Testimony of
Chris Israel
Coordinator for International Intellectual
Property Enforcement
Before the
Senate Commerce, Science and Transportation’s
Subcommittee on Trade, Tourism and Economic Development
“Piracy and Counterfeiting in China”
March 8, 2006
Chairman Smith, Ranking Member Dorgan and members of the
Committee, I am pleased to join you today to discuss the challenge of
international intellectual property rights enforcement in China.
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.
Combating piracy and counterfeiting is a top priority for
the Bush 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.
We are leveraging the capabilities and resources of the United States
to promote effective, global enforcement of intellectual property rights. My office works to coordinate the international
IP enforcement efforts of the Office of the U.S. Trade Representative, the
Department of Commerce – which includes the U.S. Patent and Trademark Office
and the International Trade Administration; the Department of Homeland Security
– which includes Customs and Border Protection; the Department of Justice –
including the FBI (Federal Bureau of Investigation); and the State Department,
among others. Our combined efforts are
extensive, and this allows us to bring even greater focus, energy and prioritization
to our IPR efforts.
I appreciate the opportunity to discuss this leadership, to address the growing
problem of counterfeiting and piracy in China, and the Federal Government’s
efforts to help protect American intellectual property and our industries.
* * *
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. The 2006 Economic Report to the
President states that IP accounts for over 1/3 of the value of all U.S.
corporations, an amount equal to almost half of our 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.
A thriving, diversified and competitive economy must protect
its intellectual property rights. In the
recent State of the Union, President Bush
outlined the American Competitiveness Initiative (ACI). ACI strengthens the President’s ongoing
commitment to research and development.
We are creating a business environment that encourages entrepreneurship
and protection of intellectual property.
And this Administration is doing everything that we can to open markets
and level the playing field.
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.
* * *
Counterfeiting and Piracy in China:
The rising tide of counterfeiting and piracy in China has created enormous challenges for U.S.
businesses. According to the U.S.
Chamber of Commerce, worldwide IP theft costs U.S. industry approximately $250
billion annually. In a 2005 survey of
the US-China Business Council, members listed IPR enforcement as their greatest
concern. Our industry reports that
infringement levels in China
range from 85 to 95 percent for all copyright works, and in 2005 the value of
copyrighted works that were pirated exceeded $2.3 billion. In 2004, U.S. Customs reported that China
was the number one source of counterfeit products that were seized at our
borders, accounting for 63% of all seizures.
And though we recognize that China has expanded their efforts,
there are still critical deficiencies in IPR protection and enforcement.
As a result of China’s
continuing problems with IP theft, we posted our first IP Attaché in Beijing in 2004, and we will be posting 2 additional IP
Attachés in China
in 2006. In addition, since 2001, the U.S.
government has conducted well over 50 training and capacity building programs
with Chinese government officials.
U.S. Trade Representative Portman recently stated, “as a
mature trading partner, China
should be held accountable for its actions and required to live up to its
responsibilities, including enforcing intellectual property rights…We will use
all options available to meet this challenge.” It can be said that, so far, China
has not lived up to its responsibility to effectively enforce intellectual
property rights.
In China,
effective enforcement efforts are undermined by: a lack of sufficient political
will, corruption, local protectionism, misallocated resources and training, and
a lack of effective public education regarding the economic and social impact
of counterfeiting and piracy.
Though the problems of IP theft are great in China,
let me first mention a few positive developments.
President Hu publicly acknowledged the problem when he met
with President Bush last September and again in November. Also, the recent statements by Chinese
Vice-Premier Wu Yi on improving IPR enforcement in China and encouraging
Chinese businesses to take greater steps to protect IP is definitely a step in
the right direction. We also appreciate the Vice-Premier’s comments on ensuring
that the Chinese government only uses legal software. The additional
announcement, by the Vice-Premier, that the Chinese government is setting up 50
reporting centers for IPR violations throughout China is good news, and we hope
that these centers can be effective.
In December 2005, a Beijing
court ruled in favor of several luxury trademark brands in a suit to stop sales
of knockoff handbags. In that case, the
court ordered the owner of the Silk Street Market to pay damages and stop its
vendors from selling the fake goods.
