This week we came across several articles and Facebook posts from our followers about online advertisements promoting counterfeit products. The problem with these advertisements, beside the fact that they promote counterfeits, is that they are not monitored or regulated. A recent article cited Rosetta Stone, the language instruction software company, demanding that Google be held liable for presenting paid search ads that link to counterfeit sites. Rosetta Stone has had problems with those specific ads using their trademarked name “Rosetta Stone” and linking to a site selling counterfeit software.

Below is an example of an ad recently shared with us by one of our Facebook fans.  When the advertisement is clicked, it brings you to the obviously fake site selling discount designer products.

The main question is, should search engines like Google be responsible and held liable for paid search ads on their site? We asked our Facebook and Twitter fans:

• “If you're not part of the solution then you're part of the problem. Perpetuating the advert of such sites = enabling the practice"
• “They need to check out everyone they allow to advertise. Called quality control. Everyone pitch in!”
• “Tricky.”
• “Yes, Google and Facebook should both be held liable.”

Many brands are struggling with counterfeiters using their trademarked brand name or logo in their online advertisements to lure in consumers. This is a trademark infringement and something companies like Rosetta Stone are taking up with the government. Senator Judiciary Chairman Patrick Leahy prepares to reintroduce the Combating Online Infringements and Counterfeits Act and I am sure many brands will be interested in amending that bill to include liability of search engines. 

What are your thoughts on this issue?

Most people are aware of the criminal acts associated with the sales of counterfeit goods, while others are still skeptical. A recent arrest is a worthy example of how counterfeit goods are linked to terrorism. (See the full article here).

In Philadelphia a man was charged for selling counterfeits in order to raise funds for the terrorist group Hezballah. More specifically, Hezballah is a Lebonese militant group. The suspect sold counterfeits in the South Jersey and Philadelphia area of the U.S. and was recently extradited back for trial from South America. He has been charged with 28 offenses, including conspiring to support Hezballah with proceeds from the sale of counterfeit goods and cash, stolen merchandise and fraudulent passports. He was arrested in Paraguay last June.

There are thousands of operations such as this one happening across the globe. Criminals see counterfeiting as a low risk, high profit business to fund other crimes. In many cases, the outcome is to support terrorist acts. Evidence has shown that Al Queda training manuals suggest using the fake trade as a form of bringing in revenue to fund operations. All we ask is that you think about what you are contributing to the next time you buy a counterfeit product.

In honor of Valentine’s Day, U.S Immigration and Customs Enforcement led a huge online seizure of domain names selling counterfeit accessories. The customs agents previously bought counterfeit bracelets, earrings, handbags, rings, sunglasses, wallets and watched from sites and later determined that many of the sites sold fakes. Titled appropriately as Operation Broken Hearted, it was meant to protect consumers from counterfeit Valentine’s Day products. As a result of the investigation, 18 websites’ domain names were seized without any previous warning in order to save valentines from buying fakes for their sweethearts. 

"Even on Valentine's day, American business is under assault from counterfeiters and pirates," said ICE Director John Morton. "These counterfeits represent a triple threat by delivering shoddy, and sometimes dangerous, goods into commerce, by funding organized criminal activities and by denying Americans good-paying jobs. HSI and our partners at the IPR Center will continue to work together to keep counterfeit products off our streets."

Operation Broken Hearted was the fourth phase of Operation In Our Sites, an ongoing investigation that started last year. We look forward to seeing the outcome of ICE’s undercover investigations.

A recent raid in Los Angeles this month by the L.A. Port Police led to a seizure of over $10 million in Apple Inc. products. Through deep investigation, authorities unveiled the sophisticated warehouse operation. Chief of the L.A. Port Police force told the Los Angeles Times this week, "This was a well-funded operation, and the counterfeits looked very authentic.” The goods were shipped from Asia and arrived to the United States in parts then assembled here and labeled appropriately.

(Image taken from LA Times article)

The Los Angeles Times stated that the Port of Los Angeles and the neighboring Port of Long Beach make up the nation's busiest harbor for trade with Asia. This is where law enforcement works the hardest to stop counterfeits from entering the country. This particular investigation not only involved L.A. Port Police, but the Department of Homeland Security and Border Enforcement Security Task Force as well. We have said many times that counterfeiters are getting smarter at their criminal business. It is taking multiple government agencies to crack down on more sophisticated, well thought out operations such as this one.

