[Congressional Record (Bound Edition), Volume 152 (2006), Part 2]
[House]
[Pages 2799-2803]
[From the U.S. Government Publishing Office, www.gpo.gov]




             STOP COUNTERFEITING IN MANUFACTURED GOODS ACT

  Mr. SENSENBRENNER. Madam Speaker, I move to suspend the rules and 
concur in the Senate amendment to the bill (H.R. 32) to amend title 18, 
United States Code, to provide criminal penalties for trafficking in 
counterfeit marks.

[[Page 2800]]

  The Clerk read as follows:

  Senate amendment:

       Strike out all after the enacting clause and insert:

     SECTION 1. TRAFFICKING IN COUNTERFEIT MARKS.

       (a) Short Title; Findings.--
       (1) Short Title.--This section may be cited as the ``Stop 
     Counterfeiting in Manufactured Goods Act''.
       (2) Findings.--The Congress finds that--
       (A) the United States economy is losing millions of dollars 
     in tax revenue and tens of thousands of jobs because of the 
     manufacture, distribution, and sale of counterfeit goods;
       (B) the Bureau of Customs and Border Protection estimates 
     that counterfeiting costs the United States $200 billion 
     annually;
       (C) counterfeit automobile parts, including brake pads, 
     cost the auto industry alone billions of dollars in lost 
     sales each year;
       (D) counterfeit products have invaded numerous industries, 
     including those producing auto parts, electrical appliances, 
     medicines, tools, toys, office equipment, clothing, and many 
     other products;
       (E) ties have been established between counterfeiting and 
     terrorist organizations that use the sale of counterfeit 
     goods to raise and launder money;
       (F) ongoing counterfeiting of manufactured goods poses a 
     widespread threat to public health and safety; and
       (G) strong domestic criminal remedies against 
     counterfeiting will permit the United States to seek stronger 
     anticounterfeiting provisions in bilateral and international 
     agreements with trading partners.
       (b) Trafficking in Counterfeit Marks.--Section 2320 of 
     title 18, United States Code, is amended as follows:
       (1) Subsection (a) is amended by inserting after ``such 
     goods or services'' the following: ``, or intentionally 
     traffics or attempts to traffic in labels, patches, stickers, 
     wrappers, badges, emblems, medallions, charms, boxes, 
     containers, cans, cases, hangtags, documentation, or 
     packaging of any type or nature, knowing that a counterfeit 
     mark has been applied thereto, the use of which is likely to 
     cause confusion, to cause mistake, or to deceive,''.
       (2) Subsection (b) is amended to read as follows:
       ``(b)(1) The following property shall be subject to 
     forfeiture to the United States and no property right shall 
     exist in such property:
       ``(A) Any article bearing or consisting of a counterfeit 
     mark used in committing a violation of subsection (a).
       ``(B) Any property used, in any manner or part, to commit 
     or to facilitate the commission of a violation of subsection 
     (a).
       ``(2) The provisions of chapter 46 of this title relating 
     to civil forfeitures, including section 983 of this title, 
     shall extend to any seizure or civil forfeiture under this 
     section. At the conclusion of the forfeiture proceedings, the 
     court, unless otherwise requested by an agency of the United 
     States, shall order that any forfeited article bearing or 
     consisting of a counterfeit mark be destroyed or otherwise 
     disposed of according to law.
       ``(3)(A) The court, in imposing sentence on a person 
     convicted of an offense under this section, shall order, in 
     addition to any other sentence imposed, that the person 
     forfeit to the United States--
       ``(i) any property constituting or derived from any 
     proceeds the person obtained, directly or indirectly, as the 
     result of the offense;
       ``(ii) any of the person's property used, or intended to be 
     used, in any manner or part, to commit, facilitate, aid, or 
     abet the commission of the offense; and
       ``(iii) any article that bears or consists of a counterfeit 
     mark used in committing the offense.
       ``(B) The forfeiture of property under subparagraph (A), 
     including any seizure and disposition of the property and any 
     related judicial or administrative proceeding, shall be 
     governed by the procedures set forth in section 413 of the 
     Comprehensive Drug Abuse Prevention and Control Act of 1970 
     (21 U.S.C. 853), other than subsection (d) of that section. 
     Notwithstanding section 413(h) of that Act, at the conclusion 
     of the forfeiture proceedings, the court shall order that any 
     forfeited article or component of an article bearing or 
