Cannes Fake Festival

Or rather, an anti-fake festival. From DFNI Online, news from Cannes that the Tax Free World Association (TFWA) played host to the signing of the Declaration of Cannes. According to this article, the Declaration of Cannes is an agreement between nine countries that will help fight the global $700 billion counterfeit luxury goods industry.

Up in Smoke

Counterfeit cigarettes seized in a raid in Felixstowe (UK). The cigarettes were hidden in a consignment of fireworks.

Paying the Piper

We recently commented on a Japanese poll showing a majority of Japanese citizens condoning the purchase of counterfeit goods. Anecdotally, we have further evidence of this worldwide trend in the American Presidential race.

The Authentics Foundation will studiously avoid the appearance of favoritism or partisanship during this American presidential election season. Counterfeiting is, after all, a problem that transcends party loyalties, and we are hopeful that both major tickets would use the levers of American Federal Government power to fight counterfeiting. But given that, we would be remiss if we did not comment on this recent photo of Sarah Palin's daughter Piper carrying a fake Louis Vuitton bag.

We do not know, of course, who purchased the bag or if the Palins were aware that Piper's handbag was counterfeit. And even so, a huge swath of Americans do not realize how profits from counterfeit goods can fund some truly undesirable activities such as child labor or criminal enterprises. The Palins also have a lot on their minds these days. Nevertheless, that the daughter of a Vice Presidential candidate can casually tote a fake handbag through a minefield of media and image handlers illustrates how deeply ingrained the consumption of counterfeit goods is, even in faraway Alaska. Highly discouraging stuff.

Fried Apples

I use a MacBook Pro to manage this blog, and it is possibly my most cherished possession. When I read stories like this showing fake power adapters that could possibly fry the motherboard of my baby, my blood runs cold. I suspect most other Mac owners would react similarly. Given the stakes, how anyone could take a chance on a "cheaper" adapter is mystifying.

Japanese Dissonance

Discouraging news from Japan, where a poll found that 52% of the people surveyed condoned the purchase of counterfeit goods. Even more discouraging is that the Japanese government has been attempting to raise the public's awareness concerning the dangers and drawbacks of counterfeit goods, and that the number of Japanese condoning counterfeiting has risen despite this campaign.

That these attitudes occur in Japan is even more disheartening. Japan is resource poor but highly educated and wealthy in large part from its innovations and intellectual property.

Smoking Dragon, Royal Charm, and the PRO-IP Act

What do you get when you combine four FBI Agents, 62 Chinese smugglers, and a billion counterfeit cigarettes? Besides the plot of a Hollywood potboiler, you get the tale of an intricate counterfeit cigarette bust that spanned several continents, a slew of agents, six years, 1,000 meetings, and enough fake smokes to supply every American man, woman and child with more than a few carcinogenic puffs.

Writing for the Center for Public Integrity, Te-Ping Chen brings her readers into the murky world of counterfeit cigarettes. Through bribery and sheer volume, Chinese cigarette counterfeiters overwhelm the inspection infrastructure in China and the United States. The numbers are startling. A shipping container of one million counterfeit cigarettes can cost about $120,000 to make, but can sell for as much as $2 million in the United States. A bribe of $20,000 can ensure safe passage out of China, and then it becomes a game of chance stacked in favor of the counterfeiter. Cargo containers are only inspected 22% of the time on average in the United States. While seizures are considered a cost of doing business for these smugglers, a run of bad luck seizures tempted the counterfeiters in the story to attempt to purchase protection from the Italian Mafia. Unfortunately for the villains, the Mafia fixers turned out to be FBI agents.

Te-Ping Chen does an excellent job of detailing the intricate nature of the smuggling world. Through the well-worn trade paths of cigarettes also comes counterfeit money, fake pharmaceuticals, and weapons. Notorious bad actors like the North Korean government profit greatly from the criminality. No doubt, a weapon of mass destruction could conceivably slip through safeguards using these same trade routes.

And what does this have to do with PRO-IP Act? Plenty, in fact. The PRO-IP Act goes to the root of the counterfeiting problem by increasing the price of doing business in counterfeits. Doubling the fines per counterfeit violation is a good start. Increasing diplomatic resources will also help, as it could enhance cooperation with law enforcement at the point of origin. And with counterfeit cigarettes often unhealthier than the real thing, criminal penalties for selling counterfeit items that do bodily harm could possibly ensure long jail sentences for the counterfeiters of cigarettes and other types of potentially harmful contraband.

This is an excellent article - entertaining, informative and even poignant in parts. Towards the end of the tale, two of the counterfeiters at the center of the investigation presented their undercover FBI Agent with two Rolexes as a wedding present for the mock gangster. "These aren't counterfeit, are they?" asked the agent. "No," replied the suspect, "these are the real deal."

You'll think Goodfellas, and you won't be far off - or disappointed. Read the whole thing.

Signs of the Times

Underwriters Laboratories, the guardian of global product compliance, has issued a press release warning customers that signs made by a company called "Clover Signs" bears the UL mark without having been approved.

