Presented by

Vaughn VolpiChief Strategy Officer

Rudy DiazChief Operating Officer

PICA CorporationSeptember 20, 2010

Best Practices for a Global Brand Protection Strategy:

Internal and External Success Factors and Risks

Presentation Outline

• Building an internal brand protection program that supports your business objectives.

• Managing through the day-to-day external risk factors inherent in operating a successful worldwide program.

• Case studies which illustrate how proper program design and management will yield measurable results.

• Open Panel Discussion

Building Your Program

Structure and Global Alignment

• Define Strategy

• Establish Global Metric– Increase Market Share– Increase Revenue

• Identifying Internal Stakeholders

• Identifying External Partners

• Resource Allocation

Program Integration

Successful brand protection programs will include all of the following elements.

• Centralized Program Management• Intelligence Gathering• Web Monitoring, Intelligence and Enforcement• Hotline Management• Diversion Control Programs• Counterfeiting Enforcement• Data Management• Domain Name Management• Training• Authentication Solutions

Four Pillars of Brand Protection

• Intelligence and Enforcement

• Metrics

• Barriers to Entry

• Training

Intelligence and Enforcement

• Investigative Resources– Training– Case Management

• Generating Actionable Intelligence – Life Cycle– Methodology– Identifying Sources– Enforcement Actions

Metrics

• Defining Success– Return on Investment– Formula for valuing seized

product

• Sizing the Problem– Market Survey– Availability of Illicit Product– Number of Incidents

Barriers to Entry

• Legal• Product Engineering &

Design• Packaging• Security Labeling• Tying Authentication Tools

to Lead Generation• Supply Chain Auditing

Training

• Who to Train– Investigators– Law Enforcement– Sales Force– Channel– In-house Counsel

• What to train them in;– Authentication Tools– Expectation of Action– Brand Awareness

Identifying External Risks

Where Does Risk Reside?

• Counterfeiters• Business Partners• Investigators• Lawyers• PSS Providers

• Media• Government Agencies• Supply Chain• Informants• Law enforcement

In Short - Everywhere_________________________

Overcoming External Risks

Corrupt and Unethical Practices

• Bribery and kick-backs• Corporate policy

violations• Conflicts of interest• Use or threatened

use of violence• Extortion or blackmail• Same violations by third

parties

Corrupt and Unethical PracticesAdvice

• If you don’t have a corporate ethics or corruption policy – write one

• Make sure all third party vendors review and are contractually bound by the same policies

• Audit work product and expenses periodically to insure compliance

• Do not bend the rules for results

• Manage vendor selection and procurement by committee

Governmental Backlash

• Government-protected infringer organizations

• Active participation and support of your competition

• Political bias based on the nationality of your company

• Potential revocation or non-renewal of registered trademarks or licenses

• Unfair competition and judicial corruption

• Criminal charges for willful negligence or agent misconduct

Governmental BacklashAdvice

• Work closely with your public affairs, legal, investigative and PR staff to expose corrupt practices and collaborate with honest government officials

• Be politically neutral and sensitive• Utilize politically and economically-

connected resources in-country• Identify and stress the areas

where your interests are aligned with government and the society

• Use the local media to promote good corporate citizenry and fight corrupt practices

• Know and control what your business partners are doing

Managing Sources

• Informants• Law Enforcement• Other Gov’t. Officials

– Yours and host country

• Tipsters• Estranged Parties

– Disgruntled former employees or biz partners

– Competitors– Ex-significant others

Managing SourcesAdvice

• Don’t try and do this in-house. This is potentially treacherous work that should only be undertaken by experienced professionals

• Train and establish relationships with police whenever practicable

• Leverage government and embassy assets for information, advice and support

• Listen to all comers, but validate the information, source and motive

• Never let them close to you or the company

• Need to know basis• Test their honesty• Be generous, but only upon success• Do not encourage illegal activity• Beware of theft of trade secrets• Don’t burn your information sources

Wrongful Arrest and Seizure

• Creates liability for your company

• Destroys law enforcement relationships

• Devastating to public opinion

Wrongful Arrest and SeizureAdvice

• Trust but verify• Measure twice, cut once• During seizures follow the

“when in doubt, leave it out” rule

• Review all evidence and complaints before they are submitted to law enforcement

• Do your homework on the target (e.g. make sure he’s not a licensee)

Evidence Handling & Destruction

• Theft• Tampering• Biohazard materials• Pollution issues• Sale of donated items• Negative perception

from law enforcement for refusing to donate

Evidence Handling & DestructionAdvice• Use secure storage• Always retain some evidence

until the case is fully adjudicated

• Set strict guidelines for the destruction of products with biohazard or polluting elements

• Ask your agents to videotape and supervise destruction

• Locate trustworthy charities in each of your critical markets where product can be safely donated, if possible

• Dispose of evidence as soon as legally possible

Infringer Retribution

• Stalking• Threatening calls• Kidnapping • Assault• Battery• Murder

Infringer RetributionAdvice

• Know your enemies. Make sure your investigations are thorough

• Report any violent history or dangerous affiliations to law enforcement

• Stay behind the scenes• Let professional risk-takers take

the risk• Report all threats to corporate

security and/or law enforcement• Institute a travel safety and

intelligence system• Instruct your vendors to proceed

with their work quietly and professionally.

