest in releasing data and information to those in the IP crime fighting community upon need wherever possible. An excellent example is the DWP teaming up with local trading standards departments and signing memoranda of understanding to aid data transfer in joint operations. The anti-piracy units of the digital media industries have signed a memorandum of understanding with the Police Regional Intelligence Units who take the lead on developing intelligence on criminals of regional and national significance. FACT reports that the establishment of their Intelligence Unit, and its links with the Police Regional Intelligence Units and others has been the most significant initiative that they have undertaken.
Internet investigation The growth of internet enabled crime has created new challenges for enforcement agencies. This has led to both the creation of new strategies and resources such as the national e-crime unit and the Welsh e-crime strategy. A variety of industry sectors including some electronics manufacturers, have also reacted through establishing programs to monitor the internet more closely. However, mainstream enforcement has also reacted to these new challenges. In this respect, the Welsh Heads of Trading Standards “Netwise” initiative (funded by the DTI) has been a trailblazer. Netwise has a three pronged approach to raise business, consumer and enforcement officers understanding and to reduce the scale of internet crime in Wales. The initiative has developed best practice guidance in enforcement techniques, which has been rolled out through a national (Wales) training program and interactive toolkits for enforcement officers to use moving forward. The Netwise team is currently conducting a nationwide (Wales) audit of all internet crime, in order to establish trends and put in place appropriate coordinated responses to what has become a disparate problem. The Netwise team is working closely with the UK-IPO and others, and it is hoped that the initiative will provide a model that can be rolled out to other regions of the UK.
Developing techniques A leading clothing manufacturer is currently in the process of establishing an industry standard in joint working. Their aim is to develop a structure to aid closer working with other ‘competitors’ in the sector and to present a unified anticounterfeiting stand, especially in 48
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instances where multiple infringements involving several brands are occurring.
co-operation with its market providers in warning off traders in IPC goods.
This is an exciting departure in an area traditionally largely closed to long term and constant co-operative activity.
A number of North of Scotland authorities, led by Dundee City Council, are exploring the potential to pool their resources and create a dedicated regional anti-counterfeiting team. Other trading standards departments realise the benefits of an intelligence-led approach and have reported plans to launch more intelligence-led activity and assessments.
In another step towards shared best practice, the Pentland Group practice of individual security numbering of each product item, is about to be taken up by another clothing manufacturer in a concerted effort to distinguish and identify product and to help eliminate illegal copies. In response to the growth in counterfeit cigarettes seized by HMRC, the tobacco manufacturers have been working with HMRC looking at the security options available to enable authentication of product. As a result of these negotiations, from October 2007 the tobacco manufacturers have introduced anticounterfeit technology on all cigarette packs sold in the UK. In what they hope will act as a deterrent to traders, the Tobacco Manufacturers’ Association are to provide specialist equipment to HMRC to allow instant authentication of tobacco products at retail outlets. The measure is intended to act as a barrier to counterfeit product seeping into the legitimate distribution chain. Dorset Trading Standards are planning to embed a ‘yellow card’ warning system which is to be employed at informal markets and car boot sales and will be directed to traders who are found to be selling, or offering for sale, illegal goods. The card, which is given to traders when illicit goods are found on their stalls, will require a signature and forfeiture of all goods to trading standards. The Service believes that this is an ideal quick response at sites where there are a large amount of alleged offenders, dealing in small amounts of goods. This will allow the Service to tackle all problem traders within a short space of time, and ensure that continuing problem traders can be targeted for concerted enforcement action. They are also working closely with market operators in their area in order to foster a spirit of
The Department of Work and Pensions recognise the benefits of multi agency working and are developing a Memorandum of Understanding with local trading standards offices to codify liaison and initiate joint working between the two organisations in accordance with the Data Protection Act 1998. Manchester Trading Standards report that they are considering the use of the Enterprise Act 2002 as a route to enforcement action. The Enterprise Act created a new modernised framework for competition and consumer protection. The Manchester Department feels that they will derive significant advantages by using this route as it is less burdensome than compiling a full prosecution report and easy to enforce with potentially better sentencing powers once an order has been obtained.
Use of the media Many respondents have described how important the press and media are to raising awareness in our communities. Local press and media sources are able to present cases and points of view in everyday terms and to a wider audience. It is generally acknowledged that the media is supportive of the need to defeat IP crime and the ability of the local radio, TV and newspapers to carry home crucial messages is commended by Scottish Trading Standards Authorities. It is also felt that such messages can influence local councillors and senior officers in Local Authorities, thus pushing IP crime fighting up the political agenda. 49
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Sharing best practice With the launch of the National IP Crime Strategy in 2004, the UK-IPO was tasked with forming a management structure to co-ordinate the different members of the IP community. The National IP Crime Group was created and provides the platform and means for Government Departments, enforcers and members of the IP rights community to come together. A valuable and tangible commodity that this group can share is the practices that they have employed to good effect to attain the best results; many of which are transferable across the sectors. Many enforcement bodies are extremely keen to develop successful techniques. For example, Suffolk Trading Standards Service employs a strategy to remove goods from the market place as quickly as possible. They have developed a fast tracking system, particularly for street sellers, to ensure that those with previous convictions are arrested, charged and appear in Court the next morning. This strategy has also been reported as being employed by other trading standards departments during 2006 and in previous IP Crime Reports.
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premises. They have found this to be a useful intervention tactic to deal with problem. In 2006 Essex County Council Trading Standards implemented a Code of Practice for Markets and Car Boot Sales to help voluntary regulation by organisers and stallholders. The Essex model focussed on trader, organiser and consumer awareness. The project has been regarded as an extremely successful venture - the organisers are now fully aware of the trading standards requirements and, in most cases, their own responsibilities. The result has been that the incidence of counterfeit goods in Essex markets and car boot sales has been greatly reduced. No more than 1%
Hull has one of the largest networks of closed circuit television cameras within the UK. Hull Trading Standards have taken advantage of this facility and have gained authorisation under The Regulation of Investigatory Powers Act 2000 (RIPA) for the use of the city’s CCTV cameras which they train on specific market sites to record evidence of counterfeiting. They are able to produce this CCTV footage as evidence during court proceedings. Midlothian Trading Standards have built good relationships with the businesses in their area through personal contact and have engaged with the local Chamber of Commerce. As a result, a system is in place that ensures that businesses contact the Department whenever they are approached by DVD sellers on their 51
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of stalls are selling IPC goods at 90% of their markets. Similar projects have been initiated by Redcar and Cleveland and East Sussex Trading Standards in past years. In terms of the future, Coventry Trading Standards will also introduce a similar code in 2008 following these models. To combat the continued and growing problem of Chinese DVD sellers that has been reported elsewhere in this report, Essex Trading Standards have also streamlined and honed their process for dealing with these criminals. They have devised an information pack for police officers which details the process needed to deal with them expediently. Offenders are charged and dealt with by the Magistrates court the following day and bail is not needed. Trading standards further accelerate this process by identifying infringing product themselves and writing detailed witness statements. One trading standards service in the South West have reported an increase in the number of market operators reporting the sellers of infringing goods due to the possibility of action against them for aiding and abetting the crime. In Sandwell, the trading standards service mounted a successful Operation at a market venue with the assistance of rights holders. A private market long suspected of being involved in IP crime but, when evidence was not forthcoming, was subjected to a surveillance exercise that involved undercover officers setting up a stall for a number of weeks. Targets were identified over the weeks and a warrant was executed that resulted in 7 arrests and 5 prosecutions. The Service has also secured an agreement with its Council run market to remove IP offenders from their venue. Evidence from this operation led to further warrants being executed on four other premises, six additional arrests and the seizure of approximately 100,000 items of counterfeit digital media.
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In Bedfordshire a partnership between the trading standards service and the police has lead to special constables being employed in a County Council Rapid Response Team. Over the last 12 months the team has arrested and detained over 40 itinerant fake DVD sellers, of these over 90% have been given custodial sentences. They also accompany the Service’s officers on IP related raids. The seizure of motor vehicles linked to the sale of fakes at car boot sales has also proved a highly effective deterrent. Northamptonshire Trading Standards has also been innovative in its approach and its written notice and voluntary surrender form has been translated into Mandarin and Cantonese and put on a CD for use
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when dealing with Oriental fake DVD sellers. The CD can be played if the seller can not read or write English. This has helped them to overcome any language barriers and alleviates the need for translators in instances where sellers have not been previously dealt with. The Metropolitan Police in Southwark has assisted its officers through the publication of a comprehensive guide that standardises investigations in relation to copyright theft in the Borough. The officers in their Case Progression Unit (CPU), permanent custody staff, licensing officers and members of the Safer Neighbourhood Team have all received training from the Federation Against Copyright Theft (FACT). They are able to identify alleged illicit film product and provide an expert statement which alleviates the need to bail prisoners and effect detections at the earliest opportunity. The guide contains information for investigating officers and custody officers and includes: • Information on how to spot a fake • Details of legislation that should be used for charges and the evidential requirements • Procedure to be followed at the station • Details of questions that should be asked at interview • Specific details regarding foreign nationals and the immigration procedures to be followed • Specimen wording for charges and for officers who examine the alleged infringing goods “Our aim is to interfere with and disrupt the cash flow to organised criminals. We aim to affect those higher up in the organised gangs and prove their lifestyle is supported by criminal activity so that we can seize their cash and assets.” Inspector Dawn Adamson, Metropolitan Police, Southwark Borough.
Intellectual Property Crime Report 2007 Responding to the threat
Members of the clothing sector have advocated the registering of applications with HM Revenue and Customs (HMRC) as being a best practice that should be employed by trade mark owners. HMRC have highlighted the importance of passing on intelligence, and indeed in giving Customs details of legitimate supply chains, in allowing them to identify unusual patterns and target enforcement action. Another large rights holder offers regular training sessions to HMRC and feels that this ensures that those at the border are equipped with the best information to allow them to make accurate decisions and results in more seizures of goods. Some clothing and footwear companies have also been working to produce clear and concise guidelines on product identification for enforcers. This should be encouraged as best practice amongst all in the community. There is clearly the need for a central information resource to allow enforcers to have this essential information at their fingertips during interventions. The International Federation of Spirit Producers UK (IFSP UK) offers a ‘dip sampling’ field kit to enforcers to allow them to test any suspect white spirits that they encounter in their interventions. The Tobacco Manufacturers’ Association (TMA) runs an innovative monthly survey to determine the scale of the non-UK duty paid cigarette market. This involves the collection of cigarette packs through face-to-face interviews, discarded cigarette pack collections at sporting and leisure facilities and also modelling work. This data gleaned in the survey provides an estimate of what is consumed after any interceptions by enforcers and as such is an ideal complementary technique. In the creative industry sector action is equally well focussed and the Entertainment and Leisure Software Producers Association (ELSPA) report 53
Intellectual Property Crime Report 2007 Responding to the threat
that they consider the National Intelligence Model to be the minimum industry standard working practice. To this end, in 2006, they embarked upon more intelligence led operations aimed at national and international level criminality. Whilst they are not bound by the regulations of the Regulation of Investigatory Powers Act 2000 (RIPA) they operate within the spirit of the legislation and believe that this constitutes best practice. The Federation Against Software Theft (The Federation) have developed a best practice guide, in conjunction with trading standards, to aid S107A investigations.
