Anti-pirating service providers in China often play a double game with their clients, according to an investigation by the Associated Press. They work as respected detectives for Western firms while doing business with brand pirates.
The list of intrigues is long: Some detectives are said to themselves engage in a booming trade with imitations of their clients’ products. In other cases they faked documents in order to simulate police raids and embezzle bonuses for fictitious successes. Finally, the private investigators are said to have directly cooperated with counterfeiters who provided them with counterfeits, which are then allegedly “confiscated” at the costs of the original manufacturers.
The example of ABB Ltd (Asea Brown Boveri) shows that even large businesses aren’t immune to such frauds. The globally operating technology company suspects that it fell victim to all three types of fraud. The details in the ABB case recently became known because of a lawsuit filed by the Swiss manufacturer in 2009 against its former Chinese anti-piracy consultant.
ABB claimed that the firm China United Intellectual Property Protection Center (CUIPPC), which it had engaged to protect its brand in China, was directly involved in the violation of ABB’s brand rights. A key CUIPPC employee had even previously been convicted of dealing fake ABB products in a trial in Dubai. In a video from 2009, she explained that she could sell as many imitated ABB products as she wanted with the knowledge of her supervisor, because her firm had a contract to perform ABB’s anti-piracy work, which meant that no one would pursue her.
Nonetheless, the Chinese judge came to the conclusion that the employee of CUIPPC had operated without the knowledge of her supervisor. The court ultimately decided that ABB had to pay outstanding invoices in the sum of roughly 500,000 US dollars (approx. 458,000 euros) to CUIPPC. The partly questionable invoices included items such as 5,000 US dollars for a raid in which counterfeits worth 1 US dollar were found. The judge took only a single day to evaluate 1,500 pages of evidence provided by ABB and come to a judgement. Before, an important witness for ABB wasn’t permitted to testify, as he didn’t receive the necessary visa in time for his testimony, which was planned on short notice.
Yet ABB is far from the only victim of questionable investigation firms. A globally leading producer of consumer articles, for example, reported that it had engaged a service provider for investigations into counterfeited shampoos. The investigator himself proceeded to open his own factory for counterfeit shampoo, and had its counterfeit products “confiscated” at the cost of the original manufacturer.
For experts, such cases are nothing new. “This is a well-known phenomenon that has been around for years,” commented Horace Lam, an intellectual property expert in the Peking branch of the DLA Piper Global Law Firm. The Chinese authorities also seem to be quite aware of the questionable investigative firms. The Office for Public Security warned against such service providers, and called on brand owners to dedicate sufficient attention and personnel to the fight against piracy. Yet the Chinese officials also seem to act in a questionable manner as there seem to be, for example, lists of firms which cannot be raided.
The anti-piracy service providers are also alleged to provide protection from prosecution. Often the counterfeiters informed on other brand pirates via proxies in order to avoid being raided themselves, reports Kevyn Kennedy from CBI Consulting. This is said to work just like a protection racket.
