Official Testimony

Chris Israel

Coordinator for International Intellectual Property Enforcement

Judiciary Subcommittee on Courts, the Internet and

Intellectual Property

December 7, 2005

Chairman Smith, Ranking Member Berman and members of the Committee, I am pleased to join you today to discuss the challenge of international intellectual property rights enforcement.

I want to thank the Committee for its continued support and leadership on issues concerning the protection of intellectual property. I look forward to the opportunity to work together to ensure that the heart of America’s innovation economy, its intellectual property, is effectively protected around the world.

The Bush Administration is keenly aware of the significance of IP protection for American businesses, workers, entrepreneurs and innovators. It is estimated that IP theft costs U.S. businesses approximately $250 billion annually and results in the loss of hundreds of thousands of American jobs. Combating piracy and counterfeiting is a top priority for this Administration. This prioritization is evident in the leadership shown by President Bush. He has consistently raised IP enforcement with foreign leaders, placed the issue on the agenda of the G8 and made it a key part of the recent U.S./EU summit. He has also discussed our ongoing concerns with leaders of critical markets such as China and Russia. He has directed his Administration to address this issue actively, aggressively and with a results-oriented approach.

I appreciate the opportunity to discuss this leadership, to address our efforts to maximize the Federal government’s role in protecting American intellectual property and to share our results-oriented strategy.

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Leadership and Prioritization

The reasons for the Administration’s leadership on IP enforcement and for its prioritization are clear.

First, few issues are as important to the current and future economic strength of the United States as our ability to create and protect intellectual property. U.S. IP industries account for over half of all U.S. exports. They represent 40% of our economic growth and employ 18 million Americans who earn 40% more than the average U.S. wage, and a recent study valued U.S. intellectual property at approximately $5 trillion – or about half of U.S. GDP. Quite simply, our ability to ensure a secure and reliable environment for intellectual property around the world is critical to the strength and continued expansion of the U.S. economy.

The enforcement of intellectual property rights also carries great consequence for the health and safety of consumers around the world. The World Health Organization estimates that 10% of all pharmaceuticals available worldwide are counterfeit. The U.S. Federal Aviation Administration estimates that 2% of airline parts installed each year are fake – or about 520,000 parts. And we have seen counterfeit circuit breakers that overheat and explode, brake linings made of wood chips and cardboard, and fake power cords. In the world of today’s sophisticated criminal IP operations, if a product can be easily counterfeited, has an immediate demand and provides a good profit margin it will be copied. Consumer safety and product quality are concerns obviously not on the minds of global IP thieves.

Finally, the theft of American intellectual property strikes at the heart of one of our greatest comparative advantages – our innovative capacity. Through the applied talents of American inventors, researchers, entrepreneurs, artists and workers we have developed the most dynamic and sophisticated economy the world has ever seen.

And I truly believe the world is a much better place due to these efforts. We have delivered life-saving drugs and products that make people more productive. We have developed entirely new industries and set loose the imaginative power of entrepreneurs everywhere. And, we set trends and market best-of-class products to nearly every country in the world.

We value our heritage of innovation and exploration – it is not only part of our history; it is the key to our future.

And this future – a future of innovation, exploration and growth that benefits the entire world -- rests on a basic, inherent respect for intellectual property rights and a system that protects them.

The Bush Administration’s effort to provide a secure and predictable global environment for intellectual property is driven by a commitment to foster U.S. economic growth, to secure the safety and health of consumers everywhere, and an abiding respect for the great American innovative spirit that has driven our nation since its founding and will determine our future.

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Organization and Effective Engagement

This is my first opportunity to testify as the Coordinator for International Intellectual Property Enforcement, and I appreciate the chance to discuss how the Administration is working to focus and leverage our vast capabilities and resources.

The Office of International Intellectual Property Coordination is located at the Department of Commerce, and I report to Commerce Secretary Carlos Gutierrez. We also work under the leadership of the White House, and our efforts thus far have met with tremendous cooperation from the all federal agencies that contribute to our IP enforcement efforts.

Reinforcing the commitment and collaboration that exists within this interagency process is the fact that a senior Justice Department official is currently serving as the Deputy Coordinator for International Intellectual Property Coordination and Customs and Border Protection and the Patent and Trademark Office have both provided detailees to support our efforts.

A critical element in our overall coordination is the Strategy Targeting Organized Piracy (STOP) Initiative launched by the Bush Administration in October 2004. STOP has built an expansive interagency process that provides the foundation and focus for all of our efforts. This initiative is led by the White House and brings together USTR, the Department of Commerce, the Department of Justice, the Department of Homeland Security and the State Department. STOP is an attempt to play offense in the global fight against piracy and counterfeiting. The agencies involved have identified ways to empower U.S. businesses to better protect their IP, increase efforts to seize counterfeit goods at our borders, pursue criminal enterprises involved in piracy and counterfeiting, found innovative ways to work with U.S. industry, and aggressively engaged our trading partners to join our efforts.

