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Feds Seize $78M of Bogus Chinese Cisco Gear

kdawson posted more than 6 years ago | from the perfect-for-man-in-the-middle dept.

Networking 197

Ian Lamont writes "The IDG News Service is reporting that US and Canadian authorities have made more than 400 seizures of counterfeit Cisco hardware from China in an ongoing investigation that started in 2005. The most recent seizure was last Friday in Toronto, where the RCMP charged two people and a company with distributing large quantities of counterfeit network components to companies in the US through the Internet. The RCMP seized approximately 1,600 pieces of counterfeit network hardware with an estimated value of $2 million, says the report. According to another source, bogus Cisco gear from China typically includes network modules, WAN interface cards, gigabit interface converters, and less expensive routers."

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197 comments

no wonder (1)

tritonman (998572) | more than 6 years ago | (#22601844)

No wonder their economy is booming when they can make a killing of counterfeit hardware and bogus harry potter books!

Makes one wonder ... (4, Funny)

trolltalk.com (1108067) | more than 6 years ago | (#22601902)

Feds Seize $78M of Bogus Chinese Cisco Gear

... as opposed to all the Legit Chinese Cisco Gear ...

Re:Makes one wonder ... (5, Interesting)

networkBoy (774728) | more than 6 years ago | (#22602382)

Actually I wonder if this was genuinely counterfeit, or was it "unlicenced" Ala Disney DVD factories that are only "open" 10 hours per day, but run 24 hours per day...

-nB

Re:Makes one wonder ... (1)

farrellj (563) | more than 6 years ago | (#22603124)

I am willing to bet that it is exactly what you are describing! The record industry used to be famous for what they called "cleans", which were the "after hours" production of records that never gave the legit rights holder's any money. Wonder how many CDs and DVDs on the shelves at your local stores are "cleans"?

ttyl
          Farrell

Or has backdoors and viruses (2, Interesting)

goombah99 (560566) | more than 6 years ago | (#22603312)

You may recall the Taiwanese router vendor that put backdoors in their routers (no one every explained why that I recall). And then there's all the picture frames and thumb drives that inject viruses.

If someone is producing un-lic gear why not pick up a few more bucks on offer to add compromises.

Why not go cheap on the capacitors or the solder? not like it will hurt your brand rep.

Not saying it happens but why not?

Re:Or has backdoors and viruses (link) (1)

goombah99 (560566) | more than 6 years ago | (#22603418)

Here's the link to be router backdoor story [slashdot.org]

Just so you know (5, Funny)

spun (1352) | more than 6 years ago | (#22601908)

No wonder their economy is booming when they can make a killing of counterfeit hardware and bogus harry potter books!
"Hairy Pooter and the Sorcerer's Bone" is not actually a counterfeit Harry Potter book, it is something quite different.

Re:Just so you know (0)

Anonymous Coward | more than 6 years ago | (#22603104)

"Analingus Dipilatorum" cried Ron, waving his wand at Hairy's backside. After the smoke had cleared and the sound of hedge clippers stopped, Ron found to his dismay that the impenetrable barrier was still there. "It's no use, Hairy. The undergrowth's thicker than the forbidden forest!"

I don't know, sounds the same to me...

Re:Just so you know (1)

ma1wrbu5tr (1066262) | more than 6 years ago | (#22603122)

I thought they were selling "Harry Pothead and the Stoned Sorcerer". And "Sysco Rowters"

Re:no wonder (0)

Anonymous Coward | more than 6 years ago | (#22602062)

The Chinese SOP

1. Copy foreign hardware/software
2. ???
3. Profit!

Re:no wonder (2, Interesting)

trolltalk.com (1108067) | more than 6 years ago | (#22602276)

The Chinese SOP

  1. Copy foreign hardware/software
  2. ???
  3. Profit!
A generation ago: s/Chinese/Japanese/g;

A generation from now: s/Chinese/American/g;

Re:no wonder (2, Interesting)

spun (1352) | more than 6 years ago | (#22602420)

That's the plan, man. As soon as a country starts getting wealthy and the workers aren't so desperate, take all the money and invest it in the next poverty stricken region. Wait until the first country gets poor and desperate again, then move back in. As long as money and goods are free to move between countries, but people are not, that's what we'll have.

Re:no wonder (0)

Anonymous Coward | more than 6 years ago | (#22602820)

this only works as long as cheap energy is available.

gasoline effectively doubled in price, and put America into a recession... it wasn't the only factor, but it was the only factor that doubled.

and besides, the plan has basically seen that more and more American companies are taken over by overseas outfits. such as the entire lumber and paper industry. once upon a time America has the most powerful and profitable paper and lumber companies, simply due to the amount of land in America. however, now they're all owned by multi-nationals.

how did this happen? the flow of money has definitely been outward in America for over a generation now. we're now a nation of debtors, it's so bad that they had to make bankruptcy harder.

Re:no wonder (2, Interesting)

Intron (870560) | more than 6 years ago | (#22603644)

Look at steel. It's kind of amazing that Japan was able to import all of the raw materials, make steel and ship it to the US cheaper than it could be made here where the resources were available. Doubling oil prices will probably be good for what's left of the US steel industry.

Re:no wonder (0, Troll)

EugeneK (50783) | more than 6 years ago | (#22602626)

mod up insightful. America - future tech backwater where sweatshop labor makes knock-off crap..except with more religious fundamentalists and a worse transportation system.

