Background

Recognizing both the growing significance of intellectual property to the U.S. economy, and the increasingly sophisticated nature of IP theft, the Justice Department ("DOJ") has been intensifying its efforts to target, investigate, and prosecute intellectual property crimes. According to a recent press release, the DOJ convicted 57 percent more defendants of criminal copyright and trademark offenses in 2006 than in 2005. And in 2005, the DOJ prosecuted nearly twice as many defendants as it had in 2004. Just last month, a former secretary for Coca-Cola was sentenced to eight years in prison following her conviction for attempting to sell Coke’s trade secrets to Pepsi.

On May 14, 2007, in an effort to enhance its efforts, DOJ proposed new legislation, the "Intellectual Property Protection Act of 2007," or "IPPA," that would criminalize additional IP infringements, and broaden certain civil remedies. In discussing the proposed legislation in a letter to the Speaker of the House, the Attorney General wrote, "[b]ecause intellectual property is critical to not only our economy but also to the public’s health and safety, the Attorney General is strongly committed to the protection of intellectual property rights, the safeguarding of our citizens, and the punishment of those who violate the law." To read the proposed legislation in its entirety, please click here.

Current Statutes

Federal statutes have criminalized certain intentional IP infringements for some time. For example, the Economic Espionage Act, 18 U.S.C. §§ 1831-1839, makes the intentional theft for economic gain of trade secrets a federal crime punishable by fines and/or imprisonment. The Copyright Act, 17 U.S.C. § 101, et seq., which protects "original works of authorship," criminalizes certain defined willful acts of infringement (17 U.S.C. § 506; see also 18 U.S.C. §§ 2318-2319B.) Trafficking in counterfeit goods is a criminal offense. (18 U.S.C. §§ 2318 and 2320.) Both the Copyright Act and the Lanham Act, 15 U.S.C. § 1051, et seq., which prohibits trademark infringement, dilution, and false advertising, also provide for civil seizure and forfeiture remedies in certain instances. (17 U.S.C. §§ 503, 509; 15 U.S.C. § 1116(d).) 

The Proposed Legislation

Through the IPPA, the DOJ is attempting to harmonize the Economic Espionage Act, the Copyright Act and the Lanham Act and at the same time increase the criminal and civil penalties for certain IP infringements. Specifically, this proposed legislation would do the following:

  • Clarify that DOJ has the authority to prosecute criminal copyright offenses without obtaining a registration for the pirated work with the U.S. Copyright Office. Registration would remain a requirement in civil copyright actions.
  • Criminalize attempts to infringe a copyright. Infringers would be prosecuted even if the crime was not completed.
  • Strengthen and broaden penalties for repeat copyright criminal offenders.
  • Strengthen penalties for counterfeiting offenses that threaten public health and safety, such as counterfeit and substandard pharmaceuticals, surgical equipment, or an electrical cord bearing a counterfeit UL designation. The proposal increases the maximum penalties for such offenses from 10 to 20 years for knowingly or recklessly causing or attempting to cause serious bodily injury, and to life imprisonment for knowingly or recklessly causing or attempting to cause death.
  • Permit wiretaps for copyright piracy and trademark counterfeiting investigations. In seeking this amendment, the Justice Department noted the increasing involvement of sophisticated organized criminal groups in such offenses.
  • Expand and harmonize forfeiture and restitution provisions under the various criminal intellectual property laws. For example, the IPPA would make computers and other equipment used or intended to be used to commit a copyright or trade secret crime subject to forfeiture.
  • Amend the Copyright Act to allow for ex parte seizure of documentary evidence concerning the manufacture, sale or delivery of a product in civil copyright cases, similar to the authority already provided in civil trademark counterfeiting cases under the Lanham Act.
  • Expand the Copyright Act to treat the export of illegal copies like the import of such copies—as an infringement of the copyright owner’s distribution rights.

At the same time, DOJ also announced efforts to improve IP protection under existing law, including (i) branching out internationally by training over 3,000 prosecutors, investigators and judges in 107 countries and setting up an IP Law Enforcement Coordinator for Asia in Thailand; (ii) expanding the Computer Hacking and Intellectual Property ("CHIP") network of prosecutors; and (iii) focusing outreach efforts in the private sector by holding training and educational conferences on the investigation and prosecution of IP cases.

Implications

Recent prosecutions and the proposed legislation make clear that the DOJ views IP infringements as serious crimes warranting investigation, prosecution and punishment. Business organizations—regardless of size—need to take heed. Companies should make sure they have an effective IP audit, protection and compliance program in place and should authenticate all software licenses and ensure that adequate licenses have been obtained. Employee and third-party access to your company’s trade secrets and copyrighted works should be monitored and regulated, particularly when they join and depart from the company. Distributors should authenticate the goods they are selling in their chain of commerce. Moreover, IP owners and their counsel can consider reporting criminal IP offenses to the authorities, and also take advantage, in the right circumstances, of the civil seizure remedies available for pirated or counterfeited material. Finally, in the event the Government initiates an investigation, a company and its counsel should be ready, willing and able to take steps to cooperate with the investigation—including by conducting its own internal investigation.


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Related Practices

Intellectual Property
White Collar Defense/Investigations