This Giant Beast That is the Global Economy (2019) s01e05 Episode Script
Counterfeiting Kills Economies (And Helps Them Too)
1
Fakes.
Phonies.
They're everywhere.
Some are easy to spot.
Some took us a little
longer to figure out.
- From our currency.
- This dude looks like me.
To our gadgets.
From our medicine,
to the logoed merchandise we wear,
fakes siphon off billions
of dollars a year
from the global economy.
It's their uncanny ability
to effectively
imitate the real thing
that gives them their power.
They can undermine
multi-million-dollar brands,
destroy trust in governments,
and pay for some really bad shit.
Terrorists can use counterfeits
to fund their attack.
Holy shit.
How do the fakers
get away with it?
We're about to find out.
Yeah, this is counterfeit,
just like your mum.
What?
Whether you like it or not,
we're all connected by money.
I'm Kal Penn, exploring
this giant beast
that is the global economy.
Gimme that money ♪
Gi-gi-gimme that money ♪
Gimme that money ♪
Gimme that that money ♪
Money, we use it to pay our debts,
spend it to buy good times,
and save it for rainy days,
but in the US, counterfeit
money has been circulating
almost as long as real money has.
So, who protects our currency
when counterfeiters are
targeting our dead presidents?
I'm in our nation's
capital to find out.
Welcome to Secret
Service headquarters.
Thank you.
This building has
every major division
the Secret Service operates in.
That would explain all the stairs.
Meet Secret Service
agent Trent Everett.
This is what they look like
without sunglasses and earpieces.
A lot of people don't know
that the Secret Service goes
after counterfeit currency.
Everybody always thinks of,
well, you guys protect the
president and the first family.
So, the reason the Secret
Service came about was,
at the end of the Civil
War it was reported
that about 1/3 to 1/2 of all
currency out in circulation
- was counterfeit.
- Wow, that much?
That much.
So, on April 14th, 1865,
President Abraham Lincoln
began drafting up the idea
to create the Secret Service.
So, later that evening,
with the legislation
drawn out on his desk to
create the Secret Service
is when Abraham Lincoln left the
White House for Ford's Theatre,
where he ultimately was
assassinated by John Wilkes Booth.
Whoa.
At the time of the Civil War,
the US had no single currency.
Banks could issue any
dollar amount in any style.
This made counterfeiting
an easy game to play.
A glut of fake bills
quickly led to inflation.
The price of a pound of
tea ballooned to $35,
while a barrel of flour
could cost you 1,000.
This led to the first
real move by the US
to take on counterfeiting.
This next part I
think you'll enjoy.
I'm gonna have you meet one
of my co-workers, Irina,
who's one of our
document analysts.
Welcome to Criminal,
Investigative Division.
Thank you.
I'm going to take you
into the specimen library,
and take a look at the
actual counterfeit collection
the Secret Service
has here on site.
We're looking at money.
Irina Geiman's job
is to make sure our
nation's currency
systems are protected.
Secret Service sees about
2 1/2 million pieces
of counterfeit currency a year.
When it comes to money,
Irina means business.
So, I have a couple of
different counterfeits laid out,
then also I have two genuines.
So, for example,
these are all real.
- You're welcome to hold them.
- Thank you.
- Thank you so much.
- No, no, no, no, buddy.
- I appreciate, no?
- I really cannot do that.
Since the birth of
the Secret Service,
America has been in a race
against counterfeiters,
to protect our money and the
trust Americans have in it.
So, here's some security features
that's kind of really
easy to remember.
So, for example, if
we take a look at it
in transmitted light,
we can actually see
that there are images
that's built into the paper.
There is an image of, a
large five right there.
Oh cool, yeah.
Yeah, and then three little fives
to the left, and there's actually,
there is a little skinny strip
to the right of the portrait.
Yeah, that's cool.
Our 100 also has an
additional feature.
We call it a 3D motion ribbon.
If you tilt the note
away from you and back,
the images move up and down.
This is why, when
you're a huge baller,
and you go to the store,
the person goes like this.
- Oh yeah, yeah.
- Before telling you
that they don't accept
hundreds anyway.
So here's some other counterfeits
that we've been
seeing quite a bit.
Is there anything about
them that catches your eye?
Okay.
Even Ben Franklin looks
unconvinced by this one.
This one looks like
Grant just found out
how many Confederate
statues there are.
Wait a minute. This
dude looks like me
more than he looks
like Abraham Lincoln.
A huge part of what Secret
Service does is education.
We do a lot of outreach, and
really travel around the globe,
and teach people, how do you
recognise genuine currency?
As counterfeiters
get more high-tech,
the US has had to innovate
new security features
to ensure its money is as
counterfeit-proof as possible.
Without their efforts,
the country could be overrun
by counterfeiting masterminds
looking to destroy an economy.
Greetings, world citizens.
I am The Counterfeiter.
I destabilise world governments.
Not with nuclear warheads,
but with a simple copy machine.
I can cause inflation
with the touch of button.
Doubt me? Why don't
you ask Yugoslavia?
Oh, that's right:
they no longer exist.
Counterfeit bills crippled
Yugoslavia's economy
in the midst of civil war.
You're no match for me, Milosevic.
Villains with shrink
rays are so small-minded.
I shrink the value of
the bills in your wallet
simply by making my own.
Bombs are so primitive.
Dropping bills could
do just as much damage.
If not, why did Hitler
make fake British pounds
during World War II?
The Bank of England
had to withdraw
all notes over five pounds.
I target cash-based economies,
hurting the poorest
people on Earth.
If you can find
someone worse than me,
I'd like to meet them,
so I can copy them
for mass production.
Freeze, you counterfeiter.
It's The Counterfeiter.
Copy Cat, attack.
Oh, Copy Cat.
Wish I'd never had you cloned.
Time for you to be brought to
justice, The Counterfeiter.
What? Where'd he go?
You fool, I'm everywhere,
especially cash-based economies.
India, it's a country
of over 1.3 billion,
and most of their financial
transactions are done in cash,
making it especially vulnerable
to the destabilising
effects of counterfeiting.
What can I do with these
old currency notes?
Sir, you can't buy anything
with that, it has no value.
No one will accept these?
No. Indian government
has voided them.
What can I do with them?
You can tear them up.
You can't even buy anything
worth a rupee with these,
he says.
Why did stacks and stacks
of India's currency
suddenly become worthless?
In 2015, India experienced
an alarming rise
in counterfeit rupees,
primarily the 500 and
1,000-rupee denominations.
Much of it had been intentionally
pumped in from Pakistan,
looking to disrupt
India's economy.
So, in 2016, in a move
that shocked the nation,
the prime minister of the country
took steps to protect
India's currency.
Enemies from across the border
have run their operations
using fake currency notes.
Fake currency, fake notes,
and terrorism.
To break the grip of
corruption and black money,
we have decided
that the 500 rupee and
1000 rupee currency notes
presently in use
will no longer be legal tender
from midnight tonight.
What the prime minister did
is called demonetisation.
It isn't a new concept.
In the past, countries used it
specifically to fight
inflation or tax dodgers,
but not to battle counterfeiters.
And there is no need for panic.
To help you understand
how it works,
imagine if, tonight, the
US government told you
your 20s, 50s, and $100 bills
were no longer any good.
That's exactly what happened
to over 85% of the
currency in India.
The prime minister was looking
to protect India's economy
from the bogus bills
by throwing out the
good ones with the bad,
but it led to
unintended consequences.
Gargi Bhattacharjee
is a financial analyst
who had a ringside seat for
the 2016 demonetisation,
and the impact it had
on the Indian people.
How did demonetisation
affect all these guys?
I think hugely.
All these guys you see around,
they're all paid in cash.
You probably will not be
able to pay them in check
because, end of the day,
it holds no value to them.
So, how did you hear
about demonetisation?
How did it first
sort of take hold?
It was on TV.
8 o'clock news.
Suddenly, there was
Narendra Modi speaking,
the Prime Minister.
And he was talking about
some notes that are
no more in existence
from that point of time.
The reason that was given
was that counterfeit
money needs to be stopped.
And slowly after half
an hour, 45 minutes,
I saw a serpentine queuing up
happening in all the ATMs.
Because they were not
understanding what was happening.
It was a mayhem.
The country was not ready
to take on the move the
prime minister had mandated.
Updated currency was
printed, but the ATMs
in India quickly ran
out of the new bills,
and some of them didn't even
fit into the bank machines.
There were deaths which
happened because of this,
because suddenly a person
in the middle of nowhere,
he he was bankrupt.
Farmers have died,
labourers have died,
because they did not have money
to follow through.
What do they eat?
How do they feed their children?
So, people have died
because of this.
Of course.
Demonetisation led into
so many other things
apart from putting the focus
only on counterfeit money.
So why did this take place?
I mean, India has incredibly
talented economists.
Who were the folks who were
advising the prime minister?
Why was this such
a drastic measure?
It is said there were
about eight to ten
people who knew
about demonetisation,
but this person
named Mr Anil Bokil,
apparently he introduced this
idea to the Prime Minister.
But it did not go the
way it was introduced.
This is Anil Bokil, known
locally as Guru Uncle.
He claims to be on a mission
to save the economy of India.
He put together a theory
that India's financial
crisis could be solved
by demonetisation,
and to lend credibility
to his theory,
he did what everyone else
does: he built a PowerPoint.
