Attorney Lorne Lipkus suggests the recession may be driving up demand for counterfeit products such as these silk shirts. (Ng Han Guan/Associated Press)When Alexis Crawford bid $50 and won an eBay auction for a pair of 7 For All Mankind jeans, she thought she was getting a steal.

"I had some friends who had bought some really nice jeans off of eBay, so I thought I would try," she said.

When the jeans, which normally sell for more than $150 a pair, arrived, however, they weren't what Crawford was expecting. The workmanship on the high-quality denim was shoddy, and the waist of the jeans was wider than the hips. When Crawford tried them on, she realized she had been duped into buying a counterfeit pair of 7s.

Crawford's experience is just one example of consumers being tricked into buying counterfeit luxury items, such as high-end clothing, purses, and sunglasses. And it's an experience that is becoming more prevalent with the rise in popularity of online shopping and a slow economy that has consumers searching for great deals.

Unaware that she could report the seller of the counterfeits to eBay, Crawford just accepted the ripoff as a tough lesson and will now only buy designer items at well-known retail shops. But even shopping at brick-and-mortar retail stores, rather than online shops, doesn't guarantee you won't get offered a knockoff.

"We've noticed an increase in counterfeit activity," says Lorne Lipkus, who specializes in intellectual property litigation and is a founding partner in the Toronto law firm of Kestenberg Siegal Lipkus LLP. "I suspect the recession is increasing counterfeiting, but it's hard to tell," he adds.

Booming business

Despite the economic slowdown, the sale of counterfeit products is booming. In the past 20 years, the counterfeit goods business has grown 100 times over, according to the Canadian Anti-Counterfeiting Network's Report on Counterfeiting and Piracy in Canada. And in the past five years, Canada has come under fire internationally for not doing more to combat the trafficking of counterfeit goods.

Both the International Anti-Counterfeiting Coalition and the International Intellectual Property Alliance have named Canada a problem country for counterfeit goods, and the U.S. Congressional International Anti-Piracy Caucus has put Canada on a watch list because of lax copyright law and border controls that allow counterfeit products to flow through.

"Our government has not passed adequate laws, nor have they given the proper mandate to customs or police to deal with this in a significant way," says Lipkus, who has worked with Chanel, Louis Vuitton, Gucci and Prada.

'The fines are in the hundreds of dollars or low thousands of dollars; it's hardly even a dent in the profits made by counterfeiters.'—Lorne Lipkus, Kestenberg Siegal Lipkus LLP

Under the current Canadian Copyright Act the maximum penalty for an offence is five years in jail and fines of up to $1 million. Under the Criminal Code, offenders can serve a maximum of two years in jail.

"It's a false sense of security for people to think that the penalties under the criminal code are adequate," says Lipkus. "We have penalties up to $1 million, but no one has been penalized up to the maximum."

According to Lipkus, often people who sell imitation designer products are given minimum sentences and fines. "The fines are in the hundreds of dollars or low thousands of dollars; it's hardly even a dent in the profits made by counterfeiters."

It is even difficult to intercept counterfeit goods entering the country from places like China, because customs officials have no authority to seize or destroy goods. Instead, they must contact the RCMP to conduct an investigation.

No longer just street vendors

Lipkus says that counterfeit goods regularly enter the Canadian market because the RCMP lacks the resources to investigate all suspect shipments. The RCMP is working to change that, according to Sgt. Sylvain St-Jean, the national Intellectual Property Rights co-ordinator.

"We are working with the private sector and various government agencies to address this problem and put together a common front," St-Jean says.

Still, counterfeit items pop up in many places, and the business is no longer just relegated to street vendors and flea markets. Lipkus notes that he recently had a case where a store that had been in a mall for years was found to be selling knockoffs of designer brands such as Affliction, Rock n Republic and Ed Hardy, at discounted prices. And in the United States, retail giant Wal-Mart settled a lawsuit with Fendi in 2007 for carrying counterfeit handbags at Sam's Club stores.

"Some of these counterfeit purses come in beautiful boxes; they have certificates of authenticity," says Lipkus.

He is currently working on a case in Toronto where counterfeit Gucci, Louis Vuitton, and Chanel purses are being sold for around $500, while the authentic bags cost about $1,000. "That's not a cheap knockoff. I can tell you that people are buying these things, and they believe that they're real."

Although there are examples of counterfeit items being sold at reputable retailers, it isn't common, according to Doug Geralde, chair of the Canadian anti-counterfeiting network and director of audits and investigations for the Canadian Standards Association.

"Counterfeiters are trying to get in everywhere. It is less likely [they will appear at a well-known retailer], but it is their goal. Retailers are often short shipments on products and have to order more, and counterfeiters capitalize on that," he says.

Countering the counterfeiters

The best way for consumers to protect themselves from counterfeits is to buy products from a licensed dealer, says Lipkus. This information can usually be obtained from the company's website. As well, the cost of an item should be considered.

"If the price appears too good to be true, it probably is," says Lipkus.

'People perceive it as a victimless crime, that it's not really hurting anybody.'—Doug Geralde, Canadian anti-counterfeiting network

If you think you've been duped, check with the manufacturer. Many designers have information on their websites on how to spot counterfeit items. And Lipkus urges consumers to report the sale of counterfeits.

While some consumers are genuinely tricked, there is still an appetite for cheap imitations, according to Sgt. St-Jean. In an Environics research survey conducted last year, more than 25 per cent of Canadians admitted to buying counterfeit goods — the most common purchase being clothing, at 44 per cent. "People perceive it as a victimless crime, that it's not really hurting anybody," says Geralde.

Some consumers think the only loser is a large corporation with a lot of money, but the truth is that counterfeiting has many victims.

Counterfeiters want to make products for the lowest price possible, which can involve forced child labour and hazardous working conditions in countries like China, where these goods are produced, for example.

Links to organized crime

New York City Mayor Michael Bloomberg stands amidst seized counterfeit goods following a massive 2008 raid. (Bebeto Matthews/Associated Press)"These are people who aren't allowed to go to school or outside of the factory, and we see deplorable living conditions for these people," says Lipkus.

Investigators have also established links between organized crime, terrorism, and the sale of counterfeit goods.

In 2002, Lipkus worked on a case in Woodbridge, Ont., which involved the Camorra, the Naples Mafia, which officials say was responsible for 120 street killings in Italy in 2007 alone. The gang was selling fake Versace jackets, and it was estimated Versace was defrauded of $9.5 million as a result of the operation.

On the consumer end, the shoddy workmanship of cheap knockoffs can also cause health hazards. "You would think the luxury items don't pose a problem, like counterfeit electrical items, but there are problems," says Geralde.

He notes an investigation where he saw counterfeit sandals made of a material that caused blistering foot infections. "In the counterfeits, they'll use anything to save money," he adds.

As the counterfeit business grows, Canadians appear to be growing more aware of the true costs of buying cheap knockoffs as well. In the Environics research survey from December 2008, two thirds of Canadians said that because of the recession, it's less justifiable to buy counterfeit goods because of the damage it causes to businesses.

"It's costing us jobs and great losses in tax revenue," says Lipkus.