Remarks as prepared for delivery
Good morning and thank you Dawn [Atlas] for the kind introduction. I want to recognize the International AntiCounterfeiting Coalition (IACC) and Underwriters Laboratories for organizing this event, for all that you and your members do to protect intellectual property rights and for your long history of collaboration with law enforcement in this area. I am delighted to be here today with so many industry leaders and representatives from every sector of the intellectual property (IP) community, along with law enforcement officials from across the Americas. Your voices are a key part of the dialogue as we look for solutions to the growing threat of counterfeiting and other intellectual property crimes.
Intellectual property crime endangers the health and safety of our citizens and threatens the very foundation of our economies. None of us wants a sick loved one taking counterfeits of life-saving pharmaceuticals, such as blood pressure medication, that do not contain the proper active ingredient. Nobody wants to buy their child a counterfeit toy that is finished with toxic paint. We don’t want to risk the failure of counterfeit integrated circuits in the trucks, airplanes or submarines used by our armed forces. And yet none of these examples is hypothetical—each was the basis for actual intellectual property cases that the Department of Justice has prosecuted in the past year alone.
This morning, I will focus my remarks on three issues: first, the challenges faced by law enforcement in fighting IP crime; second, the department’s strategies to address those challenges; and third, the recent successes we have achieved in our priority enforcement areas.
Challenges in IP Crime Enforcement
First, the challenges. As our supply chain increasingly draws from manufacturers and distributers around the world, the steps we must take to ensure product safety and authenticity are becoming much more complex. Likewise, as our economies become more global and interdependent, safeguarding the work of innovators and entrepreneurs has never been more important. At the same time, combatting intellectual property crime has never been more challenging.
Several recent trends have contributed to this challenge.
- First, criminals can now act with extraordinary speed and stealth. The same technologies that allow for the development of new products and ideas with unprecedented speed, precision and efficiency often allow criminals to manufacture and distribute knockoffs much faster than rights holders can respond with civil injunctions or law enforcement can make seizures.
- Second, criminal organizations have leveraged technology to operate at previously-unattainable scale. New business models allow counterfeiters to use large-scale online marketing and distribution networks to distribute infringing goods at minimal expense and, unfortunately, we often do not have the cooperation of those online marketplaces to protect IP and consumers.
- Third, criminals increasingly operate from outside our borders, yet are closer than ever to their customers. They use the internet to sell counterfeits directly to consumers and distribute them in small package shipments, which makes it difficult to detect and seize them at our borders, and even more difficult to stop at the source of manufacture.
We must rise to these challenges. Just as intellectual property crime continues to evolve, so must our strategy to fight it. We must work together with our partners throughout the U.S. government and in the private sector, and with our law enforcement counterparts around the world. And that is exactly what we have been doing. Today, the department has a more comprehensive and effective intellectual property criminal enforcement program than ever before.
The Department’s IP Crime Enforcement Program
A key component of our enforcement program is the Criminal Division’s Computer Crime and Intellectual Property Section—or CCIPS—in Washington, which is a team of cyber and IP crime experts dedicated to pursuing the largest multi-district and international cases involving cyber and IP crimes. Leveraging that expertise, the department has also built a network of more than 260 Computer Hacking and Intellectual Property—or CHIP—prosecutors, who are specially trained experts in cyber and IP crime deployed in U.S. Attorneys’ Offices across the country. These specialized prosecutors and forensic experts put us in a position to react quickly to the constant evolution of intellectual property crime and the increasingly sophisticated techniques relied upon by criminals. Meanwhile, when intellectual property crime becomes a national security concern, as we have seen with the theft of trade secrets by nation-state actors, the department’s National Security Division leads our response.
The FBI also plays a critical role in the department’s response to IP crime, and not just through the investigation of individual cases. The FBI also is engaged in extensive outreach and prevention efforts. For example, recognizing that third-party online marketplaces and payment processors may unwittingly enable the sale of counterfeit goods, the FBI recently unveiled a strategy to engage these entities to increase awareness and obtain information about criminal activity.
