[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
INTELLECTUAL PROPERTY: ENFORCEMENT
ACTIVITIES BY THE EXECUTIVE BRANCH
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, INTELLECTUAL
PROPERTY, AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
TUESDAY, MAY 7, 2024
__________
Serial No. 118-75
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
55-652 WASHINGTON : 2024
COMMITTEE ON THE JUDICIARY
JIM JORDAN, Ohio, Chair
DARRELL ISSA, California JERROLD NADLER, New York, Ranking
MATT GAETZ, Florida Member
ANDY BIGGS, Arizona ZOE LOFGREN, California
TOM McCLINTOCK, California SHEILA JACKSON LEE, Texas
TOM TIFFANY, Wisconsin STEVE COHEN, Tennessee
THOMAS MASSIE, Kentucky HENRY C. ``HANK'' JOHNSON, Jr.,
CHIP ROY, Texas Georgia
DAN BISHOP, North Carolina ADAM SCHIFF, California
VICTORIA SPARTZ, Indiana J. LUIS CORREA, California
SCOTT FITZGERALD, Wisconsin ERIC SWALWELL, California
CLIFF BENTZ, Oregon TED LIEU, California
BEN CLINE, Virginia PRAMILA JAYAPAL, Washington
KELLY ARMSTRONG, North Dakota MARY GAY SCANLON, Pennsylvania
LANCE GOODEN, Texas JOE NEGUSE, Colorado
JEFF VAN DREW, New Jersey LUCY McBATH, Georgia
TROY NEHLS, Texas MADELEINE DEAN, Pennsylvania
BARRY MOORE, Alabama VERONICA ESCOBAR, Texas
KEVIN KILEY, California DEBORAH ROSS, North Carolina
HARRIET HAGEMAN, Wyoming CORI BUSH, Missouri
NATHANIEL MORAN, Texas GLENN IVEY, Maryland
LAUREL LEE, Florida BECCA BALINT, Vermont
WESLEY HUNT, Texas
RUSSELL FRY, South Carolina
Vacancy
------
SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND
THE INTERNET
DARRELL ISSA, California, Chair
THOMAS MASSIE, Kentucky HENRY C. ``HANK'' JOHNSON, Jr.,
SCOTT FITZGERALD, Wisconsin Georgia, Ranking Member
CLIFF BENTZ, Oregon TED LIEU, California
BEN CLINE, Virginia JOE NEGUSE, Colorado
LANCE GOODEN, Texas DEBORAH ROSS, North Carolina
KEVIN KILEY, California ADAM SCHIFF, California
NATHANIEL MORAN, Texas ZOE LOFGREN, California
LAUREL LEE, Florida MADELEINE DEAN, Pennsylvania
RUSSELL FRY, South Carolina GLENN IVEY, Maryland
CHRISTOPHER HIXON, Majority Staff Director
AARON HILLER, Minority Staff Director & Chief of Staff
C O N T E N T S
----------
Tuesday, May 7, 2024
OPENING STATEMENTS
Page
The Honorable Darrell Issa, Chair of the Subcommittee on Courts,
Intellectual Property, and the Internet from the State of
California..................................................... 1
The Honorable Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the Internet
from the State of Georgia...................................... 2
The Honorable Jerrold Nadler, Ranking Member of the Committee on
the Judiciary from the State of New York....................... 4
WITNESSES
Michael Ball, Acting Assistant Director for the Global Trade
Devision, Homeland Security Investigations, U.S. Department of
Homeland Security
Oral Testimony................................................. 7
Prepared Testimony............................................. 9
Josh Goldfoot, Acting Deputy Assistant Attorney General, Criminal
Division, U.S. Department of Justice
Oral Testimony................................................. 16
Prepared Testimony............................................. 18
Brandon Lord, Executive Director of Trade Policy and Programs,
U.S. Customs and Border Protection, U.S. Department of Homeland
Security
Oral Testimony................................................. 26
Prepared Testimony............................................. 28
LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING
All materials submitted by the Subcommittee on Courts,
Intellectual Property, and the Internet, for the record........ 61
Materials submitted by the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the Internet
from the State of California, for the record
A letter to the Honorable Katherine C. Tai, U.S. Trade
Representative, May 4, 2024, from the Honorable Jim
Jordan, Ranking Member of the Committee on the Judiciary
from the State of Ohio, and the Honorable Jerrold Nadler,
Chair of the Committee on the Judiciary from the State of
New York
A letter to the Honorable Jim Jordan, Ranking Member of the
Committee on the Judiciary from the State of Ohio, Aug.
19, 2021, from the Honorable Katherine C. Tai, U.S. Trade
Representative
A report entitled, ``Overview of the Results of the 2023
Review of Notorious Markets for Counterfeiting and
Piracy,'' Jan. 30, 2024, Office of the United States
Trade Representative, Executive Office of the President
A report entitled, ``2024 Special 301 Report,'' Apr. 25,
2024, Office of the United States Trade Representative,
Executive Office of the President
A letter to the Honorable Katherine C. Tai, U.S. Trade
Representative, Feb. 13, 2024, from Jim Jordan, Chair of
the Committee on the Judiciary from the State of Ohio,
Darrell Issa, Chair of the Subcommittee on Courts,
Intellectual Property, and the Internet from the State of
California, and the following Members of the Subcommittee
on Courts, Intellectual Property, and the Internet,
Thomas Massie, Cliff Bentz, Lance Gooden, Nathaniel
Moran, Russell Fry, Scott Fitzgerald, Ben Cline, Kevin
Kiley, and Laurel M. Lee
A letter to the Honorable David Johanson, Chair of the U.S.
International Trade Commission, Jul. 9, 2002, from the
Honorable Katherine C. Tai, U.S. Trade Representative
A letter to the Honorable David Johanson, Chair of the U.S.
International Trade Commission, Dec. 16, 2022, from the
Honorable Katherine C. Tai, U.S. Trade Representative
A document entitled, ``Ministerial Decision on the Trips
Agreement,'' Jun. 22, 2022, from the World Trade
Organization, The Ministerial Conference
A report entitled, ``COVID-19 Diagnostics and Therapeutics:
Supply, Demand, and TRIPS Agreement Flexibilities,'' Oct.
2023, United States International Trade Commission
A press release entitled, ``Readout of Ambassador Katherine
Tai's Virtual Meeting With India Minister of Commerce and
Industry Piyush Goyal,'' May 14, 2021, The Office of the
United States Trade Representative
A press release entitled, ``Readout of Ambassador Katherine
Tai's Virtual Meeting With Minister Ebrahim Patel of
South Africa About Increasing Vaccine Production and
Combating the COVID-19 Pandemic,'' May 13, 2021, The
Office of the United States Trade Representative
A press release entitled, ``Readout of Ambassador Katherine
Tai's Virtual Meeting With World Health Organization
Director General Tedros Adhanom Ghebreyesus,'' May 14,
2021, The Office of the United States Trade
Representative
A letter to the Honorable Jim Jordan, Chair of the Committee
on the Judiciary from the State of Ohio, Apr. 3, 2024,
from the Honorable Katherine C. Tai, U.S. Trade
Representative
A letter to the Honorable Jim Jordan, Chair of the Committee
on the Judiciary from the State of Ohio, Feb. 26, 2024,
from the Honorable Katherine C. Tai, U.S. Trade
Representative
A press release entitled, ``Statement from Ambassador
Katherine Tai on an Intellectual Property Response to the
COVID-19 Pandemic,'' Jun. 17, 2022, the Honorable
Katherine C. Tai, U.S. Trade Representative
A press release entitled, ``U.S. to Support Extension of
Deadline on WTO TRIPS Ministerial Decision; Requests
USITC Investigation to Provide More Data on COVID-19
Diagnostics and Therapeutics,'' Dec. 6, 2022, The Office
of the United States Trade Representative
A redacted calendar excerpt from the Honorable Katherine C.
Tai, U.S. Trade Representative
A letter to the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of California, and the Honorable
Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of Georgia, May 14, 2024, from
Jeffrey P. Hardy, Director-General, Transnational
Alliance to Combat Illicit Trade
A letter to the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of California, and the Honorable
Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of Georgia, May 13, 2024, from
American Apparel & Footwear Association
A letter to the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of California, and the Honorable
Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of Georgia, May 7, 2024, from the
Global Innovation Policy Center, U.S. Chamber of Commerce
A letter to the Subcommittee on Courts, Intellectual
Property, and the Internet, May 15, 2024, from the
Automotive Anti-Counterfeiting Council (A2C2)
A letter to the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of California, and the Honorable
Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of Georgia, May 23, 2024, from
the Partnership for SafeMedicines
A letter to the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of California, and the Honorable
Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the
Internet from the State of Georgia, May 14, 2024, from
the Transnational Alliance to Combat Illicit Trade
(TRACIT.ORG)
QUESTIONS AND RESPONSES FOR THE RECORD
Questions submitted by the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the Internet
from the State of California, and the Honorable Ted Lieu, a
Member of the Subcommittee on Courts, Intellectual Property,
and the Internet from the State of California, for the record
Questions to Michael Ball, Acting Assistant Director for the
Global Trade Devision, Homeland Security Investigations,
U.S. Department of Homeland Security
Questions to Josh Goldfoot, Acting Deputy Assistant Attorney
General, Criminal Division, U.S. Department of Justice
Questions to Brandon Lord, Executive Director of Trade Policy and
Programs, U.S. Customs and Border Protection, U.S. Department
of Homeland Security, submitted by the Honorable Darrell Issa,
Chair of the Subcommittee on Courts, Intellectual Property, and
the Internet from the State of California
No responses at the time of publication
INTELLECTUAL PROPERTY: ENFORCEMENT
ACTIVITIES BY THE EXECUTIVE BRANCH
----------
Tuesday, May 7, 2024
House of Representatives
Subcommittee on Courts, Intellectual Property, and
the Internet
Committee on the Judiciary
Washington, DC
The Subcommittee met, pursuant to notice, at 10:08 a.m., in
Room 2141, Rayburn House Office Building, the Hon. Darrell Issa
[Chair of the Subcommittee] presiding.
Present: Representatives Issa, Massie, Fitzgerald, Bentz,
Cline, Kiley, Moran, Lee, Fry, Johnson, Ross, Schiff, Lofgren,
Dean, and Ivey.
Mr. Issa. The Subcommittee will come to order.
Without objection, the Chair is authorized to declare a
recess at any time.
We welcome everyone here today to a hearing on intellectual
property enforcement activities by the Executive Branch. I will
now recognize myself for an opening statement.
The purpose of today's hearing is to scrutinize the Biden
Administration's enforcement of existing intellectual property
laws. Any comments made today about the current
administration's enforcement does not imply the previous
administrations were somehow flawless. I want to make it clear;
this is a snapshot in time, but it's an important snapshot in
time.
IP is the foundation of our Nation's economy, creativity,
and innovation. Annual losses due to lack of enforcement are
costing the American economy nearly $1 trillion. It is
estimated to be over $715 billion; I believe that is an
understatement.
As far back as 2017, the cost of counterfeiting copyrighted
and pirated software and the theft of trade secrets in the U.S.
was estimated to be between $225 billion and $600 billion.
Unsurprisingly, the People's Republic of China is the lead
culprit. Last year, more than half of Customs and Border
Protection's total seizures of goods came from the People's
Republic of China and their captive satellite Hong Kong. These
seizures accounted for 80 percent of the value of all IP
infringing goods that were seized.
China is not only flooding the market, but the CBP with its
de minimis exception parcels finds itself with more than one
billion parcels. There is not enough money in the Treasury to
search one billion parcels properly, particularly when we don't
know what's in them. Yet, despite these significant economic
and security threats, there has been a steady decrease in
enforcement actions and prosecutions under the current
administration.
In 2023, the Department of Justice filed only one copyright
piracy case. By the way, I had to correct that from two. I've
had to cut in half the amazing performance. There has been a
drop in IP-related seizures at the border. No surprise, they're
busy with other issues. In fact, when you look at $1 trillion
in an economy, it's meaningful. It's meaningful because, for
example, the amount of theft from this country exceeds the
entire Department of Defense budget.
