Intellectual Property: Leadership and Accountability Needed to	 
Strengthen Federal Protection and Enforcement (17-JUN-08,	 
GAO-08-921T).							 
                                                                 
U.S. government efforts to protect and enforce intellectual	 
property (IP) rights domestically and overseas are crucial to	 
preventing billions of dollars in losses to U.S. industry and IP 
rights owners. The illegal importation and distribution of	 
IP-infringing goods also poses a threat to the health and safety 
of U.S. citizens. However, the challenges involved in IP	 
protection are significant and require effective coordination	 
among a wide range of policy and law enforcement agencies.	 
Multiple agencies work to protect IP rights, and they coordinate 
their efforts through certain coordination bodies as well as an  
executive- branch strategy called the Strategy Targeting	 
Organized Piracy (STOP). This testimony addresses two topics: the
need for (1) greater leadership and permanence in the national IP
enforcement strategy and coordination structure; and (2)	 
improvement in key agencies' criminal IP enforcement data	 
collection and analysis. It is based on prior GAO work conducted 
from 2003 to 2008.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-921T					        
    ACCNO:   A82391						        
  TITLE:     Intellectual Property: Leadership and Accountability     
Needed to Strengthen Federal Protection and Enforcement 	 
     DATE:   06/17/2008 
  SUBJECT:   Accountability					 
	     Agency missions					 
	     Crime prevention					 
	     Data collection					 
	     Data integrity					 
	     Federal agencies					 
	     Intellectual property				 
	     Interagency relations				 
	     International relations				 
	     Investigations by federal agencies 		 
	     Law enforcement					 
	     Performance measures				 
	     Property rights					 
	     Reporting requirements				 
	     Risk assessment					 
	     Risk management					 
	     Strategic planning 				 
	     Program coordination				 
	     program goals or objectives			 
	     Strategy Targeting Organized Piracy		 

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GAO-08-921T

   

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Testimony: 

Before the Committee on the Judiciary, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Tuesday, June 17, 2008: 

Intellectual Property: 

Leadership and Accountability Needed to Strengthen Federal Protection 
and Enforcement: 

Statement of Loren Yager:
Director, International Affairs and Trade: 

Intellectual Property: 

GAO-08-921T: 

GAO Highlights: 

Highlights of GAO-08-921T, a testimony before the Committee on the 
Judiciary, U.S. Senate. 

Why GAO Did This Study: 

U.S. government efforts to protect and enforce intellectual property 
(IP) rights domestically and overseas are crucial to preventing 
billions of dollars in losses to U.S. industry and IP rights owners. 
The illegal importation and distribution of IP-infringing goods also 
poses a threat to the health and safety of U.S. citizens. However, the 
challenges involved in IP protection are significant and require 
effective coordination among a wide range of policy and law enforcement 
agencies. Multiple agencies work to protect IP rights, and they 
coordinate their efforts through certain coordination bodies as well as 
an executive-branch strategy called the Strategy Targeting Organized 
Piracy (STOP). 

This testimony addresses two topics: the need for (1) greater 
leadership and permanence in the national IP enforcement strategy and 
coordination structure; and (2) improvement in key agenciesï¿½ criminal 
IP enforcement data collection and analysis. It is based on prior GAO 
work conducted from 2003 to 2008. 

What GAO Found: 

The coordinating structure that has evolved for protecting U.S. 
intellectual property rights lacks leadership and permanence, 
presenting challenges for effective long-term coordination. The 
National Intellectual Property Law Enforcement Coordination Council 
(NIPLECC), created by Congress in 1999, serves to coordinate IP 
protection and enforcement across agencies; and STOP, initiated by the 
White House in 2004, is the strategy that guides the council. NIPLECC 
has struggled to define its purpose and has an image of inactivity 
within the private sector. It continues to have leadership problems 
despite enhancements made by Congress in 2004 to strengthen its role. 
STOP, which is led by the National Security Council, has a more 
positive image compared to NIPLECC, but lacks permanence since its 
authority and influence could disappear after the current 
administration. While NIPLECC adopted STOP in 2006 as its strategy for 
protecting IP overseas, its commitment to implementing STOP as a 
national strategy remains unclear, creating challenges for 
accountability and long-term viability. 

