From "Wealth of Ideas" e-newsletter, February 2005

Say the term “counterfeit goods” and most people will think immediately of street vendors hawking $20 Rolex watches, fake designer handbags, or $5 CDs and DVDs. Counterfeiting is big business: in December 2004 alone, the New York Police Department shut down a 49-room “bootleggers’ mall” and seized $12 million worth of clothing and shoes bearing brand names such as North Face, Sean John, Reebok and Nike. Raids in New York City since December 2003, when Mayor Michael Bloomberg vowed to crack down on counterfeiters, have netted $40-50 million in such fake merchandise.

Despite the huge profits these bootleggers make, the average person still considers the counterfeiting of trademarked merchandise a “victimless crime” – the designers, after all, are not suffering in poverty; nor are the music and movie industries. Public apathy towards the problem is only one reason that traffic in counterfeit merchandise continues: the public’s desire for brand names at cheap prices, plus the proliferation of bootleggers and ease of producing the counterfeit products combine to make it difficult for law enforcement officials to stem the tide of counterfeit goods.

One might argue that most people who pay $30 for a $300 jacket are well aware that it’s not the trademarked or officially-licensed “real thing”, and that it’s likely of lower quality. But it looks like the trademarked item, which is enough for some people. And again, there are those who are willing to pay $300 for the genuine article, so where’s the harm?

Counterfeiting is such big business because trademarks serve as an indicator of the source or quality of the goods on which they appear. And counterfeiting of trademarked items is not just for brand name clothing, music and movies anymore; it now extends to such non-glamorous items as medicines, food and auto parts. Would you want to feed your baby counterfeit Similac infant formula or drive a car with brake linings made of compressed cardboard? How about spritzing on some counterfeit perfume that’s laced with urine? This is where counterfeiting gets personal (and disgusting, and possibly dangerous).

The problem of counterfeit merchandise is difficult to solve, and will likely continue. As a trademark owner, you are probably safe from counterfeiting unless your mark is well-known. As a consumer, you can protect yourself by knowing what not to buy at the flea market: shop the booths there for antiques and crafts, but not cheap Tylenol. And when shopping for collectibles online, be careful what you bid on when browsing eBay – the world’s biggest flea market. Although eBay promptly removes items that are known counterfeits, with millions of items posted daily, they can’t catch everything.