ABSTRACT

Brand Integrity And Brand Protection

The integrity and reputation of brands are the core value of global business. This project will;

1. Determine the value of the brand and reputation
2. Determine internal and external risks & threats to brand and product, throughout the supply chain and life cycle of the product.
3. Provide examples from real world.
4. Examine whether and how those risks & threats are managed within the corporate businesses today?
5. Conduct survey about, Tobacco, Food, Pharmacy and Clothing Companies.
6. Propose how the risks & threats could be best managed and coordinated.

Key Words: Brand Integrity, Brand Protection, Reputation, Product Protection

1.  INTRODUCTION

All companies today became corporate and they operate in the global economy. The competition among them is high as never before. And companies with strong brands take advantage in this competitive business world.

However the risks and threats like, loss of intellectual property, counterfeit goods, product diversion, and theft of trade assets or patent infringements are targeting those successful brands. They are complex as the business dynamics and attacking against the revenues and the reputation of the successful companies.

The corporate companies have protection measures which they are applying to manage those risks and threats in order to protect their brand, product and reputation. However this protection measures are either insufficient or ineffective and poorly managed.

Most of the companies have only brand managers, risk managers, security managers, supply chain managers and others functions that are managing the threats and risks in a certain level with limited functions.

In this rapidly growing global economy, criminals or bad guys take advantage on this poor management and focus their efforts on how to take advantage of successful brand and product to gain more profit.

To manage those threats and risks against brand reputation and intellectual property in today’s global economy, a Global Brand Integrity Strategy has to be implemented throughout the company. This strategy needs to be applied throughout the supply chain and life cycle of the product. This will enable to the Company to see the big picture, to coordinate between the departments and to apply the necessary measures at any stage of the product in an effective way.

This project will try to focus on the followings and conduct surveys to find out the right answer how the companies brand & reputation could be protected in this competitive world from the criminals;

1. Determining internal and external risks & threats to brand and product, throughout the supply chain and life cycle of the product.
2. Providing examples from real world.
3. Proposing how those risks & threats could be best managed and coordinated.
4. Examining whether and how those risks & threats are managed within the corporate businesses today?
5. Conducting survey about Tobacco, Food , Clothing and Pharmacy Companies.

1.  DEFINITIONS
2. 1. BRAND

A brand is the essence; it is the life-force. It’s much more than what you see – it’s emotional; it’s an atmosphere, an experience, a connection. It’s made up of all the little things your business or organization represents. Your brand is not entirely defined by you. For better or worse, your customers, clients and fans have a big hand in crafting a brand identity. This is why it’s imperative to tap into your audience’s psyche and provide something that’s truly memorable (Cheuvront 2010).

Brand is about caring about your business at every level and in every detail, from the big things like mission and vision, to your people, your customers and every interaction anyone is ever going to have with you, no matter how small (Pallotta 2011).

1. 1.  BRAND INTEGRITY

When I say Brand Integrity, I’m not talking about some kind of altruistic mission, I mean every customer experience with your company should “ring true”, it should be expected, it should not be unexpected (unless of course surprise is part of your core value proposition). Integrity in the customer experience means, things look like they should, sound like they should, feel like they should, and behave like they should (Bitners 2006).

Brand Integrity is the ultimate business and management strategy. It is the one strategy that works in companies of all sizes and within all industries to strengthen culture and business results. Brand Integrity aligns who a company is (core values, mission/vision, and strategic benefits) with where it is going (goals and strategic plans) and how employees will deliver the behaviours and experiences to achieve results. In addition to being a management strategy, Brand Integrity is a destination. The destination is the point at which a company achieves its desired brand image while reaching its business goals. Said another way, it’s when employees, customers, partners, and the market understand, believe, and experience that the company is who it says it is. To achieve

Brand Integrity, leaders need a strategy and employees need to know the strategy and how they can best deliver it through their day-to-day work activities (Post, 2008, p. 3).

1. 1.  PRODUCT INTEGRITY

“Product Integrity” includes every aspect of a product from cradle to grave. This includes product design, development, manufacture, maintenance and its disposal at the end of its useful life. Product integrity is broader than product quality or even total product quality. It is impacted by everyone who interacts in any way with the product (Grumman 2010, p. 3).

Products with integrity perform superbly, provide good value, and satisfy customer's expectations in every respect, including such intangibles as their look and feel. The most successful development organizations appoint a "heavyweight" product manager to guide the creation of a strong product concept. This person ensures that a product concept both satisfies potential customers' wants and needs and is completely embodied in a product's details (Fujimoto 1990).

Difference between Brand Integrity and Product Integrity

Brand Integrity aligns the core values, mission/vision, and strategic benefits with goals and strategic plans and how employees will deliver the behaviours and experiences to achieve results.

Product Integrity” includes product design, development, manufacture, maintenance and its disposal at the end of its useful life. Product integrity is broader than product quality or even total product quality. It is impacted by everyone who interacts in any way with the product.

1. 1. 1. Brand integrity needs broader and longer process to be applied than Product Integrity,
      2. Brand impact would damage the company’s reputation more than product impact
      3. Brand Integrity has more stakeholders than Product Integrity
2. 1.  BRAND PROTECTION

Brand Protection Strategies provide the means to identify an original product from a counterfeit. Protecting a brand through these means improves trust in a product, and requires a secure supply chain from manufacturer to consumer. The best Brand Protection programs focus on the security of the product and supply chain, and involve legal, marketing, investigation, and entrance control.

