Market Research on Counterfeit Italian Brands in the Republic of Korea

Home , Malo (company), Marni (fashion house)

Market research on counterfeit Italian brands in the Republic of Korea

in cooperation with

Market research on counterfeit Italian brands in the Republic of Korea

Italian Intellectual Property Rights DESK

INDEX 1. Introduction ································································································ 1

2. Main IPR protection organizations ···························································· 4

3. The scale of the counterfeit-products market in Korea ····························· 7 3.1. Amount of counterfeit goods in Korea ·············································· 7 3.2. Counterfeit good enforcement cases ············································· 10

4. Types of counterfeit-products ·································································· 13 4.1. Popular counterfeit goods by product type ···································· 13 4.1.1. Counterfeit market analysis based on market value ············· 13 4.1.2. Counterfeit market analysis based on the confiscated volume ··················································································· 15

4.2. Popular counterfeit products ·························································· 16 4.2.1. Popular counterfeit brand analysis by country of origin ········ 16 4.2.2. The market growth of luxury fashion brands ························· 20 4.2.3. Classification of Italian brands by risk of counterfeiting ········ 21 4.2.4. The market size of high risk counterfeit Italian brands ········· 24 4.2.5. The number of counterfeit crackdowns of high risk counterfeit brands ·································································· 25 4.2.6. High risk Italian luxury brand counterfeit crackdown by case ······················································································· 27

4.2.7. Volume of confiscations of popular counterfeit brands ········· 28 4.3. Korea’s import of Italian products ·················································· 31 4.4. Counterfeit market insight of non-fashion industry ························ 33

4.4.1. Cigarettes & Liquors ······························································ 33 4.4.2. Food ······················································································· 38 4.4.4. Medicines (excluding medical instruments) ·························· 45 4.4.5. Others ···················································································· 47

5. The manufacturing and distribution channels of counterfeit- products ··· 51

6. The consumption area and consumers of counterfeit-products ············· 56 6.1. Patterns of counterfeit good sales through internet shopping malls ······························································································· 56

6.2. Counterfeit goods-purchasing consumer profile ···························· 58 6.3. Price and grade of counterfeit-products ········································· 60

7. Appendix ·································································································· 63 7.1. Online retailers ··············································································· 63 7.2. Cross-border counterfeit flows ······················································· 64 7.3. Domestic counterfeit industry ························································· 65 7.4. Sentencing leniency ······································································· 66 7.5. Gaming industry copyright infringements······································· 66 7.6. Country of origin labels ·································································· 68 7.7. Industrial IP protection···································································· 68 7.8. IP statistical data provision ····························································· 69

8. Tables - Main brands and managing companies ····································· 70

1. Introduction Korea is ranked as the 4th in the world in terms of the annual number of Intellectual property rights applications. Despite the outstanding position, the ‘World Competitiveness Yearbook’ report released by the Swiss IMD (International Institute for Management Development) indicates that Korea is ranked as 32nd of 58 countries for the protection-level of Intellectual property rights.

Table 1.1. Korea's IPR protection ranking Year 2003 2004 2005 2006 2007 2008 2009 2010 Rank 36 33 30 38 34 37 33 32 Source: “2010 World Competitiveness Yearbook”, International Institute for Management development, 2010

Despite the continuous efforts of the Korean government, Korea’s IPR protection-level is still at a modest level. This is partially because of the consumers’ lacking awareness of IPR protection and especially due to the development of internet shopping malls through the infrastructure of the high-speed internet. The Korean B to C (Business to Consumer) Internet shopping mall is currently the second largest retail channel after the hypermarket. Through the proliferating Internet shopping malls, counterfeit products can be easily reached by large number of customers.

Table 1.2. Main exporting countries of counterfeit goods, 2007 Hong Manufacturing Country China Thailand Korea Taiwan Total Kong Main exporting countries of counterfeit goods by 32% 13% 9% 8% 4% 66% volume Source: “Counting the Cost: The Economic Impacts of Counterfeiting and Piracy”, OECD, 2008

Korea has been known to be one of the fifth largest exporters of counterfeit goods. According to the report from OECD in 2007, Korea was ranked 3rd, right after China and Thailand for counterfeit goods exporting country. In the recent year, however, the export volume of counterfeit goods from Korea has decreased significantly.

Table 1.3. The proportion of Korean counterfeit goods prosecuted in Japanese Customs 2005-2009 Year 2005 2006 2007 2008 2009 Korean proportion 44.9% 44.5% 20.0% 12.4% 6.8% Source: Korea Customs Service

Japan is the 3rd largest recipient of Korea’s total exports after China and U.S. of the counterfeit goods crackdown in Japanese customs, 6.8% was from Korea in 2009. Until 2006, Korea was ranked as the largest counterfeit goods exporting country to Japan, accountable for 44.9% of total counterfeit goods. However, through the efforts of the Korean Government of strengthening enforcements, the percentage decreased significantly from 2007. In 2009, Korea is no longer considered to be a notorious counterfeit good exporting country to Japan.

Korea was classified to either the Watch List or PWL (Priority Watch List) of IPR by the USTR (United States Trade Representative) until 2008. However, USTR recognized Korea’s continuous efforts to improve IPR protection; hence, was excluded from the Watch List consecutively in 2009 and 2010.

This report will study the landscape of the counterfeit goods market in Korea with focus on the Italian brands in the area of Intellectual Property Rights (mostly, trademark rights).

2. Main IPR protection organizations Various practices are being undergone to protect IPRs in Korea by the Korean Trade Commission, KIPO (Korean Intellectual Property Office), KCS (Korea Customs Service), National Police Agency, and the Public Prosecutors’ Office.

KIPO An Industrial Property Protection Department specialized in counterfeit- trademark related issues was created in 1987 with the purpose of Protecting the rights of Trademark holders and the establishment of fair trade.

The duties of Industrial Property Protection Department are: investigating and analyzing the distribution and retail channels of counterfeit goods; making of enforcement & crackdown plans; extensively and continuously executing counterfeit good crackdowns.

In August 2010, the ‘Special authority of law enforcement’ was granted to KIPO and the ‘Special Judicial Police’ was established in September 8th 2010. This would lead to a stronger enforcement of counterfeit goods.

Police and the Prosecution In order for the Prosecution to prevent the distribution of counterfeit goods, the ‘Joint Investigation of IPR infringement headquarters’ was

4 established. This headquarter is directed by the chief detective from the prosecutor’s office.

Directors of eight governmental departments (Ministry of Culture, Sports and Tourism, Ministry of Foreign Affairs and Trade, Korea Food & Drug Administration, Prosecutor’s Office, National Police Agency, National Tax Service, Korea Customs Service, Korean Intellectual Property Office) are participating in ‘Investigation Committee on IP Criminals’. This committee supports the aim of ‘Joint Investigation of IPR infringement headquarters’ by suppressing the counterfeit market on a governmental level.

Korea Customs Service Counterfeit goods crackdown task forces investigate the authenticity of products and block the imports and exports of counterfeit products in the central office and in 43 customs around the nation. They investigate the import of trademark infringement and hold off the clearance of any suspected goods, and confiscate counterfeit goods.

Korean Trade Commission In order to efficiently observe and prosecute unfair Trade Practices, an “Unfair Trade Practice Reporting Call-center” was established in September 2007.

Table 2.1. IP protection organizations and frameworks Korea Trade Korean Intellectual Patent Judging Organization Commission Property Office Committee

Intellectual Property Subject for Unfair competition (Patent, Utility Model, intellectual All activity Trademarks, Design protection rights) Remedial Order, Corrective warning, Judging rights, Protection Provisional Measures, Seizes and searches Confirming range of Measurer Fines (Investigation Activities) rights Import, Export, Range of Selling Import products, Unfair competition

Sanctions Manufacturing for activity export purposes Law enforcement × o × authority

Korea Customs General Court Organization Police, Prosecutor Service (Civil Cases) All. Subject for An offense subject to intellectual Trademark, Copyright complaint besides All protection trademarks and copyrights Pending Clarence Protection (up to 10 days) Criminal Penalty Compensation for Measurer Extension possible (Trespassing) damages when court files Range of All All Import, Export Sanctions Trespassing Trespassing Law enforcement o o × authority Source: Korea Trade Commission

3. The scale of the counterfeit-products market in Korea 3.1. Amount of counterfeit goods in Korea The Korea Trade Commission released a report1 that summarizes the surveys of 2,107 foreign and domestic companies out of 44,780 that possessed IPRs (patent, model utility, trademark, and design rights) in 2009. The survey indicates that IPR infringement damages were valued up to 1.4 trillion KRW (0.14% of the 1.024 quadrillion KRW of Korea GDP) in 2008.

According to the OECD report2, the trade volume of counterfeit goods is approximately 1% of the global trade volumes. As Korea’s total trade volume was 857.2 billion USD in 2008 the market size of counterfeit goods could be ranged between 8-9 billion USD based on this assumption.

According to the enforcement results of Korea Customs Service, 389 to 1,007 crackdowns were made each year in the process of clearance during 2005 to 2009. The market value of confiscated goods ranged from 159 billion to 2.66 trillion KRW. In 2006, 2.6 times crackdowns with 16.7 times greater worth of counterfeit goods were confiscated by Korean Customs. This significant rise of crackdown numbers and value

1 “The Survey of infringement on intellectual property rights in Korea 2009”, Korea Trade Commission, 2009. 2 “Counting the Cost: The Economic Impacts of Counterfeiting and Piracy”, OECD, 2008.

7 depicts not only the growth of the counterfeit goods market, but the strengthened enforcement implemented by special government programs. From the efforts of the Korean government the inflow of counterfeit goods to the Korean market place was decreased in 2007. The inflow of counterfeit goods again increased in the period of 2008- 2009 along with high sales growth of foreign luxury brands in department stores.

Table 3.1. Korea Customs Service’s counterfeit crackdown by market value (2005-2010) (Unit: million KRW)

Year 2005 2006 2007 2008 2009 2010(e)

Value 159,000 2,666,000 678,000 927,900 1,232,900 1,003,000 Source: Korea Customs Service Note: 2010(e) estimated based on 2010 Jan-Aug data.

All imported items are not subject to inspections at the Korean Customs. Depending on the product category and/or originating country, only 3-10% of the import items are inspected. Therefore, a large amount of counterfeit goods are assumed to pass the custom inspection. Based on the customs crackdown data with consideration of limited inspections the estimated market size of counterfeit goods in Korea is 5-8 trillion KRW (approximately 4-7 billion USD).

The Korea Customs Service deals with cracking down imported counterfeit goods. The Police, Prosecution, IPR protection-related

8 organizations deal with counterfeit goods that have already gone through the Korean Customs clearance or are manufactured locally. The confiscated counterfeit goods in the market (excluding customs) amounted up to 50-170 billion KRW during 2006-2009. Assuming that only a fraction of counterfeit goods are caught by the authorities, the total market size of counterfeit goods is substantially larger than these values.

Table 3.2. Police counterfeit crackdown by market value (2006-2010) (Unit: million KRW)

Year 2006 2007 2008 2009 2010 (e)

Value 63,998 50,118 173,031 127,878 93,135 Source: Intellectual Property Rights Protection Center Note: 2010(e) estimation based on 2010 Jan-Jun data.

