09.14.11

Cablegate: Apple Takes a Bite of Fake Viagra Experts

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

Cablegate

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.



VZCZCXRO1957
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3732/01 2700120
ZNR UUUUU ZZH
P 260120Z SEP 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 0136
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHIN/AIT TAIPEI 7073
RUEHKO/AMEMBASSY TOKYO 2238
RUEHUL/AMEMBASSY SEOUL 0954
RUEHMO/AMEMBASSY MOSCOW 9123
RUEHGV/USMISSION GENEVA 2295
RUEAHLC/DHS WASHDC
RUCPDOC/USDOC WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHMCSUU/FBI WASHINGTON DC

UNCLAS SECTION 01 OF 05 BEIJING 003732 
 
SENSITIVE 
SIPDIS 
 
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 
Enforcement 
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)] 
SUBJECT: CHINA/IPR: APPLE TAKES A BITE OUT OF 
CHINESE FAKES 
 
This cable is sensitive but unclassified and is not 
for Internet distribution. 
 
Summary 
------- 
 
¶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 
Summary. 
 
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 
taxes. 
 
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 
Shenzhen. 
 
¶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 
sentencing. 
 
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. 
 
Comment 
------- 
 
¶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 in other sites/networks: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Reddit
  • email

This post is also available in Gemini over at:

gemini://gemini.techrights.org/2011/09/14/apple-and-pfizer/

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

    Gravatar

    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. Microsoft 'Loves' Linux So Much That It's Spreading FUD About It All Over the Media for 3 Days in a Row (So Far)

    The stubborn cult at Microsoft likes telling us all — especially officials and decision-makers — a bunch lies like, “we invest [some amount of money] in security” and “security is our goal”, but in reality the money is sunk into hiring (‘buying’) firms with “security” in their name, bribing publishers for mindless PR/platitudes that cast critics of Microsoft insecurity/ies as “fanatics”, “bashers”, “jealous”, “irrational” et cetera; finally, actual money goes into collaborations with the NSA on back doors, i.e. the exact opposite of security. The video above is a follow-up or sequel for something we meme-ified two days ago; we’ve since then included more examples (with editorial comments added to the links) in our News Roundups/Daily Links; Western media follows the same script we saw in Indian Web sites on Sunday and the objective is to paint Linux as “equally insecure” if not less secure than Windows. As already noted on Sunday, in a much longer video, the ‘Linux’ malware (it has nothing to do with Linux itself!) needs user intervention, neglect, or even sabotage to even get on the compromised systems in the first place. One can guess what situation or which incidents Microsoft is ever so eager to distract/deflect from…



  2. [Meme] EPO Asked to Comply With the Law and Correct Behaviour

    EPO staff wants reparations for monumental abuses, but the “Mafia” of Benoît Battistelli and António Campinos will never allow that to happen (we saw the same regarding the unlawful composition of internal courts)



  3. The Unfunny Joke That Microsoft Cares for 'Developer Rights'

    Microsoft propaganda urging software developers to find comfort in a prison of Microsoft (proprietary software monopoly) is a symptom of dying media, or thinly-veiled PR looking for a buck



  4. IRC Proceedings: Tuesday, July 27, 2021

    IRC logs for Tuesday, July 27, 2021



  5. Links 28/7/2021: PulseAudio 15.0 Released, World’s Slowest Raytracer

    Links for the day



  6. Links 27/7/2021: New Godot Engine Beta and a Call for Funding of GIMP

    Links for the day



  7. The EPO's 'News' Page Annotated

    From the above: Greenwashing; Offshoring; ViCo nonsense; Openwashing; Patents=space travel? Faking empathy; Patents as monopoly; ViCo whitewash; Constitutional hogwash; ViCo propaganda; Pinkwashing; Whitewashing GDPR violation; Self-praise; Exploiting pandemic for $; More openwashing; Protectionism; Outsourcing; Occupying the legal system; Grifting and PR; 'Legalising' EPC violations; More surveillance; Patents as sharing?; Patents as mere info? Lobbying by litigation firms; Proprietary/MS



  8. Playing With Fire: The Linux Foundation Associates the Linux Brand With Proprietary Software and GitHub (as Usual)

    Racist IBM is once again using or misusing the “Linux” brand (through the Linux Foundation) to promote racist Watson (which is also proprietary software); the ‘Linux’ Foundation is now revisionism as a service (not just in service of its own mythology, e.g. the operating system starting in 1991 rather than 1983)



