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Increased, but Assessing Performance Could Strengthen Law Enforcement 
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Report to the Ranking Member, Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia, 
Committee on Homeland Security and Government Affairs, U.S. Senate: 

United States Government Accountability Office:
GAO: 

March 2008: 

Intellectual Property: 

Federal Enforcement Has Generally Increased, but Assessing Performance 
Could Strengthen Law Enforcement Efforts: 

GAO-08-157: 

GAO Highlights: 

Highlights of GAO-08-157, a report to the Ranking Member, Subcommittee 
on Oversight of Government Management, the Federal Workforce, and the 
District of Columbia, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate. 

Why GAO Did This Study: 

Federal law enforcement actions against criminals who manufacture and 
distribute counterfeit and pirated goods are important to enforcing 
intellectual property (IP) rights and protecting Americans from unsafe 
or substandard products. GAO was asked to: (1) examine key federal 
agencies’ roles, priorities, and resources devoted to IP-related 
enforcement; (2) evaluate agencies’ IP-related enforcement statistics 
and achievements; and (3) examine the status of the National 
Intellectual Property Rights Coordination Center. GAO reviewed relevant 
documents, interviewed officials in five key agencies, and analyzed 
agency IP enforcement data from fiscal years 2001 through 2006. 

What GAO Found: 

Five key agencies play a role in IP enforcement, and their enforcement 
functions include seizures, investigations, and prosecutions (see 
figure below). While IP enforcement is generally not their highest 
priority, IP crimes with a public health and safety risk, such as 
production of counterfeit pharmaceuticals, is an IP enforcement 
priority at each agency. Determining agencies’ IP enforcement resources 
is challenging because few staff are dedicated to this area, and not 
all agencies track staff time spent on IP enforcement. Agencies carry 
out some enforcement actions through their headquarters, but 
significant enforcement takes place in the field. 

Federal enforcement actions generally increased during fiscal years 
2001-2006, but the key agencies have not taken key steps to assess 
their achievements. For example, most have not systematically analyzed 
their IP enforcement statistics to inform management and resource 
allocation decisions, collected data on their efforts to address IP 
crimes that affect public health and safety, or established IP-related 
performance measures or targets to assess their achievements. Also, 
Customs and Border Protection’s enforcement of exclusion orders, which 
stop certain IP-infringing goods from entering the country, has been 
limited due to certain procedural weaknesses. 

The National Intellectual Property Rights Coordination Center, an 
interagency mechanism created to coordinate federal investigative 
efforts, has not achieved its mission and staff levels have decreased. 
Currently, only one agency participates in the center’s activities, 
which focus on private sector outreach. Agencies have lacked a common 
understanding of the center’s purpose and agencies’ roles. The center’s 
upcoming move to a new location presents an opportunity to reconsider 
its mission. 

Figure: Key Agencies Involved in IP-Related Enforcement and Their 
Enforcement Function and Structure: 

[See PDF for image] 

This figure is a table, illustrating the following information: 

Function: Seizing; 
Agency: Department of Homeland Security; Customs and Border Protection; 
Structure: Office of International Trade and Office of Field Operations 
(325 ports of entry). 

Function: Investigating; 
Agency: Department of Homeland Security; Immigration and Customs 
Enforcement; 
Structure: Office of Investigations (26 field offices). 

Function: Investigating; 
Agency: Department of Justice; Federal Bureau of Investigation; 
Structure: Cyber Crime Division (56 field offices). 

Function: Investigating; 
Agency: Department of Health and Human Services; Food and Drug 
Administration; 
Structure: Office of Criminal Investigations (6 field offices). 

Function: Prosecuting; 
Agency: Department of Justice; 
Structure: Criminal Division and U.S. Attorney’s Office (94 field 
offices). 

Sources: GAO analysis of agency data; Art Explosion (images). 

[End of figure] 

What GAO Recommends: 

GAO recommends that the Attorney General and the Secretaries of 
Homeland Security (DHS) and Health and Human Services (HHS) take steps 
to better assess and report on their agencies’ IP enforcement efforts; 
the Secretary of DHS direct the Commissioner of Customs and Border 
Protection to address the weaknesses in enforcement of exclusion 
orders; and the Attorney General and the Secretary of DHS clarify the 
purpose and structure of the National Intellectual Property Rights 
Coordination Center. DHS agreed with the recommendations. Justice did 
not comment on them. HHS disagreed with setting a law enforcement 
related performance measure. The recommendations were revised in 
response. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-157]. For more information, contact Loren 
Yager at (202) 512-4347 or yagerl@gao.gov. 

Contents: 

Letter: 

Results in Brief: 

Background: 

Multiple Agencies Carry Out IP Enforcement, but Their IP Priorities 
Vary, and Few Resources Are Dedicated Exclusively to IP Enforcement: 

IP Enforcement Generally Increased, but Agencies Have Not Taken Key 
Steps to Assess Enforcement Efforts: 

The National Intellectual Property Rights Coordination Center Has Not 
Achieved Its Mission, and Staff Levels Have Decreased: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Federal Protection and Enforcement of IP Rights under U.S. 
Law: 

Appendix III: Private Sector Views on Federal IP Enforcement Efforts: 

Appendix IV: Comments from the Department of Homeland Security: 

Appendix V: Comments from the Department of Justice: 

Appendix VI: Comments from the Department of Health and Human Services: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Dollar Value of IP Penalty Amounts Assessed and Collected by 
CBP, Fiscal Years 2001-2006: 

Table 2: DOJ's IP Crime Sentencing Outcomes, Fiscal Years 2001-2006: 

Table 3: Summary of Federal Protection and Enforcement of IP Rights 
under U.S. Law: 

Table 4: Summary of Industry Representatives' Views on the Impact of 
Counterfeiting and Piracy, by Sector: 

Table 5: Summary of Industry Representatives' Views on Federal 
Resources Dedicated to IP Enforcement, by Sector: 

Table 6: Summary of Industry Representatives' Views on Coordination 
with Federal IP Enforcement Agencies, by Sector: 

Table 7: Summary of Industry Representatives' Views on Effectiveness of 
Training on IP Enforcement Activity, by Sector: 

Table 8: Summary of Industry Representatives' Views on Areas for 
Improved IP Enforcement, by Sector: 

Figures: 

Figure 1: Federal IP Enforcement Functions, the Key Agencies That 
Execute Them, and the Agencies' Structures: 

Figure 2: Estimated Number of Investigative Resources Spent on IP-
Related Investigations by ICE, FBI, and FDA, Fiscal Years 2001-2006: 

Figure 3: Trends in the Number of IP Seizure Actions and Estimated 
Domestic Values of Seizures by CBP, Fiscal Years 2001-2006: 

Figure 4: Number of CBP Exclusion Order Exams Performed and IP 
Discrepancies Found, Fiscal Years 2002-2006: 

Figure 5: Number of Criminal Cases Opened by ICE, FBI, and FDA Related 
to IP Investigations, Fiscal Years 2001-2006: 

Figure 6: Number of Arrests, Indictments, and Convictions by FBI, ICE, 
and FDA, Fiscal Years 2001-2006: 

Figure 7: Number of IP-Related Cases Filed by DOJ, Fiscal Years 2001-
2006: 

Abbreviations: 

C3: Cyber Crimes Center: 

CBP: Customs and Border Protection: 

CCIPS: Computer Crime and Intellectual Property Section: 

CHIP: Computer Hacking and Intellectual Property: 

DHS: Department of Homeland Security: 

DOJ: Department of Justice: 

FBI: Federal Bureau of Investigation: 

FDA: Food and Drug Administration: 

FTE: full-time-equivalent: 

HHS: Health and Human Services: 

ICE: Immigration and Customs Enforcement: 

IMAGEICE: Mutual Agreement between Government and Employers: 

IP: Intellectual Property: 

NIPLECC: National Intellectual Property Law Enforcement Coordinating 
Council: 

STOP: Strategy Targeting Organized Piracy: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

March 11, 2008: 

The Honorable George V. Voinovich: 
Ranking Member: 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Dear Senator Voinovich: 

Intellectual property (IP) is an important component of the U.S. 
economy, and the United States is an acknowledged global leader in its 
creation. The United States grants IP rights through the issue of 
patents, trademarks, and copyrights, and regards many types of 
unauthorized IP use--called infringement--as a crime. Examples of IP 
infringement range from the creation or sale of counterfeit or pirated 
music and movies to the manufacturing and sale of counterfeit auto 
parts and pharmaceuticals; the poor quality of some of these goods can 
be dangerous for consumers. Governments and private companies have 
cited a recent expansion in IP crimes, noting that criminal networks 
have increasingly moved into this domain due to high profit potential, 
ease of market entry, and relatively low risks.[Footnote 1] 

Federal law enforcement actions against those who manufacture and 
distribute IP-infringing goods are an important component of U.S. 
efforts to protect IP creators and owners and American consumers. 
Federal actions range from seizing IP-infringing goods to prosecuting 
alleged criminals. Key federal law enforcement agencies that play an 
active role in enforcing IP rights are the Department of Homeland 
Security's (DHS) Customs and Border Protection (CBP) and Immigration 
and Customs Enforcement (ICE), and the Department of Justice's (DOJ) 
Criminal Division, U.S. Attorney's Offices, and the Federal Bureau of 
Investigation (FBI).[Footnote 2] The Department of Health and Human 
Services' (HHS) Food and Drug Administration (FDA) also plays a 
role.[Footnote 3] Several interagency mechanisms exist to coordinate 
federal IP enforcement efforts, including the National Intellectual 
Property Law Enforcement Coordination Council (NIPLECC) and the 
National Intellectual Property Rights Coordination Center.[Footnote 4] 

We reported to you in April 2007 on challenges that CBP faces in 
carrying out its IP enforcement role to seize IP-infringing goods at 
U.S. ports of entry and identified certain steps that it could take to 
improve its efforts.[Footnote 5] You subsequently asked us to broaden 
this work and examine efforts undertaken by CBP and other key federal 
agencies to carry out law enforcement actions against those who commit 
violations of U.S. IP laws. Specifically, this report: (1) examines 
federal agencies' roles, priorities, and resources devoted to IP-
related enforcement; (2) evaluates agencies' IP-related enforcement 
statistics and achievements; and (3) examines the status of the 
National Intellectual Property Rights Coordination Center. 

Based on our prior work and background research, we determined that 
CBP, ICE, FBI, and DOJ are the four key law enforcement agencies that 
play an active role in IP enforcement, and that FDA also plays an 
important role. To examine the key federal agencies' roles and 
priorities for IP-related enforcement, we met with agency officials in 
their headquarters and in seven field locations[Footnote 6] and 
reviewed strategic plans and other agency documents. To examine 
agencies' resources for IP-related enforcement, we obtained information 
on staff resources, where available. To evaluate IP-related enforcement 
trends and achievements, we reviewed agency statistics for fiscal years 
2001 through 2006, including IP-related seizures, investigations, and 
prosecutions. We also reviewed agencies' internal strategic planning 
documents to determine their priorities, goals, and objectives for IP 
enforcement and compared them to the types of data agencies collected. 
To examine the status of the National Intellectual Property Rights 
Coordination Center, we met with ICE, FBI, DOJ, and FDA officials to 
discuss its evolution, role, and staffing levels; reviewed agency 
documents that articulated the center's purpose; and analyzed 
congressional appropriators' conference reports that directed agencies 
to staff and fund the center. Some of the information we reviewed was 
considered sensitive for law enforcement purposes, and our report only 
discusses publicly available information. We obtained private sector 
views on federal IP enforcement efforts through interviews with 
representatives from 22 companies and eight industry associations 
across eight sectors, such as the entertainment, pharmaceutical, and 
manufacturing industries. We conducted this performance audit from 
December 2006 through March 2008 in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 
See appendix I for a more detailed description of our scope and 
methodology. 

Results in Brief: 

For the five key federal agencies that play a role in enforcing IP 
laws, such enforcement is not a top priority, and determining the 
resources they have devoted to this function is challenging. IP law 
enforcement actions consist of three primary functions--seizing goods, 
investigating crimes, and prosecuting alleged criminals. CBP is 
responsible for seizing IP-infringing goods at the U.S. border, a 
function that also includes assessing penalties and excluding--or 
denying entry to--certain types of IP-infringing goods. ICE and FBI 
share responsibility for investigating those suspected of IP crimes, 
and FDA investigates counterfeit versions of the products it regulates. 
DOJ is responsible for prosecuting those accused of committing IP 
crimes. IP enforcement activities are generally a small part of these 
agencies' much broader missions, and, according to agency officials and 
documents, IP enforcement is not the top priority for these agencies. 
However, within their IP enforcement activities, these agencies have 
given enforcement priority to IP crimes that pose risks to public 
health and safety, such as counterfeit pharmaceuticals, batteries, and 
car parts. Determining the federal resources allocated to IP 
enforcement is challenging because few agency staff are dedicated 
exclusively to IP enforcement, and only investigative agencies tracked 
the time spent by non-dedicated staff on IP criminal investigations. 
The information we obtained shows declining staff resources in some 
agencies and increases or little change in others. Because agencies' IP 
enforcement roles are interdependent, the emphasis one agency places on 
IP enforcement can affect the actions of others. For example, officials 
from several investigative agencies' field offices said their decisions 
to open IP investigations were influenced in part by the willingness of 
the local U.S. Attorney's Office to prosecute certain types of IP 
enforcement cases. 

Federal IP enforcement activity generally increased from fiscal year 
2001 through 2006, but agencies have not taken key steps to assess 
their IP enforcement achievements. Our review of agencies' enforcement 
statistics over the 6-year period found that IP enforcement activities 
generally increased, with fluctuations in activity across fiscal years 
and type of enforcement action. Specifically, the number of CBP's 
seizures have steadily increased, but the domestic value of goods 
seized varied by fiscal year. However, we found that CBP collected less 
than 1 percent of penalties assessed during 2001 through 2006. We also 
found a lack of data on CBP's exclusion of imports subject to 
"exclusion orders" and certain procedural issues, such as delays in 
creating enforcement guidance and minimal electronic targeting in 
certain cases.[Footnote 7] The number of IP-related criminal 
investigations that ICE, FBI, and FDA opened each year fluctuated 
during 2001 through 2006, but the number of arrests, indictments, and 
convictions stemming from these investigations generally increased 
during that time period. The number of IP prosecutions by DOJ for 
fiscal years 2001 through 2005 hovered around 150 cases before 
increasing to about 200 cases in fiscal year 2006. Although agencies' 
enforcement activities show general increases, agencies have not taken 
key steps to evaluate their own enforcement trends in ways that would 
better inform management decisions and resource allocation. For 
example, agencies have generally not conducted systematic analyses of 
IP-related enforcement activities, such as by field offices or type of 
violation pursued. Our analysis of agency data shows that a small 
number of CBP and DOJ field offices are responsible for the majority of 
these agencies' total IP enforcement activity. Further, all the 
agencies have given priority within their IP enforcement efforts to IP 
crimes that affect public health and safety, but most have not clearly 
identified which IP enforcement actions relate to public health and 
safety or lack data to track their achievements in this area. Finally, 
agencies have generally not established performance measures or targets 
to aid them in assessing their IP enforcement achievements and 
reporting their progress to Congress and interagency coordinating 
bodies. 

The executive branch created the National Intellectual Property Rights 
Coordination Center to improve and coordinate federal IP enforcement 
efforts, but the center has not achieved its mission, and staff levels 
have declined. The center, which began operations in 2000, was set up 
to be a hub for the collection, analysis, and dissemination to 
investigative agencies of IP-related complaints from the private 
sector. However, it got off to a slow start, compounded by the events 
of September 11, 2001, and the envisioned flow of private sector 
complaint information never materialized. In addition, participating 
agencies--FBI, legacy Customs,[Footnote 8] and ICE--did not reach a 
common understanding about the center's purpose and agencies' roles. 
Over time its mission shifted and the center began focusing instead on 
educating the private sector about federal IP enforcement agencies' 
efforts. Congressional appropriators expressed support for the center's 
creation and mission in various conference reports, which, over time, 
directed participating agencies to allocate certain appropriated funds 
to staff and operate the center. However, ICE staff at the center have 
declined from the levels originally established by the executive 
branch, and the FBI and CBP no longer participate in the center. The 
center is scheduled to move to a new location in early 2008, and ICE 
officials said they met with the other IP enforcement agencies to 
invite them to establish or increase their presence there. However, 
according to some officials from the invited agencies, their future 
involvement depends in part on clarifying, and perhaps adjusting, the 
center's purpose and activities. 

To improve agencies' assessment of their IP enforcement efforts, we 
make several recommendations to the Attorney General and the 
Secretaries of Homeland Security and Health and Human Services, 
including directing their agencies to collect additional data on, and 
systematically analyze, their enforcement activity and establish 
related performance measures and targets. To better inform CBP and 
affected rights holders on the enforcement of exclusion orders, we 
recommend that the Secretary of Homeland Security direct the CBP 
Commissioner develop a strategy for addressing identified procedural 
weaknesses, including collecting additional data to better track its 
enforcement efforts in this area. To clarify the roles and 
responsibilities of the National Intellectual Property Rights 
Coordination Center, we recommend that, in consultation with NIPLECC, 
the Attorney General and the Secretary of Homeland Security reassess 
the center's mission and agencies' roles in the center. 

We provided a draft of this report to DHS, DOJ, and HHS for comment. 
DHS, CBP, and ICE concurred with our recommendations. DOJ did not 
comment on our recommendations. HHS said it disagreed with the 
recommendation that FDA establish performance measures and targets for 
IP enforcement. Given FDA's public health and safety mission, we 
reconsidered the appropriateness of recommending that it establish law 
enforcement-related performance measures and no longer make this 
recommendation to FDA. However, because of the importance of 
understanding and addressing trends in IP violations that affect public 
health and safety, we added FDA to the recommendation that agencies 
systematically analyze their IP enforcement activity. In addition, CBP, 
DOJ, and FDA had certain concerns about portions of our report, which 
we address at the end of this letter and in appendixes IV, V, and VI. 
The agencies all made technical comments, which we incorporated as 
appropriate. 

Background: 

Intellectual property has become a critical component of our country's 
economy, accounting for an average of 18 percent of the U.S. gross 
domestic product from 1998 through 2003.[Footnote 9] Industries that 
rely on IP protection--including the aerospace, automotive, computer, 
pharmaceutical, semiconductor, motion picture, and recording 
industries--are estimated to have accounted for 26 percent of the 
annual real gross domestic product growth rate during this period and 
about 40 percent of U.S. exports of goods and services in 2003 through 
2004. Further, they are among the highest-paying employers in the 
country, representing an estimated 18 million workers or 13 percent of 
the labor force. 

The economic value of IP-protected goods makes them attractive targets 
for criminal networks. Criminal activities have negative effects for 
U.S. innovation and investment, the value and reputation of individual 
companies, and consumers who are put at risk by substandard or 
dangerous products. Such activity is inherently difficult to measure, 
but the Organization for Economic Cooperation and Development recently 
estimated that international trade in counterfeit and pirated products 
in 2005 could have been up to $200 billion.[Footnote 10] 

According to industry groups, a broad range of IP-protected products 
are subject to being counterfeited or pirated, from luxury goods and 
brand name apparel to computer software and digital media to food and 
medicine. Evidence of counterfeiting in industries whose products have 
a public health or safety component, such as auto and airline parts; 
electrical, health, and beauty products; batteries; pharmaceuticals; 
and infant formula, presents a significant concern. The World Health 
Organization estimates that as much as 10 percent of medicines sold 
worldwide are believed to be counterfeit, including essential medicines 
such as vaccines, antimalarials, and human immunodeficiency virus 
therapies. 

The federal government plays a key role in granting protection for and 
enforcing IP rights. It grants protection by approving patents or 
registering copyrights and trademarks.[Footnote 11] It enforces IP 
rights by taking actions against those accused of theft or misuse. 
Enforcement actions include both civil and criminal penalties. U.S. 
laws criminalize certain types of IP violations, primarily copyright 
and trademark violations, and authorize incarceration or fines. These 
laws are directed primarily toward those who knowingly produce and 
distribute IP-infringing goods, rather than those who consume such 
goods. Although U.S. laws do not treat patent violations as a crime, 
the federal government does take actions to protect patents and 
authorizes civil enforcement actions against infringers. See appendix 
II for a detailed list of the U.S. laws that grant IP protection and 
the criminal and civil penalties that federal law enforcement agencies 
are authorized to impose. 

Protection is also provided by the U.S. International Trade Commission, 
which investigates allegations of unfair import practices that commonly 
involve claims of patent or trademark infringement.[Footnote 12] For 
example, in January 2007, the commission issued an "exclusion order" to 
cease importation of certain types of laminated floor panels that it 
found infringed on three U.S. patents.[Footnote 13] Exclusion orders 
direct CBP to stop certain goods from entering the United States while 
the order is in effect.[Footnote 14] The commission is also authorized 
to take other actions, such as issuing "cease and desist" orders to 
those engaging in unfair import practices or assessing civil penalties. 

Congress has supported several interagency mechanisms to coordinate 
federal IP law enforcement efforts. In 1999, Congress created the 
interagency NIPLECC as a mechanism to coordinate U.S. law enforcement 
efforts to protect and enforce IP rights in the United States and 
abroad.[Footnote 15] Officials from seven federal entities are members 
of NIPLECC.[Footnote 16] A presidential initiative, called the Strategy 
Targeting Organized Piracy (STOP), is the council's strategy, and it 
articulates five broad goals.[Footnote 17] From 2001, Congress 
supported the creation of the National Intellectual Property Rights 
Coordination Center, another interagency mechanism that aims to improve 
federal IP enforcement and coordinate investigative efforts between ICE 
and FBI (discussed in detail later in this report). 

Multiple Agencies Carry Out IP Enforcement, but Their IP Priorities 
Vary, and Few Resources Are Dedicated Exclusively to IP Enforcement: 

For the five key federal agencies with IP enforcement roles, such 
enforcement is not a top priority for most of them, and determining 
their resource allocations to IP enforcement is challenging. These 
agencies' IP enforcement functions include: (1) seizing IP infringing 
goods; (2) conducting investigations; and (3) prosecuting alleged 
violations. The overall aim of U.S. government efforts is to stop trade 
in counterfeit and pirated goods, and the three functions each present 
some degree of deterrent. The key law enforcement agencies--CBP, ICE, 
FBI, and DOJ--have broad missions with many competing responsibilities, 
and their IP enforcement role is not generally their highest priority, 
while FDA's primary mission is to protect public health. We were not 
able to identify the total resources allocated to IP enforcement across 
the agencies because few staff are dedicated solely to IP enforcement, 
and only certain agencies track the time spent on IP criminal 
investigations by non-dedicated staff who carry out this function. The 
information we were able to compile shows declines in IP enforcement 
resources in several agencies, and fluctuating or growing resource 
allocations to IP enforcement in others. Because federal IP enforcement 
roles are interdependent--seizures may launch or contribute to 
investigations, and investigations may lead to prosecutions--the 
emphasis placed on enforcement of IP at one agency or field office can 
impact the IP enforcement efforts of others. 