The table above shows high fluctuations of counterfeit goods crackdown values over the years. Four very large-scaled counterfeit LOUIS VUITTON brand crackdowns contributed to the high rise in 2008 & 2009. In 2008, the Incheon provincial prosecution confiscated counterfeit LOUIS VUITTON products valuing up to 130 billion KRW. In 2009, the Incheon Coast Guard and the Geumcheon-gu police station confiscated counterfeit LOUIS VUITTON goods valued at 32 billion and 25.6 billion KRW, respectively. Six months later the Incheon Coast Guard again confiscated 27 billion KRW worth of counterfeit LOUIS VUITTON Bags & purses. Accumulation of these four cases is a value of 214.6 billion KRW

9 which is even larger than the whole value of 50.1 billion KRW in 2007.

It is very difficult to accurately estimate the counterfeit market size as the counterfeit activity and goods are undertaken and distributed illegally. Nevertheless, by making references to the crackdown reports of Korea Customs Service, OECD reports, crackdown results of police and prosecution, Synovate reports, and articles from Ohmynews 3 , the Dongdaemun market seems to be the largest with a market size of approximately 2 trillion KRW. If Namdaemun market, Itaewon, provincial minor markets, Internet auction sites and shopping mall sites were included, the fashion/accessories counterfeit market would approximate to 4 trillion KRW.

3.2. Counterfeit good enforcement cases According to the statistics of Korea Customs Service, the range of yearly crackdown cases was 347-1,007 between 2002 and 2010. The quantity is gradually decreasing from the peak in 2006. The Korean government committed a special reinforcement program in 2006 resulting in the high number of crackdown in 2006 followed by a gradual decrease. It shows the effectiveness of strengthening programs and it is advisable to continue suppressing counterfeit in the Korean market.

3 http://www.ohmynews.com/NWS_Web/view/at_pg.aspx?CNTN_CD=A0000288253

Graph 3.1. Korea Customs Service’s counterfeit crackdown by case (2002-2010) (Unit: number of cases)

Source: Korea Customs Service Note: 2010(e) estimated based on 2010 Jan-Jun data.

Those who import large quantities, distribute and manufacture are prosecuted. However, infringers selling in small scales (Dongdaemun/ Namdaemun/ Internet-shopping malls) are fined or given a warning. From 2002/2003 the number of prosecutions has been gradually decreasing until it is maintained at around 100 in 2007-2009. On the other hand, the number of warnings has been increasing since 2003 and doubling in 2009 compared to the previous year.

There may be two primary reasons as to why the number of prosecutions has decreased. First, the serious crimes of mass-import, mass-distribution, and domestic-manufacturing have actually decreased.

Second, factories are being relocated to remote provincial areas or moved to China as a means to avoid getting caught. The number of warnings has increased due to the increase of sales in internet shopping malls that provide increasing availability to consumers of counterfeit goods. Well organized raids to retail stores by the police have also contributed to the increase of warning numbers.

Graph 3.2. Type of law enforcements to counterfeit infringements (2000-2009) (Unit: number of cases) 3000

2500

2000

1500

1000

500

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Prosecutions 242 146 409 332 198 88 128 116 34 122 Corrective warnings 424 645 534 217 425 749 966 1,06 1,14 2,84

Source: “IP White paper”, Korean Intellectual Property Office, 2010

4. Types of counterfeit-products 4.1. Popular counterfeit goods by product type 4.1.1. Counterfeit market analysis based on market value Korea Customs Service’s counterfeit goods crackdown by product types are as below. Watches cover the largest proportion of 33%, handbags/leather goods with 24%, clothing with 12% followed up by shoes (6%) and sexual enhancing tablets (ex. VIAGRA).

Figure 4.1. Korea Customs Service’s crack down of counterfeit goods by market value (2009) (Unit: %)

Others, 16.3% Clothes, 11.6% Medical / Optical instruments, 0.2% Sporting goods, 0.2% Sexual enhancing tablets, 3.3%

Machines tools, 0.9% Miscellaneous, 3. 7% Watches, 32.9%

Toys / Stationary goods, 0.8%

Handbags / Leather goods, 24.0% Shoes, 6.0%

The Korea Customs Service’s crackdown history of the four years (2006- 2009) shows that the proportion covered by watches decreased from 77.7% in 2006 to 32.9% in 2009, whereas crackdowns of handbags,

13 leather goods, and shoes increased. The development of medical products opened the new counterfeit drugs for sexual enhancers (such as VIAGRA).

Graph 4.1. Korea Customs Service’s crackdown of counterfeit goods by product type on the basis of market value (2006-2009) (Unit: %) 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2006 2007 2008 2009 Medical / Optical instruments 0.0% 0.0% 0.0% 0.2% Sporting goods 0.0% 0.1% 0.3% 0.2% Machines Tools 0.0% 0.2% 0.8% 0.9% Toys / Stationary goods 0.0% 0.2% 0.2% 0.8% Sexual enhencing tablets 0.3% 0.9% 3.1% 3.3% Miscellaneous 1.8% 1.6% 19.0% 3.7% Shoes 0.8% 2.5% 1.4% 6.0% Clothing 11.3% 16.4% 12.0% 11.6% Others 0.7% 1.0% 26.7% 16.3% Handbag / Leather goods 7.3% 10.2% 11.4% 24.0% Watches 77.7% 66.8% 25.1% 32.9%

Source: Korea Customs Service

4.1.2. Counterfeit market analysis based on the confiscated volume The volume of confiscations is uneven over the observed period. In 2007, a large amount of accessories were confiscated whereas more than 80,000 labels/tags were confiscated in 2008. As the Korean government’s implementation of enforcement of 2006 and 2007 was strengthened, infringers used more intelligent methods to disguise the authorities by bringing materials or half-finished products to manufacture the counterfeit goods with label/tags.

Table 4.1. Number of counterfeit items seized by police (2002-2009) (Unit: number of items) Year 2002 2003 2004 2005 2006 2007 2008 2009 Bags and purses 4,147 1,763 1,307 1,916 2,066 7,823 5,678 7,359 Watches NA NA 241 94 200 176 102 381

Shoes 1,170 402 615 1,280 471 1,203 236 4,627

Clothes 8,817 2,623 84,781 7,102 2,172 4,598 2,988 22,139

Glasses NA NA 91 80 61 63 134 338

Accessories 5,600 4,219 53,849 6,969 8,747 20,830 5,251 30,998 Others (labels, 2,399 1,153 8,671 301 1,135 19,047 83,362 18,738 tags, etc.) Total 22,133 10,160 149,555 17,742 14,852 35,366 97,751 84,580

Source: Korean Intellectual Property Office

The crackdown results of 2009 by product type shows that Accessories cover the biggest proportion of 37% followed up by Clothes (26%) and

Others (22%). According to import statistics, the import value of watches, bags, clothes, shoes, hats has risen at an annual average of 8.3% from 2005 to 2009 which are popular product types for counterfeiting. The Consumers Union of Korea announced that, watches, bags, cloths, and shoes are the most popular counterfeit product types in internet shopping malls.

4.2. Popular counterfeit products 4.2.1. Popular counterfeit brand analysis by country of origin Nine Italian brands, six French brands and seven U.S. brands are included as the most popular counterfeit fashion brands reported by the INTELLECTUAL PROPERTY RIGHTS PROTECTION CENTER. Italian, French, and U.S. brands are mostly of clothes, bags, shoes, belts, and accessories. Whereas Swiss brands and German brands are mostly of watches and sport wears.

Popular luxury brands are a main target, subject to counterfeiting. These ‘Luxury brands’ account for over 90% of all counterfeit market size in the fashion industry. The sound market growth of luxury brands in 2005-2009 encourages the counterfeiting of these brands.

Table 4.2. Most popular counterfeit brands by country of origin Brand Main products BVLGARI clothes, accessories, shoes DIESEL clothes DSQUARED2 bags, wallets (purses), belts, shoes clothes, bags, shoes, wallets (purses), belts, ETRO accessories Italy FENDI clothes, bags, wallets (purses), belts GUCCI clothes, bags, shoes, accessories, belts PRADA clothes, bags, wallets (purses), belts SALVATORE FERRAGAMO clothes, bags, wallets (purses), belts, shoes TOD’S clothes, bags, wallets (purses), belts, shoes AGATHA accessories, watches clothes, bags, wallets (purses), accessories, CARTIER watches, belts clothes, bags, wallets (purses), accessories, CHANEL France watches, belts CHRISTIAN DIOR clothes, bags, wallets (purses), watches, belts HERMES clothes, bags, wallets (purses), watches, belts clothes, bags, wallets (purses), accessories, LOUIS VUITTON watches, belts COACH clothes, bags, wallets (purses), belts, shoes LEVI'S clothes NIKE clothes, shoes U.S. PAUL FRANK watches, clothes POLO RALPH LAUREN clothes THE NORTH FACE clothes TIFFANY accessories, watches BALLY bags, wallets (purses), belts, shoes Swiss PIAGET watches, accessories ROLEX watches, accessories BURBERRY bags, wallets (purses), belts England FRANK MULLER clothes MULBERRY accessories MCM watches, accessories Germany ADIDAS clothes, shoes PUMA bags, wallets (purses), belts Source: Intellectual Property Rights Protection Center

Table 4.3. Most popular counterfeit brands by product types

Clothes

RALPH LAUREN POLO, NIKE, ADIDAS, PUMA, LEVI’S, THE NORTH FACE, M.U.SPORTS, EXR, BEAN POLE, DIESEL, LEE DONG SOO, CALVIN KLIEN

Bags, Belts, Wallets

LOUIS VUTIION, HERMES, FENDI, CHANEL, GUCCI, PRADA, CHRISTIAN DIOR, MCM, SALVATORE FERRAGAMO, CARTIER, BURBERY, COACH, BALLY, TODS, MULBERRY, DSQUARED2, ETRO

Accessories

TIFFANY, AGATHA, CHANEL, LOUIS VUITTON, GUCCI, BVLGARI, CARTIER

Shoes

SALVATIORE FERRAGAMO, GUCCI, BALLY, TODS, NIKE, ADIDAS, PUMA, DSQUARED2

Watches

ROLEX, CARTIER, CHANEL, LOUIS VUITTON, TAGHEUER, PAUL FRANK, FRANCKMULLER, PIAGET

Source: “Guidebook for brand protection”, Intellectual Property Rights Protection Center, 2010

Figure 4.2. Popular Trademarks subject to frequent counterfeiting in fashion brands

Source: “Trademarks Frequently Pirated in Korea”, Intellectual Property Rights Protection Center

4.2.2. The market growth of luxury fashion brands As mentioned in the previous page, the popular counterfeiting brands account for over 90% of the counterfeit market size in the fashion industry. The market size of these brands grew rapidly during 2005-2009. The overall sales of 31 most popular counterfeited brands (9 Italian, 6 French, 7 U.S., and 9 others) increased at an average annual rate of 21% from 1.615 trillion KRW (2005) to 3.479 trillion KRW (2009).

Graph 4.2. Sales of most popular luxury counterfeit brands by county of origin (2005-2009) (Unit: billion KRW) 4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

- 2005 2006 2007 2008 2009 Italy 229 293 339 448 595 France 298 395 523 693 855 U.S. 680 746 863 1,002 1,156 Others 408 474 568 750 873

Source: Korea Financial Supervisory Board and Spire Research & Consulting

4.2.3. Classification of Italian brands by risk of counterfeiting The Italian brands sold in Korea can be categorized into three different levels of counterfeiting. With a total of 47 brands, 9 are high risk brands, 15 are medium risk brands, and 23 are low risk brands.

