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MEMA Brand Protection Council

March 5, 2009Detroit, MI

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Agenda• Welcome & Introductions – Cifranic & Kempski• FBI Update – Charles Rankin• Review Antitrust Guidelines – Arent Fox• Legal Update – Arent Fox• Government Affairs Update – Boland• Quantifying IP Protection in the US – Cameron• Lunch• N.A. Security Products Organization - Sherwood• Work Session: Identification Guidelines –

Cifranic• Break – 15 minutes• Council Updates:

– Special Report: Flow of Counterfeit Products– 2008 MEMA Brand Protection Award nominations– Mid America Truck Show– Future meetings

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MEMA Brand Protection Council

• “To support members’ global efforts to prevent, detect and prosecute intellectual property offenses against their products and brands”.

• “Provide the means for collective industry action against counterfeiting, sharing market intelligence and best practices, media and education campaigns and gaining increased enforcement by all relevant law enforcement agencies”.

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Anti-Trust Guidelines It is the unqualified policy of the Motor & Equipment Manufacturers Association to conduct its operations in strict compliance with the antitrust laws of the United States. MEMA's antitrust policy prohibits any discussions which constitute or imply an agreement or understanding concerning: 1) prices, discounts, or terms or conditions of sale; 2) profits or profit margins or cost data; 3) market shares, sales territories or markets; 4) allocation of customers or territories; 5) selection, rejection or termination of customers or suppliers; 6) restricting the territory or markets in which a company may resell products; 7) restricting the customers to whom a company may sell; or 8) any matter which is inconsistent with the proposition that each manufacturer, wholesaler and distributor must exercise its independent business judgement in pricing its services or products, dealing with its customers and suppliers and choosing markets in which it will compete.

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Legal Update

Tony Lupo – Arent FoxSarah Bruno – Arent Fox

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Government Affairs UpdateBrand Protection Council

March 5, 2009

Catherine Boland

Director, Government Relations

Motor and Equipment Manufacturers Association

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MEMA Washington, D.C. Office

• Six person office that develops legislative and regulatory strategies on issues impacting automotive and heavy duty suppliers

• Resource for OESA, AASA, HDMA members

• Government Affairs Committee that sets legislative priorities based on input from market segments

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MEMA Legislative SummitLEGISLATIVE SUMMIT• April 29-30, Hyatt Regency on Capitol Hill• Costs: $200 registration fee, $2000 exhibitor fee• Tom Donohue, US Chamber president, is

keynote; will invite Henry Waxman to attend Thurs breakfast

• Program committee call held 1/16 with several good suggestions on agenda and meeting materials

• Economic data from CAR, “sustainability” document

• MEMA, MSAs to continue push for registration, exhibitors

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Implementing the PRO-IP bill• Fiscal Year 2009 Omnibus Appropriations

– Close to $9.4 million for dedicated FBI agents• Same localities of DOJ Computer Hacking and Intellectual

Property (CHIP) units with no less than 26 agents assigned for this purpose

– $3 million in grants for state and local training to combat IP crimes including counterfeiting and piracy

• U.S. Chamber will be working to get funding in FY 2010 for state and local grants– Should this be a MEMA priority?

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Implementing the PRO-IP bill

• President Obama has not appointed the Intellectual Property Enforcement Coordinator, aka IP Czar– This is a Senate-confirmed post

• Government Accountability Office (GAO) study on how the federal government can best protect the IP of manufacturers– GAO has not begun work on this study, but

they will reach out to MEMA when they begin work on it

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Customs Reauthorization & Trade Enforcement

• In January, Rep. Charles Rangel and Rep. Sander Levin introduced the Trade Enforcement Act of 2009 (H.R. 496)– Title III of bill covers enforcement of IP laws at U.S. borders

• Enforces U.S. Intellectual Property Rights (IPR). The bill creates a Director of IPR Enforcement and an IPR Enforcement advisory committee to advise on IPR enforcement issues; promotes the use of new technology to better fight intellectual property rights (IPR) infringement; creates a “watch list” for suspected bad actors; and prevents Customs from excusing fines assessed for illegal imports.

• Increases Staffing, Resources, Training and Coordination. The bill authorizes the support, resources and training that Customs and Immigration and Customs Enforcement need and deserve to carry out their import safety and IPR enforcement responsibilities.