Key Agencies Carry Out Three Primary IP-Related Enforcement Functions: 

Key federal agencies carry out three IP enforcement functions.[Footnote 
18] Seizing IP infringing goods is primarily performed by CBP.[Footnote 
19] IP-related investigations are performed by agencies located in 
three different departments. Prosecuting IP crimes is carried out by 
two different entities within DOJ. Figure 1 identifies the IP 
enforcement functions and the structure, including the departments and 
agencies, in which they are performed. 

Figure 1: Federal IP Enforcement Functions, the Key Agencies That 
Execute Them, and the Agencies' Structures: 

[See PDF for image] 

Function: Seizing; 
Agency[A]: CBP; 
Structure: Office of International Trade and Office of Field Operations 
(325 ports of entry). 

Function: Investigating; 
Agency[A]: ICE; 
Structure: Office of Investigations (26 investigative field offices). 

Function: Investigating; 
Agency[A]: FBI; 
Structure: Cyber Crime Division (56 investigative field offices). 

Function: Investigating; 
Agency[A]: FDA
Structure: Office of Criminal Investigations (6 investigative field 
offices). 

Function: Prosecuting; 
Agency[A]: DOJ; 
Structure: Criminal Division and U.S. Attorney’s Office (94 field 
offices). 

Sources: GAO analysis of agency data; Art Explosion (images). 

[A} The Department of Justice is not an agency, but given that its 
Criminal Division and U.S. Attorney's Offices work in parallel with the 
other agencies we reviewed, DOJ and its entities are described as one 
of the key federal IP enforcement "agencies" for ease of reference. 

[End of figure] 

Responsible Agencies Have Broad Missions, and IP Enforcement Is Not a 
Top Priority at Most: 

The four key federal law enforcement agencies and FDA have broad 
missions and many responsibilities, and IP enforcement is not a top 
priority at most agencies. CBP and ICE address IP enforcement as part 
of their legacy efforts to combat commercial fraud, but their top 
mission is securing the homeland. DOJ identifies IP enforcement as one 
of its top priorities, but FBI does not. FDA's role is driven by its 
public health and safety mission, not IP enforcement per se. Regardless 
of the priority ranking agencies assign to IP enforcement, within their 
IP enforcement efforts, they have all given priority to IP-related 
crimes that pose risks to public health and safety. Staff in agency 
headquarters play a role in setting IP enforcement policies and, at 
some agencies, carry out certain IP enforcement actions, but most 
enforcement activity takes place at the field office level. Each field 
office faces a unique set of challenges in its local environment, 
balancing IP enforcement efforts with other agency priorities. 

Several companies and associations we interviewed remarked that the 
federal IP enforcement structure is not clear. For example, one 
association remarked that agency responsibilities are unclear and may 
overlap, while another said that there is no formal process for 
referring cases for federal action. This structure was seen as 
especially challenging for small companies who need federal assistance 
but lack the resources or expertise to navigate the federal system. 
Additional information on private sector views about federal IP 
enforcement is contained in appendix III. 

Information is presented below on each agency's IP enforcement 
function, the priority assigned to IP enforcement, and the structure 
within which such enforcement is carried out. 

CBP - Seizures, Penalties and Exclusions: 

* Function: CBP is the primary federal agency authorized to seize 
goods, including IP-infringing goods, upon their arrival in the United 
States. CBP is also responsible for preventing the entry of goods into 
the United States that are subject to exclusion orders and assesses 
penalties against IP infringers when warranted. 

* Priorities: CBP's primary mission is to protect the homeland. CBP is 
also responsible for carrying out its legacy Customs functions, 
including trade enforcement. CBP has identified six Priority Trade 
Issues, one of which is IP enforcement.[Footnote 20] Within its IP 
enforcement efforts, CBP gives priority to large value seizures and 
violations that affect public health and safety or economic security or 
that have ties to terrorist activity. 

* Structure: CBP's Office of International Trade develops IP 
enforcement policies and plans, develops national instructions for 
targeting shipments suspected of carrying IP-infringing goods, writes 
guidance for assessing penalties and enforcing exclusion orders, and 
maintains data on IP-related seizures. The Office of Field Operations 
oversees implementation of these policies and procedures at 325 U.S. 
ports of entry.[Footnote 21] While much of CBP's IP enforcement 
activity is carried out by the ports, headquarters staff play an 
integral role in supporting those efforts, including providing policy 
and guidance on enforcement priorities and developing systems and 
technologies to enhance enforcement. 

ICE Criminal Investigations: 

* Function: ICE conducts investigations of IP-related criminal 
activity, including infringement of trademark and copyright law. 

* Priorities: ICE's primary mission is to protect the homeland. It is 
also responsible for combating commercial fraud, which includes IP 
enforcement. ICE's interim agency-wide strategic plan and its plan for 
commercial fraud are law enforcement sensitive and not available to the 
public. However, according to ICE officials, the top priorities within 
commercial fraud enforcement are public health and safety violations 
and IP infringement. 

* Structure: Within ICE's Office of Investigations, the Critical 
Infrastructure and Fraud Division develops the agency's IP policies and 
oversees its IP enforcement efforts.[Footnote 22] The division's IP 
responsibilities are handled by the Branch for Commercial Fraud and 
Intellectual Property Rights, which also houses the National 
Intellectual Property Rights Coordination Center. Although the center 
is officially an interagency coordination body, it plays a lead role in 
developing and carrying out ICE's IP enforcement policies. In addition, 
ICE has a Cyber Crimes Center that focuses on Internet-based crimes, 
including IP piracy, and provides referrals and investigative 
assistance to ICE's field offices.[Footnote 23] IP investigations are 
carried out by agents located in about 100 U.S. cities, organized under 
ICE's 26 field offices. 

FBI Criminal Investigations: 

* Function: FBI conducts investigations of IP-related criminal 
activity, including infringement of trademark and copyright law, as 
well as theft of trade secrets. 

* Priorities: The FBI's principal mission is to investigate criminal 
activity and defend the security of the United States. It has 
identified 10 priority enforcement areas, including cyber 
crime.[Footnote 24] IP enforcement is included in the cyber crime area, 
but it is ranked 5th out of FBI's 6 cyber crime priorities.[Footnote 
25] Within its IP enforcement efforts, FBI's priorities are, in order, 
trade secret theft, copyright infringement, trademark infringement, and 
signal theft, and one of FBI's IP enforcement goals is for its field 
offices to initiate IP investigations that affect public health and 
safety. 

* Structure: FBI's Cyber Division oversees the agency's IP enforcement 
efforts even though not all of its IP investigations are cyber-
related.[Footnote 26] A single unit within the Cyber Division, called 
the Cyber Crime Fraud Unit, has operational and management oversight 
for all of FBI's cyber crime activities. IP-related investigations are 
primarily carried out in FBI's 56 field offices. 

FDA Criminal Investigations: 

* Function: FDA investigates illegal activity pertaining to food, 
drugs, medical devices, and other products because of the impact on 
public health.[Footnote 27] 

* Priorities: FDA's primary mission is to protect public health by 
assuring the safety, efficacy, and security of human and veterinary 
drugs, the food supply, medical devices, and other products. IP 
enforcement is not part of FDA's mission or its enforcement priorities; 
however, FDA carries out IP-related enforcement actions in fulfilling 
its mission to protect public health and safety, such as investigating 
criminals that traffic in counterfeit pharmaceuticals. 

* Structure: FDA's Office of Regulatory Affairs, in collaboration with 
other agency components, carries out the agency's enforcement 
activities. This office houses, among other entities, FDA's Office of 
Criminal Investigations and the Division of Import Operations. The 
Office of Criminal Investigations, with six field offices and presence 
in 25 U.S. cities, has the primary responsibility for all criminal 
investigations conducted by the FDA. The Division of Import Operations 
provides guidance on the agency's import policy to FDA field staff, 
including at numerous ports around the country. FDA field staff that 
discover suspected counterfeit imports of products that are regulated 
by FDA would refer these to the Office of Criminal Investigations for 
further action. In addition, Office of Regulatory Affairs laboratories 
play a role by analyzing samples of suspected counterfeit products. 

DOJ - Prosecutions: 

* Function: DOJ prosecutes IP cases referred from ICE, FBI, and FDA, as 
well as from private sector representatives and other sources. 

* Priorities: According to DOJ officials and documents, IP enforcement 
is one of the department's highest priorities. In March 2004, the 
Attorney General announced the creation of a DOJ Task Force on 
Intellectual Property, with a mission of identifying ways to strengthen 
the department's IP enforcement efforts. The Task Force produced 31 
recommendations for improving IP enforcement and provided a progress 
report on those recommendations in its 2006 report. The Task Force made 
numerous short-and long-term recommendations, including increasing the 
number of DOJ prosecutors and FBI agents that focus on computer crime 
and IP cases and prosecuting IP cases involving a threat to public 
health and safety.[Footnote 28] In addition, DOJ developed an internal 
IP enforcement strategy for 2007 with six strategic objectives designed 
to help it meets its larger goal of reducing IP theft. DOJ shared this 
document with us, but its contents are for official government use 
only. 

* Structure: DOJ's IP enforcement is carried out primarily by the 94 
U.S. Attorney's Offices located throughout the country as well as its 
Criminal Division's Computer Crime and Intellectual Property Section 
(CCIPS). Under DOJ's Computer Hacking and Intellectual Property (CHIP) 
program, each U.S. Attorney's Office has one CHIP coordinator who is 
trained in prosecuting IP enforcement cases.[Footnote 29] In addition, 
25 U.S Attorney's Offices have CHIP units, usually comprised of 2 or 
more attorneys (a few units have as many as 8 attorneys), who focus 
solely on prosecuting computer hacking or IP crimes. IP crimes 
prosecuted by the U.S. Attorney's Office are not limited to CHIP units, 
but may be prosecuted as part of a larger case, such as one involving 
organized crime. CCIPS, located in DOJ headquarters, is responsible for 
supporting IP prosecutions by U.S. Attorney's Offices, as well as 
prosecuting their own cases. CCIPS is also responsible for developing 
DOJ's overall IP enforcement strategy and coordinating among U.S. and 
foreign law enforcement officials on domestic and international cases 
of IP theft. 

Determining the Total Resources Allocated to IP-Related Enforcement Is 
Challenging: 

Determining the total resources that agencies have allocated to IP 
enforcement is challenging because agencies have few staff exclusively 
dedicated to IP enforcement, and only the agencies that conduct 
criminal investigations estimated time spent on this activity. Most 
agencies have some headquarters staff exclusively dedicated to IP 
enforcement. However, staff in the field, where most IP enforcement 
activity occurs, are generally not dedicated exclusively to IP 
enforcement. The information we were able to compile shows declines in 
IP enforcement resources in some agencies and fluctuating or growing 
resource allocations to IP enforcement in others. Agencies' ability to 
allocate staff to IP enforcement is affected by not only the priority 
they assign to this function but also their overall resource situation. 
Some agencies have faced resource challenges in recent years. 

Private sector representatives we interviewed across various sectors 
expressed concern about the federal government's ability to carry out 
IP enforcement due, in part, to a lack of resources. While several 
companies said that federal IP enforcement efforts have increased, 14, 
or nearly half, of the representatives we contacted said there is a 
shortage of resources to carry out IP enforcement. Appendix III 
provides further detail on private sector views. 

Information on each agency's resources for IP-related enforcement are 
detailed below. 

CBP - Seizures, Penalties, and Exclusions: 

Various types of CBP staff play a role in IP enforcement. The only 
staff that are dedicated exclusively to IP enforcement are 
international trade specialists, attorneys, and paralegals assigned to 
the Office of International Trade, and their numbers have fluctuated 
over time. International Trade Specialists are responsible for 
performing nationwide targeting for all CBP ports of incoming shipments 
suspected of carrying IP-infringing goods and for analyzing IP seizure 
data. The number of international trade specialists remained relatively 
flat from fiscal year 2003 through 2006, at about 11, before increasing 
to 17 in 2007. However, the number of these specialists that were 
performing targeting in 2003 through 2006 actually declined.[Footnote 
30] Attorneys are responsible for advising ports on how to carry out 
CBP's IP enforcement authorities and have sole responsibility for 
developing exclusion order enforcement guidance, a highly complex and 
labor intensive task. The number of attorneys devoted to IP enforcement 
declined from 11 in 2003 to 9 in 2006 and remains at that level. Other 
CBP staff perform IP enforcement activities, but are not exclusively 
dedicated to it; CBP does not track the amount of time these staff 
spend on IP enforcement. [Footnote 31] In addition, within the Office 
of International Trade, CBP auditors perform targeted audits on 
selected companies to assess their internal controls for preventing the 
importation of IP-infringing goods. CBP does track hours spent on IP 
audits. As of December 2007, CBP reported that slight over 14 "man 
years" have been charged to IP audits since fiscal year 2005, when such 
audits were initiated. 

CBP staff that carry out the agency's IP enforcement activities operate 
in an environment that is plagued by staffing challenges, including 
staffing shortages, difficulty hiring and retaining staff, and fatigue 
among its workforce. For example, in November 2007, we reported that 
CBP estimates it may need several thousand more CBP officers to operate 
its ports of entry.[Footnote 32] In April 2007, we also reported that 
staff resources at CBP for customs revenue functions have declined 
since the formation of DHS.[Footnote 33] 

ICE, FBI, and FDA - Criminal Investigations: 

Among the agencies that conduct criminal investigations, only ICE has 
staff dedicated exclusively to IP enforcement. These include ICE staff 
assigned to the National Intellectual Property Rights Coordination 
Center and a commercial fraud team in one of its field offices that 
focuses solely on IP enforcement. As discussed later in this report, 
the number of ICE staff assigned to the center declined from 15 in 2004 
to 8 in 2007. Neither FBI nor FDA have any staff dedicated exclusively 
to IP enforcement. A senior FBI Cyber Division official said the size 
of FBI's IP enforcement effort is small relative to other FBI efforts 
and has limited resources. 

However, ICE, FBI, and FDA all track the amount of time that their 
investigators spend on IP-related investigations (see fig. 2). By 
converting ICE and FDA investigative hours to full-time-equivalent 
(FTE) positions,[Footnote 34] and using a similar measure (average on 
board) for FBI, we determined that ICE spent an average of 154 FTEs on 
IP enforcement during 2001 through 2006, while FBI averaged 53 agents 
on board for IP enforcement, and FDA spent an average of 16 FTEs. ICE 
investigative resources spent on IP enforcement increased from 2001 to 
2003 before falling off, while the estimated number of investigator 
FTEs spent on IP cases at FBI and FDA experienced little change over 
the 6-year period. 

Figure 2: Estimated Number of Investigative Resources Spent on IP-
Related Investigations by ICE, FBI, and FDA, Fiscal Years 2001-2006: 

[See PDF for image] 

This figure is a multiple line graph. The vertical axis of the graph 
represents investigative resources spent on IP-related enforcement from 
0 to 250. The horizontal axis of the graph represents fiscal years from 
2001 to 2006. The following data is depicted: 

Agency: ICE; 
Resources spent, fiscal year: 2001: 100; 
Resources spent, fiscal year: 2002: 156; 
Resources spent, fiscal year: 2003: 216; 
Resources spent, fiscal year: 2004: 160; 
Resources spent, fiscal year: 2005: 150; 
Resources spent, fiscal year: 2006: 141. 

Agency: FBI; 
Resources spent, fiscal year: 2001: 49; 
Resources spent, fiscal year: 2002: 42; 
Resources spent, fiscal year: 2003: 48; 
Resources spent, fiscal year: 2004: 64; 
Resources spent, fiscal year: 2005: 56; 
Resources spent, fiscal year: 2006: 56. 

Agency: FDA; 
Resources spent, fiscal year: 2003: 11; 
Resources spent, fiscal year: 2004: 19; 
Resources spent, fiscal year: 2005: 16; 
Resources spent, fiscal year: 2006: 16. 

Source: GAO analysis of agency data. 

Note: ICE and FDA capture the number of investigative case hours worked 
and provided formulas for converting to FTEs. FBI captures the average 
agents on board that worked IP investigations, which we report in this 
figure as FTEs. FDA did not begin to collect data on the number of 
investigative case hours until fiscal year 2003. 

[End of figure] 

DOJ - Prosecutions: 

DOJ dedicates staff to IP enforcement in headquarters and within its 
U.S. Attorney's Offices. The number of staff dedicated to IP 
enforcement has grown in recent years. For example, DOJ's CHIP units, 
first created in February 2000, grew from 13 units as of 2002 to 25 
units as of 2007. Most of the CHIP units have approximately two or more 
attorneys who focus on prosecuting IP and high-technology crimes, with 
as many as eight in at least one of the units. As the number of units 
has grown, so has the number of attorneys assigned to working IP cases. 
As of July 2007, DOJ had 101 Assistant U.S. Attorneys assigned to CHIP 
units. Another 122 Assistant U.S. Attorneys have been specially trained 
to prosecute computer crime and IP offenses, with at least one such 
CHIP prosecutor located in every U.S. Attorney's Office. DOJ began 
tracking the time attorneys spend on IP enforcement in May 2006, but we 
did not collect this data.[Footnote 35] In addition, according to DOJ, 
it had 14 attorneys working on IP enforcement in its CCIPS. Despite 
having these dedicated and trained staff, however, officials from the 
U.S. Attorney's Offices we visited noted that, over the past few years, 
their offices have experienced high turnover and have been generally 
understaffed, with vacant positions left unfilled. 

Agency Enforcement Roles and Actions Are Often Interdependent: 

Given the interdependent nature of federal IP enforcement and the 
central role played by the field offices, the emphasis placed on IP 
enforcement at one location can affect the IP enforcement efforts of 
others. For example, investigative agency officials at some locations 
we visited said that their decisions about beginning or continuing an 
IP-related investigation were influenced by the willingness of the 
local U.S. Attorney's Office to prosecute the case. Some field office 
officials we interviewed stated that local U.S. Attorney's Offices set 
minimum value thresholds for taking IP cases, in part because the U.S. 
Attorney's Offices also have limited resources. However, officials at 
the U.S. Attorney's Offices we visited said that they did not have 
specific thresholds for IP prosecutions, particularly when it comes to 
public health and safety, and that they evaluate cases on their 
individual merits. Similarly, the degree to which an ICE field office 
can accept and work on IP enforcement referrals from CBP may depend on 
the field office's other priorities, such as money laundering or 
smuggling enforcement. Officials at most of the agencies noted other 
factors that influence their IP-related enforcement decisions, 
including the number or value of items seized, the health or safety 
impacts of the crime, and the organizational structure of the entities 
involved. 

IP Enforcement Generally Increased, but Agencies Have Not Taken Key 
Steps to Assess Enforcement Efforts: 

Federal IP enforcement activity generally increased from fiscal year 
2001 through 2006; however, most agencies have not taken key steps to 
assess their achievements. Specifically, most agencies have not: (1) 
conducted systematic analyses of their IP enforcement data to inform 
management and resource allocation decisions, (2) clearly identified 
which of their efforts relate to a key IP enforcement area--IP crimes 
that affect public health and safety--nor collected data to track these 
efforts, and (3) established performance measures or targets to assess 
their achievements and report to Congress and others. 

IP Enforcement Statistics Show an Increase in Activity: 

Our review of agency statistics for fiscal years 2001 through 2006 
indicated that IP enforcement actions generally increased over the 
period, with some fluctuations in activity. The number of CBP seizure 
actions and the value of such seizures has increased significantly. 
Investigative agencies' enforcement outcomes--arrests, indictments, 
and convictions--also increased during the time period. The number of 
DOJ prosecutions hovered around 150 cases per year during fiscal years 
2001 to 2005 before increasing to about 200 cases in fiscal year 2006, 
with the number of defendants charged with IP crimes fluctuating. 

CBP Seizure Activity Has Grown, but Penalty Collections Remain Low: 

CBP's primary IP enforcement efforts involve seizing IP-infringing 
goods that individuals attempt to import through U.S. ports of entry. 
In April 2007, we reported that the total number of CBP's seizure 
actions has grown since fiscal year 2001, nearly doubling from fiscal 
years 2005 to 2006; however, most of these actions involved numerous 
small-value seizures made from air-based modes of transport while 
significantly fewer seizure actions have been made from sea-or land-
based modes of transport.[Footnote 36] We reported in 2007 that CBP 
officials said they believed the trend reflects growing Internet sales 
and the ability of manufactures to directly ship their merchandise to 
consumers through mail and express consignment. At that time, some CBP 
officials stated that this trend may reflect a shift in smuggling 
techniques toward the use of multiple small packages rather than large 
shipments in cargo containers, possibly to reduce the chance of 
detection. See figure 3 for trends in the number of CBP seizure actions 
and estimated domestic values.[Footnote 37] 

Figure 3: Trends in the Number of IP Seizure Actions and Estimated 
Domestic Values of Seizures by CBP, Fiscal Years 2001-2006: 

This figure contains two line graphs. The first graph depicts the 
number of seizures per fiscal year from 2001 to 2006. The second graph 
depicts the domestic value of the seizures for the same time period. 
The following data is depicted in the two graphs: 

Fiscal year: 2001; 
Number is seizures: 3,586; 
Domestic value of seizures: $57.438 million. 

Fiscal year: 2002; 
Number is seizures: 5,793; 
Domestic value of seizures: $98.990 million. 

Fiscal year: 2003; 
Number is seizures: 6,500; 
Domestic value of seizures: $94.019 million. 

Fiscal year: 2004; 
Number is seizures: 7,255; 
Domestic value of seizures: $138.768 million. 

Fiscal year: 2005; 
Number is seizures: 8,022; 
Domestic value of seizures: $93.234 million. 

Fiscal year: 2006; 
Number is seizures: 14,675; 
Domestic value of seizures: $155.369 million. 

Source: GAO analysis of CBP data. 

[End of figure] 

After CBP seizes the counterfeit goods, it may also assess penalties 
that result in monetary fines imposed against the violator. CBP 
officials reported that processing penalty cases is resource-intensive, 
but noted that few penalties are collected and such enforcement has 
little deterrent effect. We found that less than 1 percent of the 
penalty amounts assessed for IP violations in each fiscal year were 
collected. See table 1 for IP-related penalties assessed and collected 
in each fiscal year from 2001 through 2006. Various factors contribute 
to CBP's limited collection rates on IP penalties, including petitions 
for mitigation or dismissal by the violator, dismissal due to criminal 
prosecutions, and the nature of counterfeit importation.[Footnote 38] 

Table 1: Dollar Value of IP Penalty Amounts Assessed and Collected by 
CBP, Fiscal Years 2001-2006, Dollars in millions: 

Total penalty amount assessed: 
2001: $52.0; 
2002: $65.0; 
2003: $45.0; 
2004: $442.9; 
2005: $423.9; 
2006: $136.6. 

