Chinese Intellectual Property Theft
JJ Cavanaugh and Andrew Lue
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Agenda
 Intellectual Property Theft Defined
 China
 How Supply Chain is Affected
 Prevention
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What Is Intellectual Property Theft?
 Using another company’s sensitive information without consent
from that company
 Often committed by inside employees or contractors
 Includes copyrights, trademarks, patents, industrial design rights,
and trade secrets
 If these measures are not taken, a company cannot claim IP theft
 Counterfeits are common in many markets because they are so
cheap to produce due to no R&D costs
 Illegal in the U.S.
 Causes lost sales to the original manufacturer
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Source: Setec
How China Fits In
 China responsible for 80% of counterfeit products seized by
U.S. Customs
 China’s central government is trying to fix the problem
 Local officials continue to ignore it
 Daewoo Spark v. Chery QQ
 Significant design data lost.
 GM lost sales due to Chery not having R&D costs
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Source: ICC
How This Affects Supply Chain
 Industries most affected
 Entertainment, automotive, pharmaceutical
 U.S. companies lose about 750,000 jobs and
$200-250 billion annually
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Type of Good
Value
Est. MSRP of counterfeit goods seized in 2010
$1.4 billion
Counterfeit goods seized in 2010
$0.188 billion
Total cost to U.S. economy
$1.212 billion
Source: ICE, Small business
How To Prevent IP Theft
 Preventative measures
 Patents, copyrights, trademarks, etc. in each country where your
product is sold or produced
 Employee/vendor background checks and training
 Implement strong information security
 Passwords and authorization for management
 Deploy surveillance measures
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Source: Small business
Conclusion
 China is a major player in IP theft
 80% of counterfeit imports
 Costs U.S. jobs and money each year
 Lost sales and costs of prevention
 Prevention
 Update government copyrights, patents, etc.
 Monitor employees and run background checks
 Strong information security
 Passwords and authorization measures
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Questions?
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Sources
 http://www.setecinvestigations.com/resources/whitepaper
s/Investigating_Intellectual_Property_Theft.pdf
 http://www.iccwbo.org/uploadedFiles/BASCAP/Pages/Int
ellectual%20Property%20Theft%20in%20the%20Automoti
ve%20Industry.pdf
 http://www.ice.gov/news/releases/1103/110315detroit.h
tm
 http://smallbusinessonlinecommunity.bankofamerica.com/c
ommunity/generalbusiness/blog/2010/09/14/preventingidea-theft-safeguard-your-intellectual-property
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