From the Desk of JMB: IP Laws and Safety – Why Every Counterfeit Has a Silver Lining

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I have suggested, on more than one occasion, that anti-IP lobbyists are the equivalent of modern day Luddites. However, many of us, at some stage in our life, have experienced a temptation to buy an article which they know flouts the rigid possessiveness of intellectual property rights. Merely being IP attorneys doesn’t exempt us from that temptation, per se, but it has led me to consider how IP law affects the lives of non-IP practitioners; the distinction between IP practitioners and everyone else (the other 99.99999% of people that inhabit this planet) being important merely in terms of awareness of IP law.

So how does IP affect our everyday lives? IP rights are everywhere, and underlie  much of our everyday activities, every time we go shopping, pick up a phone or go for a drive. The list is endless. But what is its purpose? And once we have established its purpose, are there any unintended benefits that it provides?  Are there any direct, tangible benefits that those who do not actually own IP receive due to the existence of IP laws?

We know that the basic reason for IP laws is to encourage innovation, ensuring commercial rights of an inventor of an arguably useful widget, a designer of a new product or provider of a great service. It can be argued that ensuring these rights indirectly helps to drive society to develop more and better ‘things’, many of which are beneficial to society itself.

But what about benefits, if any, to non-IP owners?

I was first drawn to thinking about this when I read that “British consumers now twice as likely to buy a counterfeit electrical product”. This is the title of a report recently issued by the UK charity Electrical Safety First. According to the report, one in twelve people said that they would choose to buy a suspected fake electrical product if it was cheaper than the original.

Initially, my reaction was focused on the statistics. After all, the phenomenon, per se, is not new. But then I started thinking that there is more to it than a mere growth in the market of counterfeits. Buying a fake electrical product is not the same as, for example, buying a fake fashion item. Yes, those that buy fake fashion items have committed a form of theft from the brand owner, but this is a theft that they can get away with. As opposed to a fake electrical appliance, a fake fashion item will not literally blow up in their face. And herein lies the problem.

“Hoverboard warning as units burst into flames” is the title of an article in The Australian Business Review which, in December last year reported that Australia’s hottest Christmas toy the “hoverboard” is so hot that some units are bursting into flames, a happening being put down to cheap clones flooding the market.

A problem indeed(!) No one died, but who’s to say that they couldn’t have?

And then I remembered a recent story about an Apple® product.

“Apple recalls power plugs over electric shock risk” is the title of a report on CNN in early 2016 which related how the company was recalling millions of power adapters because they could cause an electric shock. (In fact, one of these plugs burst into flame in my home, late 2015).

I can hear the anti-IP lobby claiming that if it’s also happening to the manufacturer of the genuine article, supposedly protected by patents and trademarks, then “why should I pay more for the genuine article when it’s just as likely to burst into flames?”

I would argue that it’s not just as likely to burst into flames; a brand name company has an inherent interest, not just in meeting the official manufacturing standards of its markets, but in protecting its bottom line and therefore the quality of its products.

Think about it. If Apple® or Nissan®, or any other manufacturer of items whose malfunction could cost lives, is perceived to have low standards, consumers will stop buying from them. Brand recognition is a double edged sword. The manufacturer is easily identified so that the consumer can easily identify and select its product from a crowded storefront. But that consumer can just as easily identify the branded product and decide to avoid it because of its reputation as being dangerous. So brand owners have a vested interest in keeping their products safe.

And there’s another thing: what happens after an electrical item malfunctions and catches fire or explodes?

That depends: if it’s a branded item, then the company will recall all potentially malfunctioning articles from the market. If the item is not branded, such as was the case with the exploding hoverboard, the anonymous company can keep selling. Why not? After all, the consumer won’t have any idea that this is the same product that exploded.

In the case of the branded item, however, the company must take responsibility, not just legally but also, being a branded company, they are easily identifiable and an easy target to boycott.

The conclusion therefore must be that limiting the manufacture and sale of patented, branded products, helps to keep people safe. After all, no one wants to be responsible for injuring a loved one or for a fire, merely because the product was cheaper.

The question is, is this limited to electronics, or are there additional areas other than electronics where IP rights help to protect the consumer?

Yes. An area where counterfeiting is even more dangerous is medicines.

On the FDA website, there is a warning article entitled “The Possible Dangers of Buying Medicines over the Internet”. The article discusses rogue websites offering to sell potentially dangerous drugs, with incorrect active ingredients, with effects that can literally devastate people’s lives. The final paragraph in the article reads as follows:

“Counterfeit drugs are fake or copycat products that can be difficult to identify. The deliberate and fraudulent practice of counterfeiting can apply to both brand name and generic products, where the identity of the source is often mislabeled in a way that suggests it is the authentic approved product.”

Of course, long-term health problems caused by counterfeit drugs aren’t often as newsworthy as exploding hoverboards, but they potentially harm vast numbers of people who may not even be aware why they or their family members are suffering recurring and sometimes additional health problems.

So what’s the silver lining in all of this?

If you hear on the news about a widget that has burst into flames, treat it is a warning to stay away from counterfeit products, and thank your lucky stars that you respect the hard-earned IP rights of others.

That not only makes you a law abiding citizen of this planet, but it also keeps you and your loved ones safe.