Guru Uncle presented
this PowerPoint,
pushing the benefits of
demonetisation
across all of India.
Eventually, he managed
to secure himself
a nine-minute meeting with
soon-to-be Prime Minister Modi.
Modi decided he
liked what he heard,
despite the fact that Guru
Uncle isn't an economist,
isn't a member of government,
and has no background in
policy-making whatsoever.
Hey.
I'm meeting with Guru Uncle
and his
think-tank-slash-entourage,
known as ArthaKranti.
His tiny group has
managed to influence
a great deal of India's
economic thinking.
Hi guys, how are you?
- Hello.
- Hello.
I've worked here before. I
was not able to get to India
- in the amount of time
- Ah, so you lost it.
Yeah, all of this.
It's worth almost $400 US dollars.
It is not.
- It's, it's
- It's worth nothing.
It is not backed by any
gold standard or anything.
- So, I'm screwed.
- Yeah.
Okay, so the implementation
of demonetisation
and this economic restructuring,
how does this all tie
into counterfeit currency?
Money in India is
a very raw state.
We are using more currency
than digital money.
Digital money is an
advanced state of money,
which is accountable.
But when you follow the cash
practise or currency practise,
you'll not get any
footprints behind
after every transaction.
So counterfeit was a major
thing to be addressed.
And how was it addressed,
and what was the difference
between your proposal
for demonetisation
and the reality in which it was
implemented by the
Modi government?
So we were never expecting
86% of our value,
in one go, demonetised.
What we proposed, you just
withdraw 1000 rupees bill.
After 6 months, you
can go for 500 bills.
But what happened actually was
a complete cut off solution.
So that created a lot
of pain in our society.
But the operation was required.
If a country has to go this far
to battle counterfeit
money and save its economy,
the upside had better
be substantial.
It's a lot to absorb,
so I'm meeting with a local
business owner to find out more,
and take a bit of the stress off.
- Vikash.
- Hi.
Vikash Kapur runs an
Indian production company
that has experienced the effects
of demonetisation first-hand.
And how does he feel about
the prime minister's changes?
I think the way he did it was
the way to do it.
And it takes guts
to tell 1.3 billion people
that your money is useless.
I mean, if I was in his place, I
would have done the same thing,
because I have encountered
counterfeit notes.
What happens is that when you
deposit counterfeit currency
into the bank, they have,
I mean, you don't know,
but when you're depositing it,
they have the machines to check.
And if they find a fake note,
they just tell you that it's fake
and you lose that money.
- You do lose it.
- You do lose that money, yes.
So the whole demonetisation
and all of that,
when all of that happened,
there were just so many
stories that unfolded.
And that's when the
real truth came out that
there's actually so much
counterfeit money, you know,
which has made its
way into the system,
into the country.
What were some of the
challenges that you saw
below sort of that
middle-class economic strata?
It was a painful period.
We had to stand in line,
we had to stand in queues.
People had to take
off from their jobs.
It was tough. But then I
look at the bigger picture.
I mean, ever since
this has happened,
I know that the number
of taxpayers has doubled.
Are you saying that the reason
people are paying more taxes
is because they were forced
to open bank accounts,
and there's now a track
record of what they're making?
Exactly. Exactly. And
it's been made simple.
There are online,
you know, payments.
Opening bank accounts right
down into the villages.
And that also helps
people understand
the economy. It educates them.
They get educated in how to, you
know, really deal
in the real world.
The hardship that people felt
in different economic classes,
you're acknowledging
that it was tough,
but you're also acknowledging
it just had to happen
because there's no other
way to have gotten rid of
I am.
Oh, yes, definitely am.
I am acknowledging it.
Because I think it was overdue.
Because when all of that happens,
it helps the government do more.
You know, better medical benefits,
you know, better infrastructure,
better roadways, better schools.
If the government has money,
they can pay better wages,
you get better teachers
Kids start going to public
schools. Everything grows.
So all these things,
they keep adding up,
which I think is
great, and which is
what I think is required
for the country.
So after all this effort,
where is India now?
Is counterfeiting
no longer a problem?
Well, not exactly.
Turns out those new notes
are already being
successfully counterfeited.
So, could India have handled
the problem differently?
Confronted with their own
counterfeiting problem,
the European Union took
a different approach,
and attempted to make fake bills
easier for everyone to spot.
This is cool. This is a
neuroscientist's office.
- Lair. Yeah, exactly, yeah.
- Lair.
David Eagleman is a
neuroscience professor
at Stanford University,
and his lab appears to be
the secret headquarters
of SkyMall.
In 2013, he was recruited
by the European Central Bank
to design a bill resistant
to counterfeiting,
drawing on his knowledge
of sensory substitution
and brain plasticity.
So, we're sure to
have a lot in common.
You're a neuroscientist. How
the heck does a neuroscientist
get involved in
designing currency?
Well, a big part about
understanding counterfeiting
is understanding what
people actually see
and what they don't see.
So, governments
spend a lot of money
putting in security features
that we don't typically see
unless we really attend to it.
Oh, interesting, okay.
Yeah, so what the,
European Central Bank did is
they had a campaign
where they tried
to get people to look at money,
where they said, hey, instead
of just passing a bill along,
stop, and look at it, and
really pay attention to it.
And it turns out that didn't work,
because if someone passes
me a counterfeit 50,
I don't know if it's counterfeit,
and if I pass it on, and it works,
then it doesn't even
matter to me, as a citizen.
So, what they're trying
to figure out is,
how can we better design the bill?
So, that's how they came
to look at neuroscience.
Okay, and what were
your recommendations?
What did they end up doing?
So, I gave a few
different recommendations.
The first one was,
all the money should be made
the same size in Europe.
- The reason being
- Oh because their bills are
Exactly, bills are
different sizes,
and if it's the same size,
it forces you to
actually look at it
for a fraction of a second longer
to detect obvious differences.
Whereas, if it's different sizes,
you already feel like
you know what it is,
and you're passing it on.
The second thing was,
what they have is the watermark
on the bills is a building,
and it turns out
that we don't have too
much neural real estate
devoted to recognising what's
going on with buildings.
We have a lot devoted
to recognising
what's going on with faces,
and it turns out
that with watermarks,
that's the hardest part
of a bill to counterfeit.
So, what they ended up doing
was putting in a watermark of
Europa, the mythical figure.
My third recommendation was,
there's so much on a
bill that's distracting,
that has nothing to do with the
security features of a bill.
So, here's what
I'd like you to do.
So, take this bill and look
at it for five seconds.
Okay, yup.
And then hand it back to me,
and I'm gonna give you a new one,
and you tell me what
the difference is there.
I couldn't tell
you the difference.
Okay, this illustrates the point
that the more stuff that
you're putting on a bill,
the harder it is for you to
detect obvious differences.
These bills are actually quite
different from one another.
If you look at the
hologram on them,
which is the single
security feature
that the government is
paying a lot of money for.
Oh wow, that's super-subtle.
It's super-subtle, and
here's the thing, right,
because of all this
other stuff on there,
it's hard for you to see that.
This is, yeah, wow.
So, I said, what you really want
is just a completely blank bill
with a single hologram
in the middle,
and get rid of all the other
stuff that's a distraction.
I see what you're saying,
where the simplicity is something
that the consumer can be
able to vet pretty quickly.
Exactly, so the European Union
thought that was a
very good suggestion,
but they decided they just
couldn't do that in the end,
because countries look regal
by having beautiful money,
and they look important that way,
and so you can't
have, they decided,
a bill that's just blank
with a hologram in it,
even though that
would make more sense.
So, there's a little bit of vanity
associated with what governments
want on their currency.
They want branding.
Yeah, exactly right.
It's crazy to think that vanity
helps put a nation's
currency at risk,
but I guess it makes sense.
I mean, sure, we
all wanna look good,
but we don't all have
the money to do it.
That's where counterfeit
brands come in.
Those brands that we know, love,
and even wear on our bodies,
are being counterfeited
all around the world.
For example, a real Hermes bag
could cost over $100,000,
but you could snag a
counterfeit version
for a few hundred bucks.
This is how counterfeits
steal away $460 billion
from legitimate
companies every year.
Hong Kong is a
global financial hub,
and due to its proximity to China,
where copyright laws
are rarely enforced,
Hong Kong is the marketplace
for nearly 25% of the
world's counterfeit goods.
So, what's real, and what's fake,
and who's doing
something about it?
Those are the questions
I'm here to get answered.
So, Kal, this is the
ladies market in Hong Kong.
We're gonna walk through, and
we're gonna see a lot of people
from all around the world who come
here to buy a lot of fake product.
All of this traffic
is driven by demand,
let's say from the US.
Ted Kavowras, a former
New York policeman,
is now an international
counterfeit crime-fighter.
He's hired by global
brands who suspect
their products are
being counterfeited.
If you're running an
anti-counterfeiting effort,
as a country, or as a
police, or even as a company,
you need to attack at
all different stratas.
So, attacking it at
the point of sale
is one of the policies to
try to stop counterfeiting.
So these Paul Frank
headphones, right?
100% fake.
- So, these are obviously fakes?
- Yeah.
Here's Star Wars,
and Spiderman, and
Marvel, the comic books
that are turned into movies.
My Little Pony.
This market is where
a tourist would come
to buy one or two products,
but big buyers from overseas
would go straight to the factory.
What do you mean by big buyers?
Big buyers buy container and
sell it in their home market.
