ITIF Logo
ITIF Search
Podcast: Counterfeiting Is a Crime Against Innovation, With Kebharu Smith

Podcast: Counterfeiting Is a Crime Against Innovation, With Kebharu Smith

Counterfeiting—one of the oldest, simplest crimes—has only continued to evolve as technology has grown more complex. Rob and Jackie sat down with Kebharu Smith, director of Amazon's Counterfeit Crimes Unit and Associate General Counsel, to talk about how counterfeiting negatively impacts business, taxes, intellectual property, and innovation itself.

Mentioned

Related

Auto-Transcript

Rob Atkinson: Welcome to Innovation Files. I'm Rob Atkinson, founder and president of the Information Technology and Innovation Foundation.

Jackie Whisman: And I'm Jackie Whisman, a head development at ITIF, which I'm proud to say is the world's top ranked think tank for science and technology policy.

Rob Atkinson: This podcast is about the kinds of issues we cover at ITIF from the broad economics of innovation to specific policy and regulatory questions about a wide array of new technologies. If you're into this stuff, please be sure to subscribe and rate us.

Jackie Whisman: Our guest today is Kebharu Smith, director of Amazon's Counterfeit Crimes Unit and Associate General Counsel. Prior to joining Amazon, Kebharu held a variety of prosecutorial roles at the federal and state level. Today we're going to talk about his work in Amazon's counterfeit Crimes unit, and we're happy to have you here.

Kebharu Smith: Thank you, Rob and Jackie, for having me today. I look forward to this discussion.

Jackie Whisman: Let's start with some table setting. How big of an issue is counterfeiting in your world?

Kebharu Smith: Counterfeiting is one of the oldest crimes on the books. It's a huge problem across the entire retail industry to the tune of hundreds of billions of dollars a year. Counterfeiters deprived brand owners of the value of their intellectual property and compete unfairly with honest entrepreneurs. They're criminals and they engage in a wide range of illicit behavior, including using falsified names and contact information to hide their identity, use fraudulent invoices and infringing packaging to commit their fraud. I'm excited to talk about how our counterfeit crimes unit at Amazon, which is a unique team of former prosecutors, civil lawyers, law enforcement, intel agents, and data analysts, go after these counterfeiters at scale through using both internal Amazon data and external data to hold them accountable and want to talk more about that.

Rob Atkinson: Gosh, who was it? Or maybe it was a book I was reading. It was a book I was reading, I think, about a former NBA player and, I think it was, and he was talking about when he was young, he went and he bought a fake Rolex or something, but he knew it was fake and he just wanted a... He was poor and he just wanted it, I think. But a lot of people don't know that when they buy fake products, not good to buy fake products at all, but definitely not good to do it when you're being tricked. I understand that Amazon released your third annual brand protection report and that details what Amazon, all the efforts you're doing to address this challenge. What were the main highlights from that report this year? What did you find?

Kebharu Smith: Great question. Our brand protection report is a report that really just shines a light on what we're doing to aggressively pursue bad actors, protect our customers and consumers and brands, and educate consumers about the ills of counterfeits, as you just noted with the reference to the watch. Three years ago, we set out to articulate our anti approach across four key pillars, strong proactive controls, powerful tools to protect brands, partnerships to hold bad actors accountable, like we're doing with CCU, and campaigns to educate customers about the harms and dangers of counterfeits. At the same time, we're making progress, but we weren't communicating our efforts effectively to our customers, brands, and policymakers. It's been a rewarding exercise to track our success over the past three years with these brand protection reports. For example, in 2022, our store selection expanded, but the number of valid notices of counterfeiting decreased by more than 35% from 2021.

This, for example, points to the fact that our robust seller vetting and efforts to hold bad actors accountable are deterring bad actors from attempting to enter our store in the first place. Further, we stopped over 800,000 attempts by bad actors to create new selling accounts, which was a decrease from over 2.5 million attempts the previous year. I'm also proud to share that through the work of our counterfeit crimes unit, we identified, seized, and appropriately disposed of more than 6 million counterfeit products, double the amount seized in the previous year. We also sued or referred bad actors over 1300 criminals in the EU, US and China, and UK, I'm sorry. We also understand the importance of consumer education. In 2022, Amazon partnered with the US Chamber of Commerce and US Customs and Border Protection to reach over 72 million people and provide tips on how to shop confidently and avoid counterfeit products. Our brand protection reports kind of summarize the work that we're doing in the space of counterfeiting and going after these counterfeiters and also protecting brands and customers from the ills of counterfeiting.

