Breaking The Counterfeit Cycle

A first hand experience

By David S. Pearl, II

It all started back in the late 1990s. Uniweld Products, Inc. was building on its reputation in the Middle East, realizing steady growth in sales. We noticed that sales for a particular group of products began to decline inexplicably in one particular area of the region. Investigating the reasons for the decline in sales was difficult, until a loyal distributor questioned our loyalty. He wanted to know why we were selling our product through a different distributor in his territory. We weren’t.

With our distributor’s help, our regional sales manager acting as a modern day Sherlock Holmes tracked down the secondary sales source who had been a customer, and in turn, the importer. We filed a lawsuit against the importer and former customer. Now, more than five years later, we are still embroiled in an expensive, prolonged litigation. As the lawyers do battle, there is no end in sight.

While the customs and legal systems are quite different in the Middle East, the judges possess significant power. In one instance, the judge required the testimony of a local bank manager. He immediately summoned the banker and within one hour had his testimony. With that testimony, the judge confiscated the accused counterfeiters’ passports. Based on the judge’s determination of deceit, the accused were ordered to remain within the local jurisdiction.

The counterfeits were remarkable. The counterfeit was impossible to detect unless a visual side-by-side comparison was made by someone familiar with our product. The counterfeiter used our packaging, with our name on it, and even had the audacity to stamp the American Flag on the box. They had NO shame. The instruction sheets were exact duplicates of instruction sheets written by our company. They even instructed customers to contact us if there were warranty issues. The counterfeiter abused our registered trademarks, which were registered in the country where the counterfeits were sold and put our name on everything. The counterfeit product quality was poor, and as a result we have lost millions of dollars in sales.

Catching the Culprit
You can take steps to protect your company. First and foremost, keep a close eye on your sales activity. If you see an unexplained drop in sales, investigate the cause as quickly as possible. If a counterfeiter is involved, it is important to locate the sellers of the counterfeit product and to utilize an undercover agent to purchase product samples. With purchased samples and a receipt for the purchase, a local attorney can issue a Cease and Desist letter, placing the seller on notice. In most circumstances, alerting local authorities of the situation will allow them to issue an immediate Search Warrant in order to uncover counterfeit products, should they appear again. Once warned, the counterfeiters can be arrested and prosecuted quickly.

Sometimes counterfeit product can be identified by the packaging. Look very closely at the corrugated materials. In our case, the Chinese counterfeiter used a very different style of corrugated packaging from the one we use. In many cases, the counterfeiter may be lazy and will copy your product’s packaging, just as you printed it. However, if you utilize four-color process in your printing, differences can be detected immediately.

Catching counterfeiters is a very difficult undertaking, but if you are persistent, it can be done. In our case, the counterfeiting was done in a third country, China, and then sold to customers in the Middle East. The counterfeiter was ruthless. Sadly, unless the counterfeiters are stopped, hundreds of thousands of U.S. and Canadian jobs can be unknowingly exported.

No manufacturer can afford to turn a blind eye on the potential of copycat products. It’s a fact of modern day life: If you manufacture a good product, someone, somewhere, may be willing to counterfeit it.