Brand Infringement: The Business Risk Nobody Can Price

Chris Bailey at Rouse argues that the underfunding of defences against counterfeiting and brand infringement is a measurement problem rather than a question of how serious the threat is

Most risks that reach a board come with a number attached. Fraud, cyber-security and regulatory exposure can be modelled, costed and weighed against everything else competing for budget. Counterfeiting and brand infringement are the exceptions. The threat is real and growing, yet the teams managing it usually have no agreed-upon way to show the financial value of brand protection, and so it loses out to risks that can be priced. 

A 2026 study in the Journal of Economic Criminality found that anti-counterfeiting receives only a fraction of the budget that companies allocate to other enterprise risks, such as fraud and cybersecurity. The reason is not that the threat is smaller. It is that firms struggle to quantify the harm counterfeiting does, and the benefit enforcement brings.

Why the usual numbers mislead

Part of the problem is how success is reported. Most brand owners, and many of the providers they hire, quantify through activity: raids conducted, goods seized, listings taken down. The assumption is that activity equals impact. In practice, the two are rarely the same, and presenting enforcement statistics to a finance director invites the obvious question: so what? The numbers say nothing about the scale of the problem, who actually drives the trade, or which actions actually deter them.

Nor does enforcement translate neatly into sales. Only where a counterfeit is priced like the genuine article does stopping it clearly recover a lost sale. Nobody buying a cheap fake luxury watch was likely to have bought the genuine one. Companies that demand a dollar value for brand protection are asking the wrong question. Brand value is not simply sales; it is also consumer trust, which is very hard to measure. Yet, the difficulty of showing hard financial value does not let brand protection teams off the hook entirely. If they cannot show a direct financial return from enforcement, they should at least show measurable impact and progress against clear objectives, just like any other business activity.

It helps to think of counterfeiters as competitors. They are more shadowy than the legitimate kind, but they compete for the same customers, and they can be subject to the same market analysis. Who are the serious players? Where do they manufacture? What are their routes to market? In hubs like China, counterfeit production tends to cluster in the same towns and districts, drawing on a shared pool of expertise. Knowing how many entities sit at the top of that supply chain, the market-makers that drive the trade, and how to disrupt them, is intelligence that can be acquired and built into measurable objectives.

Two measures that matter: visibility and deterrence

So what should companies measure instead? Two outcomes matter most, and most brand owners can agree on both.

The first is visibility: how much interference there is between a brand and its customer. How many alternative sellers and prices are presented to the customer? Is a lookalike sitting on the shelf beside the genuine product? Visibility is usually improved through suppression, such as online takedowns and market raids. It works, but it needs constant effort and does not touch the source of the problem. So reducing visibility is only part of the strategy.

The second outcome is deterrence: whether the infringer you act against actually stops. A counterfeiter who treats enforcement as a cost of business and carries on regardless delivers a return on investment for the brand owner of close to nothing. Measuring deterrence takes discipline. It means spending some of your budget gathering data to tell if the rest of the budget is being spent effectively, rather than repeating the same activity year after year, reporting numbers, and assuming that it is having an impact.

With limited budget, how do you know which bad actors to go after to create the greatest deterrence? Experience tells us that counterfeiting tends to follow a power law. A small number of operators account for most of the volume - they are successful both at selling product and avoiding detection - while a long tail of opportunistic sellers sits further down the chain. These serious players - often a network that connects manufacturers and traders - are where the real effort, skill and investment belong. 

Good deterrence also ripples outward because of the clustering effect. News of a raid or an arrest travels fast, and the counterfeiting “community” may stop offering that brand for a while. Effective deterrence shows up when the remaining producers start avoiding your brand altogether, or are forced to take risk-avoidance tactics that reduce their own return on investment. Again, the changing behaviour of counterfeiters can be investigated and measured.

A common language for brand protection

Brand protection needs to develop a common framework to measure these basic outcomes of reducing the visibility of copycats and increasing the deterrent effect on those who supply them. The only thing that changes from one business to the next is the mix of tactics used to get there. Other professions manage this: for example, HR teams have a range of metrics such as hiring costs, retention, and engagement.

Brand protection needs to develop the same kind of well-understood terms to turn enforcement from a murky dark art to something that corporate leadership can see bringing measurable results. This is only going to matter more as brands increasingly live or die by trust, and as IP grows in value.

Originally published by Business Reporter.