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. ï¿½ 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. ï¿½ 1101, obtain 
injunctions and recover damages equivalent to those available for 
copyright infringement under 17 U.S.C. ï¿½ï¿½ 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. ï¿½ 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. ï¿½ 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. ï¿½ 
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. ï¿½ 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 issueï¿½The 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 trainingï¿½Judges 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)ï¿½It 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 ï¿½ 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) ï¿½an 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 ï¿½ 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 ï¿½ including 
DOJ ï¿½ 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 ï¿½ 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 ï¿½ 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 ï¿½ 
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 ï¿½ or at least could be perceived 
as having been initiated ï¿½ 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

References

Visible links
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  72. mailto:[email protected]
  73. mailto:[email protected]
  74. mailto:[email protected]
  75. http://www.gao.gov/cgi-bin/getrpt?GAO-08-157
  76. http://www.gao.gov/cgi-bin/getrpt?GAO-08-157
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