Author Archives: paulparadise

You’ll be quite surprised if you search on Amazon.com for a book on product diversion, gray market, or parallel imports. I found one book, published in 2009.

Product diversion refers to products acquired through an unauthorized source and it is a huge underground  or ‘gray’ market. Product diversion is legal and usually involves products purchased in a country or region where the product sells for a lower cost and is then shipped to a country where it will sell for a higher price. It’s no secret that drug prices are lower in Canada and Mexico. Many Internet pharmacies use a domain name incorporating the word “Canada” to establish legitimacy.

Most consumers have purchased products off the shelf, without realizing it was diverted. Diverted products are a big problem in the cosmetics field. Paul Mitchell founded his line of beauty products and, after much effort that included driving around the country himself, had a company that was producing millions in revenue. Mitchell, who had twenty authorized distributors, began to find his product in discount stores and other locations. The problem became so bad that he launched a public awareness campaign.  https://www.paulmitchell.com/our-products/product-control/

Diversion is a lead source for counterfeit goods. A good case study would be counterfeit Similac. baby formula

In 1995, 54 complaints were filed involving children who developed skin rashes after their parents had fed them Similac. The FDA’s Office of Criminal Investigations (OCI) seized 500,000 pounds of a powdered  generic baby formula that was not authorized for sale in the United States but destined for Europe and packed to look like Similac. The counterfeiters had not followed the manufacturer’s safety standards in re-packing the fake product.

I’m enclosing an interview in the River View Observer that was distributed throughout Hudson County, NJ.

River View Observer Interview

The Counterfeit Detective is available for pre-order. I read a chapter recently at Pratt Institute’s Alumni Day and I delivered a short speech on The Counterfeiting Epidemic on cable television on Saturday.  I’m going to be interviewed by the River View Observer this Thursday. Check my website: www.paulrparadise.com.

In April, U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) announced there were 23,140 intellectual property rights seizures with an estimated manufacturer’s suggested retail price or MSRP of $1.2 billion in 2014.

The People’s Republic of China remains the primary source economy for counterfeit and pirated goods seized with a total value of $772 million, representing 63 percent of all IPR. Wearing apparel and accessories continue to be the number one commodity classification based on number of seizures with 7,922 seizures or 28 percent.  Watches and jewelry are the largest commodity classification by value with an estimated MSRP of $375 million or 31 percent.

2014 IPR Stats

I first heard about the Coalition to Advance the Protection of Sports Logos (CAPS) in the mid-1990s while attending a convention of the International AntiCounterfeiting Coalition (IACC). Each year CAPS sends out hundreds of cease-and-desist letters, usually to vendors and silk screen businesses that are infringing on one or more federally registered major league or collegiate trademarks.

CAPS purchased a zippered Chicago White Sox jersey from the ZIP-A-Tee Shirt website as part of their investigation, and then sent several cease and desist letter to James Cross, the owner of Zip-A-Tee-Shirt, in 2012 and 2013 and eventually contacted website-hosting companies to complain about Cross and his company, which resulted in the suspension of domains he was using.

Acting as his own attorney, Cross filed a law suit and asked for a declaratory judgment of non-infringement and injunctive relief, as well as $700 million in statutory damages, $5 billion in punitive damages, and an additional $500,000 for each domain change. CAPS moved to dismiss, asserting that Cross failed to state a claim upon which relief could be granted and for lack of personal jurisdiction. The Court agreed and the case was dismissed in May, 2015.

One of the most harmful and disgusting counterfeit products ever encountered is so-called “gutter oil”—so named because it is cooking oil that is made from sewer refuse, left-over oil from restaurant fryers, and rotten animal fat or slaughterhouse waste.  Nearly all of it is produced in China and is often sold to small restaurants. At one time nearly one-tenth of China’s cooking oil was gutter oil.

https://www.youtube.com/watch?v=zrv78nG9R04

Gutter oil was first discovered in 1985 in Taiwan.  Twenty-two people were arrested for involvement in a recycling oil ring. Reprocessing and filtration of gutter oil was primitive, mostly boiling and skimming off of larger adulterated matter.