- A shipping container.
- Yeah, 20, 40-foot container.
Oh, so a big buyer
is buying an entire shipping
container worth of this stuff.
Lots of them. So, my focus is to
- I see.
- Stop the factory
from producing it
so it ends up here.
Ted operates out of
his Hong Kong office,
chock-full of the
counterfeits he's seized,
mixed in with an
international-man-of-mystery vibe.
Engaging them in getting
evidence of their activities
is exactly what we do,
and we do that by posing
as a foreign buyer,
and that involves
us going undercover
and document what
they're actually doing.
- That is so cool.
- You know,
so I'll play an Arabian prince,
or a Mexican drug dealer,
or I'll just play a
businessman, I mean
I'm now intrigued,
because I feel like, once I
have to retire from acting,
- You do my kind of acting.
- I can come here.
You can hire me to go undercover.
So, what's the most interesting
thing you guys have seized?
Probably the most interesting
would be the drug-testing kits.
They have fake, you know,
anatomical part of you
that will let you
take a urine test.
So, like a fake dick that pees.
Yeah, and they were
being counterfeited.
Wait-wait-wait-wait-wait, wait,
so there's a real version of this,
- Oh yeah.
- But this is a bootleg version.
Yeah.
So the people who
manufacture this,
it was cutting into
their profits enough?
Yeah.
Must be pretty embarrassing
if someone finds out you
have a fake fake penis,
but there are counterfeit products
- that pose an actual danger.
- What are those?
These are fake
electrical switches.
Oh, no way. Fake
meaning they won't work,
or they're just a lower quality?
No, there are factories
that make fake ones,
and they put less aluminium in
the copper for conductivity,
but the problem with that is,
if there's less copper
and more aluminium,
it catches fire easily.
- Oh man.
- So that's a big safety issue.
Where do things like this
end up? Who buys them?
Let's say you're a
contractor in construction.
Would that person know they're
buying dangerous fakes?
The consumer, or the
end user would not know.
A switch like that,
that could light a
building on fire while
a kid's sleeping,
when you've talked
to these people,
is there an understanding
of what they're doing
and they just don't
care, or do they
- They don't care.
- They don't care.
They know. How could you not know?
They're willing to do this, and
not care about other people.
Wow, this is getting pretty
dark, and a little bit scary.
Counterfeiters aren't
just low-level thugs
hanging out on the streets.
Their operations are way
more complex than I realised.
If only I had an expert
who could fill me in on just
how dark this crime gets.
Ah.
Alastair Grey has been an
intellectual property investigator
for over a decade.
He says the Internet
is the next frontier
for counterfeits and ripoffs.
What we're seeing
on that street level
is just one layer of
where this all stops,
and that's the very
endpoint that consumers see,
but it's shifted.
I think more transactions
are being done online now.
The Internet is like a Wild West.
I never thought about the
online component before.
Is that how a lot of
people get the stuff?
Yeah, it's almost an
evolution of counterfeiting,
where it's almost a
shifting to brand abuse.
So, if you're a brand, and
you're selling popular products,
counterfeiters now will
spoof genuine sites,
and they'll take imagery
from an official company site
and have all the logos and
everything just feels legit,
and so you'll have people
looking for a bargain,
and they'll be the ones that are
actually tricked into
buying counterfeit.
How many people
involved in that crime
know what they're doing?
So, the web developers,
the people who work there,
do they think they're working
for a legitimate company,
or do they think they're,
do they know they're
working for this criminal?
It can be both. I mean,
there was an amazing story
where there was a whole
Apple Store in China
that wasn't an Apple Store.
- Come on.
- Yeah. Really?
And everyone was
in Genius T-shirt,
they're like fully branded.
Employees of that store thought
they were working for Apple.
- That's crazy.
- Yeah.
Counterfeiting is affecting
every different industry.
There are 700,000 deaths per year
attributed to
counterfeit medicine.
Wow.
And that's where,
it gets really scary.
You're playing with
people's lives.
If people are gonna buy
that thinking it works,
and it doesn't,
then it's game over.
What are some others that
impact public safety?
It's been proven that
terrorists can use counterfeits
- to fund their attacks.
- Wow.
The Paris attacks in January 2015.
Cherif Kouachi, he bought
counterfeits online in China,
and then was selling it
on a market in Paris,
and managed to make between
30 and 50,000 euros,
which he then used to fund
trips to Oman and Yemen
to get training from al-Qaeda.
Holy shit, so the Paris
attacks were directly funded
by people buying counterfeit
T-shirts and products.
- Yeah.
- That's bananas.
That's really sad.
The return on
investment is amazing.
If you produce a T-shirt
for less than a dollar,
and then you get a brand label,
and you can put it on it,
I mean, your markup
can be huge if you
can sell if for
like 400 times that.
Yeah.
And very few,
counterfeiting crimes
- end up in a prison sentence.
- Yeah.
Most examples, you'll
get a small fine,
and then you're pretty
much ready to set up
and start doing it again,
because, I mean, why wouldn't you,
if you can make so much returns?
I knew exploring counterfeiting
might lead me into a
criminal underworld,
but I was hoping it would be
like the fun Fast and Furious
kind of criminal underworld,
with fast machines, and
cool nicknames, and shit.
Oh wait, my next meeting's
with a guy named
Trappy.
That's not suspicious.
And it's in this
remote paper warehouse
that looks like a
haunted Dunder Mifflin.
What is this place?
Is it a drone-racing track,
or is it a paper warehouse?
- Well
- Both, I guess.
During the week it's
a paper warehouse,
and on the weekends we
build our racetracks here.
Whoa.
We have video goggles, so we see
through the perspective
of the drone.
The drone is an
extension of yourself,
and you're navigating through
any kind of environment.
Oh.
Oh, that was a mid-air.
He's fine.
Trappy doesn't just race drones
at his buddy's
warehouse on weekends.
He's also the owner
of Team BlackSheep,
which produces a wide range
of drone components
and accessories
for the hobbyist market.
The problem is the drone industry
is very susceptible
to counterfeit.
Trappy's company isn't big enough
to hire someone like Ted Kavowras,
so how does he stay ahead
of the counterfeiters?
Company of our size,
especially in the
market that we're in,
there is just no business case
of actually enforcing patents,
or even having patents,
because by the time you
get granted a patent,
the product is already out
of date and off the shelves.
What are the different
types of counterfeiting
that you deal with?
We differentiate between
three types of people.
You'll have the
straight-out counterfeiters,
who'll produce something
that looks exactly like your
product with your brand on it.
Then you will have the cloners.
They will make something
that looks like your product,
but put their own brand on it.
And then copycats basically
re-engineer your product,
so they will take
apart your product,
figure out the technology
that went into it,
the R and D, all of the
innovations that we put into it,
and apply that to
their own product.
Usually it takes maybe six months
for a serious copy to be
released to the market,
but that time has been
decreasing rapidly as well,
so that they're catching up,
- So it's
- Hurt you?
What are the parts of it that
The real damage
comes from copycats,
who take most of the innovation
without actually having
to pay for the R and D,
and then they're at liberty
to price it a lot lower,
- and we have to follow suit.
- How do you combat that?
We're very creative in the
way that we combat the issues.
- Okay.
- When we do get copied,
we try to bring
out new innovations
that then restart the whole cycle.
For example, this
product right here,
this is a remote-control link,
and it goes up to 100 kilometres.
It's a highly innovative
product that we developed.
It's very R and D intensive.
We had an RF specialist work
on that for over two years,
and the copy of that
is now selling at cost.
But two years ago we
anticipated this move,
and we have hidden features
that are yet to be unlocked.
Cool.
So over time, we keep,
releasing new innovations
that are already in the product,
basically forcing
all the people that
went with the copycats
to repurchase,
which makes it more expensive
for them in the long run,
and then eventually they
usually see the light
and buy the real stuff.
The drone market is flying forward
with awesome new technology
they wouldn't have had to innovate
if it hadn't been for copycats.
It's hard to believe that
innovators and copycats
are helping each other,
but it's as much a part
of the natural economy
as, well, nature.
The relationship of
inventors and copycats
is tantamount to to that
of hunter and scavenger.
God, I'm strong.
I'm the best at
murdering your kind.
They have evolved
to have a symbiotic relationship,
even if sometimes contentious.
No way.
Look at this thing.
This looks awesome.
You kidding me?
Whoa, whoa, fuck off, vulture.
Fuck off.
This equilibrium is
maintained in the economy
by intellectual property
protections known as patents.
I own the rights to this kill.
I own them, so back off.
Okay, all right, I
get it, I get it.
So, I don't get any fresh meat.
I got to wait till it's rotten
like a second-class citizen.
Yeah, that's exactly right.
Okay.
The hunter, like the inventor,
Oh, that's tender.
Is rewarded for its hard work
with a temporary monopoly.
Oh, oh yeah.
Oh, that's the stuff.
When it can exclusively devour
the spoils of its innovation.
Come on, man, time's up.
It's my turn to have some.
No.
Oh, my eyes.
This right here is
mine, this whole thing,
and I'm gonna have some tomorrow,
and then I'm gonna have
some the day after that,
thanks to my extra
protection here.
Stop it.
- I'm in no rush.
- My beak.
I might take a little
nap, as a matter of fact.
This is how innovation
is discouraged
when patent protection
is too strong.
The inventor isn't as motivated
to hunt for the next breakthrough.