Table 4.4. High risk counterfeit Italian brands Brand Main products

BVLGARI clothes, accessories, shoes

DIESEL clothes

DSQUARED2 bags, wallets (purses), belts, shoes clothes, bags, shoes, wallets (purses), belts, ETRO accessories FENDI clothes, bags, wallets (purses), belts

GUCCI clothes, bags, shoes, accessories, belts

PRADA clothes, bags, wallets (purses), belts

SALVATORE FERRAGAMO clothes, bags, wallets (purses), belts, shoes

TOD’S clothes, bags, wallets (purses), belts, shoes

Table 4.5. Medium risk counterfeit Italian brands Brand Main products

A.TESTONI clothes

ARMANI watches, accessories

ARMANI EXCHANGE clothes

BALLY clothes

BLUMARINE clothes

DOLCE & GABBANA clothes

EMPORIO ARMANI clothes

GIORGIO ARMANI clothes

ICEBERG clothes

MARNI clothes

MAXMARA clothes

MISSONI clothes

MOSCHINO clothes

ROBERTO CAVALLI clothes

VERSACE bags

Table 4.6. Low risk counterfeit Italian brands Brand Main products

ANNA MOLINARI clothes

BENETTON clothes

D&G clothes

DAMIANI watch, accessories

ELLESSE sports clothes

ERMENEGILDO ZEGNA clothes

FILA clothes

FURLA clothes

CASTELBAJAC clothes

GIANNI VERSACE clothes

HOGAN clothes

HUNTING WORLD clothes

KAPPA clothes

MALO clothes

MAX&CO clothes

MONTURA outdoor clothes

ROBERTA DI CAMERINO watches, accessories

ROBERTO CAVALI clothes

SISLEY bags

TAKE TWO accessories, belts

TONINO LAMBORGHINI watches

TRUSSARDI clothes

VALENTINO clothes

4.2.4. The market size of high risk counterfeit Italian brands The 9 Italian brands showed an increase in sales from 2005 to 2009 at an average annual growth of 27% (229 billion to 595 billion KRW). This is 7% higher than the 20% the average annual growth rate for brands of other countries. The market of original Italian luxury brands has been growing well in the Korean market

Graph 4.3. Sales volume of the 9 high risk Italian luxury brands (2006-2009) (Unit: billion KRW)

700 595 600

500 448

400 339 293 300 229

200

100

0 2005 2006 2007 2008 2009 TOD'S - 1.4 3.5 10.2 9.6 DIESEL 3.5 4.9 9.0 13.0 20.0 FENDI 12.0 16.2 20.0 25.0 27.6 DSQUARE2 5.3 7.4 13.0 20.0 30.0 ETRO 20.0 20.2 28.7 35.1 39.6 BVLGARI 21.5 27.6 36.5 43.0 56.0 PRADA 1.7 27.1 26.9 35.8 62.1 SALVATORE FERRAGAMO 43.3 47.8 55.3 66.9 70.4 GUCCI 121.5 140.2 145.8 199.1 279.2

Source: Korea Financial Supervisory Board and Spire Research & Consulting

4.2.5. The number of counterfeit crackdowns of high risk counterfeit brands The top 10 brands on the basis of crackdowns in 2009 are in the order of CHANEL, LOUIS VUITTON, GUCCI, BVLGARI, AGATHA, CARTIER, CHRISTIAN DIOR, SALVATORE FERRAGAMO, BURBERRY, and PRADA, consisting of four Italian, five French, and one Britain. Italian and French brands are the main brands subject to counterfeiting.

During the observed year (2005-2009), the increase in quantities of counterfeit crackdown of luxury fashion brands ranges from 4% (2008) to 31% (2009) by year with an average annual increase rate of 13%. The market growth of the 31 high risk luxury fashion brands shows an average annual increase rate of 21% during the same observed years. The market growth of original brands is higher than the increase rate of crackdowns.

Graph 4.4. Top 10 high risk brands counterfeit crackdown by case (2006-2009) (Unit: number of cases)

3500

3000

2500

2000

1500

1000

500

0 2005 2006 2007 2008 2009 PRADA (e) 29 31 29 29 26 BURBERRY (e) 68 56 71 68 77 SALVATORE FERRAGAMO 165 209 167 172 186 CHRISTIAN DIOR 150 128 193 266 252 CARTIER 234 203 232 180 263 AGATHA 165 340 269 222 298 BVLGARI 164 143 155 148 315 GUCCI 191 180 237 256 325 LOUIS VUITTON 305 390 394 480 414 CHANEL 532 526 628 648 1,084

Source: Korean Intellectual Property Office Note: PRADA and BURBERRY are estimated.

4.2.6. High risk Italian luxury brand counterfeit crackdown by case The proportion by types of goods for the four Italian brands of the top 10 high risk brands are shown below. In the case of BVLGARI, accessories cover more than 90%. GUCCI and SALVATORE FERRAGAMO also have a large proportion with accessories. On the other hand, handbags cover a large proportion for PRADA and shoes for GUCCI, SALVATORE FERRAGAMO, and PRADA. Contrary to the heavy weight covered by watches they accounts for small proportion in terms of the number of crackdown due to the expensive price.

Graph 4.5. Number of crackdowns by type of goods for GUCCI, SALVATORE FERRAGAMO, BVLGARI, and PRADA (2009)

Source: Korean Intellectual Property Office

4.2.7. Volume of confiscations of popular counterfeit brands Not only luxury brands, but middle-priced brands like LEVI’S, ADIDAS, POLO and NIKE are also commonly counterfeited. Counterfeiting is also expanded to not only fashion brands but other brands such as CIALIS (stamina-enhancing medicine, 2008), POCKET MONSTER (character products, 2009), and TITLEIST (golf balls).

Table 4.7. Volume of confiscations by brands & product types (2008) (Unit: EA)

i s s s

r s e s e e s r o e h s h e g s c o t s a h s Rank Brand Country t Total h o t a e a l l B S O c C G W c A

1 LEVI’S U.S. - - - 855 - 35 43,700 44,590 2 CIALIS U.S. - - - - - 39,000 39,000 LOUIS 3 France 3,034 11 18 154 2 389 16 3,626 VUITTON 4 MCM Germany 1,984 - - 1 - 8 - 1,993 5 CHANEL France 197 11 46 78 21 1,383 1 1,737 6 ADIDAS Germany 38 - 11 391 - 89 33 562 7 AGATHA France - 2 - 4 - 508 35 549 CHRISTIAN 8 France 7 - 7 37 6 423 1 481 DIOR 9 POLO U.S. 6 - 3 403 - 63 - 475 10 GUCCI Italy 74 10 36 52 19 252 6 449 11 NIKE U.S. 1 - 25 248 - 53 105 432 SALVATORE 12 Italy 32 - 40 27 3 177 1 280 FERRAGAMO 13 TIFFANY U.S. - - 1 - - 263 - 264 14 BVLGARI Italy 1 14 - - 1 204 - 220 15 CALVAN KLEIN U.S. 1 - - 115 1 47 50 214 16 CARTIER France 2 19 - 5 - 175 2 203 17 BURBERRY England 43 1 - 74 3 79 - 200 18 DSQUARED2 Italy - - - - 141 50 191 19 HERMES France 36 1 2 23 - 120 - 182 20 PRADA Italy 67 1 1 6 4 82 19 180 Subtotal of Major Brands 5,523 70 190 2,473 60 4,491 83,019 95,826 Subtotal of other Brands 155 32 46 515 74 760 343 1,925 Total 5,678 102 236 2,988 134 5,251 83,362 97,751 Proportion of major brands (%) 97% 69% 81% 83% 45% 86% 100% 98%

Source: Korean Intellectual Property Office

Table 4.8. Volume of confiscations by brands & product types (2009) (Unit: EA)

s s s

r s s e e e s r o e h s h e g s o t c s a h s Rank Brand Country t Total h o t a e l a l B S O c C G W c A

LOUIS 1 France 3,881 33 110 270 29 18,034 166 22,523 VUITTON

2 NIKE U.S. 28 3,341 9,052 50 1,462 13,933

POCKET 3 Japan 7,929 7,929 MONSTER

4 MCM Germany 687 1 12 4 4,122 1,592 6,418

5 TITLEIST U.S. 5,722 5,722

6 CHANEL France 638 70 162 430 58 3,490 116 4,964

7 POLO U.S. 86 72 4262 80 1 4,501

8 ADIDAS Germany 50 285 992 162 335 1,824

9 GUCCI Italy 371 18 226 196 52 553 139 1,555

10 LACOSTE France 1,180 1 1,181

11 LEVI’S U.S. 1,044 27 1,071

12 BURBERRY England 172 2 10 272 5 420 4 885

13 AGATHA France 12 7 7 49 732 27 834

THE NORTH 14 U.S. 21 2 681 14 718 FACE CHRISTIAN 15 France 27 2 10 68 19 536 11 673 DIOR SALVATORE 16 Italy 83 158 38 22 292 12 605 FERRAGAMO

17 BVLGARI Italy 12 27 2 11 13 431 19 515

s s s

r s s e e e s r o e h s h e g s o t c s a h s Rank Brand Country t Total h o t a e l a l B S O c C G W c A

18 KIA Korea 439 30 469

19 CARTIER France 26 32 1 5 4 375 1 444

20 PRADA Italy 210 1 19 16 18 147 21 432

Subtotal of Major Brands 6,304 193 4,405 19,017 224 29,466 17,587 77,196

Subtotal of other Brands 1,055 188 222 3,122 114 1,532 1,151 7,384

Total 7,359 381 4,627 22,139 338 30,998 18,738 84,580

Proportion of major brands (%) 86% 51% 95% 86% 66% 95% 94% 91%

Source: Korean Intellectual Property Office

4.3. Korea’s import of Italian products Korea is ranked as number nine with an import value of 323.1 billion USD in 2009. Italy had a trade deficit with Korea until 2007 but achieved a surplus from 2008. Italy exported 3.513 billion USD whereas importing 2.797 billion USD; achieving a surplus of 716 million USD in 2009.

Table 4.9. Trade relations between Korea and Italy (Unit: million USD) 2005 2006 2007 2008 2009 Export 2,778 2,916 3,582 4,151 3,513 Import 4,297 4,286 4,151 3,545 2,797 Balance -1,519 -1,373 -569 606 716 Source: Korea International Trade Association

Medical products are the largest import item to Korea from Italy, followed by motors, fashion clothing, and leather bags, shoes. Other fashion- related textile goods are also included within the top ten lists. Fashion- related products cover a significant proportion of Italian exports to Korea. Other popular items are ship-related parts, machineries, auto parts, and

industrial chemical products.

Table 4.10. Italian exports to Korea (Unit: thousand USD) Rank 2008 2009 1 Medicinal products 254,019 Medicinal products 259,613 2 Clothing 179,763 Motors 158,288 3 Naphtha 145,448 Clothing 135,516 4 Motors 133,987 Leather bags 115,027 Synthetic chemical 5 118,104 Ship engines and parts 94,765 materials 6 Leather bags 112,392 Valves 88,708 Synthetic chemical 7 Ships 111,788 84,493 materials 8 Other machineries 100,152 Steel caskets 84,335 9 Auto parts 94,989 Space crafts 80,877 10 Other shoes 81,857 Other textile goods 78,078

Source: Korea International Trade Association

Fashion/clothing-related products are the most frequently counterfeited product type corresponding to the largest import items of Korea from Italy. China, the world’s largest counterfeit manufacturing country, is also the largest trading partner to Korea. Therefore, the counterfeited goods

32 from China have impacted the Italian export of fashion items to Korea. Especially, bags and accessories of luxury Italian brands are popular targets to counterfeit.

