[Senate Hearing 110-561]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-561
 
        PROTECTING CONSUMERS BY PROTECTING INTELLECTUAL PROPERTY 

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 17, 2008

                               __________

                          Serial No. J-110-100

                               __________

         Printed for the use of the Committee on the Judiciary

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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware       ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin       JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York         LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland         SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
            Bruce A. Cohen, Chief Counsel and Staff Director
           Stephanie A. Middleton, Republican Staff Director
              Nicholas A. Rossi, Republican Chief Counsel
















                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     3
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    30
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................     4

                               WITNESSES

Monks, Brian H., Vice President, Anti-Counterfeiting Operations, 
  Underwriters Laboratories Inc., Melville, New York.............     7
Rose, Mike, Vice President, Supply Chain Technology, Johnson & 
  Johnson, Fountainville, Pennsylvania...........................     9
Thurnau, Jeffrey, Patent Counsel, Gates Corporation, Denver, 
  Colorado.......................................................    11
Yager, Loren, Director, International Affairs and Trade, 
  Government Accountability Office, Washington, D.C..............     5

                         QUESTIONS AND ANSWERS

Responses of Brian Monks to questions submitted by Senator Leahy.    21
Responses of Michael P. Rose to questions submitted by Senator 
  Leahy..........................................................    23
Responses of Jeffrey Thurnau to questions submitted by Senator 
  Leahy..........................................................    26

                       SUBMISSIONS FOR THE RECORD

Monks, Brian H., Vice President, Anti-Counterfeiting Operations, 
  Underwriters Laboratories Inc., Melville, New York, statement..    32
Partnership for Safe Medicines, statement and attachment.........    36
Rose, Mike, Vice President, Supply Chain Technology, Johnson & 
  Johnson, Fountainville, Pennsylvania, statement................    38
Thurnau, Jeffrey, Patent Counsel, Gates Corporation, Denver, 
  Colorado, statement............................................    42
Yager, Loren, Director, International Affairs and Trade, 
  Government Accountability Office, Washington, D.C., statement..    49


        PROTECTING CONSUMERS BY PROTECTING INTELLECTUAL PROPERTY

                              ----------                              


                         TUESDAY, JUNE 17, 2008

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, Pursuant to notice, at 10:06 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Cardin, Whitehouse, and Hatch.

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Chairman Leahy. Good morning. I should note that we are 
going to be talking about intellectual property. It is nice to 
have Senator Hatch of Utah here with me. During a number of 
years, part of the time he was Chairman, part of the time I was 
Chairman, we put together bipartisan coalitions on intellectual 
property issues. It turned out to be a pretty effective 
partnership, so, Senator Hatch, I am delighted you are here.
    I do not think there is dispute that our Nation is in 
economic and political turmoil. Gas prices have exceeded our 
worst fears, especially those of us who live in rural areas, as 
I do. They are continuing to rise. They highlight the 
entrenched power of overseas oil suppliers. Subprime mortgages 
have devastated many of our homeowners, and they have revealed 
serious flaws in our lending systems. Just reading the press 
again today, you discover more and more of this. Health 
insurance is still only a distant dream for millions of 
Americans in the wealthiest Nation on Earth. The costs in lives 
and dollars of the Iraq war mount higher by the day. We are 
deep into a Presidential election year, so the debate on these 
issues will only intensify as summer turns to fall and as 
politics becomes even more intense.
    But today the Committee is going to address a significant 
economic issue confronting our Nation, which actually should 
have no partisan flavor whatsoever.
    Intellectual property, and the creativity and innovation it 
represents, that is really the fuel in the engine of our 
economy. For the United States to maintain its position as the 
world's economic leader, we have to focus on protecting its 
industries' intellectual property. In a year like this, 
partisan legislation is impossible; even bipartisan legislation 
is unlikely. It is only truly non-partisan legislation that 
presents an opening for progress, and I want to give 
intellectual property enforcement legislation that kind of a 
chance.
    The piracy and counterfeiting of intellectual property has 
reached unprecedented levels in recent years. This theft costs 
the American economy at least $200 billion and results in the 
loss of 750,000 jobs per year. Just think of that. Stealing and 
counterfeiting of intellectual property costs the American 
economy at least $200 billion and loses 750,000 jobs per year. 
Think how much we could use those jobs. While this theft alone 
is unacceptable, it is not the only cost incurred by piracy and 
counterfeiting. You only have to look at reports of poisoned 
counterfeit toothpaste or dangerous counterfeit automobile 
parts that are entering U.S. markets. Think about that if you 
have had your brakes repaired. Were they counterfeit? Think of 
that when you suddenly need them in an emergency. These things 
are sold disproportionately to lower-income Americans. And when 
you see this and you see the fact that people's lives are at 
stake, you understand how important the enforcement of our IP 
laws is to protect the health and safety of the American 
people.
    Now, we have representatives of pharmaceutical, automotive, 
and product safety industries here today who can attest to 
these dangers, but also to the vast resources they have to 
expend not to create new products but to protect American 
consumers from the dangers of these counterfeit products. I 
would like to see, and I suspect every one of them would like 
to be able to use that money for research and development of 
new products.
    Our other witness today is from the Government 
Accountability Office. I have been troubled by reports from the 
GAO that have shown the ineffectiveness of the current 
enforcement strategies being employed by the Federal 
Government. The lack of coordination among the Federal agencies 
responsible for IP enforcement seems to be one of the biggest 
hurdles we face. I want to hear what other roadblocks are 
preventing effective IP enforcement.
    I have worked for years, as has Senator Hatch, to 
strengthen our existing laws and give our law enforcement 
agents the necessary tools to combat infringement. Other 
Members of Congress have been active this session in offering 
legislation to strengthen the enforcement of IP laws. Even the 
Chinese Government, which allows some of the most rampant theft 
of intellectual property in the world, has suddenly begun to 
realize the value and the importance of IP enforcement now that 
their own intellectual property has been threatened, and they 
have begun to crack down on infringement of their Olympic 
copyrights. So it is not ever too late for the sinner to come 
to the church, but I thought I would never see the day.
    Justice Kennedy reminded us in his opinion for the Supreme 
Court in the case of Boumediene v. Bush last week that ``the 
only mention of the term `right' in the Constitution, as 
ratified, is in its clause giving Congress the power to protect 
the rights of authors and inventors,'' referring, of course, to 
Article I, Section 8 of the Constitution. These rights in 
intellectual property have been fundamental to Americans since 
our founding and have never been more important than they are 
today. Enforcement and protection of these rights is too 
important to be addressed piecemeal. I think we have to examine 
enforcement efforts from the top down and the bottom up. I hope 
that those testifying today can help us on that.
    Orrin, if you would just allow me to tell just a quick 
story, we have a manufacturer, actually one of the preeminent 
in the world, of snowboards, Burton Snowboards, in Vermont. I 
remember getting on an airplane years ago in Chicago with Jake 
Burton, and the two of us were squeezed back in the cheap 
seats, way in the back of this airplane.
    And we are both fairly good size guys. And Jake said, ``See 
that guy going up there into first class?'' I said, ``Yes.''
    He said, ``You know, he represents a Chinese company that 
stole our design for ski boots that we spent hundreds of 
thousands of dollars to design for the safety and everything 
else. He can afford to fly first class because it does not cost 
him anything to steal the design and use it. We had to pay to 
develop it.''
    That has always stuck in my mind.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Senator Hatch?