The current administration did not nominate a new head of
the Intellectual Property Enforcement Coordinator until May
2023, and has not pushed to have that position filled. As a
matter of fact, it's one of the reasons that the nameplate is
empty, is that the ``acting'' or ``doing on behalf of''
declined to come. Additionally, the U.S. Trade Representative
declined to come.
Underscoring these failures by the Biden Administration to
prioritize IP are two empty chairs here this morning. I want to
make it clear; we'll clear off the empty chairs. We just wanted
to make it clear that we appreciate the people who are here. We
appreciate your being here. Your testimony is important. We all
know that you're not the problem, but you're here to explain
what the problem is and how we can work together on solutions.
With that, I would recognize the Ranking Member of the
Subcommittee.
Mr. Johnson. Thank you, Mr. Chair. I'd like to start by
thanking you for convening this important hearing. The agencies
represented here today are on the front lines of preventing
piracy, keeping counterfeits off the market, and securing our
businesses' trade secrets. It's important that we, as one of
the Committees responsible for their oversight, have the
opportunity to engage them about their work.
It is one of the quirks of our intellectual property system
that, in many cases, it's up to the IP owners themselves to
enforce their rights. If an individual holds a copyright
trademark or patent, that intellectual property is worth very
little unless they police it themselves. An individual can hold
a patent, for example, but that patent is only as good as its
owner's ability to enforce it in a court of law.
Some IP protections, however, are also policed by the
Federal Government. Customs and Border Protection prevents
products that violate our intellectual property laws from
entering the country; Homeland Security Investigations, through
its IPR center, works across nations and with international
governmental agencies to prevent theft of American IP; and the
Department of Justice, through its investigators at the FBI and
prosecutors with CCIPS, investigates and prosecutes
intellectual property cases ranging from piracy of e-books to
trade secret theft at the highest levels of American business.
Their work is essential to our economic competitiveness in
the United States. Just last month, an article in Bloomberg
declared that my home State of Georgia, quote, ``is booming
like it never did before Joe Biden became the 46th President.''
That is in part because of our strong IP protections for
creators, innovators, and artists, including those who call the
Atlanta area home.
Enforcement of intellectual property protections helps more
than just our economy; it also keeps consumers safe.
Counterfeit products can pose real dangers to Americans.
Imagine learning that your car is equipped with an airbag that
wasn't manufactured to American safety standards, or that the
moisturizer you just bought, the makeup you applied, or even
the pills you took for a medical condition were made with cheap
toxic chemicals, or that the batteries you bought on an e-
commerce site might start a fire in your home.
When counterfeit products slip through the cracks, these
dangers become all too real. In many cases, consumers,
manufacturers, and online marketplaces don't even know that the
products are counterfeit until it's too late. I'm looking
forward to hearing from our witnesses how their agencies are
working to prevent counterfeits and pirated goods from entering
our stream of commerce, including managing the increase in de
minimis shipments from e-commerce sites and scaling up
enforcement by adopting AI-driven systems.
Another threat to consumers comes from cybersecurity risks
posed by digital piracy. Today, it is all too easy to
unwittingly download a file from an illegal source or click on
the wrong links for a live-streamed cultural or athletic event.
Then there is the economic harm associated with piracy.
According to recent estimates from the U.S. Chamber of
Commerce's Global Innovation Policy Center, digital piracy and
illegal streaming services cost our economy about $30 billion
per year in lost revenue.
The work these agencies do to prevent online piracy helps
keep our economy strong, and I'm looking forward to hearing
from our witnesses about recent successes of taking down
pirated streaming operations and how they plan to increase
enforcement of copyright piracy.
The agencies represented today are staffed with dedicated
and capable public servants, but the challenges they confront
cannot be solved by the American government alone. It is
crucial that we work together with other governments and their
law enforcement agencies to combat the real dangers of IP theft
to the health of our economy and the safety of our citizens.
Finally, I appreciate that we often work in a bipartisan
nature on this Subcommittee. Our work reaffirms the principle
that we do not need to agree on everything to get some good
work done. Putting these empty chairs here appears more
political theater than good, honest policymaking or oversight.
Because the Senate has not yet confirmed an IPEC--and I
encourage them to confirm Ms. Robinson's nomination as soon as
possible--there is no one available to appear here.
With regard to USTR, Congress has a responsibility to
accommodate the Executive Branch. Stunts like this make the
back and forth harder, not easier, and I would advise against
it in future hearings. It's my hope that we on this Committee
can do our part to safeguard intellectual property, continue
our trend of strong economic growth, and keep consumers safe.
I thank the witnesses for appearing today, and I yield back
the remainder of my time.
Mr. Issa. I thank the gentleman.
We now recognize the Ranking Member of the Full Committee,
Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chair. Mr. Chair, intellectual
property in the United States at its core is the right to own
an idea. The power of IP is not in the individual movie, the
chemical compound, or the store sign--though they certainly
have value--but in the exclusive authority to reproduce their
protective content. Because it is difficult to put most
creations in the stream of commerce while also keeping them
under lock and key, the enforcement of IP protections is key to
the success of our system.
If the ideas we protect are easily stolen, then they hold
no value. If copyrights, trademarks, and patents have no value,
then the American system cannot encourage innovation, protect
consumers, help drive economic growth, and keep our country
safe.
Responsibility for IP investigation, enforcement, and
prosecution is spread across multiple agencies within the
Executive Branch. The Computer Crime and Intellectual Property
Section at the Department of Justice is responsible for
protecting American businesses by stopping copyright piracy,
prosecuting trademark violations, and preventing economic
espionage.
The National Intellectual Property Rights Coordination
Center, or the IPR Center, within the Homeland Security
Investigations Branch at DHS acts as a hub for all its
enforcement activities, combining regulatory, civil, and
criminal authorities to execute a mission that varies from
investigation of crimes to educating the public about IP theft.
Finally, Customs and Border Protection enforces our laws at
our ports of entry, inspecting packages and shipments for
counterfeit goods, and collaborating with other agencies leads
to shut down IP violators operating overseas.
Our witnesses today represent these agency departments
tasked with Federal enforcement of our IP system. Their
authority is clearly broad and wide ranging, from enhancing
cybersecurity and stopping copyright piracy, to counterfeit
enforcement and protection of trade secrets. Recent
technological innovations have further complicated this already
complex web of enforcement responsibilities.
The widespread availability of 3D printing to create
counterfeit goods of artificial intelligence to replicate
copyrighted works and advanced technology to make pirated live
streams available to living rooms around the world have all
made it harder to protect Americans' creative works.
Technology innovations that allow users to evade IP
protections do not mean we are in a post-IP world. Far from it.
America's leadership in AI, our flourishing research
institutions, and our diverse creative communities show that
strong intellectual property protections mean a healthy
innovation ecosystem.
As those who wish to take advantage of our IP system change
how they do business, our approach to enforcement, too, must
change. I'm particularly looking forward to hearing from our
witnesses how the shift to selling counterfeit goods on e-
commerce platforms has affected their work. Over the past few
years, violators have increasingly moved to e-commerce sites to
ship counterfeit goods into the United States.
This has been accompanied by a related change from larger
shipments to smaller parcels containing counterfeits that are
easier to evade detection. Between 2019 and 2022, those smaller
mailings of counterfeits increase from a little over 400
million to nearly 700 million shipments.
I was glad to see recent data from the Biden Administration
that HSI initiated 81 criminal investigations and conducted 94
seizures related to its e-commerce enforcement operation in
Fiscal Year 2023, preventing hundreds of thousands of dollars
in counterfeit goods from reaching the market while also
securing several indictments and convictions of bad actors.
I am concerned, however, about the ongoing proliferation of
counterfeit products available on e-commerce platforms, and I
look forward to reintroducing my bill, the SHOP SAFE Act, with
Chair Issa soon, which will further reduce the number of
dangerous counterfeits online.
While threats to Americans' intellectual property come from
many different countries, including within the United States,
the government of China prevents a persistent threat to our IP
system. This reality underscores the importance of our patents,
trademarks, and copyrights, not just to our creators and
businesses, but to our national security overall.
Over the last year, the Chair has held multiple hearings on
the IP threat from the Chinese Government, and at every one I
have emphasized the importance of protecting our system from
Nation States seeking tactical advantage by violating our
innovators' rights. At each of these hearings, however, I've
also cautioned my colleagues that recognizing a threat from a
foreign government is different from treating every citizen of
that country as a threat.
I was glad when the Biden Administration ended the China
Initiative, which sought to target individuals based on where
they were from rather than what they were doing. This strategy
ruins successful careers while yielding no meaningful results,
and I'm looking forward to hearing about DOJ's successful
prosecutions since it changed its approach.
Finally, it is imperative that the agencies responsible for
the protection of our intellectual property rights can
coordinate across agencies to maximize their effectiveness. The
White House Intellectual Property Enforcement Coordinator, or
IPEC, is tasked with coordinating a whole-of-government
approach to the enforcement of IP rights.
While the office continues to do good work, the Senate,
unfortunately, has not yet confirmed President Biden's nominee
for coordinator. I sincerely hope that Ms. Robinson's
nomination is considered soon so that she can begin the
important work of ensuring our IP laws are supported across the
administration.
I'd like to thank Chair Issa and Ranking Member Johnson for
holding this important hearing, and I extend my appreciation to
the witnesses for appearing before us today. I look forward to
hearing how your agencies' activities fit into the larger
picture of IP enforcement across the government and what
resources you need to further prevent IP violations by those
who seek to take advantage of our system and our creators.
With that, Mr. Chair, I yield back.
Mr. Issa. I thank the gentleman.
Without objection, all their opening statements will be
included in the record. It is now my honor to introduce our
distinguished panel of witnesses.
Mr. Michael Ball is the Acting Assistant Director for
Homeland Security Investigations, or HSI, Global Trade Division
at the Department of Homeland Security. In this role, Mr. Ball
oversees operational activities of HSI and GTD's national
program related to trade enforcement and intellectual property
and counterfeit proliferation investigations. He also serves as
the Acting Director of the National Intellectual Property
Rights Coordination Center.
We also have here Mr. Josh Goldfoot. Mr. Goldfoot is the
Acting Deputy Assistant Attorney in the Department of Justice
Criminal Division where he supervises criminal division
Computer Crime and Intellectual Property Section and the Child
Exploitation Obscenity Section. He has previously served as the
Principal Deputy Secretary--or Principal Deputy Chief of the
Computer Crime and Intellectual Property Section for eight
years and served as Deputy Chief for Cyber Policy in DOJ's
National Security Division for three years before that.
Welcome.
Mr. Brandon Lord is the Executive Director of the U.S.
Customs and Border Protection, or CBP, trade policy and
programs directorate. In that role, he is responsible for
policy enforcement priorities and stakeholder outreach related
to CBP's priority trade issues. He also oversees the 21st
Century Customs Framework Initiative and two ongoing pilots,
the Section 321 Data Pilot and Entry Type 86 Test, which cover
the review of what we will refer to repeatedly today as de
minimis e-commerce shipments.
Not present, and regrettably, the Intellectual Property
Enforcement Coordinator. Although the Office of Intellectual
Property Enforcement Coordinator is critical and exists for a
reason, no one was nominated for the first three years of the
administration, and when nominated the nominee has not been
confirmed. For that period of time, there has been an
``acting'' or ``performing duties as'' who declined to come,
stating that they were career professionals and inappropriate.
I might note for my Members here on both sides of the aisle
that we have two actings here. This Committee does not assume
that we can have somebody who has been confirmed, when no one
is confirmed, we take the acting or the person most
knowledgeable and we take them as prepared to answer the
questions and, by the way, as dedicate public servants who
deserve to be in that position.
Last, with great disappointment, the U.S. Trade
Representative declined to be here. We had many important
questions, some of which I will now ask for unanimous consent
that these public documents be placed in the record. That stack
of them is sitting there on the empty chair.
Without objection, so ordered.
These documents were the only ones we could glean, but they
do include important information that we wanted to ask about,
including the trip's waiver. Items that USTR has authority over
that does affect the ability for countries to, in fact,
participate in a way that can undermine the work of the other
three witnesses here. Those would not have been the only
questions, but within our jurisdiction they would've been the
ones that we were most interested in.
So, I would ask the staff to remove the name tags of the
individuals who were not able to be here and would ask the
three witnesses to rise and take the oath.
