SUCCESS STORIES: BRAND AND PLATFORMS FIGHTING ONLINE COUNTERFEIT SALES TOGETHER. Leo Longauer, Director Global IP Enforcement, Swarovski AG

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1 SUCCESS STORIES: BRAND AND PLATFORMS FIGHTING ONLINE COUNTERFEIT SALES TOGETHER Leo Longauer, Director Global IP Enforcement, Swarovski AG

2 Page 2 Corporate Legal Intellectual Property

3 ONLINE COUNTERFEIT: THE ISSUE IS GROWING Rise of the Brand & Rise of China Globalization & Rise of the Middle Class and cheap Manufacturing possibilities in Developing Markets Rise of the Internet: 3 Internet reaches more and more countries and people: 40% of the population worldwide, 3 bn people in 2015 (75% in Europe, 65% in Americas, 32% in Asia, 20% in Africa) Counterfeit economy growing 25% year on year (estimated $ 600 bn annually, $ 350 bn online) Anonymity for counterfeiters and other bad guys Huge amount of cheap internet real estate and expanding channels from which to host illegal businesses: websites, marketplaces, social media, apps, s: Low cost sales, marketing, and distribution for counterfeiters Internet Service Providers (ISPs) incentives are at best mixed (they make money from hosting counterfeiters & have limited liability) Mail order counterfeits largely avoid border and Customs controls (2014: shipments detained by EU Customs) Scope is expanding: everything is sold via Internet: apparel, luxury, pharma, auto parts, aviation, electronics, food, toys, etc. Increased professionalization: counterfeit is often linked to organized crime using advanced technology such as search engine optimization and marketing tactics

4 IMPACT OF COUNTERFEITS Desirability of top brands, the existence of the brand premium, asymmetry of manufacturing costs, globalization, and the internet all fuel the counterfeit business model Negative impact of counterfeits: Lost revenue (estimated 10% of manufacturing revenue worldwide) Increased return, warranty and customer service costs Brand damage (consumers often blame the brand owner) Strained channel relationships Diverted web traffic and increased SEO costs 4

5 COUNTERFEIT IMPACT IN THE JEWELLERY AND WATCH INDUSTRY IN THE EUROPEAN UNION * 13.5% of sales lost by the sector due to Counterfeiting 1.9 billion of revenue lost annually by the sector Additional 1.6 billion of sales lost in related sectors direct jobs lost direct and indirect jobs lost 600 million of government revenue lost (social contributions and taxes) Italy is the largest producer of Jewellery in the EU with production of 5 billion each year, the Jewellery and watches manufacturing sector in Italy loses approx. 400 million every year due to counterfeiting * The economic cost of IPR infringements in Jewellery and watches: EUIPO report 2/2016: 5

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9 FAKE WEBSITE: 9

10 FAKE WEBSITE: 10

11 FAKE WEBSITE: 11

12 MARKETPLACE INFRINGEMENTS 12

13 SOCIAL MEDIA INFRINGEMENTS 13

14 INTERNET MONITORING AS PART OF ENHANCED IP ENFORCEMENT EDUCATION & COMMUNCIATION Raising IP awareness in Swarovski, allowing employees to be brand ambassadors Inform and educate customers on how to use our IP: Proper use Guidelines, warning letters, etc. Regular business updates and communication about enforcement cases and strategy LEGAL ACTION Monitoring third party trademark filings and domain names: oppositions cancellations, trademark gap fill filings Internet monitoring and enforcement re illicit use of our IP on websites, marketplaces, social media Legal actions: Cease & Desist letters, seizures and raids, civil, administrative and criminal actions, contract termination 14

15 IP ENFORCEMENT IS A BALANCING ACT RISK OF IGNORING THE ISSUE Lost revenues (estimated 10% of manufacturing revenue worldwide) Increased return, warranty and customer service costs Brand damage (consumers often blame the brand owner) Strained channel relationships Diverted web traffic and increased SEO costs RISK OF OVER-ENFORCEMENT Resource-intensive: both in-house capabilities and outsourced solutions LEGAL BUSINESS Retaliation/Back-fire: negative brand image if too aggressive approach to brand protection (social media campaigns) Loss of trust from ISPs and Marketplaces 15 Damaged to client/channel relationship

16 INTERNET ENFORCEMENT: IMPLEMENTING THE EDUCATE FIRST APPROACH Input/ Detection Pre-enforcement warning Assessment PuG info Action By IP team, using agent By staff send to By customer or general public contact customer service or local KAM By IP team, according to agreed set of criteria and risk level, taking the client relationship and local situation into account. Misuse or infringement by customer B2B solution is preferred (IP supports) Misuse or infringement by noncustomer IP team to handle Known customers are whitelisted & informed about PuG, incl. deadline to correct their branding and to prevent enforcement actions For marketplaces: whenever possible, active communication of PuGs to all sellers (incl. indirect customers) to correct their branding and to prevent enforcement actions

17 ONLINE COUNTERFEIT: MAIN CHALLENGES* Anonymity of infringer whack-a-mole dilemma Huge Volumes, short deadlines Industrial enforcement solution needed Growing number of channels: Websites, social media, marketplaces, apps, sms, etc. Civil, criminal, admin measures available, but not top priority of law enforcement authorities Usually multi-national cases difficult enforcement of foreign judgments No international arbitration mechanism * WIPO/ACE/12/9 Rev. 2: Advisory Committee on Enforcement: Study on Approaches to Online Trademark Infringements; Dr. Frederick Mostert. 17

18 ONLINE COUNTERFEIT: TYPES OF ACTIONS Voluntary measures of online intermediaries: Notice and take-down procedures Notice and stay-down procedures Notice and Disclosure procedures Advertising code of conduct Constructive collaboration Limitations: Freedom of speech Lawful competition Privacy/Data Protection 18

19 EXAMPLE OF GOOD COLLABORATION: ALIBABA In addition to take down procedures, we collaborate in the following fields: Test-buy project: Alibaba uses data mining techniques to determine best products for testpurchase. Seller education: Fair-Use-Guidelines sent to all Swarovski-sellers. Alibaba-education: Train Alibaba staff to enhance identification of counterfeit goods. On-To-Offline cases (O2O): Using data mining techniques to select targets, collaboration with PSB for criminal actions. 19

20 EXAMPLE OF GOOD COLLABORATION: ALIBABA Test-buy project: We provide list of suspected counterfeits, Alibaba uses data mining techniques to determine best products for test-purchases: 20

21 EXAMPLE OF GOOD COLLABORATION: ALIBABA Seller education: Fair-Use-Guidelines sent to all Swarovski-sellers & specific educational website. 21

22 EXAMPLE OF GOOD COLLABORATION: ALIBABA Alibaba-education: Train Alibaba staff to enhance identification of counterfeit goods. 22

23 EXAMPLE OF GOOD COLLABORATION: ALIBABA On-To-Offline cases (O2O): Collaboration to detect counterfeiters and file PSB actions. 23

24 ENFORCEMENT WORKS! 24