IP Protection Practice in China
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- Priscilla Ellis
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1 IP Protection Practice in China
2 Intellectual Property Protection As the world becomes more globalized, the issues of protecting Intellectual Property becomes more complex and harder to do Intellectual Property such as: Trademark Patents Copy right Formulas Algorithms Design Rights Others
3 The Problems of Counterfeiting Growing more sophisticated Dispersed to Tier 3 and 4 cities Manufacturing, printing/packaging, and distribution are all broken up Cooperation from local authorities Harder to detect and enforce due to need for forensic testing Offshoring to other countries such as Vietnam, Thailand, etc
4 Impact of Counterfeiting Market share down - global US consumer products company Price impact erosion of your revenue Quality erosion misperception of customers and public German auto product company Legal issues being blamed for someone else s faulty product worldwide US chemical company Displacement pushing you out of the market place huge US electronics company
5 Damaging the Company Brand Effect on pricing strategy competing with unfair competition Lowering of clients quality standards perception Internet sales issues buying and selling Copycat counterfeiting others joining in to take your business Lawsuits that may come from misrepresented product Possible sanctioning by government entities Bad publicity or press due to mistaken identity
6 What Can be Done? Worst Decision: Do Nothing. Absolutely nothing Effect: Give open opportunity for counterfeiters to profit off customer s name Second Worst Decision: Do a case-by-case basis of IP protection Effect: Not effective consistent deterrent in ending counterfeiting Best Decision: Find out what you would like to accomplish in terms of ending counterfeiting and then create and design a program to end it Effect: A concerted plan that can be scaled to budget and then administered consistently which communicates seriousness of purpose to counterfeiters
7 Case Study 1 Problem: Major US electronics firm needed help to establish an anti-counterfeiting program for their ink and toner cartridge program in China They had the majority of the market and so their market share was seriously damaged (10-15% loss) Pinkerton Action: Pinkerton China created a fully integrated anti-counterfeiting program that covered most of the major markets. Results: Effectively cut down counterfeiting and helped to re-establish client as top producer of ink and toner cartridges. This was to launch similar efforts in Europe
8 Pinkerton Experience Bad people use various methods to get their share of the market: Counterfeiting Diversion (otherwise known as transshipment) diverting products from proper channels to improper ones Piracy stealing of goods from production or supply chain Formula Theft stealing the process to make the products Internal/External cooperation between Company employees and outsiders Scrap Misuse taking product that should be destroyed and re-routing to the market
9 IP Protection Methodologies Informant network Internet buys Physical buys Front company (sting operations) Market survey & monitoring Monitoring & surveillance Investigative cover approach Interviewing rival firms or supplier/vendors Undercover agent operation
10 Investigative Goals Target Identification Factories (registered & underground) Processing / Packaging Centers External Warehouses Printing / Container Factories Distributors (wholesalers wholesalers) Retailers / Street Level Hawkers Export Trading E-commerce Evidence Collection Samples Receipts, fapiaos Quotations Catalogs, leaflet Sales records Business cards DVD/CDs s Notes Maps Enforcement AIC QTSB PSB Customs Health Environment Taxing Authorities
11 Enforcement Options (I) Administrative Enforcement AIC (Administration of Industry & Commerce) Administrative remedies Based on PRC Trademark Law Counterfeits and infringement Confiscation, fine and destruction Trademark agent required Proceed by complaint or self inspection
12 Enforcement Options (II) Administrative Enforcement QTSB (Quality & Technical Supervision Bureau) Administrative remedies Based on Quality Standards Law Counterfeits (not for pure trademark infringement use of company name or false company name and company address) Confiscation, fines and destruction No trademark agent required Proceed by compliant or self inspection
13 Enforcement Options (III) Criminal Enforcement PSB (Public Security Bureau) Seeking large case (social implications) Has responsibilities and relevant departments to deal with counterfeit matters Greater power to search and detain suspects Can pursue criminal prosecution in bigger cases
14 Enforcement Goals To cause (economic) pains To achieve deterrent effect (touching a hot iron) Move to safe brands for marketplace Criminal Prosecution bigger impact Media coverage publicize victories Create space for legitimate brands to continue to grow Educate law enforcement, consumers, and market Lobby for better compliance and adherence Make the bad people know that you are serious!!!
15 Challenges Faced in China Valuation of seized items Identification of offenders - factories and warehouses Enforcement units lacking manpower Counterfeit factories moved from urban to rural areas Production at night time and during public holiday Immediate shipment after production Limited stock of counterfeit products Blank product, last moment minute to put trademark right before shipment Using residential unit as workshop or warehouse to store counterfeit products.
16 Case Study 2 Problem In a local automobile parts manufacturing site in Shang Rao, Jiang Xi province, a lot of counterfeit spark plug of the top brands ( company A, B and C ) were found. Shang Rao is an area where the legal system is comparatively weak, and there also exists local protectionism.
