- The Washington Times - Tuesday, September 28, 2004

Greg Booth says as many Zippo lighters are made in China as are made in Bradford, Pa., the company’s hometown.

The problem is, Zippo Manufacturing makes its iconic, rectangular lighters only in Pennsylvania. The Chinese-made products with the Zippo name are cheaper, tinnier knockoffs riding on the reputation and markets built up by the American company during the past 72 years.

“It’s illegal. And it takes sales and jobs away from us, from our workers,” said Mr. Booth, Zippo’s president and chief executive officer.

Zippo’s problem is far from unique.

Counterfeiting is a global problem that costs U.S. companies an estimated $200 billion to $250 billion a year, and China is the world’s leading source of counterfeit goods, according to government and industry data.

Resolving the rampant piracy in the fast-developing Asian nation is a top priority for the Bush administration and U.S. businesses, though so far progress has been limited at best.

“The infringement levels are too high, and it’s affecting American brands,” Deputy U.S. Trade Representative Josette Shiner said earlier this month as the administration initiated an effort to have companies document and measure intellectual property theft in China.

Intellectual property includes patented inventions and trademarked industrial designs, as well as copyrighted literary and artistic works. Knockoffs range from purses, sunglasses, DVDs and music to potentially hazardous pharmaceuticals, electrical products and automotive parts.

In one case this past summer, the U.S. Attorney’s Office in Houston won a conviction against Zheng Xiao Yi, a Chinese national, on six counts of trafficking in counterfeit merchandise. Mr. Zheng imported several illegally made products, including extension cords that burst into flames when tested under household conditions, according to the Justice Department.

When consumers aren’t directly affected, the bottom line and reputation of companies are, though the precise scope of the problem is unknown. Some companies may not even know their products are being copied.

“If you don’t have a counterfeiting problem, you probably don’t have a successful product,” said Paul Fox, spokesman for the Boston-based Gillette Co., maker of personal grooming products and Duracell batteries.

The pirating can be blatant. Mr. Booth said he has seen Zippo knockoffs sold on China’s streets. Zippo still sells about $7 million worth of its lighters a year in China, where the product is popular despite competition from cheaper imitations.

“In fact, the Chinese consumer looks very carefully and inspects the lighter before buying it … because they realize they can be fooled,” Mr. Booth said.

Still, the imitations take a chunk of Zippo’s sales in China and overseas.

Ashworth Inc., a high-end golf apparel company, has raided some counterfeiters and been shocked by their productivity.

“We’ve gone in and found thousands of units in storage areas, and in factories we’ve caught them in midstream production,” said Adrian Punderson, vice president of global security for the Carlsbad, Calif., sportswear company.

China is not the only problem: Russia, Ukraine, South Africa and other nations also produce counterfeits in high volume. But China is considered the worst.

“Based on available statistics and reports from our members, China has no equal either as a source of counterfeit and pirated goods to the world or as a market in which fakes are produced and sold locally,” the International Anti-Counterfeiting Coalition said in a report earlier this month.

The Bush administration negotiated specific commitments from China during meetings last April, including increased penalties for violations, a nationwide law-enforcement crackdown and an education campaign.

“We will adopt a clear-cut attitude and take resolute actions” to combat piracy, Chinese Vice Prime Minister Wu Yi said during her April visit to Washington.

But so far, companies have seen little in the way of results.

The Government Accountability Office in a report last week said the U.S. government is aggressively pressing foreign governments to improve their intellectual property laws but the desired result — enforcement — remains weak.

And the U.S. Chamber of Commerce in an annual report released last week said China must do more to keep the promises made when it joined the World Trade Organization in December 2001.

“Clearly China needs to do more to protect intellectual property rights, and we are urging Chinese authorities to take action in this area this year,” said Myron Brilliant, the chamber’s vice president for East Asia and co-author of the report.

The U.S. business group gave China high marks for meeting WTO obligations in many areas, including opening its market to some U.S. goods and services.

And there is hope that the country’s new anti-piracy laws would deter counterfeiting. But businesses hurt by counterfeiting say China must do more.

“The fact is that … they appear to be making strides in the right direction, but they are far from having a grip or handle on the problem,” said Ashworth’s Mr. Punderson.

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