Senate Okays Leahy Bills Targeting Counterfeit Goods

. . Bill Takes Aim At Costly Crime
Of Pirating That Plagues Many Vermont Companies

WASHINGTON (Wednesday, Nov. 16) – Sen. Patrick Leahy (D-Vt.) led efforts in the Senate to win passage of two key bipartisan anti-counterfeiting bills targeting the pernicious and costly problems of piracy and illegal trafficking of goods and services that plague several Vermont companies.

Leahy, the ranking member of the Senate Judiciary Committee, teamed up with leading Republican senators on the measures: Sen. Arlen Specter (R-Pa.), the panel’s chairman, is the principal cosponsor of the Stop Counterfeiting in Manufactured Goods Act, while Sen. John Cornyn (R-Texas), a member of the committee, joined Leahy in sponsoring the Protecting American Goods and Services Act.  

The Senate passed both bills by unanimous consent on Nov. 10, sending them to the House for consideration.

Piracy has had a particularly negative effect on a number of Vermont businesses who have worked with Leahy on combating the crime, including Burton Snowboards, Vermont Tubbs of Rutland, SB Electronics of Barre, and Hubbardton Forge of Castleton.  A representative form Burton Snowboards testified before the Committee last year on the issue.

A longtime leader in Congress on anti-piracy issues and the ranking member on the Intellectual Property Subcommittee of the Judiciary Committee, Leahy stressed the importance of the bills:  “Product counterfeiting hurts our workers and our consumers and our economy.  These are useful tools to help beat back this threat.”

Leahy noted that more than $200 billion in tax revenue is lost annually to counterfeiting and piracy operations, and estimates show that more than 5 percent of trade worldwide is illegally conducted in the trafficking of counterfeited goods.  In addition to its damage to the economy, counterfeiting has been linked to organized crime, including terrorist organizations.

[Below are Leahy’s statements on passage of the bills.]

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Statement Of Senator Patrick Leahy
On Senate Passage Of S. 1699,
The “Stop Counterfeiting In Manufactured Goods Act”
November 10, 2005

MR. LEAHY.  Counterfeiting threatens the American economy, our workers, and our consumers.  I am pleased that the Senate has today taken an important step towards beating back that threat, by passing S. 1699, the “Stop Counterfeiting in Manufactured Goods Act.”  Senator Specter is the principal co-sponsor, and I know that he shares with me the conviction that this bill that will give law enforcement improved tools to fight counterfeit trademarks, and that it could work a significant change in the efforts to combat this type of theft.  So are all our co-sponsors, and I thank them:  Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich.

It is all too easy to think of counterfeiting as a victimless crime, a means of buying sunglasses or a purse that would otherwise strain a monthly budget.  The reality, however, is far different.  According to the Federal Bureau of Investigation, counterfeiting costs the U.S. between $200 billion and $250 billion annually.  In Vermont, companies like Burton Snowboards, Vermont Tubbs, SB Electronics, and Hubbardton Forge – all of which have cultivated their good names through pure hard work and creativity – have felt keenly the damage of intellectual property theft on their businesses.  This is wrong.  It is simply not fair to the businesses who innovate and to the people whose economic livelihoods depend on these companies.  

The threat posed by counterfeiting is more than a matter of economics.  Inferior products can threaten the safety of those who use them.  When a driver taps a car’s brake pedals there should be no uncertainty about whether the brake linings are made of compressed grass, sawdust, or cardboard.  Sick patients should not have to that they will ingest counterfeit prescription drugs and, at best, have no effect.  The World Health Organization estimates that the market for counterfeit drugs is about $32 billion each year.  Knock-off parts have even been found in NATO helicopters.  What’s more, according to Interpol, there is an identifiable link between counterfeit goods and the financing of terrorist operations.  

S. 1699 makes several improvements to the U.S. Code.  The bill strengthens 18 U.S.C. 2318, the part of the criminal code that deals with counterfeit goods and services, to make it a crime to traffic in counterfeit labels or packaging, even when counterfeit labels or packaging are shipped separately from the goods to which they will ultimately be attached.  Savvy counterfeiters have exploited this loophole to escape liability.  This bill closes that loophole. 

The bill will also make counterfeit labels and goods, and any equipment used in facilitating a crime under this part of the code, subject to forfeiture upon conviction.  Any forfeited goods or machinery would then be destroyed, and the convicted infringer would have to pay restitution to the lawful owner of the trademark.  Finally, although the bill is tough, it is also fair.  It states that nothing “shall entitle the United States to bring a cause of action under this section for the repackaging of genuine goods or services not intended to deceive or confuse.”  It is truly just the bad actors we want to punish.

