Counterfeiting In the Imaging Supplies Industry3 Mar, 2011 By: Allen D. Westerfield, ISC imageSource
Counterfeiting In the Imaging Supplies Industry
Have you noticed the increase in enforcement activities against
counterfeiters by federal and local authorities? These include raids of
establishments which sell counterfeit goods and the closure of infringing
websites. Within the imaging supplies industry there have been FTC filings and
civil law suits filed by several OEM’s alleging patent infringement. In addition
there has been an increase of raids and legal actions against alleged
counterfeiters. You might now wonder why the issue of defeating counterfeiting
and enforcing IPR is becoming even more important.
The Imaging Supplies Coalition (ISC) is a nonprofit organization dedicated to
educating, empowering and protecting stakeholders in the battle to eliminate
counterfeiting and fraud in the imaging supplies industry. The Coalition is
comprised of original equipment manufacturers of consumable imaging supplies and
equipment. Coalition members include companies such as Brother International
Corp., Canon U.S.A., Inc., Epson America, Inc., HP, Lexmark International, Inc.,
Oki Data Corporation, Samsung Electronics America, Inc., Toshiba America
Business Solutions, Inc. and Xerox Corporation. Founded in 1994, the mission of
the ISC is to:
- Protect our members’ customers from misrepresented products and services
- To seek the worldwide protection of intellectual property & related
assets of the Imaging Supplies Coalition member companies.
This mission is primarily accomplished by training and education of the
channel, law enforcement and end users in counterfeit product identification,
and how to defend against counterfeiters. We also work to promote laws which
encourage the protection of intellectual property rights and their enforcement.
In its 17 year history, the ISC has accomplished a great deal in combating
counterfeiting and fraud and has established itself as a leading organization in
intellectual property protection.
The Scope of the Problem - Counterfeiting is an immense business activity.
Due to the surreptitious nature of the activity it’s difficult to estimate its
size and scope. Many organizations, including the IACC, estimate the sales of
counterfeit goods to be in the range of 5% to 7% of the world economy. According
to the CACP, Counterfeiting and piracy cost the U.S. economy billions of dollars
annually, have led to the loss of hundreds of thousands of jobs, and needlessly
expose consumers to dangerous and defective products.
The ISC estimates that the WW imaging consumables loss to counterfeiting is
approximately 4% to 5% of total revenue or between $3.5B and $4.0B. In the U.S.
it has been estimated that 3.5% of all inkjet cartridges sold are counterfeit.
In some areas of the world the estimate is up to 50%. HP, one of the ISC member
companies, reports on its website that between 2005 and 2008, it has conducted
4,620 investigations in 55 countries, resulting in 3,528 enforcement actions
conducted by law enforcement officials, where more than $795 million of
counterfeit supplies products have been seized. A second ISC member company
states that legal actions are currently pending in at least 6 states In the U.S.
Who Is Harmed by Counterfeiting - Victoria Espinel, U.S. Intellectual
Property Enforcement Coordinator, was appointed by President Obama and confirmed
by the U.S. Senate to coordinate the US government’s activities and priorities
in regard to IPR enforcement. Ms. Espinel posted the following on The White
“Intellectual property is the ideas behind inventions, the artistry that goes
into books and music, and the logos of companies whose brands we have come to
trust. My job is to help protect the ideas and creativity of the American
public. One of the reasons that I care about this is because I believe it is
enormously important that the United States remain a global leader in these
forms of innovation – and part of how we do that is by appropriately protecting
our intellectual property. Our intellectual property represents the hard work,
creativity, resourcefulness, investment and ingenuity of the American public.
Infringement of intellectual property can hurt our economy and can undermine
U.S. jobs. Infringement also reduces our markets overseas and hurts our ability
to export our products. Counterfeit products can pose a significant threat to
the health and safety of us all.”
In the imaging supplies industry all participants and harmed by
counterfeiting except the counterfeiters themselves. But let’s focus
particularly on distributors and resellers. Counterfeiting activity impacts
legitimate resellers and distributors in a number of ways. First of all,
counterfeit goods introduce a level of price competition that is unfair and
unsustainable. Price is usually the value proposition offered by the
counterfeiter and can be attractive to some consumers. Second, if a legitimate
reseller inadvertently sells counterfeit goods that have been introduced into
the supply chain through the parallel or grey market, the risk of customer
dissatisfaction and loss must be dealt with. Third, there can be significant
financial and legal risks.
Counterfeit Cartridges Defined
A counterfeit cartridge is a third party product misrepresented as an original
OEM cartridge. Cartridge counterfeiting is not the same as refilling or
remanufacturing. These counterfeit print cartridges are meant to mislead the
consumer into believing that they are genuine OEM products. This does not mean
that all refilled or remanufactured products are counterfeit or otherwise
fraudulent. Legitimate refilled or remanufactured products exist on the market
and their packaging states that they are ‘refilled’, ‘remanufactured’ or
‘compatible’ products. There is no confusion as to what these products are.
A second area of concern is the explosive growth of some clone/compatible
cartridges. When these products are packaged as a compatible under a non OEM
brand, they are not counterfeit and IP violations, if any, deal with patents
and/or trade dress issues. As previously mentioned several OEM’s have filed
legal actions against companies they allege are violating their patents.
- Counterfeit products can include:
- A remanufactured cartridge sold as a new OEM cartridge
- A clone or compatible cartridge sold as a new OEM cartridge
- Some clone or compatibles sold as an OEM remanufactured cartridge
- New empty shells sold as an OEM core
- Cartridges which violate trade dress to lead consumers to believe
they’re buying an OEM cartridge
Defending Against Counterfeiters; When In Doubt, Check It Out
The ISC’s call to action to the channel and its customers is to work with us to
eliminate counterfeiting and fraud in the imaging supplies industry. The two
best things you can do are obvious yet are the most powerful tools available.
First, know your suppliers by understanding their businesses practices and
policies. Second, avoid price deals that are too good to be true. If a vendor is
offering prices that are much better than the generally available market price,
you should be suspicious that the cartridge may be counterfeit. And third, I
would also encourage resellers and distributors to become more active in the ISC
WIDCIO Program. This unique program allows a reseller or end customer to send a
suspicious product carrying the brand of our member companies to the ISC for
authentication. This program has resulted in the targeting of illegal production
facilities and the removal of many millions of units of imaging supplies from
the market place. Confidentiality of the program participants is maintained.
Details of this program are on the ISC website
Lastly, at the end of the day counterfeiting is flourishing because there is
a demand for the products. Please work with us to develop a campaign of public
awareness that educates the consumer and to teach them how to avoid the bogus
goods. What we need is a commitment of zero tolerance of counterfeiting in the
imaging supplies industry from all industry stakeholders.