Intellectual Property
Federal Enforcement Has Generally Increased, but Assessing Performance Could Strengthen Law Enforcement Efforts Gao ID: GAO-08-157 March 11, 2008Federal 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.
Five key agencies play a role in IP enforcement, and their enforcement functions include seizures, investigations, and prosecutions. 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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-08-157, Intellectual Property: Federal Enforcement Has Generally Increased, but Assessing Performance Could Strengthen Law Enforcement Efforts
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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:
GAO Highlights:
Highlights of 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.
Why GAO Did This Study:
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.
What GAO Found:
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.
Figure: Key Agencies Involved in IP-Related Enforcement and Their
Enforcement Function and Structure:
[See PDF for image]
This figure is a table, illustrating the following information:
Function: Seizing;
Agency: Department of Homeland Security; Customs and Border Protection;
Structure: Office of International Trade and Office of Field Operations
(325 ports of entry).
Function: Investigating;
Agency: Department of Homeland Security; Immigration and Customs
Enforcement;
Structure: Office of Investigations (26 field offices).
Function: Investigating;
Agency: Department of Justice; Federal Bureau of Investigation;
Structure: Cyber Crime Division (56 field offices).
Function: Investigating;
Agency: Department of Health and Human Services; Food and Drug
Administration;
Structure: Office of Criminal Investigations (6 field offices).
Function: Prosecuting;
Agency: Department of Justice;
Structure: Criminal Division and U.S. Attorney‘s Office (94 field
offices).
Sources: GAO analysis of agency data; Art Explosion (images).
[End of figure]
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.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-157]. For more information, contact Loren
Yager at (202) 512-4347 or yagerl@gao.gov.
Contents:
Letter:
Results in Brief:
Background:
Multiple Agencies Carry Out IP Enforcement, but Their IP Priorities
Vary, and Few Resources Are Dedicated Exclusively to IP Enforcement:
IP Enforcement Generally Increased, but Agencies Have Not Taken Key
Steps to Assess Enforcement Efforts:
The National Intellectual Property Rights Coordination Center Has Not
Achieved Its Mission, and Staff Levels Have Decreased:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Federal Protection and Enforcement of IP Rights under U.S.
Law:
Appendix III: Private Sector Views on Federal IP Enforcement Efforts:
Appendix IV: Comments from the Department of Homeland Security:
Appendix V: Comments from the Department of Justice:
Appendix VI: Comments from the Department of Health and Human Services:
Appendix VII: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Dollar Value of IP Penalty Amounts Assessed and Collected by
CBP, Fiscal Years 2001-2006:
Table 2: DOJ's IP Crime Sentencing Outcomes, Fiscal Years 2001-2006:
Table 3: Summary of Federal Protection and Enforcement of IP Rights
under U.S. Law:
Table 4: Summary of Industry Representatives' Views on the Impact of
Counterfeiting and Piracy, by Sector:
Table 5: Summary of Industry Representatives' Views on Federal
Resources Dedicated to IP Enforcement, by Sector:
Table 6: Summary of Industry Representatives' Views on Coordination
with Federal IP Enforcement Agencies, by Sector:
Table 7: Summary of Industry Representatives' Views on Effectiveness of
Training on IP Enforcement Activity, by Sector:
Table 8: Summary of Industry Representatives' Views on Areas for
Improved IP Enforcement, by Sector:
Figures:
Figure 1: Federal IP Enforcement Functions, the Key Agencies That
Execute Them, and the Agencies' Structures:
Figure 2: Estimated Number of Investigative Resources Spent on IP-
Related Investigations by ICE, FBI, and FDA, Fiscal Years 2001-2006:
Figure 3: Trends in the Number of IP Seizure Actions and Estimated
Domestic Values of Seizures by CBP, Fiscal Years 2001-2006:
Figure 4: Number of CBP Exclusion Order Exams Performed and IP
Discrepancies Found, Fiscal Years 2002-2006:
Figure 5: Number of Criminal Cases Opened by ICE, FBI, and FDA Related
to IP Investigations, Fiscal Years 2001-2006:
Figure 6: Number of Arrests, Indictments, and Convictions by FBI, ICE,
and FDA, Fiscal Years 2001-2006:
Figure 7: Number of IP-Related Cases Filed by DOJ, Fiscal Years 2001-
2006:
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:
[End of section]
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.[Footnote 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).[Footnote 2] The Department of Health and Human
Services' (HHS) Food and Drug Administration (FDA) also plays a
role.[Footnote 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.[Footnote 4]
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.[Footnote 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 locations[Footnote 6] 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.
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.
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.[Footnote 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.
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,[Footnote 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.
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.[Footnote 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.[Footnote 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.[Footnote 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.
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.[Footnote 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.[Footnote 13] Exclusion orders
direct CBP to stop certain goods from entering the United States while
the order is in effect.[Footnote 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.
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.[Footnote 15] Officials from seven federal entities are members
of NIPLECC.[Footnote 16] A presidential initiative, called the Strategy
Targeting Organized Piracy (STOP), is the council's strategy, and it
articulates five broad goals.[Footnote 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.
Key Agencies Carry Out Three Primary IP-Related Enforcement Functions:
Key federal agencies carry out three IP enforcement functions.[Footnote
18] Seizing IP infringing goods is primarily performed by CBP.[Footnote
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:
[See PDF for image]
Function: Seizing;
Agency[A]: CBP;
Structure: Office of International Trade and Office of Field Operations
(325 ports of entry).
Function: Investigating;
Agency[A]: ICE;
Structure: Office of Investigations (26 investigative field offices).
Function: Investigating;
Agency[A]: FBI;
Structure: Cyber Crime Division (56 investigative field offices).
Function: Investigating;
Agency[A]: FDA
Structure: Office of Criminal Investigations (6 investigative field
offices).
Function: Prosecuting;
Agency[A]: DOJ;
Structure: Criminal Division and U.S. Attorney‘s Office (94 field
offices).
Sources: GAO analysis of agency data; Art Explosion (images).
[A} The 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.
[End of figure]
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 Exclusions:
* 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.
* 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.[Footnote 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.
* 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.[Footnote 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:
* Function: ICE conducts investigations of IP-related criminal
activity, including infringement of trademark and copyright law.
* 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.
* 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.[Footnote 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.[Footnote 23] IP investigations are
carried out by agents located in about 100 U.S. cities, organized under
ICE's 26 field offices.
FBI Criminal Investigations:
* Function: FBI conducts investigations of IP-related criminal
activity, including infringement of trademark and copyright law, as
well as theft of trade secrets.
* 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.[Footnote 24] IP enforcement is included in the cyber crime area,
but it is ranked 5th out of FBI's 6 cyber crime priorities.[Footnote
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.
* Structure: FBI's Cyber Division oversees the agency's IP enforcement
efforts even though not all of its IP investigations are cyber-
related.[Footnote 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:
* Function: FDA investigates illegal activity pertaining to food,
drugs, medical devices, and other products because of the impact on
public health.[Footnote 27]
* 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.
* 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:
* Function: DOJ prosecutes IP cases referred from ICE, FBI, and FDA, as
well as from private sector representatives and other sources.
* 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.[Footnote 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.
* 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.[Footnote 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.
Information on each agency's resources for IP-related enforcement are
detailed below.
CBP - Seizures, Penalties, and Exclusions:
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.[Footnote
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. [Footnote 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.
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.[Footnote 32] In April 2007, we also reported that
staff resources at CBP for customs revenue functions have declined
since the formation of DHS.[Footnote 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,[Footnote 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.
Figure 2: Estimated Number of Investigative Resources Spent on IP-
Related Investigations by ICE, FBI, and FDA, Fiscal Years 2001-2006:
[See PDF for image]
This figure is a multiple line graph. The vertical axis of the graph
represents investigative resources spent on IP-related enforcement from
0 to 250. The horizontal axis of the graph represents fiscal years from
2001 to 2006. The following data is depicted:
Agency: ICE;
Resources spent, fiscal year: 2001: 100;
Resources spent, fiscal year: 2002: 156;
Resources spent, fiscal year: 2003: 216;
Resources spent, fiscal year: 2004: 160;
Resources spent, fiscal year: 2005: 150;
Resources spent, fiscal year: 2006: 141.
