*Previously posted on IPPIBlog.com

On November 13th, the U.S. Department of Justice (DOJ), in the Southern District of California, announced the indictment of fourteen (14) individuals in an iPhone counterfeit scheme in which they imported counterfeit iPhones, and exchanged them for authentic phones at Apple stores throughout the U.S.

Here’s a couple of quotes from the DOJ press release:

According to the indictment, the organization – led by three brothers – imported more than 10,000 counterfeit iPhones and iPads from China, exchanged them for the real thing at Apple stores throughout the United States and Canada, and then shipped the authentic devices back to China and other foreign countries to sell at a premium.

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“Defendants intentionally damaged the counterfeit iPhones and iPads and fraudulently represented the counterfeit devices to be genuine Apple devices.

HOW COULD APPLE STORES NOT RECOGNIZE THE COUNTERFEITS?

Apparently, the criminals were able to replicate the unique International Mobile Equipment Identification (IMEI) numbers and serial numbers of authentic iPhones onto the counterfeits so effectively that Apple store personnel were unable to recognize the knockoffs.

HAVE WE SEEN THIS BEFORE?

Although it should be no surprise to learn that persons in possession of counterfeit products have returned or attempted to return counterfeits for authentic ones, this is the first time I have seen this scheme applied at such a far-reaching and coordinated scale. (40 U.S. states including Canada.)

IS THIS COUNTERFEIT-SCHEME MODEL BEING USED AGAINST OTHER BRANDS?

It is likely that this scheme could be used against virtually any brand especially when you consider these counterfeiters became sophisticated enough to copy the unique IMEI and serial numbers of authentic products to convince Apple stores that the knockoffs were the real thing.

COULD THE FOLLOWING LIST OF PRODUCTS FALL VICTIM TO THE SAME SCHEME?

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Apparel, footwear, watches/jewelry, handbags/wallets, consumer electronics, consumer products, pharmaceuticals/personal care, optical media, toys, computers/accessories, auto parts, etc. Of course.

FINAL THOUGHT

I think it would be prudent for all brands to do a review of their product-return operations to ensure they’re not being scammed into replacing fakes with the real thing.

ADDITIONAL READING

U.S. District Court, Southern District of California: Unsealed Indictment: November 13, 2019

Disclaimer: This blog is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided on this blog. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.

*Previously posted on IPPIBlog.com

On September 26, 2019, the Chicago Tribune published an article written by Todd Lightly titled, “How A Chicago college student ended up in the middle of an FBI investigation into Chinese spying.”

The article is an excellent investigative report into how a former Chinese student was allegedly recruited by a Chinese intelligence officer to recruit other Chinese nationals working in the U.S. to also become spies.

I highly recommend you read this excellent article.

But my purpose in bringing this up at this moment is because of the last section of the article titled, “Stay a little longer.”

WHY?

It essentially details how some former U.S. educated Chinese students would attempt to take advantage of a U.S. temporary work program by claiming to be employed by bonafide U.S. companies, except, as it turned out, the bonafide companies were actually shell companies.

HOW DID IT WORK?

Details from the Chicago Tribune :

“After Ji graduated with a master’s degree in electrical engineering in 2015, he remained in the U.S. through a temporary work program known as Optional Practical Training. The program allows international students to stay for up to two extra years if they have earned degrees related to science, technology engineering and mathematics.

“Ji claimed to have landed a job as a software engineer for a company called Findream LLC. His responsibilities included writing “well designed, testable, efficient code by using best software development practices,” according to court records.

SHELL COMPANIES

Chicago Tribune continued:

“Findream had advertised itself as a startup technology company based in Mountain View, California. It was one of two companies incorporated by Weiyun “Kelly” Huang, a 30-year-old Chinese citizen. Sinocontech was the other company Huang formed, authorities said.

“But Findream and Sinocontech do not exist, except on paper. Federal authorities allege they were front companies used to provide false employment verification for Chinese students, convincing immigration officials that they were here legally.

“Findream and Sincocontech had so many “employees” that they ranked among the top U.S.-based companies that hired students under the federal Optional Practical Training program. Findream ranked No. 10, just behind Facebook. Sinocontech ranked No. 25, just behind Bank of America, according to a 2017 U.S. Immigration and Customs Enforcement list.

