Tue, Oct 16, 2001 page24

• Police looking for bombs, not fake sunglasses

  PRODUCT PIRACY While the police focus on preventing terrorism, not trademark infringement, terrorists continue using counterfeit goods to finance their activities

  • NY TIMES NEWS SERVICE
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  Canal Street in Chinatown, the center of the Manhattan trade in knockoff luxury goods, has changed since Sept. 11. Fewer tourists roam the area. The already crowded storefront displays have made room for overpriced American flags and photographs of the World Trade Center.

  But what bothers Vance Lommen is how Canal Street remains the same: wedged next to the flags are dozens of styles of Oakley sunglasses, all of them fakes. In autumn, sales of counterfeit sunglasses usually start to slow, but this year stores are selling fake Oakleys briskly, and with more impunity than ever.

  It was not supposed to be this way.

  

  In autumn, sales of counterfeit sunglasses on Canal Street in Chinatown, the center of the Manhattan trade in knockoff luxury goods, usually start to slow. But this year stores are selling fake Oakleys with more impunity than ever. Counterfeit Oakleys sit on a model used for checking lenses at IPSA International, an investigative services company in Manhattan.

  PHOTO: NY TIMES

  Lommen, the security director at Oakley, has worked diligently with US Customs Service officials, training them to spot fakes. He has cultivated police departments around the country, trying to educate them about the importance of enforcing trademark violations. He has hired private investigators to develop leads.

  But the Sept. 11 attacks have led the police to focus on preventing terrorism, not trademark infringement. Customs officers are trying to stop explosives from entering the country, not fake sunglasses. And even private investigators, busy bolstering corporate security, have more work than they can handle.

  The cost of counterfeiting

  Oakley's troubles on Canal Street are emblematic of what is happening to companies in other parts of the country. Some American manufacturers are worried that as the US turns its attention to fighting terrorism, counterfeiting will be virtually unchecked and may expand.

  Counterfeiting and product piracy are major headaches for manufacturers of products ranging from detergent to watches, and computer software to jeans. The International Anticounterfeiting Coalition, a manufacturers' organization based in Washington, has estimated that counterfeiting costs the American economy US$200 billion a year and erodes consumer confidence in the quality of the real products.

  Although manufacturers acknowledge that preventing terrorism must come before fighting counterfeiting and piracy, some trade groups that have led the fight worry that their work has been dealt a setback.

  High profit, low risk

  "Clearly we have had agents who have done criminal intellectual property investigations, and their attention has been diverted," said Tim Trainer, president of the coalition.

  Some experts in intellectual trademark enforcement contend that the battles against counterfeiting and terrorism may not be as distinct as they seem. Roslyn Mazer, associate deputy attorney general in the Clinton administration, said that there were criminal organizations, including those of terrorists, that used counterfeit goods to finance their activities. That means that the effort to cut off the money flow to terrorists could include fighting counterfeiting.

  "It's natural for them because of the high profits and low risks," she said. "The commitment to combating counterfeiting has not been serious until recently, but the events of Sept. 11 are a challenge to us to strengthen those efforts."

  Oakley, a publicly traded company based in Foothill Ranch, California, has been a leader at fighting counterfeiting. So far this year, 304 people have been arrested on accusations of selling fake Oakleys, and 363,651 pairs of sunglasses have been seized in the US, according to the company. Outside the US, 85 people have been arrested and 261,045 pairs of sunglasses seized. By comparison, Oakley made 4.9 million pairs of sunglasses last year.

  Oakley sunglasses, favored by athletes and people who want to look like them, are made in the US and sell for US$60 to US$315. Counterfeit versions made in China sell for US$4 to US$20, with the price depending more on a shopper's ability to haggle than the quality of the fake.

  The company, which earned US$51 million last year on sales of US$363 million, spends more than US$4 million annually on trademark enforcement. It has deployed private investigators around the world hunting for retail sellers, regional distributors and Asian manufacturers of the fake glasses. New York has been a particularly difficult problem for Oakley and other companies.

