Articles

United States Talks Tough on Counterfeiting

IP Litigator
January/February 2008

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International counterfeiting results in industry and tax losses in the hundreds of billions of dollars annually, continually threatens jobs and economic growth, and causes a myriad of public health and safety concerns. Yet, counterfeiting continues to grow at an alarming rate. Last year, several legislative proposals were unveiled to stem the increase in counterfeiting both at home and abroad, through greater enforcement and stiffer criminal penalties. In January, Congressman Mike Rogers (R-MI) introduced the Counterfeit Drug Prevention Act of 2007 (H.R. 780) to tackle the manufacture and sale of counterfeit medicines. In July, Congressman Steven Chabot (R-OH) introduced the Intellectual Property Enhanced Criminal Enforcement Act of 2007 (H.R. 3155) to reduce counterfeiting and copyright infringement. And, in October, US Trade Representative Susan Schwab announced that the United States and several key trading partners would negotiate the Anti-Counterfeiting Trade Agreement (ACTA) to step up enforcement of the World Trade Organization's Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Although both bills currently languish in subcommittee and the ACTA is likely years away from being fully implemented, all three proposals speak to the inadequacy of current legal measures to address counterfeiting and the need to attack this problem on several different fronts.

Counterfeit Drug Prevention Act of 2007

In response to the growing proliferation of counterfeit medicines, the CDPA of 2007 was introduced to amend Section 303(a) of the Federal Food, Drug, and Cosmetic Act [21 U.S.C. § 333] and create broad criminal liability for anyone knowingly harboring equipment designed to produce counterfeit drugs or engaging in any act which causes a drug to be counterfeit. In contrast to the current criminal penalties for counterfeiting drugs under Section 303(a) (a maximum sentence of one year, or three years for repeat offenders), the CDPA would impose a maximum sentence of 20 years, and further provide for a sentence of up to life in situations where a counterfeit drug proximately causes a consumer's death.

The CDPA addresses what some perceive as a light sentence for criminals whose actions can have disastrous public health consequences and cause industry losses in the billions of dollars. The bill was referred to subcommittees in the House Judiciary and House Energy and Commerce Committees on March 1, 2007, and has broad public support from all relevant parties.

Intellectual Property Enhanced Criminal Enforcement Act of 2007

Initially introduced by former US Attorney General Alberto Gonzalez, the Intellectual Property Enhanced Criminal Enforcement Act of 2007 (H.R. 3155) seeks to simultaneously stiffen existing penalties for counterfeiting and step up enforcement. The bill would increase the maximum prison sentence for trafficking in counterfeit goods from 10 to 20 years for first-time offenders, and from 20 to 30 years for repeat offenders. The bill further provides for a sentence of up to 30 years if a counterfeiter knowingly or recklessly causes, or attempts to cause, serious bodily injury and up to life in prison if a counterfeiter knowingly or recklessly causes or attempts to cause death. Additionally, H.R. 3155 proposes to double the maximum sentences for willful copyright infringement.

The bill also contains a much broader forfeiture provision. Current law requires counterfeiters to forfeit only the actual counterfeit articles themselves and any property used to commit or facilitate the counterfeit acts. In contrast, H.R. 3155 would require violators to forfeit any property or proceeds obtained directly or indirectly from counterfeiting activities in civil proceedings. Accordingly, H.R. 3155 could potentially offer an additional avenue of monetary recovery for civil litigants and encourage the filing of more civil suits, if enacted.

One of the bill's most far-reaching provisions is to criminalize the intent to commit copyright infringement (or, when multiple persons are involved, a conspiracy to commit such infringement). The bill's sponsor, Congressman Steven Chabot, explained that like other criminal intellectual property laws, an attempt or conspiracy to violate the criminal copyright statute should be treated as an offense whether it is successful or not.

Finally, the bill allocates $12 million for the creation of (1) a special operations unit, within the Federal Bureau of Investigation, to coordinate the investigation of intellectual property crimes and (2) a special task force dedicated to developing and implementing a comprehensive, long-range plan to investigate and prosecute  international organized crime syndicates engaged in intellectual property crimes. The hope is that with increased law enforcement specifically dedicated to policing intellectual property right violations, pursuing counterfeiters will become more of a priority.

H.R. 3155 was referred to subcommittees in the House Judiciary Committee on August 10, 2007. While supported by intellectual property rights owners, it has drawn fire from many civil rights critics who argue that criminalizing intended infringement is too draconian and that the proposed penalties put counterfeiting in the same category as far more serious criminal offenses.

Anti-Counterfeiting Trade Agreement

As counterfeiting activities increasingly span national boundaries, cross-border cooperation has become essential. On October 23, 2007, US Trade Representative Susan Schwab announced that the United States has been in talks with key trading partners to implement the Anti-Counterfeiting Trade Agreement. The ACTA asks countries to set higher enforcement benchmarks to signify compliance with the World Trade Organization's Trade-Related Aspects of Intellectual Property (TRIPS) Agreement. Signatory countries of the ACTA would voluntarily commit (1) strengthening international cooperation by sharing information among law enforcement agencies; (2) increasing criminal and civil enforcement of intellectual property rights violations; (3) tightening border security; and (4) providing a strong legal framework for intellectual property rights enforcement. Additionally, countries would improve their current enforcement practices by utilizing up-to-date technology to identify counterfeit goods and locate those responsible for their production. The ACTA also encourages various "best practices" to battle counterfeiting in the longterm, such as developing specialized intellectual property expertise within law enforcement and educating the public about the importance of intellectual property rights protection.

Conclusion

While counterfeiting may never be completely eliminated, a desirable and achievable goal would be to restrict it to manageable risk levels for both IP owners and public safety. To that end, all three of the measures are steps in the right direction. As counterfeiters become more organized and use increasingly sophisticated methods to escape detection, they will have to be met with not just stiffer penalties but a more robust, internationally-coordinated response from law enforcement and the judiciary.

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