1.  BRAND INTEGRITY AND GETTING THE MOST VALUE

In many major corporations senior management has lost focus on the most critical aspect of the business: getting the most value from the products and brands. Increased production, faster delivery to the market, aggressive marketing, creative financial engineering, supply chain management, IT prowess, and so on, are all essential, but they do not necessarily ensure getting the most from either the products or the brand. Brand managers look after products; engineers look after processes and develop new products; lawyers file patents and trademarks; HR executives hire, fire, and look after the welfare of employees; technology officers manage new products; security officers look after the security of people, facilities, and assets; IT professionals manage information flow, systems, and telecommunications. But who manages and coordinates product or brand risk issues?

Brand and product are the foundation of the financial success of an enterprise. Product integrity is the foundation of a successful product. If a product or brand cannot be protected, its useful revenue-producing life will be short. If the integrity of the product cannot be maintained in the marketplace, brand loyalty will fade quickly. If integrity is maintained, it will extend and expand the product’s life and value in the market. Brand integrity efforts are good for the product and its image. It is, in short, good for business to have effective, aggressive brand integrity program because it’s profitable.

Brand protection, brand integrity, brand reputation. Whatever you call it, it comes down to the public perception of your company and the products and services it offers or manufactures. Concerns vary widely among organizations. While a fast food chain like Domino's is worried about how the public feels about their sanitation and food quality, manufacturers are concerned about supply issues, and financial institutions might be concerned their name (and logo) will be used in an email scam or phishing attack, for instance.

1.  GLOBAL THREATS AND THEIR IMPACT ON THE REVENUE

Trade secret theft, violation of product patents, product diversion, and grey marketing activities account for the largest volume of lost profits and margins from U.S. business today and are expected to continue to increase for the foreseeable future. According to the American Society for Industrial Security Trends in Proprietary Information Loss Survey Report, annual losses reported from these categories by U.S. companies are nearly US$60 billion.

According to the Counterfeiting Intelligence Bureau of the International Chamber of Commerce, counterfeiting is one of the fastest growing economic crimes of modern time. Once a cottage industry, counterfeiting has become a sophisticated network of organized crime, accounting for 5 to 7 percent of world trade, worth an estimated $600 billion a year (Eichenwald 2012).

Counterfeiting and diversion are significant and growing problems;

1. 1. 1. Counterfeiting is a $500 Billion global problem and growing
      2. 10 percent of world trade is counterfeit; growing at 20 percent /year
      3. Drugs & medical devices- 3rd most counterfeited items (International Chamber of Commerce)
      4. 5 percent of medical devices imported to US are counterfeit (Merging Industry Report)

1.  THE RISKS AND THREATS TO THE PRODUCTS & BRANDS

All companies today, became corporate companies and they operate in the global economy. The competition among them is high as never before. And companies with strong brands take advantage in this competitive business world. However the successful brands and products are under attack and it’s targeted by criminals or bad guys to take advantage of successful brand and product to gain more profit.

Today’s threats and risks are targeting the brand and the product through its Life Cycle. In this frame the successful brand and the product is under attack at any stage of R&D, Manufacturing, and Distribution or at Marketplace.

Brand protection as an emerging discipline that is truly cross-functional, involving security, supply chain, R&D, legal, quality, government affairs, press relations, and marketing. Of all those disciplines, brand protection spends most of the time with the supply chain and security teams (Banker 2011).

Figure 5.1: Typical life-cycle risks for products and brands

Source: Global Brand Integrity Management, Richard S. Post, Penelope N. Post (Author

1.  RESEARCH AND DEVELOPMENT OPERATIONS

It is very important to maintain product protection in an R&D environment. The integrity of the ideas and the longest possible lead time before competitors learn about the product must be ensured. Secrecy of plans, programs, and products must be maintained so that risks or threats are identified at the earliest possible time and appropriate investigative, legal, and administrative steps are taken to solve the problems.

1. 1.  EXAMPLE CASE OF RESEARCH AND DEVELOPMENT

A supervisor noticed that an R&D employee, developing software for a new electronic product, was copying files that he was not authorized to use. After checking the computer transaction logs and determining that copies had been made of the R&D files, the employee was confronted. The supervisor reported the compromise to company security officials, who investigated the problem and notified federal authorities. While the supervisor was contacting authorities, the employee purchased two new computers for his home, made multiple copies of the information, and sent several copies to different ISP addresses.

He also called for a FedEx pickup at his home to send additional copies to Korea. He then returned the computers to the store, saying that he did not like the way the computers performed.

