[House Report 104-556]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-556
_______________________________________________________________________


 
           ANTICOUNTERFEITING CONSUMER PROTECTION ACT OF 1995

                                _______


  May 6, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


   Mr. Moorhead, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2511]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 2511) to control and prevent commercial 
counterfeiting, and for other purposes, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Oversight Findings.....................................     4
Committee on Government Reform and Oversight Findings............     5
New Budget Authority and Tax Expenditures........................     5
Congressional Budget Office Estimate.............................     5
Inflationary Impact Statement....................................     6
Section-by-Section Analysis and Discussion.......................     6
Agency Views.....................................................     8
Changes in Existing Law..........................................     8

                          Purpose and Summary

    Because of the high profit potential and low risk of 
meaningful prosecution, criminal counterfeiting has grown 
tremendously over the past several years and has been 
increasingly tied to organized crime. The purpose of H.R. 2511 
is to prevent counterfeiting of copyrighted and trademarked 
goods and services and to ensure that counterfeit goods 
produced elsewhere cannot enter the United States. The bill 
addresses this problem by amending both criminal and civil 
laws. H.R. 2511 includes trafficking in counterfeit goods or 
services as predicate offenses subject to the Racketeer 
Influenced and Corrupt Organizations (RICO) provisions of the 
criminal code. It also amends civil laws to ensure that 
imported counterfeits are seized and destroyed and allows 
trademark owners to opt for judicially determined statutory 
damages, rather than actual damages.