Do you solemnly swear under penalty of perjury that the
testimony you are about to give is true and correct to the best
of your knowledge, information, and belief, so help you God?
Thank you. Please be seated.
Let the record reflect that all witnesses answered in the
affirmative.
For the witnesses, please know that your written testimony
will be placed in the record in its entirety, so that gives you
the ability to read your statement or summarize or even go off
message, but please try to stay as close as you can to the
five-minutes so we can get to a round of questioning.
With that, Mr. Ball is recognized for his opening--or for
his--yes, his five-minute opening statement.
STATEMENT OF MICHAEL BALL
Mr. Ball. Thank you, sir. Chair Issa, Ranking Member
Johnson, and distinguished Members of this Committee, on behalf
of the National Intellectual Property Rights Coordination
Center, thank you for the opportunity to testify before this
Committee.
Homeland Security Investigations, formed by the Homeland
Security Act in 2002, is the largest investigative component of
the Department of Homeland Security, empowered with broad legal
authority to conduct Federal criminal investigations into the
illegal cross-border movement of people, goods, money,
technology, and other contraband throughout the United States.
With the authority to enforce more than 400 Federal statutes,
HSI investigates, disrupts, and dismantles transnational
criminal organizations and national security threats seeking to
exploit the customs and immigration laws of the United States.
HSI's footprint extends toward the 6,800 special agents
assigned to 235 domestic field offices and more than 90
international offices in more than 50 countries. HSI's
international presence is the largest within DHS and enables
HSI investigations to reach beyond our borders. HSI's cadre of
internationally deployed special agents, criminal analysts, and
mission support personnel work alongside locally employed staff
and foreign law enforcement partners to advance the HSI and DHS
mission around the world.
I serve as the Acting Assistant Director of HSI's Global
Trade Division. The Global Trade Division provides oversight
and support for criminal investigations of U.S. import and
export laws to ensure national security, protect the public's
health and safety, stop predatory and illegal trade practices,
and prevent sensitive U.S. technologies or weapons from
reaching transnational criminal organizations and foreign
adversaries.
I also serve as the Acting Director of the National IPR
Center. The IPR Center leads the Federal Government's efforts
to enforce international trade laws and to stop global
intellectual property theft.
In Fiscal Year 2023, HSI initiated 623 cases, 434 criminal
arrests, obtained 327 indictments, and 206 convictions related
solely to IP theft and commercial fraud. The IPR Center
disrupts and dismantles criminal networks using a whole-of-
government approach, including interdiction, investigation, and
outreach and training.
Created in 2000 and codified with the Trade Facilitation
and Trade Enforcement Act of 2015, or TFTEA, the IPR Center is
responsible for coordinating the Federal Government's
enforcement on our IP laws. The IPR Center focuses on criminal
investigations impacting health and safety, national security,
and the U.S. economy.
We have programs dedicated to addressing counterfeit
pharmaceuticals and medical devices, consumer electronics and
technology, automotive parts, luxury goods, apparel, cosmetics,
and digital piracy. We also identify and investigate
counterfeits in the U.S. Government supply chain with an
emphasis on counterfeit microelectronics in the DOD supply
chain.
Together with IP administrative and regulatory agencies,
including the U.S. Patent and Trademark Office, the IPR Center
stands at the forefront of IP enforcement. The IPR Center
structure leverages the authorities, resources, and skills of
each participating agency. The IPR Center is headed by HSI with
deputy directors from HSI, CBP, and the FBI. Each of the
agencies represented at the IPR Center bring their unique
authorities, jurisdictions, and culture together to coordinate
a whole-of-government IP approach.
The key to the IPR Center's operating model is our
partnerships. We partner with Federal agencies including DOJ,
Department of Commerce, State Department, Food and Drug
Administrations, Veterans Affairs, DOD, and many others. We
also partner with international law enforcement agencies,
academic institutions, and private industry. While each
partnership is unique, the goal is always to enhance each
organization's capabilities in furtherance of investigative
case support, training, and outreach.
Outside of our Federal and international law enforcement
partners, the IPR Center maintains robust partnerships and
significant engagement with private industry, a range of
industry leaders and industry associations. Protecting IP is a
global problem that requires a whole-of-government approach,
strong partnerships with private industry, and continued
collaboration with academic and public partners. HSI and the
IPR Center are on the forefront of IP enforcement, leveraging
the strengths of our partners to constantly adapt to the
evolving tactics of transnational criminal organizations.
I welcome your questions. Thank you.
[The prepared statement of Mr. Ball follows:]
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Mr. Issa. I thank the gentleman. Mr. Goldfoot.
STATEMENT OF JOSH GOLDFOOT
Mr. Goldfoot. Good morning, Chair Issa, Ranking Member
Johnson, and the Members of the Subcommittee. My name is Josh
Goldfoot, and I am Acting Deputy Assistant Attorney General in
the criminal division of the Department of Justice. Thank you
for the opportunity to testify today about the important work
of intellectual property enforcement in the Department of
Justice.
I'll say, it's also an honor to be here today with Mr. Ball
and Mr. Lord, two representatives of agencies we work with so
much in enforcing intellectual property laws.
The core responsibility of the criminal division is to
ensure the enforcement of the U.S. law through effective
prosecutions, to vindicate the interests of the public, and to
deter unlawful conduct. The criminal division prosecutes all
Federal crimes not otherwise specifically assigned to other
divisions. The Computer Crime and Intellectual Property
Section, which is abbreviated CCIPS, and we pronounce it CCIPS,
is a section within the criminal division, and it executes the
criminal division's work in enforcing intellectual property
statutes.
The members of the IP team at CCIPS prosecute criminal IP
cases, as well as serve as a source of expertise for other
prosecutors, including more than 260 computer hacking and
intellectual property AUSAs and investigators across the
country. CCIPS works closely with the investigative partners at
the National Intellectual Property Rights Coordination Center
to coordinate among multiple jurisdictions in complex IP
matters.
The internet and the globalization of trade make IP crime
truly a global problem. To counter the problem of international
IP crime, the Department focuses additional resources funded by
the Department of State on international engagement, including
developing relationships and engaging in cooperative
enforcement efforts with foreign law enforcement agencies,
supporting training, case-based mentoring, and other capacity
building where appropriate.
Central to the Department's international efforts on IP
enforcement is the International Computer Hacking and
Intellectual Property program, or ICHIP program, a network of
Federal prosecutors with expertise in IP crime and other high-
tech legal issues stationed in U.S. missions in key regions
around the world, and supported by U.S.-based legal experts
specializing in internet fraud and public health, illicit
markets, cryptocurrency, as well as digital forensics experts
and CCIPS's Cybercrime Lab.
While IP is a key driver of the U.S. economy across many
sectors, some technologies protected by IP rights have national
security implications that warrant extra attention. The
Department, led by my colleagues in the National Security
Division, takes a multipronged approach to identify and counter
Nation State threats to U.S. IP and technology that affect U.S.
security interests. The criminal division works with the
National Security Division to advise on trade secrets and
economic espionage cases and prioritize those with an
international or Nation State connection.
In February 2023, the deputy attorney general announced the
creation of the Department's Disruptive Technology Strike
Force, a partnership between the Department of Justice and the
Department of Commerce, designed to enforce U.S. laws
protecting U.S. advanced technologies from illegal acquisition
and use by nation-state adversaries.
Under the leadership of the Department's National Security
Division and the Department of Commerce's Bureau of Industry
and Security, the strike force brings together experts
throughout government, including the FBI, Homeland Security
Investigations, Defense Criminal Investigative Service, and 17
U.S. Attorney's Offices in metropolitan regions across the
country to target illicit actors, strengthen supply chains, and
protect critical technological assets from being acquired or
used by nation-state adversaries.
In conclusion, the Department appreciates the opportunity
to present information about the ongoing efforts to protect IP
rights both within the Department and in collaboration with the
other agencies represented here today, and I'll be happy to
answer any questions you have.
[The prepared statement of Mr. Goldfoot follows:]
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Mr. Issa. Thank you. Mr. Lord.
STATEMENT OF BRANDON LORD
Mr. Lord. Good morning. Chair Issa, Ranking Member Johnson,
and distinguished Members of the Subcommittee, thank you for
the opportunity to appear today to discuss U.S. Customs and
Border Protection's role in enforcing intellectual property
rights, or IPR. I am proud to represent the nearly 30,000 CBP
officers, trade specialists, and others who enforce U.S. trade
laws and protect our national and economic security.
Trade in counterfeit and pirated goods threatens America's
economy and industry, the livelihood of U.S. workers, and, in
some cases, national security and the health and safety of
consumers. By some estimates, counterfeits, counterfeit
products cause over 70 deaths and 350,000 serious injuries
every year. Furthermore, trading these illegitimate goods is
frequently linked to smuggling and other criminal activities.
That's why CBP has designated intellectual property rights as a
priority trade issue since 2007. Last fiscal year, CBP seized
and destroyed over 23 million counterfeit items valued at $2.7
billion had they, in fact, been genuine. CBP is on pace to
achieve similar results this fiscal year.
CBP performs its IPR enforcement mission in a challenging
and dynamic trade environment. Increasing volumes of small
packages valued under the $800 de minimis threshold has
significantly altered the dynamic of the international trade
environment and CBP's intellectual property rights enforcement
approach. Small packages arriving at our seaports, airports,
and land border ports of entry pose the same health, safety,
and economic security risks as traditional containerized
shipments, but the volume is higher and growing.
The 600 million small packages that CBP processed in Fiscal
Year 2022 increased to more than one billion in Fiscal Year
2023, and now, today, CBP is processing close to four million
small packages every day across the Nation. These numbers are
even more significant considering 90 percent of our
intellectual property rights-related seizures in Fiscal Year
2023 occurred in the small package environment.
For all imports, from de minimis packages to traditional
containerized cargo, CBP enforces hundreds of U.S. trade laws
and regulations on behalf of over 45 different U.S. Federal
agencies by applying our advanced targeting capabilities,
collaborating with Homeland Security Investigations and other
government partners, and engaging industry stakeholders.
Partnerships and information sharing are the cornerstones
of CBP's IPR enforcement strategy. For example, CBP has an
integral role in the IPR Center. In addition to my position at
CBP, I serve as one of three deputy directors at the IPR Center
where my staff works side by side with our colleagues at HSI
and 30 additional partners to strengthen our joint enforcement
efforts. Collaboration between the IPR Center and the CBP ports
of entry generated thousands of IPR-related case leads last
year for potential criminal investigation.
We also work very closely with private industry. Thanks to
the support of Congress, the Trade Facilitation and Trade
Enforcement Act of 2015 expanded CBP's authorities to allow
direct engagement with intellectual property rights holders to
verify the authenticity of imported products that CBP
encounters. This capability has been a powerful tool for
protecting the owners of intellectual property and stopping
counterfeit products from entering the United States.
Building on our current authorities and capabilities, CBP
is working in close coordination with Congress and our trade
stakeholders to advance its 21st Century Customs Framework
Initiative, commonly referred to as 21 CCF, to ensure the
agency is positioned to address these evolving trade
enforcement challenges. Information sharing and activity proven
to be a vital tool for trade enforcement is a central pillar of
this initiative.
The 21 CCF includes a statutory concept that would
authorize CBP to share additional information with private
industry beyond a shipment-specific event to better identify
and track illicit sellers who use online marketplaces to import
IPR infringing goods into the United States. The 21 CCF
initiative also pursues several other concepts that would allow
for more efficient seizure and disposition of IPR violative
goods in the de minimis shipment environment and stricter
penalties for noncompliance.
In all shipping environments, CBP is committed to
protecting businesses and consumers from the health and safety
and economic risks associated with IPR violations. CBP will
continue to collaborate with Congress and our government and
private industry partners to identify workable solutions to IPR
enforcement challenges.
Chair Issa, Ranking Member Johnson, and distinguished
Members of the Subcommittee, thank you for your continued
support of CBP's trade enforcement mission.
I look forward to your questions.
[The prepared statement of Mr. Lord follows:]
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Mr. Issa. Thank you. I'll now recognize myself for a quick
round of questioning.
