The Mounting Threat From Counterfeits

Counterfeiting may become a problem for virtually any company with a successful product. Counterfeiters have no interest in ensuring the quality or safety of their products. This creates significant potential for negative effects on consumers and PR problems for the company whose products are being counterfeited.

The authors cite cases in which plaintiffs have tried to hold companies liable for damage done by counterfeits of their products, without success so far, but similar cases give them hope. A Kentucky court ruled that a shampoo manufacturer could be liable for damages arising from use of a bottle of its product that had been opened and adulterated, if the plaintiff convinces a jury that a prudent manufacturer would have sealed it.

To address the threat from counterfeits, companies should establish a program with at least three components: Engaging R&D and other relevant departments to make counterfeiting more difficult by such means as making packaging difficult to copy, using chemical or biological tags, serialization or track/trace systems, or bar codes and radio frequency identification tags; developing a corporate security department to investigate suspected counterfeits and their sources; and including legal assistance that can take appropriate civil action or work with government agencies to pursue criminal remedies.

The counterfeiting problem remains urgent. In addition to an effective program, strong investigatory and civil and criminal enforcement programs are essential and should be budgeted as a cost of business.