Intellectual Property: Federal Enforcement Has Generally
Increased, but Assessing Performance Could Strengthen Law
Enforcement Efforts (11-MAR-08, GAO-08-157).
Federal law enforcement actions against criminals who manufacture
and distribute counterfeit and pirated goods are important to
enforcing intellectual property (IP) rights and protecting
Americans from unsafe or substandard products. GAO was asked to:
(1) examine key federal agencies' roles, priorities, and
resources devoted to IP-related enforcement; (2) evaluate
agencies' IP-related enforcement statistics and achievements; and
(3) examine the status of the National Intellectual Property
Rights Coordination Center. GAO reviewed relevant documents,
interviewed officials in five key agencies, and analyzed agency
IP enforcement data from fiscal years 2001 through 2006.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-157
ACCNO: A81281
TITLE: Intellectual Property: Federal Enforcement Has Generally
Increased, but Assessing Performance Could Strengthen Law
Enforcement Efforts
DATE: 03/11/2008
SUBJECT: Agency missions
Allocation (Government accounting)
Consumer protection
Crime prevention
Crimes
Criminal investigation
Data collection
Intellectual property
Interagency relations
Investigations by federal agencies
Law enforcement
Law enforcement agencies
Performance measures
Product evaluation
Program evaluation
Program management
Public health
Regulatory agencies
Risk assessment
Risk management
Safety standards
Search and seizure
Statistical data
Assessments
Policies and procedures
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GAO-08-157
* [1]
* [2]Results in Brief
* [3]Background
* [4]Multiple Agencies Carry Out IP Enforcement, but Their IP Pri
* [5]Key Agencies Carry Out Three Primary IP-Related
Enforcement
* [6]Responsible Agencies Have Broad Missions, and IP
Enforcement
* [7]Determining the Total Resources Allocated to IP-Related
Enfo
* [8]Agency Enforcement Roles and Actions Are Often
Interdependen
* [9]IP Enforcement Generally Increased, but Agencies Have Not Ta
* [10]IP Enforcement Statistics Show an Increase in Activity
* [11]CBP Seizure Activity Has Grown, but Penalty
Collections Rema
* [12]CBP's Enforcement of Exclusion Orders Has Been
Limited
* [13]The Number of Investigative Agency IP Cases Have
Fluctuated,
* [14]DOJ's IP Enforcement Has Generally Increased
* [15]Agencies Have Not Taken Steps to Assess IP Law
Enforcement E
* [16]The National Intellectual Property Rights Coordination Cente
* [17]Created to Improve and Coordinate IP Enforcement, the
Center
* [18]Despite Congressional Expectations, the Center's
Staffing Le
* [19]ICE Views Center's Relocation as an Opportunity to
Revisit C
* [20]Conclusions
* [21]Recommendations for Executive Action
* [22]Agency Comments and Our Evaluation
* [23]Appendix I: Scope and Methodology
* [24]Appendix II: Federal Protection and Enforcement of IP Rights
* [25]Appendix III: Private Sector Views on Federal IP Enforcement
* [26]Various Companies Are Impacted by Counterfeiting and Piracy
* [27]Industry Concerned over Lack of Resources to Carry Out
IP En
* [28]Industry Cites Lack of Information Sharing and
Unclear Agenc
* [29]Industry Has Cited Some IP Enforcement Improvements
Followin
* [30]Increased Training and Consumer Awareness Cited as
Areas for
* [31]Appendix IV: Comments from the Department of Homeland Securi
* [32]GAO Comments
* [33]Appendix V: Comments from the Department of Justice
* [34]GAO Comments
* [35]Appendix VI: Comments from the Department of Health and Huma
* [36]GAO Comments
* [37]Appendix VII: GAO Contact and Staff Acknowledgments
* [38]GAO Contact
* [39]Staff Acknowledgments
* [40]Order by Mail or Phone
Report to the Ranking Member, Subcommittee on Oversight of Government
Management, the Federal Workforce, and the District of Columbia, Committee
on Homeland Security and Government Affairs, U.S. Senate
United States Government Accountability Office
GAO
March 2008
INTELLECTUAL PROPERTY
Federal Enforcement Has Generally Increased, but Assessing Performance
Could Strengthen Law Enforcement Efforts
GAO-08-157
Contents
Letter 1
Results in Brief 3
Background 7
Multiple Agencies Carry Out IP Enforcement, but Their IP Priorities Vary,
and Few Resources Are Dedicated Exclusively to IP Enforcement 9
IP Enforcement Generally Increased, but Agencies Have Not Taken Key Steps
to Assess Enforcement Efforts 21
The National Intellectual Property Rights Coordination Center Has Not
Achieved Its Mission, and Staff Levels Have Decreased 36
Conclusions 42
Recommendations for Executive Action 43
Agency Comments and Our Evaluation 44
Appendix I Scope and Methodology 48
Appendix II Federal Protection and Enforcement of IP Rights under U.S. Law
52
Appendix III Private Sector Views on Federal IP Enforcement Efforts 56
Appendix IV Comments from the Department of Homeland Security 63
Appendix V Comments from the Department of Justice 69
Appendix VI Comments from the Department of Health and Human Services 80
Appendix VII GAO Contact and Staff Acknowledgments 83
Tables
Table 1: Dollar Value of IP Penalty Amounts Assessed and Collected by CBP,
Fiscal Years 2001- 2006 23
Table 2: DOJ's IP Crime Sentencing Outcomes, Fiscal Years 2001 - 2006 31
Table 3: Summary of Federal Protection and Enforcement of IP Rights under
U.S. Law 53
Table 4: Summary of Industry Representatives' Views on the Impact of
Counterfeiting and Piracy, by Sector 57
Table 5: Summary of Industry Representatives' Views on Federal Resources
Dedicated to IP Enforcement, by Sector 58
Table 6: Summary of Industry Representatives' Views on Coordination with
Federal IP Enforcement Agencies, by Sector 59
Table 7: Summary of Industry Representatives' Views on Effectiveness of
Training on IP Enforcement Activity, by Sector 60
Table 8: Summary of Industry Representatives' Views on Areas for Improved
IP Enforcement, by Sector 61
Figures
Figure 1: Federal IP Enforcement Functions, the Key Agencies That Execute
Them, and the Agencies' Structures 10
Figure 2: Estimated Number of Investigative Resources Spent on IP-Related
Investigations by ICE, FBI, and FDA, Fiscal Years 2001-2006 19
Figure 3: Trends in the Number of IP Seizure Actions and Estimated
Domestic Values of Seizures by CBP, Fiscal Years 2001-2006 22
Figure 4: Number of CBP Exclusion Order Exams Performed and IP
Discrepancies Found, Fiscal Years 2002-2006 25
Figure 5: Number of Criminal Cases Opened by ICE, FBI, and FDA Related to
IP Investigations, Fiscal Years 2001-2006 28
Figure 6: Number of Arrests, Indictments, and Convictions by FBI, ICE, and
FDA, Fiscal Years 2001-2006 29
Figure 7: Number of IP-Related Cases Filed by DOJ, Fiscal Years 2001-2006
30
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Abbreviations
C3: Cyber Crimes Center:
CBP: Customs and Border Protection:
CCIPS: Computer Crime and Intellectual Property Section:
CHIP: Computer Hacking and Intellectual Property:
DHS: Department of Homeland Security:
DOJ: Department of Justice:
FBI: Federal Bureau of Investigation:
FDA: Food and Drug Administration:
FTE: full-time-equivalent:
HHS: Health and Human Services:
ICE: Immigration and Customs Enforcement:
IMAGEICE: Mutual Agreement between Government and Employers:
IP: Intellectual Property:
NIPLECC: National Intellectual Property Law Enforcement Coordinating
Council:
STOP: Strategy Targeting Organized Piracy:
United States Government Accountability Office
Washington, DC 20548
March 11, 2008
The Honorable George V. Voinovich:
Ranking Member:
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
Dear Senator Voinovich:
Intellectual property (IP) is an important component of the U.S. economy,
and the United States is an acknowledged global leader in its creation.
The United States grants IP rights through the issue of patents,
trademarks, and copyrights, and regards many types of unauthorized IP
use--called infringement--as a crime. Examples of IP infringement range
from the creation or sale of counterfeit or pirated music and movies to
the manufacturing and sale of counterfeit auto parts and pharmaceuticals;
the poor quality of some of these goods can be dangerous for consumers.
Governments and private companies have cited a recent expansion in IP
crimes, noting that criminal networks have increasingly moved into this
domain due to high profit potential, ease of market entry, and relatively
low risks.1
Federal law enforcement actions against those who manufacture and
distribute IP-infringing goods are an important component of U.S. efforts
to protect IP creators and owners and American consumers. Federal actions
range from seizing IP-infringing goods to prosecuting alleged criminals.
Key federal law enforcement agencies that play an active role in enforcing
IP rights are the Department of Homeland Security's (DHS) Customs and
Border Protection (CBP) and Immigration and Customs Enforcement (ICE), and
the Department of Justice's (DOJ) Criminal Division, U.S. Attorney's
Offices, and the Federal Bureau of Investigation (FBI).2 The Department of
Health and Human Services' (HHS) Food and Drug Administration (FDA) also
plays a role.3 Several interagency mechanisms exist to coordinate federal
IP enforcement efforts, including the National Intellectual Property Law
Enforcement Coordination Council (NIPLECC) and the National Intellectual
Property Rights Coordination Center.4
1The Economic Impact of Counterfeiting and Piracy, Organization for
Economic Cooperation and Development (Paris, 2007).
We reported to you in April 2007 on challenges that CBP faces in carrying
out its IP enforcement role to seize IP-infringing goods at U.S. ports of
entry and identified certain steps that it could take to improve its
efforts.5 You subsequently asked us to broaden this work and examine
efforts undertaken by CBP and other key federal agencies to carry out law
enforcement actions against those who commit violations of U.S. IP laws.
Specifically, this report: (1) examines federal agencies' roles,
priorities, and resources devoted to IP-related enforcement; (2) evaluates
agencies' IP-related enforcement statistics and achievements; and (3)
examines the status of the National Intellectual Property Rights
Coordination Center.
Based on our prior work and background research, we determined that CBP,
ICE, FBI, and DOJ are the four key law enforcement agencies that play an
active role in IP enforcement, and that FDA also plays an important role.
To examine the key federal agencies' roles and priorities for IP-related
enforcement, we met with agency officials in their headquarters and in
seven field locations6 and reviewed strategic plans and other agency
documents. To examine agencies' resources for IP-related enforcement, we
obtained information on staff resources, where available. To evaluate
IP-related enforcement trends and achievements, we reviewed agency
statistics for fiscal years 2001 through 2006, including IP-related
seizures, investigations, and prosecutions. We also reviewed agencies'
internal strategic planning documents to determine their priorities,
goals, and objectives for IP enforcement and compared them to the types of
data agencies collected. To examine the status of the National
Intellectual Property Rights Coordination Center, we met with ICE, FBI,
DOJ, and FDA officials to discuss its evolution, role, and staffing
levels; reviewed agency documents that articulated the center's purpose;
and analyzed congressional appropriators' conference reports that directed
agencies to staff and fund the center. Some of the information we reviewed
was considered sensitive for law enforcement purposes, and our report only
discusses publicly available information. We obtained private sector views
on federal IP enforcement efforts through interviews with representatives
from 22 companies and eight industry associations across eight sectors,
such as the entertainment, pharmaceutical, and manufacturing industries.
We conducted this performance audit from December 2006 through March 2008
in accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. See appendix I for a more detailed
description of our scope and methodology.
2We recognize that DOJ's Criminal Division and the U.S. Attorney's Offices
are not agencies, but these offices work in parallel with the other
agencies we reviewed. Thus, DOJ and its entities are discussed in this
report as one of the key federal IP enforcement "agencies" for ease of
reference. Other federal agencies also play a role in protecting and
enforcing IP rights, but we focus in this report on the key federal law
enforcement agencies.
3FDA's primary mission is to ensure public health and safety. It has both
regulatory and law enforcement authorities and responsibilities. FDA's
Office of Criminal Investigations pursues counterfeit product
investigations in furtherance of the agency's public health mission. Since
these counterfeit product cases have an impact on the protection of IP
rights, we chose to include FDA in this report.
4We have previously reported on NIPLECC. See GAO, Intellectual Property:
Strategy for Targeting Organized Piracy (STOP) Requires Changes for
Long-Term Success, [41]GAO-07-74 (Washington, D.C.: Nov. 8, 2006).
5GAO, Intellectual Property: Better Data Analysis and Integration Could
Help U.S. Customs and Border Protection Improve Border Enforcement
Efforts, [42]GAO-07-735 (Washington, D.C.: Apr. 26, 2007).
Results in Brief
For the five key federal agencies that play a role in enforcing IP laws,
such enforcement is not a top priority, and determining the resources they
have devoted to this function is challenging. IP law enforcement actions
consist of three primary functions--seizing goods, investigating crimes,
and prosecuting alleged criminals. CBP is responsible for seizing
IP-infringing goods at the U.S. border, a function that also includes
assessing penalties and excluding--or denying entry to--certain types of
IP-infringing goods. ICE and FBI share responsibility for investigating
those suspected of IP crimes, and FDA investigates counterfeit versions of
the products it regulates. DOJ is responsible for prosecuting those
accused of committing IP crimes. IP enforcement activities are generally a
small part of these agencies' much broader missions, and, according to
agency officials and documents, IP enforcement is not the top priority for
these agencies. However, within their IP enforcement activities, these
agencies have given enforcement priority to IP crimes that pose risks to
public health and safety, such as counterfeit pharmaceuticals, batteries,
and car parts. Determining the federal resources allocated to IP
enforcement is challenging because few agency staff are dedicated
exclusively to IP enforcement, and only investigative agencies tracked the
time spent by non-dedicated staff on IP criminal investigations. The
information we obtained shows declining staff resources in some agencies
and increases or little change in others. Because agencies' IP enforcement
roles are interdependent, the emphasis one agency places on IP enforcement
can affect the actions of others. For example, officials from several
investigative agencies' field offices said their decisions to open IP
investigations were influenced in part by the willingness of the local
U.S. Attorney's Office to prosecute certain types of IP enforcement cases.
6The field locations we selected were based on the locations we examined
in our April 2007 report on CBP ( [43]GAO-07-735 ). For that report, we
selected a mix of ports with high and medium import levels, measured by
value. For this report, we conducted work at ICE, FBI, and DOJ field
offices co-located near these ports to get a sense of the local federal
enforcement environment. We did not disclose port identities in our 2007
report for law enforcement reasons; we maintain that confidentiality in
this report for the same reasons.
Federal IP enforcement activity generally increased from fiscal year 2001
through 2006, but agencies have not taken key steps to assess their IP
enforcement achievements. Our review of agencies' enforcement statistics
over the 6-year period found that IP enforcement activities generally
increased, with fluctuations in activity across fiscal years and type of
enforcement action. Specifically, the number of CBP's seizures have
steadily increased, but the domestic value of goods seized varied by
fiscal year. However, we found that CBP collected less than 1 percent of
penalties assessed during 2001 through 2006. We also found a lack of data
on CBP's exclusion of imports subject to "exclusion orders" and certain
procedural issues, such as delays in creating enforcement guidance and
minimal electronic targeting in certain cases.7 The number of IP-related
criminal investigations that ICE, FBI, and FDA opened each year fluctuated
during 2001 through 2006, but the number of arrests, indictments, and
convictions stemming from these investigations generally increased during
that time period. The number of IP prosecutions by DOJ for fiscal years
2001 through 2005 hovered around 150 cases before increasing to about 200
cases in fiscal year 2006. Although agencies' enforcement activities show
general increases, agencies have not taken key steps to evaluate their own
enforcement trends in ways that would better inform management decisions
and resource allocation. For example, agencies have generally not
conducted systematic analyses of IP-related enforcement activities, such
as by field offices or type of violation pursued. Our analysis of agency
data shows that a small number of CBP and DOJ field offices are
responsible for the majority of these agencies' total IP enforcement
activity. Further, all the agencies have given priority within their IP
enforcement efforts to IP crimes that affect public health and safety, but
most have not clearly identified which IP enforcement actions relate to
public health and safety or lack data to track their achievements in this
area. Finally, agencies have generally not established performance
measures or targets to aid them in assessing their IP enforcement
achievements and reporting their progress to Congress and interagency
coordinating bodies.
7CBP is required to exclude goods that are subject to an "exclusion order"
issued by the United States International Trade Commission (ITC). The
Commission investigates allegations of unfair import practices and issues
exclusion orders in cases where it has found unfair import practices.
These cases typically involve allegations of patent or trademark
infringement.
The executive branch created the National Intellectual Property Rights
Coordination Center to improve and coordinate federal IP enforcement
efforts, but the center has not achieved its mission, and staff levels
have declined. The center, which began operations in 2000, was set up to
be a hub for the collection, analysis, and dissemination to investigative
agencies of IP-related complaints from the private sector. However, it got
off to a slow start, compounded by the events of September 11, 2001, and
the envisioned flow of private sector complaint information never
materialized. In addition, participating agencies--FBI, legacy Customs,8
and ICE--did not reach a common understanding about the center's purpose
and agencies' roles. Over time its mission shifted and the center began
focusing instead on educating the private sector about federal IP
enforcement agencies' efforts. Congressional appropriators expressed
support for the center's creation and mission in various conference
reports, which, over time, directed participating agencies to allocate
certain appropriated funds to staff and operate the center. However, ICE
staff at the center have declined from the levels originally established
by the executive branch, and the FBI and CBP no longer participate in the
center. The center is scheduled to move to a new location in early 2008,
and ICE officials said they met with the other IP enforcement agencies to
invite them to establish or increase their presence there. However,
according to some officials from the invited agencies, their future
involvement depends in part on clarifying, and perhaps adjusting, the
center's purpose and activities.
8The term "legacy Customs" refers to the U.S. Customs Service, which was
responsible for collecting revenue in the form of customs duties, taxes,
and fees. The center was originally established to be a coordination body
between FBI and Customs. Upon the creation of DHS, Customs' role was
shifted to ICE and CBP.
To improve agencies' assessment of their IP enforcement efforts, we make
several recommendations to the Attorney General and the Secretaries of
Homeland Security and Health and Human Services, including directing their
agencies to collect additional data on, and systematically analyze, their
enforcement activity and establish related performance measures and
targets. To better inform CBP and affected rights holders on the
enforcement of exclusion orders, we recommend that the Secretary of
Homeland Security direct the CBP Commissioner develop a strategy for
addressing identified procedural weaknesses, including collecting
additional data to better track its enforcement efforts in this area. To
clarify the roles and responsibilities of the National Intellectual
Property Rights Coordination Center, we recommend that, in consultation
with NIPLECC, the Attorney General and the Secretary of Homeland Security
reassess the center's mission and agencies' roles in the center.
We provided a draft of this report to DHS, DOJ, and HHS for comment. DHS,
CBP, and ICE concurred with our recommendations. DOJ did not comment on
our recommendations. HHS said it disagreed with the recommendation that
FDA establish performance measures and targets for IP enforcement. Given
FDA's public health and safety mission, we reconsidered the
appropriateness of recommending that it establish law enforcement-related
performance measures and no longer make this recommendation to FDA.
However, because of the importance of understanding and addressing trends
in IP violations that affect public health and safety, we added FDA to the
recommendation that agencies systematically analyze their IP enforcement
activity. In addition, CBP, DOJ, and FDA had certain concerns about
portions of our report, which we address at the end of this letter and in
appendixes IV, V, and VI. The agencies all made technical comments, which
we incorporated as appropriate.
Background
Intellectual property has become a critical component of our country's
economy, accounting for an average of 18 percent of the U.S. gross
domestic product from 1998 through 2003.9 Industries that rely on IP
protection--including the aerospace, automotive, computer, pharmaceutical,
semiconductor, motion picture, and recording industries--are estimated to
have accounted for 26 percent of the annual real gross domestic product
growth rate during this period and about 40 percent of U.S. exports of
goods and services in 2003 through 2004. Further, they are among the
highest-paying employers in the country, representing an estimated 18
million workers or 13 percent of the labor force.
