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PROTECTING U.S. INTELLECTUAL PROPERTY

OVERSEAS: THE JOINT STRATEGIC PLAN

AND BEYOND

HEARING

BEFORE THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

JULY 21, 2010

Serial No. 111–111

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

HOWARD L. BERMAN, California, Chairman 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

BRAD SHERMAN, California 

ELIOT L. ENGEL, New York 

BILL DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

DIANE E. WATSON, California 

RUSS CARNAHAN, Missouri 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

MICHAEL E. MCMAHON, New York 

THEODORE E. DEUTCH, Florida 

JOHN S. TANNER, Tennessee 

GENE GREEN, Texas 

LYNN WOOLSEY, California 

SHEILA JACKSON LEE, Texas 

BARBARA LEE, California 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

MIKE ROSS, Arkansas 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

JIM COSTA, California 

KEITH ELLISON, Minnesota 

GABRIELLE GIFFORDS, Arizona 

RON KLEIN, Florida 

ILEANA ROS-LEHTINEN, Florida 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

RON PAUL, Texas 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

JOHN BOOZMAN, Arkansas 

J. GRESHAM BARRETT, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

BOB INGLIS, South Carolina 

GUS BILIRAKIS, Florida 

RICHARD J. KESSLER, Staff Director 

YLEEM POBLETE, Republican Staff Director 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Victoria A. Espinel, U.S. Intellectual Property Enforcement 

Coordinator, Executive Office of the President ................................................. 14

The Honorable John T. Morton, Assistant Secretary, U.S. Immigration and 

Customs Enforcement (ICE), U.S. Department of Homeland Security ........... 40

The Honorable Chris Israel, Co-Founder and Managing Partner, PCT Government Relations LLC (Former U.S. Coordinator for International Intellectual 

Property Enforcement) ......................................................................................... 58

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Howard L. Berman, a Representative in Congress from the 

State of California, and Chairman, Committee on Foreign Affairs: 

Prepared statement .............................................................................................. 4

Letter from James N. Gianopulos, Fox Filmed Entertainment, dated July 

20, 2010 ............................................................................................................. 10

Statement from the American Association of Independent Music (A2IM) 

dated July 21, 2010 .......................................................................................... 11

The Honorable Victoria A. Espinel: Prepared statement ..................................... 16

The Honorable John T. Morton: Prepared statement ........................................... 44

The Honorable Chris Israel: Prepared statement ................................................. 60

APPENDIX 

Hearing notice .......................................................................................................... 72

Hearing minutes ...................................................................................................... 73

The Honorable Eni F.H. Faleomavaega, a Representative in Congress from 

American Samoa, and Chairman, Subcommittee on Asia, the Pacific and 

the Global Environment: Prepared statement ................................................... 75

The Honorable Russ Carnahan, a Representative in Congress from the State 

of Missouri: Prepared statement ......................................................................... 78

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 80

The Honorable Michael E. McMahon, a Representative in Congress from 

the State of New York: Prepared statement ...................................................... 82

Written responses from the Honorable John T. Morton to questions submitted 

for the record by the Honorable Howard L. Berman ........................................ 83

Written responses from the Honorable Victoria A. Espinel to questions submitted for the record by the Honorable Russ Carnahan .................................. 87

Written responses from the Honorable John T. Morton to questions submitted 

for the record by the Honorable Russ Carnahan ............................................... 88

Written responses from the Honorable Victoria A. Espinel to questions submitted for the record by the Honorable Michael E. McMahon ......................... 91

Written response from the Honorable John T. Morton to question submitted 

for the record by the Honorable Michael E. McMahon ..................................... 92

(1)

PROTECTING U.S. INTELLECTUAL PROPERTY 

OVERSEAS: THE JOINT STRATEGIC PLAN 

AND BEYOND 

WEDNESDAY, JULY 21, 2010

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FOREIGN AFFAIRS, 

Washington, DC. 

The committee met, pursuant to notice, at 10:04 a.m. in room 

2172, Rayburn House Office Building, the Honorable Howard L. 

Berman (chairman of the committee) presiding. 

Chairman BERMAN. The hearing will come to order. In a moment 

I will recognize myself and the ranking member for up to 7 minutes each to make opening statements. All other members will then 

have an opportunity to make a 1-minute opening statement if they 

wish to do so, and without objection members may also place written statements in the record. 

Last year the committee held a hearing with witnesses from industry and labor to examine the impact of intellectual property 

theft on the U.S. economy. Today’s hearing will focus on government efforts to stem the problem of piracy. 

In my district, I have seen firsthand how piracy and counterfeiting impacts not only creativity, but jobs. The lengthy credits at 

the end of every movie remind us how many people it takes to 

bring a film to the screen—and there are many who play supporting roles to the projects who don’t even appear in the credits. 

