The emergence of extremely well-made counterfeit goods is breathing new life into an old industry
Erika Fry and Maxmilian Wechsler
Six months ago, following a tip-off from the maker of an international brand of handbags, the Department of Special Investigation launched a four-month investigation focusing on a handful of high-end Patpong boutiques that were selling copies of the manufacturer's bags _ deemed by investigators to be the best fakes they'd ever come across _ for as much as 30,000 baht.
The investigation, conducted with the help of intellectual property rights investigators from the IP specialty law firm Tilleke and Gibbins, ended in a simultaneous supper-time raid on five shops. Forty DSI agents, a handful of lawyers attorneysand a crowd of journalists were present for the event.
By the end of the evening the five shops were emptied and four individuals were in custody. Thousands of bags, watches, belts and wallets were seized, and at least one tourist, having returned to the shop at the time of the raid to buy another 15,000 baht handbag he thought was real, was seriously discouraged.
The months of surveillance had also uncovered a nearby Patpong storeroom, which was also raided. The months of surveillance had not, however, uncovered sufficient evidence to nab the manufacturer of the bogus handbags, the suppliers, distributors or anyone else involved in the operation.
In interviews with the IP infringers, the lawyers did learn the methods of the operation, which they suspect took place entirely in Thailand. As discussed later, this situation is not necessarily the norm.
According to the lawyers, the counterfeiters buy real bags, completely disassemble them and then _ carefully and with great attention to materials and detail _ copy and manufacture all the parts and assemble them into very high quality, or ''triple A'', fakes. The lawyers say there are many distinct phases of the operation, with the players connected only by the business.
The lawyers at T&G expect the case against the four suspect infringers will be wrapped up in a year or so, when they will face a fine, jail time or both if found guilty.
Yet the same five shops have since reopened; their shelves hold the same high-quality, high-price handbags that were the focus of the four-month investigation only six months before.
The T&G lawyers, sitting in a pristine new office tower overlooking the port of Klong Toey, called the shops ''outstanding'' both in terms of the quality of the fakes _ repre senting 10 to 15 brands _ and the effort put into merchandise display and store decor.
They also admit their client is less than thrilled with the turn of events.
''Our client's objective is to disrupt these counterfeiting activities,'' explained lawyer Titirat Wattanachewanopakorn. ''Further actions will be carried out to ensure that these activities are eliminated.''
While IP protection in Thailand has won the attention and resources of government agencies, law firms, brand owners and police units for at least 20 years, the trade has only grown in scale and sophistication.
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| UNREAL: Fake watches are sold in Patpong |
Witness the recent rise of numerous ''super fake'' knock-offs. It may be mind-boggling to most people that anyone would pay in excess of 10,000 baht for a handbag, watch or other accessory that isn't even real, but those involved in Thailand's anti-counterfeiting forces say such deep-pocketed customers are increasingly common.
Besides the increase in triple A handbags and leather goods, law enforcement officials and IP attorneys report a rise in expensive fake jewellery, automotive accessories and electronic goods.
Unlike the inferior quality bags, belts and watches that can be bargained down to a few hundred baht on the streets of Patpong, these super fakes, sold exclusively in shops, attract a new, more affluent sort of customer, the kind that may be accustomed to buying designer goods, and who may never have considered buying counterfeits in the past, said Mr Titirat.
''These are usually marketed at upper-middle class locals or tourists with lots of money. The buyer thinks the product looks real, but they won't break the bank. The quality is almost equal.
''There are some people who will mix genuine and fake,'' added the lawyer.
A SERIOUS THREAT
The consensus among IP attorneys is that the super fake's appeal among brand-name buyers makes it a business threat far more serious than the typical 300-baht Patpong knock-off.
Police Major General Kowit Vongrungrot, head of the Economic and Cyber-Crime Division (ECD), says the high-end counterfeits are usually sold in tourist locations, and sometimes _ as was the case with a store raided in Nana district several months back _ in shops with a ''no-Thais'' policy. In such cases the ECD uses foreignors in their investigations.
Mr Titirat says the exceptional quality of many of the fakes can be attributed to the fact that they're produced in factories formerly licenced to produce a particular brand. While the facility no longer retains the rights to produce the goods, ''they know the product and have the know-how. It's not supposed to happen, but it does.''
In other cases _ including the Patpong boutique mentioned at the start of the article _ the products are totally a product of the counterfeiters' skill.
Oftentimes the fake goods are produced outside the country and smuggled in. Mr Titirat says Koreans are known especially for their expertise at copying luxury goods, particularly handbags. He says that some brand owners have been frustrated by Korean counterfeiters for several years. Customers may pay tens of thousands of dollars and wait several years for a legitimate bag, but the Korean knock-off is available on demand for just a fraction of the cost.
''The main focus of the counterfeiter is to make the product as similar as possible to the original,'' says Mr. Titirat. ''They will never test for safety, and they don't have to worry about marketing or R&D. Their only concern is if it is sufficiently similar to the real thing.''
