17,000 Counterfeit Items Collected in Minnesota Sweep – A Drop added to the Bucket

The Minneapolis Star and Tribune reported this morning that “in a five-day Twin Cities sweep, federal agents seize 17,000 counterfeit items, everything from faux football jerseys to charade Chanel perfume.” In its feature story, “Fake goods, stolen secrets cost Minnesota businesses billionsJim Spencer identified attacks against companies such as Valspar through industrial espionage of its trade secrets.

The sweep of the goods – and the sheer size of the raid – helps make real what is more often considered an amorphous or even humorous risk. Last month shoppers in China identified a number of counterfeit Apple stores. The ability to create entire stores selling counterfeit goods seems inconceivable, but the public becomes inurned to the fake DVDs sold on street corners and millions illegal of MP3 and DVD downloads.

But in a time of job loss and economic upheaval, the undermining of the U.S. innovation economy remains a serious threat. As the Star Tribune reported:

David Yen Lee, a technical director at Valspar, got caught trying to steal $20 million worth of chemical formulas to give to a Chinese company in exchange for a high-ranking job. Lee got 15 months in jail.

The bust of a group led by a Minnesotan named Charles Thompson led to the arrests of eight people accused of selling $500,000 worth of counterfeit items, said Mike Feinberg, a Minnesota-based agent with ICE. The suspects pleaded guilty and got probation.

Moreover, because the risks of apprehension are low and the consequences tend to result in short jail terms, organized crime realizes this is a very economically efficient market to exploit.

At the same time, however, economic efficiency and rationality must drive the enforcement actions. Congress is quick to draft new laws rather than fund enforcement of laws already perfectly appropriate to stop the illegal conduct. Moreover, the enforcement should be focused on the legitimate industry threats. Like the recent raid, the emphasis must be directed at large scale criminal conduct. Only once the antipiracy efforts become focused on major players (rather than college students and single mothers) and proper resources are invested in defense of these assets can the problem be addressed.

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