Intellectual Property: Leadership and Accountability Needed to
Strengthen Federal Protection and Enforcement (17-JUN-08,
GAO-08-921T).
U.S. government efforts to protect and enforce intellectual
property (IP) rights domestically and overseas are crucial to
preventing billions of dollars in losses to U.S. industry and IP
rights owners. The illegal importation and distribution of
IP-infringing goods also poses a threat to the health and safety
of U.S. citizens. However, the challenges involved in IP
protection are significant and require effective coordination
among a wide range of policy and law enforcement agencies.
Multiple agencies work to protect IP rights, and they coordinate
their efforts through certain coordination bodies as well as an
executive- branch strategy called the Strategy Targeting
Organized Piracy (STOP). This testimony addresses two topics: the
need for (1) greater leadership and permanence in the national IP
enforcement strategy and coordination structure; and (2)
improvement in key agencies' criminal IP enforcement data
collection and analysis. It is based on prior GAO work conducted
from 2003 to 2008.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-921T
ACCNO: A82391
TITLE: Intellectual Property: Leadership and Accountability
Needed to Strengthen Federal Protection and Enforcement
DATE: 06/17/2008
SUBJECT: Accountability
Agency missions
Crime prevention
Data collection
Data integrity
Federal agencies
Intellectual property
Interagency relations
International relations
Investigations by federal agencies
Law enforcement
Performance measures
Property rights
Reporting requirements
Risk assessment
Risk management
Strategic planning
Program coordination
program goals or objectives
Strategy Targeting Organized Piracy
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GAO-08-921T
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Testimony:
Before the Committee on the Judiciary, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Tuesday, June 17, 2008:
Intellectual Property:
Leadership and Accountability Needed to Strengthen Federal Protection
and Enforcement:
Statement of Loren Yager:
Director, International Affairs and Trade:
Intellectual Property:
GAO-08-921T:
GAO Highlights:
Highlights of GAO-08-921T, a testimony before the Committee on the
Judiciary, U.S. Senate.
Why GAO Did This Study:
U.S. government efforts to protect and enforce intellectual property
(IP) rights domestically and overseas are crucial to preventing
billions of dollars in losses to U.S. industry and IP rights owners.
The illegal importation and distribution of IP-infringing goods also
poses a threat to the health and safety of U.S. citizens. However, the
challenges involved in IP protection are significant and require
effective coordination among a wide range of policy and law enforcement
agencies. Multiple agencies work to protect IP rights, and they
coordinate their efforts through certain coordination bodies as well as
an executive-branch strategy called the Strategy Targeting Organized
Piracy (STOP).
This testimony addresses two topics: the need for (1) greater
leadership and permanence in the national IP enforcement strategy and
coordination structure; and (2) improvement in key agencies� criminal
IP enforcement data collection and analysis. It is based on prior GAO
work conducted from 2003 to 2008.
What GAO Found:
The coordinating structure that has evolved for protecting U.S.
intellectual property rights lacks leadership and permanence,
presenting challenges for effective long-term coordination. The
National Intellectual Property Law Enforcement Coordination Council
(NIPLECC), created by Congress in 1999, serves to coordinate IP
protection and enforcement across agencies; and STOP, initiated by the
White House in 2004, is the strategy that guides the council. NIPLECC
has struggled to define its purpose and has an image of inactivity
within the private sector. It continues to have leadership problems
despite enhancements made by Congress in 2004 to strengthen its role.
STOP, which is led by the National Security Council, has a more
positive image compared to NIPLECC, but lacks permanence since its
authority and influence could disappear after the current
administration. While NIPLECC adopted STOP in 2006 as its strategy for
protecting IP overseas, its commitment to implementing STOP as a
national strategy remains unclear, creating challenges for
accountability and long-term viability.
Agencies within the Departments of Justice, Homeland Security, and
Health and Human Services that play a role in fighting IP crimes
through seizures, investigations, and prosecutions need to improve
their collection and analysis of IP enforcement data. IP enforcement is
generally not the highest priority for these agencies, given their
broad missions, but addressing IP crimes with a public health and
safety risk, such as counterfeit pharmaceuticals, is an important
activity at each agency. Federal IP enforcement actions generally
increased during fiscal years 2001�2006, but the agencies have not
taken steps to assess their achievements. For example, despite the
importance assigned to targeting IP crimes that affect public health
and safety, most agencies lack data on their efforts to address these
types of crimes. Also, most have not systematically analyzed their IP
enforcement statistics to inform management and resource allocation
decisions or established IP-related performance measures or targets. In
addition, the National Intellectual Property Rights Coordination
Center, created to coordinate federal IP investigative efforts, has not
achieved its mission. Participating agencies have lacked a common
understanding of the center�s purpose and their roles in relation to
it, and staff levels have declined.