Total penalty amount collected: 
2001: $0.5; 
2002: $0.3; 
2003: $0.4; 
2004: $0.5; 
2005: $0.4; 
2006: $0.6. 

Percent collected: 
2001: 0.90; 
2002: 0.48; 
2003: 0.91; 
2004: 0.11; 
2005: 0.10; 
2006: 0.45. 

Source: GAO analysis of CBP data. 

Note: Penalty data are based on penalties assessed under 19 U.S.C. 
1526(f). All data presented are based on statistics available as of 
January 2007. Penalty amounts assessed in one fiscal year may not be 
collected until the following fiscal year, therefore, there is not a 
direct relationship between amounts assessed and collected in a given 
fiscal year. CBP officials said that the amount collected may change on 
different dates that data are run for open penalty cases that are still 
being processed; however, officials noted that future adjustments are 
unlikely to significantly change the disparity between penalty amounts 
assessed and collected. CBP officials said that they use the same type 
of collection calculation to report penalty statistics to Congress. 

[End of table] 

CBP's Enforcement of Exclusion Orders Has Been Limited: 

CBP does not maintain statistics on all of its exclusion order 
activities, but available information indicates that its exclusion 
activities have declined, in part due to procedural weaknesses. 
[Footnote 39] While the U.S. International Trade Commission issues 
relatively few exclusion orders each year, these orders can affect 
large volumes of trade, according to CBP officials. As of July 2007, 66 
exclusion orders were in effect, according to CBP. CBP takes two basic 
steps to enforce these orders: (1) CBP posts written guidance, called 
Trade Alerts, to its intranet to inform ports about new orders, 
[Footnote 40] and (2) it creates electronic targeting instructions that 
alert ports about incoming shipments that need to be examined for 
potential infringing goods related to the order. When its exams 
identify goods that should be excluded, CBP does not allow the goods to 
enter the country and issues a notice of exclusion to the importer. 
According to CBP officials, CBP does not maintain data on the number of 
exclusion notices, either in total or by order, nor does it alert the 
rights holder of the exclusion. However, CBP does maintain data on the 
total number of exclusion order exams it conducts and the number of 
times these exams reveal any IP discrepancies.[Footnote 41] As shown in 
figure 4, the number of exclusion order exams have declined since 
fiscal year 2002, and a very small number of discrepancies have been 
found.[Footnote 42] CBP explained that the decrease in exams from 
fiscal years 2002 to 2004 was due to the termination of targeting for 
one exclusion order that had been generating most of the exams. 
[Footnote 43] 

Figure 4: Number of CBP Exclusion Order Exams Performed and IP 
Discrepancies Found, Fiscal Years 2002-2006: 

[See PDF for image] 

This figure contains two line graphs. The first graph depicts the 
number of exams per fiscal year from 2002 to 2006. The second graph 
depicts the number of IP discrepancies for the same time period. The 
following data is depcited in the two graphs: 

Fiscal year: 2002; 
Number of exams: 5,085; 
Number of IP discrepancies: 44. 

Fiscal year: 2003; 
Number of exams: 2,137; 
Number of IP discrepancies: 9. 

Fiscal year: 2004; 
Number of exams: 105; 
Number of IP discrepancies: 3. 

Fiscal year: 2005; 
Number of exams: 709; 
Number of IP discrepancies: 7. 

Fiscal year: 2006; 
Number of exams: 713; 
Number of IP discrepancies: 1. 

Source: GAO analysis of agency data. 

Note: According to CBP, most of the IP discrepancies it found in the 
course of conducting exclusion order exams were not violations of the 
order, but were other types of IP discrepancies, such as trademark 
violations, that it found during the exam. 

[End of figure] 

CBP's limited and declining enforcement of exclusion orders has been of 
concern to certain private sector representatives, notably the 
companies that have sought such orders or the attorneys that represent 
them. Representatives said companies spend millions of dollars in legal 
fees to win a U.S. International Trade Commission ruling for their 
products, but that the effectiveness of the ruling is weakened by poor 
enforcement at CBP. Private sector representatives also stated that 
CBP's enforcement of the orders is not transparent because CBP does not 
notify companies of any exclusions that have occurred, impeding their 
ability to follow through on the matter. This differs from CBP's 
practices when it detains or seizes IP-infringing goods: CBP notifies 
both the importer and IP rights owner of such detentions or 
seizures.[Footnote 44] CBP officials said the agency does not have a 
regulation to permit the notification of exclusions to affected rights 
owners, and they did not know whether CBP had legal authority under the 
relevant statute to make such notifications. 

We found several procedural weaknesses in CBP's exclusion order 
enforcement, including a lack of intranet Trade Alerts for about half 
of the orders currently in force, delays in posting Trade Alerts to its 
intranet, minimal use of electronic targeting, and no procedures for 
updating Trade Alerts when the status of exclusion orders changes or 
expires. The effect of these weaknesses has been to limit or delay the 
degree to which exclusion orders are enforced; details are provided 
below. 

* CBP does not have Trade Alerts on its intranet for all orders 
currently in effect and lacks information to develop Trade Alerts for 
some orders. Of the 66 orders in effect as of July 2007, CBP had posted 
Trade Alerts to its internal website for 24 of them and was developing 
such guidance for 5 others. CBP said it had paper records for 15 older 
orders that it had not yet converted to Trade Alerts due to limited 
resources, but lacked records for enforcing most of these remaining 
orders.[Footnote 45] 

* Although CBP officials said the agency is required to enforce the 
orders from the date they are issued, we found that CBP's enforcement 
may be considerably delayed. According to CBP officials, this is 
because CBP must review and interpret large amounts of complex 
information generated by the administrative process, but only two 
attorneys at CBP are presently qualified to carry out this 
review.[Footnote 46] We determined that it took CBP more than 60 days 
to post Trade Alerts for 14 of 18 orders for which it could provide 
such data.[Footnote 47] According to CBP officials, work to establish 
the intranet platform for IP issues began in 2003, but CBP did not have 
the capability to actually begin posting Trade Alerts to its Web site 
until April of 2004. Prior to that date, text-only Alerts were 
published to an internal electronic bulletin board that housed them for 
90-day renewable periods. 

* CBP develops targeting instructions for most, but not all, of the 
exclusion orders it receives. Of 10 randomly selected orders for which 
CBP had posted Trade Alerts as of July 2007, we found that it had 
developed targeting instructions for only 4.[Footnote 48] Also, 
although CBP officials said that the agency is to enforce exclusion 
orders until they expire, we found that its actual targeting 
instructions for an order may expire far sooner. CBP officials said 
that targeting instructions that have not generated any exams or found 
any IP violations after 90 days are removed from CBP's targeting 
system. CBP provided data on the number of exclusion orders for which 
it had targeting instructions in place in each of fiscal years 2003 
through 2006. The number of orders with targeting instructions dropped 
from 25 in fiscal year 2003 to 10 in fiscal year 2006--far fewer than 
the number of orders in force at that time.[Footnote 49] 

* CBP has no process for ensuring that its Trade Alerts are adjusted to 
reflect changes in the status of exclusion orders. For example, CBP 
initially provided data to indicate that it had issued Trade Alerts for 
29 orders, but we determined that 5 of the Trade Alerts were for orders 
that had expired or been rescinded. CBP concurred with our findings and 
said it would adjust its Trade Alerts accordingly. 

The Number of Investigative Agency IP Cases Have Fluctuated, but 
Arrests, Indictments, and Convictions for IP Crimes Have Generally 
Increased: 

The number of criminal IP enforcement cases opened annually by ICE, 
FBI, and FDA during fiscal years 2001 through 2006 have fluctuated, but 
the enforcement outcomes--arrests, indictments, and convictions--from 
those cases grew during that same time period. As shown in figure 5, 
ICE opened the most IP cases each year, averaging 445 cases per fiscal 
year, compared to FBI's and FDA's average of 306 and 39 cases per 
fiscal year, respectively.[Footnote 50] The number of IP cases that ICE 
and FBI opened during the period fluctuated, with the number of ICE 
cases lower in 2006 than in 2001 and the number of FBI cases in 2006 
about the same as their 2001 level. In general, the number of FDA cases 
grew during this time period. 

Figure 5: Number of Criminal Cases Opened by ICE, FBI, and FDA Related 
to IP Investigations, Fiscal Years 2001-2006: 

[See PDF for image] 

This figure is a multiple line graph. The vertical axis of the graph 
represents number of investigations opened from 0 to 500. The 
horizontal axis of the graph represents fiscal years from 2001 to 2006. 
The following data is depicted: 

Fiscal year: 2001; 
Number of investigations opened by ICE: 482; 
Number of investigations opened by FBI: 301; 
Number of investigations opened by FDA: 22. 

Fiscal year: 2002; 
Number of investigations opened by ICE: 440; 
Number of investigations opened by FBI: 252; 
Number of investigations opened by FDA: 31. 

Fiscal year: 2003; 
Number of investigations opened by ICE: 430; 
Number of investigations opened by FBI: 271; 
Number of investigations opened by FDA: 31. 

Fiscal year: 2004; 
Number of investigations opened by ICE: 415; 
Number of investigations opened by FBI: 361; 
Number of investigations opened by FDA: 62. 

Fiscal year: 2005; 
Number of investigations opened by ICE: 492; 
Number of investigations opened by FBI: 359; 
Number of investigations opened by FDA: 39. 

Fiscal year: 2006; 
Number of investigations opened by ICE: 410; 
Number of investigations opened by FBI: 316; 
Number of investigations opened by FDA: 62. 

Source: GAO analysis of agency data. 

[End of figure] 

Despite the fluctuations in numbers of IP cases by the two major 
investigative agencies, the number of arrests, indictments, and 
convictions stemming from ICE and FBI investigations of IP-related 
crimes generally increased for fiscal years 2001 through 2006 (see fig. 
6), as they did for FDA. For some enforcement actions, the agencies' 
investigative activity showed fairly steady growth. For other actions, 
investigative activity peaked in fiscal year 2004, but had levels in 
2006 that were still well above their 2001 levels.[Footnote 51] 

Figure 6: Number of Arrests, Indictments, and Convictions by FBI, ICE, 
and FDA, Fiscal Years 2001-2006: 

[See PDF for image] 

This figure is a series of horizontal bar graphs depicting the 
following data: 

Agency: FBI; 
Year: 2001; 
Arrests: 51; 
Indictments: 117; 
Convictions: 152. 

Agency: FBI; 
Year: 2002; 
Arrests: 61; 
Indictments: 126; 
Convictions: 96. 

Agency: FBI; 
Year: 2003; 
Arrests: 52; 
Indictments: 103; 
Convictions: 109. 

Agency: FBI; 
Year: 2004; 
Arrests: 82; 
Indictments: 111; 
Convictions: 115. 

Agency: FBI; 
Year: 2005; 
Arrests: 104; 
Indictments: 144; 
Convictions: 124. 

Agency: FBI; 
Year: 2006; 
Arrests: 144; 
Indictments: 192; 
Convictions: 188. 

Agency: ICE; 
Year: 2001; 
Arrests: 94; 
Indictments: 80; 
Convictions: 67. 

Agency: ICE; 
Year: 2002; 
Arrests: 97; 
Indictments: 52; 
Convictions: 99. 

Agency: ICE; 
Year: 2003; 
Arrests: 110; 
Indictments: 76; 
Convictions: 65. 

Agency: ICE; 
Year: 2004; 
Arrests: 228; 
Indictments: 205; 
Convictions: 126. 

Agency: ICE; 
Year: 2005; 
Arrests: 200; 
Indictments: 200; 
Convictions: 139. 

Agency: ICE; 
Year: 2006; 
Arrests: 195; 
Indictments: 162; 
Convictions: 183. 

Agency: FDA; 
Year: 2001; 
Arrests: 6; 
Indictments: 0; 
Convictions: 4. 

Agency: FDA; 
Year: 2002; 
Arrests: 17; 
Indictments: 3; 
Convictions: 10. 

Agency: FDA; 
Year: 2003; 
Arrests: 29; 
Indictments: 16; 
Convictions: 11. 

Agency: FDA; 
Year: 2004; 
Arrests: 86; 
Indictments: 25; 
Convictions: 30. 

Agency: FDA; 
Year: 2005; 
Arrests: 59; 
Indictments: 33; 
Convictions: 41. 

Agency: FDA; 
Year: 2006; 
Arrests: 57; 
Indictments: 30; 
Convictions: 44. 

Source: GAO analysis of agency data. 

Note: In instances where joint investigations occurred, IP enforcement 
actions may be counted by each agency involved; as a result, these 
statistics may include some double counting. 

[End of figure] 

As figure 6 illustrates, each agency's enforcement activity generally 
increased from fiscal year 2001 to 2006; however, activity levels 
within and across agencies varied over the 6-year period. 

DOJ's IP Enforcement Has Generally Increased: 

DOJ tracks its IP enforcement activity in terms of the number of cases 
filed, the number of defendants in cases filed, and the number of 
defendants convicted. While the number of IP cases filed by DOJ 
fluctuated around 150 from fiscal years 2001 through 2005, the number 
of cases grew to 204 in fiscal year 2006 (see fig. 7). 

Figure 7: Number of IP-Related Cases Filed by DOJ, Fiscal Years 2001-
2006: 

[See PDF for image] 

This figure is a line graph depicting the following data: 

Fiscal year: 2001; 
Number of cases filed: 151. 

Fiscal year: 2002; 
Number of cases filed: 129. 

Fiscal year: 2003; 
Number of cases filed: 163. 

Fiscal year: 2004; 
Number of cases filed: 129. 

Fiscal year: 2005; 
Number of cases filed: 164. 

Fiscal year: 2006; 
Number of cases filed: 204. 

Source: GAO analysis of DOJ data. 

Note: IP statistics include charges for the following criminal 
statutes: Title 17 U.S.C. 506, 1201, 1202, 1203, 1204, and 1205; Title 
18 U.S.C. 1831, 1832, 2318, 2319, 2319A, 2319B, and 2320; Title 47 
U.S.C. 553, 605. 

[End of figure] 

The results of IP-related cases that DOJ filed during fiscal years 2001 
through 2006 varied. Table 2 shows that for fiscal years 2001 through 
2006, DOJ received referrals for 3,548 defendants in IP matters from 
the investigative agencies and filed charges against a total of 1,523 
defendants. During this period, a total of 891 defendants were 
convicted and 373 received prison sentences.[Footnote 52] According to 
DOJ officials, the data for the number of IP-related defendants 
referred to federal prosecutors from investigative agencies should be 
considered independent of the data for defendants charged with IP 
violations. Additionally, the difference between the number of referred 
IP defendants and the number of defendants charged with IP offenses in 
a given year, or period of years, may be explained in part by the fact 
that IP suspects may never be charged with IP offenses because they are 
instead charged with crimes carrying higher statutory maximum 
sentences, or because the IP charges are dismissed pursuant to plea 
agreements to more serious charges.[Footnote 53] We found that over the 
6-year period of our review, about 17 percent of the total number of 
defendants received prison sentences of more than 3 years, while about 
45 percent were sentenced to imprisonment of 12 months or 
less.[Footnote 54] 

Table 2: DOJ's IP Crime Sentencing Outcomes, Fiscal Years 2001-2006: 

Fiscal year: 2001; 
Number of IP-related defendants referred from investigative 
agencies[A]: 514; 
Number of defendants charged with IP-related violations[A]: 200; 
Number of defendants convicted of IP-related crimes[B]: 153; 
Number of defendants imprisoned for IP-related crimes: 52. 

Fiscal year: 2002; 
Number of IP-related defendants referred from investigative 
agencies[A]: 497; 
Number of defendants charged with IP-related violations[A]: 215; 
Number of defendants convicted of IP-related crimes[B]: 165; 
Number of defendants imprisoned for IP-related crimes: 65. 

Fiscal year: 2003; 
Number of IP-related defendants referred from investigative 
agencies[A]: 563; 
Number of defendants charged with IP-related violations[A]: 246; 
Number of defendants convicted of IP-related crimes[B]: 141; 
Number of defendants imprisoned for IP-related crimes: 58. 

Fiscal year: 2004; 
Number of IP-related defendants referred from investigative 
agencies[A]: 565; 
Number of defendants charged with IP-related violations[A]: 177; 
Number of defendants convicted of IP-related crimes[B]: 134; 
Number of defendants imprisoned for IP-related crimes: 66. 

Fiscal year: 2005; 
Number of IP-related defendants referred from investigative 
agencies[A]: 724; 
Number of defendants charged with IP-related violations[A]: 346; 
Number of defendants convicted of IP-related crimes[B]: 122; 
Number of defendants imprisoned for IP-related crimes: 53. 

Fiscal year: 2006; 
Number of IP-related defendants referred from investigative 
agencies[A]: 685; 
Number of defendants charged with IP-related violations[A]: 339; 
Number of defendants convicted of IP-related crimes[B]: 176; 
Number of defendants imprisoned for IP-related crimes: 79. 

Fiscal year: Total; 
Number of IP-related defendants referred from investigative 
agencies[A]: 3,548; 
Number of defendants charged with IP-related violations[A]: 1,523; 
Number of defendants convicted of IP-related crimes[B]: 891; 
Number of defendants imprisoned for IP-related crimes: 373. 

Source: GAO analysis of DOJ data. 

[A] According to DOJ officials, the data for the number of IP-related 
defendants referred to federal prosecutors from investigative agencies 
should be considered independent of the data for defendants charged 
with IP violations. The difference between the number of referred IP 
defendants and the number of defendants charged with IP offenses in a 
given year, or period of years, is due, in part, to the fact that IP 
suspects may never be charged with IP offenses because they are instead 
charged with crimes carrying higher statutory maximum sentences, or 
because the IP charges are dismissed pursuant to plea agreements to 
more serious charges. 

[B] Number of defendants convicted includes by plea or trial. According 
to DOJ officials, these statistics may under-represent total 
enforcement activity since some individuals charged with IP crimes may 
actually receive sentencing under another crime. Also, DOJ's total 
convictions may be less than those recorded by investigative agencies. 
DOJ collects information on the number of convictions specifically 
related to the IP rights violation while investigative agencies may 
record convictions for any case opened that includes an IP-related 
offense and for which a conviction is issued. 

[End of table] 

Agencies Have Not Taken Steps to Assess IP Law Enforcement Efforts: 

Agencies have not taken key steps to assess IP enforcement 
achievements. Specifically, most agencies have not (1) conducted 
systematic analysis of their enforcement activity, (2) clearly 
identified which of their efforts relate to a key IP enforcement area-
-IP crimes that affect public health and safety--nor collected data to 
track these efforts, or (3) set performance measures or targets for 
carrying out IP enforcement. These steps are an important part of 
agencies' ability to effectively plan and assess their performance and 
report to Congress and others. 

Although agencies' statistics show general increases in the level of 
seizures, investigations, and prosecutions, they have not taken steps 
to understand the drivers behind these increases in ways that could 
better inform management and resource allocation decisions. For 
example, while all the agencies reported using IP enforcement 
statistics to compare outputs from one year to the next, our 
discussions with agency officials revealed that little has been done to 
systematically examine enforcement statistics. Such analysis might 
include looking at field offices or regions with higher or lower levels 
of activity to identify effective enforcement practices and inform 
resource allocation decisions. It might also include identifying the 
types of IP crimes that agency staff are enforcing to understand 
criminal activity and help focus enforcement efforts. 

Agencies are already collecting some data that could be used to examine 
enforcement efforts more systematically.[Footnote 55] In April 2007, we 
reported that CBP has not analyzed variations in its IP enforcement 
activity by port or conducted analysis of ports' relative enforcement 
outcomes.[Footnote 56] By analyzing available CBP data, we found 
pockets of enforcement activity in some areas. For example, a majority 
of CBP's seizure actions took place in a limited number of locations, 
with nearly three-fourths of aggregate seizure value accounted for by 
only 10 of more than 300 ports. These are a mix of ports, including a 
few of the nation's largest and some that are smaller. In this report, 
we made recommendations to CBP to improve upon and better understand 
its IP enforcement activity through better analysis.[Footnote 57] We 
performed a similar analysis for DOJ using data on the number of 
defendants charged and number of cases filed by U.S. Attorney's Offices 
and also found concentrations of activity for prosecution activity. For 
example, about 50 percent of IP-related cases were filed by around 10 
percent of U.S. Attorney's Offices during fiscal years 2001 through 
2006. The same results were true for the number of defendants charged 
with IP crimes. 

We also compared the U.S. Attorney's Offices with the highest IP 
enforcement activity with the locations where CHIP units were created 
as of fiscal year 2006. Of the top 10 offices, ranked by number of IP 
cases filed in 2006, 7 had CHIP units, and the 2 most active offices 
had the largest CHIP units, measured by the number of attorneys working 
in the unit. This analysis suggests that the number of resources in a 
particular field office contributes to higher levels of activity; 
however, according to DOJ, other factors, such as crime level, can also 
affect activity levels. Our analyses illustrate the types of analysis 
that agencies can perform using their data, and insights they can 
obtain, to better inform management and resource allocation decisions. 
DOJ said that it performed similar analysis before deciding where to 
place CHIP units, but did not provide evidence that it conducts such 
analysis on a routine basis. 

While all the agencies collected statistics to report broadly on their 
IP-related enforcement activities, most of the agencies have not 
clearly identified which IP enforcement actions relate to public health 
and safety and do not have data to track their efforts in this area, 
despite making this a priority enforcement area. By virtue of its 
mission, FDA's data on IP-related enforcement specifically reflects its 
efforts to address IP violations that affect public health and safety. 
CBP has recently begun to monitor IP seizures related to public health 
and safety. In January 2008, it released seizure data for fiscal year 
2007 that for the first time identified seizures in product categories 
that may involve public health and safety, e.g., pharmaceutical, 
electrical articles, and sunglasses. CBP officials told us that 
defining public health and safety seizures is difficult because not all 
seizures in a given category pose public health and safety risks, and 
such risks can be found across a broad range of products. 

The other agencies lack data for identifying IP enforcement actions 
related to public health and safety. For example, ICE records IP 
enforcement under a general data field that applies to all types of IP 
cases. FBI and DOJ have some sub-categories for the types of IP 
investigations and prosecutions they pursue, but none is specific to 
public health and safety. Without specific data and definitions for IP-
related enforcement efforts that impact public health and safety, 
agencies are unable to effectively track outcomes, inform management 
and resource allocation decisions, and report to Congress on an area of 
significant public importance. 

Agencies have also taken few steps to clearly identify performance 
measures specifically for their efforts related to IP-related 
enforcement activities or establish performance targets to track their 
progress towards these efforts. We reviewed agencies' strategic plans 
and, while none had specific goals on IP enforcement, the CBP and DOJ 
plans listed IP enforcement as one issue to be addressed as part of 
working toward broader enforcement goals.[Footnote 58] We also examined 
agencies' public and internal planning documents or memos for IP 
enforcement and found that some had goals and objectives, but contained 
few performance measures or targets.[Footnote 59] Moreover, most of 
these are internal agency documents that are not available to the 
public.[Footnote 60] Neither ICE nor FDA have any additional planning 
documents for IP enforcement. 