Two restaurateurs in New York City, Tom and Anthony Martignetti announced this month that they are opening a new restaurant on Canal Street. The interesting thing about this new, unnamed restaurant is that it is set to be located right in the middle of Canal Street’s “Counterfeit Triangle” district. A few years ago, this group of storefronts was a hub for all things counterfeit, until a major raid by law enforcement officials in 2008. The estimated value of the raid was over $1 million. According to a NY Times article, the stores were required “to replace the counterfeit vendors with legitimate businesses and pay a substantial fine to the city before the buildings can be reopened.”  Last year the property owners agreed to pay the city for the right to reopen them.

(Image taken from NY Times article)

The community of downtown residents fully supports the addition of such a positive establishment. The new restaurant is certainly contributing to an urban renewal of Canal Street. From a street full of 32 criminally run bodegas, Canal Street is starting to perk up. With the “Counterfeit Triangle” gone, the destroyed brick storefronts are slowly looking more optimistic. Criminal activity has decreased making the neighborhood much safer and allowing businesses to move in that can actually contribute to the economy instead of take away jobs and taxes from New York City. We are excited to see the changes Canal Street will endure over the next few years as it tries to rebuild and become more appealing to the community.

MarkMonitor, the global leader in enterprise brand protection, conducted a study in 2010 of 22 brands with respect to online counterfeiting and piracy. The products varied across many categories including prescription drugs, luxury goods, music, films and athletic gear. The results of the study were shocking to say the least. The MarkMonitor study revealed that digital piracy and counterfeit goods websites generate more than 53 billion visits per year. Even more staggering, sites that sold counterfeit goods, including prescription drugs and luxury goods, generate more than 92 million visits per year.

Why aren’t these sites shut down? According to the study, 67 percent of sites suspected of hosting pirated content and 73 percent of sites categorized as “counterfeit” were hosted in North America or Western Europe, BUT they operate across multiple national boundaries. This makes it harder for law enforcement to shut the websites down, but it is not impossible.

Our initial thoughts are, do music and film lovers who visit these sites know that they are illegally downloading music? Do shoppers know they are buying a counterfeit product? It is hard to know for sure, but what this study does tell us is that these websites have extremely high volumes of traffic. MarkMonitor even estimates the worldwide economic impact of online piracy and counterfeiting is $200 billion annually. This is why we work hard to educate consumers about piracy and counterfeiting. Not only do we want to protect consumers, we also want to make consumers aware that supporting these sites hinder economic growth as well as the job market.

Everyone knows that you can find fakes on Canal Street in New York City, but more recently a surge of counterfeits have been reported in flea markets across the country. It is nothing new to anti-counterfeiting organizations and law enforcement that you can find counterfeit clothes, beauty products or other accessories at these markets. With counterfeits becoming more predominant at flea market vendors, authorities have launched a nationwide crackdown on those that sell fakes.

According to a recent USA Today article, in December alone, customs agents seized $250,000 worth of items at a swap-meet in New Orleans, $350,000 worth of goods at a flea market in Las Vegas, and $150,000 worth of merchandise at another flea market in Solebury, PA.

(Photo of counterfeit goods taken from USA Today article)

There are angry shoppers who report counterfeit items once they realize they have been duped, but many flea market attendees don’t care that they are buying counterfeits. During the Philly raid at the Rice Market, one shopper told The Intelligencer, "Most people know, but who cares?" Another woman was quoted saying, “I think Homeland Security can find better things to do."

Counterfeiting is not a victimless crime. We talk a lot about child labor and sweatshops that sew the counterfeit clothes and handbags or copy the counterfeit CDs and DVDs, but consumers can be victims as well. Fake beauty products contain chemicals that don’t abide by health and safety standards. Faux fragrance often contain bacteria, urine and antifreeze. Counterfeit clothes can even be made with toxic dyes. All of these pose a serious risk to a shopper’s health. Think about the friends and family you could be harming if you give these products to someone as a gift.

The next time you are at a flea market and you spot a counterfeit, think about what your purchase is funding. Above all, if you spot a fake, report it to local law enforcement authorities.

