Bureau Has Global Eye on Fake Goods : Counterfeit Items Are Real Problem, Trade Group Says

In Taipei recently, criminal investigator Eric F. Ellen came across a cheap, pirated edition of the book “International Maritime Fraud.” Ellen was co-author of the original.

It was a salutary lesson for the man who has just been appointed to head a new Counterfeiting Intelligence Bureau in London.

It showed Ellen, 54, that if counterfeiters could turn a profit on a relatively obscure book about crime at sea, they could make money on anything.

That’s just about the way it is.

Fakes All Over

According to a U.S. House of Representatives report last year on “unfair foreign trade practices” counterfeit spare parts have shown up on the NASA space shuttle, on the U.S. Army’s Lance missiles, on at least 600 NATO combat aircraft, reportedly on the queen of England’s helicopter and on 100 Boeing 737 airliners.

Some of those parts were described as critical.

Ellen said a well-known U.S. pharmaceutical company recently had to take a million boxes of contraceptive pills off the market when phonies started showing up.

In Britain, an organization called Federation Against Software Theft estimates that pirates have driven 37% of legitimate computer-software firms out of business.

Trade sources say world sales of pirated sound recordings alone exceed $900 million a year.

“Counterfeiting is bad and wrong,” said Jean-Jacques Guerlain, chairman of the Counterfeiting Intelligence Bureau.

“It is getting worse. The vast dimensions of counterfeiting, and the inadequate response by governments to the problem to date now demand a counterattack by private industry, coordinated worldwide.”

Dozens of Products

Ellen produced a glossy Japanese trade catalogue entitled “exclusive world brands” that showed dozens of well-known fashion products and accessories.

“Every product in this book is counterfeit,” he said.

Although certain Far Eastern countries have a particularly bad reputation as counterfeiters, the problem is global. Ellen pointed to a table laden with bogus products--French “Champagne” made in Italy, Swiss watches made in Hong Kong, Japanese video and audio tapes made in Taiwan, and many other products that were difficult, if not impossible, to tell from the real thing.

“These counterfeits are devastating for the manufacturer of the genuine article and the producer of the original work,” said Hans Koenig, Paris-based secretary general of the International Chamber of Commerce, the parent body behind the Counterfeit Intelligence Bureau.

“Growing numbers of counterfeit goods are neither safe nor harmless,” Koenig said. “Substandard fakes, from medicines and chemicals to household and electrical appliances to spare parts and accessories in the automobile and aviation industries, increasingly spell danger for the innocent buyer.”

The chamber estimates that counterfeiting accounts for between 3% and 9% of total world trade. Faking earns billions of dollars and has begun to attract organized crime, it said.

Not all counterfeiting is carried out in back-street sweat shops, according to Alain Thrierr, a trade-mark protection specialist for the French Manufacturers’ Union. Sometimes large, established factories--perhaps a former licensee--will agree to produce counterfeit articles for a shift or two. Thrierr said he posed as a buyer to uncover one such factory in South Korea.

Work May Be Dangerous

Ellen, formerly a senior London police officer, has no doubt that his work may be dangerous.

“We will be dealing with some pretty nasty people,” he said. “The potential profits are worth millions and it only costs a few thousand for a contract to put someone away.”

He is setting up the bureau initially with only two assistants, Jack Heslop, a former member of the London police fraud squad, and Kuoshiao-Lin, a woman former inspector with the Taiwanese police.

But Ellen said he is optimistic that support and cash from industry will quickly enable him to expand the bureau along the lines of the International Maritime Bureau, which the ICC set up five years ago to combat fraud at sea.

He thought the bureau could develop into a “focal point” for a battle against counterfeiting, which companies now have to fight on their own.

Ellen said the bureau would attempt to stem counterfeiting by disrupting the transport of bogus goods, enlisting the support of customs officials and law enforcement agencies and exposing governments that fail to take strong action against fakers.

“I don’t think there is any government that would knowingly shield counterfeiters,” said the ICC’s Koenig, “because it knows that to do so would harm its trade and economic relations with other countries.”

Details Available

He said the bureau would make details of faking operations available to victimized companies, leaving it up to them to take legal action. This some firms are reluctant to do, fearing that publicity about bogus goods could do them more harm than good.

But many companies spend large sums to protect their reputations and do not hesitate to take counterfeiters to court--like Rolls Royce Motors Ltd., which spends more than $300,000 a year to defend its trademark in the United States alone.

As head of a well-known French perfume manufacturer, Guerlain has had many years personal experience of dealing with counterfeiters. For him, imitation is definitely not a form of flattery.

“Faking is not glamorous or clever . . . it is squalid,” he said. “It does not create jobs, as some say. It destroys them. The more workers are employed by counterfeiters, the fewer can find jobs in companies making the genuine product.”