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Fighting Chinese Counterfeiters

Intellectual property theft has cost the U.S. economy some 250 billion dollars, according to some estimates, and more than 700,000 jobs. Pirated videos, DVDs and CDs are a common sight - and the U.S. entertainment industry has been hard hit by this practice.

But less well-known is that American manufacturers of industrial goods have become victims as more of their products are counterfeited, especially in China.

The Guy Chemical Company in Somerset, Pennsylvania makes silicone products used in automotive engines. Sold primarily overseas, Guy Chemical's gasket makers and other products have been counterfeited, thereby reducing sales and forcing the firm to lay-off workers from the assembly line.

Tammie Tucker was one of them. She was laid-off for about two months and suffered hardship. "I'm used to getting up and going to my job everyday. And when you don't have that to go to, it's a loss," says Tucker.

A Case of Intellectual Property Theft

Guy Chemical's products are made under the label of an American exporter called ABRO Industries. Based in South Bend, Indiana, ABRO exports automotive products, adhesives, spray paints and other goods made by suppliers like Guy Chemical to some 180 countries.

But for more than five years, its exports have been counterfeited and even sold under the ABRO label, primarily by one company -- Hunan Magic Power Industrial Company in China.

"We view it as economic terrorism. 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," says Peter Baranay, President of ABRO.

Baranay estimates his company loses 15 million dollars a year because of counterfeiting. And it has spent well over a million dollars in China in legal and other fees trying to stop Hunan Magic Power from counterfeiting its products and abusing its corporate trademark.

"We have done everything conceivable to stop Hunan Magic,’’ says Baranay. “We have attacked them legally within the Chinese system, we have had raids conducted in China and seized counterfeit products. We have aggressively gone after them in markets where they have shipped product in full violation of the trademark registrations that we have in countries like Cameroon, Ecuador, Peru, etc."

The China Connection

ABRO's experience in China is not unique. Most pirated products are made in China -- from DVD's to golf clubs. About two-thirds of the counterfeit goods seized by U.S. authorities come from China.

Chris Israel, the U.S. government's coordinator for intellectual property enforcement, says China is not doing enough to stop the pirating.

"We often fail to see a strong deterrent in the current environment in China when it comes to intellectual property, in violations there. There just is not swift and efficient deterrent and justice brought against those who engage in this type of activity. And that's where we need to see a significant amount of progress," says Israel.

The Bush administration recently introduced legislation to strengthen intellectual property rights enforcement and impose stiffer prison sentences against those convicted of certain types of counterfeiting. And it filed a formal complaint against China over copyright piracy before the World Trade Organization in April.

Chinese officials have urged Washington to withdraw its complaint, saying the government has always been firm in protecting intellectual property rights. In recent years, Chinese authorities have seized and destroyed pirated goods at highly publicized events.

No Simple Solution

While welcome, U.S. officials say more needs to be done though they also acknowledge there are no quick fixes for the problem of intellectual property theft.

"This isn't a problem that is going away soon,” says Israel. "Clearly in a lot of cases, we can't act fast enough and there's no limit to the things we can and should be doing. But I can tell you what we have been focused on here at the national level, the federal level of the United States, is making sure all the assets and the tools that the federal government has are working effectively."

In the ABRO case, Hunan Magic Power says it stopped making fake products in April following pressure from Chinese government authorities. But ABRO President Peter Baranay remains skeptical.

"I doubt they will do it. It's been too good of a deal for them. They've had too good of a run. They're not going to stop it now," says Baranay.

Most experts say intellectual property theft will likely continue until it begins affecting countries where the fakes are made.

The U.S. Chamber of Commerce has launched a project to persuade governments in Brazil, India and elsewhere that product piracy hurts them because they lose potential tax revenue to counterfeiting. This may be the first step in enlisting more nations in the fight against product piracy, thereby advancing the cause of protecting intellectual property rights.

This story was first broadcast on the English news program, VOA News Now. For other Focus reports click here.