WikiLeaks cable: Apple slow to counter Chinese fakes

A cable released by WikiLeaks reveals Apple's delayed efforts to prevent fakes of its products in China

Apple did not have a global security team, including in China, until March, 2008, when it hired employees from drug company Pfizer, to counter rampant counterfeiting of its products in China, according to a cable leaked by activist group, WikiLeaks.

Apple had not so much as registered its trademarks in China or Hong Kong until Don Shruhan, one of the Pfizer executives, joined the company, the September, 2008 cable from the U.S. embassy in Beijing said.

Apple was relatively unknown in China before the introduction of its iPod music player in 2001, and subsequently the iPhone. Now those products are so popular worldwide that China's notorious counterfeit markets are filled with knock-off versions, according to the cable.

Early evidence suggests nearly 100 percent of Apple products in unauthorized mainland markets are knock-offs, while factories in Guangdong province are exporting enough counterfeits to single-handedly supply the world with fake Apple products, the cable said.

The cable said that after recognizing the threat from counterfeiting, Apple hired in March, 2008 the team from Pfizer that had formed and led a multi-year crackdown on counterfeit production of its Viagra drug in Asia.

The cable, marked as unclassified but "sensitive", was among a large number of messages that WikiLeaks released recently, and was discovered by CNN.

Shruhan was hired from Pfizer in March as senior director of security for Asia Pacific to design and launch the company's security strategy, including anti-counterfeiting efforts, while his boss at Pfizer, John Theriault, was also hired by Apple for a global role, according to the cable.

Shruhan is said to have observed that customs seizure data definitively shows that there is enough counterfeit production of Apple products in Guangdong to effectively make China the single source for the world's fake iPods and iPhones, many of which are routed through Hong Kong to points onward.

While ruling out production of counterfeits by its own contractors working a "third shift", Shruhan attributed the poor-quality fakes to independent operators without links to the licensees, though he acknowledged the manufacturing molds for iPods or iPhones could be removed from licensed factories and used in illegal production, according to the cable.

Apple did not immediately respond to an e-mail request for comment. Theriault is listed as Apple's vice-president for global security on Linkedin, while Shruhan is senior regional director for security and investigations at Apple's operations in Hong Kong.

Apple's problems with counterfeits in China have however not been resolved, according to analysts. The company discovered recently that not only its products are counterfeited, but at times entire stores are fake. The Chinese city of Kunming has stopped 22 fake Apple stores from illegally using the company's trademarks after Apple lodged a complaint with authorities, according to the city government.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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