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE 
                            OF UTAH

    Senator Hatch. Well, thank you, Mr. Chairman, for the 
opportunity to say a few words this morning on the enforcement 
of intellectual property rights. I regret I have to go to 
another meeting in the Leader's office and will not be able to 
stay for much of the hearing. But we are paying strict 
attention to what you have to say.
    The protection and the enforcement of intellectual property 
rights are crucial components that foster ingenuity and 
innovation, which in turn drive our economy. Without meaningful 
intellectual property rights protection, our artists, our 
innovators, our entrepreneurs, and workers will all suffer. But 
we should be mindful that abuse of IP rights is not just about 
downloaded music, pirated software, or fake designer handbags. 
All sectors of our economy are affected because of this, 
including pharmaceuticals, auto parts, and the quality and 
safety of our food, and so many other things.
    Indeed, robust IP protection promotes the health and safety 
of every American person. Far too often, enforcement of these 
rights has not been as strong a priority as it should be. As a 
result, we have an environment in which the IP rights of others 
are treated casually or without any regard. This pervasive 
nonchalance stems not only from inadequate enforcement but also 
because of an inadequate education about the law.
    For example, some believe that if it is on the Internet, it 
is free. Well, our Nation must take the lead in this endeavor, 
but everyone here already knows that this is a global problem, 
and the solution will require a commitment not only to beef up 
domestic enforcement, but it will also require a concentrated 
governmentwide effort to prevent intellectual property rights 
abuse.
    Furthermore, I believe any meaningful solution will need to 
take an integrated approach with both domestic and 
international prongs which incorporate educational, judicial, 
and enforcement components to help this insidious attack on our 
intellectual property.
    In order to accomplish this task, all stakeholders must 
cooperate and work in an integrated fashion with State, 
Federal, and international governments. In the Senate, we face 
the challenge of working with multiple committees that have 
jurisdiction over various aspects of the integrated approach I 
just outlined. Coordinating efforts may take extra time, but 
doing nothing seems to me to not be an option.
    As technology advances and becomes more sophisticated, so 
does the enemy. As many of you already know, I am working on 
legislation in the Finance Committee that will provide our 
Government with the tools necessary to combat this very real 
and growing threat to our economy. And although I am not 
prepared to discuss the particulars of my legislative approach 
today, I hope upon introduction to work closely with this 
respective Committee to enact a comprehensive and well-balanced 
bill that will protect both the creators and the consumers of 
intellectual property.
    This is an important hearing. These are important issues. 
We take a tremendous interest in them. I have particularly 
enjoyed working with Senator Leahy over the years and others on 
this Committee, but particularly Senator Leahy, on intellectual 
property issues. And we have consistently been able to get 
together in the best interests of our country, and for that I 
am very grateful to him.
    And I am grateful to have all of you here today for the 
wisdom that you can provide to us in helping us to understand 
these issues better.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you very much.
    Did you want to say anything, Senator Whitehouse, or we 
will just go right to the witnesses?

 STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. SENATOR FROM THE 
                     STATE OF RHODE ISLAND

    Senator Whitehouse. I will have to go to the floor during 
the course of this hearing, so if I get up and leave, it is not 
because of anything anybody said. I am very interested in this 
hearing. I appreciate very much that the Chairman has held it. 
And when the time comes for questions, I would be particularly 
interested in the extent to which the cyber attack that the 
country is sustaining relates to efforts to steal intellectual 
property and take advantage of it in foreign countries.
    Thank you, Chairman.
    Chairman Leahy. Thank you.
    Shortly after the signing of the peace agreement between 
Egypt and Israel, Anwar Sadat, the President of Egypt, and 
Menachem Begin, the Prime Minister of Israel, came--that famous 
photo of the signing ceremony at the White House. They came up 
onto the Hill. We met separately with them in big receptions 
and a luncheon. When Prime Minister Begin was speaking, he 
started off with remarks that were a little bit critical of 
something that the Egyptians had done, and three Senators got 
up and walked out. He did not realize that the lights had gone 
off and that we had votes.
    He looked a little bit nervous, and he said, ``However, I 
must say this about President Sadat.'' And it was very 
favorable. Then it goes on a while longer, and he says 
something else, and three more get up. The poor man is getting 
very, very nervous until Frank Church, who was then the 
Chairman of the Foreign Relations Committee, whispers to him 
what is going on. He said, ``Oh. Of course, as Prime Minister, 
I am also a member of Knesset, the parliament, and I 
understand.'' Things went along a lot better. So we do explain 
to witnesses if we leave, it is not because of what you said.
    Dr. Loren Yager is the Director of International Affairs 
and Trade at the U.S. Government Accountability Office. It is a 
position he has held since 2000. He has been at GAO since 1998. 
He previously directed the Office of the Chief Economist. Prior 
to his work with the GAO, Dr. Yager was an economic analyst 
with the Rand Corporation studying high-technology trade 
issues. He has completed several reports on Government agencies 
involved in intellectual property protection. He has offered 
congressional testimony on a variety of topics, including China 
import remedies and container security.
    Dr. Yager, you are always welcome on Capitol Hill.
    Please go ahead, sir.

 STATEMENT OF LOREN YAGER, DIRECTOR, INTERNATIONAL AFFAIRS AND 
   TRADE, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C.