Agency: FBI;
Resources spent, fiscal year: 2001: 49;
Resources spent, fiscal year: 2002: 42;
Resources spent, fiscal year: 2003: 48;
Resources spent, fiscal year: 2004: 64;
Resources spent, fiscal year: 2005: 56;
Resources spent, fiscal year: 2006: 56.
Agency: FDA;
Resources spent, fiscal year: 2003: 11;
Resources spent, fiscal year: 2004: 19;
Resources spent, fiscal year: 2005: 16;
Resources spent, fiscal year: 2006: 16.
Source: GAO analysis of agency data.
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.
[End of figure]
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.[Footnote 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.
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.[Footnote 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.[Footnote 37]
Figure 3: Trends in the Number of IP Seizure Actions and Estimated
Domestic Values of Seizures by CBP, Fiscal Years 2001-2006:
This figure contains two line graphs. The first graph depicts the
number of seizures per fiscal year from 2001 to 2006. The second graph
depicts the domestic value of the seizures for the same time period.
The following data is depicted in the two graphs:
Fiscal year: 2001;
Number is seizures: 3,586;
Domestic value of seizures: $57.438 million.
Fiscal year: 2002;
Number is seizures: 5,793;
Domestic value of seizures: $98.990 million.
Fiscal year: 2003;
Number is seizures: 6,500;
Domestic value of seizures: $94.019 million.
Fiscal year: 2004;
Number is seizures: 7,255;
Domestic value of seizures: $138.768 million.
Fiscal year: 2005;
Number is seizures: 8,022;
Domestic value of seizures: $93.234 million.
Fiscal year: 2006;
Number is seizures: 14,675;
Domestic value of seizures: $155.369 million.
Source: GAO analysis of CBP data.
[End of figure]
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.[Footnote 38]
Table 1: Dollar Value of IP Penalty Amounts Assessed and Collected by
CBP, Fiscal Years 2001-2006, Dollars in millions:
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.
[End of table]
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.
[Footnote 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,
[Footnote 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.[Footnote 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.[Footnote 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.
[Footnote 43]
Figure 4: Number of CBP Exclusion Order Exams Performed and IP
Discrepancies Found, Fiscal Years 2002-2006:
[See PDF for image]
This figure contains two line graphs. The first graph depicts the
number of exams per fiscal year from 2002 to 2006. The second graph
depicts the number of IP discrepancies for the same time period. The
following data is depcited in the two graphs:
Fiscal year: 2002;
Number of exams: 5,085;
Number of IP discrepancies: 44.
Fiscal year: 2003;
Number of exams: 2,137;
Number of IP discrepancies: 9.
Fiscal year: 2004;
Number of exams: 105;
Number of IP discrepancies: 3.
Fiscal year: 2005;
Number of exams: 709;
Number of IP discrepancies: 7.
Fiscal year: 2006;
Number of exams: 713;
Number of IP discrepancies: 1.
Source: GAO analysis of agency data.
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.
[End of figure]
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.[Footnote 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.
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.
* 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.[Footnote 45]
* 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.[Footnote 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.[Footnote 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.
* 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.[Footnote 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.[Footnote 49]
* 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.
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.[Footnote 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:
[See PDF for image]
This figure is a multiple line graph. The vertical axis of the graph
represents number of investigations opened from 0 to 500. The
horizontal axis of the graph represents fiscal years from 2001 to 2006.
The following data is depicted:
Fiscal year: 2001;
Number of investigations opened by ICE: 482;
Number of investigations opened by FBI: 301;
Number of investigations opened by FDA: 22.
Fiscal year: 2002;
Number of investigations opened by ICE: 440;
Number of investigations opened by FBI: 252;
Number of investigations opened by FDA: 31.
Fiscal year: 2003;
Number of investigations opened by ICE: 430;
Number of investigations opened by FBI: 271;
Number of investigations opened by FDA: 31.
Fiscal year: 2004;
Number of investigations opened by ICE: 415;
Number of investigations opened by FBI: 361;
Number of investigations opened by FDA: 62.
Fiscal year: 2005;
Number of investigations opened by ICE: 492;
Number of investigations opened by FBI: 359;
Number of investigations opened by FDA: 39.
Fiscal year: 2006;
Number of investigations opened by ICE: 410;
Number of investigations opened by FBI: 316;
Number of investigations opened by FDA: 62.
Source: GAO analysis of agency data.
[End of figure]
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.[Footnote 51]
Figure 6: Number of Arrests, Indictments, and Convictions by FBI, ICE,
and FDA, Fiscal Years 2001-2006:
[See PDF for image]
This figure is a series of horizontal bar graphs depicting the
following data:
Agency: FBI;
Year: 2001;
Arrests: 51;
Indictments: 117;
Convictions: 152.
Agency: FBI;
Year: 2002;
Arrests: 61;
Indictments: 126;
Convictions: 96.
Agency: FBI;
Year: 2003;
Arrests: 52;
Indictments: 103;
Convictions: 109.
Agency: FBI;
Year: 2004;
Arrests: 82;
Indictments: 111;
Convictions: 115.
Agency: FBI;
Year: 2005;
Arrests: 104;
Indictments: 144;
Convictions: 124.
Agency: FBI;
Year: 2006;
Arrests: 144;
Indictments: 192;
Convictions: 188.
Agency: ICE;
Year: 2001;
Arrests: 94;
Indictments: 80;
Convictions: 67.
Agency: ICE;
Year: 2002;
Arrests: 97;
Indictments: 52;
Convictions: 99.
Agency: ICE;
Year: 2003;
Arrests: 110;
Indictments: 76;
Convictions: 65.
Agency: ICE;
Year: 2004;
Arrests: 228;
Indictments: 205;
Convictions: 126.
Agency: ICE;
Year: 2005;
Arrests: 200;
Indictments: 200;
Convictions: 139.
Agency: ICE;
Year: 2006;
Arrests: 195;
Indictments: 162;
Convictions: 183.
Agency: FDA;
Year: 2001;
Arrests: 6;
Indictments: 0;
Convictions: 4.
Agency: FDA;
Year: 2002;
Arrests: 17;
Indictments: 3;
Convictions: 10.
Agency: FDA;
Year: 2003;
Arrests: 29;
Indictments: 16;
Convictions: 11.
Agency: FDA;
Year: 2004;
Arrests: 86;
Indictments: 25;
Convictions: 30.
Agency: FDA;
Year: 2005;
Arrests: 59;
Indictments: 33;
Convictions: 41.
Agency: FDA;
Year: 2006;
Arrests: 57;
Indictments: 30;
Convictions: 44.
Source: GAO analysis of agency data.
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.
[End of figure]
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).
Figure 7: Number of IP-Related Cases Filed by DOJ, Fiscal Years 2001-
2006:
[See PDF for image]
This figure is a line graph depicting the following data:
Fiscal year: 2001;
Number of cases filed: 151.
Fiscal year: 2002;
Number of cases filed: 129.
Fiscal year: 2003;
Number of cases filed: 163.
Fiscal year: 2004;
Number of cases filed: 129.
Fiscal year: 2005;
Number of cases filed: 164.
Fiscal year: 2006;
Number of cases filed: 204.
Source: GAO analysis of DOJ data.
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.
[End of figure]
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.[Footnote 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.[Footnote 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.[Footnote 54]
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.
[A] 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. 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.
[B] Number 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.
[End of table]
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.[Footnote 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.[Footnote 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.[Footnote 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.
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.
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.[Footnote 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.[Footnote 59] Moreover, most of
these are internal agency documents that are not available to the
public.[Footnote 60] Neither ICE nor FDA have any additional planning
documents for IP enforcement.
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 1993[Footnote 61]
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.[Footnote 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.[Footnote 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.[Footnote 64]
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.
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.[Footnote 65]
Like NIPLECC, the center has had difficulty defining its purpose and
carrying out its law enforcement coordination mission.[Footnote 66]
According to ICE, FBI, and DOJ officials and our analysis, the center
has not achieved its original mission for several reasons:
* 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.[Footnote 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.[Footnote 68]
* 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,[Footnote 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.
