Tue, May 02, 2006 - Page 11 News List

Counterfeiters fake an entire company

THINKING BIG Electronics giant NEC was staggered to find out that copyright pirates had set up a parallel NEC brand linked to factories in China, Taiwan and Hong Kong

NY TIMES NEWS SERVICE , BEIJING

Stephen Vickers, president and CEO of International Risk, poses with NEC counterfeit products in Hong Kong last week. Vickers says pirates used fake documents to collect royalties on counterfeit products.

PHOTO: NY TIMES NEWS SERVICE

At first it seemed to be nothing more than a routine case of counterfeiting in a country where faking it has become an industry.

In mid-2004, managers at the Tokyo headquarters of the Japanese electronics giant NEC started receiving reports that pirated keyboards and blank CD and DVD discs bearing the company's brand were on sale in retail outlets in Beijing and Hong Kong.

So like many other manufacturers combating intellectual property thieves in China, the company hired an investigator to track down the pirates.

After two years and thousands of hours of investigation in conjunction with law enforcement agencies in China, Taiwan and Japan, the company said it had uncovered something far more ambitious than clandestine workshops turning out inferior copies of NEC products.

The pirates were faking the entire company.

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Evidence seized in raids on 18 factories and warehouses in China and Taiwan over the past year showed that the counterfeiters had set up what amounted to a parallel NEC brand with links to a network of more than 50 electronics factories in mainland China, Hong Kong and Taiwan.

Using the company name, the pirates copied NEC products, and went as far as developing their own range of consumer electronic products -- everything from home entertainment centers to MP3 players.

They also coordinated manufacturing and distribution, collecting all the proceeds. The actual NEC even received complaints about products that they did not make or provide with warranties.

According to Steve Vickers, president of International Risk, a Hong Kong-based company that NEC hired to investigate the piracy, documents and computer records seized by police during factory raids showed that the counterfeiters carried NEC business cards, commissioned product research and development in the company's name and signed production and supply orders.

He said they also required factories to pay royalties for "licensed" products and issued official-looking warranty and service documents. Some of the factories that were raided had erected bogus NEC signs and shipped their products packaged in authentic-looking boxes and display cases.

All told, about 50 products were counterfeited, including home entertainment systems, MP3 players, batteries, microphones and DVD players, according to NEC.

NEC declined to identify the counterfeiters for what it said were legal reasons, and there have not yet been any convictions in the case. NEC also said it was unable to estimate the total value of the pirated goods from these factories, but the company said it believed the organizers had "profited substantially" from the operation.

"These entities are part of a sophisticated ring, coordinated by two entities based in Taiwan and Japan, which has attempted to completely assume the NEC brand," said Fujio Okada, the NEC senior vice president and legal division general manager, in written answers to questions.

"Many of these entities are familiar with each other and cooperate with each other to develop, manufacture and sell products utilizing the NEC brand," he said.

Officials from branch offices of the State Administration of Industry and Commerce in China confirmed that counterfeit goods carrying the NEC brand had been seized in raids on a number of factories and that investigations were continuing.

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