IT Confidential: Supply Chain Takes On A New Meaning

Not exactly good for foreign relations. Last week, InformationWeek wrote about sports-shoe company Vans and its sophisticated supply-chain operation that allows customers to order custom-made tennis shoes that are then produced in China and shipped back to the customer (almost) directly. Also last week, the U.S. Attorney's office for central California said a former Vans executive, and a contractor working with him, had been indicted for allegedly taking kickbacks from those Chinese manufacturers. The indictment alleges that, from 1997 to 2000, Scott Brabson, Vans VP of sourcing, and Jay Rosendahl, product development consultant, extorted kickbacks from owners and managers of the Chinese factories amounting to 3% of Vans' orders. The perpetrators allegedly provided the factories with the number of a Hong Kong bank account, and the factories wire-transferred the kickbacks into that account. Shortly after Brabson left Vans in 2000, he moved almost $3 million of the money into accounts at a Luxembourg bank. Brabson then transferred about $1.3 million into different Hong Kong bank accounts controlled by Rosendahl, according to the U.S. Attorney's office. Vans cooperated fully with the investigation.

The tables were turned on the Recording Industry Association of America last week when it found itself on the wrong end of a patent-infringement lawsuit from Altnet, a company that distributes licensed digital content through peer-to-peer networks. Altnet claims the methods the RIAA and several partners use to identify copyrighted files being swapped on file-sharing networks violates a patent to which its parent, Brilliant Digital Entertainment, holds exclusive rights. The patent covers file-sniffing technology developed by Kenetech. The RIAA doesn't give the suit much merit. "For these plaintiffs to complain about infringement of their intellectual property is not merely ironic, it is an act of incredible chutzpah," said president Cary Sherman in a statement. "Their claims are also dead wrong."

Speaking of patents, the U.S. Court of Appeals for the Federal Circuit, the court where most patent cases end up, set a date last week for an appeals hearing in the eBay patent-infringement case. On Oct. 5, eBay will argue against a Virginia court's decision last year that eBay had violated two patents owned by MercExchange, a Great Falls, Va., company--in particular, one patent covering eBay's popular "Buy It Now" feature--and awarded MercExchange and its founder, Tom Woolston, $29.5 million. Patent awards are very often overturned on appeal. The MercExchange patents are under review by the U.S. Patent & Trademark Office.

I wonder, are there patents for sale on eBay? I know people have offered up everything from their organs to their virginity, but can you bid on intellectual property? I won't find an industry tip on eBay, so send one to [email protected] or phone 516-562-5326. If you want to talk about supply-chain problems or patent disputes, meet me at InformationWeek.com's Listening Post.

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