The Metropolitan Police Film Piracy Unit The Film Piracy Unit, (FPU), part of the Money Laundering Team, (MLIT) of the Specialist Crime Directorate, (SCD6) became operational in March 2006 and is funded by FACT under the provisions of Section 93 of the Police Act 1996, to investigate offences of film piracy at the highest levels utilising the Proceeds of Crime Act, (POCA) as its main investigative tool. The establishment of the FPU encompasses a new approach to policing, joining the private and public sectors together in the fight against what is increasingly becoming the domain of highly organised criminal enterprises The inception of the FPU also illustrates an innovative, forward thinking method of utilising the resources of the Metropolitan Police Service. The very existence of the unit highlights film piracy as an area of criminality within the MPS and provides an important focus. The team consists of a Detective Sergeant and four Detective Constables. All the officers are financial investigators accredited by ARA with extensive experience in the investigation of serious and organised criminality.
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Practically, this means officers from the FPU can obtain restraint either with or without assistance of Crown Prosecution Service, access bank accounts both for intelligence & evidential purposes, access some files held by Solicitors, provide expert confiscation statements to court upon conviction, use POCA production orders & warrants to access material held by third parties, defendants etc. These are powerful and innovative investigative techniques developed by SCD6. Sophisticated criminal networks sustaining the manufacture and distribution of illicit film product are engaged in this specific area of criminality for one reason, the extensive funds that can be accrued. Placing criminal funds at the centre of the investigative thrust changes the focus of the investigation from the traditional product orientated approach to the targeting of criminal financial gain. The FPU has developed an unrivalled knowledge base and expertise in relation to film piracy since its inception and
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approaches what might be viewed as a ‘centre of excellence’ Equally, the creation of an intelligence sharing agreement between FACT and the FPU is a particularly important milestone and the sharing of intelligence between the two organisations continues to develop. SCD6 champions the view that those who are described as ‘enablers’ are an important part of the criminal process in that they allow criminals to function and any disruption to this group has a profound effect on the whole. The initial investigation instigated by the FPU, from which a number of other operations have stemmed, involved a company which functioned as an enabler, supplying the raw materials without which organised criminal groups cannot function. Prosecutions have in the past been narrowly focussed, concentrating on an individual, or on a single premises, or on those at the bottom of these organisations, (many of whom have been trafficked or smuggled into the UK), When evidence was placed before the courts the wider criminality was not taken into consideration when sentencing and tended to re-inforce the view that this area of criminality was not serious and was not organised. The manner in which the FPU has sought to structure their enquiries has, as a primary aim, sought to dispel these views and has attempted to identify and convey to the courts both the serious and highly organised nature of the criminal groups involved. In March 2007, in association with eBay, FACT launched a campaign to educate consumers on how to buy and sell DVDs safely on eBay. FACT produced a best practice guide to buying and selling legitimate DVDs which is available on the eBay site.
Education initiatives The IP community is unanimous in identifying education and awareness
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initiatives as crucial enablers to the successful sharing of expertise within the community and to transmit a message further afield to consumers of all ages. The Industry Trust for IP Awareness, established in 2004, is a cross industry organisation representing video distributors, retailers, film distributors and cinemas. It runs a three tiered strategy to raise public awareness of the value of IP and the harm done by IP theft.
Tackling physical piracy In June 07 the Industry Trust launched a new national campaign on television and in cinemas (Knock Off Nigel) whose objective is to reduce consumer demand for fake DVDs by creating a social stigma attached to buying “knock-off” DVDs. By using contemporary terminology and humour in this campaign the industry is moving away from the finger-wagging tone about links with organised crime and the effect on the local community as the “piracy is a crime” message had reached a very high awareness (82%) amongst the public. This has been followed up by an adaptation by Pixar of a trailer featuring the lead role in Ratatouille, Disney’s latest animated film, together with a preChristmas television and radio campaign to extend the life of the summer launch commercial. It is hoped this will effect renewed engagement with consumers. “We know lecturing turns people off and that entertainment is a far more powerful tool for engagement. That is why the new Knock off Nigel campaign will help us change the way people talk and think about copyright theft.” Liz Bales, Director General Industry Trust for IP Awareness.
Creating respect for copyright In parallel with the broadcast media a new promotion to build greater appreciation for the value of copyright is using PR to help create a better understanding of the role of copyright in the creative process. Young people to consider its importance in their own future career if they aspire to make a living in the creative industries. The campaign is utilising podcasts, radio, 55
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the internet and educational materials to reflect the work and importance of copyright to the many people who work in the film industry to generate dialogue with young consumers. The Industry Trust has supported Film Education’s launch of a new teaching resource which is now being used in secondary school classrooms around the country. Film Education has also launched a competition for 11 to 19 year olds which closes at the end of January 2008. Their website says: The task is simple: create a campaign to raise awareness about intellectual property theft, highlighting potential consequences for individuals and the creative industries. This can take the form of either: a 30 second advertisement; a short radio commercial; a website; or a poster campaign featuring several designs.
Supporting the enforcers The Industry Trust continues to support the work of enforcement agencies (police and trading standards) by producing information materials which help warn the public about the harm of IP crime and its links with serious and organised crime. The Industry Trust worked with the Alliance Against IP Theft in the summer of 2007 to print a practical guide to copyright and trade mark laws that can be used in their IP enforcement work on the ground. The Alliance Against IP Theft has produced a pamphlet for businesses to encourage companies to put in place a robust IP compliant code of practice for all staff. It explains the risks to business if employees misuse intellectual property or their company is exposed to harm from hacking, spy-ware or viruses through illegal file-sharing on their company’s computers. The leaflet gives advice on how company directors can protect their businesses against, for example, the use of illegal software and on how to avoid legal action by copyright and trademark owners by the instigation of regular compliance checks.
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Northern Ireland is continually under pressure from criminals involved in counterfeiting and piracy and the IPC Expert Group of the Organised Crime Task Force (OCTF) has been continuing to combat this crime type and have worked on initiatives to raise awareness of organised IP crime. In December 2006 the OCTF held a road show in the Coleraine area which over 120 school children attended and were told about the harms caused by organised crime. The children took part in a quiz and discussion groups and posed questions to a panel of law enforcement experts. The excellent feedback from this event is to be used to shape similar events during 2007/08. These events also provide an opportunity for enforcers and local authorities to network with rights holders and brands, forge close working relationships and see the latest developments and trends in counterfeits.
Cracking ideas The Cracking Ideas campaign is a partnership between the UK-IPO and Aardman Animations to encourage
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creativity. The initiative aims to teach children that: they can all innovate; they own their ideas and that innovation can be linked to financial reward which can be exploited if their ideas are protected by intellectual property rights. By appreciating the potential value of their own ideas, children gain an insight into why they should respect other people’s ideas and intellectual property. The crackingideas.com website delivers to Key stage two students (9 -11 year olds) three work schemes, lesson plans and a nationwide competition all featuring Wallace & Gromit. During the first six months of the campaign the site had over 70,000 page views and 2750 lesson plans had been downloaded.
Think Kit The Think Kit® is a Secondary School Resource for Key stage 4 (14-16 year
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Programme for 14-16 year olds (www.young-enterprise.org.uk), the Industry Trust for IP Awareness (www.copyrightaware.co.uk), the “How not to Get Ripped Off” campaign for Business Advisers and Educators working in creative industries (www.own-it.org), the Make Your Mark Campaign (www.makeyourmark.org.uk) and the Innovation Bank (www.britishdesign.co.uk). Alongside campaigns focusing on the harm created by IP crime, a number of organisations are attempting to build public respect for IP. The respect principle has been developed by the CREATE group. The Group, chaired by the UK-IPO and facilitated by DCMS, is currently in the process of mapping the activities noted in the previous paragraph, with a view to seeing how the effectiveness of such campaigns and synergies in this area can be maximised.
Training for enforcers
olds) that contains case studies and teacher resources on all forms of intellectual property. The pack is a well established product for teachers and in 2006/7 82% of Secondary Schools requested the pack. In 2008 the UK-IPO will be working with the Young Enterprise Scheme who last year reached 3,365 schools and some 40,754 students participated in their competition. There have been a range of other initiatives during 2007, notably the “knock off Nigel” campaign. However, to mention just a few others: Respect the Value of Music Lesson plans (www.bmr.org), the Young Enterprise Quickstart Music
This Report has referred to training resources being offered by many rights holders to help enforcers to identify fake goods and their origin. The AntiCounterfeiting Group (ACG) hold quarterly road shows to facilitate informal discussion with rights holders. At a recent event specific awareness sessions were carried out for HMRC officers, focusing on issues such as common routes into the UK both for fake and genuine product and general intelligence needs. “Trading standards ensure that trade is fair and lawful. Unlawful trade of pirated goods generally involves infringement of copyright, trade marks or both. However where the infringement of rights relates to copyright alone trading standards do not have the power to act, and cannot perform searches and seizures. This means, for example, that where there are sales of counterfeit CDs and DVDs, trading standards have only limited response. This creates an 57
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inconsistency in the way that the law treats piracy and counterfeiting.” Gowers Review of Intellectual PropertyDecember 2006
The powers to enforce Copyright, contained in Sections 107A and 198A of the Copyright Designs and Patents Act (1988), were enacted on 6 April 2007. The UK-IPO together with the Mechanical Copyright Protection Society (MCPS) provided a national program of training for enforcers on copyright, the terms of the enactment and the practical interpretation of the Sections. Alongside this, comprehensive legal guidance has been produced. Members of the Alliance Against IP Theft, The Trading Standards Institute and the UK-IPO worked with the Industry Trust to produce a handbook which provides Trading Standards personnel with practical guidance on the newly enacted legislation. This handbook was produced in association with the Industry Trust for IP Awareness. The Federation Against Software Theft (The Federation) has similarly been involved in awareness activities following the enactment of the legislation and has devised software inspection regimes to help detect criminals and are delivering training and certification to software resellers. The International Federation of Spirit Producers UK (IFSP UK) regularly provides “field testing” kits to facilitate the identification of counterfeit product and also gives training to enforcers on counterfeit recognition as well as providing support for prosecutions. The Trading Standards Institute (TSI) Education and Training Team provides a number of educational and training packages relating to – investigative techniques for trading standards professionals; Assessing digital evidence; Seizing a Computer and Handling financial records relating to on line trading. The use of various ‘break-out’ sessions during the course of the annual 58
TSI conference provides a further opportunity for members to enhance professional knowledge. Trading Standards North West (TSNW) and the UK-IPO continues to provide training input on IP and IPC to all new probationary police officers recruited to the Cheshire, Greater Manchester and Lancashire forces. This training is incorporated into the force training plans, is an excellent example of interagency partnership working and is a model which should be adopted in other regions. Many individual authorities have realised the immense benefits that can be derived from education and Essex Trading Standards is just one example. Essex plans to make use of a professional surveillance company to provide training in this area of expertise to its enforcement officers. However, amongst other trading standards officers in Local Authorities there have been reports that little or no training in relation to IP crime was carried out in 2006 and in other areas there has been none for the last three years. This suggests that maintaining a program of training for front line enforcers will continue to be a significant task. The rise of internet enabled crime has been noted several times and as a result there has been a major drive for new training. One clear example is through the Net-wise initiative, which is mentioned on page 48. In response to the growing problem being faced by the football industry a significant brand protection event was held this year - Football Against Fakes. The inaugural training and awareness seminar for enforcement officers, organised by the Brand Protection team at Manchester United Limited, was held at the club’s Old Trafford stadium. Football Clubs and brands attending include representatives from: Arsenal, Bolton Wanderers, Celtic, Chelsea, Everton, The FA, Rangers, Liverpool,
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Manchester United, Middlesbrough, Tottenham Hotspur, West Ham United, Wigan Athletic, Reebok, Nike, Umbro, Puma, JJB Sport and Adidas. Also in attendance were the UK-IPO, NetResult, Crimeproofing and The FA Premier League.