The economic value of IP-protected goods makes them attractive targets for
criminal networks. Criminal activities have negative effects for U.S.
innovation and investment, the value and reputation of individual
companies, and consumers who are put at risk by substandard or dangerous
products. Such activity is inherently difficult to measure, but the
Organization for Economic Cooperation and Development recently estimated
that international trade in counterfeit and pirated products in 2005 could
have been up to $200 billion.10
According to industry groups, a broad range of IP-protected products are
subject to being counterfeited or pirated, from luxury goods and brand
name apparel to computer software and digital media to food and medicine.
Evidence of counterfeiting in industries whose products have a public
health or safety component, such as auto and airline parts; electrical,
health, and beauty products; batteries; pharmaceuticals; and infant
formula, presents a significant concern. The World Health Organization
estimates that as much as 10 percent of medicines sold worldwide are
believed to be counterfeit, including essential medicines such as
vaccines, antimalarials, and human immunodeficiency virus therapies.
The federal government plays a key role in granting protection for and
enforcing IP rights. It grants protection by approving patents or
registering copyrights and trademarks.11 It enforces IP rights by taking
actions against those accused of theft or misuse. Enforcement actions
include both civil and criminal penalties. U.S. laws criminalize certain
types of IP violations, primarily copyright and trademark violations, and
authorize incarceration or fines. These laws are directed primarily toward
those who knowingly produce and distribute IP-infringing goods, rather
than those who consume such goods. Although U.S. laws do not treat patent
violations as a crime, the federal government does take actions to protect
patents and authorizes civil enforcement actions against infringers. See
appendix II for a detailed list of the U.S. laws that grant IP protection
and the criminal and civil penalties that federal law enforcement agencies
are authorized to impose.
9Stephen E. Siwek, Economists Incorporated, Engines of Growth: Economic
Contributions of the U.S. Intellectual Property Industries (2005).
10The Economic Impact of Counterfeiting and Piracy, Organization for
Economic Cooperation and Development (Paris, 2007).
Protection is also provided by the U.S. International Trade Commission,
which investigates allegations of unfair import practices that commonly
involve claims of patent or trademark infringement.12 For example, in
January 2007, the commission issued an "exclusion order" to cease
importation of certain types of laminated floor panels that it found
infringed on three U.S. patents.13 Exclusion orders direct CBP to stop
certain goods from entering the United States while the order is in
effect.14 The commission is also authorized to take other actions, such as
issuing "cease and desist" orders to those engaging in unfair import
practices or assessing civil penalties.
11These IP rights grant registrants limited exclusive ownership over
whatever economic rewards the market may provide for their creations and
products. A copyright provides protection for literary and artistic works
such as books, musical compositions, computer software, and movies. A
copyright is a property right in an original work of authorship that
arises automatically upon creation of such a work and belongs, in the
first instance, to the author. A patent protects an invention by giving
the inventor the right to exclude others from making, using, or selling a
new, useful, nonobvious invention during a specific term. Trademarks are
words, phrases, logos, or other graphic symbols used by manufacturers or
merchants to identify their goods and distinguish them from others. Other
types of intellectual property include trade secrets, industrial designs,
and geographic indications. Geographic indications are names used to
identify products with quality, reputation, or other characteristics
attributable to the origin of the product.
12Such authority is granted under Section 337 of the Tariff Act of 1930,
19 U.S.C 1337.
13U.S. International Trade Commission Investigation Number 337-TA-445,
January 5, 2007.
14Exclusion orders involving patents are generally in effect until the
patent expires. Exclusion orders involving trademarks are in effect as
long as the trademark is valid and is recognized by the granting agency as
being in force.
Congress has supported several interagency mechanisms to coordinate
federal IP law enforcement efforts. In 1999, Congress created the
interagency NIPLECC as a mechanism to coordinate U.S. law enforcement
efforts to protect and enforce IP rights in the United States and
abroad.15 Officials from seven federal entities are members of NIPLECC.16
A presidential initiative, called the Strategy Targeting Organized Piracy
(STOP), is the council's strategy, and it articulates five broad goals.17
From 2001, Congress supported the creation of the National Intellectual
Property Rights Coordination Center, another interagency mechanism that
aims to improve federal IP enforcement and coordinate investigative
efforts between ICE and FBI (discussed in detail later in this report).
Multiple Agencies Carry Out IP Enforcement, but Their IP Priorities Vary, and
Few Resources Are Dedicated Exclusively to IP Enforcement
For the five key federal agencies with IP enforcement roles, such
enforcement is not a top priority for most of them, and determining their
resource allocations to IP enforcement is challenging. These agencies' IP
enforcement functions include: (1) seizing IP infringing goods; (2)
conducting investigations; and (3) prosecuting alleged violations. The
overall aim of U.S. government efforts is to stop trade in counterfeit and
pirated goods, and the three functions each present some degree of
deterrent. The key law enforcement agencies--CBP, ICE, FBI, and DOJ--have
broad missions with many competing responsibilities, and their IP
enforcement role is not generally their highest priority, while FDA's
primary mission is to protect public health. We were not able to identify
the total resources allocated to IP enforcement across the agencies
because few staff are dedicated solely to IP enforcement, and only certain
agencies track the time spent on IP criminal investigations by
non-dedicated staff who carry out this function. The information we were
able to compile shows declines in IP enforcement resources in several
agencies, and fluctuating or growing resource allocations to IP
enforcement in others. Because federal IP enforcement roles are
interdependent--seizures may launch or contribute to investigations, and
investigations may lead to prosecutions--the emphasis placed on
enforcement of IP at one agency or field office can impact the IP
enforcement efforts of others.
15In September 1999, Congress authorized NIPLECC (Public Law 106-58). In
December 2004, Congress passed legislation to enhance NIPLECC's mandate
(Public Law 108-447). See [44]GAO-07-74 .
16The council's membership includes officials from: CBP, ICE, DOJ, the
Department of Commerce, the U.S. Patent and Trademark Office, the
Department of State, and the Office of the U.S. Trade Representative.
NIPLECC is required to consult with the Register of Copyrights. DOJ and
the U.S. Patent and Trademark Office are co-chairs. The Coordinator for
International IP Enforcement (IP Coordinator), a presidential appointee,
heads NIPLECC and resides in the Department of Commerce. See [45]GAO-07-74
.
17STOP's five goals are to: (1) empower American innovators to better
protect their rights at home and abroad, (2) increase efforts to seize
counterfeit goods at our borders, (3) pursue criminal enterprises involved
in piracy and counterfeiting, (4) work closely and creatively with U.S.
industry, and (5) aggressively engage our trading partners to join our
efforts.
Key Agencies Carry Out Three Primary IP-Related Enforcement Functions
Key federal agencies carry out three IP enforcement functions.18 Seizing
IP infringing goods is primarily performed by CBP.19 IP-related
investigations are performed by agencies located in three different
departments. Prosecuting IP crimes is carried out by two different
entities within DOJ. Figure 1 identifies the IP enforcement functions and
the structure, including the departments and agencies, in which they are
performed.
Figure 1: Federal IP Enforcement Functions, the Key Agencies That Execute
Them, and the Agencies' Structures
aThe Department of Justice is not an agency, but given that its Criminal
Division and U.S. Attorney's Offices work in parallel with the other
agencies we reviewed, DOJ and its entities are described as one of the key
federal IP enforcement "agencies" for ease of reference.
18State and local government officials also carry out enforcement of IP
laws, and private sector companies and industry associations whose
products are counterfeited and pirated often carry out their own
enforcement efforts.
19We have previously reported on CBP's efforts to enforce IP rights at the
border, including its efforts to target and seize counterfeit goods and
assess penalties. See [46]GAO-07-735 .
Responsible Agencies Have Broad Missions, and IP Enforcement Is Not a Top
Priority at Most
The four key federal law enforcement agencies and FDA have broad missions
and many responsibilities, and IP enforcement is not a top priority at
most agencies. CBP and ICE address IP enforcement as part of their legacy
efforts to combat commercial fraud, but their top mission is securing the
homeland. DOJ identifies IP enforcement as one of its top priorities, but
FBI does not. FDA's role is driven by its public health and safety
mission, not IP enforcement per se. Regardless of the priority ranking
agencies assign to IP enforcement, within their IP enforcement efforts,
they have all given priority to IP-related crimes that pose risks to
public health and safety. Staff in agency headquarters play a role in
setting IP enforcement policies and, at some agencies, carry out certain
IP enforcement actions, but most enforcement activity takes place at the
field office level. Each field office faces a unique set of challenges in
its local environment, balancing IP enforcement efforts with other agency
priorities.
Several companies and associations we interviewed remarked that the
federal IP enforcement structure is not clear. For example, one
association remarked that agency responsibilities are unclear and may
overlap, while another said that there is no formal process for referring
cases for federal action. This structure was seen as especially
challenging for small companies who need federal assistance but lack the
resources or expertise to navigate the federal system. Additional
information on private sector views about federal IP enforcement is
contained in appendix III.
Information is presented below on each agency's IP enforcement function,
the priority assigned to IP enforcement, and the structure within which
such enforcement is carried out.
CBP - Seizures, Penalties and ExclusionsIP
o Function: CBP is the primary federal agency authorized to seize
goods, including IP-infringing goods, upon their arrival in the
United States. CBP is also responsible for preventing the entry of
goods into the United States that are subject to exclusion orders
and assesses penalties against IP infringers when warranted.
o Priorities: CBP's primary mission is to protect the homeland.
CBP is also responsible for carrying out its legacy Customs
functions, including trade enforcement. CBP has identified six
Priority Trade Issues, one of which is IP enforcement.20 Within
its IP enforcement efforts, CBP gives priority to large value
seizures and violations that affect public health and safety or
economic security or that have ties to terrorist activity.
o Structure: CBP's Office of International Trade develops IP
enforcement policies and plans, develops national instructions for
targeting shipments suspected of carrying IP-infringing goods,
writes guidance for assessing penalties and enforcing exclusion
orders, and maintains data on IP-related seizures. The Office of
Field Operations oversees implementation of these policies and
procedures at 325 U.S. ports of entry.21 While much of CBP's IP
enforcement activity is carried out by the ports, headquarters
staff play an integral role in supporting those efforts, including
providing policy and guidance on enforcement priorities and
developing systems and technologies to enhance enforcement.
ICE Criminal Investigations
o Function: ICE conducts investigations of IP-related criminal
activity, including infringement of trademark and copyright law.
o Priorities: ICE's primary mission is to protect the homeland. It
is also responsible for combating commercial fraud, which includes
IP enforcement. ICE's interim agency-wide strategic plan and its
plan for commercial fraud are law enforcement sensitive and not
available to the public. However, according to ICE officials, the
top priorities within commercial fraud enforcement are public
health and safety violations and IP infringement.
o Structure: Within ICE's Office of Investigations, the Critical
Infrastructure and Fraud Division develops the agency's IP
policies and oversees its IP enforcement efforts.22 The division's
IP responsibilities are handled by the Branch for Commercial Fraud
and Intellectual Property Rights, which also houses the National
Intellectual Property Rights Coordination Center. Although the
center is officially an interagency coordination body, it plays a
lead role in developing and carrying out ICE's IP enforcement
policies. In addition, ICE has a Cyber Crimes Center that focuses
on Internet-based crimes, including IP piracy, and provides
referrals and investigative assistance to ICE's field offices.23
IP investigations are carried out by agents located in about 100
U.S. cities, organized under ICE's 26 field offices.
20As of fiscal year 2006, CBP's Priority Trade Issues included
agriculture, antidumping and countervailing duties, IP rights, penalties,
revenue, and textiles and wearing apparel.
21We reported in April 2007 that a lack of integration between these two
offices impedes CBP's ability to improve its IP enforcement efforts. See
[47]GAO-07-735 .
FBI Criminal Investigations
o Function: FBI conducts investigations of IP-related criminal
activity, including infringement of trademark and copyright law,
as well as theft of trade secrets.
o Priorities: The FBI's principal mission is to investigate
criminal activity and defend the security of the United States. It
has identified 10 priority enforcement areas, including cyber
crime.24 IP enforcement is included in the cyber crime area, but
it is ranked 5th out of FBI's 6 cyber crime priorities.25 Within
its IP enforcement efforts, FBI's priorities are, in order, trade
secret theft, copyright infringement, trademark infringement, and
signal theft, and one of FBI's IP enforcement goals is for its
field offices to initiate IP investigations that affect public
health and safety.
22The division also investigates immigration violations, customs fraud,
and cases involving worksite enforcement and human smuggling.
23The Cyber Crimes Center is often referred to by the acronym "C3."
24As of 2006, FBI had 10 priority enforcement areas. The first 8 in order
of importance are to: (1) protect the U.S. from terrorist attack; (2)
protect the U.S. against foreign intelligence operations and espionage;
(3) protect the U.S. against cyber-based attacks and high-technology
crimes; (4) combat public corruption at all levels; (5) protect civil
rights; (6) combat transnational and national criminal organizations and
enterprises; (7) combat major white collar crime; and (8) combat
significant violent crime. In addition, FBI aims to (9) support federal,
state, local, and international partners; and (10) upgrade technology to
successfully perform FBI's mission.
o Structure: FBI's Cyber Division oversees the agency's IP
enforcement efforts even though not all of its IP investigations
are cyber-related.26 A single unit within the Cyber Division,
called the Cyber Crime Fraud Unit, has operational and management
oversight for all of FBI's cyber crime activities. IP-related
investigations are primarily carried out in FBI's 56 field
offices.
FDA Criminal Investigations
o Function: FDA investigates illegal activity pertaining to food,
drugs, medical devices, and other products because of the impact
on public health.27
o Priorities: FDA's primary mission is to protect public health by
assuring the safety, efficacy, and security of human and
veterinary drugs, the food supply, medical devices, and other
products. IP enforcement is not part of FDA's mission or its
enforcement priorities; however, FDA carries out IP-related
enforcement actions in fulfilling its mission to protect public
health and safety, such as investigating criminals that traffic in
counterfeit pharmaceuticals.
25Cyber Division's six priorities are, in order of importance: (1)
computer intrusions involving counterterrorism, (2) computer intrusions
involving counterintelligence, (3) other computer intrusions, (4) innocent
images (child pornography), (5) IP enforcement, and (6) Internet fraud. In
April 2006, the Cyber Division lowered the priority of IP enforcement to
5th rank and elevated the priority of child pornography to 4th rank.
Despite this decrease in stated priority, Cyber Division officials said
that IP investigations remain a major focus of their program, particularly
investigations targeting health and safety issues.
26This division also conducts investigations of computer intrusions and
child pornography.
27The Federal Food, Drug and Cosmetic Act (21 U.S.C. 301 et seq.) provides
legal authority for FDA to conduct counterfeit product investigations and
enforcement actions. In addition, FDA brings charges under the statute
that prohibits trafficking in counterfeit goods (18 U.S.C. 2320).
o Structure: FDA's Office of Regulatory Affairs, in collaboration
with other agency components, carries out the agency's enforcement
activities. This office houses, among other entities, FDA's Office
of Criminal Investigations and the Division of Import Operations.
The Office of Criminal Investigations, with six field offices and
presence in 25 U.S. cities, has the primary responsibility for all
criminal investigations conducted by the FDA. The Division of
Import Operations provides guidance on the agency's import policy
to FDA field staff, including at numerous ports around the
country. FDA field staff that discover suspected counterfeit
imports of products that are regulated by FDA would refer these to
the Office of Criminal Investigations for further action. In
addition, Office of Regulatory Affairs laboratories play a role by
analyzing samples of suspected counterfeit products.
DOJ - Prosecutions
o Function: DOJ prosecutes IP cases referred from ICE, FBI, and
FDA, as well as from private sector representatives and other
sources.
o Priorities: According to DOJ officials and documents, IP
enforcement is one of the department's highest priorities. In
March 2004, the Attorney General announced the creation of a DOJ
Task Force on Intellectual Property, with a mission of identifying
ways to strengthen the department's IP enforcement efforts. The
Task Force produced 31 recommendations for improving IP
enforcement and provided a progress report on those
recommendations in its 2006 report. The Task Force made numerous
short- and long-term recommendations, including increasing the
number of DOJ prosecutors and FBI agents that focus on computer
crime and IP cases and prosecuting IP cases involving a threat to
public health and safety.28 In addition, DOJ developed an internal
IP enforcement strategy for 2007 with six strategic objectives
designed to help it meets its larger goal of reducing IP theft.
DOJ shared this document with us, but its contents are for
official government use only.
28See DOJ 2006 Task Force report,
[48]http://www.usdoj.gov/criminal/cybercrime/ip.html . The Task Force
continues to monitor DOJ's implementation of these recommendations.
o Structure: DOJ's IP enforcement is carried out primarily by the
94 U.S. Attorney's Offices located throughout the country as well
as its Criminal Division's Computer Crime and Intellectual
Property Section (CCIPS). Under DOJ's Computer Hacking and
Intellectual Property (CHIP) program, each U.S. Attorney's Office
has one CHIP coordinator who is trained in prosecuting IP
enforcement cases.29 In addition, 25 U.S Attorney's Offices have
CHIP units, usually comprised of 2 or more attorneys (a few units
have as many as 8 attorneys), who focus solely on prosecuting
computer hacking or IP crimes. IP crimes prosecuted by the U.S.
Attorney's Office are not limited to CHIP units, but may be
prosecuted as part of a larger case, such as one involving
organized crime. CCIPS, located in DOJ headquarters, is
responsible for supporting IP prosecutions by U.S. Attorney's
Offices, as well as prosecuting their own cases. CCIPS is also
responsible for developing DOJ's overall IP enforcement strategy
and coordinating among U.S. and foreign law enforcement officials
on domestic and international cases of IP theft.
Determining the Total Resources Allocated to IP-Related Enforcement
Is Challenging
Determining the total resources that agencies have allocated to IP
enforcement is challenging because agencies have few staff
exclusively dedicated to IP enforcement, and only the agencies
that conduct criminal investigations estimated time spent on this
activity. Most agencies have some headquarters staff exclusively
dedicated to IP enforcement. However, staff in the field, where
most IP enforcement activity occurs, are generally not dedicated
exclusively to IP enforcement. The information we were able to
compile shows declines in IP enforcement resources in some
agencies and fluctuating or growing resource allocations to IP
enforcement in others. Agencies' ability to allocate staff to IP
enforcement is affected by not only the priority they assign to
this function but also their overall resource situation. Some
agencies have faced resource challenges in recent years.
Private sector representatives we interviewed across various
sectors expressed concern about the federal government's ability
to carry out IP enforcement due, in part, to a lack of resources.
While several companies said that federal IP enforcement efforts
have increased, 14, or nearly half, of the representatives we
contacted said there is a shortage of resources to carry out IP
enforcement. Appendix III provides further detail on private
sector views.
29Under the CHIP program, prosecutors are assigned four areas of
responsibility: prosecuting computer crime and IP offenses; serving as a
technical advisor for other prosecutors and law enforcement agents;
assisting other CHIP coordinators in multi-district investigations; and
providing training and community outreach regarding computer-related
issues.
Information on each agency's resources for IP-related enforcement
are detailed below.
CBP - Seizures, Penalties, and ExclusionsIP
Various types of CBP staff play a role in IP enforcement. The only
staff that are dedicated exclusively to IP enforcement are
international trade specialists, attorneys, and paralegals
assigned to the Office of International Trade, and their numbers
have fluctuated over time. International Trade Specialists are
responsible for performing nationwide targeting for all CBP ports
of incoming shipments suspected of carrying IP-infringing goods
and for analyzing IP seizure data. The number of international
trade specialists remained relatively flat from fiscal year 2003
through 2006, at about 11, before increasing to 17 in 2007.
However, the number of these specialists that were performing
targeting in 2003 through 2006 actually declined.30 Attorneys are
responsible for advising ports on how to carry out CBP's IP
enforcement authorities and have sole responsibility for
developing exclusion order enforcement guidance, a highly complex
and labor intensive task. The number of attorneys devoted to IP
enforcement declined from 11 in 2003 to 9 in 2006 and remains at
that level. Other CBP staff perform IP enforcement activities, but
are not exclusively dedicated to it; CBP does not track the amount
of time these staff spend on IP enforcement. 31 In addition,
within the Office of International Trade, CBP auditors perform
targeted audits on selected companies to assess their internal
controls for preventing the importation of IP-infringing goods.