Re:no wonder (1)

Dogtanian (588974) | more than 6 years ago | (#22603000)

A few generations before *that*: s/Chinese/American/g;

And I'm pretty sure us Europeans probably tried to make copies of some cool stuff that came from the East at one stage.

Europeans copies (1)

DrYak (748999) | more than 6 years ago | (#22603684)

And I'm pretty sure us Europeans probably tried to make copies of some cool stuff that came from the East at one stage.


Noodles, fireworks, compass, paper. (We got it from Chinese)
Geometric motifs on old Greek pottery, mythological chimera creatures in old Greek stories (Got it from Pheonicians and other middle east civilisation)
Modern mathematics (We got it from Arabs during middle age. The irony is that themselves partly got it from old greek sources).
etc.

Civilization development is a long story of different cultures stealing and subsequently improving from each other. Idea "theft" and improvement is an absolute necessity to improve science and technology (and opensource is a nice example that is very close to /.ers)

Just imagine what would have happened if "american-style patents-on-ideas-and/or-concepts" did already exist back when the wheel was invented...

MACs (1)

witherstaff (713820) | more than 6 years ago | (#22603522)

I wonder how they keep the MAC addresses on this stuff straight. Do they copy existing ones so these units slip under the radar? Can you imagine the - albiet small - headache from some counterfeit and real gear having the same MACs, on the same network. It'd be like the old days when DEC NICs would fail and obtain the same MACs - that was fun tracking down!

Not really counterfeit (5, Insightful)

seanadams.com (463190) | more than 6 years ago | (#22601846)

I rather doubt that much of this equipment is truly "counterfeit", at least in the usual sense of a cloned design such as the iClone. Rather, what happens is that the contract manufacturer will buy extra parts and make more units than Cisco actually ordered, and then those units go out the back door after hours. They might have illegitimate serial numbers or might be missing the authenticity stickers on some internal chips, but they are otherwise identical.

It's a very difficult problem to manage unless you have trusted people overseeing the entire manufacturing operation. The amount of gross margin in Cisco gear makes this activity extremely profitable.

Re:Not really counterfeit (5, Informative)

Brian Gordon (987471) | more than 6 years ago | (#22601886)

Yeah that confused me too.. it's apparently perfectly good equipment, but they're not licensed to use the Cisco name. And of course they stole the design (I don't mean in an IP sense, I mean that I suspect that there was actual theivery involved in obtaining it).

Re:Not really counterfeit (5, Informative)

0100010001010011 (652467) | more than 6 years ago | (#22602002)

Or it could be a '3rd shift' operation. Same factory, same 'workers' but what they do after the 1st and 2nd "authentic" shifts are finished is swap out all 'good' electronics for cheap replacements.

Say Cisco specified a 1 ohm SMT resistor that has a .09% failure rate and costs $1/per (yes, it's just an example). When the '3rd shift' comes on board, they swap those out for 1 ohm resistors with a 5% failure rate but that only cost $.50/per. So it may even be the same assembly line but the components are much cheaper and not to Cisco specification, which is why Cisco doesn't stamp them as 'authorized'. And also why they may fail down the line long after the seller has disappeared.

Re:Not really counterfeit (1)

mrboyd (1211932) | more than 6 years ago | (#22602356)

Or it is exactly the same transistor but they don't need nor try to make as much margin as cisco.. after all they don't have any R&D or marketing cost. Anyway, if Cisco gear was not priced at 80% gross margin at list price we might see less of that kind of stuff happening.

Re:Not really counterfeit (1)

pyite (140350) | more than 6 years ago | (#22602734)

Anyway, if Cisco gear was not priced at 80% gross margin at list price we might see less of that kind of stuff happening.

And who pays list for Cisco?

Re:Not really counterfeit (2)

billcopc (196330) | more than 6 years ago | (#22603656)

Small buyers, governments, colleges... anyone who doesn't have skilled purchasing managers.

They don't exactly answer the phone with "Thanks for calling Cisco, here's our best price $xxx. What's your name again?"

Re:Not really counterfeit (1)

LingNoi (1066278) | more than 6 years ago | (#22601890)

Same with clothing except it might have incorrect spelling or didn't quite pass other QC tests.

Re:Not really counterfeit (4, Informative)

fyoder (857358) | more than 6 years ago | (#22601954)

According to the article, could be the same stuff:

What has happened is that many of the companies that do the outsourcing for Cisco now run an extra shift and sell the now counterfeit hardware out the back door. After all, they have the manufacturing capability, the expertise and the full blessing of Cisco.
It's not the same as 2nds, or cheap knock offs with fake labels. It would suck if you were getting duped, esp. if paying full Cisco prices, but for a very steep discount there are probably customers who would knowingly buy these even though it means forgoing warranty.

Re:Not really counterfeit (1)

TheLink (130905) | more than 6 years ago | (#22602180)

Well I think some Cisco warranties aren't lifetime, and keeping cheap "spares/standbys" around might get rather tempting ;).

Re:Not really counterfeit (1)

LinuxDon (925232) | more than 6 years ago | (#22602864)

In my experience, Cisco warranty is rather limited compared to the price you're paying. I've personally never seen any of their equipment having lifetime warranty. (Although I might be wrong on this!)
In contrast to the HP Procurve equipment, which is sold with next business day lifetime warranty at no additional charge.