4.4. Counterfeit market insight of non-fashion industry 4.4.1. Cigarettes & Liquors Cigarettes & Liquor are imposed with very high sales taxes in a range of 50-70%. Therefore, evading tax by smuggling or counterfeiting yields in a very large profit.

a) Cigarettes According to the WTO, about 6% of the global cigarettes tradie are either smuggled or counterfeited. The Korean tobacco market size is 3 trillion KRW and the proportion of smuggled or counterfeited cigarette is less than 1% of the original product, that is significantly lower than the global average. Nevertheless, a gradual increase is forecasted.

There are three types of illegal cigarettes: 1) manufactured counterfeit cigarettes overseas illegally, then smuggled into Korea; 2) smuggling in tax-free cigarettes disguised as personal belongings, and then selling with tax included; 3) smuggling back in exported tax-free cigarettes and selling in the market.

The crew and travelers illegally bring the tax free cigarettes but omitting

33 from statements which was the main route. However, a large volume of counterfeit cigarettes manufactured in China were brought into Korea in 2006. They are sold in places like adult entertainment establishments and small retail stores.

Table 4.11. The sources of unlawful cigarettes smuggling (Unit: number of cases, million KRW) Total 2008 2009 Type Cases Value Cases Value Cases Value Crew 80 44 50 34 17 6 Traveler 79 51 51 31 19 11 Disguised legality 29 12,735 9 1,192 9 628 Illegitimately 1 2,375 1 2,375 - - import Others 72 81 32 39 24 31 Total 261 15,286 143 3,671 69 676 Source: Korea Customs Service, Aug. 2010

Korea Tobacco Retailer Association’s crackdown results show that 70% of the illegal cigarettes are sold in Seoul. They are often found at imported goods retailers in the Namdaemun market. The sales channels are expanding to nightclubs, karaokes, and adult entertainment establishments from the Namdaemun market. The main counterfeited cigarette brands are ‘MARLBORO’, ‘DUNHILL’, and ‘MILD SEVEN’ for foreign brands, ‘ESSE’ and ‘RAISON’ for domestic brands.

In the duration of 2006 – 2010, China was ranked first with the most cases of 354. Value-wise, false export statement made for tax evading

Korean cigarettes was ranked at the top with 7 billion KRW of illegitimate cigarettes.

Table 4.12. Counterfeit/smuggling cigarette crackdown (2006-2010 June) (Unit: number of cases, million KRW) 2006 2007 2008 2009 2010. 07(e)

Cases Value Cases Value Cases Value Cases Value Cases Value

China 129 1,508 92 1,025 76 1,124 37 351 20 93

Korea(B) 53 40 42 10 28 141 13 309 18 6,466 Hong - - 4 1 3 1 1 13 - - Kong Laos 1 0.1 - - 1 2,375 - - - -

Thailand ------1 2,023

Philippines 3 2 - - - - 1 0.1 1 1,913

U.S. 11 2 2 1,437 2 0.1 2 0.1 2 178

Singapore 1 0.1 ------1 250

Japan 43 52 63 43 28 19 4 0.1 1 0.1

Indonesia 2 4 1 33 4 2 - - - -

Others 25 14 21 9 8 9 12 1 5 16

Total 268 1,622 225 2,558 150 3,671 70 674 49 10,939 Source: Korea Customs Service, Aug. 2010 Note: 2010.07(e) Statistics from Jan-Jun. Korea. Korea (b): false export statement made for tax evading

The import of Italian brand cigarettes in Korea is negligible as only a small amount is brought in for the purpose of research. The damages caused from the counterfeits of Italian brand cigarettes would be unnecessary for the time being or the near future.

35 b) Liquors Korea is one of the largest liquor markets with very high alcohol consumption per capita. The market size was 7.7687 trillion KRW in 2009 of which 92% is consisted of locally manufactured beer, whiskey, and spiritual drinks. Whiskey is the most popular liquor for counterfeiting due to the high price and large consumption at adult entertainment establishments. The Korean whiskey market is ranked as number nine in the world with a value of 1.2 trillion KRW, of which 99% is premium-level and aged for at least 12 years. Counterfeit of relatively inexpensive alcohol beverages such as beer and soju are less existent due to the low profit margin despite illegal activities.

The manufacturing of counterfeit whiskey is largely in two forms: 1) mass production of fake whiskey by adding and mixing ethanol, water, and edible pigments into cheap, low quality whiskey; 2) collecting left over or refilling cheap mixed whisky to premium empty whisky bottle.

Blended whiskey is a commonly counterfeited whiskey type and is most frequently sold in adult entertainment establishments such as night club, bars, karaoke bar, and singing rooms.

Anti-counterfeit devices such as ‘Guala caps’ or holograms were implemented to prevent whiskey counterfeits after 2000, but showed inadequate effect due to the development of counterfeiting the device

36 itself. RFID (Radio-Frequency Identifica-tion) technology is planned to be implemented for all whiskey manufactured in Korea from 2012.

Imitations of renowned brands are distributed in the case of beers. Imitations with similar spelling and appearance of famous beer brands are made (ex: HIRE or HIVE imitating HITE or CDSS imitating CASS). These imitations are known to only contain 0.5% alcohol and are mostly brought in from China then sold through karaoke bars.

The wine market size in Korea was 220 billion KRW in 2009 largely determined by import wines. Wine import expanded over five times during the10 years from 20 million USD in 2000 to 112 million USD in 2009. The consumption of wine in Korea has increased more than 80% within the same period. Despite the 9% drop of the import volume in 2009, the market is forecasted to grow continuously in the coming years4.

It is estimated that 5% of the high-priced wine are of counterfeit-products in global trading. The risk of counterfeiting of wine in Korea is not prevalent but is not absolutely free from it.

Popular wine sold at Korean market is mostly low to middle priced, costing less than 20,000 KRW per bottle in retail price. These low to middle priced wine are relatively safe from counterfeits. Nevertheless, there was a case that cheap Chinese imported wine was sold as U.S. house-wine which brought an attention to wine distributors and

4 International Wine and Spirit Record.

37 consumers.

Wine covers the majority of liquor imported to Korea from Italy. By looking at the volume of wine imported in Korea, it is ranked in order as Chile, Spain, France, U.S., and then Italy. But in terms of value, Italy is ranked to be third after France and Chile. Italian wine has been showing a healthy growth in the period of 2005-2009. Once the FTA with EU is taken into effect in July 2011, the import of Italian wine is expected to increase.

Table 4.13. Value of Italian wine imported to Korea (Unit: USD, %) Year Liquor Wine Wine 2005 7,056,833 6,747,055 95.6 % 2006 9,321,292 8,989,284 96.4 % 2007 19,905,876 19,608,090 98.5 % 2008 24,438,804 24,091,244 98.6 % 2009 17,942,439 17,688,842 98.6 % Source: Korea International Trade Association

Despite the cases of counterfeit through the use of cheap Chinese wine there have not been significant damages to overall wine industry as of now.

4.4.2. Food Besides the decrease in imports due to the global economic crisis of 2009, Korea’s food import has been increasing continuously. Food can largely be divided into processed food and unprocessed food. Relatively

38 cheap imported unprocessed foods often illegally change their origin to Korean to sell at high costs.

As China is geographically located close to Korea, often Chinese origin products are imported in large numbers of commercially delegated baggage carriers with low cost.

These products usually have their origin changed to ‘Korea”. To make a counter measure IPR authorities strengthened the investigation by accentuating certificates of origins to track down distribution routes.

The ‘origin’ of Chilean skates, Chinese eels, and imported beef are often changed into ‘Korean’. A similar change of origin is practiced with unprocessed condiments such as dried red pepper powders and sesame oils. Inorganic foods are illegitimately being sold as ‘organic’, too.

In the case of processed food, counterfeited renowned brands of seasonings were imported. With the increase in exports of Korean processed food, instances of counterfeits of the Korean products overseas are occurring too. Dietary supplements of Chinese origin are often disguised as origin of New-Zealand or Australia.

When looking at the Italian food products imported into Korea, Vegetable oils (grape seed oil and olive oil) are the largest followed by noodles (for pasta), chocolate, coffee, cheese, and tomatoes.

Table 4.14. Imports of Italian food products to Korea, 2009 (Unit: thousand USD, %) Product Value Growth Rate from last year Vegetable oil 24,246 -14.6 % Noodle 18,017 -0.3 % Chocolate 16,910 29.3 % Coffee 8,266 -0.7% Cheese 5,497 -8.5 % Tomato 5,472 5.4 % Source: Korea International Trade Association

The import of Italian food with the exception of materials for processed food manufacturing can largely be divided into OEM products and import of finished-products. The consumer market for Italian food is divided into commercial and retail.

Small and medium sized specialized dealers/retailers of imported foods have mainly handled imported food until the late 1990s. After introduction of Western-style large hypermarkets in Korea the imported foods are also readily available at those hypermarkets (e.g. HOME PLUS, E-MART) which systematically screen illegal/ counterfeit foods. This leads to the difficulty of distributing counterfeit products through regular markets. As a result, the sales of counterfeited food products are increasing through easy distribution via internet shopping malls.

Cheese is largely divided into domestic and imported, and sold mainly in hypermarkets, restaurants and food processing companies. The

40 limitations of distribution, do not give much opportunity for the initiation of counterfeit cheese products.

Chinese imitations of the Italian brand FERRERO ROCHER were distributed during the peak sale period of Valentine’s day. Various original Italian chocolate brands are introduced into Korea to meet the high consumer demand for European chocolate. The influx of Chinese imitation products along with premium European chocolate brands are brought to concern.

There has not been yet a report of counterfeit case for Italian grape seed oils, olive oils, and balsamic vinegar. However, these products can be distributed over internet shopping malls, and it is difficult for customers to distinguish the authenticity. Therefore the potential counterfeiting of edible oil is not improbable.

4.4.3. Auto parts and electronics The counterfeited auto parts’ market is growing along with the increase of Korean auto parts market and the world’s market share of Korean automobiles.

IPR infringements of auto parts is largely four types: appearance replications of parts (Design infringement); counterfeiting trademarks (Trademark infringement); replicating original technologies of parts (Patent infringement); replicating newly improved parts (Utility-model infringement).

Counterfeiting trademark is the most common infringement.

According to HYUNDAI MOBIS which practically monopolizes the after sale service (AS) auto parts market in Korea the counterfeit of Korean auto parts are more prevailing overseas such as in China rather than in Korea.

Table 4.15. Crackdown of counterfeit auto part of HYUNDAI MOBIS brand (Unit: number of cases, 100 million KRW) 2008 2009 2010 Jan-June

Cases Value Cases Value Cases Value In Korea 13 37 8 34 7 19 Overseas 29 26 165 177 128 183 Total 42 63 173 211 135 202 Source: HYUNDAI MOBIS

Some counterfeit products manufactured in China are imported to Korea for re-export. These imported parts illegally change the origin to Korea with repackaging. They are then re-exported to countries such as Southeast Asia, South America, Africa, as made in Korea auto parts. Due to strong enforcements and high labor cost most counterfeit auto parts are not manufactured in Korea but in China for Korean market and for re-export.

The most counterfeited auto parts are of the HYUNDAI MOBIS brand which is a subsidiary of Hyundai and KIA Automobiles and dominates the after sale service auto parts market. Counterfeit-products of GM DAEWOO auto parts are also found.

Most car owners are unable to distinguish between original and counterfeited auto parts. Therefore, counterfeit auto parts can be easily used in auto repair shops to yield larger profits.

