A Law Enforcement Priority
Story courtesy of John Morton, Director, U.S. Immigration and Customs Enforcement (ICE)
Photo above: John Morton at a February press conference.
Intellectual property protection drives research and development in the private sector. These days, however, the R&D calculus can look like a losing proposition as large-scale counterfeiting and online digital theft badly undermine traditional market forces. Consider that a pharmaceutical company may spend over one billion dollars to develop the next “miracle drug,” only to see counterfeits of the medication appear on the market the year after its release. Similarly a film studio may invest hundreds of millions of dollars in a single film only to find free copies of the movie on the internet, even prior to official release in some british english theatres. Fashion houses and luxury brand manufacturers can easily find exact replicas of their products at a boot sale market or on the internet.
It is beyond dispute that global intellectual property theft results in billions in lost revenue, taxes, and employee benefits. Innovation, consumer safety, and economic growth are sacrificed in the name of criminal profit. And yet debate still rages as to whether law enforcement should take action against counterfeiting and online theft. As the head of ICE, I direct the U.S. law enforcement agency that investigates much of the intellectual property theft occurring in or through the United States. As a byproduct, I am criticized by some for the aggressive strategy my agency has undertaken to protect intellectual property rights because it is thought to be a matter reserved for business, not government. While neither I, nor the agents within our agency, will waver one bit from our mission, it is appropriate to address the arguments of our opponents.
Photo below: counterfeit goods.
A recent study published in the British Journal of Criminology suggests that counterfeiting of luxury fashion goods is a relatively minor concern and that law enforcement agencies should refrain from pursuing these cases. While the authors of the study seem well intentioned, their conclusion leads to the wrong answer. By focusing on counterfeiting of “luxury fashion goods,” the authors understate the scope of the problem and ignore the proven links between counterfeiting and organised crime. In addition, creating a dichotomy between types of counterfeit goods — those “worthy” of government protection and those that are not — creates an inappropriate role for government to deem certain companies or business less important.
Finally, it ignores the reality that, as a whole, aggressive enforcement against counterfeiting and online digital theft is the “rising tide that lifts all boats.” Simply put, the counterfeiting of all trademarked and copyrighted goods amounts to a significant form of theft. This crime goes far beyond luxury goods and high-end apparel to encompass software, electronic components, DVDs, pharmaceuticals, automotive parts and much more. As trafficking in these goods has grown, it has created an opportunity for criminal organisations to enter the field. And the criminal organisations have readily seized that opportunity.
Photo below: counterfeit drugs.
The link between intellectual property theft and organised criminal activity is well established. A 2009 study by the RAND Corporation showed how the same criminal groups that engage in intellectual property theft are involved in other serious crimes, such as extortion, drug trafficking, human smuggling and trafficking, and violent crime. Our law enforcement investigations have borne out the same conclusion. Moreover, attempting to separate “luxury fashion goods” from the larger realm of counterfeit goods sets up a false distinction. It is unlikely that criminal and terrorist organisations will pick and choose the types of counterfeit items in which they traffic. Instead, they will traffic in those goods that provide the greatest profits at the lowest risk-whatever makes it easiest for them to make a profit and fund further criminal activities. In our law enforcement efforts, we have come across counterfeit air bags to be installed in cars, toothpaste filled with chemicals found in anti-freeze, and even fake parts for radios intended to allow the military to communicate secretly on the battlefield. Worse, as criminal organisations realize the profits to be made, they don’t pay taxes that would otherwise be paid on legitimate goods; they don’t fund workers’ pensions, or invest in the next “miracle drug.” Criminals merely wait for their next parasitic venture: illegally copying and producing someone else’s innovative idea.
Multilateral and Multiagency Enforcement
Fortunately, law enforcement around the world is developing a clearer sense of the dangers posed by intellectual property theft. Some of our most successful intellectual property cases have been multilateral investigations conducted across international boundaries, in a true spirit of partnership. Like BritishAmerican Business, we have learned that transatlantic partnerships reap significant, mutually beneficial rewards. For example, in March 2010, nine individuals were indicted in a conspiracy to smuggle into the U.S. counterfeit shoes, handbags and watches manufactured in Malaysia and China.
