Proactive Steps To Stop Counterfeit Goods
Intellectual property theft and the sale of counterfeit goods are not just problems in this country. They are problems all over the world.
The World Customs Organization estimates that counterfeiting goods - such as jewelry, clothes and accessories, electronics, pharmaceuticals, CDs and DVDs, auto parts, toys, software, and more - accounts for 5 percent to 7 percent of global merchandise trade.
“The theft of intellectual property has become as serious for society as the theft of physical property,” writes Maria Livanos Cattaui, Secretary General of the International Chamber of Commerce, in the International Herald Tribune. “Not only has the problem grown in size - now accounting for $600 billion per year in counterfeit goods worldwide - but also in the range of products and the geographic scope. … Intellectual property theft is an illegal activity whose perpetrators do not pay tax, do not respect labor laws, and do not care about product quality or safety.”
A growing trend is to sell counterfeit items on the Internet, especially through auction sites like eBay. It's not easy to recognize a potential fake item online, other than the low price. A Washington Post article reported that eBay admits it's hard to police a marketplace where 3.5 million new goods are up for auction each day, but the company does cooperate with manufacturers through its VeRO (Verified Rights Owner) program. The program allows member manufacturers and artists to file notices about any eBay listings they determine infringe on their copyright protection.
While there doesn't seem to be counterfeit water heaters or boilers on the market, the Gas Appliance Manufacturers Association decided to take a proactive approach in this area.
“Our interest lies in preventing counterfeiting from ever becoming a problem in this industry because safety is No. 1 for our industry,” says Mike Blevins, GAMA's director of Government Affairs and Communication. “If our products are counterfeited, there's a real safety issue. Combustion takes place in our products, so we don't want products installed that aren't made to the proper specifications, not made to function the way they are supposed to.”
National EffortsGAMA has teamed up with other organizations and companies to form the Coalition Against Counterfeiting and Piracy. One if its objectives is to facilitate the passage of H.R. 32, the Stop Counterfeiting in Manufactured Goods Bill, sponsored by Rep. Joe Knollenberg of Michigan's 9th District. GAMA has been actively lobbying Congress to pass the legislation.
Under current U.S. law, when a counterfeiter is convicted, the fake products are destroyed but not the equipment. Knollenberg's legislation would provide the courts discretion to order the destruction of the machinery, tooling and supplies used to produce counterfeit goods.
“In essence, this bill treats counterfeiters like drug dealers, where not only is the contraband product seized and destroyed, but the tools used to make the product are also seized and destroyed,” Blevins notes. “We think that's a very good idea.”
The bill also would close a loophole in the current law and prohibit trafficking in counterfeit labels, hang tags and packaging that bear a registered trademark that may be attached to goods. These counterfeit items can be attached to fake merchandise and give the appearance of the genuine product.
The bill passed the U.S. House on May 23 of this year, with broad bipartisan support. It was sent to the Senate and referred to the Senate Judiciary Committee but, as of press time, no other action has been taken. Blevins is hopeful that, given the solid bipartisan support the House bill had, the Senate also will pass the bill once it comes out of committee.
“This legislation will help put an end to the constant cycle of counterfeiting and dampen the fraud within our borders,” says Knollenberg after the House passage of his bill. “By being an example for the rest of the world to follow, we can strengthen our trade negotiations with other countries, curb international trade of fake manufactured goods, and control the dangerous side effects of fraud.”
Another advantage of the legislation is that it will help trade negotiations with other countries.
“Our trade representatives are negotiating treaties with our various trading partners, and we can't insist that they agree to any anti-counterfeiting provisions in those trade treaties if we don't have strong laws on the books here in the United States,” Blevins explains. “This legislation gives our trade negotiators the ability to insist that similar provisions be included in those trade treaties. We at GAMA think that's a step toward attacking the problem overseas by getting our trading partners to follow the same rules that we do as far as counterfeiting - seizing those goods, destroying them, and seizing the machinery to make the goods.”
International EffortsLast year, GAMA opened an office in Beijing, China, to help protect and promote the industry's interests. According to the Feb. 7, 2005, cover story in BusinessWeek, China accounts for almost two-thirds of all counterfeit and pirated goods worldwide. “Even some Chinese companies, stung by fakes themselves, are getting into the act [to crack down on counterfeiting],” reports the magazine. And the Chinese government is toughening its legal sanctions by lowering the threshold for criminal prosecution of counterfeiters - from $12,000 worth of goods on hand to $6,000 worth of goods of one brand, $3,600 for those with two or more.
“China has joined the World Trade Organization, and it wants to improve its economic relations with many countries,” Blevins says. “One of the ways it thinks it can do that is by cracking down on the counterfeiting that's going on within its borders.”
In March, GAMA co-sponsored a seminar on intellectual property rights issues, bringing together Chinese government officials and representatives of U.S. manufacturers, to examine the Chinese legal system and the techniques the Chinese government uses to capture counterfeiters, and help develop a strategy to put counterfeiters out of business.
PMI InitiativesThe Plumbing Manufacturers Institute also is working to “level the playing field” with imported plumbing materials and fixtures, but in a different manner. Instead of the legislative route, PMI is taking advantage of Executive Director Barbara Higgens' position on the Commerce Department's Industry Trade Advisory Center (ITAC) to influence national policy on “uniformly applying product performance standards to products sold in the United States.”
“PMI clearly recognizes the problem of 'illegal' products being sold in this country, usually at the retail level,” she says. “These products have circumvented the system and not gone through the third-party testing required. It is unfair how our members [and other plumbing manufacturers] go by the letter of the law when others do not. Our government needs to buckle down on what products are coming into this country.”
Since a building permit is not required when a consumer purchases a plumbing product from a retailer or DIY outlet, there is no enforcement of national performance and code standards, Higgens explains. PMI's manufacturing members spend, on average, more than $150,000 each year to test and certify their products. Industry leaders can incur annual costs in excess of $750,000. This testing and certification can take months or even a year to complete.
“Importers who do not comply with these standards/certification requirements and sell their products through retail outlets have an unfair advantage over domestic manufacturers who work diligently to obtain the required certifications,” she notes in a recent letter to the Department of Commerce.
Higgens tells us that often PMI is sent photographs of improperly marked plumbing materials by members. To keep members' anonymity, PMI takes the role of whistle-blower and reports such instances to the Federal Trade Commission or to the Commerce Department.
The real concern is new technology, says Steve Tokarz, senior director of product development and engineering at BrassCraft. “Manufacturers want to know how their new innovations will be protected in the future.”
Tokarz serves on PMI's Fair Trade Committee, and also is a member of GAMA. He says the proactive approaches undertaken by each organization work because of their membership makeup. GAMA is a much larger organization with many divisions and many more targets for counterfeiters. PMI's membership is not as broad, and while several members have had problems with counterfeit products in the past, there is less risk for the group as a whole.
“We [PMI] can work with Barb's ties to ITAC to identify things we can do,” he notes. This includes taking a “collaborative approach” with China to establish effective standards and enforcement solutions that are viable for both countries.