Re:Not really counterfeit (1)

TheLink (130905) | more than 6 years ago | (#22603582)

A long time ago a customer sent in an Cisco 508 CS access server (older than the cisco 2500 series- yep _old_ ) for repair to a company I worked for (we were a Cisco reseller).

So I contacted Cisco TAC - told them it was really dead. The Cisco TAC guy got us sent a new one - well as new as something like that can be - because it was obsolete and the replacement was from old stock.

I asked them how much it'll cost - the TAC guy didn't appear to care. I guess his job was to close cases and make people happy.

In the end we told the customer - "yep free" (boss made that call). So customer was happy, we were happy.

I think the customer would have been biased to buying cisco equipment again... and maybe via us :).

I guess their margins were high enough then to justify such stuff, maybe they aren't anymore.

Why make *anything* in China, then? (4, Insightful)

Scareduck (177470) | more than 6 years ago | (#22602058)

The attractiveness of low cost manufacturing in China seems to be inevitably offset by some other negative, whether it be the creation of instant competitors once the contract manufacturer figures out how to reach their customers' customers, or ersatz ingredients (melamine in dog food last year for instance). Remind me again, why is free trade with China such a great deal for the developed world?

Re:Why make *anything* in China, then? (2, Insightful)

BlowHole666 (1152399) | more than 6 years ago | (#22602192)

Because the CEO wants to save a buck and would rather take that risk of China getting/understanding how to build last years model. Instead of paying the $10 an hour to the American worker where he can pay 10 employees $1 an hour (yes it is just an example I don't know the exchange rate). It all comes down to greed. It looks good on paper but in the long run it gets you into trouble.

Re:Why make *anything* in China, then? (4, Insightful)

emilper (826945) | more than 6 years ago | (#22603468)

Hate to blow a hole in your argument, but it's about labour availability, not about labour price. I am sure there might be 100000 competent and unemployed developers and 500000 unemployed blue collar workers in US, but if Cisco would want to build a factory in [insert random US location here] he won't find the 2000 employees needed to get things started.

The cause of offshoring/outsourcing is not labour cost, but labour mobility: the price of labour in electronics is very low, around 5%, but you cannot do without people. Giving better salaries is not a solution. It was tried during the IT bubble but it did not work: the companies got more expensive workers but not in greater numbers, since all competed over the same number of workers, and due to the limitations on immigration the game was a zero sum game. This problem is much more grave in EU than in US (imagine needing a Green Card in order to leave California and find work in Florida) so factories are moved not only to China or Eastern Europe, but even to US.

Of course in the long run it gets you into trouble, but in order to have a "long run", the companies that moved their operations in other countries attempted to have a "short run" first: they would be already dead without the ability to expand.

Re:Why make *anything* in China, then? (1)

BlowHole666 (1152399) | more than 6 years ago | (#22603580)

Oh, so when I was laid off form Dell tech support because it cost less to have the Indian worker do my job it was because they could not find enough employees? Or when you hear about assembly workers in Detroit getting laid off because Mexican workers can assemble the cars for less that is because of lack of workers? I think if you open up shop in the correct area (for tech California, Dallas, Houston, Seattle, etc) you will find the workers you need. But in Cisco's, Dell's, GM's, Ford, and HP's case they just want to save a buck.

Re:Why make *anything* in China, then? (1)

hackingbear (988354) | more than 6 years ago | (#22602794)

Because making those products in US, Germany, Japan or Taiwan (BTW both used to be doing the same things as China,) will not be price competitive; production in other 3rd world countries will have the same or worse problems. For the companies, all the extra costs and troubles still cannot negate the benefits. For the buyers, prices are always an important consideration. Quality is not the only criterion and is hardly quantifiable. Especially for electronics, my new laptop will be worth practically $0.00 in 1-2 year time frame; why do I want to pay extra for higher quality?

Why will they stop producing in China? When the labor cost starts rising. For examples, many of these labor intensive plants in Shenzhen were closed down this year and reportedly moved to Vietnam after the new labor law was enacted in China which mandates doub;e/triple pay for overtime and other restrictions. There are billions of poor laborers out there in the world.

Re:Why make *anything* in China, then? (0)

Anonymous Coward | more than 6 years ago | (#22602960)

The main reason, because Americans are cheap bastards who want to spend as little money as possible on things, get paid more for the same (or less) work, have the value of their home double each hour, and then complain about the property taxes based off of their home value.

In other words, because we can.

Re:Not really counterfeit (1)

BSAtHome (455370) | more than 6 years ago | (#22602318)

There are both surplus production being sold on the black market and there is counterfeit stuff. I have handled a batch GBICs which were in original wrapping, but on closer inspection they all had the same serial number (not on the sticker, but read using snmp). So they are probably surplus. However, another batch was clearly counterfeit as they didn't properly fit the slots.

Re:Not really counterfeit (5, Interesting)

jmorris42 (1458) | more than 6 years ago | (#22602328)

> The amount of gross margin in Cisco gear makes this activity extremely profitable.

It isn't just that. In any other tech industry you would see 'legit' clones, i.e. ones that were sold AS clones, with someone else's name on it. But you can't do that with Cisco gear. If you put any non-cisco stuff in one it voids the service contract. No service contract no bug fixes. Unpatched gear is an accident waiting to happen.

