EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS


Cablegate: Apple Takes a Bite of Fake Viagra Experts

Posted in Apple, Asia at 6:45 pm by Dr. Roy Schestowitz


Summary: Apple and Pfizer have a lot more in common than people may realise

Apple is a Badgeware/Brandware company. It is a major competitor of Linux and common sense. It’s all about marketing and perception at Apple, arguably a big delusion and spin on products made in China but designed in California. Apple is largely based on PR (and brand value). Eliminate those and all they are left with are Foxconn-made imitations/knock-offs that merely integrate good technology from IBM (hardware), Xerox, etc. The English-speaking press likes to boost the “Mac vs PC” delusion because it’s good for the US duopoly. The matter of fact is, Asia is rising and it is using Linux. Likewise, Xbox was a loser; the Japanese consoles do exceptionally well, but they don’t control English-speaking press. Linux makes affordable products; Apple makes expensive marketing. Would one prefer paying for quality and value or just marketing/peer perception?

Regardless of this introduction which mostly reuses a message that was made public earlier, the following Cablegate cable shows how Apple guards its brand. It takes the same approach as that of drug companies and even uses the same people.

DE RUEHBJ #3732/01 2700120
P 260120Z SEP 08

State for EAP/CM - PPark and EB/IPE - DBubman 
State for EB/TPP - EMagdanz and INL - JVigil 
State for EB/CIP - WWitteman and RDaley 
USTR for China Office - AWinter; IPR Office - RBae; 
and OCG - SMcCoy; and JRagland 
Commerce for National Coordinator for IPR 
Commerce for WPaugh, NWinetke 
Commerce for MAC 3204/ESzymanski 
Commerce for MAC 3042/SWilson, JYoung 
LOC/Copyright Office - STepp 
USPTO for Int'l Affairs - LBoland, EWu, STong 
DOJ for CCIPS - MDubose and SChembtob 
FTC for Blumenthal 
FBI for LBryant 
DHS/ICE for IPR Center - DFaulconer, TRandazzo 
DHS/CBP for IPR Rights Branch - GMacray, PPizzeck 
ITC for LLevine, LSchlitt 
State for White House OTP Ambassador Richard Russell 
E.O. 12958: N/A 
TAGS: ETRD [Foreign Trade], EIND [Industry and Manufacturing], 
KIPR [Intellectual Property Rights], 
ECON [Economic Conditions], CH [China (Mainland)] 
This cable is sensitive but unclassified and is not 
for Internet distribution. 
¶1. (SBU) As amazing as it seems, computer maker 
Apple Inc. had no global security team - including 
inside China - until March 2008, when they hired 
away the team from Pfizer that formed and led a 
multi-year crackdown on counterfeit Viagra 
production in Asia.  Now with Apple, Don Shruhan, 
based in Hong Kong, has taken the first basic step 
of registering the company's trademarks in China and 
Hong Kong and is targeting retailers, manufacturers, 
distributors, and online vendors to take a bite out 
of China's counterfeit iPod and iPhone production. 
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.  End 
From Viagra to iPods 
¶2. (SBU) Apple Inc., the Cupertino, California-based 
designer of Mac desktop and laptop computers, was 
not especially well known in mainland China before 
the introduction in 2001 of its now-ubiquitous iPod 
music player and, more recently, the iPhone.  Now 
those products are so popular worldwide that China's 
notorious counterfeit markets are filled with knock- 
off versions.  After finally recognizing the threat, 
Apple hired Don Shruhan 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, in the 
region.  His focus is on China, where he is "afraid" 
of the volume of fake Apple products being produced, 
though he is so far unable to quantify the scope. 
Shruhan's boss at Pfizer, John Theriault, was also 
hired by Apple, and is now VP of Global Security, 
based in California. 
¶3. (SBU) Shruhan, who over the past five years 
developed and implemented a security and anti- 
counterfeiting strategy for Pfizer aimed largely at 
tackling fake Viagra production in China, said that 
he is starting more or less from scratch at Apple - 
the company had not so much as registered its 
trademarks in China or Hong Kong until he joined the 
company early this year. 
China: Source of Fake (and Real) Apples 
¶4. (SBU) Effectively all of Apple's iPod and iPhone 
production is performed by sole-sourced third party 
vendors in China, largely in Guangdong province -- 
BEIJING 00003732  002 OF 005 
China's manufacturing heartland and counterfeit 
capital.  (Note: MacBook laptop computers are also 
produced in China, but are less popular than the 
company's other products and not subject to 
counterfeiting.  Shruhan has not yet spotted any 
fake Apple computers.  End Note.)  Media reports 
indicate that a single plant operated by electronics 
