by Robin J. Moody
In years past, counterfeit goods were easy to spot. They were typically shoddy and sold in limited venues, such as open-air markets.
These days, companies like Beaverton-based Nike Inc. have seen an alarming trend toward higher-quality counterfeits that fool even legitimate emporiums.
"The goods have improved due to technological advances," said Dave Simpson, Nike's global director of security and brand protection. "What we are seeing now is the product is ending up with legitimate retailers, and that can be confusing to customers. It's having an effect on our business partners and retailers we sell to."
Counterfeiters are now able to cosmetically replicate even high-tech footwear features such as air soles, Simpson said. Some counterfeiters are even taking the trouble to copy the small rubber stamps affixed to Columbia Sportswear jackets, said Barbara Cason, corporate council and director of intellectual property for Columbia.
A by-product of globalization and overseas sales and manufacturing, counterfeiting is increasingly on the minds of officials at Nike, Columbia Sportswear Co. and Adidas. These companies are all beefing up efforts to fight the wave of faked goods flooding the market.
"Right now, the price you pay for manufacturing overseas is that your goods will be counterfeited," said Darren Pagoda, staff attorney for the International AntiCounterfeiting Coalition, which helps train law enforcement, lobby and educate businesses. "Most manufacturers go over there with the idea that there will be knockoffs."
Cases like one on March 29, in which 16 Chinese citizens were arrested in a factory in China's Gauteng region where counterfeit Nike and Adidas apparel was allegedly being made, are increasingly common.
"In the last 12 months we have probably done eight to 10 factory raids. We are stepping it up," Cason said.
Adidas reported that between 2000 and 2003 $12.2 million was recovered in seizures of 14 million counterfeit items. Nike and Columbia declined to estimate their damages, but the International Chamber of Commerce calculates that 7 percent of world trade is in counterfeit goods, and that the counterfeit market is worth $350 billion.
"It is estimated that in apparel and footwear alone, $12 billion in sales is lost annually," Cason said.
Rapid growth and global recognition, such as Columbia has experienced in recent years, has had the unintended consequence of making the company a target of shysters. Jackets and fleeces are the Columbia products most often faked, Cason said.
Sports apparel and footwear companies are taking a variety of approaches to tackle the problem.
"Sometimes, through direct intervention, we are able to deal directly with the counterfeiter and get them to cease illegal activity," Cason said.
Columbia also educates many of its 1,800 global employees, and its distributors, on how to spot counterfeits and where to report suspected violations. It trains customs officials on how to spot and handle counterfeits, and it collaborates with regional investigators.
"In China, there are a lot of investigative agencies whose business it is to surreptitiously go to factories where they know there is counterfeiting," Cason said. "There is no charge for the initial visit, but if they find your brand they will send you a notice. For a fee they will do a factory raid in conjunction with local authorities."
Nike found assigning more personnel to the problem has helped.
"Five years ago we had two people in all of Europe. Now we have one in each country and sometimes more. We also have full-time employees in the production countries, such as China and Vietnam," Brown said. "What we've found is that as long as we have someone local authorities can contact, for the most part, they want to enforce."
Brown also stressed the importance of respecting local customs and cultures, and not undercutting local authorities.
"Outside the U.S., if you rush to settle you are causing more problems than you solve because law enforcement may perceive that you have been using them, and now you are undercutting them. If you pull the rug out ... from any law enforcement official, they will hesitate to call you again," Brown said.
Jail time is also a better deterrent than fines, which counterfeiters simply regard as a cost of doing business, said Vada Manager, Nike's director of global issues.
Ironically, companies interviewed for this story took a degree of pride in being copied -- noting it indicates successful marketing -- although all stressed it was a serious problem.
"It means we continue to enjoy consumer demand for our brand. Counterfeiters aren't stupid; they manufacture what they can sell quickly," said Kevin Brown, an attorney for Nike specializing in brand protection and counterfeiting.
Eric Merk, president and chief executive of Beaverton-based sportswear manufacturer InSport International Inc., said he knew of no attempt to copy InSport products, but added, "It's a nice problem to have, a problem I'd like to have."
Contact Robin Moody at rmoody@bizjournals.com
