PRO-IP Act - Implementation - Obama Administration

Obama Administration

In September 2009, President Barack Obama appointed intellectual property scholar Victoria Espinel to be the first Intellectual Property Enforcement Coordinator, a position informally known as the Copyright Czar.

Victoria Espinel, who taught as a professor at George Mason University, had prior experience working at the Office of the U.S. Trade Representative. Espinel also served as an intellectual property advisor to the staff of the Senate Judiciary Committee, the Senate Finance Committee, the House Judiciary Committee and the House Ways and Means Committee.

On December 3, 2009, Espinel's appointment was confirmed. The United States Chamber of Commerce, Public Knowledge and other groups approved Espinel for this position.

By Executive Order, President Obama also created two interagencies, the Senior Advisory Committee and Intellectual Property Enforcement Advisory Committee. Espinel serves as the chair of these two groups.

Senate Judiciary chairman Patrick Leahy (D-VT) was a strong supporter of these committees, which aimed to further support the goals of the PRO-IP Act, centered upon protecting American intellectual property and in turn, protect innovation central to the U.S. economy and its job market.

In 2009, the Justice Department reported on the implementation of PRO-IP Act in its first year. There were a variety of prosecutions in the protection of health and safety. One defendant was imprisoned for trafficking over $400,000 worth of counterfeit pharmaceuticals. These tablets, when consumed with alcohol, caused symptoms such as abdominal cramps, nausea, vomiting and headaches. In another case, a New York resident was incarcerated for trafficking more than a half a million tubes of counterfeit toothpaste, which contained microorganisms and diethylene glycol, a chemical used as a coolant in brake fluids. The most severe of these prosecutions included imprisonment for Kevin Xu of Texas, who trafficked counterfeit cancer drugs, which included less active ingredients than indicated on the labels. The ability to seize these counterfeit products enabled the government to protect citizen health. In commercial counterfeiting online, the Department of Justice reported the operation of forty websites that generated $800,000 selling counterfeit software online. A ring of defendants was also guilty of selling counterfeit software on eBay valued at more than $25 million. Over the course of about six years, another defendant sold pirated tele-radiological software to hospitals and outpatient facilities.

The Department of Justice also reported that the FBI was able to target piracy organizations, as well as initiate the first-ever peer-to-peer trial conviction. Apocalypse Production Crew or “APC” was one of these music piracy groups that served as a “release group,” which are the original sources in which pirated works are distributed on the Internet. In the first peer-to-peer trial conviction, Daniel Dove was convicted as the administrator of Elite Torrents, a P2P Internet piracy group, which had over 133,000 members and facilitated the distribution of more than 17,800 titles in movies, software, music and games.

In 2010, the Justice Department’s Criminal Division also coordinated work between investigatory agencies and the International Organized Crime Intelligence and Operations Center, also referred to as IOC-2. In an attempt to close intelligence gaps between these groups, the FBI, ICE and CBP routinely contribute intellectual property data to IOC-2. The IOC-2 has also collaborated with the National Intellectual Property Rights Coordination Center to train personnel in the identification of intellectual property violations that involve organized crime.

In addition, in 2010, operations detected online piracy in the sale of counterfeit clothing and computer programs. At the Fisherman’s Wharf in San Francisco, California, merchants at eight shops were charged with trafficking counterfeit designer merchandise imported from China, such as clothing, handbags and shoes, all of which were valued over $100 million. In New York, a man had been trafficking NFL, NHL, NBA and MLB sports jerseys. The FBI was also able to track organized crime internationally, such as one group that was responsible for smuggling 120 pairs of counterfeit Nike shoes, 500,000 counterfeit Coach handbags, 10,000 pairs of Coach and Gucci shoes and 500 counterfeit Cartier watches through the Port of Baltimore.

The PRO-IP Act is also utilized to prevent the theft of commercial trade secrets. Many of these cases, for example, entail former employees sharing critical information with international markets. A former Bristol-Myers-Squibb employee stole trade secrets from the company, which he planned to use to establish a pharmaceutical firm in India. Valspar Corporation chemist admitted to stealing formulas and other information valued at $20 million, which he would use working for an overseas competitor. Another chemist stole information from DuPont on Organic Light Emitting Diodes or OLED technology used for display and lighting applications. An employee for Dow AgroSciences in Indianapolis had a similar intent to take trade secrets to China.

In June 2010, Espinel’s Joint Strategic Plan integrated perspectives across federal agencies, such as U.S. Departments of Agriculture, Commerce, Health and Human Services, Homeland Security, Justice, Office of the U.S. Trade Representative and U.S. Copyright Office. It also considered 1,600 public comments and suggestions from the American public. Under this plan, the federal government will avoid purchase or use of infringing products, support transparency in the development of enforcement policy, as well as improve coordination and thus, effectiveness of intellectual property enforcement. The plan also aims to further protect American intellectual property rights through international outreach and to improve data and information collection regarding criminal violations of intellectual property. IPEC has collected data through a Budget Data Request (BDR), in which federal agencies report the resources used and measured outcomes in intellectual property enforcement.

Espinel hosted an Intellectual Property Health and Safety Forum at the White House, meeting with private sector leaders from American Express, eNom, GoDaddy, Google, MasterCard, Microsoft, Neustar, Visa and Yahoo! to take action against illegal online pharmacies, which pose a threat to health in the act of selling counterfeit drugs online. Due to interagency and cross-border efforts, the FBI was able to convict individuals selling cancer drugs that did not contain ingredients to fight cancer. The PRO-IP Act is also intended to prevent the sale of counterfeit products for use in U.S. defense and weapons systems that may possibly fail under fire, causing harm to troop missions and ultimately, public safety. In one case, a business owner was prosecuted for selling counterfeit Cisco products, which were intended to relay troop movement and intelligence for a U.S. Marine Corps base in Iraq.

As a result of this work, U.S. Immigration and Customs Enforcement (ICE HSI) opened 1,033 intellectual property cases, which resulted in 365 arrests, 216 indictments and 170 federal and state convictions. ICE HSI has identified and seized domain names facilitating the trafficking of pirated materials. Customs and Border Protection (CBP) and ICE HSI had 19,959 intellectual property seizures, which resulted in 237 civil fines and penalties totaling over $62 million.

Many have contested the legality of these seizures, suggesting that excessive shutdowns of domain names and other rogue sites is a violation of free speech. John Morton, director of Immigration and Customs Enforcement, has stated that the organization has "zero interest in limiting free speech" and that "ICE is not the police of the Internet."

In 2011, the federal government aims to shut down top illegal websites and to secure legislation that will enable funding for U.S. embassies to monitor American intellectual property internationally. For example, President Obama discussed enforcement of intellectual property rights with Chinese President Hu Jintao. Alongside Microsoft CEO Steve Ballmer, Obama urged Jintao to take action against consumers who purchase Microsoft software and other counterfeit DVDs and CDs for only a fraction of the cost online or in public markets. Other European countries and Japan have also addressed this growing problem in China, where the authorities hesitate to arrest counterfeiters due to the fact that such products bolster local economies.

Since the passage of the PRO-IP Act, the National Association of Manufacturers has lobbied for further legislation, as well. In addition to identifying counterfeit and pirate products, the Association would like the legislation that compiles a “watch list” database of importers, shippers and other participants at U.S. ports. Such legislation should also increase fines, as well as develop tools to ensure that manufacturers receive timely information about acts of infringement.

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