     consisting of a counterfeit mark be destroyed.
       ``(4) When a person is convicted of an offense under this 
     section, the court, pursuant to sections 3556, 3663A, and 
     3664, shall order the person to pay restitution to the owner 
     of the mark and any other victim of the offense as an offense 
     against property referred to in section 3663A(c)(1)(A)(ii).
       ``(5) The term `victim', as used in paragraph (4), has the 
     meaning given that term in section 3663A(a)(2).''.
       (3) Subsection (e)(1) is amended--
       (A) by striking subparagraph (A) and inserting the 
     following:
       ``(A) a spurious mark--
       ``(i) that is used in connection with trafficking in any 
     goods, services, labels, patches, stickers, wrappers, badges, 
     emblems, medallions, charms, boxes, containers, cans, cases, 
     hangtags, documentation, or packaging of any type or nature;
       ``(ii) that is identical with, or substantially 
     indistinguishable from, a mark registered on the principal 
     register in the United States Patent and Trademark Office and 
     in use, whether or not the defendant knew such mark was so 
     registered;
       ``(iii) that is applied to or used in connection with the 
     goods or services for which the mark is registered with the 
     United States Patent and Trademark Office, or is applied to 
     or consists of a label, patch, sticker, wrapper, badge, 
     emblem, medallion, charm, box, container, can, case, hangtag, 
     documentation, or packaging of any type or nature that is 
     designed, marketed, or otherwise intended to be used on or in 
     connection with the goods or services for which the mark is 
     registered in the United States Patent and Trademark Office; 
     and
       ``(iv) the use of which is likely to cause confusion, to 
     cause mistake, or to deceive; or''; and
       (B) by amending the matter following subparagraph (B) to 
     read as follows:
     ``but such term does not include any mark or designation used 
     in connection with goods or services, or a mark or 
     designation applied to labels, patches, stickers, wrappers, 
     badges, emblems, medallions, charms, boxes, containers, cans, 
     cases, hangtags, documentation, or packaging of any type or 
     nature used in connection with such goods or services, of 
     which the manufacturer or producer was, at the time of the 
     manufacture or production in question, authorized to use the 
     mark or designation for the type of goods or services so 
     manufactured or produced, by the holder of the right to use 
     such mark or designation.''.
       (4) Section 2320 is further amended--
       (A) by redesignating subsection (f) as subsection (g); and
       (B) by inserting after subsection (e) the following:
       ``(f) Nothing in this section shall entitle the United 
     States to bring a criminal cause of action under this section 
     for the repackaging of genuine goods or services not intended 
     to deceive or confuse.''.
       (c) Sentencing Guidelines.--
       (1) Review and amendment.--Not later than 180 days after 
     the date of enactment of this Act, the United States 
     Sentencing Commission, pursuant to its authority under 
     section 994 of title 28, United States Code, and in 
     accordance with this subsection, shall review and, if 
     appropriate, amend the Federal sentencing guidelines and 
     policy statements applicable to persons convicted of any 
     offense under section 2318 or 2320 of title 18, United States 
     Code.
       (2) Authorization.--The United States Sentencing Commission 
     may amend the Federal sentencing guidelines in accordance 
     with the procedures set forth in section 21(a) of the 
     Sentencing Act of 1987 (28 U.S.C. 994 note) as though the 
     authority under that section had not expired.
       (3) Responsibilities of united states sentencing 
     commission.--In carrying out this subsection, the United 
     States Sentencing Commission shall determine whether the 
     definition of ``infringement amount'' set forth in 
     application note 2 of section 2B5.3 of the Federal sentencing 
     guidelines is adequate to address situations in which the 
     defendant has been convicted of one of the offenses listed in 
     paragraph (1) and the item in which the defendant trafficked 
     was not an infringing item but rather was intended to 
     facilitate infringement, such as an anti-circumvention 
     device, or the item in which the defendant trafficked was 
     infringing and also was intended to facilitate infringement 
     in another good or service, such as a counterfeit label, 
     documentation, or packaging, taking into account cases such 
     as U.S. v. Sung, 87 F.3d 194 (7th Cir. 1996).