                Background and Need for the Legislation

    Congress recognized that the problem of copyright and 
trademark counterfeiting was much broader than individual 
street corner vendors selling watches and handbags when it 
enacted the Trademark Counterfeiting Act of 1984. While that 
legislation was a step in the right direction, it has proven to 
be an inadequate remedy for the explosive growth of criminal 
commercial counterfeiting. It is estimated that businesses in 
the United States lose more than $200 billion a year today 
because of illegal counterfeiting compared to $5.5 billion of 
losses in 1982. Today, between five to eight percent of all 
goods and services sold worldwide are counterfeit. The problem 
is especially severe for American computer software developers. 
The industry estimates that sales of counterfeit software 
exceed 40% of the industry's total revenues--that is, for every 
five programs legitimately sold, two illegally pirated copies 
are also sold
    Ms. Catherine Simmons-Gill, President of the International 
Trademark Association pointed out in her testimony that 
counterfeiting of copyrighted and trademarked goods and 
services costs American industries more than just displaced 
direct sales. In some cases, it can cost a company its 
reputation. Counterfeit products are generally made of 
substandard materials and are rarely of the same quality as the 
genuine article. They are not subject to any of the stringent 
quality control standards that a company requires before 
putting its stamp of approval, its trademark, on the product. 
An unsuspecting customer who unwittingly buys a counterfeit 
product is rightfully upset when the shoddy product fails to 
perform to expectations. Although the customer's anger and 
disappointment is justified, it is mistakenly directed at the 
legitimate manufacturer instead of the counterfeiter. In 
addition to losing the actual sale to the counterfeiter, the 
company loses any subsequent sales that the disappointed 
customer might otherwise have made.
    Consumer awareness of criminal counterfeiting also damages 
a company's reputation and reduces sales. Customers are 
reluctant to buy a particular brand that is known to be 
counterfeited for fear that they may mistakenly purchase a 
substandard copy rather than the genuine article. It is simply 
easier to buy another brand than run that risk. This problem 
was evident when the Subcommittee sought witnesses to testify 
at the December 13 hearing on H.R. 2511. Some companies that 
had experienced significant counterfeiting problems were 
reluctant to testify because their testimony might have 
generated publicity, and past acknowledgement of counterfeiting 
had historically led to significant sales losses. In those 
cases where the consumer actually intends to buy a cheap 
counterfeit, the trademark owner suffers significant losses 
because of the dilution of its trademark. This is especially 
true when luxury items, like expensive watches, are 
counterfeited.
    Even more grievous than the enormous economic losses 
suffered by American companies are the serious health and 
safety hazards caused by criminal counterfeiting. In one case, 
more than one million bogus birth control pills had been 
distributed bearing the false mark of a large pharmaceutical 
company. The company did not discover the counterfeits until 
several women complained of pain and unusual bleeding. There 
have been numerous other cases where name-brand 
pharmaceuticals, both over-the-counter and prescription, have 
been counterfeited and distributed. Last year, substandard 
counterfeited infant formula, bearing the false label of a well 
known brand, was widely distributed in California and Kentucky. 
The Food and Drug Administration intervened and issued warnings 
to consumers in fifteen additional states before the problem 
was resolved. Ms. Angela Small, Vice President of Legal Affairs 
at Saban Entertainment testified that toy manufacturers are 
concerned that cheap knock-offs present choking hazards and may 
contain toxic paint.
    Counterfeit machine parts and brake pads have been linked 
to fatal automobile, aviation and helicopter crashes. Mr. John 
Bliss, President of the International Anticounterfeiting 
Association, testified that federal investigators discovered 
that more than 600 helicopters that had been sold to NATO and 
private entities contained counterfeit parts. He also reported 
instances where counterfeit parts had been discovered in jet 
engines, bridge joints and fasteners in areas of nuclear 
facilities responsible for preventing meltdowns.
    The enormous profit potential and low risk of prosecution 
for criminal counterfeiting has made it an increasingly 
attractive enterprise for organized crime syndicates. In 1993, 
law enforcement agents raided a warehouse in New York City and 
discovered a large shipment of designer handbag knockoffs. 
There were traces of heroin in the lining of the handbags. 
Apparently, this ring of drug smugglers would smuggle drugs 
inside the bags, remove and sell the drugs, and then sell the 
counterfeit handbags. Another example of the connection between 
organized crime and counterfeiting is the case of David Thai. 
Mr. Thai, a convicted murderer and former leader of the violent 
gang Born to Kill claims to have used his gang to operate a 
counterfeit watch ring that netted nearly $13 million a year.
    Mr. Leonard S. Walton, the Deputy Assistant Commissioner of 
Investigations for the United States Customs Service, compared 
the pattern of criminal activity and organizational structure 
associated with counterfeiting to that of drug trafficking. For 
three years, Mr. Walton's agents investigated an expansive 
Korean crime syndicate that operated an enormous counterfeiting 
operation throughout America. In September 1995, that 
investigation culminated in coordinated raids in New York City 
and Los Angeles that netted $27 million in counterfeit 
merchandise and resulted in the indictments of 43 members of 
the crime syndicate. Mr. Walton explained that Section 2 of the 
bill, which applies RICO provisions in the criminal 
counterfeiting context, is essential to allow law enforcement 
agents to take down the entire criminal organization rather 
than merely react to each crime the organization commits.
    Organized crime is not the only source of criminal 
commercial counterfeiting. In some cases, the source is an 
otherwise legitimate manufacturer of goods. This category of 
counterfeiters purchases ``seconds'' or ``rejects'' from a 
manufacturer, applies counterfeit labels, and sells the 
products as first quality. Another example is where the 
counterfeiter is a legitimate manufacturer of a low-grade or 
generic product, but mislabels them as a high-grade brand name 
product. The provisions of H.R. 2511 are directed toward this 
lower level opportunistic criminal activity as well as the more 
egregious cases involving organized crime syndicates.

                                Hearings

    The Committee's Subcommittee on Courts and Intellectual 
Property held a hearing on H.R. 2511 on December 7, 1995 in 
Room B-352 Rayburn House Office Building. Testimony was 
received from the following five witnesses: Mr. Philip G. 
Hampton II, Assistant Commissioner for Trademarks at the Patent 
and Trademark Office, U.S. Department of Commerce; Mr. Leonard 
S. Walton, Deputy Assistant Commissioner of the Office of 
Investigations, United States Customs Service (Mr. Walton did 
not submit a written statement for the record but did offer 
responses to questions of the Members); Ms. Catherine Simmons-
Gill, President of the International Trademark Association; Ms. 
Angela Small, Vice President of Legal Affairs for Saban 
Entertainment, Inc.; and Mr. John Bliss, President of the 
International Anticounterfeiting Coalition.

