Countering the counterfeiters.

The word "piracy" evokes images of peglegs, the 'black spot,' buried treasure and Long John Silver.

Mention the word to Peter Maheu, president of Los Angeles-based Trademark Protection Services, Inc., and he thinks of the billions of dollars and thousands of U.S. jobs lost to "product pirates" that illegally counterfeit and copy scores of patented and trademarked products every year.

"Counterfeiters are people who think they don't have to pay the dues everybody else does," says Maheu, a former police officer and chief investigator for the Pima County, Ariz., district attorney. "Product theft is a problem that blooms just as quickly as legitimate business opportunities. As new markets open up for American products overseas, so does the market for counterfeiters to get hold of new products, copy them and reap tremendous profits for themselves."

U.S. business losses

Trade experts estimate that for every legitimate international business transaction, there's another that involves the importation of an illegal copied product.

Inevitably, many of those illegally produced products wind up being exported to the United States costing U.S. companies as much as $63 billion a year, according to the International Trade Commission in Washington, D.C.

The U.S. Customs Service is the U.S. government agency charged with the interdiction of illegal counterfeit products coming into the country from overseas. Stretched by responsibilities that exceed its manpower and funding, the agency estimates that it has the capability of seizing only about 10 percent of the illegally produced goods that pass through the nation's air and ocean terminals.

In 1991 alone, Customs seized 425 shipments of counterfeit toys, computers, apparel, watches, perfume, auto parts, and other commodities valued at more than $33 billion. Exporters from Taiwan led the list with 101 seizures, followed by China (80), South Korea (51), Hong Kong (43), France (18) and Egypt and Germany tied with 13 apiece. Other countries on the list included Thailand, Japan, Italy, Canada and Indonesia.

Pockets of progress

Long considered to be hotbeds of product piracy, several countries including Taiwan and Hong Kong have actually come a long way in cracking down on illegal trademark infringement and the like over the past several years.

Singapore, which for years had an international reputation as a hive of counterfeiting and piracy, has significantly reduced the amount of illegal activity there by easing the access to its court system by foreign companies and by increasing the criminal penalties for trademark and copyright infringement. At the same time, the government there has induced a number of American companies to build manufacturing facilities there so that their products aren't so attractive to pirates and counterfeiters.

The United States has also taken some giant steps in broadening the protective umbrella over U.S.-sourced patents, trademarks and copyrights.

In 1989, the United States joined the Berne Convention, a multinational agreement aimed at the international copyright protection of literary and artistic works, while the government has also been instrumental in expanding the scope of the General Agreement on Tariffs and Trade (GATT) to include the increased protection of trademarks, patents, copyrights and intellectual properties.

Trouble spots

But some countries -- Thailand and some countries in Latin America and the Middle East -- remain focal centers of product counterfeiting and piracy. According to the Motion Picture Association of America, counterfeit gangs in Thailand have all but wiped out the market for legally reproduced videotapes and motion pictures.

The problem, the association says, is so bad that staff members of the Thai government's Intellectual Property Protection Organization continually operate under threats of violence.

"These people are criminals," says Trademark Protection Services' Peter Maheu. "They take advantage of weakness and laxity and they'll move in wherever and whenever they see an opportunity to make some money. They don't care who they hurt or whose business they upset."

Maheu began his company eight years ago and currently has offices in 30 U.S. cities and affiliates in Japan and Hong Kong. Trademark Protection Services' clients are individuals who've taken the initiative and have decided to protect themselves by shielding their products from copying to the type of businessman who'll be strolling through a shop in Santa Barbara on vacation with his wife only to find one of "his" products sitting on the shelf with a pricetag considerably less than what his product should be sold for.

Buyers beware

His clients include such companies as 20th Century Fox and Spelling Productions -- international big names that market millions of dollars worth of promotional products all over the world every year.

"We go after the retailer who'll buy a product for 15 percent of what the legitimate market value really is," says Maheu. "We hear 'But I didn't know it was counterfeit!' all the time, but the federal government has recently taken the intent issue out of the picture. The government now says that a buyer should exercise good judgment in purchasing products for sales in his store. In other words, if a deal is too good to be true, the government says the products in question are quite probably stolen or counterfeit and the buyer should act accordingly. Ignorance is no longer a defense."

What can business people do then to make sure they won't lose their shirts in the international marketplace?

Legal counsel and working with the government to protect a trademark or patent are critical to avoiding the potential of lost revenues and high-level anxiety.

Protective measures

According to Chris Larkin, a partner in the Los Angeles law firm of Graham & James, there are several important steps a company should take before it considers taking its product overseas.

"Lesson one is not to do anything in the way of negotiating with a potential overseas distributor or agent before you've taken steps to register your patent or trademark in the country you plan on working in," says Larkin, who specializes in the protection of intellectual property.

"There are plenty of stories about U.S. companies going international only to find they have to buy back the foreign rights on their own product because they didn't make the effort to protect themselves beforehand."

According to Larkin, another smart move is to establish a relationship with legal counsel in the foreign country where you plan to do business. "That way," he says," you have somebody on site who can represent your interests. Every country is different in the way it handles trademarks, patents and copyrights. So a person on the scene is of immense importance."

U.S. Customs recommendations

The relationship, he adds, can be established through your American counsel. "Virtually all U.S. international law firms have either direct relationships or representative agreements with law firms overseas. This link is really important because it creates an unbroken chain of communication that affords a high degree of protection."

"Making protection against pirates and counterfeiters a part of a company's overseas business plan can go a long way in clearing a lot of very ugly legal problems out of the way ahead of time," he says.

The U.S. Customs Service recommends several initial steps in protecting a product before a company takes it overseas.

First, register your patent or trademark with the U.S. Patent Office at the Department of Commerce in Washington, D.C. Copyrights can be recorded with the U.S. Copyright Office at the Library of Congress.

Second, record your copyright or trademark with the U.S. Customs Service. The fee for this service is about $190 and companies in Southern California can obtain more information by calling the Customs Services Regional Office in Long Beach at [phone].

Next, use the Customs Service's Commercial Fraud Hotline -- 1-800-USA-FAKE -- anytime 24-hours a day if you suspect that your product has been pirated.

Preventing duplication

In addition, many industries such as the motion picture videotape and sports card industries have taken the initiative to specially design their products with built in anti-counterfeit features such as holograms and cassettes that don't permit duplication.

Do all you can to make your product cheat-proof, but if that's not practical, use every means to make sure that your work is covered as completely as possible by the umbrella that the government can provide, Customs says.

But above all, says Maheu of Trademark Protection Services, people need to see that everybody pays when piracy goes unchecked.

'Like the drug trade'

"This is like the drug trade. If the demand goes away, so will the supply. The public needs to understand that enough people thinking they're just saving five or six dollars for an illegal copy of a Bart Simpson T-shirt or a Teenage Mutant Ninja Turtles doll can cost the whole economy a whole lot more in the long run," he states.

It's especially true, he says, of those products that have more serious implications.

"Counterfeit aircraft parts and medical equipment are made with no quality control standards and the people who are responsible for making it and selling it really don't care what happens to the people who might get injured or even killed."

"The bottom line is all these people care about," Maheu concludes, "and they just don't care who they cheat. They can be very, very creative but legitimate business people have to be just as creative and proactive to protect themselves. Unfortunately, greed is quite a motivator."

Victoria Eslinger is manager of trade services for the Greater Los Angeles World Trade Center Association.