Hot Topic: Knocking Out Knockoffs
Does counterfeit eyewear affect your business? You bet. Here's a rundown of the how and the why
By Erinn Morgan
Illustrations by Jon Krause
Counterfeit eyewear costs everyone—brands, manufacturers, suppliers, and even independent ECPs. “Counterfeit and illegally obtained goods have a devastating impact on legitimate retailers and manufacturers,” says Joe Larocca, senior advisor of asset protection for the National Retail Federation.
Adds Frank Lam, Marchon's vice president of product development, “It's a problem for almost every company in the industry; sunglasses are so easily copied.”
While statistics specific to the optical industry are few and far between, the overall counterfeiting numbers paint the concerning picture. The International Anti-Counterfeiting Coalition (IACC) estimates that counterfeiting costs U.S. businesses between $200 billion and $250 billion annually.
These astounding numbers come specifically from lost sales incurred by retailers and suppliers when consumers purchase counterfeit goods in lieu of legal, legitimate goods. The bottom line is that counterfeiting is big business around the globe with sophisticated production and distribution arms.
In fact, approximately five to seven percent of all world trade is done in counterfeit goods, according to the World Customs Organization.
PAIN POINTS
Lost sales and lost opportunity translate to losses for the American workforce. IACC estimates that counterfeit merchandise is directly responsible for the loss of more than 750,000 jobs in the U.S.
“Counterfeiting has increased over 10,000 percent in the last 20 years," says Robert Barchiesi, president of the IACC, which estimates that the annual global trade of illegitimate goods has increased from $5.5 billion in 1982 to $600 billion today. The cost of counterfeiting can be devastating to businesses, and its effects extend far beyond cashflow.
“The societal costs of knockoffs are enormous and can be measured in terms of jobs, tax revenue, health and safety and now more than ever, national security," says Barchiesi.
“There have been ties to the profits from the sale of counterfeit goods supporting terrorist organizations," he adds. Other links Barchiesi cites include child labor, organized crime, and human trafficking.
The frightening reality of counterfeiting is that its effects have a broader reach than ever before. “The scope of counterfeiting now cuts across every sector,” says Barchiesi, “from toothpaste, eyewear, luxury goods, and pharmaceuticals to movies, music, and even the computer chips found in military hardware such as war-planes, ships, and communication networks.”
COUNTERFEITING AND EYEWEAR
While the subject of counterfeiting flies a bit under the radar in the eyewear industry (many affected companies declined to be interviewed for this article), experts report that counterfeit eyewear is a huge headache for suppliers.
Illegal goods translate into an astounding amount of legwork and funds relegated to attempting to minimize the damage from this growing problem. High fashion brands (most of which have eyewear licenses) boast multi-million-dollar budgets targeted at combating counterfeiters that knock off their products.
A number of the major eyewear companies also have significant budgets focused on tracking down (and shutting down) those operations that steal their sales and lessen the impact of their brand.
“The optical industry vigorously protects their intellectual property by utilizing both criminal and civil remedies including going after rogue websites all the way to the flea market vendor," says Barchiesi.
Who is responsible for this behemoth effort? People like Oakley's Vance Lommen, the company's vice president of brand protection. “The state of counterfeiting in the eyeglass/sunglass industry today is always under control until another counterfeit vendor or distributor opens up shop,” he says. “By the time you have a handle on one, two more may have popped up.”
Highly sought-after sunglass brands are those most affected by counterfeiting. Those in the trenches report that sunglass counterfeiters have become sophisticated. “Sunglasses are a huge problem. Now they copy the exact styles the sunglass companies are making,” says Kris Buckner, head of Investigative Consultants, a private investigation firm specializing in counterfeiting with a focus on designer sunglasses.
“Most of these are manufactured in China and they are making them so an emblem pops right on. They ship it without the logo fixed on and ship the logos separately, then they marry them up here. There is nothing we can do to stop that shipment coming in without the emblem on it," Buckner says.
The quality of counterfeit goods has also been amped up, often to the point where seasoned investigators and customs agents have trouble identifying the products as fakes. “We are seeing a huge increase in higher quality counterfeit goods,” says Buckner. “These guys are very smart, if not brilliant, people.”
It seems the days of shoddy counterfeit operations are nearing an end. “Counterfeiters have business plans like most companies,” says Lommen. “When economies are down, they push out more counterfeits.”