     SEC. 2. TRAFFICKING DEFINED.

       (a) Short Title.--This section may be cited as the 
     ``Protecting American Goods and Services Act of 2005''.
       (b) Counterfeit Goods or Services.--Section 2320(e) of 
     title 18, United States Code, is amended--
       (1) by striking paragraph (2) and inserting the following:
       ``(2) the term `traffic' means to transport, transfer, or 
     otherwise dispose of, to another, for purposes of commercial 
     advantage or private financial gain, or to make, import, 
     export, obtain control of, or possess, with intent to so 
     transport, transfer, or otherwise dispose of;'';
       (2) by redesignating paragraph (3) as paragraph (4); and
       (3) by inserting after paragraph (2) the following:
       ``(3) the term `financial gain' includes the receipt, or 
     expected receipt, of anything of value; and''.
       (c) Conforming Amendments.--
       (1) Sound recordings and music videos of live musical 
     performances.--Section 2319A(e) of title 18, United States 
     Code, is amended by striking paragraph (2) and inserting the 
     following:
       ``(2) the term `traffic' has the same meaning as in section 
     2320(e) of this title.''.
       (2) Counterfeit labels for phonorecords, computer programs, 
     etc.--Section 2318(b) of title 18, United States Code, is 
     amended by striking paragraph (2) and inserting the 
     following:
       ``(2) the term `traffic' has the same meaning as in section 
     2320(e) of this title;''.
       (3) Anti-bootlegging.--Section 1101 of title 17, United 
     States Code, is amended by striking subsection (b) and 
     inserting the following:
       ``(b) Definition.--In this section, the term `traffic' has 
     the same meaning as in section 2320(e) of title 18.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Wisconsin (Mr. Sensenbrenner) and the gentleman from Michigan (Mr. 
Conyers) each will control 20 minutes.
  The Chair recognizes the gentleman from Wisconsin.

[[Page 2801]]




