INITIATIVES WITH YOUR
Since its inception, the
Internet has doubled in size
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
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
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.
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
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
Digital content protection services (Quality Control)
Alliances (Law Enforcement, International, ISPs)
Safe and Effective Distribution
Sales Controls Using the C.O.P.E.
Factors involved in the sale of products:
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.
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?
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?
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
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.
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?
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.
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?
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
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
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
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
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
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