We asked agencies how they monitor their performance of IP enforcement 
activities. Most said they regarded their increasing trends in 
aggregate IP statistics (or outputs) as indicative of their progress. 
However, without performance measures related to these statistics, it 
is not clear how these statistics should be assessed because it is not 
clear what the agencies sought to achieve. We recognize that 
establishing measures and setting specific targets in the law 
enforcement area can be challenging. It is important that agencies 
carry out law enforcement actions that are based on merit and avoid the 
appearance that they strive to achieve certain numerical quotas, 
regardless of case quality. By definition, performance measures are a 
particular value or characteristic used to quantify a program's outputs 
- which describe the products and services delivered over a period of 
time - or outcomes - which describe the intended result of carrying out 
the program. A performance target is a quantifiable characteristic that 
establishes a goal for each measure; agencies can determine the 
program's progress, in part, by comparing the program's measures 
against targets. 

The Government Performance and Results Act of 1993[Footnote 61] 
incorporated performance measures as one of its most important 
features, and the establishment and review of performance measures are 
a key element of the standards for internal control within the federal 
government.[Footnote 62] We believe that measures and targets remain 
important components of measuring agency performance and enhancing 
accountability, particularly setting outcome-based measures that 
provide insight into the effectiveness of agencies' efforts, not just 
levels of activity.[Footnote 63] More refined performance measurements 
that include outcome measures would allow agencies to better track 
their IP enforcement performance against their goals and give managers 
crucial information on which to base their organizational and 
management decisions. Performance assessment is also important in 
reporting progress to others, such as the IP Coordinator and NIPLECC. 
Doing so could help NIPLECC address its strategic planning weaknesses 
that we previously identified in our November 2006 report.[Footnote 64] 

The National Intellectual Property Rights Coordination Center Has Not 
Achieved Its Mission, and Staff Levels Have Decreased: 

The National Intellectual Property Rights Coordination Center, an 
interagency mechanism created by the executive branch to improve 
federal IP enforcement and coordinate investigative efforts between ICE 
and FBI, has not achieved its mission or maintained the staffing levels 
set for it upon its creation. The center--intended to collect, analyze, 
and disseminate IP-related complaints from the private sector to ICE 
and FBI field offices for investigation--has suffered from a slow 
start, a lack of common understanding about its purpose and agencies' 
roles, and limited private sector complaint information. As a result, 
the center has gradually shifted its focus toward educating the private 
sector about federal IP enforcement efforts. Congressional 
appropriators expressed support for the center's original concept 
through various conference reports, which, over time, directed 
participating agencies to allocate appropriated funds to staff and 
operate the center. However, staffing levels have declined and the FBI 
no longer participates in the center. Plans are underway to move the 
center to a new location in early 2008, and according to officials from 
the other four key agencies, they have met with ICE to discuss what 
role their agencies might play in the center in the future. 

Created to Improve and Coordinate IP Enforcement, the Center Focuses 
Primarily on Private Sector Outreach: 

The National Intellectual Property Rights Coordination Center is one of 
several interagency mechanisms for coordinating federal IP enforcement 
efforts. Unlike NIPLECC, which was established in law by Congress in 
1999, the idea for creating the center arose from the work of the 
National Security Council's Special Coordination Group on Intellectual 
Property Rights and Trade Related Crime, co-chaired by the FBI and 
legacy Customs. This group was formed in order to implement 
Presidential Decision Directive 42, issued in 1995, concerning 
international crime. In 1999, a consensus of the group members resulted 
in a multi-agency plan to improve the U.S. government's efforts in IP 
enforcement, and the center was created. According to ICE officials at 
the center, the center was directed by legacy Customs and included 
staff from Customs and FBI. After the formation of DHS, ICE took over 
legacy Customs' role in directing the center and providing most of the 
DHS staff that were assigned to the center. 

While the center and NIPLECC were both created to improve coordination 
among law enforcement agencies, the concept for the center gave it a 
greater operational focus than NIPLECC. The executive branch intended 
that the center would act as a hub for the collection, analytical 
support, and dissemination to investigative agencies of IP-related 
complaints from the private sector, including copyright infringement, 
trademark infringement, and theft of trade secrets. It envisioned that 
the center would coordinate and direct the flow of criminal referral 
reports on IP violations to the participating agencies' investigative 
resources in headquarters and the field. In carrying out these roles, 
the center was expected to help integrate domestic and international 
law enforcement intelligence, consult regularly with the private 
sector, and generally act as a resource for IP complaints. 

Congressional support for the center's creation and role was noted 
through directives in various conference reports related to 
appropriations laws in fiscal years 2001 through 2004. These reports 
indicate that Congress also expected the center to be a dedicated 
effort to improve intelligence and analysis related to IP rights 
violations and gather IP enforcement information from other federal and 
state law enforcement agencies to augment investigations.[Footnote 65] 

Like NIPLECC, the center has had difficulty defining its purpose and 
carrying out its law enforcement coordination mission.[Footnote 66] 
According to ICE, FBI, and DOJ officials and our analysis, the center 
has not achieved its original mission for several reasons: 

* The center got off to a slow start with limited operations in fiscal 
year 2000, and it took several years for it to become fully 
operational. For example, in 2004, we reported that many center staff 
were reassigned after the events of September 11, 2001, according to an 
FBI official.[Footnote 67] In addition, a change in leadership after 
the formation of DHS and the relocation of the center to new physical 
space in 2006 further impacted the continuity of the center's 
operations.[Footnote 68] 

* The flow of complaint information from the private sector to the 
center never materialized sufficiently to make the concept work, 
according to ICE and FBI officials. We reported in 2004 that the center 
was not widely used by industry,[Footnote 69] and this situation has 
persisted. For example, few of the private sector representatives that 
we contacted described working through the center to address their IP 
complaints. 

* Participating agencies never reached agreement on how the center 
would operate and what their respective roles would be. FBI provided us 
a copy of a draft memorandum of understanding that it said it presented 
to ICE in fiscal years 2003, 2004, and 2005, to clarify operating 
procedures and agency roles. FBI also provided a copy of a 2004 letter 
from ICE acknowledging receipt of the draft memorandum and associated 
documents and indicating its intent to meet with FBI to discuss the 
matter. However, FBI officials said that neither ICE nor DHS followed 
up with FBI on this issue. ICE officials acknowledged having seen the 
memorandum of understanding in draft form but had no record or 
recollection of any discussions being held with FBI to discuss the 
memorandum. 

Over time and in the absence of complaint information, the center began 
focusing on educating the private sector about federal IP enforcement 
agencies, approaches, and contacts, according to ICE officials at the 
center. Center staff participate in conferences, training programs, and 
trade shows around the country in which they disseminate information 
about federal IP enforcement to the private sector. For example, center 
staff participated in 60 outreach and training events in fiscal year 
2006 and 95 in fiscal year 2007. In addition, in 2007, ICE officials 
said the center began scheduling training sessions in selected cities 
around the country in which they bring together appropriate federal, 
state, and local law enforcement agencies and private sector 
representatives. The purpose of the training is to explain the region's 
IP enforcement structure and strengthen involvement of the 
participants. 

Despite Congressional Expectations, the Center's Staffing Levels Have 
Declined: 

Through various conference reports, congressional appropriators 
supported the creation and staffing of the center by FBI, legacy 
Customs, and ICE, but agencies' staffing levels at the center have 
declined. According to ICE officials, the center's original concept 
envisioned 24 staff--16 from Customs and 8 from FBI. They said staff 
were to include a Director, investigative agents, intelligence 
analysts, and administrative support. The types of staff envisioned for 
the center further distinguish it as an operational entity compared to 
NIPLECC, which is not designed to carry out law enforcement.[Footnote 
70] After the formation of DHS, the 16 Customs positions were 
transferred to DHS and taken over by as many as 16 ICE staff and 2 CBP 
staff. However, according to ICE and FBI officials, each agency's 
staffing allotment has only periodically met the envisioned levels, and 
total staff currently at the center are about one-third of the level 
originally envisioned. 

Conference reports for fiscal years 2001 through 2004 appropriations 
bills, at various times, indicated a desire for FBI, legacy Customs, 
and ICE to allocate funding for staffing and/or operations of the 
center. For example, in fiscal year 2001, the conference report 
directed FBI to allocate $612,000 to provide eight positions to the 
center.[Footnote 71] In fiscal years 2002, the conference report 
directed legacy Customs to allocate $5 million to support the hiring of 
agents dedicated to IP enforcement and to support and enhance the 
operation of the center.[Footnote 72] In fiscal year 2003, the 
conference report directed legacy Customs to allocate $5 million to 
continue center operations and $1.4 million to expand the center and 
its staffing. Congressional conferees encouraged Customs to use a 
portion of the funds to establish the clearinghouse for referrals. 
[Footnote 73] In fiscal year 2004, the conference report directed ICE 
to allocate $6.4 million to the center.[Footnote 74] 

We asked agencies how they responded to the conference report 
directives, with agencies responding as follows: 

* FBI officials told us that the funding enabled them to authorize and 
begin filling positions noted in the congressional conference reports. 
FBI filled or nearly filled all eight positions during fiscal years 
2001 through 2005. In fiscal year 2006, FBI continued to fill six of 
the positions, but removed its computers from the center due to 
security concerns and gradually had its staff spend less time working 
out of the center.[Footnote 75] Since fiscal year 2007, due to resource 
constraints, none of the FBI positions has been filled, and the FBI no 
longer participates in the center. 

* CBP officials said that their records showed that in fiscal year 2002 
legacy Customs placed seven staff (including two agents and four 
intelligence research specialists) in the center and assigned 
additional agents and intelligence research specialists to certain 
field offices and overseas locations to carry out IP enforcement. In 
fiscal year 2003, Customs officials told us they placed more agents and 
intelligence analysts in certain field locations and headquarters, but 
could not provide us with specific numbers. According to the Director 
of the center, following the formation of DHS, the two CBP positions 
were filled in 2004 but have been vacant for several years. 

* ICE provided data indicating that, since fiscal year 2004, it spent 
about $3 million on investigative activities, set aside about $1.9 
million for future construction costs for the center, spent about $1.2 
million on direct salary costs, and spent the remainder on operating 
costs for the center. ICE staffing levels at the center have declined 
from 15 in 2004 to 8 in 2007. 

ICE Views Center's Relocation as an Opportunity to Revisit Center's 
Purpose and Agency Roles: 

In early 2008, ICE plans to move the center to a new location that is 
being configured specifically for the center and some additional 
functions. According to ICE officials, the new center will continue to 
focus on private sector outreach.[Footnote 76] The role that the center 
will play in coordinating referrals and investigations among the IP 
enforcement agencies, however, remains unclear. ICE officials said they 
view the relocation as an opportunity to return the center to its 
original concept and purpose. NIPLECC's IP Coordinator said that as an 
entity staffed by, and located in, a law enforcement agency, the center 
can play a role in facilitating law enforcement coordination at an 
operational level that NIPLECC cannot. However, the IP Coordinator 
agreed that there are mixed views among IP enforcement agencies about 
the usefulness of the center. 

In preparation for the move, ICE officials said they had met with FBI, 
DOJ, CBP, and FDA to offer them space in the center and ask them to 
permanently assign staff there; however, agencies' reactions are mixed. 
FDA plans to staff one special agent at the center initially and will 
send additional agents later if its workload at the center justifies 
additional staff. FDA officials said that the agency decided to staff 
an agent at the center despite its limited resources because 
counterfeit drugs pose a significant threat to the public health and 
are a high priority to FDA. According to an official in FDA's Office of 
Criminal Investigations, a significant portion of FDA's counterfeit 
drug investigations are conducted jointly with ICE, and the center may 
facilitate a coordinated law enforcement approach. 

According to DOJ and FBI officials, staff will not be placed at the 
center unless there is a more operational focus in addition to the 
training and outreach currently provided. More specifically, DOJ and 
FBI would like there to be some initial analysis and investigation 
after an industry referral is received at the center before information 
is passed on to field investigative agents. Further, even if FBI sees 
the center taking a more operational focus, the agency would have to 
request additional staff resources to be able to assign personnel, 
since currently none is available. CBP officials said they do not plan 
to allocate any staff to the center. 

According to ICE and FDA officials, no discussions have taken place to 
outline the purpose of the new center or define how agencies would 
coordinate their enforcement activities at the center. 

Conclusions: 

Federal IP enforcement agencies confront growing challenges in 
protecting the United States against counterfeit and pirated goods. IP 
crimes appear to be on the rise, and the key law enforcement agencies 
and FDA need to work efficiently and effectively to contend with this 
trend. Most federal IP enforcement activity has increased in recent 
years. However, because IP enforcement is generally not a top agency 
priority, few resources are dedicated solely to this task, and agencies 
may spend fewer resources on IP enforcement than on higher priority 
issues. Despite the general increases in IP enforcement activity, 
agencies have taken little initiative to improve their data or evaluate 
their enforcement activity in ways that would enable them to identify 
and track certain trends or enforcement outcomes, like regional 
variations in enforcement activity and types of IP-infringing goods 
commonly enforced. Performing this type of analysis could help the 
agencies make further improvements in their IP enforcement activity by 
making more effective management decisions and resource allocations. At 
the same time, setting performance measures and targets for IP 
enforcement activities could help the agencies better assess their 
progress toward their goals. Finally, collecting better data, analyzing 
them, and reporting on progress toward goals could help make the key IP 
enforcement agencies more accountable to the public and Congress, 
particularly regarding their efforts to address IP-infringement that 
affects public health and safety. The need for such improvements among 
IP enforcement agencies mirrors weaknesses we found previously with 
NIPLECC, in which the lack of clarity over performance measures, 
resource requirements, and oversight responsibilities limited 
NIPLECC's ability to prioritize, guide, implement, and monitor the 
combined efforts of multiple agencies to protect and enforce IP rights. 

One area where IP enforcement has not increased is CBP's enforcement of 
exclusion orders. U.S. companies spend millions of dollars to argue 
their allegations of IP infringement before the U.S. International 
Trade Commission, but the Commission relies on CBP to enforce its 
decisions. CBP has allocated few resources to carry out its role in 
this complex area, lacks data to track its enforcement of exclusion 
orders, and has not given sufficient attention to addressing the 
procedural weaknesses that we identify. Given the potential for these 
orders to affect large volumes of trade, CBP has a responsibility to 
improve its enforcement of exclusion orders. 

As agencies consider ways to further improve federal IP enforcement, 
the relocation of the National Intellectual Property Rights 
Coordination Center presents an opportunity for NIPLECC and the key IP 
enforcement agencies to reassess the need for law enforcement 
coordination in this area and the best way to achieve it. As part of 
this discussion, NIPLECC and the agencies need to examine the center's 
mission, what outcomes they expect from the center, and what role key 
agencies should play, if any, in the center's future. Given Congress' 
sustained interest in improving federal IP enforcement and its past 
support for the center, providing this information to Congress could 
help better inform Congress about what contributions to IP enforcement 
it should expect from the center. 

Recommendations for Executive Action: 

To better inform management and resource allocation decisions and 
report on agency achievements, we recommend that the Attorney General 
and the Secretaries of Homeland Security and Health and Human Services 
direct their agencies to take the following four actions: 

For ICE, FBI, FDA, and DOJ: 

* systematically analyze enforcement statistics to better understand 
variations in IP-related enforcement activity. 

For CBP: 

* continue to take steps to better identify IP seizures that pose a 
risk to the public health and safety of the American people, and 
collect and report this data throughout the agency and to Congress. 

For ICE, FBI, and DOJ: 

* take steps to better identify enforcement actions against IP-
infringing goods that pose a risk to the public health and safety of 
the American people, and collect and report this data throughout each 
agency and to Congress. 

For CBP, ICE, FBI, and DOJ: 

* establish performance measures and targets for IP-related enforcement 
activity and report such measures, targets, and actual performance to 
NIPLECC and Congress. 

To better inform Congress and affected rights holders regarding its 
enforcement of exclusion orders and address certain procedural 
weaknesses, we recommend that the Secretary of Homeland Security direct 
the Commissioner of CBP to take the following three actions: 

* identify factors currently limiting their enforcement capabilities 
and develop a strategy for addressing those limitations along with a 
timeline for implementing the strategy; 

* begin collecting data on the number of exclusions, in total and per 
exclusion order; and: 

* examine CBP's ability to develop regulations to allow notification of 
exclusions to affected rights holders, and if authorized, develop such 
regulations. 

To clarify the mission and structure of the National Intellectual 
Property Rights Coordination Center, we recommend that the Attorney 
General and the Secretary of Homeland Security, in consultation with 
NIPLECC, direct their IP enforcement agencies to take the following 
three actions: 

* reassess the National Intellectual Property Rights Coordination 
Center's mission and how its future performance will be assessed; 

* define agencies' role in the center and the number and types of 
resources needed to operate the center; and: 

* report to Congress on the center's redefined purpose, operations, 
required resources, and progress within 1 year of the center's 
relocation. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DHS, DOJ, and HHS for their 
review and comment. CBP and ICE provided comments through DHS. DHS, 
CBP, and ICE concurred with our recommendations. DOJ did not indicate 
whether it agreed or disagreed with our recommendations. HHS commented 
that it disagreed with our recommendation that FDA develop performance 
measures and targets for IP enforcement. In light of the agency's 
public health and safety mission, we determined that it was 
inappropriate to require FDA to develop law enforcement-related 
measures and targets, and no longer recommend this. However, given the 
importance of understanding the nature of IP violations that affect 
public health and safety, we now recommend instead that FDA more 
systematically analyze its IP enforcement statistics (see p. 43). We 
believe this is a more appropriate recommendation because FDA said that 
it already monitors its IP enforcement criminal investigations to 
discern trends. In response to other comments the agencies made, we 
also modified two recommendations to give the agencies more flexibility 
in identifying which of their IP enforcement actions relate to public 
health and safety. Instead of recommending that the agencies create 
categories and definitions of such actions, as we did in the draft 
report, we recommend that they take steps to better identify these 
actions (see p. 43). A summary of each agency's comments and our 
evaluation follows. 

CBP commented that the report inaccurately states that it lacks data 
and definitions for IP-related enforcement efforts that impact public 
health and safety, saying it reported this data in its fiscal year 2007 
seizure statistics. In response, we modified the final report to note 
that CBP began reporting on IP seizures related to public health and 
safety for the first time in January 2008 (see p. 33). CBP also 
commented that the report's finding that it lacks performance measures 
for IP enforcement is not completely accurate and cited its "National 
IPR Trade Strategy." We added information to the final report about 
this document (see p. 34), but continue to believe that CBP needs to 
incorporate IP enforcement measures and targets into its agency-wide 
strategic plan, which it has said it intends to do. Finally, CBP 
repeated comments made about our April 2007 report regarding an 
analysis that we proposed it could undertake to better understand its 
enforcement outcomes.[Footnote 77] We disagreed with CBP's comments at 
that time and continue to believe that CBP, and the other agencies, can 
make better use of existing data to understand their IP enforcement 
efforts and outcomes. DHS's written comments and our detailed response 
appear in appendix IV. 

DOJ made several comments about ways in which it believes the report 
understates its IP enforcement achievements. For example, DOJ cited 
percent increases between select years for certain indicators to 
demonstrate its increased enforcement results. However, the report 
takes a more systematic approach to evaluating overall federal IP 
enforcement efforts by examining multiple indicators at multiple 
agencies over a 6-year period. We believe that the report's approach 
and assessment is fair and valid. DOJ also commented we did not 
sufficiently acknowledge increases in training and resource allocations 
for IP enforcement, particularly as relates to its CHIP units. In fact, 
as was true for the draft report, the final report discusses growth in 
CHIP units and numbers of IP-trained attorneys (see p. 20). Finally, 
DOJ commented that the report inaccurately characterizes its efforts to 
analyze IP enforcement statistics by district. We modified the report 
to add information that DOJ analyzed IP enforcement statistics when 
deciding where to place CHIP units; however, DOJ never provided 
evidence that it conducts such analysis on a routine basis (see p. 33). 
We continue to believe that systematically conducting such analysis can 
help DOJ determine whether its allocation of resources is producing the 
kind of increases in IP enforcement outcomes that it desired. 

DOJ commented that the report inaccurately describes its efforts to 
establish performance measures or goals to assess its IP enforcement 
achievements. In response, we added information to the discussion of 
performance measurement about certain DOJ documents that contain such 
goals and measures, and cited again the DOJ task force reports on IP 
enforcement, which had been mentioned earlier in the report (see p. 
34). However, the task force reports contain only recommendations for 
DOJ action, not goals with associated performance measures. A few of 
these recommendations are structured like performance goals, such as 
"target large, complex organizations that commit IP crime" or 
"prosecute IP offenses that endanger the public's health or safety," 
but the task force report provides no indication of how DOJ will 
measure progress toward these recommendations. DOJ commented that 
developing numeric or percentage targets linked to its performance 
measures could create the potential for case quotas or thresholds. We 
agree that setting performance measures and targets in the law 
enforcement arena is difficult, and we added information to the report 
to further clarify the sensitivities associated with doing this (see p. 
35). However, we continue to believe that it is important, and 
possible, for DOJ to develop performance measures and targets to help 
it, and others, determine whether its overall IP enforcement efforts 
are achieving performance goals and focused on the right issues, and 
whether its resource allocations devoted to this area are contributing 
to the desired results. DOJ's written comments and our detailed 
response appear in appendix V. 

HHS expressed concerns about setting performance measures and targets 
that were similar to those raised by DOJ. While we no longer direct 
this recommendation to FDA, we continue to believe that is it important 
and possible for law enforcement agencies to set useful performance 
measures and targets to guide and assess their efforts. FDA's written 
comments and our detailed response appear in appendix VI. 

DHS, DOJ, and HHS also provided technical comments, which we 
incorporated as appropriate. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to appropriate 
congressional committees and the Secretaries of the Departments of 
Homeland Security and Health and Human Services; the Attorney General; 
the Chairman of the U.S. International Trade Commission; and NIPLECC's 
IP Coordinator. We will also make copies available to others on 
request. In addition, the report will be available at no charge on the 
GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-4347 or yagerl@gao.gov. Contact points for our 
Office of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions to 
this report are listed in appendix VII. 

Sincerely yours, 

Signed by: 

Loren Yager, Director: 
International Affairs and Trade: 

[End of section] 

Appendix I: Scope and Methodology: 

The Ranking Minority Member of the Senate Subcommittee on Oversight of 
Government Management, the Federal Workforce and the District of 
Columbia, Committee on Homeland Security and Governmental Affairs, 
asked us to (1) examine federal agencies' roles, priorities, and 
resources devoted to intellectual property (IP) enforcement, (2) 
evaluate agencies' IP-related enforcement statistics and achievements, 
and (3) examine the status of the National Intellectual Property Rights 
Coordination Center. 

