‘Tis the Season for . . . Anti-Counterfeiting Legislation?

by Christina Frangiosa


In the past several weeks, several major legislative proposals have been introduced in both the House and the Senate to provide additional anti-counterfeiting enforcement tools for law enforcement and private rights holders alike. Two of these bills – the PROTECT IP Act (S. 968) and the Stop Online Piracy Act (H.R. 3261) – have already been discussed in detail in this blog. (See posts under the Online Piracy tag.)

Details about the remaining legislative proposals follow (listed chronologically):

  • Protect American Innovation Act of 2011 – introduced in the Senate on November 8, 2011 as S. 1830 by Sen. Deborah A. Stabenow (D-Mich.)
    • Focuses on the Treasury Department, and particularly U.S. Customs and Border Protection (“CBP”) and U.S. Immigration and Customs Enforcement (“ICE”)
    • Contains provisions relating to coordinating IP rights enforcement, enhancing training in the Treasury Department and amending 19 U.S.C. § 1526 (Tariff Act; Merchandise Bearing American Trademark) to expand prohibitions on importation, exportation and transshipment of counterfeit or pirated goods.
    • Of particular note are the following provisions:
      • Coordination of IP Rights Enforcement (Subtitle B)
        • Requires coordination of CBP and ICE IP enforcement efforts through a new Director of IP Rights Enforcement (within the U.S. Department of the Treasury) (§ 111)
      • Regulatory and Policy Improvements re Combating Counterfeiting and Piracy (Subtitle C)
        • Allows CBP to set up regulations about making information and samples of seized goods available to IP owners for purposes of inspection and analysis. (§ 123)
        • Creates a system to identify “low risk importers” who could be subject to reduced inspections by CBP. (There would be a self-certification and third-party verification process put in place.) (§ 125)
        • Creates a “watch list” database of participants in import, export and transshipment process “whose activities [CBP] determines merit special scrutiny at ports of entry because of the risk of importation or transshipment of goods that violate” IP rights or exclusion orders. (The Secretary of the Treasury will have 180 days from enactment to develop a plan to implement the database.) (§ 126)
        • Provides that civil fines imposed by 19 U.S.C. § 1526(f) may not be mitigated, dismissed or vacated except in extraordinary cases or when ordered by the court. (§ 127)
      • New Legal Tools for Border Enforcement (Subtitle E)
        • Amending 19 U.S.C. § 1526 (Tariff Act) to apply the definition of counterfeiting that comes from the crimes code (18 U.S.C. § 2320) and to provide for enhanced penalties for counterfeiting (§ 141)
        • Makes conforming amendments to copyright law to include “exports and transshipments” along with imports as regulatable conduct (§ 141(b)).
        • Enhances the requirements for declarations required under the Tariff Act (§ 142)
        • Permits the seizure and forfeiture of devices designed to circumvent intellectual property rights protections (§ 143)
      • Administrative Provisions (Subtitle F)
        • Requires establishment of an advisory committee to provide advice to the Secretary of the Department of Treasury, to CBP and ICE on all matters involving the enforcement of import safety standards and IP rights by CBP and ICE (§ 151)
        • Requires the advisory committee to submit an annual report describing the operations of the Committee in the past year and set forth any recommendations about the enforcement of import safety standards and IP rights by CBP and ICE (§ 151).
        • Allows for staffing enhancements at both CBP and ICE (§§ 152 and 153)
      • Title II – Increased Penalties for Certain Unfair Trade Practices
        • Expands the exclusion orders. In addition to banning the importation of certain goods into the U.S. this provision also provides that the Secretary of State shall deny a visa to the U.S. and the Secretary for Homeland Security shall exclude from the U.S. “any alien that is an officer or member of the board of directors of the person that violated this section or an exclusion order under this section.” (§ 201)
        • Enhances penalties for each day on which the importation or sale of counterfeited goods occurred (19 U.S.C. § 1337(f)) from “$100,000 or twice [the domestic value of the articles entered or sold on such day in violation of the cease and desist order]” to “$500,000 or three times [the same domestic value].” (§201(b))
    • Status: Referred to the Committee on Finance on November 8, 2011.
       
  • American Growth, Recovery, Empowerment and Entrepreneurship Act (“AGREE Act”) – introduced on November 15, 2011 in the Senate as S. 1866 by Sen. Chris Coons (D-Del.) (text, as introduced, is here) and on November 18, 2011 in the House as H.R. 3476 by Rep. Richard L. Hanna (R-NY) (text, as introduced, is here).
    • Amends the Trade Secrets Act to explicitly allow U.S. Customs and Border Patrol to share suspected counterfeit materials with rights holders in order to determine authenticity.
    • Specifically, these bills provide:
      • if U.S. Customs and Border Protection (“CBP”) suspects a product of being imported or exported in violation of 15 U.S.C. § 1124, the Secretary of Homeland Security would be authorized to “share information on, and unredacted samples of, products and their packaging and labels, or photos of such products, packaging and labels, with the rightholders (sic) of the trademark suspected of being copied or simulated, for purposes of determining whether the products are prohibited from importation under that section.” § 601(1).
      • Further, once items are seized by CBP under 17 U.S.C. § 1201(a)(2) or (b) (both relating to devices allowing users to circumvent digital rights management information), the Secretary of Homeland Security is “authorized to share information about, and provide samples to affected parties, as to the seizure of material designed to circumvent technological measures or protection afforded by a technological measure that controls access to or protects the owner’s work protected by copyright under such title.” § 601(2).
      • Both of these provisions are made “subject to applicable bonding requirements.”
    • Under current law, these materials could not be disclosed for any purpose to rights holders.
    • Current Status of Each Bill:
      • The Senate Bill was referred to the Committee on Finance on November 15, 2011. Senator Coons’ remarks in introducing the Bill appear in the Congressional Record at pages S7594-7596.
      • The House Bill was referred to the House Committee on Ways and Means, Committee on the Judiciary and Committee on Financial Services for consideration. No hearings have yet been announced.
         
