By Catherine Saez
Counterfeiting and piracy are inflicting an uncomfortable bite on profits for businesses and tax revenues for states, and also raise health and safety risks, say businesses and governments. The global business community is determined to fight back through The International Chamber of Commerce (ICC) and its striking arm launched in 2005: BASCAP (Business Action to Stop Counterfeiting and Piracy).

A global leadership group bringing together CEOs from leading global companies such as Vivendi Universal, Nestlé, Sanofi-Aventis, EMI and NBC will try to build awareness and strengthen the lobbying effort to reduce what BASCAP describes as a drain on businesses and on the global economy resulting in a widespread loss of lawful employment, and plundering the creative community’s reward for effort and innovation.

A meeting was organised in Geneva on 29 January to present the results of a global survey on counterfeiting and piracy undertaken by ICC in cooperation with the Cass Business School of the City University of London and to deliver a plan to tackle what Jean-René Fourtou, BASCAP co-chair and chairman of the supervisory board of Vivendi Universal, labels as a “huge hidden economy” and “the biggest economic problem of the century.” The CEO event was followed on 30 January with a separate, two-day multistakeholder meeting hosted by the World Intellectual Property Organization and others.

A Top Ten and Bottom Ten List

The business survey reports that leading emerging markets such as China (in the lead), Russia, India or Brazil have the worst environments for intellectual property protection, while the United States got the top position ahead of the United Kingdom, Germany and France for the most favourable IP environments.

Raising the awareness of the public and the people working with government has been presented as the main target, followed by a strong focus on governments to set a legislative framework and, more importantly, to enforce it. The business leaders all agreed that the education of the public was essential.

The report states that most firms were in favour of enforcement. It also details slightly different approaches to confronting the problem depending on the field of the 48 companies from approximately 27 industries that were surveyed. Those relying on mass production (e.g. music, CDs) favoured a strengthened IP legislation and were more inclined to spend on IP-related public education than batch production industries (e.g. aircraft).

Numbers Elusive on the Volume of Counterfeit Goods

The CEOs in the press conference agreed it is difficult to specifically identify the impact on business. “We lack real figures” said Fourtou. But Bob Wright, vice chairman and executive officer at General Electric and chairman and CEO of NBC Universal, said, “In many countries we are unable to do any business because of counterfeiting. In the last two to three years, 10 or 12 percent [of revenue] has been affected.”

Jean-François Dehecq, CEO and president of Sanofi-Aventis, said, “in the pharma business, there are many parallel trades, it is difficult to evaluate but the affected volume is estimated between 5 and 10 percent of our sales and the trend is increasing in the North.”

Tarik Rangoonwala, CEO of Forhans in Pakistan, said that the biggest problem is in developing countries. “Piracy is a worldwide phenomenon,” he said. “We are working on this matter and want the world to know it.”

Guy Sebban, ICC secretary general, said an earlier study estimated the amount at 600 billion dollars but has been challenged. Recent lower numbers are based on custom seizures at the border and do not include the domestic counterfeit market or intangible items. Last week a new bigger figure was issued. “It is growing dramatically” he said.

Speakers’ Paint Grim Presentation of Collateral Damage

In the their awareness initiative, the CEO group presented a grim picture of the consequences on the global economy but also of collateral damage inflicted on populations, such as dangerous counterfeit drugs and faulty car parts spilling into the world wide market including the Northern hemisphere.

“We spend billions of dollars on research, studying the drug and its side effects and we find the product on parallel markets without the right ingredients,” said Dehecq. “we have to bring better information to the public.” He added that it would be better to have low-priced generic pharmaceuticals in developing countries than counterfeit products and keep the price up in developed countries where people can afford to pay more for drugs.

Fourtou also indicated that counterfeiting and piracy were linked with international crime and terrorism.

The industry leaders warned that low protection against counterfeiting and piracy influences direct investment and business decision by global firms, like the decision to base product development in a given country.

Free Trade, Doha Round and Enforcement as Useful Tools

For Fourtou, free trade is part of the solution for a piracy and counterfeiting-free world. “Wealth and development are proportionate to trade. People have to go beyond their own interest and conclude the Doha Round” of trade negotiations at the World Trade Organization, he said, adding that the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is a good basis for balanced protection.

Wright said a “big part” of the group’s agenda is to get countries to put resources into fighting the problems. The key issue remaining, according to Fourtou, is the enforcement by governments of existing IP protection rules. “Legislation could be improved,” but “the main issue is enforcement,” said Fourtou. “There is a huge lack of efficiency and willingness” at the national level.

Whether counterfeiting and piracy are the biggest problem of the century or not, it is clearly drawing attention and action from the global industry leaders wary of seeing their benefits eroded and concerned about the consequences for the general public. Whether those considerations can win the public opinion or the attention of governments remains an open question.

Catherine Saez may be reached at csaez@ip-watch.ch.