ECONOMICS AND TRADE | Achieving growth through open markets
22 April 2008
IPR Enforcement, A Priority for All Countries
U.S. government experts discuss IPR enforcement
(The following is taken from the U.S. Department of State publication, Focus on Intellectual Property Rights.)
Many countries have adopted sophisticated laws to protect intellectual property in order to join international or regional accords and organizations. By doing this, a country has taken an important first step. However, the creation of laws alone will not enable a country to effectively enforce the rights of property holders. That requires the development of appropriate enforcement mechanisms.
Why does effective enforcement often lag behind the institution of law? What are the barriers to enforcement? Will the benefits of enforcement be shared by all countries or just a few?
The State Department's Bureau of International Information Programs (IIP) invited a panel of U.S. government experts to discuss these and other questions regarding the enforcement of intellectual property rights (IPR). Led by moderator Berta Gomez, then a senior writer-editor in IIP's Office of Economic Security, the roundtable discussion included: Michael Smith, an attorney adviser in the Office of Enforcement at the U.S. Patent and Trademark Office (USPTO); Jason Gull, a trial attorney with the U.S. Department of Justice's Computer Crimes and Intellectual Property Section; and Joseph Howard, a senior attorney adviser in the Intellectual Property Rights Branch of the U.S. Customs and Border Protection Service, part of the Department of Homeland Security.
According to these experts, effective enforcement of intellectual property rights should be a priority for all countries seeking economic growth and full participation in the world economy. The following is their discussion.
MODERATOR: First, where does enforcement fit into an overall intellectual property strategy?
SMITH: As the world economy develops and as economies are more reliant on high-technology sectors, the importance of protecting intellectual property rights is rising.
When the Patent and Trademark Office began conducting overseas training in 1997, the emphasis was on advising countries about drafting legislation that would conform to obligations under the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Over time, the focus has shifted from these laws to what countries actually are doing on a daily basis. We've found that many countries have laws on the books that are TRIPS-compliant, but that much remains to be done to actually enforce those rights at the borders and in the civil and criminal court systems.
As copyrights, trademarks, and patents become more important each year to the U.S. economy, our interest in protecting those rights abroad increases. And U.S. and other rights holders around the world are reluctant to invest in countries where, on a day-to-day basis, copyrights, patents, trademarks, and trade secrets are not adequately protected.
GULL: From our perspective at the Department of Justice, the harmonizing of intellectual property laws around the world through international agreements, going back even to the Berne Convention, is important to defining the rights of authors, inventors, and companies in products they develop. We would like to see countries come to a general agreement about what those rights should be.
But without effective enforcement, these laws are essentially empty promises. Effective enforcement of these rights is required so that authors and inventors can make rational decisions about whether they're going to publish, release, or invent something.
In the last few years, enforcement has become a much more significant issue. A combination of factors, including improvements in shipping, technology, telecommunications, and the Internet, has created markets that are increasingly global in scope.
Just as tangible things can move easily and cheaply across borders, IP problems can likewise be exported. For example, counterfeit products manufactured in East Asia have been a problem for a long time. But counterfeit production like this becomes an even greater problem as the products become less expensive and easier to ship to other parts of the world.
The Internet allows for instantaneous distribution of information around the world at essentially no cost. So, in addition to all the positive activity this technology allows, people are using the Internet to engage in massive infringement of intellectual property. This problem is growing as the digital sector of the economy is growing in the United States and in other countries.
MODERATOR: You said improvements in shipping make it easier for goods to cross borders. Is this one of the barriers to effective enforcement?
HOWARD: Perhaps the most critical obstacle to effective enforcement is the absence of a full understanding of the value of intellectual property rights to every nation that engages in international trade.
I've spoken in several countries overseas, and in each I was asked, "Why should we do this? Why are we protecting the wealthy nations or manufacturers who own these intellectual property rights?"
My response is that, first, if your country is governed by the rule of law and has signed certain international agreements, it is obligated to adhere to its agreements. Secondly, as your country develops its own sectors in which manufacturers, inventors, or artisans are creating intellectual property, it's important that you give them the full value of their rights.
Many times, people don't appreciate that protecting intellectual property is important to employment, which leads to growth and a better quality of life. If you don't respect intellectual property rights, no one wants to invest in your country. You won't attract the foreign capital that you need to improve the lifestyle of your nation's inhabitants.
