[Congressional Record Volume 151, Number 115 (Wednesday, September 14, 2005)]
[Senate]
[Pages S10044-S10045]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER (for himself, Mr. Leahy, Mr. Hatch, Mr. DeWine, 
        Mr. Cornyn, Mr. Brownback, Mr. Voinovich, Mr. Feingold, Mr. 
        Levin, Mr. Bayh, Mr. Reed, and Ms. Stabenow):
  S. 1699. A bill to amend title 18, United States Code, to provide 
criminal penalties for trafficking in counterfeit marks; to the 
Committee on the Judiciary.
  Mr. SPECTER. Mr. President, on behalf of myself, Senator Leahy, and 
my colleagues Senators Hatch, DeWine, Cornyn, Brownback, Voinovich, 
Feingold, Levin, Bayh, Reed, and Stabenow, I seek recognition to 
introduce the Stop Counterfeiting in Manufactured Goods Act, a bill 
that amends title 18 of the United States Code to provide criminal 
penalties for trafficking in counterfeit marks.
  This legislation closes a loophole in Federal trademark law, which 
currently criminalizes the trafficking in counterfeit trademarks ``on 
or in connection with goods or services.'' This language, however, does 
not extend criminal liability to those persons who manufacture and/or 
traffic the counterfeit marks themselves, marks which are later applied 
to a product or service. In other words, Federal law does not prohibit 
a person Tom selling counterfeit labels bearing otherwise protected 
trademarks within the United States.
  This current loophole was created in large part by the Tenth 
Circuit's opinion in United States v. Giles, 213 F.3d 1247 (10th Cir. 
2000). In this case, the United States prosecuted the defendant for 
manufacturing and selling counterfeit Dooney & Bourke labels that third 
parties could later affix to generic purses. Examining Title 18, 
section 2320, of the United States Code, the Tenth Circuit held that 
persons who sell counterfeit trademarks that are not actually attached 
to any ``goods or services'' do not violate the Federal criminal 
trademark infringement statute. And because the defendant did not 
attach the counterfeit mark to a ``good or service,'' the court found 
that the defendant did not run afoul of the criminal statute as a 
matter of law. Thus, an individual, caught red-handed with counterfeit 
trademarks, walked free. Congress must act now to close this loophole, 
which this legislation being introduced today will most certainly do. 
Specifically, the bill will prohibit the trafficking, or attempt to 
traffic, in ``labels, patches, stickers'' and generally any item to 
which a counterfeit mark has been applied.
  In addition to closing the loophole, the Stop Counterfeiting in 
Manufactured Goods Act strengthens the criminal code's forfeiture 
provision by providing enhanced penalties for those trafficking in 
counterfeit marks, goods and services bearing counterfeit marks. 
Current law does not provide for the seizure and forfeiture of goods 
and services bearing counterfeit marks. As such, many times such 
counterfeit goods are seized one day, only to be returned and sold to 
an unsuspecting public. To ensure that individuals engaging in the 
practice of trafficking in counterfeit marks cannot reopen their doors, 
this bill provides procedures for the mandatory seizure, forfeiture, 
and destruction of counterfeit marks pre-conviction. Further, it 
provides for procedures for the mandatory forfeiture and destruction of 
property derived from or used to engage in the trafficking of 
counterfeit marks.
  The trade in counterfeit marks is only part of a much larger problem. 
The Bureau of Customs and Border Protection estimates that trafficking 
in counterfeit goods costs the United States approximately $200 million 
annually. With each passing year, the United States loses millions of 
dollars in tax revenues to the sale of counterfeit goods. Further, 
counterfeit items manufactured overseas and distributed in the United 
States cost American workers tens of thousands of jobs. This is a 
problem that we can no longer ignore.
  The trafficking in counterfeit goods and marks is not limited to 
those of the popular designer goods that we have all seen sold on 
corners of just about every major metropolitan city in the United 
States. Counterfeited products can range from children's toys to 
clothing to Christmas tree lights. More disturbing are the potentially 
hazardous counterfeit automobile parts, batteries, and electrical 
equipment that are being manufactured and placed into the stream of 
commerce by the thousands with each passing day.
  This legislation closes a loophole in the current criminal trademark 
infringement statute and ensures that it is a crime not only to traffic 
in goods or services bearing counterfeit marks, but also in the 
counterfeit marks themselves. Further, this legislation ensures that 
counterfeit goods and marks seized in violation of this statute are 
properly disposed of and do not make their way back onto the street. I 
am pleased to introduce this piece of legislation with my colleagues 
and hope that it will receive the support that it is due.