                             General Leave

  Mr. SENSENBRENNER. Madam Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks and include extraneous material on H.R. 32 currently 
under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Wisconsin?
  There was no objection.
  Mr. SENSENBRENNER. Madam Speaker, I yield myself such time as I may 
consume.
  Madam Speaker, I rise in support of H.R. 32, the Stop Counterfeiting 
in Manufactured Goods Act. This legislation, which is substantially 
similar to legislation that passed the House by voice vote in May of 
2005, contains important provisions to facilitate efforts by the 
Department of Justice to prosecute those who exploit the good names of 
companies by attaching counterfeit marks to substandard products.
  As amended by the other body, H.R. 32 includes changes to the 
definition of ``traffic'' contained in Federal counterfeiting statutes 
to permit the prosecution of persons who import or export counterfeit 
products or possess counterfeit products with the intent to transport, 
transfer, or distribute such products.
  Counterfeiting is a serious problem. Legitimate businesses work hard 
to build public trust and confidence in their products. When a 
legitimate company's name is attached to counterfeit products, that 
company may suffer financial losses and may also have its reputation 
tarnished as a result.
  In addition, counterfeit products are often purchased unwittingly by 
consumers who have come to rely on the quality of a product from a 
company they know and trust. What unsuspecting consumers of counterfeit 
products often receive is a low-quality, and potentially dangerous, 
imitation. Some of these products are such poor imitations of the 
original that they have caused physical harm to consumers.
  The FBI has identified counterfeit goods in a wide range of products 
including pharmaceuticals, automobile parts, airplane parts, baby 
formula, and children's toys. The U.S. automobile industry has reported 
a number of instances of brake failure caused by counterfeit brake pads 
manufactured from wooden chips. Counterfeits of other products, such as 
prescription or over-the-counter medications, may have serious health 
consequences if consumed by consumers.
  Under this legislation, section 2320 of title 18 would be expanded to 
include penalties for those who traffic in counterfeit labels, symbols, 
or packaging of any type knowing that a counterfeit mark has been 
applied. Additionally, H.R. 32 would require the forfeiture of any 
property derived directly or indirectly from the proceeds of the 
violations as well as any property used, or intended to be used, in 
relation to the offense. It also requires that restitution be paid to 
the owner of the mark that was counterfeited.
  In fiscal year 2003, the Department of Homeland Security reported 
6,500 seizures of counterfeit-branded goods including cigarettes, 
books, apparel, handbags, toys, and electronic games with an estimated 
street value of $94 million. According to the U.S. Customs and Border 
Protection, the number of seizures for violations of intellectual 
property rights increased by 11.8 percent between fiscal year 2003 and 
fiscal year 2004 to 7,255 seizures for an estimated value of $139 
million. Fortune 500 companies are spending between $2 million and $4 
million a year each to fight the counterfeiters.
  The counterfeiting of manufactured goods produces staggering losses 
to businesses across the United States and around the world. 
Counterfeit products deprive the Treasury of tax revenues, add to the 
national trade deficit, subject consumers to health and safety risks, 
and leave consumers without any legal recourse when they are 
financially or physically injured by counterfeit products.
  In addition, established links between counterfeiting, terrorism, and 
organized crime have made this a priority for Federal law enforcement 
agencies. H.R. 32 will help the Federal Government stop the wave of 
counterfeit products flooding the marketplace.
  Before closing, I would like to thank and congratulate the gentleman 
from Michigan (Mr. Knollenberg), the author of the House-passed 
legislation, for his tireless efforts to address the counterfeiting 
problem. He has crafted a good piece of legislation that has broad 
bipartisan support. I urge my colleagues to support this important 
bill.
  Madam Speaker, I reserve the balance of my time.
  Mr. CONYERS. Madam Speaker, I support this bill with great 
enthusiasm. I yield as much time as he may consume to the gentleman 
from Virginia (Mr. Scott). No one has worked harder on the committee 
than this gentleman.
  Mr. SCOTT of Virginia. Madam Speaker, I rise in support of H.R. 32, 
the Stop Counterfeiting in Manufactured Goods Act.
  The bill amends existing law in a matter designed to intensify the 
effort to prevent counterfeiting of goods. Counterfeited goods 
victimize the manufacturer and shortchange purchasers with substandard 
products. They also expose all of us to risks from unsafe products and 
deprive Americans of jobs and other benefits from commerce when the 
authentic goods are not sold.
  The sale of counterfeit goods is illegal. This bill clarifies any 
ambiguity there may be in present law. Madam Speaker, when we began 
working on this bill on a bipartisan basis at the subcommittee level, 
there was a concern when drafted that the bill went too far and 
actually criminalizes current legitimate, time-honored practices by 
law-abiding merchants who legally purchased authentic goods and 
repackage them in various ways to enhance sales of such goods.
  We forged an agreement which addressed this potential problem to the 
satisfaction of all those who had expressed concerns about it. So this 
bill addresses the problem of counterfeiting of manufactured goods in a 
manner that should now be considered non-controversial.
  Accordingly, Madam Speaker, I support the bill, and I urge my 
colleagues to do the same.
  Mr. SENSENBRENNER. Madam Speaker, I yield 4 minutes to the gentleman 
from Michigan (Mr. Knollenberg), the author of the bill.
  Mr. KNOLLENBERG. Madam Speaker, thank you very much for allowing me 
to speak on my bill, H.R. 32, the Stop Counterfeiting in Manufactured 
Goods Act. I sincerely want to salute the chairman, Mr. Sensenbrenner, 
for the effort he has made. And I also wanted to thank the ranking 
member, Mr. Conyers, and Mr. Scott and anybody else that wants to rise. 
I appreciate very much all the hard work and the support you have given 
this bill.
  I introduced this bill last year in response to the concerns of many 
manufacturing companies about the proliferation of counterfeit 
products, especially auto parts. Simply put, counterfeit parts and 
goods cost American jobs. Every year, counterfeiting costs the U.S. an 
estimated $200 billion, and that is climbing. Counterfeit auto parts 
alone cost the automotive supplier industry over $12 billion annually.
  To put it in more tangible terms, it is estimated that if these 
losses were eliminated, the auto industry could hire 200,000 additional 
workers.
  Counterfeit products not only damage our economy, as the chairman 
just mentioned; they compromise the safety of all Americans. 
Counterfeit auto parts, including brake pads, have been found in taxi 
cabs; fake prescriptions drugs have been confiscated; babies have been 
fed fake formula; and even, and this is serious, military combat 
vehicles have received counterfeit parts.
  Oftentimes there is no way, virtually no way of telling the 
difference between a legitimate and a counterfeit product. That is why 
H.R. 32 prohibits trafficking in also counterfeit labels, patches, and 
medallions.
  This legislation also requires convicted counterfeiters to not only 
surrender confiscated counterfeit goods but also, more importantly, the 
equipment used to make those products. H.R. 32 will help to dig up the 
counterfeiting networks by the roots, to stop

