U.S. firms fighting the flood of fakes

PART 1 OF 5 IN A SERIES

updated 3:13 p.m. ET July 7, 2006

WASHINGTON - By the time David S. Pearl II finally saw one of the knockoff versions of his company’s refrigeration testing devices, the damage had been done.

For more than 35 years, Uniweld Products Inc. had painstakingly built its reputation in the air conditioning hungry Middle East. But as the cheap counterfeits entered the market, sales plummeted. Workers were laid off, consumer confidence destroyed.

The reason for Uniweld's misery sat before him, just out of an express-mail package: a Chinese-made, nearly identical version of the real thing — one of a flood of pirated American products, the bulk from China, that the United States blames for costing thousands of jobs, robbing companies of profits and seriously harming the U.S. economy's ability to compete.

In Pearl’s case, the bogus equipment matched the original right down to the name, trademark, address and phone number of his manufacturing company's headquarters in Fort Lauderdale, Florida.

The differences, though, were crucial: The fake products cost half as much as the real ones, and they didn't work. Pearl estimated that over the years Uniweld lost well over a million dollars, a significant amount for a small company.

“You look at them side by side, it is absolutely amazing how well they copied them, and it's scary,” Pearl, Uniweld's executive vice president, said. “The United States is a country of thousands and thousands and thousands of small businesses, who employ the majority of the employees in the country. For them to be hammered by Chinese counterfeits is a serious problem.”

U.S. lawmakers, government officials and businesses agree that stopping the theft of American brands abroad would save companies billions of dollars and would help to correct a U.S. trade deficit that hit an all-time high of $202 billion with China last year.

But the accord often ends there.

Businesses want lawmakers to do more; the U.S. Congress urges the Bush administration to take a harder line on China's alleged lax enforcement of existing copyright protection laws; and the U.S. government threatens China with punitive action in the World Trade Organization if progress is not seen.

Meanwhile, rampant theft of copyrighted American products continues.

Worldwide, officials estimate that piracy and counterfeiting cost U.S. industry as much as $250 billion a year.

The High Cost of Piracy Part 1: U.S. firms fight the flood of fakes Part 2: Russia's illicit industry booming Part 3: Mexico's piracy rises with broadband Part 4: China's piracy hurts its own industries Part 5: China companies begin to fight back

China is a major culprit, U.S. officials say, accounting for nearly 70 percent of all pirated products seized at the U.S. border last year — more than 10 times greater than any other American trading partner. Russia is also seen as a problem, with American business groups urging stronger pledges from Moscow to protect intellectual property before being allowed WTO entry.

Sen. Carl Levin, a Democrat who represents Michigan's auto parts makers, says China is thought to be responsible for about $9 billion of the $12 billion in estimated losses that that industry loses annually to counterfeits.

“There China sits while our government dawdles,” Levin told a recent congressional advisory panel. “We need to stop merely putting China on lists and start taking more effective action.”

U.S. officials say they are working hard to get Beijing to more aggressively fight the problem and to follow through on commitments made when China joined the World Trade Organization in 2001.

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