How to spot a counterfeit - What is a counterfeit?

ERAI, Inc.
ERAI, Inc.

How to spot a counterfeit - What is a counterfeit?

While a large focus in the industry remains on the dangers posed by counterfeit parts such as product failures, increased program costs, reduced reliability, lost revenue, brand damage and other financial losses, the (not so simple) definition of a counterfeit electronic part is not often discussed. In some cases, no established definition for a counterfeit electronic part exists. Instead, reliance is on a broader, more general definition of a counterfeit good or counterfeit product. Definitions also vary from jurisdiction to jurisdiction, between governments and industry, and even between organizations. While there likely is consensus throughout the industry on specific criteria that define a counterfeit electronic part, discordance and inconsistency between governments, their agencies and the broader supply chain produce their own set of challenges.

Let's look at a few counterfeit definitions:

In the United States, the federal criminal code 18 USC Section 2320 (f) (1) defines a counterfeit mark as, "(1) the term "counterfeit mark" means - (A) a spurious mark - (i) that is used in connection with trafficking in any goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature; (ii) that is identical with, or substantially indistinguishable from, a mark registered on the principal register in the United States Patent and Trademark Office and in use, whether or not the defendant knew such mark was so registered; (iii) that is applied to or used in connection with the goods or services for which the mark is registered with the United States Patent and Trademark Office, or is applied to or consists of a label, patch, sticker, wrapper, badge, emblem, medallion, charm, box, container, can, case, hangtag, documentation, or packaging of any type or nature that is designed, marketed, or otherwise intended to be used on or in connection with the goods or services for which the mark is registered in the United States Patent and Trademark Office; and (iv) the use of which is likely to cause confusion, to cause mistake, or to deceive; or (B) a spurious designation that is identical with, or substantially indistinguishable from, a designation as to which the remedies of the Lanham Act are made available by reason of section 220506 of title 36; but such term does not include any mark or designation used in connection with goods or services, or a mark or designation applied to labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature used in connection with such goods or services, of which the manufacturer or producer was, at the time of the manufacture or production in question, authorized to use the mark or designation for the type of goods or services so manufactured or produced, by the holder of the right to use such mark or designation".

United States defense acquisition DFARS Section 252.246-7007 (a) specifically defines the terms for DoD acquisitions contracts for electronic parts: "counterfeit electronic part means an unlawful or unauthorized reproduction, substitution, or alteration that has been knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic, unmodified electronic part from the original manufacturer, or a source with the express written authority of the original manufacturer or current design activity, including an authorized aftermarket manufacturer. Unlawful or unauthorized substitution includes used electronic parts represented as new, or the false identification of grade, serial number, lot number, date code, or performance characteristics."

Regulation (EU) No 608/2013 Concerning Customs Enforcement of Intellectual Property Rights used by countries in the European Union defines a counterfeit good as, "goods which are the subject of an act infringing a trade mark in the Member State where they are found and bear without authorization a sign which is identical to the trade mark validly registered in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trade mark."

The United Kingdom Ministry of Defense or MOD has developed a definition for counterfeits for those supplying to the MOD. The definition is found in the UK MOD Defense Standard DEF STAN 05-135 titled "Avoidance of Counterfeit Materiel": "Counterfeit Materiel: Materiel whose origin, age, composition, configuration, certification status or other characteristic (including whether or not the materiel has been used previously) has been falsely represented by: misleading marking of the materiel, labeling or packaging; b) misleading documentation; or c) any other means, including failing to disclose information; except where it has been demonstrated that the misrepresentation was not the result of dishonesty by a supplier or sub-supplier within the supply chain."

SAE's Aerospace Standard AS5553C specifically defines a counterfeit EEE part as: "1. An unauthorized (a) copy, (b) imitation, (c) substitute, or (d) modified EEE part, which is knowingly, recklessly, or negligently misrepresented as a specified genuine item from an original component manufacturer or authorized aftermarket manufacturer; or 2. A previously used EEE part which has been modified and is knowingly, recklessly, or negligently misrepresented as new without disclosure to the customer that it has been previously used."

Early Legislation Lacked Specificity for Electronic Parts
In 2009, SAE published AS5553 to specifically address counterfeit electronic parts. In the US, concern specifically over counterfeit electronic parts in the defense chain of supply began in 2007 culminating in a Senate Armed Services Committee Hearing in late 2011 which found that over a 3-year period, over one million electronic parts were found in the defense supply chain. The 2012 National Defense Act (NDAA) Section 818 subsequently required the Secretary of Defense to, "establish Department-wide definitions of the terms "counterfeit electronic part" and "suspect counterfeit electronic part"." In 2014, DFARS Section 252.246-7007 (a) provided a definition for a counterfeit electronic part.
Intellectual Property Infringement – Mark vs. Design
Several definitions address counterfeiting as an intellectual property violation through the misuse of a company's registered marks. Currently, US Customs and Border Protection policies allow for action against product and packaging that violate a copyright or trademark (intellectual property rights infringements). In December of 2019, new legislation was introduced in the US Senate: S.2987 – Counterfeit Goods Seizure Act of 2019 that, if passed, would allow CBP to seize imported products that violate design patent rights. Meaning, instead of seizing product for bearing a spurious mark, CPB would be entitled to deem product whose physical characteristics violate design patent rights as counterfeit.
Representation - New vs. Used Parts and Fraud
Some definitions do not address used parts that are misrepresented as "new". The 2012 NDAA, Section 818 also required the Secretary of Defense to, "include previously used parts represented as new [as counterfeit]." However, as AS5553 acknowledges, "used EEE parts sold as new that have not been modified are not counterfeit, according to some civil and criminal statutes. These issues are covered under existing laws covering fraud. For civil matters, this issue would typically be covered under civil fraud and terms and conditions of a purchase order or contract that specifies EEE parts must be new". The standard does clarify that parts that have been, "refinished, upscreened, or uprated, and have been identified as such, are not considered counterfeit."

Counterfeit electronic parts have been found in every facet of the industry in every corner of the globe in both the commercial and high-reliability sectors, spanning the range from inexpensive capacitors to expensive microprocessors. Continued industry and government collaboration and standardization between stakeholders is critical to minimize the impact posed by counterfeit electronic parts.