Successes
There were presentations from Manchester United, Cardiff Trading Standards, Brent and Harrow Trading
Co-operation/maximising use of resources
significance resulting from industry investigation in these areas. More detail on this initiative, and its successes, are covered in the following section on ‘Successes’.
Perhaps a key message from contributors is that in 2006 some of the most successful actions they have achieved are the result of co-ordinated work and sharing of resources.
Standards, NetResult and the UK-IPO around the theme of IP rights protection and IPC. This was the first event of its kind and underlines the increasing importance of IP rights to this business sector. The Diploma in Consumer Affairs and Trading Standards (DCATS) module on Intellectual Property continues to develop with input and administrative assistance from the Trading Standards Institute, members of the Alliance and the UK-IPO. Delegates have predominantly come from trading standards services around the UK but others from the wider enforcement community as well as some brand holders have taken advantage of these courses. Officers from the UK Police Regional Intelligence Units (RIUs) recently assembled at Newport to exchange views and discuss priorities. This conference also played host to representatives of the anti-piracy units of the digital media sector. The event culminated in the signing of a Memorandum of Understanding between the RIUs and industry Anti-Piracy Units. The Welsh RIU has agreed to take the lead in developing intelligence on criminals of regional and national
Wales Heads of Trading Standards (WHoTS) has praised the establishment of the Regional Intelligence Officers (RIOs) network, whose work has enabled better targeting of offenders and made pooled resources more effective. Facilitated by the Office of Fair Trading (OFT) and initially funded by the DTI and OFT the initial project has run a year of its two year duration. The RIOs are working in a co-ordination role to ‘join up’ their particular regions, enabling regional trading standards structures to adopt a more intelligence led approach to working. It is hoped that additional funding can be secured to make this initiative sustainable in the long term. Many trading standards services report that where Regional Trading Standards IP Crime Groups have been formed this has been a positive step. Their formation has yielded results in relation to greater coordination, education and formulation of best practice that can be employed across the region. It is hoped that by working with the RIOs these groups will facilitate intelligence led working to combat IPC within the regions. To date groups have been set up in London (LOTSA), Scotland (SCOTSS), East Midlands (TSEM), North West (TSNW) and Wales (WHoTS). West Lothian Trading Standards praise their joint work with the Police Financial 59
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Investigation Unit and the successes achieved in the area of assets recovery as a result of this collaboration. In fact there is a whole wave of joint enforcer actions taking place throughout the UK to recover criminal assets. Many rights holders and their representative bodies are reporting stronger working relations with many trading standards authorities as well as with HM Revenue and Customs (HMRC) and police. Free services ranging from forensic examination of computers and product examination to storage for exhibits are being provided to enforcers. This is being augmented by good quality information from their rights holders monitoring services (particularly of the internet), to enforcers who have the legal status to instigate action. Other trading standards authorities such as Hull, Aberdeenshire, Trading Standards North West (TSNW) and the Society of Chief Trading Standards in Scotland (SCOTSS) report in glowing terms the work done alongside the brands and rights holders. In February 2006 Islington Council launched a multi-agency partnership initiative to address the problem of the sale of counterfeit cigarettes on Holloway Road in North London. Street sales in this area had been an ongoing problem for some years with organised gangs of Iranian males employing aggressive tactics to sell including threatening traders, residents and children. The initiative involving advertising and a rigorous enforcement campaign was run in partnership with Islington Primary Care Trust, HMRC, the Metropolitan Police Safer Neighbourhood Team, FACT, Islington Trading Standards and the Tobacco Manufacturers’ Association. The advertising campaign included bus and underground adverts, banners on the street and posters sited in local shops, bars, restaurants, schools, GPs’ surgeries and other public places.
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The Safer Neighbourhood Team (SNT), in partnership with HMRC have conducted raids at key premises and made substantial seizures. As of August 2007 the Team had seized 1.4 million illegal cigarettes and over 178kg of tobacco. At one address in Haringey 220,000 cigarettes were seized, 5kg of tobacco and two vehicles one of which was a panel van. Examination by use of x-ray equipment revealed modifications to prevent detection. The leader of the SNT has reported that, “The organised criminal activity has been reduced by 70% within the Nags Head area as a result of intelligence led operations, working together with a partnership approach and achieving custodial sentences for key members of the criminal network.” In November 2006 an offender was jailed for 27 months at Teeside Crown Court having pleaded guilty to 13 charges relating to offences under the Trade Mark Act 1994. This was the culmination of a two year investigation by Middlesborough Trading Standards into the sale on eBay of counterfeit clothing. The illegal sales had been first discovered by an internet investigator in the Burberry brand protection department. The site, which also traded under the name Burberryworld, offered for sale large quantities of counterfeit clothing bearing the brands; Burberry, Henri Lloyd, Nike and Prada amongst others. On the website the goods were described as “100% genuine” and the seller described himself as an “authorised Burberry reseller”. Following a raid at premises owned by the offender, samples of clothing were examined by trade mark holders who confirmed them to be counterfeit. The offender had sourced the goods from suppliers around the globe and a separate investigation in North Somerset revealed that he was acting as a supplier to another internet seller in the region.
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A realisable asset figure of £750,000 was agreed and a confiscation order was made in this amount. The offender was given 12 months in which to pay this back or face a further three years in jail for default. HMRC reports that more brands than ever are making applications for trade mark protection, a 40% rise in these applications have been reported this year. This clearly reflects a growing confidence in the system. HMRC also report that they have stepped up their proactive targeting of counterfeit pharmaceuticals. At Heathrow airport products infringing the IP rights of eight major international pharmaceutical companies were seized during transit from Hong Kong to the Bahamas. This is another instance of effective joint working and follow up work involving the Medicines and Healthcare Regulatory Authority (MHRA), the Pharmaceutical Security Institute (PSI) and other agencies leading to the disruption of a major international counterfeit pharmaceutical ring. As part of a Customs international benchmarking exercise on intellectual property rights, in April 2006 HMRC and EU colleagues participated in ‘Operation Magpie’. This Operation involved the Customs services of the UK, Poland, Germany and Lithuania and was focussed on detecting, detaining and seizing counterfeit goods at importation, including goods in transit. The project netted 87 seizures consisting of 970,000 assorted items. Trading standards and police are now working more closely with market organisers, publicans, employers, retailers and Chambers of Commerce to co-operatively raise consciousness of the consequences of IP crime and to discourage and disrupt sellers of fake goods. To counter street trading and occasional sales notices in Mandarin Chinese are appearing in pubs in Stirling to specifically
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warn immigrant disc sellers; in Midlothian publicans are contacting the trading standards service each time a seller appears in their premises. In South Lanarkshire the trading standards department is working closely with the licensing department on a campaign against the sale of counterfeit products in licensed premises. In Worcestershire, trading standards officers have embarked on an education campaign for car boot sale organisers in order to encourage them to ‘police’ their own venues for illicit goods. The ‘Fake Free Ayrshire’ campaign is a partnership by the three local authorities; North, East and South Ayrshire together with the British Phonographic Industry (BPI), the Federation Against Copyright Theft (FACT), the Entertainment and Leisure Software Publishers Association (ELSPA), Odeon Cinemas and Microsoft. The campaign has embraced a programme for education and deterrence which includes workplace initiatives and a trading standards open day; the education of licence holders, and the carrying out of leaflet drops. The campaign is aimed at tackling the IP crime problem at markets, on the internet, in the workplace and at residential addresses; the ‘cottage industry’ method of production which is reported elsewhere in this Report as being prevalent in Scotland. There are several trading standards authorities (e.g. Leicester) following the lead of Essex County Council Trading Standards last year, in drawing up a Code of Practice to help voluntary regulation by Market Organisers and Stallholders. The Essex model focussed on trader, organiser and consumer awareness and, through a project conducted in their region, have found that 90% of potential offenders have been discouraged from trading at markets and car boot sales in Essex. The implementation of the 61
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principles of the markets and car boot sales project has had the desired effect in ensuring organisers are aware of trading standards presence and, in most cases, their own responsibilities. The incidence of fake goods at Essex markets and car boot sales has been greatly reduced. Whilst they admit that the problem of counterfeit goods is unlikely to ever be totally eradicated, their statistics show that no more than 1% of stalls are selling fake goods at 90% of their markets. This is viewed, quite rightly, as a key performance indicator and shows that real progress is being made by the adoption of this project. In July 2007 Hertfordshire Trading Standards secured a landmark money laundering conviction against a market operator and two of its directors. These directors were found guilty of benefitting financially from the sale of counterfeit DVDs, CDs and computer software at Bovingdon Market. This was the first time that a market operator has been convicted of accepting, in the form of pitch rents, money it knew, or suspected, had been earned through criminal means. Trading standards officers, working with Hertfordshire Police, the BPI and FACT carried out an extensive investigation to bring the prosecution. Seven stall holders were also found guilty of selling counterfeit DVDs. The sentencing hearing is to be held at St. Albans Crown Court. In addition there is growing evidence of co-operation between enforcement bodies. Dorset Police and trading standards department have signed a Proceeds of Crime Memorandum of Understanding which has recently resulted in the department’s first successful proceeds of crime case. A confiscation order for £37,248 was awarded against a seller of counterfeit goods at local car boot sale. Hull Trading Standards has benefited from the city’s broad CCTV coverage and, under authority from the Regulatory of 62
Investigatory Powers Act (RIPA) 2000, are able to train these cameras on market sites in order to obtain evidence and identify criminals. This evidence is regularly produced during Court proceedings. The Isle of Wight Trading Standards Service operates a ‘zero tolerance’ to IPC and enforces it around the two annual festivals that are held there.Other trading standards services realise the effectiveness of strategies of this kind and Bedfordshire are planning a similar zero tolerance strategy for the coming year. Due to the wide scope and scale of products being counterfeited and pirated, inter-rights owner/brand co-operation can often depend on a common interest in particular actions. If two or more types of branded fakes are at issue then cooperation is more likely. However, rights holders/brand protection manager’s briefs are usually given to them by their client company/companies, whose view of the counterfeit and piracy problem is likely to be sectoral. This means that they demand tangible inroads being made specifically on fakes of their own branded goods.