subcontractor Foxconn employs 200,000 workers making 
iPods in Longhua, Guangdong province.  While cities 
in that province, which also include Shenzhen and 
Guangzhou, are far and away the biggest source for 
fake Apple products, Shruhan says that internal 
controls at subcontracted facilities, combined with 
independent audits, are good enough that he does not 
believe authorized plants are producing unlicensed 
products in a so-called "third shift" scenario.  He 
explained that Apple's system for tracking each 
product's unique serial number appears very 
effective, and more sophisticated than Pfizer's. 
Instead, he attributes the usually poor-quality 
fakes to independent operators without links to the 
licensees, though he acknowledges the manufacturing 
molds for iPods or iPhones could be removed from 
licensed factories and used in illegal production. 
This can result in fakes that appear flawless on the 
surface, but whose internal hardware is substandard. 
Shruhan has discovered, for instance, what appear to 
be real iPods with 80GB of storage, but that in fact 
have only a very inexpensive 1GB hard drive inside. 
Exports Shipped through Hong Kong 
¶5. (SBU) Whatever means counterfeiters are able to 
exploit, the numbers are compelling: Shruhan notes 
that customs seizure data definitively show 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 transshipped via Hong 
Kong to points onward.  Even with the introduction 
of genuine iPod and iPhone retail sales in China 
(through authorized dealers and, more recently, an 
actual Apple Store), Apple's marketing strategy here 
is still in its infancy.  The popularity of its 
products is stronger outside of China.  In three 
recent raids in India, all fake Apple products were 
found to have been transshipped through Hong Kong 
(from China).  Also, goods bound by air for 
Mauritius were recently seized in Hong Kong. 
Shruhan explained that Hong Kong's port has 
historically received less scrutiny than others for 
outgoing goods.  In his experience with Pfizer, he 
found Hong Kong customs authorities reluctant to 
launch investigations that they fear could slow port 
traffic - especially in comparison to more willing 
mainland customs officials - but could be convinced 
to cooperate if negative publicity can be minimized. 
¶6. (SBU) Hong Kong is not only the exit port for 
outbound fakes, Shruhan said, but is also the point 
BEIJING 00003732  003 OF 005 
of entry for legitimate Apple products entering 
China's gray market.  By buying iPods and iPhones in 
Hong Kong, outside of mainland China's customs zone, 
entrepreneurs willing to transport products across 
the border can resell them at an instant profit of 
approximately 25 percent to mainland Chinese 
accustomed to paying import duties and value-added 
Retail Outlets 
¶7. (SBU) Genuine Apple products in China until 
recently were sold only through authorized 
resellers.  In July, the company opened its first 
official Apple Store in Beijing and plans to open 
another - the world's largest - in the Chinese 
capital in early 2009.  Outside of these legitimate 
channels, vendors misrepresenting themselves as 
"authorized" may sell the occasional real iPod or 
iPhone, but predominantly offer fakes.  Shruhan 
recently completed an informal (and statistically 
insignificant) survey of markets in Beijing, 
including the notorious Silk Street Market, where 
his team found that, while many Apple products "look 
good," nearly 100 percent were fake. 
The Approach to Fighting Fakes 
¶8. (SBU) In many ways, Shruhan intends to model 
Apple's security plan in China on his successful 
experience at Pfizer, so he can quickly unroll a 
strategy.  In broad terms, the company will target 
retailers first to raise their costs and get 
counterfeit products off the street.  Next, Shruhan 
will work with the authorities to crack down on 
major manufacturers and distributors of fakes to 
undermine the supply of fake products.  Finally, he 
will seek out vendors who sell knock-offs online. 
To accomplish this will require not only a team of 
investigators, which Shruhan has subcontracted, but 
also tools like a laboratory to begin accurately 
tracing the source of counterfeit goods.  A lab that 
can perform forensic analysis on individual parts 
like batteries, for example, can help to locate 
high-volume manufacturers of such component parts. 
Cooperation with the Chinese Government 
¶9. (SBU) A key component in Shruhan's plan is close 
cooperation with the Public Security Bureau (PSB). 
Pfizer enjoyed very strong support from the PSB in 
pursuing counterfeit pharmaceuticals, in large part 
due to health and safety implications at a time when 
China was particularly sensitive to such image 