    Mr. Yager. Thank you very much, Mr. Chairman. Good morning, 
Mr. Chairman and members of the Committee. Thank you for the 
opportunity to discuss our work on U.S. efforts to protect and 
enforce intellectual property rights.
    As you mentioned in your opening statement, the illegal 
importation and distribution of counterfeit and pirated goods 
poses a threat to the health and safety of U.S. citizens, as 
well as enormous costs to the U.S. economy.
    However, the challenges involved in IP protection are also 
significant and include the technological advances that 
facilitate piracy as well as the need for effective 
coordination among a wide range of policy and law enforcement 
agencies.
    In my summary today, I will address two topics: first, the 
need for greater leadership and permanence in our national IP 
enforcement structure and strategy; and, second, the need for 
key agencies to improve their data collection and analysis on 
issues related to IP enforcement.
    My remarks are based on numerous assignments that GAO has 
conducted on intellectual property protection over the past 5 
years and, most recently, a report issued to Senator Voinovich 
regarding U.S. agencies' enforcement efforts.
    Let me first talk about the leadership issue. The current 
U.S. Government coordinating structure that has evolved for 
protecting and enforcing U.S. intellectual property rights 
lacks permanence, presenting challenges for effective and 
viable coordination over the long run. At present, we have a 
combination of leadership mechanisms.
    The National Intellectual Property Law Enforcement 
Coordination Council, called NIPLECC, is responsible for 
coordinating IP protection and enforcement across multiple 
agencies. And the White House's Strategy for Targeting 
Organized Piracy, called STOP, is the strategy that guides this 
council. NIPLECC has struggled to define its purpose and 
retains an image of inactivity within the private sector. It 
continues to have leadership problems despite enhancements made 
by Congress in December of 2004 to strengthen its role.
    From the beginning of NIPLECC in 1999, Congress's goal has 
been to institutionalize law enforcement coordination. But our 
work suggests this goal has not yet been met. In contrast, STOP 
has a positive image but lacks permanence, and the momentum 
that it helped create could disappear after the current 
administration.
    We have recommended that the IP coordinator and the STOP 
agencies clarify the relationship between the council and the 
White House strategy, but also recognize that some of the 
legislative proposals under consideration by the Congress call 
for more fundamental changes in this relationship.
    Let me now briefly summarize the second issue, the 
potential for improvement in agencies' data collection and 
analysis on IP enforcement.
    Federal IP enforcement functions include seizures, 
investigations, and prosecutions, and while IP enforcement is 
generally not the highest priority for agencies such as the 
Department of Justice, Department of Homeland Security, or 
Health and Human Services, addressing IP crimes with a public 
health and safety risk has become an important enforcement 
activity at each of those agencies.
    Our report also provides some good news in that Federal IP 
enforcement actions generally increased during the years 2001 
through 2006. Given the importance of this issue, there are 
some ways that the agencies can improve their data and analysis 
to enable Congress and others to better assess agency 
achievements. Let me give just a few examples.
    Despite the fact that many agencies identified IP related 
to health and safety as a priority, we found that some agencies 
lacked the data to report or to analyze their efforts to 
address these types of crimes. We also found a few field 
offices were driving a huge share of some of the agencies' 
overall enforcement activity. But agencies had not always 
considered the implications of these patterns.
    Most agencies had not established IP performance measures 
or targets to assess their achievements, making it more 
difficult for the Congress and for agency managers to make 
informed resource decisions and assess whether they are 
achieving their enforcement objectives. And, finally, the IPR 
Center was created with the mission to collect, analyze, and 
disseminate information about IPR enforcement. But the center 
has never achieved those goals.
    We made a number of recommendations to the agencies 
regarding improvements, and these were similar to earlier 
recommendations made to the IP coordinator to improve 
accountability measures. We continue to work with the agencies 
in terms of their response to those recommendations.
    Mr. Chairman, as you noted in your opening statement, a 
number of legislative proposals are before the Congress that 
would modify the Federal IP enforcement structure. As the 
Committee continues to consider this issue and these proposals, 
we would be happy to provide additional information where we 
believe the proposals address the weaknesses that our work has 
identified.
    Mr. Chairman, this concludes my prepared remarks, and I 
would be happy to answer any questions that you or other 
members of the Committee have.
    [The prepared statement of Mr. Yager appears as a 
submission for the record.]
    Chairman Leahy. Thank you.
    I would mention that Dr. Yager is very familiar with 
Capitol Hill. He ended within the time.
    What I am going to do is have each witness testify, and 
then we will ask questions.
    Brian Monks is the Vice President of Anti-Counterfeiting 
Operations at Underwriters Laboratories, something that is more 
than a full-time job, I am sure.
    Underwriters, of course, is a nonprofit company that 
certifies public safety. In his role at UL, Mr. Monks works 
closely with the Bureau of Customs and Border Protection, the 
FBI, Interpol, as well as other international law enforcement 
agencies to identify and seize products bearing counterfeit UL 
marks. He has written numerous articles in industry journals, 
frequently addresses anti-counterfeiting conferences around the 
world. He is also a member of several anti-counterfeiting 
organizations, including the International Anti-Counterfeiting 
Coalition, where he is an executive board member.
    Mr. Monks, thank you for coming, and please go ahead, sir.

       STATEMENT OF BRIAN H. MONKS, VICE PRESIDENT, ANTI-
  COUNTERFEITING OPERATIONS, UNDERWRITERS LABORATORIES INC., 
                       MELVILLE, NEW YORK

