US Sends Mixed Signals on Counterfeit Fight

What is wrong with the US government? OK, that's a loaded question, so let me be more specific. How is it that I know better than to buy my daughter a pair of "designer boots" from some unknown Website offering them for half the typical retail price, but the US government doesn't suspect that a Cisco router that retails for nearly $1,400 but is being offered for $234 is probably not authentic?

Come on! This scam could not have been more obvious if the seller's name was Faux Parts R Us. Yet, the government sourced $3.5 million worth of counterfeit Cisco routers and switches and installed them in US government computer networks. Forget the waste of taxpayer money. The potential national security risk this posed is unimaginable. Theoretically, it was determined that these devices did not have any "back doors," which would allow access to these systems by unauthorized sources. Then again, do you really think they would admit that not only were they duped, but they handed potential enemies the keys to the kingdom?

While in this case it was determined that a small portion of the equipment was sold through authorized Cisco resellers, the majority were purchased through non-GSA-approved sources, according to an unclassified FBI report. This is just one of what appears to be a long string of bogus parts that have been introduced into the US defense and industrial supply chains as a result of sourcing from unauthorized suppliers.

A 2010 report from the US Commerce Department outlined the results of a study to determine the extent of the infiltration of counterfeit electronics into the federal and military supply chains. The survey found that unauthorized distributors accounted for 576 of 613 counterfeit part incidents occurring at distributors in 2008. That's roughly 93 percent.

In light of the Commerce Dept. report and high-profile incidents such as the Cisco debacle, the government is purportedly "serious" about enforcing IP laws and anti-counterfeit measures. For example, in January, President Obama urged Chinese President Hu Jintao to crack down on IP theft in China. In June, the Combating Military Counterfeits Act of 2011 was proposed to prohibit trafficking in counterfeit military goods or services by "increasing penalties and creating a heightened criminal offense for trafficking in counterfeit military products."

Why not just threaten to send them to their room without dessert! These measures are not going to deter today's counterfeiters. We are not talking about some janitor that dusted off discarded parts from a chip factory and put them on eBay to make a few extra bucks. These are sophisticated, organized crime networks. There are layers upon layers of lackeys doing the bidding of the head honchos. Just like the drug cartels in Mexico -- you can arrest the runners, but that is not going to stop or even slow down the illicit business.

Clearly the counterfeit problem is not going to be solved any time soon. But, I do believe that the government can significantly minimize the infiltration of fake or substandard product into the supply chain by imposing more common-sense procurement standards.

First is the need to create a government-wide definition and standard for "counterfeit." According to the Government Accountability Office's March 2010 Defense Supplier Base report, the Department of Defense is "limited in its ability to determine the extent to which counterfeit parts exist in its supply chain because it does not have a department wide definition of the term counterfeit." So, they want to pass bills with harsher penalties for counterfeiting, but can't even define it.

Second, there should be a mandate that all products be bought either direct from the manufacturer or from authorized resellers. Counterfeiting is pervasive. While authorized channels may not be 100 percent pure, their processes, regulations, and guidelines make them a heck of a lot less vulnerable to corruption. The lack of traceability of parts from third-party sources poses too great a risk, as does the relative ease with which a fake company can set up shop online, peddle its bogus wares, and then fade into the woodwork before the deception is uncovered.

I don't care if Faux Parts R Us or CounterFeet Supplies has cheaper prices. The cost of counterfeit parts entering the supply chain goes far beyond replacement of the counterfeit part. I know it, you know it -- how could the government not know it?

It is clear that the government has a woefully inadequate infrastructure for dealing with the realities and hazards of today's global electronic components market. Without greater diligence in government procurement, we will someday be faced with a catastrophic system failure or intelligence leak that could endanger untold numbers of lives.