* 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.
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.
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.[Footnote
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.[Footnote 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.[Footnote 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.
[Footnote 73] In fiscal year 2004, the conference report directed ICE
to allocate $6.4 million to the center.[Footnote 74]
We asked agencies how they responded to the conference report
directives, with agencies responding as follows:
* 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.[Footnote 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.
* 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.
* 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.
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.[Footnote 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.
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:
* systematically analyze enforcement statistics to better understand
variations in IP-related enforcement activity.
For CBP:
* 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:
* 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:
* 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:
* identify factors currently limiting their enforcement capabilities
and develop a strategy for addressing those limitations along with a
timeline for implementing the strategy;
* begin collecting data on the number of exclusions, in total and per
exclusion order; and:
* 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:
* reassess the National Intellectual Property Rights Coordination
Center's mission and how its future performance will be assessed;
* define agencies' role in the center and the number and types of
resources needed to operate the center; and:
* report to Congress on the center's redefined purpose, operations,
required resources, and progress within 1 year of the center's
relocation.
Agency Comments and Our Evaluation:
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.
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.[Footnote 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.
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 [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4347 or yagerl@gao.gov. 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,
Signed by:
Loren Yager, Director:
International Affairs and Trade:
[End of section]
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.[Footnote 78] 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.[Footnote 79] 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.
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.[Footnote 80] 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.
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.
[End of section]
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. [Footnote 81]
Table 3: Summary of Federal Protection and Enforcement of IP Rights
under U.S. Law:
Type of IP protection: U.S. Copyright: Criminal Infringement for Profit
17 USC 506(a)(1)(A) and 18 USC 2319(b);
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $250,00 fine or twice gain/loss; 2nd offense, maximum
10 years imprisonment; Corporations: 1st offense, $500,000 fine or
twice gain/loss; Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available (of infringing copies, and plates, mold,
tapes, or other equipment from which infringing copies can be made);
Civil remedies and penalties (available to rights holders and other
victims): Copyright infringement (even where it is neither willfully
committed nor for profit) is actionable under 17 U.S.C. § 501 et seq.
For willful copyright infringement, copyright owners may obtain
injunctions, ex parte orders to seize infringing items, and recover
actual damages or statutory damages of up to $150,000 per work
infringed, as well as attorneys' fees and costs.
Type of IP protection: U.S. Copyright: Bootleg Recordings of Live
Musical Recordings (unauthorized fixation of and trafficking in sound
recordings and music videos of live musical performances) 18 USC 2319A;
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, 10
years imprisonment; Corporations: $500,000 or twice gain/loss; Criminal
forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available (for bootlegs imported into the U.S.);
Civil remedies and penalties (available to rights holders and other
victims): Performers whose performances are recorded or distributed
without authorization may, pursuant to 17 U.S.C. § 1101, obtain
injunctions and recover damages equivalent to those available for
copyright infringement under 17 U.S.C. §§ 502-505.
Type of IP protection: U.S. Copyright: Camcording (unauthorized
recording of motion pictures in motion picture exhibition facility) 18
USC 2319B;
Criminal penalties: Individuals: 1st offense, maximum 3 years
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, maximum
6 years imprisonment; Corporations: $500,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): [Empty];
Civil remedies and penalties (available to rights holders and other
victims): No specific civil remedies for camcording, although
camcording is actionable as copyright infringement.
Type of IP protection: U.S. Copyright: Large-Scale Infringement without
Profit Motive (reproduction or distribution over any 180-day
period/more than $1,000 total retail value) 17 USC 506(a)(1)(B) and 18
USC 2319(c);
Criminal penalties: Individuals: 1st offense, maximum 3 years
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, 6 years
imprisonment; Corporations: $500,000 fine or twice gain/loss; Criminal
forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Copyright infringement (even where it is neither willfully
committed nor for profit) is actionable under 17 U.S.C. § 501 et seq.
For willful copyright infringement, copyright owners may obtain
injunctions, ex parte orders to seize infringing items, and recover
actual damages or statutory damages of up to $150,000 per work
infringed, as well as attorneys' fees and costs.
Type of IP protection: U.S. Copyright: Distribution of Pre-Release
Works or Material over Publicly-Accessible Computer Network for
Commercial Purposes (17 USC 506(a)(1)(C) and 18 USC 2319(d));
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $250,00 or twice gain/loss; subsequent offense, 10
years imprisonment; Corporations: $500,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Actionable as copyright infringement (see above).
Type of IP protection: U.S. Copyright: Distribution of Pre-Release
Works or Material over Publicly-Accessible Computer Network Not for
Commercial Purposes (17 USC 506(a)(1)(C) and 18 USC 2319(d));
Criminal penalties: Individuals: 1st offense, maximum 3 years
imprisonment and $250,000 fine or twice gain/loss; subsequent offense,
6 years imprisonment; Corporations: $500,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Actionable as copyright infringement (see above).
Type of IP protection: U.S. Copyright: Use of Technology to Violate
Anti-Circumvention Systems and Anti-Piracy Protections and Protection
of Integrity of Copyright Management Information (17 USC 1201-1204);
Criminal penalties: Individuals: 1st offense, maximum 5 years
imprisonment and $500,000 fine or twice gain/loss; 2nd offense, maximum
10 years imprisonment and $1 million fine or twice gain/loss;
Non-criminal actions and penalties (by federal government): [Empty];
Civil remedies and penalties (available to rights holders and other
victims): Civil court action available, including: temporary or
permanent injunction; impoundment; actual and statutory damages; costs;
attorney's fees; remedial modification or destruction of violating
product; triple damages for repeat violations within 3 years of initial
violation.
Type of IP protection: U.S. Copyright: Trafficking in counterfeit
labels, illicit labels, or counterfeit documentation or packaging (18
USC 2318);
Criminal penalties: Individuals: Maximum 5 years imprisonment and
$250,000 fine or twice gain/loss; Corporations: $500,000 fine or twice
gain/loss; Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Available civil remedies include: temporary or permanent
injunction; -impoundment; attorney's fees and costs; actual damages and
any additional profits; statutory damages of up to $25,000 per
violation.
Type of IP protection: U.S. Trademark: Trafficking in Counterfeit Goods
or Services (using counterfeit mark) (18 U.S.C. § 2320); Criminal
penalties: Individuals: 1st offense, maximum 10 years imprisonment and
maximum $2,000,000 fine or twice gain/loss; 2nd offense, maximum 20
years imprisonment and maximum $5,000,000 fine or twice the gain/loss;
Corporations: 1st offense, maximum $5,000,000 fine or twice gain/loss;
subsequent offense, maximum $15,000,000 fine or twice the gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): Civil
forfeiture available;
Civil remedies and penalties (available to rights holders and other
victims): Available civil remedies include: temporary or permanent
injunction; impoundment; attorney's fees and costs; actual damages and
any additional profits; statutory damages of up to $100,000 per type of
goods (up to $1 million if violation is willful).
Type of IP protection: U.S. Patent: False Patent Marking (35 U.S.C. §
292);
Criminal penalties: No criminal penalties, but criminal fines based on
criminal conduct related to patents;
Non-criminal actions and penalties (by federal government): Maximum
$500 fine for every offense;
Civil remedies and penalties (available to rights holders and other
victims): Any private individual may sue for the civil penalty of $500,
which is split with the government.
Type of IP protection: U.S. Trade Secrets: Economic Espionage (18
U.S.C. § 1831);
Criminal penalties: Individuals: maximum 15 years imprisonment or
$500,000 fine or twice gain/loss, or both; Corporations: $10,000,000
fine or twice gain/loss; Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): The
Attorney General may obtain injunctions against violations;
Civil remedies and penalties (available to rights holders and other
victims): No express federal cause of action, although remedies are
available for trade secret theft under state law.
