Taking action against pump counterfeiting
Pump and valve counterfeiting costs the industry several billon dollars over the course of year and is a serious problem for the major players. This article looks at a collaboration to shut down websites and online shops engaged in unscrupulous activities.
By Bryan Orchard
When the subjects of counterfeiting and infringing trademarks and patents are discussed, it is a commonly-held view that this happens predominantly in the consumer goods markets. Here, large global organisations go to extreme lengths to protect their brands and corporate identities. While the global market in counterfeit goods costs companies many billions in lost revenues, it goes way beyond high profile consumer goods.
Manufacturers of capital goods are also affected significantly by the illegal activities of enterprises that go to great lengths to copy, distribute and sell their products as genuine items. They have no concerns about the potentially dangerous consequences of their illegal activities. The international pump industry is no stranger to counterfeiting and the challenges that many of the leading brands face in trying to fight what is termed ‘low-end disruption’. Cynics may say that the global pump technology leaders want to close down any competition in order to maintain their profit margins. There may be an element of truth in this.
However, the use of counterfeit pumps across all areas of fluid handling puts the end-users at the risk of damaging their production equipment, producing sub-standard products that do not comply with international regulations, contributing to environmental pollution and putting employees and the public at risk. Those end-users that knowingly purchase counterfeit pumps and components are equally complicit in this pernicious trade.
Many German industrial enterprises are complaining about soaring problems with counterfeit products from China. The VDMA (Verbund Deutscher Maschinen- und Anlagenbau) Mechanical Engineering Industry Association represents more than 3,200 mostly medium-sized companies in the capital goods industry, making it the largest industry association in Europe. In its 2016 Product Piracy Study, 70 percent of its participating companies indicated that they were victims of product or brand piracy. Its findings indicated that the damage to Germany’s mechanical engineering sector was estimated to be €7.1 billion every year.
Whilst the rapid growth in the internet has brought huge benefits, it has also created opportunities for unscrupulous individuals and organisations to conduct illegal operations that can seriously harm legitimate businesses. Within the framework of the globalisation and digitalisation of business models, large-sized and high-priced investment goods are now also sold over the internet. This is leading to a sharp increase in brand and trademark infringements regarding offers made on online platforms.
Over the last few years, the German based pump and valve manufacturer KSB has been closely monitoring this situation. According to Franz Bosbach, KSB Technology Foresight, a significant number of Asian manufacturers are using the good reputation of the long-established manufacturer KSB to market their products.
“Under protected KSB brand names, they offer pumps and valves as well as spare parts for sale on international trading platforms,” says Bosbach. “In particular, the names of well-known products such as Etanorm, Omega and BOA, are frequently used. But the umbrella brand ‘KSB’ is also often misused to maliciously deceive the targeted buyers.”
“Those end-users that knowingly purchase counterfeit pumps and components are equally complicit in this pernicious trade.”
Not content to sit back and let this situation continue, KSB is being proactive in tackling both the manufacturers and the on-line shops selling the counterfeit products. To put a stop to these activities that are harmful to its business, the company has now established a task force to combat these illicit activities. In cooperation with Italian project partner Convey, KSB is reporting these infringements to the platform operators and instructing them to take down the offending offers.
If necessary, legal action is also brought against the brand and trademark infringers. It is proving to be highly successful for in its first year, starting in July 2016, the KSB Group identified 420 marketers on eight different online platforms who had been illegally misusing its product names. Between April and August 2017 it uncovered 4,000 illegal offers and had them removed from the associated trading platforms.
LOW END DISRUPTION
Clearly counterfeiting is a serious global problem for all pump manufacturers, but it is also a problem for would-be pump buyers. Many of the counterfeiters use sophisticated techniques to replicate the OEM’s website and this makes it very difficult to check product authenticity. Buying pumps that claim to be from the original equipment manufacturer (OEM) and then fail because they are counterfeits, can do major harm to the user’s business, not to mention the OEM’s reputation.
Counterfeiters will go to great lengths to replicate the true product employing reverse engineering techniques. This low end disruption is a problem that is of major concern to many global brands. Bosbach adds: “We are aware of one Chinese manufacturer that has built up a considerable customer base selling a copy of one of our established brands. The quality is not the same as the KSB product, but some customers are willing to accept the risk because it is cheaper than the true KSB pump. By taking down these manufacturers before they get too big we protect our brands, quality and sales reputation.”
One problem is that it can take a long time to take down counterfeiter sites. As a result, KSB teamed up with Italian-based Convey - an internet brand protection agency that hunts down fakes. The internet the cornerstone of the counterfeit industry, and Convey has a dedicated team of engineers to develop new products to detect counterfeiters and multi-lingual experts in international property rights. Once a counterfeiter has been tracked down, Convey take the appropriate action to defend its clients’ brands. While China leads the world in the manufacture and sales of counterfeit products, the irony is that some Chinese manufacturers are turning to the resources of companies like Convey to protect their own products.