    Mr. Monks. Chairman Leahy, distinguished members, thank you 
for this opportunity for Underwriters Laboratories to appear 
before you today. I am pleased to provide UL's perspective on 
our work to keep counterfeit products out of the marketplace.
    Counterfeiting is a serious threat to our economy and to 
the safety of U.S. consumers. A variety of counterfeit products 
enter the stream of commerce every day, many posing 
unsuspectingly serious fire and electrical hazards that 
endanger the American public.
    For 114 years, UL has built a reputation on the integrity 
of the UL mark and what it represents to consumers. The UL 
mission is the protection of human life and property from 
product risks and hazards. In 2007, an estimated 21 billion 
products entered the global marketplace carrying the UL mark. 
To put this in perspective, the average American consumer's 
home contains 120 products bearing the UL mark. Everything in 
this room today you touched electrically probably has a UL mark 
on it.
    Like other brand leaders, the UL mark is being 
counterfeited--leaving consumers with a false sense of security 
about the safety of the products they purchase. To minimize 
this risk, UL maintains a zero tolerance policy, working 
aggressively with law enforcement to seize product and to 
prosecute counterfeiters.
    There can be no doubt about the correlation between 
counterfeiting and product safety. Counterfeiters do not 
discriminate in their selection of products. They care about 
profit. In 2007 alone, UL issued warnings about fire 
extinguishers, smoke alarms, extension cords, holiday lights, 
lamps, power strips, and surge protectors bearing counterfeit 
UL certification marks. Penetration of product and 
certification mark counterfeiting in electrical and fire 
protection categories increase the risk of fire, shock, and 
other hazards to American consumers, their homes, and their 
workplaces.
    Common household extension cords can typically be purchased 
for under a dollar at discount stores nationwide. They are 
often targeted by counterfeiters. Producing them requires 
basically copper and plastic. To maximize their profit, 
counterfeiters use extra plastic and reduce the amount of 
copper. Reducing the amount of copper means that when the 
electrical current is applied--for example, plugging in a hair 
dryer--these products can overheat, melt, and catch fire.
    In 2007, Customs and Border Protection made over 150 
seizures of products bearing counterfeit UL marks. When 
examined, many of these products posed an unacceptable risk to 
the public.
    Even more disturbing is the recent appearance of 
counterfeit marks on fire safety devices, such as smoke 
detectors, heat detectors, sprinkle heads, and fire 
extinguishers. Senator, these devices are designed to save your 
life in case of a fire.
    Aggressive, proactive measures need to be taken to prevent 
the entrance of these products into the marketplace. They need 
to be stopped before a failure becomes another fatality 
statistic. We cannot overstate the importance of enforcement 
authorities and lawmakers working together with the private 
sector to combat these criminal activities. For over a decade, 
UL has worked closely with the Department of Justice, the 
Federal Bureau of Investigation, and other enforcement agencies 
to identify and seize products bearing counterfeit UL marks and 
to prosecute offenders to the fullest extent of the law.
    UL's goal is to continue working with enforcement agencies 
to prevent these products from ever reaching the hands of the 
consumer. Ultimately, UL hopes that increased enforcement will 
deter counterfeiters. In 2006, the U.S. Attorney's Office of 
the Southern District of Florida announced that two defendants 
found guilty of trafficking in a range of products, including 
extension cords bearing counterfeit marks, were each sentenced 
to more than 7 years in Federal prison. The rights holders 
worked in partnership with Government to assist in successful 
prosecution, sending a message that counterfeiters that 
compromise the safety of American citizens will be pursued and 
punished.
    As these examples show, some success has been achieved in 
combating the serious and growing threat of product 
counterfeiting. There is more to be done. Additional resources 
are necessary in order to continue this positive track record. 
We believe that additional staffing and resources for the DOJ 
and FBI that are dedicated solely to combating IP crimes would 
be a step in the right direction. This means things like 
dedicated FBI agents for existing or new Computer Hacking and 
Intellectual Property units; it means additional Assistant U.S. 
Attorneys dedicated to the prosecution of IP cases; and it 
means staffing available for the formation of ad hoc task 
forces that can be mobilized quickly to address short-term 
situations and threats to combat these dangers. These ad hoc 
task forces have proven effective in New York, Newark, and 
recently Los Angeles, where the combined effort of Federal and 
local authorities were able to take down large-scale 
counterfeiting operations.
    Let me leave you with a parting thought. Last Friday, 
Federal authorities seized $1.5 million in counterfeit circuit 
breakers. Circuit breakers are found in our home electrical 
panels and protect against electrical current overloading and 
fire. Had they not been seized, these breakers could have ended 
up in our homes. Senator, one shipping container holds 186,000 
circuit breakers. To put that in perspective, that is the 
potential of 186,000 house fires.
    Thank you very much.
    [The prepared statement of Mr. Monks appears as a 
submission for the record.]
    Chairman Leahy. Thank you, Mr. Monks. We will get back to 
questions in a moment, but thank you for emphasizing two 
things: One, that counterfeiting is not just stealing money; it 
could cost you your life. You can go out and buy a product that 
you think is very reputable--my wife and I always look for the 
UL mark on electrical things we buy--but it could cost you your 
life. And, second, I like the emphasis you put on prosecution. 
As a former prosecutor myself, I think sometimes--I probably 
expect the finest motives of people, but sometimes the thought 
that the jail door may clang shut with them behind the door, 
that sometimes motivates them to be even more conscientious 
about following the law.
    Mike Rose is the Vice President of Supply Chain Technology 
at Johnson & Johnson. He has been with them for over 30 years 
in a variety of positions within the company, including Chief 
Information Officer. Mr. Rose works with several industry 
associations on supply chain issues, including the 
Pharmaceutical Research and Manufacturers of America's Supply 
Chain Work Group. He is co-chair of the Health Care 
Distribution Management Association Industry Relations Council.
    Mr. Rose, thank you very much for coming here. Please go 
ahead, sir.