Type of IP protection: U.S. Trade Secrets: Theft of Trade Secrets (18
USC 1832);
Criminal penalties: Individuals: 1st offense, maximum 10 years
imprisonment or $250,000 or twice gain/loss; 2nd offense, 10 years
imprisonment; Corporations: Maximum $5,000,000 fine or twice gain/loss;
Criminal forfeiture available;
Non-criminal actions and penalties (by federal government): The
Attorney General may obtain injunctions against violations;
Civil remedies and penalties (available to rights holders and other
victims): No express federal cause of action, although remedies are
available for trade secret theft under state law.
Source: GAO analysis of DOJ documents and review by DOJ's Criminal
Division.
[End of table]
[End of section]
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.
[Footnote 82] 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.
Table 4: Summary of Industry Representatives' Views on the Impact of
Counterfeiting and Piracy, by Sector:
Sector: Consumer electronics;
Comments:
* Federal law enforcement efforts have improved very impressively over
the past three years. There is better coordination and more resources,
but the problem is growing and now there is an economic and health and
safety issue—The magnitude of the federal law enforcement effort is
still not commensurate with magnitude of [counterfeit and pirated]
products.
Sector: Luxury goods/apparel;
Comments:
* Beyond a loss to businesses, there is a huge loss to the Treasury and
the national infrastructure that results from the sale of counterfeit
goods;
* Most counterfeit goods are sold by small businesses that
intentionally mix real products with counterfeit products so people
can't tell.
Sector: Health/food;
Comments:
* The main issue with regard to counterfeiting and piracy is fast
moving consumer goods. It has become an increased problem as personal
care products that have safety issues are found in large retail stores
and grocery stores.
Sector: Internet;
Comments:
* Losses to property rights owners from counterfeiting and piracy can
occur through Internet/online auctions.
Sector: Pharmaceutical;
Comments:
* Counterfeit medicines place public health and safety at risk, have
the potential to damage patient confidence in the branded medicine, and
negatively impact sales of the authentic medicines.
Sector: Software;
Comments:
* The impact of software piracy and counterfeit software varies by
company and losses are difficult to calculate. Most pirated software is
in the form of Internet downloads or mail order piracy that reduces
company profits and taxes paid to the government, while counterfeit
software poses greater risks to consumers in terms of potential damage
to their computers.
Sector: Manufacturing;
Comments:
* It is difficult to calculate direct losses for some companies, but
estimated losses in this sector have been reported as high as $1
billion.
Source: GAO analysis of private sector responses.
[End of table]
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.
[End of table]
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.
[End of table]
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.
[End of table]
Increased Training and Consumer Awareness Cited as Areas for Improved
IP Enforcement:
Industry representatives cited various areas that could be improved
upon to increase overall IP enforcement, including a need to better
train federal prosecutors and better inform consumers about the risks
posed from counterfeit and pirated goods. Table 8 highlights areas
private sector representatives identified for improved IP enforcement.
Table 8: Summary of Industry Representatives' Views on Areas for
Improved IP Enforcement, by Sector:
Sector: Consumer electronics;
Comments:
* If DOJ or some other federal agency were able to facilitate contacts
with local law enforcement through periodic seminars or national
conferences, it would be very helpful...A good coordinating body would
enable that to be done more effectively. It would ensure members know
the tools and resources available;
* To improve CBP seizures, there should be industry specific training
and better communication between CBP and industry;
* Federal prosecutors need more training on IP crimes so that they
understand the nature of the problem and feel more comfortable
prosecuting cases.
Sector: Entertainment/media;
Comments:
* It would be great if we could follow the "status" of the seizure.
There is no central place to get updated on enforcement actions, so one
has to chase the CBP inspector. We get Notice of Seizure letters but
that is about it - and would like to get "the number of widgets" in
those seizure notices;
* Federal prosecutors and judges need more training—Judges don't want
to hear from rights holders. Often times they need to understand the
economic impact of these crimes.
Sector: Luxury goods/apparel;
Comments:
* More consumer awareness is needed, such as education by the media. If
government and television, radio, and print journalists developed a
passion for this issue, demand for counterfeit goods would be reduced.
It is also important to educate consumers on the ills of counterfeiting
such as child labor laws, tax evasion, and the support of terrorism. We
also would recommend that companies write to government officials and
supervising officers when officers or agents make a large seizure of
counterfeit goods expressing appreciation and pointing out the good
work accomplished by defeating counterfeiting;
* We would like to have a better understanding of the problem from a
brand perspective as well as a better understanding of the laws and how
to work with the prosecuting attorneys at both the state and federal
level. We would also like to see more dedicated federal resources.
Sector: Health/food;
Comments:
* We would like to see an increase in the amount of federal penalties
assessed and collected;
* We recommend increased resources for CBP, as it is the country's
first line of defense against counterfeit products. The federal
penalties on the criminal side are generally satisfactory, but we want
them to be more punitive. We want federal laws enforced with more
resources.
Sector: Internet;
Comments:
* There is a need for increased cooperation and transparency in how
federal agencies work together and with industry;
* There is a need for strengthened information-sharing and
communication between industry and federal law enforcement;
* There is a need for continued training and education of federal law
enforcement officials on issues specific to industry.
Sector: Pharmaceutical;
Comments:
* Federal programs that encourage transportation, customs brokers, and
forwarding and express companies to cooperate in the identification of
potential counterfeit traffickers would be helpful. The application of
targeting approaches used for anti-terrorism will help CBP to be more
effective in identifying high-risk transactions;
* We would like to see more coordinated communication and dialogue with
the pharmaceutical industry on the part of federal government;
* The growth of the Internet complicates law enforcement efforts, both
in the United States and abroad. Federal law enforcement agencies will
need to be well prepared to address two types of counterfeiting threats
that may evolve in multiple and complex ways: first, agencies must
deter and stop sophisticated and organized counterfeiters that prey on
patients in an effort to profit from unsuspecting consumers; second,
officials must be prepared to manage threats from counterfeiters who
may be motivated by an intent to harm people (e.g., terrorist
activity)—It is critical that federal agencies, including the
Departments of Justice and Commerce and the U.S. Trade Representative's
office, make IP infringement and counterfeit activity top priorities.
This effort must call for more criminal prosecutions, stiffer penalties
and asset seizures. All of these activities will necessitate increased
and dedicated human and financial resources.
Sector: Software;
Comments:
* FBI's Cyber Crime squad in Los Angeles is doing great work;
however, IP should be made a higher priority for other law enforcement
agencies. Positive partnerships are imperative for successful IP
protection and enforcement;
* To improve border enforcement, federal agencies need more
investigators on the job. The current amount of staff are sorely
overworked. For high-tech goods, law enforcement needs more and better
equipment because they currently use slow, clunky technology to go
after the best and brightest cyber criminals.
Sector: Manufacturing;
Comments:
* Simply recording one's product with CBP does not guarantee that
seizures will be made of goods that infringe on the recorded product.
Companies have to be proactive about protecting their products in other
ways;
* There needs to be strengthened communication and better information
sharing between industry and federal government so that enforcement
efforts are more focused;
* There should be an effort to reduce the federal financial burden of
protecting IP, such as more information-sharing within the private
sector and with agencies and more collaborative enforcement efforts;
* There is a need for increased educational awareness for both federal
agencies and industry on how to work together. There is also a need to
increase consumer awareness of counterfeit parts.
Source: GAO analysis of private sector responses.
[End of table]
[End of section]
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.
U.S. Department of Homeland Security:
Washington, DC 20528:
[hyperlink, http://www.dhs.gov]:
February 26, 2008:
Mr. Loren Yager:
Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Yager:
Thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO's) draft report GAO-08-157 entitled
Intellectual Property: Federal Enforcement Has Generally Increased, but
Assessing Performance Could Strengthen Law Enforcement Efforts.
U.S. Customs and Border Protection (CBP) provided the following general
comments on the report. Technical comments have been provided under
separate cover.
