In short, whenever a product can be made more cheaply than the original, counterfeiting can and usually will occur. One area where we expect to see a rise in counterfeits in the coming months is the result of efforts to make electronics more environmentally friendly.

This July the European Union's 2003 Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment—the so-called RoHS directive—takes effect, banning the sale of any new products that contain lead, mercury, cadmium, or several other toxic compounds. (Some military and stationary telecom systems are exempt.) China and the state of California have their own versions of RoHS legislation.

Manufacturers and components makers have been scrambling to meet the EU deadline. Producing lead-free counterparts of existing components is the key issue. The problem is that the processes for producing lead-free parts aren't always compatible with those for making ordinary components. Counterfeiters will almost certainly capitalize on the situation, re-marking leaded components as lead-free.

Another environmentally friendly practice, electronics recycling, is creating a new stream of bogus components. We've seen low-skilled workers in China tearing apart cast-off computers and separating their parts into bins for reuse in other products [see photo, "Bin There, Done That"]. The official line is that the recycled components will be used in toys, but once the parts enter into distribution facilities, there is a real concern that they will be reused in other products. The parts may not be counterfeit per se, but they are probably being incorporated into subassemblies sold without any indication that some of their parts aren't new.

Attempts to rein in counterfeiters have taken many forms. A number of international agreements such as the Patent Cooperation Treaty of 1978 and the World Intellectual Property Organization Copyright Treaty of 1996 have tried to define and enforce IP rights. Although such pacts might be helpful for companies whose competitors are peddling look-alike products, they haven't done much to stem trafficking in bogus electronics, and they don't address the problem of counterfeit products that enter the supply chain through illicit channels.

The U.S. Congress has considered legislation intended to deter and punish counterfeiters, especially those coming from outside the country. One bill, known as the Keep America Secure Act, would have barred the Defense Department from purchasing equipment that contained electronic products not manufactured in the United States. The bill's goal was to ensure that the Pentagon had secure suppliers, but had it become law, it also would have had the effect of controlling bogus parts [see sidebar, "Counterfeit Electronics as Weapons of Mass Disruption?"]. The bill's critics noted, however, that it also would have hamstrung efforts to develop advanced systems, because many of the high-performance technologies already used by the U.S. military originate outside the country.

A number of groups monitor and report on counterfeit products. One of the most active is GIDEP, whose members include government and industry representatives from the United States and Canada. The program's chief resource is a database compiled from reports that members submit describing failed and counterfeit parts. The program has exposed many incidents of counterfeiting, but it's a voluntary service—if members don't submit reports, the information isn't shared. Our experience indicates that many companies are reluctant to go public when they do spot counterfeits, out of fear of being sued by customers and of tarnishing their brands' reputations. And although GIDEP does a service in alerting companies and the public to known counterfeits, it does nothing to actually address the cause of the problem.

Electronic Resellers Association International (ERAI), a group that represents more than 1000 independent distributors, has been working to improve quality control among its members by, for example, setting up an escrow service, which allows buyers to inspect the goods before completing their purchase, and by launching its own Web-based database, Parthunter.com, for locating parts. Unlike other online trading sites, Parthunter vets its traders and alerts users when they search for a part that is known to have been counterfeited in the past. Such activities are encouraging signs, but the fact remains that most independent distributors don't subject themselves to the kind of scrutiny that ERAI demands of its members.