Monitoring IP Infringement on the Internet Pam Passaretti – NewMomentum Matt Barkley – Hewlett Packard Imaging Supplies Coalition 2012 Anti-counterfeiting Conference August 20, 2012 Can you tell which one is counterfeit?

Three Primary Issues Counterfeiting Gray Market “Counterfeiting” is the manufacturing and/or selling of an exact imitation of something valuable with the intention to deceive or defraud. On a global scale, counterfeiting accounts for between 5 -7 % of world trade, worth an estimated $700 billion a year Gray Market “Gray Market” is the sale of authentic products through unauthorized channels, or through legitimate channels but diverted outside of a contracted territory. The estimated value of gray market for IT products alone averages $58 billion annually Policy Violations “Policy Violations“ encompass channel partner advertising violations, as well as marketplace listing violations. MAP Policy Violations occur when online resellers list goods for sale at prices below a manufacturer’s requirement for Minimum Advertised Price (MAP). Marketplace listing violations occur when marketplaces allow sellers to violate published listing policies.

Impact of the Internet Global Reach "The Internet has just completely changed the face of the problem, made it more complicated and more pervasive“ John Morton, U.S. Immigration and Customs Enforcement Global Reach Instant access to consumers/other buyers all over the world Easier to find customers (spam, cybersquatting) Market Presence No longer limited to ‘brick and mortar’ store Easier to sell goods without expensive marketing Low Operating Costs Quick and inexpensive online presence Payments can be made entirely on line Anonymous Able to conduct illicit business in a largely untraceable manner Many obstacles to enforcement

How Brand Abuses Manifest Themselves Online Auctions / Marketplaces Online Retail Stores Rogue Sites or Networks

Case Study #1: Counterfeiting Focus Online Activity by Brand for Specific Toner Cartridges Can you tell which one is counterfeit?

E260A21A Black Toner Cartridge Case Study: Toner Cartridges Online Activity TN450 Black Toner Cartridge 104 Black Toner Cartridge S050190 Black Toner Cartridge 85A Black Toner Cartridge E260A21A Black Toner Cartridge 44469801 Black Toner Cartridge MLT-D101S Black Toner Cartridge ZT170F Toner Cartridge 016194500 Magenta Toner Cartridge Selected representative toner cartridge from each manufacturer Monitored global activity across 70 data sources Processed 500 listings per manufacturer to measure size and distribution of online offerings across brands Identified distribution of “suspect” activity based on specified risk factors page| 6

Web Sites Monitored for Case Study

OEM vs. Compatible by Product Processed 500 listings per product OKI cartridge had highest percentage OEM at 99% Brother and Canon cartridges had highest percentage compatible at 66%

Discount Level by Product for OEM Products Brother TN450 Canon 104 Epson S050190 HP 85A Lexmark E260A21A Okidata 44469801 Samsung MLT-D101S Toshba ZT170F Xerox 01694500 # of listings 171 263 344 346 495 423 457 431 Reference price $68.49 $78.99 $75.99 $68.99 $139.99 $96.99 $82.49 $184.99

Discount Level by Product for Compatible Products Brother TN450 Canon 104 Epson S050190 HP 85A Lexmark E260A21A Okidata 44469801 Samsung MLT-D101S Toshba ZT170F Xerox 01694500 # of listings 329 237 156 154 5 77 43 69 Reference price $68.49 $78.99 $75.99 $68.99 $139.99 $96.99 $82.49 $184.99

Top Ten Marketplaces

Suspect Indicators Suspect Listings: Listings Risk Index (LRI) Points assigned to each listing for potentially negative indicators Higher score equals higher probability of illicit listing Suspect Sellers: Seller Risk Index (SRI) The sum of the LRI scores for all listings for a specific seller Higher score equals higher probability of suspect seller

Suspect Sellers Summary Suspect Sellers: Seller Risk Index (SRI) Distribution of 1,682 unique sellers by SRI score Higher score sellers pose greater potential risk

Suspect Listings Summary Distribution of 4,500 listings by LRI score Canon 204 and Samsung MLT-D101S have the greatest number of listings with very high risk scores

Top 10 Suspect Listings for Samsung MLT-D101S 9 out of 10 of the top 10 suspect listings are on Taobao. Select a listing for further detail.

Listing Detail

Case Study #2 Marketplace Policy Violations Focus HP IPG Intellectual Property Abuse on Amazon Can you tell which one is counterfeit?

