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MODERN DAY PIRATES A THREAT WORLDWIDE WITHOUT PROTECTION, BRANDS CAN WALK THE PLANK

Published on .

An AAI roundup Piracy stole the world's attention when the U.S. threatened China with massive tariffs last month. The warning came in retaliation for China's listless crackdown against the practice of unauthorized copyright and trademark use of U.S. marketers' computer software, music, film, apparel and sporting goods.

Though China agreed to enforce its laws-this month starting a nationwide sweep against intellectual-property pirates, followed by the awarding to China of the 1996 Olympiad trademarks licenses-it is hardly the world's sole perpetrator of intellectual thievery.

The International Intellectual Property Alliance estimates Japan and Germany were the leading sources of monetary loss to piracy in 1994, followed distantly by China and South Korea. The alliance also cites Turkey, Bulgaria and Indonesia on its list of priority watch countries for 1995. China came off this list after signing its agreement with the U.S.

As piracy escalates, U.S. marketers and industry trade associations worldwide have increased their vigilance in lobbying lawmakers, instigating local police seizures, and even ad campaigns.

For instance, the Motion Picture Association is running an ongoing cinema and videocassette trailer campaign in Belgium, Germany, Italy and the U.K. In Latin America, the group has targeted Venezuela, a growing piracy market, for an anti-piracy poster campaign by Talleres Diseeo, Caracas.

"The video trailer in Europe is working very well, with a toll-free hot line [for consumers reporting piracy] and additional marketing is always a possibility, but nothing is set for future advertising efforts," a spokeswoman said.

Washington-based Software Publishers Association, representing 1,200 U.S. business, education and consumer software marketers, this month broke a Singapore anti-piracy campaign by The Edge Partnership/Mileage Communication, both in Singapore, in English and Malaysian.

The education-and-enforcement campaign is the association's first outside the U.S. In the past it has adapted anti-piracy U.S. ads by DRK, Boston, for other markets-and more recently, ads by Woolward & Partners, San Francisco, running in Spanish for Mexico and Costa Rica, in Portuguese for Brazil and in Hebrew for Israel.

The Singapore market cost U.S. software marketers $33 million last year, the IIPA estimates. But that's small potatoes compared with markets like Germany, responsible for an estimated $1.1 billion loss last year, and Japan, where the SPA estimates U.S. industry losses last year at $1.3 billion-the world's highest rate.

The SPA said it plans to open offices this year in such markets as China-as a joint effort with American Electronics Association and Telecommunications Industries Association-France, Germany, Italy and the U.K. The association also said it will break public awareness campaigns this year in Taiwan, Korea and China.

U.S. marketers in other industries, worried more by a stolen brand image than monetary loss, often fight their battles through public relations campaigns without industry associations. Reebok International, fighting piracy primarily in China and South Korea, said it generally reaches business and trade publications through Ketchum Public Relations, New York, instead of using traditional media ads.

"Our focus is not to alert people to the problem-we wouldn't want to detract from our marketing image-but to alert people that there are consequences to counterfeiting," said Mary Ann Alford, Reebok's VP-assistant general counsel, intellectual property.

Levi Strauss & Co., San Francisco, also combats overseas counterfeiting through public relations rather than traditional advertising. Like Reebok, the company is concerned more with assaults on brand image than monetary loss.

"If someone is buying a pair of what they assume are Levi's that fall apart after a day and a half, obviously that hurts our image," said Sean Fitzpatrick, a spokesman for Levi Strauss.

But it's Mexico that is best known for music piracy, which the International Federation of the Phonograph Industry estimates costs marketers $200 million annually.

With the North American Free Trade Agreement now in place, Mexico has renovated its intellectual property laws.

Concerned industries now run an anti-piracy slogan on audio- and videocassettes, and late in 1994 the recording industry prepared a TV anti-piracy spot for the Mexican Association of Phonograph and Video Producers, featuring major Mexican music stars.

Thailand has a significant software piracy market-as much as 95% of its software, by one estimate. But that may soon change: A new copyright law takes effect tomorrow, protecting the intellectual property rights of computer software marketers' products for the first time.

In Germany, Eastern European and Asian counterfeiters are the bane of local marketers' brands, including Dusseldorf-based Henkel's Persil detergent, allegedly counterfeited in Asia for the Israeli market, and Hamburg-based Beiersdorf's Nivea skincare line.

"We are particularly worried that pirated products may ruin the Nivea brand image, because the knockoffs have very poor quality," said a Beiersdorf spokesman.

The opening of Eastern European markets also poses problems for apparel marketers such as Reebok, Adidas, Nike, Lacoste and Diesel, mimicked by unauthorized low-wage factories in the Czech Republic, Hungary and Poland. Such counterfeits are often sold at 10% of the cost of the real McCoy.

But new laws could mean trouble for pirates: Germany's new Brand Law, enabling marketers to protect their brand logos as well as colors and packaging designs, may impose stiff fines on their pirate competition. Poland also has imposed new laws, although software piracy is still an enormous industry there, costing software marketers $200 million annually.

This month 47 European marketers are expected to establish the Association of European Brand Manufacturers to challenge local piracy through investigation, lobbying and enforcement.

In Japan, 85% of all pirated products arrive from South Korea, China and Hong Kong, the Finance Ministry said. Though fines against counterfeiting increased last year to a $50,000 maximum, the practice is still widespread.

Some marketers are striking back against their illegal competition. French clothier Louis Vuitton last year began distributing 1 million anti-piracy leaflets, prepared with Nikkei Advertising, Tokyo, at three Japanese airports. The leaflets are intended for local tourists leaving Japan, reminding them of national laws forbidding the importation of counterfeit goods.

Spain's National Association for the Defense of Brand Names estimates that market is the world's eighth largest for piracy, with knockoffs accounting for 6%, or $2.3 billion, of manufactured goods sold. Informal vendors sell all manner of pirated products-apparel, sporting goods, food, cosmetics, computers, auto parts and even condoms-from Italy, the Netherlands, Morocco, Portugal and Asia.

Spain is Europe's largest software piracy market, accounting for $391 million lost yearly, said Javier Celaya, a spokesman for the Madrid branch of Washington-based Business Software Alliance. Still, software piracy fell 10% in 1994 due in part to a new anti-piracy law enacted in late 1993.

Italian sportswear manufacturer Sports Kappa, Madrid, is trying to combat the estimated $4.7 million in rip-offs sold in Spain every year-a figure amounting to 20% to 40% of its production.

Sports Kappa President Pedro Matamales said in February the company plans to introduce a hard-to-copy clothes label produced by Spain's government printing office-with the same technique used to secure Spanish paper money against counterfeiting.

Written by Todd Pruzan with reports from David Butler, Deborah Klosky, Elisabeth Malkin, Dagmar Mussey, Jack Russell, Douglass Stinson and Chris Wellisz.

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