In a shop tucked way down a long narrow corridor in a Richmond mall, you won’t find just a few fake designer bags for sale; you can thumb through entire catalogues full of them.
Like the knock-off men’s True Religion jeans that line the shop walls, the menus of phony luxury bags are out in the open, stacked by the cash register: Louis Vuitton, Chanel and a grab-bag catalogue with everything from Juicy Couture to Hermčs.
“They’re all [excellent counterfeits],” a shop girl told two undercover Business in Vancouver reporters on a recent Friday afternoon, producing a fake Louis Vuitton bag. She showed how each knock-off designer purse comes with a certificate of authenticity and a serial number.
Prices ranged from $200 to $300 for a smaller bag and from $300 to $400 for a larger size. The popular Louis Vuitton Neverfull, normally retailing at $765 for a medium-sized bag locally, goes for $230; the iconic Hermčs Birkin, retailing for $7,650 and up locally, depending on custom details, goes for $780.
The purses come from China, Korea and Japan and take two to three weeks to arrive, the salesgirl said. And finally: if a product couldn’t be found in the catalogues, it was likely still available.
“Just bring in the style number.”
The shop is an indication that a black market trade in counterfeits is alive and well in Metro Vancouver; although just weeks earlier, a Federal Court had ordered Vancouver-based counterfeiting operations Singga Enterprises Inc. and Carnation Fashion Co. to pay more than $1 million in damages to Louis Vuitton and Burberry in late June.
While the RCMP has no estimates of the total volume of counterfeit goods sold locally or transiting through Port Metro Vancouver en route to North American destinations, the dollar value of annual counterfeit seizures is rising in Canada. In the first nine months of 2010, the most recent available statistics, nearly $22 million in counterfeit goods was seized in the country.
Sgt. Dany Bernier, the RCMP’s intellectual property crime co-ordinator for B.C. and the Yukon, said Vancouver is on par with other major Canadian cities for the volume of its trade in counterfeit goods, but the city sees a disproportionate amount of fake goods transiting through the port on their way to other North American destinations.
“We’re the entrance to the U.S. and Canada,” said Bernier.
Currently, most fake goods are coming from China. According to the RCMP, 80% of counterfeit goods seized last year in Canada came from China, Hong Kong or Taiwan. Bernier said virtually no phony goods are getting manufactured in B.C.
Yet while the phony goods are arriving in Vancouver, just a small proportion of them appear to be getting caught here.
Canada shares space with China and 10 other countries on the U.S.’s blackest of blacklists for intellectual property rights (IPR) protection and enforcement: the Office of the United States Trade Representative’s Special 301 Priority Watch List. Outdated copyright legislation and the limited power Canada Border Services Agency (CBSA) personnel have to stop fake goods at the border are key reasons Canada made the list.
“We have a really porous border,” said David Wotherspoon, a partner at Fasken Martineau and member of the firm’s national technology and intellectual property group.
Wotherspoon said that in the United States and many other jurisdictions, IPR owners can register their products on a list with customs, enabling border personnel to proactively look for incoming fakes. Canada, he said, has no such list.
According to the CBSA, border personnel don’t have the legislative authority to search, target or seize suspected IPR-infringing goods and rely on the RCMP and Health Canada for enforcement when suspected fakes are identified through “the course of regular duties.”
“In Canada, if you want customs to seize something, you basically have to get a court order from Federal Court and you have to identify the ship and the container, almost down to the detail of saying, ‘It’s in the back left corner,’” Wotherspoon said.
With counterfeits thus slipping through the border, both the criminal and civil courts systems are being used to tackle the problem of fake goods on the B.C. market.
On the criminal side, Bernier said the RCMP’s top priority is stopping goods that impact health and safety. A top concern right now, he said, is phony versions of impotence drugs Viagra and Cialis, arriving by international mail.
“People don’t want to go see their doctor about it,” he said. “They’re embarrassed about it, so they go online and obtain the drugs coming from who knows where.”
The risks for purchasers are severe, he said; fakes have been found to contain up to five times the standard amount of active ingredients.
“That could kill someone in no time.”
Many of these investigations, he said, target online sellers using eBay, Craigslist and websites for phony pharmaceuticals, often branded with Canadian flags.
Bernier said the RCMP also focuses on counterfeit operations linked to organized crime. As a demonstration of that link, he cited the RCMP’s seizure last October in Richmond just shy of $10 million of Ecstasy and the methamphetamine ingredient P2P in Richmond that had been shipped with fake Nike running shoes.
With the RCMP’s resources dedicated primarily to public safety cases, Wotherspoon said it generally falls to companies to police IPR infringements through a civil court system that, while effective, can prove too expensive for smaller rights holders.
Private investigators, such as Phoenix, Arizona-based IPSA International, Inc., can be another resource for rights holders; IPSA’s Vancouver team was part of the investigation that resulted in Louis Vuitton and Burberry’s recent court victory.
Both Wotherspoon and Kim Marsh, IPSA’s Vancouver-based executive vice-president of international operations, said most of their clients seeking justice for IPR infringements in B.C. are large foreign multinationals.
Yet while most of brands knocked off locally are foreign-owned heavyweights like Louis Vuitton, contributing to a public sentiment that counterfeiting – and buying – fake goods is a victimless crime, local businesses are seeing counterfeiting hurt their bottom line.
Paul Cheung is the owner and CEO of the four-year-old Summer Night Market, the new incarnation of the Richmond Night Market.
Cheung said that in order to get the go-ahead from the City of Richmond to start up a new night market in 2008, he had to commit to various measures to combat the counterfeiting that had been rampant at the market’s earlier incarnation.
Cheung said, besides having to reject nearly half the original vendor applicants outright due to their stated plans to sell knock-offs, the market has incurred an additional $80,000 annually in RCMP costs plus the cost of two extra full-time staff to check for counterfeits. That, he said, in conjunction with escalating lease costs, has made it hard to make any money off the market.
“It hasn’t been very profitable at all,” he said, though he added that cleaning up the counterfeit problem and reinventing the market as a place of innovative businesses has proved a satisfying contribution to the community.
Jim Stewart, president and CEO of Vancouver-based Paradise Ranch Wines Corp., said a proliferation of counterfeit icewine on shelves in China is hurting his ability to sell his product to China.
“In certain sales that I’ve attempted to negotiate, I’ve been told that people backed out because, ‘There’s so much fake icewine that we can’t sell your product because the price that we would have to sell it for is not achievable in the marketplace.’”
Miles Prodan, executive director of the BC Wine Institute, said phony “icewine” currently sold in China ranges from coloured sugar-water to almost-real icewine. The latter, he said, is being exported in bulk from B.C., just missing the trademarked standard due to sidestepping bottling requirements – something that’s legal, but still damaging to the brand.
To fight back against the brand damage, he said, the B.C. wine industry and the Canadian Vintners Association are working with China to start up real icewine production in that country, in a play to ramp up the country’s appreciation for the legitimate product.
Similarly in B.C., the RCMP is coupling enforcement efforts with public education messages focused on the health risks of counterfeit goods and behind-the-scenes links to child labour and organized crime. And Bernier said the efforts are paying off.
“We’re getting more and more phone calls from people, saying ‘Hey, this is what they’re selling at this store or pharmacy or health food place.’”