Agencies within the Departments of Justice, Homeland Security, and 
Health and Human Services that play a role in fighting IP crimes 
through seizures, investigations, and prosecutions need to improve 
their collection and analysis of IP enforcement data. IP enforcement is 
generally not the highest priority for these agencies, given their 
broad missions, but addressing IP crimes with a public health and 
safety risk, such as counterfeit pharmaceuticals, is an important 
activity at each agency. Federal IP enforcement actions generally 
increased during fiscal years 2001ï¿½2006, but the agencies have not 
taken steps to assess their achievements. For example, despite the 
importance assigned to targeting IP crimes that affect public health 
and safety, most agencies lack data on their efforts to address these 
types of crimes. Also, most have not systematically analyzed their IP 
enforcement statistics to inform management and resource allocation 
decisions or established IP-related performance measures or targets. In 
addition, the National Intellectual Property Rights Coordination 
Center, created to coordinate federal IP investigative efforts, has not 
achieved its mission. Participating agencies have lacked a common 
understanding of the centerï¿½s purpose and their roles in relation to 
it, and staff levels have declined. 

What GAO Recommends: 

Previous GAO reports recommended, among other things, improvements in 
the strategic planning and coordination of IP enforcement efforts and 
in agency collection and analysis of IP enforcement data. The affected 
agencies generally agreed with our recommendations and some have begun 
taking steps in response. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-921T]. For more 
information, contact Loren Yager at (202) 512-4347 or [email protected]. 

[End of section] 

Mr. Chairman and Members of the Committee: 

Thank you for the opportunity to appear today before the Judiciary 
Committee to discuss our work on U.S. efforts to protect and enforce 
intellectual property (IP) rights. U.S. government efforts to protect 
and enforce intellectual property rights domestically and overseas are 
crucial to preventing billions of dollars in losses to U.S. industry 
and IP rights owners. Along with the costs to the U.S. economy, the 
illegal importation and distribution of counterfeit and pirated goods 
poses a threat to the health and safety of U.S. citizens. However, the 
challenges involved in IP protection are significant, and include the 
technological advances that facilitate piracy as well as the need for 
effective coordination among a wide range of policy and law enforcement 
agencies. 

In my statement today, I will address two topics: the need for (1) 
greater leadership and permanence in our national IP enforcement 
coordination structure and strategy; and (2) improvement in key 
agencies' criminal IP enforcement data collection and analysis. 

My remarks are based on a variety of assignments that GAO has conducted 
on intellectual property protection over the past 5 years.[Footnote 1] 
In this research, we performed work at multiple U.S. agency 
headquarters in Washington, D.C., agency field offices, and U.S. ports 
across the country. We reviewed key U.S. government IP reports and 
relevant agency documents, including IP enforcement data. In addition, 
we met with representatives from multiple industry associations and 
companies that are affected by IP violations. We conducted our work 
from June 2003 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. 

Summary: 

The current U.S. government coordinating structure that has evolved for 
protecting and enforcing U.S. intellectual property rights lacks 
leadership and permanence, presenting challenges for effective and 
viable coordination for the long term. The National Intellectual 
Property Law Enforcement Coordination Council (NIPLECC), created by 
Congress in 1999, serves to coordinate IP protection and enforcement 
across multiple agencies; and the Strategy for Targeting Organized 
Piracy (STOP), initiated by the White House in 2004, is the strategy 
that guides the council. NIPLECC has struggled to define its purpose 
and retains an image of inactivity within the private sector. It 
continues to have leadership problems despite enhancements made by 
Congress in December 2004 to strengthen its role. In contrast, STOP, 
which is led by the National Security Council, has a more positive 
image compared to NIPLECC, but lacks permanence since its authority and 
influence could disappear after the current administration. While 
NIPLECC adopted STOP in February 2006 as its strategy for protecting IP 
overseas, its commitment to implementing STOP as a national strategy 
remains unclear, creating challenges for accountability and long-term 
viability. 

