The economic threats and physical hazards posed by counterfeiting and piracy of intellectual property (IP) is so severe that Congress and the Administration recently enacted the Prioritizing Resources and Organization for Intellectual Property (PRO IP) Act. Nearly lost in the turmoil of the financial market crisis and the national election season, the Act had broad bipartisan support and was signed into law on October 13, 2008.
During economic downturns, intellectual property increases in value and importance. Even as the challenge of maintaining sales and retaining market share becomes more difficult, unscrupulous competitors may attempt to exploit the goodwill, innovation, and intellectual property of legitimate companies. Once, counterfeit and pirated products were associated with cheap watches and handbags hawked by street vendors. Today, fake goods run the spectrum – from bootlegged movies and music to pharmaceuticals and electronic components used in aviation and medical devices – and infiltrate otherwise legitimate streams of commerce. Legitimate IP holders must be vigilant in monitoring the use of their trademarks and intellectual capital and should be aware of the increasingly potent remedies and resources available to enforce their associated rights. In a related way, retailers, distributors, and others in the supply chain should be mindful of the potential liability that can result if their conduct is deemed to constitute trafficking in counterfeit or pirated goods.
The PRO IP Act is intended to protect the rights of consumers, workers, and entrepreneurs by strengthening both civil and criminal laws against counterfeiting and piracy. The Act doubles the statutory damage awards in civil counterfeiting cases, strengthens remedies in criminal cases involving counterfeiting and piracy, increases resources for Department of Justice programs directed against intellectual property theft, and establishes a permanent inter-agency initiative to coordinate IP enforcement efforts. The Act directs the President to appoint, subject to Senate confirmation, an Intellectual Property Enforcement Coordinator, an “IP Czar,” to chair an inter-agency IP Enforcement Advisory Committee and to coordinate the development and implementation of a national strategic plan against counterfeiting and piracy. Similar directives under the Act require the Federal Bureau of Investigation, the Department of Justice, the Department of State, the Food and Drug Administration, the Department of Agriculture, the Department of Homeland Security, and the Department of Commerce to undertake various efforts to implement and coordinate intellectual property enforcement policy.
Most important to private companies and entrepreneurs are enhanced civil remedies and mandatory treble damages available against those who intentionally and knowingly use a counterfeit mark in connection with the sale, offering for sale, or distribution of goods or services, or who provide goods and services necessary to the commission of such use. The Act also strengthens and broadens the scope of provisions related to impoundment and forfeiture. The result should be a stronger enforcement mechanism, both in terms of the remedies that are available, and the range of actors – including distributors, suppliers, mold and tool makers, and importers – who may be subject to civil actions.
Intellectual property theft has grown into a major problem, and it hurts all sectors of commerce. The U.S. Government estimates that over $200 billion and 750,000 jobs are lost by American businesses to IP theft each year. World-wide criminal organizations, and even terrorist
organizations are believed to receive up to $500 billion in annual sales of counterfeit goods according to U.S. Customs and the FBI. As counterfeiting has grown, so have efforts to recognize and combat the problem.
The PRO IP Act was overwhelmingly passed by Congress. Even so, there are controversial aspects to the legislation. There is concern that the Act will be under-utilized in preventing the flood of imported counterfeit products, and over-utilized by the entertainment and recording industry to deter the downloading of music and video files. A few critics contend that the economic and social consequences of counterfeiting and piracy were overstated by the media and commercial interests that lobbied for the Act. In order to address those concerns, the Act contains provisions directing the Government Accountability Office to undertake a study on the protection of intellectual property of manufacturers, and to audit and report on the effectiveness of the legislation. Contrary to some widely circulated media reports (and early versions of the legislation), the Act does not authorize the Attorney General to enforce a private company s civil IP claims.
While the PRO IP Act provides significant strengthening of civil remedies and criminal sanctions in IP enforcement, it continues to place the primary responsibility for monitoring, policing and enforcing intellectual property rights on the IP owner. If you have questions or concerns regarding protection of your intellectual property, or desire a copy of the PRO IP Act, please contact a member of our Intellectual Property, E- Commerce and Technology Practice Group.