Gen Kowit says the triple A goods available in Thailand are almost all imported, and emerged in the Thai market more than 10 years ago, probably when a Thai tourist came back with a then-novel high-end fake found during his/her travels. He believes most super fakes now come from China or Korea and are smuggled over the country's northern borders, trundled into commercial centres in one- or two-tonne truckloads. ''We can't estimate the overall volume, but the margin of high-end should goods should be minimal compared to the large number of inferior counterfeits that can be found roadside.''
Nonetheless, he says the ECD has seen a rise in visits from representatives of the licenced manufacturers of luxury goods regarding these sorts of products. Gen Kowit explained the ECD works closely with rights owners to investigate any information about counterfeit factories, warehouses or other inventory locations.
''We try to look at the distributors, not just those who are selling the goods, to cut the supply chain,'' he explained.
In most cases a representative of the IP rights owner will accompany police when they make a raid, to verify the goods are in fact fake. Titirat says T&G, which works with thousands of different brands, is typically involved in dozens of raids per month. One to three of these will target a manufacturer, while the rest will go after vendors.
''The biggest challenge to investigators is leaks, which can ruin a month's worth of work,'' said Pol Gen Kowit. ''There is a huge amount of money involved with these goods, and the counterfeiters have a very good defence system and a network of informants to protect themselves.'' He added that because the ECD invests considerable time and resources into investigating the triple A manufacturers/vendors, there are relatively few raids on them compared to the routine street-side vendors.
NOT-SO-CHEAP THRILL
According to one customer, besides the savings, another lure of high-end fakes is the ''thrill of it''. Jane, an American corporate executive, owns many genuine designer handbags and can easily afford more. She discovered the Patpong store (after it re-opened) through her tour guide when she was in Bangkok on business last month, after she had expressed an interest in seeing high-quality fake bags. The guide took her to the shop, where triple A bags were on the shelves, but even better ones were listed in a catalogue and kept hidden behind a curtain. She was told that the shop carried two kinds of bags _ real ones and very good copies. She was skeptical, but bought one anyway, unsure whether the product was real or fake. Another customer at the same shop was told by the owner that all the bags were fake. The owner then somewhat surprisingly began to point out the discernible differences in the fakes, as opposed to the genuine items. Nevertheless, the customer and her friends left the store after having purchased eight triple A bags.
Another visitor at the shop, a young expat named Pam who has previously worked in the fashion industry, found out about it through a family friend. She introduced a handful of friends (all similarly ''brand-named buyers'') to the shop, who altogether have purchased around 10 bags.
Though Pam says she had never anticipated buying a fake bag herself, she was so impressed with the store's products that she paid $150 for a bag (around 5,000 baht) that would have retailed for at least 3 times that. Having friends that have purchased (and been disappointed by) Chinese-produced fake designer handbags over eBay for hundreds of dollars also made it seem like a good deal to her.
She brought out the bag and pointed out all the detail, which made her question if the bag actually was a counterfeit. Because of her fashion background, she is especially aware of signs of authenticity. In the end, she decided that if the bag was not real, it was at least a ''very, very good fake''. Among other details, she pointed out the placement of logos, the enclosed certificate of authenticity, and the interior fabric. Still, she confessed to some guilt.
''I know it's not right, and when I go back to New York and have the income to buy the real thing, I will,'' she said.
For the time being though, she plans to keep visiting the shop, and if the past is any judge it's unlikely the authorities' counterfeiting suppression efforts will stop her.
DISMAL RESULT
A retired IP investigator living in Bangkok said that although counterfeits are a mainstay in Thailand, particularly in tourist markets, this most visible form of the trade only accounts for a fraction of Thailand's counterfeit business. Far more money is involved in the export of goods overseas. The former investigator added that the streetside stalls simply serve as showrooms.
''With all the millions of dollars and euros spent by brand names to suppress this illegal trade _ money which goes mostly to lawyers _ and with the thousands of seizures and arrests made by the police, the final result is more than dismal and totally unsatisfactory,'' says the former investigator.
Raids which result in the confiscation of goods, if not the ultimate shuttering of the shops, are considered a success, he added. ''This mess is a result of corruption on the part of some low-ranking officials and others who collude with the counterfeiters, for instance in warning them about impending raids.
''That doesn't mean that everyone involved in the suppression of the counterfeits is corrupt, but unfortunately even a minority can cause a lot of damage to the whole effort.''
The seizure by Thai authorities of around 35,000 fake watches in Bangkok and Samut Sakhon on November 5, after so many years of suppression, is clear evidence of the failure in combatting this type of crime. One official commented that it is not a cat-and-mouse game, but rather an elephant-and-ant game between counterfeiters and authorities.
Even Mr Titirat concedes that T&G has only a maintenance role in the fight against fakes, and is just trying to keep them somewhat under control. Completely eradicating this problem would be almost impossible without the full participation of everyone involved, including the customers. The best brands can do, he says, is to be diligent enough to defend, deter, and send copiers on to products which are less protected.
Pol Gen Kowit, while noting Thailand's resource limitations, says the the police are doing what they can.
''Statistics show arrests have gone up, but it's a low risk, high return business. That attracts people to come in.''
T&G's chairman, David Lyman, compares anti-counterfeiting efforts to ''taking a thimble to drain a row boat''. The super fakes have not changed the game, but they have raised the stakes.
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