Comparatively often, counterfeiting can even threaten the existence of small and medium-sized enterprises (SMEs): If the intellectual property of SMEs is infringed, the companies are significantly less likely to still exist after five years (34%). That is one result of the recent study Risks of Illicit Trade in Counterfeits to Small and Medium-Sized Firms by EUIPO and OECD. According to them, this is the first time that such research has focused on smaller companies.
The study highlights that smaller companies are quite often affected by infringements of their IP rights: Overall, around 15% of SMEs that own IP rights would suffer from IP infringements. In the case of innovative SMEs, the figure even rises to almost 20%. However, owing to a high number of suspected unreported cases, the figures could also be significantly higher: Around 40% of SMEs admit that they do not actively monitor their markets for possible IP infringements. A large share of smaller companies therefore appears to rely on incidental information about possible IP infringements, such as feedback from customers or business partners, the study suggests.
The damage caused by counterfeiting can be severe for SMEs. The study mentions lost sales, damage to a company’s reputation, and loss of competitive advantages as important effects of counterfeiting on SMEs. In addition, smaller companies would often lack the necessary resources to compensate for economic damages caused by counterfeits – IP infringements could therefore be more dangerous for SMEs than for large companies.
SMEs could have problems fighting counterfeiting for another reason too, according to the analysis. Because even if counterfeits are discovered, SMEs often struggle to defend themselves effectively. Many SMEs consider the processes to enforce their IP as too lengthy, too complex, and too costly, the report says. Other challenges for SMEs would include maintaining intellectual property rights in other markets, such as China. And, what is more, SMEs often would lack the resources needed to take effective measures against imitators.
According to the study, counterfeiters target all types of goods manufactured by SMEs. The most frequently counterfeited goods include electronics, clothing, perfume/cosmetics, and toys. Mostly, the counterfeits are manufactured in China and Hong Kong, and often distributed via the Internet: Around half of all seized counterfeits of SME products to be delivered to the EU had been purchased online.
// This ground-breaking study confirms that innovative SMEs are more at risk from counterfeiting. These businesses, which hopefully will create the jobs and wealth of the future, are the ones whose chances of survival are reduced due to such unfair and illegal competition from counterfeiters and other IP infringers.
Christian Archambeau, Executive Director of the EUIPO
The study also emphasizes the great importance of smaller companies for the economy in Europe and in the member countries of the OECD. Here, SMEs make up the majority of companies and provide two‑thirds of the jobs.
The SME study was published at the start of this year by the European Union Intellectual Property Office (EUIPO) and the Organization for Economic Cooperation and Development (OECD). The analysis uses data from customs seizures by the European Commission, the World Customs Organization (WCO), and the US Department of Homeland Security. This information was combined with data from the EUIPO’s Intellectual Property SME Barometer and from the ORBIS database of European companies.