Coordinating a Cure for Global Counterfeiting

Lauren Estrin is an associate in Kilpatrick Stockton’s Intellectual Property Department. She focuses her practice on trademark prosecution and litigation, and also handles unfair competition, false advertising, and copyright disputes.

Ted Davis is a partner in Kilpatrick Stockton’s Intellectual Property Department. He divides his practice between domestic and international litigation and client counseling in the fields of trademark, copyright, false advertising, and unfair competition law. Mr. Davis has served as a member of both the Board of Directors of INTA and the governing Council of the American Bar Association’s Intellectual Property Law Section.

As many industries and markets are learning, piracy and counterfeiting is now a global economic epidemic.  In the first half of 2006, over 25% of all the reported incidents of IP theft around the world were linked to venues such as street vendors, outdoor markets, and counterfeit purse parties, all prototypical markets for knock-off merchandise.¹  Counterfeiting affects IP owners everywhere and the problem is not industry-specific – art, fashion and footwear designers, builders, car manufacturers, and pharmaceutical companies to name a few, all share this unwanted and injurious experience.  Vaccinating world markets from counterfeit goods, which now comprise at least 7% of all international trade, is no easy task.  Given the movement of these goods throughout world ports, coordinating protection and enforcement efforts among a variety of actors is an imperative.  And yet, the United States has only begun to pool its own resources and initiatives in recent years.

Recognizing the need for counterfeiting and IP enforcement in the U.S., on February 7, 2007, Senators George Voinvoich (R-OH) and Evan Bayh (D-IN) introduced S.522, styled as the Intellectual Property Rights Enforcement Act (“IPREA”), legislation intended to create a coordinated, comprehensive domestic and international intellectual property enforcement scheme.  The IPREA is nearly identical to legislation Senators Bayh and Voinvoich both presented unsuccessfully in 2005.  Whether this legislation has a better chance of passing remains unclear.  A report issued by the Government Accountability Office (“GAO”) in November 2006, however, highlighted the shortcomings in the current counterfeit enforcement programs and called for a more effective national strategy to combat counterfeiting and piracy.²  With some momentum created by the GAO’s report and support from a variety of entities in both the private and public sector, the proposed IPREA could be a viable attempt at fashioning a coordinated enforcement scheme that finally takes on one of the most potent threats to IP rights worldwide.

The Current Landscape

The two government programs currently charged with IP enforcement against counterfeiters are the National Intellectual Property Law Enforcement Coordination Council (“NIPLECC”) and the Strategy for Targeting Organized Piracy (“STOP”).  NIPLECC was created by Congress in 1999 to lead U.S. efforts in protecting IP rights at home and abroad.  It was charged with creating a strategy for IP enforcement and given a supervisory role in the implementation of its proposed strategy.  In the Consolidated Appropriations Act of 2005, Congress augmented the NIPLECC program by creating the position of Coordinator for International IP Enforcement to serve as the director of NIPLECC.³  Congress also appropriated an additional $2 million to NIPLECC for expenses through the 2006 fiscal year.⁴

Also, in October 2004, President Bush created the Strategy for Targeting Organized Piracy (“STOP”) to coordinate various government agencies in fighting global piracy and the counterfeit trade.  STOP’s “mission statement” describes its task as “the most comprehensive initiative ever advanced to smash the criminal networks that traffic in fakes, stop trade in pirated and counterfeit goods at America’s borders, block bogus goods around the world, and help small businesses secure and enforce their rights in overseas markets.”⁵  STOP has helped facilitate efforts among the Departments of Commerce, Homeland Security, Justice, and State, the Office of the U.S. Trade Representative, and the Food and Drug Administration.  STOP has garnered more coordinated action among these entities and has actually been successful in implementing programs to help facilitate the protection and enforcement of U.S. IP rights.  Together with participating agencies and the United States Patent and Trademark Office (“USPTO”), STOP has taken concrete steps to provide U.S. businesses with valuable information and resources to protect their IP and enforce their rights both at home and abroad.  Indeed, it is seen by many in both the public and private sectors, as the more prominent enforcement scheme to date.

For example, some of the programs STOP has initiated include:

• creating a hotline to provide U.S. businesses with information about how to enforce their IP rights at home and abroad;
• offering brand and piracy protection strategies to businesses through the U.S. Chamber of Commerce and Coalition Against Counterfeiting and Piracy  “No Trade in Fakes” program;
• empowering U.S. district courts to issue injunctions against counterfeit goods entering U.S. ports;
• working with the Department of Justice to update criminal penalties for counterfeiting and actually prosecuting counterfeiters under available criminal laws;
• engaging China in respecting IP rights by creating a full time IP attaché  to help monitor IP violations in China, conducting the first coordinated U.S.-Chinese enforcement action, seizing over 210,000 counterfeit DVDs, in addition to other enforcement and investigation efforts; and
• creating an Office of Enforcement in the USPTO to help foreign and domestic IP owners enforce their rights in the United States and within trade agreements.