CBP does track hours spent on IP audits. As of December 2007, CBP
reported that slight over 14 "man years" have been charged to IP
audits since fiscal year 2005, when such audits were initiated.
30During 2003 through 2005, all 11 International Trade Specialists were
assigned to headquarters but worked out of CBP's Strategic Trade Center in
Los Angeles and a satellite office in San Francisco. In 2006, the number
of staff performing targeting in the field was reduced to 8. Three
positions were shifted to headquarters, and the staff in these positions
were not performing targeting. As of July 2007, CBP increased the number
of specialists in the field to 12 and the number in headquarters to 5. The
increase in the field enabled CBP to reduce the number of industries for
which each specialist is responsible.
31CBP officers are responsible for examining shipments with suspected
counterfeit goods, but one of their primary focus is screening cargo for
weapons of mass destruction. Import specialists are responsible for
applying duties to imports and develop expertise in certain goods,
including a determination of whether imports are counterfeit. Fines,
Penalties, and Forfeiture officers are responsible for assessing penalties
against importers that violate U.S. trade laws, as well as those that
traffic in counterfeit goods.
CBP staff that carry out the agency's IP enforcement activities
operate in an environment that is plagued by staffing challenges,
including staffing shortages, difficulty hiring and retaining
staff, and fatigue among its workforce. For example, in November
2007, we reported that CBP estimates it may need several thousand
more CBP officers to operate its ports of entry.32 In April 2007,
we also reported that staff resources at CBP for customs revenue
functions have declined since the formation of DHS.33
ICE, FBI, and FDA - Criminal Investigations
Among the agencies that conduct criminal investigations, only ICE
has staff dedicated exclusively to IP enforcement. These include
ICE staff assigned to the National Intellectual Property Rights
Coordination Center and a commercial fraud team in one of its
field offices that focuses solely on IP enforcement. As discussed
later in this report, the number of ICE staff assigned to the
center declined from 15 in 2004 to 8 in 2007. Neither FBI nor FDA
have any staff dedicated exclusively to IP enforcement. A senior
FBI Cyber Division official said the size of FBI's IP enforcement
effort is small relative to other FBI efforts and has limited
resources.
However, ICE, FBI, and FDA all track the amount of time that their
investigators spend on IP-related investigations (see fig. 2). By
converting ICE and FDA investigative hours to full-time-equivalent
(FTE) positions,34 and using a similar measure (average on board)
for FBI, we determined that ICE spent an average of 154 FTEs on IP
enforcement during 2001 through 2006, while FBI averaged 53 agents
on board for IP enforcement, and FDA spent an average of 16 FTEs.
ICE investigative resources spent on IP enforcement increased from
2001 to 2003 before falling off, while the estimated number of
investigator FTEs spent on IP cases at FBI and FDA experienced
little change over the 6-year period.
32GAO, Border Security: Despite Progress, Weaknesses in Traveler
Inspections Exist at Our Nation's Ports of Entry, [49]GAO-08-219
(Washington, D.C.: Nov. 5, 2007).
33GAO, Customs Revenue: Customs and Border Protection Needs to Improve
Workforce Planning and Accountability, [50]GAO-07-529 (Washington, D.C.:
Apr. 12, 2007).
34ICE and FDA use different calculations to compute their FTE equivalents.
We used the formulas provided by the agencies.
Figure 2: Estimated Number of Investigative Resources Spent on
IP-Related Investigations by ICE, FBI, and FDA, Fiscal Years
2001-2006
Note: ICE and FDA capture the number of investigative case hours
worked and provided formulas for converting to FTEs. FBI captures
the average agents on board that worked IP investigations, which
we report in this figure as FTEs. FDA did not begin to collect
data on the number of investigative case hours until fiscal year
2003.
DOJ - Prosecutions
DOJ dedicates staff to IP enforcement in headquarters and within
its U.S. Attorney's Offices. The number of staff dedicated to IP
enforcement has grown in recent years. For example, DOJ's CHIP
units, first created in February 2000, grew from 13 units as of
2002 to 25 units as of 2007. Most of the CHIP units have
approximately two or more attorneys who focus on prosecuting IP
and high-technology crimes, with as many as eight in at least one
of the units. As the number of units has grown, so has the number
of attorneys assigned to working IP cases. As of July 2007, DOJ
had 101 Assistant U.S. Attorneys assigned to CHIP units. Another
122 Assistant U.S. Attorneys have been specially trained to
prosecute computer crime and IP offenses, with at least one such
CHIP prosecutor located in every U.S. Attorney's Office. DOJ began
tracking the time attorneys spend on IP enforcement in May 2006,
but we did not collect this data.35 In addition, according to DOJ,
it had 14 attorneys working on IP enforcement in its CCIPS.
Despite having these dedicated and trained staff, however,
officials from the U.S. Attorney's Offices we visited noted that,
over the past few years, their offices have experienced high
turnover and have been generally understaffed, with vacant
positions left unfilled.
Agency Enforcement Roles and Actions Are Often Interdependent
Given the interdependent nature of federal IP enforcement and the
central role played by the field offices, the emphasis placed on
IP enforcement at one location can affect the IP enforcement
efforts of others. For example, investigative agency officials at
some locations we visited said that their decisions about
beginning or continuing an IP-related investigation were
influenced by the willingness of the local U.S. Attorney's Office
to prosecute the case. Some field office officials we interviewed
stated that local U.S. Attorney's Offices set minimum value
thresholds for taking IP cases, in part because the U.S.
Attorney's Offices also have limited resources. However, officials
at the U.S. Attorney's Offices we visited said that they did not
have specific thresholds for IP prosecutions, particularly when it
comes to public health and safety, and that they evaluate cases on
their individual merits. Similarly, the degree to which an ICE
field office can accept and work on IP enforcement referrals from
CBP may depend on the field office's other priorities, such as
money laundering or smuggling enforcement. Officials at most of
the agencies noted other factors that influence their IP-related
enforcement decisions, including the number or value of items
seized, the health or safety impacts of the crime, and the
organizational structure of the entities involved.
35DOJ's relatively recent data collection effort did not allow us
to track attorney time spent on IP enforcement over time, as we have
done for other agencies.
IP Enforcement Generally Increased, but Agencies Have Not Taken Key
Steps to Assess Enforcement Efforts
Federal IP enforcement activity generally increased from fiscal
year 2001 through 2006; however, most agencies have not taken key
steps to assess their achievements. Specifically, most agencies
have not: (1) conducted systematic analyses of their IP
enforcement data to inform management and resource allocation
decisions, (2) clearly identified which of their efforts relate to
a key IP enforcement area--IP crimes that affect public health and
safety--nor collected data to track these efforts, and (3)
established performance measures or targets to assess their
achievements and report to Congress and others.
IP Enforcement Statistics Show an Increase in Activity
Our review of agency statistics for fiscal years 2001 through 2006
indicated that IP enforcement actions generally increased over the
period, with some fluctuations in activity. The number of CBP
seizure actions and the value of such seizures has increased
significantly. Investigative agencies' enforcement
outcomes--arrests, indictments, and convictions--also increased
during the time period. The number of DOJ prosecutions hovered
around 150 cases per year during fiscal years 2001 to 2005 before
increasing to about 200 cases in fiscal year 2006, with the number
of defendants charged with IP crimes fluctuating.
CBP Seizure Activity Has Grown, but Penalty Collections Remain Low
CBP's primary IP enforcement efforts involve seizing IP-infringing
goods that individuals attempt to import through U.S. ports of
entry. In April 2007, we reported that the total number of CBP's
seizure actions has grown since fiscal year 2001, nearly doubling
from fiscal years 2005 to 2006; however, most of these actions
involved numerous small-value seizures made from air-based modes
of transport while significantly fewer seizure actions have been
made from sea- or land-based modes of transport.36 We reported in
2007 that CBP officials said they believed the trend reflects
growing Internet sales and the ability of manufactures to directly
ship their merchandise to consumers through mail and express
consignment. At that time, some CBP officials stated that this
trend may reflect a shift in smuggling techniques toward the use
of multiple small packages rather than large shipments in cargo
containers, possibly to reduce the chance of detection. See figure
3 for trends in the number of CBP seizure actions and estimated
domestic values.37
36 [51]GAO-07-735 .
Figure 3: Trends in the Number of IP Seizure Actions and Estimated
Domestic Values of Seizures by CBP, Fiscal Years 2001-2006
After CBP seizes the counterfeit goods, it may also assess penalties that
result in monetary fines imposed against the violator. CBP officials
reported that processing penalty cases is resource-intensive, but noted
that few penalties are collected and such enforcement has little deterrent
effect. We found that less than 1 percent of the penalty amounts assessed
for IP violations in each fiscal year were collected. See table 1 for
IP-related penalties assessed and collected in each fiscal year from 2001
through 2006. Various factors contribute to CBP's limited collection rates
on IP penalties, including petitions for mitigation or dismissal by the
violator, dismissal due to criminal prosecutions, and the nature of
counterfeit importation.38
37Domestic value is calculated as the landed cost plus profit (the cost of
the merchandise when last purchased, plus all duties, fees, broker's
charges, profit, unlading charges, and U.S. freight charges to bring the
good to the importer's premises), a value generally lower than the price
at which the goods might sell to the final consumer.
Table 1: Dollar Value of IP Penalty Amounts Assessed and Collected by CBP,
Fiscal Years 2001- 2006
Total penalty amount assessed:
2001: $52.0;
2002: $65.0;
2003: $45.0;
2004: $442.9;
2005: $423.9;
2006: $136.6.
Total penalty amount collected:
2001: $0.5;
2002: $0.3;
2003: $0.4;
2004: $0.5;
2005: $0.4;
2006: $0.6.
Percent collected:
2001: 0.90;
2002: 0.48;
2003: 0.91;
2004: 0.11;
2005: 0.10;
2006: 0.45.
Source: GAO analysis of CBP data.
Note: Penalty data are based on penalties assessed under 19 U.S.C.
1526(f). All data presented are based on statistics available as of
January 2007. Penalty amounts assessed in one fiscal year may not be
collected until the following fiscal year, therefore, there is not a
direct relationship between amounts assessed and collected in a given
fiscal year. CBP officials said that the amount collected may change on
different dates that data are run for open penalty cases that are still
being processed; however, officials noted that future adjustments are
unlikely to significantly change the disparity between penalty amounts
assessed and collected. CBP officials said that they use the same type of
collection calculation to report penalty statistics to Congress.
CBP's Enforcement of Exclusion Orders Has Been Limited
CBP does not maintain statistics on all of its exclusion order activities,
but available information indicates that its exclusion activities have
declined, in part due to procedural weaknesses.39 While the U.S.
International Trade Commission issues relatively few exclusion orders each
year, these orders can affect large volumes of trade, according to CBP
officials. As of July 2007, 66 exclusion orders were in effect, according
to CBP. CBP takes two basic steps to enforce these orders: (1) CBP posts
written guidance, called Trade Alerts, to its intranet to inform ports
about new orders,40 and (2) it creates electronic targeting instructions
that alert ports about incoming shipments that need to be examined for
potential infringing goods related to the order. When its exams identify
goods that should be excluded, CBP does not allow the goods to enter the
country and issues a notice of exclusion to the importer. According to CBP
officials, CBP does not maintain data on the number of exclusion notices,
either in total or by order, nor does it alert the rights holder of the
exclusion. However, CBP does maintain data on the total number of
exclusion order exams it conducts and the number of times these exams
reveal any IP discrepancies.41 As shown in figure 4, the number of
exclusion order exams have declined since fiscal year 2002, and a very
small number of discrepancies have been found.42 CBP explained that the
decrease in exams from fiscal years 2002 to 2004 was due to the
termination of targeting for one exclusion order that had been generating
most of the exams.43
38CBP officials said that many violators petition to have a penalty
mitigated or dismissed, and these actions often reduce the amount of the
penalty that CBP collects. They said that the statutory fines are large,
and when a collection action goes to court, DOJ attorneys who prosecute
the government's case are reluctant to pursue the case because they view
the penalty amounts as excessive. One agency official explained that some
penalties are dismissed as a result of the case going to criminal
prosecution, in which the U.S. Attorney negotiates to have a penalty
dropped in exchange for information or other evidence that will support
the criminal case. Also, the deceptive nature of counterfeit importation
makes it difficult for CBP to track violators and enforce penalties.
39CBP is required to exclude from entry to the United States goods that
are subject to exclusion orders issued by the U.S. International Trade
Commission. Such orders are issued when the commission has found unfair
import practices, typically involving patent or trademark infringement.
40Trade Alerts are developed by attorneys in CBP's Office of International
Trade, based on U.S. International Trade Commission documents related to
the exclusion order, and explain how to identify the goods that are to be
excluded.
41According to CBP, most of the IP discrepancies it found in the course of
conducting exclusion order exams were not violations of the order, but
were other types of IP discrepancies, such as trademark violations, that
it found during the exam.
42CBP was unable to provide similar data for 2001.
43CBP officials said that, in terminating its targeting, CBP reviewed
current use of the patented technology--a process for creating acid-wash
jeans--covered by the order as well as the results of its exams, which CBP
officials said uncovered no violations of the order.
Figure 4: Number of CBP Exclusion Order Exams Performed and IP
Discrepancies Found, Fiscal Years 2002-2006
Note: According to CBP, most of the IP discrepancies it found in the
course of conducting exclusion order exams were not violations of the
order, but were other types of IP discrepancies, such as trademark
violations, that it found during the exam.
CBP's limited and declining enforcement of exclusion orders has been of
concern to certain private sector representatives, notably the companies
that have sought such orders or the attorneys that represent them.
Representatives said companies spend millions of dollars in legal fees to
win a U.S. International Trade Commission ruling for their products, but
that the effectiveness of the ruling is weakened by poor enforcement at
CBP. Private sector representatives also stated that CBP's enforcement of
the orders is not transparent because CBP does not notify companies of any
exclusions that have occurred, impeding their ability to follow through on
the matter. This differs from CBP's practices when it detains or seizes
IP-infringing goods: CBP notifies both the importer and IP rights owner of
such detentions or seizures.44 CBP officials said the agency does not have
a regulation to permit the notification of exclusions to affected rights
owners, and they did not know whether CBP had legal authority under the
relevant statute to make such notifications.
44Under 19 U.S.C. 1499 and Customs regulation 19 C.F.R. 12.39, CBP
notifies importers and other interested parties when it detains goods for
examination. In cases involving IP infringement, CBP notifies the affected
rights holder of the detention. In addition, CBP also notifies the rights
holder when it seizes IP-infringing goods that bear counterfeit trademarks
(under 19 C.F.R. 133.21(c)) or goods seized as piratical (under 19 C.F.R.
133.42(d)).
We found several procedural weaknesses in CBP's exclusion order
enforcement, including a lack of intranet Trade Alerts for about half of
the orders currently in force, delays in posting Trade Alerts to its
intranet, minimal use of electronic targeting, and no procedures for
updating Trade Alerts when the status of exclusion orders changes or
expires. The effect of these weaknesses has been to limit or delay the
degree to which exclusion orders are enforced; details are provided below.
o CBP does not have Trade Alerts on its intranet for all orders
currently in effect and lacks information to develop Trade Alerts
for some orders. Of the 66 orders in effect as of July 2007, CBP
had posted Trade Alerts to its internal website for 24 of them and
was developing such guidance for 5 others. CBP said it had paper
records for 15 older orders that it had not yet converted to Trade
Alerts due to limited resources, but lacked records for enforcing
most of these remaining orders.45
o Although CBP officials said the agency is required to enforce
the orders from the date they are issued, we found that CBP's
enforcement may be considerably delayed. According to CBP
officials, this is because CBP must review and interpret large
amounts of complex information generated by the administrative
process, but only two attorneys at CBP are presently qualified to
carry out this review.46 We determined that it took CBP more than
60 days to post Trade Alerts for 14 of 18 orders for which it
could provide such data.47 According to CBP officials, work to
establish the intranet platform for IP issues began in 2003, but
CBP did not have the capability to actually begin posting Trade
Alerts to its Web site until April of 2004. Prior to that date,
text-only Alerts were published to an internal electronic bulletin
board that housed them for 90-day renewable periods.
o CBP develops targeting instructions for most, but not all, of
the exclusion orders it receives. Of 10 randomly selected orders
for which CBP had posted Trade Alerts as of July 2007, we found
that it had developed targeting instructions for only 4.48 Also,
although CBP officials said that the agency is to enforce
exclusion orders until they expire, we found that its actual
targeting instructions for an order may expire far sooner. CBP
officials said that targeting instructions that have not generated
any exams or found any IP violations after 90 days are removed
from CBP's targeting system. CBP provided data on the number of
exclusion orders for which it had targeting instructions in place
in each of fiscal years 2003 through 2006. The number of orders
with targeting instructions dropped from 25 in fiscal year 2003 to
10 in fiscal year 2006--far fewer than the number of orders in
force at that time.49
o CBP has no process for ensuring that its Trade Alerts are
adjusted to reflect changes in the status of exclusion orders. For
example, CBP initially provided data to indicate that it had
issued Trade Alerts for 29 orders, but we determined that 5 of the
Trade Alerts were for orders that had expired or been rescinded.
CBP concurred with our findings and said it would adjust its Trade
Alerts accordingly.
45When it provided this data to us, CBP stated that enforcement activity
based on exclusion orders can vary, depending on the nature of trade in
the product covered by the order. These orders may result in a flurry of
enforcement activity for a few weeks, months, or years, depending on trade
trends. For example, the order may cover a product for which demand is
high for a short period of time. However, orders may continue to be
legally in effect after trade in the product has ceased.
46According to CBP officials, issuing exclusion orders is a multi-step
process that involves, among other steps, coordinating with the U.S.
International Trade Commission prior to an order's issuance, making legal
and other determinations after an order issues, often in consultation with
the company filing for an order, and coordinating enforcement efforts
within CBP after instructions have been crafted.
47CBP provided exclusion order issue and Trade Alert dates for the 29
orders it said it was enforcing as of July 2007. However, the Trade Alert
date it provided for 11 orders was not the date that the Alert was
originally posted to its Web site, so we removed these orders from our
analysis. The time lag for posting the Trade Alerts we analyzed ranged
from 1 week to slightly over 10 months.
48CBP said that two of the orders for which it performed no targeting
involved products that typically enter the United States via express mail
consignment (e.g., Federal Express or similar providers), a mode of
transport for which its electronic targeting is not used. For two other
orders, it said that targeting action by CBP was not required due to the
lack of import activity. CBP provided no explanation for its lack of
targeting for the remaining three orders.
49The specific orders for which instructions existed varied during this
time period, with instructions for older orders being removed and
instructions for new orders being added. Of the 25 orders for which
targeting instructions existed in 2003, 14 were still in effect as of
February 2008. However, only one of these orders was continuously enforced
from fiscal years 2003 through 2006.
The Number of Investigative Agency IP Cases Have Fluctuated,
but Arrests, Indictments, and Convictions for IP Crimes Have
Generally Increased
The number of criminal IP enforcement cases opened annually by
ICE, FBI, and FDA during fiscal years 2001 through 2006 have
fluctuated, but the enforcement outcomes--arrests, indictments,
and convictions--from those cases grew during that same time
period. As shown in figure 5, ICE opened the most IP cases each
year, averaging 445 cases per fiscal year, compared to FBI's and
FDA's average of 306 and 39 cases per fiscal year, respectively.50
The number of IP cases that ICE and FBI opened during the period
fluctuated, with the number of ICE cases lower in 2006 than in
2001 and the number of FBI cases in 2006 about the same as their
2001 level. In general, the number of FDA cases grew during this
time period.
Figure 5: Number of Criminal Cases Opened by ICE, FBI, and FDA
Related to IP Investigations, Fiscal Years 2001-2006
Despite the fluctuations in numbers of IP cases by the two major
investigative agencies, the number of arrests, indictments, and
convictions stemming from ICE and FBI investigations of IP-related
crimes generally increased for fiscal years 2001 through 2006 (see
fig. 6), as they did for FDA. For some enforcement actions, the
agencies' investigative activity showed fairly steady growth. For
other actions, investigative activity peaked in fiscal year 2004,
but had levels in 2006 that were still well above their 2001
levels.51
50The number of FDA's cases opened is much lower than ICE's and FBI's
number of cases because of FDA's narrow jurisdiction.