First, the report acknowledges the enforcement priority that CBP places
on stopping imports of Intellectual Property-related (IPR) violative
goods that pose risks to public health and safety. However, the report
inaccurately, and repeatedly, states that CBP lacks the data and
definitions for IP-related enforcement efforts that impact public
health and safety. In fact, CBP defines, collects, and reports such
data, and published this data in its publicly-available Fiscal Year
(FY) 2007 IPR Seizure Statistics. Regrettably, GAO never specifically
asked CBP to provide this data. [See comment 1]
GAO recommends that CBP "create a category and definition for seizures
of counterfeit goods 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." CBP will report this information to CBP's
Directors, Field Operations (DFOs) and to Congress on a semi-annual
basis, and will continue to publish this data CBP will also continue to
track and analyze this data and IPR seizure data in general, and report
this analysis to upper management for use in their decision-making
processes.
Second, the report states several times that CBP lacks performance
measures for IPR, but this is not completely accurate. CBP's National
IPR Trade Strategy, which was previously provided to GAO, contains
performance measures for IPR, and it is this strategy that guides CBP's
IPR enforcement efforts. This document includes clear performance
measures and targets that are directly linked to the goals and
objectives of the National IPR Trade Strategy. [See comment 2]
CBP acknowledges that the CBP Strategic Plan does not contain specific
measures for IPR enforcement, and CBP is in the process of drafting IPR
enforcement measures for proposed inclusion in the Strategic Plan. CBP
will report key measures and an assessment of CBP's performance of
these measures to Congress and the National Intellectual Property Law
Enforcement Coordination Council (NIPLECC).
Third, throughout the report, GAO continues to promote a simple
analysis of seizure outcomes among ports as the key approach for
improving IPR enforcement at the border. GAO used this same approach in
its most recent report on CBP's IPR enforcement efforts, "INTELLECTUAL
PROPERTY Better Data Analysis and Integration Could Help U.S. Customs
and Border Protection Improve Border Enforcement Efforts" (GAO-07-350).
We continue to stand by our position, as we did in our comments to the
previous report, that this approach has fundamental flaws because of
differences in the nature of imports among ports. GAO's analysis
inaccurately assumes relative homogeneity among "IP-type" imports at
various ports. As we noted in our comments on the previous report, a
fundamental flaw with this approach is that it fails to recognize
relative risk and assumes that all similar commodities form a universe
at equal risk for IP infringement. Further, many factors in addition to
product type affect IPR risk, and these factors cannot be accounted for
in this type of analysis. Such factors include source country, shipping
patterns, and shipments entered by rights holders and their licensees.
For these reasons, CBP finds GAO's analysis about IPR border
enforcement to be incomplete and unreliable as a basis for action to
improve enforcement or allocate resources. [See comment 3]
With respect to the recommendations addressed to CBP:
Recommendation: Create a category and definition for seizures of
counterfeit goods 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.
CBP Response: Concur. The Office of International Trade (OT) has
identified categories of merchandise that could cause potential harm
and included those category breakouts in the published FY07 stats. OT
will provide this information to the Directors, Field Operations (DFOs)
within CBP and to Congress on a semi-annual basis. September 2008 is
the anticipated completion date. [See comment 4]
Recommendation: Establish performance measures and targets for IP-
related enforcement activity and report measures, targets, and
performance to Congress and NIPLECC.
CBP Response: Concur. CBP will revise its performance measures and
targets related to IP enforcement. In addition, OT will report key
measures and performance to Congress and NIPLECC. December 2008 is the
expected completion date.
Recommendation: To better inform Congress and affected rights holders
regarding its enforcement of exclusion orders and address certain
procedural weaknesses, we recommend that the CBP Commissioner direct
the Offices of International Trade and Field Operations take the
following three actions:
a) identify factors currently limiting their enforcement capabilities
and develop a strategy for addressing those limitations along with a
timeline for implementing the strategy;
b) begin collecting data on the number of exclusions, in total and per
exclusion order; and;
c) examine CBP's ability to develop regulations to allow notification
of exclusions to affected rights holders, and if authorized, develop
such regulations.
CBP Response: Concur. CBP has begun to identify factors currently
limiting our enforcement capabilities on exclusion orders and will
implement a strategy to address our limitations. OT will begin tracking
the number of denials of entry related to each exclusion order and
report the aggregate totals by exclusion order in the end of year IPR
statistics. In addition, OT will research CBP's legal authority on
providing affected rights holders notification of denials of entry. CBP
expects to complete these actions by September 2008.
With respect to the recommendations directed to ICE:
Recommendation: Analyze enforcement statistics to better understand
variations in enforcement activity.
ICE Response: Concur. ICE will analyze its Intellectual Property Rights
enforcement data to better understand variations in enforcement
activities. This analysis will be conducted during Fiscal Year 2008.
Recommendation: Create a category and definition for IP enforcement
actions that pose a risk to public health and safety of the American
people, and collect and report this data throughout each agency and to
Congress.
ICE Response: Concur. ICE will ensure its law enforcement information
system is updated to include a narrowly defined high-risk category to
categorize those enforcement actions that focus on criminal IP
violations that threaten public health and safety.
Recommendation: Establish performance measures and targets for IP-
related enforcement activity and report measures, targets, and
performance to Congress and the National Intellectual Property Law
Enforcement Coordination Center.
ICE Response: Concurs. ICE will begin developing IP performance metrics
and measures during Fiscal Year 2008, then report the measures, targets
and performance to Congress through an update to GAO. ICE will provide
a copy of the update to the NIPLECC
With respect to the recommendation directed to the Department:
Recommendation: 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, should direct their IP enforcement agencies
to take the following three actions:
* reassess the National Intellectual Property Rights Coordination
Center's mission, and how its future performance will be assessed;
* define agencies' role in the center and the number and types of
resources needed to operate the center; and;
* report to Congress on the center's redefined purpose, operations,
required resources, and progress within one year of the center's
relocation.
Response: The Department concurs with the recommendation for the
National Intellectual Property Rights Coordination Center and plans to
discuss with DOJ, in consultation with NIPLECC, the expanded mission of
the Center. The Department has committed 9 FTEs to the staffing of this
Center which is scheduled to relocate to Crystal City in March 2008.
Thank you again for the opportunity to comment on this draft report and
we look forward to working with you on future homeland security issues.
Sincerely,
Steven J. Pecinovsky:
Director:
Departmental Audit Liaison Office:
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. 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.
[End of section]
Appendix V: Comments from the Department of Justice:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
U.S. Department of Justice:
Washington, D.C. 20530:
February 21, 2008:
Ms. Christine Broderick:
Assistant Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Broderick:
On February 5, 2008, you provided the Department of Justice (DOJ or
Department) with a copy of the General Accountability Office (GAO)
draft report entitled Intellectual Property: Federal Enforcement Has
Generally Increased, but Assessing Performance Could Strengthen Law
Enforcement Efforts (08-157, Job Code 320471)(Report). The Department
of Justice appreciates the time and effort put into this draft Report
by GAO staff, as well as the professional courtesy you extended. We
appreciate the opportunity to comment on the draft. In that regard, DOJ
has objections and concerns with the report's findings.
A. The Report Understates DOJ Enforcement Activity
First, although the Report acknowledges "general increases" in
enforcement activity by all agencies in recent years, it severely
understates the recent increases in enforcement production by the
Department of Justice since FY 2004 – that is, the year in which the
Task Force on Intellectual Property began its aggressive work to
improve the Department's IP enforcement program in all phases. The
number of defendants charged with IP offenses increased dramatically
from FY 2004 (177) to FY 2006 (339) –an increase of more than 90
percent. This increase can be attributed, at least in part, to the
Department's increased emphasis on multi-district and international
prosecutions, which in turn led to more multi-defendant cases. Even
with the increase in multi-defendant cases, the number of cases
themselves also increased substantially, by more than 20 percent – from
169 in FY 2005 to 204 in to FY 2006. To be fair, these kinds of
enforcement results deserve better than a watered-down characterization
as "general increases." [See comment 1]
Moreover, the significant increases in prosecutions by the Department
continued into FY 2007. For example, 287 defendants were sentenced on
intellectual property charges in FY 2007, representing a 35 percent
increase over FY 2006 (213) and a 92 percent increase over FY 2005
(149). In addition, case filings also continued to increase: the
Department filed 217 intellectual property cases in FY 2007,
representing a 33 percent increase over cases reported in FY 2005
(169). See, Table 1, below. [See comment 2]
Table 1: Total Number of Intellectual Property Cases Filed FY 2001 -
2007:
Fiscal year: 2001;
Cases filed: 151.
