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It is a pleasure to be here today to discuss the growing problem of intellectual property theft and counterfeiting and the role law enforcement can play in protecting intellectual property rights.

First, let me emphasize that protecting intellectual property rights is an important part of the Department of Justice's mission. IP industries represent the fastest growing sector of the American economic engine. IP industries contribute approximately 5% to our Gross Domestic Product, having more than doubled in size in the last 25 years. These companies employ millions of people in high-paying jobs. The Business Software Alliance estimates that the United States software industry supplies 70% of the world's demand for legitimate software products. The American movie industry has a positive trade balance with every other nation around the world. American music and games continue to be as popular abroad as they are at home. Indeed, it would be difficult to overstate the importance of intellectual property rights to the continued economic well-being of the United States.

The digital era, in which we all live, provides intellectual property rights holders with unprecedented opportunities to distribute their works to a worldwide audience. Unfortunately, these same technologies that provide the benefits of increased public exposure and access to protected works also have a down side. They have greatly expanded the opportunity to commit piracy and widespread copyright infringement and trademark counterfeiting. Millions of copyrighted songs and hundreds of thousands of copyrighted movies are illegally copied every day. Those who create software and games suffer significant losses from illegal copying. Technology is also being misused by trademark counterfeiters who create near perfect or perfect replicas of well known trademarks and append them to shabby knock-offs. In many instances, resourceful criminals use technology to violate both trademark and copyright, creating and selling products, such as software, which to the average consumer appear legitimate when in fact they are not.

For almost 100 years, the United States has recognized a limited, though important, role for the criminal law enforcement with regard to intellectual property rights. The vast majority of intellectual property rights enforcement in the United States has always been, and should remain, civil in nature. For the most part, property rights holders are capable of enforcing their intellectual property rights through civil law suits, and law enforcement authorities must be careful about how they utilize scarce resources in the post-September 11th era. However, where the level of piracy is particularly egregious, where public health and safety are put at risk, or where civil remedies fail to adequately deter illegal conduct, we believe that criminal enforcement to protect intellectual property rights is appropriate.

For example, a few years ago we successfully prosecuted a criminal for selling counterfeit luxury items, including fake Rolex watches and designer handbags. What is significant about this case is that before the United States prosecuted him, he had almost 16 million dollars in civil judgments against him. Because the criminal ignored the civil judgments and continued his illegal activity, this case was a clear choice for criminal prosecution.

We are at a pivotal time in the history of intellectual property rights enforcement. A number of factors have come together to create unprecedented challenges to intellectual property rights holders and to law enforcement:

• The increasing value of intellectual property,
• The massive worldwide digital reproduction and distribution of copyrighted products is cheap and easy
• Millions of copies can be disseminated around the world with the simple click of a button.
• The ability of pirates to create unlimited generations of perfect copies
• The ease with which criminals avoid detection by victim companies or law enforcement
• The sporadic or inconsistent enforcement throughout the world
• Criminals are no longer motivated solely by profit
• The emergence of organized crime syndicates in international piracy and counterfeiting

During the past two years, the Department of Justice has waged the most aggressive campaign against counterfeiting and piracy in its history. Since the beginning of his tenure, Attorney General Ashcroft has worked diligently to ensure that the prosecutorial resources needed to address intellectual property crime are in place. Shortly after becoming the Attorney General, he expanded Computer Hacking and Intellectual Property (or CHIP) Units in major U.S. Attorney's Offices across the nation. These specialized units consist of dedicated federal prosecutors whose primary focus is prosecuting high tech crimes, including IP crimes.

The CHIP Units complement the existing network of Computer and Telecommunications Coordinators (CTCs) that serve in every United States Attorney's Office. The CTCs regularly receive specialized training in the investigation and prosecution of high-tech crimes, including intellectual property crimes. Many of the 94 U.S. Attorneys Offices have two or more CTCs to help meet the growing demand for trained high-tech prosecutors.

Attorney General Ashcroft has also significantly expanded the Criminal Division's Computer Crime and Intellectual Property Section, also known as CCIPS. CCIPS is a highly specialized team of over thirty-five lawyers who focus exclusively on computer and intellectual property crime. CCIPS attorneys are involved in all facets of criminal intellectual property rights enforcement. The expansion of CCIPS has allowed us to devote additional resources to address piracy both here and abroad. For the first time, CCIPS has a Deputy Chief whose sole responsibility is to oversee and manage the attorneys in the Section dedicated to IP enforcement. At present, there are twelve CCIPS attorneys working exclusively on the IP program. Working in concert, CCIPS, the CTC Network, and the CHIP Units create a formidable, multi-pronged approach to prosecuting intellectual property crimes. We are already beginning to see the positive results of their efforts.

