Asia and the issue of counterfeit productsDiscussionI. Countries and productsII. Reasons behind the problem 1) Profitability 2) Demand is high 3) Penalties are low 4) A good way to launder money III. Consequences of counterfeit products1) Loss of income2) Tarnished image of the company3) Societal costs(1) Child labor(2) Sweatshops4) Effects on consumers(1) Fire(2) Damage, death5) Loss of wages and employment6) Criminal activity(1) Financing of terrorism(2) Organized crimeIV. Why is it so hard to stop? 1) Little cooperation from the government. Chinese legal environment(1) Intellectual property laws are very strict in China(a) Conditions for admission to the World Trade Organization in 2001(2) Legal environment(a) 200,000 judges for 140,000 lawyers(b ) Judges are not trained in law(c) Judges are selected locally, paid locally, promoted locally and fired locally (3) Corruption – Paying for a decision is very common in Chinese courts.b. Government(1) Extensive use of counterfeit products and pirated software(2) Economic dependency issues2) Difficulty of identificationa. Legal Question – Is it counterfeit if it is produced in the same factory using the same materials to the same specifications?b. Technology advancements in printing, scanning and copying.3) New balance in ChinaCurrent events1) Time Warner DVD sales in China2) Microsoft Windows real advantage3) Law enforcement in China: too much weak to stop pirates4) Indian pharmaceutical company Aurobindo Pharma expands via piracy strategyAppendix A - NewsTime Warner DVD sales in ChinaBusiness Week Online, "Take That You Pirates", October 9, 2006, http://www.businessweek. com/magazine/content/06_41/b4004063.htm?chan=top news_top news index_global business Hollywood studios say up to $2 billion is lost each year to pirated DVDs in Asia. As part of a new strategy, Time Warner lowered the price of DVDs by $3 to $1.88, close to the price of pirated copies. This allows piracy, but makes pirated copies (usually from crude reproductions with no extras) less attractive. This is one of many attempts to combat piracy. The MPAA recently filed suit against two local retailers and obtained settlements in 10 similar suits over the past three years. In the first half of this year, the MPAA says an operation it calls Operation Red Card resulted in 405 raids in China and the seizure of 1.9 million pirated DVDs. Microsoft Windows' Real Advantage Ina Fried, "Microsoft Launches Crackdown on Windows Piracy, But Will the Freebies Do the Trick?", July 26, 2005, http://software.silicon.com/os/0,39024651,39150740,00 .htmMicrosoft estimates that a third of all copies of Windows are not legitimate. Windows Genuine Advantage (WGA) is a program that will ensure that all non-security Windows XP add-ons will require validation. Microsoft will also begin offering add-ons that will also require legitimate copies of Windows. Thus, Microsoft accepts that the product is pirated, but that it eventually becomes unstable, obsolete or simply unwanted, thus making pirated versions less attractive in the long term. If not applied correctly (i.e. too many false positives), Microsoft runs the risk that this strategy could have a negative impact on its customers' user experience and possibly result in significant operational expenses. related to service issues..