White Paper Asks Congress to Increase Sentences, Pass Performance Rights Bill

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The Office of the Intellectual Property Enforcement Coordinator released a White Paper March 15 recommending specific legislative initiatives for increasing the effectiveness of U.S. enforcement efforts.

“Piracy and counterfeiting in the online environment are significant concerns for the Administration,” the paper said. “They cause economic harm and threaten the health and safety of American consumers. Foreign-based and foreign-controlled websites and web services raise particular concerns for U.S. enforcement efforts.”

“Selling counterfeit products for use by the military or in national defense risks public safety and the safety of our service men and women. Therefore, we proposed today to significantly increase criminal penalties for those seeking to profit at the expense of our safety,” IPEC chief Victoria A. Espinel said in a same-day White House Blog post. “Because of the high profit margin and shorter prison sentence for intellectual property crimes compared to other offenses, piracy and counterfeiting are a strong lure to organized criminal enterprises, which can use infringement as a revenue source to fund their other unlawful activities.”

The White Paper--which was first announced by Espinel at a March 1 House Judiciary subcommittee hearing (81 PTCJ 551, 3/4/11)--sought six legislative changes to fight counterfeits drugs, including increased criminal penalties for counterfeit drug offenses, particularly those that risk death or serious bodily injury.

Recommended Legislative Changes.

In the White Paper, the administration recommended enhancing penalties for IP offenses as followss:

• Increase the statutory maximum penalty for economic espionage (18 U.S.C. § 1831) from 15 years in prison to at least 20 years in prison; and

• Increase the statutory maxima for drug offenses under the Federal Food, Drug and Cosmetic Act, particularly for counterfeit drug offenses.

The administration also urged that Congress: (1) direct the U.S. Sentencing Commission to increase the U.S. Sentencing Guideline range for intellectual property offenses; (2) require the U.S. Sentencing Commission to consider five specific categories of changes to the Guidelines; and (3) require the U.S. Sentencing Commission to act within 180 days of such legislation being adopted (including issuing a report explaining why it has not adopted any of the specific recommendations). The five categories of specific recommendations for the U.S. Sentencing Commission are:

• Increase the U.S. Sentencing Guideline range for the theft of trade secrets and economic espionage, including trade secrets transferred or attempted to be transferred outside of the U.S.;

• Increase the U.S. Sentencing Guideline range for trademark and copyright offenses when infringing products are knowingly sold for use in national defense, national security, critical infrastructure, or by law enforcement.

• Increase the U.S. Sentencing Guideline range for intellectual property offenses committed by organized criminal enterprises/gangs;

• Increase the U.S. Sentencing Guideline range for intellectual property offenses that risk death or serious bodily injury and for those offenses involving counterfeit drugs (even when those offenses do not present that risk); and

• Increase the U.S. Sentencing Guideline range for repeat intellectual property offenders.

The paper further proposed three legislative changes aimed at giving enforcement agencies the tools they need to combat infringement:

• Clarify that, in appropriate circumstances, infringement by streaming, or by means of other similar new technology, is a felony;

• Authorize the Department of Homeland Security, and its component U.S. Customs and Border Protection, to share pre-seizure information about, and samples of, products and devices with rightholders to help DHS to determine whether the products are infringing or the devices are circumvention devices; and

• Give law enforcement authority to seek a wiretap for criminal copyright and trademark offenses.

It recommended changes to allow the DHS to share information about enforcement activities with rightholders:

• Give DHS authority to notify rightholders that infringing goods have been excluded or seized pursuant to a U.S. International Trade Commission order; and

• Give DHS authority to share information about, and samples of, circumvention devices with rightholders post-seizure.