LinkedIn SEARCH

Chicago Tribune continued:

“A search of LinkedIn, a professional networking site, shows that scores of graduates from schools from around the country wrote in their online biographies that they worked for either Findream or Sinocontech. The students claimed to have positions as data analysts, web developers, consultants and software engineers.

Chicago Tribune continued:

“International students such as Ji who want to study in the U.S. must obtain a visa and enroll in a school certified by ICE’s Student and Exchange Visitor Program.

“Federal authorities would not directly address what was being done to locate the more than 2,600 Chinese nationals who claimed to work at Findream or Sincontech, how many might still be in the country or whether any of them might be agents for the Chinese government.

“ ‘Law enforcement is following up on those 2,600 to determine what action would be appropriate to take related to them going forward,” said Lausch, the U.S. attorney.’”

RESULTS OF IP PI BLOG’S LinkedIn SEARCH

IP PI Blog did a quick search for Findream and Sinocontech on LinkedIn this evening. Dozens and dozens of persons claiming to be currently or formerly employed by the two shell companies appeared.

CONCLUSION

It would be prudent for institutions / companies (public and private)–especially those involved in scientific R & D–to review their personnel records to see if any of their current or past employees claimed to have been employed by those two shell companies.

Disclaimer: This blog is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided on this blog. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.

*Previously posted on IPPIBlog.com

A couple of days ago, U.S. Deputy Assistant Attorney General Adam Hickey was interviewed by CNBC.

Although he didn’t say anything we didn’t already know, he put into more urgent context the determination of the Chinese government to expand their research and development sectors by 2025 regardless of the means used.

This is worth reflecting on again.

U.S. DEPUTY ASSISTANT ATTORNEY GENERAL ADAM HICKEY

Here are a few quotes from his interview:

“The issue … is that part of their [China’s] industrial policy, part of the way they try to accomplish that, is state-sponsored [trade secrets] theft or creating an environment that rewards or turns a blind eye to it,” 

“It’s a broader environment that encourages and rewards IP theft.”

“If you are looking for a smoking gun and you wait for it, you might end up with a gunshot.”

CHINA IP TRADE SECRETS THEFT POSTS – IP PI BLOG

Since I started this blog in May 2016, I have often written about Chinese IP trade secrets theft. Here’s a bundle that can serve as case studies for each of his points:

Know Your Researcher – Academic Espionage – Trade Secrets Theft

China’s Notorious Thousand Talents Program – Equal Opportunity Recruiter

Does China Threaten–Students, Researchers, Scientists–Working or Studying in the U.S. to Bring Back IP or Their Families Are Put in Jeopardy?

Composition of a Chinese Trade Secrets Theft Enterprise: Part 1

Composition of a Chinese Trade Secrets Theft Enterprise: Part 2

Composition of a Chinese Trade Secrets Theft Enterprise: Part 3

Composition of a Chinese Trade Secrets Theft Enterprise: Part 4

Composition of a Chinese Trade Secrets Theft Enterprise: Part 5

Composition of a Chinese Trade Secrets Theft Enterprise: A Family Affair–UPDATE

Employee Use of Company Computers and Email Continues to Chronically Facilitate Trade Secrets Theft

RECENT CASE

And just last week the indictment of a husband and wife Chinese IP theft team was announced by the U.S. Department of Justice.

Here are excerpts from the announcement:

“Zhou and Chen are spouses who worked in separate medical research labs at… {Ohio’s Nationwide Children’s Hospital] Research Institute for 10 years each (Zhou from 2007 until 2017 and Chen from 2008 until 2018).

“Exosomes play a key role in the research, identification, and treatment of a range of medical conditions, including necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer.

“The husband and wife allegedly founded a company in China in 2015 without the hospital’s knowledge.  While Zhou and Chen continued to be employed by Nationwide Children’s, they marketed products and services related to exosome isolation through their Chinese company.”

CONCLUSION

I could not agree more with the comment made by the former U.S. Intellectual Property Enforcement Coordinator (Daniel Marti) in the “U.S. Joint Strategic Plan on Intellectual Property Enforcement, FY 2017 – 2019”

“The threats posed by … misappropriation of trade secrets, are real and multidimensional. Our work must be carried forward with a sense of urgency …”

Disclaimer: This blog is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided in this blog. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.