Project Parameters Objective: Improve the listing accuracy of Amazon listings to minimize the impact of sellers attempting to leverage HP’s brand in selling their ink and toner products Issues: Amazon’s listing rules require products to be described according to specific nomenclature and listed within consistent product groups. Five product categories: Original in retail packaging, Original in other packaging, Refilled, Remanufactured, Compatible No “refurbished” product listings under Original products; Used means ‘used’ and not remanufactured Strict naming guidelines: [OEM Brand] + [Series Name] + [Model Name] + [Product: Ink or Toner Cartridge] + ([Color(s)], [#-Pack], if app) + "in Retail Packaging" [Third Party Brand] + "Compatible" + [Product: Ink or Toner Cartridge] + "Replacement for" + [OEM Brand] + [Series Name] + [Model Name] These rules are frequently violated and Amazon does little to police compliance or enforce against persistent violators

Select Products Monitor Process Data Take Action Project Methodology Select Products Monitor Process Data Take Action 100 products; e.g. Inkjet Print Cartridges HP 940 Black Ink Cartridge HP 57 Tricolor Inkjet Cartridge HP 564 Magenta Ink Cartridge LaserJet Print Cartridges HP Color LaserJet 125A Black Toner Cartridge HP LaserJet 35A Black Toner Cartridge Amazon Weekly monitoring Brand and product search terms Apply automated business rules to filter, label, and classify collected data Fine tune key word relationships to produce high quality results Product name misuse Source misattribution Miscategorization Generate trending reports Market sizing for specified products on Amazon Breakdown by product, discount level, listing misuse type Utilize data to build case with Amazon

Specific Issues Product name misuse: listings where the product name mis-identifies the source or origin of a product – for example, as an HP product when the product is actually refurbished, remanufactured, refilled, non-OEM, etc. Business Rule: apply score X to listing if criterion is met HP or “Hew” appears in the listing title BEFORE any of the key word text strings: compatible, refurbished, remanufactured, recycled, refilled, new build, 100% new, or non-oem Examples: HP Remanufactured CE505A Toner Cartridge AlphaCo Remanufactured Toner Cartridge Compatible with HP CE278A

Specific Issues Source misattribution: listings that incorrectly identify the product source or origin – for example ‘by HP’ on products that are refurbished, remanufactured, refilled, non-OEM, etc. Business Rule: apply score X to listing if both criteria are met Product manufacturer field contains text string: HP or “Hew” Listing title contains text string: compatible, refurbished, remanufactured, recycled, refilled, new build, 100% new, or non-oem Examples: by HP by Hewlett Packard by Solution Warehouse, HP

Specific Issues Mis-categorization: 3P listings under ASINs that involve the sale of conforming products – for example, a listing under an HP ASIN that is marketing a refurbished, remanufactured, refilled, non-OEM, etc. Business Rule: apply score to listing if both criteria are met Listing title contains text string: retail packaging, original HP, or HP original Item condition field or item description contains text string: compatible, refurbished, remanufactured, recycled, refilled, new build, 100% new, or non-oem

Monitoring Summary: 07/2011 – 06/2012 Total unique listings for specified HP products: 92,388 Total unique listings that met misuse criteria: 25,753 (28%)

Correlation of Listing Misuse to Product Discount %s High correlation between listing misuse and high product discounts Listings with discounts > 30% 80% of mis-categorized listings 64% of source misattribution listings 66% of product name misuse listings

Enforcement Efforts with Amazon Initial meetings to discuss issues with Amazon started Spring 2010 Amazon issues new naming guidelines Fall 2010 HP and NewMo develop web monitoring program to track and measure compliance; launched Summer 2011 Discussions restarted to address pervasive non-compliance with naming guidelines in Fall 2011 Amazon agrees to initiate category-wide steps towards policing and editing/removal of non-compliant listings in Spring 2012 Amazon begins process of editing Source Misattribution listings and removing Miscategorized Product listings in Summer 2012 Process and timeline to concretely address Product Name listings TBD

Enforcement Results with Amazon Soft enforcement efforts: March 2012 Amazon asked all parties to amend their listings to adhere to Guidelines Immediate 30% drop sustained and growing to 40% – clearly represents “good partners” Remaining 60% offenders – “something else” Amazon has begun to take hard steps to remove bad listings that misrepresent HP as the source of goods Starts to address the 60% to 70% “non-good” partners Listings are not removed; source is simply changed from “HP” to “unknown” Many of these listings still have Product Name issues Hard enforcement efforts work, but recidivism is an issue In May, Amazon removed a significant number of remans listed under HP ASINS Within 3 weeks the listings count returned to a normal run rate and had to be readdressed

Conclusions / Discussion It’s been a long haul 12 months since HP began to build its case with monitoring data 9 months since initial discussions with Amazon Recidivism makes ongoing vigilance necessary Category-wide steps should have industry-wide positive impact Similar efforts from other manufacturers will reinforce the message with Amazon and help “keep them on their toes” Questions?

Contact Information | Pam Passaretti CEO NewMomentum (415) 710-4466 ppassaretti@newmo.com Matt Barkley IP & Brand Protection Programs Printing and Supplies (360) 975-5051 matthew.barkley@hp.com