  Chinatown in Manhattan attracts tourists from all around the world looking for faux Rolex watches and ersatz Gucci bags. But more important, Lommen said, New York has become a distribution hub. He said warehouses in and near Chinatown supply dealers of counterfeit Oakleys along the East Coast and as far west as Texas and Arizona.

  Last spring, Lommen hired IPSA International, an investigative services company that had recently appointed Howard Safir, the retired New York police commissioner, as its vice chairman. Throughout the summer, IPSA gathered evidence -- buying fake Oakley glasses from stores, pursuing leads on the names of suppliers -- and fed the information to the New York Police Department's trademark enforcement division and local precincts that were doing their own investigations.

  Sting operations

  On the morning of Sept. 5, six days before New York changed forever, IPSA investigators briefed Lommen about a series of raids on Chinatown shops and another raid on a warehouse suspected of distributing fake Oakleys.

  "Everyone on my board of directors has been waiting for New York," Lommen told the IPSA investigators. "I want to be a rash in New York, so people can stop selling fake Oakleys and start doing something else."

  Two hours later, Officer James Kim, dressed in a gray T-shirt and shorts, left the Fifth Precinct, near the corner of Elizabeth and Canal Streets, and walked to a store at 55A Mott Street. There, Kim bought a pair of glasses with Oakley's trademark "O" on their temples, and left. Thirty seconds later, Lieutenant Louis Turco of the Fifth Precinct strode up to the store with Lommen trailing behind.

  Lommen took the sunglasses, popped a lens and scraped off the paint. Turco turned to one of his officers. "This is counterfeit Oakley," he said. "Take it all. I want to send a message."

  The next day, the Police Department's organized crime division raided a Midtown Manhattan warehouse suspected of selling counterfeit goods. The raid, according to Lommen, turned up thousands of counterfeit Oakleys and shipping receipts with the addresses of the Chinese factories suspected of having made them.

  On Sept. 10, four days after the raid, Lommen said he felt pumped up. Finally, he said, Oakley was poised to dent the New York market.

  Opportunity lost

  "There were thousands of Oakleys," Lommen said. "I have never seen a building so full of counterfeits. Still, these are the distributors. They aren't the big, big guys we want. But we can get them. I have an opportunity to get these guys."

  The next day, terrorists attacked the World Trade Center. Lommen's opportunity vanished.

  In the days after the attacks, Canal Street was shut down. Now, the shops have opened again and sales of fake sunglasses have resumed with renewed vigor. But not the fight against such sales.

  Trademark enforcement has dropped sharply on everyone's list of priorities. The entire police force is working overtime to secure the city and aid in the recovery. The organized crime division is working on terrorism-related investigations. The Fifth Precinct has put peddler enforcement on the back burner and turned its attention to looking for crimes deemed more serious.

  Around the country, borders have been tightened, but customs officials are checking for explosives, guns and illegal immigrants. Lommen had been working with four customs agents in Los Angeles who specialize in spotting counterfeit goods sent by ship. Now most of those agents are working on the Mexican border, looking for bombs. Top customs officials have already said they are giving lower priority to drug interdiction, which means that counterfeiting has moved even further down the list.

  A different universe

  "The standard answer is that you can do both," said Raymond Kelley, who stepped down as commissioner of the US Customs Service in January. "In the real world, the focus is off of counterfeiting."

  Even IPSA has other concerns and other clients whose needs are more pressing. Safir said the company had been contracted by many companies to create crisis management plans and to figure out better ways to evacuate buildings in the event of terrorist attacks. It is working to install new kinds of security devices for clients, including doors that close when an unfamiliar face approaches. A food distributor, prompted by worries that someone might try to contaminate its products, has asked IPSA to improve its security.

  "You are not in the same universe any more," Safir said. "The truth is, dealing with trademark is an economic crime that is important. But it is not something that threatens our way of life."

  Lommen does not disagree. Fighting terrorism is far more important that fighting counterfeit sunglasses, he said. He mourns the people killed in the attacks, yet like many Americans he also despairs over the work that was lost that day.

  "We may have to start all over next summer," Lommen said last week. "They are selling more counterfeit Oakleys than ever, because law enforcement is out on the recovery effort. I wish the criminals were more patriotic and put that on hold."
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