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Joint Strategic Plan on Intellectual Property Enforcement SECTION 1 technologies and central player[s] in global finance and trade networks” and thus “foreign attempts to collect U.S. technological and economic information… represent[s] a growing and persistent threat to U.S. economic security.” 68 Trade secret theft does not discriminate and affects all industries. It will continue to rise as methods for stealing become more sophisticated and, in some cases, easier due to technological advancements. In 2015, the United States achived important political commitments bilaterally with China, followed by a similar commitment with the G20, that “no country should conduct or support ICT-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” 69 While some improvements have been made to thwart these efforts, including increased legal protections, companies must remain vigilant. Stakeholders need to work together to protect American innovation and creativity, pillars of our global economy, by continuously monitoring emerging threats and addressing vulnerabilities expeditiously. C. THE THEFT AND UNLAWFUL EXPLOITATION OF INTELLECTUAL PROPERTY AS THREATS TO U.S. NATIONAL INTERESTS. The preceding sections describe the overall scope, magnitude and level of complexity and sophistication behind the unlawful exploitation of intellectual property rights, including copyright interests, trademarks, patents, and trade secrets. This section seeks to highlight the often-overlooked types of harms caused by the unlawful exploitation of intellectual property interests. It is important that the theft of IP be seen in the larger context of its attendant economic, social, and ethical impacts. This perspective will help to advance public understanding of these matters, as well as “Nearly any illicit market involves criminal activities that impact the security of citizens, undermine the authority of states, erode the social fabric, criminalize society, and generate an overall cost of crime that must be borne by society.” Source: Convergence: Illicit Networks and National Security in the Age of Globalization (2013). providing enhanced clarity and purpose in policymaking. If ever it was, it certainly is no longer accurate to view IP theft as a “soft crime” affecting only narrow private interests. The entities engaged in commercialscale piracy, counterfeiting, or trade secret theft harm the economic competitiveness of our businesses, the livelihood of our creative and innovative communities, the health and safety of the public, workers’ rights, the environment, and domestic and international security. 1. Undermines Principles of Fair Trade in the Global Economy. IP-intensive industries are an engine of economic growth for the United States and other countries. Success in the global marketplace is premised upon a company’s ability to innovate and compete in any free-market environment that upholds the rule of law. Entrepreneurs and rights holders invest enormous resources in creating products, content and know-how, and in strengthening their businesses through innovation and creativity. They are denied a rightful return on these investments when the integrity of the marketplace—that is, rules supporting fair competition—are violated. The development and distribution of counterfeit goods, commercial-scale piracy, trade secret theft, and the erosion of patent protection are all means to gain unearned (and unlawful) economic competitive advantage or profit. These acts, particularly at the scale being widely reported, tend in aggregate to decrease the stability and efficiency of the global economy by discouraging the creativity, investment, and innovation that improve quality of life and support wellpaying jobs. 70 Misappropriation of IP can deter critical foreign investment that would create more opportunities for American businesses abroad while simultaneously improving the economies of our trading partners. For instance, the cost of doing business in countries with poor IPR enforcement continues to increase, as companies are forced to budget for additional enforcement costs and lower sales revenue when they cannot combat the entry of counterfeits into the global supply chain. Put simply, poor IP enforcement (like all incursions on the rule of law) dampens domestic and foreign investment and the attendant benefits that flow from such investments. As noted at the outset, IP-intensive industries in the United States alone create and support tens of millions 32
Office of the Intellectual Property Enforcement Coordinator FIG. 19: The harms flowing from counterfeiting, commercial piracy, and trade secret theft are widely felt. 71 Consumers Legitimate Businesses Governments Global Trading Partners • Exposed to low quality products that are unregulated and often unsafe • Misled and defrauded • Exposed to theft of private information • Lost sales • Decreased profits • Loss of brand trust • Opportunity cost of increased spending on IP protection • Undermines rule of law • Decreased tax revenues • Increased spending on welfare, health services, law enforcement and crime prevention • Undermines fair competition in world markets • Labor exploitation • Decreased or delayed investments of U.S. companies overseas • Undermines political, financial, and security institutions in states by corruption • Financing of criminal syndicates of jobs, contribute trillions of dollars in value, represent more than 38 percent of U.S. GDP, and account for more than 50 percent of all U.S. merchandise exports. 72 When IP is stolen or unlawfully exploited, it not only hurts our artists, innovators, and businesses all over the world that rely on these protections, but presents a real and significant threat to an enormous driver of U.S. economic growth (FIG. 19). Without a comprehensive plan to continue to address the root causes of these harms, the magnitude of the impact on our economies, our people (both consumers and workers), the environment, and our political institutions will compound and increase. Indeed, the interdependence of countries resulting from the increasing integration of trade and finance, and the exchange of people and ideas in one global marketplace—driven, in part, by the digital revolution, along with continuing improvements in manufacturing methods and transportation infrastructure— have lowered barriers to entry and vastly expanded a commercial enterprise’s potential customer base. These and other factors are attracting more people into the commercial marketplace, including, unfortunately criminal actors relying on unlawful shortcuts by way of IP-exploitative activities. 2. Threatens Consumer Health and Safety. The threats to the health and safety of the American public from counterfeit goods is significant, and may be on the rise due to the growing diversity of counterfeit products entering the United States. CBP seizure statistics reveal a diverse set of products, including personal care products, pharmaceuticals, critical technology components, automotive parts, electrical components, aviation parts, medical devices, children’s toys, and foods and beverages that are routinely counterfeited and pose dangers to consumer health and safety. 73 However, there has not been a systematic analysis of the magnitude of the health and safety risk to U.S. interests from these and other categories of goods, and more data and research are critically required, as detailed in the Call for Research at the conclusion of Section IV of this Strategic Plan. For illustrative purposes, and to enhance public understanding and awareness, below are a series of case studies across four counterfeit product categories that pose significant threats to the health and safety of the public, namely: (1) personal care products; (2) pharmaceuticals; (3) consumer electronics and electrical components; and (4) automotive parts. While these case studies are instructive, there remains ample opportunity to enhance our understanding of the nature and scope of the problem across these and other product categories where counterfeiting is proliferating. Example: Counterfeit Personal Care Products. With increased seizures reported each year, counterfeit personal care products—such as perfume, soap, toothpaste, contact lenses, condoms, sanitary pads, deodorant, shampoo, lip balms, petroleum jelly, baby oil, hair curlers, and cosmetics—are on the rise and becoming one of the most-seized product categories. 74 Over the last two years, the number of personal care products seized by U.S. authorities has tripled. 75 Illustrative of scale, a single joint operation between U.S. and French customs authorities conducted from April SECTION 1 33
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ACKNOWLEDGEMENTS With thanks to, an
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