In the last couple of months I have spent considerable time with police officials in India. I am worried, very worried about the conversations I have had with them which were largely centred around the state of the informal economy, in which Intellectual Property (IP) crime plays a huge part. The most unsettling linkage is the one between the proceeds of IP crimes and terrorist activities. A senior police officer with whom I have had extensive discussions on the subject acknowledged some recent reports that many terrorist organisations now source their funding through IP crimes. According to him the terrorist outfits or organised criminal networks do not operate in a vacuum but very much in the real world. They need an interface with real commerce in order to fund their nefarious activities. These organisations are becoming increasingly sophisticated and are beginning to control the majority of IP crimes that are taking place, particularly in developing countries. The officer claims that in his state alone (India has 28 states) rampant music piracy results in a massive loss to the economy. He estimates that the size of the informal music sector is at least 12 times the size of legitimate industry. He does not stop there and quotes many more examples from fake designer goods to more serious instances, such as counterfeit drugs, food products and adulterated petrol, which have major health and safety implications. This analysis of the situation in India also applies to other high-growth countries as well as some Organisation for Economic Cooperation and Development (OECD) countries. Most global surveys however frequently cite the BRIC (Brazil, Russia, India and China) nations as the worst IP offenders. The BRIC economies are playing a major role in global economic growth and weak IP regimes in these countries are a cause of major concern for companies that sell products into these markets. IP crimes do more damage to a nation than is apparent on the surface. This grand larceny has a huge impact on the nation’s economy and society as a whole, notwithstanding its role in fuelling crime generally. The World Health Organisation (WHO) states that approximately 10 per cent of all pharmaceutical drugs in the world are counterfeit, rising to 60 per cent in certain poor and developing nations. In India, consumer watchdogs point to thousands of cases of adulteration in the food and beverage industry. According to a report the daily sales of a particular brand of Scotch whisky are greater than its monthly worldwide sales. This is only possible if the real bottles have counterfeit liquor in them. As a result the empty bottles of this particular brand have a major resale value of 250 rupees each (approximately 4 US dollars). There are thousands of other cases that can be cited but the net result of each of them is a lose-lose situation for all stakeholders: The industry loses major revenue streams because of pirated and counterfeit goods. As a result the government also suffers major loss of tax revenues. The creators and owners of IP, which may be different entities from different nations, are not remunerated. The consumers get poor value for money or in other cases are cheated outright. Due to the overall lack of monies collected, the IP ecosystem does not develop effectively. The lack of an effective IP regime in a country is a major deterrent to any R&D or IP related investments coming into the country. In order to deal with IP crimes the stakeholders must first understand the subject matter in great depth. A textbook definition states that an unauthorised use of someone’s intellectual property that includes copyright, patent, trade mark or design constitutes an IP infringement. Most people think of music CDs and film DVDs when they think of IP related crimes. Sadly, this is largely the media’s doing, by providing more than their fair share of coverage to branded goods and products that supposedly evoke a greater public reaction. The less reported and more serious crimes are in the areas of food products, everyday consumer goods, automobile parts and manufactured goods. Ironically the media itself has also been the victim of IP infringement as there have been instances when even fake newspapers and journals have been in circulation. The global trends in IP crime will only make life more difficult for industry, law enforcement agencies and governments around the world. What was a very local industry has now gone universal with the help of technology and globalisation. The global organised criminal networks tend to have very strong capabilities for moving goods, people and money across borders. These groups typically deal in mass-produced goods such as CDs or drugs as the more bespoke goods/services are difficult to imitate and replicate. Within a country’s borders the criminal networks exploit four major weaknesses in any system. Firstly, they make use of an enforcement framework that is less than adequate. For instance, although the Indian government takes IP crimes very seriously, there is just not enough support in the form of resources available to police forces to create an effective front to counter these criminals. In a major metropolis such as Delhi there are fewer than a dozen officers dealing with all forms of white-collar crimes including IP crimes. What exacerbates the situation is the perception among officers at grass-roots level that IP crime is not a real crime ‘since it is victimless’. For most officers who are battling against other heinous crimes such as homicide, rape or terrorism, the IP related crimes go to the bottom of the pile. The second major problem is the capacity of the judicial system. Even though there is a major infraction of rules taking place, the judiciary is not equipped to deal with the cases on a speedy basis. In certain industries there are