     STATEMENT OF MIKE ROSE, VICE PRESIDENT, SUPPLY CHAIN 
   TECHNOLOGY, JOHNSON & JOHNSON, FOUNTAINVILLE, PENNSYLVANIA

    Mr. Rose. Thank you, Mr. Chairman.
    Mr. Chairman, on behalf of the nearly 120,000 employees of 
the Johnson & Johnson family of companies, thank you for the 
opportunity to speak here today.
    Violation of intellectual property through counterfeit 
health care products presents a significant risk to patients 
and consumers. Mr. Chairman, there are three points I would 
like to underscore this morning.
    First, we believe that there should be one national 
standard for ensuring the integrity of the health care products 
supply chain.
    Second, coordination among the various governmental 
agencies and industries involved in combating counterfeiting, 
as well as aggressive enforcement of existing laws, is 
essential.
    Third, we must acknowledge that the lack of international 
enforcement of intellectual property laws allows counterfeiters 
to thrive.
    According to the FDA, while the United States 
pharmaceutical supply chain is one of the safest in the world, 
counterfeiting of health care products is a growing concern. 
The World Health Organization estimates that 8 to 10 percent of 
pharmaceutical products outside the United States are 
counterfeit. In some countries, counterfeit products may 
represent 50 percent of medicines.
    The Internet is fast becoming the marketplace of choice for 
counterfeiters where counterfeit pharmaceutical, consumer 
products, and medical devices can be purchased from unregulated 
Internet sites. Counterfeiters can easily sell their products 
via website and distribute them to unsuspecting U.S. consumers. 
This problem is so widespread that, according to the 
Pharmaceutical Security Institute, seizures of bogus 
prescription medicines jumped 24 percent to 1,513 incidents in 
2007, and illicit versions of 403 different prescription drugs 
were confiscated in 99 countries.
    Another avenue for counterfeiters is diversion, which 
refers to merchandise that is distributed into markets other 
than originally intended. Diverted products, so-called gray 
market products, frequently are past dated or expired, have 
been previously marked for destruction, have not been properly 
stored, or are counterfeit.
    Counterfeiters show total disregard for the safety of 
consumers, patients, doctors, and nurses. They have no regard 
for intellectual property rights and take advantage of 
countries with gaps in intellectual property laws or where 
enforcement of IP laws is non-existent or lax.
    Countries that do not enforce IP laws for products made for 
export provide counterfeiters a safe haven. The active 
ingredient can be manufactured in one country, exported to a 
second, where the product is packaged; exported to a third 
country, where it is labeled and placed in finished packaging; 
and exported for final sale.
    Both health care manufacturers and Government regulators 
are taking action to combat counterfeiting and to protect 
consumers and patients. Many health care manufacturers have 
invested in measures to tighten the security of supply chains 
and products. Here are some examples where manufacturers are 
focusing their efforts: monitoring market activities and 
trading practices; collaborating with Customs and police to 
investigate suspected cases of counterfeiting or tampering; 
working with Government agencies to ensure trademark and IP 
laws are enforced and prosecuting infringements; applying overt 
and covert features to products and packaging to aid in product 
identification; and, last, investigating and piloting track and 
trace and pedigree systems to communicate the product's chain 
of custody. These systems are intended to add greater clarity 
into where products have been and where they are moving.
    One area of special focus has been a product's pedigree, 
which documents the chain of custody of a specific product. 
More than 30 U.S. States have enacted legislation requiring 
pharmaceutical pedigrees. As a consequence, we have a patchwork 
quilt of pedigree laws and regulations that could defeat the 
purpose of improving supply chain security.
    We believe legislative efforts should eliminate the 
complexity of multiple pedigree laws and implement a simple and 
potentially effective solution--the electronic pedigree, 
otherwise known as ePedigree.
    Making the distributors produce ePedigrees would increase 
the effectiveness of law enforcement. The Federal Government 
can and should take the lead in establishing a single Federal 
standard for electronic pedigree.
    We have submitted additional testimony and our 
recommendations to the Committee. Johnson & Johnson is 
committed to working with Congress, the FDA, and other 
Government agencies on counterfeit challenge and is ready to 
make our company experts available to assist with legislative 
and regulatory efforts.
    Thank you for allowing Johnson & Johnson to share our 
perspective on this critical issue with you today. I am happy 
to answer your questions.
    [The prepared statement of Mr. Rose appears as a submission 
for the record.]
    Chairman Leahy. We will go into those, but also, listening 
to your testimony makes me realize, too, that when you have a 
company like Johnson & Johnson that is a well-recognized name, 
like General Motors or something like that in cars. If somebody 
counterfeits your product and illness or death results from 
that, the billions of dollars that have been invested to 
buildup a basic product name is severely damaged. Is that not 
correct?
    Mr. Rose. That is correct.
    Chairman Leahy. I saw Mr. Monks shaking his head. The same 
would be with UL where an enormous amount of time has been 
spent to get into consumers' minds that this is a seal of 
approval, and there you are.
    Jeffrey Thurnau is a patent attorney for the Denver-based 
Gates Corporation, where he has worked since 1999. Mr. Thurnau 
is responsible for assisting the administration of Gates' 
worldwide intellectual property portfolio, including 
preparation and prosecution of patent applications, trademark 
registrations, and licensing. Prior to joining Gates, Mr. 
Thurnau was a private attorney representing clients before the 
American Arbitration Association, the New York Stock Exchange 
in various State and Federal courts. He is a founding member of 
the Motor and Equipment Manufacturing Association Brand 
Protection Council.
    Mr. Thurnau, please go ahead, sir, and thank you for being 
here.