Based on our previous work and background research, we determined that 
the key federal law enforcement agencies carrying out IP enforcement 
are Customs and Border Protection (CBP), Immigration and Customs 
Enforcement (ICE), the Federal Bureau of Investigation (FBI), and the 
Department of Justice (DOJ). In addition, we included the Food and Drug 
Administration (FDA) due to its role in investigating counterfeit 
versions of products it regulates. To describe the federal structure 
that carries out IP enforcement, we met with CBP, ICE, DOJ, FBI, and 
FDA officials at the agencies headquarters, and, for all agencies 
except FDA, met with officials in multiple field locations. The 
locations we visited are not disclosed in this report for law 
enforcement reasons.[Footnote 78] We also met with the International IP 
Enforcement Coordinator (IP Coordinator). We reviewed agency documents 
to understand policies and practices related to IP enforcement and 
discussed the processes by which these agencies interact with each 
other in conducting IP enforcement. We also reviewed prior GAO reports 
that examined the federal IP enforcement structure, agencies' role, and 
key coordinating mechanisms.[Footnote 79] To determine agencies' IP 
enforcement priorities, we examined strategic and other planning 
documents, including agency memos detailing goals and objectives 
related to IP enforcement. In some instances, agency documents were law 
enforcement sensitive; therefore, the details have not been included in 
the report and only information that was discussed openly in interviews 
or in public documents and forums has been used. 

To determine resources dedicated to IP enforcement, we spoke with 
agency officials, obtained data on the number of staff dedicated to IP 
enforcement, and analyzed data, where available, on staff time spent on 
IP enforcement. In particular, we obtained data on (1) the number of 
criminal investigative case hours that ICE and FDA field offices 
recorded under codes used to track IP enforcement; and (2) the average 
number of agents on board that were working IP criminal cases, as 
reported by FBI field offices. We obtained data covering fiscal years 
2001 through 2006, except for FDA investigative case hours for 
counterfeit products, which the agency has only been tracking since 
fiscal year 2003. We reviewed these data for obvious errors and 
consistency with publicly reported data, where possible. When we found 
discrepancies, we brought them to the attention of relevant agency 
officials and worked with them to correct the discrepancies before 
conducting our analyses. On the basis of these efforts, we determined 
that these data were sufficiently reliable for our purposes. To make 
similar comparisons across the agencies, we converted ICE and FDA data 
on criminal case hours into full-time equivalents (FTE) using 
information that the agencies provided and confirmed with FBI officials 
that we could use FBI's measurement as equivalent to the FTE 
measurement for time spent by ICE and FDA IP investigations. 

To examine agencies' IP enforcement activity, we analyzed data from 
fiscal year 2001 to fiscal year 2006 on CBP IP seizures, penalties, and 
exclusion activities; the number of criminal cases opened in ICE, FBI, 
and FDA's Office of Criminal Investigation field offices that were 
recorded as IP enforcement cases; ICE, FBI, and FDA arrests, 
indictments, and convictions stemming from their IP investigations; and 
the numbers of referrals of IP cases to DOJ from the investigative 
agencies, IP cases that DOJ filed, defendants charged in those cases, 
defendants convicted of IP crimes, defendants imprisoned, and sentences 
awarded. Information on CBP seizures and penalties is drawn from our 
April 2007 report. In addition, we obtained data from CBP on its Trade 
Alerts as of July 2007, as well as the number of targeting instructions 
it had in place for each Trade Alert in each of fiscal years 2003 
through 2006 and the number of exams, IP violations, and seizures it 
has recorded as a result of those instructions. We discussed key law 
enforcement activities with ICE, FBI, FDA, and DOJ and determined what 
data the agencies record and what activities they report on internally. 
We then requested them to extract data from their systems on these key 
activities when they were performed for IP enforcement. For the most 
part, investigative agency data reflect activities that are coded as IP 
enforcement, while DOJ data reflect activities in which key IP 
enforcement statutes are cited. In general, the agencies said that the 
data they provided reflected most, but perhaps not all, of their 
activity related to IP enforcement. 

In order to collect uniform data on IP enforcement activities, we 
worked with each agency to develop the parameters by which we would 
request data from their systems. In addition, we worked with officials 
at each agency to develop a thorough understanding of the data that we 
received. We reviewed the data we obtained for obvious errors and 
consistency with publicly reported data, where possible. When we found 
discrepancies, we brought them to the attention of relevant agency 
officials and worked with them to correct the discrepancies before 
conducting our analyses. For example, we determined that CBP provided 
information on Trade Alerts that related to Exclusion Orders that were 
no longer in effect. CBP agreed and revised the number of Trade Alerts 
on its Web site. Also, the data we report on ICE's arrests, 
indictments, and convictions are different from data it has reported 
publicly in the IP Coordinator's quarterly IP enforcement 
updates.[Footnote 80] ICE officials said that the system from which it 
obtains this data is a "live system," meaning that data pulled from the 
system on different dates may not be the same. ICE officials cited 
updates to case information as one reason that data might differ over 
time. In addition, the parameters that ICE advised us to use when 
requesting ICE's data on IP enforcement cases differed somewhat from 
the parameters that ICE used. Finally, we found some inconsistencies 
with FBI's IP enforcement data. We discussed these discrepancies with 
FBI and made changes to the data accordingly. We asked FBI officials 
familiar with the agency's IP enforcement efforts to review the final 
data set for accuracy. We did not find discrepancies with FDA or DOJ 
data and used the most current data sets they provided for the 6 fiscal 
years we requested. Based on our discussions of internal controls and 
ability to address data discrepancies with the agencies, we determined 
that the data are sufficiently reliable to report IP enforcement 
activity. To assess federal agencies' achievements in IP-related 
enforcement activity, we reviewed agency priorities, goals, and 
objectives and compared them to the types of data agencies collected. 
We also asked program officials how they used their IP enforcement data 
to assess performance and inform management and resource allocation 
decisions. 

We also talked to private sector representatives to better understand 
how counterfeit and piracy affects their businesses and obtain their 
views on federal IP enforcement. We obtained different company contacts 
from conferences, federal agencies working with private sector, and our 
own research. We developed structured interview questions to understand 
industry views regarding federal IP enforcement efforts and private 
companies' own efforts to protect their IP. We selected eight sectors 
based on our participation in trade conferences and discussions and 
information from organizations such as the U.S. Chamber of Commerce 
that have anti-counterfeiting campaigns and are affected by 
counterfeiting and piracy. We interviewed 22 companies and 8 industry 
associations across those sectors. The sectors we selected were: 
consumer electronics, entertainment and media, luxury goods and 
apparel, health and food, Internet, pharmaceutical, software, and 
manufacturing. For the most part, we interviewed at least one industry 
association and two companies in each sector. Most of the companies we 
spoke with were large companies because the prevalence of their brand 
in the market has made them targets for counterfeiting and piracy. We 
analyzed industry interviews using a systematic coding scheme to 
identify common themes and responses to our questions. 

To examine the intended purpose and funding of the National 
Intellectual Property Rights Coordination Center, we met with ICE and 
FBI officials associated with the center to discuss its evolution, 
role, and staffing levels; reviewed agency documents that articulated 
the center's purpose; and analyzed Congressional budget documents that 
reflected funding related to the center. Specifically, we reviewed 
appropriation legislation and related reports of the House and Senate 
Committees on Appropriations and relevant subcommittees for fiscal 
years 2001 through 2006 to determine what funds and additional 
instructions were provided to ICE, FBI, and legacy Customs related to 
staffing and operating the center. We then requested information from 
ICE, FBI, and CBP about what funds were received and how the funds were 
used. We also discussed the center's future role with ICE, FBI, FDA, 
and DOJ officials, and the NIPLECC IP Coordinator. 

We conducted this performance audit from December 2006 through March 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Federal Protection and Enforcement of IP Rights under U.S. 
Law: 

The federal government plays a role in granting protection for and 
enforcing IP rights. It grants protection by approving patents or 
registering copyrights and trademarks. These IP rights grant 
registrants limited exclusive ownership over the reproduction or 
distribution of protected works (copyright), the economic rewards the 
market may provide for their creations and products (trademark), or the 
right to exclude others from using, making, and selling devices that 
embody a claimed invention (patent). The federal government enforces IP 
rights by taking actions against those accused of their theft or 
misuse. Enforcement actions include both civil and criminal penalties. 
U.S. laws criminalize certain types of IP violations, primarily 
copyright and trademark violations, and authorize incarceration or 
fines. These laws are directed primarily toward those who knowingly 
produce and distribute IP-infringing goods, rather than those who 
consume such goods. Although U.S. laws do not treat patent violations 
as a crime, the federal government does take actions to protect patents 
and authorizes civil enforcement actions against infringers. 

Table 3 summarizes federal protection and enforcement of IP rights 
under U.S. law. [Footnote 81] 

Table 3: Summary of Federal Protection and Enforcement of IP Rights 
under U.S. Law: 

Type of IP protection: U.S. Copyright: Criminal Infringement for Profit 
17 USC 506(a)(1)(A) and 18 USC 2319(b); 
Criminal penalties: Individuals: 1st offense, maximum 5 years 
imprisonment and $250,00 fine or twice gain/loss; 2nd offense, maximum 
10 years imprisonment; Corporations: 1st offense, $500,000 fine or 
twice gain/loss; Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available (of infringing copies, and plates, mold, 
tapes, or other equipment from which infringing copies can be made); 
Civil remedies and penalties (available to rights holders and other 
victims): Copyright infringement (even where it is neither willfully 
committed nor for profit) is actionable under 17 U.S.C. § 501 et seq. 
For willful copyright infringement, copyright owners may obtain 
injunctions, ex parte orders to seize infringing items, and recover 
actual damages or statutory damages of up to $150,000 per work 
infringed, as well as attorneys' fees and costs. 

Type of IP protection: U.S. Copyright: Bootleg Recordings of Live 
Musical Recordings (unauthorized fixation of and trafficking in sound 
recordings and music videos of live musical performances) 18 USC 2319A; 
Criminal penalties: Individuals: 1st offense, maximum 5 years 
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, 10 
years imprisonment; Corporations: $500,000 or twice gain/loss; Criminal 
forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available (for bootlegs imported into the U.S.); 
Civil remedies and penalties (available to rights holders and other 
victims): Performers whose performances are recorded or distributed 
without authorization may, pursuant to 17 U.S.C. § 1101, obtain 
injunctions and recover damages equivalent to those available for 
copyright infringement under 17 U.S.C. §§ 502-505. 

Type of IP protection: U.S. Copyright: Camcording (unauthorized 
recording of motion pictures in motion picture exhibition facility) 18 
USC 2319B; 
Criminal penalties: Individuals: 1st offense, maximum 3 years 
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, maximum 
6 years imprisonment; Corporations: $500,000 fine or twice gain/loss; 
Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): [Empty]; 
Civil remedies and penalties (available to rights holders and other 
victims): No specific civil remedies for camcording, although 
camcording is actionable as copyright infringement. 

Type of IP protection: U.S. Copyright: Large-Scale Infringement without 
Profit Motive (reproduction or distribution over any 180-day 
period/more than $1,000 total retail value) 17 USC 506(a)(1)(B) and 18 
USC 2319(c); 
Criminal penalties: Individuals: 1st offense, maximum 3 years 
imprisonment and $250,000 fine or twice gain/loss; 2nd offense, 6 years 
imprisonment; Corporations: $500,000 fine or twice gain/loss; Criminal 
forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available; 
Civil remedies and penalties (available to rights holders and other 
victims): Copyright infringement (even where it is neither willfully 
committed nor for profit) is actionable under 17 U.S.C. § 501 et seq. 
For willful copyright infringement, copyright owners may obtain 
injunctions, ex parte orders to seize infringing items, and recover 
actual damages or statutory damages of up to $150,000 per work 
infringed, as well as attorneys' fees and costs. 

Type of IP protection: U.S. Copyright: Distribution of Pre-Release 
Works or Material over Publicly-Accessible Computer Network for 
Commercial Purposes (17 USC 506(a)(1)(C) and 18 USC 2319(d)); 
Criminal penalties: Individuals: 1st offense, maximum 5 years 
imprisonment and $250,00 or twice gain/loss; subsequent offense, 10 
years imprisonment; Corporations: $500,000 fine or twice gain/loss; 
Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available; 
Civil remedies and penalties (available to rights holders and other 
victims): Actionable as copyright infringement (see above). 

Type of IP protection: U.S. Copyright: Distribution of Pre-Release 
Works or Material over Publicly-Accessible Computer Network Not for 
Commercial Purposes (17 USC 506(a)(1)(C) and 18 USC 2319(d)); 
Criminal penalties: Individuals: 1st offense, maximum 3 years 
imprisonment and $250,000 fine or twice gain/loss; subsequent offense, 
6 years imprisonment; Corporations: $500,000 fine or twice gain/loss; 
Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available; 
Civil remedies and penalties (available to rights holders and other 
victims): Actionable as copyright infringement (see above). 

Type of IP protection: U.S. Copyright: Use of Technology to Violate 
Anti-Circumvention Systems and Anti-Piracy Protections and Protection 
of Integrity of Copyright Management Information (17 USC 1201-1204); 
Criminal penalties: Individuals: 1st offense, maximum 5 years 
imprisonment and $500,000 fine or twice gain/loss; 2nd offense, maximum 
10 years imprisonment and $1 million fine or twice gain/loss; 
Non-criminal actions and penalties (by federal government): [Empty]; 
Civil remedies and penalties (available to rights holders and other 
victims): Civil court action available, including: temporary or 
permanent injunction; impoundment; actual and statutory damages; costs; 
attorney's fees; remedial modification or destruction of violating 
product; triple damages for repeat violations within 3 years of initial 
violation. 

Type of IP protection: U.S. Copyright: Trafficking in counterfeit 
labels, illicit labels, or counterfeit documentation or packaging (18 
USC 2318); 
Criminal penalties: Individuals: Maximum 5 years imprisonment and 
$250,000 fine or twice gain/loss; Corporations: $500,000 fine or twice 
gain/loss; Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available; 
Civil remedies and penalties (available to rights holders and other 
victims): Available civil remedies include: temporary or permanent 
injunction; -impoundment; attorney's fees and costs; actual damages and 
any additional profits; statutory damages of up to $25,000 per 
violation. 

Type of IP protection: U.S. Trademark: Trafficking in Counterfeit Goods 
or Services (using counterfeit mark) (18 U.S.C. § 2320); Criminal 
penalties: Individuals: 1st offense, maximum 10 years imprisonment and 
maximum $2,000,000 fine or twice gain/loss; 2nd offense, maximum 20 
years imprisonment and maximum $5,000,000 fine or twice the gain/loss; 
Corporations: 1st offense, maximum $5,000,000 fine or twice gain/loss; 
subsequent offense, maximum $15,000,000 fine or twice the gain/loss; 
Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): Civil 
forfeiture available; 
Civil remedies and penalties (available to rights holders and other 
victims): Available civil remedies include: temporary or permanent 
injunction; impoundment; attorney's fees and costs; actual damages and 
any additional profits; statutory damages of up to $100,000 per type of 
goods (up to $1 million if violation is willful). 

Type of IP protection: U.S. Patent: False Patent Marking (35 U.S.C. § 
292); 
Criminal penalties: No criminal penalties, but criminal fines based on 
criminal conduct related to patents; 
Non-criminal actions and penalties (by federal government): Maximum 
$500 fine for every offense; 
Civil remedies and penalties (available to rights holders and other 
victims): Any private individual may sue for the civil penalty of $500, 
which is split with the government. 

Type of IP protection: U.S. Trade Secrets: Economic Espionage (18 
U.S.C. § 1831); 
Criminal penalties: Individuals: maximum 15 years imprisonment or 
$500,000 fine or twice gain/loss, or both; Corporations: $10,000,000 
fine or twice gain/loss; Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): The 
Attorney General may obtain injunctions against violations; 
Civil remedies and penalties (available to rights holders and other 
victims): No express federal cause of action, although remedies are 
available for trade secret theft under state law. 

Type of IP protection: U.S. Trade Secrets: Theft of Trade Secrets (18 
USC 1832); 
Criminal penalties: Individuals: 1st offense, maximum 10 years 
imprisonment or $250,000 or twice gain/loss; 2nd offense, 10 years 
imprisonment; Corporations: Maximum $5,000,000 fine or twice gain/loss; 
Criminal forfeiture available; 
Non-criminal actions and penalties (by federal government): The 
Attorney General may obtain injunctions against violations; 
Civil remedies and penalties (available to rights holders and other 
victims): No express federal cause of action, although remedies are 
available for trade secret theft under state law. 

Source: GAO analysis of DOJ documents and review by DOJ's Criminal 
Division. 

[End of table] 

[End of section] 

Appendix III: Private Sector Views on Federal IP Enforcement Efforts: 

A number of companies have been affected by counterfeiting and piracy, 
particularly as criminal activity has increased in recent years. As 
part of our review of federal IP enforcement efforts, we identified 
companies and industry associations that are actively involved in anti-
counterfeiting and piracy activities. We interviewed 8 industry 
associations and 22 companies across 8 sectors, including consumer 
electronics, luxury goods and apparel, pharmaceuticals, and software. 
[Footnote 82] The views obtained through these interviews cannot be 
generalized across sector or industry overall given that our sample 
size was small. Industry responses produced a mix of views on federal 
efforts to enforce intellectual property rights, with some companies 
reporting positively about specific agency actions and others that were 
more critical of federal actions. A selection of industry views by 
sector are presented below based on analysis and synthesis of interview 
responses around common themes. For the most part, each bullet 
represents a different company or association representative. These 
views are not direct quotes and have been edited as needed for clarity 
and readability. 

Various Companies Are Impacted by Counterfeiting and Piracy: 

Table 4 highlights industry views on the impact of counterfeiting and 
piracy. 

Table 4: Summary of Industry Representatives' Views on the Impact of 
Counterfeiting and Piracy, by Sector: 

Sector: Consumer electronics; 
Comments: 
* Federal law enforcement efforts have improved very impressively over 
the past three years. There is better coordination and more resources, 
but the problem is growing and now there is an economic and health and 
safety issue…The magnitude of the federal law enforcement effort is 
still not commensurate with magnitude of [counterfeit and pirated] 
products. 

Sector: Luxury goods/apparel; 
Comments: 
* Beyond a loss to businesses, there is a huge loss to the Treasury and 
the national infrastructure that results from the sale of counterfeit 
goods; 
* Most counterfeit goods are sold by small businesses that 
intentionally mix real products with counterfeit products so people 
can't tell. 

Sector: Health/food; 
Comments: 
* The main issue with regard to counterfeiting and piracy is fast 
moving consumer goods. It has become an increased problem as personal 
care products that have safety issues are found in large retail stores 
and grocery stores. 

Sector: Internet; 
Comments: 
* Losses to property rights owners from counterfeiting and piracy can 
occur through Internet/online auctions. 

Sector: Pharmaceutical; 
Comments: 
* Counterfeit medicines place public health and safety at risk, have 
the potential to damage patient confidence in the branded medicine, and 
negatively impact sales of the authentic medicines. 

Sector: Software; 
Comments: 
* The impact of software piracy and counterfeit software varies by 
company and losses are difficult to calculate. Most pirated software is 
in the form of Internet downloads or mail order piracy that reduces 
company profits and taxes paid to the government, while counterfeit 
software poses greater risks to consumers in terms of potential damage 
to their computers. 

Sector: Manufacturing; 
Comments: 
* It is difficult to calculate direct losses for some companies, but 
estimated losses in this sector have been reported as high as $1 
billion. 

Source: GAO analysis of private sector responses. 

[End of table] 

Industry Concerned over Lack of Resources to Carry Out IP Enforcement: 

Some industry representatives expressed concern about the federal 
government's ability to carry out IP enforcement due, in part, to a 
lack of dedicated resources. While several companies said that federal 
IP enforcement efforts have increased, 14, or nearly half, of the 
representatives we contacted said there is a shortage of resources to 
carry out IP enforcement. For example, one company we interviewed said 
that CBP has made improvements over the last couple of years, but the 
scope of its efforts is still not up to the problem, and that more 
resources are needed to perform risk analysis and modeling to determine 
the origin of counterfeit goods. Another company representative said 
that the task is large compared to the federal resources applied, 
especially because the number of counterfeiters is increasing but 
federal resources have remained constant. Companies reported increasing 
their own resources to focus on IP enforcement, with 15 stating that 
they employ or contract private investigators and/or have in-house 
resources dedicated to IP investigations and anti-counterfeiting 
activity. Table 5 highlights specific representatives' statements about 
the level of federal resources dedicated to IP enforcement. 

Table 5: Summary of Industry Representatives' Views on Federal 
Resources Dedicated to IP Enforcement, by Sector: 

Sector: Consumer electronics; 
Comments: 
* CBP has greatly improved over the past couple of years, but the scope 
of the effort is still not up to the problem - they need more staff 
resources that do risk analysis and modeling to determine where 
counterfeit goods may be coming from and to help them target 
inspections more; 
* There is some need in some places around the country for specific CBP 
resources dedicated to the IP issue. It doesn't have to be the case at 
every port. With more dedicated resources to IP, we would see seizure 
numbers go up even more; 
* Federal IP law enforcement agencies are challenged because of their 
limited staff resources. 

Sector: Luxury goods/apparel; 
Comments: 
* There is a lack of resources and money available to CBP, and it would 
have to increase in both those areas to improve on the number of 
seizures. 

Sector: Health/food; 
Comments: 
* CBP is able to screen only a certain percentage of goods 
that come in, so additional resources would be helpful. 

Sector: Pharmaceutical; 
Comments: 
* There is a need for increased and dedicated human and financial 
resources in the federal government; 
* Federal agencies have to prioritize, but at the same time everyone 
knows that the number of counterfeiters is increasing while available 
federal resources are constant. 

Sector: Software; 
Comments: 
* Federal IP enforcement efforts are hampered by the limited resources, 
such as staff, technology, and funding devoted to IP enforcement. CBP 
staff at ports face incredible challenges in carrying out their jobs 
given the quantity of U.S. trade. Federal law enforcement staff are 
overworked, need more high-tech equipment and technology, and should 
have additional training. 

Source: GAO analysis of private sector responses. 

[End of table] 

Industry Cites Lack of Information Sharing and Unclear Agency Roles as 
Barrier to Effective Enforcement and Coordination: 

Representatives from 12 out of 30 companies and associations we 
interviewed told us that better information sharing is needed between 
the public and private sector; for example, one company representative 
said that agencies should let companies know whether the information 
they pass on to law enforcement is useful. In the case of CBP seizures, 
some representatives remarked on the need to obtain more detailed 
information about imports suspected of infringing on their products, 
such as the origin of the shipments. One company representative 
commented that it used to get information on suspect products from CBP 
officers, but it has not received this type of information from CBP 
recently. One company representative said that the company has referred 
information to the National Intellectual Property Rights Coordination 
Center, but has rarely received feedback on whether the information it 
provided was useful. Another company said that it has to continuously 
follow up to get updates. 

