By Cynthia Nzuki.

The word counterfeit often denotes a product that is fake and of poor quality. Dictionaries have defined the word to mean an imitation intended to be passed off fraudulently or deceptively as genuine[1].Breaking down this definition, counterfeit goods are intended to trick consumers to believe that that which they purchase are genuine goods; whereas they are unauthorized copies of branded goods presented as the authentic goods. For example, Christian Louboutin high heels are well known for having red bottoms; the sale of high heels with red bottoms and passing them off as Louboutin shoes is a good example of counterfeiting.

By its nature counterfeit is an intellectual property issue. The Anti-Counterfeit Act of 2008, defines counterfeiting as activities that enable the manufacture, production and distribution of goods under protected intellectual property without the authority of the owner.^[2] Counterfeit trade involves the production and sale of goods, technologies or services that are similar or substantially identical to existing products with protected intellectual property without licensing and authorization from the rights holder.^[3] 

In an address to the members of public, the Member of Parliament (MP) for Gatundu, Moses Kuria, called for the sacking of the Cabinet Secretary (CS) for Industrialization on grounds that the latter was not allowing counterfeits into the country. The MP argued, counterfeit goods could bring about growth of the economy and increase job opportunities within the society whilst giving the example of China and how its economy has grown as a result of imitating.

Whilst the MP has a point on the impact of imitation in China, the question is whether imitations and counterfeits are synonymous under the Law.

Intellectual Property and Counterfeits

Intellectual property (IP) is an intangible property arising out of creations of the mind.[4] IP can be in the form of copyrights, patents and trademarks; which enable people to earn recognition and financial benefit from what they invent or create.[5] Counterfeit trade thus stands in the way of or undermines the recovery of these financial benefits by the IP owners. The trade also increases the costs related to monitoring the use of and enforcement of the IP for the IP owners. The effect of this may be the avoidance of certain markets by legitimate brands because of the reality that the cheaply priced counterfeit goods will divert consumers and their money away from them. OECD reports that counterfeits are a concern for various reasons including that they pose significant health and safety risks that substandard counterfeits and pirated products pose to those who consume them. In Kenya, it is reported that the economy loses 150 – 180 billion KES every month to the trade of illicit products.

Counterfeits are characterized by cheaper pricing, identifiable similarity to original products and the misappropriation of those similarities and marks in attracting and diverting consumers. This is why anti-counterfeit laws exist, in order to identify and remove the counterfeits from markets.[6] The laws are an attempt to protect the markets and the consumers in those markets from lower quality, lower product longevity, unverified product standards and the health and wellbeing risks associated with such goods.[7] 

Counterfeits are a form of illicit imitation of branded goods. Imitation is broad and can be categorized as either; duplicative or creative imitations.[8] Duplicative imitations are copies that resemble an original. They can either be counterfeits or knockoffs[9]. Counterfeits resemble an original brand name but are of low quality and illegal.[10] They are often sold under the name of the brand owner or with a brand name so similar or identical to that of the brand owner that consumers would find it difficult to differentiate the two. In contrast, knockoffs are legal products, closely copying the original products in the absence of copyrights, trademarks and patents but sold with their own brand names at far lower prices.[11] For instance, the New York designer Faviana produces designs ‘inspired’ by celebrity dresses on the red carpet in the US but these dresses are not considered counterfeits as they carry the Faviana’s brand name and copyright does not cover fashion designs.  

Creative imitations can either be design copies, market adaptations or technological leapfrogging.[12] Design copies follow the market leader but live on the market with their own brand name and specific engineering features. Product adaptations are innovative, with improvements inspired by existing products. Technological leapfrogging takes advantage of newer technology and enables the imitator to leapfrog the innovator in creating a new product. Finally, adaptations to another industry takes on the application of innovations from one industry for use in another.[13] In general, creative imitations are focused on generating imitative products, but with new features. These imitative products involve benchmarking and strategic alliances, but also require substantial investment in research & development.[14]

Imitation of products can be legal or illegal as described above.  Therefore organizations should take precaution on their actions and lean towards imitation forms which are legal and promote innovation.

China

The address by the MP above, draws inspiration from China as one country that has used imitation to better its economy and provide job opportunities.  This is a proper argument as China’s economic growth is at times attributed to its imitation market. George S. Yip, while giving a talk at Google, provided a list of ten Chinese innovation characteristics[15] which included:-

1. Focus on local needs and customers
2. Acceptance of “good enough” standards
3. Incremental as opposed to radical innovations
4. Willingness to supply special needs
5. Using numerous staff to solve the problem
6. Staff is worked much harder
7. Fast trial and error – fail fast, but learn
8. Less formal, faster processes
9. More intervention by the boss
10. Closer to the government – top-down approach

For China, their approach is to find a global product that is the same all over the world, manufacture it in large quantities, standardize at home and ship it around. George S. Yip

In order for their market to thrive, China’s implementation of IP is considered to be lenient and less strict.[16] Confucianism can be identified as the philosophical reason for China’s high rate of imitation trade in the world. Confucius provides that to be copied is the highest compliment and one of the easiest ways one may learn wisdom.[17] Undoubtedly, China can be said to have benefited greatly from imitating, the effect has been millions employed and society’s apathy and acceptance towards counterfeiting and imitation, in addition to the growth of the state’s economy.[18]

It is important to note that, with China, the imitating is not done plainly and their aim is to further add on to that which they copy, thus encouraging innovation. Also as a result of having lenient IPRs, China encourages ‘less formal, faster processes’ in production. The Chinese government is also actively involved with most, if not all, of the manufacturing companies and invests heavily on research and development. These interventions encourages innovation propelling economic growth as a result of having new products in the market, especially because  they are produced in masses and the price is affordable.[19] China is a good example of production of creative imitations.