*Previously posted on IPPIBlog.com

Over two (2) years ago (May 2017) I asked the question in a blog post titled, “Is There a Different IP Protection Policy for Star Employees?”.

WHY DID I ASK THIS QUESTION?

I asked this question based on the allegations that the former head of Google’s self-driving program (SCOTT LEVANDOWSKI) had just walked away with Google’s trade secrets and went over to Uber.

At the time, I was baffled that LEVANDOWSKI had not been criminally charged and that Google was pursuing it through a “civil” legal process.

Google and Uber settled on the “civil” side in 2018, the criminal issue–in regards to LEVANDOWSKI’s alleged trade secrets theft–had not been resolved.

ARE STAR-EMPLOYEES SPECIAL?

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*Previously posted on IPPIBlog.com

In January 2016, U.S. federal prosecutors (Department of Justice-DOJ) in Pennsylvania indicted five people for allegedly stealing trade secrets from UK pharmaceutical company GlaxoSmithKline (GSK).

Two of the accused were scientists at GSK’s U.S. facility in Pennsylvania. A third was the twin-sister of one of the GSK scientists, and another was the husband of the other GSK scientist.

According to the DOJ press release the theft occurred in order to benefit a Chinese company.

The following five (5) defendants were charged with trade secrets theft:

  • YUE XUE; (GSK scientist)
  • TIAN XUE (her twin-sister)
  • LUCY XI (GSK scientist)
  • YAN MEI; (her husband)
  • TAO LI

A key figure in this conspiracy is former GSK scientist: YU XUE, a/k/a “Joyce.”

Here is a quote from the complaint,

“YU XUE (“Joyce”) e-mailed … from her GSK e-mail account to her personal account and then forwarded that intellectual property to her conspirators … also used her GSK computer to download a substantial amount of intellectual property from GSK’s network, apparently onto a thumb drive or other portable storage device, to send this information to her conspirators.”

***I discussed this case in five (5) consecutive posts on my blog in October 2018, titled, “Composition of a Trade Secrets Theft Enterprise-Case Study, Parts 1-5”

NEW SPIN—ACCUSED # 6

Just this week there was an additional action taken by the U.S Department of Justice (DOJ) that puts another twist on this case.

As it turns out, not only was “Joyce’s” sister involved in the conspiracy, but “Joyce’s” brother was involved as well.

According to recent press reports, GONGDA XUE, the “Joyce’s” brother worked at a drug company in Switzerland during the time of the conspiracy in which he’d received stolen GSK trade secrets from his sister (“Joyce”) and used the Switzerland drug company’s facility to perform tests. The results of the tests were then passed onto to conspirators in China.

(more…)

*Previously posted on IPPIBlog.com

WHAT IS THE U.S. CLOUD ACT?

Last year the U.S. passed the Cloud Act which essentially makes it possible for the U.S. to compel a data provider to produce electronic evidence regardless of what country the data is stored.

It also provides for bilateral agreements between the U.S. and other qualifying countries to not restrict access to the data if stored in their country.

WHAT DOES THE WORD “CLOUD’ IN THE CLOUD ACT MEAN?

The acronym C-L-O-U-D stands for, “Clarifying Lawful Overseas Use of Data Act”

WHAT WAS ONE OF THE CATALYSTS FOR THE CLOUD ACT?

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*Previously posted on IPPIBlog.com

As a follow-up to my last post titled, “Know Your Researcher – Academic Espionage – Trade Secrets Theft,” I embedded an FBI Counterintelligence Strategic Partnership Intelligence Note (SPIN) dated September 2015.

If you haven’t had a chance to look it over, it warrants a closer look.

The last two pages of the document provide a blueprint—a list of things for organizations to consider when screening employee candidates and other organizations before collaboration starts. But, even if collaboration has begun, it is still a useful guide in determining if you should continue or end the relationship.

This blueprint is a particularly useful guide for general counsel, human resources and private investigators (retained on behalf of organizations) to conduct enhanced background screening of potential employees.

*All information in italics is extracted from the 2015 FBI handout.

(more…)

*Previously posted on IPPIBlog.com

In January of this year (and July of last year) I wrote four (4) posts about “Third-Party Intermediaries” in the maritime, as well as the self-storage/landlord industries that facilitate the transport or storage of counterfeit goods—knowingly or unknowingly.

