Archive for 'Product counterfeiting.'

Intangible Assets and Counterfeit Apparel

January 13th, 2015. Published under Product counterfeiting., Reputation risk.. No Comments.

Michael D. Moberly   January 13, 2015   ‘A blog where attention span really matters’!

Here I contrast consumer’s expectation of sporting contest authenticity to growing consumer receptivity for purchasing counterfeit apparel and accessories. My views were inspired by a Frank DeFord commentary on National Public Radio and Dr. Dan Ariely’s book titled, ‘The Honest Truth About Dishonesty: How We Lie To Everyone, Especially Ourselves’ whom I have spoken.

Mr. DeFord says most sports fans care about and expect player and contest authenticity. They want contests to be genuine battles’ of player and coach tactics, wit, skills, preparation, training, and physical and mental ability and stamina, i.e., the intangible assets embedded in our sports psyche.

Growing percentages of sporting event consumers do not consistently exhibit preference for authenticity with respect to seeking-purchasing counterfeit (sports) apparel, i.e., indifference.

Dr. Dan Ariely’s research (Duke University) describes social-psychological principles that influence consumer receptivity to buying apparel and associated accessories which they know to be counterfeit prior to purchase which he designed various (human) experiments that focus on the forces that are at work, i.e.,

  • external signaling – the way we broadcast to others who we are by what we wear.
  • self-signaling – despite what we tend to think, we don’t have a clear notion of who we are but, generally hold a privileged view of our preferences and character.

The inference being, when we knowingly purchase counterfeit apparel one may act differently than those who purchase authentic apparel. For example, one’s conventional moral constraints are likely to loosen when we knowingly purchase, accessorize, and wear counterfeit goods. Once those moral constraints loosen, Ariely suggests, we become more receptive to the ‘oh, what the hell’ effect with many consumer rationalizations. For me, this begs the question, which is more powerful – influential, the…

  • negative self-signaling emanating from wearing counterfeit apparel?, or
  • positive self-signaling that comes with wearing genuine – authentic apparel?

Ariely also points to the potency and value of external signaling which can be substantially diluted as more legitimate – authentic supply chains become variously polluted with counterfeits.

Based on my own experience, the value of external signaling, as an intangible asset becomes even more diminished and/or undermined as the ‘quality’ of counterfeit apparel elevates and becomes difficult for consumers to distinguish from authentic branded/manufactured products.

Again, self-signaling and external signaling are clear examples of intangible assets whose value is connected to consumer preference via the proprietary intellectual and structural capital and trademarked logos, etc., embedded in authentic (licensed) apparel.

Presumed consumer preference for authenticity is slowing evaporating, to the point that buyer concern whether apparel is counterfeit is becomes secondary to cost, an aspect which is particularly troublesome for me. Too, I see nothing on the horizon that suggest otherwise. The cause of course will be a reflection (consequence) of changes in consumer attitudes about external signaling and self-signaling.

Having devoted a significant percentage of my professional career to safeguarding intangible assets, the increasingly efficient global product counterfeiting industry has already ‘geared up’ to accommodate consumers whose inclinations are changing. Ultimately, apparel designers and manufacturers must recognize that the positive effects derived from external and self-signaling represent the ‘intangible asset glue’ that hold company value, revenue, reputation, and brand, etc., together!

As always, reader comments are welcome and respected, and please read and submit a review of Mike’s newest book ‘Safeguarding Intangible Assets’ http://safeguarding-intangibles.com/

 

 

 

Product Piracy: A Global Economic Risk

October 6th, 2014. Published under Economic Espionage, Product counterfeiting.. No Comments.

Michael D. Moberly    October 6, 2014     ‘A long form blog where attention span really matters.’ 

Stolen, misappropriated IP and other intangible assets…

When values are calculated and assigned to stolen, misappropriated, and/or otherwise compromised intangible assets, i.e., intellectual and structural capital particularly, they may be (a.) quite subjective, (b.) merely regurgitated guesstimates, and/or (c.) embedded with inadvertent biases or political agendas and other variables that inevitably influence high or low valuations.

For example, it’s quite common to witness pundits and open source media to merely regurgitate high dollar losses (impacts) attributed to cyber – economic espionage, ranging between $100 to $500+ billion annually to the U.S. alone.