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Customs Reauthorization & Trade Enforcement

• Senator Max Baucus, Chairman of the Senate Finance Committee, is planning to move Customs Reauthorization legislation in the coming months

• Senator Debbie Stabenow of Michigan serves on the Finance Committee and is interested in being helpful to the supplier industry on counterfeiting

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CBP Seizures

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Pocket Card

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Patent Reform

• Earlier this week, Patent Reform legislation was introduced in both Houses of Congress

• These bills are very similar to the legislation opposed by MEMA and other business groups last year

• Issues of concern that remain– Apportionment of Damages– Inequitable Conduct

• If you or your company is interested in this, have the appropriate member of your staff contact me

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Anti-Counterfeiting Trade Agreement

• In 2007, USTR announced that they had begun discussions with our trading partners engaged in discussions to negotiate an anti-counterfeiting trade agreement

• Discussions include Canada, the European Union (with its 27 Member States), Japan, Korea, Mexico, New Zealand, and Switzerland

• ACTA still being negotiated• Very few details available

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Discussion

For more information contact

Catherine Boland

Director, Government Relations

202-312-9241 or cboland@mema.org

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Quantifying IP Protection in the US

• Requested by DOJ and other government agencies to place an updated value on lost revenues and expenditures to protect Intellectual Property

• Current estimate by the FTC of $12B global and $3B US is in need of updating and validating

• Article in Authentication News by Reconnaissance International states $16B global growing 9-10% annual

• Need to update MEMA BPC Special Report on IP • Last BPC Work Session proposed a member survey

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Quantifying IP Protection in the US

Survey Results – 6 of 25 Member Companies Responding:1. What were your companies net sales of motor vehicle component parts (OE and aftermarket) for the most recent fiscal year?

Global US Only Avg. $3,354 Million $1,265 Million

Tot $20,125 Million $7,590 Million 2. About how much has your company spent on protection of intellectual property rights (IP) during the most recent fiscal year? Please include all expenditures including legal fees, staff salaries, product security, training, direct actions taken and the expenses associated with the acquisition and protection of patents, copyrights and trademarks. Dollar amount ($) or percent of net sales (%)

$1 Million Average $4 Total 3. What were your companies lost sales of motor vehicle component parts (OE and aftermarket) that can be attributed to IP theft or infringement? Dollar amount ($) or percent of net sales (%)

$11 Million Average* $33 Total 90% confidence interval = $0 to $23 million 75% confidence interval = $2 to $20 million

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Quantifying IP Protection in the US

Mathematical Update to 2004 FTC Estimates:

(In Billions $USD) 2004 2005 2007 AdjustedGlobal Vehicle Parts Sales $1,147.90 $1,980.00 $1,340.00

1.0% 0.6% 1.0% $13.40Global Aftermarket Parts Sales $336.90 $352.80 $380.20

3.6% 3.4% 3.5% $13.31FTC Counterfeit Estimate $12 $12

U.S. Vehicle Parts Sales n/a $388.70 $388.000.8% 1.0% $3.88

U.S. Aftermarket Parts Sales $175.80 $184.70 $191.101.7% 1.6% 1.7% $3.25

FTC Counterfeit Estimate $3 $3

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Lunch

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The North American Security Products Organization

A Security Assurance Standard for the Protection of

Security Components

Robert Sherwood, CPPNASPO Chairman

VP Security Programs Management, Sekuworks LLC

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NASPO Concept proposed at a conference First Board Meeting December 2002 Development of an industry standard

completed September 2003 First audited companies certified January 2004 Recognized as an ANSI Accredited Standards

Developer October 2004 ANSI/NASPO-SAv3.0P-2005 Declared by ANSI

as an American National Standard on November, 2005 - Update January 2008

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The Need for NASPO

Fraud and terrorism has been enabled by the lack of a secure supply chain to restrict the availability of security materials and technologies.

No structure was available to recognize and certify organizations that met a specified level of security assurance.

Governmental agencies and private industry has recognized that this standard supports their efforts of enhanced security assurance.

One holistic recognized standard versus multiple narrowly defined standards.

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NASPO and Current Legislation

Sarbanes Oxley – Risk management requirements for publicly held companies

Bioterrorism Bill – Secure supply issues in pharmaceuticals and food

Real ID Act – Securing our identification documents

Consumer Privacy Act (GLB Act) – Securing personal information in the financial market

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Application of the ANSI/NASPO Standard Requirements in RFP’s and contracts

Compliance to legislative and industry regulations

Internal security practices The control of purchased and sold security

materials.

A set of “Best Practices” for organizations

Recognition of certified companies for market differentiation

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Risk Management Requirements

3 - Levels :- Class I - Very High Security Class II - Medium-High Security Class III - Basic Security

Management Objectives (Security Culture) Avoids Weakness of Checklist Approach

9 Areas of Risk Each Area has Own Objective

Risk Reduction Infrastructure, Systems Procedures Based on a Consensus of Best Practice

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Risk Management Objectives

Class I – To prevent all unwanted disclosure of information of potential strategic value to Criminals and Terrorists criminals and terrorists and to fully mitigate the effects of fraudulent acts in the event that they occur.