When a movie is pirated, it puts all of those jobs at risk. 

The ease of the distribution in the case of CDs and DVDs make 

them an obvious target for piracy, but counterfeiting and IP theft 

impact many other industry from pharmaceuticals to auto parts, 

from clothing to sporting goods. As such, intellectual property is an 

integral part of many important policy issues, from climate change, 

to fighting infectious disease in the developing world, to Russia’s 

accession to the WTO. 

The geographic scope of intellectual property theft has also 

grown. While our attention was previously focused on a relatively 

small number of countries—most notably Russia and China—we 

have now seen an explosion of piracy and counterfeiting in many 

nations. And the situation is further exacerbated by Chinese policies like ‘‘indigenous innovation’’ which may discriminate against 

foreign intellectual property holders in favor of their own domestic 

businesses. Today, piracy and counterfeiting has become so effortless, and enforcement resources spread so thin, that the legitimate 

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marketplace for music and movies is disappearing in countries such 

as Spain. 

The current situation is untenable—and I commend the Obama 

administration for taking aggressive action to improve enforcement. We were pleased to see Vice President Biden call industry 

leaders together back in December, and eagerly awaited the Joint 

Strategic Plan on Intellectual Property Enforcement, which was recently issued by U.S. Intellectual Property Enforcement Coordinator Victoria Espinel, one of our distinguished witnesses today. 

In the 2009, Pro-IP Act, we envisioned that the intellectual property enforcement coordinator would work with all the key players 

in the administration and make policy recommendations to help 

Congress and the relevant agencies and departments more efficiently and more effectively protect this vital part of our economy. 

The Joint Strategic Plan takes an important step in the right direction by including IP-enforcement guidelines stretching across eight 

different Federal agencies. We look forward to hearing Ms. Espinel 

speak on behalf of the administration about improving and modernizing our laws, and look forward to working with her and ensuring she has adequate resources to do her job. 

The coordinator has a tough job that is enhanced by the many 

agencies it works with to coordinate our IP enforcement strategy. 

Most recently, I was interested to read about the initiative undertaken by Immigration and Customs Enforcement, or ICE, to seize 

the domain names of Web sites that were unlawfully offering firstrun movies. That is exactly the kind of innovative thinking the 

Vice President called for—and I am curious to hear from Assistant 

Secretary Morton on how it came about, the obstacles you faced 

and how we can scale Operation ‘‘In Our Sites’’ to enterprises that 

facilitate the theft of music, books and other products prone to 

counterfeiting. 

I understand that the program isn’t a panacea—I know that 

some unlawful sites that we take down today will spring up with 

new names, and in new jurisdictions, tomorrow. But part of the 

idea is to educate users—looking for the many legitimate sites such 

as Hulu, Vevo, Pandora Rhapsody, and others coming online every 

day. 

Senator Leahy and I are exploring legislative approaches to expand on the ICE program, and would like to learn from your experiences before introducing legislation later this month. But we are 

committed to reining in the rogue sites and the intermediaries that 

facilitate or support financially the online businesses predicated on 

theft. As was described at a subcommittee hearing held 3 years 

ago, Visa testified that its credit card system should not be used 

for illegal transactions. Furthermore, they stopped processing 

transactions for ALLOFMP3.com, a notorious foreign Web site 

based in Russia for downloading illegal music in part because it 

was the ‘‘right thing to do.’’ This should be the guiding principle. 

Our frustration with lackluster foreign enforcement is nothing 

new. The Office of the U.S. Trade Representative has been publishing its Special 301 report for about two decades, detailing the 

state of intellectual property enforcement in all its forms on a country-by-country basis. While there is some positive news in this 

year’s report in three countries—the Czech Republic, Hungary, and 

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Poland—have been removed from the watch list much more work 

needs to be done. Some of the largest countries and largest markets 

in the world such as China, Russia, and India remain on the priority watch list. The same goes for one of our closest trading partners, Canada, which is on the priority watch list for failing to fulfill 

international commitments to strengthening its copyright laws and 

for demonstrating weak enforcement in the IP and online areas. 

This committee should play a positive role in moving the ball forward. After last year’s hearing on copyright issues, the committee 

engaged in conversations with the Government of the Bahamas on 

their compulsory license of pay television which had been on the 

books for almost 10 years. As a result of our intervention, the Bahamas repealed those compulsory license and copyright owners are 

now negotiating for their goods and service for market value. 

In the State Department authorization bill passed by the House 

last year, we included a provision that would expand the IP attache ́

program to provide for greater focus on intellectual property protection in our embassies around the world and station additional personnel in countries where greater U.S. involvement could result in 

better enforcement. 

