AKRON, OH — It’s hardly been two years since MEMA first sent out feelers to its members, looking for any interest in forming a council to look more closely at issues relating to counterfeiting and intellectual property rights violations.
Since then, the MEMA Brand Protection Council (BPC) has not only formed a cohesive group to educate themselves and the rest of the industry about this growing problem, it is already making an impact on Capitol Hill. In June, 100 members of MEMA, including key members of the association’s Brand Protection Council, met in Washington, D.C. for MEMA’s Legislative Summit. While there, BPC members met with officials from both parties to give them a more intimate perspective on how counterfeiting and intellectual property rights are impacting this industry.
Several members of the council took time to talk with aftermarketNews.com about their own experiences protecting their companies’ brands against IPR violations and counterfeiting.
Their efforts appear to have paid off. In May, Congress passed the Stop Manufacturing Goods Act (HR 32), which mandates both the destruction of the counterfeit goods and the forfeiture of any assets traceable to illegal counterfeiting activities. It will also permit the courts to order the forfeiture of any property/equipment used to aid in the commission of the violation, such as tooling, raw materials and packaging supplies. The bill also prohibits trafficking in counterfeit labels, patches, stickers, hangtags or medallions.
Similar legislation is now being looked at in the Senate as well, with the hopes that creating a strong foundation at home will help to convince trading partners like China to get more serious about counterfeiting and brand protection as well.
The council started out with the initial goal of educating the industry about the impact that counterfeiting and intellectually property rights violations are having on this industry. Since its inception, the BPC has held several highly informative meetings, often with a speaker for Department of Homeland Security on the agenda, and has also published two informational pieces on counterfeiting to be distributed to the industry.
“I think after that first meeting, everyone who was there could see that if we had a strong foundation of industry members who had the same kind of feelings about these things and who were also interested in the political side of it, then we as an organization could accomplish things that many of these companies weren’t sure how to get done on their own,” said Allen Rowley, a founding member of the BPC and vice president of marketing and services for Remy International.
The BPC has made it its job to ‘bang the drum’ about the problem of counterfeiting and the industry has definitely heard it. Still, there are a few major barriers on the road to success. While better anti-counterfeiting and IPR laws are being developed, if victimized companies don’t take action, it makes it pretty difficult to prove to Congress that a real problem exists.
“It’s been really good that we’ve been able to push this bill through, but it doesn’t solve the problem,” said Paul Foley, vice president of the Automotive Aftermarket Suppliers Association. In additon, Foley heads up the BPC. “It’s up to the manufacturers, when they find people trafficking counterfeit parts to prosecute and go after them. I keep explaining to our members, it’s like cancer, if you don’t do something about it, it keeps growing.”
Unfortunately, according to Foley, sometimes businesses can find ways to justify not addressing the problem. Not only are they worried that calling attention to the problem will hurt their brands, they also have concerns about the costs and challenges of dealing with foreign companies.
For some companies, like Tenneco, the cost of pursuing a counterfeiter doesn’t always make sense.
“The dollar amount is not always that large and it can be an expensive issue to address,” said Jim Lewis, chief engineer for Tenneco and a member of the BPC. While Lewis said the company follows-up on all leads they take legal action where appropriate, but also utilize communications as an alternative method of pursuit.
Again, the MEMA Brand Protection Council has come up with a solution for this. According to Foley, the group is now organizing groups to share in the costs of prosecution and investigation.
“What we are doing is helping people pool those resources,” said Foley. “What we find overseas is that most of these counterfeiters are not just dealing in one part, they are dealing in multiple parts in the auto industry. We can hire a Pinkerton and share the cost among four or five members, or hire a law firm and do the same thing.”
Tenneco is, in fact, one of the industry’s success stories when it comes to anti-counterfeiting efforts. At the AAPEX show in 2002, the company first discovered an exhibitor displaying counterfeit product bearing the Tenneco name. While they discovered it too late in the show to take action, they made it their mission to blanket the show in 2003 looking for counterfeit product. In 2003 the company took legal action against four companies – two which were displaying Tenneco knockoffs and two that were illegally displaying actual Tenneco product. Apparently their aggressive pursuit set off an alarm because in 2004, the company did not find a single suspicious product bearing its name.
While some aftermarket manufacturers are reluctant to shine a spotlight on their own experiences with counterfeiting, other companies are using to their advantage. Among BPC members, several that we spoke with, such as Remy International, Federal-Mogul and GM/ACDelco are extremely vocal about the issue.
“In our case, our intellectual property, our inventions and the brand that goes with them is everything that our company is,” said Rowley. “Our Remy brand stands for the OE heritage, quality, reliability, durability and excellence. Once somebody tries to take some of those things and put them in a knock off product, it has significant impact on the reputation of our company. Our intellectual property and our brand are sacred and people or companies who are willing to violate that will get a strong response from us.”
AMN: I know that MEMA and the BPC were involved in legislation for the STOP legislation that passed in Congress in May. What does this mean now?
