Cisco Fakes: A $76M BusinessCisco Fakes: A $76M Business

Law enforcement officials said yesterday they've seized more than $76 million in counterfeit Cisco Systems Inc. (Nasdaq: CSCO) components and labels, the result of more than 400 raids across multiple agencies.

That announcement, made yesterday by the U.S. Department of Justice and U.S. Department of Homeland Security, is the first indication of how much counterfeiting of Cisco optical modules might be going on. (See Feds Seize Cisco Fakes.)

Agencies that have tracked down counterfeiting operations during the last few years include U.S. Immigration and Customs Enforcement and U.S. Customs and Border Protection. The Royal Canadian Mounted Police were involved, too, and had their own announcement of a $2 million raid yesterday.

The problem has been pervasive enough that the FBI even started up something called Operation Cisco Raider to combine 15 ongoing cases. That led to $3.5 million in fake goods seized, with 10 convictions notched.

The release doesn't specify what type of counterfeit gear was seized, but it's possible that much of the $76 million is related to optical modules. The timeframe is right; the raids involved go back to at least 2005, and Cisco began inserting proprietary microcode into its modules sometime before 2003. (See Use Our Optics, or Else! and UTStarcom Unveils Phone.)

That microcode is what's spurring a counterfeit module business in the first place. Cisco's software is keyed to reject any modules that aren't Cisco-authorized, even though Cisco uses a standard type of module available from several vendors.

According to the module vendors, counterfeiters are buying up "regular" modules and slapping fake Cisco labels on them. (See Optical Raids!)

— Craig Matsumoto, West Coast Editor, Light Reading