The Billion Dollar Competitor; Intellectual Property Theft

By Yvette Rabago

Are you familiar with the concept of Intellectual Property? Are you an owner of Intellectual Property? Is your company a victim of intellectual property theft?

Is it possible you’ve been victimized and don’t even realize it?

Intellectual Property is an original creative thought or design with commercial value which has been trademarked, copyrighted, or patented.

Intellectual Property owners are the possessors of the trademark or copyright (also known as the brand owner). As the brand owners, they decide how, when, and where their Intellectual Properties get manufactured, distributed, and sold. These are Intellectual Property owners’ exclusive rights.

A trademark is a unique and distinctive design, phrase or word mark used to identify the products and/or services of the owner (an individual, business, or legal entity). Trademark infringement is a violation of the exclusive rights a trademark owner has been provided by law, such as using a logo identical or similar to one owned by another party.

A copyright is protection provided creators of original works of art or authorship, including literary, dramatic, musical, and artistic renderings. The protection enforces the rights to both published and unpublished works. Copyright infringement occurs when the exclusive rights of a copyright owner have been violated by unauthorized copying of someone else’s copyrighted property, such as the unauthorized downloading of copyrighted material and sharing of music.

In cases of Intellectual Property theft, the victims are the brand owner(s), legitimate business owners, and consumers. Brand owners not only lose money but can suffer damage to their reputations for superior quality when consumers buy counterfeit, substandard products. Consumers waste money buying inferior and possibly hazardous products. Buyers of unwarrantable products have no recourse. Everyone loses but the thieves unless you take appropriate action to stop production and sale of fake goods bearing your company’s good name.

The theft of Intellectual Property, sometimes called counterfeiting, piracy and bootlegging, is on the rise, globally; with a currently estimated 7% of global trade involving fake products, counterfeiting is thought to cost U.S. businesses between $200 billion and $500 billion annually and leads to losses of important jobs. Counterfeiters seldom pay taxes; they usually create goods cheaply by paying unfair wages, using sweatshops and forced child labor.

Counterfeit items are sold on the Internet, in boutiques, salons, small retail establishments, and on the streets by vendors in every large city. Almost any merchandise including handbags, watches, tennis shoes, jewelry, music, movies, games, toys, beer, marking pens, and clothing is being counterfeited. You might be surprised and shocked to learn that tooth paste, baby food, airplane parts, auto parts and even pharmaceuticals are being counterfeited, as well. Numerous health and safety issues arise from counterfeiting; approximately 10% of pharmaceuticals sold in the United States are counterfeit.
And according to the Federal Aviation Administration (FAA), about 2% of airline parts installed each year are counterfeit. This means every year a staggering 520,000 parts used in repairing airplanes are counterfeit!

Intellectual Property theft is illegal, and consumers who buy counterfeit merchandise, wittingly or not, support illegal activities like organized crime, drug trafficking, and terrorism. Groups including Al-Qaeda, Hezbollah and Chechen Separatists have been linked to counterfeiting to raise money for terrorist activities. The group accused of the Madrid train bombings in 2004, which killed 191 people, partially funded their activities through the sales of pirated CDs. Another terrorist group is known to sell fake pharmaceuticals to support Hezbollah global activities. In 2001, Federal Prosecutors indicted more than 70 members of the Genovese crime family for offenses including trafficking counterfeit handbags. It has been reported that sales of counterfeit goods funded the 1993 World Trade Center bombing.

In addition, street gangs support some of their activities through the sale of counterfeit goods. This article’s author worked a case wherein a confirmed gang member was selling both counterfeit merchandise and illegal drugs simultaneously.

The growing threat of counterfeit goods makes it extremely important that you protect your Intellectual Property rights. First, trademark your Intellectual Property with the United States Patent and Trademark Office ( or at the Secretary of State’s Office (procedures vary from state to state, so check with your State Secretary’s Office). You can notprotect your Intellectual Property if it is not registered with the USPTO or Secretary of State’s Office. It typically takes from six months to a year to register a trademark.

Secondly, you should know your state’s statutes on counterfeiting. For the State of California, Penal Code 350(a) is Counterfeit of a Registered Mark. The Federal Statutes for Counterfeiting laws are felonies pursuant to title 18 of the United States Code, §§ 2318 and 2320. You can read your state’s applicable statutes and all the relevant Federal Statutes at

Next, you should record your Intellectual Property with U S Customs ( When they search containers coming in through our ports and come across “knockoffs” of your merchandise, they can take action. Be aware there are 11 million cargo containers entering U.S. ports each year and only highly suspicious containers coming through our ports are searched because of lack of manpower.

This author has worked several hundred counterfeiting cases and trained hundreds of U S Customs Federal Agents and law enforcement officers on detecting, confiscating and prosecuting cases involving counterfeit merchandise.

Counterfeiters will go to any lengths to import their illegal goods. We have seen counterfeiters cleverly packaging their products by covering counterfeit “knock-off” labels with generic labels; after clearing customs, they remove the generic labels and sell counterfeit items with the brand owner’s trademark.

In an attempt to inhibit counterfeiting, many brand owners utilize covert security measures to ensure the quality of their product and to aid in distinguishing authentic from counterfeit goods; these are often highly guarded trade secrets.

