GUEST EDITOR’S PERSPECTIVE

Protecting your intellectual property rights

Peggy E. Chaudhry

Villanova School of Business, Villanova University, 800 Lancaster Avenue, Villanova, PA 19085, U.S.A.

Business Horizons (2013) 56, 131—133

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

1. The booming growth of illicit trade

When counterfeit trade and Web piracy are men-tioned, knock-off Prada handbags and illegallydownloaded music from the internet usually springto mind. And while these problems are wellknown, other areas of illicit trade–—such as fakepharmaceuticals and cigarettes–—have becomeemerging markets for counterfeiters seekingwindfall profits. During the past 5 years, I havefollowed the growth of the counterfeit phar-maceutical market, a so-called ‘perfect storm’whereby product pirates continue to penetratethe supply chains of both developed (e.g., theU.S.) and developing economies. I’ve also assessedthe growth of counterfeit trade in cigarettes dueto recent plain packaging legislation in Australia;such legislation is under consideration in othermarkets, too, including the UK. Barriers to entryare being lowered in both these trades, as thetools for producing these goods are readily avail-able. A plethora of factors entice pirates to sellfake wares, ranging from huge profit incentives tolack of adequate regulation and absence of penalsanctions. In many cases, the attraction is appar-ently just too tempting to ignore.

In response to this barrage, various countermeas-ures have been formulated and put in place. Someof those, including efforts aimed toward monitoringcompany supply chains and distribution channels,are outlined herein. Moreover, a synopsis of overt,

E-mail address: peggy.chaudhry@villanova.edu

0007-6813/$ — see front matter # 2012 Kelley School of Business, Ihttp://dx.doi.org/10.1016/j.bushor.2012.10.001

covert, and forensic authentication methods isprovided to debate technological ‘track and trace’anti-counterfeiting measures. The counterfeiter’smain goal is to, with minimal effort, producea lookalike product to deceive the consumer;at times, even experts have difficulty differentiat-ing between the genuine product and the imposter.Thus, we have seen a wide array of both overt(e.g., hologram) and covert (e.g., chemicaltaggants) technologies designed as anti-counter-feiting tactics.

The variety of expert advice offered in this Spe-cial Issue on the protection of intellectual property(IP) rights is broad in scope. It encompasses a com-prehensive debate of salient issues, including thehistory of this illicit trade stemming from China, anevaluation of technological measures designed tocurb online piracy, a legal discussion of protectingyour brand against ‘genericide,’ an in-depth look ata multitude of measures developed to safeguard thecompany’s legitimate supply chain, an assessmentof the role that stronger IP protection in the foreignmarket has on U.S. exports to various destinations,and an overview of the increasing menace of coun-terfeit pharmaceuticals.

The collective work highlights the contribution ofa variety of authors from diverse backgrounds inbusiness law, government policy, international busi-ness, marketing, supply chain, and informationtechnology from the academic, public, and privatesectors. My intent was to ask each author to select akey IP topic that her/his field is currently address-ing, to ultimately yield a more eclectic overview ofthe problem.

ndiana University. Published by Elsevier Inc. All rights reserved.

132 GUEST EDITOR’S PERSPECTIVE

2. China: The new United States?

Mike Peng, Jindal Chair of Global Strategy at theUniversity of Texas, starts us off with a thought-provoking Executive Digest titled An Institution-Based View of IPR Protection. This piece provideshistorical perspective of the evolution of an indige-nous IP culture. Professor Peng reports that at onetime, the U.S. was considered a rogue developingcountry, willing to steal IP from other developedcountries such as Great Britain. Perhaps this willreshape your view of China. It may just take time,albeit many decades, to reshape the IP culture inthis market.

3. Contending with illicit trade inChina: An historical problem

Alan Zimmerman, Professor of International Businessat the City University of New York, has writtenarticles on illicit trade in China for numerous outlets,including Business Horizons, Journal of Asia-PacificBusiness, and Multinational Business Review. Theforthcoming second edition of his book, ProtectingYour Intellectual Property Rights: Understanding theRole of Management, Governments, Consumers, andPirates (co-authored with Peggy Chaudhry), featuresa chapter devoted to the ‘‘Special Case of China’’ andthe challenge of counterfeit trade.

To date, not many sources have provided a his-torical perspective of IP in this country’s market;Contending with Chinese Counterfeits: Culture,Growth, and Management Responses addresses thisgap. Via his contribution, Alan Zimmerman providesa synopsis of the growth of the Chinese economy, asuccinct discussion of the size of illicit trade inChina, and a more in-depth review of the historyand enforcement of IP in China. Using current datafrom The Economist Intelligence Unit, the U.S.Trade Representative (USTR), and scholars, he pro-vides an up-to-date view of the continuing problemof China. Professor Zimmerman summarizes with anarray of anti-counterfeiting tactics that managerscan employ, such as establishing a brand integrityteam, to focus on the trade in counterfeit goods.

4. Harnessing technological measuresto provide solutions for online piracy

Hasshi Sudler–—CEO of Internet Think Tank Inc., aPhiladelphia-based firm that provides product in-novation, research, and technology services toGlobal 2000 companies–—has published work on

anti-counterfeit tactics targeted at online piracyin the journal Enterprise Information Systems.His article in this Special Issue, Effectiveness ofAnti-Piracy Technology: Finding Appropriate Solu-tions for Evolving Online Piracy, contends that thedigital revolution has been the main driver of IPe-crime, rather than a sudden change in consumerbehavior. In addition to citing then-versus-now ex-amples (e.g., downloading movie content vs. ille-gally streaming video; cassette tapes vs. iTunes),Sudler discusses the failure of Digital Rights Man-agement (DRM) to stop pirating and claims thisanti-counterfeiting tactic has actually discouragedconsumers from obtaining legitimate product. Heproposes that a change in the supply chain ecosystemhas resulted from two major paradigm shifts: theonset of digital media and the World Wide Web.Sudler suggests new concepts, such as employingthe advertising model (e.g., Hulu, YouTube), to pro-vide legitimate internet content. Using the exampleof iTunes Match, he illustrates how a company canutilize cloud computing technology and access man-agement that adds both value and convenience to theconsumer. Finally, the author concludes with a con-ceptual model regarding the effects of piracy on themusic industry’s supply chain ecosystem to provide asummary of his ideas.