issues after the use of lead-based paint in toys and 
unsafe Heparin.  Shruhan is unsure how much the PSB 
will focus on Apple's issues, but believes a safety 
angle like shoddy devices causing fire hazards will 
BEIJING 00003732  004 OF 005 
strengthen his case.  Short of this, his most 
persuasive argument will be the economic impact of 
counterfeiting: lost tax revenue and jobs.  Apple is 
studying what this costs the Chinese Government per 
counterfeit device sold.  Whatever degree of support 
the PSB offers, Shruhan accepts that, as with 
Pfizer, the reality of successful cooperation will 
be that his team "does 95 percent of the 
investigative work," turns case files over to the 
PSB, and "gives the PSB 100 percent of the credit" 
for successful enforcement actions.  The payoff is 
worth it.  China has some of the strictest penalties 
around for counterfeiters, he claimed - if the PSB 
can successfully prosecute a case.  Shruhan recalled 
a pharmaceuticals case in which the counterfeiter 
was sentenced to ten years and received a USD 
250,000 fine. 
¶10. (SBU) Apple's first raids will be carried out in 
Shenzhen in Guangdong province, where Shruhan has 
identified at least one major underground factory. 
In such a raid, carried out by the PSB, the factory 
will be shut down by authorities only if its output 
exceeds the criminal threshold that under Chinese 
law represents production on a commercial scale: RMB 
150,000 (USD 22,000).  In addition to working with 
the PSB to shut down manufacturers, Shruhan is also 
encouraging China's local Administrations of 
Industry and Commerce (AICs) to raid retailers. 
Such raids may not put vendors out of business, but 
associated fines and penalties from civil suits will 
raise their costs.  Shruhan said that low profile 
retail raids are a good option for Apple, a company 
that wants to stay away from too much publicity 
surrounding this issue.  The evidence Apple gathers 
doing market surveys, including the names of 
infringing shops, the number of fakes found, and the 
trademarks being violated, will be provided to the 
AIC for support in upcoming raids in cities 
including Shanghai, Beijing, Guangzhou, and 
¶11. (SBU) Shruhan describes his relationship with 
China Customs, developed over five years of joint 
efforts to fight fake drugs, as very cooperative, 
and he is already getting the support he needs, 
including five export seizures in August.  A key 
element of his relationship with customs officials 
in the past has been providing them with the 
training they need to identify counterfeit goods in 
the field.  In addition to building strong 
relationships with investigators and law enforcement 
agencies, Shruhan knows that currying favor with the 
Supreme People's Procuratorate and the courts are 
essential in ensuring effective prosecution and 
Selling the Plan in California 
¶12. (SBU) While Shruhan has the benefit of his 
BEIJING 00003732  005 OF 005 
Pfizer experience in China, he laments that Apple 
lawyers do not.  Based in California, the company's 
inexperience has slowed cooperative progress with 
Chinese Authorities.  Officials at Lowu Commercial 
City, one of China's notorious counterfeit markets 
near Hong Kong, asked Apple for training and 
evidence of counterfeit sales in their shops. 
However, reluctance by the company to accept 
standard Chinese legal documents and other problems 
in corporate communication have so far prevented 
such cooperation.  Shruhan has an ally at Apple's 
Cupertino headquarters who will help him win the 
support he needs to build an effective security 
operation in China.  John Theriault, former Vice 
President of Global Security for Pfizer, was 
Shruhan's boss for the last five years, and is the 
one responsible for bringing Shruhan to Apple, where 
Theriault is now Vice President of Global Security. 
Theriault, said Shruhan, has already pitched the 
China security strategy to Steve Jobs. 
¶13. (SBU) Shruhan and Theriault spent five years 
building an effective security plan for Pfizer, 
resulting in high-profile raids and seizures of 
large quantities of counterfeit drugs like Viagra. 
This was due in large part to the high priority the 
Chinese Government placed on health and safety 
issues.  Now at Apple, they have an excellent 
understanding of China's underground manufacturers 
and global distribution channels that will serve 
them well as they seek to stem fake iPod and iPhone 
production.  However, the key will be whether their 
personal relationships with customs, law 
enforcement, and judiciary officials will be enough 
to focus the Chinese Government on Apple's non- 
health-related problems as they seek to make life 
uncomfortable for counterfeiters.  End Comment.

