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MEMA Brand Protection Council
November 13, 2008Detroit, MI
2
Agenda• Welcome & Introductions – Cifranic & O’Rourke• Review Antitrust Guidelines – Arent Fox• Pending Litigations Update – Arent Fox• AAPEX Update / IP Incidents – Arent Fox• TechIdentity – Francois Augnet, TRW • Lunch – 30 minutes• Government Affairs Update- Catherine Boland• Brand Protection Talking Points – Catherine
Boland• Work Session: Quantifying IP Protection in North
America Vehicle Parts Industry – Andy Cifranic• Break – 15 minutes• Final Review: Special Report Draft on Flow of
Counterfeit Parts• Council Updates / Adjourn
3
AASA/MEMA Brand Protection Council
• “To support members’ global efforts to prevent, detect and prosecute intellectual property offenses against their products and brands”.
• “Provide the means for collective industry action against counterfeiting, sharing market intelligence and best practices, media and education campaigns and gaining increased enforcement by all relevant law enforcement agencies”.
4
Anti-Trust Guidelines It is the unqualified policy of the Motor & Equipment Manufacturers Association to conduct its operations in strict compliance with the antitrust laws of the United States. MEMA's antitrust policy prohibits any discussions which constitute or imply an agreement or understanding concerning: 1) prices, discounts, or terms or conditions of sale; 2) profits or profit margins or cost data; 3) market shares, sales territories or markets; 4) allocation of customers or territories; 5) selection, rejection or termination of customers or suppliers; 6) restricting the territory or markets in which a company may resell products; 7) restricting the customers to whom a company may sell; or 8) any matter which is inconsistent with the proposition that each manufacturer, wholesaler and distributor must exercise its independent business judgement in pricing its services or products, dealing with its customers and suppliers and choosing markets in which it will compete.
Counterfeiting at AAPEX
Litigation Update
• Autozone v. Strict Enterprises Inc.
• Bosch v. Pylon
• U.S. v. Able Time
• Toyota Hybrid Lawsuit - Green Claim
• SIIA v. eBay
• Kingdom Auto Parts v. MEMA
Counterfeiting at AAPEX
Summary of the Actions at 2008 AAPEX
Number of Complainants: 9
Number of Companies Complained About: 21
Nature of Violations (The number exceeds the total number of complaints because there were multiple complaints about some companies)
• Non-compliant product: 12• Patent Violations: 4• Trademark and/or part number infringements: 4• Generalized IP allegations, including trade dress and copyright: 3
Resolution of Complaints (without follow-up to assure compliance in all cases)
• Insufficient evidence to pursue, or complaint withdrawn or deferred: 2• Products seized and/or catalogs removed or redacted: 7• Delivered Letter or Warning to Booth: 3
Mema Brand Protection Council MeetingTecIdentify
Francois Augnet13th November 08
© TRW Automotive Inc. 20088
Mema Brand Protection Council Meeting
2
Why a Branch Solution? Facts and Figures
1
What is TecIdentify? Fully integrated solution
2
Benefits & Value Added Usage of code in daily business
3
Status & Future First Movers & The next steps
4
8
© TRW Automotive Inc. 20089
Criminal Activities growing…
Product piracy costs
Global Automotive Parts Industry
5 – 10 € billion per year
Source: OECD
© TRW Automotive Inc. 200810
Spare parts – Threats!
• Counterfeit parts – including trademark-infringement
• Grey-market imports – including genuine parts diverted from one market to another without consent of brand owner
• Excess stock by authorised suppliers, including non-branded genuine parts sold directly from supplier to dealer without consent of brand owner
• Re-labelling – eg. Sales of used parts / reject parts
• ….and more!
Source: OECD
© TRW Automotive Inc. 200811
Spare parts counterfeiting facts
Targeted products
• Fast moving products
• Standard parts sold off-the-shelf & which can be fitted to different models
• Parts with low per-unit costs as less likely to carry any security device
Consequences
• Illegal
• Brand Image affected – disastrous long term effects
• Liability in case of accidents
• Lost revenues
Eg. manufacturers 5% - 7% p.a
Source: OECD
© TRW Automotive Inc. 200812
Potential threats in Supply Chain
??