Figure 6: Number of Arrests, Indictments, and Convictions by FBI,
ICE, and FDA, Fiscal Years 2001-2006
Note: In instances where joint investigations occurred, IP
enforcement actions may be counted by each agency involved; as a
result, these statistics may include some double counting.
As figure 6 illustrates, each agency's enforcement activity
generally increased from fiscal year 2001 to 2006; however,
activity levels within and across agencies varied over the 6-year
period.
DOJ's IP Enforcement Has Generally Increased
DOJ tracks its IP enforcement activity in terms of the number of
cases filed, the number of defendants in cases filed, and the
number of defendants convicted. While the number of IP cases filed
by DOJ fluctuated around 150 from fiscal years 2001 through 2005,
the number of cases grew to 204 in fiscal year 2006 (see fig. 7).
51The data we report for ICE differ from data that ICE has provided in the
past to NIPLECC's IP Coordinator for inclusion in the IP Coordinator's
quarterly updates on federal IP enforcement efforts (see
[53]www.stopfakes.gov ). In many instances, the numbers we report are
lower. We discussed these differences with ICE, which explained that
enforcement data pulled from its systems may vary each time the data are
requested because its systems are continually updated. More importantly,
the parameters ICE used to create the data for the IP Coordinator differed
somewhat from the parameters that ICE advised us to use. We believe our
parameters provide a more accurate representation of ICE's IP enforcement
activities. Data on ICE's arrests, indictments, and convictions were not
included in the IP Coordinator's quarterly update for the fourth quarter
of 2007.
Figure 7: Number of IP-Related Cases Filed by DOJ, Fiscal Years
2001-2006
Note: IP statistics include charges for the following criminal
statutes: Title 17 U.S.C. 506, 1201, 1202, 1203, 1204, and 1205;
Title 18 U.S.C. 1831, 1832, 2318, 2319, 2319A, 2319B, and 2320;
Title 47 U.S.C. 553, 605.
The results of IP-related cases that DOJ filed during fiscal years
2001 through 2006 varied. Table 2 shows that for fiscal years 2001
through 2006, DOJ received referrals for 3,548 defendants in IP
matters from the investigative agencies and filed charges against
a total of 1,523 defendants. During this period, a total of 891
defendants were convicted and 373 received prison sentences.52
According to DOJ officials, the data for the number of IP-related
defendants referred to federal prosecutors from investigative
agencies should be considered independent of the data for
defendants charged with IP violations. Additionally, the
difference between the number of referred IP defendants and the
number of defendants charged with IP offenses in a given year, or
period of years, may be explained in part by the fact that IP
suspects may never be charged with IP offenses because they are
instead charged with crimes carrying higher statutory maximum
sentences, or because the IP charges are dismissed pursuant to
plea agreements to more serious charges.53 We found that over the
6-year period of our review, about 17 percent of the total number
of defendants received prison sentences of more than 3 years,
while about 45 percent were sentenced to imprisonment of 12 months
or less.54
52Not all persons who are investigated for, or charged with, IP crimes are
convicted and sentenced for those crimes, although they still may receive
prison sentences. According to DOJ officials, persons who are investigated
for the commission of both IP crimes and related crimes that carry
potentially lengthier sentences may receive convictions and sentences for
the more serious crimes in lieu of IP convictions. In such a case, an IP
charge may be dismissed pursuant to plea negotiations, or it may not be
filed at all. Additionally, if an IP offense is charged only as a
conspiracy, DOJ states that the conspiracy charge will generally not be
recorded as an IP charge or an IP conviction in DOJ's database for
prosecutions by U.S. Attorney's Offices.
Table 2: DOJ's IP Crime Sentencing Outcomes, Fiscal Years 2001 -
2006
Fiscal year: 2001;
Number of IP-related defendants referred from investigative
agencies[A]: 514;
Number of defendants charged with IP-related violations[A]: 200;
Number of defendants convicted of IP-related crimes[B]: 153;
Number of defendants imprisoned for IP-related crimes: 52.
Fiscal year: 2002;
Number of IP-related defendants referred from investigative
agencies[A]: 497;
Number of defendants charged with IP-related violations[A]: 215;
Number of defendants convicted of IP-related crimes[B]: 165;
Number of defendants imprisoned for IP-related crimes: 65.
Fiscal year: 2003;
Number of IP-related defendants referred from investigative
agencies[A]: 563;
Number of defendants charged with IP-related violations[A]: 246;
Number of defendants convicted of IP-related crimes[B]: 141;
Number of defendants imprisoned for IP-related crimes: 58.
Fiscal year: 2004;
Number of IP-related defendants referred from investigative
agencies[A]: 565;
Number of defendants charged with IP-related violations[A]: 177;
Number of defendants convicted of IP-related crimes[B]: 134;
Number of defendants imprisoned for IP-related crimes: 66.
Fiscal year: 2005;
Number of IP-related defendants referred from investigative
agencies[A]: 724;
Number of defendants charged with IP-related violations[A]: 346;
Number of defendants convicted of IP-related crimes[B]: 122;
Number of defendants imprisoned for IP-related crimes: 53.
Fiscal year: 2006;
Number of IP-related defendants referred from investigative
agencies[A]: 685;
Number of defendants charged with IP-related violations[A]: 339;
Number of defendants convicted of IP-related crimes[B]: 176;
Number of defendants imprisoned for IP-related crimes: 79.
Fiscal year: Total;
Number of IP-related defendants referred from investigative
agencies[A]: 3,548;
Number of defendants charged with IP-related violations[A]: 1,523;
Number of defendants convicted of IP-related crimes[B]: 891;
Number of defendants imprisoned for IP-related crimes: 373.
Source: GAO analysis of DOJ data.
aAccording to DOJ officials, the data for the number of IP-related
defendants referred to federal prosecutors from investigative
agencies should be considered independent of the data for
defendants charged with IP violations. The difference between the
number of referred IP defendants and the number of defendants
charged with IP offenses in a given year, or period of years, is
due, in part, to the fact that IP suspects may never be charged
with IP offenses because they are instead charged with crimes
carrying higher statutory maximum sentences, or because the IP
charges are dismissed pursuant to plea agreements to more serious
charges.
bNumber of defendants convicted includes by plea or trial.
According to DOJ officials, these statistics may under-represent
total enforcement activity since some individuals charged with IP
crimes may actually receive sentencing under another crime. Also,
DOJ's total convictions may be less than those recorded by
investigative agencies. DOJ collects information on the number of
convictions specifically related to the IP rights violation while
investigative agencies may record convictions for any case opened
that includes an IP-related offense and for which a conviction is
issued.
53The IP statutes specify statutory maximum sentences for a first offense
of 3 to 5 years for copyright violations, and up to 10 years for both
trademark and trade secret violations.
54According to DOJ, defendants are sentenced pursuant to the U.S.
Sentencing Guidelines, and for most IP offenses are determined based on
offense level 8 (0-6 months) for most IP offenses, with offense-level
enhancements for, among other things, infringement amount, manufacturing
or importation, and conscious or reckless risk of serious bodily injury.
Agencies Have Not Taken Steps to Assess IP Law Enforcement Efforts
Agencies have not taken key steps to assess IP enforcement
achievements. Specifically, most agencies have not (1) conducted
systematic analysis of their enforcement activity, (2) clearly
identified which of their efforts relate to a key IP enforcement
area--IP crimes that affect public health and safety--nor
collected data to track these efforts, or (3) set performance
measures or targets for carrying out IP enforcement. These steps
are an important part of agencies' ability to effectively plan and
assess their performance and report to Congress and others.
Although agencies' statistics show general increases in the level
of seizures, investigations, and prosecutions, they have not taken
steps to understand the drivers behind these increases in ways
that could better inform management and resource allocation
decisions. For example, while all the agencies reported using IP
enforcement statistics to compare outputs from one year to the
next, our discussions with agency officials revealed that little
has been done to systematically examine enforcement statistics.
Such analysis might include looking at field offices or regions
with higher or lower levels of activity to identify effective
enforcement practices and inform resource allocation decisions. It
might also include identifying the types of IP crimes that agency
staff are enforcing to understand criminal activity and help focus
enforcement efforts.
Agencies are already collecting some data that could be used to
examine enforcement efforts more systematically.55 In April 2007,
we reported that CBP has not analyzed variations in its IP
enforcement activity by port or conducted analysis of ports'
relative enforcement outcomes.56 By analyzing available CBP data,
we found pockets of enforcement activity in some areas. For
example, a majority of CBP's seizure actions took place in a
limited number of locations, with nearly three-fourths of
aggregate seizure value accounted for by only 10 of more than 300
ports. These are a mix of ports, including a few of the nation's
largest and some that are smaller. In this report, we made
recommendations to CBP to improve upon and better understand its
IP enforcement activity through better analysis.57 We performed a
similar analysis for DOJ using data on the number of defendants
charged and number of cases filed by U.S. Attorney's Offices and
also found concentrations of activity for prosecution activity.
For example, about 50 percent of IP-related cases were filed by
around 10 percent of U.S. Attorney's Offices during fiscal years
2001 through 2006. The same results were true for the number of
defendants charged with IP crimes.
55We reviewed agency statistics by field office and aggregated by fiscal
year. Field office level statistics are considered law enforcement
sensitive so details on the locations are not provided in this report.
56 [54]GAO-07-735 .
We also compared the U.S. Attorney's Offices with the highest IP
enforcement activity with the locations where CHIP units were
created as of fiscal year 2006. Of the top 10 offices, ranked by
number of IP cases filed in 2006, 7 had CHIP units, and the 2 most
active offices had the largest CHIP units, measured by the number
of attorneys working in the unit. This analysis suggests that the
number of resources in a particular field office contributes to
higher levels of activity; however, according to DOJ, other
factors, such as crime level, can also affect activity levels. Our
analyses illustrate the types of analysis that agencies can
perform using their data, and insights they can obtain, to better
inform management and resource allocation decisions. DOJ said that
it performed similar analysis before deciding where to place CHIP
units, but did not provide evidence that it conducts such analysis
on a routine basis.
While all the agencies collected statistics to report broadly on
their IP-related enforcement activities, most of the agencies have
not clearly identified which IP enforcement actions relate to
public health and safety and do not have data to track their
efforts in this area, despite making this a priority enforcement
area. By virtue of its mission, FDA's data on IP-related
enforcement specifically reflects its efforts to address IP
violations that affect public health and safety. CBP has recently
begun to monitor IP seizures related to public health and safety.
In January 2008, it released seizure data for fiscal year 2007
that for the first time identified seizures in product categories
that may involve public health and safety, e.g., pharmaceutical,
electrical articles, and sunglasses. CBP officials told us that
defining public health and safety seizures is difficult because
not all seizures in a given category pose public health and safety
risks, and such risks can be found across a broad range of
products.
57We recommended that CBP use existing data to understand and improve IP
enforcement activity by analyzing IP enforcement outcomes across ports and
other useful categories, such as modes of transport. See [55]GAO-07-735 .
The other agencies lack data for identifying IP enforcement
actions related to public health and safety. For example, ICE
records IP enforcement under a general data field that applies to
all types of IP cases. FBI and DOJ have some sub-categories for
the types of IP investigations and prosecutions they pursue, but
none is specific to public health and safety. Without specific
data and definitions for IP-related enforcement efforts that
impact public health and safety, agencies are unable to
effectively track outcomes, inform management and resource
allocation decisions, and report to Congress on an area of
significant public importance.
Agencies have also taken few steps to clearly identify performance
measures specifically for their efforts related to IP-related
enforcement activities or establish performance targets to track
their progress towards these efforts. We reviewed agencies'
strategic plans and, while none had specific goals on IP
enforcement, the CBP and DOJ plans listed IP enforcement as one
issue to be addressed as part of working toward broader
enforcement goals. 58 We also examined agencies' public and
internal planning documents or memos for IP enforcement and found
that some had goals and objectives, but contained few performance
measures or targets.59 Moreover, most of these are internal agency
documents that are not available to the public.60 Neither ICE nor
FDA have any additional planning documents for IP enforcement.
58We reviewed the most recent agency strategic plans available, including
DHS's 2004 strategic plan; CBP's strategic plan for fiscal years
2005-2010; ICE's interim strategic plan dated July 2005; DOJ's strategic
plan for fiscal years 2007-2012; and FDA's strategic plan, dated August
2003.
59CBP has an IP Rights Trade Strategy that contains certain performance
measures and targets for IP enforcement, such as improving by 15 percent
the efficiency of its efforts to target shipments containing IP violations
and increasing the number and value of seizures meeting the strategy's
goal by 15 percent. However, the document lacks baselines against which to
measure progress. FBI articulates annual IP enforcement goals in a memo to
its field offices, but does not include performance measures or targets.
DOJ task force reports on IP enforcement contain recommendations for DOJ
action, but no measures or targets. In 2007, DOJ developed its first IP
enforcement strategy with enforcement objectives and some performance
measures, but this document is for internal government use only, and we
cannot disclose its contents.
60For example, we found in our April 2007 report that CBP's IP Rights
Trade Strategy is an internal document with limited distribution
throughout CBP and therefore has limited usefulness as a tool to guide the
agency's IP enforcement efforts. See GAO -07-735. DOJ's 2007 strategy is
also for internal use only.
We asked agencies how they monitor their performance of IP
enforcement activities. Most said they regarded their increasing
trends in aggregate IP statistics (or outputs) as indicative of
their progress. However, without performance measures related to
these statistics, it is not clear how these statistics should be
assessed because it is not clear what the agencies sought to
achieve. We recognize that establishing measures and setting
specific targets in the law enforcement area can be challenging.
It is important that agencies carry out law enforcement actions
that are based on merit and avoid the appearance that they strive
to achieve certain numerical quotas, regardless of case quality.
By definition, performance measures are a particular value or
characteristic used to quantify a program's outputs - which
describe the products and services delivered over a period of time
- or outcomes - which describe the intended result of carrying out
the program. A performance target is a quantifiable characteristic
that establishes a goal for each measure; agencies can determine
the program's progress, in part, by comparing the program's
measures against targets.
The Government Performance and Results Act of 199361 incorporated
performance measures as one of its most important features, and
the establishment and review of performance measures are a key
element of the standards for internal control within the federal
government.62 We believe that measures and targets remain
important components of measuring agency performance and enhancing
accountability, particularly setting outcome-based measures that
provide insight into the effectiveness of agencies' efforts, not
just levels of activity.63 More refined performance measurements
that include outcome measures would allow agencies to better track
their IP enforcement performance against their goals and give
managers crucial information on which to base their organizational
and management decisions. Performance assessment is also important
in reporting progress to others, such as the IP Coordinator and
NIPLECC. Doing so could help NIPLECC address its strategic
planning weaknesses that we previously identified in our November
2006 report.64
61The Government Performance and Results Act of 1993 (GPRA, Pub. L. No.
103-62) requires federal agencies to develop strategic plans with
long-term, outcome-oriented goals and objectives, annual goals linked to
achieving the long-term goals, and annual reports on the results achieved.
62GAO, Internal Controls: Standards for Internal Controls in the Federal
Government, [56]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999).
63GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [57]GAO/GGD-96-118 (Washington, D.C.: June
1996).
The National Intellectual Property Rights Coordination Center Has
Not Achieved Its Mission, and Staff Levels Have Decreased
The National Intellectual Property Rights Coordination Center, an
interagency mechanism created by the executive branch to improve
federal IP enforcement and coordinate investigative efforts
between ICE and FBI, has not achieved its mission or maintained
the staffing levels set for it upon its creation. The
center--intended to collect, analyze, and disseminate IP-related
complaints from the private sector to ICE and FBI field offices
for investigation--has suffered from a slow start, a lack of
common understanding about its purpose and agencies' roles, and
limited private sector complaint information. As a result, the
center has gradually shifted its focus toward educating the
private sector about federal IP enforcement efforts. Congressional
appropriators expressed support for the center's original concept
through various conference reports, which, over time, directed
participating agencies to allocate appropriated funds to staff and
operate the center. However, staffing levels have declined and the
FBI no longer participates in the center. Plans are underway to
move the center to a new location in early 2008, and according to
officials from the other four key agencies, they have met with ICE
to discuss what role their agencies might play in the center in
the future.
Created to Improve and Coordinate IP Enforcement, the Center Focuses
Primarily on Private Sector Outreach
The National Intellectual Property Rights Coordination Center is
one of several interagency mechanisms for coordinating federal IP
enforcement efforts. Unlike NIPLECC, which was established in law
by Congress in 1999, the idea for creating the center arose from
the work of the National Security Council's Special Coordination
Group on Intellectual Property Rights and Trade Related Crime,
co-chaired by the FBI and legacy Customs. This group was formed in
order to implement Presidential Decision Directive 42, issued in
1995, concerning international crime. In 1999, a consensus of the
group members resulted in a multi-agency plan to improve the U.S.
government's efforts in IP enforcement, and the center was
created. According to ICE officials at the center, the center was
directed by legacy Customs and included staff from Customs and
FBI. After the formation of DHS, ICE took over legacy Customs'
role in directing the center and providing most of the DHS staff
that were assigned to the center.
64We reported that NIPLECC's strategy was limited because it did not fully
address the characteristics of an effective national strategy, missing
elements such as a discussion of performance measures, resources, risk
management, and designation of oversight responsibility. Although the
strategy cites some output-related performance measures provided by the
different agencies, we reported that these figures were presented without
historical data on prior years or goals, limiting their usefulness to
guide policy and decision makers in assessing performance, allocating
resources, and balancing priorities. See [58]GAO-07-74 .
While the center and NIPLECC were both created to improve
coordination among law enforcement agencies, the concept for the
center gave it a greater operational focus than NIPLECC. The
executive branch intended that the center would act as a hub for
the collection, analytical support, and dissemination to
investigative agencies of IP-related complaints from the private
sector, including copyright infringement, trademark infringement,
and theft of trade secrets. It envisioned that the center would
coordinate and direct the flow of criminal referral reports on IP
violations to the participating agencies' investigative resources
in headquarters and the field. In carrying out these roles, the
center was expected to help integrate domestic and international
law enforcement intelligence, consult regularly with the private
sector, and generally act as a resource for IP complaints.
Congressional support for the center's creation and role was noted
through directives in various conference reports related to
appropriations laws in fiscal years 2001 through 2004. These
reports indicate that Congress also expected the center to be a
dedicated effort to improve intelligence and analysis related to
IP rights violations and gather IP enforcement information from
other federal and state law enforcement agencies to augment
investigations.65
Like NIPLECC, the center has had difficulty defining its purpose
and carrying out its law enforcement coordination mission.66
According to ICE, FBI, and DOJ officials and our analysis, the
center has not achieved its original mission for several reasons:
o The center got off to a slow start with limited operations in
fiscal year 2000, and it took several years for it to become fully
operational. For example, in 2004, we reported that many center
staff were reassigned after the events of September 11, 2001,
according to an FBI official.67 In addition, a change in
leadership after the formation of DHS and the relocation of the
center to new physical space in 2006 further impacted the
continuity of the center's operations.68
o The flow of complaint information from the private sector to the
center never materialized sufficiently to make the concept work,
according to ICE and FBI officials. We reported in 2004 that the
center was not widely used by industry,69 and this situation has
persisted. For example, few of the private sector representatives
that we contacted described working through the center to address
their IP complaints.
o Participating agencies never reached agreement on how the center
would operate and what their respective roles would be. FBI
provided us a copy of a draft memorandum of understanding that it
said it presented to ICE in fiscal years 2003, 2004, and 2005, to
clarify operating procedures and agency roles. FBI also provided a
copy of a 2004 letter from ICE acknowledging receipt of the draft
memorandum and associated documents and indicating its intent to
meet with FBI to discuss the matter. However, FBI officials said
that neither ICE nor DHS followed up with FBI on this issue. ICE
officials acknowledged having seen the memorandum of understanding
in draft form but had no record or recollection of any discussions
being held with FBI to discuss the memorandum.
65See Conference Reports: 106-1005, accompanying P.L. 106-553; 107-253,
accompanying P.L. 107-67; 108-10 accompanying P.L. 108-7 and 108-280
accompanying P.L. 108-90.
