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Faking a Company 262

Posted by CowboyNeal
from the just-like-the-real-thing dept.
gambit3 writes "What happens when pirating a movie, an application, or a game is not enough for you? Well, you take the next step and pirate a whole company. It happened to Japanese electronics giant NEC. Counterfeiters had set up what amounted to a parallel NEC brand with links to a network of more than 50 electronics factories in China, Hong Kong and Taiwan."
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Faking a Company

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  • by Oldsmobile (930596) on Friday April 28, 2006 @06:48AM (#15219591) Journal
    All I can say is, wow, that is incredibly cool! What moxy! What an idea!

    These guys should get a criminal Nobel or something!
    • by squiggleslash (241428) on Friday April 28, 2006 @08:06AM (#15219855) Homepage Journal
      You may feel that's the case. I'm baffled by it, to be honest.

      There are a lot of "counterfieting" operations where the work involved makes you wonder why they didn't go legit. People selling "fake" iPod Shuffles, for instance, that actually work, they're just not real shuffles. Someone's taken the time and trouble to organize the manufacturing of this item, including a certain amount of R&D, for a working product. And then they proceed to spoil the entire enterprise by putting someone's else's name on it, meaning:

      - they can't sell via legitimate distributors
      - they can't get funding except from organized crime.
      - they have to do business constantly looking over their shoulders.

      Now, we're talking about creating a massive corporation. This solves the first part of the problem, but suddenly introduces brand new ones. We're no longer talking about a one-off production run of something that, once off loaded onto distributors, can be treated as a job done and, as time goes on with no knock on the door, a success that doesn't have to be worried about. We're talking about a business where you're guaranteed to get caught eventually. Your risks just went up massively. Even organized crime is going to be careful dealing with you. On top of this, you need the organizational ability and resources to hire a hell of a lot more people, which is going to be difficult to do if you either have to fool everyone in the organization that you're legit, or you limit yourself to a pool of people who don't really care about the almost certainty they'll end up in prison at the end of the game.

      What the hell? If you're that skilled in business, why knock off NEC? Why not start something legitimate? Yeah, NEC's an established brand, but, c'mon!

      • by mgblst (80109)
        The reasons you mentioned are why it doesn't happen that often (probably).

        The advantages are now need for marketing, a well built up brand, and not having to provide warranties or support.
      • Quite simple (Score:5, Insightful)

        by Oldsmobile (930596) on Friday April 28, 2006 @08:18AM (#15219894) Journal
        It is quite simple compare business case number 1:

        1) Buy generic mp3 player innards off general market for next to nothing
        2) Wrap iPod shuffle lookalike plastic
        3) Sell as iPod
        4) Profit

        Compare with business case number 2:

        1) Buy generic mp3 player innards off general market for next to nothing
        2) Pay designer to design a cool funky faux iPodesque white plastic exterior
        3) Pay huge international marketing firm to make worldwide humongously expensive marketing campaign
        4) Rummage through garbage for scraps of food, use cardboard for shelter
        • Re:Quite simple (Score:5, Insightful)

          by squiggleslash (241428) on Friday April 28, 2006 @08:32AM (#15219941) Homepage Journal
          You're forgetting a number of steps that I specifically mentioned in my write up:
          1) Buy generic mp3 player innards off general market for next to nothing
          2) Wrap iPod shuffle lookalike plastic
          3) Sell as iPod
          4) Profit
          Let's insert 0) Raise money for (1) and (2), from investors who need a rough idea of what you're doing. This limits you to organized crime. Congratulations.

          Between 2) and 3) you need to insert "2.5) Find distributors for a product who know you're not Apple but will be selling a product branded as Apple, therefore putting themselves at risks of lawsuits. This limits you to organized crime, and they'll be demanding a high margin on the products. Which they'll be selling discounted anyway. Congratulations.

          4) needs to be replaced with "Get some money, pay back your investors, and hope you're not caught"

          So: to recap: you're having to get your money from people who'll kneecap you if you don't pay it back. Despite the high price of the legit product, you'll be making a tiny margin, if one at all, because you're selling to distributors who will be taking a massive risk and will want to be compensated for it and who don't want to sell for the same price as the legit product, you're restricted in terms of the number of sales anyway. Where's the profit?