                        Committee Consideration

    On December 13, 1995, the Subcommittee on Courts and 
Intellectual Property met in open session and approved the 
following two amendments to the bill: (1) technical and 
clarifying changes and (2) the addition of 18 U.S.C. Sec. 2319A 
to the list of intellectual property violations that are 
subject to RICO provisions in Section 2 of the original bill. 
The Subcommittee ordered the bill H.R. 2511, reported as 
amended, by a voice vote, a quorum being present. On March 12, 
1996, the Committee met in open session and ordered the bill 
H.R. 2511 reported as introduced, by a voice vote, a quorum 
being present. However, the Committee intends to take up H.R. 
2511 on the Suspension Calendar with an amendment to reflect 
the amendments adopted by the Subcommittee.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 2511, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 28, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 2511, the Anticounterfeiting Consumer Protection 
Act of 1995, as ordered reported by the House Committee on the 
Judiciary on March 12, 1996. CBO estimates that enacting this 
legislation would have no significant impact on the federal 
budget. While the bill could lead to increases in both direct 
spending and receipts, the amounts involved would be less than 
$500,000 a year. Because H.R. 2511 could affect direct spending 
and receipts, pay-as-you-go procedures would apply.
    H.R. 2511 would make several changes to current law that 
aim to prevent commercial counterfeiting. Violators of certain 
provisions would be subject to civil or criminal fines, or 
forfeiture of assets.
    Federal Budgetary Impact. Enacting H.R. 2511 could increase 
governmental receipts from additional fine collections, but we 
estimate that any such increase would be less than $500,000 
annually. Civil penalties would be recorded in the budget as 
miscellaneous receipts to the Treasury. Criminal fines would be 
deposited in the Crime Victims Fund and would be spent in the 
following year. (Thus, direct spending from the fund would 
match the increase in revenues with a one-year lag.) Enacting 
this legislation also could increase governmental receipts from 
additional forfeitures of criminals' assets, but we estimate 
that any such increase also would be less than $500,000 
annually in value. Proceeds from the sale of any such assets 
would be deposited as revenues into the Assets Forfeiture Fund 
of the Department of Justice and spent out of the fund in the 
same year. Thus, direct spending from the Assets Forfeiture 
Fund would match any increase in revenues.
    In addition, H.R. 2511 would place some additional 
recordkeeping requirements on the U.S. Customs Service relating 
to the entry of imported merchandise. We estimate that this 
would result in costs of less than $500,000 a year, subject to 
appropriations action.
    State and Local Government Impact. The bill includes 
provisions governing the seizure and disposition of vehicles 
(cars, boats, airplanes) used in the trafficking of counterfeit 
items. Those provisions would allow a court to order the 
seizure of such vehicles by a state or local law enforcement 
officer. Section 4 of the Unfunded Mandates Reform Act of 1995 
excludes, from the application of that act, legislative 
provisions that enforce constitutional rights of individuals. 
CBO has determined that these provisions fit within that 
exclusion.
    Private Sector Impact. H.R. 2511 would impose new private 
sector mandates, as defined in Public Law 104-4. Those mandates 
would increase the paperwork requirements imposed on importers 
of merchandise produced outside of the United States. However, 
importers are already required to transmit information on 
imported merchandise to the U.S. Customs Service, and the 
additional information that importers would be required to 
report would not impose a substantial new burden. CBO expects 
that the additional costs imposed on the private sector would 
fall well below the $100 million threshold.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark 
Grabowicz, for federal costs, and Leo Lex for the state and 
local government impact, and Matthew Eyles for the private 
sector impact.
            Sincerely,
                                         June E. O'Neill, Director.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 
2511 will have no significant inflationary impact on prices and 
costs in the national economy.

