Cablegate: Vietnamese Ipr Enforcement: How Nike Got Its Swoosh Back

This record is a partial extract of the original cable. The full text of the original cable is not available.

2002HOCHI00934 - UNCLASSIFIED

UNCLASSIFIED PTQ9199

PAGE 01 HO CHI 00934 161034Z
ACTION STR-00

INFO LOG-00 AGRE-00 AID-00 AMAD-00 CEA-01 CIAE-00 CTME-00
DINT-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 EAP-00 EB-00
EXME-00 E-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00
INR-00 ITC-01 LAB-01 LOC-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OES-01 OMB-01 OPIC-01 PA-00 PRS-00
ACE-00 SP-00 SSO-00 SS-00 TEST-00 USIE-00 DRL-02
G-00 NFAT-00 SAS-00 /011W
------------------E7D6B7 161311Z /38
FM AMCONSUL HO CHI MINH CITY
TO SECSTATE WASHDC 6786
AMEMBASSY HANOI
AMEMBASSY BANGKOK
AMEMBASSY PHNOM PENH
AMEMBASSY VIENTIANE
DEPTTREAS WASHDC
USDOC WASHDC

UNCLAS HO CHI MINH CITY 000934

SIPDIS

SENSITIVE

STATE PASS TO USTR FOR EBRYAN

UNCLASSIFIED

PAGE 02 HO CHI 00934 161034Z
E.O. 12958: N/A
TAGS: VM ETRD KIPR KTEX IPROP
SUBJECT: VIETNAMESE IPR ENFORCEMENT: HOW NIKE GOT ITS SWOOSH BACK

(1) (U) SUMMARY: NIKE WENT ON THE OFFENSIVE RECENTLY IN
SOUTHERN VIETNAM, WORKING WITH LOCAL POLICE ON A RAID THAT NETTED
23 TRUCKLOADS OF COUNTERFEIT NIKE AND ADIDAS SHOES AND MATERIALS.
NIKE'S AGGRESSIVE STRATEGY, AND NEWFOUND FRIENDSHIP WITH THE
VIETNAMESE POLICE, IS BREATHING LIFE INTO LARGE-SCALE TRADEMARK
ENFORCEMENT. END SUMMARY.

(2) (SBU) IN LATE JULY, LOCAL AND SPECIAL "ECONOMIC POLICE" IN
HO CHI MINH CITY SEIZED 23 TRUCKLOADS OF MATERIAL USED TO MAKE
COUNTERFEIT NIKE AND ADIDAS SHOES. IN GATHERING THE EVIDENCE FOR
THE RAID, THE POLICE WORKED CLOSELY WITH NIKE'S NEW IN-HOUSE
INVESTIGATOR, WHO SPENT ONE YEAR GATHERING EVIDENCE FROM
INFORMANTS AND OLD-FASHIONED DETECTIVE WORK. IRONICALLY, NIKE
INITIATED THE INVESTIGATION AFTER RECEIVING A TIP-OFF FROM A
COMPETING COUNTERFEIT PRODUCER.

(3) (SBU) THE MATERIALS SEIZED IN THE RAID WERE EITHER
COUNTERFEIT PARTS, MOSTLY MANUFACTURED IN VIETNAM, OR DEFECTIVE
NIKE AND ADIDAS SHOE PARTS SLATED FOR RECYCLING. COUNTERFEITERS
BOUGHT THE DEFECTIVE PARTS FROM RECYCLERS, SCAVENGERS OR FROM NIKE
WORKERS WHO SMUGGLE SHOE PARTS OUT OF THE FACTORY IN THEIR CLOTHES
OR LITERALLY FLING THEM OVER THE BACK FENCES. THE NIKE COUNTRY
MANAGER ESTIMATES THAT THE OPERATION HAD MADE 5000 PAIRS OF SHOES
SINCE JANUARY 2001, WHICH WERE SOLD ALL OVER VIETNAM FOR A PROFIT
OF VND 800 MILLION (APPROXIMATELY USD 52,000). THE RAW MATERIALS
ALONE WERE WORTH OVER VND 300,000,000 (USD 20,000) AND COULD BE
MANUFACTURED INTO 15,000 SHOES. SOLD AT AN AVERAGE USD 7.25 PER
UNCLASSIFIED

PAGE 03 HO CHI 00934 161034Z
PAIR, THE COUNTERFEITERS COULD HAVE MADE AN ADDITIONAL USD
112,300. THE AVERAGE PER CAPITA INCOME IN VIETNAM IS ABOUT USD
450.

