Intellectual property (IP) is an important commercial asset; a company’s failure to protect that asset can not only damage it financially, but also ruin its brand and reputation. So for brand owners, identifying counterfeiting activities isn’t just a matter of protecting valuable IP, it is also a matter of protecting their brands and consumers. Adding to that, companies in the medical products space must also consider how public health can be compromised through medical products that are improperly diverted to a market for sale. And the diversion of products often times leads to the identification of more damaging counterfeiting operations.

With so much at stake, companies are turning to investigators to help them not only to identify whether fraudulent activity is taking place, but also to investigate and—when possible—help to disrupt the diversion or counterfeiting operations they discover.

The stakes in such investigations are exceedingly high at home and abroad: Targeted products are no longer limited to knock-off handbags and blue jeans. No sector of the global economy is safe, and diverters and counterfeit producers are targeting sensitive industries like pharmaceuticals and medical devices.

Identifying the Problem

What triggers an investigation differs from case to case. While many companies initiate an investigation in response to a suspicious action, some companies are taking a more proactive approach, asking investigators to track products through the internet and the dark web to determine whether they are being sold or distributed by less-than-reputable sources.

When a K2 Intelligence client that manufactures medical products suspected that one of its products was being diverted, or sold through or by an unauthorized seller or channel, it took action. Records suggested, at least preliminarily, that a distributor in the Midwest might be involved. What followed was an intensive investigation that demonstrates just how complex it has become to track down and stop diversion and counterfeiting operations.

K2 Intelligence investigators combined online research with on-site investigation and interviews, and conducted evidentiary purchases to confirm that the product had been diverted. They also went online and did open-source research to find former employees of the company who could provide information about the activities of the company suspected of diverting the product. Working with counsel, K2 Intelligence investigators conducted in-person interviews of these former employees. Based on its investigation, K2 Intelligence was able to clearly identify that the organization was engaging in diversionary business practices.

Investigating Diversion and Counterfeiting Operations

But for many investigations, identifying the bad actors is just the beginning. Most clients are not only looking to stop diversion and counterfeiting—they also seek monetary restitution for the damages they’ve suffered. K2 Intelligence investigators not only work to disrupt these efforts, they are involved in searches around the world to find tangible assets that can help satisfy judgments in these cases.

In this case, once the organization selling the diverted product was identified, litigation followed, and, based on the strength of K2 Intelligence’s findings, the medical product manufacturer won a large financial settlement. Following up, K2 Intelligence investigators conducted additional research to identify assets that could be seized to fulfill the judgment.

The Investigative Toolbox

K2 Intelligence’s investigators created a bespoke approach to the medical product client’s problems. That’s typical: There is no cookie-cutter approach when it comes to diversion and counterfeiting-related investigations. In each case, investigators combine the appropriate tools and methods to fit the specific issues that arise.

Among the most common tools used are public records and online research. Records are used to find former employees and to determine the corporate structure of companies that may be involved in a counterfeiting scheme. They also can reveal who’s really controlling a company, how big it is, and what its distribution network looks like.

Related to this is the ability of investigators to conduct deep and dark web analysis. For its part, K2 Intelligence dives into the dark web’s forums, message boards, and illicit sales platforms to cull information. In a case last year, K2 Intelligence investigators searched for an over-the-counter medication being marketed by a client. The dark web research revealed three individuals in two countries who were improperly distributing counterfeit versions of the medication, providing the client with valuable insight into how and through whom the counterfeits were marketed online.

The investigative process also involves covert evidentiary purchases where K2 Intelligence anonymously buys products from suspected bad actors. The goal is to collect evidence and establish/maintain a chain of custody ahead of potential litigation. Products purchased this way can be sent to manufacturers for testing to establish product authenticity, or lack thereof. Shipping information and communications with sellers during the purchase process also provides intelligence about the individuals and companies involved in a distribution network.

Once the investigators have gone through records, searched online (including dark web) resources, and conducted evidentiary purchasing, they are more informed about the counterfeiter’s suppliers, assets, and finances. But an investigation almost always requires another critical step—interviews.

The ability to properly handle sensitive, face-to-face interactions can make or break a counterfeiting investigation. The K2 Intelligence team includes experts at the art of interviewing—former law enforcement officials with decades of experience—who successfully interview the associates of suspected bad actors, such as former employees, business associates, litigation opponents, and clients and customers.

Disrupting a Network

When a counterfeiter is identified, the brand owner, usually working with a law firm, decides whether it is feasible to proceed with litigation. If the answer is “yes,” the company’s lawyers can, under the right circumstances, obtain a federal seizure order, which amounts to a civil search warrant. It gives the lawyers, investigators, and local law enforcement the ability to legally enter a facility to determine if evidence of counterfeiting is present.

K2 Intelligence investigators have assisted in the execution of civil seizure orders in locales around the globe—including one case that resulted in the team executing civil seizure orders in three countries in a matter of weeks. It’s an important device for helping battle the increasingly complex, international nature of counterfeiting operations.

Coordinating with counsel, K2 Intelligence’s investigators may also assist in the seizure and imaging of electronic data kept on premises, collection of relevant records, and interviews of employees, among other activities. Doing this work can immediately help to identify the next link in the counterfeiting chain.

Not all clients will need to execute civil seizure orders in three countries. But identifying, investigating, and disrupting counterfeiting or diversion activities requires that investigators keep all of their options open and build a custom approach tailored to the situation as well as to the needs of each client. As criminals are building ever more creative and complex counterfeiting operations, investigators are responding in kind.