66In 2004, we reported that after its creation, NIPLECC struggled to
define its purpose, had leadership problems, and was regarded by Congress
and the private sector as having had little discernable impact, having
done little else in its early years than issue annual reports on federal
IP enforcement efforts. This was due in part to a lack of clear
expectations in its authorizing legislation. See [59]GAO-04-912 . Congress
clarified NIPLECC's mission in the 2005 Consolidated Appropriations Act,
calling on it to (1) establish policies, objectives, and priorities
concerning international IP protection and enforcement; (2) promulgate a
strategy for protection of American IP overseas; and (3) coordinate and
oversee implementation of the policies, objectives, priorities, and
overall strategy for protection of IP overseas by agencies with IP
responsibilities. See [60]GAO-07-74 .
Over time and in the absence of complaint information, the center
began focusing on educating the private sector about federal IP
enforcement agencies, approaches, and contacts, according to ICE
officials at the center. Center staff participate in conferences,
training programs, and trade shows around the country in which
they disseminate information about federal IP enforcement to the
private sector. For example, center staff participated in 60
outreach and training events in fiscal year 2006 and 95 in fiscal
year 2007. In addition, in 2007, ICE officials said the center
began scheduling training sessions in selected cities around the
country in which they bring together appropriate federal, state,
and local law enforcement agencies and private sector
representatives. The purpose of the training is to explain the
region's IP enforcement structure and strengthen involvement of
the participants.
67 [61]GAO-04-912 .
68In 2006, the center was moved from its original physical location to a
temporary location that lacked the required security precautions to
install FBI's classified computer system. As a result, FBI removed its
staff and computers from the center because it could no longer assure the
security of its data.
69 [62]GAO-04-912 .
Despite Congressional Expectations, the Center's Staffing Levels Have Declined
Through various conference reports, congressional appropriators
supported the creation and staffing of the center by FBI, legacy
Customs, and ICE, but agencies' staffing levels at the center have
declined. According to ICE officials, the center's original
concept envisioned 24 staff--16 from Customs and 8 from FBI. They
said staff were to include a Director, investigative agents,
intelligence analysts, and administrative support. The types of
staff envisioned for the center further distinguish it as an
operational entity compared to NIPLECC, which is not designed to
carry out law enforcement.70 After the formation of DHS, the 16
Customs positions were transferred to DHS and taken over by as
many as 16 ICE staff and 2 CBP staff. However, according to ICE
and FBI officials, each agency's staffing allotment has only
periodically met the envisioned levels, and total staff currently
at the center are about one-third of the level originally
envisioned.
Conference reports for fiscal years 2001 through 2004
appropriations bills, at various times, indicated a desire for
FBI, legacy Customs, and ICE to allocate funding for staffing
and/or operations of the center. For example, in fiscal year 2001,
the conference report directed FBI to allocate $612,000 to provide
eight positions to the center.71 In fiscal years 2002, the
conference report directed legacy Customs to allocate $5 million
to support the hiring of agents dedicated to IP enforcement and to
support and enhance the operation of the center.72 In fiscal year
2003, the conference report directed legacy Customs to allocate $5
million to continue center operations and $1.4 million to expand
the center and its staffing. Congressional conferees encouraged
Customs to use a portion of the funds to establish the
clearinghouse for referrals.73 In fiscal year 2004, the conference
report directed ICE to allocate $6.4 million to the center.74
70NIPLECC's staff include the IP Coordinator, a policy analyst, press and
legislative assistants, and various trade- or policy-oriented detailees
from the participating agencies.
71Specifically, the conference report directed FBI to allocate "$612,000
(8 positions and 4 workyears, including 2 agents)." Conference Report
106-1005, accompanying P.L. 106-553.
72Conference Report 107-253, accompanying P.L. 107-67.
73Conference Report 108-10 accompanying P.L. 108-7. The purpose of the
clearinghouse was to gather IP rights information from other federal as
well as state and local agencies. According to CBP officials, the funding
that Customs was directed to provide in fiscal year 2003 was recurred at
about $4.6 million to reflect the absence in that fiscal year of one-time
costs that were present in fiscal year 2002. Also, CBP officials said that
the direction to Customs to allocate an additional $1.4 million was
reduced to $1.39 million following a $9,100 rescission.
74Conference Report 108-280 accompanying P.L. 108-90. According to ICE
officials, the funding that it was directed to provide in fiscal year 2004
was reduced to about $6.36 million due to a rescission contained in the
Consolidated Appropriations Act, 2004 (P.L. 108-199).
We asked agencies how they responded to the conference report
directives, with agencies responding as follows:
o FBI officials told us that the funding enabled them to authorize
and begin filling positions noted in the congressional conference
reports. FBI filled or nearly filled all eight positions during
fiscal years 2001 through 2005. In fiscal year 2006, FBI continued
to fill six of the positions, but removed its computers from the
center due to security concerns and gradually had its staff spend
less time working out of the center.75 Since fiscal year 2007, due
to resource constraints, none of the FBI positions has been
filled, and the FBI no longer participates in the center.
o CBP officials said that their records showed that in fiscal year
2002 legacy Customs placed seven staff (including two agents and
four intelligence research specialists) in the center and assigned
additional agents and intelligence research specialists to certain
field offices and overseas locations to carry out IP enforcement.
In fiscal year 2003, Customs officials told us they placed more
agents and intelligence analysts in certain field locations and
headquarters, but could not provide us with specific numbers.
According to the Director of the center, following the formation
of DHS, the two CBP positions were filled in 2004 but have been
vacant for several years.
o ICE provided data indicating that, since fiscal year 2004, it
spent about $3 million on investigative activities, set aside
about $1.9 million for future construction costs for the center,
spent about $1.2 million on direct salary costs, and spent the
remainder on operating costs for the center. ICE staffing levels
at the center have declined from 15 in 2004 to 8 in 2007.
75See footnote 66.
ICE Views Center's Relocation as an Opportunity to Revisit Center's
Purpose and Agency Roles
In early 2008, ICE plans to move the center to a new location that
is being configured specifically for the center and some
additional functions. According to ICE officials, the new center
will continue to focus on private sector outreach.76 The role that
the center will play in coordinating referrals and investigations
among the IP enforcement agencies, however, remains unclear. ICE
officials said they view the relocation as an opportunity to
return the center to its original concept and purpose. NIPLECC's
IP Coordinator said that as an entity staffed by, and located in,
a law enforcement agency, the center can play a role in
facilitating law enforcement coordination at an operational level
that NIPLECC cannot. However, the IP Coordinator agreed that there
are mixed views among IP enforcement agencies about the usefulness
of the center.
In preparation for the move, ICE officials said they had met with
FBI, DOJ, CBP, and FDA to offer them space in the center and ask
them to permanently assign staff there; however, agencies'
reactions are mixed. FDA plans to staff one special agent at the
center initially and will send additional agents later if its
workload at the center justifies additional staff. FDA officials
said that the agency decided to staff an agent at the center
despite its limited resources because counterfeit drugs pose a
significant threat to the public health and are a high priority to
FDA. According to an official in FDA's Office of Criminal
Investigations, a significant portion of FDA's counterfeit drug
investigations are conducted jointly with ICE, and the center may
facilitate a coordinated law enforcement approach.
According to DOJ and FBI officials, staff will not be placed at
the center unless there is a more operational focus in addition to
the training and outreach currently provided. More specifically,
DOJ and FBI would like there to be some initial analysis and
investigation after an industry referral is received at the center
before information is passed on to field investigative agents.
Further, even if FBI sees the center taking a more operational
focus, the agency would have to request additional staff resources
to be able to assign personnel, since currently none is available.
CBP officials said they do not plan to allocate any staff to the
center.
76The center will be co-located with two other ICE initiatives: ICE Mutual
Agreement between Government and Employers (IMAGE) and the Washington
Field Office's Document and Benefit Fraud Task Force.
According to ICE and FDA officials, no discussions have taken
place to outline the purpose of the new center or define how
agencies would coordinate their enforcement activities at the
center.
Conclusions
Federal IP enforcement agencies confront growing challenges in
protecting the United States against counterfeit and pirated
goods. IP crimes appear to be on the rise, and the key law
enforcement agencies and FDA need to work efficiently and
effectively to contend with this trend. Most federal IP
enforcement activity has increased in recent years. However,
because IP enforcement is generally not a top agency priority, few
resources are dedicated solely to this task, and agencies may
spend fewer resources on IP enforcement than on higher priority
issues. Despite the general increases in IP enforcement activity,
agencies have taken little initiative to improve their data or
evaluate their enforcement activity in ways that would enable them
to identify and track certain trends or enforcement outcomes, like
regional variations in enforcement activity and types of
IP-infringing goods commonly enforced. Performing this type of
analysis could help the agencies make further improvements in
their IP enforcement activity by making more effective management
decisions and resource allocations. At the same time, setting
performance measures and targets for IP enforcement activities
could help the agencies better assess their progress toward their
goals. Finally, collecting better data, analyzing them, and
reporting on progress toward goals could help make the key IP
enforcement agencies more accountable to the public and Congress,
particularly regarding their efforts to address IP-infringement
that affects public health and safety. The need for such
improvements among IP enforcement agencies mirrors weaknesses we
found previously with NIPLECC, in which the lack of clarity over
performance measures, resource requirements, and oversight
responsibilities limited NIPLECC's ability to prioritize, guide,
implement, and monitor the combined efforts of multiple agencies
to protect and enforce IP rights.
One area where IP enforcement has not increased is CBP's
enforcement of exclusion orders. U.S. companies spend millions of
dollars to argue their allegations of IP infringement before the
U.S. International Trade Commission, but the Commission relies on
CBP to enforce its decisions. CBP has allocated few resources to
carry out its role in this complex area, lacks data to track its
enforcement of exclusion orders, and has not given sufficient
attention to addressing the procedural weaknesses that we
identify. Given the potential for these orders to affect large
volumes of trade, CBP has a responsibility to improve its
enforcement of exclusion orders.
As agencies consider ways to further improve federal IP
enforcement, the relocation of the National Intellectual Property
Rights Coordination Center presents an opportunity for NIPLECC and
the key IP enforcement agencies to reassess the need for law
enforcement coordination in this area and the best way to achieve
it. As part of this discussion, NIPLECC and the agencies need to
examine the center's mission, what outcomes they expect from the
center, and what role key agencies should play, if any, in the
center's future. Given Congress' sustained interest in improving
federal IP enforcement and its past support for the center,
providing this information to Congress could help better inform
Congress about what contributions to IP enforcement it should
expect from the center.
Recommendations for Executive Action
To better inform management and resource allocation decisions and
report on agency achievements, we recommend that the Attorney
General and the Secretaries of Homeland Security and Health and
Human Services direct their agencies to take the following four
actions:
For ICE, FBI, FDA, and DOJ:
o systematically analyze enforcement statistics to better
understand variations in IP-related enforcement activity.
For CBP:
o continue to take steps to better identify IP seizures that pose
a risk to the public health and safety of the American people, and
collect and report this data throughout the agency and to
Congress.
For ICE, FBI, and DOJ:
o take steps to better identify enforcement actions against
IP-infringing goods that pose a risk to the public health and
safety of the American people, and collect and report this data
throughout each agency and to Congress.
For CBP, ICE, FBI, and DOJ:
o establish performance measures and targets for IP-related
enforcement activity and report such measures, targets, and actual
performance to NIPLECC and Congress.
To better inform Congress and affected rights holders regarding
its enforcement of exclusion orders and address certain procedural
weaknesses, we recommend that the Secretary of Homeland Security
direct the Commissioner of CBP to take the following three
actions:
o identify factors currently limiting their enforcement
capabilities and develop a strategy for addressing those
limitations along with a timeline for implementing the strategy;
o begin collecting data on the number of exclusions, in total and
per exclusion order; and
o examine CBP's ability to develop regulations to allow
notification of exclusions to affected rights holders, and if
authorized, develop such regulations.
To clarify the mission and structure of the National Intellectual
Property Rights Coordination Center, we recommend that the
Attorney General and the Secretary of Homeland Security, in
consultation with NIPLECC, direct their IP enforcement agencies to
take the following three actions:
o reassess the National Intellectual Property Rights Coordination
Center's mission and how its future performance will be assessed;
o define agencies' role in the center and the number and types of
resources needed to operate the center; and
o report to Congress on the center's redefined purpose,
operations, required resources, and progress within 1 year of the
center's relocation.
We provided a draft of this report to DHS, DOJ, and HHS for their
review and comment. CBP and ICE provided comments through DHS.
DHS, CBP, and ICE concurred with our recommendations. DOJ did not
indicate whether it agreed or disagreed with our recommendations.
HHS commented that it disagreed with our recommendation that FDA
develop performance measures and targets for IP enforcement. In
light of the agency's public health and safety mission, we
determined that it was inappropriate to require FDA to develop law
enforcement-related measures and targets, and no longer recommend
this. However, given the importance of understanding the nature of
IP violations that affect public health and safety, we now
recommend instead that FDA more systematically analyze its IP
enforcement statistics (see p. 43). We believe this is a more
appropriate recommendation because FDA said that it already
monitors its IP enforcement criminal investigations to discern
trends. In response to other comments the agencies made, we also
modified two recommendations to give the agencies more flexibility
in identifying which of their IP enforcement actions relate to
public health and safety. Instead of recommending that the
agencies create categories and definitions of such actions, as we
did in the draft report, we recommend that they take steps to
better identify these actions (see p. 43). A summary of each
agency's comments and our evaluation follows.
Agency Comments and Our Evaluation
CBP commented that the report inaccurately states that it lacks
data and definitions for IP-related enforcement efforts that
impact public health and safety, saying it reported this data in
its fiscal year 2007 seizure statistics. In response, we modified
the final report to note that CBP began reporting on IP seizures
related to public health and safety for the first time in January
2008 (see p. 33). CBP also commented that the report's finding
that it lacks performance measures for IP enforcement is not
completely accurate and cited its "National IPR Trade Strategy."
We added information to the final report about this document (see
p. 34), but continue to believe that CBP needs to incorporate IP
enforcement measures and targets into its agency-wide strategic
plan, which it has said it intends to do. Finally, CBP repeated
comments made about our April 2007 report regarding an analysis
that we proposed it could undertake to better understand its
enforcement outcomes.77 We disagreed with CBP's comments at that
time and continue to believe that CBP, and the other agencies, can
make better use of existing data to understand their IP
enforcement efforts and outcomes. DHS's written comments and our
detailed response appear in appendix IV.
DOJ made several comments about ways in which it believes the
report understates its IP enforcement achievements. For example,
DOJ cited percent increases between select years for certain
indicators to demonstrate its increased enforcement results.
However, the report takes a more systematic approach to evaluating
overall federal IP enforcement efforts by examining multiple
indicators at multiple agencies over a 6-year period. We believe
that the report's approach and assessment is fair and valid. DOJ
also commented we did not sufficiently acknowledge increases in
training and resource allocations for IP enforcement, particularly
as relates to its CHIP units. In fact, as was true for the draft
report, the final report discusses growth in CHIP units and
numbers of IP-trained attorneys (see p. 20). Finally, DOJ
commented that the report inaccurately characterizes its efforts
to analyze IP enforcement statistics by district. We modified the
report to add information that DOJ analyzed IP enforcement
statistics when deciding where to place CHIP units; however, DOJ
never provided evidence that it conducts such analysis on a
routine basis (see p. 33). We continue to believe that
systematically conducting such analysis can help DOJ determine
whether its allocation of resources is producing the kind of
increases in IP enforcement outcomes that it desired.
77 [63]GAO-07-735 .
DOJ commented that the report inaccurately describes its efforts
to establish performance measures or goals to assess its IP
enforcement achievements. In response, we added information to the
discussion of performance measurement about certain DOJ documents
that contain such goals and measures, and cited again the DOJ task
force reports on IP enforcement, which had been mentioned earlier
in the report (see p. 34). However, the task force reports contain
only recommendations for DOJ action, not goals with associated
performance measures. A few of these recommendations are
structured like performance goals, such as "target large, complex
organizations that commit IP crime" or "prosecute IP offenses that
endanger the public's health or safety," but the task force report
provides no indication of how DOJ will measure progress toward
these recommendations. DOJ commented that developing numeric or
percentage targets linked to its performance measures could create
the potential for case quotas or thresholds. We agree that setting
performance measures and targets in the law enforcement arena is
difficult, and we added information to the report to further
clarify the sensitivities associated with doing this (see p. 35).
However, we continue to believe that it is important, and
possible, for DOJ to develop performance measures and targets to
help it, and others, determine whether its overall IP enforcement
efforts are achieving performance goals and focused on the right
issues, and whether its resource allocations devoted to this area
are contributing to the desired results. DOJ's written comments
and our detailed response appear in appendix V.
HHS expressed concerns about setting performance measures and
targets that were similar to those raised by DOJ. While we no
longer direct this recommendation to FDA, we continue to believe
that is it important and possible for law enforcement agencies to
set useful performance measures and targets to guide and assess
their efforts. FDA's written comments and our detailed response
appear in appendix VI.
DHS, DOJ, and HHS also provided technical comments, which we
incorporated as appropriate.
As agreed with your office, unless you publicly announce the
contents of this report earlier, we plan no further distribution
until 30 days from the report date. At that time, we will send
copies to appropriate congressional committees and the Secretaries
of the Departments of Homeland Security and Health and Human
Services; the Attorney General; the Chairman of the U.S.
International Trade Commission; and NIPLECC's IP Coordinator. We
will also make copies available to others on request. In addition,
the report will be available at no charge on the GAO Web site at
http://www.gao.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-4347 or [52][email protected] . Contact
points for our Office of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff
who made major contributions to this report are listed in appendix
VII.
Sincerely yours,
Loren Yager, Director
International Affairs and Trade
Appendix I: Scope and Methodology
The Ranking Minority Member of the Senate Subcommittee on
Oversight of Government Management, the Federal Workforce and the
District of Columbia, Committee on Homeland Security and
Governmental Affairs, asked us to (1) examine federal agencies'
roles, priorities, and resources devoted to intellectual property
(IP) enforcement, (2) evaluate agencies' IP-related enforcement
statistics and achievements, and (3) examine the status of the
National Intellectual Property Rights Coordination Center.
Based on our previous work and background research, we determined
that the key federal law enforcement agencies carrying out IP
enforcement are Customs and Border Protection (CBP), Immigration
and Customs Enforcement (ICE), the Federal Bureau of Investigation
(FBI), and the Department of Justice (DOJ). In addition, we
included the Food and Drug Administration (FDA) due to its role in
investigating counterfeit versions of products it regulates. To
describe the federal structure that carries out IP enforcement, we
met with CBP, ICE, DOJ, FBI, and FDA officials at the agencies
headquarters, and, for all agencies except FDA, met with officials
in multiple field locations. The locations we visited are not
disclosed in this report for law enforcement reasons.1 We also met
with the International IP Enforcement Coordinator (IP
Coordinator). We reviewed agency documents to understand policies
and practices related to IP enforcement and discussed the
processes by which these agencies interact with each other in
conducting IP enforcement. We also reviewed prior GAO reports that
examined the federal IP enforcement structure, agencies' role, and
key coordinating mechanisms.2 To determine agencies' IP
enforcement priorities, we examined strategic and other planning
documents, including agency memos detailing goals and objectives
related to IP enforcement. In some instances, agency documents
were law enforcement sensitive; therefore, the details have not
been included in the report and only information that was
discussed openly in interviews or in public documents and forums
has been used.
To determine resources dedicated to IP enforcement, we spoke with
agency officials, obtained data on the number of staff dedicated
to IP enforcement, and analyzed data, where available, on staff
time spent on IP enforcement. In particular, we obtained data on
(1) the number of criminal investigative case hours that ICE and
FDA field offices recorded under codes used to track IP
enforcement; and (2) the average number of agents on board that
were working IP criminal cases, as reported by FBI field offices.
We obtained data covering fiscal years 2001 through 2006, except
for FDA investigative case hours for counterfeit products, which
the agency has only been tracking since fiscal year 2003. We
reviewed these data for obvious errors and consistency with
publicly reported data, where possible. When we found
discrepancies, we brought them to the attention of relevant agency
officials and worked with them to correct the discrepancies before
conducting our analyses. On the basis of these efforts, we
determined that these data were sufficiently reliable for our
purposes. To make similar comparisons across the agencies, we
converted ICE and FDA data on criminal case hours into full-time
equivalents (FTE) using information that the agencies provided and
confirmed with FBI officials that we could use FBI's measurement
as equivalent to the FTE measurement for time spent by ICE and FDA
IP investigations.
