Illicit trade in counterfeit goods is a serious threat that continues to grow in scope and magnitude, with multiple impacts on consumers, rights holders and governments. For consumers, counterfeiting poses health and safety risks. It also lowers consumer satisfaction when low-quality fakes are unwittingly purchased. For legitimate intellectual property rights (IPR) holders, counterfeiting means lost sales, lower profits, reduced innovation incentives and longer-term brand erosion. For governments, counterfeiting leads to lower tax revenues and higher unemployment. Governments also face additional expenses in addressing public safety concerns and dealing with anti-counterfeiting legislation.
Korea is one of the most innovative economies in the world. Its innovative ecosystem has been made possible due to significant government support and private investment activities in research and development. The Korean economy is also well-integrated in global value chains, which boosts Korean productivity and competitiveness. However, this high level of innovation and globalisation makes the Korean economy vulnerable as intellectual property (IP) embodied in Korean products has been subject to counterfeiting and theft.
This report examines how trade in counterfeit and pirated goods affects the Korean economy. More specifically, it evaluates the magnitude and impact of global trade in counterfeit goods that infringe the IPR of Korean rights holders. The analysis identifies product categories that are targeted, the main economies of origin of counterfeit goods, and the main trade routes and transit points used. It also assesses the losses due to counterfeiting in terms of forgone sales and profit losses, taxes forgone by the Korean government, and jobs lost in Korea.
The impact of the COVID-19 pandemic on the trade in fake goods infringing Korean companies' IPR is also assessed in this report. It is found that although the pandemic exacerbated existing trends, its impact seems to have been moderate when absolute volumes of counterfeit goods are considered. The key effect of the pandemic has been the proliferation of e-commerce, which has amplified the availability and purchase of counterfeit goods online, demonstrating a discernible shift in consumer behaviour and sales channels.