We are making substantial impact on piracy and counterfeiting - both in regard to online and traditional hard goods activities. We have made significant inroads into online piracy, which has grown precipitously in lockstep with the phenomenal growth of the Internet, file compression technology and broadband web access. We have successfully targeted some of the most egregious online offenders including the international organizations that have placed the latest, hardest to obtain, and highest quality pirated products on the Internet. Working in cooperation with law enforcement counterparts overseas, our collective efforts, which are ongoing, have dismantled many of the most prominent online piracy groups and resulted in the substantial prison sentences ranging, for first offenses, from 33 to 47 months for the core conspirators.

We have also successfully prosecuted trademark violations. Just last month, an Alabama man pled guilty to twenty-eight counts of counterfeiting and pesticide misbranding charges pending against him. The defendant sold mislabeled and adulterated pesticides used to control mosquitos and West Nile Virus to various municipalities. As this case illustrates, the potential consequences of intellectual property offenses go beyond lost sales, but cut right at the heart of public health and safety.

Another emerging area of intellectual property rights enforcement that may be of interest to you are recent successful prosecutions for the theft of trade secrets under the Economic Espionage Act. Recent prosecutions have involved the theft of such trade secrets as satellite encryption technology, confidential pricing information used as part of the government contracting process, proprietary customer databases, and various mechanical processes used by American manufacturers to produce goods and services. Many of these trade secrets are critical to the economic viability of the victim companies. Since its inception in 1996, this statute has risen to prominence on the intellectual property landscape as stolen trade secrets have become an increasingly attractive commodity on the black market. As this threat increases, American industry has taken steps to protect its trade secrets from theft. Criminal enforcement of trade secret law has become an important aspect of protecting these vital intellectual property rights.

Although we have had great success in each of these important areas, piracy is a continually evolving crime. We know there is much work to be done. I would like to touch on just a few of the more prominent issues that loom on the horizon.

Organized crime syndicates have begun to use piracy and counterfeiting as a means to fund their illicit activity. Traditionally, piracy operations were small, often run by individuals or a loose collection of people trying to make a quick buck in what has been perceived to be a fairly risk-free criminal enterprise. This has all changed. Piracy has become big business: it is a world-wide, multi-billion-dollar illicit economy which robs legitimate industries and creators of income, while driving up costs for consumers. It is against this backdrop that criminal organizations are playing a more prominent - and dangerous - role in piracy around the globe.

Highly organized criminal syndicates have significant resources to devote to their illegal operations, thus increasing the scope and sophistication of their criminal activity. Further, by nature, these syndicates control international distribution channels which allow them to move massive quantities of pirated goods, as well as other illicit goods, throughout the world. As one might expect, these groups do not hesitate to threaten or injure those who attempt to interfere with their illegal operations. Industry representatives in Asia report that they have been threatened and their property has been vandalized by members of these syndicates when their anti-piracy efforts strike too near the illegal operation. Government officials have also been threatened. These criminal syndicates, which are not limited to Asia, are formidable foes, but must be dealt with to truly attack the problem of intellectual property theft.

As the emergence of organized crime illustrates, IP crime has reached global proportions. The Internet has created a borderless community for online pirates. Online cases almost inevitably involve co-conspirators located outside of the United States. We must increasingly rely on foreign governments for much of the enforcement effort in this area. To this end, we have successfully engaged a number of foreign countries to assist in prosecuting criminals both here and abroad. We have taken the unprecedented step of seeking extradition of one such criminal for his leadership role in an international piracy ring.

Finally, although we are making inroads in this battle, pirates and counterfeiters are also refining their own illicit techniques. In response to our aggressive enforcement activities, organizations and individuals have found new and more sophisticated ways to hide their illegal activity. The quality of counterfeit and pirated goods is near perfect. In some instances, even representatives of victim companies have difficulty distinguishing counterfeit goods from legitimate ones. That is how sophisticated this illicit industry has become. We have worked, and will continue to work closely with American rights holders to ensure that we continue to respond to this threat.

While there are many challenges ahead, we look forward to meeting them head on. The harm caused by piracy is real. It robs our economy of vital resources and ignores the fundamental notion that innovation should be rewarded. The American intellectual property rights community is second to none. American products are sought the world over. The Justice Department is committed to working with all of you to ensure that the intellectual capital of this nation receives the protection it deserves. Thank you for allowing me to speak with you this morning on this important topic.

 
• More information on:  Protecting Intellectual Property Rights
• More information on:  Intellectual Property Crime Cases
• More information on: Congressional Speeches
  

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