1Our April 2007 report included analysis and information about IP
enforcement at the ports we visited. We withheld information on these
ports' identity for law enforcement reasons. Therefore, we cannot disclose
this information in this report.
2 [64]GAO-04-912 ; [65]GAO-07-74 ; and [66]GAO-07-735 .
To examine agencies' IP enforcement activity, we analyzed data
from fiscal year 2001 to fiscal year 2006 on CBP IP seizures,
penalties, and exclusion activities; the number of criminal cases
opened in ICE, FBI, and FDA's Office of Criminal Investigation
field offices that were recorded as IP enforcement cases; ICE,
FBI, and FDA arrests, indictments, and convictions stemming from
their IP investigations; and the numbers of referrals of IP cases
to DOJ from the investigative agencies, IP cases that DOJ filed,
defendants charged in those cases, defendants convicted of IP
crimes, defendants imprisoned, and sentences awarded. Information
on CBP seizures and penalties is drawn from our April 2007 report.
In addition, we obtained data from CBP on its Trade Alerts as of
July 2007, as well as the number of targeting instructions it had
in place for each Trade Alert in each of fiscal years 2003 through
2006 and the number of exams, IP violations, and seizures it has
recorded as a result of those instructions. We discussed key law
enforcement activities with ICE, FBI, FDA, and DOJ and determined
what data the agencies record and what activities they report on
internally. We then requested them to extract data from their
systems on these key activities when they were performed for IP
enforcement. For the most part, investigative agency data reflect
activities that are coded as IP enforcement, while DOJ data
reflect activities in which key IP enforcement statutes are cited.
In general, the agencies said that the data they provided
reflected most, but perhaps not all, of their activity related to
IP enforcement.
In order to collect uniform data on IP enforcement activities, we
worked with each agency to develop the parameters by which we
would request data from their systems. In addition, we worked with
officials at each agency to develop a thorough understanding of
the data that we received. We reviewed the data we obtained for
obvious errors and consistency with publicly reported data, where
possible. When we found discrepancies, we brought them to the
attention of relevant agency officials and worked with them to
correct the discrepancies before conducting our analyses. For
example, we determined that CBP provided information on Trade
Alerts that related to Exclusion Orders that were no longer in
effect. CBP agreed and revised the number of Trade Alerts on its
Web site. Also, the data we report on ICE's arrests, indictments,
and convictions are different from data it has reported publicly
in the IP Coordinator's quarterly IP enforcement updates.3 ICE
officials said that the system from which it obtains this data is
a "live system," meaning that data pulled from the system on
different dates may not be the same. ICE officials cited updates
to case information as one reason that data might differ over
time. In addition, the parameters that ICE advised us to use when
requesting ICE's data on IP enforcement cases differed somewhat
from the parameters that ICE used. Finally, we found some
inconsistencies with FBI's IP enforcement data. We discussed these
discrepancies with FBI and made changes to the data accordingly.
We asked FBI officials familiar with the agency's IP enforcement
efforts to review the final data set for accuracy. We did not find
discrepancies with FDA or DOJ data and used the most current data
sets they provided for the 6 fiscal years we requested. Based on
our discussions of internal controls and ability to address data
discrepancies with the agencies, we determined that the data are
sufficiently reliable to report IP enforcement activity. To assess
federal agencies' achievements in IP-related enforcement activity,
we reviewed agency priorities, goals, and objectives and compared
them to the types of data agencies collected. We also asked
program officials how they used their IP enforcement data to
assess performance and inform management and resource allocation
decisions.
We also talked to private sector representatives to better
understand how counterfeit and piracy affects their businesses and
obtain their views on federal IP enforcement. We obtained
different company contacts from conferences, federal agencies
working with private sector, and our own research. We developed
structured interview questions to understand industry views
regarding federal IP enforcement efforts and private companies'
own efforts to protect their IP. We selected eight sectors based
on our participation in trade conferences and discussions and
information from organizations such as the U.S. Chamber of
Commerce that have anti-counterfeiting campaigns and are affected
by counterfeiting and piracy. We interviewed 22 companies and 8
industry associations across those sectors. The sectors we
selected were: consumer electronics, entertainment and media,
luxury goods and apparel, health and food, Internet,
pharmaceutical, software, and manufacturing. For the most part, we
interviewed at least one industry association and two companies in
each sector. Most of the companies we spoke with were large
companies because the prevalence of their brand in the market has
made them targets for counterfeiting and piracy. We analyzed
industry interviews using a systematic coding scheme to identify
common themes and responses to our questions.
3The IP Coordinator reports quarterly on IP enforcement. These reports are
posted on the Stop Fakes Web site ( [67]http://www.stopfakes.gov ) and
have been distributed at public events such as the U.S. Chamber of
Commerce's Coalition Against Counterfeiting and Piracy monthly meetings.
Several of these reports, including the report for the third quarter of
2007, have contained data on ICE's arrest, indictments, and convictions.
However, the data was not included in the fourth quarter report for 2007.
To examine the intended purpose and funding of the National
Intellectual Property Rights Coordination Center, we met with ICE
and FBI officials associated with the center to discuss its
evolution, role, and staffing levels; reviewed agency documents
that articulated the center's purpose; and analyzed Congressional
budget documents that reflected funding related to the center.
Specifically, we reviewed appropriation legislation and related
reports of the House and Senate Committees on Appropriations and
relevant subcommittees for fiscal years 2001 through 2006 to
determine what funds and additional instructions were provided to
ICE, FBI, and legacy Customs related to staffing and operating the
center. We then requested information from ICE, FBI, and CBP about
what funds were received and how the funds were used. We also
discussed the center's future role with ICE, FBI, FDA, and DOJ
officials, and the NIPLECC IP Coordinator.
We conducted this performance audit from December 2006 through
March 2008 in accordance with generally accepted government
auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based
on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based
on our audit objectives.
Appendix II: Federal Protection and Enforcement of IP Rights under
U.S. Law
The federal government plays a role in granting protection for and
enforcing IP rights. It grants protection by approving patents or
registering copyrights and trademarks. These IP rights grant
registrants limited exclusive ownership over the reproduction or
distribution of protected works (copyright), the economic rewards
the market may provide for their creations and products
(trademark), or the right to exclude others from using, making,
and selling devices that embody a claimed invention (patent). The
federal government enforces IP rights by taking actions against
those accused of their theft or misuse. Enforcement actions
include both civil and criminal penalties. U.S. laws criminalize
certain types of IP violations, primarily copyright and trademark
violations, and authorize incarceration or fines. These laws are
directed primarily toward those who knowingly produce and
distribute IP-infringing goods, rather than those who consume such
goods. Although U.S. laws do not treat patent violations as a
crime, the federal government does take actions to protect patents
and authorizes civil enforcement actions against infringers.
Table 3 summarizes federal protection and enforcement of IP rights
under U.S. law. 1
1In addition to the laws cited in the table, the Federal Food, Drug and
Cosmetic Act (21 U.S.C. 301 et seq.) provides legal authority for FDA to
conduct counterfeit product investigations and enforcement actions.
Table 3: Summary of Federal Protection and Enforcement of IP Rights under
U.S. Law
Type of IP protection: U.S. Copyright: Criminal Infringement for Profit
17 USC 506(a)(1)(A) and 18 USC 2319(b);
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $250,00 fine or twice gain/loss; 2nd offense, maximum
10 years imprisonment; Corporations: 1st offense, $500,000 fine or
twice gain/loss; Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available (of infringing copies, and plates, mold,
tapes, or other equipment from which infringing copies can be made);
Civil remedies and penalties (available to rights holders and other
victims): Copyright infringement (even where it is neither willfully
committed nor for profit) is actionable under 17 U.S.C. � 501 et seq.
For willful copyright infringement, copyright owners may obtain
injunctions, ex parte orders to seize infringing items, and recover
actual damages or statutory damages of up to $150,000 per work
infringed, as well as attorneys' fees and costs.
Type of IP protection: U.S. Copyright: Bootleg Recordings of Live
Musical Recordings (unauthorized fixation of and trafficking in sound
recordings and music videos of live musical performances) 18 USC 2319A;
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, 10
years imprisonment; Corporations: $500,000 or twice gain/loss; Criminal
forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available (for bootlegs imported into the U.S.);
Civil remedies and penalties (available to rights holders and other
victims): Performers whose performances are recorded or distributed
without authorization may, pursuant to 17 U.S.C. � 1101, obtain
injunctions and recover damages equivalent to those available for
copyright infringement under 17 U.S.C. �� 502-505.
Type of IP protection: U.S. Copyright: Camcording (unauthorized
recording of motion pictures in motion picture exhibition facility) 18
USC 2319B;
Criminal penalties: Individuals: 1st offense, maximum 3 years
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, maximum
6 years imprisonment; Corporations: $500,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): [Empty];
Civil remedies and penalties (available to rights holders and other
victims): No specific civil remedies for camcording, although
camcording is actionable as copyright infringement.
Type of IP protection: U.S. Copyright: Large-Scale Infringement without
Profit Motive (reproduction or distribution over any 180-day
period/more than $1,000 total retail value) 17 USC 506(a)(1)(B) and 18
USC 2319(c);
Criminal penalties: Individuals: 1st offense, maximum 3 years
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, 6 years
imprisonment; Corporations: $500,000 fine or twice gain/loss; Criminal
forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Copyright infringement (even where it is neither willfully
committed nor for profit) is actionable under 17 U.S.C. � 501 et seq.
For willful copyright infringement, copyright owners may obtain
injunctions, ex parte orders to seize infringing items, and recover
actual damages or statutory damages of up to $150,000 per work
infringed, as well as attorneys' fees and costs.
Type of IP protection: U.S. Copyright: Distribution of Pre-Release
Works or Material over Publicly-Accessible Computer Network for
Commercial Purposes (17 USC 506(a)(1)(C) and 18 USC 2319(d));
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $250,00 or twice gain/loss; subsequent offense, 10
years imprisonment; Corporations: $500,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Actionable as copyright infringement (see above).
Type of IP protection: U.S. Copyright: Distribution of Pre-Release
Works or Material over Publicly-Accessible Computer Network Not for
Commercial Purposes (17 USC 506(a)(1)(C) and 18 USC 2319(d));
Criminal penalties: Individuals: 1st offense, maximum 3 years
imprisonment and $250,000 fine or twice gain/loss; subsequent offense,
6 years imprisonment; Corporations: $500,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Actionable as copyright infringement (see above).
Type of IP protection: U.S. Copyright: Use of Technology to Violate
Anti-Circumvention Systems and Anti-Piracy Protections and Protection
of Integrity of Copyright Management Information (17 USC 1201-1204);
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $500,000 fine or twice gain/loss; 2nd offense, maximum
10 years imprisonment and $1 million fine or twice gain/loss;
Non-criminal actions and penalties (by federal government): [Empty];
Civil remedies and penalties (available to rights holders and other
victims): Civil court action available, including: temporary or
permanent injunction; impoundment; actual and statutory damages; costs;
attorney's fees; remedial modification or destruction of violating
product; triple damages for repeat violations within 3 years of initial
violation.
Type of IP protection: U.S. Copyright: Trafficking in counterfeit
labels, illicit labels, or counterfeit documentation or packaging (18
USC 2318);
Criminal penalties: Individuals: Maximum 5 years imprisonment and
$250,000 fine or twice gain/loss; Corporations: $500,000 fine or twice
gain/loss; Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Available civil remedies include: temporary or permanent
injunction; -impoundment; attorney's fees and costs; actual damages and
any additional profits; statutory damages of up to $25,000 per
violation.
Type of IP protection: U.S. Trademark: Trafficking in Counterfeit Goods
or Services (using counterfeit mark) (18 U.S.C. � 2320); Criminal
penalties: Individuals: 1st offense, maximum 10 years imprisonment and
maximum $2,000,000 fine or twice gain/loss; 2nd offense, maximum 20
years imprisonment and maximum $5,000,000 fine or twice the gain/loss;
Corporations: 1st offense, maximum $5,000,000 fine or twice gain/loss;
subsequent offense, maximum $15,000,000 fine or twice the gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Available civil remedies include: temporary or permanent
injunction; impoundment; attorney's fees and costs; actual damages and
any additional profits; statutory damages of up to $100,000 per type of
goods (up to $1 million if violation is willful).
Type of IP protection: U.S. Patent: False Patent Marking (35 U.S.C. �
292);
Criminal penalties: No criminal penalties, but criminal fines based on
criminal conduct related to patents;
Non-criminal actions and penalties (by federal government): Maximum
$500 fine for every offense;
Civil remedies and penalties (available to rights holders and other
victims): Any private individual may sue for the civil penalty of $500,
which is split with the government.
Type of IP protection: U.S. Trade Secrets: Economic Espionage (18
U.S.C. � 1831);
Criminal penalties: Individuals: maximum 15 years imprisonment or
$500,000 fine or twice gain/loss, or both; Corporations: $10,000,000
fine or twice gain/loss; Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): The
Attorney General may obtain injunctions against violations;
Civil remedies and penalties (available to rights holders and other
victims): No express federal cause of action, although remedies are
available for trade secret theft under state law.
Type of IP protection: U.S. Trade Secrets: Theft of Trade Secrets (18
USC 1832);
Criminal penalties: Individuals: 1st offense, maximum 10 years
imprisonment or $250,000 or twice gain/loss; 2nd offense, 10 years
imprisonment; Corporations: Maximum $5,000,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): The
Attorney General may obtain injunctions against violations;
Civil remedies and penalties (available to rights holders and other
victims): No express federal cause of action, although remedies are
available for trade secret theft under state law.
Source: GAO analysis of DOJ documents and review by DOJ's Criminal
Division.
Appendix III: Private Sector Views on Federal IP Enforcement Efforts
A number of companies have been affected by counterfeiting and piracy,
particularly as criminal activity has increased in recent years. As part
of our review of federal IP enforcement efforts, we identified companies
and industry associations that are actively involved in
anti-counterfeiting and piracy activities. We interviewed 8 industry
associations and 22 companies across 8 sectors, including consumer
electronics, luxury goods and apparel, pharmaceuticals, and software.1 The
views obtained through these interviews cannot be generalized across
sector or industry overall given that our sample size was small. Industry
responses produced a mix of views on federal efforts to enforce
intellectual property rights, with some companies reporting positively
about specific agency actions and others that were more critical of
federal actions. A selection of industry views by sector are presented
below based on analysis and synthesis of interview responses around common
themes. For the most part, each bullet represents a different company or
association representative. These views are not direct quotes and have
been edited as needed for clarity and readability.
Various Companies Are Impacted by Counterfeiting and Piracy
Table 4 highlights industry views on the impact of counterfeiting and
piracy.
1Most of the companies we interviewed were large companies with
anti-counterfeiting and/or piracy initiatives.
Table 4: Summary of Industry Representatives' Views on the Impact of
Counterfeiting and Piracy, by Sector
Sector: Consumer electronics;
Comments:
* Federal law enforcement efforts have improved very impressively over
the past three years. There is better coordination and more resources,
but the problem is growing and now there is an economic and health and
safety issue�The magnitude of the federal law enforcement effort is
still not commensurate with magnitude of [counterfeit and pirated]
products.
Sector: Luxury goods/apparel;
Comments:
* Beyond a loss to businesses, there is a huge loss to the Treasury and
the national infrastructure that results from the sale of counterfeit
goods;
* Most counterfeit goods are sold by small businesses that
intentionally mix real products with counterfeit products so people
can't tell.
Sector: Health/food;
Comments:
* The main issue with regard to counterfeiting and piracy is fast
moving consumer goods. It has become an increased problem as personal
care products that have safety issues are found in large retail stores
and grocery stores.
Sector: Internet;
Comments:
* Losses to property rights owners from counterfeiting and piracy can
occur through Internet/online auctions.
Sector: Pharmaceutical;
Comments:
* Counterfeit medicines place public health and safety at risk, have
the potential to damage patient confidence in the branded medicine, and
negatively impact sales of the authentic medicines.
Sector: Software;
Comments:
* The impact of software piracy and counterfeit software varies by
company and losses are difficult to calculate. Most pirated software is
in the form of Internet downloads or mail order piracy that reduces
company profits and taxes paid to the government, while counterfeit
software poses greater risks to consumers in terms of potential damage
to their computers.
Sector: Manufacturing;
Comments:
* It is difficult to calculate direct losses for some companies, but
estimated losses in this sector have been reported as high as $1
billion.
Source: GAO analysis of private sector responses.
Industry Concerned over Lack of Resources to Carry Out IP Enforcement
Some industry representatives expressed concern about the federal
government's ability to carry out IP enforcement due, in part, to a lack
of dedicated resources. While several companies said that federal IP
enforcement efforts have increased, 14, or nearly half, of the
representatives we contacted said there is a shortage of resources to
carry out IP enforcement. For example, one company we interviewed said
that CBP has made improvements over the last couple of years, but the
scope of its efforts is still not up to the problem, and that more
resources are needed to perform risk analysis and modeling to determine
the origin of counterfeit goods. Another company representative said that
the task is large compared to the federal resources applied, especially
because the number of counterfeiters is increasing but federal resources
have remained constant. Companies reported increasing their own resources
to focus on IP enforcement, with 15 stating that they employ or contract
private investigators and/or have in-house resources dedicated to IP
investigations and anti-counterfeiting activity. Table 5 highlights
specific representatives' statements about the level of federal resources
dedicated to IP enforcement.
Table 5: Summary of Industry Representatives' Views on Federal Resources
Dedicated to IP Enforcement, by Sector
Sector: Consumer electronics;
Comments:
* CBP has greatly improved over the past couple of years, but the scope
of the effort is still not up to the problem - they need more staff
resources that do risk analysis and modeling to determine where
counterfeit goods may be coming from and to help them target
inspections more;
* There is some need in some places around the country for specific CBP
resources dedicated to the IP issue. It doesn't have to be the case at
every port. With more dedicated resources to IP, we would see seizure
numbers go up even more;
* Federal IP law enforcement agencies are challenged because of their
limited staff resources.
Sector: Luxury goods/apparel;
Comments:
* There is a lack of resources and money available to CBP, and it would
have to increase in both those areas to improve on the number of
seizures.
Sector: Health/food;
Comments:
* CBP is able to screen only a certain percentage of goods
that come in, so additional resources would be helpful.
Sector: Pharmaceutical;
Comments:
* There is a need for increased and dedicated human and financial
resources in the federal government;
* Federal agencies have to prioritize, but at the same time everyone
knows that the number of counterfeiters is increasing while available
federal resources are constant.
Sector: Software;
Comments:
* Federal IP enforcement efforts are hampered by the limited resources,
such as staff, technology, and funding devoted to IP enforcement. CBP
staff at ports face incredible challenges in carrying out their jobs
given the quantity of U.S. trade. Federal law enforcement staff are
overworked, need more high-tech equipment and technology, and should
have additional training.
Source: GAO analysis of private sector responses.
Industry Cites Lack of Information Sharing and Unclear Agency Roles as Barrier
to Effective Enforcement and Coordination
Representatives from 12 out of 30 companies and associations we
interviewed told us that better information sharing is needed between the
public and private sector; for example, one company representative said
that agencies should let companies know whether the information they pass
on to law enforcement is useful. In the case of CBP seizures, some
representatives remarked on the need to obtain more detailed information
about imports suspected of infringing on their products, such as the
origin of the shipments. One company representative commented that it used
to get information on suspect products from CBP officers, but it has not
received this type of information from CBP recently. One company
representative said that the company has referred information to the
National Intellectual Property Rights Coordination Center, but has rarely
received feedback on whether the information it provided was useful.
Another company said that it has to continuously follow up to get updates.
Several companies and associations we interviewed remarked that the
federal IP enforcement structure is not very clear, and companies,
particular smaller ones, have a hard time knowing who to contact for IP
issues. For example, one association said that there is no formal process
for referring cases to law enforcement and that information on the
structure needs to be clearer and more efficient. While larger companies
may be more familiar with [law enforcement] agencies' procedures and
contacts, smaller companies don't know where to begin. Another association
said that agency responsibilities are unclear and may overlap. Table 6
highlights industry representatives' general comments on their
coordination with federal IP enforcement agencies.