What GAO Recommends:
Previous GAO reports recommended, among other things, improvements in
the strategic planning and coordination of IP enforcement efforts and
in agency collection and analysis of IP enforcement data. The affected
agencies generally agreed with our recommendations and some have begun
taking steps in response.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-921T]. For more
information, contact Loren Yager at (202) 512-4347 or [email protected].
[End of section]
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to appear today before the Judiciary
Committee to discuss our work on U.S. efforts to protect and enforce
intellectual property (IP) rights. U.S. government efforts to protect
and enforce intellectual property rights domestically and overseas are
crucial to preventing billions of dollars in losses to U.S. industry
and IP rights owners. Along with the costs to the U.S. economy, the
illegal importation and distribution of counterfeit and pirated goods
poses a threat to the health and safety of U.S. citizens. However, the
challenges involved in IP protection are significant, and include the
technological advances that facilitate piracy as well as the need for
effective coordination among a wide range of policy and law enforcement
agencies.
In my statement today, I will address two topics: the need for (1)
greater leadership and permanence in our national IP enforcement
coordination structure and strategy; and (2) improvement in key
agencies' criminal IP enforcement data collection and analysis.
My remarks are based on a variety of assignments that GAO has conducted
on intellectual property protection over the past 5 years.[Footnote 1]
In this research, we performed work at multiple U.S. agency
headquarters in Washington, D.C., agency field offices, and U.S. ports
across the country. We reviewed key U.S. government IP reports and
relevant agency documents, including IP enforcement data. In addition,
we met with representatives from multiple industry associations and
companies that are affected by IP violations. We conducted our work
from June 2003 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.
Summary:
The current U.S. government coordinating structure that has evolved for
protecting and enforcing U.S. intellectual property rights lacks
leadership and permanence, presenting challenges for effective and
viable coordination for the long term. The National Intellectual
Property Law Enforcement Coordination Council (NIPLECC), created by
Congress in 1999, serves to coordinate IP protection and enforcement
across multiple agencies; and the Strategy for Targeting Organized
Piracy (STOP), initiated by the White House in 2004, is the strategy
that guides the council. NIPLECC has struggled to define its purpose
and retains an image of inactivity within the private sector. It
continues to have leadership problems despite enhancements made by
Congress in December 2004 to strengthen its role. In contrast, STOP,
which is led by the National Security Council, has a more positive
image compared to NIPLECC, but lacks permanence since its authority and
influence could disappear after the current administration. While
NIPLECC adopted STOP in February 2006 as its strategy for protecting IP
overseas, its commitment to implementing STOP as a national strategy
remains unclear, creating challenges for accountability and long-term
viability.
Agencies within the Departments of Justice (DOJ), Homeland Security
(DHS), and Health and Human Services (HHS) that play a role in fighting
IP crimes need to improve their collection and analysis of IP
enforcement data. Federal IP enforcement functions include seizures,
investigations, and prosecutions. IP enforcement is generally not the
highest priority for these agencies, given their broad missions, but
addressing IP crimes with a public health and safety risk, such as
counterfeit pharmaceuticals, is an important enforcement activity at
each agency. Federal IP enforcement actions generally increased during
fiscal years 2001-2006, but the agencies have not taken steps to assess
their achievements. For example, despite the importance assigned to
targeting IP crimes that affect public health and safety, we found that
most agencies lack data to report on or analyze their efforts to
address these types of crimes. Also, most have not systematically
analyzed their IP enforcement statistics to inform management and
resource allocation decisions or established IP-related performance
measures or targets to assess their achievements. We also found that
the National Intellectual Property Rights Coordination Center, an
interagency mechanism created to coordinate federal investigative
efforts related to IP crimes, has not achieved its mission, in part
because participating agencies have lacked a common understanding of
the center's purpose and their roles in relation to it, and staff
levels have declined.
Background:
Intellectual property, for which the U.S. government provides broad
protection through means such as copyrights, patents, and trademarks,
plays a significant role in the U.S. economy, and the United States is
an acknowledged leader in its creation. According to the U.S.
Coordinator for International Intellectual Property Enforcement,
industries that relied on IP protection were estimated to account for
over half of all U.S. exports, represented 40 percent of U.S. economic
growth, and employed about 18 million Americans in 2006. These
industries must compete with the global illicit market that is being
spurred by economic incentives such as low barriers to entry into
counterfeiting and piracy, high profits, and limited legal sanctions if
caught. In addition, technology has made reproduction and distribution
of some products more accessible, and some countries, particularly
China, continue to have weak IP enforcement despite U.S. efforts.
Multiple federal agencies undertake a wide range of activities to
protect and enforce IP rights. The Departments of Commerce and State,
the U.S. Trade Representative (USTR), the Copyright Office, the U.S.