Mr. Lord, from your experience, you gave us $3 billion--
nearly $3 billion of seizures, 23 million seizures, some of
which were in the de minimis, but most, I assume, were in
larger shipments. Is that correct?
Mr. Lord. No, sir. Actually, the 90 percent of our
intellectual property rights seizures did occur in the de
minimis environment.
Mr. Issa. So, the de minimis environment, the $800, or at
least alleged to be $800 in value, because if they're true
Louis Vuittons, they would be more than that for just one. Is
that correct?
Mr. Lord. Thank you for the question, sir. I'm not 100
percent familiar with the going price for a Louis Vuitton bag.
My wife might be better at that. Yes, if the bag as a genuine
article is, in fact, valued at more than $800, it would not be
eligible for de minimis.
Mr. Issa. So, when these come in at $800, sometimes they
actually are more than $800 selling price but that's what they
claim. The reality is this is a backdoor and abusive system
that particularly China has figured out and is gaming to the
tune of one billion parcels a year.
Mr. Lord. Well, Chair, I would just start by saying, in the
environment we see today, the average declared value of a
shipment is $50. The vast majority of shipments are declared
well under $100. So, while we see shipments that are declared
higher dollar value, and there certainly are instances of
legitimate shipments being valued over--being well valued over
$800 but being declared under $800, the vast majority of what
we see from a value perspective is, in fact, much, much less
than $800.
Mr. Issa. So, to fix this we have to deal not at going from
$800--$400 or $200, we have to deal with the fact that a $50 or
$100 declared value is, in fact, very, very often, and I'll use
that fake Louis Vuitton as an example, but it could be a fake
Rolex. It could be any number--it could be, as the Ranking
Member said, ``counterfeit cosmetics that literally can burn
your face.'' It could be any of that.
Mr. Lord. That's correct.
Mr. Issa. So, this is iclearly a backdoor, something that
you do not have the authority to change, only Congress does. Is
that correct?
Mr. Lord. That is correct. We're looking at other ways,
sir, to better manage that risk environment. It is, at close to
four million small packages a day. It is an area of concern for
us. We're looking at making changes to our regulatory
environment as well as making investments in key infrastructure
and technology to help us better manage them.
Mr. Issa. Let me ask one quick question. It may tax some of
the expertise, but it's a potential solution. As somebody who
shipped to and from around the world for years and sometimes
using Speed Post and other systems that offer that de minimis
opportunity. If you were given the authority not only to reduce
the amount, but also to create two categories, known shipper,
meaning the shipper of de minimis who has been cleared, who has
that responsibility because they do ship, for example, to
Amazon regularly or whatever, and then concentrate on those who
are not, if you will, a trusted shipper, would that help in
your authority if Congress gave you that specific opportunity?
Mr. Lord. Well, thank you, Congressman. I would start by
just saying given the very real economic benefits of the de
minimis exception, I'm not sure as a law enforcement agency
we're best placed to make the decision as to what the dollar
value should or should not be in that environment.
Regarding the known shipper idea, that is an idea that we
are looking at internally. The challenge in the environment,
without spending too much time on it, sir, is its very low
barriers to enter as an overseas shipper, very low incentive to
learn our laws, customs regulations, requirements, and the cost
of being caught is too low to deter bad behavior.
So, what that means is, the minute you figure out somebody
might be trusted, or somebody might be a violative shipper,
they may disappear tomorrow and reconstitute as a completely
different entity. Since this is all overseas, it does pose an
enforcement challenge.
Mr. Issa. I appreciate that.
Mr. Ball, I apologize for not having time to ask all of you
questions.
Mr. Goldfoot, my round of questioning in any additional
time I have will really concentrate on, why are there so few
prosecutions in this area? Are they incredibly difficult? I'll
just give you a quick example--hopefully a quick answer--I was
a shipper. I was an importer. My products came from Hong Kong
and Taiwan almost exclusively from Taiwan. Fake Viper Security
Systems came in from South Korea. They were discovered inside
what was purported to be garments, they had no business being
in to begin with.
I was able to get the seizure of it. I was able to get
Customs and Border to eventually destroy them. I was even able
to get one sample so I could verify that not only was it not
mine, it hadn't been transshipped, but the Korean manufacturer,
who he was and so on. We knew who the Korean manufacturer was.
We turned that over. Of course, they knew where the product was
going. There was no prosecution.
So, I ask you today, because this is an old one, but it
obviously is still happening, why is it you do not routinely
send the FBI or other agencies to the recipient of large
counterfeit shipments and followup with prosecution more often
than the records indicate?
Mr. Goldfoot. Thank you for the question. So, I think your
question also hints at some of the answers, which is to say
that these cases can be quite complex. While it is one thing to
detect at the border that goods are counterfeit, cease them and
dispose of them appropriately, identifying a defendant with
whom we can charge with counterfeit with proof beyond a
reasonable doubt, getting that defendant into court,
particularly if they're in Korea or some other foreign
jurisdiction, requires considerable resources.
Mr. Issa. My question was actually as to the recipient. If
you don't mind, we'll focus on that.
Mr. Goldfoot. As to the recipient specifically.
Mr. Issa. The buyer.
Mr. Goldfoot. Thank you, sir, for the clarification. Here,
again, there could be some difficulty in identifying all the
necessary elements of the case, such as that the recipient
understood what they were bringing in. Let me speak more
broadly of how we're spending our resources. Given the
resources we have, we are prioritizing cases in trademark and
counterfeiting that affect health and safety issues.
For example, a case I like to think of, we did, I think
about two years ago, it was two individuals from Ukraine,
Maksym Nienadov and Volodymyr Nikolaienko, both ran a company
called Healthy Nation. This company was importing counterfeit
cancer medicine into the United States. These were pills that
were marked as though they were legitimate cancer medicine, but
they had inactive ingredients. They did nothing. Unsuspecting
Americans were receiving this counterfeit medication, taking
it, hoping to treat their cancer, and there were disastrous
results.
We focus on cases like that. We focus on a case like the
one we sentenced last week, Mr. Aksoy, who was selling
counterfeit Cisco routers. These routers were being sold to
hospitals, to government installations, and they were
counterfeit. They didn't work or they didn't work longer than a
few days. They were patchy things that the actual company would
never sell. You can imagine the threat to the health and public
safety that occurs from those.
So, I think you and I agree, I would like to see more
counterfeit prosecutions as well. I think probably anyone who
works in law enforcement, if you ask him or her, are you
satisfied with the amount of cases you're doing, whether it's
IP or some other field, we'll say no. Given the resources we
have, we're looking to create the maximum benefit for the
American people.
Mr. Issa. Thank you. Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chair.
Let me say straight out that this Subcommittee has been
very unique, in terms of the Judiciary Committee, in that the
leadership of the Committee has always been--the leadership of
the Subcommittee has always been open, forthright, and
apolitical when it comes to the operations of this
Subcommittee. So, I made some comments about the empty chairs
here this morning. I'll note that the markings for the empty
chairs have been removed, and that's a testament to the good
faith of the Chair of this Committee, who sometimes can be
misunderstood in terms of his actions, but nothing that
communication cannot cure. So, I appreciate the Chair.
Mr. Lord, in your written statement, you discuss the
increase in the use of de minimis administrative exemptions to
reach consumers directly, including over one billion shipments,
and those are coming in at the rate of four million per day, as
you've said, that are processed by CBP in Fiscal Year 2023
alone. Can you walk us through how e-commerce sites are driving
an increase in these smaller shipments?
Mr. Lord. Thank you, Ranking Member. I appreciate the
question. I would just begin by saying we actually believe the
internet writ large is driving this increase. You can go to
almost any retailer or any website and order something. Maybe
it's online--maybe it's on Marketplace, maybe it's a favorite
clothing brand and that gets shipped direct to your house from
overseas, oftentimes with the American consumer not knowing
that it originated from overseas.
Having said all that, sir, the challenge that we face with
online marketplaces is that it's very easy to sign up as a
seller on those online marketplaces, as a foreign seller. I'm
talking about foreign sellers only. I'm not talking about U.S.
citizens selling. Foreign sellers selling on these online
marketplaces. It's at a low cost. There's oftentimes little, if
any, guidance given on what the expectations are to comply with
U.S. laws, especially if you're shipping a product that might
be regulated, say, by the Consumer Product Safety Commission or
maybe the Food and Drug Administration. Then when that sale is
made, it's very easy to just drop that into your country's post
service or use another freight forwarder or logistics provider
to move that into the country through the de minimis exemption.
The last thing I would say that's challenging about that,
too, is it's very easy for a foreign seller to take down their
listing on an online marketplace, move to a different online
marketplace, or even stay on the same online marketplace but
just come back as a seemingly new or different entity. All that
makes our targeting interdiction that much more difficult at
the border.
Mr. Johnson. Thank you.
Mr. Ball, you've testified that HSI's innovation lab is
using AI to enhance staff capabilities. Can you walk us through
how AI is helping staff currently and how you see the
technology being used in the future to expand your agency's
reach?
Mr. Ball. Yes, sir. It's a great question. So, the
innovation lab within HSI is relatively unique in Federal law
enforcement. It's an entity in our cyber and operational
technology division dedicated to out-of-the-box thinking, using
advanced technology to further criminal investigations.
When I started working criminal investigations, I'm dating
myself a bit here, when we would plan for a search warrant,
we'd have to take into account renting a truck and getting hand
trucks and boxes, moving file cabinets and boxes of paper to go
through. Today that's not the case. You're dealing with
terabytes and petabytes of data that are collected on search
warrants or through other core processes that we have to sift
through.
The innovation lab is currently using AI technology to help
criminal investigations sift through those core processes to
identify items of evidence, things that we're looking for that
are in that search warrant to take criminal investigations with
the goal of taking those criminal investigations down from that
aspect of it, from weeks, months, and numbers of people, now
down to much shorter. So, we're very proud of the effort that
we're using at this time.
Mr. Johnson. Thank you.
Mr. Chair, I've just about run out of time, so I'll yield
back.
Mr. Issa. Oh, I did run a little over.
Mr. Johnson. Well, I know you did, but I'm not going to
follow your abuse of precedence.
Mr. Issa. I thank the gentleman for part of that.
With that, we go to Mr. Fitzgerald.
Mr. Fitzgerald. Thank you, Mr. Chair.
Mr. Goldfoot, according to the Bureau of Justice
Statistics, DOJ filed only six new trade secret theft cases in
2022, as compared with over 91 cases filed between 2017 and
2021. What are your thoughts on why that happened, why such a
reduction?
Mr. Goldfoot. Thank you for the question. So, I think when
I look at trade secrets, the case statistics, I'm a little less
concerned about fluctuations from year to year. I focus more on
the impact of what we are doing and how we're using our
resources to best serve the American people. What I mean by
that is, trade secret cases are truly some of the most complex
cases that I've seen worked on in the sections I supervise.
These are cases that, in addition to the difficulties that come
with being a white-collar case, typically also require the
investigators and the prosecutors to become deeply familiar
with the technology at issue, and sometimes that means mastery
over not just the technology, but an entire industry that
you've never heard of or worked on before.
I think about a recent case we did involving the chemical
lining on the inside of beverage containers, known as BPA free,
and that was a trade secret that was stolen. The work involved
in identifying that and preparing a case like that, not to
mention the different proof issues involved with the trade
secret statute, such as establishing all the aspects of the
trade secret are maintained, the amount of preparation can be
intense.
Now, I think where you and I agree is the number is lower
than it ought to be. I wish that we could be doing more of
these cases. We're doing what we can with the resources that
have been provided.
Mr. Fitzgerald. So, coincidentally, in February 2022, when
DOJ ended the China Initiative, do you think there's any
relationship there because of the decline in prosecutions,
maybe because of the trade secret theft, do you think this
decline had anything to do with the elimination of the China
Initiative?
Mr. Goldfoot. Well, thank you for the question. I do not
think the fluctuation of the statistics was caused by the end
of the China Initiative. So, the China Initiative was--I should
clarify, this was my colleagues in the National Security
Division. I don't want to take credit for their work. They're
continuing to do excellent work in this field.