Personally I'm happy as hell. We don't have much Cisco gear and I didn't buy it (donated) but it has been enough of a PITA that I absolutely HATE Cisco. When I had to scrounge up some extra ports I certainly hope I managed to get the knockoffs and avoid giving those rat bastards one cent more than absoluteley required. Had to put the unit back under a service contract before I could get a IOS with device drivers. Tell me, who still charges for (basically) device drivers and security fixes?

Adn their hardware is so pathetic. Open one up sometimes and check out just how little is inside one. Ponder just how little they are paying those Chinese contract manufacturers for the hardware they then jackup to such stupid prices. And don't tell me it is the software either, they used to just be running BSD with the serial numbers filed off and with the volume they do they can afford some software devels. As for support it ain't in the price of the product, they sell that as a extra and for all intents and purposes only to those who have also paid em a crapload to get their people certified.

By being able to milk hardware, software and support they probably make Gates & Balmer jealous.

Re:Not really counterfeit (5, Insightful)

Feyr (449684) | more than 6 years ago | (#22602592)

have you checked the cisco price list for a standard power cable? do it sometimes, you'll get a kick :)

(hint: it's around 80$. same cable that comes with every power supply)

Re:Not really counterfeit (1)

blincoln (592401) | more than 6 years ago | (#22603040)

Agreed. Cisco won't even let you download the latest (I use that term loosely) firmware for their old 675 and 678 DSL routers without a service contract. It's absolutely ridiculous.

Re:Not really counterfeit (2, Insightful)

Itninja (937614) | more than 6 years ago | (#22602392)

So how is that not counterfeit? By definition counterfeiting is an imitation that is made with the intent to deceptively represent its content or origins. Isn't that precisely what happened here?

Re:Not really counterfeit (5, Funny)

jellomizer (103300) | more than 6 years ago | (#22602400)

Sorney, MagnetBox? I know a Genuine Peniphonics when I see one.

The dangers of outsourcing (1)

mcrbids (148650) | more than 6 years ago | (#22602752)

It's a very difficult problem to manage unless you have trusted people overseeing the entire manufacturing operation. The amount of gross margin in Cisco gear makes this activity extremely profitable.

And this is where outsourcing becomes so viciously dangerous. When considering outsourcing, it's important to limit it to only those areas that are not "core competencies". If your core business is to manufacture hardware, it's just stupid to outsource manufacturing hardware. If you're in the business of hosting, don't outsource your hosting.

Sure, when you do, there may be short term cost reductions. But in the process, you lose something very basic and fundamental. When you outsource your core competency, you are sort of living a professional lie, and that lie will catch up to you!

Don't buy counterfeits & don't buy the real th (1)

GameboyRMH (1153867) | more than 6 years ago | (#22602852)

The amount of gross margin in Cisco gear makes this activity extremely profitable.
I always say that if there are counterfeits going around, you shouldn't buy the real thing either, because it's a sure sign that the real thing is a ripoff. Inkjet cartridges, designer apparel, popular kids' toys, certain fashionable DAPs that will remain nameless, popular software packages that will remain nameless, all things that sell for FAR more than their manufacturing cost. Give me a counter-example...anyone.

Re:Don't buy counterfeits & don't buy the real (1)

milsoRgen (1016505) | more than 6 years ago | (#22603510)

Just to jump in here, you mentioned inkjet cartridges, and I believe the prices are inflated. However in my experience using knock off carts, refill kits or even commercial refill services you tend to get back a cart that lasts 1/4 of the time for 1/2 the price. Just my 0.02

Re:Not really counterfeit (1)

evildarkdeathclicheo (978593) | more than 6 years ago | (#22603352)

Or it's just all the crap that failed their already abysmal QC

So that's why.... (0, Redundant)

jacksonai (604950) | more than 6 years ago | (#22601848)

So that's why my router keeps crapping out on me.... Fake chips!!!

Re:So that's why.... (1)

djupedal (584558) | more than 6 years ago | (#22602090)

"So that's why my router keeps crapping out on me.... Fake chips!!!"

No.

Fake cables.

Yes! Built in censoring.. (0, Offtopic)

bagboy (630125) | more than 6 years ago | (#22601878)

Now I will not have to purchase add-on equipment to keep my users from seeing non-approved sites....

Where is this warehouse, (2, Funny)

Trigun (685027) | more than 6 years ago | (#22601926)

And can I get 20 minutes of completely unsupervised access?

I'll even waive the disposal fees.

So? (-1, Troll)

Wandering Wombat (531833) | more than 6 years ago | (#22601930)

Anyone who buys Cisco deserves what they get, right? Why should nerds care?

Re:So? (0)

Anonymous Coward | more than 6 years ago | (#22602122)

"Deserve what we get"? Like 4-hour hardware on site replacement? Like routers that have uptimes of YEARS? (I'm talking 'real' Cisco gear, not Linksys crap)
Yeah...that Cisco stuff is really bad.

Re:So? (1)

gallwapa (909389) | more than 6 years ago | (#22602376)

If your router has an uptime of 'years' you aren't applying critical security patches.

Like it or not, IOS has had a few over the past 10 years that should be applied.

Re:So? (1)

bleh-of-the-huns (17740) | more than 6 years ago | (#22602552)

While yes their have been IOS updates, alot of their equipment can be updated without a reboot of the router, usually just the management module, and if the equipment has redundant modules, then you update them separately, without the need to reboot, or lose connectivity.