STOP has yielded tangible results (Fact Sheet is submitted for the record), maintained the commitment of senior Administration officials, institutionalized an unprecedented level of coordination within the federal government and received attention around the world. The message that the STOP Initiative, and indeed our new Office of International Intellectual Property Enforcement, allows us to deliver is – the United States takes the issue of IP enforcement very seriously, we are leveraging all of our resources to address it and we have high expectations of all of our global trading partners.

In addition to the infrastructure put in place by the STOP Initiative and reinforced by the Office of International Intellectual Property Enforcement, the Administration will seek a reinvigorated role for the National Intellectual Property Law Enforcement Coordination Council (NIPLECC). NIPLECC is tasked with coordinating domestic and international intellectual property law enforcement in order to ensure the effective and efficient enforcement of intellectual property in the United States and worldwide. NIPLECC has made a number of valuable contributions since its creation in 1999 including the development of a comprehensive database that includes all recent IP law enforcement training provided by the U.S. government to developing and least developed nations as well as delivering legislative suggestions to improve domestic IP laws related to enforcement. However, there is unmet potential and in my role as Director of NIPLECC I look forward to working with this Committee to ensure that we are maximizing the capabilities of NIPLECC. To begin this effort, I can report that we will conduct a meeting of all NIPLECC members in January. This will be the most comprehensive NIPLECC meeting since its inception in 1999.

NIPLECC can play a vital role in our effort by bringing together the leaders of the key operational entities within the federal government that are responsible for IP enforcement. By establishing priorities and objectives at a senior level we will reinforce our day-to-day activities and ensure that all of the agencies critical to the federal government’s IP enforcement efforts are closely coordinated and committed to a common results-oriented agenda. In addition to the existing NIPLECC structure - which is comprised of the Department of Justice (Assistant Attorney General of the Criminal Division), the Commerce Department (Under Secretary for Intellectual Property and Director of the Patent and Trademark Office and Under Secretary for International Trade), the Office of the U.S. Trade Representative (Deputy USTR), the Department of Homeland Security (Commissioner of Customs and Border Protection) and the State Department (Under Secretary for Economics, Business and Agricultural Affairs).

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Strategy and Focus

As this Committee clearly understands, the problem of global piracy and counterfeiting confronts many industries, exists in many countries and demands continuous attention. With finite resources and seemingly infinite concerns, how we focus our efforts is crucial. I appreciate this opportunity to share with you the key areas which make up the Administration’s overall Strategy for Targeting Organized Piracy.

First, we are working to empower America’s innovators to secure and enforce their rights at home and abroad. Our efforts to provide new federal services and assistance include:

· A hotline (1-866-999-HALT) to counsel businesses on how to protect their IP.

· A website (www.stopfakes.gov) and brochure, to provide information and guidance to right holders on how to register and protect their IP in markets around the world.

· “IP toolkits” to guide businesses through securing and enforcing their rights in key markets around the world. Available at the www.stopfakes.gov website, toolkits for China, Russia, Mexico, Korea and Taiwan are downloadable.

· Extensive education campaigns across the country to teach small and medium sized enterprises how to secure and protect their rights and where to turn for federal resources and assistance. These seminars have occurred in 20 states and more are planned in 2006.

· An online recordation tool for rights holders to record their trademarks and copyrights with Customs and Border Protection.

· We have launched a China Intellectual Property Rights (IPR) Advisory Program in conjunction with the American Bar Association, the National Association of Manufacturers and the American Chamber of Commerce in China to provide legal counsel for SMEs to protect and enforce their IPR in China.

· Training for U.S. embassy personnel to be effective first responders to IPR issues in order to identify problems abroad and assist rights holders before fakes enter the market and/or supply chain.

Next, we need to increase our efforts to stop fake and counterfeit goods at America’s borders. This means:

· Casting a wider, tighter net on counterfeit and pirated goods by implementing new risk assessment models and technologies to stop counterfeit goods at our borders.

· Working with trading partners to share information and improve our capabilities to assess and anticipate risks. We have seen results of this effort with the European Union. At the U.S./EU Economic Ministerial last week, leaders of both governments committed to expand information sharing of customs data. Follow-up work on this commitment has already begun.

We need to build international support and rules to stem the flow of fake and counterfeit goods and keep them out of global supply chains. Our efforts here include:

· Commissioning a study by the Organization for Economic Cooperation and Development on the impact of global counterfeiting and piracy.

· Conducting outreach to Canada, the European Commission, France, Germany, Hong Kong, Japan, Korea, Mexico, Singapore and the United Kingdom laying the basis for increasing cooperation on IP enforcement. Outreach to other like-minded countries is underway.