          Your second example, of the legitimate company, is absolutely laughable. Have you seen Apple's profits lately?

          • Let's insert 0) Raise money for (1) and (2), from investors who need a rough idea of what you're doing. This limits you to organized crime. Congratulations.

            Um, why ? We are talking about fraudsters here. Why would a fraudster treat his investors any more honestly than his customers ?

            Just sell them a plausible business plan that has nothing to do with what you're really going to do, take the money, use it to set up a criminal operation, and disappear one night with the cash.

            Why set up a criminal orga

            • Um, why ? We are talking about fraudsters here. Why would a fraudster treat his investors any more honestly than his customers ?

              Because he actually wants the money? He might possibly be able to get away with ripping off a huge number of legit investors once, but he's going to find it increasingly difficult to raise the money if he establishes a pattern of doing this. Realistically, the investors need to be as crooked as the fraudster is.

              Why set up a criminal organization if you have a plausible legitim

          • Re:Quite simple (Score:2, Insightful)

            by Silverstrike (170889)
            Simple:

            The people that do this ARE organized crime. John Smith, engineering degree from XYZ college, who has a wife and three kids and used to work salary for a legit business doesn't wake up one morning and start a business like this.

            No, its Joey Fishhooks who starts this sort of thing. He's already organized crime, and he doesn't bat an eye at dealing with that crowd.
            • Re:Quite simple (Score:3, Insightful)

              by Grishnakh (216268)
              The people that do this ARE organized crime. John Smith, engineering degree from XYZ college, who has a wife and three kids and used to work salary for a legit business doesn't wake up one morning and start a business like this.

              No, its Joey Fishhooks who starts this sort of thing. He's already organized crime, and he doesn't bat an eye at dealing with that crowd.


              Maybe there's some crossovers:
              John Smith, with engineering degree from top-ranked XYZ University, works salary for a legit business. One m
          • Re:Quite simple (Score:3, Interesting)

            by putaro (235078)
            Who's raising money? You don't need to. The factory and the suppliers give you credit. You don't need to put any money into R&D (or at least not much) and you're not putting any money into branding or advertising.

            You're not selling in the US. There's no threat of lawsuits really. Maybe, possibly, the goods might get confiscated but the odds are highly against it.

            It's an easy way to make a buck and it's been going on in the Far East for at least the last 50 years. Counterfeit products are big busin
      • "I'm baffled by it, to be honest."

        It's not that baffling. In trademarks, as in other intellectual 'property', there is a lot of so-called 'value' created through artificial scarcity. As the scarcity is artificially created through legal means, and not due to scarcity in the supply channel, this discrepancy in the market becomes exceedingly profitable. You can basically input an at-market-cost produced item, slap a zero-cost piece of paint on it, and charge more for it.

        "Why not start something legitimate?"

        Be
      • There are a lot of "counterfieting" operations where the work involved makes you wonder why they didn't go legit

        I'm sure these guys, criminal though they may be, have put considerable thought into the alternatives.

        The answer must be that they get to capitalize, for free, on Apple's advertising budget and years of reputation.

        The benefits are enormous. If you crank out your own knock off ishuffle (assuming you avoid patent and trademark restrictions and good luck with that), it's an uphill battle to get the
    • What is far more interesting are a couple of sentences in the article.

      Most significant of which is the one that says NEC is in negotatiations with some of the manufacturers. That and the fact that some of the knock-off goods were up to NEC standards. Talk about the dream of finding an in-place manufacturing setup with cheap labor costs. That's precisely what NEC has gotten.

      so in the long run it isn't a total loss for NEC.
  • by Mostly a lurker (634878) on Friday April 28, 2006 @06:59AM (#15219626)
    ... so why does NEC seem so upset?
    • Because you won't buy NEC stuff a second time if it turned out to be crap. Now say, for a 2 dollar versace shirt you can be sure that it is fake, but I can imagine that they were selling the burnable DVDs for "expectable" prize-ranges.

      The people doing this apparently have the skills to set up a whole production and distribution network, they should stop buggering other companies and start their own! Who knows, they might get somewhere with it, samsung was only a B-brand in electronics not too long ago and

      • Everytime I go to China I always buy a ton of counterfit goods. The stuff is quite often of excellent quality, sometimes even better than the original. I am talking about things like shoes, bags, clothing etc.