Also recommended by the administration were six legislative changes targeted at improving U.S. enforcement efforts involving pharmaceuticals:

• Require importers and manufacturers to notify the Food and Drug Administration and other relevant agencies when they discover counterfeit drugs or medical devices, including the known potential health risks associated with those products;

• Extend the Ryan Haight Act's definition of “valid prescription” (and its telemedicine exemption) to the FFDCA to drugs that do not contain controlled substances;

• Adopt a track-and-trace system for pharmaceuticals and related products;

• Provide for civil and criminal forfeiture under the FFDCA, particularly for counterfeit drug offenses;

• As noted above, increase the statutory maxima for drug offenses under the Federal Food, Drug, and Cosmetic Act, particularly for counterfeit drug offenses; and

• As noted above, recommend that the U.S. Sentencing Commission increase the U.S. Sentencing Guideline range for intellectual property offenses that risk death and serious bodily injury, and for those offenses involving counterfeit drugs (even when those offenses do not present that risk).

With regards to Customs and Border Protection's administrative penalties, the paper recommended that Congress:

• Permit relief when someone who unknowingly and unintentionally acquires infringing products voluntarily discloses them to CBP before becoming aware of any CBP enforcement action (or a law enforcement investigation);

• Give CBP authority to issue penalties for infringing exports; and

• Strengthen CBP's authority to issue penalties for infringing imports discovered during audits of company records.


Performance Rights.

Finally, according to the paper, the administration also believes that legislation providing a right of public performance will improve international enforcement efforts:

• Create a right of public performance for copyright owners for sound recordings transmitted by over-the-air broadcast stations which, in part, will allow copyright owners to obtain overseas royalties that are now denied to them.

Efforts to create a statutory public performance right for recording artists became stagnant as the last Congress adjourned without final action two 2009 bills, H.R. 848 and S. 379. Currently, AM and FM radio stations can broadcast any recorded music by paying royalties to the composer of a song, but not to the recording artist who made the record. Other media, such as satellite and internet radio, do not enjoy such an exemption.

The White Paper could spark new movement on this issue and prompt reintroduction of the performance rights legislation in the upcoming months.

Groups Support the Paper.

Rob Calia, the U.S. Chamber of Commerce Global Intellectual Property Center's senior director for counterfeiting and piracy, said in a press statement that the Chamber “applauded” the paper.

“We are particularly encouraged to see several of our top legislative priorities covered by the white paper, especially the issue of rogue websites. The paper makes clear that the Administration shares Congress' commitment towards combating websites dedicated to the sale or distribution of infringing products,” he said in a statement released the same day as the paper. “We also strongly support the white paper's call for Congress to clarify that criminal copyright infringement through unauthorized streaming, is a felony. We know both the House and Senate are looking at this issue and encourage them to work closely with the Administration and other stakeholders to combat this growing threat.”

The Chamber also supports the IPEC's call for strong penalties for counterfeiters and pirates, “especially those who profit at the risk of our safety by peddling dangerous consumer products, such as counterfeit drugs, and those who target our war fighters and law enforcement with their phony wares,” Calia added. “The enactment and enforcement of stronger penalties, like those proposed in the white paper, would send an important message to counterfeiters and pirates and would provide a more meaningful deterrent.”

Gigi B. Sohn of the public interest group, Public Knowledge, said in a statement, “The recommendations largely address important areas of intellectual property enforcement that are often overlooked in more contentious debates at the edges of these issues.”

“While there may be room for disagreement on specific methods of implementation, Victoria Espinel has compiled a thoughtful list of targeted recommendations for enforcement,” she said. “We note as well her advocacy on behalf of a public performance right for copyright owners for material which is broadcast. While this seems tangentially related to an enforcement agenda, performing artists deservingly stand to benefit from such a system.”

Sandra Aistars, executive director of the advocacy group Copyright Alliance, also applauded the Espinel report. “We welcome her recommendations to Congress, and were especially encouraged by the recommendation that additional resources and authority be given to law enforcement entities to effectively combat the threat to U.S. citizens, their jobs and the economy from IP theft,” Aistars said in a press statement.

By Nathan Pollard

Request Intellectual Property on Bloomberg Law