International Trade Commission, and the U.S. Patent and Trademark
Office play a role in IP protection. Key federal law enforcement
agencies that play a role are DHS's Customs and Border Protection (CBP)
and Immigration and Customs Enforcement (ICE), and DOJ's Criminal
Division, U.S. Attorneys Offices, and the Federal Bureau of
Investigation (FBI). HHS's Food and Drug Administration (FDA) and the
U.S. International Trade Commission also help enforce IP rights.
U.S. IP Enforcement Structure and Strategy Need Stronger Leadership and
Permanence:
The current coordinating structure for U.S. protection and enforcement
of intellectual property rights lacks clear leadership, hampering the
effectiveness and long-term viability of such coordination. Created in
1999 to serve as the central coordinating structure for IP enforcement
across federal agencies, NIPLECC has struggled to define its purpose,
retains an image of inactivity within the private sector, and continues
to have leadership problems despite enhancements made by Congress in
December 2004 to strengthen its role. In addition, in July 2006, Senate
appropriators expressed concern about the lack of information provided
by NIPLECC on its progress.
In contrast, the presidential initiative called STOP, which is led by
the National Security Council, has a positive image compared to
NIPLECC, but lacks permanence, since its authority and influence could
disappear after the current administration leaves office. Many agency
officials said that STOP has increased attention to IP issues within
their agencies, in the private sector, and abroad; they attributed this
to the fact that STOP came out of the White House, thereby lending it
more authority and influence. While NIPLECC adopted STOP as its
strategy for protecting IP overseas in February 2006, its commitment to
implementing STOP remains unclear, creating challenges for
accountability and long-term viability. For instance, neither NIPLECC's
September 2006 annual report nor its most recent January 2008 report
explain how the NIPLECC principals plan to carry out their oversight
responsibilities mandated by Congress to help ensure a successful
implementation of the strategy. In addition, the STOP strategy document
has not been revised to mention NIPLECC's oversight role.
STOP is a first step toward an integrated national strategy to protect
and enforce U.S. intellectual property rights, and it has energized
agency efforts. However, we found that STOP's potential as a national
strategy is limited because it does not fully address important
characteristics of an effective national strategy. For example, its
performance measures lack baselines and targets that would allow
policymakers to better assess how well the activities are being
implemented. In addition, the strategy lacks a risk management
framework and a discussion of current or future costs--important
elements for policymakers to effectively balance the threats from
counterfeit products with the resources available. STOP does not
specify who will provide oversight and accountability among the
agencies carrying out the strategy, but it does identify organizational
roles and responsibilities with respect to individual agencies' STOP
activities. We found individual agency documents that include some key
elements of an effective national strategy, but they have not been
incorporated into the STOP documents. This lack of integration
underscores the strategy's limited usefulness as a management tool for
effective oversight and accountability by Congress as well as the
private sector and consumers whom STOP aims to protect. In our November
2006 report on this subject, we made two recommendations to clarify
NIPLECC's oversight role with regard to STOP and to improve STOP's
effectiveness as a planning tool and its usefulness to Congress. The
U.S. IP Coordinator, who heads NIPLECC, concurred with our
recommendations and said NIPLECC has taken some steps to address them.
Key Agencies Need Better Data Collection and Analysis to Strengthen IP
Enforcement Efforts:
The five key federal agencies that play a role in fighting IP crimes--
DOJ's U.S. Attorney's Offices and the FBI; DHS's CBP and ICE; and HHS's
FDA--need to improve their collection and analysis of IP enforcement
data. IP enforcement activities are generally a small part of these
agencies' much broader missions, and IP enforcement is not the
agencies' top priority. 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. The key agencies have
various IP enforcement functions: CBP is responsible for seizing
counterfeit goods at U.S. ports of entry; ICE, the FBI, and FDA share
responsibility for investigating crimes, with FDA focusing solely on IP
crimes that present public health and safety risks; DOJ is responsible
for prosecuting alleged violations. 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 the FBI does not. FDA's role is driven
by its public health and safety mission, not IP enforcement per se.
Our review of agencies' enforcement statistics from fiscal year 2001
through 2006 found that many IP enforcement activities generally
increased (with some fluctuations across fiscal years and type of
enforcement action), but some did not. For example, the number of CBP
seizure actions and the value of seizures have increased steadily
between 2001 and 2006, with the estimated value of goods seized
reaching about $155 million in 2006. However, CBP collected less than 1
percent of IP-related penalties assessed during those years. The number
of arrests, indictments, and convictions by ICE, the FBI, and FDA also
generally increased during that time. Finally, the number of DOJ IP
prosecutions was around 150 per year before increasing to 200 in 2006.
Of the approximately 1,500 defendants that DOJ charged with IP crimes
from fiscal year 2001 and through 2006, 373 were imprisoned.