Agencies within the Departments of Justice (DOJ), Homeland Security 
(DHS), and Health and Human Services (HHS) that play a role in fighting 
IP crimes need to improve their collection and analysis of IP 
enforcement data. Federal IP enforcement functions include seizures, 
investigations, and prosecutions. IP enforcement is generally not the 
highest priority for these agencies, given their broad missions, but 
addressing IP crimes with a public health and safety risk, such as 
counterfeit pharmaceuticals, is an important enforcement activity at 
each agency. Federal IP enforcement actions generally increased during 
fiscal years 2001-2006, but the agencies have not taken steps to assess 
their achievements. For example, despite the importance assigned to 
targeting IP crimes that affect public health and safety, we found that 
most agencies lack data to report on or analyze their efforts to 
address these types of crimes. Also, most have not systematically 
analyzed their IP enforcement statistics to inform management and 
resource allocation decisions or established IP-related performance 
measures or targets to assess their achievements. We also found that 
the National Intellectual Property Rights Coordination Center, an 
interagency mechanism created to coordinate federal investigative 
efforts related to IP crimes, has not achieved its mission, in part 
because participating agencies have lacked a common understanding of 
the center's purpose and their roles in relation to it, and staff 
levels have declined. 

Background: 

Intellectual property, for which the U.S. government provides broad 
protection through means such as copyrights, patents, and trademarks, 
plays a significant role in the U.S. economy, and the United States is 
an acknowledged leader in its creation. According to the U.S. 
Coordinator for International Intellectual Property Enforcement, 
industries that relied on IP protection were estimated to account for 
over half of all U.S. exports, represented 40 percent of U.S. economic 
growth, and employed about 18 million Americans in 2006. These 
industries must compete with the global illicit market that is being 
spurred by economic incentives such as low barriers to entry into 
counterfeiting and piracy, high profits, and limited legal sanctions if 
caught. In addition, technology has made reproduction and distribution 
of some products more accessible, and some countries, particularly 
China, continue to have weak IP enforcement despite U.S. efforts. 

Multiple federal agencies undertake a wide range of activities to 
protect and enforce IP rights. The Departments of Commerce and State, 
the U.S. Trade Representative (USTR), the Copyright Office, the U.S. 
International Trade Commission, and the U.S. Patent and Trademark 
Office play a role in IP protection. Key federal law enforcement 
agencies that play a role are DHS's Customs and Border Protection (CBP) 
and Immigration and Customs Enforcement (ICE), and DOJ's Criminal 
Division, U.S. Attorneys Offices, and the Federal Bureau of 
Investigation (FBI). HHS's Food and Drug Administration (FDA) and the 
U.S. International Trade Commission also help enforce IP rights. 

U.S. IP Enforcement Structure and Strategy Need Stronger Leadership and 
Permanence: 

The current coordinating structure for U.S. protection and enforcement 
of intellectual property rights lacks clear leadership, hampering the 
effectiveness and long-term viability of such coordination. Created in 
1999 to serve as the central coordinating structure for IP enforcement 
across federal agencies, NIPLECC has struggled to define its purpose, 
retains an image of inactivity within the private sector, and continues 
to have leadership problems despite enhancements made by Congress in 
December 2004 to strengthen its role. In addition, in July 2006, Senate 
appropriators expressed concern about the lack of information provided 
by NIPLECC on its progress. 

In contrast, the presidential initiative called STOP, which is led by 
the National Security Council, has a positive image compared to 
NIPLECC, but lacks permanence, since its authority and influence could 
disappear after the current administration leaves office. Many agency 
officials said that STOP has increased attention to IP issues within 
their agencies, in the private sector, and abroad; they attributed this 
to the fact that STOP came out of the White House, thereby lending it 
more authority and influence. While NIPLECC adopted STOP as its 
strategy for protecting IP overseas in February 2006, its commitment to 
implementing STOP remains unclear, creating challenges for 
accountability and long-term viability. For instance, neither NIPLECC's 
September 2006 annual report nor its most recent January 2008 report 
explain how the NIPLECC principals plan to carry out their oversight 
responsibilities mandated by Congress to help ensure a successful 
implementation of the strategy. In addition, the STOP strategy document 
has not been revised to mention NIPLECC's oversight role. 