Trustedsupply chain
Trustedsupply chain
Original manufacturer
Distributor /Dealer Garage / End user
Unknownsource
Distributor /Dealer
Source: Vesdo
© TRW Automotive Inc. 200813
Consequences - dealing with counterfeited products
Personal (Emotional)
• Dealer is cheated as he pays for an original product & gets “junk” goods
Liability
• Low quality product create quality claims
Reputation
• Low quality products ruin the dealers reputation
Business
• The dealer is in breach of his contract with the original parts manufacturer
Legal
• Selling counterfeit products is prohibited
Source: Vesdo
© TRW Automotive Inc. 200814
Mema Brand Protection Council Meeting -
TecIdentify
2
Why a Branch Solution? Facts and Figures
1
What is TecIdentify? Fully integrated solution
2
Benefits & Value Added Usage of code in daily business
3
Status & Future First Movers & The next steps
4
14
© TRW Automotive Inc. 200815
TRW supports Industry Solution
TecIdentify
New CLEPA coding standard for authentication
TRW Response to Counterfeiting
Source: Vesdo
© TRW Automotive Inc. 200816
Future
16
246 248 438 686Every item gets its own identityAnonymous mass of items
(21)……. =
14 digits(01) 9 - 20 digits…....free space
GTIN SerialisationSource: Vesdo Ltd
Today
CLEPA Code –Basic Principles of Logical Security and Barcode Structure
© TRW Automotive Inc. 200817
Product Folding box Bundle/ Display Shipping case
Objective forpilot project
Objective forpilot project For Track & Trace
Extendedsecurity
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combination with other security systems
combination with other security systems
Application of Clepa Code
Source: Vesdo Ltd & Teccom
© TRW Automotive Inc. 20081818
TRW Label with CLEPA Code
© TRW Automotive Inc. 200819
TecIdentify Version 1.2 Authentication Process
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Clepa Code
19
TecIdentify Database
Single Scans
Online
Mobile
Multiple Scans
Online
Local
© TRW Automotive Inc. 200820
TecIdentify Version 1.2Scan, show results
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TecCom Mobile
TecIdentify
Congratulations!
This part is a genuine part from TecCom GmbH.
[9] Impress
Authentication: OK
TecCom Mobile
TecIdentify
Warning!
Unknown Code.This part partmight not be an original part from TecCom GmbH.
[1] Yes, I want to report this!
[9] Impressum
Authentication: Warning
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© TRW Automotive Inc. 200821
Feedback form
TecCom Mobile
TecIdentify
Contact Form:
Name:
Phone:
E-mail:
TecCom Mobile
TecIdentify
E-mail:
Yes, send the form!
Barcode: (01)14399901959689(10)2457689145(21)ABC123DEF45
[9] Impress
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TecIdentify Version 1.2Feedback possible
© TRW Automotive Inc. 200822
TecIdentify Version 1.2Website
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1. scan
2. check
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© TRW Automotive Inc. 200823
TecIdentify Version 1.2Response
2323
© TRW Automotive Inc. 200824
1. Open solution based on global standards (GS1,ISO..)Customs, importers, distributors, garages, car driver.....
2. Worldwide 24/7
3. Answer within seconds
4. Low requirements Internet PC with scanner Mobile phone with camera and free to download
reader software
5. Direct contact in case of a problem possible
6. Sophisticated algorithms on a secure database
TecIdentifyFeatures & Benefits
24
© TRW Automotive Inc. 200825
Mema Brand Protection Council Meeting -
Tecidentify
2
Why a Branch Solution? Facts and Figures
1
What is TecIdentify? Fully integrated solution
2
Benefits & Value Added Usage of code in daily business
3
Status & Future First Movers & The next steps
4
25
© TRW Automotive Inc. 200826
Manufacturer Requirements & Benefits
Requirements• Pre-requisite for TRW to implement branch solution =
Achieve Global Standard Label, Design & Printing
• Move from local sites doing local labeling to streamlined standards and processes for all aspects of product labels
Benefits of Global Standard Label, Design & Printing Project• Synergy – Standard processes & data integrity• More efficient & effective• Flexible – additions/deletions & immediate changes to labels worldwide• Can implement branch solution using CLEPA code and Tecidentify!
© TRW Automotive Inc. 200827
Possible Approach - Challenges & Benefits
How to start ?
By Product National Global
Requirements Low Medium High
Benefits of CLEPA code on label
Protection of specific products
Marketing messages etc.
Security for a certain region or country
Marketing messages etc.
Global solution protecting all products & territories
Synergy & Economies of scale
Targetted marketing activities by using the code for messaging, promotions, part of loyalty program
Challenges If product produced across multiple sites – adapt site processes or review need to standardise?
Or cost to outsource the work but then lose some control
Creating one process across the sites within one region
Or cost to outsource the work but then lose some control
Large workload to standardise processes, role definitions & resource allocation
To find / create a global, user friendly software solution
© TRW Automotive Inc. 200828
TRW Approach - Challenges & Benefits
How to start ?