Class II - To prevent unwanted disclosure of selected information of potential strategic value to Criminals and Terrorists criminals and terrorists and to mitigate the effects of fraudulent acts in the event that they occur.

Class III - To be aware of the need and act to avoid disclosure of selected information of potential strategic value to Criminals criminals and to act quickly to mitigate the effects of

fraudulent acts in the event that they occur.

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Areas of Risk Customer Related Information – Computer (IT) and Non Computer Based

Materials Supply & Custody Chains Physical Intrusion Personnel Disaster Recovery Breaches of Security Management

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Public Disclosure Standard Avoids helping bad guys. Requirements re-stated as

performance requirements. Requirements say what not

how to deliver security. Elective requirements

removed Class 1, II & III retained.

Certificates based solely on compliance with mandatories.

Perception of Very High Barriers should Deter Attempts to Defraud

Security Assurance Standards

For the

Document & Product Security Industry

Version 1.0PNovember 16, 2004

© NASPO 2004

2300 N Street, NW, Washington, D.C. 20037-1128, U.S.A.www.naspo.info

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Risk Reduction

Policies Procedures Infrastructure Systems

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Certification

Openness (under NDA) Qualification Application/Class Determination Readiness Review Conformity Assessment (NASPO Audit)

Action Items Certificate Award by NASPO Board Annual Maintenance

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NASPO Conformity Assessment (Audit)

Self evaluation prior to audit.

Non disclosure agreement with independent, trained auditor

Mutual classification determination

On-site audit verifying self audit to actual

Discrepancy rectification Audit report to NASPO Certification

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Conformity Assessment Process Vulnerability Assessment

Attractiveness of Product Portfolio to Thieves Consequences of Getting Into Wrong Hands History of Local Attack

Identification of Potential Risks Identification of Actual Risks Being Taken

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NASPO / ASIS Connection Both Standards Development Organizations

(SDO) NASPO / ASIS Standards Complementary

NASPO Standard Example: Requires employee background screening

ASIS Standards Example: Guide to implementing a screening process

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Security Assurance in the Context of ISO

Technical Advisory Group (TAG) 247 established

“Fraud Countermeasures and Control” ISO Secretariat for TC 247 has been

awarded to ANSI. ISO Secretariat and US TAG

Administration will be supported by the North American Security Products Organization, NASPO

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Benefits of NASPO Enhances Overall Security Set of “Best Practices” Uniform interoperability

Vendor / Vendor Vendor / Customer

Cost reductions Adoption and/or Recognition by US

Government Agencies

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NASPO Members

Pro-Document Solutions – Northstar – Meyercord Revenue – JDSU/Flex Products – Glatfelter – Sun Chemical – Intel – Chesapeake Resource Group – GDW Consulting – Amgraf – Brady – ITW Covid – Appleton – Arjo Wiggins – Keller Crescent - SICPA – Sekuworks - Standard Register – John Henry – Kurz – Challenge Printing – Bristol Myers Squibb – Technicote – Ultradots – Accucote – Armark – National Label – DSS – Yottamark – Midwest Banknote – Nanoink – Authentix – Fasver – CCL Label – Digimarc – Inksure – TUV Rheinland – NPC – Ashton Potter – Gemalto – PPG – Troy Group - Latitude 49 – Viisage – Worldmark – American Bank Note – Schreiner Group - RR Donnelley – 3M – Stardust Materials – Crane & Company – Tullis Russell – US Government Printing Office- Hologram Industries – Crane & Co. – on+qor - NPC

As of 4-08

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Use of Standard Update 11 Certified Companies 32 Companies in process >25 Companies – serious intent Adopted by GPO Real ID DHS

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The ANSI/NASPO Standard

Security Assurance Standardsfor the

Document & Product Security Industries

Reference : ANSI/NASPO-SA- 2008

From www.naspo.info

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Thank You

Any Questions ?

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Working Session:Identification Guidelines

• Third in a series to engage council members and develop valuable industry information to support IP enforcement

• Today's topic requested by U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Protection (CBP)

• To be published by BPC and distributed IP enforcement– Manufacturers Identification Guide– Trademark ID Guide Book

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Break15 minutes

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BPC Updates

• Special Report: Flow of Counterfeit Products– Posted to web site– Distributed to Government Agency contacts

• 2008 MEMA Brand Protection Award nominations

• Updated BPC presentation posted to member-only web site

• Mid America Truck Show• Future Agenda Topics

– Ideas– Volunteers for Member Spotlight / Best Practices

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2008 MEMA Brand Protection Award

• OVERVIEWThe MEMA Brand Protection Council is establishing an award to honor government officials (foreign or domestic) whose work and dedication in the fight against counterfeiting merit special recognition by our group.