The worlds’ second oldest profession…

It’s important to recognize that an, as yet unknown percentage of malicious cyber activity, evolves into economic espionage.

There remain a percentage of policymakers, company c-suites, and management teams who find it to be an especially challenging ‘to get their arms and heads around’ insofar as articulating, with strategic clarity, precisely why cyber – information asset protection security and economic espionage prevention/mitigation initiatives are essential from the outset to any business initiative.

Objective calculation of losses and costs to materialized risks…

Calculating and assigning a dollar value to losses and costs associated with cyber crimes, particularly those which culminate in economic espionage, may appear, at first blush, to be relatively straightforward tasks. But, to be sure, there is much more to calculating and assigning dollar values to costs – losses than acquiescing to mere guesstimates.

Factors that influence companies to go public with their victimization…

Going public, represents, among other things, a companies’ admission of being victimized followed by a guesstimated admission of the extent – value of the losses attributed to the adverse acts, which, are often initially framed in passionate and angry descriptions how the acts and losses will impact the victims’ company..

Victim anger and passion aside, we know it is challenging to determine, let alone isolate and accurately assess asset losses rapidly. In many instances, that’s because, the losses are not limited solely to stolen or undermined intellectual property or capital, i.e., trade secrets, and proprietary information, etc. Instead, the full extent of a targeted companies’ losses are frequently more strategic and include equally valuable structural and relationship capital and thus may not be immediately measurable or fully realized and calculated until well after the fact.

No surprises…

Again, assigning specific price tags to companies’ cyber – economic espionage losses is a challenging undertaking, because the processes are often embedded with subjective assessments that do not reflect a comprehensive accounting of the ‘contributory value’ of various assets which serve as foundations to an infringed patent. For example, it’s not especially prudent then to assume the findings of the various surveys and studies produced over the years are the result of using objective data and calculations free from the influence of larger political, social, and national security agendas.

Numerous reports…

Since the passage of the Economic Espionage Act (EEA) in October, 1996, there has been no shortage of surveys and studies produced whose focus has largely been to ‘dramatize’ the costs, losses, and adverse impacts attributed to cybercrime and economic espionage.

Having read and studied most, if not each of these studies/surveys over the past 25+ years, I interpret many of the methodologies and findings to be somewhat competitive in the sense that each appears to be conceptually broader in the ranges of dollar losses and adverse economic impacts and characterized in more dramatic fashion.

Calculating losses attributed to economic espionage require objectively framed equations…

For many years there has been a general inclination to accept, perhaps naively, after-the-fact prognosticative research regarding the valuation of losses attributed to cyber – economic espionage.

My counsel on that matter is that any formula or conventional intangible asset valuation methodology used to calculate the loss and/or compromise of intellectual properties should differentiate the assets which have been stolen and/or compromised by category, i.e., intellectual, structural, and relationship capital.

As always, reader comments are most welcome!

ACTA’s Rejection By European Parliment…Not The Presumptive No-Brainer…

July 23rd, 2012. Published under Intellectual Property Rights, Personal Privacy, Product counterfeiting.. No Comments.

Michael D. Moberly   July 23, 2012

Admittedly, I took somewhat of a passive approach to the passage of the Anti-Counterfeiting Trade Agreement (ACTA) by the European Union’s Parliament, earlier in July, because I believed it to be a ‘no brainer’.   Was I ever wrong!  In hindsight, I did not give the groundswell opposition the attention or credence it deserved and ultimately misjudged the influence such sustained, diverse, and intensive lobbying efforts would come to have on the EU Parliament.

Today, the ‘nanosecond communication environment’ contributes to fewer and fewer legislative ‘no brainers’ whether it is proposed legislation in the US or EU.  Subsequently, less can, and probably should, be assumed or taken for granted.

Certainly, there’s no argument that global product counterfeiting poses substantial adverse economic impacts to every industry sector, not just the music side.  Aside from the largely subjective, but nevertheless, increasing guesstimates of economic losses attributed to infringement, counterfeiting, and product piracy, it’s quite correct to portray each as now being an entrenched and extraordinarily lucrative  global industry that comprises substantial (and rising) percentages of many countries GDP, sources of employment and personal income, and manufacturing base.

