In Depth

Counterfeiting: Faked in China

The world's biggest factory is also a fake goods hotbed. Here are 13 ways to protect your company. The second in a CSO series on counterfeiting.

By Todd Datz

January 01, 2006 — CSO — There are a thousand stories of counterfeit goods coming from China. Here's one:

Four years ago a Chinese company, Shenzhen Superway, approached The Will-Burt Co., the Ohio-based maker of Night-Scan telescoping masts, which provide high-intensity lighting and sit atop military and public safety vehicles. Shenzhen said, We would like to be the sole distributor of your products in China. Ditch the multiple distributors you've been using—make them buy your product through us. We have a large marketing force eager to sell, and we have a great relationship with the Chinese Public Security Bureau (the national police department). The bottom line is, we'll sell more of your product.

CEO Jeff Evans was impressed. "They had done a lot of research and had put together what they thought was a pretty good sales and marketing plan for our product before they even talked to us," he recounts. Will-Burt agreed to the deal, but Evans sought to make sure his company was protected by including noncompete and confidentiality clauses in the agreement that Shenzhen wouldn't steal Will-Burt's product or compete against the company. "We felt pretty solid. We were concerned, but on the other hand, it was a strong offer. Their first order from us was for a large number of units," says Evans.

The good feelings flickered out as quickly as a firefly's glow. After the initial rise in sales, Shenzhen stopped buying the product, and for a simple reason: Almost immediately, Shenzhen had begun reverse engineering the Will-Burt masts and building them itself.

Will-Burt's sales plummeted. One of the company's former distributors reported that Shenzhen was knocking off its product. When the president of Will-Burt's mast division went to a trade show in China to find the fake product, there it was, complete with Will-Burt's name on it; Shenzhen's manual even used pictures from the real manual, including that of an Ohio state trooper examining a mast. The Shenzhen reps warmly greeted their Will-Burt visitor and proudly showed off their fake Night-Scan, seemingly oblivious to the fact that they had broken a contract and ripped off their former partner's product.

Will-Burt reconnected with a former distributor. But the pain remains. "Now we're trying to sell against ourselves in the market," Evans says, noting that his company is competing against a cheaper knock-off. The irony, he says, is that Will-Burt's main customer is the law enforcement officials at the Chinese Public Security Bureau, which as a purchaser would be choosing between the real Will-Burt deal and cheaper counterfeits. Another pain point: Will-Burt, which is employee-owned, now manufactures its masts for the Chinese market in that country, not at its headquarters in Orrville, Ohio.

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• Unwelcome (Product) Diversions