Rob Atkinson: It must be this humongous problem. It's a humongous problem in the world, but obviously with Amazon being such a big player that you really see a lot of it. Are there certain products that you see are big counterfeit problems? Which are the ones that are kind of most prevalent in that world in retail?

Kebharu Smith: As this is one of the oldest crimes in the book, because referenced at the outset, and this is not going anywhere, we find that counterfeiters are constantly chasing the money and staying oftentimes a step ahead of law enforcement and prosecutors and they'll really counterfeit anything. However, we tend to see apparel, home products, and cosmetics counterfeited. From a CCU perspective, we have pursued bad actors who have attempted to sell counterfeit beauty products, for example, in the Amazon store. In 2020, Amazon and KF Beauty, which is a cosmetics brand, jointly filed a lawsuit against four companies and 16 individuals for counterfeiting KF Beauty's award-winning Wunder2 beauty products. We've also partnered with Cisco. Just this year we partnered with Cisco in a matter that resulted in criminal prosecution of a bad actor related to the sale of counterfeit Cisco products. He recently pled guilty and as a part of that plea agreement he's going to face from four to six years in the federal penitentiary and has forfeited over $15 million worth of illicit proceeds.

This prosecution was made possible in part from a criminal referral to Cisco that CCU provided to the United States Department of Justice. We've also partnered with brands such as Ferragamo, the luxury brands, where we worked with them to report a counterfeiter who was selling counterfeit Ferragamo belts. This matter resulted in enforcement in China with Chinese law enforcement and following an investigation by Chinese law enforcement, Amazon CCU officials raided the criminal's warehouse seizing hundreds of counterfeit belts and buckle accessories that may otherwise have been sold through retail channels around the world. We've lastly partnered with several small and medium-sized businesses such as Dutch Blitz and JL Childress. It's our mission to ensure that we're partnering with brands that are husband and wife owned small businesses that may not have those same resources to go after counterfeiters at scale. But to answer your question, Rob, we see counterfeit goods that are sold across many different industries and our mission is to pursue these bad actors, not just to protect Amazon customers but consumers broadly. That's what our work has been able to do in partnership with law enforcement all over the globe from the United States to China.

Rob Atkinson: Makeup, not a product that I buy, but I know other people Who do you think, "Well, what's the problem with that?" Maybe the makeup quality's a little bit less so you're paying for them, but are there any safety issues with some of these things? Maybe there are different chemicals in the makeup? I know that for a lot of people, they look at this as, "I'm just getting a fake product and I'm paying money for them," but are there also safety issues involved here?

Kebharu Smith: Great question. We believe that counterfeiting is not a victimless crime, whether it involves health and safety products, we certainly give an emphasis on pursuing bad actors who may attempt to sell counterfeit ingestibles or vitamins or anything of that nature. Our focus is certainly going to be turned to them, but it's not a victimless crime. It impacts jobs, it impacts our tax base, it impacts innovation and creativity. Our mission is to ensure that we are going after these bad actors to hold them accountable. We also see that counterfeiting can touch other types of more nefarious crimes such as human trafficking, terrorism financing, money laundering. Regardless of what the counterfeiters end goal is, which we know to be greed, we're going to ensure that we're holding them accountable because there can be a health and safety piece but can also impact innovators and jobs. That's our focus to pursue these bad actors at scale.

Rob Atkinson: Yeah, that's a really good point that it's broader than just you getting a product that you didn't want. It hurts the real producers and the people that they employ. It's a good point.

Kebharu Smith: It's also worth noting that Amazon is the safest space for our customers and we do everything to ensure that our customers have the most reliable and safest shopping experience. Outside of our counterfeit crimes unit, which is a team of around 40 people based all over the world, we partner with several thousand others who are protecting Amazon customers by building the proactive measures, whether it's data scientists and algorithms that they're using, checks that are put in place for new sellers to ensure that they are in fact who they represent themselves to be with video verification and also proactively taking down suspicious sellers or suspicious goods in the store and ensuring that we're spending our time and billions of dollars to make sure that this is the safest place for customers. In the rare instances that counterfeits do make it in the store, then CCU comes to assist and we use external tools, civil referrals or civil suits to go after those illicit proceeds and to ensure that they're not allowed back in the store and criminal referrals to law enforcement to hold them accountable in the courts.

