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Brands Push to Stem Flow of Fake Product

Published November 18, 2011

By NICOLE FORMOSA

CHARLOTTE, NC—Sandy Nicholls estimates he has shut down more than 1,000 Internet auctions during the past 18 months while trolling the web for counterfeit Giordana apparel.

As the owner of the Giordana trademark in the U.S., Nicholls’ employer, Gita Sporting Goods, has the authority to close online sales of knockoff product through programs like eBay’s Vero.

It’s more than a full-time job to keep pace with the seemingly never-ending profusion of sites and sellers hawking inauthentic jerseys to consumers looking for a deal, but Nicholls believes he’s making progress.

“I don’t report as many [knockoffs] at a time,” he said. “At times, I’ve reported more than 150 items. I think in the last three or four months, the biggest has probably been 20 or 30 items at once. A lot of times, it’s only four or five. I like to think I’m making a difference.”

Apparel is one of the most commonly and easily imitated products in the industry, although fake carbon fiber components and frames also proliferate on websites like eBay and Alibaba.com. Brands with global appeal and high-end cachet like Pinarello, Colnago, Specialized, FSA and Ritchey tend to be prime victims for impostors.

“We’re seeing it at the bar and stem level. And it’s not just Asia; it’s South America too. If you have a popular brand and a popular item, I think it’s going to be copied. It’s a lot easier to move this kind of product through harder-to-track pipelines,” said Sean Coffey, global marketing director for Ritchey/Syncros.

Counterfeiting is certainly not a new issue—some of the bigger companies now staff full-time employees dedicated to tracking down illegal sales—but it’s one that has intensified over the years as the rise of the Internet created massive online marketplaces for the sale of millions of dollars’ worth of fake goods.

The industry’s shift in production to Asia over the past decade and increased competency working with carbon fiber among factories in Taiwan and China has also contributed. The difference between quality, high-strength carbon and cheap carbon may not be easily noticed by the untrained eye, Coffey noted, and the potential profit gained by using low-quality material and selling it online to unsuspecting or undiscriminating consumers is significant. Cycling has also become a much more popular sport among the middle classes in Asia, creating more demand for highly sought after brands and products.

“They’re opportunists looking for markets they somewhat understand and feel they can reach,” Matt VanEnkevort, head of FSA’s North American office, said of the factories and resellers imitating bike brands.

As the problem has grown into a global epidemic, with fake product being sold in Asia, Europe and North America, companies are ramping up their efforts to control supply out of concerns over safety and liability—and damage to brand image.

Tracking online auctions is time-consuming and tedious work, and though it can produce results in the short term, it’s not cutting product off at the source, and that’s a problem, VanEnkevort added. FSA recently started a PR campaign to inform its retailers and consumers about ongoing problems with counterfeit product in hopes of curbing sales.

FSA and Ritchey have enlisted legal teams in Taiwan to tackle the problem, and have seen some success. Tien Hsin Industries, FSA’s parent company and owner of the factory that produces its components, traced fake product back to an unaffiliated manufacturer in Taiwan and won trademark infringement convictions in court. Ritchey Asia has hired an aggressive attorney and, working in conjunction with local police, approached retailers selling fake items and reduced their fines if they divulged sources. That has resulted in fines levied against numerous shops, counterfeit goods seized and distributors taken to court during the past 18 months.

“This process has slowed down some of the counterfeits found online outside of Taiwan and also cleaned up our authorized dealers and brand image in Taiwan,” said Rick Hartwell, general manager of Ritchey Asia.

“The big problem now is the brash counterfeiters in China, who are difficult to find accountable and who exclaim that they are helping us build brand awareness. We are in the early stages of approaching China-sourced counterfeits as we have in Taiwan, but is a slow process as we learn the ins and outs of the Chinese legal system,” he added.

Hartwell said he believes counterfeiters are purchasing components from common overseas suppliers and then branding the goods themselves with Ritchey logos or sourcing a second supplier for branding.

The lack of enforcement of intellectual property law and copyright and patents in China is a source of constant frustration for many companies trying to protect their brands.

After numerous problems with intellectual property violations and patent infringements over the years, Dahon introduced a hologram label to help ensure the authenticity of its bikes. Starting next year, every Dahon bike will bear a serialized 3D holographic label as proof to dealers and consumers that they’re buying the real thing. Tracking numbers will help Dahon identify vendors selling counterfeit merchandise with forged holograms.

Dr. David Hon, Dahon’s owner, has devoted years to protecting his folding bicycle brand’s 200 patents in China. He has earned several victories along the way, including a five-month prison sentence for one violator. Two-dozen cases are in progress. Hon, who lives in China, also helped push through 2006’s Measures for the Protection of Intellectual Property Rights law in China to help strengthen protection of IP at trade shows held in the country, has spoken at U.S.-China conferences on IP rights and has been published on the matter in China’s largest economics journal.

The problem for most companies is they don’t have the resources to hire a strong enough physical legal presence in China to keep constant tabs on counterfeiters. And even if a company has the means, protecting interests of Western companies isn’t a top priority for a country mired in its own labor and trade issues.

VanEnkevort believes the industry can take a stronger stance against counterfeiters if more brands start fighting back—using online programs to track and shut down auctions of illegal products and sending a message to consumers to buy from authorized shops where trust and a relationship have been established.

“This is a problem that needs attention from us all,” he said.

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