The committee needs to continue to engage on these issues. I 

look forward to hearing from all of our distinguished witnesses on 

the ways we can support a strong and productive government role 

in protecting one of our most treasured assets. 

First, though, I would like to turn to the ranking member, Ileana 

Ros-Lehtinen for any opening remarks that she may wish to make. 

[The prepared statement of Mr. Berman follows:]

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Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman. My commitment to protecting the intellectual property rights of U.S. citizens and our companies is longstanding. Prior to becoming the 

ranking member of this committee, I chaired the Subcommittee on 

International Economic Policy and Trade where fighting the piracy 

of intellectual property was one of our top concerns. I would like 

to note that our chairman has demonstrated consistent leadership 

on this issue in this committee as well as at the Judiciary Committee where in the 110th Congress Chairman Berman served as 

the chairman of the Subcommittee on Courts, the Internet and Intellectual Property. Under his direction the Foreign Affairs Committee held a field hearing, as he noted, in California in April 2009, 

that brought together a remarkable set of witnesses representing 

the major interests in the music and movie industries. He knows 

a lot of cool people in Hollywood. Thank you for that hearing. 

Their description of the threat to their industries from piracy in 

China and elsewhere was stunning in its scope and consequences. 

Unfortunately, this problem has continued to grow rapidly. The 

Global Intellectual Property Center estimates that the annual loss 

to U.S. businesses now total over $12 billion in the music recording 


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industry, $12 billion in the automotive industry, $46 billion the 

pharmaceutical industry, and $53 billion in the software industry. 

That is well over $100 billion in income and jobs lost—stolen actually—from this country and our citizens every year. 

It is unfortunate that many people in our country and abroad regard these crimes as impacting only faceless and wealthy corporations. The fact is that our economy has become increasingly more 

knowledge-based, and costs resulting from IPR policy have grown 

for all of us in terms of reduced employment, reduced income, and 

government revenue. 

The problem is a global one, and there are few countries where 

it does not occur, including our own, but there are some countries 

where the problem is not only widespread among the general population, but it is tolerated, even promoted by national and local governments. China is by far the worst violator of intellectual property 

rights globally, and its government is complicit in ensuring that it 

keeps its number one position. Chinese authorities have repeatedly 

pledged to take action to deal with the open and rampant theft of 

U.S. intellectual property. However their efforts to date have been 

minimal, especially when compared with the immense resources 

and energy they have dedicated to censoring the Internet services 

of content that they find objectionable. In fact, intellectual property 

piracy in China is rapidly increasing, often with tacit government 

support and even as a consequence of official policy. 

For example, the government is actively supporting efforts by 

China’s largest Internet search company to become a global player. 

With the government looking on by automatically offering to those 

who log on its site the opportunity to link to a long list of known 

music piracy sites, in effect actively facilitating the theft of intellectual property. The Chinese authorities are fully aware of this problem and could stop it with a simple phone call, but they have 

brushed aside all requests to do so and have deliberately decided 

to do nothing to halt the aiding and abetting of this continuing 

theft. 

But this is only one of many examples. Intellectual property violations in Russia are also extensive and longstanding, ranging from 

pirated music and videos to pharmaceuticals. Here, too, the government has repeatedly promised to take action, but then has done little or nothing. 

Corruption at all levels of the Russian Government has made 

this problem a difficult one to address, but it is compounded by the 

lack of interest on the part of senior officials who see it as an 

American problem that does not impact them. However, Russia’s 

desire to join the World Trade Organization, or the WTO, provides 

the United States with the necessary leverage to compel Moscow 

to carry out its promises. Before the U.S. approves its application, 

we must require that Moscow take effective action to shut down 

the expensive piracy of intellectual property occurring on its territory and put in place far-reaching safeguards to ensure that it does 

not reoccur. 

In fact, given Russia’s history of broken promises, Moscow should 

be required to demonstrate a long track record of success prior to 

an okay by the United States to its joining the WTO. 

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President Obama has said that increasing U.S. exports is a key 

to creating jobs here in the U.S. Because those exports are increasingly made up of intellectual property, our future prosperity depends upon our ability to fight piracy in other countries. 

An easy way to enhance U.S. exports and intellectual property 

rights at the same time is through carefully negotiated trade agreements such as those we have already signed with Colombia, Panama and South Korea. These agreements will help raise the standards of our trading partners’ national laws and regulations regarding intellectual property protection to new highs. They will also 

provide enhanced monitoring and corrective measures if the governments refuse to take action to end piracy. 

