1. JJ Cavanaugh and Andrew Lue Chinese Intellectual Property Theft 1

2. Agenda Intellectual Property Theft Defined China How Supply Chain is Affected Prevention 2

3. What Is Intellectual Property Theft? Using another company’s sensitive information without consent from that company Often committed by inside employees or contractors Includes copyrights, trademarks, patents, industrial design rights, and trade secrets If these measures are not taken, a company cannot claim IP theft Counterfeits are common in many markets because they are so cheap to produce due to no R&D costs Illegal in the U.S. Causes lost sales to the original manufacturer 3 Source: Setec

4. How China Fits In China responsible for 80% of counterfeit products seized by U.S. Customs China’s central government is trying to fix the problem Local officials continue to ignore it Daewoo Spark v. Chery QQ Significant design data lost. GM lost sales due to Chery not having R&D costs 4 Source: ICC

5. How This Affects Supply Chain Industries most affected Entertainment, automotive, pharmaceutical U.S. companies lose about 750,000 jobs and $200-250 billion annually Type of GoodValue Est. MSRP of counterfeit goods seized in 2010$1.4 billion Counterfeit goods seized in 2010$0.188 billion Total cost to U.S. economy$1.212 billion 5 Source: ICE, Small business

6. How To Prevent IP Theft Preventative measures Patents, copyrights, trademarks, etc. in each country where your product is sold or produced Employee/vendor background checks and training Implement strong information security Passwords and authorization for management Deploy surveillance measures 6 Source: Small business

7. Conclusion China is a major player in IP theft 80% of counterfeit imports Costs U.S. jobs and money each year Lost sales and costs of prevention Prevention Update government copyrights, patents, etc. Monitor employees and run background checks Strong information security Passwords and authorization measures 7

8. Questions? 8

9. Sources http://www.setecinvestigations.com/resources/whitepaper s/Investigating_Intellectual_Property_Theft.pdf http://www.iccwbo.org/uploadedFiles/BASCAP/Pages/Int ellectual%20Property%20Theft%20in%20the%20Automoti ve%20Industry.pdf http://www.ice.gov/news/releases/1103/110315detroit.h tm http://smallbusinessonlinecommunity.bankofamerica.com/c ommunity/generalbusiness/blog/2010/09/14/preventing- idea-theft-safeguard-your-intellectual-property 9