Despite these activities, as the GAO report notes, STOP is only “a good first step.”⁶  It lacks permanence and is not set up to address long-term goals or ensure accountability in any way. NIPLECC recently adopted STOP as part of its strategy for international IP enforcement, however, it is still unclear how NIPLECC will fulfill its oversight and accountability functions.⁷  Moreover, as the distinction between NIPLECC and STOP blurs and STOP faces an expiration date in 2008, the national strategy may be due for reorganization, especially considering how these two entities operate in practice.  To that effect, the IPREA could be a well-timed overhaul.

Second Time’s A Charm

The IPREA seeks to coordinate IP intelligence and enforcement efforts across federal, state, and local government entities, the private sector, and other countries facing similar counterfeiting problems.  The IPREA largely mirrors its failed predecessor S. 1984, which Senators Bayh and Voinvoich introduced in November 2005.

The IPREA takes on the widespread counterfeit and piracy trade.  The bill notes significant counterfeiting is occurring in the drug, automobile and aviation-part industries, which affects the health and safety of Americans.⁸  The bill also cites many national interests, varying from counterfeiting, terrorism, and protecting U.S. jobs and business interests as the basis for its findings.⁹

To protect a myriad of industries and IP owners domestically and overseas, the IPREA proposes establishing an interagency coalition to monitor and enforce IP rights and prevent piracy.¹⁰  The “Intellectual Property Enforcement Network” or “IPEN” would be an interagency coalition, consisting of various cabinet members and led by the Deputy Director for Management of the Office of Management.¹¹  The organization and tasks of IPEN were designed to mirror the Financial Crimes Enforcement Network, the domestic and international system currently regulating, with reported success, money laundering and other financial crimes.¹²

IPEN would be charged with establishing policies and initiatives to combat counterfeiting and piracy.  Specifically, IPEN would have enforcement duties to stop counterfeiting and piracy of goods worldwide, including “disrupting and shutting down counterfeit and piracy networks.”¹³  IPEN would also be responsible for collecting information about individuals and groups involved in counterfeit activities and sharing such information with other government agencies to further the protection of U.S. IP interests worldwide.¹⁴

The bill also contemplates that IPEN would work with “like-minded countries” by establishing an international task force to set international policies and standards for IP enforcement.¹⁵  The international task force would be comprised of countries who share the same interest in protecting domestic and international IP rights and combating counterfeiting and piracy in the worldwide market.¹⁶  With a formal mechanism in place, the IPREA hopes to provide countries with a forum to share information and help facilitate individual members’ enforcement efforts.

Interestingly, IPREA seeks to build coalitions, not only among various federal executive agencies and “like-minded” countries, but also among state and local governments and entities in the private sector.¹⁷  The IPREA seeks to create an exchange of information among the countries of the international task force, the Department of Homeland Security, the Department of Justice, state and local governments, and the private sector.  The bill charges IPEN to incorporate the private sector by “building a formal process for consulting with companies, industry associations, labor unions, and other interested groups” within the countries that are part of the international task force.¹⁸  Indeed, the bill makes a point of including small and medium- sized businesses, which was absent from its failed predecessor S.B.1984.¹⁹  If the IPREA seems far-reaching, it is.  Indeed, the IPREA seems to engage actors and groups on nearly every level to overhaul IP enforcement on a comprehensive scale.

In addition to enforcing international IP rights, one of the bill’s goals is to enforce IP-related trade agreements.²⁰  The IPREA provides that information collected and reported to IPEN and the international task force would also be used to help the U.S. Trade Representative enforce trade agreement violations, specifically against countries and parties in violation of the World Trade Organization’s IP provisions.²¹

Conclusion

The IPREA is certainly an ambitious piece of legislation whose likelihood of passage remains uncertain.  It has been referred to the House Judiciary Committee and awaits a formal testimony and vote.  If successful, the IPREA could be the long-awaited antidote to curb rampant counterfeiting and design piracy.  Even if passed, however, the amount of valuable IP vested in U.S. industries needs muscle to enforce these rights across the globe.  Without more aggressive legislation at home and coordinated international efforts, more shipments of knock-offs and counterfeit goods will continue to infiltrate U.S. and other ports, infecting world markets and hurting the success of business and owners of IP worldwide.  The IPREA’s effect will depend on its implementation.  Nevertheless, if Congress can look to the strengths of STOP and inadequacies of the NIPLECC, the U.S. could help lead the international fight against costly large-scale IP violations.

Endnotes