Several companies and associations we interviewed remarked that the 
federal IP enforcement structure is not very clear, and companies, 
particular smaller ones, have a hard time knowing who to contact for IP 
issues. For example, one association said that there is no formal 
process for referring cases to law enforcement and that information on 
the structure needs to be clearer and more efficient. While larger 
companies may be more familiar with [law enforcement] agencies' 
procedures and contacts, smaller companies don't know where to begin. 
Another association said that agency responsibilities are unclear and 
may overlap. Table 6 highlights industry representatives' general 
comments on their coordination with federal IP enforcement agencies. 

Table 6: Summary of Industry Representatives' Views on Coordination 
with Federal IP Enforcement Agencies, by Sector: 

Sector: Consumer electronics; 
Comments: 
* It would be helpful if there was more information about the right 
levels of government to contact regarding law enforcement issues. The 
Chamber of Commerce's Coalition against Counterfeiting and Piracy 
provides a lot of support in this area; 
* When leads are referred to the National Intellectual Property Rights 
Coordination Center, we don't hear back from them and have not received 
feedback on whether the information we provided is helpful in leading 
to an enforcement action. 

Sector: Entertainment/media; 
Comments: 
* Most of our referrals go to local law enforcement because they are 
more nimble to follow up and investigate cases, particularly smaller 
ones. We do not refer cases to federal investigators that we don't feel 
are worth federal resources; 
* CBP does well when and where it can with regards to IP enforcement. 
Five years ago, our relationship with them was pretty good, but they 
have fewer resources now. 

Sector: Luxury goods/apparel; 
Comments: 
* Communication with CBP is not consistent. One company is still trying 
to understand how CBP detects IP violations. 

Sector: Internet; 
Comments: 
* We work very closely with state and local law enforcement and 
coordinate with federal agencies on specific investigative matters, 
such as CBP checking corporate shipments at ports or companies 
providing information for federal cases on an ongoing basis. 

Sector: Pharmaceutical; 
Comments: 
* We have forged effective partnerships with law enforcement agencies, 
including providing referrals, support to the investigating agency and 
assistance in determining the authenticity of products suspected as 
counterfeit. We note that the good working relationship that exists in 
New York between ICE, the FBI and the FDA is one to be emulated; 
* We will work with any law enforcement agency that can develop strong 
IP cases leading to successful criminal prosecutions. 

Sector: Software; 
Comments: 
* We coordinate some with local law enforcement on IP cases that can be 
completed more quickly through the local systems or that do not warrant 
federal attention and resources. 

Sector: Manufacturing; 
Comments: 
* Our experience to date with CBP has not been very successful. The key 
to success would be a closer business relationship. Some companies we 
represent are still developing relationships with federal agencies; 
* We have not had much success with CBP. Counterfeit auto parts are 
coming to the United States but not being stopped. Ten years ago the 
counterfeit packaging was poor but now packaging is sophisticated and 
it is harder to detect real from fake. 

Source: GAO analysis of private sector responses. 

[End of table] 

Industry Has Cited Some IP Enforcement Improvements Following Training 
Provided to Agency Officials: 

Several of the company representatives commented that increased 
training efforts for federal officials that carry out IP enforcement 
have strengthened IP enforcement efforts. Table 7 highlights private 
sector comments on this issue. 

Table 7: Summary of Industry Representatives' Views on Effectiveness of 
Training on IP Enforcement Activity, by Sector: 

Sector: Luxury goods/apparel; 
Comments: 
* After we provide training to federal law enforcement officials, we do 
see a momentary increase in action by federal law enforcement agencies. 
We also participate in industry seminars to stay up to date on 
investigation methods and remedies offered to us. This improves our 
ability to better coordinate our efforts with federal law enforcement 
on anti-counterfeiting investigations. 

Sector: Internet; 
Comments: 
* Training has certainly increased the level of cooperation and number 
of instances where we were able to pursue a prosecution. Just having 
someone to call or put together a package of supporting evidence can 
make a difference in whether a case will be prosecuted. 

Sector: Pharmaceutical; 
Comments: 
* Participating in training programs sponsored by federal agencies or 
private associations provides us with an opportunity to network and 
exchange intelligence information with representatives of other 
pharmaceutical companies and law enforcement officials who are also 
engaged in the battle against counterfeit pharmaceuticals; 
* It appears that a number of seizures have occurred since private 
sector led training with federal officials has taken place and the 
level of communication has increased with CBP officials at those ports. 

Sector: Software; 
Comments: 
* Training provided to federal officials by industry has heightened 
awareness and helped to establish relationships between CBP port 
officials and companies. 

Source: GAO analysis of private sector responses. 

[End of table] 

Increased Training and Consumer Awareness Cited as Areas for Improved 
IP Enforcement: 

Industry representatives cited various areas that could be improved 
upon to increase overall IP enforcement, including a need to better 
train federal prosecutors and better inform consumers about the risks 
posed from counterfeit and pirated goods. Table 8 highlights areas 
private sector representatives identified for improved IP enforcement. 

Table 8: Summary of Industry Representatives' Views on Areas for 
Improved IP Enforcement, by Sector: 

Sector: Consumer electronics; 
Comments: 
* If DOJ or some other federal agency were able to facilitate contacts 
with local law enforcement through periodic seminars or national 
conferences, it would be very helpful...A good coordinating body would 
enable that to be done more effectively. It would ensure members know 
the tools and resources available; 
* To improve CBP seizures, there should be industry specific training 
and better communication between CBP and industry; 
* Federal prosecutors need more training on IP crimes so that they 
understand the nature of the problem and feel more comfortable 
prosecuting cases. 

Sector: Entertainment/media; 
Comments: 
* It would be great if we could follow the "status" of the seizure. 
There is no central place to get updated on enforcement actions, so one 
has to chase the CBP inspector. We get Notice of Seizure letters but 
that is about it - and would like to get "the number of widgets" in 
those seizure notices; 
* Federal prosecutors and judges need more training…Judges don't want 
to hear from rights holders. Often times they need to understand the 
economic impact of these crimes. 

Sector: Luxury goods/apparel; 
Comments: 
* More consumer awareness is needed, such as education by the media. If 
government and television, radio, and print journalists developed a 
passion for this issue, demand for counterfeit goods would be reduced. 
It is also important to educate consumers on the ills of counterfeiting 
such as child labor laws, tax evasion, and the support of terrorism. We 
also would recommend that companies write to government officials and 
supervising officers when officers or agents make a large seizure of 
counterfeit goods expressing appreciation and pointing out the good 
work accomplished by defeating counterfeiting; 
* We would like to have a better understanding of the problem from a 
brand perspective as well as a better understanding of the laws and how 
to work with the prosecuting attorneys at both the state and federal 
level. We would also like to see more dedicated federal resources. 

Sector: Health/food; 
Comments: 
* We would like to see an increase in the amount of federal penalties 
assessed and collected; 
* We recommend increased resources for CBP, as it is the country's 
first line of defense against counterfeit products. The federal 
penalties on the criminal side are generally satisfactory, but we want 
them to be more punitive. We want federal laws enforced with more 
resources. 

Sector: Internet; 
Comments: 
* There is a need for increased cooperation and transparency in how 
federal agencies work together and with industry; 
* There is a need for strengthened information-sharing and 
communication between industry and federal law enforcement; 
* There is a need for continued training and education of federal law 
enforcement officials on issues specific to industry. 

Sector: Pharmaceutical; 
Comments: 
* Federal programs that encourage transportation, customs brokers, and 
forwarding and express companies to cooperate in the identification of 
potential counterfeit traffickers would be helpful. The application of 
targeting approaches used for anti-terrorism will help CBP to be more 
effective in identifying high-risk transactions; 
* We would like to see more coordinated communication and dialogue with 
the pharmaceutical industry on the part of federal government; 
* The growth of the Internet complicates law enforcement efforts, both 
in the United States and abroad. Federal law enforcement agencies will 
need to be well prepared to address two types of counterfeiting threats 
that may evolve in multiple and complex ways: first, agencies must 
deter and stop sophisticated and organized counterfeiters that prey on 
patients in an effort to profit from unsuspecting consumers; second, 
officials must be prepared to manage threats from counterfeiters who 
may be motivated by an intent to harm people (e.g., terrorist 
activity)…It is critical that federal agencies, including the 
Departments of Justice and Commerce and the U.S. Trade Representative's 
office, make IP infringement and counterfeit activity top priorities. 
This effort must call for more criminal prosecutions, stiffer penalties 
and asset seizures. All of these activities will necessitate increased 
and dedicated human and financial resources. 

Sector: Software; 
Comments: 
* FBI's Cyber Crime squad in Los Angeles is doing great work; 
however, IP should be made a higher priority for other law enforcement 
agencies. Positive partnerships are imperative for successful IP 
protection and enforcement; 
* To improve border enforcement, federal agencies need more 
investigators on the job. The current amount of staff are sorely 
overworked. For high-tech goods, law enforcement needs more and better 
equipment because they currently use slow, clunky technology to go 
after the best and brightest cyber criminals. 

Sector: Manufacturing; 
Comments: 
* Simply recording one's product with CBP does not guarantee that 
seizures will be made of goods that infringe on the recorded product. 
Companies have to be proactive about protecting their products in other 
ways; 
* There needs to be strengthened communication and better information 
sharing between industry and federal government so that enforcement 
efforts are more focused; 
* There should be an effort to reduce the federal financial burden of 
protecting IP, such as more information-sharing within the private 
sector and with agencies and more collaborative enforcement efforts; 
* There is a need for increased educational awareness for both federal 
agencies and industry on how to work together. There is also a need to 
increase consumer awareness of counterfeit parts. 

Source: GAO analysis of private sector responses. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of Homeland Security: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

U.S. Department of Homeland Security: 
Washington, DC 20528: 
[hyperlink, http://www.dhs.gov]: 

February 26, 2008: 

Mr. Loren Yager: 
Director: 
International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Yager: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office's (GAO's) draft report GAO-08-157 entitled 
Intellectual Property: Federal Enforcement Has Generally Increased, but 
Assessing Performance Could Strengthen Law Enforcement Efforts. 

U.S. Customs and Border Protection (CBP) provided the following general 
comments on the report. Technical comments have been provided under 
separate cover. 

First, the report acknowledges the enforcement priority that CBP places 
on stopping imports of Intellectual Property-related (IPR) violative 
goods that pose risks to public health and safety. However, the report 
inaccurately, and repeatedly, states that CBP lacks the data and 
definitions for IP-related enforcement efforts that impact public 
health and safety. In fact, CBP defines, collects, and reports such 
data, and published this data in its publicly-available Fiscal Year 
(FY) 2007 IPR Seizure Statistics. Regrettably, GAO never specifically 
asked CBP to provide this data. [See comment 1] 

GAO recommends that CBP "create a category and definition for seizures 
of counterfeit goods that pose a risk to public health and safety of 
the American people, and collect and report this data throughout the 
agency and to Congress." CBP will report this information to CBP's 
Directors, Field Operations (DFOs) and to Congress on a semi-annual 
basis, and will continue to publish this data CBP will also continue to 
track and analyze this data and IPR seizure data in general, and report 
this analysis to upper management for use in their decision-making 
processes. 

Second, the report states several times that CBP lacks performance 
measures for IPR, but this is not completely accurate. CBP's National 
IPR Trade Strategy, which was previously provided to GAO, contains 
performance measures for IPR, and it is this strategy that guides CBP's 
IPR enforcement efforts. This document includes clear performance 
measures and targets that are directly linked to the goals and 
objectives of the National IPR Trade Strategy. [See comment 2] 

CBP acknowledges that the CBP Strategic Plan does not contain specific 
measures for IPR enforcement, and CBP is in the process of drafting IPR 
enforcement measures for proposed inclusion in the Strategic Plan. CBP 
will report key measures and an assessment of CBP's performance of 
these measures to Congress and the National Intellectual Property Law
Enforcement Coordination Council (NIPLECC). 

Third, throughout the report, GAO continues to promote a simple 
analysis of seizure outcomes among ports as the key approach for 
improving IPR enforcement at the border. GAO used this same approach in 
its most recent report on CBP's IPR enforcement efforts, "INTELLECTUAL 
PROPERTY Better Data Analysis and Integration Could Help U.S. Customs 
and Border Protection Improve Border Enforcement Efforts" (GAO-07-350). 
We continue to stand by our position, as we did in our comments to the 
previous report, that this approach has fundamental flaws because of 
differences in the nature of imports among ports. GAO's analysis 
inaccurately assumes relative homogeneity among "IP-type" imports at 
various ports. As we noted in our comments on the previous report, a 
fundamental flaw with this approach is that it fails to recognize 
relative risk and assumes that all similar commodities form a universe 
at equal risk for IP infringement. Further, many factors in addition to 
product type affect IPR risk, and these factors cannot be accounted for 
in this type of analysis. Such factors include source country, shipping 
patterns, and shipments entered by rights holders and their licensees. 
For these reasons, CBP finds GAO's analysis about IPR border 
enforcement to be incomplete and unreliable as a basis for action to 
improve enforcement or allocate resources. [See comment 3] 

With respect to the recommendations addressed to CBP: 

Recommendation: Create a category and definition for seizures of 
counterfeit goods that pose a risk to public health and safety of the 
American people, and collect and report this data throughout the agency 
and to Congress. 

CBP Response: Concur. The Office of International Trade (OT) has 
identified categories of merchandise that could cause potential harm 
and included those category breakouts in the published FY07 stats. OT 
will provide this information to the Directors, Field Operations (DFOs) 
within CBP and to Congress on a semi-annual basis. September 2008 is 
the anticipated completion date. [See comment 4] 

Recommendation: Establish performance measures and targets for IP-
related enforcement activity and report measures, targets, and 
performance to Congress and NIPLECC. 

CBP Response: Concur. CBP will revise its performance measures and 
targets related to IP enforcement. In addition, OT will report key 
measures and performance to Congress and NIPLECC. December 2008 is the 
expected completion date. 

Recommendation: To better inform Congress and affected rights holders 
regarding its enforcement of exclusion orders and address certain 
procedural weaknesses, we recommend that the CBP Commissioner direct 
the Offices of International Trade and Field Operations take the 
following three actions: 

a) identify factors currently limiting their enforcement capabilities 
and develop a strategy for addressing those limitations along with a 
timeline for implementing the strategy; 
b) begin collecting data on the number of exclusions, in total and per 
exclusion order; and; 
c) examine CBP's ability to develop regulations to allow notification 
of exclusions to affected rights holders, and if authorized, develop 
such regulations. 

CBP Response: Concur. CBP has begun to identify factors currently 
limiting our enforcement capabilities on exclusion orders and will 
implement a strategy to address our limitations. OT will begin tracking 
the number of denials of entry related to each exclusion order and 
report the aggregate totals by exclusion order in the end of year IPR 
statistics. In addition, OT will research CBP's legal authority on 
providing affected rights holders notification of denials of entry. CBP 
expects to complete these actions by September 2008. 

With respect to the recommendations directed to ICE: 

Recommendation: Analyze enforcement statistics to better understand 
variations in enforcement activity. 

ICE Response: Concur. ICE will analyze its Intellectual Property Rights 
enforcement data to better understand variations in enforcement 
activities. This analysis will be conducted during Fiscal Year 2008. 

Recommendation: Create a category and definition for IP enforcement 
actions that pose a risk to public health and safety of the American 
people, and collect and report this data throughout each agency and to 
Congress. 

ICE Response: Concur. ICE will ensure its law enforcement information 
system is updated to include a narrowly defined high-risk category to 
categorize those enforcement actions that focus on criminal IP 
violations that threaten public health and safety. 

Recommendation: Establish performance measures and targets for IP-
related enforcement activity and report measures, targets, and 
performance to Congress and the National Intellectual Property Law 
Enforcement Coordination Center. 

ICE Response: Concurs. ICE will begin developing IP performance metrics 
and measures during Fiscal Year 2008, then report the measures, targets 
and performance to Congress through an update to GAO. ICE will provide 
a copy of the update to the NIPLECC 

With respect to the recommendation directed to the Department: 

Recommendation: To clarify the mission and structure of the National 
Intellectual Property Rights Coordination Center, we recommend that the 
Attorney General and the Secretary of Homeland Security, in 
consultation with NIPLECC, should direct their IP enforcement agencies 
to take the following three actions: 

* reassess the National Intellectual Property Rights Coordination 
Center's mission, and how its future performance will be assessed; 

* define agencies' role in the center and the number and types of 
resources needed to operate the center; and; 

* report to Congress on the center's redefined purpose, operations, 
required resources, and progress within one year of the center's 
relocation. 

Response: The Department concurs with the recommendation for the 
National Intellectual Property Rights Coordination Center and plans to 
discuss with DOJ, in consultation with NIPLECC, the expanded mission of 
the Center. The Department has committed 9 FTEs to the staffing of this 
Center which is scheduled to relocate to Crystal City in March 2008. 

Thank you again for the opportunity to comment on this draft report and 
we look forward to working with you on future homeland security issues. 

Sincerely, 

Steven J. Pecinovsky: 
Director: 
Departmental Audit Liaison Office: 

The following are GAO's comments on the Department of Homeland 
Security's letter dated February 26, 2008. 

GAO Comments: 

1. We discussed health and safety issues with CBP during our review. In 
January 2008, CBP released seizure data for fiscal year 2007 that for 
the first time identified seizures in product categories that may 
involve public health and safety, e.g., pharmaceuticals, electrical 
articles, and sunglasses. We commend CBP for taking this step and 
modified our report to reflect this new data (see p. 33). These data 
are publicly available; therefore, GAO did not have to request them 
from CBP. We added information to the draft report to state that CBP 
officials also told us that creating a definition of IP seizures that 
affect public health and safety is difficult because not all products 
within a given category necessarily pose such risks and the potential 
for such risks cuts across a broad range of products (see pp. 33-34). 
We modified our recommendation to state that CBP should continue to 
take steps toward better identifying IP seizures that pose a risk to 
public health and safety of the American people, and collect and report 
this data throughout the agency and to Congress (see p. 43). 

2. We reported on CBP's IP Rights Trade Strategy (a document that CBP 
refers to in its letter as the National IPR Trade Strategy) in our 
April 2007 report. We added information to this report to describe 
this trade strategy and note that it contains certain measures and 
indicators related to IP enforcement (see p. 34.) However, we also 
noted, as we did in our April 2007 report, that CBP officials told us 
this trade strategy was an internal planning document, and we 
determined it had limited distribution across CBP. For example, we 
found that revisions to the document had not been distributed to CBP 
ports since 2003 and given the document's status as "For Official Use 
Only," it is not distributed to Congress or the public. Therefore, we 
concluded in April 2007 that this document, while containing certain 
measures and indicators, has limited usefulness for holding CBP 
accountable for its performance on IP enforcement. At that time, we 
recommended that CBP work with OMB to include IP enforcement-related 
measures in its strategic plan and are pleased that CBP states in its 
current comment letter that it is in the process of taking such action. 

3. We do not understand why CBP is making comments in this report about 
analysis that appeared in our April 2007 report, but that is not 
reproduced in this report. That analysis showed that among the top 25 
IP-importing ports in fiscal year 2005, many ports' IP seizure rates 
(measured by value of IP seizures over value of IP imports) were lower 
than the group average. We did this analysis because CBP had not 
attempted to analyze its IP enforcement outcomes in this way. CBP made 
these same comments in April 2007; we disagreed with how CBP 
characterized our work at that time and continue to stand by our 
analysis. In that report, we said that this and other types of analysis 
contained in our April 2007 report represented approaches that CBP 
could take to better understand variations in IP enforcement outcomes 
across ports, inform resource allocations and management decisions, and 
further improve its IP enforcement. We continue to believe that CBP, 
and the other agencies, can better use existing data to understand 
their IP enforcement outcomes across field locations or product types 
as a way of further improving overall IP enforcement. 

4. See comment 1. 

[End of section] 

Appendix V: Comments from the Department of Justice: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

U.S. Department of Justice: 
Washington, D.C. 20530: 

February 21, 2008: 

Ms. Christine Broderick: 
Assistant Director: 
International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Broderick: 

On February 5, 2008, you provided the Department of Justice (DOJ or 
Department) with a copy of the General Accountability Office (GAO) 
draft report entitled Intellectual Property: Federal Enforcement Has 
Generally Increased, but Assessing Performance Could Strengthen Law 
Enforcement Efforts (08-157, Job Code 320471)(Report). The Department 
of Justice appreciates the time and effort put into this draft Report 
by GAO staff, as well as the professional courtesy you extended. We 
appreciate the opportunity to comment on the draft. In that regard, DOJ 
has objections and concerns with the report's findings. 

A. The Report Understates DOJ Enforcement Activity 

First, although the Report acknowledges "general increases" in 
enforcement activity by all agencies in recent years, it severely 
understates the recent increases in enforcement production by the 
Department of Justice since FY 2004 – that is, the year in which the 
Task Force on Intellectual Property began its aggressive work to 
improve the Department's IP enforcement program in all phases. The 
number of defendants charged with IP offenses increased dramatically 
from FY 2004 (177) to FY 2006 (339) –an increase of more than 90 
percent. This increase can be attributed, at least in part, to the 
Department's increased emphasis on multi-district and international 
prosecutions, which in turn led to more multi-defendant cases. Even 
with the increase in multi-defendant cases, the number of cases 
themselves also increased substantially, by more than 20 percent – from 
169 in FY 2005 to 204 in to FY 2006. To be fair, these kinds of 
enforcement results deserve better than a watered-down characterization 
as "general increases." [See comment 1] 

Moreover, the significant increases in prosecutions by the Department 
continued into FY 2007. For example, 287 defendants were sentenced on 
intellectual property charges in FY 2007, representing a 35 percent 
increase over FY 2006 (213) and a 92 percent increase over FY 2005 
(149). In addition, case filings also continued to increase: the 
Department filed 217 intellectual property cases in FY 2007, 
representing a 33 percent increase over cases reported in FY 2005 
(169). See, Table 1, below. [See comment 2] 

Table 1: Total Number of Intellectual Property Cases Filed FY 2001 - 
2007: 

Fiscal year: 2001; 
Cases filed: 151. 

Fiscal year: 2002; 
Cases filed: 129. 

Fiscal year: 2003; 
Cases filed: 163; 

Fiscal year: 2004; 
Cases filed: 129. 

Fiscal year: 2005; 
Cases filed: 164. 

Fiscal year: 2006; 
Cases filed: 204. 

Fiscal year: 2007; 
Cases filed: 217. 

[End of table] 

The Report also fails to adequately acknowledge the significant 
increase in training and resource allocation accomplished by the 
Department since 2001. For instance, in January 2001, there was only 
one CHIP Unit in the United States, in San Jose, California. Subsequent 
expansions that year, as well as in 2002, 2005, and 2006 have increased 
the total number of CHIP Units nationwide to 25. These Units consist of 
between two and eight Assistant U.S. Attorneys who receive specialized 
training annually in prosecuting intellectual property and computer 
crimes. See, Tables II and III, below. 