By Product National Global
Requirements Start with packed in house products
Starting with 2 geographical regions in initial roll out
Will roll out globally step by step
Review current processes & resources for labeling activities
Understand internal & external requirements
Definition of future requirements & conceptual design with chosen software provider
Benefits Global web-based solution for TRW & suppliers / Controlled access for suppliers
Protection of all products (Image, turnover etc.)
Synergy, efficient streamlined processes for all labeling design & print activities (internal efficiencies), Single data source & storage for label information
Marketing benefits - code can be used in daily business to eg. Send messages, announce promotions, link to a customer loyalty programme etc.
Challenges Managing IAM & VMS channels
Large workload & rethinking of roles & resource allocation
Large workload to standardise processes, complex to design & arrive at global user friendly software solution for TRW sites & suppliers
© TRW Automotive Inc. 200829
The Clearing Hub - Architecture of an authentication system
If each manufacturer is operating his own system:
Business processes at the POS will be very complicated.
Using a hub as unique certification authority in a given industry:
Business processes at the POS will be simple & easy.
© TRW Automotive Inc. 200830
Mema Brand Protection Council Meeting -
Tecidentify
2
Why a Branch Solution? Facts and Figures
1
What is TecIdentify? Fully integrated solution
2
Benefits & Value Added Usage of code in daily business
3
Status & Future First Movers & The next steps
4
30
© TRW Automotive Inc. 200831
1 Bosch 13 Contitech
2 Continental Teves 14 ThyssenKrupp
3 Federal Mogul 15 Knorr Bremse
4 GKN 16 Osram
5 Hella (2009)
6 Mahle
7 Mann + Hummel (2009)
8 Schaeffler, LuK, INA Networking
9 Tenneco ITG
10 TRW Figiefa
11 Wabco MEMA / JAPIA
12 ZF-Trading Car Manufacturer
First Moversproject started project start open decision open
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© TRW Automotive Inc. 20083232
Automechanika 2008First Movers activities
- Invitation with 2DMatrix- Presentation on the booths- Promotion using Clepa Code
Joint PR activities with CLEPA & Messe Frankfurt
TecIdentify won the Innovation award at Automechanika in IT category
Automechanika Sept.2008
Source:Teccom
© TRW Automotive Inc. 200833
Next steps
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2. Anticounterfeiting - Platform - conceptual
Projects
Security Concepts
Uncovered Fakes
Links
Company Case Country Contact
Schaeffler Gruppe
5 container of clutches
Czech-German Border
Mario Thümmler
TRW Ningbo Automechanika Frankfurt 2006
Karen Landis
Contitech 195.000 drive belts
Malta Christoph Stegemann
…
1. TecIdentify Version 1.3: Enhancement of user interface Add new algorithms Enhancement of reports ....
1. TecIdentify Version 1.3: Enhancement of user interface Add new algorithms Enhancement of reports ....
© TRW Automotive Inc. 20083434
• Encouraging garages etc. across all territories to use the solution!
• Equipment available?
• Ensuring this great solution is embedded in an internal process eg. what happens in YOUR COMPANY when a garage gets a warning message?
Challenges for ALL companies!
© TRW Automotive Inc. 20083535
Q & A
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Lunch30 minutes
37
Government Affairs UpdateBrand Protection Council
November 13, 2008
Catherine Boland
Director, Government Relations
Motor and Equipment Manufacturers Association
38
MEMA Washington, D.C. Office
• Seven person office that develops legislative and regulatory strategies on issues impacting automotive and heavy duty suppliers
• Resource for OESA, AASA, HDMA members
• Government Affairs Committee that sets legislative priorities based on input from market segments
39
Legislative Update
PRO-IP Bill (S. 3325) signed into law on October 13, 2008
• Contains language requested by MEMA that calls for a Government Accountability Office (GAO) study on how the federal government can best protect the IP of manufacturers
• Study is to be completed and submitted to Congress by October 2009
• GAO has not begun work on this study, but they will reach out to MEMA when they begin work on it
40
Legislative UpdatePRO-IP Bill (S. 3325) • Heavy focus on copyright and trademark
protection• Coordination of Federal Effort Against
Counterfeiting and Piracy– This legislation takes domestic portions of the Bayh
Voinovich bill and creates an advice-and-consent level position, the Intellectual Property Enforcement Coordinator (IPEC), to serve in the Executive Office of the President and chair an inter-agency committee, that will produce and implement a joint strategic plan to enforce intellectual property laws
41
Legislative Update
PRO-IP Bill (S. 3325)• Increased Resources at Department of Justice
– This legislation increases the resources available to federal and local law enforcement agencies to combat theft of intellectual property
• Creates grants for state and local law enforcement• New operational unit within the FBI • Training program on intellectual property offenses• New funds for the FBI and DOJ for additional agents and
prosecuters • Sends five “intellectual property law enforcement
coordinators” to the countries or regions where there presence and assistance can have the greatest positive effect on US intellectual property rights and interests
42
Legislative Update
Issues not addressed in PRO-IP
This bill does not address certain MEMA priorities– Increased protection for IP of goods not
bearing a trademark– Increased protection of trade dress– International cooperation between like-minded
countries
43
Legislative Update - International
Rangel-Levin Trade Enforcement Bill – H.R. 6530– Introduced as a legislative marker in July– Will not move this Congress– Title III of bill covers enforcement of IP laws at U.S.
