Counterfeit Goods Pose Real Threat; Counterfeit Goods Result in Loss of Jobs as Well as Revenue. but of Even Greater Concern Is the Way This Global Black Market Is Funding Terrorist and Criminal Organizations

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Byline: Timothy W. Maier, INSIGHT

Is it real or is it fake? These days it's hard to tell because counterfeiters are becoming increasingly sophisticated and daring as they have moved their wares from sidewalk pushcarts to shopping malls to prey upon the unsuspecting. If you think you got a "steal" on that Coach purse or Rolex watch, look again. It is you who may have been ripped off.

FBI and customs and border agents estimate sales of counterfeit goods are lining the pockets of criminal organizations to the tune of about $500 billion in sales per year. By midyear for fiscal 2003, the Department of Homeland Security already had reported 3,117 seizures of counterfeit branded goods including cigarettes, books, apparel, handbags, toys and electronic games with an estimated street value of about $38 million up 42 percent from last year. For the fiscal 2003 midyear report the top five offending countries of origin are the People's Republic of China ($26.7 million), Hong Kong ($1.9 million), Mexico ($1.6 million), Korea ($1.4 million) and Malaysia ($1 million).

The International AntiCounterfeiting Coalition (IACC) estimates that counterfeiting results in more than $200 billion a year in lost jobs, taxes and sales. Fortune 500 companies spend an average of between $2 million and $4 million a year each to fight counterfeiters. The problem is so bad in Asia that the Bangkok law firm of Tilleke & Gibbins built a museum of counterfeit goods in 1989 in Thailand. Today, it has a collection of more than 20 categories of such goods, including shoes, perfumes, watches, household appliances, stereos, car and machine parts, decorative ornaments, foods, drugs, alcohol, chemical products and stationery.

"We need to keep in mind that counterfeiters are business people," says IACC President Tim Trainer, whose organization is an association of more than 150 companies fighting product counterfeiting. "Their sole objective is to make money. They don't care about laws and rules. We are talking about people whose sole mission is to profit off the back of successful companies that have successful products. There is no product exempt from counterfeiting sunglasses, shirts, purses. But counterfeiting has impacted home appliances, electrical products and [parts] for cars."

In fact, in a recent U.S. case, a customer who took his car in for a break job found out the hard way that his brake pads were made of sawdust. And product fraud is spreading worldwide. For example, there was a mass poisoning in Armenia in 2001 when fake Stolichnaya and Kristall vodka poured into the market. Two people were blinded after drinking the poison.

The global counterfeit market accounts for 9 percent of world trade and likely will double in the next two years, according to Carratu

International PLC, a leading investigator of abuses of intellectual property. These London-based investigators repeatedly have warned that the innocent purchases from Internet sites and street markets of counterfeit products ranging from knockoffs of Nike and Tommy Hilfiger merchandise to electrical parts are funding terrorist and criminal organizations, including al-Qaeda, the Mafia and the Irish Republican Army. In a statement released to the press earlier this year Carratu International also claimed to have unearthed links between counterfeiting and Hezbollah, Basque ETA, Chinese Triad gangs, the Japanese Yakuza crime syndicate, the Russian Mafia and the drug cartels.

"The bogusly branded clothes people are buying off the Internet might be helping to prop up terrorist or criminal gangs," reports Spencer Burgess, director of Carratu International's Intellectual Property Investigations division. "Every major terrorist group in the world is into counterfeiting one way or another. It is a fairly straightforward way to raise funds. It does not have to involve the sale of anything sinister. It's easy to make money from something as bland as a T-shirt. …