Frozen: Bank accounts of suspected Chinese Cisco counterfeiters who exploited pandemic shortages

Three Chinese companies accused by Cisco of selling counterfeit components badged with its logo on have had their US bank accounts frozen by a federal district court judge.

The judge, sitting in northern California, decided that Cisco was likely to succeed in its lawsuit [PDF], lodged last week, and so issued a temporary restraining order against Shenzhen Usource Technology, Shenzhen Warex Technologies and Warex Technologies.

The three companies have, according to Cisco, been advertising and selling their own transceivers as Cisco’s, complete with its logo, to US customers through online retailers. Judge Edward J. Davila ordered the three companies to attend court in mid-August to answer the claims but in the meantime laid down some heavy restrictions.

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They are banned for marketing or selling the transceivers that Cisco identified, and from claiming that are connected to Cisco in any way. He also ordered them not to destroy any records or documents connected to the products.

At the same time however, Judge Davila recognized that his jurisdiction doesn’t stretch to China and there was little he could do in reality to enforce his order. He also states plainly [PDF] that he expects the companies to grab their money and run, saying: “It is not only likely that defendants can and will dissipate their assets during the pendency of this case, if given the opportunity to do so, but it is also difficult if not impossible to enforce US judgments in China.”

As such he took the significant step of agreeing to Cisco's request that the trio's assets be frozen as well as any funds held by the companies. Any banks of other financial institutions used by the companies are also prevented from releasing funds.

Shortage

Cisco acknowledged that there have been “severe shortages” of its products thanks to disruption caused by the coronavirus pandemic, and said counterfeiters were taking advantage of the situation.

“Counterfeiters are increasingly exploiting consumers’ needs for certain products during a time when there are significant halts and delays in production of authentic products, resulting in severe shortages in the marketplace,” its lawsuit read. “The substitution of inauthentic products using counterfeit marks in place of genuine products can be catastrophic, and not just to the interests of businesses that manufacture and sell genuine products using the trademarks they have spent years developing.”

It also argues that using fake kit is more than just a matter of it losing money or receiving inferior goods, saying that it “has the potential to be very dangerous” because it could “expose sensitive patient, military, and government information to potential breaches, or worse, puts people in physical danger.”

Judge Davila’s order on Monday was also damning: “Defendants' sales of counterfeit Cisco transceivers mislead customers, and they threaten irreparable harm to Cisco's goodwill that cannot be adequately addressed by awarding damages after-the-fact.” ®