As an Intellectual Property owner, you should consider joining Intellectual Property Organizations such as the World Customs Organization, an intergovernmental and business security group exclusively focused on customs matters (

Also, WIPO, the World Intellectual Property Organization is a specialized United Nations agency dedicated to developing a balanced, accessible, international Intellectual Property system while safeguarding the public interest. The website serves as an online voice promoting anti-counterfeiting measures and resources.

The International Anti Counterfeiting Coalition is the largest non-profit organization devoted to protecting Intellectual Property and deterring counterfeiting. Their website,, has links for Intellectual Property Rights, Protection Acts, conferences, and even has a helpful quiz on spotting fake merchandise.

Once your Intellectual Property has been trademarked and you know your state’s counterfeiting statutes, you might have a counterfeiting case needing investigation. It’s not always easy to go directly to law enforcement and have them pick up your case. They’re incredibly busy and do not always take Intellectual Property theft cases seriously unless your provable losses are in the millions of dollars.

If you choose to go directly to law enforcement, make sure that you have a provable crime and that the agency to which you report it has jurisdiction. The more information you can give law enforcement, the more likely they are to take your case. Establish the retail value of your product; law enforcement appreciates knowing the amount of loss to help decide which cases to work and which to set aside because more cases than agents forces them to triage incoming reports. Let them know that your company’s policy is to prosecute any and all counterfeiters to the fullest extent of the law.

Make all contact with law enforcement a positive experience. Make your conversation simple and to the point. The way in which you communicate your case will often dictate the level and enthusiasm of their response.

For experienced guidance through an Intellectual Property theft case, hiring a private investigator can be a good investment. Having professionals looking after your company’s interests can result in faster resolution, greater success in stopping the violations, and larger recoveries of damages. Whether you choose our firm or another agency, there are a four things you should establish before hiring one:

  • Does the Private Investigator hold a current license in the proper jurisdictions?
  • Is the Private Investigator fully insured against claims of malpractice?
  • Does the Private Investigator have real, first person experience in conducting Intellectual Property cases?
  • Can the investigator provide references from law enforcement and Intellectual Property owners, to confirm he or she is credible and experienced with these matters?

As an Intellectual Property owner, you should be immersed in your case from beginning to end, communicating frequently with your investigator. Your investigator has to be able to fully prove the grounds for your state’s statute on counterfeiting.

You should make sure that your investigator can facilitate obtaining search warrants and working fluidly with the police, should the need arise.

Often, an undercover buy should be completed to prove the product is actually counterfeit. Once that’s determined, the brand owner may wish to proceed criminally, civilly or a combination of both.

If the brand owner wants to precede civilly, the brand owner’s attorney should have “cease and desist” paperwork ready to serve the counterfeiter. This is a notice to counterfeiters or merchants that they were illegally handling counterfeit products. The counterfeiter be ordered by a court to surrender all counterfeit merchandise and comply with the attorney’s demands.

If the brand owner wants to proceed criminally, he may want additional undercover buys done to solidify the fact that the subject (the counterfeiter) is knowingly and repeatedly selling counterfeits. The undercover investigator needs obtain evidence that the subject knowingly, willingly, and intentionally sold counterfeit merchandise. The investigator should also try to find out where the subject keeps additional stock.

Once it’s been established how much counterfeit merchandise the subject has and you have proof, photos, statements, physical evidence, undercover buys, etc., law enforcement can be brought in; they can obtain a search warrant.

While police are executing the search warrant, your investigator needs to verify the merchandise being seized is fraudulent. The investigator needs to be an expert in this discipline. If there is a large amount of merchandise, the investigator only needs to conduct a random sampling of the product being seized. During the execution of one such search warrant, the author personally recovered over 12,000 fake items. Conclusively verifying the counterfeiting of all 12,000 items would have been daunting: we identified approximately 100 pieces as examples and samples of the counterfeited goods, and this was sufficient for a successful prosecution in court.

Once your case gets to court, the Intellectual Property owner should request that the Deputy District Attorney seek restitution in an amount not less than the cost of your investigation, which includes retaining the investigative services, retaining and storing evidence, destruction of evidence, and your investigator’s court testimony time. Often money is confiscated as evidence in these cases; ask the District or U S Attorney to release these funds to your firm as part of the restitution. The victim company should also seek a court order to have the evidence seized and destroyed and to have the defendant subject to random search and seizure during probation.

Currently, punishment is often lax; small fines, little or no jail time and a few months of formal probation are common results of prosecution. Once in a while cases end in harder fines and more jail time.

We believe there should be a strong push by manufacturers and legitimate merchants to make the public aware of the sinister counter culture and terrorism associated with trade in counterfeit goods. To the degree consumers refuse to buy fake goods, the problem will subside.

Until then, arm yourself with the information you need, and the professionals you must have, to mitigate the damage counterfeiters can do to your business.

About the Author:

Yvette Rabago is a Corporate Investigator at Diversified Risk Management, Inc., Los Angeles, a full-service investigation firm specializing in labor and employment related investigations and risk mitigation consulting services. Ms. Rabago can be reached at +800.810.9508 or by email.

Posted in Legal Support, Security, Workplace.

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