But if there were no
protection at all,
scavengers would move right in.
Get in there, guys.
Feast upon the carcass.
Oh, what?
- Come on.
- Oh, yeah.
This is where scavenger
moves from harmless
mooch to deadly parasite.
- It's vulture time.
- If the hunter is not able
to reap the benefits
of its work
That's just so gross.
It does not have the resources
to hunt the next beast,
just like when inventors don't
make money off their products
they lack the funding for
research and development
of the next big innovation.
Do you know how long I was
crouching in the bushes,
stalking this thing?
You deformed turkey.
- Hey, whoa.
- Hey, whoa.
Nature, like economics,
can be harsh.
You know what? Ow, ow, I'm out.
Good luck hunting antelope
on your own from now on.
Fine.
In this scenario,
without the hunter
to provide the banquet that
sustains the ecosystem,
both of them will die.
Their loose skin will be stripped
off their emaciated carcasses,
and if they're lucky
turned into coats.
- Whoa.
- Yeah, we
We can hear you.
That is not cool.
Sorry.
You know, out of respect,
I would never wear you.
Thank you, and I
would never wear you.
- Thank you.
- Yeah.
- Hope you've learnt something.
- Yeah, have a good one.
You too, man. See you later.
The freedom to copy
other people's ideas
is a necessary part of innovation.
Some industries thrive
in an environment
where copycats and
inventors live in harmony.
The ones that really play it right
could end up making money like
it's going out of fashion.
The wonderful thing
about knockoffs,
for the luxury designer,
is that it's kinda
like a gateway drug.
You know, you get a little puff,
and you get excited
about the brand.
You wear the knockoff.
You think, wow,
I'd really like a real Gucci,
and so that's the heroin
of fashion addiction.
Johanna Blakley runs a
media-focused think tank
which has explored intellectual
property laws in the US
and their impact on innovation.
What's the difference between
a knockoff and a counterfeit?
Well, a knockoff is a
perfectly legal thing
in the fashion industry,
and it means that somebody
has based another design
on somebody else's design,
so nobody owns any of that stuff.
What people do own in
the fashion industry,
and I think this is a really
good thing for the business,
is they own their name.
They own the registered
trademark, the brand.
Interesting.
One reason that you see
these really expensive bags
just laden with logos
is because that's what
knockoff artists cannot copy.
- Okay, got it.
- So, if the logo
is intrinsic to the
design of the dress,
it's really hard to copy that,
and so that allows consumers
to understand what
they're purchasing,
which is a good thing.
People should know.
They're making an
informed decision.
Okay, so I see what you're saying.
So, if a high-end brand
is selling a handbag for,
I don't know, how
much are handbags?
- Obscene.
- Okay.
- Obscene prices.
- Thousands?
- Oh yeah.
- All right, $10,000
- for a bag?
- Oh, yeah.
- Is that?
- Oh, more.
- Really, that's normal?
- Oh, yeah.
- More?
- Go to Barneys.
- No.
- No, no, no.
It'll take your breath away.
Okay, so let's say
$10,000 for a bag,
and then other people
make a similar bag,
but it's missing the logo.
- That's totally okay.
- Totally okay,
and it's because fashion designs
are utilitarian articles.
Okay.
And because they serve
a utilitarian purpose,
they are not qualified
for copyright protection.
- Okay.
- Which is so ironic,
because we think of fashion
as being very fanciful,
and fun, and totally unnecessary.
We kind of forget that
underlying purpose,
which is to cover naked bodies.
Right, and what's
the benefit of that?
That's precisely because there
is no copyright protection
that fashion has elevated
itself to an art form.
There's a huge
structure of incentives
that get built into an industry
where you can be ripped
off at any moment.
It's become a science to rip
off these luxury designers,
and of course they
complain about it,
but ultimately, when
a look is knocked off,
that means you're a trendsetter.
You've been knocked off.
It means you tapped
into the zeitgeist.
You get it. Crown is yours.
Okay.
But that means that trendsetters
have got to get the
hell out of there.
They've got to get,
the next new thing.
It's not cool any more.
Oh, no, they want
They cannot be part of the herd.
No, no, no.
- Okay.
- And what's really interesting
is that there's quite
a few other industries
that cannot be
copyright protected.
Cuisine: chefs do not
own their recipes.
Furniture: because they're
utilitarian objects,
even the most famous designers
don't own the design.
Comedians, too.
Comedians develop signature styles
because they don't
own their jokes.
The ironic thing is that's
just really good for business.
When you're constantly creating
this desire for new products,
that's really good in
a capitalist economy.
Masterful innovation could
mean a great new idea
or an innovative way to
steal someone else's,
and if there's one town
that is known for taking
a single original idea
and creatively spinning it
off forever, it's Tinseltown.
Here we go, in the bowels
of the asylum, so
Oh, wow.
Welcome to Asylum Studios,
celebrated for their most
famous creation, Sharknado.
You might recognise this bad boy.
He was the shark that
burned up in Sharknado 3
as it was entering orbit.
Because the shark didn't survive.
- Poor guy.
- But, tragedy.
While there are six Sharknadoes,
David Latt and his partner
Paul Bales actually built
their empire on what
are called mockbusters,
with over 250 movies produced,
these guys generate more
than $30 million a year.
You did Thor?
Well, we did, that
version of Thor,
the public domain version of Thor.
Oh, interesting.
I didn't realise. Yeah, I
didn't realise Thor was
Well, neither do they.
Anyway, so over here
In fact, the less you're sure
what movie you're watching,
the more successful they are.
You guys are known for
making mockbusters.
Can you talk about what they are?
I love that term. Is
that the right term?
That's the right term.
That's trademarked
and everything, so
Which is true,
so if anybody tries to
steal it, you know
Mockbusting is basically drafting
off what the studios are
doing at any given time.
So, if there's a film
about giant transforming
robots called Transformers,
we're gonna probably
make Transmorphers.
Move out.
Roll the team back down
to the drop left corner.
- Get the hell out of there.
- No.
You mentioned drafting,
that big studios do.
What is drafting?
Drafting, it's a
kinder, more gentle word
that the studios have
used for decades,
that basically is the
same thing as mockbusting.
They're looking to see
what, if I'm Paramount,
they're looking at
Warner Bros., Universal,
going wow, they're making a
Star Wars movie coming out.
I better make another space
movie in order to capitalise,
because there's gonna
be so much publicity
and press around that.
Many years ago, Da
Vinci Code came out,
and we released a film
called The Da Vinci Treasure.
Did the studio have a problem
with either your version
of the Da Vinci Code
I don't think they liked
their version of it.
Yes, but it really didn't
have anything to do
with the content.
It was marketing. It
was a studio saying,
the A in your font is too
close to the A in our font,
and we'd simply change the font,
and the movie went out as planned.
The film business
regularly sees remarkably
similar stories
succeeding big in the marketplace.
In 1998, Earth was
almost destroyed
by flying rocks from space. Twice.
First came Deep Impact, and
two months later, Armageddon.
And for you younger nerds,
just replace these two movies
with The Avengers
and Justice League.
My interest in this is
a little bit selfish,
because I'm an actor, right?
And I don't like people
who actually pirate
our movies, right?
You know, the first DVD pressing
of Harold & Kumar Go to White
Castle made like $50 million.
I think that's if I'm
remembering that right,
but then people just download
it for free illegally.
That was just money that was lost.
On the flip side, there's
like a porn parody
Harold & Kumar Escape
From Guantanamo Bay
that I think is fantastic,
because they changed
just enough of it
that it was clear what they meant.
I think it's called Farold
& Fubar or something.
Where is that line, in terms
of intellectual property?
How do you make sure that
you're not violating IP law,
but still managing to capitalise
on what you think the
audience actually wants?
I think you have to
have an understanding
of what piracy is, as opposed
to mockbusting or drafting.
If you're downloading
Transformers, or Transmorphers,
illegally, without paying for
the privilege of watching it,
then you are stealing.
The difference that
we're doing is that
we're making a movie
about robots, okay,
and we're not
stealing the content.
We're not stealing the stars.
Mark Wahlberg is not in our movie.
We have, you know, Mark Stahlberg.
And
- No, that's the porn version.
- That is the porn version.
No one is going to nominate
The Da Vinci Treasure
for an Oscar,
but there are examples
of how copying
actually leads to innovations
that transmorph an
industry forward,
instead of holding it back.
Think about prescription meds.
The FDA grants patents
on new medicines
so companies can make
money developing them.
But when the patent is up,
generic versions arrive,
allowing more competition
and much lower prices,
and generic brands
at your supermarket
may have the exact same
ingredients as name brands,
but cost much less
because of things
like lack of promotion
and no flashy packaging.
If an economy can nail the
balance between protecting IP
and allowing copycatters
to drive innovation,
or simply being able to deliver
goods at a better price,
then it seems counterfeiting
does have a role to play,
even if it's not the hero.
Sometimes counterfeits
lead to innovation,
sometimes they lead
to some dark shit,
and sometimes they
just lead to this.
But the cinematic geniuses
who made this work of art
wouldn't let us show it to you,
so we respected their
intellectual property
and made our own version.
Whoo.
Act-ing.
Yeah.
Yeah, fuck, oh, fuck.
I like to check out
the meat before I eat.
Oh, this is
This is shitty meat.
This is unbelievable.
Do you know how long I was
crouching in the bushes,
stalking this thing
like a pervert?
