New Legislation Seeks to Enhance IP Enforcement

16 October 2008 Publication
Authors: Cynthia J. Rigsby

Legal News Alert: Intellectual Property

In late September 2008, the U.S. Senate and the U.S. House of Representatives passed legislation that seeks to enhance the resources and tools necessary to counter intellectual property (IP) infringement and counterfeiting. The bill, entitled Prioritizing Resources and Organization for Intellectual Property Act of 2008, or the “PRO IP Act,” was signed into law by President George W. Bush on October 13, 2008.

Recognizing that IP is critical to our nation’s fiscal health and our leading position in the world economy, U.S. Congress passed this bipartisan legislation to bolster the federal government’s ability to enforce IP rights. According to studies examined by the House, counterfeiting and piracy cost the United States between $200 billion and $250 billion in annual lost sales and have caused the loss of 750,000 jobs. In an attempt to counteract these losses, the PRO IP Act makes significant changes to copyright and trademark laws and provides more staffing and greater resources for IP enforcement efforts.

Relaxed requirements for criminal prosecution of copyright infringement. To deter copyright infringement and hold infringers responsible for their actions, the new law makes it easier for the United States Department of Justice (DOJ) to prosecute copyright infringement cases. In contrast to civil copyright infringement actions, criminal copyright infringement actions no longer require pre-registration or registration of the copyright before filing suit. 17 U.S.C. § 411.

Forfeiture provisions. The previous laws relating to civil and criminal forfeiture of counterfeit goods varied substantially. To increase predictability and consistency of application, the new law harmonizes all provisions relating to forfeiture and destruction of counterfeit goods under 18 U.S.C. § 2323.

In addition, the new law enhances the civil and criminal forfeiture provisions by allowing forfeiture of “[a]ny property used, or intended to be used,” in acts of infringement. Id. Critics of the legislation had argued that these forfeiture provisions may be overly broad and may unduly punish parties that are only tangentially related to the infringing acts.

Additional actionable offenses and harsher penalties. To counteract counterfeiting and piracy, the new law has increased the number of activities that are actionable. For instance, exportation, in addition to importation, of copies or phonorecords without the authority of the copyright owner is now considered an infringement of the exclusive right to distribute. 17 U.S.C. § 602. Transshipment or exportation of goods bearing counterfeit trademarks also is prohibited. 18 U.S.C. § 2320.

Further, offenders who cause serious bodily harm or death from conduct involving trafficking counterfeit goods or services are now subject to substantial fines, lengthy imprisonment, or both. Id.

In an effort to deter trademark infringement and because statutory damages for trademark infringement have not been adjusted since 1996, the new law doubles the amounts of statutory damages. 15 U.S.C. § 1117. In addition, the availability of treble damages in trademark infringement cases is now extended to more offenders. Under the old law, only offenders who intentionally used a mark or designation knowing that the mark or designation was a counterfeit mark in connection with a sale, offering for sale, or distribution of goods or services, were liable for treble damages. The new law extends treble-damage liability to those offenders who provide goods or services necessary for the commission of a violation with the intent that the recipient of the goods or services would put the goods or services to use in committing the violation. Id.

Closed loopholes. Under previous copyright law, inadvertent mistakes in copyright registration documents rendered the registration invalid, which resulted in the inability to collect statutory damages. To prevent infringers from exploiting this loophole, the new law provides that a certificate of registration is satisfactory regardless of whether the certificate contains any inaccuracies, unless that information was included on the application for copyright registration with knowledge of the inaccuracies and the inaccuracies, if known, would have caused the Register of Copyrights to refuse registration. 17 U.S.C. § 411.

To protect copyright owners’ proprietary information and to combat infringers’ destruction of evidence prior to infringement litigation, the new law provides that copyright owners may impound records “documenting the manufacture, sale, or receipt of things” involved in the infringement. Under the old law, impoundment was limited to infringing copies and articles by which those copies were made. Now, courts must take into custody all records relating to the infringement and enter a protective order with respect to the discovery and use of those records so that any proprietary, privileged, private, or confidential information is not improperly disclosed or used. 17 U.S.C. § 503.

Intellectual Property Enforcement Coordinator. To step up IP enforcement and to better coordinate the activities of various federal agencies, the new law requires the president to appoint an Intellectual Property Enforcement Coordinator (IPEC) to serve in the executive branch. The IPEC, supported by an interagency IP enforcement advisory committee, will develop and implement a Joint Strategic Plan (Plan) against counterfeiting and infringement. Among the objectives of the Plan are reducing counterfeit and infringing goods in global supply chains, improving coordination among the many agencies that deal with IP enforcement, and establishing programs and policies to enhance the IP enforcement efforts of foreign governments. The IPEC also must report annually to Congress regarding the progress made on implementation of the various aspects of the Plan, including any recommendations for improvements of federal IP laws and enforcement efforts.

DOJ programs. The PRO IP Act also authorizes the Office of Justice Programs of the DOJ to make grants from a $25 million appropriations pool to eligible state and local law enforcement entities for training, prevention, enforcement, and prosecution of IP offenses. Further, the law calls for increased Federal Bureau of Investigations (FBI) and United States Attorney staffing of IP units within the DOJ. Finally, the law provides for additional $10 million appropriations, on top of existing earmarked funds, to both the FBI and the Attorney General for resources to investigate and prosecute IP crimes and criminal computer activity. The Attorney General and the director of the FBI also are required to submit to Congress an annual report summarizing the IP enforcement policies and activities of the DOJ and the FBI.

Government accountability. Pushed by concerns raised by U.S. manufacturers, the new law requires the U.S. Government Accountability Office (GAO) to conduct a study on the impact of imported and domestic counterfeit goods to help determine how the federal government can better protect the IP of domestic manufacturers. In addition, the GAO will perform an audit on the efforts, activities, and effectiveness of the IPEC and the Attorney General in achieving the goals and purposes of this legislation.

No government-initiated civil infringement actions. While the new law certainly bolsters the tools and resources available to the executive branch for IP enforcement, the version of the bill as adopted by both houses of Congress and signed by the President, left out a controversial pro-business provision that was strongly opposed by the DOJ. The omitted provision authorized the DOJ to bring civil actions against criminal copyright infringers, with any resulting civil award given to the copyright owner. An obvious boon to businesses that hold copyrights, the omitted provision was criticized as requiring the federal government to serve as pro bono lawyers for private copyright owners regardless of their resources. The provision also was criticized for diverting already limited funds from public-benefit enforcement actions to actions that solely benefit private entities.

Conclusion. The PRO IP Act had garnered strong support from pharmaceutical companies, manufacturers, the entertainment industry, and others in the business community. Even in the absence of the provision calling for government-led civil enforcement actions, the changes to copyright and trademark law and the added resources and staffing provided by the PRO IP Act could significantly curtail the pirating and counterfeiting that has plagued domestic IP interests for years. In contrast, critics have viewed portions of the new law as creating an unnecessary bureaucracy that may actually stifle IP enforcement efforts. While the effectiveness of enforcement efforts under the new law remains to be seen, it is clear that Congress has gotten serious about protecting the IP that is so vital to our nation’s economy. 

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues.

If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or any of the following individuals:

Sharon R. Barner
Chicago, Illinois

Cynthia J. Franecki
Milwaukee, Wisconsin

Adam E. Crawford
Milwaukee, Wisconsin

Andrea M. Toldt
Milwaukee, Wisconsin