“Throughout the world there are a great many platforms which make it easy to set up an online shop,” says Michele Provera, vice-president IPR Protection Convey SRL. “In the pumps and valves industries there are the manufacturers who make counterfeit products and traders who sell counterfeit products. Many of these traders sell any number of pump and valve brands and not all customers are end-users. Thus the counterfeit sales chain is complex. The internet provides counterfeiters with a world-wide market and anonymity. Then there are spare parts, where the number of units purchased can run into thousands.”
In its first year of working with KSB, Convey concentrated on manufacturers selling in China and South East Asia. Sophisticated technologies called ‘crawlers’ are used to analyse hundreds of thousands of web pages on the internet each day. Using this processed, shops selling KSB products were detected, which led to information on the products being sold, the prices, suppliers and where they came from.
“It is very difficult to shut down the manufacturers, but we can take steps to reduce and shutdown their sales over the internet,” adds Provera.
Counterfeiting has been a problem for a long time, but identifying rogue sellers has been difficult and taking them down took a long time and involved considerable resources. With the expansion of the internet and growth in counterfeiters setting up websites, the incidents of counterfeiting have a higher visibility so it is possible to take them down more effectively. However, another challenge has emerged: as soon a site which has been selling counterfeit products has been taken down, the site re-emerges often selling competitors’ products.
Convey has been checking twenty online trading platforms and eight social media channels for KSB to root out counterfeits. In future, patent and design rights are to be added to the monitoring of brand and trademark rights. It is also possible that the number of trading platforms to be checked will be increased and that the project will be further expanded globally.
“KSB has a great many registered trademarks and patent rights so we can see if the products being offered are registered,” says Provera. “If they are not then we can instigate enforcement procedures to take the offending websites down. The seller receives a warning and if they fail to respond we alert their service provider to the violation of intellectual property rights via their network. This involves issuing Take Down notices to the website hosting providers informing them of infringements, for they are legally obliged to cease transmission in such instances. If they do not take action, then they become liable to prosecution by KSB. This approach is very effective. Most sellers remove their offers after the first warning.”
Many websites operate a penalty points system, so when a first notice of infringement is issued they will be served a penalty point. If they ignore this, a second penalty is issued and again if this is ignored then the site is shut down with immediate effect. Within the pumps and valves industry, it is highly probable that the trader is selling any number of manufacturers’ brands, so by shutting down the website the trader can loses its entire portfolio of products. This approach is more effective than instigating legal procedures which are expensive, complicated and take a long time. In the meantime, the seller can move their trade elsewhere or continue under a new name. Convey makes sure an offer is taken off the internet within days and that the seller is removed from the market place.
The China connection
In China, arresting the people behind the counterfeits is one of the central elements of the work taking place by the task force. It is not enough to merely delete a counterfeiter’s offer. The goal must be to shut down this shop on the respective trading platform and ensure through constant checks that the trader does not open a new shop. This requires close cooperation between the parties involved.
Due to the excellent contacts between Convey and the platform provider Alibaba and their IP complaint systems, these infringements of law can be quickly eliminated. This is also in Alibaba’s interest since the company does not wish to find these infringements of law in the wider Chinese e-shopping marketplace either.
Provera adds that those responsible at Alibaba want to ensure that western companies have secure access and are able to examine the associated legal bases.
The pump industry is probably one of the most exposed to counterfeiting, which is now worth many billions of dollars. The major problem is what happens when a company buys what it believes to be a genuine product and it turns out to be a fake? The failure of a pump or valve can have very serious consequences, so should such a situation arise then the user will usually take issue with the manufacturer. Problems can also arise when a counterfeit component is fitted as a replacement in a genuine KSB pump and then causes damage to the pump. Investigating claims for compensation can be complex and costly and the onus is on the manufacturer to prove that the product is a counterfeit.
Where litigation is enforced, courts may well acknowledge that the product is a counterfeit. However, they will argue that it is not sufficient to prove that it is a counterfeit, but to demonstrate that the manufacture has taken action against the counterfeiter. If it can be shown that efforts were not undertaken then the manufacturer can be charged with negligence.
The partnership with Convey shows that manufacturers such as KSB are showing that it is taking all possible steps to close eliminate counterfeiters internationally and protect its patents and trademarks.
The KSB Etanorm pump series is an international best seller, but has been the subject of counterfeiting.
KSB goes to great lengths to protect its brands and reputation around the world and has set up a task force to combat and shut down illicit activities.
Bryan Orchard heads up Bryan Orchard PR Communications and represents KSB AG.