So, every business today, whether it’s based in the EU or the US, is well advised to conclude that IP infringement, counterfeiting, and product piracy have moved well beyond merely being annoying probabilities to increasingly costly inevitabilities if left unchecked by either practice or laws.  (For additional perspective please see July 8th blog post titled ‘Intangible Assets and Counterfeit High-End Apparel).

But, that doesn’t appear to be the primary rationale behind the opposition that ultimately led to the rejection of ACTA.  Instead, opposition to ACTA, according to Chris Brogan, Managing Director, Security International, who has an extraordinarily experienced track record in such matters, points out that ACTA’s demise was largely due to it being framed as both a privacy and human rights issue.

Brogan says, no one should get the opinion that the European Parliament is not supportive of international efforts to curb piracy.  However, in large part due to the vagueness and breadth of ACTA’s intended coverage, privacy and human rights lobbyists felt that individuals and small businesses, as well as large commercial concerns, would be laid open to draconian legal measures of enforcement.

The privacy – human rights based opposition, Brogan says, evolve around three key issues…

  1. respect for privacy, i.e., many individuals share their choice in music, but not for commercial gain.
  2. freedom of expression which has to be balanced against any harm to another individual/organization, and interestingly,
  3. the right to a fair trial which opponents argued ACTA provided too much legal power to organizations to enforce their proprietary rights.

Brogan adds, as an experienced participant in privacy legal issues for 25+ years, “I understand the difficulty that non-Europeans have with Europe’s strong advocacy for strengthening the privacy laws, and presumably any legislation, which on its face, appears to limit or otherwise modify expectations of privacy”.  Brogan also points out that Europe’s previous experience with Facist and Communist states that purposefully curtailed citizen freedoms through (draconian) legislation and law enforcement remains an impetus to oppose legislation that contains language that could be interpreted as curtailing human rights and personal privacy.

Similarly, an official of a European institution stated that ACTA had been rejected due to the presence of a strong movement of concerned citizens who feared that their civil rights were in jeopardy.  In addition, this source described unprecedented lobbying by thousands of EU citizens in the form of street demonstrations, e-mails and calls to MEP’s and a petition, signed by 2.8 million citizen’s worldwide, urging ACTA’s rejection.  Even some, the source said, characterized ACTA as a new form of dictatorship in which authorities and companies would have too much control over the Internet and the possible restriction of access to generic medicines, if it were to be passed.

The European institution source goes on to suggest there is a growing and influential anti-EU movement in Europe today, one claim of which is that ‘Brussels is ruling everything’.  Both the European institution source and Mr. Brogan agree that ACTA’s language appeared vague, and thus susceptible to being misinterpreted.

Thus, in an environment where such strong sentiments exist regarding privacy and human rights, and having been confronted with a strong and like-minded public lobby, the EU Parliament overwhelmingly voted against ACTA. Proponents of ACTA suggest the MP’s vote was not based on facts, rather one on sentiment.

Still, Mr. Brogan and the European institution source agree a strong need remains to find alternative ways to protect intellectual property. And, in today’s increasingly irreversible knowledge-based global economy in which 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from intangible (IP) assets, finding common ground whereby those assets are respected and accordingly safeguarded is critical!

Intangible Assets and Counterfeit High-End Apparel

July 9th, 2012. Published under Intangible Asset Value, Product counterfeiting.. No Comments.

Michael D. Moberly    July 8, 2012

This post represents a pessimistic, but, what I believe is a very relevant analogy contrasting the global preference for – expectation of authenticity in sporting contests to consumer receptivity to buying and wearing counterfeit high-end apparel and accessories.  This post was inspired by a Frank DeFord commentary on NPR and Dan Ariely’s newly published book, ‘The Honest Truth About Dishonesty: How We Lie To Everyone, Especially Ourselves’.

Presumably, DeFord says, most sports fans (consumers) care about player – contest authenticity. I believe though, there is one notable exception, the followers of so-called ‘professional wrestling’.  DeFord believes, and I certainly agree, sports fans prefer, presume, and expect contest authenticity.  That is, fans want sporting contests to be genuine battles’ of player – coach tactics, wit, skills, preparation, training, and physical and mental ability and stamina, which not-so-incidentally I say, are incalculably valuable, influential intangible assets embedded in our psyche.   