Paul Foley: It is only for the U.S., first off. What it does is increase penalties for counterfeit activity. There are some state laws that are different from Federal laws. On the Federal law, you can seize counterfeit property but with this new legislation you can seize assets, you can take equipment, cash in banks, etc. It also has a second amendment to it that allows for, the ability to prosecute label makers, package makers – people that are on the periphery of the business. So if someone is making boxes or plastic wraps that have trademarks on them and then sends them to a manufacturer, they are liable also.
AMN: Since it only applies to the U.S., how much of the manufacturing of counterfeit products does place here?
Paul Foley: Three billion dollars of the $12 billion worldwide.
The other part is, then you go around the world and of course we have trade agreements with the countries we trade with. And, in those trade agreement, every one has a patent and trademark/IPR section. What we are trying to do now is make sure that the U.S. government is enforcing those. That becomes paramount that our world trade negotiators are leaning on China, Brazil, Pakistan and Morocco and any country that is allowing this to go on.
It’s been really good that we’ve been able to push this bill through, but it doesn’t solve the problem. It’s up to the manufacturers, when they find people trafficking counterfeit parts that they prosecute and go after them and use the Justice Department and FBI. Hopefully, this will also throw a little more fear into these people, because up until now it’s just been a slap on the hand if you get caught. They might think twice about it. Maybe one day we will get laws that are as strict as those for drug violations. We’re not there yet, but we’re getting better.
AMN: The BPC has accomplished so much in short period of time. The council has only been together about a year. With all that the BPC has accomplished already, what are some of your upcoming goals, now that the bill has been passed?
Paul Foley: For almost the entire first year, we really focused on education. We had to get our members up to speed to fully understand what they need to do and what resources are available to them. In other words, they need to have their patents and trademarks registered with the patent and trademark department, that they also had to have them registered with Customs and Border Protection and/or in the countries they are doing business in or thinking of doing business in. Then, we had to take them through the process of ‘what do I do when I have a problem, how do I report it, what are the agencies I can go to.’ Then, at the end of the first year, we decided our next step would be to educate the industry because what we are trying to do is get across to the entire supply chain that this is not just a manufacturing problem, this is an industry problem that gives the industry a black eye. We all need to work together on this thing and be cognizant of the fact that this is a serious problem and can cause safety issues as well as ruining brands and companies. You need to be aware that you are responsible. If you are caught trafficking in counterfeit parts, you are liable. That was the next step
Now, we are really leaning on the enforcement. We need to really be pushing to get people to take action. We’ve educated the industry so people are looking out, now we mean business and we’re really going to start taking these guys to court and running proper investigations. Now, that’s in the U.S. Overseas, it’s another issue. We working with the embassies, we are working with the World Trade Organization. The U.S. Chamber of Commerce and collaborating with other industries to clamp down on those countries that are the major violators. If we don’t do something it’s just going to get worse.
The next major step we are taking is we’ve developed a public relations/communications work group within the Brand Protection Council. They are putting together a media plan, including a video. At our next meeting coming up August 4 they will present their plan to the whole council.
We also formed a Brand Protection work group in Europe. We’re not only doing it here. We’re taking it overseas and working around the world to try and stop it.
AMN: How many current members in the BPC?
Paul Foley: It’s about 50 in the U.S. and 27 in Europe.
AMN: You talked about the steps in your action plan — education within the industry and now enforcement. What do you think is holding people/companies back from pursuing enforcement? Is it that they are simply overwhelmed by the process?
Paul Foley: It’s a couple of things. One is a concern for cost. If it involves overseas, some people are concerned with having to hire investigation companies to do the investigation work, law firms and getting involved in the prosecution. What we are doing is helping people pool those resources. What we find overseas is that most of these counterfeiters are not just in one part, they are in multiple parts of the auto industry. We can hire a Pinkerton and share the cost among four or five members, or hire a law firm and do the same thing.
Then it becomes much more reasonable to go after these people. Now the second problem is the fear of tarnishing of a brand in the marketplace. They are a little afraid of waving a flag and pointing out the problem. Then everyone says, I’m not buying Brand A anymore. So, that is a concern, but I think we’re getting slowly over that.
That was the reason we created the print counterfeiting pieces. Companies didn’t feel comfortable pointing the finger at their products, so we did a neutral supplement. On the other hand I think we’re getting people more convinced that they don’t have any choice.
We had New York’s Assistant District Attorney speak to our members at our last meeting. He was really tough on them. He said the problem is, we, as Americans, are too nice. We’re too conciliatory. We would rather send a person a cease-and-desist letter. You can’t do that. These guys are crooks. You’ve got to get ugly – take their house, take their businesses. He said we need to change our attitudes and be much more difficult. Let the word get out that we don’t joke around.
Now we’re into discussions of things we’re learning from other industries. For example, Gucci bags. There is not a Gucci bag that come into the U.S. that is legitimate unless it enters through the port of Baltimore. They’ve limited the importation of Gucci bags to just one port so now they now, if it comes in through another port, it’s counterfeit.
AMN: Does this offer any potential solutions for the auto parts industry?
Paul Foley: It’s hard to say. The auto parts industry is so big. But these are the types of thought processes we’re going through right now.