This is an important ruling because the Chinese courts are finally
holding landlords responsible for the illegal activities of their tenants.
In January 2006, Starbucks won a lawsuit against a local
company that had adopted its Chinese name and a similar logo. The Shanghai
court fined the company and ordered it to stop using the Starbucks’ name and
issue an apology in a local newspaper.
In January 2006, the chocolate company Ferrero Rocher won a
lawsuit against a Chinese company that was producing a copycat version of its
well known gold-wrapped chocolates. The
Chinese court ordered the company to pay compensation and to stop producing the
copycat product.
Though these are good examples, the problems in China
run deep, and we continue to work extensively with the Chinese government on
the issues of counterfeiting and piracy.
U.S.
Government China
Strategy:
The U.S.
government is working on many fronts to engage China on IPR, and under President
Bush’s leadership, we have developed an effective China IP strategy. The Bush Administration’s China IP Strategy
is built on four pillars: bilateral engagement; effective use of our trade
tools; expanding law enforcement cooperation; and working with the private
sector. We are utilizing all of our
resources to effectively implement our approach:
- Working
through the U.S.-China Joint Commission on Commerce and Trade (JCCT) to
secure IP commitments;
- Effective
use of all of our trade tools:
- The
Office of the U.S. Trade Representative’s China Top-to-Bottom Review,
- Special
301 Report,
- The
World Trade Organization (WTO) TRIPS Article 63.3 request and consider
filing a complaint under the WTO dispute settlement process;
- Expanding
Law Enforcement Cooperation with the Chinese Government;
- Private
Sector Cooperation.
Joint Commission on Commerce and Trade (JCCT):
Established in 1983, the U.S.-China Joint Commission on
Commerce and Trade (JCCT) is a government-to-government consultative mechanism
that provides a forum to resolve trade concerns and promote bilateral
commercial opportunities.
Led on the U.S.
side by the U.S. Secretary of Commerce and the U.S. Trade Representative, and
on the Chinese side by Vice Premier Wu Yi, the status of the JCCT was elevated
following the December 2003 meeting of President Bush and Chinese Premier Wen
to focus higher-level attention on outstanding trade disputes. Of particular importance to this Committee is
the work of the U.S.-China JCCT Intellectual Property Working Group.
At the April 2005 JCCT session, the U.S. and China agreed to
establish an IPR Working Group so that U.S. and Chinese officials, IP
specialists, and law enforcement authorities could consult on specific problems
and cooperate on a range of IPR issues.
Through the IPR Working Group, we are working with the Chinese, helping
them take concrete steps toward significantly improving IPR protection and enforcement.
President Bush has discussed the issue personally with
Chinese President Hu Jintao, and President Hu made further commitments during a
September 2005 United Nations speech. We
need to see delivery on these commitments and achieve measurable results as China
looks to take its place among the world’s leading economic powers.
The next meeting of the JCCT will take place on April 11th,
prior to the visit of Chinese President Hu.
As the JCCT meeting approaches, it is important to look at the status of
the comprehensive set of commitments from the Chinese government to reduce
counterfeiting and piracy that were agreed to in the last meeting of the
U.S.-China JCCT. These include:
- Increasing
criminal IP prosecutions and customs enforcement,
- Expanding
law enforcement cooperation,
- Using
only legal software in government offices and enterprises, and
- Joining
the World Intellectual Property Organization Internet Treaties.
Out of the many commitments so far, only a few have been
completed.
The Chinese Ministry of Public Security established an IP
unit responsible for overall research, planning and coordination of all IPR
criminal enforcement. The unit serves
under the auspices of both the Economic Crimes Investigation Division and the
Social Order Division.
The Chinese government recently put in place an IP
Ombudsman, Yang Guohua, at the Chinese Embassy in Washington.
I met with him a few weeks ago, and he has also begun meeting with U.S.
rights holders.
The Chinese government confirmed that the criminal
thresholds in the 2004 Judicial Interpretation (JI) are applicable to sound
recordings and that the JI makes exporters subject to independent criminal
liability. But there have not been any
reported criminal cases using the new thresholds.
We also have quite a few commitments that are still in
progress and others where there has been little if any movement.