[[Page 2802]]

criminals from reusing machinery and defrauding the American people.
  I do just want to briefly address why we have to pass H.R. 32 again, 
when the House passed it last year by voice vote. First, the Senate 
added a technical clarification to address the concerns of some 
Internet marketplace companies that this bill would unfairly punish 
them for crimes committed by third parties. I support this technical 
change. The intent of this bill is not to punish the victims of 
counterfeit schemes but, rather, to penalize those that blatantly and 
consciously pursue the sale of counterfeit products.
  Second, the Senate added additional anticounterfeit provisions that 
broaden the activities deemed criminal under current law to include 
international property violations, and I fully support the addition of 
these provisions.
  Madam Speaker, in closing, I want to again thank Judiciary Committee 
Chairman Jim Sensenbrenner for his work on this bill. His committee has 
been tasked to do so many things over the last several months, so many 
pressing issues; and it took some time to bring this about. I sincerely 
appreciate everything he has done to bring this along. I also want to 
thank everybody else who was involved in bringing this bill to a final 
legislative finish.
  We should all be proud of this bill, and I urge my colleagues to 
support its passage.
  Mr. CONYERS. Madam Speaker, I yield myself such time as I may 
consume.
  Madam Speaker, I rise proudly in support of this legislation and 
thank the chairman of the committee and his staff and others for 
working with us to ensure that this bill does not overreach.
  The measure was designed to target illegitimate actors who trade in 
counterfeit trademarks, ranging from auto parts to fake labels for 
handbags or cologne. We all agree that manufacturers have a right to 
ensure that fake goods are not marketed in their names and that their 
own goods are not marketed under fake names.
  The bill as originally written, however, went further than that. It 
was vague on the issue of whether someone other than the manufacturer 
could affix marks to goods that correctly identify the source of the 
goods. This struck at the very heart of the parallel market in which 
third parties lawfully obtain genuine goods and make them available in 
discount stores without deception. Not only has this practice been 
upheld by the Supreme Court, but it also saves consumers billions of 
dollars each year.
  Through negotiation with the majority and affected parties, we have 
been able to revise the legislation to protect manufacturers, target 
illegitimate actors, and leave a legitimate industry unscathed. More 
specifically, because the bill amends the definition of a counterfeit 
trademark to include packaging and labeling formats which can be used 
lawfully by a variety of businesses, the new language clarifies that 
the repackaging of goods that were made under the authority of the 
United States trademark owner is not prohibited.