If Apple “hired away the team from Pfizer that formed and led a multi-year crackdown on counterfeit Viagra production in Asia,” does that explain Apple’s fertile spirit of litigation and assaults?

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

A Single Comment

  1. Michael said,

    September 15, 2011 at 2:01 am


    Wow. Reading the above it is as if Roy is completely clueless about how Apple turned around desktop computing. And smart phones. And the handset maker’s relationship to the data providers. And portable music players with their integrated software and store. And tablets.

    It is like Roy is completely ignorant of the history of technology over the last 20 years and more.

    Yes. it is *exactly* like that.

    There is a reason Apple is held up as an example of one of the most innovate companies in the last 20 years. And that reason is completely lost on Roy. Completely.

What Else is New

  1. Links 25/5/2020: Wrapland Redone, DebConf20 Plans, Many More Games

    Links for the day

  2. Media Covers WSL Like People Actually Use This Trash (a Failed Distro Which Only Works With Windows)

    Lots of abundantly redundant puff pieces have appeared in paid-for (by Microsoft) media this past week covering WSL/2, but that's grossly disproportional to the people who care and actually use those types of things (because money talks, not technical substance)

  3. Working From Home on Patent Monopolies Would Lower Their Quality and Perceived Legitimacy

    The patent system wherein people grant monopolies from their sofas and bedrooms isn't helping the already-eroded perception/image of patent offices that mostly grant patents to massive multinationals (and far too many patents overall)

  4. The Attitude of António Campinos Toward Courts and Toward Justice Same as Benoît Battistelli's

    6 years down the road we're still dealing with unaccountable tyrants who laugh at the law, laugh at lawmakers and disregard law enforcers (like the Trump regime across the Atlantic)

  5. IRC Proceedings: Sunday, May 24, 2020

    IRC logs for Sunday, May 24, 2020

  6. Asking Microsoft If It Loves Linux is Like Asking Google If It's Evil

    The media keeps bombarding us with lousy, weakly-sourced messages about Microsoft regretting its stance on “Open Source” and loving “Linux” (both are lies that are very easily debunked), so journalism has an existential problem and maybe too much dependence on ad money (a form of bribery) from “Big Tech” that does “clown computing” and “apps”

  7. Features Considered Harmful

    "But the benefits of Free software, free candy and new features are all meaningless, if the user isn't in control."

  8. Free, as in “App”

    "As everyday users, we need to be able to configure our applications, and this process must/needs to be made as easy and understandable as possible."

  9. Links 25/5/2020: Linux 5.7 RC7 and TeleIRC 2.0.0

    Links for the day

  10. Links 24/5/2020: TUXEDO Computers on AMD, Ardour 6.0 is Out

    Links for the day

  11. Trust Microsoft With Everything Including Your Life

    A timely if not apt meme about the state of Windows-powered hospitals, which very often end up foreign-operated (taken over by crackers in another country)

  12. When the Response to Hospitals Being Systematically Cracked Through Microsoft Products Like Windows is... Blocking the Competition of Microsoft

    People keep dying because Microsoft Windows, poorly designed with NSA back doors in it, falls into the hands of malicious actors (sometimes overseas, sometimes using leaked tools of the NSA itself) and guess who takes the blame when hospitals grind to a halt due to this…

  13. IRC Proceedings: Saturday, May 23, 2020

    IRC logs for Saturday, May 23, 2020

  14. Ode to the 'Orange One'

    Bush Senior and Junior, Hillary/Bill Clinton and now António Battistelli (or Benoît Campinos); are we dealing with monarchies/monarchs and pledges of allegiance or with public institutions beholden to the public, to be governed by the law?

