Counterfeit parts

Suggestions for avoiding them and their consequences


“Successful American auto parts brands are the envy of the world,” he notes. “Whether U.S. companies supplied world markets exclusively from North America, or also used foreign-based production, pirates would still want to exploit stolen U.S. trademarks to reap huge profits.”

CRIMINAL ACTIVITY

Counterfeiting is criminal activity which the FBI has labeled the “Crime of the 21st Century,” says AASA’s Handschuh. It is extremely difficult to quantify the economic and industry-wide costs because of the illicit nature of counterfeiting and piracy, Kadrich says. Because of the significant differences in types of counterfeited and pirated goods and industries involved, no single method can be used to develop estimates.

Handschuh says data from the Center for Automotive Research (CAR) shows the motor vehicle parts supplier industry produces $388 billion in sales annually and employs 686,000 people. The $3 billion in sales lost to counterfeiting can translate into 5,000 to 6,000 lost jobs directly in the supplier industry and nearly 28,000 indirect jobs lost - positions at businesses supporting supplier companies. The average median income in the parts supplier industry is $46,000, so the resulting job losses can translate into $230 million to $275 million in lost taxable income.

Lost sales of automotive parts also occur in overseas markets where counterfeiters have for many years preyed on the trademarks of respected American suppliers.

The greatest cost of counterfeiting and intellectual property rights (IPR) violations go beyond lost sales and manufacturing. “These fake parts pose a serious safety threat to the unsuspecting repair professional who installs them, to the unsuspecting driver who has counterfeit parts on his vehicle and to everyone traveling our nation’s roads and highways,” says Handschuh. “Counterfeit parts also damage a legitimate company’s good name and reputation, and can lead to product liability claims.”

Back in the 1980s, the tools for tracking and fighting counterfeiters were primitive compared to what technology provides today, says Kadrich of AAIA. The industry began pushing for stronger U.S. laws, as well as a new international agreement, to deter counterfeiting.

AAIA and other groups succeeded in securing passage of the 1984 Trademark Counterfeiting Act, he says. The law, for the first time, made counterfeit trafficking a federal crime punishable by fines and imprisonment and greatly beefed up civil suits for damages caused by counterfeiting.

AAIA was also involved in getting a1994 global accord by nations to provide intellectual property rights (IPR) protection. However, Kadrich says “ineffective and uneven enforcement by some countries means that overseas counterfeiters are still actively stealing sales from U.S. parts makers.”

To address the serious issue of counterfeiting and other IPR violations within the automotive manufacturing community, AASA, the Motor & Equipment Manufacturers Association (MEMA) and its affiliate associations - the Heavy Duty Manufacturers Association (HDMA) and the Original Equipment Suppliers Association (OESA) - created the Brand Protection Council in 2004. It provides a forum for manufacturers to discuss counterfeiting and other IPR violations with a focus on North America.

The Brand Protection Council, MEMA, AAIA and others played a role in the 2006 passage of the Stop Counterfeiting in Manufactured Goods Act. It extends the authority of federal seizures to include the tooling, equipment and supplies used to produce and traffic counterfeit goods, in addition to the goods themselves. It also mandates the destruction of equipment and materials used for making and packaging counterfeit goods and strengthens penalties for counterfeiters.

AAIA, the Brand Protection Council, MEMA and others also played a role in the passage of the Prioritizing Resources and Organization for Intellectual Property Act (PRO-IP) of 2008. This law helps bolster the effectiveness of the government’s intellectual property protection efforts.

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