Jackie Whisman: In your dealings with law enforcement on this, are there tools or capacity they need where action from policymakers could be impactful?

Kebharu Smith: We're constantly one partnering with law enforcement. One of our major areas of focus is to share data with law enforcement proactively without legal process when needed when we identify bad actors and fraudsters who violate our terms of service. We will share information related to addresses, IP addresses, other information that can help law enforcement put that bad actor behind the computer or their device to hold them accountable. We're also constantly advocating and seeking more resources for our law enforcement partners, whether it's financial resources or more prosecutors and law enforcement to go after the scourge of counterfeiters. That's both here in the United States and all over the globe. We're excited to be a partner in this effort because we understand that it's going to take wraparound support from law enforcement, e-commerce stores like Amazon and brands to continue to beat the drum on the threat and scourge of counterfeits and how it impacts consumers, brands, and Amazon customers as well.

Rob Atkinson: It's really interesting. Last year, in fact, ITIF has long been pushing and promoting and supporting strong intellectual property laws because we think they're important to both innovation and also creativity or creators, but also US competitiveness. We thrive on intellectual property based products. Last year we wrote a report called Best Practices to Combat Online Sales of Counterfeits in the EU and the US, and one of the things that we called for is establishing and enforcing policies to protect IP rights, addressing pervasive counterfeit products proactively, preventing repeat offenders. What do you think are the best practices that are important as industry and government think about this? Because as you noted earlier, you can't do this alone. You have to work with not only government but also other stakeholders. What do you think are the best practices we've got to be moving towards or broadening, if you will?

Kebharu Smith: First let me commend ITIF's report to all of our listeners. Daniel Castro and Becca Trait produce an insightful report that has helped propel the conversation forward and it's a valuable resource to anyone working in this space or looking to get more involved. For my work at Amazon through the CCU, two particular recommendations from the report that I think are really important. One, preventing repeat offenders and assisting law enforcement. Hearing and knowing that you all are beating the drum in the same way, we understand that that type of collaboration of efforts and among teams is crucial to really having an impact. Again, as we talked about, this is one of the oldest crimes in the books. E-commerce has changed the game and the way people buy goods and are receiving goods and bad actors and criminals are always finding new ways to commit crime and pursue illicit proceeds.

Being that e-commerce is here to stay, we have to partner together to ensure that law enforcement is receiving data from e-commerce stores like Amazon that they can act on quickly to hold these bad actors accountable. Further, this is a borderless crime. These bad actors do not respect borders. They're going to ship their goods all over the globe, violate customs laws, and they're also going to find evasive ways to get goods into respective borders. For example, we've seen in some instances where fraudsters will ship the counterfeit products separate from the trademark itself in an effort to evade our custom and border protection officials, not only here in the United States but around the globe, and then the good will be assembled in the United States. That collaboration of forces and collaboration of partners is critical to us being able to really have a dent in the counterfeit crime and the efforts that these bad actors are committing to receive illicit proceeds.

Jackie Whisman: Shifting gears just a little bit, Amazon recently announced its participation in a data exchange alongside other companies that shares information regarding counterfeit products. We love to see this because it's something that ITIF called for in the report rob was just talking about. Can you share more about the program, how it works, what Amazon hopes to achieve?

Kebharu Smith: Sure, sure. I would love to. The counterfeit exchange or a ACX is an industry collaboration designed to make it safer to shop online and more difficult for counterfeiters to move among different stores to attempt to sell their counterfeit products. ACX allows participating stores to share information about confirmed counterfeiters who attempted to use their services to try to sell counterfeit products. ACX has enabled regular information sharing and participants to use this information in their ongoing efforts to detect and address counterfeiting, improve their individual risk evaluation systems, and make more robust referrals to law enforcement so bad actors can be held accountable. This goes centrally to the point that I just made and that is that for us to really have an impact, e-commerce stores are going to have to share data on bad actors that we identify that are moving from store to store, that are moving from store brick and mortar, because if that doesn't happen, we're operating in a silo and we're not having the impact that we could have. We're really excited about our involvement and participation in the ACX and we're hoping to, at some point in time, expand to provide for other types of companies and services to ensure that, whether it's from logistics or e-commerce shipping companies or banking, that brands and partners have the best and most robust data to go after these bad actors at scale.