Yeah, well you're
certainly dressed like one.
How dare you?
Fakes.
Phonies.
They're everywhere.
Some are easy to spot.
Some took us a little
longer to figure out.
- From our currency.
- This dude looks like me.
To our gadgets.
From our medicine,
to the logoed merchandise we wear,
fakes siphon off billions
of dollars a year
from the global economy.
It's their uncanny ability
to effectively
imitate the real thing
that gives them their power.
They can undermine
multi-million-dollar brands,
destroy trust in governments,
and pay for some really bad shit.
Terrorists can use counterfeits
to fund their attack.
Holy shit.
How do the fakers
get away with it?
We're about to find out.
Yeah, this is counterfeit,
just like your mum.
What?
Whether you like it or not,
we're all connected by money.
I'm Kal Penn, exploring
this giant beast
that is the global economy.
Gimme that money ♪
Gi-gi-gimme that money ♪
Gimme that money ♪
Gimme that that money ♪
Money, we use it to pay our debts,
spend it to buy good times,
and save it for rainy days,
but in the US, counterfeit
money has been circulating
almost as long as real money has.
So, who protects our currency
when counterfeiters are
targeting our dead presidents?
I'm in our nation's
capital to find out.
Welcome to Secret
Service headquarters.
Thank you.
This building has
every major division
the Secret Service operates in.
That would explain all the stairs.
Meet Secret Service
agent Trent Everett.
This is what they look like
without sunglasses and earpieces.
A lot of people don't know
that the Secret Service goes
after counterfeit currency.
Everybody always thinks of,
well, you guys protect the
president and the first family.
So, the reason the Secret
Service came about was,
at the end of the Civil
War it was reported
that about 1/3 to 1/2 of all
currency out in circulation
- was counterfeit.
- Wow, that much?
That much.
So, on April 14th, 1865,
President Abraham Lincoln
began drafting up the idea
to create the Secret Service.
So, later that evening,
with the legislation
drawn out on his desk to
create the Secret Service
is when Abraham Lincoln left the
White House for Ford's Theatre,
where he ultimately was
assassinated by John Wilkes Booth.
Whoa.
At the time of the Civil War,
the US had no single currency.
Banks could issue any
dollar amount in any style.
This made counterfeiting
an easy game to play.
A glut of fake bills
quickly led to inflation.
The price of a pound of
tea ballooned to $35,
while a barrel of flour
could cost you 1,000.
This led to the first
real move by the US
to take on counterfeiting.
This next part I
think you'll enjoy.
I'm gonna have you meet one
of my co-workers, Irina,
who's one of our
document analysts.
Welcome to Criminal,
Investigative Division.
Thank you.
I'm going to take you
into the specimen library,
and take a look at the
actual counterfeit collection
the Secret Service
has here on site.
We're looking at money.
Irina Geiman's job
is to make sure our
nation's currency
systems are protected.
Secret Service sees about
2 1/2 million pieces
of counterfeit currency a year.
When it comes to money,
Irina means business.
So, I have a couple of
different counterfeits laid out,
then also I have two genuines.
So, for example,
these are all real.
- You're welcome to hold them.
- Thank you.
- Thank you so much.
- No, no, no, no, buddy.
- I appreciate, no?
- I really cannot do that.
Since the birth of
the Secret Service,
America has been in a race
against counterfeiters,
to protect our money and the
trust Americans have in it.
So, here's some security features
that's kind of really
easy to remember.
So, for example, if
we take a look at it
in transmitted light,
we can actually see
that there are images
that's built into the paper.
There is an image of, a
large five right there.
Oh cool, yeah.
Yeah, and then three little fives
to the left, and there's actually,
there is a little skinny strip
to the right of the portrait.
Yeah, that's cool.
Our 100 also has an
additional feature.
We call it a 3D motion ribbon.
If you tilt the note
away from you and back,
the images move up and down.
This is why, when
you're a huge baller,
and you go to the store,
the person goes like this.
- Oh yeah, yeah.
- Before telling you
that they don't accept
hundreds anyway.
So here's some other counterfeits
that we've been
seeing quite a bit.
Is there anything about
them that catches your eye?
Okay.
Even Ben Franklin looks
unconvinced by this one.
This one looks like
Grant just found out
how many Confederate
statues there are.
Wait a minute. This
dude looks like me
more than he looks
like Abraham Lincoln.
A huge part of what Secret
Service does is education.
We do a lot of outreach, and
really travel around the globe,
and teach people, how do you
recognise genuine currency?
As counterfeiters
get more high-tech,
the US has had to innovate
new security features
to ensure its money is as
counterfeit-proof as possible.
Without their efforts,
the country could be overrun
by counterfeiting masterminds
looking to destroy an economy.
Greetings, world citizens.
I am The Counterfeiter.
I destabilise world governments.
Not with nuclear warheads,
but with a simple copy machine.
I can cause inflation
with the touch of button.
Doubt me? Why don't
you ask Yugoslavia?
Oh, that's right:
they no longer exist.
Counterfeit bills crippled
Yugoslavia's economy
in the midst of civil war.
You're no match for me, Milosevic.
Villains with shrink
rays are so small-minded.
I shrink the value of
the bills in your wallet
simply by making my own.
Bombs are so primitive.
Dropping bills could
do just as much damage.
If not, why did Hitler
make fake British pounds
during World War II?
The Bank of England
had to withdraw
all notes over five pounds.
I target cash-based economies,
hurting the poorest
people on Earth.
If you can find
someone worse than me,
I'd like to meet them,
so I can copy them
for mass production.
Freeze, you counterfeiter.
It's The Counterfeiter.
Copy Cat, attack.
Oh, Copy Cat.
Wish I'd never had you cloned.
Time for you to be brought to
justice, The Counterfeiter.
What? Where'd he go?
You fool, I'm everywhere,
especially cash-based economies.
India, it's a country
of over 1.3 billion,
and most of their financial
transactions are done in cash,
making it especially vulnerable
to the destabilising
effects of counterfeiting.
What can I do with these
old currency notes?
Sir, you can't buy anything
with that, it has no value.
No one will accept these?
No. Indian government
has voided them.
What can I do with them?
You can tear them up.
You can't even buy anything
worth a rupee with these,
he says.
Why did stacks and stacks
of India's currency
suddenly become worthless?
In 2015, India experienced
an alarming rise
in counterfeit rupees,
primarily the 500 and
1,000-rupee denominations.
Much of it had been intentionally
pumped in from Pakistan,
looking to disrupt
India's economy.
So, in 2016, in a move
that shocked the nation,
the prime minister of the country
took steps to protect
India's currency.
Enemies from across the border
have run their operations
using fake currency notes.
Fake currency, fake notes,
and terrorism.
To break the grip of
corruption and black money,
we have decided
that the 500 rupee and
1000 rupee currency notes
presently in use
will no longer be legal tender
from midnight tonight.
What the prime minister did
is called demonetisation.
It isn't a new concept.
In the past, countries used it
specifically to fight
inflation or tax dodgers,
but not to battle counterfeiters.
And there is no need for panic.
To help you understand
how it works,
imagine if, tonight, the
US government told you
your 20s, 50s, and $100 bills
were no longer any good.
That's exactly what happened
to over 85% of the
currency in India.
The prime minister was looking
to protect India's economy
from the bogus bills
by throwing out the
good ones with the bad,
but it led to
unintended consequences.
Gargi Bhattacharjee
is a financial analyst
who had a ringside seat for
the 2016 demonetisation,
and the impact it had
on the Indian people.
How did demonetisation
affect all these guys?
I think hugely.
All these guys you see around,
they're all paid in cash.
You probably will not be
able to pay them in check
because, end of the day,
it holds no value to them.
So, how did you hear
about demonetisation?
How did it first
sort of take hold?
It was on TV.
8 o'clock news.
Suddenly, there was
Narendra Modi speaking,
the Prime Minister.
And he was talking about
some notes that are
no more in existence
from that point of time.
The reason that was given
was that counterfeit
money needs to be stopped.
And slowly after half
an hour, 45 minutes,
I saw a serpentine queuing up
happening in all the ATMs.
Because they were not
understanding what was happening.
It was a mayhem.
The country was not ready
to take on the move the
prime minister had mandated.
Updated currency was
printed, but the ATMs
in India quickly ran
out of the new bills,
and some of them didn't even
fit into the bank machines.
There were deaths which
happened because of this,
because suddenly a person
in the middle of nowhere,
he he was bankrupt.
Farmers have died,
labourers have died,
because they did not have money
to follow through.
What do they eat?
How do they feed their children?
So, people have died
because of this.
Of course.
Demonetisation led into
so many other things
apart from putting the focus
only on counterfeit money.
So why did this take place?
I mean, India has incredibly
talented economists.
Who were the folks who were
advising the prime minister?
Why was this such
a drastic measure?
It is said there were
about eight to ten
people who knew
about demonetisation,
but this person
named Mr Anil Bokil,
apparently he introduced this
idea to the Prime Minister.
But it did not go the
way it was introduced.
This is Anil Bokil, known
locally as Guru Uncle.
He claims to be on a mission
to save the economy of India.
He put together a theory
that India's financial
crisis could be solved
by demonetisation,
and to lend credibility
to his theory,
he did what everyone else
does: he built a PowerPoint.
Guru Uncle presented
this PowerPoint,
pushing the benefits of
demonetisation
across all of India.