Watch This!

From the Wall Street Journal, a watch that cannot be counterfeited. Or at least, not yet.

The watch is made by Vacheron Constantin, the venerable Swiss watch maker that first started making watches in 1755. This old school outfit employs cutting edge technology and clever technique to fight counterfeiting. Using "layers of invisible UV marking, laser perforations of some watch parts, special high-security inks, and other measures used to secure passports and currencies like the euro and Swiss franc," Vacheron Constantin has designed the "Quai de l'Ile" watch it claims is "impossible to counterfeit." If you hold the Quai de l'Ile under ultraviolet light, a tiny image of the sun appears between the 1 and 2 on the watchdial.

The article sounds a warning - counterfeiters have become increasingly capable themselves, so Vacheon Constantin's braggadocio may be misplaced. Nevertheless, anti-counterfeiting techniques like these can keep the brand owners one step ahead of the counterfeiters, and that, even if only temporary, is a good thing.

Read the whole thing.

PRO-IP Act

President Bush signed the Prioritizing Resources and Organization for Intellectual Property Act (a.k.a., the PRO-IP Act) earlier this week.

You can read about it here and here. The full text of the PRO-IP Act can be found here.

The PRO-IP Act establishes increased penalties for counterfeiting violations and strengthens America's ability to combat counterfeiting, including by the following means:

• Treble damages in civil actions and a doubling of criminal fines.
• Strengthened penalties against sellers of counterfeit goods that do physical harm.
• Increased seizure ability by law enforcement in copyright cases (normally, pirated media rather than counterfeited manufactured goods).
• Increased diplomatic resources and attention to the problem of counterfeiting and piracy by dedicating ten "Intellectual Property Attaches" to staff American embassies to promote the protection of intellectual property as a formal component of international relations.
• $25 million to help local law enforcement develop anti-counterfeiting law enforcement techniques.

There has been a large amount of online commentary (also here and elsewhere) about the PRO-IP Act and its impact, but the chatter is mostly concerned with the effects of the law on online piracy of music and entertainment.

In addition, there has been some debate on whether the full intent of the law will be carried out. For example, Counterfeit Chic's Susan Scafidi writes that the new Intellectual Property Czar will likely be appointed by the next President. Unless there is a late surge by Senator McCain, Senator Obama is likely to be elected the next President. Scafidi believes that he could then appoint Larry Lessig as the first IP Czar to enforce provisions of the PRO-IP Act. While Lessig advocates a radical loosening of enforcement of copyright, his primary focus is on the intangible world of the internet rather than physical counterfeiting. Lessig has shown relatively little interest in undermining the real world regime, and as such, I must respectfully dissent from Professor Scafidi's analysis (at least in terms of "real world" counterfeit goods).

Wired's Threat Level Blog is polling its readers on who should be the next Intellectual Property Czar here.

And while $25 million dollars sounds impressive, the actual application of the monies (spread over the entirety of the United States) may well be insufficient for the task at hand.

While attention and controversy swirl around the copyright/media portion of the PRO-IP Act, there is little doubt and debate that for the real world manufactured counterfeits, the increased enforcement is very welcome and a very positive step in the right direction.

Don't Brake for Fakes

From SkyNews, a spotlight on fake auto parts. Imagine trying to make a sudden emergency stop with fake brake pads made from compressed grass clippings and wood chips. Really, could there be anything more dangerous?

Fake Grass

If you click on the image to the right, you will read an excerpt of an interview with Phillip Jennings, founder of Phillip Jennings Turf Farm. Mr. Jennings has successfully developed golf turf for areas normally considered too dry or inhospitable for normal grass. When asked what his biggest competition is, he says, "Piracy."

Milking Profits from Fakes

Tainted milk from China has sickened more than 53,000 children while killing 12. While a food safety issue for sure, the recent tainted milk scare is likewise a counterfeit issue. These evil counterfeiters dilute the milk and add industrial chemical melamine to cover their tracks. Milk tainted with melamine masks dilution by tricking protein detectors into detecting the right amount of protein in the milk. Unfortunately, ingestion of melamine causes kidney failure in babies. Parents think they are buying "real milk" for their children, but are instead buying counterfeit milk.

As with many other industries, milk is a good where counterfeiters flourish due to the large payoff and small risks of detection and punishment. Bee Wilson explains in this New York Times Op-Ed piece that the milk tampering problem today in China is in some ways an echo of 19th century New York City. Lack of refrigeration and high demand in densely urban New York gave rise to temptations to dilute milk and cover up the tampering with flour - or worse. The deaths from bad milk sparked a movement that ultimately led to government reform and the establishment of oversight agencies. The American food supply chain, while not perfect, is a heck of a lot better today because of the reforms.

Many of the same conditions occur in China today. Chinese regulatory agencies are still nascent, and are often easily bought off. Children are dying. Popular rage is simmering. But perhaps like 19th century New York, the recent scandals could spark reforms necessary to safeguard the food supply chain from counterfeiters.

Excellent and fascinating piece. Read the whole thing.