HP Gets Tough on Ink Counterfeiters

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CARTRIDGE SLEUTHS

Times have changed, however, and HP rejoined the group in March. As financial firms go bust and thousands of workers lose their jobs, people are printing fewer pages—and using less ink. IDC predicts the number of printed pages will decline for the first time this year, to 1.47 trillion pages, from 1.5 trillion in 2008. At the same time, counterfeiting has grown to the point that one in 20 ink cartridges sitting on store shelves globally is suspected of being fake. Now HP, Samsung, and others are hiring teams of private investigators and setting up forensic labs around the world to analyze suspect ink and packaging. They take their findings to law enforcement to help nab big distributors of counterfeit ink supplies. "Stemming the flow of counterfeits has become an absolute priority," says IDC analyst Jake Wang.

In the North Carolina case, HP's Anti-Counterfeiting Force swung into action. Peter Hunt, the group's Singapore-based director, dispatched one of his 12 investigators to examine pallets of ink in the reseller's warehouse. Then they worked with North Carolina authorities to set up a sting operation. Within weeks, a local man was charged with selling counterfeit HP, Samsung, and Canon toner and ink cartridges via his Web site. Some $60,000 in fake goods was seized. HP traced the origin of the ink to China, where it believes 80% of counterfeit ink originates. "The marching orders from the highest levels are this: Protect our brand and the enormous amount of R&D that has gone into creating our products," Hunt says.

HP scored its biggest antipiracy success in May 2007 in Foshan City, China. After tracking illicit supplies for more than six months, the company worked with Chinese police to raid 14 warehouses, seizing $88 million in equipment, supplies, and packaging materials from a variety of manufacturers. Two men were convicted this year and sent to jail.

Ink counterfeiters have developed techniques to throw off investigators. One approach: They sell supplies only slightly below the usual cost, unlike knockoffs of, say, Rolex watches. The North Carolina reseller says that's why she wasn't concerned. "Who would think they'd be selling ink for a 500% markup?" she asks.

Edwards is a correspondent in BusinessWeek's Silicon Valley bureau.

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