Now what we’re doing is sharing best practices among our members – what successes have you had. It’s really interesting what we’re hearing as these companies are starting to take action.
They were afraid in the beginning. The trust wasn’t there.
Allen Rowley, Vice President of Marketing and Services, Remy International: I was one of the folks beating the drum, saying that we need an industry effort on protection of intellectual property and brand protection. Remy has been involved in several lawsuits, or potential lawsuits, where these folks were using our intellectual property and knowledge to make similar products to what we were selling, mostly in the alternator field. We have been outspoken and aggressive advocates of protecting intellectual property rights all along. I was one of the charter members of the Brand Protection Council.
At our initial meeting there were 43 companies sitting around a big table, none of us knew much about the other and each one of us individually got up and introduced ourselves and our companies. I think after that first meeting, everyone who was there could see that if we had a strong foundation of industry members who had the same kind of feelings about these things and were also interested in the political side of it, then we as an organization, working through MEMA and BPC, could accomplish things that many of these companies weren’t sure how to get done on their own. We’ve had several meetings where MEMA brought in individuals from U.S. Customs and Homeland Security and we’ve put together a ‘how to list’….All of us on the council share experiences, and contacts, etc. It makes getting to the bottom of these things so much easier than before because we have central industry focus.
AMN: You mentioned being outspoken about these issues, which is to be applauded. Many companies are still very hesitant to speak up about what they’ve been experiencing as far as intellectual property rights violations. Why do you think that is and why is Remy different and what’s the process when you suspect you’ve come across a Remy knockoff?
Allen Rowley: I don’t think we have a structure that we’re satisfied with yet. A lot of these things come to light through our sales people who could be at a customer location and they would perhaps see a product that looked a lot like ours, markings and IDs. We usually ask that those be sent to Anderson, IN., where we perform a tear down and test of the product. We can usually tell fairly quickly whether the product is ours or not. So, that’s kind of the way the process works. Our people in the field look out for us. Anytime they or a customer suspects it may not be our product we try to get a hold of that product and we do our analysis on it and if it turns out to be counterfeit or violating any of our brands or intellectual property, we approach that company legally, with a cease-and-desist letter.
Most of our problems, have come, believe it or not, from companies here in the United States, probably 80 percent in the U.S. and 20 percent outside this country. Obviously, it’s a global problem. We have been able to reach out of court settlements with everyone so far.
AMN: It sounds then as though HR 32, which recently passed in May, will be helpful to Remy.
Allen Rowley: Yes, there are two ways. One, it puts more teeth in the law here in the United States but it also sets a standard where our people who are negotiating trade agreements in other countries can use this as an example. We’re hopeful that our action both in the House and the Senate will serve as an example so our trading partners will see that we are serious about this issue.
AMN: Being that yours was one for first companies to speak out about this, and also given the fact that the BPC has come a long way in a short period of time, what’s next?
Allen Rowley: We hope to continue to be the industry’s voice and obviously we want to see countries have tough laws on the books, as well as a record of going after people who counterfeit or violate intellectual property rights. So, the next step would be to try and assist in some manner in our political process as it relates to our trading partners.
People need to understand how big this problem is. We need to do the best we can by having good, solid laws and reciprocal issues with our trading partners to make sure we are all in this together, because it hurts everybody.
Jim Lewis, Chief Engineer, Tenneco: For Tenneco it dates back to 2002. We found a company at AAPEX that was displaying counterfeit product with our name on it. At the time, we could not react quickly enough. It’s a show that only lasts three days. We couldn’t react quick enough to take action but we came back the following year in 2003, and really blanketed the show looking for counterfeit product.
We went from one company in 2002 to having four companies the following year who were displaying products with our name on it. We ended up taking legal action against them. As it turns out two of the companies were displaying counterfeit product and two companies who were actually displaying our product. It really raised our awareness as far as what was going on. We followed up from a legal standpoint. The next year MEMA became involved and formed the BPC.
As the BPC formed Tenneco became a part of it. We put out a number of publications, raising the awareness…
I’m pleased to note that last year we didn’t find any counterfeit Tenneco product at the show. We had some IPR issues but nothing blatantly displayed with our name on it. It has certainly improved significantly in the last few years.
AMN: We noticed that Tenneco is a lot more vocal about these issues than other companies…
Jim Lewis: Really the focus of the brand protection council is to raise awareness.
AMN: Do you have a team or process set up to handle these issues?
Jim Lewis: We have made our employees more aware of the issue. So they are out there looking for problems, whether their trademark or patent infringement issues. But it’s also a matter of educating our customers and following up on whatever leads you have.
AMN: What’s the next step?
Jim Lewis: I guess at this point, if we don’t have an issue, we’ve accomplished our goal. We’ve seen a marked improvement from 2002-2003. Looking at the point of entry it can be difficult to try and track the product down. Working with customs officials to identify what is counterfeit and what is not counterfeit can be a huge task. The dollar amount is not always that large and it can be an expensive issue to address. We’ve looked at communications as one route instead of attacking from a legal standpoint. We need to address the issue. You lose your trademark protection if you don’t enforce it. We are following up on all leads and taking legal action as appropriate.
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