It is well known that intellectual property theft affects the U.S. movie, music and computer software industry – pirated videos, DVDs and CDs are sold on the streets of many major cities around the world. Less well known is how product counterfeiting is hurting manufacturers of industrial goods.
ABRO Industries, an exporter of adhesives, automotive products and lubricants, has become a textbook example of how a company can not only lose sales from counterfeiting but even its corporate identity. In this first of several reports, VOA's Bill Rodgers takes a look at how ABRO Industries – and its suppliers – have suffered at the hands of a Chinese counterfeiter.
Tammie Tucker is a victim of intellectual property theft. She was laid off from her factory job at Guy Chemical for a time because of product counterfeiting. "I'm used to getting up and going to my job everyday,” she says. “And when you don't have that to go to, it's a loss."
Guy Chemical, in Somerset, Pennsylvania, makes silicone products used in automotive engines. Produced with the ABRO Industries label, they are exported by ABRO overseas. But rampant counterfeiting has cut into sales – hurting suppliers like Guy Chemical – and causing hardship for workers like Tammie Tucker.
"A lot of women that we have working here are single parents, it's the only income they have. And when word got out about the layoffs, girls were worried, they were crying," she recalls.
The same thing is happening to another ABRO supplier, U.S. Chemical and Plastics in Massillon, Ohio. It makes epoxies and other fillers used for automotive body repairs. Sales to ABRO have dropped sharply over the past three years, says national accounts manager, John Franken.
"Every sale that we lose, what happens is that it affects us in our income, our profits,” says Franken. “It affects our people because we don't need as many people. We end up, unfortunately, laying some people off."
U.S. Chemical sales of ABRO products are down 18 percent because of counterfeiting.
"We view it as economic terrorism," says ABRO president Peter Baranay. "They don't follow the rule of law, they're operating entirely under the radar, they are violating every conceivable rule and regulation there is in business."
He is referring to Hunan Magic Power Industrial Corporation in Hunan province. For years, the Chinese firm has been making fake, low-quality ABRO products and selling them around the world under the ABRO brand. Counterfeits – some displayed at ABRO headquarters – were sold in countries such as Pakistan, Lithuania, Kenya and Ecuador.
Some of the knock-offs are more obvious than others and even include spelling mistakes.
ABRO, based in South Bend, Indiana, first encountered Hunan Magic's blatant piracy in 2002 at the Canton trade fair. ABRO Vice President Tim Demarais was there. "I really was stunned to see a booth, a Hunan Magic Booth, full of ABRO products. It had our epoxy, our super-glue, our gasket-maker. They literally had assumed our corporate identity."
And there was more – a super epoxy package he designed featured a familiar face.
"I noticed they had the actual photo of my wife in some of the paperwork,” recounted Demarais. “And I asked them, 'Who is this woman?' And they said, 'It's just some western model.' I said: 'Western model! This is my wife!' "
Hunan Magic later replaced the picture but continued selling the epoxy under the ABRO label along with other fake ABRO products despite efforts by the U.S. company to stop the pirating.
And with lost sales, manufacturers, like the Guy Chemical Company in Pennsylvania, have had to cope with fewer ABRO orders and fewer workers on the production line.