Eventually, he managed
to secure himself
a nine-minute meeting with
soon-to-be Prime Minister Modi.
Modi decided he
liked what he heard,
despite the fact that Guru
Uncle isn't an economist,
isn't a member of government,
and has no background in
policy-making whatsoever.
Hey.
I'm meeting with Guru Uncle
and his
think-tank-slash-entourage,
known as ArthaKranti.
His tiny group has
managed to influence
a great deal of India's
economic thinking.
Hi guys, how are you?
- Hello.
- Hello.
I've worked here before. I
was not able to get to India
- in the amount of time
- Ah, so you lost it.
Yeah, all of this.
It's worth almost $400 US dollars.
It is not.
- It's, it's
- It's worth nothing.
It is not backed by any
gold standard or anything.
- So, I'm screwed.
- Yeah.
Okay, so the implementation
of demonetisation
and this economic restructuring,
how does this all tie
into counterfeit currency?
Money in India is
a very raw state.
We are using more currency
than digital money.
Digital money is an
advanced state of money,
which is accountable.
But when you follow the cash
practise or currency practise,
you'll not get any
footprints behind
after every transaction.
So counterfeit was a major
thing to be addressed.
And how was it addressed,
and what was the difference
between your proposal
for demonetisation
and the reality in which it was
implemented by the
Modi government?
So we were never expecting
86% of our value,
in one go, demonetised.
What we proposed, you just
withdraw 1000 rupees bill.
After 6 months, you
can go for 500 bills.
But what happened actually was
a complete cut off solution.
So that created a lot
of pain in our society.
But the operation was required.
If a country has to go this far
to battle counterfeit
money and save its economy,
the upside had better
be substantial.
It's a lot to absorb,
so I'm meeting with a local
business owner to find out more,
and take a bit of the stress off.
- Vikash.
- Hi.
Vikash Kapur runs an
Indian production company
that has experienced the effects
of demonetisation first-hand.
And how does he feel about
the prime minister's changes?
I think the way he did it was
the way to do it.
And it takes guts
to tell 1.3 billion people
that your money is useless.
I mean, if I was in his place, I
would have done the same thing,
because I have encountered
counterfeit notes.
What happens is that when you
deposit counterfeit currency
into the bank, they have,
I mean, you don't know,
but when you're depositing it,
they have the machines to check.
And if they find a fake note,
they just tell you that it's fake
and you lose that money.
- You do lose it.
- You do lose that money, yes.
So the whole demonetisation
and all of that,
when all of that happened,
there were just so many
stories that unfolded.
And that's when the
real truth came out that
there's actually so much
counterfeit money, you know,
which has made its
way into the system,
into the country.
What were some of the
challenges that you saw
below sort of that
middle-class economic strata?
It was a painful period.
We had to stand in line,
we had to stand in queues.
People had to take
off from their jobs.
It was tough. But then I
look at the bigger picture.
I mean, ever since
this has happened,
I know that the number
of taxpayers has doubled.
Are you saying that the reason
people are paying more taxes
is because they were forced
to open bank accounts,
and there's now a track
record of what they're making?
Exactly. Exactly. And
it's been made simple.
There are online,
you know, payments.
Opening bank accounts right
down into the villages.
And that also helps
people understand
the economy. It educates them.
They get educated in how to, you
know, really deal
in the real world.
The hardship that people felt
in different economic classes,
you're acknowledging
that it was tough,
but you're also acknowledging
it just had to happen
because there's no other
way to have gotten rid of
I am.
Oh, yes, definitely am.
I am acknowledging it.
Because I think it was overdue.
Because when all of that happens,
it helps the government do more.
You know, better medical benefits,
you know, better infrastructure,
better roadways, better schools.
If the government has money,
they can pay better wages,
you get better teachers
Kids start going to public
schools. Everything grows.
So all these things,
they keep adding up,
which I think is
great, and which is
what I think is required
for the country.
So after all this effort,
where is India now?
Is counterfeiting
no longer a problem?
Well, not exactly.
Turns out those new notes
are already being
successfully counterfeited.
So, could India have handled
the problem differently?
Confronted with their own
counterfeiting problem,
the European Union took
a different approach,
and attempted to make fake bills
easier for everyone to spot.
This is cool. This is a
neuroscientist's office.
- Lair. Yeah, exactly, yeah.
- Lair.
David Eagleman is a
neuroscience professor
at Stanford University,
and his lab appears to be
the secret headquarters
of SkyMall.
In 2013, he was recruited
by the European Central Bank
to design a bill resistant
to counterfeiting,
drawing on his knowledge
of sensory substitution
and brain plasticity.
So, we're sure to
have a lot in common.
You're a neuroscientist. How
the heck does a neuroscientist
get involved in
designing currency?
Well, a big part about
understanding counterfeiting
is understanding what
people actually see
and what they don't see.
So, governments
spend a lot of money
putting in security features
that we don't typically see
unless we really attend to it.
Oh, interesting, okay.
Yeah, so what the,
European Central Bank did is
they had a campaign
where they tried
to get people to look at money,
where they said, hey, instead
of just passing a bill along,
stop, and look at it, and
really pay attention to it.
And it turns out that didn't work,
because if someone passes
me a counterfeit 50,
I don't know if it's counterfeit,
and if I pass it on, and it works,
then it doesn't even
matter to me, as a citizen.
So, what they're trying
to figure out is,
how can we better design the bill?
So, that's how they came
to look at neuroscience.
Okay, and what were
your recommendations?
What did they end up doing?
So, I gave a few
different recommendations.
The first one was,
all the money should be made
the same size in Europe.
- The reason being
- Oh because their bills are
Exactly, bills are
different sizes,
and if it's the same size,
it forces you to
actually look at it
for a fraction of a second longer
to detect obvious differences.
Whereas, if it's different sizes,
you already feel like
you know what it is,
and you're passing it on.
The second thing was,
what they have is the watermark
on the bills is a building,
and it turns out
that we don't have too
much neural real estate
devoted to recognising what's
going on with buildings.
We have a lot devoted
to recognising
what's going on with faces,
and it turns out
that with watermarks,
that's the hardest part
of a bill to counterfeit.
So, what they ended up doing
was putting in a watermark of
Europa, the mythical figure.
My third recommendation was,
there's so much on a
bill that's distracting,
that has nothing to do with the
security features of a bill.
So, here's what
I'd like you to do.
So, take this bill and look
at it for five seconds.
Okay, yup.
And then hand it back to me,
and I'm gonna give you a new one,
and you tell me what
the difference is there.
I couldn't tell
you the difference.
Okay, this illustrates the point
that the more stuff that
you're putting on a bill,
the harder it is for you to
detect obvious differences.
These bills are actually quite
different from one another.
If you look at the
hologram on them,
which is the single
security feature
that the government is
paying a lot of money for.
Oh wow, that's super-subtle.
It's super-subtle, and
here's the thing, right,
because of all this
other stuff on there,
it's hard for you to see that.
This is, yeah, wow.
So, I said, what you really want
is just a completely blank bill
with a single hologram
in the middle,
and get rid of all the other
stuff that's a distraction.
I see what you're saying,
where the simplicity is something
that the consumer can be
able to vet pretty quickly.
Exactly, so the European Union
thought that was a
very good suggestion,
but they decided they just
couldn't do that in the end,
because countries look regal
by having beautiful money,
and they look important that way,
and so you can't
have, they decided,
a bill that's just blank
with a hologram in it,
even though that
would make more sense.
So, there's a little bit of vanity
associated with what governments
want on their currency.
They want branding.
Yeah, exactly right.
It's crazy to think that vanity
helps put a nation's
currency at risk,
but I guess it makes sense.
I mean, sure, we
all wanna look good,
but we don't all have
the money to do it.
That's where counterfeit
brands come in.
Those brands that we know, love,
and even wear on our bodies,
are being counterfeited
all around the world.
For example, a real Hermes bag
could cost over $100,000,
but you could snag a
counterfeit version
for a few hundred bucks.
This is how counterfeits
steal away $460 billion
from legitimate
companies every year.
Hong Kong is a
global financial hub,
and due to its proximity to China,
where copyright laws
are rarely enforced,
Hong Kong is the marketplace
for nearly 25% of the
world's counterfeit goods.
So, what's real, and what's fake,
and who's doing
something about it?
Those are the questions
I'm here to get answered.
So, Kal, this is the
ladies market in Hong Kong.
We're gonna walk through, and
we're gonna see a lot of people
from all around the world who come
here to buy a lot of fake product.
All of this traffic
is driven by demand,
let's say from the US.
Ted Kavowras, a former
New York policeman,
is now an international
counterfeit crime-fighter.
He's hired by global
brands who suspect
their products are
being counterfeited.
If you're running an
anti-counterfeiting effort,
as a country, or as a
police, or even as a company,
you need to attack at
all different stratas.
So, attacking it at
the point of sale
is one of the policies to
try to stop counterfeiting.
So these Paul Frank
headphones, right?
100% fake.
- So, these are obviously fakes?
- Yeah.
Here's Star Wars,
and Spiderman, and
Marvel, the comic books
that are turned into movies.
My Little Pony.
This market is where
a tourist would come
to buy one or two products,
but big buyers from overseas
would go straight to the factory.
What do you mean by big buyers?
Big buyers buy container and
sell it in their home market.
- A shipping container.
- Yeah, 20, 40-foot container.