               Section-by-Section Analysis and Discussion

Section 1. Short title

    Section 1 sets for the short title of the bill, the 
``Anticounterfeiting Consumer Protection Act of 1995.''

Sec. 2. Counterfeiting as racketeering

    Section 2 amends 18 U.S.C. Sec. 1961 to include certain 
intellectual property crimes under 18 U.S.C. Sec. Sec. 2318-
2320 1 as predicate offenses subject to the Racketeer 
Influenced and Corrupt Organizations (RICO) provisions of the 
Organized Crime Control Act of 1970. Invoking RICO does not 
proscribe any conduct that is not already prohibited by the 
provisions of 18 U.S.C. Sec. Sec. 2318-2320, nor does it 
automatically increase criminal penalties. However, when these 
offenses are associated with organized crime, RICO expands both 
criminal and civil consequences. Pursuant to 18 U.S.C. 
Sec. 1963, RICO permits law enforcement agents to seize the 
nonmonetary personal and real estate assets connected with the 
criminal enterprise in addition to the counterfeit goods. 
Furthermore, RICO provides for an aggrieved party to pursue 
civil remedies under 18 U.S.C. Sec. 1964.
---------------------------------------------------------------------------
    \1\  As amended in Section 3 of H.R. 2511.
---------------------------------------------------------------------------

Sec. 3. Application to computer programs, computer program 
        documentation, or packaging

    Section 3 amends 18 U.S.C. Sec. 2318 to criminalize 
trafficking in counterfeit copyrighted computer program 
documentation or packaging or labels affixed or designed to be 
affixed to copies of copyrighted computer programs. The current 
provisions of Sec. 2318 are limited to the prohibition of 
trafficking in counterfeit phonorecord and video labels.
    While other industries have experienced problems with 
counterfeit labels being affixed to their products, it is the 
considered judgment of the Committee that 18 U.S.C. Sec. 2318 
should continue to apply exclusively to copyrighted materials. 
Unlike other goods, the act of copying a copyrighted product is 
nearly always a violation of federal law, even before a 
counterfeit label is affixed to the product. The provisions of 
18 U.S.C. Sec. 2318 reflect this problem and recognize its 
unique occurrence within the copyright context. In addition, 
the Committee believes that the existence of 18 U.S.C. 
Sec. 2318 should not preclude a court from imposing the 
penalties of 18 U.S.C. Sec. 2320 to situations where a 
defendant is found to have trafficked in counterfeit labels 
that are to be affixed to otherwise legitimate goods.

Sec. 4. Trafficking in counterfeit goods or services

    Section 4 amends 18 U.S.C. Sec. 2320 to require the 
Attorney General to maintain statistics, on a district-by-
district basis, for all actions subject to RICO pursuant to the 
provisions of Section 2 of the bill. The statistics must 
include an accounting of: (1) The number of open 
investigations, (2) the number of cases referred by the U.S. 
Customs Service, (3) the number of cases referred by other 
agencies or sources, and (4) the number and outcome of 
prosecutions under those provisions.

Sec. 5. Seizure of counterfeit goods

    Section 5 amends 15 U.S.C. Sec. 1116(d)(9) 2 to ensure 
that any federal law enforcement or local law enforcement agent 
can execute a seizure order in a civil action. Section 5 also 
grants courts the authority, under certain circumstances, to 
seize an aircraft, vehicle, or vessel used in connection with a 
violation of the Lanham Act.
---------------------------------------------------------------------------
    \2\ In this report, the Trademark Act of 1946 is referred to by its 
more commonly used name, the Lanham Act. Section Five amends 
Sec. 34(d)(9) of the Lanham Act.
---------------------------------------------------------------------------

Sec. 6. Disposition of merchandise bearing counterfeit American 
        trademarks and civil penalties

    Section 6 inserts a new section, Sec. 34A, to the Lanham 
Act which requires the seizure and destruction of counterfeit 
goods imported into the United States. Where the counterfeit 
goods do not present a health risk and the trademark owner 
consents, the goods (or proceeds from the sales of the goods) 
may be distributed to an appropriate charity or governmental 
agency. It also provides for the assessment of civil fines 
against persons who aid in the importation of counterfeit goods 
that are seized. The amounts of the fines are tied to the 
retail value of the genuine goods.

