Market Research on Counterfeit Italian Brands in the Republic of Korea
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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. 1 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. 2 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). 3 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. 5 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,