Recommendation 9 UK-IPO to engage at corporate level with UK businesses, to ensure an understanding of the responsibilities and work programme being progressed by the UK-IPO/ IP Crime Group. However, on the creative media side cooperation is more common as there are many identical products and issues. The BPI cite the sharing of operational skills with FACT and the use of a CRIME GROUP IP streamlined intelligence database as being a successful initiative this year.
IP Crime Group and the UK Intellectual Property Office
IP
CRIME GROUP
The IP Crime Group (IPCG) is facilitated by the UK-IPO and is a multi agency structure ofCRIME Working Groups involving GROUP IP
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Government, enforcement and industry sectors. The IPCG offers a means of collating knowledge and information so that decisions can be made about how best to deploy and co-ordinate resources to ensure that best practice strategies and lessons are developed and spread across the IP community. To ensure the IP Crime Group continues to offer a realistic approach to combatting counterfeiting and piracy it has adopted a control strategy to take forward key projects. Many of the IPCG projects are clearly aimed at prevention and education. A Best Practice Strategy to improve intervention and enforcement at markets is being developed using highly experienced enforcers and rights holders. Despite several industry sectors initiatives providing materials to help businesses reduce the risk and incidence of IP theft in the workplace, there remains a worrying level of ignorance of the law, lack of internal policy or compliance, of procedures for reporting IP infringements or for disciplining staff engaged in IP theft. The IPCG is in the process of
developing a complementary best practice tool kit to give help and advice to all types of businesses and enforcement officers. Moreover, as counterfeiters and pirates seek new ways to expand their illicit business channels the security of business supply chains becomes increasingly important. It is vital that our business interactions are managed efficiently and that our processes engage best practices. The IP Crime Group is working to develop and publish a toolkit to provide a practical guide to help UK businesses review their current supply chains and consider options for improvement based on some of the best processes adopted by market leaders. In counterfeiting and piracy cases, rights holders and their representatives’ share a common goal with enforcers and prosecutors and have a key role in assisting the prosecution by helping to prove fundamental elements of offences. Another primary responsibility is to provide first class evidence that will help reduce the number of cases discontinued in court and increase early guilty pleas. There is no doubt that counterfeiting and piracy has been growing at a significant rate and has become an organised national and international criminal activity. Consequently, defendants are becoming well versed in court procedures and are becoming more challenging to the prosecution. Accordingly, there has been an increasing call for updated guidance to help prosecution witnesses prepare for cases and secure convictions. The IPCG 63
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is in the process of developing such training and guides. To complement this work, a programme of awareness training for the Crown Prosecution Service and Magistrates is also under development. IP crime is moving rapidly and the tools that enforcers need must be equally innovative. One of the key enforcement tools is based in assets recovery. The IPCG is therefore focussing on providing a simple toolkit to help enforcers take advantage of available legislation and prevent criminals profiting from their ill gotten gains. Through the UK-IPO the IPCG is engaged with key developments and initiatives. The UK-IPO represents the IP community in a number of important channels, particularly helping to build the Olympics Enforcement Strategy in the lead up to 2012. The role of the Serious and Organised Crime Agency (SOCA) is growing and the UK-IPO again supports the SOCA Programme Board on counterfeiting and piracy issues by providing important links and research material. 2006 also saw the establishment of a Scottish IP Crime Group which is again facilitated by the UK-IPO. Still in its early stages, a control strategy is currently being developed to complement the work of the UK Group and to address Scottish issues. The UK-IPO also has a strong tradition of working in and with overseas institutions. IP crime is truly transnational and the Office uses its position and reputation to assist emerging and vulnerable countries to develop their IP infrastructures. The Office is also heavily involved in developing the work of international institutions such as the UN, World Customs and Interpol. Working with European Commission and other international partners such as the US Patent and Trade Marks Office the UKIPO takes a lead in international assistance activities, developing key reports and programmes for countries as 64
diverse as Romania, Bulgaria, Serbia, Albania, Montenegro, Slovakia, Slovenia, Estonia, Turkey and China. The recent pilot scheme (due to end December 2007) between the Welsh Regional Intelligence Unit (police) supported by the UK-IPO, and the digital media anti-piracy units of BPI, IFPI, FACT, MCPS/PRS and ELSPA has showed the benefits of joint working. Equally, whilst it is acknowledged the participants in the pilot scheme have adopted enforcement practices, wider IP community compliance with legislation such as RIPA and the prescribed practices under the National Intelligence Model (NIM) will be encouraged by the IPO The digital media anti-piracy units have long been considered as leading the field in IP crime investigations due to their commitment in providing a coordinated and committed response to UK enforcement of IP infringement. Therefore, in order to support and further such activities the BPI, FACT and UK-IPO IP Crime Team, have commenced a 'Preferred Partner' scheme, which, is intended to promote joint working at regional/national level (Level 2 / 3 NIM) and assist in identifying the processes required to better tackle enforcement issues in the future, in particular the threat of Internet related criminality. The UK-IPO IP Crime Team, as a result of its efforts, has been recognised through several awards. Most recently Graham Mogg, a serving Police Officer and currently on secondment to the UK-IPO, received an award from the British Phonographic Industry (BPI) in recognition of his dedication and professionalism in the fight against music piracy. Phil Lewis, Senior Policy Advisor at the UK-IPO, also received a special commendation award by the AntiCounterfeiting Group (ACG). Alison Newbold, Group Manager at the ACG- “Phil has worked tirelessly in 2006
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ensuring that the IP Crime Group and the National IP Crime Strategy remain viable. He also provided unprecedented levels of support and advice to brand owners.”
Successes in law and government Trading standards powers On 6 April 2007 Sections 107A and 198A of the Copyright Designs and Patents Act (CDPA) 1988 was enacted. This action by the UK-IPO has been widely welcomed. The Federation Against Software Theft calls it ‘a major boost to tackling copyright offences in the workplace’. Trading standards authorities have also positively endorsed this added arm in the fight against UK offenders. In addition to the enactment funding was provided by HM Treasury. This funding for 2007/08 amounted to £5million. The Local Authorities Co-ordinators of Regulatory Services (LACORS) identified that the new burdens for councils associated with these additional copyright powers would need additional funding for 2008/09 of £7.922 million. This is 58.44% above the 2007/08 funding figure. These figures were approved by the UK-IPO and have been accepted by HM Treasury. This figure will be fully funded in the Revenue Support Grant (RSG) in England from April 2008. The RSG will rise by 3.55% in 2009/10 and by a further 3.45% in 2010/11. By way of example, Essex Trading Standards used their additional sum of money to employ two officers to work at markets and car boot sales in their area. These officers work at weekends and bank holidays to gather intelligence and conduct all the necessary groundwork in order for the Service to mount interventions against alleged offenders that are discovered. These officers have been instrumental in building good relationships with the market organisers that they encounter
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and this has also been reported as being a major factor that has affected the Service’s success in this area this period. FACT has noted that the intelligence processes displayed by Essex Trading Standards is a model which should be adopted by other Authorities to build an effective regional and national picture. The Government sponsored training for enforcers following the enactment of Section 107A, was provided by the UKIPO and MCPS. Specific training was given on the terms of the enactment and how and where the Section can be applied. The BPI also reports that the enactment of this part of the legislation has been a factor in the increased levels of seizure of their product. The legislation has given enforcers the powers to seize types of their product that they describe as ‘mixtapes’ that would have otherwise not been covered by other legislation.
Enterprise Act 2002 Following extensive consultation, new powers were brought in on the 1 October 2007, to facilitate the transfer of information from enforcement agencies to IP rights holders to pursue litigation. Part 9 of the Enterprise Act creates gateways for the disclosure of information relating to specific consumer and competition matters. It lays down the requirements that have to be met before public authorities may disclose information. The new provisions allow information to be disclosed to consumers and IP rights holders and their authorised representatives seeking redress. Although the new disclosure gateway is discretionary, a public authority must exercise the discretion in good faith and for the purposes of the legislation, which is to help consumers and IP rights holders to obtain their legal rights. Both enforcement agencies and IP rights holders have welcomed the change, believing that it will allow greater joining up of enforcement efforts. 65
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Assets recovery The Government announced its Assets Recovery Action plan in May 2007, to further extend the Proceeds of Crime Act powers. The Government intends to introduce proposals for: • New powers to seize ‘bling’, such as jewellery and plasma TVs, from those charged with acquisitive crimes; • Extending powers to include the seizure of cash and other assets such as cars or boats believed to have been used in crimes or are the proceeds of crime; • Ensuring the recovery of assets is mainstreamed into the criminal sentencing process;
Article by Alan McQuillan, interim director of the assets recovery agency (ARA) Organised crime is big business and it’s our job as law enforcement agencies working in partnership with industry and other agencies, to put it out of business. The threat from organised crime does not remain constant, it continues to evolve bringing with it new threats and different challenges. The Federation Against Copyright Theft estimates that film piracy in the UK costs £818 million in 2005 and criminal gain from this to be in the region of £278 million. Music piracy cost £168 million, a loss of some 10% of the UK’s legal CD market. Counterfeit medicines are currently estimated to make up almost 10 per cent of the world market with annual sales in the region of US$35 billion. Counterfeiting also extends to many many other products ranging from cigarettes to car parts. IPC is therefore not a ‘robin hood’ crime just conducted on a small scale by local entrepreneurs. It is a core part of the business of organised crime groups. Many of these counterfeits are sourced internationally and on a commercial scale. It is big business and organised crime 66
• Offering citizens a percentage of assets seized for whistle-blowing on fraud committed against the Government; • Removing the time limit for the seizure of assets through civil recovery; • Asset sharing with other countries to target assets sent overseas; • Creating a system to process seized cash outside the courts, if not contested; • Giving law enforcement agencies the authority to decide which assets should be seized to pay the confiscation order; and • Extending the use of tax powers to target unexplainable criminal assets. groups don’t just stick to one area of crime or one produce. They are linked to activities across the spectrum of serious crime from families and communities destroyed by drugs to citizens whose safety and livelihoods are jeopardised by counterfeit goods. Each of these types of crimes is a serious offence, whether committed by small-scale hawkers or international crime organisations.
