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Exposing the Weak Link Controlling IPR with
Materials and Production
Betty Morgan
Partner

Epstein, Becker Green Rick Horwitch
VP,
Sourcing
Bureau Veritas
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Session 1 Exposing the Weak Link Controlling
IPR with materials and production
AAFA Brand Protection Council Seminar New York,
NY November 14, 2006
For the benefit of business and people
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THE ISSUE

• Est. could be up to 1 trillion USD
• Most reports quote 500bb to 600bb
• Major problem for all consumer products
  manufacturers regardless of product type
  (apparel, footwear, accessories, toys,
  pharmaceuticals, electronics, food, housewares,
  hardware, etc)
• Russell Athletic (owner of Spalding brand)
  estimates up to 60 of all basketballs in use in
  China are counterfeit
• Huge liability, health and safety risks
• Most enforcement efforts are aimed at the end
  user/delivery black market retail, consumer
  level
• Very little effort at source level
• Piece goods material and trim are the key
  items to watch. Trim is currency in the
  counterfeiting world.

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SUPPLY CHAIN SECURITY
 

• Secure supply chain best practices TOOL KIT
• Protecting businesses, consumers, and brand
  integrity
• SECURE LEGITIMATE INPUTS
• Ensure the authenticity of raw materials and
  component parts
• Employ the concept of strict liability for
  failure to deliver authentic components and parts
  in contracts with suppliers
• II. VERIFY LEGITIMACY OF CUSTOMERS AND
  DISTRIBUTORS
• A. Utilize risk management procedures to
  verify legitimacy of customers.
• B. Ensure that subcontractors only produce
  authorized merchandise
• III. MANAGE PRODUCTION WASTE AND DAMAGED OR
  UNUSABLE INVENTORY
• A. Institute policies to certify that
  production waste and damaged and
  unusable products are destroyed or appropriately
  disposed of
• B. Select one or two trusted charities
  for product donation to ensure that
  goods are not diverted to the gray market and
  blended back into the
  legitimate supply chain