Fiscal year: 2002;
Cases filed: 129.
Fiscal year: 2003;
Cases filed: 163;
Fiscal year: 2004;
Cases filed: 129.
Fiscal year: 2005;
Cases filed: 164.
Fiscal year: 2006;
Cases filed: 204.
Fiscal year: 2007;
Cases filed: 217.
[End of table]
The Report also fails to adequately acknowledge the significant
increase in training and resource allocation accomplished by the
Department since 2001. For instance, in January 2001, there was only
one CHIP Unit in the United States, in San Jose, California. Subsequent
expansions that year, as well as in 2002, 2005, and 2006 have increased
the total number of CHIP Units nationwide to 25. These Units consist of
between two and eight Assistant U.S. Attorneys who receive specialized
training annually in prosecuting intellectual property and computer
crimes. See, Tables II and III, below.
Table 2: Computer Hacking and Intellectual Property (CHIP) Units
Installed Cumulative Total - FY 2000-2006:
Fiscal year: 2000;
Units installed: 1.
Fiscal year: 2001;
Units installed: 10.
Fiscal year: 2002;
Units installed: 13.
Fiscal year: 2003;
Units installed: 13.
Fiscal year: 2004;
Units installed: 18.
Fiscal year: 2005;
Units installed: 18.
Fiscal year: 2006;
Units installed: 25.
[End of table]
Table 3:
Fiscal Year: 2000;
Judicial Districts Where CHIPs Units Installed: NDCA.
Fiscal Year: 2001;
Judicial Districts Where CHIPs Units Installed: CDCA; SDCA; NDGA; DMA;
EDNY; SDNY; NDTX; EDVA; WEWA.
Fiscal Year: 2002;
Judicial Districts Where CHIPs Units Installed: WDMO; NDIL; SDFL.
Fiscal Year: 2003;
Judicial Districts Where CHIPs Units Installed: None.
Fiscal Year: 2004;
Judicial Districts Where CHIPs Units Installed: EDCA; MDFL; WDPA; DDC;
MDTN.
Fiscal Year: 2005;
Judicial Districts Where CHIPs Units Installed: None.
Fiscal Year: 2006;
Judicial Districts Where CHIPs Units Installed: WDTX; DMD; DCO; EDMI;
DNJ; DCT; EDPA.
[End of table]
The growth of the CHIP Unit program reflects the Department's deep
commitment to the prosecution of intellectual property and computer
crimes, and it has resulted in tangible increases in prosecution
successes. For example, in FY 2007, CHIP Units were responsible for
sentencing 199 defendants for IP offenses, which represents an 80
percent increase over the 110 defendants sentenced in CHIP Unit
districts in 2006.
Statistics alone are insufficient to accurately show the quality of
improvements in the Department's prosecution activity. For instance,
there have been numerous groundbreaking investigations and prosecutions
during the past year, including: [See comment 4]
* Three Indicted and Arrested in One of Largest Counterfeit Goods
Prosecutions in U.S. History: On January 16, 2008, in Richmond,
Virginia, a seven-count indictment was unsealed in one of the largest
counterfeit goods prosecutions in U.S. history. The indictment charges
three individuals with one count of conspiracy to traffic in
counterfeit goods imported from the People's Republic of China (PRC),
four counts of trafficking in counterfeit handbags, wallets, purses,
and carry-on bags, and two counts of illegally smuggling counterfeit
goods into the United States. ICE agents arrested the three defendants
and executed a court order restraining defendants' numerous assets,
including 29 bank accounts and three properties in New York. According
to the indictment, the three defendants operated a massive
international import and wholesale counterfeit goods business from 2002
until at least Oct. 31, 2005, engaging in a corporate shell game
whereby they conspired to, and in fact imported, over 300,000
counterfeit luxury handbags and wallets into the United States from the
PRC in the names of different companies, all under their control. The
value of the corresponding authentic luxury goods manufactured by
Burberry, Louis Vuitton, Gucci, Coach, and others, whose legitimate
sales were displaced, is estimated to be over $100 million.
Ms. Christine Broderick Page 4
* Largest Ever Joint U.S.-China Criminal Enforcement Operation Nets 25
Arrests and Over $500 Million in Counterfeit Software: On July 23,
2007, Chinese officials arrested 25 Chinese nationals and seized more
than half a billion dollars worth of counterfeit software as a result
of the largest ever joint investigation conducted by the FBI and the
People's Republic of China, code-named Operation Summer Solstice."
China's Ministry of Public Security also searched multiple businesses
and residential locations, seized more than $7 million in assets, and
confiscated over 290,000 counterfeit software CDs and Certificates of
Authenticity.
* First Ever Extradition for Online Software Piracy/Extradited
Australian Ringleader Sentenced to 51 Months in Prison: On June 22,
2007, in Alexandria Virginia, Hew Raymond Griffiths was sentenced to 51
months in prison for crimes committed as leader of one of the oldest
and most renowned Internet software piracy groups worldwide, known as
"Drink Or Die." From his home in Australia, Griffiths violated the
criminal copyright laws of the United States by leading this criminal
group which caused the illegal reproduction and distribution of more
than $50 million worth of software, movies, games and music. This was
one of the first ever extraditions for an intellectual property
offense.
* 50th Conviction in Largest Online Software Piracy Enforcement Action:
On May 14, 2007, in Alexandria Virginia, the Department obtained the
50th conviction in Operation FastLink, the largest and most successful
global online piracy enforcement initiative ever conducted. This
Operation culminated in the execution of more than 120 searches and
arrests in 12 countries, the seizure of more than 200 computers, the
complete dismantlement of 30 Internet distribution sites, and the
confiscation of hundreds of thousands of counterfeit software titles
valued at more than $50 million. This 50th conviction represented a
milestone never before achieved in an online piracy prosecution.
B. DOJ Has Appropriately Analyzed Its Enforcement Statistics:
The Report concludes that the federal enforcement agencies ” including
DOJ ” have done little "to systematically examine enforcement
statistics." Report at 40. As one example of this type of systematic
analysis, the Report analyzed the number of cases filed by U.S.
Attorney's Offices by district and concluded that there was a "high
correlation between IP enforcement activity and offices with resources
dedicated to IP enforcement." Report at 41. [See comment 5]
It is simply inaccurate to state that DOJ does not analyze its
prosecution statistics, much less that it does not analyze them by
district. We conduct such analysis routinely, and that analysis has
helped inform the placement of additional CHIP Units around the
country. Indeed, one of the IP Task Force's principal recommendations
in its 2004 Report was to increase resource allocations to CHIP Units
in key regions: [See comment 6]
"The Department of Justice should reinforce and expand existing CHIP
Units located in key regions where intellectual property offenses have
increased, and where the CHIP Units have effectively developed programs
to prosecute CHIP-related cases, coordinate law enforcement activity,
and promote public awareness programs."
The Department implemented this recommendation in January 2005, after a
thorough assessment of CHIP Unit production nationwide, including
analysis of case statistics by district. The Attorney General provided
additional, full-time funding for a total of three AUSAs to serve as
CHIP prosecutors in the Central and Northern District of California.
Time has shown the wisdom of that decision: in FY 2006, the CHIP Units
in the Northern and Central Districts of California charged a total of
50 IP cases, out of a nationwide total of 204 IP cases, accounting for
approximately 25 percent of the national total.
Additionally, the Department considered case filings by district when
it determined the locations of the 12 additional CHIP Units established
since 2004, and it will continue to evaluate the need for additional
CHIP Units in districts with a high incidence of IP and computer crime,
or where additional prosecutors are best matched to local investigative
resources.
Although the Department does routinely conduct this type of statistical
analyses to identify trends in domestic IP crime, we would not
necessarily draw the same absolute conclusion that the GAO staff
apparently reached ” i.e., that more prosecutors in a district results
in more prosecutions (and the underlying assumption that IP crime
occurs at the same rate and magnitude in all districts). Report at 41.
