[Congressional Record Volume 152, Number 17 (Monday, February 13, 2006)]
[Senate]
[Pages S1124-S1125]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STOP COUNTERFEITING IN MANUFACTURED GOODS ACT
Mr. SPECTER. Mr. President, I will to take a moment to speak about
H.R. 32, the Stop Counterfeiting in Manufactured Goods Act of 2005,
sponsored by Representative Knollenberg and 59 House cosponsors. The
counterfeiting of goods bearing American held trademarks is an
important problem that I am committed to fighting, as reflected by my
sponsoring S. 1699, the Senate companion bill to H.R. 32, earlier this
year with Senator Leahy and Senators Alexander, Bayh, Brownback,
Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin,
Reed, Stabenow, and Voinovich.
H.R. 32, the Stop Counterfeiting in Manufactured Goods Act of 2005,
addresses a problem that has reached epidemic proportions as a result
of a loophole in our Criminal Code: the trafficking in counterfeit
labels. Criminal law currently prohibits the trafficking in counterfeit
trademarks ``on or in connection with goods or services.'' However, it
does not prohibit the trafficking in the counterfeit marks themselves.
As such, there is nothing in current law to prohibit an individual from
selling counterfeit labels bearing otherwise protected trademarks
within the United States.
This loophole was exposed by the Tenth Circuit Court of Appeals 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. Since the defendant did not attach counterfeit the marks to
``goods or services,'' the court found that the defendant did not run
afoul of the criminal statute as a matter of law. Thus, someone caught
redhanded with counterfeit trademarks walked free.
H.R. 32 closes this loophole by amending title 18, section 2320 of
the United States Code to criminally prohibit the trafficking, or
attempt to traffic, in ``labels, patches, stickers'' and generally any
item to which a counterfeit mark has been applied. In so doing, H.R. 32
provides U.S. Department of Justice prosecutors with the means not only
to prosecute individuals trafficking in counterfeit goods or services
but also individuals trafficking in labels, patches, and the like that
are later applied to goods.
Congress must act expeditiously to protect U.S. held trademarks to
the fullest extent of the law. The recent 10- count indictment of 4
Massachusetts residents of conspiracy to traffic in approximately $1.4
million of counterfeit luxury goods in the case of U.S. v. Luong et
al., 2005 D. Mass., underscores the need for this legislation.
According to the indictment, law enforcement officers raided self-
storage units earlier this year and found the units to hold
approximately 12,231 counterfeit handbags; 7,651 counterfeit wallets;
more than 17,000 generic handbags and wallets; and enough counterfeit
labels and medallions to turn more than 50,000 generic handbags and
wallets into counterfeits. Although the U.S. Attorney's Office was able
to pursue charges of trafficking and attempting to traffic in
counterfeit handbags and wallets, they could not able to bring charges
for trafficking and attempting to traffic in the more than 50,000
counterfeit labels and medallions. As such, these defendants will
escape prosecution that would have otherwise been illegal if they had
only been attached to an otherwise generic bag. This simply does not
make sense and had the Stop Counterfeiting in Manufactured Goods Act of
2005 been in effect at the time of indictment, U.S. prosecutors would
have been able to bring charges against the defendants for trafficking
and attempting to traffic in not only counterfeit goods but also
counterfeit labels.
As Assistant Attorney General Alice Fisher said, ``Those who
manufacture and sell counterfeit goods steal business from honest
merchants, confuse or defraud honest consumers, and illegally profit on
the backs of honest American workers and entrepreneurs.'' This point is
underscored by the Bureau of Customs and Border Protection estimate
that trafficking in counterfeit goods costs the United States
approximately $200-$250 million annually. With each passing year, the
United States loses millions of dollars in tax revenues to the sale of
counterfeit goods. Further, each counterfeit item that is manufactured
overseas and distributed in the United States costs American workers
tens of thousands of jobs. With counterfeit goods making up a growing 5
to 7 percent of world trade, this is a problem that we can no longer
ignore.
To be sure, counterfeiting is not limited to the popular designer
goods that we have all seen sold on corners of just about every major
metropolitan city in the United States. Counterfeiting has a
devastating impact on a broad range of industries. In fact, for almost
every legitimate product manufactured and sold within the United
States, there is a parallel counterfeit product being sold for no more
than half the price. These counterfeit products range from children's
toys to clothing to Christmas tree lights. More frightening are the
thousands of counterfeit automobile parts, batteries, and electrical
equipment that are being manufactured and placed into the stream of
commerce with each passing day. I am told that the level of
sophistication in counterfeiting has reached the point that you can no
longer distinguish between the real and the counterfeit good or label
with the naked eye. However, just because these products look the same
does not mean that they have the same quality characteristics. The
counterfeit products are not subject to the same quality controls of
legitimate products, resulting in items that are lower in quality and
likely to fall apart. In fact, counterfeit products could potentially
kill unsuspecting American consumers.
In addition to closing the ``counterfeit label loophole,'' the Stop
Counterfeiting in Manufactured Goods Act strengthens the Criminal Code
and provides heightened penalties for those trafficking in counterfeit
marks. Current law does not provide for the seizure and forfeiture of
counterfeit trademarks, whether they are attached to
[[Page S1125]]
goods or not. Therefore, 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, H.R. 32 establishes
procedures for the mandatory seizure, forfeiture, and destruction of
counterfeit marks prior to a 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.
