1. COORDINATE YOUR
INITIATIVES WITH YOUR
2. Since its inception, the
Internet has doubled in size
3. The Problem….
The DMCA has not scaled well for enforcing copyrights
infringed by means of P2P file-sharing networks.
The safe harbor provisions of § 512 covers routing and
transmission. This has led to waves of John Doe
litigations, which does not scale well either.
Notice-forwarding agreements (“Notice and Notice
arrangements”) as a workaround
4. New Developments
In 2010, members of the Department of Homeland
Security, Bureau of Immigration and Customs
Enforcement (“ICE”) conducted an investigation into
websites that illegally distributed copyright-protected
content, particularly, first-run movies, over the
During the course of the investigation, ICE agents
discovered that many of the websites that are
involved in the illegal distribution of copyright-
protected content over the Internet may be divided
into two classes: “linking” websites and
5. New Developments
Direct download websites (“cyberlockers” or “one-click hosting”
services) (e.g., MegaUpload, DropBox, HotFile, RapidShare,
MediaFire, FileSonic, FileFactory MegaVideo, DepositFiles and
System of Referral Links - Easier to enforce (recentralization)
(Follow the Money)
Many brand and trademark infractions are committed by
unauthorized resellers, dealers and agents who advertise one brand
of product then switch the consumer at the point of sale to a
competitive product or black market look-a- like.
6. Proposed Solutions
Preventing Real Online Threats to Economic Creativity
and Theft of Intellectual Property (PROTECT IP) Act (S
Stop Online Piracy Act (SOPA) (HR 3261)
Who has taken interest? Computer & Communications
Industry Association with respect to the impact on fair
use, and the Business Software Alliance with respect to
7. Proposed Solutions
Software authors: Write software in such a way that it
can be recalled or modified after it has been obtained
by a user and then put to an undesirable purpose; (2)
Program software to disable the installed software of
others. Control over software as a service allows for
minor adjustments in code.
Backbone level of the Internet (Fingerprinting,
filtering and blocking technologies)
System of private, Online Dispute Resolution via
ICANN similar to UDRP
8. Proposed Solutions
Digital content protection services (Quality Control)
Alliances (Law Enforcement, International, ISPs)
Safe and Effective Distribution
9. Sales Controls Using the C.O.P.E.
Factors involved in the sale of products:
10. Company Indicators
The company is unknown to you.
It has recently been established.
It has recently changed its name (but has the same ownership).
It has recently changed ownership.
It has recently changed ownership and changed its name.
It has one or more subsidiaries (local, national, and global).
It has recently set up subsidiary companies.
It shares an address(es) with other companies in a similar industry.
It has links to another company or companies not through
ownership, or it shares employees (family).
Its market is primarily international (it is looking to acquire products
at cheaper rates).
Its facilities do not justify the ordered products.
11. Company-related Questions
Company Is the company in your database?
Has the company profile been completely filled out?
Who are the directors?
When was the company formed?
Does the company have subsidiaries or branch offices
locally, nationally, or in other countries?
Where are the company's primary markets?
What are its channels of distribution?
What shippers does it use? Has the company ever been
involved in any civil or criminal litigations or proceedings?
12. Company-related Questions
Has the company provided your company with a
recent financial statement?
Who are the company's clients and customers?
Has there been a change of ownership within the last
Has the company changed its name in the last year?
Would the company report to you anyone who
approaches it to provide gray market goods?
Would the company be willing to use a preselected
group of shippers?
13. Company-related Questions
Would the company agree to a biannual audit by your
Would the company agree to a visit at its offices and
facilities by a representative of your company?
Would the company be willing to reimburse you for
products sold to it that are found on the gray market
Would the company object to a background
Has the company moved to new facilities within the
14. Order Indicators
The first order for the company is unusually large.
The company ordered only one specific product.
The order does not make sense (e.g., too large for the
The company requested special pricing. The company
required immediate shipping.
15. Order-related Questions
What is the size of the order?
Does the order make sense for the customer?
What product is being ordered?
Are the bill-to and ship-to information the same?
Are there questionable shipping instructions,
shippers, or forwarders?
How will the company use your products?
Does the company want your products because of the
price or because of their quality?
Is a new freight forwarder being used?
16. Person Indicators
One or more of the directors of the company is a
director of one or more other companies.
The company has directors, owners, and/or
employees with relatives working at your company.
The company's directors, owners, and/or employees
have personal relationships with employees of your
Some of the company's employees are former
employees of your company.
17. Person-related Questions
What interest (ownership, directorship, employee)
does the company itself and everyone in the company
have in other companies?
Does the company have ties with or are any
employees in the company related to anyone who
works at your company?
Do family members or any of the employees work for
the company's competition?
Are any of the company's current employees former
employees of your company?
18. End-User Indicators
The company is a subsidiary of a purchasing company.
The company is located in a country other than the
country in which the order was placed.
The company is a government agency; and even
though it has never bought your products before, it is
placing a large order.
The company is a reseller and claims that the end user
is confidential or that the product is for a confidential
19. End-user Related Questions
Would the company object if you verified all orders
over X number of products?
Has the company verified the end users' ability to
legally use or acquire products?
How will your products be used?
Does the company meet your compliance
department's standards and qualifications to purchase
20. Best Practices
Share information with others in a manner consistent
with antitrust, privacy and other applicable laws, but
members should do so consistently and in a uniform
manner as part of working groups
Public relations and advertising campaigns to end
users as well as distributor education and
Highlight your brand as a hard target by giving high
visibility to aggressive prosecution of violation of
compliance and product diversion matters
21. Best Practices for Enforcing
 Conduct training and awareness programs concerning diversion and
gray market prevention activities for your company sales staff as well
as OEMs, customers and distributors
 Make undercover purchases of products on a regular basis from the
gray market to gain acceptance in the gray market-diverter
 Use stings, buy-and-bust, and deception operations against known
 Take legal actions, request customs seizures, and demand differential
price repayments from diverters
22. Best Practices for Managing Sales and
 Review Sales Procedures and Contract Forms
 Remove “gray market friendly” language
 Restrictions on where goods can be sold, conditions for sale and resale pricing, and so forth,
all lower risk and increase chances for recovery of margins
 Tighten controls and procedures for programs involving large discounts, and check
for fraud by employees or customers
 Train the staff to use due diligence inquiries for all new customers or unusual deals with
 Check for fraud or misrepresentation by employees
 Check for fraud or misrepresentation by customers
 Ensure that employee compensation programs, rebate programs, and discounts do not
encourage fraud or abuse leading to gray market goods
 Establish ethics program training, and implement enforcement
23. MONITOR THE MARKETPLACE
 Track shipments from production facilities to end users to verify the supply chain
 Monitor the Internet for products and price anomalies to identify gray market products
that quickly appear in the marketplace
 Take prompt remedial action
 Purchase sample products from Internet sources considered questionable so that you
can determine their source and authenticity
 Continually collect intelligence about customer mergers, acquisitions, and new ventures
 Covert penetration of gray market operations requires “front” purchasing companies
around the world that are viewed as part of the gray market system and trust by the bad
guys – this provides real-time tracking of product movement and allows monitoring for
distribution-- incorporate into a database of gray market good players and pricing trends