The Hindu Business Line : Look out for lookalikes

Is that Arnold Schwarzenegger doing the rounds in Chennai? Or is that a lookalike? No marks for guessing this one. The real test is one of spotting counterfeit IT products and combating the trend.

WHEN the Government speaks, the rest listen.

But at a recent seminar, it was the other way around, as top officials of the Tamil Nadu Government's Police, Excise and Customs departments listened keenly to representatives of the IT sector. The scene was a seminar highlighting the menace of fake IT products and the damage they unleash on the sector.

For the police department, counterfeiting is something that is generally associated with currency. At the seminar, though, police officials were updated on the increasing incidence of fakes in IT products and the need to combat this trend.

Counterfeit is deceit, says an official of an IT firm. In other words, it is something that has been forged, copied or imitated without the perpetrator having the right to do so, for the purpose of extracting money from credulous or consenting consumers.

The term `counterfeiting' is generally used in relation to the copying of trademarks (covering words, pictures and symbols), the infringements of patents (protecting inventions), licensing and copyright (relating to software, literary, musical and artistic works), as well as the faking of industrial designs, currency, consumer goods, substances, even plants and works of art, and also packaging and labelling.

Within the IT peripherals market in India, the estimated proportion of counterfeited products is 12-15 per cent, according to MAIT (Manufacturers' Association of Information Technology). Hardware products being counterfeited include ink cartridges and motherboards.

Counterfeiters illegally use the brand names of reputed companies and copy the packaging, says Vinnie Mehta, Executive Director, MAIT. Fake IT products are costing the IT peripherals industry over Rs 2,000 crore a year, he says.

As consumption of IT products rises in India, the price-sensitive IT peripherals market is flooded with fake products. PC usage is growing at 30 per cent a year, and adding around four million computers a year. As demand grows, people are looking at cheaper products. "Counterfeiting is a major concern to the IT industry, because a lot of intellectual property goes into the product and a lot of money is spent to create awareness on the product," he says.

Vivek Harinarain, IT Secretary, Government of Tamil Nadu, says the magnitude and size of counterfeit crimes in IT products and services is yet to be realised in full terms. Described as the crime of the 21st century, IT counterfeit and cyber crimes are 400 times more in value than robberies and other physical crimes in the world, he says.

There is also the hurdle in terms of jurisdiction, as goods are produced, transported and sold in different places. The problem does not lie in judicial intervention, as criminals will find ways through judicial loopholes. Rather, manufacturers need to go in for measures to fight imitations. Around 10 lakh people are employed in the IT industry in the country and they are sure to face economic death if counterfeit crimes in software products and services are not checked in time, he says.

Presenting the police department's perspective, R. Nataraj, Commissioner of Police, Chennai, says that as counterfeit in software products is something intangible, detecting it is a problem. The department needs to learn to handle such cases related to the IT Act 2004. "Most of our officers know only about counterfeit currency while counterfeiting of IT products is a new subject," he says.

Beat them with ink

But manufacturers are sensitive to the seriousness of the issue. They are adopting measures to combat counterfeits, including going in for customised packing for India, says an official of a large computer peripherals manufacturing firm. Further, IT majors such as Hewlett-Packard (HP), Canon and Intel have joined hands with MAIT to form the IT anti-counterfeit coalition (ISAAC) to curb hardware counterfeiting. The coalition works with industry and Government to combat counterfeiting of IT products from the grassroot level, thereby protecting consumer interest, he says.

Says Krishnendu Biswas, Programme Manager, Hewlett-Packard, "We are deeply concerned about counterfeiting. Counterfeiting is `profitable', and it is relatively easy to manufacture fake products. There is very minimal requirement of upfront capital, and counterfeiting business is a `low-risk' venture. In India, there are a large number of assemblers who manufacture counterfeit products and sell them in the local market, he says.

HP has introduced, in India, a new security label on its ink and toner packaging. This will not only make counterfeiting more difficult, but will also help consumers identify original HP products better, he says.

In the new colour-shifting ink, when the angle of view is changed, the colour of the logo on the label will shift from green to dark blue. This area has a glossy appearance and sparkles when viewed from a different angle, he says.

HP has also introduced a thermal-chromatic security thread. A heat-sensitive strip runs vertically through the ink security seal and horizontally across the toner security seal. This thermo-chromatic thread is woven through the paper label and is printed with blue heat-sensitive ink. When rubbed vigorously, the heat-sensitive ink fades on the strip, and the message `HP INVENT' can be seen underneath. This ink will return to its original blue colour once the heat source is removed, he says.

In a newsletter on product protection, HP says the manufacturing of counterfeit is largely unorganised, although the company has come across a few large players indulging in this activity. Over the past year-and-a-half, the company has carried out raids in New Delhi, Mumbai, Bangalore and other places in Tamil Nadu and Andhra Pradesh. Mumbai remains the hub of counterfeit manufacturing.

In a raid on manufacturing units in Mumabi, HP seized counterfeit goods, including filled and unfilled cartridges, toner drums, HP stickers, HP holograms, outer packing and sealing machines. Another raid last year uncovered counterfeit cartridges worth Rs 2 lakh, says the newsletter.

Packing it differently

According to Madhav Kota, Senior Manager, Consumable Marketing, Canon India, the turnover of the consumable division was around Rs 120 crore a year in India, and revenues could be much more, but the company is losing around Rs 25 to Rs 40 crore due to counterfeiting. The Government is also losing money by way of customs duty, he says."We are forced to do India packaging that is different from packaging in Singapore or Dubai," he says. The products also have holograms. "We spend a lot of money on advertising and creating awareness among consumers to buy only genuine products," he says.

`Genuine for sure'

TVS-Electronics, the domestic IT peripheral manufacturer, recently launched a `Genuine For Sure' programme. This nationwide programme, claimed to be the first of its kind initiated by an Indian hardware company, was to educate channel partners and consumers about the benefits of genuine supplies and also initiate legal action on counterfeiters. The company aims to reach out to more than 500 channel partners spanning 250 towns by the end of this year.

According to S. Narendran, General Manager, Marketing, TVS-E, the printing supplies market is plagued by piracy and fakes, which is a big problem for all printer OEMs (original equipment manufacturers). This affects the performance of the products and also takes away a bulk of the revenues.

`Genuine for Sure' is a large branding exercise by TVS Electronics to educate consumers about genuine supplies. This programme will eventually be extended to communicate "genuineness" to all other TVS-E product lines as well. With this, TVS-E plans to increase its current market share from 10 per cent to 50 per cent in the printing supplies business, which is estimated at Rs 100 crore today, he says.

TVS-E has also engaged the services of the Mumbai-based Enforcement of Intellectual Property Rights (EIPR) to help its anti-piracy drive. The `Genuine For Sure' campaign also includes the introduction of contemporary packaging with RFID (radio frequency identification) tags, as a major differentiator for its products in the market.

R. Jaishankar, Business Development Manager, Supplies, TVS-E, says the company's marketing efforts towards customers and channel partners will be supplemented through its 20-seat call centre. . Customers can also place orders under the `Dial-a-Head' programme. Also, TVS-E has in place a customer relationship management solution for effective lead management.

The company intends to segment the `Genuine For Sure' programme by taking it to the top eight cities in the first phase, the top 16 cities in the second phase, and eventually reach the entire country by the end of the year, he says.

Picture by Vino John

raja@thehindu.co.in

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