17 Case Study 2 Pinkerton Action Submit sighting reports to company A, B and C. After being authorized by the customers ( company A, B and C ), a detail investigation and action plan created. But considering the comparatively weak legal system and local protectionism in Shang Rao, we adopted a circumvention method that allow Pinkerton to create the case in Shanghai. It was then reported to central Ministry of Public Security. The Central Ministry of Public Security then gave instruction to Jiang Xi PSB and requested them to implement the order accordingly.
18 Case Study 2 - Results Raid action done by united team of ECID, criminal police and special police boxes of counterfeit products seized. The suspected boss of the factory was detained.
19 Common Anti- Counterfeit Complaints Shallow busts market raids, market surveys, distribution centers Counterfeit busts fake counterfeiting entities Not pan-china in capability or multiple provinces Not pan-asia in capability Fixated on quantity of busts not quality of cases No real damage being done to counterfeiters slap on the wrists Integrity issues with local IP houses Rampant fraud issues throughout markets are not addressed
20 Pinkerton Answer and Approach Based on client needs and budget (within guidelines) Interdisciplinary - multiple tools holistic approach Turnkey operation or ala carte style Methodology: Engagement Operations Education
21 Methodology Engagement Operations Counterfeit Education
22 Case Study 3 - Problem This case is in Shanghai Baoshan, Shanghai is an area with sound legal procedure and system, filing of a case require hard and reliable evidence, with detail facts supported. Overseas feedback revealed that a Shanghai trading company was dealing with export of many counterfeit spark plug products of Brand B. The source of the counterfeiting products was then identified to be a spark plug manufacturer in Baoshan district, Shanghai. Relative investigation has been done and confirms that the suspect company does actually manufacture counterfeit spark plug of Brand B for export.
23 Case Study 3 Pinkerton Action After authorized by the customer ( Brand B company ), we adopt the approach of double evidence / assurance and combination of law s enforcement. Which means: Collecting information and turn it into to Department of Quality Supervision to confirm the fact of counterfeiting with huge value, then transfer the case to PSB. To prevent the suspect to use their connection to affect the process, we create the case in another XX district, and executed by the responsible ECID.
24 Case Study 3 Results Raid action was conducted by ECID, over 9000 pieces of counterfeiting spark plug and 260,000 labels seized. The suspected boss of the factory has been detained.
25 Pinkerton Approach Many points of information gathering Pinkerton network Experience in dealing with counterfeiters and how they operate across industry lines (chemical, agricultural, auto, luxury goods, electronics, consumer products) Close cooperation with various governmental agencies to get results Upstream work going after the larger problems Cross border work - going beyond border limitations Multi-disciplinary skills to solve the problem
26 Pinkerton Capabilities
27 Greater China & Taiwan Beijing, PRC Shanghai, PRC Taipei, Taiwan, ROC Guangzhou, PRC Hong Kong, PRC
28 World Coverage North America United States Canada Mexico Latin America Argentina Brazil Bolivia Chile Colombia Ecuador Peru Panama Paraguay Venezuela Costa Rica Guatemala Honduras Nicaragua W. Europe United Kingdom Ireland Germany France Netherlands Belgium Switzerland Austria Spain Portugal Italy Greece Turkey Sweden Norway Denmark Finland Caribbean Consult for specific islands E. Europe Poland Russia Bulgaria Romania Hungary Czech Republic Slovakia Bosnia Herzegovina Croatia Serbia Estonia Latvia Lithuania Belarus Ukraine Asia Pacific People s Republic of China (PRC) Taiwan Japan South Korea Philippines Vietnam Malaysia Thailand Singapore Indonesia Australia India Middle East United Arab Emirates Saudi Arabia Kuwait Jordan Dubai
29 Services Investigations: Corporate Investigations Forensic Accounting Protective Services (EP, WPV) Intellectual Property Protection Cyber Surveillance Computer Forensics Litigation Support TSCM ( debugging ) Consulting: Security Consulting Crisis Management Supply Chain Security Event Management Security Assessments Services: Global Screening Solutions Due Diligence Compliance Services
30 Recommendation Aim High but be realistic Be Patient in approach may take months or even years Concentrate on one product line (high margin or reputation) Concentrate on one area or geography Intelligence gathering for upstream busts Don t be distracted by noise of easy busts offered in market
31 Summary Why do people choose Pinkerton? Legacy knowledge that is deep and broad culled from 160+ years of experience Program management format one point of contact on local basis for communication, planning, execution, billing, quality control, etc Use of native, local experts who know the local geography, culture, laws, and customs Interdisciplinary having a multitude of capabilities (as you have just seen) that can be deployed in complex cases or situations Able to tailor to high level needs with turnkey operations or ala carte
32 We Never Sleep Name Surname Title of presentation Date 32
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