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Therefore, corporate managements are asked to protect the knowledge of their companies in such a way that no unauthorised third parties can access this elemental company substance.
The tension between knowledge and unauthorised application of this knowledge can be defined as follows:“The seed you sow, another reaps.”
Therefore, it is no wonder that not only competitors but also professional service providers illegally suck up knowledge throughout the whole world to use it for their own commercial ends. Their goal is an illegal transfer of knowledge gained by spying on competitors and the industry in general. They want to compensate innovation deficits, save research and development costs and avoid misdevelopments.
As reported by newspapers worldwide, this illegal knowledge transfer, this plagiarism or product piracy is globally increasing. The focus is on China. The Chinese government provides state aids for the Chinese industry to make sure that it gains technical know-how as fast as possible to reach latest state-of-the-art levels. This attitude is based on the teachings of Confucius. Already in 500 B.C., Confucius assured the Chinese that “The master is proud when copied by his students.”
Therefore, the Chinese do not feel guilty when copying the technological progress of others. After all, they are only copying the master. In their point of view, technology leaders should rather be proud to be deemed worth copying by the Chinese. This attitude is hard to accept when having to face our enormous development costs.
However, also other emerging markets like Russia, Iran or North Korea are plagiarising with the same intensity.
This plagiarism is not only aimed at technical solutions but also refers to brand piracy. The unauthorised use of famous brands has become part of the illegal knowledge transfer.
According to studies of the VDMA (German Engineering Federation), the German mechanical engineering industry loses every year up to 5 billion EURO due to product and brand piracy. This corresponds to an annual loss of 70,000 jobs in Germany. According to these studies, up to 300,000 jobs are lost in Europe every year due to plagiarism. A truly gigantic figure.
And the damage to the German mechanical industry’s image is not even considered in this figure. The damage is huge because poorly copied machines are marketed as “Made in Germany”. According to our experience, these copies resemble the originals in their appearance but cannot satisfy the expectations of the customer.
Recently there was a case in the news where a German manufacturer was held liable by a Chinese user. It was all about a tool which was sold in China under the German brand. However, the tool was not produced by the German manufacturer but by his Chinese competitor. The German manufacturer had a hard time proofing that he could not be held liable for the defective tool as his article number was inscribed in the tool. Such tricks are especially dangerous when applied to components with a high safety factor, e.g. in the aircraft industry.
But not only tools are copied. Meanwhile, globally organised product and brand pirates copy besides luxury goods like watches, bags and clothes increasingly also spare parts, complete machines and installations.
The value of imported product copies confiscated by German customs amounted to 1.1 billion Euro last year which is five times as much as in the year before.
We are all affected. We must sensitise our experts to this subject. Employees must understand that unfair technology transfer harms the company and thus puts at risk their own job.
According to the findings of the Federal Office for the Protection of the Constitution in Baden-Württemberg, one out of two companies is already affected by product and brand piracy. But only few companies know that they are being spied out.
There is a series of measures that can be taken against product and brand piracy:

Overall strategy nessesary

– First of all, legal measures can be taken, e.g. by filing an application for industrial property rights like brands, patents or designs. This application can be filed at local patent offices. However, it can also be extended to other regions by filing an international patent application. The important thing is to prosecute patent infringements once they have been detected and to cooperate with the corresponding national law enforcement agencies. An assertion of legal rights is frequently ineffective in China – also after their joining of the World Trade Organisation WTO. Despite industrial property rights, foreign companies have a hard time fighting Chinese product piracy. Indemnifications and fines are so low that they hardly discourage plagiarists. Penal laws can be easily evaded. Moreover, the Chinese start to file patents in China for known state-of-the-art technology as their own utility patents. As the degree of novelty and innovation regularly remains unchecked, Chinese companies get the industrial property right for the product which can then only be fought by means of a so-called cancellation request. Such a cancellation process lasts for years and is very expensive for foreigners. This new quality of product piracy is very worrying. Especially, if the Chinese apply this new tactic also in Western countries.
– Moreover, it makes sense to clearly define and protect industrial property rights in contractual relationships with customers and suppliers. Especially, the German-Chinese standard contracts regarding know-how and patent licenses should be applied. Confidentiality agreements that protect company know-how should also be made. Breaches of these agreements should be sanctioned with fines. The observance of WTO rules for the protection of intellectual property (TRIPS) must be claimed. Finally, agreements on export restrictions can be made.
– Besides legal measures, also political measures can be taken by the corresponding governments to fight plagiarism by means of statutory and customs law regulations.
– The enlightenment of customers and the cooperation with domestic and foreign associations are appropriate means to proceed against product and brand piracy. They include also the marketing strategy of companies. This means that the latest developments are not delivered to certain countries and that not every order for a standard machine is being accepted.
– A public-oriented campaign of the VDMA with the slogan “Pro Original” and of other industrial research groups like “Pro Protect” support actions against plagiarism worldwide.
But these are not all preventive strategies available. They are supplemented by technical measures which can make originals unforgeable. Such measures include, for example, intelligent components with special imprints. One possibility are, for example, holograms as they are known from ID cards, cash cards or bank notes.
Another possibility would be to install slightly different screws into a machine. If product pirates then use not only original screws for their copies, the entire machine will work only partly or not at all.
Another preventive measure is the use of intelligent components. If an intelligent screw does not recognise a steel spring at a certain point, then the control circuit, for example, is not completed. The screw which needs the connection with a certain component is then installed in every machine at a different place. The many thousands of screws in a machine would make it impossible for product pirates to find the manipulated screw. Another idea would be a modular construction of machines. Due to the different modules, only partial know-how would become known.
Another focus of product piracy is the software that is installed in machines. Software cannot be copied that easily. Therefore, only such programs should be used that are working with encoded data. Hackers would then have a hard time to access the code of this software. Especially key functions must be secured in this way.
It is also possible to protect the access to passwords in such a way that the user first has to enter a code or insert a certain USB memory stick in order to use the machine.
Another preventive strategy for avoiding product and brand piracy is the application of different marks which can only be recognised at certain temperatures or if certain constellations are met. Contitech, for example, uses certain number combinations which turn every belt into a unicum. Moreover, certain individually composed additives are added to the rubber.
All these measures, however, are only part of the overall strategy that a company should have for protection against product and brand piracy.
All technical, market-political and legal preventive measures are only some aspects of an overall strategy and have to be considered within a risk management for the protection against product and brand piracy.
Our goal must not only be to implement some aspects of the prevention strategy but to use our creativity to always be one step ahead of product and brand pirates, i.e. to innovate faster than pirates are able to copy.
Therefore, we have to act upon the following maxime:
Our innate creativity is a protection against product and brand piracy as it helps us to make innovations and develop new products so we can always be the market leader.
We should do our best to reach this goal.

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