© 2011 Rochester Electronics, LLC

Page 3

September 2011

All Rights Reserved

 

Counterfeit sales of all products (including pharmaceuticals, jewelry, electronics, and other goods) has been

estimated to be 7% of total sales. Seven percent of the total projected semiconductor sales for 2010 is over

$US20 billion. This represents a considerable number of dangerous parts.

Here are some recent counterfeit semiconductor incidents that were cited in a press release issued in September

2010 by the U.S. Department of Justice:

•

2010 — Defendants imported counterfeit integrated circuits from China and Hong Kong and sold them to

the U.S. Navy, defense contractors, and others, marketing some of these products as “military grade.”

They and others generated nearly $US16,000,000 in gross receipts from the sales of counterfeit

integrated circuits, having imported from China and Hong Kong nearly 60,000 integrated circuits bearing

counterfeit marks, including military-grade markings, valued at approximately $US425,293.

•

2009 — Defendants and others engaged in a “bait-and-switch” fraud involving devices to be used in the

controllers of high-speed trains. They shipped 13 devices to the buyer that conformed to product

specifications, and then shipped 1,987 counterfeit devices.

•

2009 — Defendants, who are now cooperating with law enforcement authorities, sold a military-grade

counterfeit device to a government undercover agent during a criminal investigation.

•

2009 — Defendants sold 350 counterfeit parts for integration into a beam steering control module board

within the multiple sub-array of the testable antenna for the U.S. Navy Cobra Replacement Program

(ballistic missile defense).

•

2008 — Defendants sold 1,500 counterfeit parts to ultimately be used to support production and repairs of

A9 (missile) circuit card assemblies for classified application.

•

2007 — Defendants sold 75 counterfeit parts intended to be used for production of ship-based antenna

equipment, the Identification Friend Foe (IFF) system, which is used to determine an in-flight aircraft’s

identification and intention.

Despite the fact that the penalties for counterfeiting are substantial in some regions of the world, the crime

continues to rise as the profit that counterfeiters make can be large. The UK Intellectual Property Office (IPO)

estimates that the profit margin on counterfeit semiconductors is considerably greater than the profit margin for

narcotics.

Penalties in the United States are:

•

Conspiracy: a potential statutory penalty of up to five years of incarceration, a fine of $US250,000, a

three-year term of supervised release, and an order of restitution.

•

Trafficking in counterfeit goods: a potential statutory penalty of up to 10 years incarceration, a fine of

$US2 million, a three-year term of supervised release, an order of restitution, and an order of forfeiture

and destruction for articles bearing or consisting of counterfeit marks and for any property used to commit

or facilitate the commission of the offense.

•

Mail fraud: a potential statutory penalty of up to 20 years incarceration, a fine of $US250,000, a five-year

term of supervised release, and an order of restitution.