It is true that some of the largest CHIP Units, such as in the Central
District of California (8 prosecutors) are also the most active in
terms of IP case filings. But that is because, at least in part, the
Department has tried to establish CHIP Units in areas of greater
criminal activity (IP or cybercrime), and has allocated additional
resources to those U.S. Attorneys Offices, like Los Angeles, that are
most active, receive more case referrals, and/or have the highest level
of commitment from local investigative agencies. [See comment 7]
C. DOJ Has Established Appropriate Performance Measures and Goals to
Assess Its Progress:
The Report suggests in numerous places that DOJ has not established
performance measures or goals that adequately assess its achievements.
This is inaccurate. The Department has taken unprecedented steps to
assess its achievements in the area of intellectual property
enforcement. It has been especially aggressive in providing progress
reports on the implementation of the 31 recommendations issued by its
Task Force on Intellectual Property in 2004. This includes the Task
Force's Progress Report in June 2006, as well as its annual reporting
to the President and Congress as part of NIPLECC. See, e.g., "Report to
the President and Congress on Coordination of Intellectual Property
Enforcement and Protection" (January 2008). These reports can be
accessed online through the following links:
2007 NIPLECC Report (Jan 2008):
[hyperlink,
http://crmin05.crm.doj.gov:7778/pls/portal/docs/PAGE/CRIMLINK/PRESSROOM/
PRESSRELEASES/YR2008/01/012008-NIPLECCRPRT.PDF]
2006 NIPLECC Report (Sept 2006):
[hyperlink,
http://www.commerce.gov/opa/press/Secretary_Gutierrez/2006Releases/Septe
mber/2006%20IP%20report.pdf]
2006 DOJ IP Task Force Progress Report (June 2006):
[hyperlink, http://www.cybercrime.gov/2006IPTFProgressReport6-19-
06).pdf]
The above reports are replete with performance measures and goals. The
DOJ has aggressively and thoroughly monitored its performance with
respect to improving IP criminal enforcement. For example, the IP Task
Force issued a detailed Progress Report in June 2006, providing
extensive detail on which of its 31 recommendations had been
implemented, and on which implementation was still ongoing. The Task
Force has continued to set ambitious goals and objectives, and evaluate
their achievement, on an annual basis. No other federal agency has been
more aggressive in reviewing and improving its IP enforcement programs
as the DOJ in the past few years, nor has any agency been more thorough
in rating its progress and performance.
What the Department of Justice's IP Task Force did not do, however, was
set performance measures based on case quotas, numerical thresholds, or
percentage "targets." The GAO views the absence of such numerical or
percentage targets as a deficiency. The Department views it as a
necessity.
The GAO criticism reflects a failure to appreciate the core justice
principle that criminal prosecutions should never be initiated ” or
judged -- based on actuarial tables or case quotas. As the GAO Report
notes, many of the Task Force's recommendations called for "more"
enforcement in critical areas, such as increases in the number and
quality of prosecutions. As noted above, the DOJ achieved these goals
with substantial increases in prosecution activity. For instance, in FY
2006, 213 defendants were sentenced on intellectual property charges,
representing nearly 50 percent increase over FY 2005 (149). Moreover,
in FY 2005, 350 defendants were charged with intellectual property
offenses, nearly double the 177 defendants charged in FY 2004 ”
representing a 98 percent increase. [See comment 9]
The GAO report discounts these substantial increases because "without
[numeric or percentage] measures or targets, it is not clear how
certain achievements, such as increases in arrests or numbers of
defendants charged with IP crimes, should be assessed because it is not
clear what the agencies sought to achieve." Report at 43. As we
attempted to explain in meetings with GAO drafters, however, the
Department of Justice has intentionally resisted setting numeric or
percentage "targets" as performance measures because it creates a risk
that prosecutions could be initiated ” or at least could be perceived
as having been initiated ” for the improper purpose of meeting
prosecution quotas or the expectations of White House and Congressional
officials.
Federal prosecutors file criminal charges based on the individual
merits of each case, and only where the prosecutor "believes that the
person's conduct constitutes a Federal offense and that the admissible
evidence will probably be sufficient to obtain and sustain a
conviction." U.S. Attorney's Manual 9-27.220. Criminal actions should
never be motivated by prosecution quotas or numerical/percentage goals,
nor should the Department risk creating an appearance of improper
motivation by setting this particular types of performance measure.
There are other ways to assess performance. Indeed, the Department
believes that doubling the number of defendants charged with IP crimes
within a one year period, or increasing by 50 percent the number of
defendants sentenced, are commendable results using any performance
measure. They should not be discounted simply because the Department
declined to set a specific numerical or percentage "target." [See
comment 10]
Thank you for the opportunity to submit our formal comments for
inclusion in the final Report. The Department of Justice is committed
to improving its intellectual property enforcement efforts, and we
share with you the belief that accountability to the public and
Congress are an important component of our law enforcement mission.
Sincerely,
Signed by Michael H. Allen:
for: Lee J. Lofthus:
Assistant Attorney General for Administration:
Glossary Of Judicial Districts With CHIP Units Installed (in order of
appearance in Table 3):
Northern District California, MDCA:
Central District California, CDCA:
Southern District California, SDCA:
Northern District of Georgia, NDGA:
District of Massachusetts, DMA:
Eastern District of New York, EDNY:
Southern District of New York, SDNY:
Northern District of Texas, NDTX:
Eastern District of Virginia, EDVA:
Western District of Washington, WDWA:
Western District of Missouri, WDMO:
Northern District of Illinois, NDIL:
Southern District of Florida, SDFL:
Eastern District of California, EDCA:
Middle District of Florida, MDFL:
Western District of Pennsylvania, WDPA:
District of the District of Columbia, DDC:
Middle District of Tennessee, MDTN:
Western District of Texas, WDTX:
District of Maryland, DMD:
District of Colorado, DCO:
Eastern District of Missouri, EDMI:
District of New Jersey, DNJ:
District of Connecticut, DCT:
Eastern District of Pennsylvania, EDPA.
The following are GAO's comments on the Department of Justice letter
dated February 21, 2008.
GAO Comments:
1. We disagree that our report severely understates DOJ's enforcement
activities. Our analysis of federal IP enforcement efforts is a
systematic evaluation of trends in key agencies' enforcement indicators
over a 6-year period. Although there were fluctuations (i.e., increases
and decreases) in individual indicators from year to year, we concluded
that all the indicators, when taken as a whole, showed a general
increase in federal IP enforcement efforts from the beginning to the
end of the period examined. Moreover, we considered all indicators
together because no single indicator from any one agency sufficiently
reflects overall trends. The DOJ statistics we examined also showed
increases and decreases during the time period. However, in its letter,
DOJ selected statistics that only reflect increases, and it did so in
one instance by comparing the lowest and highest levels for a given
indicator, regardless of the year in which they occurred, which
generated the highest possible percent increase for that indicator. We
do not believe DOJ's analysis is useful for discerning overall long-
term trends.
2. Our report is based on agency data covering fiscal years 2001
through 2006. In several cases, fiscal year 2007 data became available
as we were finalizing our report. However, given the challenges we
faced in obtaining sufficiently reliable data from all agencies for the
period we studied (see appendix I, pp. 48-51), we were unable to
systematically update our data in a timely fashion to include fiscal
year 2007 statistics.
3. We disagree that our report gives insufficient attention to resource
increases at DOJ for IP enforcement. Our report discusses the creation
and growing number of CHIP units and also notes that the number of
Assistant U.S. Attorneys trained to prosecute IP cases has grown in
recent years (see p. 20).
4. We agree with DOJ that statistics alone are not sufficient to
accurately show the quality of improvements in IP enforcement activity.
This is why we recommend that DOJ and the other agencies develop IP
enforcement performance measures and targets to more systematically
measure and report on their efforts. While the examples that DOJ
provides of recent enforcement cases are useful illustrations of the
types of enforcement activity that DOJ has undertaken, they do not
provide a complete picture of DOJ's overall efforts over time. For
example, as we state in our report, agencies including DOJ could
analyze the types of IP cases it most commonly prosecutes or could
report on the number of cases it has prosecuted involving IP crimes
that posed a health and safety risk (see p. 32).
