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BYInvitation
CHANSIN TANGBURANAKIJ
Counterfeit products have long been widely available in Thailand, but the people responsible for their production, distribution and sale today are dealing with the same kinds of competitiveness problems as their legitimate peers.
In the past, Thai counterfeit products were not only sold locally but also exported to other countries. Most of the products were low-tech, low quality and low priced. Intellectual property (IP) rights were infringed, for example, by simply copying famous trademarks and applying them to low-quality products such as T-shirts and jeans. Infringing activities were straightforward. Counterfeit products were made in small factories, transferred to and kept in warehouses, distributed to retailers per order, and finally openly sold by retailers throughout the country.
Relatively recently, things have started to change. Fewer and fewer counterfeit products are being produced in or originate from Thailand. Cost benefits can be gained by outsourcing production to places where labour and material costs are lower than the local market. Thus, like mainstream industries, counterfeiters are relocating or outsourcing production to countries where there are clear cost benefits from doing so.
One such country is China, which also has the added advantage of having a massive market of its own, with a voracious appetite for counterfeit brand name goods. Millions of competitive counterfeit products are being produced in China and shipments are arriving in Thailand on a daily basis.
These Chinese fakes are very different from those made in Thailand in the old days. They are much better in terms of quality and price per unit. Thus, those counterfeiters that did not outsource or relocate, simply stopped producing their own goods and started to import cheaper ones from suppliers in China, among others. They had no option as they were no longer competitive.
This trend will be a huge problem for IP owners in the future because Chinese counterfeiters are now not only copying well-known brands, but also pirating the technology needed to produce more technologically advanced counterfeit products. It seems to be a Catch 22 situation.
High-tech industries seeking cost benefits are outsourcing production overseas but in doing so are also having to transfer their technology to enable such production. This transferred technology appears to be falling into the hands of the counterfeiters, who then go on to produce fake goods that compete directly with those produced by the originators of the technology. Sometimes you just can't win.
While the demand for counterfeit products in the Thai market has remained stable over the years - constantly high in other words - Thai people and tourists are focusing more on purchasing better quality and technologically more advanced products, which are the same price or only slightly more expensive than the lower-quality products made locally. Thus, the more "traditional"Thai counterfeit products are being replaced by these better quality imports.
That is not to say that Thailand does not have a major role to play in the supply of counterfeits, just that it tends to have a greater focus on particular markets, namely, counterfeit low-end clothing, automobile and motorcycle parts and a few other items.
While the source of counterfeit products has changed as a result of market trends, economic feasibility and technical know-how, the methods of bringing those products to the market have also changed considerably. The whole counterfeit market and trade in Thailand is much better organised than it was. In the past, organisation was very relaxed, if it existed at all. Now it is a well-oiled machine of illicit activity.
There is so much more to be gained and lost in the counterfeit business nowadays that infringers have had no alternative but to improve their organisational and business practices. Strategies have been introduced for maintaining sufficient inventory to meet demand while at the same time reducing the risk to the holder of the inventory.
Who would ever have thought that infringers would have started to use supply chain and inventory control economic models for carrying out their illegal activities? They may not know the correct terms to use for what they are doing, although some certainly do, but they assuredly are taking advantage of such business models. In part two of this article we will focus more on the Thai end of the counterfeit market.
Chansin Tangburanakij is a lawyer with Baker & McKenzie's Bangkok office, e-mail
Chansin.tangburanakij@bakernet.com
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