Implications for Affected Enterprises

The far-reaching implications of counterfeit trade are widely recognized, and most brand- and product-protection experts are aware of the major risks for their business. However, detailed knowledge on the numerous long and short-term effects appears to be sparse, and many related questions have not been thoroughly addressed yet: Counterfeit trade can reduce revenue – but to what extent? Illicit imitation products can damage a brand name – but how do they interfere with individual performance measures of trademarks, such as name recognition, perceived exclusiveness, and quality associations, and what is the effect on brand value? Counterfeiters may benefit from learning effects during production and may turn into licit competitors in the future – but what about the resulting barriers of entry for contemporary licit competitors in emerging markets?

In the following chapter we will provide answers to these questions. We will investigate the potential loss of revenue due to short-term substitution effects, thoroughly analyze the impact on brand value, and introduce a set of tools to quantify financial losses that stem from these effects. Moreover, we will discuss the impact of imitation products on total cost of quality, liability claims and future competition. We will furthermore outline the potentially positive implication for example on network effects, access to a future user base, and product launches. Addressing these issues not only provides a substantiated basis to vindicate investments in anti-counterfeiting measures, it also helps a great deal to develop targeted protection strategies.