Ramblings & ephemera

A new fraud: faking an entire company

From David Lague’s “Next step in pirating: Faking a company” (International Herald Tribune: 28 April 2006):

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

Reports filtering back to the Tokyo headquarters of the Japanese electronics giant NEC in mid-2004 alerted managers that pirated keyboards and recordable CD and DVD discs bearing the company’s brand were on sale in retail outlets in Beijing and Hong Kong.

Like hundreds, if not thousands, of manufacturers now locked in a war of attrition with 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.

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 China, Hong Kong and Taiwan.

In the name of NEC, 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 Japanese company even received complaints about products – which were of generally good quality – that they did not make or provide with warranties.

NEC said it was unable to estimate the total value of the pirated goods from these factories, but the company believed the organizers had “profited substantially” from the operation.

“These entities are part of a sophisticated ring, coordinated by two key 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.

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