5. In section B of its letter (pp. 4-5), DOJ addresses the issue of
whether additional IP enforcement resources necessarily result in more
IP prosecutions. On page 5 of its letter, DOJ provides information that
demonstrates a correlation between increased IP resources in two U.S.
Attorney's Offices and the number of IP cases prosecuted by those
units, but then goes on to state that it would not necessarily
conclude, as it said GAO did, that more prosecutors in a district
results in more prosecutions. We agree that existing data across all
U.S Attorney's Offices with CHIP units does not necessarily show a high
correlation between increased CHIP unit resources and increased IP
prosecutions, and removed this language. We modified our report to note
that various factors, including crime levels, can affect the level of
IP enforcement activity (see p. 33).
6. We modified our report to state that DOJ reviewed its data on U.S.
Attorney's Office prosecutions when deciding where to place additional
CHIP units. However, at no time during this audit did DOJ indicate, or
provide documentation reflecting, that it routinely analyzed IP
prosecution data by district. We commend DOJ for examining the fiscal
year 2006 IP enforcement activity of two of the CHIP units. Our
analysis of DOJ's data on IP enforcement activity by all 94 U.S.
Attorney's Offices showed a mix of activity among field offices across
the 6-year period, including those with CHIP units. We believe that
conducting such analysis on a more systematic basis can better inform
DOJ about whether its allocation of resources is appropriate and not
just inform placement of CHIP units.
7. See comment 5.
8. We mentioned in the draft report, under our discussion of agency
priorities that DOJ has established some goals related to its IP
enforcement efforts that are contained in an internal agency document
not available to the public (see p. 15). We added information to refer
again to this in our discussion of performance measures (see p. 35).
However, we disagree that DOJ's Task Force report is replete with goals
and measures. The Task Force report makes multiple recommendations for
improving IP enforcement efforts, but recommendations are not the same
as performance goals, and the report does not contain performance
measures. Moreover, many of these recommendations are task-oriented
actions rather than outcome-oriented. For example, one of DOJ's Task
Force recommendations is to prosecute aggressively intellectual
property offenses that endanger the public's health or safety; yet, DOJ
does not provide any details on how they plan to achieve this
recommendation and how they will measure their progress. Further, as we
report, DOJ has not taken steps to capture enforcement statistics to
assess their progress in this area. As we discuss in our report,
strategic planning and assessment requires agencies to articulate
outcome-oriented goals and objectives and to develop performance
measures and targets that will enable them and others to determine
whether they are making progress toward these goals. We added language
to our report to better define outcome-oriented performance measures.
9. We added information to the report to further explain the challenges
associated with setting performance measures and targets in the law
enforcement area (see p. 35). Our example of a performance measure and
target was not intended to suggest that the agencies should adopt
numerical case quotas or take any steps that would otherwise negatively
affect the quality of their investigations. However, because it was
interpreted in this way, and distracted attention from the more
important discussion of adopting appropriate performance measures and
targets, we removed the example. We continue to believe that DOJ can
develop reasonable and acceptable measures and targets for IP
enforcement.
10. See comments 1 and 4.
[End of section]
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).
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager (202) 512-4347 or yagerl@gao.gov:
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.
[End of section]
Footnotes:
[1] The Economic Impact of Counterfeiting and Piracy, Organization for
Economic Cooperation and Development (Paris, 2007).
[2] We 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.
[3] FDA'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.
[4] We have previously reported on NIPLECC. See GAO, Intellectual
Property: Strategy for Targeting Organized Piracy (STOP) Requires
Changes for Long-Term Success, GAO-07-74 (Washington, D.C.: Nov. 8,
2006).
[5] GAO, Intellectual Property: Better Data Analysis and Integration
Could Help U.S. Customs and Border Protection Improve Border
Enforcement Efforts, GAO-07-735 (Washington, D.C.: Apr. 26, 2007).
[6] The field locations we selected were based on the locations we
examined in our April 2007 report on CBP (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.
[7] CBP 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.
[8] The 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.
[9] Stephen E. Siwek, Economists Incorporated, Engines of Growth:
Economic Contributions of the U.S. Intellectual Property Industries
(2005).
[10] The Economic Impact of Counterfeiting and Piracy, Organization for
Economic Cooperation and Development (Paris, 2007).
[11] These 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.
[12] Such authority is granted under Section 337 of the Tariff Act of
1930, 19 U.S.C 1337.
[13] U.S. International Trade Commission Investigation Number 337-TA-
445, January 5, 2007.
[14] Exclusion 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.
[15] In 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 GAO-07-74.
[16] The 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
GAO-07-74.
[17] STOP'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.
[18] State 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.
[19] We 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 GAO-07-735.
[20] As of fiscal year 2006, CBP's Priority Trade Issues included
agriculture, antidumping and countervailing duties, IP rights,
penalties, revenue, and textiles and wearing apparel.
[21] We reported in April 2007 that a lack of integration between these
two offices impedes CBP's ability to improve its IP enforcement
efforts. See GAO-07-735.
[22] The division also investigates immigration violations, customs
fraud, and cases involving worksite enforcement and human smuggling.
[23] The Cyber Crimes Center is often referred to by the acronym "C3."
[24] As 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.
[25] Cyber 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.
[26] This division also conducts investigations of computer intrusions
and child pornography.
[27] 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. In addition, FDA brings charges
under the statute that prohibits trafficking in counterfeit goods (18
U.S.C. 2320).
[28] See DOJ 2006 Task Force report, [hyperlink,
http://www.usdoj.gov/criminal/cybercrime/ip.html]. The Task Force
continues to monitor DOJ's implementation of these recommendations.
[29] Under 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.
[30] During 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.
[31] CBP 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.
[32] GAO, Border Security: Despite Progress, Weaknesses in Traveler
Inspections Exist at Our Nation‘s Ports of Entry, GAO-08-219
(Washington, D.C.: Nov. 5, 2007).
[33] GAO, Customs Revenue: Customs and Border Protection Needs to
Improve Workforce Planning and Accountability, GAO-07-529 (Washington,
D.C.: Apr. 12, 2007).
[34] ICE and FDA use different calculations to compute their FTE
equivalents. We used the formulas provided by the agencies.
[35] DOJ'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.
[36] GAO-07-735.
[37] Domestic 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.
[38] CBP 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.
[39] CBP 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.
[40] Trade 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.
[41] 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.
[42] CBP was unable to provide similar data for 2001.
[43] CBP 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.
[44] Under 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)).
[45] When 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.
[46] According 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.
[47] CBP 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.
[48] CBP 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.
[49] The 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.
[50] The number of FDA's cases opened is much lower than ICE's and
FBI's number of cases because of FDA's narrow jurisdiction.
[51] The 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
hyperlink, http://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.
[52] Not 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.
[53] The 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.
[54] According 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.
[55] We 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] GAO-07-735.
[57] We 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 GAO-07-735.
[58] We 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.
[59] CBP 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.
[60] For 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.
[61] The 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.
[62] GAO, Internal Controls: Standards for Internal Controls in the
Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999).
[63] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June
1996).
[64] We 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 GAO-07-74.
[65] See 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.
[66] In 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
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
GAO-07-74.
[67] GAO-04-912.
[68] In 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] GAO-04-912.
[70] NIPLECC's staff include the IP Coordinator, a policy analyst,
press and legislative assistants, and various trade-or policy-oriented
detailees from the participating agencies.
[71] Specifically, 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.
[72] Conference Report 107-253, accompanying P.L. 107-67.
[73] Conference 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.
[74] Conference 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).
[75] See footnote 66.
[76] The 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.
[77] GAO-07-735.
[78] Our 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.
[79] GAO-04-912; GAO-07-74; and GAO-07-735.
[80] The IP Coordinator reports quarterly on IP enforcement. These
reports are posted on the Stop Fakes Web site [hyperlink,
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.
[81] In 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.
[82] Most of the companies we interviewed were large companies with
anti-counterfeiting and/or piracy initiatives.
[83] GAO-07-735.
[End of section]
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