Once people appreciate the value of the rule of law, then it's clearly not just benefiting the wealthy countries.
GULL: I, too, am asked by foreign audiences, "Why protect intellectual property when it's all American or rich countries' brands? Why should I do the bidding of these U.S. companies?" One answer is that, in much the same way that trademark owners must work to protect their brands, countries themselves must work to enforce IPR to protect the country's own reputation.
A trademark is simply a brand. It conveys information about the reputation of the manufacturer and the reputation of the product. If a particular trademark holder starts turning out poor-quality products, people will stop buying them. The reputation goes down.
To encourage investment, you need an effective legal regime that protects people's rights, including intellectual property rights. A country can help build its own brand image by ensuring effective IP enforcement. Conversely, countries that neglect IPR enforcement will tend to see their reputations, and the investment climate, suffer.
SMITH: Another key barrier to effective enforcement is a lack of political will. Without political will starting at the very top of the government, it's hard for enforcement authorities to look at these issues as important and to commit resources to solving them.
When the USPTO conducts technical assistance, we try to explain why enforcement is important to the local economy. For example, local music is not only an indigenous cultural heritage issue; it is a copyright issue of economic concern to local industries. We have found, particularly in Asia, that there's a link between the ability of the country to provide effective enforcement mechanisms and the growth of music made by local artists.
MODERATOR: But how does a government go about providing effective enforcement once it has decided to do so?
GULL: Although political will is certainly important, that is not to say that protecting intellectual property rights is just a matter of convincing the upper levels of government that this is an important issue, and that their decrees will trickle down to street-level enforcement.
The government also has to work on public awareness to make sure that the public agrees that intellectual property is worth protecting. Michael's point about indigenous music is an excellent one.
Of course, many pirated products are copies of goods produced by U.S. companies, such as Microsoft's software or American pop stars' CDs, which are then sold overseas. But if a country allows piracy to go unchecked, its own industries – music, or film, or software – will likely find their own products being pirated along American ones. Since the domestic creators of music, or movies, or software, tend to rely more heavily on their own domestic markets for their livelihoods, a high level of piracy at home may hurt these domestic producers most of all.
Piracy can make it even tougher for domestic industries to compete with large foreign companies. In countries where every kind of CD, DVD, or software is available for a couple of dollars per disc, a local film studio or software publisher will find it very difficult to compete, based on price, with the latest Silicon Valley software or Hollywood blockbuster.
Ironically, countries that want to avoid being overrun by American goods might consider strengthening their protection of intellectual property. That would serve local industry in the long run by allowing that industry to grow and encouraging investment.
If the public is on board with protecting intellectual property, then police officials will be willing to shut down street vendors selling pirated and counterfeit products. Prosecutors will be willing to pursue those cases because they won't face the wrath of an unhappy public. Judges will be more willing to mete out deterrent penalties, whether prison time or monetary damages.
HOWARD: It is particularly important for a country to have a mechanism whereby a foreign rights holder can bring a problem to the attention of authorities and have a realistic chance of receiving enforcement activity on his or her behalf. This overcomes the inertia that otherwise is present. It encourages the authorities to enforce rights.
MODERATOR: Can you describe the training or speaking that you do overseas?
HOWARD: I've gone to other countries, looked at legislation, and talked to people about what we do. I explain that it's reasonable, if you don't have the resources to have a database of all the intellectual property rights that might be infringed, to at least have a mechanism so that others can bring information to your attention. Many countries thought that that was useful.
The U.S. Customs Service also enforces exclusion orders (legally binding commands barring entry into the United States of goods that allegedly violate U.S. intellectual property rights) issuing from the U.S. International Trade Commission (USITC). Just as with intellectual property rights that are recorded with us, information about exclusion orders issued by the USITC is entered into the IPR module for dissemination to field officers. The public version of the IPR module1 can be easily accessed. The web address is http://www.cbp.gov. Click on the "Quick link" at that page for "Intellectual Property Rights," and at the next page click on "Intellectual Property Rights Search (IPRS)." The web site also contains a wealth of information about our intellectual property rights border enforcement program.