Korean electronics companies such as SAMSUNG & LG are globally recognized and dominate the Korean market. Due to very competitive prices and a well-organized distribution/ sales network cases of counterfeits to electronics goods (e.g. white goods, home appliance) are very rare. Most counterfeit electronics goods are imported electronic components for the assembling of electronics goods. Many computer and other electronics components such as 3COM Hubs, main Board, Adaptec Card, RAM, SANDISK Memory cards, Intel CPU, as well as high priced IC parts of telecommunication components (MAXIM, DALLAS) are subject to counterfeiting by Chinese infringers.

Auto and electronic components are rated as having a middle risk in counterfeiting in the Korean market, and the impact to Italian export of auto part and electronic components to Korea is small.

Table 4.16. Italian auto part export to Korea, 2005~2009 (Unit: thousand USD) Year Value Growth Rank Share of Korea’s auto import 2005 151,435 9.2% 5 5.0 % 2006 93,205 -38.4% 8 2.7 % 2007 116,620 25.1% 6 2.9 % 2008 94,989 -18.5% 6 2.2 % 2009 45,239 -52.4% 9 1.9 % Source: Korea International Trade Association

Although the aftermath of the global economic crisis in 2009 caused decreases of Italian auto parts export volume to Korea, it is forecasted to recover with slight increases in 2010 corresponding to the growing Korean auto manufacturing capacity. Italian auto parts are not for after sale service market but mainly used for auto manufactures. In this regard, the impact of auto part counterfeit to Italian auto part is insignificant.

A wide range of foreign auto brands are being introduced into Korea along with the increase in market share of imported automobiles. The prices of auto parts for foreign brand automobiles are unreasonably expensive which lead to the triggering of parallel import of auto parts. The overall market size of imported auto parts for foreign brand automobiles is growing and the possible emergence of counterfeit parts should not be ignored in the future.

The market share of Italian electronic components in Korea is small, and MMIC (Monolithic Microwave ICs) are the main export items to Korea. Made in China counterfeit ICs are found in the market but the impact to Italian brands seems insignificant.

Table 4.17. The export status of Italian electronic components to Korea, 2005- 2009 (Unit: thousand USD) Year Value Growth Rank Share of Korea’s electronics import 2005 62,354 -17.5 16 0.20% 2006 78,360 25.7 16 0.22% 2007 77,622 -0.9 18 0.19% 2008 93,740 20.8 17 0.22% 2009 73,866 -21.2 17 0.20%

Source: Korea International Trade Association

4.4.4. Medicines (excluding medical instruments) According to the WHO (World Health Organization), 10% of all medicines distributed worldwide are estimated to be counterfeit-products.

The medicine market size was 18.9 trillion KRW in 2009. Finished- medicinal products, raw medicinal material and supplementary medical products are consisted of 15.1, 2.9, 0.9 trillion KRW respectively. Chinese herbal medicine market is quite significant with 4.5 trillion KRW.

Approximately 80% of herbal medication is imported from China. There is a very vague line in between agricultural products and medicine for Chinese herbs which leads to the difficulty and inefficiency in monitoring the distribution of imported herbal medicines. Illegitimately changing origins of Chinese products to ‘Korean’ commonly occurs for seven popular products. Three most common products, milk vetch root, Chinese matrimony vine and angelica root are subject to ‘distribution

45 record management’ when imported through the Korea Customs Service.

General counterfeit medicines besides herbal medicines are mostly impotence-treating medicines smuggled through China. They enter Korea by international posts and express couriers which are distributed through adult shops and adult entertainment establishments. Counterfeit weight-loss medicines are also sold through internet shopping malls.

The crackdown of smuggled counterfeit products of impotence-treating medicine (VIAGRA or CIALIS) cover a percentage of 92% of all crackdowns of medicinal product counterfeits. When converted into value sold, it is estimated to 17.5 billion KRW (19% percent of the total 90 billion KRW impotence-treating medicine market).

Table 4.18. Crackdowns of smuggled medication and medical products by year (Unit: 100 million KRW) 2005 2006 2007 2008 2009 2010.07(a) Product Cases Value Cases Value Cases Value Cases Value Cases Value Cases Value Impotence- treating 19 38 39 74 69 62 49 287 37 415 18 905 medicine Other medicinal or 0 0 1 1 1 0.1 2 3 3 10 3 3 medical products Total 19 38 40 75 70 62 51 290 40 425 21 908 Source: Korea Customs Service Note: (a) 7months figure Jan-Jul 2010

A massive increase in crackdowns of counterfeit medicines and medical products by the Korea Customs Service is recorded with 3.8 billion KRW in 2005 to 90.8 billion in 2010 (Jan-July). Popular counterfeit medicines beside impotence-treating and weight-loss medication are hypertension pills, oral antibiotics and antimicrobials.

The Korean government will implement stricter enforcement from 2011 making it mandatory stating the origin of the herbal medicine and herbal material to Chinese herbal shops and to pharmaceutical companies that use Chinese herbal as raw materials. RFID technology will be also used aiming to track over 50% of all medical products by 2015.

According to KPTA (Korea Pharmaceutical Traders Association), 260 million USD of the total medication and medical products imported from Italy and 244 million USD (94% of total value) is directly sold to pharmaceutical companies as raw materials. Therefore, Italian medicinal products are not targeted for counterfeiting unless the finished product grows.

4.4.5. Others Diverse counterfeits are present in other various product groups, with mainly, Chinese counterfeit products and the change of trademarks.

Cosmetics Counterfeit cosmetics products are largely divided into forms of: counterfeiting the expiry date (“use by”) or certification number;

counterfeiting the trade marks in Korea; selling imported Chinese counterfeit products.

Imported cosmetic products have to go through the difficult import procedures of the KFDA (Korea Food & Drug Administration) and Korea Customs Service. To avoid this, they are also smuggled through international couriers and container cargos. Some Chinese counterfeit cosmetics containing health-risking substances are reported to cause skin irritations. Renowned foreign brands such as SK-II and LANCÔME are popular targets for counterfeits of cosmetics products that are sold through internet-open markets.

Fire extinguishers 580,000 Chinese counterfeit fire extinguishers that had their origins changed to ‘Korean’ were distributed through wholesalers and TV home shopping companies having eight importers prosecuted in 2008. The total supply of fire extinguishers amounted to 2.4 million of which 24% (580,000) are of Chinese counterfeit. This incident of Chinese-made low- costing fire extinguishers in Korea forced 20 out of 30 fire extinguisher manufacturers out of business in 2008/2009.

Circuit breakers and electromagnetic switches The cost of manufacturing circuit breakers and electromagnetic switches in China is a quarter of the Korean competitors. Large amounts of these products counterfeiting the brand of LG INDUSTRIAL SYSTEMS were

48 reported. These counterfeit products that do not undergo safety tests raise concerns regarding breakdowns, dissatisfaction and fire hazards.

Toys Continuous inflow of Chinese counterfeit toys is occurring. 400,000 counterfeit “Metal Blade” tops were confiscated by Korean Customs. Trendy and character toys are major targets for counterfeiting. Most of these counterfeit toys are sold to children through thousands of small- sized shops. It becomes difficult to crack them down once they enter the market.

Copyrights The internet is the main route for copyright infringements offering various options to people. P2Ps (Peer to Peer) through internet is the most common route spreading illegal reproduction. Strengthened enforcement of online copyright infringements has caused difficulties to the sharing of illegal reproductions in the ‘Web hard’ system leading to people turning to P2Ps more. In 2008, P2Ps were the main distribution route for illegal reproduction of music, publications, and games; whereas the ‘Web hard’ being the main distribution route for movies, and broadcast content. In 2009, P2Ps was the most common route for most types of illegal copyright.

The market size of illegal reproduction in terms of values amounted to 966 billion KRW in 2008 and 878.4 billion KRW in 2009 with 9.1% value

49 and 30.5% case decrease. Despite this positive figure, illegal reproduction is still quite prevalent in Korea.

Table 4.19. Market size by areas of illegal reproduction (Unit: billion cases, billion KRW) 2008 2009 Area Cases Value Cases Value Music 2.56 239.70 1.77 248.10 Movies 0.35 207.38 0.23 156.31 Broadcast content 0.27 79.57 0.21 75.36 Publications 0.21 341.68 0.14 309.86 Game 0.06 976 0.05 88.81 Total 3.45 965.98 2.40 878.44 Source: “Annual Report on Copyright Protection”, Korea Federation of Copyright Organizations, 2010.

5. The manufacturing and distribution channels of counterfeit- products

Korea was known as a main country in manufacturing counterfeited goods along with renowned counterfeit goods market such as Dongdaemun and Itaewon. Koreans have the talent in manufacturing high quality counterfeited goods which attracted tourists from overseas.

However, due to the rise in labor costs and strengthened enforcements, most counterfeit good manufacturing factories moved overseas to locations such as China and SouthEast Asia. Locally remaining manufacturers also moved to more remote areas. For instance, counterfeit clothes factories used to be located at the proximity of flourishing markets such as Dongdaemun and Itaewon. In the recent years, they have moved the manufacturing capabilities to provincial areas to avoid law enforcement.

It is known that there are thousands of counterfeit-product retailers nationwide, of which 46% is located within Seoul. Counterfeit goods are easily available in Itaewon, Dongdaemun, Namdaemun, Sogong-dong, ‘Cheonggyechon peace market’ in Seoul. Outside Seoul ‘International Market’ in Busan, ‘Seomoon market’ in Daegu, ‘East Incheon Underground Shopping Area’ in Incheon, tourist markets in Shinjeju & Gyeongju, and areas around the U.S. Army posts are well known places for counterfeited goods.

The majority of counterfeit goods sold in Korea are from China. Some of the counterfeit goods manufactured in China are exported to Japan through Korea after changing the product’s origin from China to Korea. By the same token, made in China counterfeit goods get the country of origin changed from China to another 3rd country before entering the Korean market.

China accounts for 83% of the cases and more than 90% in value of counterfeit good import to Korea. Hong Kong and SouthEast Asian countries are also blamed as counterfeit exporting sources. Although European fashion brands are popular targets for counterfeiting, hardly any counterfeit goods are brought into Korea from Europe including Italy.

Table 5.1. Counterfeit goods import to Korea by case and value proportion (2006 – 2009) (Unit: %) 2006 2007 2008 2009 (e) Country Cases Value Cases Value Cases Value Cases Value China 78.0% 96.0% 79.2% 91.7% 80.1% 69.8% 83.4% 96.0% Hong Kong 4.4% 1.4% 3.6% 2.9% 1.9% 1.2% 1.9% 0.3% Japan 0.8% 0.1% 0.5% 0.0% 0.1% 0.3% 0.9% 0.1% Philippine 1.2% 0.0% 1.0% 0.1% 7.7% 1.7% 1.2% 0.4% U.S. 0.6% 0.1% 0.7% 0.1% 0.6% 2.9% 0.7% 0.0% Italy 0.4% 0.2% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% Others 14.5% 2.2% 14.9% 5.2% 9.5% 24.1% 11.9% 3.1% Total 100% 100% 100% 100% 100% 100% 100% 100% Source: Korea Customs Service Note: 2009 (e) estimation based on Jan-Aug

Korea is currently limited from trade with China via land due to the current non-diplomatic relationship with North Korea, which is located right in between Korea and China by border. Freight by sea and air are the only available trading routes. Busan port is the largest trade port accounting for 26.3% of all trade followed by Incheon Airport (23.0%) and Incheon port (10.8%). These three ports are the most significant trade locations accounting for 60.1% of total Korean trade.

