The word "counterfeit" is easily associated with "money." But dead presidents are not the only things that whet the appetites of commercial criminals around the world today. Common counterfeit products include auto parts, airplane parts, apparel, cosmetics, sunglasses, computer software, fragrances, children's toys, medicines, health and beauty aids and food products. According to the U.S. Department of Commerce, losses to U.S. businesses from the counterfeiting of trademarked consumer products are estimated at $200 billion a year, and professional audio products are a slice of that cake. Ken Berger, senior VP of marketing and product development at EAW, says the problem is pervasive and persistent, particularly in South America. "That's where it's been most obvious and most problematic," he says, referring to poorly executed copies of EAW speaker bins, such as the KF series.
Berger says the alerts to fakes often come from local and regional distributors. "It cuts into their revenues and it negatively impacts the perception of the brand," Berger states. EAW has taken legal action on a few occasions in Brazil, an expensive and often frustrating undertaking.
Sister company Mackie has had its share of knock-off experience as well, Berger says, mostly in China, which agencies that track pirated products agree is the most egregiously offending nation, accounting for as many as 85% of counterfeit products worldwide. China's extensive electronics manufacturing infrastructure, in which factories have been known to turn out legitimate, licensed products on the day shift and run illicit duplicates at night, makes it ripe for copying any electronics products.
Berger has encountered blatant rip-offs, including one Chinese manufacturer of mixers that used a logo similar to Mackie's that spelled out "Macie" instead. However, Berger notes that Chinese manufacturers whose design begins to encroach upon the company's intellectual property (IP) generally back off quickly when confronted.
Larry the O, communications manager for Meyer Sound Labs, suggests that the increasing sophistication of many live sound products may actually help to insulate them from illicit copying. "It's tricky to pull off making self-powered speaker systems if you don't know what you're doing," he says. "You're sticking hundreds of watts into a cabinet and if you don't do it right, it blows up." He notes that virtually all of Meyer's speaker lines are active, and that has likely helped the company's products avoid being counterfeited.
Chris Parks, corporate intelligence manager at amp maker QSC, has seen knock-offs of their products that are accurate down to the name of the supplier of the circuit board. "They'll put tremendous effort into copying something, then they'll put a crossover diode in backwards," he says in disbelief. Parks says that customer service becomes the dividing line between companies that copy products and ones that develop original ones. "There's a limit to how much time and energy you can spend enforcing your product protections. You're often better off putting the effort into customer service. That's the key."
The U.S. and the European Union have become more active in pursuing counterfeit products in recent years, driven in large part by the software sector–including music–where pirating is rampant. Several months ago, U.S. Commerce Department Secretary Donald Evans lashed out at China's lax enforcement of IP regulations and treaties.
A stepped-up government effort to help American businesses avoid the problems posed by counterfeiting is apparently helping live sound equipment manufacturers. Dan Zimbelman, director of sales and marketing at console and signal processing maker API, recalls that someone identifying himself as from the U.S. State Department approached him at the API booth at the Musik Messe show in Frankfurt in 2004. "He specifically asked if we had been having problems with Chinese companies knocking off any of our products," he remembers.
Zimbelman says that companies with API's production model–higher priced/low volume–have a lower exposure to product piracy than those with the opposite model. However, like many other pro audio manufacturers, API outsources at least some of its manufacturing to China. "But we've been very careful about how much we send out," he says. "Only non-mechanical components–extruded knobs, that sort of thing. No moving parts."
Counterfeiting is a problem not likely to disappear anytime soon. However, John Wiggins, VP at speaker system maker Community, suggests that piracy, while deplorable, may be a phase that societies have to go through in a post-industrial age. "Some countries may well be going through a period of replicating ideas that ultimately leads to the development of a creative engineering culture," he speculates. "People griped about Sony making knock-offs of German tape recorders in 1955. Now look at Sony. And this is already happening in India and Latin America."
As governments get more of a stake in IP through their own manufacturing base, they will likely become more assiduous in protecting their homegrown IP in the future. In the meantime, though, U.S. manufacturers are going to have to live with a certain level of revenue impairment and the legal costs necessary to defending brand integrity. Like retailers learned long ago, despite elaborate and costly security systems, shrinkage–the commercial euphemism for theft–has to be figured into the cost of doing business to some degree.