At a time when Americans are apparently facing extraordinary 

economic challenges, Congress cannot leave the task of protecting 

intellectual property rights of U.S. citizens and U.S. businesses to 

the Executive Branch alone. We cannot afford a business as usual 

approach to those governments that profess friendship and cooperation even as they bless the theft of our citizens’ wealth and of our 

country’s prosperity. 

Thank you, Mr. Chairman, for this hearing and this opportunity. 

Chairman BERMAN. Thank you very much for your very strong 

statement, and does the gentleman from California seek recognition? The gentleman is recognized for 1 minute. 

Mr. SHERMAN. I think we have taken good steps to do what we 

can to protect intellectual property if we are going to be inside the 

box, but the problem is as long as we stay inside the box America 

will be a nation in decline. China is synonymous with intellectual 

property theft. Our diplomats trip over pirated disks being sold on 

the streets on their way to meetings where they can make further 

concessions to the Chinese. 

Not content with stealing our intellectual property for the Chinese market, China now wants to steal the U.S. market as well 

through the Internet. Clearly trade retaliation is necessary to get 

China’s attention, but that would anger many in Wall Street, 

Washington, and Wal-Mart. We should also be taking cyber offensive to use viruses to shutdown these sites and we should be going 

after those who advertise on sites primarily dedicated to piracy. 

I look forward to trying to get outside the box. I realize that the 

tendency is to stay inside. Thank you. 

Chairman BERMAN. Thank the gentleman. The gentleman from 

New Jersey, Mr. Smith, is recognized for 1 minute. 

Mr. SMITH. Mr. Chairman, it is very sobering to read that the 

Global Intellectual Property Center estimates almost $125 billion of 

losses annually in just four industries alone: The pharmaceutical, 

automotive, recording, and software industries. The loss of American jobs is staggering. Mr. Chairman, as we all know, almost all 

of the damage done to American workers, to our companies, and to 

our economy is done by a mere handful of foreign governments—

China, Russia, Brazil, Mexico, and just a few others. In fact, the 

Chinese Government is the cause of most of the problem. It tolerates and in some cases probably encourages widespread infringement of American intellectual property rights, and then exports 

U.S. property rights infringing products right back to us. 

8

In fact, the U.S. Trade Representative’s 2010 Special 301 report 

said that 79 percent of the infringing products ceased at our border 

were of Chinese origin. 

Mr. Chairman, my hope is that we will take not only Special 301 

actions against the Chinese on such things as labor rights, but Special 301 negotiations should be fully initiated, and if they fail we 

need to take more aggressive action. 

Chairman BERMAN. The time of the gentleman has expired. The 

gentleman from Florida, Mr. Deutch, is recognized for 1 minute. 

Mr. DEUTCH. Thank you, Mr. Chairman. Thank you, Ranking 

Member Ros-Lehtinen. Thank you for holding this hearing. I would 

like to thank the witnesses for being here today and I look forward 

to hearing your thoughts. 

Intellectual property theft is often overlooked as a serious crime 

but, unfortunately, it is a highly lucrative underground business 

that often serves as a profitable and low-risk funding source for 

very serious criminal activities from international crime groups to 

terrorist organizations. There are too many examples to list where 

profits from IP piracy ends up in the hands of terrorist groups. One 

notable example involves several piracy rings in the tri-border area 

of South America that have been linked to large-scale donations to 

the Iranian-backed terrorist organization Hezbollah. 

Isolating the sources of this funding through this IP piracy will 

take high level international cooperation, increased accountability, 

and adequate resources. This hearing should provide an opportunity to explore this further. I hope we will continue our work on 

this important issue, Mr. Chairman, and I look forward to probing 

this further as we get into questions. 

I yield back. Thank you. 

Chairman BERMAN. The gentleman from California, Mr. Rohrabacher, is recognized for 1 minute. 

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. 

So, we are losing jobs, we are losing over $100 billion a year. 

This is insane. I will just say that steal from me once, shame on 

you. Steal from me twice, shame on me. Well, the fact is we have 

been ignoring this for years. We watched China track down a dissident who may utters a few words on the Internet, and yet they 

won’t put up one bit of effort to try to stop this theft of intellectual 

property rights which is putting our people out of work, and transferring wealth into their countries. We have been putting up with 

it. It is time for us not to put up with it anymore. We either get 

tough on intellectual property rights and the theft of our intellectual property or we will lose the future because that is what the 

future is all about. 

Thank you very much, Mr. Chairman. 

Chairman BERMAN. I thank the gentleman, and the gentleman 

from Illinois, Mr. Manzullo, is recognized for 1 minute. 

Mr. MANZULLO. Thank you, Mr. Chairman, for calling this meeting. It has been nearly 2 years since we passed the Pro IP Act and 

it was signed into law, and it is quite appropriate that we have this 

oversight hearing today. 

