Concrete Steps Congress Can Take to Protect America's Intellectual Property

Today, the Administration issued 20 legislative recommendations to Congress, designed to improve intellectual property enforcement.  These legislative recommendations exemplify the Administration’s commitment to protect and grow jobs and exports, as well as to safeguard the health and safety of our people.

The theft of American innovation costs jobs and imperils economic growth.  This must end.  We have recommended legislative changes that will help us ensure that American workers and businesses are protected.  Among those changes, we are seeking significantly increased criminal penalties for those selling counterfeits to our military, when counterfeiting and piracy is funding organized criminal activity, for those selling products that can harm or kill American consumers and for those stealing American innovation and transferring it overseas.  We are also seeking changes to ensure that our laws can address technological changes, such as illegal streaming, and that law enforcement can share information effectively with businesses.  

Selling counterfeit products for use by the military or in national defense risks public safety and the safety of our service men and women.  Therefore, we  proposed today to significantly increase criminal penalties for those seeking to profit at the expense of our safety.  We are working intensely with the Department of Defense and NASA to ensure counterfeit goods are not entering the U.S. Government supply chain.  Yesterday, we hosted a White House meeting with DOJ, the FBI, DoD and others to discuss how to prevent procurement of counterfeit products across the Federal government.   We look forward to working closely with Senator Levin and Senator McCain as the Senate Armed Services Committee investigates this critical issue.

Because of the high profit margin and shorter prison sentence for intellectual property crimes compared to other offenses, piracy and counterfeiting are a strong lure to organized criminal enterprises, which can use infringement as a revenue source to fund their other unlawful activities.  One of the most brutal drug cartels in the world – Mexico-based La Familia -- manufacturers and sells counterfeit software, generating more than $2.4 million in profits each day.  The Administration has recommended increased penalties for intellectual property crimes committed by organized criminal enterprises and wiretap authority for copyright and trademark offenses, which will enhance efforts to fight organized crime and bring their leaders to justice.

In this White Paper, we are seeking six legislative changes to fight counterfeits drugs, including increased criminal penalties for counterfeit drug offenses, particularly those that risk death or serious bodily injury.  Many of you may have seen the 60 Minutes report this past Sunday on counterfeit drugs coming in the U.S.   We are aggressively going after this problem on multiple fronts, including by significantly increasing law enforcement efforts.  In fact, health and safety seizures are up 97% from last year.  And we are engaging with private sector companies on this issue as well-- like Google, GoDaddy, Mastercard and other leading Internet companies that are setting up a nonprofit to fight illegal online pharmacies.

I look forward to working with Congress in the months ahead to consider and pass these legislation recommendations.  As we continue to implement the Joint Strategic Plan, we will likely make additional legislative recommendations in the coming months.  It is critical that we work together to make sure that we are doing all we can to combat these crimes.

So that you know the full extent of what we have proposed, I have simultaneously made our legislative proposals available on our website:  http://obamawhitehouse.archives.gov/omb/intellectualproperty/. 

I have also summarized below the specific proposals:

First, we recommend increasing the maximum sentence for the following offenses:

• Increase the maximum sentence for economic espionage (18 U.S.C. § 1831) from 15 years in prison to at least 20 years in prison; and
• Increase the maximum sentence for drug offenses under the Federal Food, Drug and Cosmetic Act (FFDCA), particularly for counterfeit drug offenses.

Second, we recommend that Congress: (1) direct the U.S. Sentencing Commission to increase the U.S. Sentencing Guideline range for intellectual property offenses; (2) require the Sentencing Commission to consider five specific categories of changes to the Guidelines; and (3) require the Sentencing Commission to act within 180 days of such legislation being adopted (including issuing a report explaining why it has not adopted any of the specific recommendations).  The five categories of recommendations are:

• Increase the Guideline range for the theft of trade secrets and economic espionage, including trade secrets transferred or attempted to be transferred outside of the U.S.;
• Increase the Guideline range when infringing products are knowingly sold for use in national defense, national security, critical infrastructure, or by law enforcement.
• Increase the Guideline range for intellectual property offenses committed by organized criminal enterprises/gangs;
• Increase the Guideline range for intellectual property offenses that risk death or serious bodily injury and for those offense involving counterfeit drugs (even when those offenses do not present that risk); and
• Increase the Guideline range for repeat intellectual property offenders.

Third, we recommend the following legislative changes to give enforcement agencies the tools they need to combat infringement:

• Ensure that, in appropriate circumstances, infringement by streaming, or by means of other similar new technology, is a felony;
• Authorize DHS (including its component CBP) to share pre-seizure information about, and samples of, products and devices with rightholders to help DHS to determine whether the products are infringing or the devices are circumvention devices; and
• Give law enforcement wiretap authority for criminal copyright and trademark offenses.

Fourth, we recommend the following legislative changes to allow DHS to share information about enforcement activities with rightholders:

• Give DHS authority to notify rightholders that infringing goods have been excluded or seized pursuant to an ITC order; and
• Give DHS authority to share information about, and samples of, circumvention devices with rightholders post-seizure.

Fifth, we recommend the following legislative changes to improve U.S. efforts to fight illegal drugs, particularly counterfeit drugs:

• Require importers and manufacturers to notify the FDA and other relevant agencies when they discover counterfeit drugs, including the known potential health risks;
• Extend the Ryan Haight Act’s definition of “valid prescription” (and its telemedicine exemption) to the FFDCA to drugs that do not contain controlled substances;
• Adopt a track-and-trace system for pharmaceuticals and related products;
• Provide civil and criminal forfeiture under the FFDCA, particularly for counterfeit drug offenses;
• As noted above, increase the statutory maximum for drug offenses under the FFDCA, particularly for counterfeit drug offenses; and
• As noted above, recommend that the U.S. Sentencing Commission increase the Guideline range for intellectual property offenses that risk death and serious bodily injury, and for those offenses involving counterfeit drugs (even when those offenses do not present that risk).

Sixth, we recommend the following legislative changes to CBP’s administrative penalties:

• Permit relief when someone who unknowingly and unintentionally acquires infringing products voluntarily discloses them to CBP before becoming aware of any CBP enforcement action (or a law enforcement investigation);
• Give CBP authority to issue penalties for infringing exports; and
• Strengthen CBP’s authority to issue penalties for infringing imports discovered during audits of company records.

Finally, we recommend creating a right of public performance for copyright owners for sound recordings transmitted by over-the-air broadcast stations which, in part, will allow copyright owners to obtain overseas royalties that are now denied to them.

Victoria Espinel is the U.S. Intellectual Property Enforcement Coordinator