Intellectual property protection needs a kick in the pants

When it comes to protecting intellectual property the federal government has done a passable job but much more needs to be done to put a crimp in the over $200 billion counterfeit and pirated goods industry, according to a Government Accountability Office report issued today.

According to auditors, Federal IP enforcement activity generally increased from fiscal year 2001 through 2006 but most agencies need to:

·        Systematically analyze enforcement statistics to better understand variations in IP-related enforcement activity.

·        Take steps to better identify IP seizures that pose a risk to the public health and safety of the American people, and collect and report this data throughout the agency and to Congress.

·        Better identify enforcement actions against IP-infringing goods that pose a risk to the public health and safety of the American people. 

The GAO said a broad range of IP-protected products are subject to being counterfeited or pirated, from luxury goods and brand name apparel to computer software and digital media to food and medicine. Evidence of counterfeiting in industries whose products have a public health or safety component, such as auto and airline parts; electrical, health, and beauty products; batteries; pharmaceuticals; and infant formula, presents a significant concern. The World Health Organization estimates that as much as 10% of medicines sold worldwide are believed to be counterfeit.   

Industries that rely on IP protection—including the aerospace, automotive, computer, pharmaceutical, semiconductor, motion picture, and recording industries—are estimated to have accounted for 26% of the annual gross domestic product growth rate during this period and about 40% of U.S. exports of goods and services in 2003 through 2004. Further, they are among the highest-paying employers in the country, representing an estimated 18 million workers or 13% of the labor force.

According to the GAO most IP enforcement falls on the Department of Homeland Security’s (DHS) Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE), and the Department of Justice’s (DOJ) Criminal Division, U.S. Attorney’s Offices, and the Federal Bureau of Investigation. But the Department of Health and Human Services’ (HHS) Food and Drug Administration (FDA) also play a role.  Several interagency groups that coordinate federal IP enforcement efforts, including the National Intellectual Property Law Enforcement Coordination Council and the National Intellectual Property Rights Coordination Center are also involved.

One of the problems is that for many of the key federal agencies (DHS, CBP, ICE, and FBI) that play a role in enforcing IP laws, IP enforcement is not a top priority, and determining the resources they have devoted to this function is challenging, the GAO said.  IP law enforcement actions consist of three primary functions—seizing goods, investigating crimes, and prosecuting alleged criminals.

The GAO did say IP enforcement is one of the DOJ’s highest priorities. In March 2004, the Attorney General announced the creation of a DOJ Task Force on Intellectual Property, with a mission of identifying ways to strengthen the department’s IP enforcement efforts. The Task Force produced 31 recommendations for improving IP enforcement and provided a progress report on those recommendations in its 2006 report. The Task Force made numerous short- and long-term recommendations, including increasing the number of DOJ prosecutors and FBI agents that focus on computer crime and IP cases and prosecuting IP cases involving a threat to public health and safety. In addition, DOJ developed an internal IP enforcement strategy for 2007 with six strategic objectives designed to help it meets its larger goal of reducing IP theft. DOJ shared this document with the GAO, but its contents are for official government use only.

But there are other problems.  One big issue is a lack of penalty bite. The GAO said over the 6-year period it looked at (2001-2006), IP enforcement activities generally increased.   Specifically, the number of CBP’s seizures have steadily increased, but, the GAO found that CBP collected less than 1% of penalties assessed during 2001 through 2006. For example in 2006, the CPB assesses $136.6 million in penalties but collected about $600,000.  The number of IP-related criminal investigations that ICE, FBI, and FDA opened each year fluctuated during 2001 through 2006, but the number of arrests, indictments, and convictions stemming from these investigations generally increased during that time period. The number of IP prosecutions by DOJ for fiscal years 2001 through 2005 hovered around 150 cases before increasing to about 200 cases in fiscal year 2006.

Although agencies’ enforcement activities show general increases, agencies have not taken key steps to evaluate their own enforcement trends in ways that would better inform management decisions and resource allocation. According to the GAO report, the President created the National Intellectual Property Rights Coordination Center to improve and coordinate federal IP enforcement efforts, but the center has not achieved its mission, and staff levels have declined. The center, which began operations in 2000, was set up to be a hub for the collection, analysis, and dissemination to investigative agencies of IP-related complaints from the private sector. However, it got off to a slow start, compounded by the events of September 11, 2001, and the envisioned flow of private sector complaint information never materialized.  

Another issue is people-related.  The number of international trade specialists working for Customs has remained relatively flat from fiscal year 2003 through 2006, at about 11, before increasing to 17 in 2007. However, the number of these specialists that were performing targeting in 2003 through 2006 actually declined, the GAO said.   Attorneys are responsible for advising ports on how to carry out CBP’s IP enforcement authorities and have sole responsibility for developing exclusion order enforcement guidance, a highly complex and labor intensive task. The number of attorneys devoted to IP enforcement declined from 11 in 2003 to 9 in 2006 and remains at that level. Other CBP staff perform IP enforcement activities, but are not exclusively dedicated to it; CBP said does not track the amount of time these staff spend on IP enforcement, the GAO reported.   

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