  Mr. LEAHY. Counterfeiting is a threat to America. It wreaks real harm 
on our economy, our workers, and our consumers. Today, Senator Specter 
and I introduce the ``Stop Counterfeiting in Manufactured Goods Act,'' 
a tough bill that will give law enforcement improved tools to fight 
this form of theft. The bill is short and straightforward, but its 
impact should be profound and far-reaching.
  It is all too easy to think of counterfeiting as a victimless crime, 
a means of buying sunglasses or a purse that would otherwise strain a 
monthly budget. The reality, however, is far different. According to 
the Federal Bureau of Investigation, counterfeiting costs the U.S. 
between $200 billion and $250 billion annually. In Vermont, companies 
like Burton Snowboards, Vermont Tubbs, SB Electronics, and Hubbardton 
Forge--all of which have cultivated their good names through pure hard 
work and creativity--have felt keenly the damage of intellectual 
property theft on their businesses. This is wrong. It is simply not 
fair to the businesses who innovate and to the people whose economic 
livelihoods depend on these companies.
  The threat posed by counterfeiting is more than a matter of 
economics. Inferior products can threaten the safety of those who use 
them. When a driver taps a car's brake pedals there should be no 
uncertainty about whether the

[[Page S10045]]

brake linings are made of compressed grass, sawdust, or cardboard. Sick 
patients should not have to worry that they will ingest counterfeit 
prescription drugs and, at best, have no effect. The World Health 
Organization estimates that the market for counterfeit drugs is about 
$32 billion each year. Knock-off parts have even been found in NATO 
helicopters. What's more, according to Interpol, there is an 
identifiable link between counterfeit goods and the financing of 
terrorist operations.
  This is a global problem, and it demands global solutions. Earlier 
this year at a Judiciary Committee hearing on international piracy, the 
General Counsel for the United States Trade Representative reported 
that China continues to see piracy rates of about ninety percent in 
nearly all industries. Russia is a growing concern too, even as that 
country seeks membership in the World Trade Organization. Both 
countries were added to USTR's Priority Watch List this year. Such 
lists are useful, but they are meaningless without concrete steps by 
the countries singled out by USTR. We know that counterfeiting can be 
fought when a country treats it as a priority. China, for example, 
flexed its intellectual property enforcement muscle recently in 
protecting logos related to Beijing's 2008 Summer Olympic Games. In a 
Newsweek International article last January, one vendor who was fined 
for selling Olympic t-shirts noted that the crackdown was concerted: `` 
`They are,' she says, `very serious.' ''
  I am very serious as well. Even as we work toward better 
international enforcement, there is much we can do, and much that we 
have done, to improve domestic law. In 1996, I worked with Senator 
Hatch to pass the Anticounterfeiting Consumer Protection Act, which 
strengthened our criminal and tariff codes and applied federal 
racketeering laws to counterfeiting. And earlier this year, Senator 
Cornyn and I introduced S. 1095, the Protecting American Goods and 
Services Act. That bill would criminalize possession of counterfeit 
goods with intent to traffic, expand the definition of ``traffic,'' and 
criminalize the importing and exporting of counterfeit goods.
  The bill that Senator Specter and I are introducing today also makes 
several improvements to the U.S. Code. The bill strengthens 18 U.S.C. 
2318, the part of the criminal code that deals with counterfeit goods 
and services, to make it a crime to traffic in counterfeit labels or 
packaging, even when counterfeit labels or packaging are shipped 
separately from the goods to which they will ultimately be attached. 
Savvy counterfeiters have exploited this loophole to escape liability. 
This bill closes that loophole.
  The bill will also make counterfeit labels and goods, and any 
equipment used in facilitating a crime under this part of the code, 
subject to forfeiture upon conviction. Any forfeited goods or machinery 
would then be destroyed, and the convicted infringer would have to pay 
restitution to the lawful owner of the trademark. Finally, although the 
bill is tough, it is also fair. It states that nothing ``shall entitle 
the United States to bring a cause of action under this section for the 
repackaging of genuine goods or services not intended to deceive or 
confuse.'' It is truly just the bad actors we want to punish.
  Those who profit from another's innovation have proved their 
creativity only at escaping responsibility for their actions. As 
legislators it is important that we provide law enforcement with the 
tools needed to capture these thieves. It is a task to which Senator 
Specter and I are both committed. I would like to thank Senator Bayh, 
Senator Brownback, Senator Cornyn, Senator DeWine, Senator Feingold, 
Senator Hatch, Senator Levin, Senator Reed, and Senator Stabenow for 
cosponsoring this important legislation.
                                 ______