Making Anti-Counterfeiting Laws
and Enforcement Work:
A Case Study from China
David FinnAssociate General Counsel
World-wide Anti-Piracy and Anti-Counterfeiting
Microsoft Corporation
The software industry’s counterfeiting The software industry’s counterfeiting problemproblem
Overall world-wide piracy problemOverall world-wide piracy problem
35%35%average world-wide piracy rate for business average world-wide piracy rate for business software. More than 1 out of 3 copies of software. More than 1 out of 3 copies of business software in use world-wide is business software in use world-wide is counterfeited or otherwise infringing. Lost counterfeited or otherwise infringing. Lost revenues: $39.6bn.revenues: $39.6bn.
IDC, The Risks of Obtaining and Using Pirated Software, Oct. 2006Tier 1 - Piracy Rate Below 50%Tier 1 - Piracy Rate Below 50% Tier 2 - Piracy Rate 50% to 80%Tier 2 - Piracy Rate 50% to 80% Tier 1 - Piracy Rate Above 80%Tier 1 - Piracy Rate Above 80%
Guangdong: Guangdong: Center of China Center of China Counterfeiting Counterfeiting IndustryIndustry
Source: BSA, IDC
The software industry’s counterfeiting The software industry’s counterfeiting problemproblem
High-quality counterfeits are a growing High-quality counterfeits are a growing problemproblemHigh-quality printing and packagingHigh-quality printing and packaging
Replication of Microsoft product security featuresReplication of Microsoft product security features
Disc holograms (“edge to edge”)Disc holograms (“edge to edge”)
Certificate-of-Authenticity (COA) labels Certificate-of-Authenticity (COA) labels
Security threads for COAsSecurity threads for COAs
Unique security keys – required for activation and validationUnique security keys – required for activation and validation
Consumer fraud as well as other economic and societal harmConsumer fraud as well as other economic and societal harm
COUNTERFEIT
COUNTERFEIT
genuinegenuine
The Chinese counterfeiting syndicate
19 products in 11 languages found in 36 countries
Forensics showed at least 30 unique production lines
$2 billion+ estimated value of counterfeits produced
UNITS FOUND IN UNITS FOUND IN TEST PURCHASES TEST PURCHASES AND SEIZURESAND SEIZURESCOUNTRY UNITSChina 384,732 Taiwan 56,827 United States 56,638 Germany 54,288 United Kingdom 6,876 Austria 4,803 Spain 4,585 Switzerland 3,134 Ireland 2,040 Qatar 1,500 Canada 1,384 UAE 1,025 India 583 Israel 426 Australia 402 Korea 375 Italy 317 Pakistan 200 Indonesia 125 Malaysia 108 Thailand 96 Singapore 71 Netherlands 23 Poland 22 Egypt 16 New Zealand 14 South Africa 14 Nigeria 11 Philippines 7 Paraguay 2 Cyprus 2 France 1 Ethiopia 1 Czech Republic 1 Trinidad & Tobago 1 Croatia 1 WORLD-WIDEWORLD-WIDE
580,38580,3811
# of Countries# of Countries 36 36 # of Languages 11 # of Products# of Products 19 19
Units by CountryUnits by Country
100,000 to 400,000100,000 to 400,000
10,000 to 99,99910,000 to 99,999
1,000 to 9,9991,000 to 9,999
100 to 999100 to 999
0 to 990 to 99
July 2007 arrests and seizures in China
FBI and Ministry of Public Security meeting in June
Raids and arrests July 6-16, 200724 raids and 25 arrests in three cities
$500 million
Value of counterfeit software and components seized, including 22 master replication discs, 70,000 units of counterfeit Vista, Windows XP and Office 2007; 250,000 counterfeit COA labels; 60,000 user guides, product cases, and security labels; and asset seizures totaling $7.7 million including equipment and raw materials
Seized productSeized product
CounterfeitCounterfeit COAsCOAs
Security threadSecurity thread
Fake “holograms”Fake “holograms”
Fake activation keysFake activation keys
Lessons learned
1. Substantial investigative work is needed.• Six-year investigation – begun in May 2001• Test purchases and raids - 580,000 counterfeits from 36
countries• Test purchases from 2,033 on-line auctions in 17 countries• Identification of major targets and distribution channels• Wide expertise needed: traditional investigation, product ID,
distribution channel expertise, business intelligence, lawyers• All this on top of security features built into the products
2. Cooperation between the public and private sector, as well as between different public enforcement officials across borders, is vital.
• Michel Danet, WCO: “Customs around the world, from Cairo to London, Vancouver to Hamburg, and New York to Beijing, seized dozens of shipments numbering thousands of counterfeit Microsoft software products produced by these criminals.”
Documentary evidenceDocumentary evidence
Alleged “Mr. Big”Alleged “Mr. Big”
Lessons learned
3. Cooperation with the supply chain and even consumers can provide invaluable evidence.
• More than 100 resellers helped to trace counterfeits, provide physical evidence including invoices, payment slips, e-mails
• More than 1,000 consumers sent physical copies of Windows XP for forensic analysis
• Tens of thousands of consumers used the Genuine Advantage security feature to identify their software as fake
4. Successes against counterfeiting can be achieved in China.
• The involvement and cooperation of the FBI with the Chinese Ministry of Public Security was key
Range of products Range of products & components & components seizedseized
5. Public awareness of these cases is an indispensable part of the fight against counterfeiting.
Lessons learned
Making Anti-Counterfeiting Laws
and Enforcement Work:
A Case Study from China
David FinnAssociate General Counsel
World-wide Anti-Piracy and Anti-Counterfeiting
Microsoft Corporation