In February 2022, as you say, the Assistant Attorney
General Olsen, at the same time that he canceled the China
Initiative he launched a new initiative, the national strategy
to counter nation-state threats. The same work as before,
looking about China, the PRC's theft of American intellectual
property, continues to be done under that present initiative
and now also through the Destructive Technology Strike Force,
which has been in effect for about a year.
You can look at recent announcements out of the National
Security Division. In March 2024, they announced one case of an
arrest of an individual who was taking technology related to
electric car batteries and planning to give that to a PRC-
related company. There was another case in March 2024, where
someone attempted to steel files from Google related to
artificial intelligence and give it to a PRC-related entity.
So, I see the NSD's work in countering intellectual
property theft to benefit the PRC continuing. What Assistant
Attorney General Olsen said when he canceled the China
Initiative is he was concerned that the name was giving people
an incorrect impression that the Department was cutting corners
in these cases, and he found that to be harmful to his
prosecutor's work.
Mr. Fitzgerald. Thank you. I'm going to sneak in one more
question here.
I'm concerned with the amount of counterfeit goods coming
into the United States under de minimis, which we talked about
before. Mr. Lord, how are they leveraging the National
Intellectual Property Rights Coordination Center when it comes
to specifically vaping products, which has suddenly risen in
overall concern about some of the knockoffs that you're seeing
globally right now? Can you talk about that very specific
subject?
Mr. Lord. Happy to, Congressman, and thank you for the
question. Our approach to vaping products in the de minimis
space is very similar to what we do with other products. So
anytime our officers at port of entry makes an interdiction or
detain a good, they do two things:
First, they call the partner or government agency that
might regulate that product, in the case of vaping products,
that's the Food and Drug Administration, to get some advice on
what to do, what should the ultimate disposition of that
product be.
Second, of course, we have our special agents from Homeland
Security Investigations at all our ports of entry where these
goods are coming in, and they'll alert HSI if we, in fact, do
make a seizure of those goods. That work that starts at that
port of entry then moves up to the National IPR Center as
appropriate based on sometimes it's--most of the time it's a
pattern of seizures, right, that might speak to certain means,
methods, and tactics that warrant a more specific criminal
investigation or additional action by the other government
agencies that are at the IPR Center.
Mr. Fitzgerald. Very good. Thank you. I yield back.
Mr. Issa. I thank the gentleman.
We now go to the Ranking Member of the Full Committee, Mr.
Nadler, for five minutes.
Mr. Nadler. Thank you, Mr. Chair.
Mr. Ball, last year, HSI opened 81 criminal investigations
through its e-commerce program, IOS. These operations included
94 seizures with an estimated value of over $300,000. How does
HSI in the IPR Center work with e-commerce platforms to prevent
the intrusion of counterfeit goods into the stream of commerce?
Mr. Ball. That's a great question, sir. We found early on
in the flow of e-commerce, especially in the increase in de
minimis, that we were running into an issue. One of the things
that we do at the National Intellectual Property Rights Center
is coordinate very well with industry. The major e-commerce
platforms were encountering counterfeits and were encountering
bad actors, but weren't talking to each other, worried about
trade secrets, worried about bad publicity, and worried about
things shifting from one to the other.
We brought the four major platforms together, Amazon, eBay,
Alibaba, and Wal-Mart, to create an e-commerce task force. This
e-commerce working group we were able to use some great common
practices and some best practices that we had used with the
automotive industry, with the airbag issue, where they created
an industry group called A2C2 that's extremely effective and
bring that to bear on the e-commerce platforms.
So, to date, they have agreed for a joint counsel, they
have agreed to a third-party data contractor where they can
share that information with each other, and then that
information also flows to HSI for criminal investigations as
well.
Mr. Nadler. Thank you.
Mr. Goldfoot, just a few months ago, in March, the GAO
submitted their report to Congress with recommendations for
stronger fraud risk management in the trademark system. The
study found that in recent years there have been a growing
number of trademark applications with false or inaccurate
images of goods that are usually--that are not actually sold or
used, making it more difficult for businesses to find unused
trademarks.
The GAO warns that, quote, ``As generative AI becomes more
advanced, the potential for more sophisticated fraudulent
activity could increase.'' Though the GAO primarily directs
this warning to the PTO, it flags that it would be incumbent on
the DOJ to pursue charges when the PTO discovers such instances
of trademark fraud. Are you aware of the GAO's report, and how
are you thinking about the use of generative AI to facilitate
fraud?
Mr. Goldfoot. Well, thank you, sir, for that question. I
was not aware of the report you just described, but now that
you've brought it to my attention, I'll absolutely look at
that. I think we are looking at all the different ways that
artificial intelligence changes the game in the enforcement of
intellectual property laws.
I think you can look at it from two different directions:
(1) How does it make crime easier, such as the situation you
describe where people are using generative AI to create
meritless trademark filings? (2) We're within the Department of
Justice looking at how we can use it to improve our own
enterprise and improve our ability to go after intellectual
property crime.
Mr. Nadler. Thank you.
Mr. Lord, in a 2018 study by the Department of Commerce,
the authors discuss the introduction of counterfeit
semiconductors, including chips infected with malware into the
product supply chain for defense manufacturing and operations.
Counterfeit chips are a significant concern for our national
security, particularly because many of these products originate
in China where multiple cyber intrusions against the United
States have originated.
Could you explain how infected chips affect our national
security and what your agency is doing to prevent this problem
from spreading?
Mr. Lord. Thank you, Ranking Member. I appreciate the
question.
Yes, happy to explain. So, first and foremost, Customs and
Border Protection works closely with private industry on such
matters. It is very difficult to expect a CBP officer working
at a port of entry to just be able to look at a semiconductor
and make a decision on counterfeits, and that's why we lean
heavily on our Donation Acceptance Program, which is an
authority that Congress gave us in the Trade Facilitation and
Trade Enforcement Act of 2015.
What that program allows is for private sector industry to
donate to CBP authentication devices. Cisco and Apple are two
that have signed up for that program now and provide those
devices to our officers at ports of entry to help make better
determinations on authentication.
In terms of the danger of getting into the military supply
chain, we're regular participants through the IPR Center, an
operation called Chain Reaction, which is entirely focused on
keeping semiconductors out of sensitive supply chains.
The Cisco case that Mr. Goldfoot referenced earlier came
out of that very operation. CBP had a role in interdicting
counterfeit shipments, identifying the means, methods, and
tactics, referring that to the investigators, and then also
participating in the search warrants that helped build that
case.
Mr. Nadler. Thank you.
My time has expired. I yield back.
Mr. Issa. I thank the gentleman.
We now go to the gentleman from Oregon for five minutes,
Mr. Bentz.
Mr. Bentz. Thank you, Mr. Chair. Thank you, witnesses, for
your testimony today.
I'm looking at an article from Reuters, dated October 18,
2023, where they say five countries came together, including
the United States, Britain, Canada, Australia, and New Zealand,
and made comments following meetings with private companies in
the Silicon Valley. FBI Director Christopher Wray said,
The unprecedented joint call was meant to confront the threat
China poses to innovation across the world. From quantum
technology and robotics to biotechnology and artificial
intelligence, China was stealing secrets in various sectors.
He goes on to say the incredible amount of theft--I'll just
read the exact phrase.
What makes this so challenging is all of the tools deployed in
tandem at a scale of the likes we have never seen.
Christopher Wray said,
The officials called for private industry and academia to help
in countering those threats.
Chief among them which they said were artificial intelligence
tools.
We worry about AI as an amplifier for all sorts of misconduct.
Accusing China of stealing more personal and corporate data
than any other Nation by orders of magnitude.
Mr. Lord, so assuming that Mr. Wray is correct--I assume he
is--how have you focused on China? Or you can share that--I'd
hate to blame you, but how has your organization, following
what Mr. Wray said, responded?
Mr. Lord. Thank you, Congressman, for that question.
I'm not familiar with the specific meeting that you
referenced, sir. I'll be happy to look into it and have my
staff look into it. What I can say, as a general matter, is a
lot of what you described there often requires export of
sensitive technologies from the United States. So, Customs and
Border Protection works very closely with Congress' Bureau of
Industry and Security, which is tasked with enforcing export of
sensitive technology.
Through that partnership, we do make interdictions at
export when we get the correct information from the Bureau of
Industry--
Mr. Bentz. OK. I'm asking, are you focusing on China?
That's my question. If so, are you prioritizing China? That's
my question.
Mr. Lord. OK. I apologize, sir.
Yes, so we're responsible at import for managing all
threats. In the context of IPR, well over 90 percent
counterfeit goods come from China and Hong Kong. They're
consistently named on the USTR Special 301 Report as a source
for counterfeits. We are absolutely concerned about that
threat, and it's something that we think about every day.
Mr. Bentz. Mr. Ball, same question.
Mr. Ball. Again, as my colleague said too, not being
familiar with the interchange that you mentioned, I can tell
you on that same line to go a couple of steps further. On the
export of sensitive technology, this is part of what we do
under his global trade; we have our counter proliferations
investigations. Yes, to be very clear, we are focusing on
China, on Russia, and on Iran on what's happening in those
theatres.
With the export of sensitive technologies, we have a
wonderful working group, E2C2. It's our Export Enforcement
Coordination Center, and we work hand-in-hand with DOJ and with
the Department of Commerce using their strike force for
prosecutions on those cases.
Mr. Bentz. Let me shift to Mr. Goldfoot.
Mr. Goldfoot, you mentioned some activity in this space.
How much more do you think we should be doing than what you
mentioned? The suggestion by Director Wray was that we're not
doing enough. Do you agree? If so, what would you do in
addition to what he has suggested?
Mr. Goldfoot. Thank you for the question. It's a very
interesting one and thank you also for repeating and amplifying
Director Wray's comments about this.
I think also, not only he, but the Office of ODNI in the
annual threat report said, specifically, that,
Beijing is seeking to increase its science and technologies
sector in part through the theft of intellectual property.
This is absolutely a concern within the Department of Justice.
We're prioritizing that.
Regarding your question of how much more should we do and
what more should we be doing, I hesitate to describe the limit
of how much we ought to be doing. In this field, as you see the
amount of intelligence go by, you see information about the
extent of the theft, it's just deeply concerning.
As I've said before, if we had more resources, we would do
more of these cases. We're interested in doing more of this. I
also, having micro'd this, I want to emphasize that, within the
Department of Justice, this work is primarily coordinated
through my colleagues in the National Security Division, who
treat intellectual property theft for the benefit of foreign
nation-states alongside the other ways that foreign nation-
states are breaking our laws to advance themselves.
Mr. Bentz. Thank you yield back.
Mr. Issa. I thank the gentleman.
We now go to the gentlelady from North Carolina, Ms. Ross,
for her questions.
Ms. Ross. Thank you, Mr. Chair and thank you to all the
witnesses for being with us today.
I'm really grateful that this Subcommittee has shown such a
bipartisan interest in protecting American innovation. This
hearing is yet another example of that focus and the work
between the Chair and the Ranking Member.
Criminal IP theft costs American innovators hundreds of
billions of dollars every year. The 47 percent of brands have
lost sales to counterfeit goods, a third of which have been
reported and at a drop in revenue of 10 percent or more. As you
know, this is a serious loss to American innovation and one
that administration after administration has tried to combat.
Mr. Goldfoot, my first question is for you. In 2020,
Congress passed the Protecting Lawful Streaming Act to close a
loophole in the law that allowed sophisticated criminal
enterprises operating streaming websites to traffic illegally
copyrighted material.
It's important, given that the American motion picture and
television industries contribute 2.4 million jobs across the
United States, and in 2022 alone, there were over 215 billion
visits to pirate sites, many which look much more sophisticated
than they did even a few years ago. Piracy of filmed
entertainment costs the U.S. economy $29.2 billion annually.
Now, that Congress has closed that loophole in the law, I'm
interested in how this authority has been used. Has DOJ pursued
any actions using this new tool?
Mr. Goldfoot. Thank you for the question.
So, in fact, last week, the District of South Carolina in a
press release announced what we believe to be the first
concluded case for the Protecting Lawful Streaming Act. The
defendant's name was Franklin Valverde, and that press release
came out on May 2nd. However, having given you that example, I
don't want to give the impression that the Protecting Lawful
Streaming Act has been used as much as you or I might hope.
Let me first thank all the Members of the Subcommittee for
the work that many of you did in getting the PLSA passed.