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Be under no illusion - criminals are motivated purely by profit and seek to increase their wealth by reinvesting in other criminal activities: where they see a market – they fill it. They also seek to protect the source of their criminal proceeds in order to make it more difficult to detect. Seizing illicit goods and prosecuting offenders is a key objective but so too is removing the profits and disrupting their business enterprises through criminal confiscation, civil recovery or tax. To that end the Assets Recovery Agency’s core mission is to take the profit out of crime and we continue to work with our partners and industry to target counterfeiting and piracy operations and thereby helping to make our communities safer. We have had many successes in disrupting and taking the profit out of these types of crime – whether carried out at the market stall, over the Internet or as a vehicle to fund large-scale organised crime. Between April 2006 and July 2007, some £2.25million has been recovered through criminal confiscation orders, with a further £4.97million currently under restraint. In addition, £216,000 worth of assets have been frozen using our unique civil recovery powers, with several more still in the pipeline. We have also been working very closely with trading standards offices across the UK supporting them in using Proceeds of Crime Powers to attack IP crime, make this activity less profitable and increase the risk to criminals.
Intellectual Property Crime Report 2007 Responding to the threat
with its partners in the crime-fighting community, to continue to tackle counterfeiting and piracy using the full rigour of the law – whether that involves disrupting those involved in large criminal enterprises or individuals who persist in duping hundreds of innocent buyers at market stalls or on the internet. The examples that follow show the effectiveness of the Proceeds of Crime Act in recouping the profits made by criminal activities.
Case study 1 A partnership between ARA and the London Borough of Sutton Trading Standards secured a £68,000 confiscation order against a market stall trader dealing in counterfeit designer bags. An investigation against M/S X of Surrey resulted in her arrest under the Trade marks Act 1994. Significant quantities of goods including bags, clothing, sunglasses, hair accessories and jewellery bearing false trade marks including Louis Vuitton, Christian Dior, Gucci, Chanel, Prada, Von Dutch, Tiffany & Co. and Burberry were seized from the market stall. The defendant was charged with 20 offences, including one of conspiracy and 19 substantive offences relating to improper use of Trade Marks. Pleading guilty at a crown court hearing to nine offences relating to the Trade Marks Act 1994, she was sentenced to 240 hours community punishment. In July 2006, the
However, we can never be complacent. Organised criminals often deploy sophisticated methods to disguise their activities and continue to diversify into wider and varied markets. International crime organisations, many with UK links, are involved in counterfeiting and use this as a way to launder money and fund a wide range of criminal activities. The sanction of asset recovery acts as a strong deterrent to others by sending out a clear message that crime does not pay. The Agency remains committed, together 67
Intellectual Property Crime Report 2007 Responding to the threat
court determined that the defendant had benefited from criminal conduct to the tune of £68,000 and made a confiscation order to that amount. She was ordered to pay the sum within six months or face a twoyear prison sentence in default.
Case study 2 In June 2006, ARA financial investigators, working in partnership with Cumbria Trading Standards (CTS) secured a Confiscation Order worth £96,172 against Mr Y of Cumbria. The offences first came to light on the 9th June 2004 when officers from CTS and Cumbria Constabulary executed a warrant at Mr. Y’s home. Officers recovered six computers together with four stand alone copying towers, 6,000 counterfeit discs, 4,000 blank discs, 1800 MP3s, 10,000 empty cases made up of 2,000 DVD cases and 8,000 plastic wraps, 40,000 CD sleeves, and numerous pens, ink cartridges, and packs of glossy paper. The computers and writing towers were forensically examined. This revealed that the computers held eleven CD writing programs which could be used for the production of bootleg copies of compact discs and their associated covers, labels and case inserts. The computers also contained 5,148 graphic files which could be used to counterfeit music, film, play station and MP3 products. Almost all of these 5,148 graphic files held at least one registered mark. In December 2005 Mr. Y pleaded guilty at Carlisle Crown Court to three counts of conspiracy to copy and supply unauthorised counterfeit copies of music CDs, computer games, DVD files and unclassified or restricted 18-rated video titles. He was later sentenced to 21 months’ imprisonment on each count, which was ordered to run concurrently. In June 2006 Mr Y again appeared before Carlisle Crown Court where a confiscation hearing took place. A benefit of £123,991.57 was determined as being the proceeds obtained by the defendant from criminality. 68
A confiscation order was made in the sum of £96,172.23 which was ordered to be paid within 12 months with a sentence of 15 months’ imprisonment being fixed for default of payment.
Case study 3 A couple involved in counterfeiting offences that included selling fake Disney DVDs on eBay and Amazon were ordered to pay confiscation orders of £25,149 after a successful case by ARA financial investigators and Newport Trading Standards. The couple from Newport, were convicted of trading standards offences in March 2005 after a search at their property unearthed more packages and boxes from Thailand containing counterfeit Disney DVDs in cellophane wrappers. More than 300 DVDs were discovered, which Mrs H admitted were bought by her on a large scale to sell over online auction websites. Mrs H said she had sold up to 600 pirate Disney DVDs, buying them for £7 and selling them on for £12. Investigations showed that more than 1,300 DVDs had been sold between March 2004 and March 2005. Claiming the profit as being between £2 - £3 per DVD, she described it as ‘pin money.’ She pleaded guilty to nine offences under the Trade Marks Act and Mr H to eight offences. At Newport Crown court, the judge certified that Mrs H had benefitted to the sum of £24,015 and granted a confiscation order for that amount. The judge certified that that Mr H had benefited to the tune of £1,134.
Case study 4 In June 2007, the Agency was granted a Property Freezing Order (PFO) in the Belfast High Court on assets with an estimated net value of £216,000, including a property, monies held in a credit union account and a pension fund. The case was referred to the Agency by the PSNI so that it could pursue the assets through civil proceedings after the criminal process had been exhausted. The investigation involved assets held by Eugene Geraghty and his
Chapter 3
Chapter 3
wife, Mary Geraghty, of Greenfield Park, Armagh. The investigation has been assisted by the Federation Against Copyright Theft (FACT), the British Phonographic Industry (BPI) and the European Leisure Software Publishers Association (UK) Ltd (ELSPA). In its case to the High Court, ARA highlighted Mr. Geraghty’s criminal record in relation to counterfeit goods with 14 criminal convictions for trading in counterfeit products and a further 24 convictions for copyright offences. The Agency also alleges that Mr. Geraghty has committed various financial offences including mortgage fraud, obtaining a pecuniary advantage by deception and tax evasion.
Fraud Act 2006 Section 1 of the Fraud Act 2006 creates a new general offence of fraud and introduces a number of possible ways of committing it. Section 2 outlines the offence of – False representation. These powers supplement those under the Trademarks and Copyright, Designs and Patents Act. Fraud can extend to the sale of counterfeit goods per se, and particularly if sold as genuine. It means that the possession, use or sale of chipping or copying equipment can result in 10 years imprisonment. The Fraud Act came into effect on 15 January 2007.
Serious crime act The Serious Crime Act should provide another weapon in enforcement agencies amoury to fight IP crime. IP crime offences are listed in the schedules as serious crimes. This means that a court could make a serious crime prevention order where:
Intellectual Property Crime Report 2007 Responding to the threat
Case study 5 A confiscation order worth £191,000 was secured against a man convicted on eight counts of possessing and offering for sale almost 6,000 counterfeit designer clothes, including brands such as Ted Baker, Timberland, Ben Sherman, Kickers, Pringle and Speedo. The defendant’s company was also convicted of a further nine counts. In November 2006, Mr M was sentenced to 18 month’s imprisonment and his company fined £9,000. The confiscation order was secured in March 2007, with the benefits declared at £273,398.
involvement by the person in serious crime in England and Wales (or Northern Ireland in the case of applications made to the High Court or the Crown Court in Northern Ireland). As with the other civil orders used to restrain criminal or anti-social behaviour the standard of proof to be applied by either court in proceedings concerning SCPOs will be the civil standard of proofwhich is a flexible standard, from “on the balance of probabilities” at one end to “beyond reasonable doubt” at the otherrather than the criminal standard. These orders would allow effective action to be taken to prevent future involvement by the subject in serious crime by imposing conditions in relation to, amongst other things: a) an individual’s or business’s financial, property or business dealings or holdings; b) an individual’s working arrangements;
a) it is satisfied that a person has been involved in serious crime in England and Wales, Northern Ireland, or elsewhere; and
c) the means by which an individual communicates or associates with others, or the persons with whom he communicates or associates; employment of staff
b) it has reasonable grounds to believe that the order would protect the public by preventing, restricting or disrupting
d) the premises to which an individual or business has access;
69
Intellectual Property Crime Report 2007 Responding to the threat
e) the use of any premises or item by an individual or business; f) an individual’s travel (whether within the United Kingdom, between the United Kingdom and other places or otherwise). g) an individuals’ private dwelling, including prohibitions or restrictions on, or requirements relating to, where he or she may reside. h) the types of agreements to which a business may be a party; i) the provision of goods or services by a business; The Act will also further embed proceeds of crime recovery work, with changes to bring the Serious Organised Crime Agency closer to assets recovery work.
The courts and sentencing The issue of incomplete statistics has been discussed in other parts of the Report. However, figures held by the Courts are encouraging. While sentencing is recorded by the most serious charge the figures for prosecutions where the CDPA or Trademarks Act are the lead offence, show a significant rise in the number of successful prosecutions and a rise in the number of custodial sentences, since the launch of the IP Crime Strategy in 2004. Allied to this, there is anecdotal evidence from respondents to show that the sentencing results in relation to IP Crime
are increasing in severity, through other charges such as conspiracy to defraud. A table of sentences is included in the Annex to this report. Coupled with this, increased use of the provisions of the Proceeds of Crime Act (POCA) 2002 is evident and confiscation orders have been more widely reported by respondents in relation to IP offences. A table of cash forfeitures and confiscation orders is included in the Annex to this report. Detectable in the submissions by enforcers for this Report was an increased confidence in the preparation and management of IP investigations and prosecutions. The widespread use of POCA has been mentioned; and the power of more accurate witness statements as evidence, RIPA authorisations to acquire CCTV footage have also been noted as steps forward. All of the above paints an encouraging picture for the IP community. In evidence from the submissions there is greater use of a multi agency approach seeking to present to the court the totality of an individual’s criminality with the intention of securing appropriate sentencing. In May 2007 at Manchester Crown Court a six year custodial sentence for trade mark offences was given to the operator of a counterfeit vodka plant in Oldham. He was also given 5 years imprisonment, concurrent, for duty evasion and an additional 3 years 4 months for the possession of firearms; a total of 9 years 4 months. A search of the offender’s home address revealed an additional still and unlicensed firearms. Distribution of the vodka was taking place nationally. This result highlights what can be achieved by partnership working between police, HMRC and trading standards. A Proceeds of Crime investigation has also commenced.
70
Chapter 3
Chapter 3
Intellectual Property Crime Report 2007 Responding to the threat
In Scotland penalties are generally lower, although one must bear in mind that most illegal IP activity there was reported to be small scale ‘cottage industry’. Fines of £500, £275, £2,000, and formal warnings are usual; whereas custodial sentences are a rarer, but not unused, option.
the Internet. The arrest came during an operation by officers from Gloucestershire County Council Trading Standards Service working with investigators from the Federation Against Copyright Theft (‘FACT’) and Gloucestershire Police. The man has been released pending further enquiries.
