From Mass Merchandise To Luxury,
A Strategic Discussion
Barbara Kaplan
Senior Counsel
VF Corporation
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COPS, ROBBERS, AND PLUMBERS:
PLUGGING PIPELINE LEAKS IN
A FLUID GLOBAL MARKET
From Mass Market to Luxury Brands
Brands and the Counterfeiting Quandary
American Apparel and Footwear Association
14 November 2006
Barbara J. Kaplan
Senior Counsel
V.F. Corporation
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© 2006 B.J. Kaplan
Answer: Money
QUESTION:
•
•
•
•
Why do counterfeiters counterfeit?
Why do diverters divert?
What determines where you manufacture?
What determines the scope of your
enforcement program?
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What you think when you say “pipeline”:
1. Authorized Manufacturer
1
2
2. Exit Port
3
3. Port of Entry
U.S. Customs
4
www.lgib.gov.uk/images/news/pipes.jpg
4. Distribution Center
5
5. Customer
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Before the Deluge: Plumbers’ Concerns
• Before the pipeline floodgates open:
– Have you checked your company’s compliance
policy?
• What does it say about IP protection?
– What else do you require of your contractors
and other vendors?
• Do the same requirements apply to the contractors
and other vendors used by your licensees?
– Who is the owner of each of your contractors or
and other vendors? Is any of them owned by a
distributor or licensee?
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Antediluvian Concerns (continued)
• Preventing leakage on the supply side:
– Do your contractors and other vendors agree, in
writing, not to register your IP in their own
names or otherwise assert rights in it?
• Are you and they on the same page as to what “IP”
means? As to what it includes?
– Are you sure?
– Do you know where each of your contractors
and other vendors is?
• Not where the business office is, but where each
actual manufacturing, warehouse, shipping, etc.,
facility is located.
– Are you sure?
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Once the pipeline opens:
• Preventing leakage on the supply side (continued):
– How streamlined (or un-streamlined) is your
pipeline?
• How many manufacturers do you have? Where?
• Are manufacturers allowed to sub-contract?
• Are manufacturers allowed to source any components
locally? If so, do you know from where?
• How many sourcing agents do you have?
• What are manufacturers permitted to do with:
–
–
–
–
Overruns?
Irregulars and other items that are other than first-quality?
Excess components?
Goods from rejected or cancelled purchase orders?
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Once the pipeline opens (continued):
– How streamlined (or un-streamlined) is your
pipeline? (continued)
• How many authorized exporters do you have?
• From how many ports do your goods leave their
countries of manufacture?
• How many authorized importers?
• Through how many ports of entry do your goods
arrive in each market?
• How many distribution centers do you use in each
market?
• Do you permit drop-shipping directly to customers?
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Post-Flood: Leaks on the Supply Side
• Cops and Robbers:
– Assuming that current manufacturers are not
permitted to sell off or otherwise dispose of
any items in the marketplace:
• Who’s been monitoring the manufacturers to make sure
they comply?
• Who’s retrieving and destroying leftover materials?
– What about former manufacturers?
• Were all remaining materials retrieved and destroyed?
• Has anyone checked to see if ex-contractors haven’t
gone right on manufacturing products incorporating
your IP?
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Post-Flood: Leaks on the Demand Side
• Cops and Robbers:
– How are your authorized customers permitted to
sell you products?
• Are there restrictions on how and where they can sell
your products?
• Is each prospective customer required to agree, in
writing, not to engage in counterfeiting, infringement, or
diversion?
– What are the penalties for breach of such an agreement?
– How would you prove a breach?
– Would you go to court to enforce?
• Are customers allowed to sell your products on-line?
• Are customers allowed to ship products outside their
territory (e.g., overseas)?
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Post-Flood: Leaks on the Demand Side
• Cops and Robbers:
– How well do you really know your customers?
• Do you ship your products to a central location
designated by your customer?
• Do you know where all of each customer’s doors are?
• Do you allow customers to have separate “ship to” and
“bill to” addresses?
• Does each customer’s product order volume correlate to
the size of its store(s)? To its territory?
• Do you monitor your customers’ ordering trends? Their
order histories?
• Are your sales representatives accountable for booking
questionable orders?
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Let’s review: what you think when you say “pipeline”:
1. Authorized Manufacturer
1
2
2. Exit Port
3
3. Port of Entry
U.S. Customs
4
4. Distribution Center
5. Customer
www.lgib.gov.uk/images/news/pipes.jpg
5
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What some of your “partners” think when you say “pipeline”:
Authorized
Factory
Customer
linuxfromscratch.mirrorservice.org/.../pipes.jpg
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P.S. Even the best appearance can be deceiving
www.lgib.gov.uk/images/news/pipes.jpg
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