It's a Fake!

Getting stuck with counterfeit or gray-market goods can lead to losses and legal issues. Retired FBI agent Jerry W. Howe's Gobi International Investigations Inc. investigates counterfeiting cases. After watching a Seattle-area hairstylist lose $15,000 worth of counterfeit goods she purchased through an ad in a trade publication, he advises retailers to ensure they're dealing only with authorized distributors. "Call the manufacturer and check them out," says the Fountain Hills, Arizona, investigator. "Don't deal with suppliers that [can] only [be contacted through] the internet."

Mitchell C. Stein, an intellectual property attorney with law firm Sullivan & Worcester, says gray-market goods--those purchased cheaper overseas and resold in the U.S.--come from the same manufacturers but often don't have the same warranties. Stein tells clients to get familiar with the goods they're buying and be wary of those that arrive with not-quite-right logos, missing labels or poorly printed packaging.

If you're on the receiving end of a government demand letter because you've been duped into buying fakes, don't panic. "It doesn't mean you're going to have to pay a settlement fee," Stein says. "But you should consult an intellectual property attorney to get it straightened out."

Gwen Moran is co-author of The Complete Idiot's Guide to Business Plans.

This article was originally published in the June 2007 print edition of Entrepreneur with the headline: It's a Fake!.