HEWLETT-PACKARD LOSING MILLIONS FROM COUNTERFEIT

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000293 SIPDIS SIPDIS E.O. 12958: DECL: 02/26/2016 TAGS: ECON EIND KIPR PREL CH AE NI SUBJECT: HEWLETT-PACKARD LOSING MILLIONS FROM COUNTERFEIT INK CARTRIDGES REF: 2005 LAGOS 1413 Classified By: Acting Consul General William Howe for reasons 1.4 (B) and (D) ¶1. (C) Summary: Hewlett-Packard (HP) executives complain the number of outlets selling counterfeit HP ink/toner cartridges has increased the past year, costing the company millions of US dollars in lost revenue. Local law enforcement and the Nigerian Copyright Commission (NCC) are doing little to combat intellectual property right (IPR) violations, they said. Counterfeiting likely will increase. End summary. -------------- Hewlett Packard Claims Revenue Losses of 20-30 Million/Year Due to Counterfeiting -------------- ¶2. (SBU) Consulate Staff visited the Otigba Street Ikeja Computer village with Hewlett-Packard Printing Supplies Manager Jovita Agwu February 21, to obtain a better sense of the traffic in counterfeited goods. The Ikeja Computer Village comprises over 1,500 businesses, many of them selling pirated or counterfeit products. Technology Distributions, one of HP's main distributors, frequently visits the Village in the near vain attempt to encourage the businesses there to sell HP authorized products. ¶3. (SBU) General Manager of Hewlett Packard, Maduka Emelife, intimated HP Nigeria was losing between USD 20 to 30 million per year in potential revenue due to ink and toner cartridge couterfeiting. According to Emelife, counterfeiting occurred two ways. First, Nigerians obtained discarded HP ink/toner cartridges from dustbins, use imported ink to refill them, and then resold them at less than the price of a genuine HP cartridge. Alternatively, Nigerians import cartridges from Chinese firms via Dubai, import ink directly from China, and sell them in open markets, including the Ikeja Computer Village. However, because Ikeja Computer Village has become a frequent target for unannounced police raids, many street vendors have moved to Alli Street in Tinubu Square on Lagos Island, company representatives said. Consumers can purchase counterfeit HP 92ADeskJet toner cartridges, valued at USD 65, for 11 US dollars (naira 1,500) and HP 42A ink cartridges, valued at USD 35, for less than 5 US dollars (naira 600). According to Hewlett-Packard and Technology Distributions representatives, for every licensed HP ink cartridge, dozens of counterfeit products are sold. -------------- Lack of IPR Enforcement, Awareness, Drives High Counterfeit Rate -------------- ¶4. (SBU) At Ikeja Market, over 90% of purported Hewlett-Packard ink/toner cartridges were counterfeit. Company representatives estimate counterfeiting rates for Nigeria as a whole is over 80%. We did not find one shop that did not carry counterfeit HP products. On average, total sales volume for HP licensed ink/toner cartridges at Ikeja is 1,000 per year, or 20 per week, with numbers reaching between 30-50 during special promotion weeks, according to company sales representatives. (Comment: These sales numbers, however, are insignificant compared to thousands of counterfeit products sold openly at Ikeja and Lagos Island. End Comment.) -------------- Chinese Firms Engaging Nigerians to Sell Counterfeit Cartridges -------------- ¶5. (C) Technology Distributions Ikeja Branch Manager, Rita Momah, said she periodically witnessed Chinese vendors seeking local Nigerian partners to sell unlicensed HP ink/toner cartridges in both the Ikeja and Lagos Island area. The number of Nigerians visiting Dubai to meet Chinese businessmen is increasing, she alleged. Technology Distributions and HP said they will compile a list of Chinese companies engaging Nigerians to sell counterfeit products, and will attempt to discover how counterfeit products are imported from Dubai to Lagos. ¶6. (C) In an earlier visit to Otigba Market with Microsoft LAGOS 00000293 002 OF 002 Nigeria representatives, we gathered information suggesting that several Chinese firms were hiring local Nigerian vendors to sell pirated Microsoft computer products (reftel). The Otigba Market-based Computer and Allied Products Dealers Association of Nigeria (CAPDAN),said their organization is receiving an increasing number of requests by Chinese businessmen seeking local Nigerian partners. It appears mainland Chinese firms view Ikeja as an ideal operations base for selling pirated computer hardware and software products. -------------- No Support from Government; Local Police Part of the Problem -------------- ¶7. (C) Emelife complained HP has received little support from the Nigerian Copyright Commission (NCC),the Standards Organization of Nigeria, customs, and law enforcement agencies in combating IPR violations. He said HP had offered training seminars to government officials, including customs officials to assist them in curbing the import of unlicensed HP products, but no significant progress has been made. He said local government was ineffective in enforcing IPR laws. ¶8. (C) Technology Distribution Ikeja Branch Marketing Manager Obinna Onwu said CAPDAN and local law enforcement would periodically stage "raids" at Otigba market. However, he noted police often would either return the goods to street vendors or keep the items to sell themselves. Organizations like CAPDAN are merely staging these raids for publicity to make it appear they are combating IPR violations, when in fact they profit by it, he said. -------------- Comment -------------- ¶9. (C) HP's tale is the familiar one of flagrant IPR violations in Nigeria. No significant progress has been made in tackling IPR violations since our last visit to Otigba Market in September 5, 2005. To date, weak regulatory agencies such as the NCC, lack of resources to fund IPR enforcement, and the cheap costs of reproduction make Nigeria and Lagos ideal for firms interested in producing and selling counterfeit items. End comment. HOWE