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Stemming the Tide of Counterfeit Products and Intellectual Piracy

Paula Cotter, Energy and Environment Counsel

Paula Cotter, Environment Project Director and Chief Counsel

Attorneys General Rob McKenna (Wash.) and Jim Hood (Miss.) believe law enforcement should take intellectual property crime seriously. They are leaders in NAAG’s efforts to reduce the incidence of this kind of theft. Both Attorneys General have spearheaded efforts in their states to address counterfeit products, and both have been instrumental in supporting upcoming training, through the National Attorneys General Training and Research Institute (NAGTRI), designed to help state and local law enforcement investigate and prosecute the theft of intellectual property.

If most people think about intellectual property crime at all, they think of knockoff designer purses and sunglasses bought at incredibly low prices, sold on a street corner in New York. But the scope of such crime is much broader than counterfeit fashion. Fake products cover a huge array of goods of every kind, sold in both rural and urban venues, on the streets and in stores, by commercial enterprises and by private citizens working part-time. U.S. businesses are estimated to lose billions of dollars on an annual basis to intellectual piracy.

The financial impact of intellectual property crime is serious—but in their capacity as chief law enforcement officers of the states, Attorneys General are also apprehensive about its impact on the health and safety of the public. Perhaps the most egregious example of increased risk to consumers is in the area of pharmaceuticals, where look-alike pills can literally endanger people’s health. Many mechanical devices can be fabricated from shoddy materials, designed carelessly, or built without safety features—but sold with an ersatz label that buyers mistakenly trust. Investigators have found counterfeit brake pads, wiring, safety features on carnival rides, and a host of other bad products.

Another dimension to the problem is that counterfeit goods are sometimes part of a supply chain tied to other illegal activities. While buyers of counterfeit goods might be otherwise law-abiding citizens, sellers sometimes have links to organized crime. It goes without saying that someone selling counterfeit goods is not going to play by the rules—and often that seller is buying from others outside the law in other ways as well. Counterfeit goods have been found in conjunction with extortion, illegal firearms, and illegal drug sales. Some experts also believe that counterfeit goods are sold in this country partly to finance terrorist activities.

State Attorneys General and local prosecutors have a mix of civil and criminal legal authorities that can be used against people and businesses that deal in counterfeit products. In some cases, of course, offering the fake is in itself a crime under state fraud statutes. Some states have adopted the Model Trademark Bill or the Uniform Deceptive Trade Practices Act, which provide for civil liability stemming from selling or offering to sell counterfeit goods. In other cases, other state consumer protection laws broadly prohibit activities that encompass intellectual property theft. States may also have the option to bring enforcement actions in parens patriae . In addition, some state statutes were enacted to protect industries of particular importance to the state. In the criminal context, criminal acts of intellectual theft may act as predicate offenses for state racketeering laws.

In addition to enforcement of prohibitions of intellectual property theft, Attorneys General are working with local law enforcement officials in this arena. There are two reasons for the multi-jurisdictional approach. First, it often happens that local law police and sheriffs have the first inkling of intellectual property crimes because they are most familiar with local businesses and conditions. Second, in many cases, criminal enforcement authority rests with local prosecutors—but their offices are unfamiliar with the outlines of intellectual property crime. In those cases, an Attorney General can help to provide communication and information, or technical expertise in investigation and prosecution.

NAGTRI, in partnership with the National White Collar Crime Center, plans to offer a series of regional training programs focusing on intellectual property crime. Each regional training will be offered to a mix of law enforcement investigators and lawyers from Attorneys General offices and local prosecutors’ offices. The first regional training, which will be available to representatives of the Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, and West Virginia Attorneys General, is scheduled for Sept. 14 in Baltimore. A formal announcement of the training and application process will be posted on NAAG’s Web site and circulated to offices in the region.

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