      STATEMENT OF JEFFREY THURNAU, PATENT COUNSEL, GATES 
                 CORPORATION, DENVER, COLORADO

    Mr. Thurnau. Chairman Leahy, thanks very much, other 
distinguished members of the Judiciary Committee, thank you for 
this opportunity to testify on ``Protecting Consumers by 
Protecting Intellectual Property.'' Gates is headquartered in 
Denver, Colorado. We have 5,000 employees at 25 facilities 
across America. The motor vehicle parts suppliers are the 
Nation's largest manufacturing sector, directly employing 
783,100 people and contributing to 4.5 million jobs in private 
industry across the Nation.
    Today I am going to focus my comments on the safety 
implications of counterfeit parts. I will begin with an 
overview of the counterfeit challenges facing the auto parts 
industry, give you an idea of the issues facing Gates 
Corporation, and then offer some ideas, legislative and 
otherwise, that help move this important legislation forward.
    Counterfeit parts and components for cars, trucks, buses, 
and commercial vehicles pose a critical problem to the American 
economy. Chairman Leahy mentioned the $2 million in annual 
losses to counterfeit sales, and in the auto parts industry, 
approximately 250,000 fewer jobs as a result of counterfeit 
parts in the marketplace.
    Vehicle performance and safety can be severely impacted by 
counterfeit products such as brakes, brake pads, timing belts, 
automotive lighting, and tires. The use of counterfeit parts 
can result in sudden, catastrophic engine failure, brake 
failure, and other system malfunctions.
    Trademark and brand infringement is the most immediate 
problem we face at Gates Corporation. That is because this 
represents the easiest method by which pirates can get their 
products sold in the marketplace.
    Another issue we confront is trade dress infringement.
    Trade dress relates to the unique or distinctive appearance 
of products or packaging. Often, the consumers are unable to 
distinguish the difference between the authentic goods and 
counterfeit goods and may mistakenly make a purchase of 
counterfeit products.
    We have tested pirate timing belts and find they simply do 
not rise to industry standards. As I have said, failure of a 
timing belt can lead to catastrophic engine damage. This 
saddles the consumer with thousands of dollars in repairs, as 
well as presenting a significant safety risk when one considers 
where the failure may occur, for example, on a busy highway.
    Let me give you some other examples. In March 2008, Taiwan 
customs contacted Gates with respect to a suspect shipment of 
counterfeit timing belts. Gates confirmed that they were 
counterfeit, and we are in the process of working with 
Taiwanese officials to move the case forward.
    In November 2006, a Puerto Rican distributor was caught 
selling counterfeit timing belts. The supplier was located in 
China. The supplier had 600 timing belts in his possession and 
had been selling them on the Internet.
    In October 2006, a Polish distributor was caught selling 
counterfeit timing belts. Warsaw authorities brought a criminal 
complaint against the distributor.
    As you can see, a company like Gates faces a myriad of 
challenges to its intellectual property. I urge you to consider 
some of the following ideas to address the range of concerns I 
have expressed today on behalf of Gates and the Motor Equipment 
Manufacturers' Association.
    First, better coordination among executive branch 
enforcement agencies. Current legislation provides three 
options worth looking at: Senate bill 522, with its OMB-
centered Coordinating Committee; next, legislation recently 
passed in the House creates an IP czar at the Department of 
Justice; and last, but certainly not least, Mr. Chairman, your 
legislation, S. 2317, which provides for a special unit at the 
FBI, as well as increased penalties for trafficking in 
counterfeit labels.
    We also support increased enforcement resources at the 
Department of Homeland Security and the Department of Justice. 
This would be directed toward additional personnel, training, 
and technology for detecting counterfeit parts at U.S. ports.
    Finally, we support increased coordination and cooperation 
among U.S. law enforcement agencies and the law enforcement 
agencies of like-minded countries so that the IP laws in those 
countries might be more vigorously enforced.
    Mr. Chairman, thanks very much for the opportunity to 
testify today. I am glad to take any questions.
    [The prepared statement of Mr. Thurnau appears as a 
submission for the record.]
    Chairman Leahy. Well, thank you, and I think you agree with 
me that prosecution alone is not the answer, but it is good to 
have some pretty tough teeth if you do catch people and 
prosecute them.
    Mr. Thurnau. Yes.
    Chairman Leahy. Dr. Yager, let me ask you, the National 
Intellectual Property Law Enforcement Coordination Council, 
NIPLECC, as we have said, is an interagency group that is 
supposed to coordinate U.S. domestic and international IP 
enforcement activities. We had the former coordinator of 
NIPLECC, Chris Israel, before this Committee several times, and 
he was doing as well as he could. But NIPLECC itself is often 
criticized as being ineffective. In contrast, we have the 
Strategy Targeting Organized Piracy, or STOP. It seems to have 
done a little bit better in bringing in the Departments of 
Commerce, Justice, Homeland Security, State, Food and Drug, 
Office of the U.S. Trade Representative together.
    Has STOP been more effective and why? And if it has been 
more effective, how can we make it even more effective than 
that?
    Mr. Yager. We believe that STOP actually did add quite some 
energy and some momentum to the efforts among agencies to work 
together to improve IP enforcement. I think there are a couple 
reasons for that. One, it was a very highly visible effort, not 
only inside the Government but in terms of outreach to the 
private sector. There was also some additional reporting and a 
little bit more in terms of accountability features, providing 
information to the Congress and other stakeholders as to what 
their goals were, and what was the purpose. They set some 
targets for performance. So I think there were a number of 
factors that made STOP more effective, including some fairly 
vigorous support from the White House. So it being an important 
effort within the administration gave it some additional 
prominence, and, frankly, it got the attention not just 
internally in the United States but also abroad. So there were 
some features about it that made it more effective than its 
predecessor.
    On the other hand, one of the problems with a Presidential 
initiative is it is certainly possible that that initiative 
will go away with the new administration. So one of the points 
that I made in my statement and my written report was about the 
permanence of this particular entity, because after achieving 
some momentum along the lines of the things that I mentioned, 
as well as, frankly, some increased prosecutions at Justice. 
This problem obviously will not be solved by the end of this 
administration, and there needs to be some discussion about how 
to make that group and that function more permanent to continue 
to make some progress on this difficult subject.
    Chairman Leahy. I wear another hat as Chairman of the 
Subcommittee that funds all of the State Department and its 
overseas operations. I have been pushing very hard to make sure 
we have people in our embassies who can work on these issues 
and train to.
    I should probably ask Mr. Monks, and Mr. Rose and Mr. 
Thurnau, has the coordination worked well? It is one thing to 
have our agencies coordinate with each other. They are 
coordinating with the industry. Mr. Monks?
    Mr. Monks. I think the reach-out is mutual. You know, from 
private industry we reach out to the Department of Justice, to 
the Bureau, to ICE, whoever it may be, and educate, talk about 
the problem how we can work together to combine our resources 
to get effective enforcement, get effective prosecution. So it 
is a two-way street. From UL's vantage point, it has worked on 
many occasions where we have had some good prosecutions. We are 
certainly not catching all the crooks, but, you know, we are 
out there pushing the envelope.
    So it has worked. There are some limitations. There is 
communication problems here and there. But overall we are quite 
happy with the outcome.
    Chairman Leahy. Mr. Rose?
    Mr. Rose. We have coordinated with various governmental 
agencies, and they are very important resources to us. In our 
industry, we work very closely with the FDA and also with the 
group in the FDA, the Office of Criminal Investigation. They 
are very important to us, and they have been great resources, 
as well as Homeland Security and ICE.
    Coordination always is a difficult thing. As we look at 
counterfeiting, we have to also be cognizant that 
counterfeiting is occurring outside the U.S.; we need to have 
better coordination with regulatory agencies, and enforcement 
agencies overseas.
    Chairman Leahy. Mr. Thurnau?
    Mr. Thurnau. Thank you. Let me take that segue in terms of 