· Facilitating the transfer of IP criminals to justice in America by revising and modernizing mutual legal assistance treaties and extradition treaties with Finland, Sweden, Belgium, Spain, the UK and Luxembourg. Additional treaties are under negotiation.

· Conducting post-entry audits to identify companies vulnerable to IP violations and working with them to correct their faulty business practices.

· Working closely with U.S. industry – namely, the Coalition Against Counterfeiting and Piracy, a U.S. Chamber of Commerce and National Association of Manufacturers led association - on the “No Trade in Fakes” program to develop voluntary guidelines companies can use to ensure their supply and distribution chains are free of counterfeits.

Law enforcement must play a leading role in dismantling criminal enterprises that steal intellectual property. We have:

· Pursued numerous operations targeting criminal organizations involved in online piracy and trafficking in counterfeit goods. We have indicted the four leaders of one of the largest counterfeit goods operations ever uncovered in New England – broke up a scheme to sell more than 30,000 luxury goods -- including handbags, wallets, sunglasses, coats, shoes, and necklaces, and found the materials to manufacture at least 20,000 more counterfeit items.

· Led Operation Site Down, an international online piracy investigation involving more than 90 searches in twelve countries. Such cases have led to numerous arrests and convictions around the globe, seizure of millions of dollars worth of pirated products and the dismantling of criminal operations.

· Led Operation Ocean Crossing, a joint U.S. and Chinese law enforcement action that disrupted an organization trafficking in counterfeit pharmaceuticals. The action resulted in arrests in China and the United States and the capture of hundreds of thousands of fake pharmaceuticals.

· Executed measures to maximize law enforcement’s ability to pursue perpetrators of IPR crimes. For example, we increased from 5 to 18 the total number of Computer Hacking and Intellectual Property Units in U.S. Attorneys’ Offices across the country. This increased to 229 (one in each federal district) the number of specially trained prosecutors available to focus on IP and high-tech crimes.

· Proposed the Intellectual Property Protection Act of 2005 to strengthen criminal intellectual property protection, toughen penalties for repeat copyright criminals, and add critical investigative tools for both criminal and civil enforcement authorities. 

We must reach out to our trading partners and build international support. U.S. leadership is critical and we are active on a number of fronts:

· We have obtained endorsement of increased protection for IP in multilateral forums such as the G-8 and Asia-Pacific Economic Cooperation forum, and bilateral venues with the European Union and China.

· The past year has resulted in particularly strong commitments from China in a variety of fora. Within the Joint Committee on Commerce and Trade (JCCT) the Chinese have committed to, among other things, address the proliferation of illegal software within government and state-owned enterprises, increase criminal prosecutions for IP violations, enhance cooperation with U.S. law enforcement and join the WIPO Internet Treaties. We have already seen movement on a number of these commitments. Notably, Attorney General Gonzales laid the groundwork for expanded law enforcement cooperation on IP cases during a recent trip to China and China recently sent a delegation to the United States to discuss the steps necessary to accede to the WIPO Internet Treaties. In addition, USTR has recently invoked a procedure under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights to make a formal request for China to provide detailed information regarding their IP enforcement regime. The Japanese and Swiss governments also delivered similar requests to China for enforcement data under the same WTO provision.

· Noting the interest this Committee showed in increased cooperation with the European Union and Japan at its hearing in May, I would like to point to two significant developments. Just last week, Secretary Gutierrez reached an agreement with European leaders to significantly expand the cooperation between the United States and EU to address global piracy through stepped-up commitment to enforcement and information sharing.

· We are increasing the number of U.S. IP attaches abroad in our embassies located in China, India, Brazil and Russia, who will assist U.S. businesses, advocate U.S. intellectual property policy and conduct IPR training.

Finally, we must educate other governments about intellectual property rights:

· The United States has conducted numerous training and capacity building programs working with foreign judges and law enforcement officials from around the world to improve criminal and civil IPR protection. So far, we have conducted over 100 IPR enforcement projects and 290 IPR technical-assistance projects around the world, producing real results in IP protection and enforcement.

· We have established a Global Intellectual Property Academy to consolidate and expand intellectual property training programs for foreign judges, enforcement officials, and relevant administrators.

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Mr. Chairman, the Bush Administration is committed to stopping intellectual property theft and providing businesses the tools they need to flourish in the global economy. As I work to coordinate the U.S. government’s intellectual property enforcement efforts, and with your continued support and the partnership of this Committee, we will be able to do even more to provide American businesses and innovators with the protection they need. America’s intellectual property is important not just for her national security, but it is also a necessary component in ensuring continued U.S. economic growth and technological leadership. We must take advantage of the opportunity to work together to better protect the knowledge industries of today so that we may continue to see the innovations of tomorrow. Thank you very much.