To a certain extent, the sheer number of Apple knockoff products is flattering. It reaffirms that people hold Apple products in high esteem and demonstrates that devices like the iPhone and iPad are in high enough demand as to create entire criminal syndicates dedicated to manufacturing and selling counterfeit versions of these devices.
But that flattery, I’m sure, is fleeting. Counterfeit Apple products cost Apple millions of dollars each year and can even have a negative impact on Apple’s brand. After all, if someone buys a device that they think is the iPhone, only to experience a significant number of problems, the blame will unfairly fall squarely on Apple.
A recent wikileaks cable originating from the Beijing embassy in September 2008 relays that Apple in March of 2008 organized a team to fight back against the proliferation of counterfeit iPod and iPhone sales.
Members of Apple’s recently formed global security team were recruited from Pfizer after they executed a series of crackdowns on counterfeit Viagra production in Asia, the report says.
John Theriault, formerly Pfizer’s security chief and, before that, a special agent for the Federal Bureau of Investigation, leads Apple’s global security unit. Don Shruhan, who worked for Theriault at Pfizer, is now a director on Apple’s security team in Hong Kong.
Shruhan told the Beijing embassy official that his group at Pfizer spent five years planning raids on counterfeit drug rings, the cable says. He said he’s “afraid” of the volume of imitation Apple products being produced in China and about the inexperience of Apple’s lawyers in dealing with Chinese authorities, the report says.
Recently, Apple has faced an even greater, more sensational problem – the wholesale copying of actual Apple retail stores.
Over the past few weeks, well over 20 counterfeit Apple retail stores were found to be in operation in Kumming, China. In a brazen disregard for intellectual property, many of these stores copy in specific detail the look, feel, and setup of authorized Apple retail stores. Some of these stores do, however, sell genuine Apple merchandise, though that really doesn’t make much of a difference.
Now as for the mechanics of how Apple’s counterfeit security team operates, the leaked cable explains that Apple’s first target are retailers and street vendors who sell counterfeit Apple products to the public. Next up on the team’s radar are the manufacturing facilities that produce said devices. Cooperating with local police, Apple also helps organize raids on these manufacturing facilities. And the third prong in Apple’s attack centers on going after online retailers of phony Apple merchandise.
Interestingly, the cable notes that John Theriault briefed Steve Jobs on the matter in 2008 and advised him that “low-profile retail raids are a good option for Apple” because they like to avoid being in the spotlight unnecessarily. Somewhat ironically, Apple was all up in the news this past weekend amid reports that Apple security staff joined forces with the SFPD to investigate another missing iPhone prototype.
So while Apple is clearly attacking counterfeiters with full force, the efficacy of the program remains open to debate.
But Apple is having limited success. In countless stores and at tables setup on streets, merchants purporting to sell iPods, iPhones and iPads at deeply discounted prices are prevalent, said Wini Chen, a student in San Francisco who recently returned from studying abroad in Beijing.
“They’ll say, ‘Yeah, we have iPad. We’ll give you a really good deal,'” Chen recalled from her shopping trips. “If I really want to buy a knockoff Apple product, I could probably do that in 15 minutes.”
Part of the problem is that software piracy in China isn’t seen as a big deal. And whereas counterfeit medication, for example, can lead to serious injury and even death, counterfeit software theoretically hurts no one. Consequently, Chinese officials haven’t been as willing to cooperate with Apple as they’ve been with drug companies like Pfizer in the past.
Apple had planned to strengthen its case with the government by arguing that defective batteries could blow up and injure people, and that lost tax revenue could have a significant economic impact, the cable says.
The arguments weren’t very effective. China’s government declined to investigate a facility in March 2009 that was manufacturing imitation Apple laptops because it threatened local jobs, says a cable dated April 2009. A different arm of China’s government scrapped plans for a raid on an electronics mall in the Guangdong province because it could have driven away shoppers, the cable says.
Recently, Apple added another anti-counterfeit weapon to its arsenal when it sued counterfeit resellers in the US and abroad for hocking fake Apple products.
All in all, counterfeit products is arguably a good problem to have, but a serious problem nonetheless. For the time being, though, we imagine Apple is more concerned with legal counterfeit products – you know, all those Android devices.
I kid, I kid.