international efforts. From the Gates Corporation's point of 
view, our primary issues are offshore, and we have had some 
success in dealing with U.S. agencies, but at the moment, we 
also are trying to beef up our contacts with other governments, 
other law enforcement agencies in those governments, so that 
they are familiar with us and familiar with the products and 
the automotive industry products. So to the extent that U.S. 
agencies can assist in that coordination effort between U.S. 
and other governments, it would be appreciated.
    Chairman Leahy. Well, thank you. And, you know, I would 
hope that each one of you would feel free, after you think 
further on this, to write to me if you have ideas, concrete 
things that you feel that could be done, and write to both 
myself and Senator Hatch, who is interested in this. This 
really is not a partisan issue. It is one that we all have a 
stake in. I have a lot of small companies but very big 
companies in my own State of Vermont that have international 
work, many in the electronic areas, other types of areas, and 
one that does circuit breakers that you have certified, Mr. 
Monks, your company has. And they are constantly being faced 
with counterfeit products labeled as theirs, and they do not 
begin to match the quality of theirs.
    Mr. Rose, we just touched on this earlier, but just give us 
some idea of what you have to do in your company, a brand that 
we all recognize, what you have to do just to protect your 
brand name that people are counterfeiting and thinking they are 
buying a Johnson & Johnson brand. I am sure that what you would 
say is probably could be said by just about every large 
corporation in this country.
    Mr. Rose. I will speak on behalf of the health care 
industry. I am sure Mr. Thurnau could comment on the automotive 
industry as well.
    What we are seeing is a huge investment of resources and 
time. If you go back 30 years ago, this was not an issue on 
anyone's agenda. We were developing products and marketing 
products. Now we have added another dimension to our supply 
chain activities where we have to protect our products. So we 
invest in various anti-counterfeiting measures and features for 
our products, overt and covert markers, color-shifting inks and 
holograms. We have invested in time with our trading partners 
to reassess our agreements, our trade agreements that we have 
with them. We are monitoring the marketplace as well.
    These activities are taking a lot of resources, corporate 
resources, that we now have to invest in just to protect 
products. We manufacture genuine products, and as you 
rightfully mentioned, the Johnson & Johnson name is a very 
important name to protect. Now we have to invest to protect 
that name even more than we ever have in the past.
    Chairman Leahy. It would be more fun to be spending that 
money on developing new products, I am sure.
    Mr. Rose. We would all benefit from spending money on new 
products. Many of us would benefit from having new medical 
products.
    Chairman Leahy. I am going to yield to Senator Cardin in 
just one moment, but, Mr. Thurnau, when I walked in, I noticed 
you had a belt over there, and I am sitting here intrigued. 
Would you tell me what that is?
    Mr. Thurnau. Absolutely. Thank you. I brought in an 
authentic belt and a counterfeit belt and some authentic and 
counterfeit packaging as well. And the point is that 
counterfeiters to a certain extent have to meet quality 
standards, as odd as that sounds, because even though it is a 
point-of-sale issue for the purchase of counterfeit products, 
they still have to get past that initial purchase. So often it 
is very difficult to distinguish between the authentic goods 
and the counterfeit goods. I am glad to offer these up for 
inspection by the Committee.
    Chairman Leahy. Thank you.
    Senator Cardin?
    Senator Cardin. Well, Mr. Chairman, thank you very much for 
holding this hearing, and I thank our witnesses for their 
testimony. The stealing of intellectual property is a very 
serious problem. It is not only an economic loss. It is a 
fairness issue. It is a safety issue. And I think you all have 
pointed that out in your testimony. And whether we are dealing 
with pirated goods or we are dealing with counterfeit products, 
it is a huge problem.
    And there is an attitude issue. I think people in this 
country do not realize that when they take a pirated product, 
it is stealing; or that when they use software that they get 
from a friend without a license, it is stealing. When they look 
for a product that might be counterfeit and are not really too 
concerned about it, it is stealing. And we need to do a much 
better job on enforcement.
    In the last Congress, I served as the ranking Democrat on 
the Trade Subcommittee of the House Ways and Means Committee. I 
spent a lot of time dealing with intellectual property issues 
in our trade agreements. So I just really want to ask the panel 
a question. This hearing is primarily focused as to how we can 
strengthen our internal enforcement of our intellectual 
property rights, how we can help enforce the laws of this 
country, strengthen the laws.
    One could say, Are our laws adequate? That is, is it clear 
what is legal and what is not legal? Second, do we have the 
right enforcement? And we have been talking here and the 
Chairman has been very active as to the coordination of so many 
agencies that are involved here, whether there should not be a 
better way to coordinate that, either through a central person 
or through a better focus within an agency. And the third is 
whether we should be looking at our trade laws in a different 
light.
    I remember discovering in regards to counterfeit products 
that other countries that we trade with actually finance the 
manufacturing operations of counterfeit products. They actually 
assist in getting U.S. product to their country, which they 
analyze, then they set up manufacturing plants that produce 
that product in a counterfeit way for their own economic 
advantages, which is clearly something that should never be 
tolerated by the United States for a trading partner or any 
other country. So the question really is: Do we need to take a 
new look at our multinational trade agreements or our bilateral 
trade agreements or our U.S. attitude as to which countries we 
will allow access to our country if they are not enforcing 
basic intellectual property protections for U.S. manufacturers 
and producers?
    So, yes, we have got to take care of our own domestic laws. 
We have to take care of enforcement here. We have got to take 
care of our trade laws. And if you could just help me a little 
bit as to where we should place our priorities in regards to 
being the most effective in preventing the stealing of 
intellectual property with American companies and individuals.
    Mr. Yager. If I could answer that, Senator Cardin, I think 
certainly we will not be successful if our efforts end at the 
U.S. borders in terms of trying to protect the U.S. from the 
entry of these goods.
    There is a procedure, there is a special 301 process, which 
includes a number of the different agencies, and the focus of 
the special 301 process is for Government to get together with 
different industry representatives and foreign governments to 
talk about the ways that their legislation abroad can be 
improved. And there also has been some discussion about 
enforcement of those laws within the special 301 process.
    So there is an active process within the Federal Government 
that has been relatively successful--
    Senator Cardin. The United States has been challenged 
internationally on its enforcement, and in the latest round, 
there was a fear that we might have actually weakened some of 
our enforcement provisions. We did not get to that point, but 
it does not seem like we are winning in the international 
arena.
    Mr. Yager. There certainly have been some situations where 
the special 301 tool has been used against countries like 
Russia, Ukraine, and others to exert pressure. In some cases, 
there has been stronger legislation written in those countries. 
I have to say, though, the real difficulty with working with 
foreign countries is to try to convince them to put resources 
into this effort because, obviously, stopping the production of 
pirated goods abroad is a very resource-intensive effort, as it 
is here. And one of the things that we noticed when we did some 
travel is if there are groups within the law enforcement 
agencies abroad that are serious about seizing counterfeit 
goods, they have a storage problem very quickly. There is just 
so much counterfeit merchandise in many of these other cities 
that if the agencies, whether they are police or other, get 
serious about this, in a matter of days of seizures they have 
trucks full of counterfeit goods that they somehow have to try 
to destroy while keeping enough evidence to prosecute.
    So it is an enormous effort where I believe the U.S. 
Government has been somewhat successful in helping them 
strengthen the laws, but the enforcement is still a major 
challenge.
