Brazil: Fake Caps, Pharmaceuticals, Hair Appliances and More
One of the counterfeit capitals in the West is Brazil, where its illicit retail market is intensified by the social, political, and economic crises throughout the country.[1] My first exposure to the counterfeit market in Brazil stemmed from my role as a member of the brand protection team of a law firm, where I searched through online marketplaces for counterfeit external hard drives and hair appliances. I was surprised to find that the Brazilian counterfeit market appeared almost as pervasive as that of China.
Brazil lost $41.5 billion in 2016 in part because of the prevalence of counterfeit goods.[2] The negative consequences of such a pervasive counterfeiting market include a decrease in jobs and tax revenue.[3] For instance, piracy alone hinders the creation of about two million jobs.[4]
Due to the increase in large factories manufacturing counterfeit goods in Brazil during the past decade, not only is the counterfeit market growing within Brazil, but it is also being imported to and from other countries in South America.[5] Notably, while most of the counterfeit goods originate in China and Paraguay, a significant amount now derives from Bolivia and Uruguay.[6]
Although many factories within Brazil have been forced to close down, the ones that remain are resorting to using their technical knowledge of legitimate products for illicit means.[7] Additionally, new manufacturing sites have surfaced to satisfy the counterfeit market.[8]
The Brazilian counterfeit market encompasses “clothing, luxury goods, accessories, shoes, school supplies, auto parts, beverages and pharmaceuticals.”[9] The textile sector has been impacted the most with an annual estimated loss of BRL 1.56 billion, followed by the electronic, medical, and cosmetics markets.[10] Part of this loss occurs in the Brazilian state of Parana, where 95% of around 500 factories are producers of counterfeit caps.[11] The counterfeit pharmaceutical industry is also rampant, despite the severe penalties of 15 years imprisonment.[12] Many of the active ingredients in the drugs are imported from Paraguay, China, and India and are mixed in Brazilian backyards and basements for local consumption.[13] The industry for counterfeit alcoholic beverages is also dangerous because counterfeiters refill brand-name whiskey and vodka bottles with unknown liquids, and then sold as the original product.[14]
The Brazilian counterfeit market is also unique because certain neighborhoods are notorious for selling particular counterfeit goods; Sao Paolo is known for counterfeit luxury goods, Nova Serrana is known for cheap or fake footwear, Franca is known for imitation leather footwear, Rio Grande do Sul and the Santa Catarina States are known for counterfeit apparel, and Southeast/Central Brazil are known for replica car and motorcycle parts.[15] Furthermore, entire malls are frequently dedicated to selling counterfeit goods.[16] Although sometimes well made, these counterfeit goods are infringing on both trademarks and industrial designs.[17]
The key stakeholders in the Brazilian counterfeit market include “criminals, local millionaires, and state police officers.”[18] Therefore, the counterfeit scheme is often conducted through multi-state organized crime syndicates with large distribution networks.[19] Moreover, depreciation of the Real in the last few years has prompted counterfeiters to seek raw materials locally and a series of raids illuminates that “[m]any producers of raw materials are already closely linked to manufacturers of counterfeit goods, exposing them to charges of criminal association.”[20]
When counterfeit goods are found, the owner of the IP is notified and has the choice of enforcing their rights through a customs administrative procedure, where they can seize and destroy the goods, or through a judicial remedy, where they can seek damages for the infringement and obtain the name and address of the importer from customs authorities.[21] If a rights owner does not present a complaint in response to the notice sent from the customs authorities within 10 days, and if all other customs requirements are satisfied, the goods will be released for delivery.[22]
Despite the severity of Brazil’s counterfeit market, there have been efforts by the government to combat the problem. For example, Anvisa, the National Health Surveillance Agency, tracks fake health products and issues guidance on “how to detect them, how to identify original products and which manufacturing batches are counterfeit.”[23] The Federal Revenue in Brazil, who oversees Brazilian customs, often creates campaigns focused on piracy and seizes counterfeit goods.[24] Additionally, the Ministry of Justice has sponsored a campaign, titled “The Brazil We Want,” which aims to educate the government and society on the harms of smuggling and promote an effective agenda to create more jobs, revenue, and improve economic conditions for the population.[25]
The counterfeit problem may be alleviated with improved border control,[26] an increase in the frequency of goods inspections, and improved training of customs officers for the identification of genuine and counterfeit goods. Additionally, trademark and patent owners may benefit from hiring their own brand protection teams, whose sole purpose is to enforce against infringements within brick-and-mortar and online marketplaces.
Footnotes