IP piracy threatens our future economic prosperity. IP piracy is 

more than music, it is more than movies, it threatens the long-term 

health of the manufacturing sector. Coming from a district where 

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one out of four jobs in our biggest city is directly related to manufacturing, it is quite important to us. 

I experienced this issue firsthand several years ago when I advocated for an environmental technology firm located in Rockford, Illinois, which experienced theft of their IP for a wastewater treatment plant when bidding on a project in China. They were one of 

the few success stories using the Chinese court system to enforce 

their patent. I worked directly with our U.S. Embassy officials in 

Beijing who personally monitored the hearing and also worked very 

closely with the Chinese Ambassador to the United States. At that 

time I chaired the U.S.-China Interparliamentary Exchange, and 

he took great interest in the case because it was such a rank violation. 

Chairman BERMAN. Time. 

Mr. MANZULLO. But it should not take the intervention of a 

Member of Congress in order to protect our manufacturers. 

Chairman BERMAN. The time of the gentleman has expired. I 

now ask unanimous consent to enter into the record a letter from 

Jim Gianopulos, chairman and CEO of Fox Filmed Entertainment, 

and comments from the American Association of Independent 

Music, supporting the importance of this hearing. The committee 

has received no letters dismissing the importance of the hearing. 

[Laughter.] 

[The information referred to follows:]

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Chairman BERMAN. We are very pleased to have Victoria Espinel 

with us, the only member of the first panel. Victoria Espinel currently serves as the first U.S. Intellectual Property Enforcement 

Coordinator in the Executive Office of the President. She is responsible for developing and implementing the administration’s unified 

strategy for the defense of intellectual property right. 

From 2007 to 2009, Ms. Espinel taught intellectual property and 

international trade law at George Mason School of Law. Prior to 

this, Ms. Espinel served as the first Assistant U.S. Trade Representative for Intellectual Property and Innovation at the Office of 

the USTR, and in that capacity I remember her testifying before 

the committee down the hall. 

She holds a master’s of law from the London School of Economics, a J.D. from Georgetown University Law School, and a B.S. in 

foreign service from Georgetown University’s School of Foreign 

Service. 

We are very pleased to have you here and we look forward to 

hearing your testimony. Your entire statement will be put in the 

record, and if you would care to summarize your remarks, we welcome you to begin. 

STATEMENT OF THE HONORABLE VICTORIA A. ESPINEL, U.S. 

INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR, 

EXECUTIVE OFFICE OF THE PRESIDENT 

Ms. ESPINEL. Thank you very much. Chairman Berman, Ranking 

Member Ros-Lehtinen, and members of the House Committee on 

Foreign Affairs, thank you for your leadership on this important 

issue. I feel particularly privileged to work with this committee. 

This is a global problem that will require global solutions. 

As many have already noted, intellectual property infringement 

affects a vast range of businesses and industry sectors. In developing a strategic plan, we asked the public for input so that the 

administration could hear their concerns directly, and we received 

over 1,600 responses. We reviewed all of those responses, and the 

hundreds of recommendations that came with them, and posted 

them on our Web site so that everyone could see what we were taking into account. 

We met with companies across a broad spectrum of America’s industries as well as unions, academics, and consumer groups to engage them about where the problems in enforcement lie, and to 

find out what we can do to make things better for the many Americans and American industries that depend on intellectual property 

for success. The strategy that we delivered to Congress a few weeks 

ago reflects that input from the public. 

I also want to emphasize that the strategy reflects an extensive 

interagency collaboration: Justice, Homeland Security, Commerce, 

USTR, HHS, State, and others all worked with us to make this an 

excellent and forward-leaning strategy. 

This plan has the ability to alter our approach to intellectual 

property enforcement for many years to come. To do so we are taking some bold new steps and we look forward to working with this 

committee on many of them. Let me highlight a few now. 

Recognizing the importance of our overseas personnel, we will 

improve their effectiveness and coordination. Specifically, we will 

15

work to prioritize our personnel where they are needed most. We 

will establish embassy working groups and work plans to better coordinate, and we will ensure that our overseas personnel have clear 

priorities and guidance. 

We are establishing an interagency working group to improve 

our capacity-building and training so that foreign governments can 

strengthen enforcement on their own. We will share plans and information and best practices, focus efforts where enforcement is 

most needed, develop agency strategic plans, ensure that our 

trainings are consistent with our laws and with our polices, and coordinate our efforts with international organizations and the business community to make our trainings as effective as possible. 

We will work with foreign government to increase foreign law enforcement efforts, and we will promote enforcement of American intellectual property rights through our trade policy tools, including 

bilateral dialogues, our trade agreements, communicating our concerns clearly through mechanisms such as Special 301, and when 

necessary, asserting our rights at the WTO to dispute settlement 

process. 

