Intellectual property theft hurts small businesses

By: Dee DePass

Plymouth-based Midwest Rubber Service and Supply makes squeegees for floor scrubbing machines with Linatex, a red rubber that is so unique and durable, its Malaysian manufacturer had it trademarked.

But since the companies didn't do anything more to protect the rubber's good name, counterfeiters made knockoffs of Midwest's squeegees. They used cheap rubber that they dyed and dared to call Linatex.

Midwest's business plummeted as its customers in China and Europe demanded it cut prices to match counterfeits. "We are probably doing about half the business we could do if we had protected this brand globally."

Small companies like Midwest are increasingly becoming the targets of intellectual property (IP) theft. While big names such as General Mills, 3M, Apple and Microsoft have the financial muscle to chase down nefarious characters trying to pinch their technology, smaller businesses often lack the money and resources to sue fraudsters.

The International Trade Administration has labeled IP theft one of the top problems faced by U.S. exporters today. Thieves increasingly sidestep patents, trademarks and copyrights with counterfeit products that falsely carry brand names or crib technologies they have no right to use. The Federal Bureau of Investigation says counterfeiting costs U.S. companies billions of dollars in lost revenues each year. And the smaller the business, the bigger the threat.

"This is a high priority for us in Minneapolis," local FBI spokesman Kyle Loven said. "Unfortunately, it's a problem, especially for companies that are not accustomed to global trade. When they venture out to the other parts of the world, they find that the rules are oftentimes not what they are in the United States. And often they become educated through bad experiences."

Larger U.S. companies feverishly file patents in every country they do business, something smaller firms often can't do. Big companies also pounce with lawsuits when they learn of thefts. And they increasingly heed attorney counsel and keep tight-lipped about product ingredients, manufacturing processes, distribution and suppliers, all in an effort to prevent counterfeiting.

3M, for instance, sued a California man two years ago for importing counterfeit 3M stethoscopes and selling them over the Internet. 3M pursued the case to trial and won.

Even so, "It's like a game of whack-a-mole. You can knock them down, but they will pop up again," said Kevin Rhodes, 3M's chief intellectual property counsel. In addition to stethoscopes, 3M's face masks are a favorite target among intellectual property thieves.

"Whenever there's a bird flu or some other pandemic, the counterfeiters come out of the woodwork," Rhodes said.

Fakes of products made by Minnesota-based companies have popped up in China, Taiwan, Singapore, Russia, Belarus, Ukraine, Czech Republic, the United States and a host of other nations, company executives complain.

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