The Chinese government initiated a nationwide campaign in 2011, which led to the shutting down of about one hundred manufacturers. Continued enforcement has led to other arrests. The Taiwanese police arrested a man named Chang Guann, a major lard supplier in 2014. Guann had purchased over 200 tons of gutter oil and sold it throughout Southeast Asia.

Since its launch in 1992, Coalition to Advance the Protection of Sports Logos (CAPS) has seized over 10 million pieces of counterfeit sports merchandise on behalf of its major league and collegiate members. CAPS values the merchandise it has seized at over $389 million.

The volume of merchandise seized by CAPS is a reflection of the success and consumer demand for sports-related apparel bearing the trademarks and names of big league players like Michael Jordan and others. According to statistics provided by the International Licensing Merchandisers’ Association (LIMA) in 2014,the sports category had $698 million in royalty revenue on retail sales of $12.8 billion, while a separate collegiate category had revenues from licensing estimated at $209 million, or $3.88 billion at retail.

Pete Rozelle who started out as the head of public relations for the Los Angeles Rams and became Commissioner of the NFL in 1959, is largely responsible for the major leagues moving into sports licensing. Rozelle established National Football League (NFL) Properties in 1963. The other major leagues followed with Major League Baseball Properties, formed in 1966. The National Basketball Association Properties was formed in 1967. The Collegiate Licensing Company (CLC), formed in 1981, licenses and markets apparel and other items for over 200 colleges and universities.

Remember Hydrox Cookies?  Well, they’re ba-a-a-ck.

On Wednesday (9/23) Ellia Kassoff of Leaf Brands was interviewed on WNYC on how he obtained the Hydrox trademark so he could relaunch Hydrox Cookies.

Hydrox was trademarked by the Sunshine Company that first made Hydrox Cookies over a hundred years ago. Kassoff discovered that Kelloggs owns the trademark and did something private investigators who specialize in IP do all the time: he called the company and spoke to a customer service rep, who told him Hydrox Cookies had been discontinued and there were no plans to bring the product (or its trademark) back into commerce. Kassoff wrote to the USPTO and the mark was declared abandoned.

Kassoff’s company, Leaf Brands, now owns the mark. Kassoff will be going head-to-head with Oreo Cookies. That will be quite a feat. Worldwide one in 20 cookies sold is an Oreo. Oreo Cookies got a big write up in this week’s New York Magazine (See: “Treats: The Oreo Boom”). Oreo sales are up 60 percent over the past decade and exceed $2.5 billion. Hydrox’s marketing pitch will center on its not using corn syrup.

Operation Red Zone was the largest seizure of sports-related apparel in history; a nationwide enforcement operation which began in September, 2012 and concluded six months later, with seizures of professional sports apparel and souvenirs amounting to $17.3 million in MSRP–196,333 items including fake jerseys, ball caps, T-shirts, jackets, sweatshirts. Sports jerseys accounted for nearly 29 percent of all seized counterfeits.

Special agents from ICE’s Homeland Security Investigations (HSI), U.S. Customs and Border Protection, U.S. Postal Inspection Service, and state and local police departments around the country worked in partnership with the NFL and other major sports leagues during the operation.

Operation Red Zone not only targeted international shipments of counterfeit merchandise as it entered the United States, but also focused on warehouses, stores, flea markets, online vendors and street vendors. 168 counterfeit tickets for the SuperBowl were also seized with an MSRP of more than $154,000. Forty-one individuals were arrested nationwide during the operation including six federal and 35 state and local arrests

“Sneaker Culture” is an art exhibition at the Brooklyn Museum of the Art that has approximately 150 pairs of sneakers on display and looks at the evolution of the sneaker from its beginnings to its current role as status symbol and urban icon. The popularity of sneakers has also spawned a huge market for counterfeits. The quality is very good and most of the fakes come from China.

A book was recently self-published on Amazon with the title: Mustle: I Must Hustle: How I made $50,000 Selling Counterfeit Shoes from the Trunk of My Car by Team9 Logic. I don’t expect any readers of this blog to buy the book, although someone should arrest the author for his chutzpah.

Many counterfeits target consumers who will pay thousands of dollars for limited-edition designer sneakers; these have panache with sneaker aficionados because only a limited number were produced. eBay and Instagram are good outlets for fake shoes because the customer can’t inspect the shoes until they arrive. I’ve read that 90 percent of the sneakers sold on eBay are fake.