  • National Defense Authorization Act for Fiscal Year 2012 – introduced in the Senate on November 15, 2011 as S. 1867 (H.R. 1540 in the House). (Text of the current version of the Senate bill as passed has not been published yet.)
    • The majority
      of this Bill has nothing to do with counterfeiting, and in fact is an appropriations bill relating to military spending.
    • However, Amendment No. 1092 (text available here at S7966-7967) was agreed to in the Senate by Unanimous Consent on November 29. This Amendment inserted a provision (based closely on S. 1228 (Combating Military Counterfeits Act of 2011), which was reported favorably by the Senate Judiciary Committee in July) entitled “Detection and Avoidance of Counterfeit Electronic Parts.”
    • Among other provisions, this Amendment adds the following requirements:
      • Secretary of Homeland Security shall “establish a risk-based methodology for the enhanced targeting of electronic parts imported from any country . . .” (§ 848(b)(1) – S7966).
      • If CBP “suspects a product of being imported or exported in violation of section 42 of the Lanham Act [15 U.S.C. § 1124], and subject to applicable bonding requirements, the Secretary of the Treasury is authorized to share information appearing on, and unredacted samples of, products and their packaging and labels, or photographs of such products, packaging and labels, with the rightholders of trademarks suspected of being copied or simulated, for purpose of determining whether the products are prohibited from importation pursuant to such section.” (§ 848(b)(2) – S7966).
      • Amends 18 U.S.C. § 2320 by adding provisions relating to military goods or services such that
        • If a qualifying offense is committed (by trafficking or attempting to traffic in goods or services and knowingly uses a counterfeit mark, the use of which is likely to cause confusion, to cause mistake or to deceive), AND
        • The good or service “malfunctioned, failed or was compromised” AND
        • Could reasonably be foreseen to cause serious bodily injury or death, disclosure of classified information, impairment of combat operations or other significant harm to a member of the Armed Forces or to national security AND
        • The offender had knowledge that the good or service was falsely identified as meeting military standards or is intended for use in a military or national security application;
        • THEN the following penalties will apply:
          • Maximum fines increased from $2 million to $5 million or maximum sentence is increase from no more than 10 years to no more than 20 years, or both (for individuals)
          • For subsequent offenses, individuals would be subject to fines up to $15 million, imprisoned for not more than 30 years, or both.
          • Or, if the offender is other than an individual, the maximum fine remains at $15 million.
          • For subsequent offenses, non-individual offenders would be subject to a fine of up to $30 million.
      • Sentencing Commission required to determine whether Federal Sentencing Guidelines should be amended to reflect the “intent of Congress that penalties for such offenses be increased for defendants that sell infringing products to, or for the use by or for, the Armed Forces” or law enforcement or “for use in critical infrastructure or in national security applications.” § 848(f)(2).
      • This Bill did not provide a definition for “counterfeit electronic part,” instead requiring the Secretary of Defense to provide such definition. § 848(g)(1).
    • Status: S. 1867 as amended was agreed to in the Senate by a vote of 93-7 on December 1, 2011.
       
  • Counterfeit Drug Penalty Enhancement Act of 2011 – introduced in the Senate on November 17, 2011 as S. 1886 by Sen. Patrick J. Leahy (D-Vt.) (text, as introduced, is here) and in the House as H.R. 3468 by Rep. Patrick L. Meehan (R-Pa.)
    (text, as introduced, is here)
    • Amends 18 U.S.C. § 2320(a) to double the maximum fine to be assessed for trafficking in “counterfeit drugs” (defined under the Food, Drug and Cosmetic Act, 21 U.S.C. § 321(g)(2) to the following: 1) $4 million for individual defendants; and 2) $10 million for “persons other than individuals” (e.g., entities of any sort, including corporations, companies, associations and organizations).
    • Both bills provide that repeat offenses incur increased penalties of $8 million, with a 20 year prison term (individuals) and $20 million (entities), respectively.
    • Differences between the House and Senate Bills
      • The Senate Bill recommends increasing the maximum prison sentence of 20 years, and mandates that the U.S. Sentencing Committee re-evaluate the recommended sentences for all counterfeiting crimes.
      • The House bill recommends that the prison sentence be increased to “life or any term of years.” The House bill does not direct any evaluation by the Sentencing Commission.
    • Current law provides that these limits are 1) $2 million with a maximum prison sentence of 10 years for individuals; and 2) $5 million for entities. Repeat offenders incur a maximum fine of $5 million and 20 years imprisonment for individuals, and $15 million for entities. 18 U.S.C. § 2320.
    • Current Status of Each Bill
      • The Senate Bill is scheduled to be considered by the Senate Judiciary Committee on December 8, 2011, at 10:00am in SD-226. (Hearing notice is here – with a link to the webcast, when it’s prepared.)
      • The House Bill has been referred to the House Committee on the Judiciary, but a hearing has not yet been scheduled.

Clearly, both houses of Congress have “counterfeiting” on the mind, and it will be interesting to see where these various proposals go. Of course, only if one can keep up.