When this legislation was sent over to the Senate from the House,
concerns were raised to Senator Leahy and myself about the language in
Section 2(b)(1)(B) of this bill pertaining to the forfeiture authority
of the U.S. Department of Justice. In focusing our attention to this
section, we discussed the scope of the facilitation language, which
parallels the drug and money laundering forfeiture language in 21
U.S.C. 853 and 18 U.S.C. 982, respectively, and how it might relate to
Internet marketplace companies, search engines, and ISPs. Specifically,
we were aware of concerns regarding the potential misapplication of the
facilitation language in section 2(b)(1)(B) to pursue forfeiture and
seizure proceedings against responsible Internet marketplace companies
that serve as third party intermediaries to online transactions.
Mr. LEAHY. Section 2(b)(1)(B) authorizes U.S. attorneys to pursue
civil in rem forfeiture proceedings against ``any property used, in any
manner or part, to commit or to facilitate the commission of a
violation of subsection (a).'' The intent of this language is to
provide attorneys and prosecutors with the authority to bring a civil
forfeiture action against the property of bad actors who are
facilitating trafficking or attempts to traffic in counterfeit marks.
The forfeiture authority in section 2(b)(1)(B) cannot be used to pursue
forfeiture and seizure proceedings against the computer equipment, Web
site, or network of responsible Internet marketplace companies, which
serve solely as a third-party to transactions and do not tailor their
services or their facilities to the furtherance of trafficking or
attempts to traffic in counterfeit marks. However, these Internet
marketplace companies must make demonstrable good faith efforts to
combat the use of their systems and services to traffic in counterfeit
marks. Companies must establish and implement procedures to take down
postings that contain or offer to sell goods, services, labels, and the
like in violation of this act upon being made aware of the illegal
nature of these items or services.
It is the irresponsible culprits that must be held accountable. 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.
Senator Specter, it is also my understanding that the U.S. Sentencing
Commission recently promulgated new Federal sentencing guidelines to
account for the changes in how intellectual property crimes are
committed. Could you clarify for the record why we have authorized the
U.S. Sentencing Commission to further amend the Federal sentencing
guidelines and policy statements for crimes committed in violation of
title 18, section 2318 or 2320, of the United States Code?
Mr. SPECTER. As Senator Leahy is aware, periodically the Sentencing
Commission has sought to update the Federal sentencing guidelines upon
the periodic directive of Congress to reflect and account for changes
in the manner in which intellectual property offenses are committed.
The recent amendments to which you refer were promulgated by the
Sentencing Commission pursuant to the authorization in the Family
Entertainment and Copyright Act of 2005, also known as FECA. These
amendments to the Federal sentencing guidelines, which took effect on
October 24, 2005, address changes in penalties and definitions for
intellectual property rights crimes, particularly those involving
copyrighted prerelease works and issues surrounding ``uploading.'' For
example, these guidelines provide for a 25 percent increase in
sentences for offenses involving prerelease works. In addition, the
Commission revised its definition of ``uploading'' to ensure that the
guidelines are keeping up with technological advances in this area.
I would like to make it clear for the record that the directive to
the Sentencing Commission in section 3 of H.R. 32 is not meant as
disapproval of the Commission's recent actions in response to FECA.
Rather, section 3 covers other intellectual property rights crimes that
Congress believes it is time for the Commission to revisit.
Specifically, section 3 directs the Commission to review the
guidelines, and particularly the definition of ``infringement amount,''
to ensure that offenses involving low-cost items like labels, patches,
medallions, or packaging that are used to make counterfeit goods that
are much more expensive are properly punished. It also directs the
Commission to ensure that the penalty provisions for offenses involving
all counterfeit goods or services or devices used to facilitate
counterfeiting are properly addressed by the guidelines. As it did in
response to the No Electronic Theft Act of 1997 and FECA, I am
confident that the Commission will ensure that the Federal sentencing
guidelines provide adequate punishment and deterrence for these very
serious offenses, and I look forward to the Commission's response to
this directive.
Mr. LEAHY. Senator Specter, thank you for that clarification. As you
are aware, there has been overwhelming support for this legislation. It
has been very heartening to see such overwhelming support for this
important bill. Counterfeiting is a threat to America. It wreaks real
harm on our economy, our workers, and our consumers. This bill is 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.
Mr. SPECTER. At this point, I would like to take this opportunity to
thank like to thank Representative Jim Sensenbrenner, Chairman of the
House Judiciary Committee, and Representative Joe Knollenberg for their
leadership in the House with regard to H.R. 32. In January of 2005,
Representative Knollenberg introduced H.R. 32 in the House. When the
bill was in Committee, he fostered negotiations between the Department
of Justice, the U.S. Chamber of Commerce, and the International
Trademark Association to ensure that it passed the House. I would also
like to thank my colleague Senator Leahy, ranking member of the Senate
Judiciary Committee, and Senators Alexander, Bayh, Brownback, Coburn,
Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed,
Stabenow, and Voinovich for their cosponsorship of S. 1699, the
companion legislation to H.R. 32. It is through the hard work of all of
these Members that we were able to achieve truly bipartisan support for
language that will ensure the protection of American-held trademarks.
Mr. LEAHY. Some of our most important legislation is produced not
only when we reach across the aisle in the name of bipartisanship but
when we work across chambers and reach true consensus. I would also
like to thank Senators Alexander, Bayh, Brownback, Coburn, Cornyn,
DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow
and Voinovich for their cosponsorship of the Senate companion
legislation. Counterfeiting is a serious problem that does not lend
itself to a quick and easy solution. This legislation is an important
step toward fighting counterfeiting. I hope we can build on the success
of this law.
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