By the end of 2005, China committed to use only legal
software at all levels of government and to extend this commitment to large
enterprises, including state-owned enterprises, this year. China claims to have completed its government
legalization program, but U.S. industry says its sales data does not support
this claim, and there is no other evidence to show that China has moved forward
to purchase and use only legal software.
In a recent interview, Commerce Secretary Gutierrez stated that the use
of pirated software by China
is “absolutely unacceptable” and that this requires more attention from the
world community.
Also, as part of our discussions with the Chinese, we
continue to raise the issue of optical disc piracy. China needs to take steps to
eliminate all illegal optical disc production. Action especially needs to be
taken against those “government licensed” optical disc plants in China that
engage in this type of criminal activity.
We consider this an important issue for our copyright industry, and
apart from the significant economic damages, this type of piracy harms our
cultural and creative innovative capacity.
China has also agreed to regularly instruct enforcement
authorities throughout the country that copies of select films which are still
in censorship, and not yet ready for distribution are deemed pirated and
subject to enhanced enforcement. However, industry reports that progress on
this initiative has been very uneven.
This memorandum of understanding (MOU) between China and the Motion Picture Association (MPA)
protects only the 15 theatrical films actually released in China. Industry reports that little progress has
been made on this initiative.
The Chinese legal system follows three routes: administrative,
civil and criminal. U.S. rights holders place primary importance on criminal
cases being filed against violators of IPR in China. In the last JCCT meeting, China committed to increasing the
number of criminal prosecutions for IPR violations relative to the number of
administrative cases. This is important
because it would send a message to those who violate the law that they can not
get away with just paying a fine – IP theft is a crime, and there will be
criminal penalties.
China
has also agreed to improve IPR enforcement at trade shows and retail and
wholesale markets. The United States is working with China to: establish IPR monitoring centers at
major trade fairs, set up a training program, and host a trade fair IPR
enforcement seminar to educate U.S.
and Chinese small and medium-sized enterprises (SMEs) on how to enforce their
IPR at an upcoming trade fair. China also agreed to “clean up” Beijing’s Silk Street
Market and other well-known consumer markets.
At the major consumer markets, it may appear at first glance
that the Chinese have made some progress.
In January, the Shanghai
government announced its plans to shut down Xiangyang Market, that city's biggest
seller of fake goods. According to local
reports, the Mayor of Shanghai stated that the market had damaged Shanghai's reputation,
because approximately 80% of the city’s counterfeiting and piracy originates in
that market. But that market will not close
until June 2006, and at that point, most of the vendors will be moving to other
markets, including one, southwest of the city, in Longhua. These illegal markets which exist all over China,
continue to operate openly and notoriously.
They must be shut down or permanently be rid of infringing goods. The Chinese government’s ability to take
active steps to stop the sale and production of counterfeit Olympic products
demonstrates that they have this ability.
Also, China
is working toward accession to the World Intellectual Property Organization
Internet Treaties. China recently sent a delegation to the United States
to discuss the legislative steps necessary to accede to the WIPO Internet
Treaties. We have problems with China’s draft legislative package and will
continue to communicate our concerns to China. It is important China
get this right, so that China’s
protections move forward and meet the needs of the digital age.
The proliferation of fake pharmaceuticals also creates
serious issues of health and safety. In China,
there are certain factories that are categorized as unregulated “chemical
factories” but they primarily manufacture the active ingredients for certain
drugs. Our interest is to have these
“factories” come under the supervision of China’s Food and Drug
Administration (FDA), so that they can be monitored and regulated.
Additional issues include protecting undisclosed test data
against unfair commercial use for pharmaceutical products. We also need to see clarification and improved
coordination between China’s
patent office and the SFDA to prevent generic drug companies from infringing on
pharmaceutical patents and producing patent infringing drugs.
Effectively using all of our Trade Tools:
We are making use of all the trade tools that we have at our
disposal. As China takes its place as a player
on the world economic stage, we expect that it will live up to its
international obligations and uphold the rule of law.
USTR Top-to-Bottom Review:
The Top-to-Bottom review assesses the benefits and
challenges in U.S.-China trade following China’s first four years of
membership in the World Trade Organization.