Occasional reports arise of criminals reoffending on release from jail, commonly in a less visible role than previously. However, the effective deterrent of confiscation of assets is being increasingly recognised.
The site, TV Links (www.tv-links.co.uk), was providing links to illegal film content that has been camcorded from within a cinema and then uploaded to the Internet. The site additionally provided links to TV shows that were also being illegally distributed.
In December 2006 at Birmingham Crown Court six men received custodial sentences ranging from six months to four years for offences in relation to the manufacture, sale and distribution of DVDs on the internet. All pleaded guilty to conspiracy to defraud. The case was a landmark one being the first of its kind concerning an illegal digital film sharing forum. The PIR8 web forum facilitated the selling of pirate material to over 13,000 users. This case was the culmination of a three year investigation and prosecution of the group by FACT. Kieron Sharp FACT Director General stated “This was a major criminal conspiracy and a sophisticated organisation making hundreds of thousands of pounds from their illegal activities. This should send a strong message to those involved in film piracy in all forms, including online, that FACT will trace and prosecute criminals seeking to profit from defrauding legitimate businesses and that the Courts can and will hand out strong sentences.”
TV links website owner arrested for copyright infringement A man aged 26 from Cheltenham was arrested on 18th October 2007 in connection with offences relating to the facilitation of copyright infringement on
Sites such as TV Links contribute to and profit from copyright infringement by identifying, posting, organising, and indexing links to infringing content found on the Internet that users can then view on demand by visiting these illegal sites. Roger Marles, Head of Trading Standards, said: "This practice allows people to view any one of a large number of films and television programmes directly via the website. This is illegal under UK copyright law. The 'users' are potentially evading licence fees, subscription fees to digital services or the cost of purchase or admittance to cinemas to view the films. No physical product changes hands but the effect is the same - anyone has the opportunity to view an illegal copy of a copyrighted work. This is all done without the permission of the owners of the copyright or trade mark protection in the works being distributed. As no control is exerted over who can visit the site and access the service, there is no regard for the age of the viewer and therefore no control of the content of what is viewed." The operation was conducted with the assistance of BREIN, the Dutch anti-piracy body, who have served notice on the TV Links hosting provider, Leaseweb, to allow the website servers to be removed. Leaseweb is based in the Netherlands.
71
Statistical charts and comments Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 Asset recovery orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74 Figures from trading standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Pooling resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Statistical charts and comments
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
Chapter 4
Chapter 4
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Statistical charts and comments Introduction The quantity of returns received was insufficient for the Report to be able to offer watertight statistics for the range of counterfeit products it discusses. Geographically returns were also a little patchy and as such it is not possible to give more than a ‘best available indicator’ of many IP crime trends as they are happening up and down the UK at the present time. The statistical part of the Report is therefore subject to limitations based on the level and content of the responses received. Trends in Prosecutions
39
342
124930
1997
621
35
418
166184
1998
724
66
417
158506
1999
532
51
291
104131
2000
475
47
264
145953
2001
518
33
269
128515
2002
441
25
211
101463
2003
534
24
282
119808
2004
686
98
300
163933
2005
995
195
338
144315
1000
800
600
400
200
0
Note: More serious IP crime cases will often result in convictions for Fraud and other offences – these figures only relate to prosecutions where the Trademarks Act or the Copyright Designs and Patents Act is the most serious conviction. Figures to 1999 for England and Wales only.
2005
524
2004
1996
2003
89987
2002
293
2001
34
2000
455
1999
1995
1998
Total Fines
1997
Total Fined
1996
Total Imprisoned
1995
Total Sentenced
Total
Year
Year Total sentanced Total fined Total imprisoned
73
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Chapter 4
Asset recovery orders Note these relate to Counterfeiting / Intellectual Property since 01 April 2006 for Local Enforcement Agencies (LEAs) police and Regional Asset Recovery Teams (RARTS) 04/2006
Confiscation Order
05/2006
Cash Forfeiture Order
Other LE Agencies Police RARTs
Total Cash forfeiture
£1.00 £27,125.13 £44,356.71 36,809.02 £8,143.35 £628,561.63 £5,301.17 £6,120.00 £96,172.23 £3,759.50 £6,001.38 £6,120.00 £96,172.23 £3,759.50 £6,001.38 £68,000.00 £1,632.36 £14,408.12 £5,000.00 £1,278,788.89 £38,739.20 £79,575.00 £175,000.00 £55,676.73 £458,178.18 £3,080.00 £9,428.00 £1,077,700.00 £15,087.00 £2,710.00 £971,988.02 £4,155.67 £10,140.00 £132,873.72 £25,001.00 £15,309.38 £60,724.23 £1,334.54 £95,000.00 £500.00 £12,896.36 £60,365.00 £7,062.00 £191,000.00 £282,313.69 £3,621,978.74 £1,140.00 £111,645.48 £105,228.41 £316,000.00 £70.00 £928,127.72
Total Confiscation Orders
£9,356,006.23
Total POCA Orders
£10,284,133.95
Police RARTs Confiscation Order Other LE Agencies Police 06/2006
Cash Forfeiture Order Confiscation Order
07/2006
Confiscation Order
08/2006
Confiscation Order
09/2006
Cash Forfeiture Order Confiscation Order
10/2006
Cash Forfeiture Order Confiscation Order
11/2006
Cash Forfeiture Order Confiscation Order
12/2006
Cash Forfeiture Order Confiscation Order
01/2007
Cash Forfeiture Order Confiscation Order
02/2007
Cash Forfeiture Order Confiscation Order
03/2007
Confiscation Order
04/2007
Cash Forfeiture Order Confiscation Order
05/2007
Confiscation Order
74
Police Other LE Agencies Police RARTs Other LE Agencies Police RARTs Police RARTs Police SOCA Other LE Agencies Police RARTs Police Police RARTs Police Other LE Agencies Police RARTs Police Other LE Agencies Police Police RARTs Police RARTs Other LE Agencies Police Other LE Agencies Police Other LE Agencies Police RARTs Other LE Agencies Police RARTs Other LE Agencies Police
Chapter 4
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Figures from trading standards In all 56 UK trading standards departments responded to the questionnaire. 32 were Scottish and 22 were English; and Wales was covered by WHoTS as well as by 2 individual returns from Cardiff County Council and Bridgend.
TOTAL
-
-
-
-
-
-
-
-
-
26,550
-
-
-
-
-
-
-
-
-
-
14,940
Derbyshire
16,686
1,239
-
-
3,106
-
-
-
-
-
-
-
-
-
-
21,031
Gloucester
5,507
400
85
700
50
-
-
-
-
-
-
-
-
-
-
6,742
Hull
5,750
3,500
-
-
-
-
-
-
-
-
-
-
-
-
-
9,250
Isle of Wight Luton Manchester
Jewellery
MP3 files
Accessories
1,700
5,964
e Game
1,600
1,091
Handbags
750
-
Batteries
-
885
Watches
Mobile Acc
4,000
7,000
Perfumes
Clothing
18,500
Coventry
Cigarettes
CD
Bedfordshire
Trainers
DVD/SWr
Table 1: Numbers of items seized
Sunglasses
32 of these authorities reported that interventions/seizure raids had been undertaken in 2006. 16 were from England, 14 were Scottish and 2 Welsh.
199
-
-
-
-
-
-
-
-
-
-
-
-
-
-
199
1,050
-
-
-
480
-
-
-
-
-
-
-
-
-
-
1,530
150,000
-
-
-
-
-
-
-
250
-
-
125
-
260,375
Norfolk
4,247
642
-
-
3
-
-
-
-
-
-
-
-
-
-
4,892
Northamptonshire
3,355
250
150
-
500
-
-
-
-
-
-
-
-
-
-
4,255
200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200
-
-
700
-
-
-
-
-
-
6,000
970
-
-
31,170 5,000
Anon 3 Sandwell
20,000 3,500
10,000 100,000
Anon 4
1,800
200
-
-
3,000
-
-
-
-
-
-
-
-
-
-
Suffolk
2,000
-
-
-
181
520
-
-
-
-
-
-
-
459
-
3,160
Anon 5
2,241
345
40
-
36
-
-
-
-
-
-
1,121
-
-
-
3.783
Aberdeen
3,000
20
-
1,000
-
114
-
-
-
-
-
-
-
-
-
4,134
Aberdeenshire
200
-
-
-
595
-
10
-
-
-
-
-
-
-
-
805
Angus
350
150
-
-
200
-
-
5
3
-
-
-
-
-
-
708
Dumfries & Galloway
172
-
-
-
-
-
-
-
3
1,920
50
-
6
-
-
2,151
East Renfrewshire
-
-
-
-
51
-
-
-
-
-
-
-
-
-
-
51
2,600
300
-
1,000
-
-
-
-
-
-
-
500
-
-
-
4,400
Moray
130
-
-
-
-
-
-
-
-
-
-
-
-
-
-
130
Perth & Kinross
187
-
-
-
86
-
261
-
-
-
-
-
61
-
-
595
South Ayrshire
1,035
-
-
-
238
-
-
-
-
-
-
-
-
-
-
1,273
775
76
2,646
-
7,225
-
-
-
-
-
-
-
-
2,250
-
12,972 5,500
Midlothian
Refrewshire Stirling West Dunbartonshire West Lothian
5,000
-
-
500
-
-
-
-
-
-
-
-
-
-
-
-
1,000
50
-
80
-
-
-
-
-
-
-
25
-
-
1,155
887
285
-
-
-
-
-
-
-
-
-
-
2,900
-
391
4,463
Bridgend
2,173
50
-
-
1,790
-
-
-
-
-
-
18
121
-
-
4,152
Cardiff
4,416
2,001
-
-
1,379
744
-
-
-
-
-
-
-
979
-
9,519
WHoTS
Nil Return
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
TOTALS
217,274 12,719
858
271
5
6
1,920
50
518
3,113
3,229
391
445,085
2,971
13,200 116,594
75
MP3 files
TOTAL
-
-
-
-
-
-
-
-
-
254.05
-
-
-
-
-
-
-
-
-
-
102.27
Gloucester
16.5
1.2
4.25
1.75
0.3
-
-
