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Joint Strategic Plan on Intellectual Property Enforcement SECTION 1 most vulnerable individuals in society that find their way to these positions on the ‘sweatshop’ floor, where they are not granted the same form of protection available to the legitimate employment market. 121 With a workforce comprised of individuals with little to no means—including migrants who have been smuggled into a country or immigrant workers who have had their identity papers confiscated—these are often ‘deadend’ positions from which it is difficult to free oneself. “I remember walking into an assembly plant in Thailand a couple of years ago and seeing six or seven little children, all under 10 years old, sitting on the floor assembling counterfeit leather handbags. The owners had broken the children's legs and tied the lower leg to the thigh so the bones wouldn't mend. [They] did it because the children said they wanted to go outside and play.” Source: Dana Thomas, Harper's Bazaar, "The Fight Against Fakes," exerpt from "Delux: How Luxury Lost its Luster." Labor and human rights violations extend beyond the point of manufacture to the time of sale, where individuals are exploited by human traffickers and illicit traders. For example, illegal immigrants—often from Africa or Asia— are reported to have been smuggled into countries and coerced by their facilitators to engage in street sales of counterfeits. 122 Although street sales operations may not appear to be under forced circumstances, reports confirm that many of these street sales and unlicensed markets are often controlled by organized crime groups and other illicit actors. 123 These types of exploitative acts and violations are not confined to foreign countries, as reports demonstrate that individuals in the United States have engaged in human trafficking and forced labor in connection with the distribution and sale of counterfeit and pirated goods. 124 As the U.S. Attorney for the Southern District of Texas noted in connection with one criminal case that was prosecuted to conviction: “Driven by greed, these defendants mistreated and abused the victims of human trafficking after enticing them to come…with promises of employment and a better life. Forced to sell counterfeit goods to repay their smuggling fees and earn their freedom, bootleg CDs and DVDs became the shackles of the victims of this modern day slavery.” 125 5. Poses Threats to Domestic and International Security. In addition to the various risks and consequences flowing from the unlawful exploitation of intellectual property rights discussed above, these same illicit activities may also give rise to far-reaching and serious threats to domestic and international security. Although these threats may be closely linked to, and converge with, one or more of the threats summarized above, the risks to national security interests must be better understood. The U.S. is a key player in the global financial and trade networks and a leader in producing valuable intellectual property. Therefore, it continues to remain a prime target for counterfeiting and piracy networks. As a target, the United States is both seen as a main source of critical technology, life-saving medicines, and other innovative and creative works to be stolen or otherwise misappropriated, as well as an attractive receiver or destination of incoming illicit goods due to market size. Put simply, the dual nature of the threat—incoming illicit goods and outgoing misappropriated IP—gives rise to unique national security concerns. “Illicit networks seek to navigate, infiltrate, and/ or dominate global supply chains to further their activities and enhance their power. They actually thrive in open societies with the free flow of goods, people, and capital. Just like licit businesses, illicit networks are matching the supply and demand for goods, services, capital, and information for their clients. Illicit actors utilize and…seek to control or co-opt supply chains around the world[.]” This section highlights two particularly acute threats in which illicit IPR activities may also impact security concerns: namely, when illicit goods infiltrate critical supply chains (such as military and civilian computer network systems) and when intellectual propertybased crimes are used to finance and support criminal syndicates around the world. Source: Convergence: Illicit Networks and National Security in the Age of Globalization (2013). 40
Office of the Intellectual Property Enforcement Coordinator FIG. 31: Examples of Tests to Detect Suspect Counterfeit Electronic Parts. An acoustic microscopy test identified that the center of the part contained a different material that was otherwise undetectable upon visual inspection. Visual inspection and X-ray revealed part leads that were replaced and covered up. Source: Naval Surface Warfare Center Crane Division | GA-16-236 a. The Integrity of Supply Chains and Critical Infrastructures. When counterfeit computer and networking devices enter the supply chain, for example, they directly “undermine the reliability of our communications and transportation networks and create national security vulnerabilities. In addition, nation states target U.S. civilian industries for trade secret theft to obtain information that can be used to advance their domestic industries and military capabilities.” 126 There are particularly significant consequences when the supply chain is one operated for the benefit of the U.S. Department of Defense (DOD). The existence of counterfeit parts in the DOD supply chain can, for example, delay or threaten military and intelligence missions, affect the integrity of sensitive data and secure networks, cause weapon or other system failures, and ultimately endanger the lives of service members. Almost anything is at risk of being counterfeited, including microelectronics used in fighter jets and missile guidance systems, fasteners used in aircraft, and materials used in engine mounts. 127 The DOD supply chain is vast, covering over 4.7 million parts that are used in, for example, communication and weapon systems, at a cost of approximately $100 billion. 128 “DOD draws from a large number of suppliers in a global supply chain—in both the acquisition phase and throughout a system’s operational and sustainment phases—providing multiple opportunities for the risk of counterfeit parts into these systems.” 129 In particular, contractors rely on thousands of subcontractors and suppliers, including the original component manufacturers that assemble microcircuits and the mid-level manufacturers subcontracted to develop the individual subsystems that make up a complete system or supply. United States of America v. Peter Picone Case No. 3:13-cr-oo128 (D. Conn.) In October 2015, an individual was convicted for conspiring with suppliers in China and Hong Kong to sell thousands of counterfeit integrated circuits, bearing the trademarks of approximately 35 major electronics manufacturers, intended for use in nuclear submarines by the U.S. Navy. Source: IPEC FY 2015 Annual Report Based on an audit of reports submitted through the Government-Industry Data Exchange Program (GIDEP)—a program that allows government and industry participants to share information on nonconforming parts, including suspect counterfeit parts, via a web-based database—the Government SECTION 1 41
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ENDNOTES Office of the Intellectual
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ACKNOWLEDGEMENTS With thanks to, an
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