Counterfeiting of goods is a huge problem for U.S. businesses. As more companies outsource production to foreign countries, they lose control of their designs, plans, processes, trademarks and copyrights. As I recently noted, China is clearly taking a leisurely approach to enforcing intellectual property protections—it should be no surprise that 66 percent of counterfeit goods seized are from there.
The scale of the problem is enormous
According to U.S. Customs and Border Protection and U.S. Immigration and Customers Enforcement, the number of seizures of counterfeit goods increased to nearly 20,000 during 2010 from 14,800 in 2009. Compare these statistics to 2001 when there were roughly 3,000 seizures. The MSRP of the goods seized in 2010 was $1.4 billion. More troubling is the fact that the average value of a seizure dropped from $17,600 to $9,425 from 2009 to 2010. This drop indicates that counterfeiters are changing their tactics to avoid detection and capture. Instead of importing large shipments of counterfeit goods they are opting to send high volumes of smaller packages via express mail and drop shopping. This most likely indicates that the aggregate value of counterfeit goods entering the U.S. is far higher.
Breakdown by category
Goods seized in 2010 fell into the following categories:
- Footwear: 24 percent
- Consumer electronics: 18 percent
- Apparel: 10 percent
- Handbags, wallets, and backpacks: 8 percent
- Optical media: 7 percent
- Computer and other hardware: 5 percent
- Everything else: 28 percent
The “everything else” category shows some rather troublesome trends as well. Consumer safety and critical technology seizures, included in this category, increased 50 percent. One of the fastest growing areas of counterfeit goods under critical technologies is counterfeit bearings which represent an important component in rotating and stationary machinery. Low quality or defective bearings can lead to serious accidents in consumer, commercial and industrial settings.
So how can you protect your company?
There are no easy answers and despite your best efforts it’s doubtful you’ll eliminate the problem. The goal is to protect critical intellectual property at all costs and minimize the value of counterfeit goods being sold:
1. Only outsource abroad if absolutely necessary. Companies like Apple can outsource production of their critical technology to Foxconn Technology Group precisely because of their scale and virtually unlimited resources. Small businesses don’t have this kind of leverage.
2. Fly to China. There are a number of Web-based intermediaries and sales agents that connect U.S. companies with foreign manufacturers. This is efficient, cost-effective and unfortunately dangerous. Before outsourcing hundreds of thousands or millions of dollars in potential business to an unknown third party you should buy a plane ticket and meet your vendor.
3. Monitor the web. Websites selling counterfeit goods to consumers in the U.S. have become a major source of sales for counterfeiters. Monitor search engine results for your company name and product brand names to determine if someone is undermining your business. As you find them, use the standard procedures in existence at reputable ISPs to have the website taken down. It’s like playing “whack-a-mole” but for right now the alternatives are limited.
4. Support appropriate legislation. The U.S. Intellectual Property Enforcement Coordinator has issued legislative recommendations to minimize counterfeiting. Lobby your representatives to take action on this issue.