5. Protecting your brand: Hedgingagainst genericide

Michael Walsh, former Associate Professor of Busi-ness Law at the Villanova School of Business, hasbeen working in the area of safeguarding intellec-tual property rights and anti-gray market strategiesfor over 20 years. Two of his articles on the globalprotection of IP, published in the Columbia Journalof World Business, are still being cited in the cur-rent literature. Protecting Your Brand against theHeartbreak of Genericide, presented here, dis-cusses how a firm can prevent genericide and prof-fers several examples, including Cola, Yo-yo, Nylon,Thermos, Xerox, and more. Ironically, the trade-marked goods and services that are most suscepti-ble to genericide can be the most popular brandswith significant market share. This article is repletewith illustrations of previous court cases used tohighlight such topics as proving ‘genericness’through different types of direct evidence by wayof consumer survey, the owner’s use of the trade-mark, and a competitor’s use of the trademark.Walsh also illustrates indirect evidence of generic-ness through publications and expert testimony. Heconcludes with several concise tactics for firms to

GUEST EDITOR’S PERSPECTIVE 133

litigate, including establishing a prima facie case;selecting a distinctive, nongeneric term when in-troducing the product; and monitoring employees’and advertisers’ use of the trademark.

6. Safeguarding the legitimate supplychain

Ling Li–—Professor of Information Technology/Decision Sciences, E.V. Williams Research Fellow,and Area Coordinator, Maritime & Supply Chain Man-agement at Old Dominion University–—provides anoverview of the technology that is used for bothproduct authentication and tracking and tracingtechnologies in the supply chain. Technology De-signed to Combat Fakes in the Global Supply Chainanalyzes whether authentication technology used asanti-counterfeiting tactics in the supply chain areovert or covert, and illustrates both advantages anddisadvantages of this technology. For example, someovert technology has the advantage of immediateuser verification on the product (e.g., color-shiftingink/U.S. currency). However, other overt technology(e.g., holograms) can be easily imitated and oftenappears on illicit goods. Covert technology (e.g.,chemical taggants) may pose issues related to useridentification; a common problem entails how tostreamline covert authentication for various stake-holders in the supply chain, including U.S. Customsand Border Protection agents. The author coversmicroscopically or nano-encoded identification ma-terials, track and trace technology focusing on radiofrequency identification tags (RFIDs) and electronicproduct codes (EPCs), and the printing technologyavailable for packaging that might help identify realversus illicit goods. Li proposes managerial tactics tofight fakes in the legitimate supply chain, such asSecureTrace in the pharmaceutical sector, and sug-gests future use of the Internet of Things (IoT) usingwireless technology to provide the information archi-tecture for supply chain quality management.

7. Assessing the role of IP protectionon U.S. exports

E. Tani Fukui, Alexander Hammer, and Lin Jones ofthe U.S. International Trade Commission add to thedialogue with Are U.S. Exports Influenced by Stron-ger IPR Protection Measures in Recipient Markets?Based on verified international business concepts,we know that various factors (e.g., a country’smarket size, income levels, consumer preferences)

are used to determine foreign market feasibility.We also know logistics (e.g., cost of moving mar-kets, tariff and non-tariff barriers) are weighedinto the decision. In this article, Fukui, Hammer,and Jones reach far beyond these well-testedvariables to apply IP as a decision variable as anexport determinant using a regression model.Their study employs data collected in sectors in-cluding aerospace, semiconductors, chemicals,petroleum, pharmaceuticals, instruments, resin/synthetic rubber, agriculture and construction ma-chinery, general purpose machinery, and motorvehicles. Using a comparative indicator of IPRprotection measures in various country markets,the authors isolate the effect of IPR protection as adeterminant of U.S. export activity. Results revealthat certain sectors have the greatest sensitivity togreater IP protection in markets, and this yields apositive effect on their U.S. export performance.Fukui, Hammer, and Jones conclude with a propos-al of novel, additional factors to be considered inexport decisions.

8. IP and consumer safety: Fakepharmaceuticals

Peggy Chaudhry (Associate Professor) and StephenStumpf (Fred J. Springer Chair in Leadership), bothof the Villanova School of Business, wrap things upwith The Challenge of Curbing the Growth ofCounterfeit Prescription Drugs: Preventing thePerfect Storm. This article provides a synopsis ofthe present policy and law governing counterfeitmedicines, the financial and non-financial motiva-tions of pirates, the myriad agencies involved withcurbing this problem, and the need to cultivatenew anti-counterfeiting measures to fight thegrowth of fake medicines. Through transnationalcriminal networks, fakes make their way into thehands of patients in all countries, accounting for anestimated 10% of medicines sold worldwide. Withthe advent of illegal online pharmacies, buyingcheap drugs is easier than ever. And with the risingcost of healthcare and an aging population, alter-native methods of obtaining medication may ap-peal to a broad base of potential customers.Chaudhry and Stumpf outline the situation andconclude with a brief discussion of awareness cam-paigns (e.g., ‘BeSafeRx’/USFDA; ‘Counterfeitersare Smart. You can be Smarter’/Pfizer Inc.) thathave been launched to make the general publicmore cognizant of the dangers of counterfeit phar-maceuticals.