• ELIGIBILITYAny government official (foreign or domestic) is eligible for nomination for the award. The nomination form is attached.

• SELECTION PROCESSNominations will be accepted until the June 11, 2009 Brand Protection Council meeting. Nominations will be announced and voted on during the meeting. (See nomination form)

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2007 MEMA Brand Protection Award

Recipients• U.S. Customs and Border Protection – Port of Savannah for their timely seizure and ultimate forfeiture and destruction of products involving trademark and U.S. design patent infringement. Nominated by Chrysler.

• Mr. Mohammad Al-Aiyash who is Director General of Internal Trade and Chairman of the IPR Committee for Ministry of Commerce & Industry in the Kingdom of Saudi Arabia recognized for his efforts which lead to the seizure of counterfeit brake fluid and chassis parts. Nominated by Federal-Mogul.

• The Anti-Fraud Division of the Consumer Protection Department for the Sharjah Municipality of United Arab Emirates (UAE) for their aggressive investigation and prosecution of violators with several brand owners and MEMA members. Nominated by Ford.

Intellectual Property andBrand Protection

Jack Cameron, AAP

Vice President, Automotive Aftermarket Suppliers Association

Group Executive, MEMA Brand Protection Council

Counterfeiting Statistics:• The automotive industry loses an estimated $12 Billion in revenue annually

(75% from Asia) to service parts counterfeiters, $3 Billion in the U.S. alone.

• Projected to grow to $45 Billion by 2011.

• It is estimated that 250,000 automotive industry jobs are lost to counterfeit auto parts.

• The International Anti-Counterfeiting Coalition puts revenue loss to U.S. Trademark holders at $200 Billion per year.

• The International Chamber of Commerce estimates 7% of the world trade is in counterfeit goods worth $350 Billion.

• More than 80% of goods seized at U.S. borders are produced in China. Other countries include Taiwan, Hong Kong, Russia, India, Pakistan and Uruguay.

• An estimated 30% of products sold in mainland China are counterfeit.

• Counterfeit parts constitute over 37% of the total automotive aftermarket in India.

Counterfeit ProductBrake Valves

Fake Genuine Bendix

Counterfeit ProductBelt Tensioners

MEMA BPC Initiatives

Legitimatew/ Counterfeit

and Gray Market

UnauthorizedInternational

Supplier

UnauthorizedManufacturer

Internet/ web site

/mail orderWill-Fit

Supplier

Broker

converted to

counterfeit

DomesticSupplier

DomesticManufacturer

InternationalSupplier

Distribution Center

O.E. VehicleManufacturer

WarehouseDistributor

Parts Store /Jobber /

Retail Chain

Repair Facility

End User /Vehicle Owner

MEMA Member CompanyUS Manufacturer

Raw MaterialOr

Component

Color Key: = Raw Materials and/or Components = MEMA Member Companies / US Mfgs = Original Equipment Channel = Independent Aftermarket Channel = Steps in the legitimate Supply Chain = Illegitimate Steps in Supply Chain

O.E. Dealer

Independent Aftermarket Channel

Original Equipment Channel

Master Dist / Importer of Record

MEMA BPC Initiatives

OFree Trade Zone

FreightConsolidator

CustomsBroker

CustomsBroker

FreightConsolidator

Purchaser

International Origin U.S. Destination

Illustrative of Potential Counterfeit and Gray Market

Dubai

Paraguay Mexico

Canada

PanamaShipments get “pinballed” around the world prior to

final destination

Get Help• State and Local Law Enforcement• Privately Retained Legal Counsel• U.S. Customs and Border Protection (CBP)

– Web site www.cbp.gov – E-mail ipr.helpdesk@dhs.gov– Contact David Brener david.brener@dhs.gov

• U.S. Immigrations and Customs Enforcement (ICE)– Web site www.ice.gov– Contact David Faulconer david.faulconer@dhs.gov

• Federal Bureau of Investigation (FBI)– Web site www.usdoj.gov/criminal/cybercrime/reporting.htm – Contact Kiffa Shirley kiffa.shirley@ic.fbi.gov

• U.S. Department of Justice (DOJ)– Web site www.cybercrime.gov – Contact Matt Bassiur matthew.bassiur@usdoj.gov

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Thank You!Travel Safe!