We are establishing an interagency counterfeit pharmaceutical 

committee to focus on the problems associated with unlicensed 

Internet pharmacies distributing counterfeits in the United States 

and the proliferation of counterfeit drugs abroad. 

We need to facilitate cooperation to reduce infringement over the 

Internet. It is essential for the private sector to work together to 

find practical and effective solutions to this problem, at the same 

time we will vigorously investigate and prosecute criminal activity. 

We will focus on foreign-based Web sites and web services that violate our intellectual property rights using a combination of tools, 

including law enforcement, diplomatic measures, and coordination 

with the private sector. 

We will review how we support our businesses as they face difficulties in overseas markets. Due to the scale and scope of manufacturing, its industrial policies and its potential as an export market, it is fair to say that China raises a particularly troubling set 

of issues. Therefore China will be a significant focus of our enforcement efforts. 

Since the release of the strategy a few weeks ago the administration announced the launch of a new joint initiative to go after 

Internet piracy, Operation In our Sites. During the course of the 

first investigation under this initiative, DHS and DOJ authorities 

moved together across the country to seize numerous bank and 

PayPal accounts from sites that were offering first run movies, 

often within hours of their theatrical release. Federal agents also 

seized the names for these pirate sites. But this is only the beginning of our enforcement actions. 

Before I conclude I want to say a word or two about John Morton 

who is following me at this table. Under his leadership ICE has 

made intellectual property enforcement a real priority. ICE’s creation of the interagency IPR center demonstrates that agency’s 

commitments, and John has taken that center to a new place. Domestic and foreign law enforcement, as well as industry partners, 

are coordinating better and working together because of it both doVerDate 0ct 09 2002 09:12 Sep 28, 2010 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 F:\WORK\FULL\072110\57607 HFA PsN: SHIRL
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mestically and internationally, and I want to applaud what he has 

done. 

I have stated some ambitious goals today. We are aware that the 

release of the strategy is just the beginning, and that much hard 

work lies ahead. I commend your leadership on these issues and 

I look forward to working closely with this committee in the coming 

months on improving our enforcement efforts both here and 

abroad. 

Thank you very much and I look forward to your questions. 

[The prepared statement of Ms. Espinel follows:]


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Chairman BERMAN. Well, I thank you very much, Ms. Espinel, 

and I will yield myself 5 minutes to start the questioning. 

In the Joint Strategic Plan there is a paragraph about improving 

the effectiveness of personnel overseas to combat IP infringement. 

Do you have a notion of how the administration will do that? Will 

the administration support the provision on greater IP resources 

abroad that we had in our State Department authorization bill? 

And just to add, I have some information that the administration 

does not have plans to replace the person who is in the Department 

of Justice’s Intellectual Property Law Enforcement Coordinator 

Program who is now based in Sofia, Bulgaria, and as we understand when that individual returns at the end of the year there 

will be no replacement. Could you take a look into that particular 

issue and let us know if it has been resolved? 

Ms. ESPINEL. We agree, as many have said the experience of the 

company in Mr. Manzullo’s district indicates that our overseas personnel are critical to our efforts. They play a very important role 

in a number of ways, including improving our relationships with 

our counterparts in foreign law enforcement, which is critical because we have to have our trading partners taking this seriously 

if we are going to be effective. They have been very effective in 

terms of training capacity building, again to help foreign law enforcement take this on more seriously. 

So I am in complete agreement with you that while the overseas 

personnel that we have right now are doing an excellent job, I 

think that there are also ways that they could be improved further. 

We have some ideas along those lines. Part of that is making 

sure we have personnel in the places where we need them most. 

Part of that is making sure that they are working well within the 

embassies; that they have the support that they need when they 

are on the ground. Part of that is making sure that they are getting clear guidance and priorities from Washington, and that we 

have clear communication. 

I am well aware of the bill that you introduced on this and it 

seems to me that the goals in that bill are entirely consistent with 

what we are trying to do with the administration’s strategy, so we 

would indeed support that. 

Chairman BERMAN. Can you give me advice on how to get the 

Senate to take it up? [Laughter.] 

Ms. ESPINEL. I will confer and get back to you. 

Chairman BERMAN. The same issue in the context of cooperative 

efforts within the business community the Joint Strategic Plan 

talks about, can you elaborate on that a little bit? And how do you 

hope to see that work, and what should Congress do, and how does 

it measure cooperative efforts within the business community to reduce Internet piracy, especially if no agreement is reached? Can we 

name and shame? 

