President’s notes: The IACC (International Anti-Counterfeiting Coalition) is an organization dedicated to fighting counterfeit goods. This article courtesy of Ambrose Clancy, Long Island Business News.
A couple of years ago a building inspector in North Hempstead was checking out a warehouse when he noticed something was wrong with the back gates. As he walked in to inform the owner about the problem, several Asian women bolted past him, piled into a van and sped off.
Photo above. Fake goods. Bad quality and very bad for the economy. Why? Counterfeiters do not pay taxes, but you do.
Inside were boxes of Timberland boots. Well, the label said Timberland. Actually they were cheap knockoffs manufactured in China and smuggled into the Port of New York/New Jersey.
“They were moving thousands and thousands of boots out of there,” said Detective Sgt. Thomas Riley of the Nassau County Police Department.
Trademark counterfeiting is ” where a brand name is essentially stolen and slapped on a cheaper and vastly inferior copy”. This is big business. On Long Island, fakes are sold at nearly every flea market, in carwashes, delis, mom-and-pop stores and at kiosks in the malls. They change hands at shopping parties in people’s homes and from the trunks of cars by so-called “bag ladies.” These are not homeless women but crooks hawking what on first glance looks like a Louis Vuitton bag for a quarter of the price, but in reality is a inferior product, doomed to fall apart in six months.
Figures on the size of the counterfeit market are murky. More than $600 billion has been mentioned as the amount of cash generated by worldwide counterfeiting of apparel, luggage, handbags, sunglasses and other designer goods.
But Susan Scafidi, a law professor at Fordham University and an expert in intellectual property law, said all figures are suspect, since counterfeiters don’t file with the Internal Revenue Service.
“The $600 billion is a vague number taken from estimates that something like 7 percent of world trade is counterfeit,” said Scafidi, who also runs the up-to-the minute blog Counterfeit Chic, tracking the fashion industry’s battle against fakes.
Bob Barchiesi, president of the International Anti-Counterfeiting Coalition, had no problem with the $600 billion global figure, adding that the total for the United States is a quarter of a trillion dollars. Formed in 1979, the IACC works with investigators and law firms, lobbies politicians and gets the word out.
“This is a serious problem and not getting any better,” said Barchiesi.
Photo below. Counterfeits are a world wide problem, including fake baby formula. Hong Kong’s two biggest grocery chains removed all milk made by the leading Chinese dairy after traces of a chemical that killed and sickened babies was found in products in mainland China. (AP Photo/Kin Cheung)
Above: Logo Of Product Being Removed From Chinese Stores
The criminal enterprises began in the late 1960s when fashion designers figured out that copyright and patent laws don’t protect designs, Scafidi said. As a response, designers placed visible logos on garments and bags, in part because the logos were copyright protected, even if the designs were not.
But then the counterfeiters moved in, copying those logos in an effort to trick buyers into believing their wares were the real thing.
Fifteen years ago when China became a manufacturing powerhouse, the illegal trade boomed, said Barchiesi, who estimated that 85 percent of trademark counterfeiting comes from China.
The goods are moved in shipping containers, mislabeled from electrical equipment to actual clothing, Riley said. Some clever importers recently moved winter coats with a Chinese label and when the New York contact picked them up, the Chinese labels were peeled off to reveal a North Face logo, he added.
The classic crime success story is very low risk and very high reward. Trademark counterfeiting is all of that, said Barchiesi, adding that the illegal trade is safer and more profitable than importing heroin.
“The low risk is the judicial system doesn’t levy out significant penalties for this type of crime,” he said.
Trademark counterfeiting law in New York has two degrees of felony offense, with a second degree charged if more than $1,000 worth of merchandise is sold, according to Deputy Inspector James Burke, commanding officer of the Suffolk County Police Department’s District Attorney Squad.