Table 6: Summary of Industry Representatives' Views on Coordination with
Federal IP Enforcement Agencies, by Sector
Sector: Consumer electronics;
Comments:
* It would be helpful if there was more information about the right
levels of government to contact regarding law enforcement issues. The
Chamber of Commerce's Coalition against Counterfeiting and Piracy
provides a lot of support in this area;
* When leads are referred to the National Intellectual Property Rights
Coordination Center, we don't hear back from them and have not received
feedback on whether the information we provided is helpful in leading
to an enforcement action.
Sector: Entertainment/media;
Comments:
* Most of our referrals go to local law enforcement because they are
more nimble to follow up and investigate cases, particularly smaller
ones. We do not refer cases to federal investigators that we don't feel
are worth federal resources;
* CBP does well when and where it can with regards to IP enforcement.
Five years ago, our relationship with them was pretty good, but they
have fewer resources now.
Sector: Luxury goods/apparel;
Comments:
* Communication with CBP is not consistent. One company is still trying
to understand how CBP detects IP violations.
Sector: Internet;
Comments:
* We work very closely with state and local law enforcement and
coordinate with federal agencies on specific investigative matters,
such as CBP checking corporate shipments at ports or companies
providing information for federal cases on an ongoing basis.
Sector: Pharmaceutical;
Comments:
* We have forged effective partnerships with law enforcement agencies,
including providing referrals, support to the investigating agency and
assistance in determining the authenticity of products suspected as
counterfeit. We note that the good working relationship that exists in
New York between ICE, the FBI and the FDA is one to be emulated;
* We will work with any law enforcement agency that can develop strong
IP cases leading to successful criminal prosecutions.
Sector: Software;
Comments:
* We coordinate some with local law enforcement on IP cases that can be
completed more quickly through the local systems or that do not warrant
federal attention and resources.
Sector: Manufacturing;
Comments:
* Our experience to date with CBP has not been very successful. The key
to success would be a closer business relationship. Some companies we
represent are still developing relationships with federal agencies;
* We have not had much success with CBP. Counterfeit auto parts are
coming to the United States but not being stopped. Ten years ago the
counterfeit packaging was poor but now packaging is sophisticated and
it is harder to detect real from fake.
Source: GAO analysis of private sector responses.
Industry Has Cited Some IP Enforcement Improvements Following Training
Provided to Agency Officials
Several of the company representatives commented that increased training
efforts for federal officials that carry out IP enforcement have
strengthened IP enforcement efforts. Table 7 highlights private sector
comments on this issue.
Table 7: Summary of Industry Representatives' Views on Effectiveness of
Training on IP Enforcement Activity, by Sector
Sector: Luxury goods/apparel;
Comments:
* After we provide training to federal law enforcement officials, we do
see a momentary increase in action by federal law enforcement agencies.
We also participate in industry seminars to stay up to date on
investigation methods and remedies offered to us. This improves our
ability to better coordinate our efforts with federal law enforcement
on anti-counterfeiting investigations.
Sector: Internet;
Comments:
* Training has certainly increased the level of cooperation and number
of instances where we were able to pursue a prosecution. Just having
someone to call or put together a package of supporting evidence can
make a difference in whether a case will be prosecuted.
Sector: Pharmaceutical;
Comments:
* Participating in training programs sponsored by federal agencies or
private associations provides us with an opportunity to network and
exchange intelligence information with representatives of other
pharmaceutical companies and law enforcement officials who are also
engaged in the battle against counterfeit pharmaceuticals;
* It appears that a number of seizures have occurred since private
sector led training with federal officials has taken place and the
level of communication has increased with CBP officials at those ports.
Sector: Software;
Comments:
* Training provided to federal officials by industry has heightened
awareness and helped to establish relationships between CBP port
officials and companies.
Source: GAO analysis of private sector responses.
Increased Training and Consumer Awareness Cited as Areas for Improved IP
Enforcement
Industry representatives cited various areas that could be improved upon
to increase overall IP enforcement, including a need to better train
federal prosecutors and better inform consumers about the risks posed from
counterfeit and pirated goods. Table 8 highlights areas private sector
representatives identified for improved IP enforcement.
Table 8: Summary of Industry Representatives' Views on Areas for Improved
IP Enforcement, by Sector
Sector: Consumer electronics;
Comments:
* If DOJ or some other federal agency were able to facilitate contacts
with local law enforcement through periodic seminars or national
conferences, it would be very helpful...A good coordinating body would
enable that to be done more effectively. It would ensure members know
the tools and resources available;
* To improve CBP seizures, there should be industry specific training
and better communication between CBP and industry;
* Federal prosecutors need more training on IP crimes so that they
understand the nature of the problem and feel more comfortable
prosecuting cases.
Sector: Entertainment/media;
Comments:
* It would be great if we could follow the "status" of the seizure.
There is no central place to get updated on enforcement actions, so one
has to chase the CBP inspector. We get Notice of Seizure letters but
that is about it - and would like to get "the number of widgets" in
those seizure notices;
* Federal prosecutors and judges need more training�Judges don't want
to hear from rights holders. Often times they need to understand the
economic impact of these crimes.
Sector: Luxury goods/apparel;
Comments:
* More consumer awareness is needed, such as education by the media. If
government and television, radio, and print journalists developed a
passion for this issue, demand for counterfeit goods would be reduced.
It is also important to educate consumers on the ills of counterfeiting
such as child labor laws, tax evasion, and the support of terrorism. We
also would recommend that companies write to government officials and
supervising officers when officers or agents make a large seizure of
counterfeit goods expressing appreciation and pointing out the good
work accomplished by defeating counterfeiting;
* We would like to have a better understanding of the problem from a
brand perspective as well as a better understanding of the laws and how
to work with the prosecuting attorneys at both the state and federal
level. We would also like to see more dedicated federal resources.
Sector: Health/food;
Comments:
* We would like to see an increase in the amount of federal penalties
assessed and collected;
* We recommend increased resources for CBP, as it is the country's
first line of defense against counterfeit products. The federal
penalties on the criminal side are generally satisfactory, but we want
them to be more punitive. We want federal laws enforced with more
resources.
Sector: Internet;
Comments:
* There is a need for increased cooperation and transparency in how
federal agencies work together and with industry;
* There is a need for strengthened information-sharing and
communication between industry and federal law enforcement;
* There is a need for continued training and education of federal law
enforcement officials on issues specific to industry.
Sector: Pharmaceutical;
Comments:
* Federal programs that encourage transportation, customs brokers, and
forwarding and express companies to cooperate in the identification of
potential counterfeit traffickers would be helpful. The application of
targeting approaches used for anti-terrorism will help CBP to be more
effective in identifying high-risk transactions;
* We would like to see more coordinated communication and dialogue with
the pharmaceutical industry on the part of federal government;
* The growth of the Internet complicates law enforcement efforts, both
in the United States and abroad. Federal law enforcement agencies will
need to be well prepared to address two types of counterfeiting threats
that may evolve in multiple and complex ways: first, agencies must
deter and stop sophisticated and organized counterfeiters that prey on
patients in an effort to profit from unsuspecting consumers; second,
officials must be prepared to manage threats from counterfeiters who
may be motivated by an intent to harm people (e.g., terrorist
activity)�It is critical that federal agencies, including the
Departments of Justice and Commerce and the U.S. Trade Representative's
office, make IP infringement and counterfeit activity top priorities.
This effort must call for more criminal prosecutions, stiffer penalties
and asset seizures. All of these activities will necessitate increased
and dedicated human and financial resources.
Sector: Software;
Comments:
* FBI's Cyber Crime squad in Los Angeles is doing great work;
however, IP should be made a higher priority for other law enforcement
agencies. Positive partnerships are imperative for successful IP
protection and enforcement;
* To improve border enforcement, federal agencies need more
investigators on the job. The current amount of staff are sorely
overworked. For high-tech goods, law enforcement needs more and better
equipment because they currently use slow, clunky technology to go
after the best and brightest cyber criminals.
Sector: Manufacturing;
Comments:
* Simply recording one's product with CBP does not guarantee that
seizures will be made of goods that infringe on the recorded product.
Companies have to be proactive about protecting their products in other
ways;
* There needs to be strengthened communication and better information
sharing between industry and federal government so that enforcement
efforts are more focused;
* There should be an effort to reduce the federal financial burden of
protecting IP, such as more information-sharing within the private
sector and with agencies and more collaborative enforcement efforts;
* There is a need for increased educational awareness for both federal
agencies and industry on how to work together. There is also a need to
increase consumer awareness of counterfeit parts.
Source: GAO analysis of private sector responses.
Appendix IV: Comments from the Department of Homeland Security
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
See comment 2.
See comment 1.
See comment 4.
See comment 3.
The following are GAO's comments on the Department of Homeland Security's
letter dated February 26, 2008.
GAO Comments
1. We discussed health and safety issues with CBP during our
review. In January 2008, CBP released seizure data for fiscal year
2007 that for the first time identified seizures in product
categories that may involve public health and safety, e.g.,
pharmaceuticals, electrical articles, and sunglasses. We commend
CBP for taking this step and modified our report to reflect this
new data (see p. 33). These data are publicly available;
therefore, GAO did not have to request them from CBP. We added
information to the draft report to state that CBP officials also
told us that creating a definition of IP seizures that affect
public health and safety is difficult because not all products
within a given category necessarily pose such risks and the
potential for such risks cuts across a broad range of products
(see pp. 33-34). We modified our recommendation to state that CBP
should continue to take steps toward better identifying IP
seizures that pose a risk to public health and safety of the
American people, and collect and report this data throughout the
agency and to Congress (see p. 43).
2. We reported on CBP's IP Rights Trade Strategy (a document that
CBP refers to in its letter as the National IPR Trade Strategy) in
our April 2007 report. 1 We added information to this report to
describe this trade strategy and note that it contains certain
measures and indicators related to IP enforcement (see p. 34.)
However, we also noted, as we did in our April 2007 report, that
CBP officials told us this trade strategy was an internal planning
document, and we determined it had limited distribution across
CBP. For example, we found that revisions to the document had not
been distributed to CBP ports since 2003 and given the document's
status as "For Official Use Only," it is not distributed to
Congress or the public. Therefore, we concluded in April 2007 that
this document, while containing certain measures and indicators,
has limited usefulness for holding CBP accountable for its
performance on IP enforcement. At that time, we recommended that
CBP work with OMB to include IP enforcement-related measures in
its strategic plan and are pleased that CBP states in its current
comment letter that it is in the process of taking such action.
3. We do not understand why CBP is making comments in this report
about analysis that appeared in our April 2007 report, but that is
not reproduced in this report. That analysis showed that among the
top 25 IP-importing ports in fiscal year 2005, many ports' IP
seizure rates (measured by value of IP seizures over value of IP
imports) were lower than the group average. We did this analysis
because CBP had not attempted to analyze its IP enforcement
outcomes in this way. CBP made these same comments in April 2007;
we disagreed with how CBP characterized our work at that time and
continue to stand by our analysis. In that report, we said that
this and other types of analysis contained in our April 2007
report represented approaches that CBP could take to better
understand variations in IP enforcement outcomes across ports,
inform resource allocations and management decisions, and further
improve its IP enforcement. We continue to believe that CBP, and
the other agencies, can better use existing data to understand
their IP enforcement outcomes across field locations or product
types as a way of further improving overall IP enforcement.
4. See comment 1.
1 [68]GAO-07-735 .
Appendix V: Comments from the Department of Justice
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
U.S. Department of Justice:
Washington, D.C. 20530:
February 21, 2008:
Ms. Christine Broderick:
Assistant Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Broderick:
On February 5, 2008, you provided the Department of Justice (DOJ or
Department) with a copy of the General Accountability Office (GAO)
draft report entitled Intellectual Property: Federal Enforcement Has
Generally Increased, but Assessing Performance Could Strengthen Law
Enforcement Efforts (08-157, Job Code 320471)(Report). The Department
of Justice appreciates the time and effort put into this draft Report
by GAO staff, as well as the professional courtesy you extended. We
appreciate the opportunity to comment on the draft. In that regard, DOJ
has objections and concerns with the report's findings.
A. The Report Understates DOJ Enforcement Activity
First, although the Report acknowledges "general increases" in
enforcement activity by all agencies in recent years, it severely
understates the recent increases in enforcement production by the
Department of Justice since FY 2004 � that is, the year in which the
Task Force on Intellectual Property began its aggressive work to
improve the Department's IP enforcement program in all phases. The
number of defendants charged with IP offenses increased dramatically
from FY 2004 (177) to FY 2006 (339) �an increase of more than 90
percent. This increase can be attributed, at least in part, to the
Department's increased emphasis on multi-district and international
prosecutions, which in turn led to more multi-defendant cases. Even
with the increase in multi-defendant cases, the number of cases
themselves also increased substantially, by more than 20 percent � from
169 in FY 2005 to 204 in to FY 2006. To be fair, these kinds of
enforcement results deserve better than a watered-down characterization
as "general increases." [See comment 1]
Moreover, the significant increases in prosecutions by the Department
continued into FY 2007. For example, 287 defendants were sentenced on
intellectual property charges in FY 2007, representing a 35 percent
increase over FY 2006 (213) and a 92 percent increase over FY 2005
(149). In addition, case filings also continued to increase: the
Department filed 217 intellectual property cases in FY 2007,
representing a 33 percent increase over cases reported in FY 2005
(169). See, Table 1, below. [See comment 2]
Table 1: Total Number of Intellectual Property Cases Filed FY 2001 -
2007:
Fiscal year: 2001;
Cases filed: 151.
Fiscal year: 2002;
Cases filed: 129.
Fiscal year: 2003;
Cases filed: 163;
Fiscal year: 2004;
Cases filed: 129.
Fiscal year: 2005;
Cases filed: 164.
Fiscal year: 2006;
Cases filed: 204.
Fiscal year: 2007;
Cases filed: 217.
[End of table]
The Report also fails to adequately acknowledge the significant
increase in training and resource allocation accomplished by the
Department since 2001. For instance, in January 2001, there was only
one CHIP Unit in the United States, in San Jose, California. Subsequent
expansions that year, as well as in 2002, 2005, and 2006 have increased
the total number of CHIP Units nationwide to 25. These Units consist of
between two and eight Assistant U.S. Attorneys who receive specialized
training annually in prosecuting intellectual property and computer
crimes. See, Tables II and III, below.
Table 2: Computer Hacking and Intellectual Property (CHIP) Units
Installed Cumulative Total - FY 2000-2006:
Fiscal year: 2000;
Units installed: 1.
Fiscal year: 2001;
Units installed: 10.
Fiscal year: 2002;
Units installed: 13.
Fiscal year: 2003;
Units installed: 13.
Fiscal year: 2004;
Units installed: 18.
Fiscal year: 2005;
Units installed: 18.
Fiscal year: 2006;
Units installed: 25.
[End of table]
Table 3:
Fiscal Year: 2000;
Judicial Districts Where CHIPs Units Installed: NDCA.
Fiscal Year: 2001;
Judicial Districts Where CHIPs Units Installed: CDCA; SDCA; NDGA; DMA;
EDNY; SDNY; NDTX; EDVA; WEWA.
Fiscal Year: 2002;
Judicial Districts Where CHIPs Units Installed: WDMO; NDIL; SDFL.
Fiscal Year: 2003;
Judicial Districts Where CHIPs Units Installed: None.
Fiscal Year: 2004;
Judicial Districts Where CHIPs Units Installed: EDCA; MDFL; WDPA; DDC;
MDTN.
Fiscal Year: 2005;
Judicial Districts Where CHIPs Units Installed: None.
Fiscal Year: 2006;
Judicial Districts Where CHIPs Units Installed: WDTX; DMD; DCO; EDMI;
DNJ; DCT; EDPA.
[End of table]
The growth of the CHIP Unit program reflects the Department's deep
commitment to the prosecution of intellectual property and computer
crimes, and it has resulted in tangible increases in prosecution
successes. For example, in FY 2007, CHIP Units were responsible for
sentencing 199 defendants for IP offenses, which represents an 80
percent increase over the 110 defendants sentenced in CHIP Unit
districts in 2006.
Statistics alone are insufficient to accurately show the quality of
improvements in the Department's prosecution activity. For instance,
there have been numerous groundbreaking investigations and prosecutions
during the past year, including: [See comment 4]
* Three Indicted and Arrested in One of Largest Counterfeit Goods
Prosecutions in U.S. History: On January 16, 2008, in Richmond,
Virginia, a seven-count indictment was unsealed in one of the largest
counterfeit goods prosecutions in U.S. history. The indictment charges
three individuals with one count of conspiracy to traffic in
counterfeit goods imported from the People's Republic of China (PRC),
four counts of trafficking in counterfeit handbags, wallets, purses,
and carry-on bags, and two counts of illegally smuggling counterfeit
goods into the United States. ICE agents arrested the three defendants
and executed a court order restraining defendants' numerous assets,
including 29 bank accounts and three properties in New York. According
to the indictment, the three defendants operated a massive
international import and wholesale counterfeit goods business from 2002
until at least Oct. 31, 2005, engaging in a corporate shell game
whereby they conspired to, and in fact imported, over 300,000
counterfeit luxury handbags and wallets into the United States from the
PRC in the names of different companies, all under their control. The
value of the corresponding authentic luxury goods manufactured by
Burberry, Louis Vuitton, Gucci, Coach, and others, whose legitimate
sales were displaced, is estimated to be over $100 million.
Ms. Christine Broderick Page 4
* Largest Ever Joint U.S.-China Criminal Enforcement Operation Nets 25
Arrests and Over $500 Million in Counterfeit Software: On July 23,
2007, Chinese officials arrested 25 Chinese nationals and seized more
than half a billion dollars worth of counterfeit software as a result
of the largest ever joint investigation conducted by the FBI and the
People's Republic of China, code-named Operation Summer Solstice."
China's Ministry of Public Security also searched multiple businesses
and residential locations, seized more than $7 million in assets, and
confiscated over 290,000 counterfeit software CDs and Certificates of
Authenticity.
* First Ever Extradition for Online Software Piracy/Extradited
Australian Ringleader Sentenced to 51 Months in Prison: On June 22,
2007, in Alexandria Virginia, Hew Raymond Griffiths was sentenced to 51
months in prison for crimes committed as leader of one of the oldest
and most renowned Internet software piracy groups worldwide, known as
"Drink Or Die." From his home in Australia, Griffiths violated the
criminal copyright laws of the United States by leading this criminal
group which caused the illegal reproduction and distribution of more
than $50 million worth of software, movies, games and music. This was
one of the first ever extraditions for an intellectual property
offense.
* 50th Conviction in Largest Online Software Piracy Enforcement Action:
On May 14, 2007, in Alexandria Virginia, the Department obtained the
50th conviction in Operation FastLink, the largest and most successful
global online piracy enforcement initiative ever conducted. This
Operation culminated in the execution of more than 120 searches and
arrests in 12 countries, the seizure of more than 200 computers, the
complete dismantlement of 30 Internet distribution sites, and the
confiscation of hundreds of thousands of counterfeit software titles
valued at more than $50 million. This 50th conviction represented a
milestone never before achieved in an online piracy prosecution.
B. DOJ Has Appropriately Analyzed Its Enforcement Statistics:
The Report concludes that the federal enforcement agencies � including
DOJ � have done little "to systematically examine enforcement
statistics." Report at 40. As one example of this type of systematic
analysis, the Report analyzed the number of cases filed by U.S.
Attorney's Offices by district and concluded that there was a "high
correlation between IP enforcement activity and offices with resources
dedicated to IP enforcement." Report at 41. [See comment 5]
It is simply inaccurate to state that DOJ does not analyze its
prosecution statistics, much less that it does not analyze them by
district. We conduct such analysis routinely, and that analysis has
helped inform the placement of additional CHIP Units around the
country. Indeed, one of the IP Task Force's principal recommendations
in its 2004 Report was to increase resource allocations to CHIP Units
in key regions: [See comment 6]
"The Department of Justice should reinforce and expand existing CHIP
Units located in key regions where intellectual property offenses have
increased, and where the CHIP Units have effectively developed programs
to prosecute CHIP-related cases, coordinate law enforcement activity,
and promote public awareness programs."