        I am not so sure about electronics and counterfit media, except for movies, that are usually DVD rips. DVD rips actually work better than commercial DVD's as they don't have encoding on them -so no complaints there either.

        I heard from a reliable source, that many western companies have been forced to e
        • Actually alot of "pirated" stuff is the real deal, the dealers in China just go have a chat with the foreman of the factory makeing the real stuff and asks for a few crates (thats the penalty you get from outsourcing production - try get a pirated B&O television*).

          It's just like crackin, theres no point in bruteforcing the solution, when you can go have a chat with the middleman and have him supply it.

          *I'm not sure of their status any longer, but they used to be produced in Denmark.
    • Because they don't want your admiration, they want your money. Now, if there's an imitator, they have to share that money with him, while he doesn't give them any. So...
    • I'm assuming it would be embarassing if the top execs looked at this fake company and saw that it was running more profitably than the real company or building better products.
  • by DJ Rubbie (621940) on Friday April 28, 2006 @06:59AM (#15219627) Homepage Journal
    This is not supposed to be called piracy of a company, it's a trademark violation, unauthorized and fraudulant usage of the NEC trademark. The affected factories claims that they have papers to prove that they were licensed to manufacturer the goods, but the papers were faked, which is considered fraud. The term 'piracy' has been utterly bastardized and overused already, please be more specific.
    • by jozi (908206) <valsharessa1.hotmail@com> on Friday April 28, 2006 @07:13AM (#15219673)
      The misuse of the word piracy gives all us true pirates a bad name. Piracy doesn't even have to take place on the high seas anymore. Damn all sweet water pirates to hell!
    • Actually, it sounds a heck of a lot more like "identity theft," on a corporate level. Well, I suppose that would be trademark violation of sorts, except taken to a whole new level.
    • It's not just piracy. It's any word. This is the battle over memes and the transnationals (err, multinationals) are way ahead of the game. Our little voices yelling can't compete with their saturation media outlets.
    • Hey, let's pirate the pirate term! Once it's lost all its meaning, the RIAA will have to come up with something else.

      In fact, I think it's pretty dumb to use piracy in the first place, at least while the latest hollywood movies promote the usual romantic, somewhat-evil-but-ultimatly-good-at-heart image of pirates.
      • Exactly what I think. We should just apply the word "piracy" to any kind of misdemeanor whatsoever. Make it a part of the common slang. Once teenagers talk about pirating apples from the neighbour's garden we can be sure that nobody will care about the oh-so-evil pirates anymore.
        • Exactly what I think. We should just apply the word "piracy" to any kind of misdemeanor whatsoever. Make it a part of the common slang. Once teenagers talk about pirating apples from the neighbour's garden we can be sure that nobody will care about the oh-so-evil pirates anymore.

          Better yet, make it the verb equivalent of "it". Once you can say "I pirated my wife twice last night" or "The Sun is pirating", or "It's pirating" the whole concept of "pirating movies" will lose its meaning, since it could ref

    • This is not supposed to be called piracy of a company, it's a trademark violation, unauthorized and fraudulant usage of the NEC trademark. The affected factories claims that they have papers to prove that they were licensed to manufacturer the goods, but the papers were faked, which is considered fraud.

      <pirate>Ahhrrrrrrrrrrrrrr!!! Sign over yer intellectual property rights and branding, or yew'll be swimmin' with the sharks, Maties!</pirate>

  • by arivanov (12034) on Friday April 28, 2006 @06:59AM (#15219628) Homepage
    Well... The ad on the article says it all:

    • Product Sourcing
      Buy Risk Free From China IVELL - Global product sourcing
      www.ivell.com
    and

    • Quality Manufacturing
      Plastic, electronics and metal UK Management, Chinese Factory
      www.motiontouch.com

    More Questions anyone?

  • by bobamu (943639) on Friday April 28, 2006 @07:11AM (#15219664)
    I was looking at a chinese electronics manufacturers page some time ago, and they had a bulletin board.