  15. Home Working at the EPO: Your Corporate, Global Monopolies Will Be Rubber-stamped From Private Homes

    We’re expected to believe that EPO employees working under the noses of Microsoft (in another continent!) with kids running around will be able to be both productive and professional; staff already complains about working until midnight and beyond, without any conceivable separation between career and personal life

  16. To Understand Why “Inner Source” is a Cheap Corporate Ploy if Not a Free Software-Hostile 'Scam' Look Who's Behind It

    It's rather easy to see that the O'Reilly-connected and Bill Gates-connected leadership of InnerSource Commons (ISC) doesn't register this fake 'charity' to promote Software Freedom but to fight against it under the guise of "open" (openwashing)

  17. Microsoft: We Were Wrong About Open Source and That's Why We 'Liberate' Code... From 1983 (and We Won't Accept Code Changes, Either!)

    The tiresome openwashing efforts from Microsoft verge on the farcical, but the Microsoft-funded media plays along with it all regardless

  18. The Unitary Patent and Unified Patent Court Book

    The Unified Patent Court (UPC) propaganda must be confronted; there's a book in the making about UPC lies and the anatomy of this legislative coup attempt by litigation fanatics (who profit from monopolies, patent trolls and so on)

  19. Links 23/5/2020: Oracle Solaris 11.4 SRU21, Wine-Staging 5.9

    Links for the day

  20. Spillover: Team UPC Trying to Fill Up the Cup 'Half Empty'

    The European Patent Office's (EPO) corruption is mirrored in UPC corruption; the former hasn't yet seen its downfall due to this corruption and the latter is already up in flames, no matter how media sites (are paid to) spin it, giving false hope for the sake of lobbying by Team UPC

  21. The EPO Continues to Publicly Brag About Granting Illegal Patents to Fake 'Production' (It's Not Really Production But Abuse of the Granting Authority)

    Patents on life, nature and mathematics serve to highlight the degree of corruption embraced by EPO management, eager to fake ‘production’ in order to hoard money, which is then stolen and misused in other ways

  22. GNOME Settlement With Patent Troll Fails to Address/Tackle the Software Patent and Software Patents in General

    GNOME settles with the troll on terms that are superficially friendly towards Free software; however, more could be done to actually defuse matters on legal if not precedential grounds

  23. IRC Proceedings: Friday, May 22, 2020

    IRC logs for Friday, May 22, 2020

  24. Fiduciary Technology: Why It's Often Impermissible to Use Microsoft (But It's Done Anyway)

    "As such and if your CTO isn’t actively moving tooling out of the Microsoft ecosystem like bailing water out of a sinking ship, then you should probably be looking for a new CTO."

  25. Links 23/5/2020: FreeBSD 11.4 RC1, Wine 5.9

    Links for the day

  26. Links 22/5/2020: App Icon Preview 2.0.0, dav1d 0.7.0, LibreOffice's New Icons

    Links for the day

  27. Freedom Is Not Possible Without Privacy

    Privacy was the subject of today's feature article; let's not forget how essential a concept it is to guard against encroachments, no matter the given excuses

  28. IRC Proceedings: Thursday, May 21, 2020

    IRC logs for Thursday, May 21, 2020

  29. How Surveillance Works: A Primer

    "We are expected to carry around devices that violate our rights and deprive us of liberty, against our wishes and despite reasonable and valid protest. These devices take something sacred from us -- they are an attack on our humanity, and they make us live more like livestock."

  30. The Industrial Revolution 5.0 (or 6.0) -- Symptom of Totally Incompetent Management at the European Patent Office

    European Patent Office (EPO) management is technically, in effect, incompetent; it's like the Office is run by a bunch of children with no skills other than name-dropping buzzwords and bullcrap

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

Recent Posts