Few people question the impact that raid actions have upon Chinese based counterfeiters. The headline grabbing stuff often sounds something like “cha kou le gong chang, zong shu wei liang wan shuang jia xie” - Raid on Factory nets 20,000 pairs of counterfeit shoes.  Such actions are seen by many as the holy grail of IP enforcement, when in actual fact, they might not have that much effect on the overall supply of counterfeit goods.  Some might argue that raid actions do achieve their intended purpose, citing lengthy jail terms and monetary fines as a deterrent for counterfeiters.  If this is the case then why do US & European authorities continue to report steady, if not higher, incidents of counterfeited goods entering their borders from China?  Why do governments continue to report ever increasing costs to the economy as a result of counterfeiting?

 

The Great Co-Operative  

The Chinese small business community is firmly entrenched in what can be described as 'The Great Co-Operative". In The Great Co-Operative everyone joins together to form manufacturing, sales and distribution syndicates which can equal the size and reach of large corporations. These syndicates are often headless organizations without an established hierarchy. And that means that breaking down and identifying everyone involved can be extremely complicated.

 

Counterfeiters operate within this "Great Co-operative' because it so mitigates the risk and responsibility involved with the crime, that detection has proven to be unlikely. The growth of the internet and online trading has strengthened the development of this co-operative approach to counterfeiting, making these co-operatives even more clandestine and impenetrable.

 

Identifying Online Marketing Arrays using Online Research and Mapping

Mapping arrays can assist enforcement agencies and investigators to identify those Chinese co-ops that are engaged in counterfeit production and sales. Using well designed internet-based investigative procedures, we can accurately map significant components of an array and the primary, controlling nodes that need to be targeted in a take-down. Once all the elements are extracted from the Internet, these arrays can be used to generate a graphical representation of a counterfeiting syndicate as illustrated in Fig 1.

 

When structured properly, this will show all the manufacturers, traders and other elements in the array and how they're all connected. The elements of a Chinese counterfeiting syndicate displayed as an "array" are all linked in some tangible way. And it is these tangible links that we use to find them.
But what are the pitfalls of each collected link or element? Well for starters they require a heavy amount of research and analysis to identify and they could just lead to dead ends. In some cases, the collected elements for an array will be very loosely connected in the grand scheme of things and may even be totally false. Arrays will typically display many weak links. They could be identities who appear to be part of a counterfeiting syndicate but who in actual fact, are simply connected through the cooperative system. To give you an example: An independent sales agent may be connected to multiple elements in the array by a common telephone number. His connections may also be linked in the same way with other elements in the array, and so on. These connections alone do not prove any unlawful activity. They merely indicate the workings of 'The Great Co-Operative'- The trade of legitimate and fake products all rolled into one. Using some good internet search skills and smart data visualization software, arrays can be put together in a chart. This very use ful for identifying the strength of each link.

Pin the Tail on the Donkey

In an online marketing array or chart, It is often quite difficult choosing which target to take action against; the one that would cause the most damage to others in the array.

In reality, only a handful of companies in an array will actually exist whilst the others are non-existent, set up by members of the syndicate to trade goods, provide invoices and basically hide their true identities. All of the addresses are likely false or only partly correct and it would be an exhaustive if not overly expensive exercise to determine if all the persons named are real or not. What is likely to be real however, are some if not all of the mobile phones, emails, chat addresses and other contact points, since these are the tools needed to conduct business.

Many people involved in the investigation of IP infringement in China do not take the time to identify counterfeiting arrays, Nor do they consider it as an important part of the enforcement process. Focus is instead placed on raiding an individual target. Worse still is the likelihood that the investigators have ordered and paid for the goods seized. Such actions have little to no impact and in many cases the array is left in-tact, continuing business as usual.

 

Chinese Co-ops and Online Marketing Arrays – Part II: Identifying, Analysing & Dismantling Arrays

Decision Time. Whilst raids are necessary given the right circumstances, they aren’t the only thing you should be aiming for. In fact, if you analyse things from an impact POV the most effective way to bring about the demise of a counterfeiting syndicate is to bring down the array.  By doing this you can effectively stop an entire group of people from marketing and selling counterfeit goods.  To illustrate this, the array in the Gold Sun WinWin Syndicate (see figure 1) was totally mapped out, the main entities identified. Two small factories were raided and very few items seized. However, all the domains and URLs through which counterfeits were sold were taken down. In all, a group which probably sold millions of dollars in counterfeits each year had been pulled down with nowhere to go other than to start again. The cost was less than a criminal action and the impact was more severe.