“But the real rub is that a first-degree offense is only when $100,000 worth of illegal goods are sold,” Burke said. Stay below $100,000 and if you’re convicted, you can expect one to four years in jail. Cross the line and it’s five to 15.
Another low-risk factor for criminals is diminishing resources in law enforcement, Burke said. There is no trademark counterfeiting squad in any Long Island department. “Violent crime trumps trademark counterfeiting every time,” Burke added.
Law enforcement mainly works with companies, trade associations and private investigators to fight the fakes, he said.
Investigator Andrew Oberfeldt has been ferreting out counterfeiters on Long Island since 1991 for the Manhattan firm Abacus Security & Investigation. He works mainly on tips from jealous competitors.
“Informants are motivated by greed and envy,” Oberfeldt said.
He’s seen fake goods in beauty parlors, gas stations, small clothing and shoe stores. Bag ladies go to Manhattan’s Chinatown twice a month and load up on bogus handbags, he said. “They drive around the Island with stuff in their trunk and sell it where people work,” he added. If they know the receptionist at a doctor’s office, for example, they will drop by and hustle the bags in the waiting room.
It has become so commonplace that many people don’t consider it a crime. Oberfeldt had a friend in the Nassau County Police Department who was approached by a secretary at headquarters offering to sell designer clothes. He said, “Sure, lead the way,” the investigator said. “Out in the parking lot, he took one look at the stuff and locked her up.”
To those who say trademark counterfeiting is a victimless crime, all experts beg to differ. Not only do legitimate businesses suffer, but taxes are never paid on the goods sold. (Estimates on annual unpaid taxes approach $1 billion.)
Buying these goods supports violent criminals. Buying a knockoff pair of designer jeans also supports Third World sweatshops, where children labor for slave wages in appalling conditions.
Going for an illegal bargain can also be physically dangerous, Sgt. Riley said, referring to the brisk trade in fake electronics products.
“Buy a replacement cord for your coffee maker and if it’s counterfeit you’ve got a fire hazard,” he said.
Photo above. Fake goods can hurt you. Here is an exploding counterfeit battery from a hand held video device. Cell phones are also at risk.
Another hazard could be related to knockoff Major League Baseball items. Jerseys and caps for adults and children are often processed with toxic chemicals and contain no flame-resistant elements.
According to MLB spokesman Matt Bourne, in the past five years organized baseball has seized more than four million pieces of counterfeit goods.
On a slow morning last week at the mammoth indoor Attitas Flea market in Sayville, Mets home jerseys were going for $35, more than half off the MLB price.
Genuine MLB merchandise is identified by a hologram attached either to the product or to a hang tag. Some jerseys at Attitas had the hologram, most did not. When someone brought the lack of holograms to the merchant’s attention, he said, “All I know is these are official.”
He then wasn’t interested in continuing the conversation.
Photo above. Fake and real hologram. Once a counterfeiter targets a product, a fake hologram can be made within 24 hours.
A crime related to counterfeiting trademarked goods is music piracy, which is swamping the recorded music industry. The Recording Industry Association of America said pirates cost the music industry $12.5 billion annually and that 71,000 jobs have been lost over the past five years. Thieves have also cost the government $422 million in unpaid taxes.
Although it’s a worldwide problem, there are homegrown illegal manufacturers as well, mostly involved in pirating music with CD “burner factories” set up in office parks on Long Island and funded in some instances by organized crime, said Bob Barchiesi, president of the International Anti-Counterfeiting Coalition.
The music pirates have made the music makers change strategies. Since 2003, music companies sued 35,000 individuals for copying music online. Last December, however, they waved the white flag.
This was a combination of ineffectiveness and disastrous public relations. The practice of suing teenagers and single moms came across as bullying.
Instead, the RIAA asked for help from the Internet service providers to stop music piracy and a preliminary agreement has been reached. When file sharing is discovered, RIAA will inform the provider and the provider will then tell the offending customer to stop. If the customer is unwilling to do so, the provider can then cut off access to the offender.