borders• Enforces U.S. Intellectual Property Rights (IPR). The bill
creates a Director of IPR Enforcement and an IPR Enforcement advisory committee to advise on IPR enforcement issues; promotes the use of new technology to better fight intellectual property rights (IPR) infringement; creates a “watch list” for suspected bad actors; and prevents Customs from excusing fines assessed for illegal imports.
• Increases Staffing, Resources, Training and Coordination. The bill authorizes the support, resources and training that Customs and Immigration and Customs Enforcement need and deserve to carry out their import safety and IPR enforcement responsibilities.
44
Legislative Update - International
S. 3464 - International Intellectual Property Protection and Enforcement Act of 2008 (introduced by Senator Baucus and Senator Hatch)
• Action Plans. The bill requires the United States Trade Representative (USTR) to develop an action plan for each foreign country that has remained on USTR’s “Priority Watch List” of intellectual property deficient countries for at least one year.
• Enforcement Actions. If a foreign country has not complied with its action plan within one year, the bill authorizes the President to take various enforcement actions against the country.
• Developing Country Assistance. The bill authorizes appropriations to USTR to assist developing countries in complying with their action plans.
• Congressional Report. The bill requires USTR to include, in its annual “Special 301” report, a description of the action plan developed for each country and the actions taken by each country pursuant to that plan.
• Intellectual Property Officials. The bill requires the President to ensure that intellectual property officials are placed in the U.S. embassy of each foreign country that has a commercially significant relationship with the United States.
45
Anti-Counterfeiting Trade Agreement
• Late last year, USTR announced that they had begun discussions with our trading partners engaged in discussions to negotiate an anti-counterfeiting trade agreement
• Discussions include Canada, the European Union (with its 27 Member States), Japan, Korea, Mexico, New Zealand, and Switzerland
• The National Association of Manufacturers is working with USTR and Immigration and Customs Enforcement to put together a round table in the Detroit area to discuss the trade agreement– When this is scheduled, MEMA Washington will inform the BPC
and provide information about attending
46
Discussion
For more information contact
Catherine Boland
Director, Government Relations
202-312-9241 or [email protected]
47
Working Session:Quantifying IP Protection in North American Vehicle Parts Industry
• Second in a series to engage council members and develop valuable industry information to support IP enforcement
• Today's topic requested by Department of Justice• To be published by BPC and distributed to assist
MEMA DC Office and IP enforcement
48
Break15 minutes
49
Working Session:Flow of Counterfeit and Gray Market
Goods
• Special Report: “Understanding the Flow of Counterfeit and Gray Market Goods through the U.S. Automotive and Commercial Vehicle Parts Marketplace” (handout)
• Developed at last BPC meeting• Forwarded via e-mail for review• Finalize before publishing and distribution
50
Legitimate U.S. Motor Vehicle Parts Supply Chain• Raw material and component suppliers – These may include
international or domestic.• Manufacturing – This includes the actual manufacture, assembly
and completion of a finished component or part.• Distribution Center – Owned by the manufacturer and where
finished parts are moved for packaging, warehousing and shipping.
• OE Production or Warehouse Distributor – The part is then sold by the manufacturer either for assembly onto a vehicle (OE Production) or into the aftermarket distribution channel (Warehouse Distributor).
• Parts Store / Jobber / Retail Chain – In the case of the aftermarket distribution channel, a warehouse distributor may elect to sell through a parts store either independent or company owned.
• Repair Facility – If the part is installed professionally, the part is sold directly or indirectly to a repair facility. This may be independent or a car dealer.
• End User / Vehicle Owner – The ultimate end-user or consumer of the part.
