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Counterfeit Christmas Gifts – Understanding The Law

» Posted on: 18 December 2007
» Posted by: Tony Catterall
» Service area: Intellectual Property

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Retailers want to ensure that Christmas is a profitable month, leading many to look for discounted goods with a good margin. The danger comes when judging whether that bargain is genuine or whether it could be a counterfeit product. So what exactly is the law on selling ‘dodgy’ goods? Joanne Shelley, intellectual property law specialist and Partner at North West solicitors, Taylors, explains the dangers of counterfeit goods and outlines the responsibilities of, and repercussions to, retailers and brand owners.

“Designer label clothes/bags, watches, perfumes and cosmetics are the most common counterfeit goods available in the marketplace, closely followed by alcohol, CDs and DVDs, computer software and toys – it is a list that continues to grow each year. Retailers are usually attracted by the low cost of the products in order to increase their own profit and may fail to acknowledge the shockingly poor quality of these goods, which are often discovered to be dangerous or unfit for purpose by EU safety bodies. A retailer stocking counterfeit goods may have purchased the items without sight of the actual products but believe them to be the genuine branded article, or are misled by the supplier who shows an original branded sample or image but when the retailer receives the delivery of goods they are copies.

“Retailers are often caught up in the counterfeit chain, and regardless of their intentions, may be held accountable. Counterfeit goods, and / or the profits made from their sales, can be taken by authorities and /or the genuine brand owner without reimbursement. Retailers are advised to do their homework, especially if they are dealing with suppliers to provide extra goods for the Christmas season. In addition to building a relationship with the supplier and having agreed appropriate trading terms, ask for a sample of all goods and check what is actually received, if possible, before payment. It is also important that your suppliers can show an invoice or a licensing / distribution agreement, which verifies the authenticity of any branded products to be sold.

“If a retailer does have suspicions regarding the goods that are being supplied, it is vital that the issue is addressed at the earliest opportunity. Seeking advice immediately will position the retailer in a positive light, reduce the negative financial loss to the retailer’s profits and will be viewed favourably when the brand owners become involved.”

Joanne highlights that it is the brand owner who ultimately pays the price for counterfeit goods as a product can loose its valuable market reputation and status through any publicity surrounding faulty / poor quality merchandise, and the increased high availability and low cost of the counterfeit products will devalue the brand.

As a result, brand owners have become increasingly responsive to claims of counterfeit goods being sold and will swiftly aim to take action against any retailers involved. “Brand owners are advised to be alert at all times to what retailers are selling, but particularly over the Christmas period. An unexpected drop-off in sales, or an unusually large number of complaints to the brand’s customer services department, can often highlight that the distribution chain has become corrupted,” highlights Joanne.

Joanne concludes: “Counterfeit goods within the marketplace result in consumers buying shoddy, often unusable or dangerous products, retailers being left out of pocket and brand owners loosing sales and damaging their goodwill and reputation while having to rectify the situation.

More importantly, however, it is a simple fact that the supply chains bringing these ‘fake’ products to market are illegal, and the profits made are often used to support serious criminal and terrorist activity both within the UK and abroad. This means the purchase and selling of counterfeit goods has wide reaching and dangerous consequences that go far beyond a brand or retailer loosing money.”

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