The incident was investigated for violation of the 1996 Economic Espionage Act, and the suspect was arrested at the airport while en route to Korea; he was charged with grand theft. In this case, the company had an effective security program, excellent system documentation, and observant supervisory personnel. Consequently, potentially serious damage to the company’s new product was minimized (PosT 2011, p. 99)

1. 1.  TRADE SECRETS

One of the main criteria of the Uniform Trade Secrets Act requires that “you take reasonable measures to keep information secret.” Therefore, to ensure that you will have legal recourse, you must:

1. 1. 1. Conduct security audits of your facilities.
      2. Provide security awareness education and training.
      3. Have and maintain a security policy and procedures.
      4. Perform compliance reviews.
      5. Conduct background investigations on employees having access to secret information.
      6. Conduct investigations of known or suspected compromises.
      7. Review IT security systems and controls.
2. 1.  INTELLECTUAL PROPERTY PROTECTION

Patents; Whether to register or not

Copyrights; When, how, and where to register

Trademarks; When, how, and where to register

Trade secrets; How to handle or recover if lost or mishandled

Logo(s); How and where to register and how to deal with logo squatting

Web site; How to protect a Web site and deal with Web site squatting

1.  MANUFACTURING

Protecting the manufacturing process is in many ways more complicated than protecting R&D activities. More people, locations, suppliers, and activities are involved. It requires constant attention to get the right balance between achieving cost- effectiveness throughout the supply chain and ensuring that Brand Integrity principles are applied. Calibrating Brand Integrity to make sure that supply chain partners are following established processes means that you must attend to the following:

1. 1. 1. Supply chain management issues
      2. Product security
      3. Raw materials controls
      4. Finished-product protection
      5. Unauthorized production
      6. Patent pending production
      7. Packaging

1. 1.  EXAMPLE CASE OF MANUFACTURING

Manufacturing issues that have led to recalls and product shortages continue to be a drag on the earnings of Johnson & Johnson ($JNJ), but the company managed to offset that with enough cost-cutting to see its first quarter profits rise by double digits.

The pharmaceutical colossus today reported net income was 3.91 billion dollar, or 1.41 dollar per share, up from 3.48 billion dollar, or 1.25 dollar per share, in 2011's first quarter, a 12.5 percent jump, the Associated Press reports.

Revenue for prescription drugs edged up 1.2 percent to 6.13 billion dollar but its consumer product sales fell to 3.6 billion dollar, a decline of 2.4 percent because manufacturing problems have kept it from getting many of its most popular brands onto pharmacy shelves.

At J&J, manufacturing and quality issues have been on-going for more than two years. A string of recalls began in late 2009, affecting such products as Tylenol, Benadryl, Motrin and Zyrtec (and prompting FDA intervention and congressional hearings). Its McNeil Consumer Healthcare immediately closed its Fort Washington, PA, plant after an April 2010 recall of more than 136 million children's and infants' products. Earlier this year it recalled 574,000 bottles of children's Tylenol because of possible problems with its dosing mechanism.

1. 1.  SUPPLY CHAIN MANAGEMENT ISSUES

Establishing strict contractual terms with all supply chain partners is the most critical aspect of ensuring effective brand integrity for the manufacturing process. The standards must be applied to each aspect of the relationship for quality, accountability, security, audits, IT security controls, information protection, production controls, unauthorized production, and control over molds, raw materials, dies, and intellectual property. The terms must be agreed to in advance and be a part of the overall contract. If the vendors lack the ability or technical expertise in implementing any of the key aspects of brand integrity, the company should provide it. Any breach in the security provisions of the brand integrity agreement must be handled by the company immediately whether it is related to the product, intellectual property, Internet, or marketplace.

1. 1.  EXAMPLE CASE OF SUPPLY CHAIN MANAGEMENT ISSUES

The importance of a comprehensive supplier risk management programme has been highlighted once again this week with the news in the UK that possible contamination of one jar of curry sauce has allegedly caused botulism poisoning of two people. Damage to the ‘celebrity’ brand has been immediate with shares in the manufacturing company falling 9 percent, a recall of 37,000 jars in the batch and an investigation from the Food Standards Agency (FSA). This particular manufacturing company is very well run and manufactures high numbers of many branded products.   So, what has gone wrong? Investigations by both the company and the FSA will quickly get to the bottom of the matter, but the source could be anything from raw materials to the transportation of the product or where it has been stored.

A supplier may not be at the root cause of this particular scare, but in recent times, the supply chain has become so core to many global organisations now that there have been several incidents of products affected by sourced harmful parts or raw materials. These have involved breaches in corporate and social responsibility such as use of child labour and sustainability as well as failure to comply with local and international standards in avoiding the use of toxic materials. The impact on brand and costs of recovery can be immense.

Examples of incidents over the past years due to failures by suppliers in the supply chain into Europe have included:

1. 1. 1. High Street brand fined £1M due to alleged asbestos fibre contamination during a store refit
      2. Incorrect date coding causes supermarket to recalls a batch of Shredded Duck
      3. Plastic contamination causes food brand to recall a packaged desert pie
      4. Fish products recall due to production in an unapproved premises
      5. Yoghurt manufacture recall product produced in premises served with hygiene emergency prohibition order
      6. Notebook computer batteries recalled after a number of instances where the batteries overheated or caught fire
      7. Sporting and fashion brands accused of sourcing from factories employing child labour
      8. Intellectual Properties (IPR) breaches in factories manufacturing similar goods from different brands
      9. In fact there are currently 4,372 product recalls in one on-line database with toys and clothing accounting for 50 percent of all recalls and the top country of origin being China

1. 1.  PRODUCT SECURITY

Products will not provide full financial value to the company if they aren’t sold through normal means. Brand integrity at this stage starts at the point when the product is at the end of the production cycle and is placed into inventory at either the company manufacturing facility or the contract site. Theft, damage, hidden defects, and substitutions of counterfeit products into inventory can all have a serious impact on brand image, reliability, authenticity, or margin. It is the brand integrity program that will analyse the risks present, establish programs, monitor activities, conduct fact- finding if problems arise, and direct enforcement actions as required.