STOP is a first step toward an integrated national strategy to protect 
and enforce U.S. intellectual property rights, and it has energized 
agency efforts. However, we found that STOP's potential as a national 
strategy is limited because it does not fully address important 
characteristics of an effective national strategy. For example, its 
performance measures lack baselines and targets that would allow 
policymakers to better assess how well the activities are being 
implemented. In addition, the strategy lacks a risk management 
framework and a discussion of current or future costs--important 
elements for policymakers to effectively balance the threats from 
counterfeit products with the resources available. STOP does not 
specify who will provide oversight and accountability among the 
agencies carrying out the strategy, but it does identify organizational 
roles and responsibilities with respect to individual agencies' STOP 
activities. We found individual agency documents that include some key 
elements of an effective national strategy, but they have not been 
incorporated into the STOP documents. This lack of integration 
underscores the strategy's limited usefulness as a management tool for 
effective oversight and accountability by Congress as well as the 
private sector and consumers whom STOP aims to protect. In our November 
2006 report on this subject, we made two recommendations to clarify 
NIPLECC's oversight role with regard to STOP and to improve STOP's 
effectiveness as a planning tool and its usefulness to Congress. The 
U.S. IP Coordinator, who heads NIPLECC, concurred with our 
recommendations and said NIPLECC has taken some steps to address them. 

Key Agencies Need Better Data Collection and Analysis to Strengthen IP 
Enforcement Efforts: 

The five key federal agencies that play a role in fighting IP crimes-- 
DOJ's U.S. Attorney's Offices and the FBI; DHS's CBP and ICE; and HHS's 
FDA--need to improve their collection and analysis of IP enforcement 
data. IP enforcement activities are generally a small part of these 
agencies' much broader missions, and IP enforcement is not the 
agencies' top priority. 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. The key agencies have 
various IP enforcement functions: CBP is responsible for seizing 
counterfeit goods at U.S. ports of entry; ICE, the FBI, and FDA share 
responsibility for investigating crimes, with FDA focusing solely on IP 
crimes that present public health and safety risks; DOJ is responsible 
for prosecuting alleged violations. 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 the FBI does not. FDA's role is driven 
by its public health and safety mission, not IP enforcement per se. 

Our review of agencies' enforcement statistics from fiscal year 2001 
through 2006 found that many IP enforcement activities generally 
increased (with some fluctuations across fiscal years and type of 
enforcement action), but some did not. For example, the number of CBP 
seizure actions and the value of seizures have increased steadily 
between 2001 and 2006, with the estimated value of goods seized 
reaching about $155 million in 2006. However, CBP collected less than 1 
percent of IP-related penalties assessed during those years. The number 
of arrests, indictments, and convictions by ICE, the FBI, and FDA also 
generally increased during that time. Finally, the number of DOJ IP 
prosecutions was around 150 per year before increasing to 200 in 2006. 
Of the approximately 1,500 defendants that DOJ charged with IP crimes 
from fiscal year 2001 and through 2006, 373 were imprisoned. 

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. For example, despite the 
importance agencies assign to targeting IP crimes that affect public 
health and safety, we were surprised to learn that most of these 
agencies lacked data to track their efforts in this area. Naturally, 
this is not true for FDA--by virtue of its mission, all its IP-related 
investigations affect public health and safety. Collecting better data, 
analyzing them, and reporting on progress toward goals could help make 
the IP enforcement agencies more accountable to the public and 
Congress, particularly regarding public health and safety. To address 
these issues, we made a number of recommendations to the IP enforcement 
agencies to improve analysis and reporting on their enforcement 
activities. In response, DOJ has said that it will take steps to 
routinely and systematically analyze IP enforcement statistics within 
fiscal year 2008. It also has directed the U.S. Attorneys Offices and 
the FBI to collect information on investigations and prosecutions 
related to IP crimes that affect public health and safety. DHS and HHS 
also generally agreed with these recommendations but have not yet 
indicated the specific steps they will take in response. 