Although many of you know that China is a major source of counterfeit goods, Korea is also a huge manufacturer of fake products. Known for their skill in creating perfect imitations of luxury designer products, Korea is also becoming known as the creators of “super fakes.”  Widely available in Korea, these “super fakes” are boldly near designer boutiques as well as copycat websites.  There is little wonder why Korea’s “super fakes” are becoming a hot item.

An article published in the Korea Times last month addressed growing a stereotype.  In Korea some feel that purchasing counterfeits could actually bring free advertising for luxury brands and show the level of the brand’s success. Some may feel that when a product is counterfeited they have “made it” so to speak, but in reality, purchasing a counterfeit does absolutely nothing to help the brand, or the economy for that matter.

This year, the Intellectual Property Centre of the European Union Chamber of Commerce in Korea (EUCCK IP Centre) developed and published a series of anti-counterfeiting materials to distribute throughout Korea. This awareness campaign was put into practice to stop the stereotypes about counterfeiting, show Koreans that it is a punishable crime and make the general public aware of the criminal acts they are supporting when they purchase a fake.

Apparently anyone can walk down one of the main streets in Korea and find someone to sell them a “super fake,” even in broad daylight. So how do these counterfeiters get away with such an illegal act? Korea is very lenient with regards to punishing them and when they get to court, the maximum sentence is only one year in prison.  The EUCCK works to track down the culprits online, but it is difficult. “You have these advertising links flashing up on legitimate websites, and it will take you to other websites, whose servers are often based outside of Korea. That causes problems for taking enforcement action against them,” Tom Duke, director of the European Chamber of Commerce in Korea (EUCCK) IP Centre, told The Korea Times.

Although it just launched this past August, we are hoping that the EUCCK IP Centre campaign will see some positive results over the next year and slow down the counterfeit market in Korea.

The Department of Homeland Security has made great strides against the counterfeit industry this month. In two raids alone, they confiscated over $700K in counterfeit merchandise.

In Milwaukee, Customs & Border Protection (CBP) officers seized over $400K in counterfeit goods. Working with the CDP, DHL and FedEx facilities made over 80 seizures of goods including fake NFL jerseys, footwear, Tiffany jewelry and DVDs.

“These seizures represent the commitment by CBP in protecting the American consumer from receiving fraudulent, inferior and in many cases potentially dangerous products.” said David Murphy, CBP director of field operations in Chicago.

In New Orleans, over $250K was seized by the U.S. Immigration and Customs Enforcement (ICE) at a flea market. 16,171 pieces of counterfeit merchandise were confiscated including fake Nike, Polo Ralph Lauren, Oakley, Ray Ban, Coach, Chanel, Gucci, DVDs and CDs. ICE also found 3 DVD burners with the culprits and an additional 4,572 pieces of counterfeit merchandise worth $59,000 that were abandoned during the operation.

(Image taken from ICE Press Release) 

ICE is the largest division of the Department of Homeland Security that leads the U.S. in the fight against counterfeits.  They work to target criminal organizations that smuggle, manufacture, and distribute counterfeit goods and we are eager to see what programs and technologies they will use to further their quest to end counterfeiting.

In Africa, counterfeit prescription drugs are a colossal problem that is growing. Not only are the consumers in need of malaria drugs being duped, but doctors and medical buyers are as well. Luckily mPedigree Network, a nonprofit based in Ghana who advocates for development strategies to fight counterfeiting, has teamed up with Hewlett Packard (HP) to bring a new anti-counterfeiting program to Ghana and Nigeria.

As seen in the image above, the HP and mPedigree Network program requires a consumer to scratch off a label on their prescription bottle to reveal a verification code. This code can then be texted to a designated phone number for verification. mPedigree Network works with the pharmaceutical companies to insure that each prescription has its own unique code. HP’s secure “cloud” verifies that the medication is authentic and a text message is sent back to the consumer stating whether or not the prescription is authentic.  

According to the World Health Organization, 10% of drugs globally are counterfeit and in developing countries as much as 25% of the drug market is counterfeit. Eliminating counterfeit drugs could save over 700,000 lives a year. In a recent interview with mPedigree Network Founder, Bright Simmons, he states that he has seen estimates that up to 60% of the legitimate supply chain of medicine in West Africa has been compromised. Shocking statistics for countries that need such medications the most.