1. 1.  EXAMPLE CASE OF PRODUCT SECURITY

Wal-Mart Agrees to Pay Fine in Child Labour Cases

Wal-Mart Stores, the nation's largest retailer, has agreed to pay $135,540 to settle federal charges that it violated child labour laws in Connecticut, New Hampshire and Arkansas.

Labour Department officials said most of the 24 violations covered by the settlement involved workers under age 18 operating dangerous machinery, including cardboard balers and chain saws. In the agreement, Wal-Mart denied any wrongdoing.

Department officials said that one of the violations was in New Hampshire, three were in Arkansas, and 20 were in Connecticut, where the investigation began in 2001. Investigators said the stores in Connecticut with violations were in Hartford, New Britain, Norwich, North Windham, Old Saybrook, Putnam, Rocky Hill, Shelton, Southington and Torrington. One violation involved a youth who injured his thumb while using a chain saw to cut Christmas trees (Greenhouse 2005)

1. 1.  RAW MATERIAL CONTROLS

If raw materials are not available at the right time and place, manufacturing schedules cannot be met, customer deliveries are affected, and brand damage can occur. If raw materials are substandard, damaged, improperly handled, delivered to the wrong location, or not delivered on time, production will also be adversely affected.

It is important to see that all partners and suppliers providing raw materials are adequately vetted to ensure reliability. When just-in-time delivery schedules are a normal part of the manufacturing process, how and when products are delivered is critical to the process. Inventories are normally kept as low as possible, consistent with expected usage, to decrease manufacturing costs. Consequently, anything that disrupts the supply can quickly affect the manufacturing process. Ensuring that key raw materials are closely monitored and protected is an important Brand Integrity function.

1. 1.  EXAMPLE CASE OF RAW MATERIAL CONTROLS

Medical Plastics QC: Handheld Raman for Raw Materials, Intermediates and Final Product Inspection. The global medical plastics industry is growing at an increasing annual volume. Industry drivers are principally the development of new medical devices that replace metal parts with advanced polymers, the increased use of these devices for a growing number of longer living patients in both developed and emerging countries, and the move to disposable products. The increasing availability of portable, point of care devices is also a key development driving home-based diagnostic applications. About three-quarters of the medical plastics market is comprised of pharmaceutical and biological products, the rest is made up of surgical appliances and medical instruments.

Patient safety drives the adoption of government regulations. Medical grade plastics must be long lasting, be able to be sterilised with radiation, exhibit blood compatibility, particularly antithrombotic activity and other characteristics which are symbiotic with the human environment. Regulators mandate close communications between manufacturers and suppliers. However, problems can be created when even slight changes are made in approved materials. Timely incoming inspection of raw materials by manufacturers is a critical step in ensuring a rigorous QA/QC process, to avoid potential brand damage with high recall costs.

1. 1.  FINISHED PRODUCT PROTECTION

Most attacks against brand assets take place when the product is finished and ready for entry into the marketplace, as this is when the product has its most direct value. Attacks can include theft, contamination, damage, counterfeiting, patent infringement, copyright violations, and gray market. Determining the likelihood of each of these categories is an aspect of brand asset risk analysis, and developing the appropriate countermeasures is a vital aspect of operating the Brand Integrity program.

Several key risks require special attention, as they increase the risks to a product because they occur early in the production process and can have a major impact on financial results.

1. 1.  PATENT PENDING PRODUCTION

Specific methods need to be implemented to protect products for a limited time until there is full patent protection. A comprehensive program must be in place that ensures that production security, site inspections, internal monitoring, and marketplace surveillance are in force until the product has full international patent protection. This program is essential for a six-month period from the time the manufacturing site is determined to the final patent approval in order to prevent unknown manufacturing and introduction of products.

1. 1.  UNAUTHORIZED PRODUCTION

Similar to the unauthorized production of patent pending products, unauthorized production can be a problem for any product. It generally will take place within a contract manufacturer’s facility or another plant that is given access to your processes. The product is usually touted as genuine and is sold outside of your normal distribution channels. It can disrupt your customer channels, likely cause warranty or guarantee problems, and account for lost profits. Since quality can be an issue, the reputation and brand image problems will also be significant. Market surveillance and aggressive enforcement of contract manufacturing terms are a must to minimize exposure to this type of problem.

1. 1.  PACKAGING

Packaging involves brand image, product identification, required product information, warnings, bar code and POS data, RFID tagging, security features to deter counterfeiting, and numerous other data sets and layers of film, paper, cardboard, foil, and the like. All these features and pieces of information are placed on the product to guarantee authenticity, ensure safe delivery to the customer, fulfil legal requirements, identify price and place of manufacture, certify date of production, and so on. Each packaging layer, data set, and security feature provides consumer and producer alike with tools to ensure authenticity and value until the product is purchased.

The decision process regarding packaging and marking is product specific and should be based on risk, cost, threat, supply chain management considerations, and marketing requirements. Again there is no magic bullet for picking the “best” or “right” approach; it must be based on an analysis of what needs to be done to get the product to the consumer with a high probability of authenticity and at a competitive price. This is “frontline” product, brand, and market-specific Brand Integrity decision making.

