While Herrington is loath to reveal specifics of the conversation, he and Wan discussed the fact that many golf club counterfeiters fly their shipments to Vancouver or Toronto, then truck them into the U.S. Another method, according to U.S. Customs officials, is transshipping: sending the merchandise first to a country not associated with counterfeit golf clubs—say, the Netherlands—thus avoiding the red flag that cargo from Taiwan or China might raise. Counterfeiters also smuggle club components in containers filled with legal goods, such as ceramics or auto parts. Or they simply list their cargo as something else on the shipping bill, playing the odds that it will get through amid the mass of foreign goods flooding U.S. docks. Six thousand containers a day are shipped to the U.S. from Hong Kong, according to U.S. Customs, and only 2% are physically inspected.
After an hour or so of such banter, Herrington and Wood identified themselves to Wan. "She insisted she'd done nothing wrong," Herrington recalls. "When we asked her where the clubs were made, she claimed she didn't know. She said some Chinese man named Joe had come up to her with the stuff on the streets of Hong Kong." Herrington confiscated the samples, and Wood delivered a stern lecture to the distraught Wan on the penalties she I could face. In the end, though, he let her go, and she bolted. Although trafficking in counterfeit goods is a felony, "it's difficult if not impossible now to prosecute," says Wood, because so much attention is focused on combating terrorism. Two years ago Wan might have been put behind bars. Today, Wood notes, " U.S. law enforcement has bigger fish to fry." Still, from Herrington's point of view the sting was a success. "We really scared her," he says. "She's never coming back here."
Others are, though. "Now that so much legitimate business has moved to China, the counterfeit market can't be stopped," says Ken Gaul, the U.S. Customs agent who spearheaded Project Teed Off, which resulted in 14 indictments and the seizure of $6 million worth of counterfeit golf merchandise in 1999. "At this year's show in Orlando, I saw an Asian man taking pictures of a golf club from several angles. Everyone knew what he was doing."
Those photographs, industry experts say, could have been digitally transmitted to a tooling factory in China, converted into three-dimensional form by means of a computer program and used to create a copper master of a head that could be ready for mass production in two weeks. "It takes us over a year to design a new club, using sophisticated computer programs that require the expertise of very experienced engineers," says Barney Adams, founder and chairman of Adams Golf. "If the club's a success, copies are on the market in 60 days. It's reprehensible. To get into the copying business, all you need is to take a couple of drivers and irons you like, fly to Hong Kong, and voil�, you could be in the knockoff business tomorrow."
How much all this costs the golf industry is difficult to gauge. According to the National Golf Foundation, U.S. consumers spent $2.8 billion last year on golf clubs, some 70% of which came from China. If only 10% of those sales involved illegal knockoffs and counterfeits—some experts believe that figure might be higher—that would amount to $196 million.
Jethro Liou is an expert in the knockoff business. A boyish 25-year-old Californian, he has been selling golf clubs since he was 15. After school he would make cold calls for his father, Ren-Jei (R.J.) Liou, asking pro shops and discount stores if they wanted to order from his line of clubs. R.J. owned Kent Graphtec, an importer of club components from Taiwan and, later, China. He'd have the components assembled at his warehouse outside of Los Angeles and would distribute them to retailers all over the U.S. "The golf business was so good between 1991 and '97, you could sell anything," Jethro says. "We were one of the first companies to import from China."
Kent Graphtec dealt primarily in knock-off clubs, products with names such as King Snake and Big Bursar—simulations of the popular clubs King Cobra and Big Bertha. "The customs people thought my father was [the primary distributor of] King Snake, which in its heyday had something like 10 percent of the market," Jethro says, "but a lot of people were importing that product."
A lot of people eventually got in trouble for it too. "There are different levels of counterfeiting," says Debra Peterson, a U.S. Customs official who was involved in Project Teed Off. There is the direct counterfeit, which is a dead-on copy that carries the legitimate product's trademark, and that's illegal. Also illegal is a club that is very close to a direct copy and is termed either "confusingly similar" (if it infringes on company trademarks) or "substantially similar" (if it infringes on design patents). What is legal is the generic look-alike that does not infringe on a company's trademarks or patents. Some features of a driver—its head size, for instance—cannot be protected, while others can. But with confusingly or substantially similar knockoffs, the line between legality and patent or trademark infringement is often fuzzy and is subject to legal challenge and interpretation. A counterfeiter tries to alter a company's protected features just enough to avoid prosecution. Whether the result is illegal can be established only in court, on a case-by-case basis; in other words, the aggrieved company has to sue.
Callaway threatened to sue Kent Graphtec over its Big Bursar driver, alleging patent, trademark and trade dress (trademark design) infringement. In 1997 R.J. Liou reached a settlement with Callaway. Four years later, in March 2001, the U.S. District Court in Los Angeles ruled that R.J. Liou, Kent Graphtec and Trophy Sports—a separate company started by Jethro and his mother, Yeh-Chyn, in late 2000—had breached the settlement by continuing to sell Big Bursars. The court ordered the defendants to pay $20,000 in damages to Callaway and to turn over their inventory of more than 11,500 infringing components for Callaway to destroy. According to Jethro, the family's legal fees for the discovery phase alone came to more than $1 million.
By then, Nehru's parents had divorced, and Jethro had fallen out with his father. Kent Graphtec officially went out of business, though R.J. is now back in business on his own, according to Jethro.