The need for improved coordination of federal law enforcement efforts 
has long been recognized. Around the same time Congress created 
NIPLECC, the executive branch created the National Intellectual 
Property Rights Coordination Center to improve federal IP enforcement 
and coordinate investigative efforts between ICE and FBI, 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, the 
envisioned flow of private sector complaint information never 
materialized, agencies never reached agreement on their roles and 
responsibilities, and the center has gradually shifted its focus from 
investigative coordination to private sector outreach. We recommended 
that the responsible agencies reassess the mission of the center and 
communicate with the Congress regarding its purpose and required 
resources. In response, DHS indicated it concurred with this 
recommendation, and DOJ said it has directed FBI to coordinate with ICE 
to address this recommendation. 

Concluding Observations: 

Mr. Chairman, we appreciate the opportunity to summarize our work on 
federal IP enforcement efforts. The challenges of IP piracy are 
enormous and will require the sustained and coordinated efforts of U.S. 
agencies, their foreign counterparts, and industry representatives to 
be successful. As the title of the hearing suggests, the issue of IP 
protection is not only important for U.S. producers, but also for the 
health and safety of U.S. consumers. 

Our key findings show that the current coordinating structure comprised 
of NIPLECC and STOP has weaknesses related to leadership, permanence, 
and accountability. They also show that improved data collection, 
analysis, and reporting among the key enforcement agencies could help 
them better manage resources and performance and improve their 
accountability to Congress and affected parties. These findings were 
particularly important concerning IP crimes related to public health 
and safety, given that most agencies lack data to analyze or 
demonstrate the effect of their efforts in this area. The affected 
agencies generally agreed with our recommendations and some have begun 
taking steps in response. 

A number of legislative proposals are before Congress that would modify 
the federal IP enforcement structure.[Footnote 2] As the committee 
continues to consider this issue and these proposals, we would be happy 
to provide additional information on where we believe the proposals 
address the weaknesses that our work has identified. 

Mr. Chairman, this concludes my prepared remarks. I would be happy to 
address any questions that you or the other members of the Committee 
may have. 

If you have any questions on matters discussed in this testimony, 
please contact Loren Yager at (202) 512-4347 or by email at 
[email protected]. Other key contributors to this testimony include Adam 
Cowles (Assistant Director), Shirley Brothwell, Nina Pfeiffer, Jason 
Bair, and Adrienne Spahr. 

[End of section] 

Related GAO Products: 

Intellectual Property: Federal Enforcement Has Generally Increased, but 
Assessing Performance Could Strengthen Law Enforcement Efforts. 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-157]. Washington, 
D.C.: March 11, 2008. 

Intellectual Property: Risk and Enforcement Challenges. [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-177T]. Washington, D.C.: 
October 18, 2007. 

Intellectual Property: Better Data Analysis and Integration Could Help 
U.S. Customs and Border Protection Improve Border Enforcement Efforts. 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-735]. Washington, 
D.C.: April 26, 2007. 

Intellectual Property: National Enforcement Strategy Needs Stronger 
Leadership and More Accountability. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-710T]. Washington, D.C.: April 12, 2007. 

Intellectual Property: Strategy Targeting Organized Piracy (STOP) 
Requires Changes for Long-term Success. [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-74]. Washington, D.C.: 
November 8, 2006. 

Intellectual Property: Initial Observations on the STOP Initiative and 
U.S. Border Efforts to Reduce Piracy. [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-06-1004T]. Washington, D.C.: July 
26, 2006. 

Intellectual Property: U.S. Efforts have Contributed to Strengthened 
Laws Overseas, but Significant Enforcement Challenges Remain. 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-788T]. Washington, 
D.C.: June 14, 2005. 

Intellectual Property: U.S. Efforts Have Contributed to Strengthened 
Laws Overseas, but Challenges Remain. [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-912]. Washington, D.C.: 
September 8, 2004. 

[End of section] 

Footnotes: 

[1] See Related GAO Products at the end of this statement for a list of 
GAO reports and testimonies on intellectual property protection since 
2004. 

[2] Intellectual Property Rights Enforcement Act, S.522, 110th 
Congress; Prioritizing Resources and Organization for Intellectual 
Property Act, H.R. 4279, 110th Congress. 

[End of section] 

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