    Senator Cardin. I would point out, if a country wants a 
trade agreement with the United States or, as we negotiate the 
multinational trade agreements, it should be, I think, high on 
our agenda to deal with how those nations are enforcing 
protection against taking of intellectual property. What 
resources are they putting behind enforcing the laws they have 
on the books to protect in this area? And certainly--and this 
is very true in the auto parts area. They certainly should not 
be helping to finance companies in their own country that are 
making counterfeit product. And that has been true of some of 
our trading partners. You at least want them to stop 
encouraging it, and certainly we would like them to enforce by 
confiscating counterfeit products and making sure they do not 
get into commerce.
    Mr. Thurnau. Yes, Senator Cardin, exactly. We agree.
    And enforcement in those countries presents a problem, and 
it is not entirely clear in all instances that enforcement has 
taken place, even when there has been a successful seizure or 
shutting down of a pirate operation. It is not uncommon that 
they simply reopen someplace down the road and put a different 
label on, and they are off and running again.
    So there does seem occasionally to be lack of interest on 
the part of these governments to follow through with the 
process, either destruction of the physical plant that was 
doing the counterfeit operation, incarceration of the 
individuals who were involved, and it is a serious problem. We 
agree.
    Senator Cardin. I thank the Chairman. I guess my point is, 
Mr. Chairman, you are absolutely right to put attention in this 
hearing on the jurisdiction of our Committee to enforcement of 
our IP laws. We need to do a much better job here in this 
country. But we also need our trade representatives to put a 
higher priority on IP protections on the trade agenda so that 
you do not have to fight as hard with other countries as you do 
only to find when you win what you think is a battle, they just 
move down the street and open up another operation and you 
really have not gained anything other than costing a lot of 
energy and time and resources of your company.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you very much, Senator Cardin.
    We talked about the cost of the theft of intellectual 
property. Mr. Rose, do you know offhand how much your company 
spends to protect your intellectual property a year?
    Mr. Rose. Mr. Chairman, I do not know the exact number that 
we spend to protect our intellectual property. I think it is 
hard to estimate because we integrate it into so many parts now 
of our company, and we do not look at it as an isolated cost. 
We can tell you some numbers. We have seen from the World 
Health Organization, we understand the economic impact is about 
$40 billion just to the pharmaceutical industry alone. And as 
you know, Johnson & Johnson is a medical device company, as 
well as a pharmaceutical company, as well as a consumer 
products company. So that is just one estimate for the whole 
pharmaceutical industry globally, $40 billion, what it costs us 
and what the economic impact would be. What it means 
specifically for our company, we do not have a good estimate 
for that.
    Chairman Leahy. Mr. Monks, do you have any idea?
    Mr. Monks. It is in the several millions of dollars. This 
is my full-time job. This job did not exist with this function 
UL 15 years ago, so it is relatively new. And it is global in 
its reach. And I would just say if we put in, you know, another 
thousand people into the job, it still would not be enough. It 
is growing at an epidemic level. It is in the millions. And it 
has to be spent because like Johnson & Johnson and everyone 
else that is in this room, the integrity of the UL mark cannot 
be tarnished, that if people plug something in, they expect it 
to be safe. And so we have to put this asset in place and 
protect the mark.
    Chairman Leahy. Mr. Thurnau, and I realize that I am 
jumping around here a little bit, but we have heard about 
organized criminal syndicates, especially in Eastern Europe and 
China, counterfeiting American goods. Has that been your 
experience? Are they a major force in all of this?
    Mr. Thurnau. It has. We in the past, had instances in 
Russia, for example, where the counterfeiting operation, as far 
as we understand, was based in organized crime. And it 
presented problems for the investigators and for the 
individuals who are dealing with the counterfeiters. So we have 
run across that, yes.
    Chairman Leahy. Should we be looking at changes in our RICO 
statutes or anything in our criminal laws that we should 
change? Or is it simply a case of enforcement and trying to 
grab people?
    Mr. Thurnau. I think in this case, sir, it is a matter of 
enforcement, resources being allocated in terms of Federal 
agents and prosecutors to, as you say, put people behind bars.
    Chairman Leahy. I realize this is kind of a broad-based 
question, but have you found in some of these countries that 
there is at least implicit government support, if not direct?
    Mr. Thurnau. Yes, but not at the central government levels. 
It is usually at the provincial or city levels where the folks 
who we are working with may have an interest in the operation 
itself, so they have got the bias in favor of seeing that it 
continued to operate. That has happened, but as I said, not at 
the central government level, primarily provincial and city.
    Chairman Leahy. You know, I have been following this. I 
have had so many briefings, both public briefings and closed-
door briefings of this. It is hard to think of any area of 
crime, and international crime as well as internal crime, that 
has grown so fast in this whole area.
    Mr. Monks, we try to figure out ways to stop the 
counterfeiting of seals, whether it is the UL seal or any other 
seal. Should we be doing more in that? Do we need more laws in 
place? I am happy to push for laws, but I am also trying, as 
I--again, we are not trying to bring everything back to one's 
own experience as a prosecutor. I recall telling the Vermont 
Legislature once, when we had a rash of armed robberies around 
the State, I said, ``We need some help to get that.'' They 
said, ``Well, we will double the penalty.'' I said, ``People do 
not think they are going to get caught. Doubling the penalty 
does not do anything. You need people to go out there and catch 
them.''
    If you wanted to leave me with any last thought, what would 
it be?
    Mr. Monks. I think the clang of the jail door is really a 
deterrent. More police tuned into, trained on IP crime. It is 
quite possible that police officers walk into a warehouse and 
seize drugs and weapons, and then there is a bank of DVR 
players, and they think the guy is into hi-fi. But, really, he 
is counterfeiting movies and making money.
    It is the prosecution of these individuals. You need to 
create the laws that makes a deterrent to steal, because 
counterfeiting right now is all about stealing, and if I am 
going to steal and bring a shipment in of a million dollars and 
I get caught and the fine is $25,000, I will play that game 
every day with you. It is a win-win for the counterfeiter.
    So it is not only prosecution, putting the assets on the 
ground, the police officers, the law enforcement, the customs 
agents, and taking it to them.
    Chairman Leahy. I think we have to do a better job of 
letting people know that people die from some of these things, 
not just buying a counterfeit article of clothing. And I am not 
suggesting in any way to condone that if somebody has done 
their own design and done the work. But if your seat belt does 
not meet the standards, if your medicine does not meet the 
standards, if your brake pad does not meet the standards, you 
can die.
    One of the things that I am glad to see--and I have talked 
about this not being a partisan issue. It is also one where 
labor and business have joined together. I know organized labor 
has joined industry in promoting stronger intellectual property 
protection. We have all got a stake in this. You have got the 
stake of your reputations. We have the stake of our lives. We 
also have the stake of jobs. And we all know that in today's 
world, you are going to have international competition anyway. 
And that is significant. It is a fact of life. But I would kind 
of like to have fair competition. Most of the corporations I 
have known in this country can keep the rules the same for 
everybody. They can compete. You can make tough competition, 
but they can compete. It is when somebody does not have to 
follow the rules where you have a difficult time.
    Well, gentlemen, I appreciate your being here. You will get 
a copy of the transcript. If you want to add to it, please feel 
free. But also know that almost every member of the Committee 
has about three different meetings going on today, but we are 
going to be talking about this in the Committee. Feel free to 
add anything you want to.
    We will stand in recess. Thank you.
    [Whereupon, at 11:07 a.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

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