This would be good for spying (1)

BlowHole666 (1152399) | more than 6 years ago | (#22601996)

This would be a good way for China, or any other country that creates large amounts of tech goods, to spy on countries. China could embed components in the hardware to phone home with data. Yes people would catch on eventually that every packets are being sent, but a common person would not notice. How often do you suspect your network switch of phoning home with any information that looks like a credit card number or something worse?

Re:This would be good for spying (4, Interesting)

bleh-of-the-huns (17740) | more than 6 years ago | (#22602618)

This is currently a valid issue, not a "what if" scenario. Currently, atleast in the gov entities I work in, the gov is no longer purchasing IBM desktop and Laptops, well the Lenovo branded ones anyways. A while back, in some of the meetings I have attended, there was a particular briefing which discussed a particular component in a device, that apparently had no function. This was from a well known brand that manufactures it's products Taiwan.

The problem is china (0)

Anonymous Coward | more than 6 years ago | (#22602006)

The reason is that the Chinese gov. does NOTHING to stop this production. To make clones, they even had to make the cases. This is designed to destroy the west's manufacturing capabilities. It is time for the west to step up and say no more. While over all this is directed at America, it is also happening on a small scale in EU. Once America is destroyed, CHina WILL focus on ALL of EU.

Re:The problem is china (1)

milsoRgen (1016505) | more than 6 years ago | (#22603566)

My linksys router hasn't had a restart in 5 months, granted it's just residential usage but still...

Doesn't take Sherlock Holmes (2, Funny)

arteas (1002034) | more than 6 years ago | (#22602014)

What genius figured out the Linksys stuff was actually fake Cisco Chinese knockoffs? Explains their routers intermittently dropping connections all the time. All that stupid Chinese solder and boards are screwing them up. The water on the island makes better wafers.

Re:Doesn't take Sherlock Holmes (1)

dfdashh (1060546) | more than 6 years ago | (#22602158)

It also doesn't take Sherlock Holmes to figure out that China isn't on an island.

Re:Doesn't take Sherlock Holmes (1)

arteas (1002034) | more than 6 years ago | (#22602242)

But Taiwan and Japan are... woooooosh

Re:Doesn't take Sherlock Holmes (1)

dfdashh (1060546) | more than 6 years ago | (#22602484)

My apologies, but if I'm not mistaken, you said /the/ island. You also made no mention of Taiwan or Japan.

Re:Doesn't take Sherlock Holmes (0)

Anonymous Coward | more than 6 years ago | (#22602374)

:((

That isn't exactly clear when we poor folks only have maps like this [fao.org]

The IDG article (0, Redundant)

djupedal (584558) | more than 6 years ago | (#22602056)

US, Canadian agencies seize counterfeit Cisco gear
Grant Gross 02.29.2008

U.S. and Canadian law enforcement authorities have seized more than US$78 million worth of counterfeit Cisco Systems networking equipment in an ongoing investigation into imports from China, the U.S. Department of Justice and other agencies announced Friday.

The coordinated operation, begun in 2005, has resulted in more than 400 seizures of Cisco hardware and labels, the DOJ said in a news release. The operation targets the illegal importation and sale of counterfeit network hardware such as routers, switches and network cards. One of the operation's goals is to protect the public from network infrastructure failures associated with the counterfeits, the DOJ said.

"Counterfeit network hardware entering the marketplace raises significant public safety concerns and must be stopped," Assistant Attorney General Alice Fisher of the DOJ's Criminal Division, said in a statement. "It is critically important that network administrators in both private sector and government perform due diligence in order to prevent counterfeit hardware from being installed on their networks."

The agencies that worked together on the operation included the U.S. Federal Bureau of Investigation's Cyber Division, U.S. Immigration and Customs Enforcement (ICE), U.S. Customs and Border Protection (CBP) and the Royal Canadian Mounted Police (RCMP).

The FBI named its portion of this ongoing initiative Operation Cisco Raider, an investigation involving nine FBI field offices and help from several other agencies. Over the last two years, the FBI's operation has resulted in 36 search warrants that identified about 3,500 counterfeit network components with a retail value of more than $3.5 million, the DOJ said. The FBI's work has led to 10 convictions and $1.7 million in restitution.

ICE and CBP have opened 28 investigations in 17 field offices since 2005. ICE has conducted 115 seizures of counterfeit Cisco products, with an estimated retail value of $20.4 million. ICE's investigation have lead to six indictments and four felony convictions. CBP has made 373 seizures of counterfeit Cisco hardware since 2005, and 40 seizures of Cisco labels for counterfeit products.

ICE and CBP seized more than 74,000 counterfeit Cisco networking products and labels with a retail value of more than $73 million.

On Friday in Toronto, the RCMP charged two people and a company with distributing large quantities of counterfeit network components to companies in the U.S. through the Internet. The RCMP seized approximately 1,600 pieces of counterfeit network hardware with an estimated value of $2 million.

Other recent cases:

-- On Feb. 14, Todd Richard, 33, was sentenced to 36 months in prison and ordered to pay $208,440 in restitution to Cisco by the U.S. District Court for the Northern District of Georgia. From late 2003 to early 2007, Richard imported shipments of counterfeit Cisco computer components from China, and separate shipments of counterfeit Cisco labels. He then affixed the fake labels to the fake components and sold the products on eBay, the DOJ said.

Richard sold more $1 million worth of counterfeit Cisco products, the DOJ said.

