From the car boot sale to the cyber-market of the internet, the trade in counterfeit goods is booming, says Matthew Valentine, so what are brands doing to turn back the tide and keep their reputations intact?

Imitation may be the most sincere form of flattery, but for brands which find copies of their products on sale around the world it is no laughing matter. Lost sales, damaged reputations and worse can result from the hijacking of well-known brand names.

Legal practice Davenport Lyons has repeated its Counterfeiting Luxury Report, first released in 2006, and uncovered what seems to be exponential growth in the sale of fake goods. Its figures show shoppers have spent 10 per cent more on fake goods this year, making an average of £21.30 per person. More than one in ten of the people taking part had paid over £50 for a single fake item. Perhaps more worryingly, two-thirds of consumers are said to be happy to sport fake products, and would be proud to tell friends and family they were fake. Nearly a third had bought fakes believing themto be real.

Designer fashion items are the highest profile goods to suffer from this trend, to the detriment of both brand owners and retailers. Even though many proud buyers of fakes were also more likely to be buyers of genuine designer goods, they conceded that buying counterfeit items damaged the exclusivity of brands they were spending their own money on.

"The social acceptability of fake goods is a deeply concerning shift in consumer behaviour. Given the balance of findings in our 2007 report, the time has come to tackle the UK demand for fakes head on," says Simon Tracey, head of intellectual property at Davenport Lyons. There is widespread support for this stance. "I'm quite horrified by some of the findings," says Ruth Orchard, director-general of the Anti-Counterfeiting Group, which has campaigned against fake goods for 25 years, of the report.

Orchard says that while nobody would question that faked products in, for example, the pharmaceutical industry are a dangerous thing, many consumers still need to be educated to the dangers in counterfeit fashion goods.

"There should at least be a recognition that counterfeiting goods is theft," Orchard says. "With luxury goods brands, the issue we have to focus on is where the money goes." She concurs with the Davenport Lyons' suggestion that highlighting the connection between faked goods, organised crime and even the funding of terrorist groups should be highlighted.

"What they've done is to formalise what we've been saying. I couldn't agree with the sentiment more strongly," says Dids Macdonald, chief executive of ACID (Anti Copying in Design), which has more than 1,000 member companies. "The real picture [behind counterfeiting] isone of child labour and organised crime. The culture has to be changed," she adds.  Combating the production of counterfeits goods can prove extremely difficult and expensive, not least because the counterfeiting industry replicates the business models of genuine brands, using a multinational production and distribution method.

"You need to dry up demand," says Orchard. This could be aided by education in schools and universities about the dangers posed by fake goods, she says, and also by making it a criminal offence to buy counterfeit goods, even unknowingly - a change that has the full support of Dids Macdonald at ACID.

The report suggests that traditional market stalls are the source of many of the fake products sold, an allegation strongly rejected by Joe Harrison, chief executive officer of the National Market Traders Federation, which represents more than 36,000 members. "I totally refute the claim that a prime source of these goods is markets," he says. "There are stringent rules around markets, and Trading Standards has a very close relationship with markets," Harrison says. The last decade has brought about another threat to brands, however. The internet, and specifically online auction sites, provide an enormous and difficult-to-police opportunity to distribute counterfeit products. "It's a hydra. Chop off one head and another one grows,"says Ruth Orchard. "The internet is the biggest challenge brands face."

"It's pretty easy online to find sites that will show you picturesof a Patek Philippe watch, and then sell you a replica for £20," says Thayne Forbes, joint managing director of consultancy Intangible Business. "You don't see these things on the mainstream high street, but it's important to remember that the internet is mainstream now."

He says that the improvement in quality of counterfeited goods is especially worrying, as it can make it seem as though the added cost of genuine products is entirely down to branding. "It's very dangerous for brands if people think they are being ripped off. But the manufacturing costs are only a small part of things. There's the research and development, design, promotion." When fake goods achieve a wide distribution they can also make genuine users of the copied brand decide they don't want to be associated with it any longer, says Forbes.

Louis Vuitton, Gucci and Burberry are the most commonly faked brands, according to the research.Representatives of Burberry declined to comment on the issue of counterfeiting, but the company concedes on its website that it remains a major issue. "We have a dedicated team operating internationallyto establish and protect our trademarks and other intellectual property rights. Where infringements are identified, we resolve these through a mixture of criminal and civil legal action and negotiate settlement," says the company. The group is understood to retain some staff just to monitor online auction sites, to intercept as many counterfeit goods as it can find.

Not only fashion groups are at risk. Technology company Canon estimates that some of its product lines are replaced by fakes for up to2 per cent of sales in the European market. These include "toners for copying machines, cartridges for facsimile and laser printers, ink cartridges for ink-jet printer, cameras, batteries, binoculars andcamcorders." Sony has warned that counterfeiters have released fakeversions of its memory card products.

Whether the increased acceptability of fake goods is down to an improvement in their quality, greater ease in their distribution, or the opening up of international trade, one thing appears certain: a brand image consists of a reputation for quality, service and innovation, and that increasingly is the one thing that separates famous brands from anonymous factories. Established companies must do all they can to protect themselves