Sec. 7. Recovery for violation of rights

    Section 7 amends Sec. 35 of the Lanham Act to allow 
trademark owners to opt for judicially determined statutory 
damages, rather than actual damages and profits, in civil 
cases.

Sec. 8. Disposition of excluded articles

    Section 8 deletes provisions in 17 U.S.C. Sec. 603(c) that 
have been interpreted to allow seized counterfeit goods to be 
returned to the importer. Together with Section 6, this 
provision mandates the destruction of imported counterfeit 
goods thereby preventing the return of the goods to the 
counterfeiters for reshipment to another destination.

Sec. 9. Recordkeeping requirements

    Section 9 amends Sec. 42 of the Lanham Act to allow 
trademark owners to obtain certain shipping information 
contained in vessel and aircraft manifests from the appropriate 
federal agency. It also requires that documentation associated 
with imported merchandise contain certain information necessary 
for Customs officials to determine whether the merchandise or 
packaging bears an infringing trademark.

                              Agency Views

    In testimony before the Subcommittee on Courts and 
Intellectual Property on December 13, 1995, the Assistant 
Commissioner for Trademarks testified in favor of H.R. 2511 on 
behalf of the Administration, the Department of Commerce and 
the Patent and Trademark Office; the United States Customs 
Service also expressed support of the bill at that hearing. In 
addition, the Department of Justice expressed support for the 
bill in a letter to the Chairman of the Subcommittee dated 
December 20, 1995.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italics, existing law in which no change is proposed 
is shown in roman):

                      TITLE 18, UNITED STATES CODE

          * * * * * * *

                             PART I--CRIMES

          * * * * * * *

       CHAPTER 96--RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS

          * * * * * * *

Sec. 1961. Definitions

  As used in this chapter--
          (1) ``racketeering activity'' means (A) any act or 
        threat involving murder, kidnapping, gambling, arson, 
        robbery, bribery, extortion, dealing in obscene matter, 
        or dealing in a controlled substance or listed chemical 
        (as defined in section 102 of the Controlled Substances 
        Act), which is chargeable under State law and 
        punishable by imprisonment for more than one year; (B) 
        any act which is indictable under any of the following 
        provisions of title 18, United States Code: Section 201 
        (relating to bribery), section 224 (relating to sports 
        bribery), sections 471, 472, and 473 (relating to 
        counterfeiting), section 659 (relating to theft from 
        interstate shipment) if the act indictable under 
        section 659 is felonious, section 664 (relating to 
        embezzlement from pension and welfare funds), sections 
        891-894 (relating to extortionate credit transactions), 
        section 1029 (relating to fraud and related activity in 
        connection with access devices), section 1084 (relating 
        to the transmission of gambling information), section 
        1341 (relating to mail fraud), section 1343 (relating 
        to wire fraud), section 1344 (relating to financial 
        institution fraud), sections 1461-1465 (relating to 
        obscene matter), section 1503 (relating to obstruction 
        of justice), section 1510 (relating to obstruction of 
        criminal investigations), section 1511 (relating to the 
        obstruction of State or local law enforcement), section 
        1512 (relating to tampering with a witness, victim, or 
        an informant), section 1513 (relating to retaliating 
        against a witness, victim, or an informant), section 
        1951 (relating to interference with commerce, robbery, 
        or extortion), section 1952 (relating to racketeering), 
        section 1953 (relating to interstate transportation of 
        wagering paraphernalia), section 1954 (relating to 
        unlawful welfare fund payments), section 1955 (relating 
        to the prohibition of illegal gambling businesses), 
        section 1956 (relating to the laundering of monetary 
        instruments), section 1957 (relating to engaging in 
        monetary transactions in property derived from 
        specified unlawful activity), section 1958 (relating to 
        use of interstate commerce facilities in the commission 
        of murder-for-hire), sections 2251-2252 (relating to 
        sexual exploitation of children), sections 2312 and 
        2313 (relating to interstate transportation of stolen 
        motor vehicles), sections 2314 and 2315 (relating to 
        interstate transportation of stolen property),, section 
        2318 (relating to trafficking in counterfeit labels for 
        phonorecords, computer programs or computer program 
        documentation or packaging and copies of motion 
        pictures or other audiovisual works), section 2319 
        (relating to criminal infringement of a copyright), 
        section 2320 (relating to trafficking in goods or 
        services bearing counterfeit marks) section 2321 
        (relating to trafficking in certain motor vehicles or 
        motor vehicle parts), sections 2341-2346 (relating to 
        trafficking in contraband cigarettes), sections 2421-24 
        (relating to white slave traffic), (C) any act which is 
        indictable under title 29, United States Code, section 
        186 (dealing with restrictions on payments and loans to 
        labor organizations) or section 501(c) (relating to 
        embezzlement from union funds), (D) any offense 
        involving fraud connected with a case under title 11 
        (except a case under section 157 of that title), fraud 
        in the sale of securities, or the felonious 
        manufacture, importation, receiving, concealment, 
        buying, selling, or otherwise dealing in a controlled 
        substance or listed chemical (as defined in section 102 
        of the Controlled Substances Act), punishable under any 
        law of the United States, or (E) any act which is 
        indictable under the Currency and Foreign Transactions 
        Reporting Act.
          * * * * * * *