-
-
-
-
-
-
-
-
24
Hull
14.65
7
-
-
-
-
-
-
-
-
-
-
-
-
-
21.65
Isle of Wight
0.796
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.796
6
2.5
-
-
10
-
-
-
-
-
-
-
-
-
-
18.5
750
-
-
300
2,000
-
-
-
-
-
0.4
-
-
0.25
-
3050.65
Luton Manchester
Jewellery
3.4
46.59
e Game
27.75
-
Handbags
141.4
-
Batteries
-
3.717
Watches
Mobile Acc
12
51.96
Perfumes
Clothing
69.5
Derbyshire
CD
Bedfordshire
DVD/SWr
Cigarettes
Accessories
Chapter 4
Trainers
Table 2: Street value of seizures 2006 (in £K) as reported by trading standards
Sunglasses
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Norfolk
21.595
2.1
-
-
0.1
-
-
-
-
-
-
-
-
-
-
23.795
Northamptonshire
16.775
1.25
4.5
-
10
-
-
-
-
-
-
-
-
-
-
32.525
Anon 3
0.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.8
Sandwell
65
10
-
-
7
-
-
-
-
-
-
60
-
1
-
143
Anon 4
18
2
-
-
71
-
-
-
-
-
-
-
-
-
-
91
Suffolk
5
-
-
-
5.4
2.08
-
-
-
-
-
-
-
-
-
12.48
Anon 5
19.5
6.2
1
0.9
-
0.4
-
-
-
-
-
-
11
-
-
-
Aberdeen
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9
Aberdeenshire
1
-
-
-
17.4
-
0.1
-
-
-
-
-
-
-
-
18.5
Angus
2
1
-
-
2
-
-
0.05
0.025
-
-
-
-
-
-
5.075
Dumfries & Galloway
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
2
East Renfrewshire
-
-
-
0.05
0.775
-
-
-
-
-
-
-
-
-
-
0.825
Midlothian
11.5
1.5
-
0.2
-
-
-
-
-
-
-
3
-
-
-
16.2
Moray
0.54
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.54
Perth & Kinross
0.54
-
-
-
3.4
-
2.61
-
-
-
-
-
0.5
-
-
7.05
South Ayrshire
4
-
-
-
1.2
-
-
-
-
-
-
-
-
-
-
5.2
South Lanarkshire
30
2.5
-
-
5
-
-
-
-
-
-
20
-
-
-
57.5 268.35
Refrewshire
4
0.35
75
-
175
-
-
-
-
-
-
-
-
14
-
16.5
-
-
1
-
-
-
-
-
-
-
-
-
-
-
17.5
-
5
2.5
-
1.6
-
-
-
-
-
-
-
0.11
-
-
9.21
21.3
1.425
-
-
-
-
-
-
-
-
-
14.5
-
-
1.95
39.175
11
0.15
-
-
35.4
-
-
-
-
-
-
0.15
0.37
-
-
47.07
Cardiff
22.08
7
-
-
15
2.1
-
-
-
-
-
-
-
5
-
51.18
TOTALS
1176.2 61.692
7.58
2.71
0.05
0.025
0
0.4
108.7
2.98
20.25
1.95
4349.4
Stirling West Dunbartonshire West Lothian Bridgend
76
87.15
444.4 2435.3
Chapter 4
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Apparel and Accessories: Number of items seized 2006 as reported by brands
Household Goods: Number of items seized 2006 as reported by brands
113,864
Shirts
60,989
Eyewear
36,647
Tops
-
Printer Accessories
29,044
Handbags
-
Razors
13,577
Bottoms
12,925
Other Clothing
-
Other
10,830
Scarves
-
Logos, etc
10,341
Footwear
5,000
Ceramics
8,500
Tracksuits
17,469
TOTALS
7,674
Jewellery
2,847
Fragrance
2,480
Bed Linen
2,000
Watches
660
Swimwear
Apparel and Accessories: Street values (in £K) for items seized 2006 as reported bt brands
10,325
2,144
Batteries Mobile Phone Accessories
Badges, etc
Audio Visual Products: Number of items seized 2006 and value as reported by rights holders Number of Items
Value in £K
1,656,910
8,285
FACT - Discs (DVD-R/DVD)
691,160
3,450
BPI - Music (all formats)
116,642
No value reported
ELSPA - Games’ Master Discs
935.3
Shirts
7,976
No value reported
MCPS - Music and/or Music Video
475.07
Handbags
5,634
No value reported
MCPS - MP3 compressed file format
245
Tops
127.5
Tracksuits
58
Jewellery
31.18
Other Clothing
27.15
Bottoms
1,488,000
Apparel
25.5
Eyewear
1,178,650
Other
16.75
Footwear
735,000
Pharmaceuticals
13.2
Scarves
460,000
Electricals
10
Watches
70,000
Watches/Jewellery
6.6
Fragrance
46,000
Disks and Games
5.5
Swimwear
77
HM Revenue and Customs (HMRC) Seizures 2006 by Goods Type
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Chapter 4
Items 312,378 2,020,520 17,469 3,977,650 445,085
£ Brands Clothing and Accessories
1,976,750
Brands Disks and MP3
9,684,550
Brands Household Goods
35,000
HMRC
Nil Rtn
Trading Standards
6,773,102
4,349,400 16,045,700
Limitations are Some reported only numbers of Items and no £ value Some reported less than 100% of their seizures Top 5 faked Goods types, only, were requested Some quantities may represent double countings being reported by more then one organisation/agency Size of sample at best around 25%-30-% for Trading Standards Services nationwide amongst which only around 70% listed seizures The HMRC figure represents 70% of their 2006 Seizures Around 33% of respondents from the brands did not report any figures
78
Chapter 4
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Pooling resources
• Miscellaneous Public Services Creative Entertainment Apparel/Clothing
• •
• • •
•
• •
• •
•
•
• •
• •
•
•
•
• • •
•
• •
•
IPO/Govt
FAST
REACT
Other Soc
• •
TSAs
•
ACG
BPI
MCPS
• • •
ELSPA
• • •
FACT
• • •
ARA
•
• • • •
DWP
Key Apparel/Clothing Creative Entertainment Electronics Consumer
HMRC
•
Police
Others & Like Brands
Co-operation as reported within the UK IP Crimefighting Comunity for the year 2006
• •
• • • •
• • •
• • •
•
• • •
• • •
•
• •
The information in Table 3 was acknowledged in responses to a direct question about co-operative action among enforcers. The results show that there remains, in the private sector, a high confidence in the police, HM Customs and trading standards authorities.
79
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Statistics from IPOS Study1 commissioned by the British Video Association Average number of illegal copies: change Year on Year (Film only)
Chapter 4
Impact of Piracy - TV series & Film: The Financial Impact - Total Prices used to evaluate financial impact:
-4.2
Catalogue DVD: (4+ mths)
£7.29 (Film); £17.44 (TV) (source: TNS)
7.1
-1.4
DVD Rental:
£3.11 (Film/TV) (source: BVA)
8.0
14.8
+6.8*
PPV:
£3.50 (Film) (estimate)
Burning
7.0
6.3
-0.7
Download:
£10-£17.99 (used £14) (Film) (estimate)
Borrowed
9.8
6.6
-3.2
Live streaming:
£5.00 (TV) (estimate)
Viewed
N/A
6.8
N/A
(Average)
(Average)
Counterfeit
13.5
9.3
Home copied
8.5
Downloading
Total (Film & TV) Cinema
Secondary Piracy
£12.96 (Film); £21.25 (TV) (source: TNS)
(Average)
Digital Piracy
New Release DVD: (0-3 mths)
Diff
Phyical Piracy
£4.87 (Source: UKFC)
2006
Total
Cinema ticket:
2005
£102m
£23m
£26m
£53m
* Significant shift to digital copies Origins as Reported by Respondents by Country of Production: Counterfeit/Pirated Goods 2006
1
DVD sales
£299m
£66m
£84m
£149m
25%
Domestic
Rental
£28m
£9m
£9m
£10m
24%
China
PPV
£11m
£5m
£3m
£3m
2%
Europe
Official Downloads
£15m
£3m
£6m
£6m
11%
Thailand
Live Streaming
£2m
£1m
£1m
9%
Far East
Total Loss (2006*)
£459m
£107m
£129m
£223m
7%
‘Unspecified’
Total VAT lost
£80m
£19m
£23m
£39m
6%
Hong Kong
2%
India
2%
Pakistan
* These estimates are based on the newer, more conservative methodology and are not comparable with figures from previous studies as this methodology was not used previously and cannot be applied retrospectively.
2%
Portugal
2%
Russia
2%
S America
2%
Taiwan
2%
Turkey
2%
USA
IPSOS - Piracy in GB - Industry Study Wave 4: 2006
80
Chapter 4
Intellectual Property Crime Report 2007 Statistical Charts and Comments
Figures reported by top 12 Brands for internet interventions 2006 Organisation
Removed Auction Listings
Cease and Desist Letters
Numbers of Items Removed
Infringement Notices Sent
1
12000
0
20000
0
2
3000
0
3000
600
3
19480
0
21244
19480
4
759
0
5887
759
5
0
0
0
0
6
3461
65
20435
3461
7
0
0
0
0
8
100
250
300
300
9
120
260
0
260
10
30000
120
30000
0
11
525
52
7875
525
12
0
0
0
0
Note: Rather than naming individual brands, the organisations remain anonymous as requests for confidentiality are being honoured by putting all contributory brand organisations on a single footing.
Figures reported by top 5 organisations from the digital media sector for internet interventions 2006 Organisation
Removed Auction Listings
Cease and Desist Letters
Numbers of Items Removed
Infringement Notices Sent
BPI
342,628
720
350,000*
342,628
ELSPA
0
0
35,000*
0
FACT
23,036
107
208,620
23,036
FAST
20
260
23
155
MCPS
2,458
0
0
24587
* - Estimate
81
Intellectual Property Crime Report 2007 Bibliography
Bibliography Organisation for Economic Co-operation and Development – The Economic Impact of Counterfeiting and PiracyExecutive Summary June 2007 EU Directorate General for Taxation and Customs- Summary of Community Customs Activities on Counterfeiting and Piracy- Results at the European Border 2006 The Serious Organised Crime AgencyThe United Kingdom Threat Assessment of Serious Organised Crime 2006/07 Fourth Annual BSA and IDC Global Software Piracy Study- May 2007 Internet Shopping- An OFT Market Study- June 2007-11-09 Counterfeiting Luxury:Exposing the Myths- 2nd Edition Davenport LyonsJune 2007 New Responses to New Challenges: Reinforcing the Tackling Tobacco Smuggling Strategy – HMT/HMRC 2006 Gowers Review of Intellectual PropertyDecember 2006
82
National Enforcement Priorities for Local Authority Regulatory Services- Rogers Review- March 2007 Intellectual Property: Source of Innovation, Creativity, Growth and Progress- International Chamber of Commerce- August 2005 Public attitudes towards crime and recovery of assets by the Assets Recovery Agency in Northern Ireland: Findings from the January 2006 Northern Ireland Omnibus Survey- Statistics and Research Branch of the Northern Ireland Office- Research and Statistical Bulletin 6/2006 House of Commons Culture, Media and Sport Committee New Media and the Creative Industries Fifth Report of Session 2006-07 TECHNOPOLIS Study: “Effects of counterfeiting on EU SMEs and a review of various public and private IPR enforcement initiatives and resources”.
