More on Anti-Counterfeiting: Defending Your Brand

A lot of attention is paid to measures that try to thwart counterfeiting. Equally important, says Phil Huff, CEO of Brandwatch Technologies, a provider of brand security and product authentication solutions, is what a business does when a counterfeit product is discovered. (See: In Search of Counterfeiting’s Silver Bullet.)

As part of an overall strategy to address counterfeiting, Brandwatch emphasizes the importance of data collection — not just identifying authentic products, but bogus parts as well:

    Many times there is an IT aspect to our solution. Gathering information about a product as it travels throughout the supply chain is part of the overall strategy and can help the enforcement piece of the process. We don't get directly involved in pursuing enforcement; we provide the evidence that can be used as proof [of counterfeiting] if it becomes part of a court case.

In the electronics supply chain, cases have made it to court in several ways: companies targeting counterfeits as patent infringement; prosecution by state or federal government agencies; and investigation by bodies such as the International Trade Commission (ITC). Within the past year there have been two high-visibility cases of fake components sold to the US Department of Defense that were prosecuted by the government. Both resulted in guilty pleas. The US Department of Justice released details of a case against Neil Felahy. Network World , part of the IDG News Service, covered the case of VisionTech, a Florida-based distributor.

In the Felahy case, the Department of Justice notes that military-grade components are treated differently than commercial-grade components — in other words, they undergo more rigorous screening. Additionally, details are provided on how the counterfeit goods entered the supply chain:

    According to the Indictment, the defendants engaged in the interstate trafficking of counterfeit integrated circuits, in a variety of ways. First, they acquired counterfeit integrated circuits from supply sources in China, imported them into the United States, and sold them to the public via the Internet. Second, they obtained trademark-branded integrated circuits then scraped, sanded, or ground off the original markings, and caused the devices to be remarked with another trademark and other markings thereby fraudulently indicating, among other things, that the devices were of a certain brand, newer, higher quality or were of a certain grade, including military grade. Third, the defendants “harvested” dies from integrated circuits and caused them to be repackaged to appear new, including adding trademarks and other markings indicating that the devices were of a certain brand, higher quality or were of a certain grade.

Clearly, there is a high level of traceability and data-gathering in the military procurement process — which is as it should be. For the military and aerospace industries, lives are almost always at stake in the equipment they manufacture. In the two cases above, components were sold in the US to the US military, which may account for the rapid and successful prosecution.

It may not be possible or viable for commercial components to be treated the same way. Patent infringement is time-consuming and costly, and prosecuting in foreign regions is difficult because laws vary from country to country. But patent and copyright protection should not be as time-consuming or as costly as it currently appears to be.

Brandwatch says companies that aggressively defend their brands are less likely to be targeted by counterfeiters. Has your company had any experience in defending its brand? What was the outcome?

3 comments on “More on Anti-Counterfeiting: Defending Your Brand

  1. Backorder
    November 30, 2010

    You have brought up a very important point in this discussion. It is impractical to go after the counterfeiting source as the channel through which these infiltrate into market are often very difficult to trace. Secondly, as you correctly mentioned, the process is lengthy and costly and might not actually prevent other instances to spring up. I think the best bet to eradicate counterfeiting is to implement advanced ID processes and techniques and to educate the customers and those in the authorized supply chain.

  2. Clairvoyant
    November 30, 2010

    Good point, Backorder. Educating distributors and customers about key things to identify proper parts is the best way to go. Counterfeiters will try to get into the market by the weakest link, which will be the buyer that has the least knowledge on identifying and spotting counterfeit parts.

  3. Barbara Jorgensen
    December 2, 2010

    One of the interesting things I've found out about the electronics supply chain is that the companies that take legal action against counterfeiters do not always discourage the practice. Some years ago ADI successfully shut down a Taiwan compnay that was manufactuirng fake ADI chips. It was a huge achievement for ADI. Nevertheless, ADI chips were among those sold to the DoD by VisionTech.

    In this case, counterfeiters targeted the most expensive chips and ignored the consequences. Also, the distributor in this case was snagged, but the actual suppliers of the fake chips were not identified. This distributor is cooperating as part of the settlement. If the counterfeiters are tracked down and prosecuted, it might make a difference–or maybe not.

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