--On Jan. 4, a grand jury in U.S. District Court for the Southern District of Texas indicted Michael Edman, 36, and his brother Robert Edman, 28, for trafficking in counterfeit Cisco products. The indictment alleges that the Edmans purchased and imported the counterfeit computer network hardware from an individual in China, then selling the products to retailers across the U.S. The Edmans shipped some of the counterfeit hardware directly to the U.S. Marine Corps, Air Force, Federal Aviation Administration, FBI, defense contractors, universities and financial institutions, according to the indictment. These organizations had purchased the product from a computer retailer serving as a middleman, which in turn purchased the products from the Edmans.

Re:The IDG article (0)

Anonymous Coward | more than 6 years ago | (#22602842)

This is nice,
Image the resources in time and money that US Customs, ICE, FBI, and border patrol as spending keeping 2 million retail dollars worth of unlicensed Cisco gear out of the country for this bust. How many illegal PEOPLE have crossed those same borders in that same time frame and at what cost the legal citizens? Aren't every one of these organizations claiming they need more money and resources? Even if you look at the totals quoted "over the years" of 73 million. That is NOT 73 million dollars of lost profit for Cisco, that is $73 million dollars of retail sales (which is equal to profit) that they may or may not have had. Technically, Cisco lost nothing unless they actually paid for the raw materials and production of this equipment from the factory but never actually received it. In that instance, it would be a theft issue and should be handled at the factory level. Oh, Cisco can't handle the security at a Chinese factory? Then why the hell did they contract out to there? Cisco took the chance and should bear the costs and effort. Instead they want cheap labor in a country that has different rules and ethics and wants the US taxpayers to make up the difference for that. Have your cake and eat it too.
That $73 million was not lost either. That is money that was spent on things other than real Cisco products.

I can think of at least a thousand other places and programs that my tax dollars could be better spent on tracking down counterfeit Cisco products.

Re:The IDG article (1)

djupedal (584558) | more than 6 years ago | (#22603670)

Redundant? that's funny!

hey, kdawson...tip: /. is redundant...the original article stands on its own :)

kettle calling the pot, eh?

karma: excellent, w/flexibility beyond steamed /. staffers

sorry, this isn't clear (0)

Anonymous Cowpat (788193) | more than 6 years ago | (#22602118)

have they been seizeing this stuff from the people selling it, or wherever they can find it (including tearing the guts out of working networks)? If it's the latter then; why? Shouldn't they be trying to work so that the victims of this don't get battered any more over it and can get the bad hardware out of their systems tidily.

So, um... (3, Interesting)

scubamage (727538) | more than 6 years ago | (#22602144)

when are they auctioning this stuff off..? I'd love to get me some pods together on the cheap.

Re:So, um... (2, Insightful)

SuperBanana (662181) | more than 6 years ago | (#22602664)

when are they auctioning this stuff off..?

"Counterfeit" (or in this case, unlicensed) goods are usually destroyed.

Re:So, um... (1)

scubamage (727538) | more than 6 years ago | (#22603094)

God, thats such a damn waste :( At least donate it to a local university or something for CCNA prospectives.

Re:So, um... (2, Insightful)

seanadams.com (463190) | more than 6 years ago | (#22603292)

God, thats such a damn waste :( At least donate it to a local university or something for CCNA prospectives.

You're missing the whole point of this. Having these products in circulation is extremely detrimental to Cisco. Not just in terms of lost sales, but also that people will be calling in for tech support, attempting to get warranty replacements, putting it up on eBay, etc. Even if you donate it to a charitable cause it is costing them real money in a direct sense, and also tarnishing the brand and pissing off their legitimate dealers.

The product absolutely should be destroyed and the people responsible should bear the full pain of that loss. The only other remedy I could think of that might make sense would be to return the hardware to Cisco so that it can be either refurbished or destroyed at their discretion. I guess it would depend on whether the goods ultimately get classified as stolen vs fraudulently manufactured.

Re:So, um... (3, Insightful)

scubamage (727538) | more than 6 years ago | (#22603356)

No, its a waste, plain and simple. They don't tarnish Cisco's name because they're known to be counterfiet. If someone turned around and sold them, sure, that'd be bad. However I personally see no issue of using perfectly good hardware to train prospective students. The hardware is counterfiet, the IOS software on it would not be. It's a waste because it could be used. Throwing away something that can be used is the very definition of waste.

What's the Difference? (4, Insightful)

Doc Ruby (173196) | more than 6 years ago | (#22602154)

Other than the brand name on the boxes being fraudulent, what is the difference between this HW and the real Cisco products? If they're even close in quality, then catching these fraudsters will move Chinese manufacturers to market them under their own brands. Then they'll just be violating patents, not trademarks (and copyrights in the manuals). But then they'll be pressured to actually create their own better ways of doing it. Which is actual progress, even if not quite as profitable as the ripoff.

If Chinese counterfeits can get marketed under their own brands, we'll actually have some price competition. And maybe when some American companies get killed by their OEM factories like Japanese manufacturers did to cameras and consumer electronics in the 1970s-80s, we'll see some more caution in shipping all their tech expertise overseas to create their competitors. They might be more likely to consider the less immediate costs of outsourcing from a country where the law (usually) protects things like intellectual property, contracts, labor and the environment.

Or maybe every generation is doomed to watch America squander its hard-won tech leads for the sake of a few years of cheap manufacturing that then eats the parent for lunch.