    One of the posts effectively consisted of "Can you make me some tv's branded panasonic and send them to north africa"

    Tip of the iceberg, perhaps.
  • Why target NEC? (Score:3, Insightful)

    by antifoidulus (807088) on Friday April 28, 2006 @07:14AM (#15219675) Homepage Journal
    Why did they go through all the motions of creating a distribution network but only pretend to be one company? And why NEC? NEC isn't really much of a player anymore in the consumer world, they are more into industrial grade manufacture and IT consulting. They still do make consumer electronics, but they hardly seem to be the companies bread and butter anymore. Nor are they dominant in the field, TFA goes on to say that some of the products weren't even close to anything NEC currently makes. Why not also claim to be Philips or Sony or Samsung?
    • Re:Why target NEC? (Score:5, Informative)

      by petermgreen (876956) <plugwash@p10liWELTYnk.net minus author> on Friday April 28, 2006 @07:25AM (#15219716) Homepage
      i'd guess because NEC is a well known brand without having so many existing deals with retailers/distributors that it would be difficult to set up such deals for the clone company
      • This does not suprise me, it is the result of the way large american companies do business. Think about it, you are a new company who can produce anything and when you go to Sears, Dillards, Target, etc... they will not even talk to you because you are not a major supplier; never mind can provide the same product for a better price. By pretending to be NEC they get their foot in the door; before they could not even get on the parking lot.

        I bet the next step is for major companies to license small compan

  • by Thecarpe (697076) on Friday April 28, 2006 @07:16AM (#15219679) Homepage
    Hi, Bill Gates here. I'd like you to visit my new site:

    http://www.m1cr0s0ft.com/ [m1cr0s0ft.com]
  • by soren42 (700305) * <j.son-kay@com> on Friday April 28, 2006 @07:17AM (#15219683) Homepage Journal

    This is exactly what Microsoft did to IBM's PC software division in the 80's!

    I always knew there was *something* underhanded there, but couldn't put my finger on it.... ^_^ Contract, schwantract.... No company, not even IBM, could have been that stupid. It was all just "Corporation Piracy".

    It all makes sense... DOS, CP/M, and, of course, once MS had made enough money from the theft they started taking less and less of IBM's assest - with the last partial theft in the Windows 95 + OS/2 Warp releases... from there, Microsoft could just keep heaping "original" code onto the DOS codebase it secreted away.

    Ahhh, all is right in the world when everything finally falls into place!

    (Disclaimer: This is a joke. Sarcasm. Humor, people. We all know the real facts..... or do we???)
  • by mustafap (452510) on Friday April 28, 2006 @07:18AM (#15219690) Homepage
    I've been faking being an employee for years :o)
  • Neat! (Score:3, Interesting)

    by mano_k (588614) on Friday April 28, 2006 @07:32AM (#15219745) Homepage

    And I thought the guys who claimed to work for the railway company and started removing the rails of an abandoned line not far from where I livedhad been something!

    The hired local companies for transport and even distributed leaflets to the people in the neighbarhood informing them of the upcomming works! They made some money from the scrap iron before anybody noticed!

  • by Anonymous Coward on Friday April 28, 2006 @07:33AM (#15219750)
    How do we know the reporters were getting comments from the real NEC executives?
  • MP3 Players, too (Score:4, Interesting)

    by Killshot (724273) on Friday April 28, 2006 @07:39AM (#15219768) Homepage
    An aquaintance recently went to China to visit a factory that makes the sony bean mp3 players. They told him they could make the players for him and just leave the sony logo off it. He then plans to sell them on ebay.

    I tried to explain how bad an idea this was and how there are so many other legal ways to invest your money, but he wouldnt hear it.
    • This would be perfectly legal if the company was ODM/OEM'ing the product for Sony. Then they own the design, etc., and Sony might merely be branding it as their products.
    • IANAL but it seems to me this might be an actually legal idea.

    • by Rolo Tomasi (538414) on Friday April 28, 2006 @09:52AM (#15220391) Homepage Journal
      You mean like Sony buying LiteOn Optical drives, putting their logo on them and changing the firmware to report 'Sony' instead of 'LiteOn'?

      Or like virtually every notebook manufacturer (including Apple), assembling their notebooks out of Chinese OEM parts?

