But there has been substantial change in this area in recent years, especially as the ROC government has strengthened its laws and — even more importantly — put teeth in its punishments and emphasized better enforcement.
Problems still remain. But as the following story indicates, considerable progress has been made in a short time, and the prospects for further elimination of product pirates are positive indeed.
It is 10:00 a.m., Tuesday morning. George Southrey, product manager for Nike Shoes, is on the phone with a private investigator. "Eleven thousand pairs!" Southrey gasps.
"That's right," the private investigator says. "And they're probably headed for Nepal or India."
Southrey hangs up the phone and shakes his head in exhausted relief. The counterfeiters will soon be stopped. But what a loss to Nike if they had not been!
This is one of many sting operations conducted by Nike to break up product counterfeiting rings. The day before, the local police had acted on tips from an investigator assigned to the case, and had raided a small factory in Taipei manufacturing cheap plastic upper castings for sneakers that would all eventually bear a purloined Nike trademark.
Southrey is all too familiar with today's general pattern of pirating trademarks. "If we hadn't seized the shoe parts, they would have headed for Calcutta, and then on to Nepal for assembly into fraudulent Nike sneakers," he explains. "Fortunately, we're having to deal less and less with this sort of abuse in Taiwan. But just three or four years ago, I estimate that 40 percent of the foreign label merchandise on the shelves here was counterfeit. I'm very happy to say that the percentage has dropped to the single digit level now."
Experts credit a major part of this decline in local counterfeiting to the kind of investigative operations Southrey initiated for Nike. The task has been aided immeasurably by the ROC government's moves in 1984 and 1985 to improve legal protection for trademark owners by revising the trademark law, thereby stiffening penalties for counterfeiters. Since then, police raids have increased, as have the odds for a successful prosecution.
General methods of nabbing offenders have already evolved. One approach is to have an undercover detective pose as a legitimate buyer who is looking for a particular item. The detective builds up the confidence of counterfeiters by demonstrating expertise during frequent visits to night markets, stores, and factories. It is only a matter of time before the detective discovers which factories are doing the counterfeiting and when. Once he knows the network, he informs the police.
The effort has paid off, and piracy of trademarks has plummeted. Even in the area of copyright protection, where enforcement is especially difficult, the push is beginning to gain momentum. Bill Thompson, general manager of Commercial Trade Services (CTS), a detective firm that also handles intellectual property cases, says that Taiwan has progressed tremendously compared to its Asian neighbors.
"When I arrived here in 1980, there were blatant displays of counterfeit merchandise almost everywhere you looked on the street," he says. "But today, even though you may see a counterfeit Snoopy doll or a few fake Rolex watches, the number of items is minuscule compared to other places in Asia where the count less number of phony items openly displayed along major avenues staggers the imagination. "
Jeff Harris, managing director of Orient Commercial Inquires Ltd., another private detective firm specializing in intellectual property violations, explains that the process of breaking up a counterfeiting operation can be complex, involving simultaneous raids on different factories, many of which are in different police districts or even different cities.
Southrey adds that the problem is often compounded in many Southeast Asian nations because the police themselves may be involved. But he and Harris both laud the cooperation of the authorities in Taiwan. Thompson agrees that he has found the police sincere and helpful at all levels. "When we schedule a raid, it succeeds about 98 percent of the time," he says. "In places like the Philippines, you can't count on such cooperation. You can expect to arrive on the scene and find nothing about half the time."
The decline in counterfeiting has other causes in addition to increased police action. Harris believes one is the appearance of a more sophisticated shopper, quick to spot fakes and no longer impressed with low quality products. Many experts also credit a government-sponsored public awareness program that encourages originality. Ads on television seem to have an impact as well, and Thompson believes posters at elementary and junior high schools are particularly influential. The drive has changed social attitudes toward counterfeiting.
But economic factors are of tremendous importance, specifically economic growth, the appreciation of the NT dollar, and advances in technology. "Counterfeiting is typically a low-capital operation," Harris says. "But the appreciation of the NT dollar forces up the costs of labor and assembly, and thus prices rise for consumers. The appeal of a counterfeit compared to a legitimate product consequently fades. So counterfeiters are making smaller profits, and often decide to move their operations to greener pastures. Whole factories are now moving to Thailand, whether they produce automobile parts, shirts, or watches. Why hawk a fake watch here that costs US$29 to US$35 to manufacture in Taiwan, when it can be made in Thailand for just US$12, and be sold more easily?"
Countries less developed than Taiwan are rapidly becoming the new centers for counterfeiting, including mainland China. The labor is cheap and workers ask for little. But Taiwan is still facing problems with eliminating high-tech and high-quality counterfeiting. Both the government and private investigators are now focusing greater attention on these areas, and are seeking to break certain international chains of more sophisticated counterfeiting that involve buyers, component-part manufacturers, and distributors in half a dozen or more countries.
A type of counterfeiting that so far remains fairly small-scale in Taiwan is piracy of automobile parts. This form of piracy has failed to boom because Taiwan possesses a large infrastructure for producing the products legitimately. A few factory owners might engage in some illegal spot work, since they already produce legitimate contact points, brake pads, or filters. Manufacturing a spin-off is simple, and the practice has been common in Japan for a long time.
But improved enforcement in the ROC is making life considerably tougher for the pirates. A few legal problems still need ironing out, such as protection for unregistered trademarks. But progress is now inevitable, and those who know how bad things were a short time ago can honestly say that the ROC has taken a giant step forward.