Heavy Gear (1)

Spinlock_1977 (777598) | more than 6 years ago | (#22602184)

... bogus Cisco gear from China typically includes network modules, WAN interface cards, gigabit interface converters, and less expensive routers

It's easy to identify this bogus gear in the wild. It's really really heavy, because it's made of lead.

Great Firewalls! (0, Redundant)

dasunst3r (947970) | more than 6 years ago | (#22602206)

Each one of these routers came with the ruleset for the Great Firewall of China pre-loaded! Perfect for suppressing criticism in my company! Great seller, would buy from again! A++++++++++++

Prefered Trade Status (1, Insightful)

thejuggler (610249) | more than 6 years ago | (#22602260)

Is is it about time to terminate China's Preferred Trade Status with all the problems with Chinese products that are dangerous, poisonous, fake, bogus and fraudulent. Both political parties have voted in favor of keeping China's preferred trade status. Why? It can't be the superior products we get to buy from China.

Re:Prefered Trade Status (3, Insightful)

sheph (955019) | more than 6 years ago | (#22602530)

It could have something to do with all of the campaign contributions that come from large organizations manufacturing goods and services. Of course it could be that the general populous likes products that are dangerous, poisonous, fake, bogus and fraudulent. It's so hard to tell.

Re:Prefered Trade Status (1)

BarlowBrad (940854) | more than 6 years ago | (#22603044)

Likely because Chinese products are superior in price.

Re:Prefered Trade Status (1)

Wildclaw (15718) | more than 6 years ago | (#22603046)

It could have something to do with the -260 billion/year trade balance that the US currently have with China.

If the US suddenly stopped trading with China, it would lose access to 320 billion/year of production, and ramping up to that production level would take a while possibly sending the whole of US into a new depression. China on the other hand would lose access to 60 billion/year of trade, most of which it could replace locally or get from other trading partners. Not being able to sell their products is much less of a problem that not being able to produce them. It isn't like China has a lack of people that could use them.

And this havn't even mentioned the big US dollar cash reserve that China could decide to play with if the US began to behave badly against them.

OK, I know that not that preferred trade status doesn't mean sanctions, but the above should still you a pretty good idea of why.

Re:Prefered Trade Status (0)

Anonymous Coward | more than 6 years ago | (#22603154)

+3 Insightful? WTF? Have you ever taken Economics 101?

A sure-fire way to massively ramp up inflation in this country is to suddenly curb the number of goods sold to us by our #1 trading partner.

It was easy to identify the fakes (1)

Prototerm (762512) | more than 6 years ago | (#22602274)

They just had to look for stuff covered in all that lead paint.

yeah, right. (4, Insightful)

peccary (161168) | more than 6 years ago | (#22602286)

One of the operation's goals is to protect the public from network infrastructure failures associated with the counterfeits, the DOJ said.
As opposed to network infrastructure failure caused by ships dragging their anchors through the Mediterranean. Or Verizon techs installing crap on their toplevel DNS servers.
No, I think the goal is to protect the corporation. Not that I completely object to these actions, just that it's getting pretty tiresome to see the police always trotting out the public safety angle.

Re:yeah, right. (0, Troll)

ScentCone (795499) | more than 6 years ago | (#22602964)

getting pretty tiresome to see the police always trotting out the public safety angle

No more tiresome than it is to see someone on slashdot trotting the "The Pigs are only working for The Man" socialist hippy crap whenever another country's counterfitting efforts are exposed or someone's work is ripped off and they actually get some help dealing with it.

protect the corporation

Yeah, that evil Cisco. We sure wouldn't want to protect the millions of people who own stock in it, the billions of people who depend on data that passes through their equipment, or the thousands of people who work for the company. We should only protect routing equipment makers with 20 or fewer employees that work in organic huts owned by families of no more than three living generations and a just enough net worth to buy a Yugo that's been converted to run on oil pressed from chicken feathers that have been voluntarily offered up by free range chickens living in harmony with other birds, including predators that have been converted to veganism, no matter how much they want to eat that chicken.

Who cares? (1)

allaunjsilverfox2 (882195) | more than 6 years ago | (#22602296)

If I can get it for half the price, I'll buy it. I buy 13 dollar power supplies KNOWING they will die in 3-6 months. But as long as they work in the midterm, I'm happy. Same goes for routing equipment. BRING ON THE PAIN!

Initial scan of the title... (0, Redundant)

Phoenix-IT (801337) | more than 6 years ago | (#22602300)

My first eye scan of the title had me confused because I thought it said "Bogus Chinese DISCO Gear." Which created some very confusing mental imagery.

big software thefts in past too (1)

peter303 (12292) | more than 6 years ago | (#22602302)

If you cant engineer it, then steal [usatoday.com] it.

Are people that dumb? (-1, Troll)

Anonymous Coward | more than 6 years ago | (#22602330)

Do people really buy a Cisco "Loutel" or a "Road Barancel" and think it's the real thing?

Re:Are people that dumb? (1)

jameskojiro (705701) | more than 6 years ago | (#22602742)

You Lacist sod! You ale a learry bad pelson!

First Communist Party (0)

Anonymous Coward | more than 6 years ago | (#22602334)

posting.

All your internets hardware are belong to us.

P.S.: Universal health care for our U.S.A. comrades.

Communally forever,
Xiao Zshe Ching

Not so much "Counterfit" but overproduction.. (0, Redundant)

Pontiac (135778) | more than 6 years ago | (#22602354)

This is something that been going on with small engines and Chinese manufactures too..

