Fakes: Can You Tell The Difference?

Tracing the Source
Products typically go from counterfeiter to what Kobuszewski and others in the industry call "tweeners." These companies know where to find cheap goods—sometimes fake, sometimes stolen—and market themselves as legitimate suppliers to customers shopping around for the lowest price. When a potential buyer inquires about certain products, the tweener digs into the black market to find the goods, then passes them off as genuine, from the manufacturer.

And that's where VARs often get entangled in the black market.

Take American Data and Computer Products. In September 2006, CRN sister publication GovernmentVAR reported on incidents involving allegedly counterfeit goods that resulted in lawsuits between the Tampa, Fla., solution provider and Largo, Fla.-based Gulfcoast Workstation, a division of Relational Technology Solutions. According to court documents, American Data went to Gulfcoast to source Cisco switches for a contract with Lockheed Martin, having been told the supplier could leverage Relational's position as a Cisco Gold partner. When the switches were delivered, Lockheed discovered duplicate serial numbers.

Upon investigation, court documents from Cisco revealed the serial numbers listed on the Gulfcoast invoices were attached to products produced as early as 2003 and shipped to locations all over the U.S. and Europe. Many of those serial numbers have since been traced to units still being used by other customers.

"If these companies still have physical possession of the switch, then how is it that another like piece of equipment was delivered to Lockheed's receiving dock with the same serial number?" asked Robert Castro, president of American Data. "No other conclusion can be arrived at, except that black market or counterfeit equipment is involved here."

Indeed, evidence shows that the collection of switches was a mix of gray- and black-market equipment. Documents filed with the court showed that Relational and Gulfcoast bought the switches from VOIP Inc., Murrieta, Calif., and Epoch Sales, Santa Ana, Calif. Neither is a certified Cisco partner, and both specialize in liquidation and "alternative" sources. In recent developments, subpoenaed invoices prove that VOIP got at least some of the equipment from Chicago-based Equivoice, which sourced the products from distributor Comstor, a division of Westcon. Epoch, however, acquired the goods from two companies in Hong Kong, which named both China and Taiwan as countries of origin.

While relatively common, vendors argue that VARs play with fire when they go outside authorized channels.

"There's a phenomenon of gray going black," said Phil Wright, director of worldwide brand protection at Cisco. "After the dot-com bubble burst, there was an ongoing demand for products and a secondary market. This market grew up, and became a source for people who needed product sooner than what was possible through normal channels. There was a good chance a few years ago it was genuine product, but with the rise of the counterfeit base, the gray market has been an attractive conduit for counterfeits. That channel is potentially contaminated with fakes. There's no guarantee at all—there never was, but the chance of getting a mixture of used, fake, not updated and so on are better than ever."

The situation between Aqua Systems and QLogic stands as another example. According to the legal complaint filed by QLogic, Aqua Systems sells host bus adapters with the QLogic name that the vendor claims are not genuine or authorized, charging prices significantly below those charged by the vendor or authorized distributors. In response, Aqua Systems filed a third-party complaint against Microsource, a company based in Singapore. If the goods are indeed counterfeit, the complaint states, Microsource is responsible as Aqua Systems' supplier.

Regardless of whether Aqua Systems was indeed duped along with the end customers, some might argue that sourcing product from an unauthorized supplier in China was asking for trouble. An Internet search for Microsource brings up a static Web site described as "under construction," with contact information included. Microsource could not be reached for comment. Neither QLogic nor Aqua Systems would speak about the suit.

"Buy through authorized channels, and don't worry about anything," Wright said. "It's when [VARs] stray that they have to watch. Just don't do it and you won't have a problem."

Next: Harm Done