The department also has embraced opportunities to build relationships with government agencies both within and outside our borders. We work closely with our law enforcement colleagues at the National Intellectual Property Rights Coordination Center, which brings together more than 20 U.S. and international partners to address and coordinate the law enforcement response to IP crime. We also work closely with the Office of the IP Enforcement Coordinator to develop a government-wide approach to IP protection. In that capacity, we have contributed to the development of the administration’s Updated Joint Strategic Plan, which will help chart the direction for IP protection in the U.S. for the next three years.
We rely on our partners at the Department of Homeland Security, and particularly the efforts of Customs and Border Protection (CBP), to identify and seize the counterfeits as they cross our borders or are transshipped around the globe. CBP’s ability to detect many of the vast number of counterfeit shipments that arrive every day, whether in cargo containers or direct mail packages, provides leads to other law enforcement agencies and eventually leads to prosecutions of the most serious offenses.
We also have a robust international program and work closely with the State Department to target key countries and regions for capacity building and operational assistance, and to place experienced attorneys as IP Law Enforcement Coordinators to work with our international partners. I would like to acknowledge Daniel Ackerman, who will be the department’s IP Law Enforcement Coordinator—or IPLEC—for Latin America beginning this fall. Dan will be based in Sao Paulo, Brazil, but it is my hope that he will work with each of you to increase our joint capacity to fight IP crime throughout the region.
IPLECs like Dan are at the forefront of our cross-border strategy to root out IP crime around the world. Indeed, we have successfully leveraged our international partnerships to disrupt the sources of supply in countries on the other side of the planet. This has resulted in the successful disruption of criminal groups that produced counterfeit pharmaceuticals, dangerous fake airbags, reproductions of electronic equipment—including sub-standard cell phone batteries—and expensive counterfeit luxury goods.
Further, we continue to prioritize outreach to and positive working relationships with a broad cross-section of IP rights holders and very much look forward to hearing your concerns and experiences directly.
We also continue to increase our support for and coordination with state and local law enforcement agencies in IP matters. Since 2009, the department’s Office of Justice Programs has awarded more than $22 million in grants to support state and local law enforcement agencies and training and technical assistance providers, and to fund an IP public education campaign. Of this funding, state and local law enforcement agencies have received almost $17 million in grant funds. In turn, during the duration of the program, these agencies have seized a total of $345 million in counterfeit merchandise and other property and more than $6 million in currency. In addition to these seizures, last year, state and local grantees arrested 545 individuals for violation of IP laws; served 175 state and local IP-related search warrants; and disrupted or dismantled 474 piracy and counterfeiting organizations.
The Department’s Enforcement Priorities
Of course, at its core, the Department of Justice is responsible for prosecuting federal offenders and a critical piece of our mission is to monitor, evaluate and prioritize areas for enforcement emphasis. Those priorities include:
- Protecting the public health and safety from dangerous counterfeit products;
- Protecting against commercial and state-sponsored trade secret theft;
- Disrupting large-scale counterfeiting and piracy networks; and
- Reducing the impact of international organized criminal groups in IP crime.
Some recent examples highlight these focus areas and the creative work of our investigators and prosecutors to stop individual defendants and deter others who might view intellectual property crime as a low-risk, high-profit endeavor.
I’ll start with the threat posed by counterfeit products to public health and safety. In recent years, we have seen the counterfeit pharmaceutical trade grow exponentially as criminals aggressively seek to profit from fake painkillers and psychotropic medications.
Earlier this month, a husband and wife in San Francisco were arrested on charges that they operated an illegal pill press to manufacture and distribute counterfeit oxycodone pills, which were laced with fentanyl. According to the charges, the couple distributed these potentially deadly counterfeit pills through online sales and direct transactions.