                              {time}  1545

  Such repackaging can include combining single products into gift 
sets, separating combination sets of goods into individual items for 
resale, inserting coupons into original packaging or repackaged items, 
affixing labels to track or otherwise identify products, removing goods 
from original packaging for customized retail displays, and moving 
products from large end caps or display modules into smaller cases.
  In deciding whether to bring a cause of action under the new law in 
situations involving the repackaging of genuine goods, it is expected 
that the government will consider evidence that clearly shows an intent 
to deceive or confuse. Such evidence could come in the form of 
altering, concealing or obliterating expiration dates or information 
important to the consumer use of the product; for example: safety and 
health information about the quality, performance or use of the product 
or service; statements or other markings that a used, discarded or 
refurbished product is new; or statements or other markings that the 
product meets testing and certification requirements. Also relevant to 
a decision to bring a criminal action would be a meaningful variance 
from product testing and certification requirements, placing seals on 
product containers that have been opened or otherwise adulterating the 
genuine product.
  Finally, the bill was modified to clarify that it was not intended to 
allow criminal actions against persons who, with no intent to deceive 
or confuse, traffic in goods or services that were originally 
manufactured under the authority of the United States trademark owner. 
In this regard, the phrase ``the use of which is likely to cause 
confusion, to cause mistake, or to deceive'' is not intended to create 
a new element for this cause of action but, instead, reiterates what is 
already reflected in the definition of ``counterfeit mark.''
  So I congratulate the bipartisan effort that made this measure far 
more useful and appealing, and I urge my colleagues to support this 
legislation.
  Mr. GILLMOR. Madam Speaker, as an original co-sponsor of H.R. 32, I 
am proud to rise in support of this important legislation.
  Each year, counterfeit manufactured goods cost American companies 
billions in lost revenue and exacerbate the global challenges that this 
sector of our economy already face on a daily basis. Madam Speaker, in 
my district alone, manufacturing accounts for 50 percent of all jobs. 
This legislation will make a significant impact in ensuring that 
northwest Ohio's long and vibrant manufacturing history is not lost as 
a result of criminal actions designed to make a quick profit and 
deprive consumers of high-quality manufactured goods. Finally, I want 
to thank my colleague from Michigan, Mr. Knollenberg, for his 
leadership on this legislation as well as my colleague from Wisconsin, 
the distinguished Chairman of the Judiciary Committee, Mr. 
Sensenbrenner, for ushering it to the floor just two weeks before 
National Manufacturing Week is set to kickoff.
  Madam Speaker, I would urge all of my colleagues to show their 
support for the manufacturing community by voting in favor of this 
legislation.
  Mr. LEVIN. Madam Speaker, I rise in strong support of H.R. 32, the 
``Stop Counterfeiting in Manufactured Goods Act.'' This legislation 
responds to a serious and growing problem: the trafficking of 
counterfeit goods.
  We've all seen movies in which someone buys what looks to be an 
expensive Rolex watch from a street vendor, only to find out later what 
they've really purchased is a cheap imitation that doesn't even keep 
proper time. Lately, it's the DVDs of the movie themselves that are 
increasingly likely to be counterfeit. In the area of pharmaceuticals, 
counterfeit drugs are now being sold in this country and around the 
world. The packaging makes them look like the real thing, but the pills 
inside often lack the active ingredient people are relying on to treat 
their illnesses, or contain the wrong active ingredient altogether. 
According to the Food and Drug Administration, upwards of ten percent 
of the drugs worldwide are counterfeit. In some countries, it is 
estimated that more than half the drug supply is made up of counterfeit 
drugs.
  The trade in counterfeit goods has also had a negative impact on the 
automobile industry, including the auto parts industry. People buy what 
they believe are name-brand parts, like brake pads and spark plugs, 
only to find that they spent good money on counterfeit goods that do 
not meet safety and performance requirements. Beyond the obvious safety 
problem for consumers, the trade in counterfeit parts costs the 
automotive parts industry an estimated $12 billion a year. This is a 
heavy loss to a U.S. auto parts industry that already faces immense 
challenges.
  The fact of the matter is that--whether it's counterfeit DVDs, video 
games, medicines, auto parts, or handbags--the United States economy is 
losing millions of dollars in tax revenue and tens of thousands of jobs 
because of the manufacture, distribution, and sale of counterfeit 
goods.We need new tools to deal with this growing problem, and that's 
what this legislation does. This bill expands criminal penalties to 
include those who traffic in counterfeit labels and packaging, setting 
fines of up to $2 million and a prison sentence of up to ten years for 
those who intentionally sell or distribute counterfeit labels and other 
false packaging. It also requires the offender to make restitution to 
the owner of the mark. In addition, the bill requires the forfeiture of 
any property derived from the proceeds of the violation, as well as any 
property used in connection with the offense.

[[Page 2803]]

  I urge all my colleagues to join me in supporting this needed 
legislation.
  Mr. CONYERS. Madam Speaker, I have no other requests for time, and I 
yield back my time.
  Mr. SENSENBRENNER. Madam Speaker, I also yield back the balance of my 
time.
  The SPEAKER pro tempore (Mrs. Biggert). The question is on the motion 
offered by the gentleman from Wisconsin (Mr. Sensenbrenner) that the 
House suspend the rules and concur in the Senate amendment to the bill, 
H.R. 32.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate amendment was 
concurred in.
  A motion to reconsider was laid on the table.

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