It's become known as "the Watson's Flea Market Raid."
It began at the peak of the sales day, when local police and
corporate officials wove through the crowd of bargain-hunters like
buyers with badges. They inspected the merchandise, comparing serial
numbers on the products with computerized lists from the
manufacturers - and confiscated carton after carton of fake Red
Monkey jeans and knockoff Timberland boots.
Allegations of selling stuff that purported to be something it
wasn't landed 20 people in handcuffs that day, on charges of
breaking state and federal licensing and trademark laws.
"It's good that they get rid of people who undercut ...
legitimate dealers," says Catherine Scott, a necklace-maker who
witnessed the raid two weeks ago. "But the flip side is there are
fewer customers, because the knockoffs are what drew people to the
Traditionally, the counterfeit-goods trade has fallen under the
purview of federal authorities, but that's changing. At the Watson's
raid and in other crackdowns, local and state law officers are
taking the initiative, in part because the counterfeit industry has
become so large - worth $200 billion a year to US corporations -
that crime-fighting backup is needed.
Intellectual property rights seizures in the US rose 72 percent
between 2005 and 2006, and the value of seized apparel rose from $8
million to $10 million during that time. Seizures of footwear were
up by $3.6 million last year, with 89 percent of those goods coming
from China, according to the US Customs and Border Protection
"We're seeing an increase in seizures and an increase in
enforcement, but also in the volume of goods coming through," says
Travis Johnson, general counsel for the International Anti-
Counterfeiting Coalition (IACC), an industry group based in New
Everyone agrees that trade in "counterfeit chic" has exploded
over the past five years, expanding to include many more products
and flooding the US market. Not everyone is united, though, on what
to do about it. Manufacturers want an even more aggressive attack on
patent and copyright violators, citing billions of dollars in lost
sales. Others, however, suggest such crackdowns can go too far,
impeding free enterprise, crimping artistic license, and even
devoting too many taxpayer dollars to protecting the market position
Many economists trace global counterfeiting from the open-air
markets of Shanghai to places like Watson's Flea Market on the
fringe of the Tar Heel capital, a sprawling, dusty yard that on
weekends becomes a sort of low-income Mall of America. Some 15,000
people pack in to browse what state officials say is $1 million in
counterfeit designer jeans and Kate Spade handbags.
The Watson's raid was the biggest in a series of flea-market
busts organized by North Carolina's secretary of State, Elaine
Marshall. Infractions of trademark and intellectual- property law
caught the state's attention a few years ago, when licensed NASCAR
vendors complained that fake Jimmie Johnson and Matt Kenseth hats
and gear were being sold at races. Since then, officials have cited
concern about public health and public safety, as counterfeiters
expanded into appliances and other electrical products and even baby
formula and pharmaceuticals.
What's more, counterfeiting undercuts states' tax revenues,
because counterfeiters don't pay sales taxes on their illicit gains.
In a 2004 report, New York State's comptroller said the state lost
about $1 billion in tax revenues from counterfeit goods. Such
reports are helping to drive enforcement efforts in North Carolina.
"Global competition is hard on us, and counterfeiting is another
hardship. Legitimate businesses with licenses are saying, 'I'm
paying taxes and following the rules, and I'm getting ripped off,' "
says George Jeter, spokesman for Secretary of State Marshall. …