Fentanyl, a Schedule II controlled substance, is a highly potent opiate that can be diluted with cutting agents to create counterfeit pills in an attempt to mimic the effects of oxycodone and is typically used by counterfeiters because it is less costly than genuine oxycodone. However, even small variations in the amount or quality of fentanyl can have significant effects on the potency of the counterfeit pills, raising the danger of overdoses. In fact, numerous overdoses and deaths from counterfeit pills containing fentanyl have been reported, including 14 in the state of California this year alone. The critical health risks posed by this form of counterfeiting require an aggressive response from law enforcement at all levels—including through joint efforts between federal and local authorities, as in this case—and we will continue to develop our ability to combat these illegal, dangerous schemes.
In addition, the department continues to be vigilant in safeguarding U.S. businesses’ trade secrets despite the growing sophistication and ambition of would-be thieves.
This month an electrical engineer in California was sentenced to federal prison following his conviction on 32 counts of violating the Economic Espionage Act for stealing trade secrets belonging to his former employer—an aircraft avionics company—and distributing the proprietary material to three competitors. During his brief employment with the victim company, the defendant had access to corporate trade secrets. After he was terminated, he retained trade secret information that he had collected and packaged it with supporting documentation and instructions so that other competitor companies would be able to use the information and reproduce the victim company’s products.
Using email addresses created under a false name and a public internet connection at a popular coffee shop, the defendant sent the stolen trade secrets to other companies that produced avionics, including a company outside of the United States. Fortunately, one of the companies that received the stolen plans stepped forward to notify the FBI, which was able to successfully identify the defendant and locate the evidence which led to his conviction. This case illustrates the importance of maintaining strong relationships between the private sector and law enforcement in the IP space.
Further, we have worked to dismantle online piracy sites used by criminals to distribute infringing products, sometimes on a massive scale and with international reach. Technology has truly been a game-changer for IP crime in this area but law enforcement is working to keep pace.
In December 2015, the owner of Seattle-based companies Digisoft LLC and Premiere Software Inc. pleaded guilty for his role in a widespread, multimillion-dollar conspiracy involving trademark and copyright infringement of Microsoft and other software company products. Co-conspirators operating in the People’s Republic of China, Singapore, Germany and across the United States illegally sold 170,000 Microsoft and Adobe Systems product activation key codes through a charitable organization and several online businesses. To date, six defendants have pleaded guilty and investigators have seized more than $20.6 million in assets, 10 luxury automobiles and 27 parcels of real estate with a total market valuation of $9.7 million. It is estimated that the conspirators reaped about $30 million in profits from customers who paid more than $100 million for the software and these estimates are likely to grow as the investigation continues.
Finally, it has long been our experience that, where there is a profit to be made from illegal activity, organized criminal groups will not be far behind. We are looking at new ways to work with other law enforcement components to remove the profit motive by disrupting payments, increasing criminal enforcement and making the cost of doing business too high to be worthwhile, and by reducing the number of international safe harbor countries that do not effectively address IP crime committed within their borders.
Our strategy is paying dividends with a growing number of high-impact prosecutions and higher sentences, and—by our public messaging—an increased deterrent effect on other IP criminals. However, any true success in this task can only result from our work in partnership with the industry leaders and law enforcement experts in this room. I want to applaud, for example, the innovative and cooperative work of the IACC and the Office of the IP Enforcement Coordinator in leading the way with the Rogue Block program and other voluntary agreements with payment processors and large online markets to reduce piracy and counterfeiting by helping to identify and remove the worst violators from their platforms. By increasing the degree of difficulty for counterfeiters seeking to receive payment for their fake goods, you have created a powerful disincentive to their business model. Your insight and creativity, the same attributes that have helped to build and sustain successful businesses, have provided invaluable leadership in seeking new methods to protect IP.
Let’s continue that spirit of creativity and cooperation to help strengthen our joint work to detect, report and combat IP crimes. Expand your efforts to educate the public about the prevalence and the consequences of these offenses. Strengthen your own ability to prevent IP crimes that affect people, companies, products and services. And help us enhance our understanding of emerging trends in counterfeiting, piracy and trade secret theft, so we can develop the tools we need to fight back.
I thank you for your time and hope that this conference has been informative and productive and will provide a foundation for future success in fighting IP crimes.