Rob Atkinson: It's funny because Amazon, obviously very sophisticated IT company. You've got Amazon Web Services and the whole e-commerce obviously is IT based. It just makes sense that you're utilizing, and your competitors, are utilizing it as a really important tool to address this. My question, maybe it's a statement, is I think the way a lot of Americans think about counterfeit is perhaps, "Well, there's some bad people in the US and they're counterfeiting things. Yeah, okay." But when counterfeiting is global, I think we add need to add another level of understanding and recognition, which is this directly hurts American jobs. Imagine if it's a counterfeiter of the US. Well, they're creating jobs by making counterfeit belts here and it's just different people and it's bad for the consumer. Maybe it's bad for the owner of the belt, but at least there's some jobs here. But when it's overseas counterfeiters, it really is directly hurting the US economy. Is that what you're seeing as well, that more of it's overseas and that policy makers need to understand that point more effectively?

Kebharu Smith: What I can say is that much of our work involves pursuing bad actors all over the globe. China is a big area of focus and we partner with our law enforcement partners in China. For example, we work with Homeland Security partners who are based in Guango and in Beijing when we are sharing data with law enforcement in China to go after the manufacturers and distributors of those counterfeits. When we look at what our mission is and what it was set out to be, it was and is to disrupt and dismantle counterfeiting organizations at scale. That means that we're not just pursuing sellers, but we're pursuing sellers, logistics networks, and those manufacturers and distributors of counterfeits. Oftentimes, a lot of those are coming from foreign countries. We've seen China, Turkey, other parts of the world where we are working with law enforcement partners in those respective countries, also working with our US law enforcement partners working with USPTO in China to stop the goods before they even make it to our borders in the first place.

When you talk about the impact on customers, consumers, and then also sellers and businesses who are selling goods in the Amazon store, the Dutch Blitz example comes to mind. As I mentioned, we partner with small and medium-sized businesses and Dutch Blitz is a husband and wife owned company out of Pennsylvania that makes card games. We're thinking about those types of businesses when we sue these bad actors and submit these referrals to law enforcement to ensure that American consumers, innovators, creators, and American employees and employees around the world are protected from the scourge of counterfeits and counterfeiters.

Rob Atkinson: That's crazy. Basically, there are people who see this game, it says, "Husband and wife," they've got a really cool game, card game, and they actually would go out and make a fake one. Is that what you're saying? And then try to sell it?

Kebharu Smith:Exactly.

Rob Atkinson: Wow.

Kebharu Smith: Exactly. Our CCU partners with companies like Dutch Blitz, whereas we will own the legal fees and cover those and any recovery goes to the brand. The majority of any recovery goes to the brand. Because, again, we're interested in protecting small, medium-sized businesses, luxury brands, Fortune 500, just to ensure that we are going after these bad actors at scale and also partnering, like we talked about in the ACX, with other e-commerce stores and other companies to make sure that if the counterfeiters are moving around from place to place, we're sharing that data with law enforcement so that we can be effective in our enforcement actions. That's critical to the next iteration or the next stage of going after counterfeiters, making sure that there's collaboration, partnerships, data sharing among key stakeholders because that's what it's going to take for us to really have an impact.

Rob Atkinson: Well, this is really great. Thank you so much for being here, Kebharu. It seems like it's an arms race and you and the government are taking big steps to keep us ahead of these bad actors. I'm hopeful after listening to this interview. Thank you so much.

Kebharu Smith: Thank you for your time and really enjoyed talking to both you and Jackie today.

Jackie Whisman:And that’s it for this week If you liked it, please be sure to rate us and subscribe. Feel free to email show ideas or questions to [email protected]. You can find the show notes and sign up for our weekly email newsletter on our website itif.org. And follow us on Twitter, Facebook, and LinkedIn @ITIFdc.

Rob Atkinson: And we have more episodes of great guests lined up. We hope you'll continue to tune in.

Back to Top