Oh, so a big buyer
is buying an entire shipping
container worth of this stuff.
Lots of them. So, my focus is to
- I see.
- Stop the factory
from producing it
so it ends up here.
Ted operates out of
his Hong Kong office,
chock-full of the
counterfeits he's seized,
mixed in with an
international-man-of-mystery vibe.
Engaging them in getting
evidence of their activities
is exactly what we do,
and we do that by posing
as a foreign buyer,
and that involves
us going undercover
and document what
they're actually doing.
- That is so cool.
- You know,
so I'll play an Arabian prince,
or a Mexican drug dealer,
or I'll just play a
businessman, I mean
I'm now intrigued,
because I feel like, once I
have to retire from acting,
- You do my kind of acting.
- I can come here.
You can hire me to go undercover.
So, what's the most interesting
thing you guys have seized?
Probably the most interesting
would be the drug-testing kits.
They have fake, you know,
anatomical part of you
that will let you
take a urine test.
So, like a fake dick that pees.
Yeah, and they were
being counterfeited.
Wait-wait-wait-wait-wait, wait,
so there's a real version of this,
- Oh yeah.
- But this is a bootleg version.
Yeah.
So the people who
manufacture this,
it was cutting into
their profits enough?
Yeah.
Must be pretty embarrassing
if someone finds out you
have a fake fake penis,
but there are counterfeit products
- that pose an actual danger.
- What are those?
These are fake
electrical switches.
Oh, no way. Fake
meaning they won't work,
or they're just a lower quality?
No, there are factories
that make fake ones,
and they put less aluminium in
the copper for conductivity,
but the problem with that is,
if there's less copper
and more aluminium,
it catches fire easily.
- Oh man.
- So that's a big safety issue.
Where do things like this
end up? Who buys them?
Let's say you're a
contractor in construction.
Would that person know they're
buying dangerous fakes?
The consumer, or the
end user would not know.
A switch like that,
that could light a
building on fire while
a kid's sleeping,
when you've talked
to these people,
is there an understanding
of what they're doing
and they just don't
care, or do they
- They don't care.
- They don't care.
They know. How could you not know?
They're willing to do this, and
not care about other people.
Wow, this is getting pretty
dark, and a little bit scary.
Counterfeiters aren't
just low-level thugs
hanging out on the streets.
Their operations are way
more complex than I realised.
If only I had an expert
who could fill me in on just
how dark this crime gets.
Ah.
Alastair Grey has been an
intellectual property investigator
for over a decade.
He says the Internet
is the next frontier
for counterfeits and ripoffs.
What we're seeing
on that street level
is just one layer of
where this all stops,
and that's the very
endpoint that consumers see,
but it's shifted.
I think more transactions
are being done online now.
The Internet is like a Wild West.
I never thought about the
online component before.
Is that how a lot of
people get the stuff?
Yeah, it's almost an
evolution of counterfeiting,
where it's almost a
shifting to brand abuse.
So, if you're a brand, and
you're selling popular products,
counterfeiters now will
spoof genuine sites,
and they'll take imagery
from an official company site
and have all the logos and
everything just feels legit,
and so you'll have people
looking for a bargain,
and they'll be the ones that are
actually tricked into
buying counterfeit.
How many people
involved in that crime
know what they're doing?
So, the web developers,
the people who work there,
do they think they're working
for a legitimate company,
or do they think they're,
do they know they're
working for this criminal?
It can be both. I mean,
there was an amazing story
where there was a whole
Apple Store in China
that wasn't an Apple Store.
- Come on.
- Yeah. Really?
And everyone was
in Genius T-shirt,
they're like fully branded.
Employees of that store thought
they were working for Apple.
- That's crazy.
- Yeah.
Counterfeiting is affecting
every different industry.
There are 700,000 deaths per year
attributed to
counterfeit medicine.
Wow.
And that's where,
it gets really scary.
You're playing with
people's lives.
If people are gonna buy
that thinking it works,
and it doesn't,
then it's game over.
What are some others that
impact public safety?
It's been proven that
terrorists can use counterfeits
- to fund their attacks.
- Wow.
The Paris attacks in January 2015.
Cherif Kouachi, he bought
counterfeits online in China,
and then was selling it
on a market in Paris,
and managed to make between
30 and 50,000 euros,
which he then used to fund
trips to Oman and Yemen
to get training from al-Qaeda.
Holy shit, so the Paris
attacks were directly funded
by people buying counterfeit
T-shirts and products.
- Yeah.
- That's bananas.
That's really sad.
The return on
investment is amazing.
If you produce a T-shirt
for less than a dollar,
and then you get a brand label,
and you can put it on it,
I mean, your markup
can be huge if you
can sell if for
like 400 times that.
Yeah.
And very few,
counterfeiting crimes
- end up in a prison sentence.
- Yeah.
Most examples, you'll
get a small fine,
and then you're pretty
much ready to set up
and start doing it again,
because, I mean, why wouldn't you,
if you can make so much returns?
I knew exploring counterfeiting
might lead me into a
criminal underworld,
but I was hoping it would be
like the fun Fast and Furious
kind of criminal underworld,
with fast machines, and
cool nicknames, and shit.
Oh wait, my next meeting's
with a guy named
Trappy.
That's not suspicious.
And it's in this
remote paper warehouse
that looks like a
haunted Dunder Mifflin.
What is this place?
Is it a drone-racing track,
or is it a paper warehouse?
- Well
- Both, I guess.
During the week it's
a paper warehouse,
and on the weekends we
build our racetracks here.
Whoa.
We have video goggles, so we see
through the perspective
of the drone.
The drone is an
extension of yourself,
and you're navigating through
any kind of environment.
Oh.
Oh, that was a mid-air.
He's fine.
Trappy doesn't just race drones
at his buddy's
warehouse on weekends.
He's also the owner
of Team BlackSheep,
which produces a wide range
of drone components
and accessories
for the hobbyist market.
The problem is the drone industry
is very susceptible
to counterfeit.
Trappy's company isn't big enough
to hire someone like Ted Kavowras,
so how does he stay ahead
of the counterfeiters?
Company of our size,
especially in the
market that we're in,
there is just no business case
of actually enforcing patents,
or even having patents,
because by the time you
get granted a patent,
the product is already out
of date and off the shelves.
What are the different
types of counterfeiting
that you deal with?
We differentiate between
three types of people.
You'll have the
straight-out counterfeiters,
who'll produce something
that looks exactly like your
product with your brand on it.
Then you will have the cloners.
They will make something
that looks like your product,
but put their own brand on it.
And then copycats basically
re-engineer your product,
so they will take
apart your product,
figure out the technology
that went into it,
the R and D, all of the
innovations that we put into it,
and apply that to
their own product.
Usually it takes maybe six months
for a serious copy to be
released to the market,
but that time has been
decreasing rapidly as well,
so that they're catching up,
- So it's
- Hurt you?
What are the parts of it that
The real damage
comes from copycats,
who take most of the innovation
without actually having
to pay for the R and D,
and then they're at liberty
to price it a lot lower,
- and we have to follow suit.
- How do you combat that?
We're very creative in the
way that we combat the issues.
- Okay.
- When we do get copied,
we try to bring
out new innovations
that then restart the whole cycle.
For example, this
product right here,
this is a remote-control link,
and it goes up to 100 kilometres.
It's a highly innovative
product that we developed.
It's very R and D intensive.
We had an RF specialist work
on that for over two years,
and the copy of that
is now selling at cost.
But two years ago we
anticipated this move,
and we have hidden features
that are yet to be unlocked.
Cool.
So over time, we keep,
releasing new innovations
that are already in the product,
basically forcing
all the people that
went with the copycats
to repurchase,
which makes it more expensive
for them in the long run,
and then eventually they
usually see the light
and buy the real stuff.
The drone market is flying forward
with awesome new technology
they wouldn't have had to innovate
if it hadn't been for copycats.
It's hard to believe that
innovators and copycats
are helping each other,
but it's as much a part
of the natural economy
as, well, nature.
The relationship of
inventors and copycats
is tantamount to to that
of hunter and scavenger.
God, I'm strong.
I'm the best at
murdering your kind.
They have evolved
to have a symbiotic relationship,
even if sometimes contentious.
No way.
Look at this thing.
This looks awesome.
You kidding me?
Whoa, whoa, fuck off, vulture.
Fuck off.
This equilibrium is
maintained in the economy
by intellectual property
protections known as patents.
I own the rights to this kill.
I own them, so back off.
Okay, all right, I
get it, I get it.
So, I don't get any fresh meat.
I got to wait till it's rotten
like a second-class citizen.
Yeah, that's exactly right.
Okay.
The hunter, like the inventor,
Oh, that's tender.
Is rewarded for its hard work
with a temporary monopoly.
Oh, oh yeah.
Oh, that's the stuff.
When it can exclusively devour
the spoils of its innovation.
Come on, man, time's up.
It's my turn to have some.
No.
Oh, my eyes.
This right here is
mine, this whole thing,
and I'm gonna have some tomorrow,
and then I'm gonna have
some the day after that,
thanks to my extra
protection here.
Stop it.
- I'm in no rush.
- My beak.
I might take a little
nap, as a matter of fact.
This is how innovation
is discouraged
when patent protection
is too strong.
The inventor isn't as motivated
to hunt for the next breakthrough.
But if there were no
protection at all,
scavengers would move right in.
Get in there, guys.