1.  EXAMPLE CASE OF PACKAGING

After a 20 month investigation in collaboration with (and initiated by) Bayer Animal Health, the EPA has "ordered retailers and distributors in a number of states to stop selling counterfeit Advantage products which falsely contain EPA registration numbers and labelling for Advantage." (Bayer Press Release) Mariel, manufacturer of Frontline, has also been victimized, and is cooperating with the EPA investigation.

A forum member shared the story of her cat Casey, dying after being treated with counterfeit Advantage, which she had purchased online. A necropsy was performed by her veterinarian, who confirmed the cause of death was attributable to this product.

None of the material published by the EPA, Mariel, or Bayer has indicated that the actual product inside the counterfeit packaging is counterfeit. However, the labelling may differ enough, and packaging may omit cautionary material, so that the wrong dosage may actually be used. It would appear that these counterfeit products have been repackaged in countries outside the U.S., relabelled to appear to be the genuine article, and then illegally imported back into the U.S. for sale to unsuspecting buyers. The relabeling (and often mislabelling) appears to be the real problem.

1.  DISTRIBUTION

Product distribution is one of the four elements of the marketing mix. Making a product or service available for use or consumption by a consumer or business user in a timely manner is very important. What can go wrong in distribution? Examples of some of the bad things that can happen include these:

1. 1. 1. Products are hijacked before getting into normal distribution channels.
      2. Goods are damaged in storage.
      3. Employees pilfer products.
      4. Returned goods are not managed effectively.
      5. Orders are filled and shipped incorrectly, causing high returns and reduced profit margins.
      6. Goods are not shipped in a timely manner, causing JIT systems to break down.
      7. High labour costs, lack of mechanization, and overstaffing reduce profit margins.
   2.  EXAMPLE CASE OF DISTRIBUTION

Super Group, the company behind the fast-growing Superdry brand, has fired off a shock profit warning after a computer glitch at its warehouse waylaid despatch of its bestselling T-shirts and hoodies to stores.

The shares dropped 25 percent in morning trading on Wednesday after a misfiring IT system resulted in products being dispatched in small and extra-large but not the sizes in between, leading to depleted sales. The company said the upset would wipe up to £9 m off this year's profits.

The retailer also had to rent temporary warehouse space to take the strain off the main site in Barnwood, Gloucestershire. The systems upgrade was supposed to increase efficiency but instead £2 m of stock was wrongly left sitting in the main warehouse.

1. 1.  PRODUCT STORAGE AND WAREHOUSING

Reliance on warehousing for managing inventories is not as significant a problem for many companies at it once was. Warehouse inventories are a major concern because of their cash value, the cost of holding the inventory, and vulnerability to loss. They also represent an additional step in the product cycle that many companies are trying to minimize by shipping directly to customer locations. Anything that can be done to quickly move the product into customer hands will lower costs, reduce product loss exposure, and improve profits.

1.  MARKETPLACE

The marketplace is a very difficult place for both buyers and sellers today. Buyers can unknowingly purchase counterfeit or grey market products, contaminated or defective goods, or out-of-warranty merchandise. Sellers can have their goods counterfeited, stolen, cloned, or grey-marketed and their reputations damaged without their knowledge. Any of these situations creates a Brand Integrity problem that must be quickly and effectively addressed by the company.

1. 1.  EXAMPLE CASE OF MARKETPLACE

A high-tech electronic products manufacturer experienced a significant drop in sales within the United States, while the Asia-Pacific region was having record sales. It was discovered that fraudulent purchases were being made at discounted prices in the “high sales” region and then were being sold to distributors and resellers in the “low- sales” region. Margin losses amounted to over $100 million during a six-month period.

The investigation revealed that several companies were working together to fraudulently buy and then resell products outside normal distribution methods, as well as through Internet multilevel sales organizations and bulletin boards.

An investigation of the transactions and distribution channels identified who was involved, documented the distribution methods by purchasing suspected gray market products, and collected sufficient evidence to bring both criminal and civil actions against the ringleaders. The margin saving for one product line amounted to over $25 million per quarter.

1. 1.  COUNTERFEITING

Worldwide, the problem of product counterfeiting is one of the most significant threats to product and brand integrity. Numerous associations and organizations exist to support individual corporate efforts to address this global problem. The problem is, for the most part, caused by criminal enterprises for which internal controls are not particularly effective.

Product counterfeiting is a form of consumer fraud: a product is sold, purporting to be something that it is not. This is different from the crime of copyright violation, which involves the unauthorized transfer of licensed material, such as the sharing of music or video files electronically. Product counterfeiting is typically an organized group activity, because the manufacturing of goods takes people and time, and the goal is invariably profit. Many jurisdictions take the offence quite seriously, for reasons described below. As a result, most product counterfeiting would be considered organized crime under the Convention.

Counterfeit products are often smuggled, both to circumvent problematic inspections and to evade import taxes. Since they are generally retailed irregularly, sales taxes are avoided. Tax evasion also allows counterfeit goods to be priced extremely competitively, while at the same time affording attractive profits for the dealers. By displacing the sales of legitimate products, they undermine the tax base, and thus affect public services available for all.

