When we came up with the idea to create StopTheFakes.io, we were fully aware of the scope of the counterfeit market. We couldn’t imagine, however, how serious the problem is. Government watchdogs missed the emergence of a global industry and allowed it to turn into a monster devouring law-abiding businesses. Currently, governments keep discussing what can be done to deal with this problem while continuing to apply the old methods, such as tax surveillance, customs and few cybersecurity units.

Out of all the global research studies on the issue, we decided to choose the most conservative one to give you a big picture. This article is based on the facts and figures provided by the Organization for Economic Co-operation and Development (OECD) and the European Union Intellectual Property Office (EUIPO).

For research purposes, officials draw on two main sources of data:

Official international trade statistics

Reports of the customs authorities on confiscated counterfeit goods

In other words, they take into consideration the detected infringements, which are almost less numerous than the non-detected ones. What follows is the most conservative evaluation of the volumes of counterfeit goods. The real extent of the fake and piracy market is much larger.

First glimpse of the problem’s extent

The data obtained from customs reports of various countries for 2013 gives us the following figures.

In 2013, sales of counterfeit goods and pirated content exceeded $461 billion, or some 2.5% of the total amount of international trade.

These figures are almost equivalent to the GDP of Austria or the combined GDP of the Czech Republic and Ireland. In a way, a pirate state has essentially been created; a state as big as a medium-sized EU member. This pirate state exerts a strong influence on the global economy. Incidentally, the market capitalization of the world’s largest retailer, Amazon.com Inc., also amounted to $461 billion. However, this retailer has a less impressive turnover, its revenues being less than $140 billion last year.

The worst thing is that counterfeit trade volumes are growing rapidly. Back in 2008, global counterfeit trade volumes were estimated at only $200 billion, or 1.9%.

These figures didn’t impress you, did they? Well, then just imagine that they are destroying the modern business model based on intellectual property rights. Modern economy reposes on innovations and original ideas protected by copyright, whereas counterfeit producers level out the innovations’ economic dimension by appropriating someone else’s achievements.

Furthermore, pirates counterfeit not only luxury brands, but also mass-produced goods and even products intended for business. They operate in all market segments and are present all over the world. Even China, known for its fake products, suffers from counterfeiting.

What Rights Are Violated?

Violations of law in terms of types of intellectual property rights are as follows:

Trademarks: 95%

Copyright: 2%

Design rights: 2%

Patents: 1%

In most developed countries, legislation and law enforcement practices aim to protect copyright and patented technologies. Violations of law in this segment represent only 5%, while most crimes concern trademark property rights. As of now, there are no mechanisms to ensure their protection, so right holders are left face to face with offenders and have to meet enormous expenses to protect their rights.

What type of goods get counterfeited the most?

If we divide into categories the counterfeits seized by the customs authorities all over the world, we’ll come up with the following results for 2013 (in thousands of fakes seized; the figures are rounded up):

Footwear: 27

Sewed or knitted clothes: 18

Leather products: 18

Electrical devices and tools: 16

Watches: 9

Tools, optical products, medical equipment: 8

Other types of clothing: 7

Perfume and cosmetics: 5

Toys: 4

Medicines: 3

Jewelry: 3

Comparison of the counterfeit market with other types of criminal activities

Counterfeit products; $461 billion

Prostitution: $186 billion

Marijuana sales: $141 billion

Illegal gambling: $140 billion

Cocaine sales: $85 billion

Heroin sales: $68 billion

Oil theft: $37 billion

Human trafficking: $32 billion

Important point

As can be seen from the table above, the total turnover of illicit drugs remains well below the counterfeit trade volumes. However, police in every country has a Drug Enforcement Agency. Let us remind you that we use the data provided by the customs authorities. Therefore, when drugs cross the border and get into the domestic market, law enforcement agencies continue to keep track of them. Counterfeiting is a different story. As soon as fake running shoes pass through customs, they get out of sight of the regulatory bodies. The trademark owner is left alone with offenders and has to invest money in detecting and documenting cases of counterfeit sales.

Global Piracy Market

We can estimate the counterfeit market by analyzing how many counterfeits are detected at customs. If a consumer ordered a fake Swiss watch in China, it is expected to cross the border where the customs authorities may intercept it. Pirated content is a more complicated story. An Internet user downloads a torrent or watches a pirated movie at home. Attempts of the regulatory bodies to block access to pirate websites look pathetic, because basic computer skills are all a user needs to get a VPN connection and bypass any bans.

This is why it is extremely hard to estimate, if approximately, the extent of the piracy market. MUSO, a London-based tech company, has been the most successful of all in this respect so far. Their research focused on the pirate website traffic in 2016. The results are listed below:

Total number of Internet users’ visits to piracy websites: 191 billion

Total number of one user’s visits to piracy websites throughout 2016: 53.33 times throughout 2016

Number of Internet users around the world: 3.37 billion

Global population: 7.38 billion

The development of network technologies has only aggravated the situation. In the past, pirates used to steal only ready content (movies, musical compositions and software), but now they are stealing Internet broadcasts of various events and channels too. It is difficult to estimate the amount of money lost by a right holder who organized, suppose, a pay-per-view broadcast of the World Cup Final. Immediate reaction –in an online mode, literally — is required to detect and put a stop to this infringement.

The users’ interests in pirated content are as follows. Below is the number of one user’s visits to different websites by topic:

Online (streaming) broadcasting: 32.05

File downloads: 8.79

Public torrent trackers: 9.48

Private torrent trackers: 0.67

Broadcast recordings: 2.34

Important point

As a matter of fact, fighting Internet piracy is not that hard. US legislation allows rights holders to directly address the management of search engines and of Internet providers demanding that they block access to this content. Information on how Internet users learn about piracy websites is provided below:

Direct visits: 41.9%

Search results: 34.7%

Links posted on other websites: 20.4%

Social networks: 2%

Ads: 0.6%

Emails: 0.4%

As can be seen from these figures, most of these sources can be shut down, if detected, on time.

Join Our Effort to Fight Counterfeiting and Piracy

A giant army of volunteers searching for and documenting infringements is the best way to change the status quo in the counterfeit and piracy market.

This idea led us to the creation of our project, StopTheFakes.io. We are fully confident that it will be a success: right holders will never miss the opportunity to get users involved into the search for infringements, all the more so because their efforts will be remunerated. Join us and we’ll change the world for the better.

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