Table 2: Computer Hacking and Intellectual Property (CHIP) Units 
Installed Cumulative Total - FY 2000-2006: 

Fiscal year: 2000; 
Units installed: 1. 

Fiscal year: 2001; 
Units installed: 10. 

Fiscal year: 2002; 
Units installed: 13. 

Fiscal year: 2003; 
Units installed: 13. 

Fiscal year: 2004; 
Units installed: 18. 

Fiscal year: 2005; 
Units installed: 18. 

Fiscal year: 2006; 
Units installed: 25. 

[End of table] 

Table 3: 

Fiscal Year: 2000; 
Judicial Districts Where CHIPs Units Installed: NDCA. 

Fiscal Year: 2001; 
Judicial Districts Where CHIPs Units Installed: CDCA; SDCA; NDGA; DMA; 
EDNY; SDNY; NDTX; EDVA; WEWA. 

Fiscal Year: 2002; 
Judicial Districts Where CHIPs Units Installed: WDMO; NDIL; SDFL. 

Fiscal Year: 2003; 
Judicial Districts Where CHIPs Units Installed: None. 

Fiscal Year: 2004; 
Judicial Districts Where CHIPs Units Installed: EDCA; MDFL; WDPA; DDC; 
MDTN. 

Fiscal Year: 2005; 
Judicial Districts Where CHIPs Units Installed: None. 

Fiscal Year: 2006; 
Judicial Districts Where CHIPs Units Installed: WDTX; DMD; DCO; EDMI; 
DNJ; DCT; EDPA. 

[End of table] 

The growth of the CHIP Unit program reflects the Department's deep 
commitment to the prosecution of intellectual property and computer 
crimes, and it has resulted in tangible increases in prosecution 
successes. For example, in FY 2007, CHIP Units were responsible for 
sentencing 199 defendants for IP offenses, which represents an 80 
percent increase over the 110 defendants sentenced in CHIP Unit 
districts in 2006. 

Statistics alone are insufficient to accurately show the quality of 
improvements in the Department's prosecution activity. For instance, 
there have been numerous groundbreaking investigations and prosecutions 
during the past year, including: [See comment 4] 

* Three Indicted and Arrested in One of Largest Counterfeit Goods 
Prosecutions in U.S. History: On January 16, 2008, in Richmond, 
Virginia, a seven-count indictment was unsealed in one of the largest 
counterfeit goods prosecutions in U.S. history. The indictment charges 
three individuals with one count of conspiracy to traffic in 
counterfeit goods imported from the People's Republic of China (PRC), 
four counts of trafficking in counterfeit handbags, wallets, purses, 
and carry-on bags, and two counts of illegally smuggling counterfeit 
goods into the United States. ICE agents arrested the three defendants 
and executed a court order restraining defendants' numerous assets, 
including 29 bank accounts and three properties in New York. According 
to the indictment, the three defendants operated a massive 
international import and wholesale counterfeit goods business from 2002 
until at least Oct. 31, 2005, engaging in a corporate shell game 
whereby they conspired to, and in fact imported, over 300,000 
counterfeit luxury handbags and wallets into the United States from the 
PRC in the names of different companies, all under their control. The 
value of the corresponding authentic luxury goods manufactured by 
Burberry, Louis Vuitton, Gucci, Coach, and others, whose legitimate 
sales were displaced, is estimated to be over $100 million.
Ms. Christine Broderick	Page 4 

* Largest Ever Joint U.S.-China Criminal Enforcement Operation Nets 25 
Arrests and Over $500 Million in Counterfeit Software: On July 23, 
2007, Chinese officials arrested 25 Chinese nationals and seized more 
than half a billion dollars worth of counterfeit software as a result 
of the largest ever joint investigation conducted by the FBI and the 
People's Republic of China, code-named Operation Summer Solstice." 
China's Ministry of Public Security also searched multiple businesses 
and residential locations, seized more than $7 million in assets, and 
confiscated over 290,000 counterfeit software CDs and Certificates of 
Authenticity. 

* First Ever Extradition for Online Software Piracy/Extradited 
Australian Ringleader Sentenced to 51 Months in Prison: On June 22, 
2007, in Alexandria Virginia, Hew Raymond Griffiths was sentenced to 51 
months in prison for crimes committed as leader of one of the oldest 
and most renowned Internet software piracy groups worldwide, known as 
"Drink Or Die." From his home in Australia, Griffiths violated the 
criminal copyright laws of the United States by leading this criminal 
group which caused the illegal reproduction and distribution of more 
than $50 million worth of software, movies, games and music. This was 
one of the first ever extraditions for an intellectual property 
offense. 

* 50th Conviction in Largest Online Software Piracy Enforcement Action: 
On May 14, 2007, in Alexandria Virginia, the Department obtained the 
50th conviction in Operation FastLink, the largest and most successful 
global online piracy enforcement initiative ever conducted. This 
Operation culminated in the execution of more than 120 searches and 
arrests in 12 countries, the seizure of more than 200 computers, the 
complete dismantlement of 30 Internet distribution sites, and the 
confiscation of hundreds of thousands of counterfeit software titles 
valued at more than $50 million. This 50th conviction represented a 
milestone never before achieved in an online piracy prosecution. 

B. DOJ Has Appropriately Analyzed Its Enforcement Statistics: 

The Report concludes that the federal enforcement agencies — including 
DOJ — have done little "to systematically examine enforcement 
statistics." Report at 40. As one example of this type of systematic 
analysis, the Report analyzed the number of cases filed by U.S. 
Attorney's Offices by district and concluded that there was a "high 
correlation between IP enforcement activity and offices with resources 
dedicated to IP enforcement." Report at 41. [See comment 5] 

It is simply inaccurate to state that DOJ does not analyze its 
prosecution statistics, much less that it does not analyze them by 
district. We conduct such analysis routinely, and that analysis has 
helped inform the placement of additional CHIP Units around the 
country. Indeed, one of the IP Task Force's principal recommendations 
in its 2004 Report was to increase resource allocations to CHIP Units 
in key regions: [See comment 6] 

"The Department of Justice should reinforce and expand existing CHIP 
Units located in key regions where intellectual property offenses have 
increased, and where the CHIP Units have effectively developed programs 
to prosecute CHIP-related cases, coordinate law enforcement activity, 
and promote public awareness programs." 

The Department implemented this recommendation in January 2005, after a 
thorough assessment of CHIP Unit production nationwide, including 
analysis of case statistics by district. The Attorney General provided 
additional, full-time funding for a total of three AUSAs to serve as 
CHIP prosecutors in the Central and Northern District of California. 
Time has shown the wisdom of that decision: in FY 2006, the CHIP Units 
in the Northern and Central Districts of California charged a total of 
50 IP cases, out of a nationwide total of 204 IP cases, accounting for 
approximately 25 percent of the national total. 

Additionally, the Department considered case filings by district when 
it determined the locations of the 12 additional CHIP Units established 
since 2004, and it will continue to evaluate the need for additional 
CHIP Units in districts with a high incidence of IP and computer crime, 
or where additional prosecutors are best matched to local investigative 
resources. 

Although the Department does routinely conduct this type of statistical 
analyses to identify trends in domestic IP crime, we would not 
necessarily draw the same absolute conclusion that the GAO staff 
apparently reached — i.e., that more prosecutors in a district results 
in more prosecutions (and the underlying assumption that IP crime 
occurs at the same rate and magnitude in all districts). Report at 41. 
It is true that some of the largest CHIP Units, such as in the Central 
District of California (8 prosecutors) are also the most active in 
terms of IP case filings. But that is because, at least in part, the 
Department has tried to establish CHIP Units in areas of greater 
criminal activity (IP or cybercrime), and has allocated additional 
resources to those U.S. Attorneys Offices, like Los Angeles, that are 
most active, receive more case referrals, and/or have the highest level 
of commitment from local investigative agencies. [See comment 7] 

C. DOJ Has Established Appropriate Performance Measures and Goals to 
Assess Its Progress: 

The Report suggests in numerous places that DOJ has not established 
performance measures or goals that adequately assess its achievements. 
This is inaccurate. The Department has taken unprecedented steps to 
assess its achievements in the area of intellectual property 
enforcement. It has been especially aggressive in providing progress 
reports on the implementation of the 31 recommendations issued by its 
Task Force on Intellectual Property in 2004. This includes the Task 
Force's Progress Report in June 2006, as well as its annual reporting 
to the President and Congress as part of NIPLECC. See, e.g., "Report to 
the President and Congress on Coordination of Intellectual Property 
Enforcement and Protection" (January 2008). These reports can be 
accessed online through the following links: 

2007 NIPLECC Report (Jan 2008): 

[hyperlink, 
http://crmin05.crm.doj.gov:7778/pls/portal/docs/PAGE/CRIMLINK/PRESSROOM/
PRESSRELEASES/YR2008/01/012008-NIPLECCRPRT.PDF] 

2006 NIPLECC Report (Sept 2006): 

[hyperlink, 
http://www.commerce.gov/opa/press/Secretary_Gutierrez/2006Releases/Septe
mber/2006%20IP%20report.pdf] 

2006 DOJ IP Task Force Progress Report (June 2006): 

[hyperlink, http://www.cybercrime.gov/2006IPTFProgressReport6-19-
06).pdf] 

The above reports are replete with performance measures and goals. The 
DOJ has aggressively and thoroughly monitored its performance with 
respect to improving IP criminal enforcement. For example, the IP Task 
Force issued a detailed Progress Report in June 2006, providing 
extensive detail on which of its 31 recommendations had been 
implemented, and on which implementation was still ongoing. The Task 
Force has continued to set ambitious goals and objectives, and evaluate 
their achievement, on an annual basis. No other federal agency has been 
more aggressive in reviewing and improving its IP enforcement programs 
as the DOJ in the past few years, nor has any agency been more thorough 
in rating its progress and performance. 

What the Department of Justice's IP Task Force did not do, however, was 
set performance measures based on case quotas, numerical thresholds, or 
percentage "targets." The GAO views the absence of such numerical or 
percentage targets as a deficiency. The Department views it as a 
necessity. 

The GAO criticism reflects a failure to appreciate the core justice 
principle that criminal prosecutions should never be initiated — or 
judged -- based on actuarial tables or case quotas. As the GAO Report 
notes, many of the Task Force's recommendations called for "more" 
enforcement in critical areas, such as increases in the number and 
quality of prosecutions. As noted above, the DOJ achieved these goals 
with substantial increases in prosecution activity. For instance, in FY 
2006, 213 defendants were sentenced on intellectual property charges, 
representing nearly 50 percent increase over FY 2005 (149). Moreover, 
in FY 2005, 350 defendants were charged with intellectual property 
offenses, nearly double the 177 defendants charged in FY 2004 — 
representing a 98 percent increase. [See comment 9] 

The GAO report discounts these substantial increases because "without 
[numeric or percentage] measures or targets, it is not clear how 
certain achievements, such as increases in arrests or numbers of 
defendants charged with IP crimes, should be assessed because it is not 
clear what the agencies sought to achieve." Report at 43. As we 
attempted to explain in meetings with GAO drafters, however, the 
Department of Justice has intentionally resisted setting numeric or 
percentage "targets" as performance measures because it creates a risk 
that prosecutions could be initiated — or at least could be perceived 
as having been initiated — for the improper purpose of meeting 
prosecution quotas or the expectations of White House and Congressional 
officials. 

Federal prosecutors file criminal charges based on the individual 
merits of each case, and only where the prosecutor "believes that the 
person's conduct constitutes a Federal offense and that the admissible 
evidence will probably be sufficient to obtain and sustain a 
conviction." U.S. Attorney's Manual 9-27.220. Criminal actions should 
never be motivated by prosecution quotas or numerical/percentage goals, 
nor should the Department risk creating an appearance of improper 
motivation by setting this particular types of performance measure. 
There are other ways to assess performance. Indeed, the Department 
believes that doubling the number of defendants charged with IP crimes 
within a one year period, or increasing by 50 percent the number of 
defendants sentenced, are commendable results using any performance 
measure. They should not be discounted simply because the Department 
declined to set a specific numerical or percentage "target." [See 
comment 10] 

Thank you for the opportunity to submit our formal comments for 
inclusion in the final Report. The Department of Justice is committed 
to improving its intellectual property enforcement efforts, and we 
share with you the belief that accountability to the public and 
Congress are an important component of our law enforcement mission. 

Sincerely, 

Signed by Michael H. Allen: 
for: Lee J. Lofthus: 
Assistant Attorney General for Administration: 

Glossary Of Judicial Districts With CHIP Units Installed (in order of 
appearance in Table 3): 

Northern District California, MDCA: 
Central District California, CDCA:
Southern District California, SDCA: 
Northern District of Georgia, NDGA: 
District of Massachusetts, DMA: 
Eastern District of New York, EDNY: 
Southern District of New York, SDNY: 
Northern District of Texas, NDTX: 
Eastern District of Virginia, EDVA: 
Western District of Washington, WDWA: 
Western District of Missouri, WDMO: 
Northern District of Illinois, NDIL: 
Southern District of Florida, SDFL: 
Eastern District of California, EDCA: 
Middle District of Florida, MDFL: 
Western District of Pennsylvania, WDPA: 
District of the District of Columbia, DDC: 
Middle District of Tennessee, MDTN: 
Western District of Texas, WDTX: 
District of Maryland, DMD: 
District of Colorado, DCO: 
Eastern District of Missouri, EDMI: 
District of New Jersey, DNJ: 
District of Connecticut, DCT: 
Eastern District of Pennsylvania, EDPA. 

The following are GAO's comments on the Department of Justice letter 
dated February 21, 2008. 

GAO Comments: 

1. We disagree that our report severely understates DOJ's enforcement 
activities. Our analysis of federal IP enforcement efforts is a 
systematic evaluation of trends in key agencies' enforcement indicators 
over a 6-year period. Although there were fluctuations (i.e., increases 
and decreases) in individual indicators from year to year, we concluded 
that all the indicators, when taken as a whole, showed a general 
increase in federal IP enforcement efforts from the beginning to the 
end of the period examined. Moreover, we considered all indicators 
together because no single indicator from any one agency sufficiently 
reflects overall trends. The DOJ statistics we examined also showed 
increases and decreases during the time period. However, in its letter, 
DOJ selected statistics that only reflect increases, and it did so in 
one instance by comparing the lowest and highest levels for a given 
indicator, regardless of the year in which they occurred, which 
generated the highest possible percent increase for that indicator. We 
do not believe DOJ's analysis is useful for discerning overall long-
term trends. 

2. Our report is based on agency data covering fiscal years 2001 
through 2006. In several cases, fiscal year 2007 data became available 
as we were finalizing our report. However, given the challenges we 
faced in obtaining sufficiently reliable data from all agencies for the 
period we studied (see appendix I, pp. 48-51), we were unable to 
systematically update our data in a timely fashion to include fiscal 
year 2007 statistics. 

3. We disagree that our report gives insufficient attention to resource 
increases at DOJ for IP enforcement. Our report discusses the creation 
and growing number of CHIP units and also notes that the number of 
Assistant U.S. Attorneys trained to prosecute IP cases has grown in 
recent years (see p. 20). 

4. We agree with DOJ that statistics alone are not sufficient to 
accurately show the quality of improvements in IP enforcement activity. 
This is why we recommend that DOJ and the other agencies develop IP 
enforcement performance measures and targets to more systematically 
measure and report on their efforts. While the examples that DOJ 
provides of recent enforcement cases are useful illustrations of the 
types of enforcement activity that DOJ has undertaken, they do not 
provide a complete picture of DOJ's overall efforts over time. For 
example, as we state in our report, agencies including DOJ could 
analyze the types of IP cases it most commonly prosecutes or could 
report on the number of cases it has prosecuted involving IP crimes 
that posed a health and safety risk (see p. 32). 

5. In section B of its letter (pp. 4-5), DOJ addresses the issue of 
whether additional IP enforcement resources necessarily result in more 
IP prosecutions. On page 5 of its letter, DOJ provides information that 
demonstrates a correlation between increased IP resources in two U.S. 
Attorney's Offices and the number of IP cases prosecuted by those 
units, but then goes on to state that it would not necessarily 
conclude, as it said GAO did, that more prosecutors in a district 
results in more prosecutions. We agree that existing data across all 
U.S Attorney's Offices with CHIP units does not necessarily show a high 
correlation between increased CHIP unit resources and increased IP 
prosecutions, and removed this language. We modified our report to note 
that various factors, including crime levels, can affect the level of 
IP enforcement activity (see p. 33). 

6. We modified our report to state that DOJ reviewed its data on U.S. 
Attorney's Office prosecutions when deciding where to place additional 
CHIP units. However, at no time during this audit did DOJ indicate, or 
provide documentation reflecting, that it routinely analyzed IP 
prosecution data by district. We commend DOJ for examining the fiscal 
year 2006 IP enforcement activity of two of the CHIP units. Our 
analysis of DOJ's data on IP enforcement activity by all 94 U.S. 
Attorney's Offices showed a mix of activity among field offices across 
the 6-year period, including those with CHIP units. We believe that 
conducting such analysis on a more systematic basis can better inform 
DOJ about whether its allocation of resources is appropriate and not 
just inform placement of CHIP units. 

7. See comment 5. 

8. We mentioned in the draft report, under our discussion of agency 
priorities that DOJ has established some goals related to its IP 
enforcement efforts that are contained in an internal agency document 
not available to the public (see p. 15). We added information to refer 
again to this in our discussion of performance measures (see p. 35). 
However, we disagree that DOJ's Task Force report is replete with goals 
and measures. The Task Force report makes multiple recommendations for 
improving IP enforcement efforts, but recommendations are not the same 
as performance goals, and the report does not contain performance 
measures. Moreover, many of these recommendations are task-oriented 
actions rather than outcome-oriented. For example, one of DOJ's Task 
Force recommendations is to prosecute aggressively intellectual 
property offenses that endanger the public's health or safety; yet, DOJ 
does not provide any details on how they plan to achieve this 
recommendation and how they will measure their progress. Further, as we 
report, DOJ has not taken steps to capture enforcement statistics to 
assess their progress in this area. As we discuss in our report, 
strategic planning and assessment requires agencies to articulate 
outcome-oriented goals and objectives and to develop performance 
measures and targets that will enable them and others to determine 
whether they are making progress toward these goals. We added language 
to our report to better define outcome-oriented performance measures. 

9. We added information to the report to further explain the challenges 
associated with setting performance measures and targets in the law 
enforcement area (see p. 35). Our example of a performance measure and 
target was not intended to suggest that the agencies should adopt 
numerical case quotas or take any steps that would otherwise negatively 
affect the quality of their investigations. However, because it was 
interpreted in this way, and distracted attention from the more 
important discussion of adopting appropriate performance measures and 
targets, we removed the example. We continue to believe that DOJ can 
develop reasonable and acceptable measures and targets for IP 
enforcement. 

10. See comments 1 and 4. 

[End of section] 

Appendix VI: Comments from the Department of Health and Human Services: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

Department Of Health & Human Services: 
Office of the Assistant Secretary for Legislation: 
Washington, D.C. 20201: 

February 15, 2008: 

Loren Yager: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Yager: 

Enclosed are the Department's comments on the U.S. Government 
Accountability Office's (GAO) draft report entitled: Intellectual 
Property: Federal Enforcement has Generally Increased, but Assessing 
Performance Could Strengthen Law Enforcement Efforts" (GAO 08-157). 

The Department appreciates the opportunity to review and comment on 
this report before its publication. 

Sincerely, 

Signed by: 

Jennifer R. Luong: 
for: Vince Ventimiglia: 
Assistant Secretary for Legislation: 

General Comments Of The U.S. Department Of Health And Human Services 
(HHS) On The U.S. Government Accountability Office's (GAO) Draft 
Entitled: "Intellectual Property: Federal Enforcement Has Generally 
Increased, But Assessing Performance Could Strengthen Law Enforcement 
Efforts" (GAO 08-157): 

The Department does not agree with GAO's recommendation to "establish 
performance measures and targets for IP-related enforcement activity 
and report measures, targets, and performance to Congress and NIPLECC." 
As GAO notes, such measures and targets are difficult to establish in 
the law enforcement arena. For FDA, such measures and targets would not 
be meaningful, would be difficult to set, and might even be 
counterproductive. [See comment 1] 

The amount of criminal activity involving FDA-regulated products cannot 
be known in advance, or accurately predicted, for any given year. More 
specifically, the universe of potential cases cannot be accurately 
identified, making it difficult to set performance measures for their 
investigation. 

In its report, GAO offers an example of a performance target for DOJ 
as: "...to `increase by "yy" percent the number of prosecutions filed 
based on investigative agency referrals.'" FDA undertakes criminal 
investigations of counterfeit FDA-regulated products in response to 
reports and other information gathered by the agency. FDA evaluates 
these leads and potential cases to ascertain whether or not a full 
criminal investigation should be pursued. Imposing a percentage-based 
target might negatively affect the quality of cases brought if 
achievement of this percentage goal, rather than the merits of the 
cases, were to become a driving force for pursuing investigations. [See 
comment 2] 

GAO noted in its report that FDA already tracks its "achievements" 
regarding counterfeit FDA-regulated products. More precisely, FDA 
monitors the number of criminal investigations to identify any trends 
in product areas and to develop an understanding of the scope of 
counterfeiting in those areas. FDA plans to continue these monitoring 
efforts as a means to assess and refine our investigational approaches 
as appropriate. In addition, FDA collaborates, and will continue to 
collaborate, with other law enforcement agencies, as well as private 
sector entities, to advance FDA's efforts to address counterfeit 
products in accordance with the agency's mission to protect public 
health. However, for the reasons described above, establishing and 
reporting on performance measures for FDA's conduct of criminal 
investigations of counterfeit FDA-regulated products would not be 
meaningful or feasible, and might even be counter-productive. [See 
comment 3] 

Therefore, the Department does not concur with GAO's recommendation. 

The following are GAO's comments on the Department of Health and Human 
Services letter dated February 25, 2008. 

GAO Comments: 

1. While we acknowledged in our draft report that setting performance 
measures and targets in a law enforcement area is difficult, we added 
information to further explain why setting such measures and targets is 
a sensitive issue (see p. 35). We continue to believe that setting 
performance measures and targets is important, even in the law 
enforcement environment. However, because FDA's primary mission is to 
protect public health and safety, we reconsidered our recommendation 
that FDA set law enforcement-related measures and targets, and no 
longer direct this particular recommendation to FDA. 

2. We modified our report to provide additional information on the 
definition of output and outcome performance measures and targets (see 
p. 35). Our example of a performance measure and target was not 
intended to suggest that the agencies should adopt numerical case 
quotas or take any steps that would otherwise negatively affect the 
quality of their investigations. However, because it was interpreted in 
this way, and distracted attention from the more important discussion 
of adopting appropriate performance measures and targets, we removed 
the example. 

