In recent years, US companies have been taking counterfeiters in Asia to court in order to protect the copyright and trademarks of their brands. Beats by Dr. Dre, a US premium headphones maker, is the latest victim. In the past year they have filed a total of five complaints regarding Asian online stores posing as official Beats websites and illegally selling products bearing the Beats logo. Estimates suggest that illicit online stores such as those mimicking Beats’ site generate an annual total of $135 billion in profits from unlawful uses of brands.
This case mirrors the fight of Starbucks to maintain its trademark in China, where numerous knockoffs have been operating and luring in unaware customers. Shanghai Xingbake Cafe, a direct Chinese translation of Starbucks, was ordered in 2006 to stop using the Xingbake name and forced to pay$62,000 in damages.
Counterfeit products from Asia are understandably troubling for US firms. In China, the term shanzhai refers to fake products which mimic the names and designs of the original brands. Product categories extend from phones to fast food and hotels, bearing names like HiPhone and Pizza Huh. Such copycatting behavior can reduce willingness of US firms to invest in Asia or use Asia-based services for fear of intellectual property breach. This may also hurt Asian exporters, as demand for their goods is hit by a perception of lack of innovation or that their products might be of low quality imitations.
Despite this, not all counterfeits have a negative impact. Studies have found they often increase brand awareness and consumers’ desire to purchase the actual brand. The craze for Apple products in China, despite countless counterfeit brands, seems indicative of such potential benefits. That counterfeiters are willing to go to extreme lengths to mimic the original is testament to the fact that legitimate brands are in high demand. The presence of counterfeits also helps to drive up the exclusivity of the legitimate product.
Intellectual property rules and regulations are a key component of pending and existing trade agreements between the US and Asia, such as the Trans-Pacific Partnership (TPP), which may help to limit the negative financial impact of counterfeits on American brands in the future. The rules under TPP go beyond the current international laws to increase copyright terms, control importation of copyrighted goods and establishing greater sanctions for copyright infringements. Until the TPP can be finalized and enforcement begins, US companies must work to defend their brands while also considering if they can reap any reward from flattering imitations.
Doris Xu is a Research Intern at the East-West Center in Washington and an undergraduate student at the University of Sydney.