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Illustration by iStock; Security Management

COVID-19 Effects Drove Counterfeit or Pirated Goods Markets Online

Goods from China accounted for 75 percent of the value of all of the counterfeit and pirated goods seized by U.S. Customs and Border Protection in 2021, a new report found.

According to the 2022 Review of Notorious Markets for Counterfeiting and Piracy from the Office of the United States Trade Representative (USTR), there were 39 online markets and 33 physical markets engaging in or facilitating substantial trademark counterfeiting or copyright policy, and the e-commerce system and mobile app WeChat was one of the largest platforms for counterfeit goods in China.

“Although described by owner Tencent as a ‘social communication tool and information publishing platform,’ WeChat provides an e-commerce ecosystem that facilitates the distribution and sale of counterfeit products to users of the overall WeChat platform,” the report said. “For example, right holders highlight the growing popularity of WeChat’s ‘Channels’ short video functionality to advertise counterfeit goods directly to consumers, who can purchase the counterfeits featured in such short videos via a ‘shopping cart’ functionality in the WeChat app.”

Right holders have complained that WeChat’s seller vetting process is weak and the brand protection portal is “overly bureaucratic,” making it difficult to submit complaints about counterfeits. There is also a lack of transparency about penalties for intellectual property (IP) theft or copyright violations, right holders allege.

Since the release of the 2021 Notorious Markets List, there have been some notable efforts worldwide to address the availability of counterfeit goods, the 2022 USTR report noted, but some of the changes merely reflect shoppers’ new needs and interests. While many of the physical markets for counterfeit or pirated goods remain closed after the start of the COVID-19 pandemic, sellers shifted to e-commerce platforms, using physical storefronts just to fulfill online sales.

“Online sellers of counterfeit goods have continued efforts to evade the anti-counterfeiting processes and systems established by governments and e-commerce platforms by, for example, using social media advertisements and influencers, hidden links, and drop shipping schemes,” the report said.

This year’s report also includes a section that assesses the adverse impact of online piracy on U.S. workers involved in creating digital works, such as films, books, games, music, or software.

“As technological development and the ubiquity of the Internet facilitate the high-speed, low-cost reproduction and transmission of digital content, strong copyright protection remains one of the best ways to support workers in the creative sectors,” the report said. “The COVID-19 pandemic accelerated the consumption of digital media across the globe, highlighting the importance of preventing online piracy and protecting the livelihoods of workers who rely on IP protections, not just in the United States but also internationally.”

When the COVID-19 pandemic shuttered cinemas, theaters, and other venues, people stayed home and turned to online content platforms—including illegal ones—to get their entertainment. In early 2020, film piracy increased by 41 percent in the United States, 43 percent in the United Kingdom, 50 percent in Spain, 62 percent in India, and 66 percent in Italy, the USTR report noted.

The U.S. Patent and Trademark Office found that IP-intensive industries in the United States accounted for 41 percent of the total gross domestic product (GDP)—around $7.8 trillion.

“Online piracy negatively impacts the careers of workers who dedicate their time and resources to developing creative works including the films, television series, music, books, games, and software that enrich lives around the world on a daily basis,” the report said. “When the content these workers help produce is pirated, the potential loss of sales can mean less revenue is available for the wages, residuals, pensions, and health care benefits that workers depend on. Recent estimates suggest that digital video piracy causes lost domestic revenues of at least $29.2 billion per year.”