thousands of cases registered in various courts of India but due to a massive backlog they are just gathering dust. An affirmative ruling is a far cry as most cases have not even been heard by the courts. Another bottleneck is caused by a serious shortage of experienced lawyers in the country who are able to represent the victims. Those who have a thriving practice are in such high demand that they charge exorbitant rates which only the major corporations are able to afford and thus take access to quality legal advice outside the reach of the small and medium enterprise (SME) industry and the common person on the street. This makes the whole IP regime elitist and the entire exercise self-defeating. The third area is the huge intelligence chasm that exists between all the stakeholders. The industry rarely shares information with the key stakeholders as they fear brand erosion if the news leaks out in the media. The different industry bodies also rarely share information between themselves. It is astonishing that this is the situation since most criminal organisations will commit IP crimes cutting across many industries. Sharing of this intelligence with other industries would most certainly help in crime prevention. The enforcement agencies also suffer from a serious intelligence deficit. They rarely share information with other forces within the country or with global networks such as INTERPOL. The industry must also develop an internal intelligence gathering system. Many instances of IP crimes are due to leakages within the industry. For instance the surplus output from manufacturing outfits is sold and distributed in grey markets without the knowledge of the owners of the IP. Equally there is leakage in the enforcement system. The offenders get regular tip-offs from insiders that help them evade raids. There have been numerous complaints of fake raids that the agencies conduct to show to various stakeholders that much is being done to prevent IP crime. The fourth major weakness is poor knowledge and awareness of IP within the system. An interview with some police constables in India highlights this issue well. When asked what IP crime prevention meant, most constables thought that it involved mayors and other local government officials. According to their logic VVIP protection is applicable to the prime minister (and similar levels of office), VIP protection is applicable to ministers, therefore IP protection must apply to those lower in the government hierarchy. The senior officers, however, are mostly aware of the situation on the ground but are unable to change it due to poor resources. Firstly, there needs to be a much greater will within the system to eradicate this scourge. The three main stakeholder camps: (1) policy and legislation; (2) intelligence and enforcement; and (3) awareness are all cogs of a wheel that have to be perfectly in sync with each other and must be adapted to the unique situation in each country. No battle against IP crimes can be won without government’s proactive role in strengthening the legislation. Both policy makers and judiciary have to design a system that will not only be effective in containment but also act as a strong deterrent to any future crimes. This will primarily be achieved by heavy penalties and fines for crimes, swift and cost-effective judicial process, fast-track courts, improved industry standards and clear guidelines. Greater innovation is required in intelligence and enforcement. Although there is a willingness among the forces to eradicate this crime, they must realise that greater sharing of knowledge and pooling of resources is the only way forward. Additionally the industry cannot wash its hands of what is perceived as a sovereign function. It must contribute not only in resources but also in development of an effective crime prevention framework. Both technology (e.g. GPS tracking, radio frequency identification (RfID)) and processes (e.g. intelligence databases, evidence protection, continuous monitoring) will play a major role. Awareness has a huge role to play in making the stakeholders realise the damage that IP crimes inflict upon a nation. The industry is obviously very much aware as it suffers direct consequences. Consumers however have a tendency to believe that it is only the large multinationals that suffer from IP crime or they suffer from Robin Hood syndrome whereby they support the criminals for making available products that may not generally be within their purchasing power. Education must be imparted at all levels. Many countries are contemplating including IP related education in primary and secondary schools so that younger generations preserve and improve the IP framework. Consumers need to be educated equally by producing quality research that demonstrates the linkage between IP crime and loss of value. Policy makers and industry must contribute by making the judiciary and enforcement agencies aware that IP crimes are not victimless. The biggest victim is the nation as a whole. The most effective solutions in combating IP crimes will come from greater engagement by the private sector. The public private partnership (PPP) model offers much potential and must be explored further. Although the private sector cannot get involved in areas that are under the remit of the state such as law enforcement and the judiciary, it can certainly play a very strong supporting role through better intelligence gathering and creating advanced technology solutions that will provide a deterrent to the criminal outfits. There is a larger imperative, which is to cut all possible sources that fund terrorism and organised crime. If global policy makers do not take a cue from this growing trend, it will confront them in much more dangerous forms at a later date.
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