Counterfeit microprocessors are on the market. Most
counterfeit chips work, to a varying degree, so do purchasers and
wholesalers need to worry? writes Stephen
Reid.
A "counterfeit" article purports to be something that it is not.
Normally, a trade mark belonging to one company is applied to chips
not manufactured by that company. The advantage to the
counterfeiter is the ability to sell something at a higher price
than it would otherwise command. This often results in customers
being supplied with a quality or specification that is lower than
they expected.
From my experience advising on this, the chip makers are keen to
enforce their legal rights and will work with private investigators
to trace illegal sources if necessary.
There are many situations where chips are tampered with to
artificially upgrade their performance. This "over-clocking" of
chips will often result in their failure.
Even where the performance of a chip has not been tampered with,
the customer is not getting what they bargained for. The chip is
likely to be old, below specification, or of a cheaper make.
Using such chips could invalidate service or other warranties
pertaining to the machine in which they are used. Selling such
chips can also lead to civil and criminal legal liability.
Trade marks
Anyone selling or offering counterfeit chips will be guilty of
trade mark infringement and will be open to legal proceedings
commenced by the trade mark owner. A lack of knowledge about the
counterfeit nature of the chips is irrelevant to liability.
If the seller can be shown to have known that the chips were
counterfeit, they will be at risk of criminal prosecution by
trading standards bodies and a face a fine or custodial
sentence.
Patent infringement
If the maker of the genuine product owns relevant patents, keeping
and selling the chips in the course of business could also amount
to patent infringement, whether or not there has been trade mark
infringement.
Damages will be payable once the infringer is on notice of the fact
that the chips may infringe. Usually, the patent holder will
concentrate on the main importer (assuming the counterfeit chips
are made in the Far East) or large distributors. They may take
steps to have goods detained by Customs & Excise.
Contractual liability
If you find that you have been sold counterfeit chips, there is
legal recourse available. The seller of the chips will have
breached the terms implied by law into the contract of sale that
they have the right to sell you those goods and that you will enjoy
"quiet possession".
Even if you have not yet been sued, you will still be able to make
a claim against the seller on this basis.
Furthermore, if the sale was by reference to a brand (ie, you were
offered "chips manufactured by brand X"), there is likely to have
been a breach of the contract of sale, which will give you a right
of action. However, many sales are by specification or by price
only. In these circumstances it may be difficult to make a
case.
Avoiding the problem
Identifying counterfeit chips can be difficult. They will normally
be passable imitations of the real thing. However, two minutes
spent on a close examination may reveal that all is not well.
The brand of the real manufacturer is likely to be found somewhere
on the chip as it is often deemed too costly to erase. The
circumstances of the sale may also indicate that the chips are not
genuine. If a price seems too good to be true, it probably is.
In circumstances of doubt, a call to the alleged manufacturer
should clarify matters. If it is essential that you obtain a
certain brand of memory or processor, check with the manufacturer
to identify authorised distribution routes.
Stephen Reid is a solicitor at City law firm Simmons &
Simmons