Those who profit from another’s innovation have proved their creativity only at escaping responsibility for their actions.  As legislators it is important that we provide law enforcement with the tools needed to capture these thieves.  I am committed to this effort, and will continue to sponsor legislation that will support law enforcement in the protection of the intellectual property rights that are so important to the American economy and its creative culture.

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Statement Of Senator Patrick Leahy
On Senate Passage Of S. 1095,  
The “Protecting American Goods and Services Act Of 2005”
November 10, 2005

MR. LEAHY.  Today, I am pleased that the Senate has passed S. 1095, the “Protecting American Goods and Services Act of 2005,” which is the latest of the bipartisan efforts that Senator Cornyn and I have made to improve the lives of Americans through effective and efficient government.  The “Protecting American Goods and Services Act of 2005” will strengthen our ability to combat the escalating problem of counterfeiting worldwide.  In order to effectively fight intellectual property theft, we need stiff penalties for counterfeiters and those who are caught with counterfeit goods with the intent to traffic their false wares.  Ours is a short bill – indeed, it is only two pages long – but it will have powerful global implications in the fight against piracy.

Counterfeiting is a growing problem that costs our economy hundreds of billions of dollars every year and has been linked to organized crime, including terrorist organizations.  According to the International Anti-Counterfeiting Coalition, counterfeit parts have been discovered in helicopters sold to NATO, in jet engines, bridge joints, brake pads, and fasteners in equipment designed to prevent nuclear reactor meltdowns.  The World Health Organization estimates that the market for counterfeit drugs is about $32 billion each year. 

Several years ago, Senator Hatch joined me in sponsoring the “Anti-counterfeiting Consumer Protection Act of 1996,” which addressed counterfeiting by amending several sections of our criminal and tariff codes.  That law made important changes, particularly by expanding RICO, the federal anti-racketeering law, to cover crimes involving counterfeiting and copyright and trademark infringement.  Then, as now, trafficking in counterfeit goods hurts purchasers, state and federal governments, and economies at every level. 

Perhaps most disturbingly, the U.S. Customs Service reports that terrorists have used transnational counterfeiting operations to fund their activities:  The sale of counterfeit and pirated music, movies, software, T-shirts, clothing, and fake drugs “accounts for much of the money the international terrorist network depends on to feed its operations.” 

Last year, as in years past, I worked with Senator Allen on an amendment to the Foreign Operations bill that provides the State Department with vital resources to combat piracy of U.S. goods abroad.  The bill we ultimately passed included $3 million for this important purpose.  Yet more work both at home and abroad remains.  When you consider that the economic impact of tangible piracy in counterfeit goods is estimated to be roughly $350 billion a year and to constitute between 5 percent and 7 percent of worldwide trade, a few million dollars is a worthwhile investment. 

We have certainly seen how this form of theft touches the lives of hard-working Vermonters.  Burton Snowboards is a small company, whose innovation has made it an industry leader in snowboarding equipment and apparel.  Unfortunately, knock-off products carrying Burton’s name have been found across the globe.  Vanessa Price, a representative of Burton, testified about counterfeiting at the Judiciary Committee’s March 23, 2004, hearing on this topic.  In addition to learning about the economic costs of counterfeiting, I asked her after the hearing about the risks posed to consumers by these goods.  Her answer was chilling: “In the weeks since my Senate testimony, I discovered a shipment of counterfeit Burton boots for sale through a discount sports outfit… After examining the poor quality of the counterfeit boots, we determined that anyone using the boots for snowboarding risks injury due to a lack of reinforcement and support in the product’s construction.”  

Customers and businesses lose out to counterfeiters in other ways, too.  SB Electronics in Barre, Vt. has seen its capacitors reverse engineered and its customers lost to inferior copycat models.  Vermont Tubbs, a furniture manufacturer in Rutland, has seen its designs copied, produced offshore with inferior craftsmanship and materials, and then reimported, so that the company is competing against cheaper versions of its own products.  And Hubbardton Forge in Castleton, Vt. has seen its beautiful and original lamps counterfeited and then sold within the United States at prices – and quality – far below their own.  This is wrong. It is unfair to consumers who deserve the high quality goods they think they are paying for, and it is unfair to innovators who play by the rules and deserve to profit from their labor.  

The “Protecting American Goods and Services Act of 2005” will help to combat this growing scourge.  It amends the definition of “trafficking” in the counterfeit law to criminalize the possession of counterfeit goods with the intent to sell or traffic in those goods, as well as to include any distribution of counterfeits with the expectation of gaining something of value – criminals should not be able to skirt the law simply because they barter illegal goods and services in exchange for their illicit wares.  Finally, the bill’s new definition will criminalize the importation and exportation of counterfeit goods, as well as of bootleg copies of copyrighted works into and out of the United States.    

By tying off these loopholes and improving U.S. laws on counterfeiting, we will be sending a powerful message to the criminals who belong in jail, and to our innovators. 

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