The Top-to-Bottom review announced several actions that will be
implemented by USTR and other U.S.
government agencies; and I will mention a few of them here. First, USTR is expanding their trade
enforcement capacity to help ensure that China complies with its trade
obligations. USTR is establishing a China Enforcement Task Force to be headed
by a Chief Counsel for China Trade Enforcement.
Second, USTR is expanding its ability to obtain comprehensive
forward-looking information regarding China’s
trade regime and U.S.
trade policy practices by adding additional USTR personnel and establishing an
Advisory Committee for Trade Policy and Negotiation (ACTPN) China Task
Force. Third, USTR and the State
Department are discussing expanding U.S.
trade policy and negotiating capacity in Beijing
to augment our current efforts and more effectively pursue top priority issues,
such as protecting IPR. Having a trade
negotiator on the ground is key. This
individual will be in constant contact with American businesses and Chinese
officials, working to help remove trade barriers, improve market access and
improve IP enforcement.
Through USTR, my office and our inter-agency team, the
Administration is improving coordination across the U.S. government. We are regularly reviewing our strategies and
assessing the progress that we have made so that we can continue to take the
appropriate next steps.
Special 301 Report:
China’s
placement last year on the Priority Watch List (PWL) reflects the significant
level of concern that we have concerning China’s problems with IPR
protection, enforcement and market access.
This ranking sends a global signal to our trading partners and to
companies seeking to do business in China. It also sends a strong message to China
that these concerns must be addressed.
World Trade Organization Mechanisms:
In the fight against counterfeiting and piracy, we are using
every trade tool at our disposal, and we consider all options to be on the
table. As announced in its Special 301
Report last year, USTR filed a formal request under Article 63.3 of the TRIPS
agreement (Agreement on the Trade-Related Aspects of Intellectual Property
Rights), asking China to detail the specific efforts it has taken to enforce
IPR, which includes China’s application of criminal, administrative, and civil
remedies for infringement cases that affect U.S. rights holders. We were joined in our Article 63.3 request by
Japan and Switzerland, who also submitted
similar requests at the same time.
Though China’s
official response was less than forthcoming, we are working, alongside our
trading partners and with the Chinese government, to fulfill this request. China’s
response will demonstrate whether it is serious about enforcing its IPR
protections in a transparent open manner.
The United States
is the only country that has brought a case against China in the WTO. And the United
States government is again left with no choice but to
consider filing another complaint against China this time for inadequate
enforcement of IPR. In this regard, USTR
is working with industry to evaluate facts and develop the necessary
information on this potential case.
Law Enforcement Cooperation:
Another major priority is to expand law enforcement
cooperation between the U.S.
and China. Progress is being made, and Attorney General
Gonzales laid the groundwork for expanded law enforcement cooperation on IP
cases during his trip to China
in late 2005.
Our law enforcement agencies are already working with their
counterparts in China
to share information, expertise and investigation techniques.
The Department of Justice is looking to build on these
existing efforts and develop even stronger bilateral IPR law enforcement
cooperation.
The existing U.S.-China Joint Liaison Group (JLG) works to
facilitate criminal justice cooperation and has already discussed criminal IPR
enforcement on the plenary level.
The U.S.
has requested that the Chinese agree to establish an IP law enforcement experts
group through the JLG. Expanding our IPR
law enforcement cooperation efforts would enable us to focus on developing
joint IPR enforcement operations and improve cooperation on criminal
investigations. In addition, our efforts, led by the Department of Justice,
would focus on the operational aspects and training linked to China’s
criminal law enforcement efforts to address online piracy. Though a nationwide crackdown on internet piracy
has not begun, as China has committed to do, China has worked out a plan to
focus on copyright violations involving audio-video and software products,
including unauthorized using and sharing at Internet cafes and the illegal
operation of websites.
Building on the joint U.S.-China law enforcement effort
called Operation Spring, the U.S.
and Chinese law enforcement authorities recently joined forces in Operation
Ocean Crossing, successfully disrupting an organization engaged in the
large-scale trafficking of counterfeit pharmaceuticals. The action resulted in numerous arrests in China and the United States and the capture of
hundreds of thousands of fake pharmaceuticals.
