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Faking it: Piracy poses headache for Olympics

  • Story Highlights
  • Piracy increasingly contentious trade issue between China, Western nations
  • Report: More then 1,500 Olympic trademark violations in China since 2004
  • Piracy very difficult to crack down on in China, analysts say
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By Hamish McKenzie
For CNN
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HONG KONG, China (CNN) -- At a stall in a crowded street market in Mong Kok, one of Hong Kong's many busy shopping districts, a vendor with a quick whip of his hands produces from behind a plywood wall a set of Beijing Olympics key rings. They are perfect rubber replicas of the five Olympics mascots: the Fuwas.

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Chinese workers make Beijing 2008 Olympic mascots at a factory east of Beijing in December 2005.

"Have you been looking for this stuff for long?" he asks the buyer.

He asks for good reason: fake Olympics merchandise is becoming increasingly scarce in Hong Kong.

Until the end of May, there was more to be had as opportunistic salesmen targeted tourists in an area famous for cheap knock-offs. But then the police swooped in, seizing the illicit goods and effectively freezing the supply, local vendors say.

The swoop came as part of a China-wide crackdown against fake Olympics goods and the people who sell them. In raids on markets in Hong Kong districts such as Wan Chai, Yau Ma Tei, and Mong Kok on May 30 and 31, customs officers seized 350 pieces of counterfeit Olympics goods, including key-rings, watches, caps, badges, and stickers, worth about HK$7,000 ($895).

The vendors aren't taking it lightly. This is a central government issue. The Hong Kong customs department says it is increasing its vigilance in combating the sale of Olympics-related counterfeit products.

"Apart from stepped-up monitoring of the market, Hong Kong Customs has been conducting repeated and intensive raids against such counterfeiting activities," said Edmond Cheng, head of intellectual property investigation operations, in a written statement to CNN.com. "As a result, the situation is firmly under control."

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Since 2004, Chinese authorities have uncovered more than 1,500 cases of violations involving Beijing Olympic slogans, logos, and other trademarks, according to the English-language newspaper China Daily.

In 2004 and 2005, such cases involved fake goods worth 14.8 million yuan ($1.9 million), resulting in fines of 8.38 million yuan ($1.1 million), the newspaper reported. Figures were unavailable for 2006 and the first half of this year.

It is not difficult to judge the authenticity of an official piece of Olympics merchandise. The security features on an "anti-counterfeiting label" include a 3mm-wide hologram window bearing the Games emblem; the words "Beijing 2008" visible only under certain lighting; and an embossed design.

The message is clear: Olympics merchandise is a no-go zone for counterfeiters. That could be something to do with the money involved. The 2004 Athens Games generated $61.5 million in revenues from the sale of licensed Olympics merchandise, according to a report by the International Olympic Committee. Olympic host cities are entitled to between 10 percent and 15 percent of the royalties, according to a report from the China Daily.

The crackdown is indicative of Beijing's "selective enforcement", says Oded Shenkar, a professor at Ohio State University and author of "The Chinese Century."

"In a way, it's a reminder that when they want to they can enforce, but sometimes they don't want to," Shenkar says.

Piracy benefits China's economy by providing jobs and a cheap way to quickly catch up with modern technology, Shenkar says.

"Piracy provides them with a certain advantage, at least for now," he says. "They do realize that at some point they will need to crack down in order to create innovation in the system."

This past April the United States filed a formal piracy complaint against China at the World Trade Organization, arguing that China's inadequate protection of intellectual property rights was costing the U.S. dearly and putting consumers around the world at risk.

The U.S. Commerce Department estimates piracy and counterfeiting costs that country between $200 billion-$250 billion a year. China is a major culprit, costing the United States an estimated $24 billion through sales of pirated goods, the department says.

On April 26, World Intellectual Property Day, cities across China demonstrated the country's commitment to quashing piracy by staging public exhibitions and destroying pirated goods.

Yet, says Shenkar, China's government treats intellectual property issues the same as any other issue: they are subject to bargaining. So, if the United States pushes hard for China to take action and there is something to be gained by doing so, the government will make a highly visible concession.

For instance, a year after China banned "naked computers" -- new computers without pre-installed operating systems -- Bill Gates announced major Microsoft investment in the country and offered $3 software packages for poor Chinese students.

Expect more of the same, says Shenkar. "You're going to see some temporary, high visibility crackdowns."

That being said, it would be extremely difficult to crack down on all cases of piracy, says James McGregor, CEO of China research and advisory firm JL McGregor and Company.

"China's like piracy on steroids," McGregor says. Tackling the piracy industry -- which likely provides thousands of jobs in retail and manufacturing -- would take enormous political and personal effort. Instead, the government has to pick its shots, says McGregor, and Olympics merchandise is an obvious target.

Meanwhile, by targeting violations of Chinese-owned trademarks, the authorities can be seen to be vigilant while protecting China's internal economy.

"It's the Olympics. It's international. It's China's coming-out party. It's China's face," McGregor says. "Who wants to put on the Olympics and be looked at as the low-class pirate country that steals everyone else's trademarks?" E-mail to a friend E-mail to a friend

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