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. For example, despite the
importance agencies assign to targeting IP crimes that affect public
health and safety, we were surprised to learn that most of these
agencies lacked data to track their efforts in this area. Naturally,
this is not true for FDA--by virtue of its mission, all its IP-related
investigations affect public health and safety. Collecting better data,
analyzing them, and reporting on progress toward goals could help make
the IP enforcement agencies more accountable to the public and
Congress, particularly regarding public health and safety. To address
these issues, we made a number of recommendations to the IP enforcement
agencies to improve analysis and reporting on their enforcement
activities. In response, DOJ has said that it will take steps to
routinely and systematically analyze IP enforcement statistics within
fiscal year 2008. It also has directed the U.S. Attorneys Offices and
the FBI to collect information on investigations and prosecutions
related to IP crimes that affect public health and safety. DHS and HHS
also generally agreed with these recommendations but have not yet
indicated the specific steps they will take in response.
The need for improved coordination of federal law enforcement efforts
has long been recognized. Around the same time Congress created
NIPLECC, the executive branch created the National Intellectual
Property Rights Coordination Center to improve federal IP enforcement
and coordinate investigative efforts between ICE and FBI, 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, the
envisioned flow of private sector complaint information never
materialized, agencies never reached agreement on their roles and
responsibilities, and the center has gradually shifted its focus from
investigative coordination to private sector outreach. We recommended
that the responsible agencies reassess the mission of the center and
communicate with the Congress regarding its purpose and required
resources. In response, DHS indicated it concurred with this
recommendation, and DOJ said it has directed FBI to coordinate with ICE
to address this recommendation.
Concluding Observations:
Mr. Chairman, we appreciate the opportunity to summarize our work on
federal IP enforcement efforts. The challenges of IP piracy are
enormous and will require the sustained and coordinated efforts of U.S.
agencies, their foreign counterparts, and industry representatives to
be successful. As the title of the hearing suggests, the issue of IP
protection is not only important for U.S. producers, but also for the
health and safety of U.S. consumers.
Our key findings show that the current coordinating structure comprised
of NIPLECC and STOP has weaknesses related to leadership, permanence,
and accountability. They also show that improved data collection,
analysis, and reporting among the key enforcement agencies could help
them better manage resources and performance and improve their
accountability to Congress and affected parties. These findings were
particularly important concerning IP crimes related to public health
and safety, given that most agencies lack data to analyze or
demonstrate the effect of their efforts in this area. The affected
agencies generally agreed with our recommendations and some have begun
taking steps in response.
A number of legislative proposals are before Congress that would modify
the federal IP enforcement structure.[Footnote 2] As the committee
continues to consider this issue and these proposals, we would be happy
to provide additional information on where we believe the proposals
address the weaknesses that our work has identified.
Mr. Chairman, this concludes my prepared remarks. I would be happy to
address any questions that you or the other members of the Committee
may have.
If you have any questions on matters discussed in this testimony,
please contact Loren Yager at (202) 512-4347 or by email at
[email protected]. Other key contributors to this testimony include Adam
Cowles (Assistant Director), Shirley Brothwell, Nina Pfeiffer, Jason
Bair, and Adrienne Spahr.
[End of section]
Related GAO Products:
Intellectual Property: Federal Enforcement Has Generally Increased, but
Assessing Performance Could Strengthen Law Enforcement Efforts.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-157]. Washington,
D.C.: March 11, 2008.
Intellectual Property: Risk and Enforcement Challenges. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-177T]. Washington, D.C.:
October 18, 2007.
Intellectual Property: Better Data Analysis and Integration Could Help
U.S. Customs and Border Protection Improve Border Enforcement Efforts.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-735]. Washington,
D.C.: April 26, 2007.
Intellectual Property: National Enforcement Strategy Needs Stronger
Leadership and More Accountability. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-710T]. Washington, D.C.: April 12, 2007.
Intellectual Property: Strategy Targeting Organized Piracy (STOP)
Requires Changes for Long-term Success. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-74]. Washington, D.C.:
November 8, 2006.
Intellectual Property: Initial Observations on the STOP Initiative and
U.S. Border Efforts to Reduce Piracy. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-06-1004T]. Washington, D.C.: July
26, 2006.
Intellectual Property: U.S. Efforts have Contributed to Strengthened
Laws Overseas, but Significant Enforcement Challenges Remain.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-788T]. Washington,
D.C.: June 14, 2005.
Intellectual Property: U.S. Efforts Have Contributed to Strengthened
Laws Overseas, but Challenges Remain. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-912]. Washington, D.C.:
September 8, 2004.
[End of section]
Footnotes:
[1] See Related GAO Products at the end of this statement for a list of
GAO reports and testimonies on intellectual property protection since
2004.
[2] Intellectual Property Rights Enforcement Act, S.522, 110th
Congress; Prioritizing Resources and Organization for Intellectual
Property Act, H.R. 4279, 110th Congress.
[End of section]
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