1.  PATENT AND COPYRIGHT INFRINGEMENT

Patent infringement can take place from two distinct sources:

1. 1. 1. Counterfeiters and
      2. A company that once were authorized to manufacture the product and that continue manufacturing after the permission has been withdrawn.

Both categories can present revenue loss problems, but the manufacturer that once was an authorized producer is more dangerous as it has your formulas and often knows your customers. It can then undercut prices, confuses customers, and ruin distribution channels. It is therefore important that contracts be carefully written and after-contract surveillance occurs to ensure that the manufacturer abides by the terms of the severance agreement.

1. 1.  GREY MARKET PRODUCTS AND PRODUCT DIVERSION

Grey market products are essentially original products that either are not authorized to be sold in a particular market location or are obtained by deception at lower than normal prices and sold in a predatory manner in the same market locations as authorized products. In either of these situations, the product price is lower than that of the product normally obtained through legitimate distribution channels.

Diversion and gray market sales can attack any product. The characteristics that a diverter selling gray market products looks for include:

1. 1. 1. Products in high demand
      2. Sales and rebate plans that can be manipulated
      3. Company sales strategies that provide for differential pricing around the world
      4. Incentive plans for sales staff that recognize sales volume, not margin
      5. Products with high internal margins and high value-added content
      6. Strong internal pressures on sales staff to meet pricing from the competition
      7. Financial pressures on the company to meet quarterly sales or earnings forecasts

1. 1. 1. Poor internal procedures for the verification of product end users before the sale is made
      2. Dumping of products to reduce inventories
      3. Lack of audit and controls at the point of manufacturing or distribution

It is almost impossible for diversion to take place unless one or more of these factors are present in a company with a desirable product.

1. 1.  END USER VERIFICATION

The ultimate user of a product is oftentimes more important than the entity it is sold to in the first instance. If the law of first sale limits control over what is done with a product after it passes to the first purchaser, understanding who will handle the product and what the person really plans to do with it, is extremely important. Selling to a company that says it is a manufacturing company and plans to use the product for OEM purposes will often result in special pricing. If the company, in turn, doesn’t manufacture but instead sells the product in the market, in reality it becomes a discount broker. This often causes significant margin loss and channel disruption. Thousands of situations like this occur every day. They could be avoided if proper screening of potential customers had taken place.

Due diligence investigations on the background of clients, potential clients, end users, distributors, and the like are an essential part of keeping profits up and good business coming in the front door. This strategy should be used to ensure that people with intent to do harm to your business are weeded out before they can do any damage to you.

1. 1.  GLOBAL ELECTRONIC MONITORING

Through an international network of Internet locations, investigators can monitor the electronic trafficking of products for a company. Products are purchased to determine pricing, availability, source, and the way in which unauthorized distribution systems function. Intelligence gathered is used for litigation, channel management, and the monitoring of suspected grey market activities or in stings against fraudulent operators.

Individual product lines can be monitored, specific types of products at specified price points purchased, or entire distribution systems monitored around the world through a single, discreet, controlled, and knowledgeable group of product specialists. This type of service has saved millions of dollars per quarter in profit margin for companies that have experienced leakage from established distribution channels. Similar services monitor Internet sites to ensure that copyright and trademark infringements do not occur or are identified for enforcement actions in a timely way.

1.  CO-OPERATION WITH LAW ENFORCEMENT AUTHORITIES

Businesses can reap big dividends from a strong outreach program to educate federal, state, and local law enforcement as well as regulatory officials and support their efforts to enforce laws against fraudulent activities. Law enforcement officials, in particular, need industry help in understanding how counterfeiters and their accomplices carry out illegal activities and what the impact is on business, consumers, and law enforcement priorities (e.g., collecting tax revenue; fighting organized crime; and enforcing consumer health, safety, and environmental regulations).

Some will also appreciate the opportunity to share information that will help them in their enforcement work. Possible initiatives include:

1. 1. 1. Develop informational materials that explain the harm that counterfeit products cause businesses, consumers, and governments, giving specific examples and pro economic data and statistics.
      2. Meet with key federal, state, and local officials and customs authorities to personally brief them and learn more about their priorities. Help them understand legitimate distribution channels in an industry and how counterfeiters abuse this system
      3. Establish procedures for sharing information that can be used in law enforcement investigations and offer to provide legitimate products, under appropriate conditions, to assist in investigations
      4. Provide a counterfeit product destruction service to ensure that seized counterfeit products are properly disposed of
      5. Monitor court dockets on counterfeiting cases to gauge enforcement trends and improve outreach efforts. (U.S. Chamber of Commerce, Coalition Against Counterfeiting and Piracy)
2.  BRAND PROTECTION & INTEGRITY SURVEY

Four (4) Brand Protection Surveys have been conducted about today’s Tobacco, Pharmacy, Food and Clothing Companies to determine how they protect their brand and provide for their brand integrity.

1. 1.  TOBACCO
2. What are the internal and external threats to your brand?

The most important external threat for us is the illicit trade of tobacco. Small tobacco brands are produced at neighbour countries and smuggled to Turkey. Unauthorised diversion is our internal threat.

1. How do you protect your brand against those threats?

We have Global Security and Anti Illicit Trade divisions that cooperating on the brand protection and brand integrity issues.