(4) (SBU) NIKE PRAISED THE COOPERATION IT RECEIVED FROM THE
LOCAL POLICE, EVEN THOUGH NIKE PAID FOR THE POLICE OVERTIME AND
MATERIALS (E.G., FUEL) TO MOUNT THE RAID, TRUCKS TO HAUL AWAY THE
MATERIAL, AND THE STORAGE COSTS AT A WAREHOUSE PENDING ACTUAL
DESTRUCTION OF THE MATERIALS. THE POLICE RESPONDED QUICKLY (ONE
WEEK) TO NIKE'S REQUEST FOR AN INVESTIGATION, AND WORKED
EXPEDITIOUSLY (SIX MONTHS) TO COMPLETE THE INVESTIGATION.
IRONICALLY, NIKE SUSPECTS THAT THE RAID WAS SUCCESSFUL BECAUSE AN
INFORMANT INSIDE THE POLICE DEPARTMENT HAD TIPPED OFF THE
COUNTERFEITER SO FREQUENTLY, THAT THE COUNTERFEITER ASSUMED THE
RAID TIP OFF WAS A FALSE ALARM AND FAILED TO VACATE THE PREMISES.

(5) (SBU) ALTHOUGH POLICE HELD APPROXIMATELY TWO DOZEN
COUNTERFEITERS FOR SEVERAL HOURS, NO ARRESTS WERE MADE SINCE THE
CASE IS NOT YET CONSIDERED CRIMINAL. NO FINES HAVE BEEN ASSESSED
EITHER, ALTHOUGH THE ECONOMIC POLICE SHOULD DETERMINE THE FINE
SHORTLY. AUTHORITIES ARE STILL CONSIDERING WHETHER TO FILE
CRIMINAL CHARGES AGAINST THE COUNTERFEITERS. (NOTE: ONE OF THE
COUNTERFEITERS IS THE NEPHEW OF THE COMMUNIST PARTY CHAIRMAN OF A
POWERFUL NEIGHBORING PROVINCE. END NOTE.) CRIMINAL CHARGES ARE
POSSIBLE WHEN THE COUNTERFEIT MATERIAL IS WORTH OVER VND 30
MILLION (USD 2000). NIKE CONSIDERS THE SEIZURE OF THE MATERIALS
AND POSSIBLE PAYMENT OF BACK TAXES TO BE A VICTORY IN ITSELF.

(6) (SBU) COMMENT: NIKE'S NEW PROACTIVE STANCE -- HIRING AN
INVESTIGATOR AND WORKING CLOSELY WITH THE POLICE -- MAY SIGNAL A
NEW PHASE OF TRADEMARK ENFORCEMENT IN VIETNAM. NIKE'S STATUS AS
UNCLASSIFIED

PAGE 04 HO CHI 00934 161034Z
AN INDIRECT EMPLOYER OF ALMOST 60,000 WORKERS IN VIETNAM MAY HAVE
MOTIVATED THE ENTHUSIASTIC GVN RESPONSE TO NIKE'S CONCERNS.
CRITICAL NOW IS THE PENALTY PHASE, AND WHETHER THE COUNTERFEITERS
RECEIVE A SLAP ON THE HAND OR A REAL CRIMINAL SENTENCE. WHATEVER
THE OUTCOME, NIKE'S PUBLIC PRAISE OF THE POLICE AND ITS PROMISE TO
INITIATE MORE RAIDS MAY MAKE FOR MORE INTERESTING ACTION IN THE
MONTHS TO COME. END SUMMARY.

YAMAUCHI

UNCLASSIFIED

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