Ms. ESPINEL. So as we noted in the strategy, we think it is not 

just important but essential for the private sector to be working together, to have all sort of players in the Internet economy working 

cooperatively to find a solution to Internet piracy that is both practical and efficient. We are actively encouraging that cooperation to 

happen. 

23

That said, while we think it is essential that it is happening, it 

is also not our position that we will sit back and wait for the private sector to figure this out on their own. There are actions that 

we can take as the government and we will take those actions, including investigating, vigorously investigating and prosecuting 

criminal activity where we can. 

While we are also exploring alternative measures to reducing 

Internet piracy, and it may be that there are new things that we 

need to do, I will tell you we take this problem very seriously, and 

we would like to consider all options. 

In terms of naming and shaming, since you raised that specifically, one of the things that we have committed to do in the strategy is work with USTR and the other agencies, of course, to use 

the Special 301 to highlight foreign Web sites that are a particular 

problem. One thing that has been very clear to me in this job is 

that foreign Web sites are a particular problem that we need to address both because of the scope of material that is coming into the 

United States from foreign-based Web sites, and because they pose 

particular challenges for our law enforcement to go after them. So 

we are very focused on figuring out how we address what is an admittedly an complicated problem, but an extremely important one. 

Chairman BERMAN. Thank you, and my time has expired. I am 

going to yield 5 minutes to the ranking member, Ms. Ros-Lehtinen. 

Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman. Thank 

you for your testimony. 

On China and Russia, all experts agree that China is by far the 

leading violator of intellectual property rights in the world and has 

been for some time, and for years the United States and other governments have pressed Chinese officials to take action to stop this 

rampant piracy with little to show for it. How can we bring sufficient pressure on China to stop this widespread theft? What form 

would that pressure take? And is this a country that deserves normal trade relations with the U.S.? I don’t believe that it does because of this and many other reasons. 

And on Russia, the Russian Government has repeatedly pledged 

and signed agreements to fight the rampant intellectual property 

piracy on its territory, but it has yet to fulfill any of those commitments. Now President Obama has said that he will work to bring 

Russia into the WTO as soon as possible. Now, given Russia’s history of false promises wouldn’t it make more sense to have its government demonstrate a track record of success in fighting piracy 

before we let them enter the WTO and thereby we lose our leverage? Thank you. 

Ms. ESPINEL. Well, first of all, I would agree with you that China 

is the biggest problem that we face for a whole host of reasons, including the fact that the volume of what is coming out of China 

dwarfs what is coming out of other countries. Eighty percent of 

what our Customs seizes every year comes from China. The range 

of products that are coming out of China are immense, and the fact 

that China has beyond sort of a lack of enforcement has affirmative 

industrial policies in place that are directed at putting our companies at a competitive disadvantage is an enormous problem, and 

one that we are very focused on. It is unacceptable for China to 

24

continue the practices that it has in place, and we are committed 

to making that stop. 

There are a number of things in the strategy that I think will 

go to helping us enforce our rights better overseas in all markets, 

but let me assure you that in all of those areas China is a particular focus. There are a number of things that I could highlight. 

In the interest of time, though, let me focus on one that has a particular focus on China which is the following: We think it is very 

important to make sure that as our companies are moving into 

overseas markets, and in particular in China, that they know that 

they have the full support of the U.S. Government behind them. 

And you mentioned the President’s goals of doubling exports. 

Using intellectual property enforcement as one of the tools that we 

have to double exports is of critical importance to the administration. So we are going to, we are actively now actually working with 

Commerce and other agencies to assess what it is that we do as 

a government to support our industries as they are moving into 

China, and to see if, one, our companies are aware of the resources 

of the U.S. Government that are at their disposal, but two, and 

even more than that, that there is more that we could be doing 

now to make sure that our companies know that they are well supported by their government as they are navigating the Chinese 

market. 

With respect to Russia, I could speak to the issues with Russia 

at great length. I will just say briefly there are enormous intellectual property enforcement problems in Russia as you pointed out. 

They have been going on for a significant amount of time. USTR 

and other agencies are well aware of that. I think that the point 

that you make about WTO accession is a very good one, and clearly 

Russia needs to make significant improvements in intellectual 

property in order to join the WTO. 

Ms. ROS-LEHTINEN. Thank you, but I am not sure that my question was answered. What kind of pressure can we bring to bear on 

China and on Russia to make them fulfill their pledges and commitments, and isn’t our rush to have Russia enter the WTO giving 

them an easy pass and saying they don’t have to do anything about 

intellectual property theft? 

Ms. ESPINEL. With respect to Russia, we have made clear to the 

Russian Government repeatedly that intellectual property enforcement has to be strengthened in order for them to enter the WTO, 

and in fact USTR is on its way to meet with Russia about WTO 

accession and the improvements that we need to make there in the 

coming weeks. 

