‘Knockoff’ King Taiwan Tries to Mend Its Ways

The “king of knockoffs,” enterprising Taiwan, is mending its copycat ways, passing laws and locking up business people who counterfeit toys, computers and other brand-name big sellers on the world market.

But a stroll through Taipei shows that the crackdown has only begun.

In the Snake Alley night market, copies of Rolex, Cartier and other top-of-the-line watches are still on sale.

Elsewhere, pirated copies of American computer software go for just $10 or $15.

A popular local soft drink, meanwhile, is sold in Coca-Cola look-alike cans. And on Taiwan television, commercials make free use of copyrighted U.S. music.

“The enforcement process is slow,” Roger D. Severance, Pacific Basin specialist for the Commerce Department, said in a Washington interview. “We’re trying to change the way a fairly significant part of business has been run in Taiwan.”

The Reagan Administration says U.S. industry loses up to $20 billion a year to industrial counterfeiters worldwide.

One of Biggest Offenders

In the early 1980s, the U.S. International Trade Commission estimated that 60% of the knockoffs were made in Taiwan. Although some dismiss that estimate as too high, American authorities have long identified this island of cheap labor and family-run factories as the biggest international source of unauthorized industrial copies.

Taiwanese officials say the counterfeiting trade developed because the island’s rapid economic growth outstripped an antiquated legal system in which patents, trademarks and copyrights had little place.

And while productive capacity boomed, Taiwan’s design, research and marketing abilities lagged.

“Taiwan companies didn’t have the money to do the design,” Lee Ta-hai, Taiwan’s economic affairs minister, told a reporter. Consequently, the companies copied the designs of others.

The blame is not all one-sided. Explained Jeffrey R. Harris, Taipei manager of Hong Kong-based Commercial Trademark Services, which tracks down trademark and patent violators:

Work Off Fads

“The typical Taiwanese involved owns a middle-size factory, say, a plastics factory making toys. Don’t tell me he’s going to go to the States looking for trends and then line up 200 stores there as outlets. It’s done by Americans, thousands of guys coming in here placing orders, guys who know what they need and where they can sell it.”

The counterfeiters often work off fads, making “Gremlins” or “E.T.” toys and clothes, for example--spinoffs from popular movies or children’s TV shows that they then ship off quickly to the United States.

In other cases, Taiwanese plants churn out fragrances approximating such heavily advertised perfumes as Chanel, or produce “Lee” or “Levi” blue jeans for sale in Third World markets.

Harris said his firm was hired by a jeans manufacturer whose Middle East market was being ruined by counterfeiters. His investigators traced the illicit denim copies to 45 small Taiwanese enterprises, each of which made part of the garment and sent it to three exporters that assembled and shipped the product.

In the past two years, Taiwan’s Chinese Nationalist government has been closing loopholes in the complex web of laws and regulations protecting intellectual property:

- It broadened the copyright law last year to protect computer software.

- Last January it granted copyright protection to U.S. books.

- Inspections were toughened to block export of pirated musical tapes.

- Legislation awaits approval that would extend patent protection to pharmaceuticals, pesticides and other chemical products.

- A Fair Trade Law, also awaiting final legislative approval, would ban look-alike packaging that capitalizes on consumer familiarity with expensively promoted products.

Washington’s key weapon in pressuring Taiwan, South Korea, Indonesia and other countries that harbor counterfeiters is a 1984 U.S. law requiring the President to withdraw U.S. tariff preferences from nations doing too little to combat the problem.

Officials Unimpressed

The Taiwan government works hard to publicize its efforts. Last January, for example, it invited photographers to record the destruction of counterfeit computers by a steamroller. And Taiwanese officials say convictions for infringement of trademarks, patents and copyrights have almost doubled from 1983 to 1985, to 629 from 344, most of them for trademark violations. Offenders generally were sentenced to two- to six-month prison terms.

But some American officials are unimpressed.

“They steamroll counterfeit computers, but you still can go out around Taipei and buy them,” complained one U.S. trade specialist here who spoke with a reporter on condition of anonymity.

“Enforcement is a tremendous problem. Taiwan is ahead of anyone else in the Third World in passing laws. But they need to have more police raids, more confiscations.”

Harris, who believes that industrial counterfeiting here is shifting from “mom and pop” operations to “hard-core” underground factories, says the Taiwanese police are slow to conduct raids once private investigators pinpoint violators.

Said a U.S. official: “Corruption, illegal shipments and smuggling are all tied up together, and this is what makes it difficult to resolve.”

Terry Chen, executive director of Taiwan’s National Anti-Counterfeiting Committee, said education is as important as enforcement.

Steady Improvement

“We have to publicize the concept of intellectual property rights,” said Chen, whose government- and business-financed office produces anti-counterfeiting advertisements and posters. “Taiwanese people are unfamiliar with the idea. They think of property as land or buildings--tangibles.”

The Commerce Department’s Severance said the situation is improving steadily because, more and more, Taiwan’s own interests are threatened.

“For one thing, countries like Taiwan are now making their own computer software. It’s to their advantage to have protective laws for their own intellectual property,” he said.

In fact, those in the anti-counterfeiting front lines see their target quickly moving elsewhere--to mainland China, where the Communist system’s new free-wheeling industrial enterprises, working on contracts from Hong Kong business people, reportedly are copying growing numbers of toys, garments and other Western-trademarked goods.