Graph 5.1. The trade volume of main ports (Port, Airport) in 2009 (Unit: million USD)

Source: “Foreign Trade Statistics”, Korea Customs Service, 2010

Figure 5.1. Main import route and consumption area

Import Consumption

23.0% 27.0% Incheon Airport Seoul

Incheon Port 10.8% Capital Region 55.6% * Include Seoul

26.3% 6.9% Pusan Port Pusan

Source: “Foreign Trade Statistics”, Korea Customs Service, 2010 “Final Consumption Expenditure”, National Statistical Office, 2008

The Incheon Port is the closest port to China, therefore handling the largest volume of personal trading with China. As China is blamed as a source for over 90% of counterfeit goods within Korea, a crackdown result of 60% of counterfeit goods of all three ports turned out at the Incheon Port.

From April 2009, the clearance-control level of travelers (many of them are not genuine travelers but goods delivery men) from China have been strengthened. This enforcement makes some change of tactics using the delivery men to combine LCL (Less than Container Load) cargo. By conspiring with the forwarder, counterfeit goods exporters submit the cargo manifest as the representative merchant’s name, concealing the actual owner and the names of goods. The exporters also hide or disguise the goods to get through illegal custom clearance.

With the increase of buying agents services of online shopping malls, the volume of inflow through international couriers and international post has been increasing. Internet shopping malls that provide buying agent services of luxury goods from Hong Kong are increasing. This leads to the increase in the bringing in of counterfeit goods through international post and couriers.

Table 5.2. Amount cleared through international courier and posts (Unit: thousand cases, million USD) Cleared by Simple Clearance Regular Clearance Total Year inspecting list Number Amount Number Amount Number Amount Number Amount 2005 3,560 96 463 272 481 3,146 4,505 3,514 2006 4,784 151 621 334 496 4,318 5,901 4,803 2007 5,972 209 743 379 557 4,819 7,273 5,407 2008 6,593 244 812 383 660 5,058 8,065 5,685 2009 5,336 163 779 378 1,743 4,785 7,858 5,326

Source: Korea Customs Service

6. The consumption area and consumers of counterfeit-products 6.1. Patterns of counterfeit good sales through internet shopping malls

Internet online shopping malls are the 2nd largest retail channel surpassing over 20 trillion KRW after the hypermarket with a 21.9% annual growth. The sales of fashion products have shown a significant increase with 900 billion KRW in 2004 to 3.5 trillion KRW in 2009 with a 32.4% annual average growth.

Figure 6.1. Korea internet shopping mall market size (2004-2009) (Unit: billion KRW)

25,000

20,000

15,000

10,000

5,000

0 2004 2005 2006 2007 2008 2009 Clothes and Fashion-related products Total

Source: “The trend of e-commerce & cyber shopping”, National Statistical Office, 2010

As fashion related products are the most popular product type for counterfeiting at off line stores (e.g. Namdaemoon market), watches, bags, clothes, and shoes turned out to be the majority product type of counterfeit goods in internet shopping malls. Through the internet shopping malls the range for counterfeit brands are also expanding from luxury fashion brands to middle-priced ranged brands. As the gradual strengthening of enforcement to internet shopping malls grows counterfeit traders cleverly manage it to evade the law enforcement by operating the server of the malls overseas. The trading of counterfeited goods of fashion related products is likely to be increased in internet shopping malls.

According to the study conducted by the SNU (Seoul National University), Internet shopping malls are responsible for 31-46% of counterfeit sales after offline stores. As the price range of the goods decrease (from Luxury Special A/SA to Sport/middle) the market share difference between offline stores and internet shopping malls are narrowed. The number of buying agents services for luxury SA grade goods are increasing which make it be more easily available to consumers. Therefore, the market share of internet shopping mall for high priced counterfeit goods will be also increased in the future.

Table 6.1. Purchasing channels by counterfeit good category 2009 Luxury SA Luxury B Sport/middle Channel Grade Grade Grade Stores 56 % 58 % 50 %

Internet shopping malls 31 % 35 % 46 %

Overseas 10 % 5 % 3 %

Others 3 % 2 % 1 %

Total 100 % 100 % 100 %

Survey sample size 704 771 686 Source: “Counterfeit Consumption in Korea: Who Buys What. And Why?" in Consumer Research Vol. 21. No. 1, Korean Society of Consumer Studies, 2010 Note: based on 2,161 sample size of consumer surveys.

6.2. Counterfeit goods-purchasing consumer profile In March 2010, the SNU released a survey report to 1,148 people regarding the purchase of counterfeit luxury and sports/middle priced goods. According to the survey, 72.2% people have experience in purchasing a counterfeit product. Among the consumers non-married women in their 20s are the most frequent counterfeit buying group. The age group of 10-20s and those enjoying sports at 30-40s have the tendency of purchasing sporting or casual brands such as NIKE, LESPORTSAC, HOLLISTER, etc. Whereas women in their late 20s to 30-50s seemed to have the tendency to buy luxury foreign brands such

as CHANEL, LOUIS VUITTON, GUCCI, etc.

Table 6.2. Counterfeit good consumer profile analysis 2009 % experience in purchasing Consumer Profile counterfeit good 20s 82.7%

30s 67.5% Age group 40s 71.2%

50s 65.3%

Male 64.5% Sex Female 75.9%

Married 68.7% Marital status Not-married 79.2%

Yes 68.4% Children No 78.5%

Below High school 66.2%

Final degree of In University 82.4% education Bachelor Degree 72.4%

Graduate School degree 71.8%

0 73.9%

1-50 74.6%

Personal income 51-100 77.7% (10,000 KRW per month) 101-200 76.6% 201-300 66.9%

301+ 58.9% Source: “Counterfeit Consumption in Korea: Who Buys What. And Why?" in Consumer Research Vol. 21. No. 1, Korean Society of Consumer Studies, 2010 Note: based on 1,148 sample size of consumer surveys.

6.3. Price and grade of counterfeit-products Counterfeit products can be largely divided into ‘Special A grade’ (SA) and ‘B grade’. SA grade products are mainly manufactured in Korea; whereas B grade products are imported from China. Popular counterfeited Italian brands are BVLGARI, GUCCI, FERRAGAMO and PRADA. Price levels by product-types of the counterfeit products are in the table below. The price levels of SA products are approximately double of B grade products which still cost a fraction of 5-15% of the original goods. The design and appearance of some ‘Super Special A grade’ counterfeit goods are so close to the original product so that many consumers are unable to distinguish it from the original.

A survey conducted by an internet shopping mall of counterfeit retailers to the subscribed members showed three main buying motivations of counterfeit goods. They are 1) unable to tell the difference with the original product: 35%, 2) low cost: 20%, 3) the comfort of being able to use it casually (e.g. worry less about damaging etc.) compared to the original product. Beside by the low prices, elaborately well made high quality counterfeit goods make it to be difficult for eradication.

Table 6.3. Counterfeit type, price & market share 2009 Type Product Share Average price KRW

Bags 16% 182,000

Clothes 6% 159,000 Luxury Special A grade Shoes 4% 98,000

Accessories 6% 106,000

Bags 13% 78,000

Clothes 8% 92,000 Luxury B grade Shoes 7% 61,000

Accessories 8% 51,000

Bags 4% 80,000

Clothes 13% 75,000 Sport/Middle grade Shoes 12% 58,000

Accessories 3% 39,000 Source: “Counterfeit Consumption in Korea: Who Buys What. And Why?" in Consumer Research Vol. 21. No. 1, Korean Society of Consumer Studies, 2010 Note: based on 1,148 sample size of consumer surveys.

Most of the Grade B counterfeit goods of luxury brands or sport/middle price ranged brands are under 100,000 KRW which account for 76.1% market share. The market share of luxury brand SA grade products costing 100,000 – 200,000 KRW is 16.4%, and that of super special A grade products of luxury brands cost above 200,000 KRW as 7.6%.

Figure 6.2. Price of counterfeit goods and market share 2009 (Unit: KRW)

200,000 over, 7.6% 100,000- 200,000, 16.4%

100,000 less, 76.1%

Source: “Counterfeit Consumption in Korea: Who Buys What. And Why?" in Consumer Research Vol. 21. No. 1, Korean Society of Consumer Studies, 2010 Note: based on 1,148 consumer surveys.

7. Appendix IP Center of the EUCCK (European Union Chamber of Commerce in Korea) continuously investigates and expresses their opinions on the IPR conditions of Korea and for the IPR protection of European brands. In the ‘2010 Market Access Issues’5, 8 issues and proposals were stated regarding the IPR of Korea.

This statement addresses clear and specific recommendations.

7.1. Online retailers Issues Internet sales platforms account for a growing share of consumer retail sales in Korea. The most popular sites enable sellers to establish online stores to connect with consumers on a central platform. Such a structure allows the platform providers to argue that they should avoid liability for IP infringements on their sites as they are not themselves directly selling products.

Related IP infringements can be broadly divided into two categories: a) enhance third-party liability in relation to online sales platforms; b) improve the report and remove systems on the larger retail sites.

Recommendations a) The sites can be used for the sale of counterfeit goods.

5 http://trade.eucck.org/site/2010/ko/market13.htm

63 b) Sellers violate brand owner trademarks or copyright by uploading logos, product or model images, and advertisements

7.2. Cross-border counterfeit flows Issues In recent years, a growing number of the counterfeit products found in Korea originated abroad. China is a major source of counterfeit products, but the common image of fake goods made in China and sold in Korea is an oversimplification of the true supply chain.

In particular, goods are often imported into Korea in semi-manufactured forms (for example, without logos attached), and machine tools used in the manufacture of counterfeit products have also been seized at border entry points.

A recent example that combined product disaggregation and the global nature of counterfeiting was a major seizure by the Korea Customs Service at Incheon in December 2009. This involved disaggregated counterfeit goods originating in China, imitating European brands, en route to the U.S., seized by Korean customs authorities (without actually entering Korea).

The EUCCK appreciates the commitment of the KCS to tackling regional IP violations, and welcomes initiatives such as the Intellectual Property Information Management System (IPIMS) in principle. The EUCCK will continue to work with the KCS to improve the system and cross-border

64 monitoring and control.

Recommendations a) Enhance the IPIMS database to cover disaggregated products and unregistered designs. Develop an English language interface. b) Release more data on counterfeit seizures on a regular basis.

7.3. Domestic counterfeit industry Issues Many of the notorious markets in Seoul and elsewhere continue to sell counterfeit consumer products, despite sporadic enforcement authority crackdowns. Selling practices have evolved, in particular by stores not carrying many counterfeit products on their retail premises. This may be to avoid legal criminal thresholds, or otherwise just to reduce the risk of detection.

For industrial products (such as autoparts etc.) the supply lines are less concentrated on small geographical areas, and are dispersed through a network of dealerships, for example.

Recommendations a) Develop enforcement methods to cope with stores carrying volumes of products below criminal thresholds, but that supply counterfeit goods to order. b) Properly enforce licensing arrangements for street vendors at the

local government level. c) Concerted campaigns by enforcement officers to tackle the entire counterfeit supply chain.

7.4. Sentencing leniency Issues Whereas counterfeit seizures and crackdowns, especially by the KCS, are showing improving trends in relation to other Asia/Pacific nations, the actual sentences resulting from these seizures are comparatively weak. This results in a low deterrent to engaging in counterfeiting activities and can discourage enforcement officers.

Recommendations a) Consistent pressure by prosecutors for stronger sentencing. Fully utilize appeal mechanisms against lenient sentencing. b) Build understanding of sentencing deterrent in IP cases into national judicial training programs.

