When you think of counterfeiting, you probably envision the knock-off designer handbags and watches sold on the streets of every American city. But counterfeiting is not confined to consumer goods: The truck parts aftermarket has been victimized by counterfeiters.
The Federal Trade Commission and the World Customs Organization in Interpol estimate that counterfeiting costs the global motor vehicle parts industry $12 billion a year and $3 billion in the United States. That’s according to the Brand Protection Council of the Motor & Equipment Manufacturers Association’s special report, Understanding the flow of Counterfeit and Gray Market Goods through the U.S. Automotive and Commercial Vehicle Parts Marketplace.
Tim Kraus, president and chief operating officer of the Heavy Duty Manufacturers Association, says he hears estimates of $30 million to $50 million in the heavy-duty aftermarket.
Phillip Rotman has spent nine of 15 years he’s been with Dana Holding Corp. as its chief intellectual property counsel.
“We have dealt with hundreds of counterfeit matters over the past 15 years.” He says Dana is aggressive against counterfeiters, and “our goal primarily is to take those products out of the marketplace. It is not so much about the money or getting damages for the infringement, it is more about removing the product.”
Jane Clark, vice president of member services at NationaLease, believes new technologies have made it possible for counterfeiters to create fakes that are virtually indistinguishable from the real thing. “With the pressures today to control costs in the maintenance operations, everyone is looking for the best price. Both the supply and demand [for counterfeit parts] are there, which creates the problem.”
The problem is made worse by “lack of knowledge about parts specifics from the end use, too much emphasis on the cheapest price, and not enough on the part’s expected life cycle or performance,” explains Stephane Godbout, vice president of fleet management for location at Brossard NationaLease.
Rotman explains that Dana views counterfeiters as criminals. “We think of their organization and distribution of products similar to drugs.” And the motivation behind selling counterfeit parts is the same as the one behind selling illegal drugs — easy money. “Counterfeiters sell a product that people want to buy and they sell it at deeply discounted prices.” In the case of truck parts, Rotman says, the quality of the counterfeit parts is inconsistent and not up to brand name standards – but it is priced 50% to 60% less.
The entrepreneurial nature of the truck parts market makes it ripe for counterfeiters, Kraus believes. “People see ways to sell things for a profit and identify niches in which they can sell.”
He says brake-related products seem to be a common target for counterfeiters. “That has major safety and liability issues,” he says. “Other [common] counterfeit parts are seals, bearing, filters, lighting and a range of appearance products.”
TJ Thomas, director of corporate marketing at Bendix Commercial Vehicle Systems, says counterfeiting is still a concern for Bendix, but not as big as it was five years ago. “We were aggressive in our actions [against counterfeiters],” he says. “Early on when we first saw it, we … targeted specific distributors that we saw were selling counterfeit parts.”
The company sent cease-and-desist letters and went so far as to shut down one distributor that was selling counterfeit parts at the SEMA/AAPEX show, with the support of show management. “Those actions put people on notice that they better be careful how they promote and sell Bendix-style products.”
Outright counterfeiting is not the only way branded truck parts are misrepresented.
“We see instances where people have taken our parts and treated them, coated them or used cryogenics on them,” says Aaron Bickford, director of brake and wheel end at Meritor.
He explains there is a way to do this “that has a positive impact on the part and there is a way to do it where you have a destructive impact on a part where it becomes brittle.” He recalls an incident where the company heard about someone selling Meritor parts that it said had been treated. “What we discovered was some guy in an abandoned strip mall in Florida. They weren’t even our customers. They were buying our parts somewhere else and then ‘treating’ them.”
Bickford also says Meritor sees some issues with gray market parts. “This is where people are bringing in parts from other markets that are similar in form, fit and function but are not designed for use in our markets.”
Another big problem Bickford sees is people not respecting Meritor’s intellectual property. “Someone will take our [intellectual property], create a product [for] a less developed market, and then people in North America will pick up on it because they shop [on the Internet.]”
Rotman says violations of intellectual property cause confusion in the market. Companies seek IP protection through patents and trademarks because “they come up with a unique idea, and when we are granted a patent no one else can make the product the same way we do.”
Product vs. package
Counterfeiters are not likely to violate patents, because they are not interested in making the large investments required to copy sophisticated parts. Patent violations are more likely to be made by companies already in the industry using their own brand.
Counterfeiters will, however, copy packaging in an attempt to make their products appear legitimate, and that could be a violation of “trade dress,” a form of trademark.
The product and packaging are often created separately, according to Dana’s Rotman. A counterfeiter will often reverse-engineer and produce the copied product without markings or packaging.
“They recreate the packaging, go to a printer and ask them to make the package,” he says. “A product without any markings isn’t a counterfeit product yet. It is just an unmarked product. It may look like Dana’s and may not infringe our patents.”
He adds, “You are allowed to reverse engineer a product, make it and sell it as long as it does not infringe a patent and does not contain brand name markings.” But when the packaging and product are brought together and sold as the original branded product, that is when it becomes counterfeiting.