Feast upon the carcass.
Oh, what?
- Come on.
- Oh, yeah.
This is where scavenger
moves from harmless
mooch to deadly parasite.
- It's vulture time.
- If the hunter is not able
to reap the benefits
of its work
That's just so gross.
It does not have the resources
to hunt the next beast,
just like when inventors don't
make money off their products
they lack the funding for
research and development
of the next big innovation.
Do you know how long I was
crouching in the bushes,
stalking this thing?
You deformed turkey.
- Hey, whoa.
- Hey, whoa.
Nature, like economics,
can be harsh.
You know what? Ow, ow, I'm out.
Good luck hunting antelope
on your own from now on.
Fine.
In this scenario,
without the hunter
to provide the banquet that
sustains the ecosystem,
both of them will die.
Their loose skin will be stripped
off their emaciated carcasses,
and if they're lucky
turned into coats.
- Whoa.
- Yeah, we
We can hear you.
That is not cool.
Sorry.
You know, out of respect,
I would never wear you.
Thank you, and I
would never wear you.
- Thank you.
- Yeah.
- Hope you've learnt something.
- Yeah, have a good one.
You too, man. See you later.
The freedom to copy
other people's ideas
is a necessary part of innovation.
Some industries thrive
in an environment
where copycats and
inventors live in harmony.
The ones that really play it right
could end up making money like
it's going out of fashion.
The wonderful thing
about knockoffs,
for the luxury designer,
is that it's kinda
like a gateway drug.
You know, you get a little puff,
and you get excited
about the brand.
You wear the knockoff.
You think, wow,
I'd really like a real Gucci,
and so that's the heroin
of fashion addiction.
Johanna Blakley runs a
media-focused think tank
which has explored intellectual
property laws in the US
and their impact on innovation.
What's the difference between
a knockoff and a counterfeit?
Well, a knockoff is a
perfectly legal thing
in the fashion industry,
and it means that somebody
has based another design
on somebody else's design,
so nobody owns any of that stuff.
What people do own in
the fashion industry,
and I think this is a really
good thing for the business,
is they own their name.
They own the registered
trademark, the brand.
Interesting.
One reason that you see
these really expensive bags
just laden with logos
is because that's what
knockoff artists cannot copy.
- Okay, got it.
- So, if the logo
is intrinsic to the
design of the dress,
it's really hard to copy that,
and so that allows consumers
to understand what
they're purchasing,
which is a good thing.
People should know.
They're making an
informed decision.
Okay, so I see what you're saying.
So, if a high-end brand
is selling a handbag for,
I don't know, how
much are handbags?
- Obscene.
- Okay.
- Obscene prices.
- Thousands?
- Oh yeah.
- All right, $10,000
- for a bag?
- Oh, yeah.
- Is that?
- Oh, more.
- Really, that's normal?
- Oh, yeah.
- More?
- Go to Barneys.
- No.
- No, no, no.
It'll take your breath away.
Okay, so let's say
$10,000 for a bag,
and then other people
make a similar bag,
but it's missing the logo.
- That's totally okay.
- Totally okay,
and it's because fashion designs
are utilitarian articles.
Okay.
And because they serve
a utilitarian purpose,
they are not qualified
for copyright protection.
- Okay.
- Which is so ironic,
because we think of fashion
as being very fanciful,
and fun, and totally unnecessary.
We kind of forget that
underlying purpose,
which is to cover naked bodies.
Right, and what's
the benefit of that?
That's precisely because there
is no copyright protection
that fashion has elevated
itself to an art form.
There's a huge
structure of incentives
that get built into an industry
where you can be ripped
off at any moment.
It's become a science to rip
off these luxury designers,
and of course they
complain about it,
but ultimately, when
a look is knocked off,
that means you're a trendsetter.
You've been knocked off.
It means you tapped
into the zeitgeist.
You get it. Crown is yours.
Okay.
But that means that trendsetters
have got to get the
hell out of there.
They've got to get,
the next new thing.
It's not cool any more.
Oh, no, they want
They cannot be part of the herd.
No, no, no.
- Okay.
- And what's really interesting
is that there's quite
a few other industries
that cannot be
copyright protected.
Cuisine: chefs do not
own their recipes.
Furniture: because they're
utilitarian objects,
even the most famous designers
don't own the design.
Comedians, too.
Comedians develop signature styles
because they don't
own their jokes.
The ironic thing is that's
just really good for business.
When you're constantly creating
this desire for new products,
that's really good in
a capitalist economy.
Masterful innovation could
mean a great new idea
or an innovative way to
steal someone else's,
and if there's one town
that is known for taking
a single original idea
and creatively spinning it
off forever, it's Tinseltown.
Here we go, in the bowels
of the asylum, so
Oh, wow.
Welcome to Asylum Studios,
celebrated for their most
famous creation, Sharknado.
You might recognise this bad boy.
He was the shark that
burned up in Sharknado 3
as it was entering orbit.
Because the shark didn't survive.
- Poor guy.
- But, tragedy.
While there are six Sharknadoes,
David Latt and his partner
Paul Bales actually built
their empire on what
are called mockbusters,
with over 250 movies produced,
these guys generate more
than $30 million a year.
You did Thor?
Well, we did, that
version of Thor,
the public domain version of Thor.
Oh, interesting.
I didn't realise. Yeah, I
didn't realise Thor was
Well, neither do they.
Anyway, so over here
In fact, the less you're sure
what movie you're watching,
the more successful they are.
You guys are known for
making mockbusters.
Can you talk about what they are?
I love that term. Is
that the right term?
That's the right term.
That's trademarked
and everything, so
Which is true,
so if anybody tries to
steal it, you know
Mockbusting is basically drafting
off what the studios are
doing at any given time.
So, if there's a film
about giant transforming
robots called Transformers,
we're gonna probably
make Transmorphers.
Move out.
Roll the team back down
to the drop left corner.
- Get the hell out of there.
- No.
You mentioned drafting,
that big studios do.
What is drafting?
Drafting, it's a
kinder, more gentle word
that the studios have
used for decades,
that basically is the
same thing as mockbusting.
They're looking to see
what, if I'm Paramount,
they're looking at
Warner Bros., Universal,
going wow, they're making a
Star Wars movie coming out.
I better make another space
movie in order to capitalise,
because there's gonna
be so much publicity
and press around that.
Many years ago, Da
Vinci Code came out,
and we released a film
called The Da Vinci Treasure.
Did the studio have a problem
with either your version
of the Da Vinci Code
I don't think they liked
their version of it.
Yes, but it really didn't
have anything to do
with the content.
It was marketing. It
was a studio saying,
the A in your font is too
close to the A in our font,
and we'd simply change the font,
and the movie went out as planned.
The film business
regularly sees remarkably
similar stories
succeeding big in the marketplace.
In 1998, Earth was
almost destroyed
by flying rocks from space. Twice.
First came Deep Impact, and
two months later, Armageddon.
And for you younger nerds,
just replace these two movies
with The Avengers
and Justice League.
My interest in this is
a little bit selfish,
because I'm an actor, right?
And I don't like people
who actually pirate
our movies, right?
You know, the first DVD pressing
of Harold & Kumar Go to White
Castle made like $50 million.
I think that's if I'm
remembering that right,
but then people just download
it for free illegally.
That was just money that was lost.
On the flip side, there's
like a porn parody
Harold & Kumar Escape
From Guantanamo Bay
that I think is fantastic,
because they changed
just enough of it
that it was clear what they meant.
I think it's called Farold
& Fubar or something.
Where is that line, in terms
of intellectual property?
How do you make sure that
you're not violating IP law,
but still managing to capitalise
on what you think the
audience actually wants?
I think you have to
have an understanding
of what piracy is, as opposed
to mockbusting or drafting.
If you're downloading
Transformers, or Transmorphers,
illegally, without paying for
the privilege of watching it,
then you are stealing.
The difference that
we're doing is that
we're making a movie
about robots, okay,
and we're not
stealing the content.
We're not stealing the stars.
Mark Wahlberg is not in our movie.
We have, you know, Mark Stahlberg.
And
- No, that's the porn version.
- That is the porn version.
No one is going to nominate
The Da Vinci Treasure
for an Oscar,
but there are examples
of how copying
actually leads to innovations
that transmorph an
industry forward,
instead of holding it back.
Think about prescription meds.
The FDA grants patents
on new medicines
so companies can make
money developing them.
But when the patent is up,
generic versions arrive,
allowing more competition
and much lower prices,
and generic brands
at your supermarket
may have the exact same
ingredients as name brands,
but cost much less
because of things
like lack of promotion
and no flashy packaging.
If an economy can nail the
balance between protecting IP
and allowing copycatters
to drive innovation,
or simply being able to deliver
goods at a better price,
then it seems counterfeiting
does have a role to play,
even if it's not the hero.
Sometimes counterfeits
lead to innovation,
sometimes they lead
to some dark shit,
and sometimes they
just lead to this.
But the cinematic geniuses
who made this work of art
wouldn't let us show it to you,
so we respected their
intellectual property
and made our own version.
Whoo.
Act-ing.
Yeah.
Yeah, fuck, oh, fuck.
I like to check out
the meat before I eat.
Oh, this is
This is shitty meat.
This is unbelievable.
Do you know how long I was
crouching in the bushes,
stalking this thing
like a pervert?
Yeah, well you're
certainly dressed like one.
How dare you?