Imaging Supplies Coalition Combating Counterfeiting & Fraud In the Imaging Supplies Industry The Imaging Supplies Coalition (ISC) is a nonprofit organization dedicated to educating, empowering and protecting stakeholders in the battle to eliminate counterfeiting and fraud in the imaging supplies industry. The Coalition is comprised of original equipment manufacturers of consumable imaging supplies and equipment that have joined together to protect their customers by combating illegal activities in the Imaging Supplies Industry. Coalition members include Brother International Corporation, Canon U.S.A., Inc, Epson America Inc., HP, Lexmark International, Inc., Oki Data Corporation, Samsung Electronics America, Inc., Toshiba America Business Solutions Inc. and Xerox Corporation. Allen D. Westerfield - President Founded in 1994, the mission of the ISC is to protect our members' customers from misrepresented products and services by seeking the worldwide protection of intellectual property and related assets of the Imaging Supplies Industry's distributors, suppliers, and manufacturers. This is accomplished by training and education in counterfeit product identification, methods of product security, techniques for avoiding telemarketing and e-commerce fraud, and by promoting laws and their enforcement. In its 16 year history, the ISC has accomplished a great deal in combating counterfeiting and fraud and has established itself as an international force in the Imaging Supplies Industry as well as a leading organization in Intellectual Property protection. From engineering a unique, highly efficient product authentication program and publishing hundreds of articles on counterfeit-related topics to working with U.S. Customs, the ISC has and continues to generate unprecedented results in combating counterfeiting and fraud in our industry. How large is the problem? We think that worldwide imaging consumables loss to counterfeiting is approximately 4% to 5% of total revenue or between $3.5 and $4.0 billion. In the US it has been estimated that 3.5% of all inkjet cartridges sold are counterfeit. In some areas the estimate is up to 50%. HP, one of the ISC member companies, reports on its website that between 2005 and 2008 it has conducted 4,620 investigations in 55 countries, resulting in 3,528 enforcement actions conducted by law enforcement officials where more than $795 million USD worth of counterfeit supplies products has been seized. A second ISC member company states that legal actions are currently pending in at least 6 states in the US. Exactly what is considered to be a counterfeit product? A counterfeit cartridge is a third party product misrepresented as an original OEM cartridge. Cartridge counterfeiting is not the same as refilling or remanufacturing. These counterfeit print cartridges are meant to mislead the consumer into believing that they are genuine OEM products. This does not mean that all refilled or remanufactured products are counterfeit or otherwise fraudulent. Legitimate refilled or remanufactured products exist on the market and their packaging states that they are 'refilled,' 'remanufactured' or 'compatible' products. Raids in Bolivia By definition, a counterfeit product is designed and packaged to deceive and mislead an unknowing customer in such a way that confuses them into believing that they are buying a brand new genuine OEM product. Such products may be counterfeit and the sale and distribution of counterfeit OEM cartridges is fraudulent and illegal. Why is the Imaging Supplies Industry Vulnerable? The Imaging Supplies is a broad, repeat market with a significant market for recycled/remanufactured goods. This means that there is an available supply of empty cartridges, as well as components and known processes, making entry relatively easy for counterfeiters. In addition, there is access to the distribution channel through the gray market where counterfeit goods have the opportunity to be commingled with legitimate merchandise. The expansion of e-commerce through the Internet has also enabled ease of market entry. An emerging threat is the explosive growth of clone/compatible cartridges. There are many methods to bring these new clones/compatibles to market: 1) Packaged as a compatible under a non OEM Brand. These are not counterfeit and IP violations, if any, deal with patents and/or trade dress issues. However, the next three items are potentially counterfeit and Illegal. 2) Packaged as a new OEM branded cartridge. 3) Packaged as a remanufactured OEM Cartridge under a remanufacturer brand 4) Packaged as a used OEM core and sold into the remanufacturer supply chain Why should I care? Counterfeiting Activity impacts legitimate resellers and distributors in a number of ways. First of all, counterfeit goods introduce a level of price competition that is unfair and unsustainable. Price is usually the value proposition offered by the counterfeiter and can be attractive to some consumers. Second, if a legitimate reseller inadvertently sells counterfeit goods that have been introduced into the supply chain through the parallel or gray market, the reseller must deal with the risk of customer dissatisfaction and loss. Third, there can be significant financial risks as well as substantial legal risks. What can I do? When In Doubt - Check It Out (WIDCIO) In this article we are issuing a call to action to the channel and its customers to work with us to eliminate counterfeiting and fraud in the imaging supplies industry. Many of you have worked with us in the past in this effort but we need to double down and develop a zero tolerance for counterfeit or pirated imaging supplies. The two best things you can do are obvious but are the most powerful tools available. First, know your supply chain by understanding their businesses practices and policies. Second, avoid price deals that are too good to be true. In general, deep discounts on OEM cartridges are not practical. If a vendor is offering prices that are much better than the generally available market price, you should be suspicious that the cartridge may be counterfeit. Third, When In Doubt - Check It Out (WIDCIO) I would also encourage resellers and distributors to become more active in the ISC WIDCIO Program. We believe WIDCIO has been very instrumental to the overall success of the ISC. This unique program allows a reseller or end customer to send a suspicious product carrying the brand of our member companies to the ISC for authentication. The ISC will forward the product to the brand owner who will analyze the product and inform the ISC of its authenticity. The ISC in turn will inform the participant of the product's status. If the product is genuine that is the end of the process. However if it is counterfeit the participant is obligated to furnish the source of the product. The information about the counterfeiter is given to the OEM Brand owner for appropriate investigation and action. The identity of the WIDCIO participant is protected and remains confidential throughout the process. Confidentiality is all-important here. This program, while simple in concept, is very powerful in practice. It has resulted in the targeting of illegal production facilities and the removal of many millions of units of imaging supplies from the market place. It has protected tens of millions of dollars in imaging supplies of the ISC brand owners. Lastly, at the end of the day counterfeiting is flourishing because there is a demand for the products. Please work with us and with the authorities to develop a campaign of public awareness that educates the consumer as to the evils caused by the crime of counterfeiting and to teach them how to avoid the bogus goods. To conclude, I hope that today I have been able to convince you that counterfeiting is a problem in our industry, which causes real problems for all of us. While we are making progress there is still much work to be done. Businesses and government can find focus areas and invest in brand protection on an ever-improving basis. What we need in addition is this, a commitment to a zero tolerance for counterfeit goods from all industry stakeholders. The ISC thanks you for your diligence and support. Contact Imaging Supplies Coalition: Allen D. Westerfield, President isc.westerfield@gmail.com Phone: 941-961-7897