1 The Intellectual Property Rights Module (IPR module) is the U.S. Customs Services's automated system containing information about recorded intellectual property rights. The IPR module currently contains over 25,000 recordations. It provides a systematic listing and detailed information, including images, to assist Customs officers in providing adequate protection on a timely basis. The IPR module is an extension of the Customs recordation process. Recordation refers to bringing a valid, federally registered intellectual property right, a trademark or copyright, to the IPR Branch, Office of Regulations and Rulings, Bureau of Customs and Border Protection and recording that right with the IPR Branch. Information about that intellectual property right is entered into the IPR module and made available to field officers. A public version of the IPR module is available to those outside of Customs.
MODERATOR: And this is a case in which new technology actually helps enforcement?
HOWARD: Yes. But as my colleagues have pointed out, people have to want to do it. That's crucial.
MODERATOR: Do you have examples of countries in which you've seen progress and growing interest in protecting IPR?
HOWARD: I was in Egypt when they were talking about IP enforcement issues, and the people I spoke with said that they wanted a customs system like that in the United States. It seems people from all over the world look to our government for guidance on how to do certain things. They might not like what we say in some instances, but they're open to considering what we have to say.
SMITH: I think most countries would agree that the U.S. system for protecting intellectual property rights at the border is one of the most efficient systems in the world. But a lot of what is done in the United States is not practical for most countries. Certainly developing and least developed countries don't have nearly the resources that the U.S. government has. Also, most countries don't have as many border crossing points as the United States.
The customs services in these countries have to decide how best to utilize the resources that they have. In technical assistance programs overseas, the Patent Office uses that as a starting point to encourage compliance with a country's obligations under the TRIPS agreement. TRIPS provides minimum standards, such as establishing a system so that rights holders can go and record and seek enforcement of their rights.
Having said that, a country can be fully in compliance with the minimum obligations of the TRIPS agreement and still have a huge problem at its borders. For instance, the TRIPS agreement requires countries to provide for protection against imports of pirated copies of goods and goods bearing counterfeit trademarks. It does not require countries to provide protection at the border with regard to exportations of such goods or movements of such goods within the country that might be exported later.
So a primary concern of the U.S. government is the exportation of pirated and counterfeit goods that are produced in one country to other countries, for instance, within Europe or Asia. In that case, we would advocate for "TRIPS-plus" provisions. We do this in bilateral negotiations as part of the free trade agreements negotiation process. In training, we would emphasize why, although these are not TRIPS requirements, they are often needed in order to have an effective enforcement system.
MODERATOR: Are countries receptive to this?
SMITH: Definitely now more than 10 years ago. I think that, as countries have become more comfortable with their obligations under the TRIPS agreement and have had legislation in place for a while, they become more receptive.
Of particular importance to the U.S. government right now is regulating optical disc (i.e., CDs, VCDs, DVDs, etc.) piracy in countries where the production exceeds the amount of legitimate demand. Obviously, this overproduction of pirated material can't be supported by the local economy, so the product is being exported. In these instances, we would advocate export controls at the border and optical disc regulations.
MODERATOR: How big a problem is corruption as it relates to IPR?
GULL: Corruption is a significant problem in a number of countries around the world that are trying to enforce intellectual property rights.
Part of this is related to just how much money is at stake. When there's a lot of money involved in an illicit activity, there is bound to be some corruption.
Another aspect of intellectual property piracy and counterfeiting is organized crime. Criminal gangs, both within the United States and in many other parts of the world, are involved in the production and distribution of pirated and counterfeit goods at all different levels. Of course, corruption of public officials is by no means unique to intellectual property issues. But in those places where corruption is widespread, it's going to affect intellectual property enforcement.
SMITH: You asked, "What are the barriers to effective enforcement?" I think it depends on whether you are talking about civil, criminal, or border enforcement.
Criminal enforcement and border enforcement can be grouped together in that they are actions taken by the government. On the civil side, it's a private litigant going in and redressing harm in a civil courts system.
The problems on the civil side are similar in many countries around the world. The USPTO found that although lots of countries have legislation and a civil procedure code that provides for a rights holder to go into court and get interim relief or a temporary restraining order, those laws are not applied in practice.
We've also found that the damage awards that many courts give are so low that they are not actually a deterrent to those who engage in piracy or counterfeiting and do not adequately compensate rights holders for the harm they have suffered.
Finally, we've found that, in some countries, the infringing goods and the machinery used to produce those goods are not actually destroyed. They can enter back into the stream of commerce. That's obviously not in the best interest of the rights holders or the public.