Legal System Variances

• Many countries have very strict laws governing investigation work

• Courts in many countries often side with local infringers against multinational companies

• Non-local vendors and counsel may not fully understand the realities of the local system

• Local vendors and counsel may take advantage of your lack of knowledge

• The legal process in certain countries can be slow and expensive

Legal System VariancesAdvice

• Hire experienced multi-national vendors and counsel with direct experience and resources in your key markets

• Reach out to your colleagues in the industry for recommendations and advice

• Choose criminal over civil remedies when operating in an unfamiliar area.

• Choose your battles carefully• Allocate budget based on

impact to the business and likelihood of success

PSS Failures

• Theft• Quality, performance,

sourcing, or integration issues

• Exact duplication• Practical compromise• Inability to act at “law

enforcement speed”

PSS FailuresAdvice

• Keep very tight controls on access, sourcing and distribution to keep legit PSD’s off the black market

• Apply and distribute the device uniformly throughout your supply chain, even if the packaging varies

• Choose a solution that is unique to your company and avoid buying “off the rack”

• Make sure the device contains overt features that are easily recognizable, but not easily defeated

• Build in multiple layers of covert features - don’t divulge them all at once – it is cost effective and will extend the life of the device

• Update at least the covert features on your device every 3-4 years

Negative Public Relations

• Damages brand and/or company reputation

• Can invite political intervention

• Reflects poorly on the value brand protection brings to the business

Negative Public RelationsAdvice

• Avoid making public statements against infringers

• Arrange for your PR Dept. or the Police to make all statements

• Arm your PR Dept. with local facts designed to turn public opinion against counterfeiting

• Remember that nothing you do is worth damaging the brand image

and worst of all … Failure to Act

• Infringers are not brand-loyal. If you are an easy target you will be a victim.

• Can lead to the erosion of your company’s IP rights.

• Threatens your market position and reputation.

• Consumers of IS counterfeits are your core target market.

• Depending on the market size, a 1% counterfeit share can cost up to $100 million per year in lost sales.

Case Studies

Buenos Aires Actions

Main

• Tens of thousands in counterfeit packaging interdicted

• Case originated from a previously executed enforcement action which identified an illicit packaging source in Argentina

• Multinational approach allowed our agent to penetrate target and associates in Sao Paulo and Bogotá

• Excellent ties to LE facilitated the speed of action necessary to shut down multiple operations simultaneously

• The availability of counterfeit product in Brazil dropped precipitously immediately after this seizure.

Buenos Aires Actions

Singapore / PRC Syndicate

• Sophisticated counterfeiting operation headquartered in Singapore with operations in Hong Kong, Mainland China, and the USA.

• Their organizational structure and operations were identified and mapped through months of comprehensive investigation and research.

• Product was being shipped all over the world.

Singapore / PRC Syndicate

Singapore / PRC SyndicateInternal WarehouseInternal Warehouse

External WarehouseExternal Warehouse

Singapore / PRC Syndicate

Brazil Actions

• Included different businesses in Londrina and

Maringa (PR), and Sao Paulo (SP)

• Imports refilling equipment and supplies from China

through a legitimate business in Maringa, and prints

counterfeit flat packaging at a local printer in

Maringa, sending to Londrina

• Took advantage of interstate commerce laws to

conduct intra-company shipments to Sao Paulo,

avoiding taxes at the State border

• Focused on supplying local, State and Federal

Government bids

• Main shipping points were Londrina (PR) and Sao

Paulo (SP)

Brazil Actions

Maringa, Parana State• Legitimate refilling company imports supplies

from China• Printer provides counterfeit flat packaging

Londrina, Parana State• 3 subjects (A,B, C) were identified individually

through Hotline selling in public tenders• Investigation identified Call Center in Londrina

servicing all 3 subjects. Subjects also sold direct.• Confidential source provided PCC location

Sao Paulo, Sao Paulo State• The owner of Subject A was found to also own a

company in Sao Paulo, Subject D• Subject D was found to be co-located at the SP

branch of a large refilling operation known to be involved in counterfeit

• Subject C has a branch in SP, also co-located with Subject D

• Subject E was identified through the sale of counterfeit products to the SP Revenue Service - the owner is nephew of the owner of the legit refill/reman

Subject A Subject B Subject c

Call Center

Subject c

Legitimate Refiller/Reman

Subject d Subject c

Subject e

Public Tenders Wholesale Retail

SP Branch

SameOwner

Nephew

Refiller (Maringa)

Illicit Printer(Maringa)

PCCPackaging Supplies

Brazil Actions

• 15 search warrants were issued and executed

– Business, residential and informal locations associated with all linked targets, both belonging to the organization or known to be business partners

• The operation was orchestrated by Maringa Civil Police, with support from Londrina and Curitiba Civil Police Departments

• Seizure included:– Brand 1

• 11,850 toner flat boxes• 239 toner cartridges• 180 toner finished product• 1,010 ink finished product• 2,500 ink security labels

– Brand 2• 3,000 toner flat boxes• 2,000 toner security labels (counterfeit)• 5,000 toner security labels (OEM)

– Stolen from China manufacturer in 2009, resurfaced in Brazil during raids

– Similar amounts for at least 3 other brands

Subject a Subject b Subject c

Call CenterPCC

Owner B

Brazil Actions

Counterfeit Flat Boxes

Toner CartridgesFor Remanufacturing

Toner Drums forRemanufacture

Counterfeit Flat Boxes

Counterfeit Flat Boxes

Thanks!

Questions?

Vaughn Volpivvolpi@pica.net

813.831.1999

Please visit our website www.pica.net

Rudy Diaz rdiaz@pica.net

305.477.7702