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Major Anti-Counterfeiting Legislation Passed in the U.S. House of Representatives

IP Litigator
July/August 2008

Kilaru, Naresh , Sommers, Mark

Article

Authored by Naresh Kilaru and Mark Sommers

On May 9, 2008, the US House of Representatives overwhelmingly passed a bill that, if enacted into law, will significantly increase existing civil and criminal laws to help fight counterfeiting. Part of a recent surge in such legislation, the Prioritizing Resources and Organization for Intellectual Property Act, known as the PRO IP Act (H.R. 4279), was introduced in December 2007 by Representatives John Conyers Jr. (D-MI), Lamar S. Smith (R-TX), and Howard L. Berman (D-CA). The House passed the bill by a vote of 410–411.

The bill is a major legislative proposal that aims to place anti-counterfeiting at the forefront of US domestic and international law enforcement efforts. It not only enhances existing penalties for counterfeiting offenses, but establishes new executive branch departments to combat counterfeiting and provides greater resources to law enforcement officials. While there has been some negative reaction to the bill, the final version passed by the House was the result of significant compromise and presents a balanced approach to strengthening US anti-counterfeiting laws.

A Ramp Up in Federal Resources Dedicated to Fight Counterfeiting

HR 4279 allocates increased federal government resources to fight counterfeiting on several different fronts. First, to enhance the coordination of anti-counterfeiting efforts at the local, federal, and international levels, the bill establishes the Office of the US Intellectual Property Enforcement Representative in the Executive Office of the President. The head of this Office is to be appointed by the President and serve as the President's principal advisor and spokesperson on domestic and international IP issues. This person also would chair an Intellectual Property Advisory Committee composed of eight federal agencies (including the Department of Justice, the Patent and Trademark Office, and the Office of the US Trade Representative), and be responsible for developing and implementing a consistent, national anti-counterfeiting strategy.

Second, to increase direct US involvement in international anti-counterfeiting, the bill requires the Director of the PTO to appoint at least 10 attachés to serve in US embassies or other diplomatic missions around the world. These attachés would be charged with fostering cooperation among foreign governments to promote enforcing existing anti-counterfeiting laws and assisting US companies abroad in their efforts to police counterfeiting and piracy.

Third, the bill establishes a new Intellectual Property Enforcement Division in the Department of Justice. The head of this Division would be responsible for coordinating all Justice Department efforts related to counterfeiting and piracy and lead the Justice Department's international anti-counterfeiting efforts. The bill also directs the Division to provide increased training and technical assistance to foreign countries that can potentially disrupt the importation of counterfeit goods into the United States.

Stiffer Penalties and Broader Seizure and Forfeiture Provisions

With broader seizure and forfeiture provisions, HR 4279 proposes to give law enforcement officials increased power to fight counterfeiting. For instance, in addition to the seizure of the counterfeit goods themselves, the bill allows law enforcement to seize any equipment used to make those goods and any business records related to the counterfeiting activity. The bill also allows for the forfeiture of "any property used, intended to be used, or derived from the commission" of the infringement, so long as there is a "substantial connection" between the property and the counterfeiting violation. For criminal counterfeiting violations, the bill mandates the forfeiture of not only the infringing goods, but "any property used, or intended to be used, to commit or substantially facilitate the commission" of the offense. As to monetary penalties, the bill doubles the amount of statutory damages available to trademark owners in civil counterfeiting actions from $100,000 to $200,000, and from $1 million to $2 million for willful violations.

Interestingly, some of the bill's original provisions were criticized as too harsh. For instance, an earlier draft included a provision that would have substantially increased the amount of statutory damages available to plaintiffs in copyright infringement suits. Specifically, the provision would have amended 17 U.S.C. § 504(c)(1) so that statutory damages would be calculated based on each work within a compilation. Such a provision would have made the statutory damages for a counterfeit CD containing 10 songs, for instance, range from $7,500 to $1.5 million, rather than the current $750 to $150,000. Because critics viewed the increased damages as an attempt to intimidate small-time infringers, this provision was removed while the bill was still in subcommittee.

Conclusion

The final version of HR 4279 enjoyed broad bipartisan support in the House and has been endorsed by the Department of Commerce and key industry groups, such as the Motion Picture Association of America and the Recording Industry Association of America. A companion version of the bill is now in committee in the Senate.

Concerned about the damage counterfeiting has on the US economy and the increased threats to public safety, US lawmakers see counterfeiting as a major national and international problem. HR 4279 is significant in that it not only imposes stiffer penalties (like other bills introduced over the past year), but substantially increases the amount of federal resources dedicated to addressing counterfeiting on a global scale.

Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes and is not intended to constitute legal advice. This memorandum may be considered advertising under applicable state laws.