New Product Piracy Report – Same Old Story

The VDMA, the advocacy organization for Germany’s mechanical and systems engineering industry, has released data from its latest research on product piracy (Product Piracy 2018), and once again, the results are alarming –71% of the enterprises in Germany’s industrial engineering sector are directly affected by product or brand piracy with damages estimated at €7.3 billion annually.

Conducted every 2 years, VDMA’s survey seeks to determine the current state of threats posed by counterfeiters, pirates and forgers. The study is mostly concerned with the illicit reproduction of products, or more specifically, the imitation of products in breach of special proprietary rights or imitation of products without any breach of proprietary rights, but against accepted competitive practice.

The study, completed in March 2018, determined that the overall scale of damage from product piracy remains relatively unchanged from 2016, while surprisingly, 39% indicated that damages had worsened in the last 2 years. The People’s Republic of China remains the grand champion of the countries named as the origin of piracy, with 82% of counterfeits made there and 44% sold there. By comparison, Germany was second with 19% of respondees saying they were the country of origin.

Beyond the damages of IP theft, public safety is also a major casualty of counterfeits: 36% of companies reported counterfeits that endanger their operators, users, and the environment while 46% of the participants see the counterfeits they have identified as a danger to the effective operations of industrial facilities.

How are these companies protecting their IP and product innovations from piracy? Most (61%) of the participating companies consider the piracy to be a legal management issue but are engaging other areas of their organization to join the fight. R&D functions (42% of cases), legal and patent affairs offices (34%) and even sales and marketing (29%) have become actively involved. However, before trying legal recourse, most companies will first attempt to settle such matters out of court. More than one third of the affected companies would not, however, take any action. This applies in particular to small and medium-sized enterprises.

Unfortunately, the data suggests that current legal efforts have not stemmed the tide of global product and or brand piracy which continues to pose a major danger to the industry. And, with the emergence of the IoT and Industrie 4.0 fueled by millions of connected devices and the communication of sensitive data over the Internet, the dangers to public safety loom even larger.

The VDMA is working closely with security experts like Wibu-Systems and other industry organizations to develop strong and preventive measures that make it more difficult to copy or reverse engineer product designs, secure data, and add a measure of safety to industrial processes. Some of those protection mechanisms are outlined in VDMA documents, Product and Know-how Protection, and, Industrie 4.0 in practice – solutions for industrial applications.

For our part, Wibu-Systems has dedicated itself to eradicate sabotage, espionage and cyber-attacks in smart factories. With our flagship CodeMeter^® licensing and protection platform, developers can safeguard digital assets and product know-how that are available in machines as well as on personal computers, industrial PCs, embedded systems, mobile devices, tablets, programmable logic controllers and microcontrollers from software counterfeiting, product piracy, reverse-engineering and machine code tampering.