U.S. Automotive and Commercial Vehicle Parts Distribution Supply Chain Model
51
U.S. Automotive and Commercial Vehicle Parts Distribution Supply Chain Model
DomesticSupplier
DomesticManufacturer
InternationalSupplier
Distribution Center
O.E. Production
WarehouseDistributor
Parts Store /Jobber /
Retail Chain
Repair Facility
End User /Vehicle Owner
MEMA Member CompanyUS Manufacturer Legitimate
RawMaterial
Or Component
52
Supply Chain – How Counterfeit and Gray Products get Introduced:• Unauthorized Suppliers – Producers of raw materials or components
that were not commissioned by the original manufacturer.• Unauthorized Manufacturers – Producers products made for the
replacement of the original but in violation of the original manufacturer’s intellectual property.
• Generic Supplier – May produce legitimate replacement products not in violation of intellectual property but may later be converted to counterfeit by affixing trade marks or other trade dress violations by another party.
• Master Distributor / Importer of Record – Generally the company that takes receipt of illegitimate products within the U.S. with the intent to distribute. They may also be the converters of legitimate replacement products to counterfeit through the use of markings, packaging, etc.
• Internet / Web Sites / Mail Order – May also be distributors of illegitimate products and may or may not be located in the U.S.
• Broker – In the commodities business. Generally not product experts but in the business of selling large quantities of over run, over stock products which may or may not contain counterfeit goods.
U.S. Automotive and Commercial Vehicle Parts Distribution Supply Chain Model
53
RawMaterial
Or Component
U.S. Automotive and Commercial Vehicle Parts Distribution Supply Chain Model
DomesticSupplier
DomesticManufacturer
InternationalSupplier
Distribution Center
O.E. Production
WarehouseDistributor
Parts Store /Jobber /
Retail Chain
Repair Facility
End User /Vehicle Owner
Legitimatew/ Counterfeit
and Gray Market
UnauthorizedInternational
Supplier
UnauthorizedManufacturer
Internet/ web site
/mail order
Master Dist / Importer of Record
GenericSupplier
Broker
converted to counterfeit
54
A simplified flow chart illustrating the normal flow of products from international sources to U.S. buyers include:
• Free Trade Zone – Within international borders.• Freight Consolidator – Actual transporter of goods.• Customs Broker – Completes necessary documentation for export
of goods.• The process is then reversed upon receipt within U.S. borders.
U.S. Automotive and Commercial Vehicle Parts Distribution Product Flow
55
O
U.S. Automotive and Commercial Vehicle Parts Distribution Product Flow
Free Trade Zone
FreightConsolidator
CustomsBroker
CustomsBroker
FreightConsolidator
Purchaser
Legitimate
Origin Destination
56
In the case of counterfeit or gray market products, shipments are generally not direct to U.S. borders but may include many stops along the way. There are too many to name but some include:
• Dubai• Paraguay• Panama• Mexico• CanadaWhere import restrictions are less complicated and the entry of
counterfeit goods more likely. The additional paper trail of many stops along the way make origin hard to detect.
U.S. Automotive and Commercial Vehicle Parts Distribution Product Flow
57
O
U.S. Automotive and Commercial Vehicle Parts Distribution Product Flow
Free Trade Zone
FreightConsolidator
CustomsBroker
CustomsBroker
FreightConsolidator
Purchaser
International Origin U.S. Destination
Illustrative of Potential Counterfeit and Gray Market
Dubai
Paraguay Mexico
Canada
Panama
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To address the serious issue of counterfeiting and other IPR violations within the automotive manufacturing community, the Motor & Equipment Manufacturers Association (MEMA) – in conjunction with its market segment associations to include the Automotive Aftermarket Suppliers Association (AASA), Heavy Duty Manufacturers Association (HDMA), Original Equipment Suppliers Association (OESA) – created the Brand Protection Council to provide a forum for manufacturers to discuss counterfeiting and other IPR violations with a focus on North America.
For more information on the Brand Protection Council or for assistance in contacting automotive brand owners, please contact Jack Cameron at 919-406- 8856 or e-mail [email protected].
(http://www.aftermarketsuppliers.org/issues/counterfeiting.php)
U.S. Automotive and Commercial Vehicle Parts Distribution
59
MEMA and BPC Updates
• CBP Product Identification Guidelines (handout)– Most effective ways to help enforcement agencies– Develop a database or CD of MEMA BPC member
companies for distribution
• Brian O’Rourke – Thank you!• Rick Kempski – Welcome, incoming Co-
Chairman
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Thank You!Travel Safe!