Counterfeits are a threat to any product-oriented industry. Yet, the counterfeit industry itself is huge, predicted to reach $1.82 trillion by 2020. And, as is common knowledge by now, China is the biggest player in the counterfeit industry.
Now, one might ask, how is it a problem for a ‘normal’ consumer? Rather, it’s great that they get hi-tech products at almost half the price. What more could one ask for? Right? Wrong. Apart from anything else, these fake products are often made of low-grade, toxic material and are very unhealthy to use.
“So much so, that more than 40% of Chinese products sold online are fakes. This, in turn, proves detrimental to the US economy, as a majority of the fake products in the US are procured from China”, says Nikhil Sethi, Marketing Director, Morpheus.Network.
Despite all, there’s a silver lining to the scenario. To mitigate the massive violation of Intellectual Properties (IP) of its citizens, the US Department of Homeland Securities is now turning to emerging technologies such as Blockchain. Primarily, the idea is to implement a Blockchain-based Proof of Concept, which will enable greater transparency and accountability in supply chains.
Why protect Intellectual Property?
Now, this is, indeed, a pertinent question. What good is intellectual property to an average American, and why protect it in the first place?
Because it isn’t an exaggeration to say that IP is pivotal to the US Industrial Policy. First, it plays a crucial role in making the US a world leader with respect to its innovations. Second, it assures innovators a sort of exclusivity for their ideas, inspiring them to do more. The rapid growth of the US patent industry over the years clearly speaks for this positive force.
Counterfeits, on the other hand, are a great threat to the very idea of IP. Obviously, consumers who feel that they are getting more for less are mistaken. Fakes are inevitably lesser versions of the originals, and they eat into the markets and financial returns of brands who strive hard to add value to peoples’ lives. In turn, this demotivates companies from innovating.
The Criminal Intent of Counterfeits
The size, as well as the growth, of the counterfeit industry, is not without reasons. Dealing in counterfeits is, at times, more profitable than dealing in drugs. Moreover, the risks involved in the former are significantly lesser.
That said, the industry is run by organized crime groups, who leverage the cheap labor available in the Chinese markets. To add, compliance laws for off-shore manufacturers are substantially relaxed.
The USA, on its part, is simultaneously the biggest producer and importer of fake goods, in violation of the innovators’ IP. Other sectors, including health and education, inevitably suffer the consequences of this attack on the US economy.
Moreover, the humongous amounts of resources have to be directed towards the US Customs & Border Protection (CBP). In a task that is daunting, to say the least, the department checks around 28 million cargo consignments every year, often scanning them manually for counterfeits. Alongside this, there are some 250 million international parcels coming their way, if not more.
In all, the process in its present stage is rather inefficient and rife with issues and risks. Among others, rampant corruption is a major pain point in this regard. So, wherein lies the solution?
Implementing Blockchain – Towards Efficient IP Protection
To ensure a stronger IP protection ecosystem in the US, the Commercial Customs Operation Advisory Committee (COAC) has formed an Emerging Technologies working group that reports best practices and recommendations to a COAC subcommittee that includes Customs Direct, out of Sioux Falls, South Dakota. Primarily, their aim is to undertake research in determining the possibilities and outcomes of implementing Blockchain or other Distributed Ledger Technology (DLT) platforms.
According to Vincent Annunziato, “…blockchain will help the United States maintain a competitive edge in the worldwide competition to grow stronger, better and more reliable ways of protecting our country from illegal imports and exports.”
He also believes that the technology would allow better communication among importers, as well as, seamless access to data. However, the first major hurdle to the project was finding the right platform which could do justice to the proposed proof of concept.
Among other things, there’s a need for a Blockchain platform that is highly interoperable. After substantial research and trials, CBP is nearing completion of the live-fire testing of blockchain interoperability with a Proof of Concept conducted Customs Direct, members of the Emerging Technologies working group, leveraging the Morpheus.Network platform with more assessment to follow.
As Noam Eppel, the co-founder of the platform has repeatedly pointed out, “One unique aspect of [their] platform is that it’s blockchain-agnostic, which means you don’t need to be tied to a single blockchain. We provide supply chain managers with a Digital Footprint, providing shipment and item visibility for automating safe and secure supply chains while also saving time and money.”
“Made in America” – The Road Ahead
Import substitution was, and still is a major tenet of the American dream. In fact, it is a significant force that drives the nation to its heights. Yet, it seems rather bland in the absence of strong and effective Intellectual Property Rights. Moreover, it is of utmost importance to ensure proper enforcement of these rights.
Indeed, the time is right for the US government to adopt promising technologies such as the Blockchain. This can not only help mitigate the present issues but also prevent those that are to come in the future.
Having taken the first steps in the right direction, it is very much expected and desirable that the concerned authorities keep a steady head, helping the nation sustain its hard-earned state of glory on a global scale.