7.5. Gaming industry copyright infringements Issues There are numerous IP infringement activities regarding game software in Korea. These include followings. a) Illegal downloads of packaged game software Packaged game software, especially STARCRAFT software, is

frequently downloaded illegally by online PtoP companies and via portal sites. b) Free server (i.e. illegal private server) operation of games Illegal private servers for online games, especially the WORLD of WARCRAFT, are operated and advertised through major portal sites. c) Unapproved operation of gaming tournaments Tournaments using software under copyright, in particular STARCRAFT software, are operated illegally by several organizations, including the KeSPA (Korea e-Sports Association), without approval of the copyright owners (BLIZZARD in the case of STARCRAFT software). d) Unapproved broadcast of gaming tournaments Tournaments using protected software (such as STARCRAFT software) are broadcasted illegally by several broadcasting companies, especially the ONGAME NETWORK and MBC GAMES, without the approval of the copyright owner (BLIZZARD in the case of STARCRAFT Software).

If no action is taken against these kinds of IP infringements, then it may result in foreign game companies investing less in Korea, and may also negatively affect the overseas business of Korean game companies.

Recommendations a) More active criminal investigations of violations. b) Greater commitment to regulations protecting game industry copyright by government legislators.

7.6. Country of origin labels Issues Country of origin labels accepted by border controls should be brought in line with those of standard international practice in regards to commonly used acronyms and alternative country names.

Furthermore, given the free movement of goods and labour within the European Union, consideration should be made to accepting a “Made in EU” mark.

Recommendations a) Accept common acronyms and alternative country names in line with global standards. b) Consider accepting the “Made in EU” mark at border points of entry.

7.7. Industrial IP protection Issues There have been a number of cases of industrial IP violations in recent years, with concerns over patent infringement and technology transfer in particular. This is a problem in the automotive and shipbuilding industries,

68 and is also anticipated in the renewable energy field in the coming years.

New Technology Certificates have also been used as a method to prevent overseas companies protecting established technology in Korea.

Recommendations a) Isolate and resolve the sources of IP leakage in registration and certification processes. b) Improve the search procedure for the issuance of New Technology Certificates to prevent applications referring to established overseas technology.

7.8. IP statistical data provision Issues Currently statistical flows on IP from Korean government sources are not meeting the requirements of brand owners.

Recommendations a) Make available to brand owners any data collected on their brand by government agencies. b) This should be provided free of charge, or through reasonable charges made directly to the central data collecting department. c) Data is needed on total import volumes, counterfeit seizures (by various sources), and patent/trademark applications and filings. d) Raw data should be provided regularly (hopefully monthly).

8. Tables - Main brands and managing companies Italian brands with High severity of counterfeit with Medium severity of counterfeit with Low severity of counterfeit

French brands with High severity of counterfeit with Medium severity of counterfeit with Low severity of counterfeit

U.S. brands with High severity of counterfeit with Medium severity of counterfeit with Low severity of counterfeit

Other brands with High severity of counterfeit

Italian brand sales

French brand sales

U.S. brand sales

Other brand sales

Table 8.1. Italian brands with High severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English) clothes, 1 BVLGARI ㈜불가리코리아 BVLGARI KOREA 02-546-2906 accessories, shoes

SHINSEGE 2 DIESEL clothes ㈜신세계인터내셔날 02-3440-1234 INTERNATIONAL bags, wallets SHINSEGE 3 DSQUARED2 (purses), belts, ㈜신세계인터내셔날 02-3440-1042 INTERNATIONAL shoes clothes, bags, shoes, wallets 4 ETRO 듀오 DUO 02-511-2572 (purses), belts, accessories clothes, bags, 5 FENDI wallets (purses), ㈜펜디 코리아 FENDI KOREA 02-2056-9099 belts clothes, bags, 6 GUCCI shoes, accessories, 구찌그룹코리아 GUCCI KOREA 02-3443-7921 belts clothes, bags, 7 PRADA wallets (purses), ㈜프라다코리아 PRADA KOREA 02-3443-2323 belts clothes, bags, SALVATORE FERRAGAMO 8 wallets (purses), ㈜페라가모코리아 02-2140-9600 FERRAGAMO KOREA belts, shoes clothes, bags, 9 TOD'S wallets (purses), 토즈코리아 TOD'S KOREA 02-3448-8121 belts, shoes

Table 8.2. Italian brands with Medium severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English) A. TESTONI 1 A. TESTONI clothes ㈜아테스토니코리아 02-554-4310 KOREA watches, 2 ARMANI 우림 T&C WOORIM T&C 02-592-5432 accessories ARMANI 3 clothes B&F 통상 B&F TRADE 02-719-9303 EXCHANGE KOREA 4 BALLY clothes 한국 코르사베르만 02-3781-2200 CORSA BERMAN

5 BLUEMARINE clothes LG 패션 LG FASHION 02-3441-8114

DOLCE & SHINSEGE 6 clothes ㈜신세계인터내셔날 02-3440-1234 GABBANA INTERNATIONAL EMPORIO SHINSEGE 7 clothes ㈜신세계인터내셔날 02-3440-1234 ARMANI INTERNATIONAL GIORGIO SHINSEGE 8 clothes ㈜신세계인터내셔날 02-3440-1234 ARMANI INTERNATIONAL WAREFUN 9 ICEBERG clothes 웨어펀 인터네셔날 02-3446-3200 INTERNATIONAL bags, wallets SHINSEGE 10 MARNI ㈜신세계인터내셔날 02-3440-1234 (purses), belts INTERNATIONAL

11 MAX MARA clothes 코리막스 KORIMAX 02-3470-1706

JEDONG 12 MISSONI clothes 제동물산 02-512-1700 CORPORATION

13 MOSCHINO clothes 블루벨코리아 BLUBELL KOREA 02-3444-2203

ROBERTO 14 clothes ㈜SH Holdings SH HOLDINGS 02-563-9601 CAVALI clothes, watches, 15 VERSACE - - - accessories

Table 8.3. Italian brands with Low severity of counterfeit Managing Managing company Brand Main products company Tel (Korean) (English) ANNA 1 clothes LG 패션 LG FASHION 02-3441-8224 MOLINARI

BENETTON 2 BENETTON clothes ㈜베네통코리아 02-3488-3645 KOREA

3 D&G clothes ㈜SH Holdings SH HOLDINGS 02-563-9601

watches, MYUNGBO 4 DAMIANI 명보교역 02-3279-9000 accessories TRADE

clothes, 5 ELLESSE ㈜이랜드 E LAND 02-323-0456 accessories, shoes

ERMENAGILDO 에르메네질도제냐 ERMENAGILDO 6 clothes 02-2016-5320 ZEGNA 코리아㈜ ZEGNA KOREA

clothes, 7 FILA 휄라코리아 FILA KOREA 02-523-6100 accessories, shoes

LOTTE 8 FURLA clothes ㈜롯데쇼핑 02-2079-9462 SHOPPING

DAEKYUNG 9 GASTELBAJAC clothes 대경글로벌 02-3443-0084 GLOBAL

GIANNI WAREFUN 10 clothes 웨어펀 인터네셔날 02-3446-3200 VERSACE INTERNATIONAL

11 HOGAN clothes 토즈코리아 TOD'S KOREA 02-3448-8121

HUNTING HUNTING 12 clothes 헌팅월드코리아 02-757-6621 WORLD WORLD KOREA

13 KAPPA clothes 카파코리아 KAPPA KOREA 02-2046-2990

14 MALO clothes ㈜티디코 TDCO 02-2104-9122

Managing Managing company Brand Main products company Tel (Korean) (English) ESCO 15 MAX & CO clothes 에스코 인터내셔날 02-3470-1780 INTERNATIONAL

clothes, MONTURA 16 MONTURA ㈜몬츄라코리아 02-352-3107 accessories, shoes KOREA

ROBERTA DI clothes, 17 ㈜팬코 FENCO 02-2210-8745 CAMERINO accessories

ROBERTO 18 clothes ㈜에스에이치홀딩스 SH HOLDINGS 02-563-9601 CAVALI

BENETTON 19 SISLEY bags, accessories ㈜베네통코리아 02-3488-3645 KOREA

20 TAKE TWO clothes ㈜프레피코리아 PREPPY KOREA 02-3447-7611

TONINO wallets (purses), 21 ㈜에이션패션 ASIAN FASHION 02-2263-3223 LAMBORGHINI accessories

clothes, 22 TRUSSARDI ㈜에이션패션 ASIAN FASHION 02-3433-3503 accessories

JEDONG 23 VALENTINO clothes 제동물산 02-512-1700 CORPORATION

Table 8.4. French brands with High severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English) accessories, 1 AGATHA ㈜폴린컴퍼니 FOLIN COMPANY 02-555-4165 watches clothes, bags, wallets (purses), ㈜미치몬트 MICHMONT 2 CARTIER 02-3440-5500 accessories, 코리아 KOREA watches, belts clothes, bags, CHANEL wallet s (purses), 3 CHANEL 샤넬 유한회사 PRIVATE 02-3708-2700 accessories, COMPANY watches, belts clothes, bags, 크리스챤 디올 CHRISTIAN DIOR 4 CHRISTIAN DIOR wallets (purses), 02-513-3200 꾸뛰르 COUTURE belts, watches clothes, bags, ㈜헤르메스 5 HERMES wallet s (purses), HERMES KOREA 02-544-7722 코리아 belts, watches clothes, bags, wallets (purses), ㈜루이비똥 LOUIS VUITTON 6 LOUIS VUITTON 02-3432-1854 accessories, 코리아 KOREA watches, belts

Table 8.5. French brands with Medium severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English)

1 BALENCIAGA clothes ㈜한섬 HANSUM 02-3416-2002

2 CELINE clothes ㈜세린느 코리아 CELINE KOREA 02-3441-6350

HANHWA 3 GOTARD clothes 한화갤러리아㈜ 02-410-7114 GALLERIA

4 CHLOE clothes ㈜한섬 HANSUM 02-3416-2000

WAREFUN 5 KENZO clothes 웨어펀 인터내셔날 02-3446-3200 INTERNATIONAL

LE COQ DESCENTE 6 clothes 데상트코리아㈜ 02-2007-3300 SPORTIF KOREA

LONG CHAMP 7 LONG CHAMP clothes 롱샴코리아㈜ 02-725-1505 KOREA

watches, 8 MONTBLANC 유로통상 EURO TRADE 02-3485-6610 accessories

clothes, 9 S.T. DUPONT 에스제이듀코 SJ DUCO 02-2106-3561 accessories

VANESSA 10 clothes ㈜LG패션 LG FASHION 02-3441-8224 BRUNO

YVES SAINT (주)구찌그룹 GUCCI GROUP 11 clothes 02-3442-7921 LAURENT 코리아 KOREA

Table 8.6. French brands with Low severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English)

1 BALMAIN clothes 발망코리아 BALMAIN KOREA 02-521-8191

watches, MYUNGBO 2 BREITLING 명보교역 02-3279-9000 accessories TRADE

BLUEBELL 3 CACHAREL clothes 블루벨 코리아 02-3444-2203 KOREA

CHARLES clothes, watches, 4 ㈜파비즈글로벌 FABITZ GLOBAL 02-517-0916 JOURDAN accessories

BORYUNG 5 CHOCOLAT clothes 보령메디앙스㈜ 02-708-8236 MEDIANCE

CHRISTIAN 코오롱인더스트리 KOLON 6 clothes 02-3677-7102 LACROIX ㈜ INDUSTRY

7 ELLE clothes ㈜에프앤에프 FNF 02-520-0113

EMMANUEL 8 clothes 캄텍 CAMTECH 02-3701-3071 UNGARO SUNGYOON PNP bags, wallets ㈜성윤피엔피 9 FIGARO COMMUNICATIO 02-6000-3010 (purses), belts 커뮤니케이션 NS

