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Pirated Products Are Big Business

Despite increased enforcement efforts, sales of counterfeit goods are a major headache for brand owners.

Despite increased enforcement efforts, sales of counterfeit goods are a major headache for brand owners.

This story first appeared in the December 6, 2007 issue of WWD.  Subscribe Today.

Although exact estimates of the scope of the illegal industry are hard to come by, industry and trade associations generally agree that counterfeiting and piracy is a $200 billion- to $250 billion-a-year business that accounts for roughly 750,000 jobs.

In the 2006 fiscal year, U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement reported an 83 percent increase in seizures of goods that violated intellectual property rights. That figure includes almost 15,000 seizures of more than $155 million worth of goods.

Customs officials at the Los Angeles-Long Beach port, the largest in the country, said confiscations of counterfeit goods last month jumped 24 percent on a year-over-year basis.

Louis Vuitton, Gucci, Coach, Levi Strauss and Nike were among the brands seized most frequently at the Los Angeles port, but they are far from the only labels facing a tidal wave of fake goods. Cartier, Chanel, Chloé, Dolce & Gabbana, Fendi, Seven For All Mankind and Rolex, among others, are also among the frequent targets.

Many of the counterfeits that slip through the U.S. ports wind up on street vendor tables, in back-alley “stores,” in otherwise legitimate retail locations and online. The same counterfeits seen in Chinatown in Manhattan can be found in countless other places.

Industry experts and luxury brand owners are awaiting the outcome of a lawsuit filed by Tiffany & Co. against eBay over online sales of counterfeits. Lawyers presented their final arguments before Thanksgiving and will file their last briefs on Friday. The decision of U.S. District Judge Richard Sullivan in New York could have far-reaching effects for the litigation of intellectual property matters, regardless of the outcome.

The lawsuit, filed by Tiffany in 2004, alleged that eBay should be held liable for the sale of counterfeits on its Web site. Brands acknowledge that the Internet and auction sites such as eBay, in particular, are the fastest-growing problem. The approach taken in the Tiffany/eBay case, known as “vicarious liability,” has proven effective in prosecuting landlords in Manhattan’s Chinatown who owned buildings where counterfeit goods were sold. It also has been used in some cases in markets in China. EBay has argued that it cannot be held responsible for the actions of individual vendors on its site.

Trade organizations within the fashion industry and key individuals have taken a strong interest in lobbying the House and Senate to tighten intellectual property laws. The Council of Fashion Designers of America and the group’s president, Diane von Furstenberg, are leading this charge.

The Design Piracy Prohibition Act is backed by Sen. Charles Schumer (D., N.Y.) and eight other legislators. The bill, which would extend copyright protection for fashion designs for three years, is in committee. There is no law that directly protects apparel. Registered trademarks are protected, and it is illegal to sell counterfeits of those, but there is no protection for apparel designs beyond that.