That's an important new authority. We were able to take down
some streaming services before the passage of the PLSA,
charging defendants based on conduct they did before that
statute was enacted, using the 1976 Copyright Act and other
authorities.
One example I can give is Gears TV. This was a service that
was essentially stealing streams from channels, reselling that.
We were able to charge and convict that individual under the
Copyright Act of 1976.
Another example I would give--and this was also used
initially on the PLSA--was a defendant named Joshua Street, who
was charged in the Southern District of New York. Now, his
business, he was stealing the streams from sporting events,
such as Major League Baseball and NFL. He would get all of
them. Now, he would get them through various means, but for
Major League Baseball specifically, he was charged with hacking
into their facilities to get that.
Now, that's a helpful example because it shows that, when
we address these, it isn't necessarily one or two statutes that
are always going to get used. In that case, we had a guy who
was violating the Computer Fraud and Abuse Act. So, he was
charged with that and also with the Protecting Lawful Streaming
Act. In the end, that was a plea. He pled to the Computer Fraud
and Abuse Act and not to the PLSA, but that was still there in
the case, and it was used there.
So, the PLSA is a welcome development for us.
I agree with you also; streaming services are an enormous
concern of ours. We have taken down--as I mentioned, there was
Gears TV. We took down Jetflicks and a related site named
iStreamItAll. I want to take down more. I want to take down
more. I hate seeing these things up. I'm very interested in
everything we can do to address it.
With more resources, we can address more of these, but I'm
quite proud of the work that we've been doing so far, and the
PLSA is going to help us do more in the future.
Ms. Ross. OK. Thank you very much.
With the very limited time that we have, Mr. Ball, one of
my colleagues touched earlier on AI and China. Can you tell us
anything that you're doing to address President Biden's
Executive Order on AI and enforcement for AI?
Mr. Ball. Yes, ma'am, very important question.
In that Executive Order, the National IPR Center and his
were specifically tasked working with industry to find out what
threats they're seeing from AI and what these industries,
especially the ones that have a large technological support,
are using AI to protect their intellectual property, and then
creating a training program specifically for medium and small
businesses that might not have those resources.
At the National IPR Center, with all the partners that we
have, one of the unique things--another one of the unique
things we have is partnerships with academia. We have these
incredible research institutions in the United States. We
specifically partner on many of these items with Michigan State
University and their A-CAPP program, their Anti-Counterfeiting
and Property Protection program, and we have employed their
very robust research engine that Ph.D. and master students
reach out to industry across the spectrum. Right now, they have
gathered quite a bit of data. In talking to their research lead
just last week, it's the best response they've ever received at
any research project from industry. So, we're in the process of
putting that together.
One initial finding that I can talk about now is that
industry is finding that the initial threat that's coming from
AI is using AI to attack their computer systems and hacking to
overcome their encryption to steal their trade secrets. That's
just one that's coming out of that, and we'll be working to put
together a training course on that as well.
Ms. Ross. Thank you for your indulgence.
Mr. Issa. That's all right. I had to make up for my excess
and my Ranking Member's indulgence.
Mr. Johnson. Almost as abusive as--
Mr. Issa. Important question; important answer.
We now go to the gentleman from California, Mr. Kiley, for
five minutes.
Mr. Kiley. Thank you, Mr. Chair.
Intellectual property protections are vital to our Nation's
economic success. Not only that, it is an extremely personal
right in a sense in that it is a right that an individual or,
for that matter, an enterprise has to benefit from the fruits
of their labor and from their own enterprise.
So, I think this is a very important hearing, because to
the extent that our intellectual property laws are not being
enforced or had adhered to, then it undermines both that right
and the economic vitality of our country.
In addition to that, the theft of intellectual property
also potentially has national security concerns and concerns
when it comes to the competitiveness of the United States,
particularly with respect to China.
In 2023, Customs and Border Protection seizures of goods
from the Peoples Republic of China and Hong Kong alone made up
more than half of the agency's total seizures and more than 80
percent of the value of IP infringing goods seized.
Approximately 80 percent of all economic espionage cases
prosecuted by the Department of Justice involved theft of trade
secrets by the Chinese Government or its instrumentalities or
agents, and approximately 60 percent of all trade secret
misappropriation cases brought in the United States have a
nexus to China.
In addition, as of just a few years ago, in 2020, the FBI
had approximately 1,000 open investigations involving China's
attempted theft of U.S.-based technology in all 56 field
offices spanning almost every industry and every sector.
So, Mr. Goldfoot, you made a point a few minutes ago to my
colleague about how China has specifically used the theft of
intellectual property in the U.S. and elsewhere to advance--as
one tool to advance its science and technology sector.
So, could you expand on that as to how intellectual
property theft by the CCP is harming the United States' global
competitiveness and its competitiveness vis-a-vis China?
Mr. Goldfoot. Thank you for that question.
So, as my colleagues on the National Security Division, the
Justice Department, and their Assistant Attorney General Matt
Olsen have said, ``it's an enormous concern that China is
attempting to gain a competitive advantage over the United
States by cutting corners and taking our technology rather than
developing it.''
So, as you say, sir, one of the issues we protect
intellectual property at all is to encourage people to develop
it, to give a sort of property right over it so that we're
encouraging investment in everything else. There's damage
whenever that's lost, yes, but it's doubly damaged when that is
a loss that then benefits one of our chief adversaries in
technology and science.
So, I can tell you this is an issue that I see come across
my desk repeatedly. As we discuss these issues with our
National Security Division colleagues, they're quite sided to
this as well, the problem that is being created by a foreign
nation-state benefiting from U.S. technology improperly by
acquiring it either through theft or through acquisition.
Mr. Kiley. Mr. Lord, same question. Do you have any
thoughts on the broader concerns this raises for United States'
competitiveness and security?
Mr. Lord. Well, thank you, Congressman, for the question.
I largely agree with Mr. Goldfoot. What I think about, from
Customs and Border Protection's standpoint, though, is a lot of
this trade secrets theft oftentimes involve export, right,
export of sensitive technology. While we have the authorities
to interdict with our partners on export, we've already talked
a lot about that we've got a lot coming in, four million small
packages. So, it is going to be important that we all think
about new and innovative ways to prevent physical technology
from being exported out of the United States to our
adversaries.
Mr. Kiley. Thank you.
So, I think this underscores two things. (1) Is the need
for greater scrutiny, which, unfortunately, this administration
has perhaps taken a step back from, when it comes to the
concerted efforts of the CCP to steal U.S. intellectual
property; but, (2) It speaks to the need to have strong
intellectual property protections for our own inventors, for
our own innovators so that we're able to advance our science
and technology and continue our lead in key technology areas
where, unfortunately, we have been falling behind, even with
respect to China and others in recent years.
So, I appreciate you calling this hearing, Mr. Chair, and I
yield back.
Mr. Cline. [Presiding.] The gentleman yields back.
The gentlelady from California is recognized.
Ms. Lofgren. Thank you, Mr. Chair.
Thanks to each of the witnesses. It's been very
informative, not only your oral testimony, but the written
statements we were able to read in advance.
I think all of us agree that protecting intellectual
property is very important, not only for the creators but for
the security of the United States and its people.
I'm interested--you're talking about the packages
interdicted and the counterfeits, and there's a lot of
counterfeits that could be harmful to people. I'm wondering,
among the counterfeit goods that have been interdicted, how
many of them are toys? Because I always worry the Consumer
Product Safety Group tests toys to make sure that children are
not harmed by them, but they don't do that, of course, with
counterfeits.
Can you enlighten us on that point, any of you?
Mr. Lord. I assume that question was to me, Congresswoman?
Ms. Lofgren. Yes.
Mr. Lord. OK. Thank you very much for the question.
We do, in fact, encounter counterfeit toys. We do, in fact,
encounter substandard toys. We encounter children's bike
helmets that don't survive a basic drop test onto a concrete
floor and then shatter when they hit the floor. We're fortunate
enough, though, to have at many of our ports of entry a
Consumer Product Safety Commission inspector to help us make
sure that we are seizing the appropriate goods.
I do not have a specific breakout here for you today for
toys. I'll just say that last fiscal year, we did seize just
over 230,000 game consoles and accessories, and from that, I
would imagine there's a portion of toys in there. Toys are a
big focus of what we do. We focus on that a little bit more
from the import safety aspect.
Ms. Lofgren. Right.
Mr. Lord. Because there's other aspects that maybe they're
not counterfeit, but maybe there's too much lead in the toy.
So, there's just a little bit of a different lens there. I'd be
more than happy to have my team followup with your staff.
Ms. Lofgren. Whatever. I don't want to put a lot of extra
work on you. I would rather you spent the time enforcing, but
whatever data you have I would appreciate having.
Mr. Lord. Yes.
Ms. Lofgren. Last Congress we passed the INFORM Act, which
was a pretty robust piece of legislation helping to reduce
counterfeit goods online. One of the things about that is it
gave concurrent jurisdiction not only to the FTC but to State
attorney generals.
Do we know whether the State attorney generals have taken
advantage of the new authority that they have under that act?
Anyone?
Mr. Goldfoot. I'm sorry. I do not know the answer to that
question.
Ms. Lofgren. Maybe that's something we can check on from
the FTC.
I was interested, Mr. Ball, in your testimony that you are
collaborating with outside groups. I think that's very smart
because they're also on the lookout to protect their property.
You mentioned that you had a partnership with the Motion
Pictures Association, which I think is terrific. We had a
hearing a while ago where they showed a website that was a
broad that was massively infringing on movies, and it's
important that we figure out how to deal with that.
I'm wondering if you have had success working with the MPA
on cutting out or dealing with illegal streaming sites that
operate from outside the United States?
Mr. Ball. Yes, ma'am. That's a great question as well.
We have, with our Digital Piracy Working Group dealing with
the recording industry of America that's dealing with--
Ms. Lofgren. Yes, they've got the same problem.
Mr. Ball. --those AI threats right now and what MPA is
looking at and what they're dealing with illegal streaming.
One of the issues of working with this partnership, as you
mentioned, industry is losing money. So, industry is a vested
interest, and they are our first line of intelligence and
information. MPA is the organization that was able to inform us
that circumvention devices were changing from physical devices,
and then that's where our relation comes in with CBP.
Ms. Lofgren. Right.
Mr. Ball. We're able to tell them, ``Here are the different
devices that they're using.'' Now, it's going to more software
based. So, the issue with digital streaming will always be
taking down sites, and the sites going up so easy.
Ms. Lofgren. Yes.
Mr. Ball. So, our goal is to work with all these partners
with a focus on disrupting the network and dismantling the
organization.
We've recently had some great success in talking to the
website hosting services to get their voluntary agreement, in
addition to court orders, to where a joint MPA-IPR Center
communication just to take that website down or to block it
while we're trying to--instead of waiting for a court process.
So, we have a wonderful relationship there.
Ms. Lofgren. That's very smart. As you know, we're trying
to work through various other legal remedies that don't disrupt
the actual workings of the internet, but also are effective in
protecting American interests. So, I'm glad to hear that you're
succeeding even without our successful conclusion of that, but
I'm going to continue working on that.
Thank you, Mr. Chair. I yield back.
Mr. Cline. The gentlelady yields back.
The gentleman from Texas is recognized.
Mr. Moran. Thank you, Mr. Chair.
Mr. Goldfoot, I want to talk to you just briefly about
China in particular. I want to go back to this issue of China.
I think we can all agree that China really is the most major
actor out there from a country that is infringing on our
intellectual property.
Would you agree with that?
Mr. Goldfoot. Sir, I do agree with that based on what I
have seen.
Mr. Moran. Right. By statistics, when we actually prosecute
crimes, such as economic espionage cases or trade secret
misappropriations cases, most of those by an overwhelming
majority actually are against entities or individuals connected
to the PRC, correct?
Mr. Goldfoot. Thank you for the question.
I'm actually unsure if we have accurate statistics from
that. Anecdotally, what you say does sound right to me.
Mr. Moran. I can tell you the statistics I've seen is about
80 percent of the economic espionage cases are connected to the
PRC, and about 60 percent of the cases for trade secret
misappropriations are connected to the PRC. Anecdotally, I
think that you would agree with that.