  9. Links 27/7/2021: KDE Plasma 5.22.4, Libinput 1.19 to Include Hold Gestures

    Links for the day



  10. Recording Videos With Webcamoid on GNU/Linux

    A lot of people use OBS Studio or similarly high-profile Free software that's mostly designed for live streaming; but this video is a bit different as it takes a look at Webcamoid, which not many people even know about, explaining the current setup that's used to record pretty much every video we make



  11. Getting News and Updates Over Gemini (in General and for Techrights)

    Gemini (gemini://) is very well suited for 'consumption' of news; the hardest part is getting past the simple fact that not every article needs to have pictures in it and syndication (for updates) isn't done through social control media



  12. IRC Proceedings: Monday, July 26, 2021

    IRC logs for Monday, July 26, 2021



  13. [Meme] Microsoft is Lecturing Us on Security!

    Dev Kundaliya and 'Hacker' News play along and go along with this laughable lie that Microsoft is some kind of security expert with moral authority/credibility on this subject



  14. [Meme] EPO 2025 (When Most of the Decent Patent Examiners Have Been Chased Away)

    Based on this week's reports (see batches of Daily Links), many recently-granted European Patents are being thrown out by courts, which means it's hardly surprising that demand for European Patents is in fact decreasing (while quality/validity/legal certainty nose-dives)



  15. Funding Sources Like Corporate Sponsors/Patrons/Masters Put at Risk the Freedom of Free Software

    Sources of funding or “sponsors” such as large corporations typically come with some barely-visible or temporarily-invisible strings attached (an expectation of commercial reciprocity, rendering the recipients subservient like ‘slaves’) and we need to understand how to preserve software freedom in the face of such trends



  16. Links 26/7/2021: Nanotale on GNU/Linux and IBM Promoting Microsoft GitHub

    Links for the day



  17. Free Software Projects Should Quit Selling Keynote Speeches to the Highest Bidders (Corporations) and Choose Based on Merit/Relevance

    OSI, SFC, FSF and Linux Foundation are in effect selling time and space (even to Microsoft, except the FSF was never foolish enough to do this). As of today, LibreOffice does the same thing (which might remain benign; just be sure to reject rivals as "sponsors" because it dooms projects and events).



  18. Microsoft Windows Has Lost Another 2 Million Web Sites This Past Month Alone (IIS Floundering)

    The rapid decline of Microsoft, Windows and IIS in servers is undeniable; it's just a damn shame that corporate and so-called 'tech' media never writes about this subject



  19. Links 26/7/2021: Grml 2021.07 and DXVK 1.9.1

    Links for the day



  20. Increasing Focus on Advocacy for the Free Software Community (Putting Control Over Computing in the Hands of People, Not Large Corporations)

    After 31,000 blog posts it's time to add a new theme to our coverage, which prioritises science, computer developers, and technology users; an urgent matter and pressing issue is the passage of control (e.g. over code and policy) to non-practising entities



  21. Video: How to Follow All Our Channels (Interactively) From the Command Line

    We’ve been enhancing the access possibilities/options for #techrights and other IRC channels, partly because we want to encourage more people to wean themselves off the DRM-ready Web, the monoculture, the bloat, the surveillance, and centralisation in general (the Web favours centralisation, which is exacerbated by the bloat and other topological dynamics)



  22. IRC Proceedings: Sunday, July 25, 2021

    IRC logs for Sunday, July 25, 2021



  23. Links 26/7/2021: Third RC of Linux 5.14 and Beta 3 of Haiku Project

    Links for the day



  24. No, Microsoft Does Not Get to Lecture Us on GNU/Linux Security (or Security in General)

    The corporate media wants us to think (or feel) like Microsoft is some kind of security guru; the reality, however, is the exact opposite because at Microsoft sometimes if not always/by default insecurity is the actual objective (back doors)



  25. Links 25/7/2021: MyGNUHealth 1.0.3 and Lots About Patents

    Links for the day



  26. Links 25/7/2021: LibreELEC (Matrix) 10.0 RC1 and Ubuntu 20.10 (Groovy Gorilla) End of Life

    Links for the day



  27. IRC Proceedings: Saturday, July 24, 2021

    IRC logs for Saturday, July 24, 2021



  28. Following Techrights IRC Channels From the Command Line (or the Web and Gemini)

    The (almost) real-time logs for #techrights have been available in http://techrights.org/irc and in gemini://gemini.techrights.org/chat/index.gmi for over a month; today we extend that to cover all channels (aggregated into one)



  29. Links 24/7/2021: Skrooge 2.26.1 and K-9 Mail Release

    Links for the day



  30. Links 24/7/2021: FreeBSD Report (April-June) and KDE Reporting Its Progress

    Links for the day


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