A US company will contract for a specific line to be produced..
A few months later you'll see a Hong Kong Web store open up selling the same motor for 1/2 price..
The quality usually isn't all that great..

I suspect the manufacturer might be finding things to do with excess parts and dumping in the parts that wouldn't pass QA for the original contract.

Was it just non-sanctioned boxes or IP theft? (4, Interesting)

ErichTheRed (39327) | more than 6 years ago | (#22602386)

It sounds like most of these Chinese counterfeiting cases have been manufacturers making exact copies of the items they were contracted to make, then selling them without the warranty, name, etc. for similar profit margins.

How much of this is the manufacturer just building more than what they were supposed to, and how much of it is actually theft of intellectual property? I remember reading that the Soviet Union would go the IP theft route...obtain a computer from another country and totally reverse-engineer it so they could use a similar design. My bet is that these manufacturers just want to make more money and not necessarily use the same quality parts. (If you're building 1000 routers, the difference between a $10 transciever and a $100 one is big, for example. How worried should we be that, say, the manufacturer has reverse-engineered IOS and put it into their own gear?

Either way, if my business was based on building clever hardware, I'd be worried about outsourcing the manufacturing to anyone, let alone a different country. However, there is absolutely no way to stop people from demanding cheaper goods. It's at the point where people are haggling over a few cents -- we're just addicted to low prices.

I'm generally not one of these protectionist, "keep America working" types, but I can't see a good way out of this situation. All the scenarios are bad:
- Go to war with China or cut off trade completely in some other fashion --> Huge price increases and emergency ramp-up of domestic production --> possibly a bad recession.
- Continue as-is --> More poisoned or cloned merchandise and IP theft --> eventually a very bad situation for us.
- Try to get China to comply with environmental and IP laws --> ???

Re:Was it just non-sanctioned boxes or IP theft? (1)

SL Baur (19540) | more than 6 years ago | (#22603224)

I remember reading that the Soviet Union would go the IP theft route...obtain a computer from another country and totally reverse-engineer it so they could use a similar design.
I recall reading something like that too, only it was a bit more blatant. Along the lines that careful examination of a supposedly Soviet made CPU had "Copyright Intel" buried in the guts of it.

This isn't what I originally read, but here's a reference: http://www.cpushack.net/soviet-cpus.html [cpushack.net]

Some gear doesnt work (5, Informative)

Gadgit (1067790) | more than 6 years ago | (#22602396)

Had actually received some of this gear unknowingly and while some of it does work...there were a few cases where that when a switch that would lose power the GBIC would not come back up in a 'no shut' state. Instead you had to console into the switch and issue a 'shut > no shut' on the interdace to get the port to come back. So while the technically do kind of work, it is not something I would recommend deploying in a mission critical switch/router.

Re:Some gear doesnt work (2, Interesting)

jandrese (485) | more than 6 years ago | (#22602604)

I have a suspicion that a lot of this third party resale equipment is the stuff that failed QA the first time around, but only barely. There's probably some overproduction in there as well, but it does make buying one of these discount routers a risky proposition.

Apparently the boxes were labeled... (0, Flamebait)

Hamster Lover (558288) | more than 6 years ago | (#22602526)

Apparently the counterfeit Cisco products were labeled "D-Link."

Wait. What!?! (0, Offtopic)

porkchop_d_clown (39923) | more than 6 years ago | (#22602868)

cleaning my glasses...

The first time I read that I saw "Feds Sieze $78m of Bogus Chinese Crisco Gear".

I don't want to tell you what popped into my head....

Made Where? (1)

Plekto (1018050) | more than 6 years ago | (#22602942)

Since it's all made in China anyways and patents mean nothing over there... exactly how is this counterfeit?

Let me make a guess here... It's the same stuff, just without the right paperwork or import tax/fee applied. Kind of like how they claim "Grey Market" versions aren't real despite being from the same company in China.

Who do you blame? (0)

grumpyman (849537) | more than 6 years ago | (#22603048)

The whore, the pimp or the johns? Most slashdotter are pointing to the whores.

Backdoors? (0)

Anonymous Coward | more than 6 years ago | (#22603226)

Is there a possibility that this gear has built in backdoors to facilitate e-warfare?

Incremental Revenue for OEM Manufacturers (1)

GlobalColding (1239712) | more than 6 years ago | (#22603332)

Remember 3Com? Their stuff was made by Delta and Accton, and they just made different plastic exteriors, slapped their name on it and made BANK until people realized they could get same functionality for less money. You could buy same exact gear, usually in "ugly" but functional metal enclosures for much less money from companies like SVEC, Hawking Technology, D-Link, Netgear, Asante, SMC, etc... On one hand - Fake or Real, Cisco branded units still increase Cisco's market share, especially since the only difference is in legitimacy - licensing, and not in functionality. As it stands Cisco is unique in the manufacturing sector because they make more money off their hardware than off software and service contracts, so its no surprise they are so militant about protecting their interests. Since they really cant do much to the manufacturers in China best they can do is to come down HARD on people selling it in the US.

Dumb question but need to ask .... (1)

bizitch (546406) | more than 6 years ago | (#22603362)

Does any of that Chinese Cisco shit actually work?

Not that I want to buy it - just curious - can they make something that can be passed off as working hardware?

If they can - that's kinda impressive IMHO
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