Contact details for IP Crime Group members
Contact details for IP Crime Group members
Intellectual Property Crime Report 2007 Contact details
Intellectual Property Crime Group Organisations
Organisation: BDO Stoy Hayward LLP
Organisation: adidas Group
Name:
Name: Position: Email: Phone: Sector:
Mike Roylance Brand Protection Manager
[email protected] 0161 930 2488 Sportswear
Organisation: Adobe Systems Europe Ltd Address:
Name: Position: Email: Telephone: Mobile: Sector:
3 Roundwood Avenue, Stockley Park, Uxbridge UB11 1AY Najeeb Khan Anti Piracy Manager
[email protected] 0208 606 1157 07799 644441 Software
Address:
Position: Email: Telephone: Fax: Sector:
Organisation: Brand Enforcement UK Ltd Name: Position: Email: Telephone: Sector:
Address:
Name: Email: Telephone:
c/o Luther Pendragon, Priory Court, Pilgrim Street, London, EC4V 6DR Dan Guthrie
[email protected] 020 7618 9100
Name: Position: Telephone: Sector:
Address: Name: Position: Email: Telephone: Fax: Sector:
PO Box 578, High Wycombe, Bucks, HP11 1YD Ruth Orchard Director-General
[email protected] 01494 449165 01494 465052 Trade association
Organisation: Autodata Limited Address: Name: Email: Telephone: Fax:
Unit 5, Priors Way, Maidenhead, Berks, SL6 2HP. Malcolm Rixon
[email protected] 01628 688130 01628 770385
John Noble Director
[email protected] 01730 821212 Branding
Organisation: BP p.l.c. Name: Position: Email: Telephone:
Organisation: Anti-Counterfeiting Group
Lisa Lovell Managing Director
[email protected] 08702 726385 IP enforcement
Organisation: British Brands Group
Email: Organisation: Alliance Against IP Theft Ltd
8 Baker Street, London, W1U 3LL Leam Thompson Asset Forfeiture Consultant
[email protected] 0207 893 3085 0207 893 2201 Asset Investigation & Control
Sector:
Michael Keogh Trade Mark Attorney
[email protected] 020 7948 5494 Oil, gas and energy
Organisation: British Phonographic Name: Position: Email: Telephone: Sector:
Industry Ltd (BPI) David Wood Director of Anti Piracy
[email protected] 0207 803 1300 Music
Organisation: British Video Association Address: Name: Email: Telephone:
167 Great Portland Street, London, W1W 5PE Lavinia Carey
[email protected] 020 7436 0041
83
Intellectual Property Crime Report 2007 Contact details
Organisation: Cardiff City Council Address: Name: Position: Email: Telephone: Sector:
71 Bridge Street, Cardiff, CF10 2TS Handley Brustad Senior Trading Standards Officer
[email protected] 02920 872079 Local Government
Organisation: Crimeproofing Ltd Name: Position: Email: Telephone:
Ray Parry CEO
[email protected] 01225 761 198
Organisation: Department for Culture, Position: Email: Telephone: Sector:
Media and Sport Creative Industries Division
[email protected];
[email protected] 020 7211 6432; 020 7211 6296 Government
Organisation: The Entertainment and Leisure
Address: Name: Email: Telephone: Fax:
Software Publishers Association (ELSPA) 46 The Chestnuts, Cross Houses, Shrewsbury, Shropshire, SY5 6JH John Hillier
[email protected] 07855 300438 01743 761287
Organisation: Federation Against Software Address: Name: Email: Telephone: Mobile: Fax: Sector:
Organisation: Gallaher Ltd Address: Name: Email: Telephone: Fax:
Address: Name: Email: Telephone: Fax:
Name: Email: Telephone: Mobile: Fax:
Organisation: Federation Against Copyright Name: Position: Email: Telephone: Sector:
84
Theft (FACT) Eddy Leviten Head of Communications
[email protected] 0208 568 6646 Film/Anti-Piracy/Enforcement
Suite 1, 7 Chalcot Road, London NW1 8LH Adam Glass
[email protected] 0870 0661 953 0870 0661 954
Organisation: Her Majesty’s Revenue
Organisation: Essex County Council
Trading Standards New Dukes Way Building, 2, Beaufort Road, Dukes Park Industrial Estate, Chelmsford CM2 6PS Steve Lynch
[email protected] 01245 341905 07900 164895 01245 341986
Virginia House, Weston Road, Sandbach, Cheshire. CW11 1BP Iain Hughes
[email protected] 01270 504673 01270 504653
Organisation: Glass Law Ltd
Address:
Address:
Theft (FAST) York House, 18 York Road, Maidenhead, Berks. SL6 1SF John Lovelock and Julian Heathcote - Hobbins
[email protected] [email protected] 01628 622121 07734345401 (John Lovelock) 01628 760338 Enforcement
Name: Email: Telephone: Fax: Sector:
& Customs Room LG70, 100 Parliament Street, London, SW1A 2BQ Tim Longley
[email protected] 020 7147 9040 020 7147 0131 Customs & International
Organisation: Industry Trust for IP Awareness Ltd Address:
Name: Email: Telephone: Fax:
Prospect House, 80 - 110 New Oxford Street, London, WC1A 1HB Paul Archer
[email protected] 020 7079 6329 020 7079 6525
Intellectual Property Crime Report 2007 Contact details
Organisation: International Federation of Spirits Name: Email: Telephone: Sector:
Producers UK (IFSP UK) Philip Scatchard
[email protected] 01279 777765 Branded Spirits
Organisation: LACORS
Address: Name: Position: Email: Telephone: Fax: Sector:
(Local Authorities Co-ordinators of Regulatory Services) Local Government House, Smith Square, London, SW1P 3HZ Cheri Lloyd Policy Officer
[email protected] 020 7665 3859 0207 665 3888 Local Government
Organisation: London Organising Committee of
Name: Position: Email: Telephone:
the Olympic Games and Paralympic Games Ltd Farisha Constable Brand Protection Manager
[email protected] 020 32012 079
Organisation: Lovells LLP Name: Position: Email: Telephone: Sector:
Louise Zafer Partner
[email protected] 0207 296 2000 Legal, Private Practice
Organisation: Microsoft Limited Address:
Names: Emails: Telephone: Fax:
Organisation: Periodical Publishers Association Name: Position: E:mail: Telephone: Sector:
Address:
Name: Position: Email: Telephone: Sector:
Society Ltd (MCPS) Copyright House, 29-33 Berners Street, London, W1T 3AB Alan Cronin Operations Manager
[email protected] 0207 306 4053 Music Industry
Andrew Yeates IP Adviser
[email protected] 07967 645 647 Publishing magazines/periodicals
Organisation: The Premier League Name: Position: Email: Telephone: Sector:
Oliver Weingarten Solicitor - Commercial and Intellectual Property
[email protected] 020 7864 9178 Sport
Organisation: The Publishers Association Address: Name: Position: Email: Telephone:
Organisation: Mechanical-Copyright Protection
Microsoft Campus, Thames Valley Park, Reading, Berkshire. RG6 1WG Mary Gadsden, Graham Arthur
[email protected];
[email protected] 07764 359797 (Mary); 07890 900572 (Graham) 01189 09 6767 (both)
Fax: Sector:
29B Montague Street, London. WC1B 5BW Rob Hamadi Head of eCrime
[email protected] 020 7691 9191 020 7691 9199 Publishing
Organisation: Renfrewshire Council Address:
Name: Email: Telephone:
Trading Standard Section, Environmental Services Dept., Renfrewshire Council, Cotton Street, Paisley, PA1 1UG Graham Paterson
[email protected] 0151 840 3145
Organisation: Metropolitan Police Name: Email: Telephone:
Stuart Simpson
[email protected] 07768 712144
Organisation: Richemont Sector
Luxury Goods
85
Intellectual Property Crime Report 2007 Contact details
Organisation: Graham Satchwell (AntiName: Position: Email: Telephone: Sector:
counterfeiting strategies) Graham Satchwell Owner
[email protected] 01264 889116 All
Organisation: Tobacco Manufacturers' Name: Position: Email: Telephone: Mobile: Sector:
Association Robert Fenton QGM Security Liaison Manager
[email protected] 0207 544 0114 07850 559366 Manufacturing
Organisation: Scottish Business Crime Centre Ltd Name: Position: Email: Telephone:
Martin Rutland Assistant Director
[email protected] 01786 447441
Organisation: Trading Standards East Midlands Name: Position: Email: Telephone:
Organisation: Serious and Address: Name: Email: Telephone: Mobile:
Organised Crime Agency PO Box 8000, London, SE11 5EN Jason Fensome
[email protected] 020 7238 3788 07717 868185
Organisation: Taylor Macmillan LLP Name: Position: Email: Telephone: Sector:
Simon Gallant Partner
[email protected] 020 7758 4722 Solicitors
Organisation: Timberland UK Ltd Address:
Name: Email: Telephone: Fax:
86
Wexham Springs, Framewood Road, Wexham, Slough, SL3 6PJ Chrissie Morse
[email protected] 01753 497148 01753 497141
Sector:
Matthew Edmonds Chairperson
[email protected] 0116 305 6559 Trading Standards
Organisation: Trading Standards North West Name: Position: Email: Telephone: Sector:
Informal Economy Group Stephen Dundon Senior Trading Standards Officer
[email protected] 01254 2225227 Trading Standards
Organisation: Warrington Borough Council -
email:
Community Services Peter Astley Trading Standards Food/Health & Safety Manager 01925 442672 01925 442655 07717 816724
[email protected]
Web:
www.tradingstandards.gov.uk/warrington
Name: Position: Telephone: Fax: Mob:
Intellectual Property Crime Report 2007 Acknowledgements
Acknowledgements We would like to thank the following organisations for their contributions to this Report: adidas Group
Producers UK
Americana International Ltd
Isle of Wight Council
Assets Recovery Agency
Leicestershire County Council
Bedfordshire County Council
Luton Borough Council
British Phonographic Industry Ltd
Manchester City Council
Bridgend County Borough Council
Mechanical Copyright Protection Society Ltd
Cardiff City Council
Merthyr Tydfil County Borough Council
Coventry City Council
Metropolitan Police
Derbyshire County Council
Norfolk County Council
Dorset County Council
Northamptonshire County Council
The Entertainment and Leisure Software Publishers Association
Nottingham City Council
Essex County Council European Commission - Taxation and Customs Union - Directorate General Federation Against Copyright Theft Federation Against Software Theft Gloucestershire County Council Her Majesty’s Revenue & Customs Hertfordshire County Council Hull City Council International Federation of the Phonographic Industry International Federation of Spirits
Panasonic UK Limited Publishers Association Sandwell Metropolitan Borough Council Scottish Business Crime Centre Ltd The Society of Chief Officers of Trading Standards in Scotland Suffolk County Council Tobacco Manufacturers' Association UK Film Council Wales Heads of Trading Standards West Lothian Council Worcestershire County Council
87
The IP Crime Team is based at: UK-IPO Concept House Newport South Wales NP10 8QQ. The contact details are: E-mail:
[email protected] Tel: 01633 814535 Fax: 01633 814950
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