 

Figure 1 – How the Goldsun WinWin grew over time. This is typical if arrays are left unchecked.

 

Identifying Arrays

Firstly, you can't do this through currently available commercial applications, which identify, sort and track counterfeit goods. Such applications will extract suspect infringements from the Internet through text base analysis, sort them into priorities and assist with URL takedowns but will not sort them by target name or look for matching data in an array. At the moment data matching at this level requires a manual approach.

A typical time frame for putting together something like the Goldsun WinWin Syndicate would be two to four days preferably in front of two PC's with fast Internet access. Google, as always is the most effective tool for this type of search process and doesn't cost a cent to use. It also allows for multiple language input and extraction, which is particularly useful when searching in Chinese. There are however some very good inexpensive commercial grade search software packages available that allow for prioritizing, auto page change tracking and reports.

To put the array together, you will need to completely identify as many elements as possible, record those elements and start data matching. This doesn't mean looking for exact matches either. In many cases you can find partially matching addresses, web addresses and company names that "almost match" and should be added to the array. Telephone numbers need to be thoroughly researched for matching exchanges and so on. Another thing to look for is syntax – the way advertisements and other text such as "About Us" can be used to match elements in an array.

Analysing & Identifying Entities in the Array

Once the array is charted, the next step would be to analyse the entities with a view to identifying which entities actually exist and which ones do not. Start the process by conducting China AIC Company searches.  In many large arrays, like the Goldsun WinWin Syndicate, you will find one or more registered entities. These are likely to physically exist and need to be identified and their location(s) confirmed. Verify all other entities and addresses in the array. It is likely none of them actually exist except in cyberspace.

 

Dismantling the Array

The most effective way of taking down the array is by removing any traces of advertising from the Internet, which is by law, infringing upon the IP rights of others. Counterfeiting syndicates can't survive if their product is removed from the Internet. This can be done in a number of ways:

 

• Complaint to the AIC (Administration for Industry & Commerce) through which process registered entities that breach TM, Copyright or advertising laws can be fined and forced to cease advertising counterfeit and or infringing goods. The AIC can also fine unlicensed businesses.

 

• C&Ds served directly upon entities found operating within the array. This is a popular choice considering many counterfeiters will either pack up and run or attempt to start up in another array, which can take months to establish.

 

• Contact the host server and complain to them that entities in the array are selling counterfeit goods or infringe you IP rights in some other manner. Host servers are legally bound to comply with take down requests.

 

Raid Actions

As already mentioned, raids are very worthwhile given the right circumstances.  Try to identify the best target; it may not be the one you started with. One way to do this is to present the array in a timeline sequence, then determine who started the array to begin with. You will probably find that this is the target you should be concentrating on. With the Goldsun WinWin Syndicate, the entity first identified in the investigation, hadn’t commenced operations until well along in the timeline and it was only a trading office, which processed orders as they came in.  To catch them out a large order would need to have been placed and the timing for a raid properly coordinated.  This was clearly not the most desirable target in the array. However by analysing the timeline in the array the primary target shifted to the entity which commenced operations back in 2008 / 2009. Surveillance showed a small warehouse containing enough counterfeit goods to conduct an administrative raid action.

 

Thank you for reading.

Next Issue- December 2011
Chinese Co-ops and Online Marketing Arrays – Part III Case Study: Investigating and Dismantling the Goldsun WinWin Syndicate

 

For more information about:

• The Chinese Counterfeit Industry,
• Training in Online Anti-Counterfeit Strategies and /or
• Anti-Counterfeiting Programs & Services
  

CONTACT:  Phill Arnold at phill@cisaa.com.au

 

About the Author:

Phill Arnold - Director of CISAA   22 years of Investigation Experience, 11 of those in IP case management. Phill is a passionate advocate for ethical investigation practices with a track record of Investigative excellence across the world.

 

 

 

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