Kenya’s Case

As stated earlier, the Anti-Counterfeit Act defines counterfeiting as activities that enable the manufacture, production and distribution of goods without the authority of the intellectual property holder.^[20] This definition (which is further broken down in the Act) seem to condemn all and any form of imitation as long as such is done without the authority of the IPR owner. Dr. Bitange Ndemo in a piece he wrote for the Business Daily in 2018 advises that:

“It must be noted that the rapid economic growth of East Asian Countries was due to their ability to imitate, absorb assimilate and replicate foreign innovations… The soft intellectual property protection regime adopted by these countries during the time of duplicative imitation or reverse engineering played an important role in facilitating firm-level technological learning.”

Dr. Ndemo speaks against the blanket condemnation of counterfeits as he argues the same may affect generics which are goods sold without a brand name. Although the fight against counterfeit goods is highly appreciated, we are of the opinion that the government should consider supporting positive imitation within the ambit of the law. One way of doing this would be through the implementation of open innovation policies. Open innovation targets research and development including innovation and imitation processes simultaneously.[21] It works by gathering information from outside and developing it internally then competing in the market.[22] This would work to for example, encourage creative imitation where innovators would take in technologies from outside (especially from developed states) and adapt them in and for the country. This allows for creative imitation including through technological leapfrogging, adaptations etc. thereby creating the impact the Gatundu MP was referring to but within the law.  This we believe does not affect the enforceability of IPRs in the country.

In quoting Dr. Ndemo we conclude by saying:

“We get it wrong always when we fight creative minds. Instead we should nurture them and help them observe established safety standards in manufacturing.”

The IP Team is grateful for the contributions made by Ms. Judy Muriuki for her immeasurable contribution in the initial stages of the research of this piece.

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[1] https://www.dictionary.com/browse/counterfeit?s=ts accessed 4^th June 2019

^[2] Section 3, Anti-Counterfeiting Act.

^[3] Ben Sihanya (2001) “Intellectual property confronts counterfeiting in Africa: protecting innovators and consumers in the cyber society,” Chapter 19, in Prof Thomas Wilhemsson, et al. (Eds.) (2001) Consumer Law in the Information Society Kluwer Law International, London, pp. 329-364.

[4] https://www.wipo.int/about-ip/en/ accessed 6^th June 2019

[5] https://www.wipo.int/about-ip/en/ accessed 6^th June 2019

[6] https://www.youtube.com/watch?v=8OspgTblGAQ&t=745s

[7] https://www.youtube.com/watch?v=8OspgTblGAQ&t=745s

[8] Silvio M. Brondoni, ‘Innovation and Imitation:  Corporate Strategies for Global Competition’, Symphonya Emerging Issues in Management, n. 1, 2012,12 accessed at http://www.unimib.it/symphonya

[9] Silvio M. Brondoni, ‘Innovation and Imitation:  Corporate Strategies for Global Competition’, Symphonya Emerging Issues in Management, n. 1, 2012,12 accessed at http://www.unimib.it/symphonya

[10] Steven P. Schnaars, ‘ Managing Imitation Strategies’, Simon & Schuters, 1994

[11]Steven P. Schnaars, ‘ Managing Imitation Strategies’, Simon & Schuters, 1994  

[12] Enrico Valdani*& Alessandro Arbore**, ‘Strategies of Imitation: An Insight’, Problems and Perspectives in Management / Volume 5, Issue 3, 2007 (https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/1855/PPM_EN_2007_03cont_Valdani.pdf)

[13] Steven P. Schnaars, ‘ Managing Imitation Strategies’, Simon & Schuters, 1994

[14]Silvio M. Brondoni, ‘Innovation and Imitation:  Corporate Strategies for Global Competition’, Symphonya Emerging Issues in Management, n. 1, 2012,12 accessed at http://www.unimib.it/symphonya

[15]https://www.youtube.com/watch?v=NRqEPGOcEfI

[16] Daniel C. Fleming, ‘Counterfeiting in China’, University of Pennsylvania East Asia Law Review, Vol. 10.

[17] https://iversity.org/blog/great-educators-confucius/ accessed 9^th September, 2019.

[18] https://www.youtube.com/watch?v=NRqEPGOcEfI

[19] https://www.youtube.com/watch?v=NRqEPGOcEfI

^[20] Section 3, Anti-Counterfeiting Act.

[21]Silvio M. Brondoni, ‘Innovation and Imitation:  Corporate Strategies for Global Competition’, Symphonya Emerging Issues in Management, n. 1, 2012,12 accessed at http://www.unimib.it/symphonya

[22] Silvio M. Brondoni, ‘Innovation and Imitation:  Corporate Strategies for Global Competition’, Symphonya Emerging Issues in Management, n. 1, 2012,12 accessed at http://www.unimib.it/symphonya