Intellectual property fraud has risen sharply during the last ten years according to the Global Fraud Report on IP released Jan. 2 by the global risk consultancy Kroll.

Consumers and companies are both harmed by this trend. According to World Health Organization estimates, 10 percent (globally) of prescription drugs are counterfeit, while electronic products are illegally copied so fast in China that they often arrive on shelves before the original. The report cites European Union Customs statistics that show a 1,000 percent increase in counterfeit goods in Europe between 1998 and 2004. The World Customs Organization puts the total figure of counterfeiting and piracy at $650 billion, which is 5 percent to 7 percent of world trade. The report says this is mainly due to better access to Internet distribution channels and increased use of IP fraud by criminal networks to finance operations. It also cites the corporate world's inadequate processes to dispose of defective products and store rejected prototypes. To fight counterfeiting, the report suggests an IP audit of trade secrets and proprietary information and the design of enforceable IP rights into products.