So, let's talk about the China Initiative, because when the
China Initiative was dropped in February 2022, we saw a decline
in actual cases prosecuted after that time. Isn't that true?
Mr. Goldfoot. Thank you for the question.
So, when Assistant Attorney General Olsen announced an end
to the China Initiative, in the same speech, he announced the
beginning of a new strategy to counter nation-state threats.
Mr. Moran. So, on that new strategy, because the numbers I
looked at said that in Fiscal Year 2022, that same time this
program got canceled, this China Initiative, we actually
prosecuted zero of the trade secret misappropriations or zero
of the economic espionage cases. Is that accurate?
Mr. Goldfoot. Sir, I do not have that statistic at my
fingertips, but it would coincide with what I think to be true,
that the number went down for that year. I don't believe that
this was because of the cancellation of the China Initiative.
As I said before, fluctuations from year to year in the
number--
Mr. Moran. If we're going to--even if we change the name or
change initiatives, would you agree that we ought to be ramping
up our efforts to push back against Chinese intellectual
property theft, or should we be reducing our enforcement
efforts?
Mr. Goldfoot. Well, thank you for that question.
Because I think all of us agree that we ought to be
increasing our amount of intellectual property--
Mr. Moran. Absolutely agree with that. Unfortunately, the
numbers are showing we're decreasing our enforcement, which is
really a big problem I think for us because they're ramping up
their efforts to steal our intellectual property, and we seem
to be reducing our efforts to push back against that.
Let me ask about criminal enforcement in particular. We've
got criminal enforcement statutes out there for trademark and
copyright. We do not have them out there for patent
infringement.
Would you agree that this might be something we need to
look into as it relates to foreign entities and espionage
cases?
Mr. Goldfoot. Well, thank you for that question.
It's an interesting idea I haven't heard before. I'm not
sure that I've seen a bill about it, so I don't know standing
here right now I could weigh in on that idea.
If I could address your prior question a little bit more,
if I could, I want to emphasize that the work of prosecuting
trade secret theft to benefit the PRC is absolutely continuing.
You can see in my statement for the record five cases announced
over the last couple of months of arrests of individuals who
are taking electric vehicle battery information, missile
guidance systems, and artificial intelligence source code, all
to benefit the People's Republic of China. Those are arrests.
They're innocent until proven guilty. I should emphasize that.
You can see the work against that is continuing apace.
I am not aware of any particular prosecutor or agent being
told, ``Well, I'm sorry. The China Initiative has canceled so
now you're going to be working on other things.''
Mr. Moran. Was there anything communicated to the U.S.
Attorney's Office about the cancellation of the China
Initiative, the reasons for that?
Mr. Goldfoot. Assistant Attorney General Olsen made public
remarks at George Mason University in February 20--
Mr. Moran. Other than that, was there anything said
internally to the Justice Department or were there any changes
made to the Justice Manual as a result of the decision to
cancel the China Initiative?
Mr. Goldfoot. I'm not sure I'm able to answer your
question, sir. I'm sorry about that.
Mr. Moran. OK. Would you agree that perhaps we ought to
also look into additional enforcement actions that are private
actions that maybe put more teeth into the individuals behind
these entities that are actually engaging in intellectual
property theft? Would that be an appropriate response?
Mr. Goldfoot. Yes. I would say that really the leading
force in enforcing intellectual property rights in the United
States has always been private sector, civil lawsuit
enforcement. We on the criminal side tend to reserve ourselves
for the most egregious cases where the deterrent effect of
criminal law can have the most impact.
Mr. Moran. One last question on that.
Do you think that injunctive relief, additional injunctive
relief, the ability to get injunctions, permanent injunctions
when there is infringement in patent cases would be an
essential tool to bring back American businesses to get their
redress here in American courts as opposed to going to Chinese
courts?
Mr. Goldfoot. Thank you for the question.
It's an interesting idea. I'm not sure that we've seen a
bill about that. I don't feel comfortable weighing in on the
idea now, but we'd be happy to examine any legislation you ask
the Department to comment on.
Mr. Moran. Thank you. I yield back.
Mr. Cline. The gentleman yields back.
The gentleman from Maryland is recognized.
Mr. Ivey. Thank you, Mr. Chair. Good afternoon to all of
you.
Mr. Goldfoot, let me stick with you. Along the lines of the
questions you were just getting and some previous to that, it's
clear at this point that there's bipartisan view that we'd like
to do more with respect to addressing espionage issues and
thefts of trade secrets and the like.
On a couple of occasions you said, ``If we had the
resources, we would do more of these cases.'' I don't know if
that's--what set of cases you meant. One thing I did want to
figure out, though, was what kind of resources do you need?
Because you've got this rare moment in Congress here where
there's bipartisan agreement that this is something that needs
to happen, especially with respect to the PRC. What sorts of
resources do you need to ramp up the prosecution efforts?
Mr. Goldfoot. Thank you for the question.
So, being a career official in the Department of Justice,
it's not my place to make, for example, a budget request or
anything independent of what the administration is--or what
they're asking for.
What I can tell you, as far as the work we're supervising
and what we're seeing, we use the resources we have to recruit
and train prosecutors who can then work with investigators in
the field to appropriately build cases.
Intellectual property cases are hard. They're hard because
of the statutes involved and the elements you need to prove.
They're hard also increasingly because of the international
aspect of them. That is probably one of the biggest changes
we've seen in the last 10 or 15 years. We're no longer in the
world of 2012 when you could do something like the Megaupload
takedown by just finding their servers in the United States and
seizing them and knocking out one of the biggest infringers at
the time.
What you have now is the criminals are adapting to tactics
like that. They're attempting to locate their businesses
themselves and their servers in jurisdictions where they
calculate, or sometimes incorrectly, that the United States
cannot get law enforcement cooperation.
So, increasingly, the resourcing tool we need isn't just
within the Department of Justice. We rely on the Nation's
international relations.
Mr. Ivey. Let me get you to focus on what is internal. Do
you need more investigators? Do you need more prosecutors? What
do you need? What is it that we can do to help you ramp up
those efforts? I'm not asking you to speak for the White House
or anything along those lines on specific budgetary requests,
but I do want to get a sense of what exactly we're talking
about from the standpoint of, if you need additional resources,
what are they?
Mr. Goldfoot. Well, thank you for the question.
I can just repeat that with more input, you've got more
output. I think we are looking--I think it's a mixture of
everything that you have described here.
Mr. Ivey. All right. Let me--just last point with respect
to this issue. Iit was your testimony that touched on intended
loss. Not to get too deep into the weeds on the sentencing
guidelines, but I think it's a good point that you made with
respect to the calculation of intended loss, depending on how
low it is, undermines the likely range that you can get for
jail time.
So, it says here in your testimony that you're seeking with
the Sentencing Commission to get a reworking of the definition
of how that's defined. A quick suggestion, part of the reason
that judges increasingly became suspicious about that was
because of the way the Department was using it in some
unrelated matters, but like credit card fraud. So, you get a
guy that steals a credit card and he can charge up to $20,000,
and he buys--I don't know--something for $100, and the
prosecutors come in and say, ``We think the sentencing
guideline should be based on a $20,000 calculation''; judges
started dismissing that basically.
So, I appreciate the fact that you're going to the
Sentencing Commission on this, but I would encourage you to try
and separate your prosecutions from those kinds of
prosecutions.
Then really quickly--I see I'm running out of time--one of
the issues that I heard with respect to my participation on the
Homeland Security Committee was some of the seizures, and this
goes to at the border with respect to imported goods. This was
forced labor, Uyghurs, China, and the like. I also raised the
issue of forced and slave labor with respect to some minerals
like cobalt coming largely from Africa but frequently through
China anyway.
One of the things that was said by one of your colleagues
at Homeland Security was that sometimes they would detect these
goods and reject them as opposed to seizing them. In fact, it
sounded like they reject them more than they seize them. One of
the things I asked them to do was to increase the number of
seizures, because if you just reject it, they just send it
somewhere else, and they're not losing the money. It undermines
the sanction that could be had. When you go through the
effort--and as you pointed out, there's hundreds of millions of
these items coming through. When you catch one, you have to put
the hammer down as much as possible. It's tough to prosecute
these criminally sometimes, but administratively do that if you
can.
Then the last quick point, the task force, the UFLPA Task
Force, which I think DOJ is on as well, with respect to that
type of labor also isn't generating a lot of prosecutions or
even the number of entities that are on these lists having been
caught with trying to import these defective goods. If there's
a way to ramp that up, I would appreciate it as well because,
one way or the other, we have got to find ways to prosecute
these cases or at least make an impact with administrative or
civil sanctions so we send a message back to China, or whoever
is sending these goods, that we're going to enforce it and
there's going to be a sanction for it.
So, I apologize for running over, Mr. Chair, but I thank
you for the time, and I yield back.
Mr. Cline. The gentleman yields back.
The gentlelady from Florida is recognized.
Ms. Lee. Thank you, Mr. Chair.
Mr. Ball, in your testimony you spoke about how the
Intellectual Property Rights Coordination Center, or the IPR
Center, operates with partnerships with over 20 other Federal
agencies and academic institutions as well as stakeholders in
of the private sector.
Would you elaborate on how HSI's partnership with the
National Football League and the Motion Picture Association
work and what outcomes these partnerships have created?
Mr. Ball. Yes, ma'am. Fantastic question.
Our partnerships across the spectrum of intellectual
property benefit both business and our criminal investigations.
One of those keys is the NFL. The Super Bowl every year is a
major, major event for both human trafficking and, obviously,
intellectual property theft. We work hand-in-hand with the NFL
and with the brands and the apparel manufacturers, and we
conduct operations around large events. The sports
manufacturers provide subject-matter experts with teams of
agents in the field taking these goods. Then as a key
partnership in the National IPR Center and to these events is
our CPB partnership, identifying where these routes, the ports,
intelligence, where things are coming from, for seizures of
everything from counterfeit rings to jerseys to all kinds of
sports apparel.
We have that same kind of relationship with the Motion
Picture Association as well.
I have found that industry, when they own what is happening
to their products and they share that information from us. It
helps direct our criminal investigations much more effectively.
When they take what has been called before onesie-twosie
seizures and they help put those together with what's happening
not only to their brand, but then we can take that and attach
it to other brands going after networks versus just individual
shippers.
Ms. Lee. Tell us, if you would, how the IPR Center is
working with universities on similar types of partnerships?
Mr. Ball. Another great question. Thank you.
I'm going to go back to Michigan State University. Michigan
State University's A-CAPP program isn't a degree program. It's
multidisciplinary, so there's law students, business students,
criminal justice students that are all focused on property
protection. They have a massive data base of research, of
information that's informed by industry where they go, and
they'll look at a particular problem set in a particular way.
What we're doing with them in the AI space, we replicated
with them in a program that we created jointly called IP
Protect. We are finding from our industry partners that the
medium and small businesses weren't having the same benefit of
having an internal large brand protection program within their
industry. So, we created this IP Protect program with MSU to
inform medium and small businesses how they can better protect
their IP.
Ms. Lee. Would it potentially be productive for you to
expand those partnerships to include other universities, like
the University of Florida or the University of South Florida,
and access their IP research data bases as well?
Mr. Ball. Yes, absolutely. In some of the questioning
earlier about what we could do with more, Congress was generous
enough to provide Homeland Security Investigations some
enhancement money in the Fiscal Year 2023 budget, and we used
that not only on the IP space to increase what we're doing with
the government supply chain investigative unit, outside of our
work with DOD, also in our wildlife and environmental crimes,
and I know, just recently speaking with my team leads of our
wildlife and environmental crimes, that they're actually
talking to both of those universities.
Ms. Lee. Thank you.
Mr. Chair, I yield back.
Mr. Cline. The gentlelady yields back.
The gentleman from South Carolina is recognized.
Mr. Fry. Thank you, Mr. Chair, for having this hearing
today.
For generations the textile industry has been a pillar of
the economy in both South Carolina and the United States.
Darling Fibers in the district I represent is one of the
largest domestic producers of high-quality fibers for fabric,
garment, and fashion industries. Milliken, also in South
Carolina, is located in Spartanburg and has been in the
business since the 1800s.