The indictment resulted from an investigation between U.S. Immigration and Customs Enforcement (ICE), the City of London Police and the United Kingdom Border Agency. During the investigation, the defendants arranged with undercover agents to smuggle shipments of counterfeit products into the U.S. The defendants also paid the undercover agents to ship three containers of counterfeit goods to the UK. In addition to the smuggling fee, the indictment alleges that the co-conspirators often paid an additional amount of money which was to be “laundered” through the undercover agents. As part of the investigation, the London police arrested seven suspects and seized 50,000 items of counterfeit clothing, believed to be the largest ever counterfeiting case in U.K. history.
In the U.S. we realise that no one law enforcement agency can tackle this problem alone. That’s why the National Intellectual Property Rights Coordination Center, commonly known as the IPR Center, is leading the effort to make aggressive, effective IP theft enforcement a reality. The IPR Center, led by ICE’s Homeland Security Investigations (HSI), brings together 14 U.S. agencies, along with INTERPOL and the governments of Mexico and Canada to tackle all forms of IP theft. The IPR Center’s mission is to be “one stop shopping” for rights holders who are victims of IP theft by making available the resources of multiple agencies under one roof.
21st Century Enforcement
We are also attacking IP theft operating in cyber space. The internet is one of the great advances of our time and will shape our lives and those of our children without any doubt. But cyber IP thieves are increasingly using the web to market and sell counterfeit and pirated goods everything from knockoff luxury goods to pirated movies, to fake pharmaceuticals. These investigations present unique challenges. The thieves are often overseas, sometimes in countries without robust anti-counterfeiting regimes. And the increasing use of multiple servers complicates the collection of electronic evidence, requiring countless hours of computer forensics work. In June 2010, the IPR Center, ICE’s HSI and U.S. prosecutors announced the most aggressive enforcement action against online counterfeiting and digital theft ever conducted through Operation “In Our Sites.”
In the course of this operation, we have seized domain names of websites illegally offering copyrighted films and television programs as well as selling counterfeit electronics, luxury goods, software, games and items that pose a threat to health and safety. Using judicially-ordered seizure warrants and posting an electronic seizure banner on offending websites, we have observed an unprecedented level of public interest and awareness. How do we know this? One measure is that the seizure banner has received over 36 million hits as a result of these four successive rounds of seizures over eight months. Combined with the fact that over 80 illegal websites have voluntarily been taken down by their operators, it is clear we are making an impact through Operation In Our Sites.
Our intellectual property enforcement on the internet has been alternately praised by victim rights holders, criticised by some, and watched with curiosity by many. However, I remain firmly convinced that government exists, in great part, to protect private property from theft. Intellectual property defines private property in industry. Law enforcement needs to combat intellectual property theft at all levels Crime is crime and given the stakes, law enforcement should not turn a blind eye to this pernicious form of theft. One reason for the success of enforcement actions like Operation In Our Sites is the IPR Center’s efforts to foster partnerships with the private sector. We recognise that law enforcement cannot fight IP theft alone.
To facilitate productive partnerships, the IPR Center launched Operation Joint Venture, which supplies both industry and law enforcement with valuable information about our efforts to combat the importation of hazardous and counterfeit products, and provides you with a point of contact in the field that you can use to provide us with leads and tips. If you know about efforts to compromise your company’s intellectual property rights, let us know. Often our best cases often start with leads industry provides. Through our combined efforts, by collaborating and sharing information, we can have a resounding impact on IP theft.
John Morton is director of U.S. Immigration and Customs Enforcement (ICE), the largest investigative agency in the Department of Homeland Security. ICE leads the National Intellectual Property Rights Coordination Center (IPR Center), a multi-agency task force in Arlington, Virginia, dedicated to combating intellectual property theft.