On the other hand, growing percentages of consumers, a percentage of which no doubt, are sports fans, who do not consistently convey the comparable sense of concern for legitimacy and authenticity with respect to buying – wearing counterfeit high-end apparel and accessories.  Evidence points to growing numbers of consumers who willingly and knowingly seek, purchase, and wear counterfeit products, referred to in previous posts as ‘indifference’.

Interestingly, Ariely’s book/research describes multiple social-psychological principles (theories) that influence consumer receptivity and/or inclination to use high-end apparel and accessories which they know to be counterfeit.

The implication is that for otherwise law abiding citizens, growing numbers are variously receptive to purchasing (high end) counterfeit apparel which Airely brings-to-life through various and carefully conducted (human) experiments that focus on two sociological – psychological forces that are at work, i.e.,

  • External signaling – the way we broadcast to others who we are by what we wear.
  • Self-signaling – despite what we tend to think, we don’t have a clear notion of who we are but, generally hold a privileged view of our preferences and character.

The reality, Ariely suggests, is that we don’t know ourselves nearly as well as we think we do. The inference is that when we knowingly purchase and wear counterfeit high-end apparel and accessories, most of us feel less legitimate and will act differently than consumers who pay full retail for the opportunity to wear authentic products.  

In other words, wearing fake apparel influences us to hold a less honorable self image which manifests as tainted self-concept which in turn, influences the way that we observe and judge the actions of others.  This begs the question, which is more powerful – influential, the negative self-signaling emanating from wearing counterfeit apparel, or the positive self-signaling that comes with wearing genuine – authentic apparel? 

Not surprisingly, Ariely’s findings indicate that wearing authentic (non-counterfeit) apparel and/or accessories may not necessarily increase our honesty.  However, our conventional moral constraints are likely to loosen a bit in circumstances in which we knowingly purchase and wear and/or accessorize with counterfeit goods.  And, once our moral constraints loosen, Ariely’s research indicates, it becomes easier, that is, we become more receptive to taking further steps down a path of dishonesty which is what Ariely appropriately describes as the ‘oh, what the hell’ effect!

Such receptivity also breeds various rationalizations for consumers. One such, often touted rationalization is that the purchase of counterfeit high-end apparel and accessories does not produce any adverse (economic, competitive advantage) consequences to the high-end fashion designing – manufacturing industry because only the wealthy would pay full retail value anyway, therefore there are no lost sales!  Of course, what is noticeably and perhaps conveniently left out this particular ‘rationalization equation’ are weighing both the positive and negative economic sides to external signaling.

Also revealed in Ariely’s research, is that the potency and value of external signaling is diluted and diminishes in a similar manner described in previous posts regarding the ‘pollution of legitimate supply chains’. Too, my experience – research indicates the value of external signaling, as an intangible assets, becomes even more diluted and diminished as the ‘quality’ of counterfeit apparel and accessories elevates to the point, as it already has in many instances, counterfeits are increasingly difficult to distinguish from authentic branded products.

Again, self-signaling and external signaling are pretty clear examples, in my view, of  intangible assets whose value is connected to consumer preference via the proprietary intellectual capital and trademarked logos, etc., embedded in high-end apparel.  I believe, unfortunately, there are irreversible economic – competitive advantage consequences to all of this.  Presumed consumer preference for authenticity which delivers positive (intangible asset) economics to high-end apparel designers and manufacturers through self-signaling and external signaling are evaporating to the point that concern (care) whether apparel or accessories are ‘fake’ is secondary to their cost.  Of course, readers recognize there are other factors in play here, but these are particularly evident and troublesome. 

So, as this sociological, psychological, and intangible asset phenomenon continues, and I see nothing specific on the horizon that suggests otherwise, it will adversely affect company’s value and sustainability.  But, the cause won’t necessarily be attributable to conventional risks or threats.  Instead it will be a reflection (consequence) of changes in consumer attitudes about external signaling and self-signaling. 

Having devoted a significant percentage of my professional career to safeguarding intangible assets, I fully expect that the increasingly efficient global product counterfeiting industry has already ‘geared up’ to accommodate consumers whose inclinations change for the worse.

Ultimately, high-end apparel designers and manufacturers must come to fully recognize that the positive effects derived from external and self-signaling effects represent the  ‘intangible asset glue’  that holds company value, revenue, and its ‘building blocks’ for growth together!