The Department implemented this recommendation in January 2005, after a
thorough assessment of CHIP Unit production nationwide, including
analysis of case statistics by district. The Attorney General provided
additional, full-time funding for a total of three AUSAs to serve as
CHIP prosecutors in the Central and Northern District of California.
Time has shown the wisdom of that decision: in FY 2006, the CHIP Units
in the Northern and Central Districts of California charged a total of
50 IP cases, out of a nationwide total of 204 IP cases, accounting for
approximately 25 percent of the national total.
Additionally, the Department considered case filings by district when
it determined the locations of the 12 additional CHIP Units established
since 2004, and it will continue to evaluate the need for additional
CHIP Units in districts with a high incidence of IP and computer crime,
or where additional prosecutors are best matched to local investigative
resources.
Although the Department does routinely conduct this type of statistical
analyses to identify trends in domestic IP crime, we would not
necessarily draw the same absolute conclusion that the GAO staff
apparently reached � i.e., that more prosecutors in a district results
in more prosecutions (and the underlying assumption that IP crime
occurs at the same rate and magnitude in all districts). Report at 41.
It is true that some of the largest CHIP Units, such as in the Central
District of California (8 prosecutors) are also the most active in
terms of IP case filings. But that is because, at least in part, the
Department has tried to establish CHIP Units in areas of greater
criminal activity (IP or cybercrime), and has allocated additional
resources to those U.S. Attorneys Offices, like Los Angeles, that are
most active, receive more case referrals, and/or have the highest level
of commitment from local investigative agencies. [See comment 7]
C. DOJ Has Established Appropriate Performance Measures and Goals to
Assess Its Progress:
The Report suggests in numerous places that DOJ has not established
performance measures or goals that adequately assess its achievements.
This is inaccurate. The Department has taken unprecedented steps to
assess its achievements in the area of intellectual property
enforcement. It has been especially aggressive in providing progress
reports on the implementation of the 31 recommendations issued by its
Task Force on Intellectual Property in 2004. This includes the Task
Force's Progress Report in June 2006, as well as its annual reporting
to the President and Congress as part of NIPLECC. See, e.g., "Report to
the President and Congress on Coordination of Intellectual Property
Enforcement and Protection" (January 2008). These reports can be
accessed online through the following links:
2007 NIPLECC Report (Jan 2008):
[hyperlink,
http://crmin05.crm.doj.gov:7778/pls/portal/docs/PAGE/CRIMLINK/PRESSROOM/
PRESSRELEASES/YR2008/01/012008-NIPLECCRPRT.PDF]
2006 NIPLECC Report (Sept 2006):
[hyperlink,
http://www.commerce.gov/opa/press/Secretary_Gutierrez/2006Releases/Septe
mber/2006%20IP%20report.pdf]
2006 DOJ IP Task Force Progress Report (June 2006):
[hyperlink, http://www.cybercrime.gov/2006IPTFProgressReport6-19-
06).pdf]
The above reports are replete with performance measures and goals. The
DOJ has aggressively and thoroughly monitored its performance with
respect to improving IP criminal enforcement. For example, the IP Task
Force issued a detailed Progress Report in June 2006, providing
extensive detail on which of its 31 recommendations had been
implemented, and on which implementation was still ongoing. The Task
Force has continued to set ambitious goals and objectives, and evaluate
their achievement, on an annual basis. No other federal agency has been
more aggressive in reviewing and improving its IP enforcement programs
as the DOJ in the past few years, nor has any agency been more thorough
in rating its progress and performance.
What the Department of Justice's IP Task Force did not do, however, was
set performance measures based on case quotas, numerical thresholds, or
percentage "targets." The GAO views the absence of such numerical or
percentage targets as a deficiency. The Department views it as a
necessity.
The GAO criticism reflects a failure to appreciate the core justice
principle that criminal prosecutions should never be initiated � or
judged -- based on actuarial tables or case quotas. As the GAO Report
notes, many of the Task Force's recommendations called for "more"
enforcement in critical areas, such as increases in the number and
quality of prosecutions. As noted above, the DOJ achieved these goals
with substantial increases in prosecution activity. For instance, in FY
2006, 213 defendants were sentenced on intellectual property charges,
representing nearly 50 percent increase over FY 2005 (149). Moreover,
in FY 2005, 350 defendants were charged with intellectual property
offenses, nearly double the 177 defendants charged in FY 2004 �
representing a 98 percent increase. [See comment 9]
The GAO report discounts these substantial increases because "without
[numeric or percentage] measures or targets, it is not clear how
certain achievements, such as increases in arrests or numbers of
defendants charged with IP crimes, should be assessed because it is not
clear what the agencies sought to achieve." Report at 43. As we
attempted to explain in meetings with GAO drafters, however, the
Department of Justice has intentionally resisted setting numeric or
percentage "targets" as performance measures because it creates a risk
that prosecutions could be initiated � or at least could be perceived
as having been initiated � for the improper purpose of meeting
prosecution quotas or the expectations of White House and Congressional
officials.
Federal prosecutors file criminal charges based on the individual
merits of each case, and only where the prosecutor "believes that the
person's conduct constitutes a Federal offense and that the admissible
evidence will probably be sufficient to obtain and sustain a
conviction." U.S. Attorney's Manual 9-27.220. Criminal actions should
never be motivated by prosecution quotas or numerical/percentage goals,
nor should the Department risk creating an appearance of improper
motivation by setting this particular types of performance measure.
There are other ways to assess performance. Indeed, the Department
believes that doubling the number of defendants charged with IP crimes
within a one year period, or increasing by 50 percent the number of
defendants sentenced, are commendable results using any performance
measure. They should not be discounted simply because the Department
declined to set a specific numerical or percentage "target." [See
comment 10]
Thank you for the opportunity to submit our formal comments for
inclusion in the final Report. The Department of Justice is committed
to improving its intellectual property enforcement efforts, and we
share with you the belief that accountability to the public and
Congress are an important component of our law enforcement mission.
Sincerely,
Signed by Michael H. Allen:
for: Lee J. Lofthus:
Assistant Attorney General for Administration:
Glossary Of Judicial Districts With CHIP Units Installed (in order of
appearance in Table 3):
Northern District California, MDCA:
Central District California, CDCA:
Southern District California, SDCA:
Northern District of Georgia, NDGA:
District of Massachusetts, DMA:
Eastern District of New York, EDNY:
Southern District of New York, SDNY:
Northern District of Texas, NDTX:
Eastern District of Virginia, EDVA:
Western District of Washington, WDWA:
Western District of Missouri, WDMO:
Northern District of Illinois, NDIL:
Southern District of Florida, SDFL:
Eastern District of California, EDCA:
Middle District of Florida, MDFL:
Western District of Pennsylvania, WDPA:
District of the District of Columbia, DDC:
Middle District of Tennessee, MDTN:
Western District of Texas, WDTX:
District of Maryland, DMD:
District of Colorado, DCO:
Eastern District of Missouri, EDMI:
District of New Jersey, DNJ:
District of Connecticut, DCT:
Eastern District of Pennsylvania, EDPA.
The following are GAO's comments on the Department of Justice letter
dated February 21, 2008.
GAO Comments:
1. We disagree that our report severely understates DOJ's enforcement
activities. Our analysis of federal IP enforcement efforts is a
systematic evaluation of trends in key agencies' enforcement indicators
over a 6-year period. Although there were fluctuations (i.e., increases
and decreases) in individual indicators from year to year, we concluded
that all the indicators, when taken as a whole, showed a general
increase in federal IP enforcement efforts from the beginning to the
end of the period examined. Moreover, we considered all indicators
together because no single indicator from any one agency sufficiently
reflects overall trends. The DOJ statistics we examined also showed
increases and decreases during the time period. However, in its letter,
DOJ selected statistics that only reflect increases, and it did so in
one instance by comparing the lowest and highest levels for a given
indicator, regardless of the year in which they occurred, which
generated the highest possible percent increase for that indicator. We
do not believe DOJ's analysis is useful for discerning overall long-
term trends.
2. Our report is based on agency data covering fiscal years 2001
through 2006. In several cases, fiscal year 2007 data became available
as we were finalizing our report. However, given the challenges we
faced in obtaining sufficiently reliable data from all agencies for the
period we studied (see appendix I, pp. 48-51), we were unable to
systematically update our data in a timely fashion to include fiscal
year 2007 statistics.
3. We disagree that our report gives insufficient attention to resource
increases at DOJ for IP enforcement. Our report discusses the creation
and growing number of CHIP units and also notes that the number of
Assistant U.S. Attorneys trained to prosecute IP cases has grown in
recent years (see p. 20).
4. We agree with DOJ that statistics alone are not sufficient to
accurately show the quality of improvements in IP enforcement activity.
This is why we recommend that DOJ and the other agencies develop IP
enforcement performance measures and targets to more systematically
measure and report on their efforts. While the examples that DOJ
provides of recent enforcement cases are useful illustrations of the
types of enforcement activity that DOJ has undertaken, they do not
provide a complete picture of DOJ's overall efforts over time. For
example, as we state in our report, agencies including DOJ could
analyze the types of IP cases it most commonly prosecutes or could
report on the number of cases it has prosecuted involving IP crimes
that posed a health and safety risk (see p. 32).
5. In section B of its letter (pp. 4-5), DOJ addresses the issue of
whether additional IP enforcement resources necessarily result in more
IP prosecutions. On page 5 of its letter, DOJ provides information that
demonstrates a correlation between increased IP resources in two U.S.
Attorney's Offices and the number of IP cases prosecuted by those
units, but then goes on to state that it would not necessarily
conclude, as it said GAO did, that more prosecutors in a district
results in more prosecutions. We agree that existing data across all
U.S Attorney's Offices with CHIP units does not necessarily show a high
correlation between increased CHIP unit resources and increased IP
prosecutions, and removed this language. We modified our report to note
that various factors, including crime levels, can affect the level of
IP enforcement activity (see p. 33).
6. We modified our report to state that DOJ reviewed its data on U.S.
Attorney's Office prosecutions when deciding where to place additional
CHIP units. However, at no time during this audit did DOJ indicate, or
provide documentation reflecting, that it routinely analyzed IP
prosecution data by district. We commend DOJ for examining the fiscal
year 2006 IP enforcement activity of two of the CHIP units. Our
analysis of DOJ's data on IP enforcement activity by all 94 U.S.
Attorney's Offices showed a mix of activity among field offices across
the 6-year period, including those with CHIP units. We believe that
conducting such analysis on a more systematic basis can better inform
DOJ about whether its allocation of resources is appropriate and not
just inform placement of CHIP units.
7. See comment 5.
8. We mentioned in the draft report, under our discussion of agency
priorities that DOJ has established some goals related to its IP
enforcement efforts that are contained in an internal agency document
not available to the public (see p. 15). We added information to refer
again to this in our discussion of performance measures (see p. 35).
However, we disagree that DOJ's Task Force report is replete with goals
and measures. The Task Force report makes multiple recommendations for
improving IP enforcement efforts, but recommendations are not the same
as performance goals, and the report does not contain performance
measures. Moreover, many of these recommendations are task-oriented
actions rather than outcome-oriented. For example, one of DOJ's Task
Force recommendations is to prosecute aggressively intellectual
property offenses that endanger the public's health or safety; yet, DOJ
does not provide any details on how they plan to achieve this
recommendation and how they will measure their progress. Further, as we
report, DOJ has not taken steps to capture enforcement statistics to
assess their progress in this area. As we discuss in our report,
strategic planning and assessment requires agencies to articulate
outcome-oriented goals and objectives and to develop performance
measures and targets that will enable them and others to determine
whether they are making progress toward these goals. We added language
to our report to better define outcome-oriented performance measures.
9. We added information to the report to further explain the challenges
associated with setting performance measures and targets in the law
enforcement area (see p. 35). Our example of a performance measure and
target was not intended to suggest that the agencies should adopt
numerical case quotas or take any steps that would otherwise negatively
affect the quality of their investigations. However, because it was
interpreted in this way, and distracted attention from the more
important discussion of adopting appropriate performance measures and
targets, we removed the example. We continue to believe that DOJ can
develop reasonable and acceptable measures and targets for IP
enforcement.
10. See comments 1 and 4.
Appendix VI: Comments from the Department of Health and Human Services
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Department Of Health & Human Services:
Office of the Assistant Secretary for Legislation:
Washington, D.C. 20201:
February 15, 2008:
Loren Yager:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Yager:
Enclosed are the Department's comments on the U.S. Government
Accountability Office's (GAO) draft report entitled: Intellectual
Property: Federal Enforcement has Generally Increased, but Assessing
Performance Could Strengthen Law Enforcement Efforts" (GAO 08-157).
The Department appreciates the opportunity to review and comment on
this report before its publication.
Sincerely,
Signed by:
Jennifer R. Luong:
for: Vince Ventimiglia:
Assistant Secretary for Legislation:
General Comments Of The U.S. Department Of Health And Human Services
(HHS) On The U.S. Government Accountability Office's (GAO) Draft
Entitled: "Intellectual Property: Federal Enforcement Has Generally
Increased, But Assessing Performance Could Strengthen Law Enforcement
Efforts" (GAO 08-157):
The Department does not agree with GAO's recommendation to "establish
performance measures and targets for IP-related enforcement activity
and report measures, targets, and performance to Congress and NIPLECC."
As GAO notes, such measures and targets are difficult to establish in
the law enforcement arena. For FDA, such measures and targets would not
be meaningful, would be difficult to set, and might even be
counterproductive. [See comment 1]
The amount of criminal activity involving FDA-regulated products cannot
be known in advance, or accurately predicted, for any given year. More
specifically, the universe of potential cases cannot be accurately
identified, making it difficult to set performance measures for their
investigation.
In its report, GAO offers an example of a performance target for DOJ
as: "...to `increase by "yy" percent the number of prosecutions filed
based on investigative agency referrals.'" FDA undertakes criminal
investigations of counterfeit FDA-regulated products in response to
reports and other information gathered by the agency. FDA evaluates
these leads and potential cases to ascertain whether or not a full
criminal investigation should be pursued. Imposing a percentage-based
target might negatively affect the quality of cases brought if
achievement of this percentage goal, rather than the merits of the
cases, were to become a driving force for pursuing investigations. [See
comment 2]
GAO noted in its report that FDA already tracks its "achievements"
regarding counterfeit FDA-regulated products. More precisely, FDA
monitors the number of criminal investigations to identify any trends
in product areas and to develop an understanding of the scope of
counterfeiting in those areas. FDA plans to continue these monitoring
efforts as a means to assess and refine our investigational approaches
as appropriate. In addition, FDA collaborates, and will continue to
collaborate, with other law enforcement agencies, as well as private
sector entities, to advance FDA's efforts to address counterfeit
products in accordance with the agency's mission to protect public
health. However, for the reasons described above, establishing and
reporting on performance measures for FDA's conduct of criminal
investigations of counterfeit FDA-regulated products would not be
meaningful or feasible, and might even be counter-productive. [See
comment 3]
Therefore, the Department does not concur with GAO's recommendation.
The following are GAO's comments on the Department of Health and Human
Services letter dated February 25, 2008.
GAO Comments:
1. While we acknowledged in our draft report that setting performance
measures and targets in a law enforcement area is difficult, we added
information to further explain why setting such measures and targets is
a sensitive issue (see p. 35). We continue to believe that setting
performance measures and targets is important, even in the law
enforcement environment. However, because FDA's primary mission is to
protect public health and safety, we reconsidered our recommendation
that FDA set law enforcement-related measures and targets, and no
longer direct this particular recommendation to FDA.
2. We modified our report to provide additional information on the
definition of output and outcome performance measures and targets (see
p. 35). Our example of a performance measure and target was not
intended to suggest that the agencies should adopt numerical case
quotas or take any steps that would otherwise negatively affect the
quality of their investigations. However, because it was interpreted in
this way, and distracted attention from the more important discussion
of adopting appropriate performance measures and targets, we removed
the example.
3. We commend FDA for monitoring the number of criminal investigations
to identify any trends in product areas and to develop an understanding
of the scope of counterfeiting in those areas. FDA mentioned for the
first time in December 2007 that it conducts such analysis, but given
the challenges we faced in obtaining sufficiently reliable data from
all agencies for the period we studied (see appendix I, pp 48-51), we
did not ask FDA to provide this analysis to us. Given the increasing
threat posed by IP-infringing products that affect public health and
safety, we believe it is important that the government improves its
understanding of this threat. Therefore, we modified our recommendation
to ICE, FBI and DOJ that agencies conduct analysis of their IP
enforcement outcomes to also address this recommendation to FDA and to
clarify that such analysis should be done systematically (see p. 43).
Appendix VII: GAO Contact and Staff Acknowledgments
GAO Contact
Loren Yager (202) 512-4347 or [email protected]
Staff Acknowledgments
Christine Broderick, Assistant Director; Shirley Brothwell; and Adrienne
Spahr made significant contributions to this report. Virginia Chanley,
Karen Deans, Ernie Jackson, Mark Molino, Jackie Nowicki, Dimple Pajwani,
Suneeti Shah, Jena Sinkfield, Stephen Caldwell, Tony DeFrank, Rebecca
Gambler, Michael Simon, Tom Costa, and Jennifer Young also provided
assistance.
(320471)
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Highlights of [76]GAO-08-157 , a report to the Ranking Member,
Subcommittee on Oversight of Government Management, the Federal Workforce,
and the District of Columbia, Committee on Homeland Security and
Governmental Affairs, U.S. Senate
March 2008
INTELLECTUAL PROPERTY
Federal Enforcement Has Generally Increased, but Assessing Performance
Could Strengthen Law Enforcement Efforts
Federal law enforcement actions against criminals who manufacture and
distribute counterfeit and pirated goods are important to enforcing
intellectual property (IP) rights and protecting Americans from unsafe or
substandard products. GAO was asked to: (1) examine key federal agencies'
roles, priorities, and resources devoted to IP-related enforcement; (2)
evaluate agencies' IP-related enforcement statistics and achievements; and
(3) examine the status of the National Intellectual Property Rights
Coordination Center. GAO reviewed relevant documents, interviewed
officials in five key agencies, and analyzed agency IP enforcement data
from fiscal years 2001 through 2006.
[77]What GAO Recommends
GAO recommends that the Attorney General and the Secretaries of Homeland
Security (DHS) and Health and Human Services (HHS) take steps to better
assess and report on their agencies' IP enforcement efforts; the Secretary
of DHS direct the Commissioner of Customs and Border Protection to address
the weaknesses in enforcement of exclusion orders; and the Attorney
General and the Secretary of DHS clarify the purpose and structure of the
National Intellectual Property Rights Coordination Center. DHS agreed with
the recommendations. Justice did not comment on them. HHS disagreed with
setting a law enforcement related performance measure. The recommendations
were revised in response.
Five key agencies play a role in IP enforcement, and their enforcement
functions include seizures, investigations, and prosecutions (see figure
below). While IP enforcement is generally not their highest priority, IP
crimes with a public health and safety risk, such as production of
counterfeit pharmaceuticals, is an IP enforcement priority at each agency.
Determining agencies' IP enforcement resources is challenging because few
staff are dedicated to this area, and not all agencies track staff time
spent on IP enforcement. Agencies carry out some enforcement actions
through their headquarters, but significant enforcement takes place in the
field.
Federal enforcement actions generally increased during fiscal years
2001-2006, but the key agencies have not taken key steps to assess their
achievements. For example, most have not systematically analyzed their IP
enforcement statistics to inform management and resource allocation
decisions, collected data on their efforts to address IP crimes that
affect public health and safety, or established IP-related performance
measures or targets to assess their achievements. Also, Customs and Border
Protection's enforcement of exclusion orders, which stop certain
IP-infringing goods from entering the country, has been limited due to
certain procedural weaknesses.
The National Intellectual Property Rights Coordination Center, an
interagency mechanism created to coordinate federal investigative efforts,
has not achieved its mission and staff levels have decreased. Currently,
only one agency participates in the center's activities, which focus on
private sector outreach. Agencies have lacked a common understanding of
the center's purpose and agencies' roles. The center's upcoming move to a
new location presents an opportunity to reconsider its mission.
Key Agencies Involved in IP-Related Enforcement and Their Enforcement
Function and Structure
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