10 GIVENCHY clothes 에프지엔 FGN 02-588-2790

clothes, 11 GUY LAROCHE ㈜리센시아 LICENCIA 02-2236-0276 accessories

HARRY watches, MYUNGBO 12 명보교역 02-3279-9001 WINSTON accessories TRADE

Managing Managing Brand Main products company company Tel (Korean) (English) DONGIL 13 LACOSTE clothes ㈜동일드방레 02-550-1175 DEVANLAY

14 LAFUMA clothes ㈜엘지패션 LG FASHION 02-2156-3801

15 LANVIN clothes ㈜한섬 HANSUM 02-3416-2001

clothes, GLI 16 MARIE CLAIRE 지엘아이컨설팅 02-522-6447 accessories CONSULTING

DONGIL 17 MICMAC clothes 동일레나운㈜ 02-531-5366 RENOWN

HANGO 18 MILLET clothes, bags 한고상사 02-306-7033 COMPANY

wallets (purses), 19 MORGAN ㈜인디에프 INDY F 02-3456-9123 accessories

clothes, 20 NINA RICCI 에이알 AR 02-790-2130 accessories

clothes, LOTTE 21 PACO RABANNE 롯데쇼핑 02-726-4441 accessories SHOPPING

clothes, SANGKOO 22 PIERRE CARDIN 상구통상 02-425-3722 accessories TRADE

clothes, 23 RENOMA DURU-K DURU-K 02-2203-1077 accessories

웨어펀 WAREFUN 24 SONYA RYKIEL clothes 02-3446-3201 인터내셔날 INTERNATIONAL

Table 8.7. U.S. brands with High severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English) clothes, bags, ㈜신세계 SHINSEGE 1 COACH wallets (purses), 02-3440-1042 인터내셔날 INTERNATIONAL belt 리바이스트라우스 LEVI STRAUSS 2 LEVI'S clothes 02-528-8978 코리아 KOREA

나이키스포츠 NIKE SPORTS 3 NIKE clothes, shoes 02-2006-5700 코리아 KOREA

GAEMI PLUS 4 PAUL FRANK watches, clothes 개미플러스 유통 02-730-6388 DISTRIBUTION

POLO RALPH 5 clothes ㈜두산 DOOSAN 02-3398-1121 LAUREN

THE NORTH GOLD WIN 6 clothes ㈜골드윈코리아 02-940-1247 FACE KOREA

accessories, 7 TIFFANY ㈜티파니코리아 TIFFANY KOREA 02-540-6270 watches

Table 8.8. U.S. brands with Medium severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English)

1 ABERCROMBIE clothes NA - -

J. ROSEROCO 2 ANNA SUI clothes 제이.로즈로코뉴욕 02-3446-0177 NEW YORK

clothes, watches, CALVIN KLEIN 3 CALVIN KLEIN 캘빈클라인진코리아 02-516-1811 accessories JEANS KOREA

4 DKNY clothes 에스케이네트웍스 SK NETWORKS 02-2221-4779

5 HOLLISTER clothes NA - -

6 LESPORTSAC clothes ㈜스타럭스 STARLUX 02-551-7050

KOLON 7 MARC JACOBS clothes 코오롱인더스트리㈜ 02-3677-7114 INDUSTRY

8 MICHAEL KORS clothes 시몬느에프씨 SIMON FC 02-553-2772

페리엘리스 PERRY ELLIS 9 PING clothes 016-230-3426 인터내셔날 INTERNATIONAL

TOMMY 10 clothes 타미 코리아 TOMMY KOREA 080-519-0700 HILFIGER

Table 8.9. U.S. brands with Low severity of counterfeit Managing Managing Brand Main products company company Tel (Korean) (English) clothes, bags, 1 AIRWALK 에어워크코리아 AIRWALK KOREA 02-720-9160 shoes clothes, bags, YOUNGCHANG 2 ANNE KLEIN 영창실업 02-2106-3301 shoes INDUSTRY ARNOLD 3 clothes 동일레나운㈜ DONGIL LENOUN 02-531-5162 PALMER BANANA clothes, bags, ㈜신세계 SHINSEGE 4 02-3440-1044 REPUBLIC shoes 인터내셔날 INTERNATIONAL COLUMBIA 컬럼비아스포츠웨어 COLUMBIA 5 clothes, shoes 02-540-0277 SPORTSWEAR (유) SPORTSWEAR 6 COOLMAX clothes (fabric) 인비스타코리아(유) INVISTA KOREA 02-550-5259 COUNTLESS 7 clothes ㈜클리포드 CLIFFORD 031-781-3091 MARA 8 EARL JEAN clothes 키슨스 KISSINS 02-546-4620 9 FUBU clothes 제일모직㈜ CHEIL CLOTH 02-2076-7157 ㈜신세계 SHINSEGE 10 GAP clothes 02-3440-1043 인터내셔날 INTERNATIONAL 11 HALLMARK cards, ceramics ALI ALI 02-784-7660 HANGTEN 12 HANG TEN clothes 행텐코리아 02-837-7484 KOREA clothes, 13 HARVARD SMC SMC 02-463-6133 accessories J.ROSEROCO J. ROSEROCO 14 clothes 제이.로즈로코뉴욕 02-3446-0178 NEW YORK NEW YORK 15 JACK NICKLAUS clothes ㈜아이엠지코리아 IMG KOREA 02-558-8544 16 JEEP clothes ㈜인피니스 INFINUS 02-2263-3233 17 JILL STUART clothes ㈜엘지패션 LG FASHION 02-2156-3802 clothes, bags, 18 K-SWISS ㈜화승 HWASEUNG 02-320-0600 shoes, watches 19 LYCRA clothes (fabric) 인비스타코리아(유) INVISTA KOREA 02-550-5260 MARC BY KOLON 20 clothes 코오롱인더스트리㈜ 02-3677-7115 MARC JACOBS INDUSTRY

Managing Managing Brand Main products company company Tel (Korean) (English) clothes, 21 MLB ㈜에프앤에프 F&F 02-520-0113 accessories 22 MOUNTAIN DEW licenses ㈜인피니스 INFINUS 02-2263-3234 clothes, bags, MOUNTAIN 컬럼비아스포츠웨어 COLUMBIA 23 shoes, 02-540-0278 HARD WEAR (유) SPORTSWEAR accessories clothes, YOUNGCHANG 24 NAUTICA watches, 영창실업 02-2106-3300 INDUSTRY accessories 25 NEW BALANCE shoes 글로벌스포츠 GLOBAL SPORTS 02-2254-4600 GAEMI PLUS 26 NINE WEST shoes 개미플러스 유통 02-730-6388 DISTRIBUTION BORYUNG 27 OSHKOSH clothes 보령메디앙스 02-708-8236 MEDIANCE 28 PEPSI COLA licenses ㈜인피니스 INFINUS 02-2263-3233 페리엘리스 PERRY ELLIS 29 PERRY ELLIS clothes 016-230-3425 인터내셔날 INTERNATIONAL SAMSONITE 30 SAMSONITE bags 쌤소나이트코리아 02-539-7770 KOREA ㈜신세계 SHINSEGE 31 ST. JOHN clothes 02-3440-1042 인터내셔날 INTERNATIONAL J&M 32 UCLA licenses J&M Corporation 02-2107-8525 CORPORATION VANESSA 33 clothes, bags ㈜엘지패션 LG FASHION 02-2156-3801 BRUNO 34 YALE license SMC SMC 02-463-6132

Table 8.10. Other brands with High severity of counterfeit Managing Managing Country Brand Main products company company Tel (Korean) (English) ADIDAS 1 Germany ADIDAS clothes, shoes 아디다스코리아 02-2186-0300 KOREA bags, wallets KOREA 한국 2 Swiss BALLY (purse), belt, COSARY 02-3781-2200 코사리베르만 shoes BERMAN bags, wallets ㈜버버리 BURBERRY 3 England BURBERRY 02-3485-6500 (purses), belts 코리아 KOREA FRANK 4 England watches - - - MULLER Germany / watches, SUNG JOO 5 MCM ㈜성주디앤디 02-2194-6803 Korea accessories D&D ㈜SHK SHK 6 England MULBERRY accessories 02-3442-2286 Holdings HOLDINGS watches, MYUNGBO 7 Swiss PIAGET 명보교역 02-3279-9000 accessories TRADE bags, wallets 8 Germany PUMA 푸마코리아 PUMA KOREA 02-3284-2889 (purses), belts watches, 9 Swiss ROLEX 한국로렉스 ROLEX KOREA 02-2112-1251 accessories

Table 8.11. Italian brand sales (Unit: million KRW) No Brand 2005 2006 2007 2008 2009 1 BVLGARI 21,492 27,568 36,546 42,981 56,041 2 DIESEL 3,527 4,938 8,888 13,333 20,000 3 DSQUARED2 5,291 7,407 13,333 20,000 30,000 4 ETRO 20,038 20,206 28,649 35,060 39,584 5 FENDI 12,032 16,206 19,948 24,918 27,632 6 GUCCI 121,544 140,201 145,753 199,138 279,265 7 PRADA 1,741 27,108 26,923 35,837 62,066 SALVATORE 8 43,309 47,822 55,301 66,940 70,404 FERRAGAMO 9 TOD'S - 1,409 3,523 10,230 9,611

Table 8.12. French brand sales (Unit: million KRW) No Brand 2005 2006 2007 2008 2009 1 AGATHA 12,458 13,703 13,099 12,430 14,916 2 CARTIER 68,871 75,758 83,333 100,000 120,000 3 CHANEL 94,209 122,472 159,213 206,774 232,240 4 CHRISTIAN DIOR 27,174 24,299 24,951 27,497 31,713 5 HERMES 33,053 37,021 53,831 65,518 84,269 6 LOUIS VUITTON 89,285 121,252 168,976 281,198 372,101

Table 8.13. U.S. brand sales (Unit: million KRW) No Brand 2005 2006 2007 2008 2009 1 COACH 5,000 12,000 21,000 35,000 35,000 2 LEVI'S 106,767 109,910 99,233 99,100 107,405 3 NIKE 291,484 288,210 331,334 363,978 405,935 4 PAUL FRANK 8,333 10,000 - - - 5 POLO RALPH LAUREN 120,419 144,502 173,403 208,083 249,700 6 THE NORTH FACE 121,371 155,266 212,258 261,717 309,705 7 TIFFANY 26,840 26,194 25,559 34,046 48,244

Table 8.14. Other brand sales (Unit: million KRW) No Country Brand 2005 2006 2007 2008 2009 1 Germany ADIDAS 184,026 217,048 256,154 302,849 334,536 2 Swiss BALLY 12,794 15,353 14,804 18,110 21,732 3 England BURBERRY 105,038 106,575 117,181 130,909 158,663 5 Germany MCM 61,351 88,100 121,964 159,289 183,284 7 Swiss PIAGET 24,895 24,538 29,998 28,955 34,746 8 Germany PUMA - - - 71,024 96,431 9 Swiss ROLEX 20,257 22,490 28,281 39,164 43,810

이탈리아지식재산권사무소∙이탈리아무역공사서울무역관 IPR DESK at the Italian Trade Commission, Seoul Office 서울특별시 중구 서소문동 135번지 올리브타워 23층 23rd Fl., Olive Tower, 135 Seosomun-dong, Chung-ku, Seoul, 100-737 Tel. (822) 757-3102/3 Fax (822) 757-3104 E-mail: [email protected] - [email protected]