As I stated earlier, China
was the number one source of counterfeit products that were seized at the United States
border last year. The Chinese government
needs to better equip its Customs Authorities to control the exports of
counterfeit and pirated goods from China. An important step that China agreed to take at the 2005
JCCT is to adopt regulations that allow Customs to refer serious cases for
criminal prosecution. China should also reinstate
provisions in its Customs regulations to allow for fines up to 100% of the
value of the seized goods. To take
forward China’s JCCT commitments
on better customs enforcement, U.S.
and Chinese Customs officials, subject to confidentiality concerns, will be
cooperating on the exchange of infringement data and information on significant
seizures. There will also be technical
exchanges on risk assessment and regulatory improvements.
Private Sector Cooperation:
Companies need to be aggressive advocates of their own
IP. We are working actively with the
business community for assistance as we go forward. They are our eyes and ears on the ground and
know better than anyone how inadequate IPR enforcement affects their
businesses. My office conducts active
outreach with industry, and we want to hear their stories and find ways to use
the data that they have collected in China. We will continue to work together to find
solutions and lead enforcement efforts.
We are working with U.S. and international trade
associations such as the American Bar Association, American Chamber of Commerce
in China, Business Software Alliance, Entertainment Software Association,
International Chamber of Commerce, International Intellectual Property
Alliance, International Federation of Phonographic Industries, Motion Picture
Association, National Association of Manufacturers, The Pharmaceutical Research
and Manufacturers of America, Quality Brands Protection Committee, Recording
Industry Association of American, U.S. Chamber of Commerce and the U.S.-China
Business Council, to name just a few.
An important tool that we use is the IPR Case Referral
Mechanism (CRM) which was created by the U.S.
government to facilitate the submission of individual U.S. company IPR cases through MOFCOM (China’s
Ministry of Commerce) to relevant Chinese agencies. Our inter-agency team
reviews cases where the Chinese government fails to provide adequate protection
of IPR to U.S.
businesses, and after an internal vetting process, sends approved cases to the
Chinese government to facilitate their resolution. Five cases have already been
submitted to the Chinese through the Case Referral Mechanism.
Ambassador Clark Randt at our Embassy in Beijing
holds an annual IPR Roundtable which brings together senior Chinese officials
and U.S.
business representatives. The Roundtable
gives U.S.
rights holders the opportunity to discuss the problems they are facing and find
the solutions that they need.
Also, our Embassy and Consulate officers on the ground are a
valuable asset for U.S.
companies. They play a critical role as
IPR “first responders”, helping U.S.
businesses resolve cases when their rights are violated.
We know that companies are conducting investigations into
IPR theft and collecting data as they do business in China. But American companies should not have to be
the sole investigators of IP crime in China. The Chinese government needs to step up to
the plate, conduct investigations and stop the crime of IP theft that is
occurring in their country.
The Bush Administration’s efforts 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.
* * *
Strategy, Organization and Focus:
As this Committee clearly understands, the problem of global
piracy and counterfeiting confronts many industries, exists in many countries,
apart from China,
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.
Through President Bush’s leadership, we created a five-point plan.
- Empower
American innovators to better protect their rights at home and abroad.
- Increase
efforts to seize counterfeit goods at our borders.
- Pursue
criminal enterprises involved in piracy and counterfeiting.
- Work
closely and creatively with U.S. Industry.
- Aggressively
engage our trading partners to join our efforts.
By working more closely with other U.S. government agencies, we
implemented that plan, and we have made progress. I’d like to share with you some of the
approaches that we are taking and the objectives that we have set to improve
global IP enforcement.
Last month, under the leadership of my office and the White
House, the National Intellectual Property Law Enforcement Coordination Council
(NIPLECC) held its first principals meeting this year. NIPLECC brings together the leaders of the
key operational entities within the federal government that are responsible for
IP enforcement. At the meeting, we
looked at better ways to coordinate our domestic and international IP efforts
in order to ensure the effective and efficient enforcement of IP both at home
and abroad. By establishing priorities
and objectives at a senior level, we are reinforcing our day-to-day activities
and ensuring 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.
The Council 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 Economic, Business and Agricultural Affairs).
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 national 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.