I've heard from many of my constituents concerning their
concerns regarding de minimis. So, most of my questions are
going to be centered around that. De minimis imports from
places like China account have exceeded a billion total
packages just last year according to the CBP reports. E-
commerce giants are flooding the U.S. market with low-cost
products. Many of them, as we know from this hearing today, are
counterfeit, and yet they avoid inspection and taxes.
Unfortunately, this number is expected to grow in the coming
years.
Deputy Director Lord, you oversee CBP policy and
enforcement priorities, and I've heard from many constituent
companies about the problems they're facing due to the influx
of de minimis packages entering the U.S. We've heard that 85
percent of all IP seizures occur in the de minimis environment,
and it's become a high-way for other illicit goods such as
fentanyl, which has been talked about here. The sheer volume of
these duty-free packages, though, is crippling our own economy
and our own companies and our own American workers, especially
in textiles, which is a crucial industry not only for my direct
but my State and indeed the country.
So, Mr. Lord, how do we close these loopholes? What policy
recommendations would be helpful to you in closing these
loopholes?
Mr. Lord. Well, thank you very much for the question,
Congressman.
I want to acknowledge first that Customs and Border
Protection is very much aware of the challenges that the
textile industry is facing at this moment. We've been working
closely with the domestic textile producers in the United
States since, we'll say September or October of last year. I've
had the privilege of going down to some of the production
facilities in South Carolina that you have mentioned during my
career. It's an impressive operation. I don't wake up every day
and my staff does not wake up every day not thinking about how
to protect U.S. jobs.
When it comes to the specific challenges in de minimis, we
are ramping up our inspections of textile products in the de
minimis environment. As an agency, we've made investments in
some of our laboratory and scientific services centers around
the country, in Savannah, New York, and Los Angeles. They will
have very cutting-edge technology to begin testing textiles for
compliance with the Uyghur Forced Labor Protection Act. We do
intend and are deploying that technology in the de minimis
environment. There's a perception that we're not testing for
that in the de minimis environment. That is not true.
Mr. Fry. Mr. Lord, let me ask you something really quick,
and I don't mean to cut you off, but I've got two minutes. So,
I just want to vet this thing through a little bit.
Do you think that maybe labeling China as a country of
concern would be a prudent step for us to take in Congress?
Because we know that most of these issues are coming from the
PRC, at least they're a big actor in this. Would that be
helpful to you in your efforts to do your job?
Mr. Lord. That is an excellent question, sir.
It's difficult for me to answer without understanding what
that label might trigger in terms of additional legal
authorities or presumption of guilt or anything along those
lines. At Customs, we're focused on the China threat, sir. More
than happy to explore those ideas with you and your staff.
We're committed to finding workable solutions in the de minimis
space.
Mr. Fry. Mr. Lord, as part of your portfolio, you receive
the de minimis data pilot program. What insights can you
provide about the results so far?
Mr. Lord. Yes, absolutely. I appreciate you asking that
question, sir.
Our two pilot programs in the de minimis environment have
been running since the Summer 2019. Those two pilot programs
look at a couple of different things, but what I'll just
highlight is what we're discovering is there is better data out
there that will help us better segment risk and identify
compliant or noncompliant shipments, particularly from what
I'll all nontraditional actors in the supply chain, to include
online marketplaces. We have successfully been able to pair a
web address of a product listing with a small package coming
through. Thw data from that website helps us make better risk
management decisions.
Last Fiscal Year when there were a billion small packages
entering the United States, over half of them had additional
information from one of those two tests, which to us signals an
interest in the private sector in getting this additional data
for us. As a result, we're in the process now of updating our
regulations to codify the lessons learned from those tests.
Mr. Fry. Thank you for that.
I'll just conclude by saying, look, there are so many
concerns. I didn't know a lot about IP when I got onto this
Subcommittee, but there's so many concerns, from the fees and
tariffs that the United States is missing out on within the de
minimis space. There's no adherence by foreign actors or
entities on the Uyghur Act that you mentioned, labor standards.
The IP concerns are very self-evident when you look at kind of
what we're talking about here. Of course, at the end of the
day, the real impact--and this isn't a fault at you. I'm just
kind of sharing the concern that I have, which you share too,
is that American workers and American companies are put at a
disadvantage because we basically have created a free trade
agreement with China because they're shipping these things in
with substandard labor standards, and American companies are
forced to compete with that on an international stage at a very
big disadvantage to them.
So, however we can partner with you, I'm happy to do that
and listen to your insights because I think this is a very big
issue for our country to tackle.
Thank you so much.
Mr. Lord. Chair, if I may?
Mr. Cline. Mr. Lord.
Mr. Lord. Thank you, sir.
Thank you for that, Congressman.
I would just like to say and offer my staff to reach out to
your staff. We have an initiative that I mentioned in my
opening remarks, the 21st Century Customs Framework Initiative,
that proposes statutory changes to help us better manage this
environment. We are concerned, just to be very direct, and we
do need help and are eager to partner with Congress. So, thank
you.
Mr. Fry. Well, and thank you, by the way, for being--and
all three of you, quite frankly, but thank you for being a
witness that actually answers questions. We have that very
rarely in Congress sometimes. So, thank you for that.
Mr. Chair, I yield back.
Mr. Cline. The gentleman yields back.
I'm going to go ahead and take a few minutes to ask some
questions as well.
Mr. Goldfoot, I've heard you speak about how the past
several years have seen fewer IP-related cases brought by DOJ,
the fact that the Protecting Lawful Streaming Act of 2020,
which I was pleased to see enacted, has only been used to
conclusion once.
Is that your testimony?
Mr. Goldfoot. We have announced, I believe, one case where
someone was sentenced under that act.
Mr. Cline. What resources or authorities does the DOJ
believe it lacks at this point to enforce criminal copyright
piracy laws effectively?
Mr. Goldfoot. Thank you for the question.
So, enforcing criminal--going after streaming sites
specifically, which is the target of the Protecting Lawful
Streaming Act, is a very difficult lift investigatively, yes,
but also in terms of securing the necessary foreign cooperation
is quite difficult.
So, for some of the streaming sites we're talking about--I
don't want to say their name to give publicity, but you
probably know which one I'm referring to--the location of the
servers, the locations of the domain name registration, the
location of the individuals responsible are all outside the
United States. They've attempted to locate themselves in places
where they believe that their local law enforcement will not
follow U.S. legal process in terms of getting at them.
How do we approach such a situation? First, there's no
substitute for slowly over time building appropriate law
enforcement relationships with our international partnerships,
coming to a common understanding, helping each other out in
investigations, providing case-based mentoring, and so on, as
that proceeds.
Separate from that, given the profusion of these sites and
the amount of streaming occurring, as the amount of crime
increases, it's helpful if we can increase our capacity to
address it at the same time.
Mr. Cline. OK. Back in December, the Subcommittee held a
hearing on digital copyright piracy in the film and television
industry. At that hearing we heard testimony about a notorious
foreign pirate site, FMovies, which the Motion Picture
Association testified averages 98 million users a month, 33
percent of the traffic coming from the United States.
We saw a demonstration showing how easy it was to access
high-quality copies of American movies and television shows
advertised using the studio's copyrighted cover art and
organized by title, genre, season, and episode. It also used an
interface highly similar to legitimate streaming services. The
U.S. Chamber estimates these sites cost the U.S. economy at
least $29 billion in lost revenue annually.
U.S. intellectual property rights holders referred FMovies
to the IPR Center five years ago in 2019, and his brought in
Vietnamese law enforcement in early 2021. A couple of years
ago, his believed that Vietnamese law enforcement was wrapping
up the investigation and close to making arrests, but since
then, the case seems to have stalled numerous times.
In the meantime, the streaming piracy site dedicated to
infringing content continues to see over 160 million visits per
month, a third of which traffic still comes from the United
States.
So, can you speak to the challenges of working with
international law enforcement on prosecuting streaming piracy
cases and with Vietnamese law enforcement specifically
regarding FMovies?
Mr. Goldfoot. Thank you.
I assume the question is directed to me, sir?
Mr. Cline. Yes.
Mr. Goldfoot. So, thank you for the question.
So, of course, longstanding policy prevents me from
commenting about or confirming or denying the existence of any
particular investigation. However, your question is quite
astute in pointing out the difficulties that we have in going
after streaming sites or foreign defendants when they're
located in jurisdictions where you're having challenges dealing
with them. I think that increasingly we see this as an issue
not solely for the Department of Justice, but administrative
wide looking, also as part of a foreign policy and other ways
to address the problem.
Mr. Cline. Mr. Ball, Mr. Lord, do you have anything to add
to that?
Mr. Ball. I will say, sir, that, yes, our relationship with
the MPA and this case and many other cases, the problem that we
face, as mentioned earlier, is shifting the jurisdiction,
shifting the sites, having the trained investigators to work
those cases. So, we've partnered with the MPA and with the RAAA
and with one of our key partners, the National Cyber Forensic
Training Alliance, in Pittsburgh to create a digital piracy
training program, both for the investigators and for inspectors
and for attorneys as well.
We do face the same international challenges from an
investigative standpoint. His has his offices in those
countries working with their law enforcement, but we share the
concern and the frustration from DOJ as well.
Mr. Cline. Mr. Lord?
Mr. Lord. Nothing further to add, sir.
Mr. Cline. All right. Thank you.
I'll ask one more question, Mr. Goldfoot. I have been
concerned that the Biden DOJ has had recent significant losses
in cases, including the case against Georgia Tech researcher
Gee-Kung Chang. Mr. Chang is accused of collaborating with
sanctioned PRC telecommunications company, ZTE, assisting
Chinese nationals applying for visas that claimed to be
students at Georgia Tech. Instead of attending Georgia Tech,
the Chinese nationals traveled to the U.S. to work for ZTE.
Mr. Goldfoot, despite these allegations, how many of the 10
counts against Mr. Chang were recently dismissed by the Federal
judge?
Mr. Goldfoot. Thank you for the question.
I'm not sure that this case was done under my supervision.
I'm not certain of the answer.
Mr. Cline. The answer is nine. So, dismissal of nine out of
ten counts generally would be troubling. Wouldn't you agree?
Mr. Goldfoot. I would answer the question by saying I think
the Department of Justice does not bring a count or indeed a
prosecution unless we think we can prove it beyond a reasonable
doubt. When losses happen, you take it to heart. You examine
why it occurred.
I don't know if I can say more about a case, I didn't
supervise that, sir.
Mr. Cline. Do you know the status of the Chinese nationals
who Mr. Chang assisted?
Mr. Goldfoot. No. I'm sorry, sir, this case was not under
my supervision. I'm not familiar with the facts at all.
Mr. Cline. All right. My time has expired. I will yield
back to the Chair.
Mr. Issa. [Presiding.] OK. I'm going to take the liberty of
just one comment, and then we're going to close this out if
that's all right.
Mr. Goldfoot, the last round of questioning I found great.
I've got no objections, and I agree with all the questions.
Isn't it also true that, a little bit like Babe Ruth that, in
fact, if you want to hit home runs, sometimes you get
strikeouts, that you sometimes charge because you want to, in
fact, enforce the law, and you don't always succeed. In other
words, you don't only take slam-dunk cases is maybe the way to
ask it.
Mr. Goldfoot. Thank you for the question. I could describe
the approach of the Department of Justice as that our job, the
Department of Justice wins when justice is done. We want to
bring cases only when we can prove it beyond a reasonable
doubt. Losses are regrettable, but as you say, sometimes that's
how it breaks.
Mr. Issa. With that, this hearing was informative. I would
ask all the witnesses; would you agree to take additional
questions from those who did not have sufficient time or who
have followup questions?
Mr. Ball. Absolutely sir.
Mr. Lord. Yes.
Mr. Goldfoot. Of course, sir.
Mr. Issa. OK. With that, I'll leave three legislative days
for those questions to be placed in the record and then
submitted to you.
Without objection, this hearing is concluded.
[Whereupon, at 12:06 p.m., the Subcommittee was adjourned.]
All materials submitted for the record by Members of the
Subcommittee on Courts, Intellectual Property, and the Internet
can
be found at: https://docs.house.gov/Committee/Calendar/ByEvent
.aspx?EventID=117252.
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