                      CHAPTER 113--STOLEN PROPERTY

          * * * * * * *

Sec. 2318. Trafficking in counterfeit labels for phonorecords and 
                    copies of motion pictures or other audiovisual 
                    works

  (a) Whoever, in any of the circumstances described in 
subsection (c) of this section, knowingly traffics in a 
counterfeit label affixed or designed to be affixed to a 
phonorecord, or a copy of a computer program or computer 
program documentation or packaging or a motion picture or other 
audiovisual work, shall be fined under this title or imprisoned 
for not more than five years, or both.
  (b) As used in this section--
          (1)  * * *
          * * * * * * *
          (3) the terms ``copy'', ``phonorecord'', ``motion 
        picture'', ``computer program'', and ``audiovisual 
        work'' have, respectively, the meanings given those 
        terms in section 101 (relating to definitions) of title 
        17.
  (c) The circumstances referred to in subsection (a) of this 
section are--
          (1)  * * *
          (2) the mail or a facility of interstate or foreign 
        commerce is used or intended to be used in the 
        commission of the offense; or
          (3) the counterfeit label is affixed to or encloses, 
        or is designed to be affixed to or enclose, a copy of a 
        computer program or computer program documentation or 
        packaging, a copyrighted motion picture or other 
        audiovisual work, or a phonorecord of a copyrighted 
        sound recording.
          * * * * * * *

Sec. 2320. Trafficking in counterfeit goods or services

  (a)  * * *
          * * * * * * *
  (e) Beginning with the first year after the date of the 
enactment of this subsection, the Attorney General shall 
include in the report of the Attorney General to Congress on 
the business of the Department of Justice prepared pursuant to 
section 522 of title 28, on a district by district basis, for 
all actions involving trafficking in counterfeit labels for 
phonorecords, copies of computer programs or computer program 
documentation or packaging, copies of motion pictures or other 
audiovisual works (as defined in section 2318 of title 18), 
criminal infringement of copyrights (as defined in section 2319 
of title 18), or trafficking in goods or services bearing 
counterfeit marks (as defined in section 2320 of title 18), an 
accounting of--
          (1) the number of open investigations;
          (2) the number of cases referred by the United States 
        Customs Service;
          (3) the number of cases referred by other agencies or 
        sources; and
          (4) the number and outcome, including settlements, 
        sentences, recoveries, and penalties, of all 
        prosecutions brought under sections 2318, 2319, and 
        2320 to title 18.
          * * * * * * *
                              ----------                              


                          ACT OF JULY 5, 1946

          (Commonly Referred to as the Trademark Act of 1946)

 AN ACT To provide for the registration and protection of trade-marks 
used in commerce, to carry out the provisions of certain international 
                  conventions, and for other purposes.