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 is the strategy that
NIPLECC is implementing. STOP 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 the most comprehensive initiative ever advanced to
fight global piracy where it starts, block bogus goods at America’s borders and help American
businesses secure and enforce their rights around the world. STOP has made significant progress in the
past year, and we are planning to build on this success. STOP is an attempt to play offense in the
global fight against piracy and counterfeiting.
Through all of these initiatives, we are achieving results, maintaining the
commitment of senior Administration officials, institutionalizing an
unprecedented level of coordination within the federal government and receiving
attention around the world. The message
that we are delivering is – that 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.
To help American
innovators secure and enforce their rights across the globe, we have new
federal services and assistance:
We created a hotline (1-866-999-HALT), which is staffed by
specialized attorneys who counsel businesses on how to protect their IP and work
with callers on how to best resolve problems.
In cases where the individual or company has properly registered its
rights, its issue can then be referred to a trade compliance team that will
monitor their case and work to see what next steps can be taken.
We also developed a website (www.stopfakes.gov) and brochure
to provide information and guidance to rights holders on how to register and
protect their IP in markets around the world.
We created downloadable “IP toolkits” to guide businesses
through securing and enforcing their rights in key markets across the
globe. These toolkits are available at
the Stopfakes.gov website, and cover countries such as China, Russia,
Mexico, Korea and Taiwan.
In November 2005, Commerce Secretary Gutierrez announced,
the China Intellectual Property Rights (IPR) Advisory Program. This program is done in conjunction with the
American Bar Association, the National Association of Manufacturers and the
American Chamber of Commerce in China. It offers small and medium sized U.S.
businesses free IPR consultation with an attorney.
Also, we are providing 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 the supply chain.
Next, we need to
increase our efforts to stop fake and counterfeit goods at America’s borders:
Customs and Border Protection (CBP) has developed an online
recordation tool for rights holders to record their trademarks and copyrights
with them. Additionally, CBP has also
begun implementing new risk assessment models and technologies to cast a wider,
tighter net on counterfeit and pirated goods and to stop these goods from
entering our borders.
We are working with our trading partners to share
information and improve our capabilities to assess and anticipate risks. We have seen the results of this effort with
the European Union. We have followed up
on the U.S./EU Economic Ministerial held last year, where leaders of both governments
committed to expand information sharing of customs data.
We are also working to build international support and rules to stem the flow
of fake and counterfeit goods and keep them out of global supply chains. We have conducted 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.
Law enforcement must play a leading role
in dismantling criminal enterprises that steal intellectual property:
U.S.
law enforcement agencies are also working closely with industry to gather
information, develop cases and bring convictions against the criminals who
steal their IP. We need to be as
sophisticated and creative as the criminals.
It is important that government and industry work together with
coordinated efforts.
The U.S.
government (Department of Justice) has pursued numerous large-scale operations
targeting criminal organizations involved in online piracy and trafficking in
counterfeit goods. For instance, the
Department of Justice (DOJ) has 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.
The Department of Justice led Operation Site Down, an international online
piracy investigation culminating in the execution of over 90 search warrants
and arrests in the U.S.
and eleven countries abroad in June 2005.
Operation Site Down dismantled some of the largest and most prolific
high-level distribution sites preventing tens of million in further losses to
the content industry. To date, 44
individuals have been indicted and ten convicted of felony copyright offenses.
As part of the STOP Initiative, the Department of Justice
formed an Intellectual Property Task Force to examine how it could maximize its
efforts to protect intellectual property rights. In October of 2004, the Task Force Report was
released and it included a comprehensive set of recommendations on steps that
the Department of Justice could take to better protect IPR.
In addition the Department of Justice has executed measures to maximize law
enforcement’s ability to pursue perpetrators of IPR crimes. For example, we are increasing 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 230 (two in virtually every U.S. Attorney’s Office in
the country) the number of specially trained prosecutors available to focus on
IP and high-tech crimes. As part of the
Task Force recommendations, the DOJ also appointed an IP Law Enforcement
Coordinator for Asia, who is stationed in Bangkok. This individual will work with DOJ officials
in the Computer Crime and Intellectual Property Section and the Office of
International Affairs to oversee their law enforcement efforts in the region.
The Administration 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.