1. Do you have any brand integrity/protection manager?

Head of Anti-Illicit Trade Division is responsible for brand protection.

1. If yes, what are his functions?

The manager is cooperating with local law enforcement authorities, evaluates the intelligence and information about the illicit trade and provides that info to the law enforcement authorities. Follows the trend of the smuggled and illicit produced tobacco

1. If no, who is/which unit is taking care of this function?
2. Do you apply any measure to detect the risks & threats for supply chain, packaging and marketplace?

Every production and shipment is registered and filmed. The registration of the product will be followed until the last store.

We apply the “know your customer” strategy. Internationally if a customer asks for more products we start considering this and if we have the suspicion that this product may smuggled to another country we may stop or decrease the shipment to that customer.

1. What are the challenges you face while protecting your brand?
2. 1. Lack of punishment on illicit tobacco trade
   2. Convincing and motivating the governmental institutions on combating with the illicit trade.
3. What is the most important issue needs to be applied to protect a brand?

The most important issue is to establish the cooperation and collaboration with the governmental institutions (Police, Gendarmerie, Custom, Coast Guard, Finance, Taxation authority) that are combating the illicit tobacco trade.

1. 1.  FOOD
2. What are the internal and external threats to your brand?

Counterfeiters

1. How do you protect your brand against those threats? What are the measures you apply?

We conduct market searches, consumer complaint investigations, and raids leading to criminal charges against illegal manufacturers.

1. Do you have any brand integrity/protection manager?

No

1. If yes, what are his functions?
2. If no, who is/which unit is taking care of this function?

Market security manager coordinates the market searches, consumer complaint investigations and raids in cooperation with the legal department that initiates and follows the court cases

1. Do you apply any measures to detect the risks & threats for supply chain, packaging and marketplace?

We have security features on the packaging.

1. What are the challenges you face while protecting your brand?

The current law and regulations are not deterrent. It is a long and difficult way to collect evidence required for search warrants and raids where the investigators are not legally empowered and authorized to conduct efficient investigations to gather relevant evidence. In a large number of the cases, the confiscated counterfeit products and manufacturing devices are returned to the perpetrators as legal custodian.

1. What is the most important issue needs to be applied to protect a brand?

IP rights need to be protected at international standards by law not by statutory decree which is the current situation in Turkey. The private investigation parties should be decorated with law enforcement power at least to a limited extent to meet the basic needs of evidence collection process.

1. 1.  CLOTHING
2. What are the internal and external threats to your brand?

The internal staff is unaware of the importance of Information security and they can easily share the trade secrets or companies important information with anyone outside the company.

Not registering the patent rights because of the high cost, is another problem that we face.

Counterfeiting the product by copying the logos and the products from the competitors and by illegal companies is the main external threat.

1. How do you protect your brand against those threats? What are the measures

you apply?

We apply some IT security software and hardware. Data security policy/procedure will be disseminated and notified to the staff. External audits will be initiated.

Patent rights of some best seller products will be registered.

Lawsuits will be initiated against the companies that uses, produces our brand, design and product.

1. Do you have any brand integrity/protection manager?

No

1. If yes, what are his functions?
2. If no, who is/which unit is taking care of this function?

Loss prevention, Advertisement and Marketing Departments

1. Do you apply any measures to detect the risks & threats for supply chain, packaging and marketplace?

Package tapes and labels are produced specific for our brand. If the producing companies doesn’t fulfil with the requirements decided on the mutual protocol some sanctions/punishment will be initiated against them.

The shops are our own premises.

1. What are the challenges you face while protecting your brand?

The size of the market and the diversity of the laws complicate the detection of the follow up of actions that damage the brand. The information follow about counterfeiting is very slow or improper.

1. What is the most important issue needs to be applied to protect a brand?

The employees need to be trained about information security. News, meetings, panels, programs, events about the disadvantages, harm and the damage of counterfeited product should be initiated.

Experts on this issue/topic should be trained and coached.

1.  PHARMACY
2. What are the internal and external threats to your brand?

The main threat is external – that posed to patient health and safety by those who counterfeit our medicines. Counterfeit medicines pose a threat to patients because of the conditions under which they are manufactured, in unlicensed, unregulated, uninspected and often unsanitary sites. We have seen life-saving medicines being manufactured in rodent and pest infested labs, with mold growing on the walls, peeling paint and dirty equipment. We have also seen supposedly “sterile” injectable filled with ordinary tap water in filthy bathrooms.

The “medicines” themselves pose a threat to patient health and safety because their contents are not regulated and they may contain none of the active pharmaceutical ingredient (API) to deliver the therapeutic benefit for which they were prescribed, the incorrect dosage or the wrong API, or even ingredients that are themselves harmful such as heavy metals or pesticides.

Our labs have confirmed the presence of pesticides (boric acid), rat poison, brick dust, leaded highway paint, commercial grade paint, floor polish, cartridge ink, plaster and wallboard. There have also been reports of heavy metals, arsenic and even anti-freeze.

The danger posed by counterfeits is not limited to toxic ingredients, but extends to those that contain no active ingredient, the wrong active ingredient or the incorrect dosage of an active ingredient, thereby depriving patients of the therapeutic benefit of the medicine that their doctors have prescribed.

