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.

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Hewlett Packard Claims Revenue Losses
of 20-30 Million/Year Due to Counterfeiting
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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.

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Lack of IPR Enforcement, Awareness,
Drives High Counterfeit Rate
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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.)

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Chinese Firms Engaging Nigerians
to Sell Counterfeit Cartridges
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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

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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.

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No Support from Government;
Local Police Part of the Problem
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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.

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Comment
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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