I provided some context to the problem, a few case studies, as well as suggesting a number of steps these two industries are encouraged to apply in an effort to prevent their services from being used by criminals.

*Links to those posts can be found at the end of this post.

I have since come to learn of comprehensive “Best Practices” strategies laid out for both the maritime transportation and landlord/self-storage industries, respectively, by the “International Chamber of Commerce (ICC)” and their affiliate the, “Business Action to Stop Counterfeiting and Piracy (BASCAP.)”

WHAT IS THE INTERNATIONAL CHAMBER OF COMMERCE (ICC) BUSINESS ACTION TO STOP COUNTERFEITING AND PIRACY (BASCAP)?

If you’re not familiar with BASCAP, the following quote was extracted from their website:

“ICC created Business Action to Stop Counterfeiting and Piracy (BASCAP) to raise awareness of the economic and social harm of counterfeiting and piracy and to petition for greater commitments by local, national and international authorities in the enforcement and protection of intellectual property rights.”

SYNOPSIS OF THE ICC/BASCAP BEST PRACTICES RECOMMENDATIONS

KNOW YOUR CUSTOMER, DUE DILIGENCE AND MARITIME SUPPLY CHAIN INTEGRITY: Best Practices under the Declaration of Intent to Prevent the Maritime Transportation of Counterfeit Goods, ICC/BASCAP

Know Your Customer (KYC):

  • Verify the identity of a potential customer
  • Perform due diligence and ongoing monitoring of their established customers
  • Identify possible counterfeit shipments
  • Reviewing suspected high-risk customers through further validation processes and documenting the outcome of this review with reasons provided for the decision
  • Pre and Post Booking
  • Directly convey to all customers their policy against the shipment of counterfeit goods

MEASURES TO ENGAGE LANDLORDS IN THE FIGHT AGAINST COUNTERFEIT AND PIRATED GOODS: Best Practices for Landlords, Government and Enforcement Agencies, ICC/BASCAP.

Landlords:

  • Implement due diligence checks to ensure a basic understanding of who tenants are
  • Include lease provision prohibiting activities related to counterfeit and pirated goods; and to evict tenants in the event of IPR crimes
  • Maintain a “No Counterfeit and Pirated Products Policy” for markets
  • Perform periodic inspection of tenants’ shops and stalls for obvious counterfeit and pirated goods
  • Establish co-operative working relationships with brand owners

Governments:

  • Clarify the conditions under which a landlord may be held liable for tenants or other temporary occupants that deal in counterfeit and pirated goods
  • Consider alternative approaches to deter landlords who knowingly rent to tenants that deal in counterfeit and pirated goods

Enforcement Agencies:

  • Conduct regular and sustained enforcement
  • Increase landlord education: explain the benefits of participation in voluntary programs to avoid renting to criminals
  • Look beyond retail seller and markets

TARGETING INTERMEDIARIES

In the above-referenced ICC/BASCAP publication, “Measures to Engage Landlords in the Fight Against Counterfeit and Pirated Goods” it says,

“Landlords are becoming more vulnerable as law enforcement officials, supported by new laws and regulations in some areas, are increasingly targeting owners and landlords that support counterfeiting.

“A recent increase in the number of prosecutions confirms that landlords who are not vigilant about the activities that are taking place in their premises, are becoming victims of counterfeiters and incurring a dramatic increase in costs in damage penalties and legal fees.”

And here are a few quotes from an article published in the World Trademark Review titled, Liability of Intermediaries: The Effective Anti-Counterfeiting Tool, written by Greek IP Attorney Michalis Kosmopoulos on May 24, 2018:

“The most effective approach is to target the infrastructure and means used by counterfeiters to supply their products internationally. In this regard, counterfeiters often act through third parties…” [i.e., self-storage facilities, transportation, financial services, open markets, etc.]

“Such third-party engagement renders the liability of intermediaries a cutting-edge matter in IP law worldwide.”

“Targeting intermediaries is vital for enhancing the effectiveness of an anti-counterfeiting program.”[

FINAL THOUGHTS

In considering the essential obligation of “third-party intermediaries” to do more to stem the tide of counterfeit commerce, we need only to reflect on the staggering projection reported on the ICC/BASCAP website:

“The negative impact of counterfeiting and piracy are projected to drain US$4.2 trillion from the global economy and put 5.4 million legitimate jobs at risk by 2022.”