3. We commend FDA for monitoring the number of criminal investigations 
to identify any trends in product areas and to develop an understanding 
of the scope of counterfeiting in those areas. FDA mentioned for the 
first time in December 2007 that it conducts such analysis, but given 
the challenges we faced in obtaining sufficiently reliable data from 
all agencies for the period we studied (see appendix I, pp 48-51), we 
did not ask FDA to provide this analysis to us. Given the increasing 
threat posed by IP-infringing products that affect public health and 
safety, we believe it is important that the government improves its 
understanding of this threat. Therefore, we modified our recommendation 
to ICE, FBI and DOJ that agencies conduct analysis of their IP 
enforcement outcomes to also address this recommendation to FDA and to 
clarify that such analysis should be done systematically (see p. 43). 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Loren Yager (202) 512-4347 or yagerl@gao.gov: 

Staff Acknowledgments: 

Christine Broderick, Assistant Director; Shirley Brothwell; and 
Adrienne Spahr made significant contributions to this report. Virginia 
Chanley, Karen Deans, Ernie Jackson, Mark Molino, Jackie Nowicki, 
Dimple Pajwani, Suneeti Shah, Jena Sinkfield, Stephen Caldwell, Tony 
DeFrank, Rebecca Gambler, Michael Simon, Tom Costa, and Jennifer Young 
also provided assistance. 

[End of section] 

Footnotes: 

[1] The Economic Impact of Counterfeiting and Piracy, Organization for 
Economic Cooperation and Development (Paris, 2007). 

[2] We recognize that DOJ's Criminal Division and the U.S. Attorney's 
Offices are not agencies, but these offices work in parallel with the 
other agencies we reviewed. Thus, DOJ and its entities are discussed in 
this report as one of the key federal IP enforcement "agencies" for 
ease of reference. Other federal agencies also play a role in 
protecting and enforcing IP rights, but we focus in this report on the 
key federal law enforcement agencies. 

[3] FDA's primary mission is to ensure public health and safety. It has 
both regulatory and law enforcement authorities and responsibilities. 
FDA's Office of Criminal Investigations pursues counterfeit product 
investigations in furtherance of the agency's public health mission. 
Since these counterfeit product cases have an impact on the protection 
of IP rights, we chose to include FDA in this report. 

[4] We have previously reported on NIPLECC. See GAO, Intellectual 
Property: Strategy for Targeting Organized Piracy (STOP) Requires 
Changes for Long-Term Success, GAO-07-74 (Washington, D.C.: Nov. 8, 
2006). 

[5] GAO, Intellectual Property: Better Data Analysis and Integration 
Could Help U.S. Customs and Border Protection Improve Border 
Enforcement Efforts, GAO-07-735 (Washington, D.C.: Apr. 26, 2007). 

[6] The field locations we selected were based on the locations we 
examined in our April 2007 report on CBP (GAO-07-735). For that report, 
we selected a mix of ports with high and medium import levels, measured 
by value. For this report, we conducted work at ICE, FBI, and DOJ field 
offices co-located near these ports to get a sense of the local federal 
enforcement environment. We did not disclose port identities in our 
2007 report for law enforcement reasons; we maintain that 
confidentiality in this report for the same reasons. 

[7] CBP is required to exclude goods that are subject to an "exclusion 
order" issued by the United States International Trade Commission 
(ITC). The Commission investigates allegations of unfair import 
practices and issues exclusion orders in cases where it has found 
unfair import practices. These cases typically involve allegations of 
patent or trademark infringement. 

[8] The term "legacy Customs" refers to the U.S. Customs Service, which 
was responsible for collecting revenue in the form of customs duties, 
taxes, and fees. The center was originally established to be a 
coordination body between FBI and Customs. Upon the creation of DHS, 
Customs' role was shifted to ICE and CBP. 

[9] Stephen E. Siwek, Economists Incorporated, Engines of Growth: 
Economic Contributions of the U.S. Intellectual Property Industries 
(2005). 

[10] The Economic Impact of Counterfeiting and Piracy, Organization for 
Economic Cooperation and Development (Paris, 2007). 

[11] These IP rights grant registrants limited exclusive ownership over 
whatever economic rewards the market may provide for their creations 
and products. A copyright provides protection for literary and artistic 
works such as books, musical compositions, computer software, and 
movies. A copyright is a property right in an original work of 
authorship that arises automatically upon creation of such a work and 
belongs, in the first instance, to the author. A patent protects an 
invention by giving the inventor the right to exclude others from 
making, using, or selling a new, useful, nonobvious invention during a 
specific term. Trademarks are words, phrases, logos, or other graphic 
symbols used by manufacturers or merchants to identify their goods and 
distinguish them from others. Other types of intellectual property 
include trade secrets, industrial designs, and geographic indications. 
Geographic indications are names used to identify products with 
quality, reputation, or other characteristics attributable to the 
origin of the product. 

[12] Such authority is granted under Section 337 of the Tariff Act of 
1930, 19 U.S.C 1337. 

[13] U.S. International Trade Commission Investigation Number 337-TA-
445, January 5, 2007. 

[14] Exclusion orders involving patents are generally in effect until 
the patent expires. Exclusion orders involving trademarks are in effect 
as long as the trademark is valid and is recognized by the granting 
agency as being in force. 

[15] In September 1999, Congress authorized NIPLECC (Public Law 106-
58). In December 2004, Congress passed legislation to enhance NIPLECC's 
mandate (Public Law 108-447). See GAO-07-74. 

[16] The council's membership includes officials from: CBP, ICE, DOJ, 
the Department of Commerce, the U.S. Patent and Trademark Office, the 
Department of State, and the Office of the U.S. Trade Representative. 
NIPLECC is required to consult with the Register of Copyrights. DOJ and 
the U.S. Patent and Trademark Office are co-chairs. The Coordinator for 
International IP Enforcement (IP Coordinator), a presidential 
appointee, heads NIPLECC and resides in the Department of Commerce. See 
GAO-07-74. 

[17] STOP's five goals are to: (1) empower American innovators to 
better protect their rights at home and abroad, (2) increase efforts to 
seize counterfeit goods at our borders, (3) pursue criminal enterprises 
involved in piracy and counterfeiting, (4) work closely and creatively 
with U.S. industry, and (5) aggressively engage our trading partners to 
join our efforts. 

[18] State and local government officials also carry out enforcement of 
IP laws, and private sector companies and industry associations whose 
products are counterfeited and pirated often carry out their own 
enforcement efforts. 

[19] We have previously reported on CBP's efforts to enforce IP rights 
at the border, including its efforts to target and seize counterfeit 
goods and assess penalties. See GAO-07-735. 

[20] As of fiscal year 2006, CBP's Priority Trade Issues included 
agriculture, antidumping and countervailing duties, IP rights, 
penalties, revenue, and textiles and wearing apparel. 

[21] We reported in April 2007 that a lack of integration between these 
two offices impedes CBP's ability to improve its IP enforcement 
efforts. See GAO-07-735. 

[22] The division also investigates immigration violations, customs 
fraud, and cases involving worksite enforcement and human smuggling. 

[23] The Cyber Crimes Center is often referred to by the acronym "C3." 

[24] As of 2006, FBI had 10 priority enforcement areas. The first 8 in 
order of importance are to: (1) protect the U.S. from terrorist attack; 
(2) protect the U.S. against foreign intelligence operations and 
espionage; (3) protect the U.S. against cyber-based attacks and high-
technology crimes; (4) combat public corruption at all levels; (5) 
protect civil rights; (6) combat transnational and national criminal 
organizations and enterprises; (7) combat major white collar crime; and 
(8) combat significant violent crime. In addition, FBI aims to (9) 
support federal, state, local, and international partners; and (10) 
upgrade technology to successfully perform FBI's mission. 

[25] Cyber Division's six priorities are, in order of importance: (1) 
computer intrusions involving counterterrorism, (2) computer 
intrusions involving counterintelligence, (3) other computer 
intrusions, (4) innocent images (child pornography), (5) IP 
enforcement, and (6) Internet fraud. In April 2006, the Cyber Division 
lowered the priority of IP enforcement to 5th rank and elevated the 
priority of child pornography to 4th rank. Despite this decrease in 
stated priority, Cyber Division officials said that IP investigations 
remain a major focus of their program, particularly investigations 
targeting health and safety issues. 

[26] This division also conducts investigations of computer intrusions 
and child pornography. 

[27] The Federal Food, Drug and Cosmetic Act (21 U.S.C. 301 et seq.) 
provides legal authority for FDA to conduct counterfeit product 
investigations and enforcement actions. In addition, FDA brings charges 
under the statute that prohibits trafficking in counterfeit goods (18 
U.S.C. 2320). 

[28] See DOJ 2006 Task Force report, [hyperlink, 
http://www.usdoj.gov/criminal/cybercrime/ip.html]. The Task Force 
continues to monitor DOJ's implementation of these recommendations. 

[29] Under the CHIP program, prosecutors are assigned four areas of 
responsibility: prosecuting computer crime and IP offenses; serving as 
a technical advisor for other prosecutors and law enforcement agents; 
assisting other CHIP coordinators in multi-district investigations; and 
providing training and community outreach regarding computer-related 
issues. 

[30] During 2003 through 2005, all 11 International Trade Specialists 
were assigned to headquarters but worked out of CBP's Strategic Trade 
Center in Los Angeles and a satellite office in San Francisco. In 2006, 
the number of staff performing targeting in the field was reduced to 8. 
Three positions were shifted to headquarters, and the staff in these 
positions were not performing targeting. As of July 2007, CBP increased 
the number of specialists in the field to 12 and the number in 
headquarters to 5. The increase in the field enabled CBP to reduce the 
number of industries for which each specialist is responsible. 

[31] CBP officers are responsible for examining shipments with 
suspected counterfeit goods, but one of their primary focus is 
screening cargo for weapons of mass destruction. Import specialists are 
responsible for applying duties to imports and develop expertise in 
certain goods, including a determination of whether imports are 
counterfeit. Fines, Penalties, and Forfeiture officers are responsible 
for assessing penalties against importers that violate U.S. trade laws, 
as well as those that traffic in counterfeit goods. 

[32] GAO, Border Security: Despite Progress, Weaknesses in Traveler 
Inspections Exist at Our Nation’s Ports of Entry, GAO-08-219 
(Washington, D.C.: Nov. 5, 2007). 

[33] GAO, Customs Revenue: Customs and Border Protection Needs to 
Improve Workforce Planning and Accountability, GAO-07-529 (Washington, 
D.C.: Apr. 12, 2007). 

[34] ICE and FDA use different calculations to compute their FTE 
equivalents. We used the formulas provided by the agencies. 

[35] DOJ's relatively recent data collection effort did not allow us to 
track attorney time spent on IP enforcement over time, as we have done 
for other agencies. 

[36] GAO-07-735. 

[37] Domestic value is calculated as the landed cost plus profit (the 
cost of the merchandise when last purchased, plus all duties, fees, 
broker's charges, profit, unlading charges, and U.S. freight charges to 
bring the good to the importer's premises), a value generally lower 
than the price at which the goods might sell to the final consumer. 

[38] CBP officials said that many violators petition to have a penalty 
mitigated or dismissed, and these actions often reduce the amount of 
the penalty that CBP collects. They said that the statutory fines are 
large, and when a collection action goes to court, DOJ attorneys who 
prosecute the government's case are reluctant to pursue the case 
because they view the penalty amounts as excessive. One agency official 
explained that some penalties are dismissed as a result of the case 
going to criminal prosecution, in which the U.S. Attorney negotiates to 
have a penalty dropped in exchange for information or other evidence 
that will support the criminal case. Also, the deceptive nature of 
counterfeit importation makes it difficult for CBP to track violators 
and enforce penalties. 

[39] CBP is required to exclude from entry to the United States goods 
that are subject to exclusion orders issued by the U.S. International 
Trade Commission. Such orders are issued when the commission has found 
unfair import practices, typically involving patent or trademark 
infringement. 

[40] Trade Alerts are developed by attorneys in CBP's Office of 
International Trade, based on U.S. International Trade Commission 
documents related to the exclusion order, and explain how to identify 
the goods that are to be excluded. 

[41] According to CBP, most of the IP discrepancies it found in the 
course of conducting exclusion order exams were not violations of the 
order, but were other types of IP discrepancies, such as trademark 
violations, that it found during the exam. 

[42] CBP was unable to provide similar data for 2001. 

[43] CBP officials said that, in terminating its targeting, CBP 
reviewed current use of the patented technology--a process for creating 
acid-wash jeans--covered by the order as well as the results of its 
exams, which CBP officials said uncovered no violations of the order. 

[44] Under 19 U.S.C. 1499 and Customs regulation 19 C.F.R. 12.39, CBP 
notifies importers and other interested parties when it detains goods 
for examination. In cases involving IP infringement, CBP notifies the 
affected rights holder of the detention. In addition, CBP also notifies 
the rights holder when it seizes IP-infringing goods that bear 
counterfeit trademarks (under 19 C.F.R. 133.21(c)) or goods seized as 
piratical (under 19 C.F.R. 133.42(d)). 

[45] When it provided this data to us, CBP stated that enforcement 
activity based on exclusion orders can vary, depending on the nature of 
trade in the product covered by the order. These orders may result in a 
flurry of enforcement activity for a few weeks, months, or years, 
depending on trade trends. For example, the order may cover a product 
for which demand is high for a short period of time. However, orders 
may continue to be legally in effect after trade in the product has 
ceased. 

[46] According to CBP officials, issuing exclusion orders is a multi-
step process that involves, among other steps, coordinating with the 
U.S. International Trade Commission prior to an order's issuance, 
making legal and other determinations after an order issues, often in 
consultation with the company filing for an order, and coordinating 
enforcement efforts within CBP after instructions have been crafted. 

[47] CBP provided exclusion order issue and Trade Alert dates for the 
29 orders it said it was enforcing as of July 2007. However, the Trade 
Alert date it provided for 11 orders was not the date that the Alert 
was originally posted to its Web site, so we removed these orders from 
our analysis. The time lag for posting the Trade Alerts we analyzed 
ranged from 1 week to slightly over 10 months. 

[48] CBP said that two of the orders for which it performed no 
targeting involved products that typically enter the United States via 
express mail consignment (e.g., Federal Express or similar providers), 
a mode of transport for which its electronic targeting is not used. For 
two other orders, it said that targeting action by CBP was not required 
due to the lack of import activity. CBP provided no explanation for its 
lack of targeting for the remaining three orders. 

[49] The specific orders for which instructions existed varied during 
this time period, with instructions for older orders being removed and 
instructions for new orders being added. Of the 25 orders for which 
targeting instructions existed in 2003, 14 were still in effect as of 
February 2008. However, only one of these orders was continuously 
enforced from fiscal years 2003 through 2006. 

[50] The number of FDA's cases opened is much lower than ICE's and 
FBI's number of cases because of FDA's narrow jurisdiction. 

[51] The data we report for ICE differ from data that ICE has provided 
in the past to NIPLECC's IP Coordinator for inclusion in the IP 
Coordinator's quarterly updates on federal IP enforcement efforts [see 
hyperlink, http://www.stopfakes.gov]. In many instances, the numbers we 
report are lower. We discussed these differences with ICE, which 
explained that enforcement data pulled from its systems may vary each 
time the data are requested because its systems are continually 
updated. More importantly, the parameters ICE used to create the data 
for the IP Coordinator differed somewhat from the parameters that ICE 
advised us to use. We believe our parameters provide a more accurate 
representation of ICE's IP enforcement activities. Data on ICE's 
arrests, indictments, and convictions were not included in the IP 
Coordinator's quarterly update for the fourth quarter of 2007. 

[52] Not all persons who are investigated for, or charged with, IP 
crimes are convicted and sentenced for those crimes, although they 
still may receive prison sentences. According to DOJ officials, persons 
who are investigated for the commission of both IP crimes and related 
crimes that carry potentially lengthier sentences may receive 
convictions and sentences for the more serious crimes in lieu of IP 
convictions. In such a case, an IP charge may be dismissed pursuant to 
plea negotiations, or it may not be filed at all. Additionally, if an 
IP offense is charged only as a conspiracy, DOJ states that the 
conspiracy charge will generally not be recorded as an IP charge or an 
IP conviction in DOJ's database for prosecutions by U.S. Attorney's 
Offices. 

[53] The IP statutes specify statutory maximum sentences for a first 
offense of 3 to 5 years for copyright violations, and up to 10 years 
for both trademark and trade secret violations. 

[54] According to DOJ, defendants are sentenced pursuant to the U.S. 
Sentencing Guidelines, and for most IP offenses are determined based on 
offense level 8 (0-6 months) for most IP offenses, with offense-level 
enhancements for, among other things, infringement amount, 
manufacturing or importation, and conscious or reckless risk of serious 
bodily injury. 

[55] We reviewed agency statistics by field office and aggregated by 
fiscal year. Field office level statistics are considered law 
enforcement sensitive so details on the locations are not provided in 
this report. 

[56] GAO-07-735. 

[57] We recommended that CBP use existing data to understand and 
improve IP enforcement activity by analyzing IP enforcement outcomes 
across ports and other useful categories, such as modes of transport. 
See GAO-07-735. 

[58] We reviewed the most recent agency strategic plans available, 
including DHS's 2004 strategic plan; CBP's strategic plan for fiscal 
years 2005-2010; ICE's interim strategic plan dated July 2005; DOJ's 
strategic plan for fiscal years 2007-2012; and FDA's strategic plan, 
dated August 2003. 

[59] CBP has an IP Rights Trade Strategy that contains certain 
performance measures and targets for IP enforcement, such as improving 
by 15 percent the efficiency of its efforts to target shipments 
containing IP violations and increasing the number and value of 
seizures meeting the strategy's goal by 15 percent. However, the 
document lacks baselines against which to measure progress. FBI 
articulates annual IP enforcement goals in a memo to its field offices, 
but does not include performance measures or targets. DOJ task force 
reports on IP enforcement contain recommendations for DOJ action, but 
no measures or targets. In 2007, DOJ developed its first IP enforcement 
strategy with enforcement objectives and some performance measures, but 
this document is for internal government use only, and we cannot 
disclose its contents. 

[60] For example, we found in our April 2007 report that CBP's IP 
Rights Trade Strategy is an internal document with limited distribution 
throughout CBP and therefore has limited usefulness as a tool to guide 
the agency's IP enforcement efforts. See GAO -07-735. DOJ's 2007 
strategy is also for internal use only. 

[61] The Government Performance and Results Act of 1993 (GPRA, Pub. L. 
No. 103-62) requires federal agencies to develop strategic plans with 
long-term, outcome-oriented goals and objectives, annual goals linked 
to achieving the long-term goals, and annual reports on the results 
achieved. 

[62] GAO, Internal Controls: Standards for Internal Controls in the 
Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 
1999). 

[63] GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 
1996). 

[64] We reported that NIPLECC's strategy was limited because it did not 
fully address the characteristics of an effective national strategy, 
missing elements such as a discussion of performance measures, 
resources, risk management, and designation of oversight 
responsibility. Although the strategy cites some output-related 
performance measures provided by the different agencies, we reported 
that these figures were presented without historical data on prior 
years or goals, limiting their usefulness to guide policy and decision 
makers in assessing performance, allocating resources, and balancing 
priorities. See GAO-07-74. 

[65] See Conference Reports: 106-1005, accompanying P.L. 106-553; 107-
253, accompanying P.L. 107-67; 108-10 accompanying P.L. 108-7 and 108-
280 accompanying P.L. 108-90. 

[66] In 2004, we reported that after its creation, NIPLECC struggled to 
define its purpose, had leadership problems, and was regarded by 
Congress and the private sector as having had little discernable 
impact, having done little else in its early years than issue annual 
reports on federal IP enforcement efforts. This was due in part to a 
lack of clear expectations in its authorizing legislation. See 
GAO-04-912. Congress clarified NIPLECC's mission in the 2005 
Consolidated Appropriations Act, calling on it to (1) establish 
policies, objectives, and priorities concerning international IP 
protection and enforcement; (2) promulgate a strategy for protection of 
American IP overseas; and (3) coordinate and oversee implementation of 
the policies, objectives, priorities, and overall strategy for 
protection of IP overseas by agencies with IP responsibilities. See 
GAO-07-74. 

[67] GAO-04-912. 

[68] In 2006, the center was moved from its original physical location 
to a temporary location that lacked the required security precautions 
to install FBI's classified computer system. As a result, FBI removed 
its staff and computers from the center because it could no longer 
assure the security of its data. 

[69] GAO-04-912. 

[70] NIPLECC's staff include the IP Coordinator, a policy analyst, 
press and legislative assistants, and various trade-or policy-oriented 
detailees from the participating agencies. 

[71] Specifically, the conference report directed FBI to allocate 
"$612,000 (8 positions and 4 workyears, including 2 agents)." 
Conference Report 106-1005, accompanying P.L. 106-553. 

[72] Conference Report 107-253, accompanying P.L. 107-67. 

[73] Conference Report 108-10 accompanying P.L. 108-7. The purpose of 
the clearinghouse was to gather IP rights information from other 
federal as well as state and local agencies. According to CBP 
officials, the funding that Customs was directed to provide in fiscal 
year 2003 was recurred at about $4.6 million to reflect the absence in 
that fiscal year of one-time costs that were present in fiscal year 
2002. Also, CBP officials said that the direction to Customs to 
allocate an additional $1.4 million was reduced to $1.39 million 
following a $9,100 rescission. 

[74] Conference Report 108-280 accompanying P.L. 108-90. According to 
ICE officials, the funding that it was directed to provide in fiscal 
year 2004 was reduced to about $6.36 million due to a rescission 
contained in the Consolidated Appropriations Act, 2004 (P.L. 108-199). 

[75] See footnote 66. 

[76] The center will be co-located with two other ICE initiatives: ICE 
Mutual Agreement between Government and Employers (IMAGE) and the 
Washington Field Office's Document and Benefit Fraud Task Force. 

[77] GAO-07-735. 

[78] Our April 2007 report included analysis and information about IP 
enforcement at the ports we visited. We withheld information on these 
ports' identity for law enforcement reasons. Therefore, we cannot 
disclose this information in this report. 

[79] GAO-04-912; GAO-07-74; and GAO-07-735. 

[80] The IP Coordinator reports quarterly on IP enforcement. These 
reports are posted on the Stop Fakes Web site [hyperlink, 
http://www.stopfakes.gov] and have been distributed at public events 
such as the U.S. Chamber of Commerce's Coalition Against Counterfeiting 
and Piracy monthly meetings. Several of these reports, including the 
report for the third quarter of 2007, have contained data on ICE's 
arrest, indictments, and convictions. However, the data was not 
included in the fourth quarter report for 2007. 

[81] In addition to the laws cited in the table, the Federal Food, Drug 
and Cosmetic Act (21 U.S.C. 301 et seq.) provides legal authority for 
FDA to conduct counterfeit product investigations and enforcement 
actions. 

[82] Most of the companies we interviewed were large companies with 
anti-counterfeiting and/or piracy initiatives. 

[83] GAO-07-735. 

[End of section] 

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