In addition, we have executed agreements to implement
obligations of the US/EU Mutual Legal Assistance and Extradition
Agreements. These agreements ensure
cooperation regarding intellectual property crimes with Austria, Belgium,
Denmark, Finland, France, Hungary, Ireland, Latvia, Lithuania, Luxembourg,
Netherlands, Portugal, Slovenia, Spain, Sweden, United Kingdom; and we have
completed negotiations with the nine remaining E.U. countries – Cyprus, Czech
Republic, Estonia, Germany, Greece, Italy, Malta, Poland and Slovakia.
Working closely and
creatively with U.S.
industry:
As I mentioned earlier, we are conducting extensive outreach
with U.S.
industry and trade associations.
Additionally, we are working with 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.
We are also conducting post-entry audits to identify
companies vulnerable to IP violations and working with them to correct their
faulty business practices.
We are reaching out
to our trading partners and building international support. U.S. leadership is critical and we
are active on a number of fronts:
When U.S.
government officials meet with our global trading partners for bilateral and
multilateral discussions, IP protection and enforcement are always top
priorities.
This Administration makes IPR a priority when negotiating
new free trade agreements as you saw most recently with CAFTA-DR (the United
States-Central America-Dominican Republic Free Trade Agreement).
In January, we met with European Union Officials at the
White House for a series of meetings to address global piracy. We are breaking new ground and have begun to
expand our cooperation with the EU – focused on border enforcement, a strategy
to address problems in developing countries and working with the private
sector. Particularly with China, the EU announced that they will be
posting an IP attaché in Beijing.
At the G8 meeting, President Bush secured an agreement from
fellow leaders to focus on IP enforcement, and we plan on working with Russia
on IP issues during their presidency of the G8.
At APEC last year, we secured an endorsement of a U.S.-Japan
sponsored ‘APEC Anti-Counterfeiting and Piracy Initiative’ to reduce trade in
counterfeit goods and to combat online piracy, while increasing cooperation and
capacity building. In close cooperation
with industry and a number of U.S. Government agencies, USTR led this effort,
which culminated last November in agreement by the leaders of APEC’s 21 member
economies in a set of model guidelines to reduce trade in counterfeit and
pirated goods, and to protect against unauthorized copies, and to prevent the
sale of counterfeit goods over the Internet.
We are currently working to implement and expand these model guidelines.
Also, the work of the U.S.-Russia IP Working Group remains a
high priority, as the United States,
through USTR, and Russia
work to address a number of IP-related issues and steps that need to be
taken.
Additionally, we have commissioned a study by the OECD (The
Organization for Economic Cooperation and Development) to examine the impact of
global counterfeiting and piracy. My
office and our inter-agency team have held several meetings with OECD officials
to follow-up and assist with this study.
We are looking for sound, reliable and accurate information to be
produced with this study, so that we may have accurate metrics that can be used
effectively by our principals and by industry as we continue building
international support to stem the flow of fake and counterfeit goods and keep
them out of global supply chains.
Next, the U.S.
has conducted several hundred IP training and capacity building programs around
the world to improve criminal and civil IPR protection. To that end, the Administration has
established a Global
Intellectual Property
Academy to consolidate
and expand our training programs for foreign judges, enforcement officials and
administrators.
We are continuing to expand our IP attaché program in China and positioning new attachés in Brazil, Russia
and India. Having IP attachés stationed in these
countries will enhance our ability to work with local government officials to
improve IP laws and enforcement procedures in addition to assisting U.S.
businesses to better understand the challenges of protecting and enforcing
their IPR.
On the domestic front, we have education campaigns that take
place across America
to teach small and medium sized enterprises how to secure and protect their
rights and where to turn for federal resources and assistance. It is important to note that only 15% of
small businesses that do business overseas know that a U.S. patent or trademark provides protection
only in the United States. Companies need to make sure that they
register for intellectual property protection overseas. We had an education program in San Diego and a China-specific program in Atlanta
last week, and we have upcoming programs in Nashville,
Columbus and Northern
Virginia. These events help
educate businesses on what intellectual property rights are, why they are
important, and how to protect and enforce these rights domestically and
internationally.
* * * *
Mr. Chairman, the Bush Administration is committed to stopping intellectual
property theft in China
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, trade and education 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.