      Do you know why Chinese 'piracy' is so rampant? Because all the products are made in China anyway. One factory produces the 'brand' product during the day and the 'pirate' product after-hours. Of course they're completely identical.

      I mean think about it, if you were a Chinese company manufacturing electronics, and you see how the stuff you design and produce is sold for ten times the price that brand X pays you in the West, you'd start to wonder a bit too.

      If the products were designed and produced in the 'West', this would be much more difficult. But the corporations don't care. They still make a huge profit by sticking their brand name on Chinese stuff and selling it for a huge markup.
  • by Arcturax (454188) on Friday April 28, 2006 @07:40AM (#15219769)
    So there is a use for the MikeRoweSoft name after all!
  • by tddoog (900095) on Friday April 28, 2006 @07:46AM (#15219789)
    This pirated company built existing and new products and business relationships. What if the fake company became more successful?

    Just a thought. Seriously though, if I was NEC, I would try and by up the fake company and continue to operate it. you could probably get it for pennies on the dollar and you already have trained employees.

  • Duck? (Score:2, Insightful)

    by pryonic (938155)
    If it looks like a duck and quacks like a duck, then it's a duck?
  • by RubberDogBone (851604) * on Friday April 28, 2006 @08:06AM (#15219856)
    I'm a fan of NEC's burners and happily recommend the brand to my friends. Good stuff.

    One of these friends said "Wow, I am sure am glad I get my NEC stuff from a reputable online dealer, like Newegg!"

    My question is, where'd Newegg get these drives? Did their distributor vouch for the goods? How about their distributor's distributor or the originating factory?

    When somebody up the chain said "I _KNOW_ these are good drives" and vouched for them, then that product carried that credential all the way to the end users and that's what we're trusting. But we don't know, really.

    "It came from Newegg" might be nice sentiment but Newegg probably has no idea if they were selling fakes or not. I don't think they would knowingly do so, of course. That kind of cheap money is not worth the hassle with an IPO in the works.
    • As far as DVD players are concerned, the "fakes" are probably superior to the "originals". Here's why:

      The "fake" NEC is not just a shoddy backwater pirate, they put quite some effort on the scheme. They didn't merely copy genuine NEC products, but did their own research, came up with new models with better features, etc.

      The only thing they didn't have, is deals with the content industry that restrict what kind of features they may offer to their customers. Unlike a real company, the fake NEC had no reason

    • Counterfeit goods are more likely to show up at retailers that don't buy from authorized distributors. The companies that specialize in inventory liquidations, overruns, excess inventory, etc. They can be fooled by a smooth salesman with a genuine-looking product at an attractive price. Some don't need to be fooled. They know they are selling counterfeit merchandise and do not care.
  • wow (Score:2, Insightful)

    by Tom (822)
    Many of these pirated items were not part of the genuine NEC product range.

    In other words: The criminal version of "embrace and extend". Plus, of course, it avoids direct comparison which would threaten the appearance of authenticity.

    Genius, pure genius.

    Also note that the article says the goods were generally of good quality. I wonder if NEC - provided they had known about these before starting criminal investigations - would've simply bought them out instead, expanding its product line at the same time. :-
  • by brunes69 (86786) <slashdot AT keirstead DOT org> on Friday April 28, 2006 @08:28AM (#15219932) Homepage
    This article has the            ere is no need to
    most hard to read               create a stupid column
    format for the text             based layout. These
    I have ever seen. The           guys should be shot.
    web != the newspaper, th-
    • To get a slightly more traditional web format on IHT articles, look for "ARTICLE TOOLS" on the left and click "CHANGE FORMAT".

    • I kind of like it. The line lengths are short, which makes it easier to read because your eyes don't have as far to travel from the end of one line to the next, which makes it less likely that your eyes will land on the wrong line. Having multiple columns takes advantage of what would otherwise be white space or unrelated information and it minimizes scrolling. The IHT have put a lot of thought into their website- I think it's one of the best-designed news sites online.
    • I strongly disagree.

      The International Herald Tribune has had this layout for several years and were pretty early adopters of using dhtml to allow the readers to save articles and also modify the size and format of article text.