          * * * * * * *

                           TITLE VI--REMEDIES

          * * * * * * *
  Sec. 34. (a)  * * *
          * * * * * * *
  (d)(1)  * * *
          * * * * * * *
  (9) [The court shall order that a United States marshal or 
other law enforcement officer is to serve a copy of the order 
under this subsection and then is to carry out the seizure 
under such order.] A court may order the seizure of an 
aircraft, vehicle, or vessel used in connection with a 
violation of this Act. The court shall order that service of a 
copy of the order under this subsection shall be made by a 
Federal law enforcement officer (such as a United States 
marshal or an officer or agent of the United States Customs 
Service, Secret Service, Federal Bureau of Investigation, or 
the United States Postal Service) or may be made by a State or 
local law enforcement officer, who, upon making service, shall 
carry out the seizure under the order. The court shall issue 
orders, when appropriate, to protect the defendant from undue 
damage from the disclosure of trade secrets or other 
confidential information during the course of the seizure, 
including, when appropriate, orders restricting the access of 
the applicant (or any agent or employee of the applicant) to 
such secrets or information.
          * * * * * * *
  Sec. 34A. (a) Any merchandise bearing a counterfeit mark (as 
defined in section 45) imported into the United States in 
violation of section 42 shall be seized by the appropriate 
Federal official and, in the absence of the written consent of 
the trademark owner, forfeited. Upon seizure of such 
merchandise, the appropriate official shall notify the owner of 
the trademark, and shall, after forfeiture, destroy the 
merchandise. Alternatively, if the merchandise is not unsafe or 
a hazard to health, and the official has the consent of the 
trademark owner, the appropriate official may obliterate the 
trademark where feasible and dispose of the goods seized--
          (1) by delivery to such Federal, State, and local 
        government agencies as in the opinion of the 
        appropriate official have a need for such merchandise;
          (2) by gift to such eleemosynary institutions as in 
        the opinion of the appropriate official have a need for 
        such merchandise; or
          (3) more than 1 year after the date of forfeiture, by 
        sale by appropriate officials at public auction, except 
        that before making any such sale the official shall 
        determine that no Federal, State, or local government 
        agency or eleemosynary institution has established a 
        need for such merchandise under paragraph (1) or (2).
  (b)(1) Any person who directs, assists financially or 
otherwise, or is in any way concerned in the importation of 
merchandise for sale or public distribution that is seized 
under subsection (a) shall be subject to a civil fine.
  (2) For the first such seizure, the fine shall be equal to 
the value that the merchandise would have had if it were 
genuine, according to the manufacturer's suggested retail 
price, as determined under regulations prescribed by the 
Secretary of the Treasury.
  (3) For the second seizure and thereafter, the fine shall be 
equal to twice the value that the merchandise would have had if 
it were genuine, according to the manufacturer's suggested 
retail price, as determined under regulations prescribed by the 
Secretary of the Treasury.
  (4) The imposition of a fine under this subsection shall be 
within the discretion of the court, and shall be in addition to 
any other civil or criminal penalty or other remedy authorized 
by law.
  Sec. 35. (a)  * * *
          * * * * * * *
  (c) In a case involving the use of a counterfeit mark (as 
defined in section 34(d)) in connection with the sale, offering 
for sale, or distribution of goods or services, the plaintiff 
may elect, at any time before final judgment is rendered by the 
trial court, to recover, instead of actual damages and profits 
under subsection (a), an award of statutory damages for any 
such use in the amount of--
          (1) not less than $500 or more than $100,000 per 
        counterfeit mark per type of goods or services sold, 
        offered for sale, or distributed, as the court 
        considers just; or
          (2) if the court finds that the use of the 
        counterfeit mark was willful, not more than $1,000,000 
        per counterfeit mark per type of goods or services 
        sold, offered for sale, or distributed, as the court 
        considers just.
          * * * * * * *

