Senate Bill 3325 – The Enforcement of Intellectual Property Rights Act of 2008: The Good, the Bad and the Ugly

By Beni Surpin and Crystina Coats

In his opening remarks to the Senate, when presenting Senate Bill S.3325 to the floor on July 24, 2008, Senator Evan Bayh (D – Ind.) stated: “if hundreds of our cargo ships were being hijacked on the high seas or thousands of our business people were being held up at gunpoint in a foreign land, there would be a great sense of alarm and unshakable government resolve to act. That, in effect, is what is happening today, yet we are not doing nearly enough to stop it.”

As a proponent of intellectual property rights reform, Senator Bayh’s analogy was used in the context of the $5 trillion contribution that intellectual property makes to the United States economy. In the movie industry alone, piracy is estimated to cost 140,000 U.S. jobs, $5.5 billion in wages, and $837 million in state and local tax revenue annually. It is estimated that American businesses are losing $250 billion, and over 750,000 jobs annually, because of intellectual property theft. In an effort to strengthen protection of United States intellectual property rights and prevent further violations of the same, a bipartisan group of Senators are proposing S.3325, entitled the “Enforcement of Intellectual Property Rights Act of 2008.” The bill, reflecting a compromise of several intellectual property proposals introduced during the current Congressional term, was approved by the Senate Judiciary Committee on September 11, 2008 by a vote of 14-4. Proponents of S.3325, such as the Recording Industry Association of America and the National Association of Manufacturers, say that the bill protects owners of copyrights and trademarks by providing the government with additional tools to enforce such intellectual property rights, and discourages potential violators of such rights from domestic and international acts of counterfeiting and piracy. Opponents argue that the bill requires unnecessary enforcement by the federal government of private rights that are already protected by civil remedies available to private parties, and that the penalties set forth in the bill are dangerously broad.

Currently, the Justice Department may only bring criminal charges against alleged copyright infringers. Criminal actions generally require that prosecutors satisfy a burden of proof beyond a reasonable doubt – the highest level of proof and the most difficult to satisfy. S.3325 would authorize the Attorney General to institute civil suits against any person who engages in conduct that constitutes a criminal offense under the copyright laws, provided that the copyrighted work is registered before bringing such a civil infringement suit. By expanding the available means of suit, the bill would ease the burden on federal prosecutors by requiring that only the preponderance of the evidence standard of proof be met.

In so far as shipment across the border is concerned, S.3325 would apply copyright and trademark law not only to imported infringing goods, as is currently the case, but also to exported infringing items and those items trans-shipped through the United States – not something which is within the scope of the current laws. The Justice Department would have the right to pursue action against domestic and international counterfeiters, a remedy which many smaller domestic owners of intellectual property lack the capacity to pursue.

Under the proposed bill, in cases involving trademark violations or use of counterfeit marks, courts would be authorized to enter judgment for three times profits earned by an infringer or damages suffered by a trademark owner, whichever is greater, in addition to attorneys’ fess, unless the courts find extenuating circumstances. The bill further doubles the statutory damages available in trademark counterfeiting cases to a range of $1000 to $200,000, and authorizes treble damages where a trademark violation involves: (1) intentional and knowing use of a counterfeit mark or designation in connection with the sale, offering for sale, or distribution of goods or services; or (2) providing goods or services for the commission of such violation, with the intention that the recipient would use the goods or services in committing such violation.

S.3325 would empower federal agents with the ability to seize and destroy equipment suspected of being used by an alleged infringer in committing copyright infringement activity as well as trademark counterfeiting activity. The bill would allow federal agents to confiscate equipment owned or predominantly controlled by an alleged infringer such as computers, servers and other devices used by alleged violators. Prior to seizing any equipment, the government would be required to show a “substantial connection” between seized property and the alleged infringing acts. Following seizure, however, such seized equipment must be destroyed or otherwise disposed of. Additionally, the bill increases the maximum statutory penalties for trafficking in counterfeit goods or services that endanger public health and safety, from 10 years imprisonment to 20 years for knowingly or recklessly causing bodily injury, and to life imprisonment for knowingly or recklessly causing or attempting to cause death.

An additional component of the bill provides for the creation of a new federal position called the Intellectual Property Enforcement Coordinator (IPEC). Appointed by the President to serve in the Executive Office of the President, the IPEC would work with various governmental agencies to develop a unified strategy to combat piracy and counterfeiting. The IPEC would oversee an “inter-agency advisory committee,” including, among others, the Department of Justice, the United States Patent and Trademark Office, the Department of State, the Department of Homeland Security and the Food and Drug Administration, to produce a joint strategic plan for domestic and international intellectual property law enforcement, coordinating anti-counterfeiting and anti-piracy activities, and having the ability to institute federal lawsuits on behalf of copyright holders.

Contemplating an increase in the amount of funding available to federal, state and local law enforcement, the bill would create a unit within the Federal Bureau of Investigation to fight intellectual property crimes, establish a Department of Justice Organized Crime Task Force for the study of organized crime related to the theft of intellectual property, and authorize funds for the FBI and DOJ to hire and train agents and prosecutors to investigate and prosecute intellectual property crimes. Further, a number of “intellectual property law enforcement coordinators” would be sent by the Attorney General to foreign countries in order to reduce counterfeit and pirated products in the United States market and protect domestic intellectual property rights by attempting to curtail the sources overseas.

Opposing public interest groups, such as Public Knowledge and the Electronic Frontier Foundation, have dubbed the bill as “an enormous gift” to copyright owners that would impede, rather than protect, progress in arts and sciences in the United States. A concern for them is that the IPEC would retain unnecessary and excessive authority, and since domestic owners of intellectual property already have the right to bring suit against infringers, there is no need to expend public resources to allow the government to enforce such rights. Such critics have pointed to the recording industry’s legal actions against thousands of individual consumers for intellectual property infringement as an example, and argue that S.3325 is the result of lobbying from powerful recording and movie industries, to the detriment of the ordinary consumer.

S.3325 is expected to be placed on the Senate calendar soon, to then be considered by the entire Senate. Several bills containing similar provisions have been proposed in recent years but without success, including one that passed the House in 2007, but which did not provide for the Justice Department’s ability to sue copyright infringers, though it did provide for anti-piracy task forces and an FBI piracy unit. It remains to be seen therefore whether such reform will be actually enacted, and whether provisions will be amended to ease public interest groups’ concerns.

For more information please contact Beni Surpin and Crystina Coats. Mr. Surpin is a partner in the Intellectual Property and Corporate Practice Groups in the firm’s Del Mar Heights office. Ms. Coats is an associate in the Intellectual Property Litigation and Technology Transactions Practice Group in the Del Mar Heights office.