Retailers, too, say they have to be cautious of questionable suppliers peddling counterfeit goods. This problem is particularly a concern in counterfeit-heavy cities such as New York, Los Angeles, and Miami. “I don't deal with counterfeit goods because everybody knows I won't touch them,” says Ed Beiner, owner of the nine-location, high-end Ed Beiner eyewear shops located in the Miami area. “Miami is very well known for this, but the bottom line is that it will affect the value of a brand if it is in every store and every t-shirt shop.”
NET EFFECT
The Internet has enabled counterfeit sunwear to become much more of a problem in recent years. “The troublesome state of counterfeiting in the eyeglass/sunglass industry continues to grow—online stores and auction sites appear to be the preferred method that counterfeiters use to distribute their wares,” says Barchiesi.
Oakley's Lommen says sales of counterfeit goods on the Internet in recent years has increased by 50 percent, noting that the web is counterfeiting's largest growth area. “There are some websites in China that are willing to show how you can become a counterfeit distributor and sell old public recorded patents,” he adds. “The product is fake online and so is the ID of the seller.”
What can ECPs do about counterfeiting? The best medicine for this industry ailment is to ensure that all the goods being purchased for the dispensary are legitimate products sold by reputable companies.
Doing so will help maintain the brand integrity of the products ECPs sell and it will help keep counterfeiters at bay. EB
| Counterfeit Q&A |
|---|
| We checked in with the Vance Lommen, Oakley's vice president of brand protection, to learn more about the fight against sunglass knockoffs. One of the best-known private investigators combating sunglass counterfeits today, Lommen lives on the front lines. In addition to his position with Oakley, Lommen has also worked in international brand protection for Luxottica Group, Oakley's parent company. His fervor for tracking down counterfeiting criminals around the world has earned him the monikers: The Viking, The Ghost, Thor, and James Bond. EB: Which products are most vulnerable to counterfeiting? Vance Lommen: It doesn't matter—if the product is hot, it will be knocked off. Money is key to counterfeiters and they don't care what the product is, nor do the people on the production line, as long as they are paid. It really doesn't matter, especially if there is a trademark that most people around the world are aware of. EB: Does counterfeiting cost your company time and money? Lommen: We invest each year to protect our brands, renew our marks, file new trademarks or patents, hire investigators, and pay attorneys. The cost can go up or down each year depending on the world's market. Oakley is different, however, as we do not keep record of loss of sales based on knockoffs. We are focused on protecting our quality and brand name around the world. I don't see the counterfeiters paying for taxes, business licenses, patents, lawyers, trademark filings, and so forth, so it's strange to see companies paying to register our trademarks, patents, and renewals in different countries when counterfeiters don't pay a thing. EB: Are there other costs involved with counterfeiting? Lommen: Each state and country loses millions in taxes since there is no product tax, business tax, and employee tax that counterfeiters have to file. EB: How does your company work to battle counterfeits? Lommen: Oakley has a brand protection department that works and monitors the world from the street level to the Internet 24 hours a day, 7 days a week. It's like fighting a drug war in that there are the same kind of methods but different types of products. However, counterfeiters and criminals know you do less time in dealing with fakes (or no time at all, only a ticket). EB: What is being done inside the optical industry to better police counterfeits? Lommen: We play the same games as the counterfeiters. We learn from them after each confiscation and develop a plan of action to stay ahead of them. However, most companies are on their way to developing a working enforcement plan and to selling it to the local federal state agencies and city police to enforce their trademarks. Brand holders must have the entire investigation completed before taking it to the police to help to get criminal action. There are civil courses of action, but that takes a lot of money and time for civil courts, especially in third-world countries. Additionally, dealing with counterfeiters knocking off our brand style without our trademark is an ugly and costly task since it's a civil matter and not criminal. Patent fights are expensive to battle especially on the Internet. |
| Knockoffs BY THE NUMBERS |
|---|
Estimated worldwide losses to legitimate businesses from counterfeiting and piracy:
Fast Fact: In 2002, the New York City Police Department uncovered a major stash of fake watches, handbags, sunglasses, and wallets in Chinatown worth over $125 million. The building hiding the merchandise contained secret tunnels, trapdoors, and vaults. |
![]({"src":"/media/zxjntkza/122010.jpg","focalPoint":null,"crops":[{"alias":"thumbnail","width":1110,"height":700,"coordinates":null}]})