1. How do you protect your brand against those threats? What are the measures you apply?

We conduct and manage pro-active investigations and refer the cases we develop to enforcement authorities for their action. Our pro-active investigations are initiated in response to “leads” from a variety of sources, including complaints from consumers and healthcare professionals, observations by members of our sales force, information concerning changes in sales volume and patterns, confidential informants, and information from enforcement authorities. Another tool we employ in our anti- counterfeiting program are “market surveys” in which we make test purchases from pharmacies to monitor the integrity of our medicines sold in the legitimate supply chain.

The key to the success of that program is the effective partnerships we have built with enforcement authorities around the world. As part of those partnerships, we initiate investigations and refer the results to enforcement authorities for their action, as well as provide training to authorities from at least 94 countries to raise awareness to the counterfeiting problem and enhance their ability to distinguish counterfeit from authentic medicines.

We have taken the lead among pharmaceutical companies with a comprehensive anti- counterfeiting strategy. In addition to the aggressive anti-counterfeiting program implemented by Global Security, we also protect the integrity of our medicines and supply chain by

1. 1. Ensuring the recordation of high-risk products with Customs authorities
   2. Enhancing business practices, for examples, by modifying terms of sales and through direct to pharmacy sales
   3. Exploring and examining new and existing technologies to make it more difficult for counterfeiters to copy our products and easier for pharmacists and patients to tell the difference between authentic and counterfeit products

We are doing what it can to deter, detect and dismantle counterfeiting operations. We can and will continue to protect the integrity of our products, to educate the public, to partner with law enforcement and regulatory agencies, and to advocate for adequate public investment in enforcement and stronger penalties for pharmaceutical counterfeiting.

1. Do you have any brand integrity/protection manager?

No

1. If yes, what are his functions?
2. If no, who is/which unit is taking care of this function?

As indicated above, we take a holistic approach. While Global Security takes the lead by initiating pro-active investigations, our Legal Division ensures recordation of trademarks with Customs authorities to permit their seizure and our Manufacturing Division explores new and existing technologies to incorporate into our packaging.

1. Do you apply any measure to detect the risks & threats for supply chain, packaging and marketplace?

See 2 and 5

1. What are the challenges you face while protecting your brand?

Because it is a high profit-low risk crime, pharmaceutical counterfeiting attracts entrepreneurs, and those who have trafficked in narcotics and firearms. The laws in many jurisdictions are either non-existent or very weak. Laws that do exist are poorly enforced.

1. What is the most important issue needs to be applied to protect a brand?

EVALUATION OF THE SURVEY

One of the objectives of this project is to demonstrate that brand protection and brand integrity could only be provided if a global brand strategy throughout the supply chain and life cycle of the product is applied by a unique Brand Integrity Manager.

However most of the companies have only brand managers, risk managers, security managers, supply chain managers and others functions that are managing the threats and risks in a certain level with limited functions.

Brand Protection & Integrity Survey has been conducted about Tobacco, Food, Clothing and Pharmacy Companies in order to determine whether and how those risks & threats are managed within the corporate businesses today and whether a global brand strategy is applied.

Followings have been determined, as a result of this qualitative survey;

1. 1. 1. All four corporate companies consider counterfeiting and illicit trade as the main threat to the brand.
      2. None of the companies has Brand Protection or Brand Integrity Manager.
      3. Different Units within those companies (Tobacco – Clothing – Food - Pharmacy) are responsible for protecting the brand, conducting investigations and applying security measures.
      4. Lack of local legislation and poor cooperation & collaboration between the different industries, are the main challenges they face during their brand protection issues.
      5. The pharmacy has a pro-active approach while protecting their brand because of the patient health and safety.

As a conclusion of the survey we can say that, Brand Protection and Brand Integrity issues are managed by different units in a certain level with limited functions. None of the companies have Brand Protection or Brand Integrity Manager. Considering counterfeiting and illicit trade as the main threat, causes to allocate their sources on this piece of the threat chain.

12. CONCLUSION

A new way of thinking about doing business is required. The primary strategic focus must be on protecting the brand and the products. Managing risk to products and brands must be integrated into daily management of the company. Since risk-reduction requirements change from day to day and within each stage of a product’s life cycle, management systems must be geared to collecting and disseminating timely information so adjustments can readily be made.

Global product protection programs must be designed to help the company protect its products, brand and information wherever they are found. The programs should offer a variety of approaches based on the products’ needs and individual market requirements.

The major outcome of using a brand integrity model is to prolong product life, maximize margins and profits, focus corporate energies on brand management, and adapt business strategies to respond to global marketplace risks.

To manage this effectively, a Global Brand Integrity Strategy has to be implemented throughout the supply chain and life cycle of the product and applied by a unique Brand Integrity Manager. The Brand Integrity Strategy needs also to be integrated in to the brand owners corporate strategy, marketing plans or distribution Models.

The structure of the Global Brand Integrity Strategy should reflect the requirement to extend product life in the marketplace, minimize the erosion of revenue from margin loss and counterfeit product attacks, narrow the exposure to safety risks and hazards caused by these attacks, and enhance the reputation of company products and brands. However different units within corporate companies today, are responsible for managing this process, and this prevents seeing the threats as a whole and responding in an efficient manner.

Huseyin Bayraktar
Associate Director, EMEA Regional Security  
Global Security Group, MSD