      Anyway, the wide 3-column format usually allows for much more text than the traditional one-column variant, at least with the wide margin that the latter comes with.
  • by narkotix (576944) on Friday April 28, 2006 @08:33AM (#15219943)
    And look, there's Magnetbox and Sorny.
  • by Yewbert (708667) on Friday April 28, 2006 @08:35AM (#15219950)
    ...there's a place near here that's doing the same thing with a whole industry/product line - couterfeit food. Luckily, they're easy to spot, all being labelled with a big bright yellow M,...
  • by Aim Here (765712) on Friday April 28, 2006 @08:48AM (#15220014)
    Of course, once this 'faked company' meme has taken hold, the multinationals will exploit it to the full by making sure all their outsourced third world factories and production centres can be turned into 'pirate' factories at short notice:

    Bleeding heart liberal type: You're running sweatshops and paying 12 year olds 10 cents for an 18 hour working day! You're pumping toxic chemicals into the drinking water supply! You're making defective products that explode and kill people! You bribe politicians!
    Your factories are run by fascist thugs who hire death squads to kill union organisers! And we have proof this time! You're going to jail at long last!

    CEO of MegaCorp, your friendly neighbourhood planet-raping multinational: Errr umm ... that's not us! Yeah, that's it! They're a bunch of pirates who made a fake MegaCorp factory! We've never seen those guys in our lives! Officer! Arrest that factory! Secretary - type me up a shoddy-looking forgery of our licensing agreement. "Fake" factory workers - You're all fired! Back to unemployment and poverty for you!

    Third World Workers: Sigh. Shafted again...
  • by puzzled (12525) on Friday April 28, 2006 @08:53AM (#15220043) Journal


        A WIC-1DSU-T1-V2 is $1,000 list, $700 or so to a small reseller in distribution, and $400 for a clean used unit from a reliable aftermarket dealer. Go look for that part number on Ebay and check out how new boxed product is 15% of list price ... this stuff is everywhere and it basically drove me out of the Cisco aftermarket.
  • The Yes Men (Score:3, Interesting)

    by Brackney (257949) on Friday April 28, 2006 @09:26AM (#15220220)
    This is news? The Yes Men have been doing this for a long time. http://www.theyesmen.org/ [theyesmen.org] Pure genius. :)
  • by doesnothingwell (945891) on Friday April 28, 2006 @09:28AM (#15220234)
    A close relative told me the company he works for has an a little secret that no one talks about. Seems after setting up a partnership with a chinese company to outsorce production (eliminate local jobs) they went to china to further the deal. Production lines were seen, hands shaken, and everthing was going along nicely. Before getting on the planes to go home someone had to return to the "factory" for something they forgot. It sould seem that thieves had made off with the workers and were taking down the "factory". I don't think the theives got too much money, but today no one at X corp. will mentions foreign investment without a quick look and a cautionary tale. Probably just a story told by the middle management to explain a lack of ambition, maybe. Ahh capitalism... don't ya just love the smell?
  • Fake (Score:2, Funny)

    by ZenKen (963177)
    It's ok. We have fake CEOs, and CEO/CFOs who make fake profits.
  • by Maljin Jolt (746064) on Friday April 28, 2006 @09:42AM (#15220335) Journal
    In China, they have a fake Slashdot, see slashdot.cn [slashdot.cn], registered to jesse.webmaster@gmail.com. The website even keeps crashing my firefox-1.5.0.2 on linux box.
  • Now that name brands are pretty much all set up solely for R&D and advertising, I'm surprised this doesn't happen all the time.

    Back when an NEC-owned factory made NEC brand products, this would have been impossible. Now that NEC gets all of its products made for it by another business, what's stopping that business from selling the same product to somebody else, with or without the NEC.

    Take apparel for example. Nike designs and markets a shoe. They send the specs to a factory in china and order 10,00
  • by TheWizardTim (599546) on Friday April 28, 2006 @10:12AM (#15220552) Journal
    That's nothing, right now we have a dictator faking a democracy in the US. Beat that pirates!
  • by Intron (870560) on Friday April 28, 2006 @10:14AM (#15220568)
    Use javascript to prevent copy/pasting your article to /.
  • If only (Score:3, Funny)

    by soft_guy (534437) on Friday April 28, 2006 @11:37AM (#15221313)
    If only you could get someone to pirate just the technical support part of your company!

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