On the government side, one barrier to border enforcement is that it's labor-intensive. You need customs officials at the border who are good consumers, familiar with the trademarks that have been recorded, and who have an interest in enforcing the rights of trademark holders. Without knowledgeable customs inspectors, you're going to have a problem with effective enforcement at the border.
On the criminal side, another problem is that countries initially might prosecute numerous cases of vendors selling pirated or counterfeit goods on the street. Although this might get the infringers off the street, it's not going to the source of the activity. In many countries, the infringement of intellectual property rights has its base in organized crime. Therefore, a more efficient use of a government's time and money would be to use their organized crime statutes to prosecute these cases at the source of the funding.
GULL: Yes, it's more effective to go after "big fish" than small ones because you cut off the supply. Generally, the biggest effect of going after street vendors is that piracy gets pushed a little off the street. That is, instead of a table full of pirated optical discs, you'll have one guy with a sign saying CDs and DVDs, and he'll burn you a copy or get you a counterfeit copy from a van or an apartment down the street.
Michael touched on the critical importance of having effective civil remedies. In the United States, the vast majority of enforcement is done by copyright holders or trademark owners who initiate actions. The United States has effective civil remedies: injunctions, seizures of counterfeit goods, and monetary damages. One has a realistic chance of actually obtaining those types of remedies here, and in many other countries with more established civil law mechanisms.
In some places, there isn't as mature a civil enforcement system. In those areas, for now at least, criminal and related border-enforcement mechanisms are the only realistic chance of making a dent in intellectual property infringement.
In some countries, a criminal prosecution or investigation cannot be initiated unless there is a complaint from a rights holder. This is a serious impediment because it's not practical for the rights holder to make a complaint in every instance. It means that, in some countries, police aren't empowered to seize offending goods that they recognize on the street or at a criminal enterprise. We encourage countries to eliminate this kind of requirement, whether it's in their actual law or merely a policy on the part of the police and prosecutors.
Also, some countries erect or maintain artificial barriers that make it more difficult to show ownership of a trademark or copyright. A court may require that there be testimony from the actual copyright owner, rather than simply allowing a certificate from a copyright office as "prima facie" (Ed. Note: Latin for "on its face," as it seems at first sight) evidence of copyright ownership. This sort of excessive formality can impede an effective enforcement regime. Often it's little things like this that persist even after the large steps of signing on to TRIPS, for example, have been accomplished.
MODERATOR: How important is participation on the part of the rights holder?
HOWARD: The U.S. Customs and Border Protection Program relies heavily on the rights holder who has recorded something with us to bring information about potential problems to us. Often the rights holder can pinpoint the date when infringing goods are going to arrive, the port or ship they're going to be on, or the mode of entry into the United States. That helps us to focus our efforts and not waste our limited resources.
Intellectual property rights holders also might help themselves by educating the consumer to understand that not all decisions should be based merely on price alone. A counterfeit product may be sold at a lower price, but may not have the same features as the actual product, or it may not be as safe or last as long. Equally or perhaps more important, you may not get the support that you would get from a legitimate manufacturer if the product is defective.
MODERATOR: Do health authorities have a role in telling consumers that counterfeit products may be unsafe or dangerous?
GULL: In the United States, a variety of federal laws and agencies protect against the kinds of counterfeit products that endanger health and safety. Selling a counterfeit drug on the Internet, like the fake Viagra advertised by "spammers" through e-mail, would likely be a violation of Food and Drug Administration laws regarding drug safety, as well as a federal trademark violation. It might violate laws in the individual 50 U.S. states as well.
When something is counterfeit, there's no way of tracing it to the true manufacturer. For example, counterfeit liquor is prevalent in a number of Eastern European countries. When genuine liquor violates health and safety standards, the origin of the product can be traced. The factory where it was made can be inspected and forced to improve. But with counterfeit goods, that's not possible because, by definition, the origin of the product is unknown.
SMITH: This ties in with public awareness. The government can play a role in educating the population that intellectual property protection is not only an economic issue, but also a health and safety issue. Counterfeit food products and counterfeit pharmaceuticals have resulted in deaths. Either they don't contain the components that they're supposed to or they contain components that are lethal to people, and people purchase them unwittingly.
Or consider airplane parts, where a pirated or counterfeit product is labeled as meeting laboratory standards of safety, but actually contains faulty components.
Health and safety issues can bring the discussion to a more personal level than the economic aspects of intellectual property protection. This is about people's lives.