*I highly recommend you visit the links to the ICC/BASCAP sources referenced in this post to get a complete understanding of the pro-active ways for the maritime and self-storage/landlords industries, and others, to keep fighting the good fight against global counterfeiting.

PREVIOUS IP-PI BLOG POSTS ON THIS TOPIC:

Disclaimer: This is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided in this blog. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.

*Previously posted on IPPIBlog.com

It was widely reported a few days ago that a pharmacy professor at the University of Missouri allegedly stole his gifted student’s research, sold it to a pharmaceutical company, and did not credit his student or the university with having made the discovery.

The alleged misappropriation of the student’s research took place sometime between 2008 and 2010.

Here’s one quote from a New York Times article titled, Former Missouri Professor Stole Student’s Research to Sell New Drug, Lawsuit Alleges: “The lawsuit said that Dr. Mitra and Mrs. Mitra [the professor and his wife] … or people responding to their orders, removed or destroyed Dr. Cholkar’s [the graduate student’s] laboratory notebooks that he used to document the experiments…

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Previously posted on IPPIBlog.com

On January 22nd the arrest of another Apple employee—hired to work on their self-driving program—was made by the FBI the same day he planned to board a flight to China for stealing Apple trade secrets. You can’t help but shake your head over the audacity of this theft especially in view of the other Apple employee arrested only seven months earlier (July) before his plan to get on a flight back to China after his alleged theft. In an effort to better understand and bring more context to what led to this recent (January) arrest, I have reviewed the criminal complaint filed by the FBI against the accused (JIZHONG CHEN).

INSTRUCTIVE

It’s instructive to consider the steps Apple took to protect their IP, as well as their follow-up investigation. *Quoted and italicized information is extracted from the criminal complaint.

WHEN AND WHY WAS CHEN HIRED?

Chen was hired in June 2018… “…Chen was a core employee on the electrical engineering team and had full access to a subset of the Databases related to his job function on the Project.”

APPLE’S STEPS TO PROTECT THEIR INTELLECTUAL PROPERTY

 “…Apple’s Databases are only accessible with Apple employee credentials and password.” “…Apple uses an internal software tool to manage requests for project disclosure and maintains a record of all disclosures.” “…Apple limits access to the building where the Project is developed…limited by badge access.” “…Before starting at Apple, employees must sign an Intellectual Property Agreement (“IPA”)… Chen signed an IPA in 2018. “…even within Apple’s operations, the Project development in the Building is not listed” “Employees disclosed on the Project must also attend an in-person secrecy training for the Project… Chen attended the secrecy training on June 13, 2018 “…The [Secrecy] training also covered Apple’s policy prohibiting employees from storing Apple’s intellectual property on devices over which they [Apple] do not have personal control.”

DID IT TAKE LONG FOR CHEN TO ALLEGEDLY START STEALING?

Well, it seems, no time at all. It appears he felt comfortable enough to start stealing Apple’s self-driving trade secrets the same month he was hired. According to the criminal complaint (as mentioned above), he attended “Secrecy Training on June 13th, and on June 20th, a photograph of “…an assembly drawing of a wire harness for an autonomous vehicle” was stored on his iPhone.

WHAT RAISED SUSPICIONS ABOUT CHEN?

Last month (January) another Apple employee observed CHEN taking wide angled photographs within the Apple workspace and reported it.

WHAT DID APPLE’s SUBSEQUENT INVESTIGATION REVEAL?

 “…Chen admitted to taking photographs in Apple’s workspace.” “…Chen conducted a backup of his entire work computer onto a personally-owned hard-drive” “…Chen’s personally owned computer had over two thousand files containing confidential and proprietary Apple material, including manuals, schematics, and diagrams.” “…hundreds of files on Chen’s personally-owned computer were photographs of computer screens.” “…taking a photograph of the computer screen with Apple’s information would circumvent Apple’s internal monitoring of activity on its network.” “…When Apple’s investigation team went through Chen’s personally-owned phone, with Chen present, they discovered that it had about 100 photographs taken within the interior of Apple’s building. Apple deleted these photographs with Chen’s permission. Chen subsequently kept his personally-owned cellphone.”

QUESTION?

What do you think about the steps Apple took to protect their IP and their subsequent investigation?

Disclaimer: This blog is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided in this blog. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.