 TITLE VII--IMPORTATION FORBIDDEN OF GOODS BEARING INFRINGING MARKS OR 
                                 NAMES

  Sec. 42. (a) Except as provided in subsection (d) of section 
526 of the Tariff Act of 1930, no article of imported 
merchandise which shall copy or simulate the name of the any 
domestic manufacture, or manufacturer, or trader, or of any 
manufacturer or trader located in any foreign country which, by 
treaty, convention, or law affords similar privileges to 
citizens of the United States, or which shall copy or simulate 
a trade-mark registered in accordance with the provisions of 
this Act or shall bear a name or mark calculated to induce the 
public to believe that the article is manufactured in the 
United States, or that it is manufactured in any foreign 
country or locality other than the country or locality in which 
it is in fact manufactured, shall be admitted to entry at any 
customhouse of the United States; and, in order to aid the 
officers of the customs in enforcing this prohibition, any 
domestic manufacturer or trader, and any foreign manufacturer 
or trader, who is entitled under the provisions of a treaty, 
convention, declaration, or agreement between the United States 
and any foreign country to the advantages afforded by law to 
citizens of the United States in respect to trade-marks and 
commercial names, may require his name and residence, and the 
name of the locality in which his goods are manufactured, and a 
copy of the certificate of registration of his trade-mark, 
issued in accordance with the provisions of this Act, to be 
recorded in books which shall be kept for this purpose in the 
Department of the Treasury, under such regulations as the 
Secretary of the Treasury shall prescribe, and may furnish to 
the Department facsimiles of his name, the name of the locality 
in which his goods are manufactured, or of his registered 
trade-mark, and thereupon the Secretary of the Treasury shall 
cause one or more copies of the same to be transmitted to each 
collector or other proper officer of customs.
  (b)(1) The owner, registrant, or authorized user of a 
trademark registered under this Act, and any authorized agent 
or representative thereof, shall be entitled to obtain from the 
appropriate Federal officers in a timely manner the following 
information when contained in a vessel or aircraft manifest:
          (A) The name and address of each importer or 
        consignee and the name and address of the shipper to 
        such importer or consignee, unless the importer or 
        consignee has made a biennial certification, in 
        accordance with procedures adopted by the Secretary of 
        the Treasury, claiming confidential treatment of such 
        information.
          (B) The general character of the cargo.
          (C) The number of packages and gross weight.
          (D) The name of the vessel or aircraft.
          (E) The port of loading.
          (F) The port of discharge.
          (G) The country of origin of the shipment.
  (2) The documentation relating to the entry into the United 
States of imported merchandise shall contain such information 
as may be necessary to determine whether the merchandise bears 
an infringing trademark in violation of subsection (a) or any 
other applicable law, including a trademark appearing on goods 
or packaging.
          * * * * * * *
                              ----------                              


              SECTION 603 OF TITLE 17, UNITED STATES CODE

Sec. 603. Importation prohibitions: Enforcement and disposition of 
                    excluded articles

  (a)  * * *
          * * * * * * *
  (c) Articles imported in violation of the importation 
prohibitions of this title are subject to seizure and 
forfeiture in the same manner as property imported in violation 
of the customs revenue laws. Forfeited articles shall be 
destroyed as directed by the Secretary of the Treasury or the 
court, [as the case may be; however, the articles may be 
returned to the country of export whenever it is shown to the 
satisfaction of the Secretary of the Treasury that the importer 
had no reasonable grounds for believing that his or her acts 
constituted a violation of law.] as the case may be.
          * * * * * * *

                                
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