So, I think the leverage that we have with Russia and one of the 

important points of leverage that we have is exactly what you referred to, the WTO accession process, and we intend to use it. And 

if there is a lack of doubt about that let me allay those concerns. 

Ms. ROS-LEHTINEN. Thank you, Mr. Chairman, my time is up but 

I think that we are just letting China and Russia slide, and I think 

it is pretty obvious. 

Chairman BERMAN. The time of the gentlelady has expired. The 

gentleman from Florida, Mr. Deutch, is recognized for 5 minutes. 

Mr. DEUTCH. Thank you, Mr. Chairman. Thank you for your testimony, Ms. Espinel. 

25

Intellectual property theft, as I raised earlier, has been increasingly funding to the terrorist organizations like Hamas and 

Hezbollah, an egregious example of which there are, frankly, too 

many to list, involves counterfeiters in tri-border area of South 

America who have provided millions of dollars in direct contributions to Hezbollah through their IP piracy. In fact, one such especially designated global terrorist entity in Paraguay provided the 

payment of millions of dollars directly to Hezbollah. 

Can you outline what is being done to combat this type of terror 

financing and what level of coordination between U.S. enforcement 

and intelligence agencies take place, and ultimately as you pursue 

your broader strategy, if you could speak to the extent to which 

this type of financing that comes from IP piracy plays a role in 

your determination of how best to approach these issues? 

Ms. ESPINEL. Thank you. So, first I would say that we are well 

aware of the fact that piracy and counterfeiting generally are attractive for the types of organizations that you are talking about, 

for illicit organized criminal activity, because the margins are high 

and because the risks are low, or perceived as low, so that is something that we are quite focused on. 

One of the things that I think that we need to ensure that we 

are doing a better job of in order to go after this problem is to make 

sure our law enforcement agencies are sharing information cooperatively, and that is something that we are very focused on and 

have already started to put steps in place to make sure that that 

happens. 

With respect to the link between organized criminal activity and 

international piracy and counterfeiting, we are working with the 

National Security Council as well as other relevant agencies to see 

what more we can find out about the extent of that scope. There 

are some cases that you alluded to but there may be a problem, 

there may or may not be a problem that sort of extends beyond 

that, and I think that is important for us to know as we are putting our policies in place. 

But more generally I think the efforts that we are taking with 

DOJ, with the FBI, with DHS, and others to prioritize this issue 

and to make sure our law enforcement agencies are sharing information cooperatively will be helpful to address this issue generally, 

and including the kind of links that you refer to between piracy 

and counterfeiting and organized criminal activity. 

Mr. DEUTCH. Thank you. So as you put in place, as you pursue 

these efforts to share information between law enforcement agencies can you describe what that looks like on the ground, the enforcement of the IP laws and how that information ultimately is 

shared with appropriate national security agencies? 

Ms. ESPINEL. Well, obviously I am somewhat limited in what I 

can say in a public hearing like this. What I can do, first of all, 

I am happy to have discussions outside this hearing if that would 

be helpful. 

The second thing that I can tell you is, as we move forward in 

this progress and move toward better sharing of databases and 

other information, I think there will be stuff that we can talk about 

publicly. I am both obligated by legislation, but also interested in 

coming back and talking to this committee and to Congress genVerDate 0ct 09 2002 09:12 Sep 28, 2010 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 F:\WORK\FULL\072110\57607 HFA PsN: SHIRL
26

erally about what we have done in December to move forward in 

practical ways. 

Again, I may always be somewhat limited in what I can say in 

a public hearing. 

Mr. DEUTCH. Finally, is the issue of funding of terrorist organizations through IP piracy on the agenda in discussions that take 

place not just interagency in America but in your discussions with 

the folks who do enforcement in the countries that we are dealing 

with to combat these issues? 

Ms. ESPINEL. Absolutely. 

Mr. DEUTCH. Thank you. 

Chairman BERMAN. The time of the gentleman has expired, and 

the gentleman from New Jersey, Mr. Smith, is recognized for 5 

minutes. 

Mr. SMITH. Thank you very much, and thank you for your testimony. 

Let me just focus on one particular issue. Both over-the-counter 

and prescription drug safety and efficacy are of deep concern to all 

patient consumers. As more drugs are foreign-sourced the risk of 

producing inferior, substandard products and/or the stealing of the 

patents to those compounds is obviously very, very high. 

Bing reported last December on its blog, and it was an article 

written by Jim Edwards, that in China there were two inspectors 

watching the drug factories—in the entirety of China. I have seen 

other reports that suggested that less than 10 percent of the factories are looked at by FDA, so this is obviously an engraved invitation, if you ask me, for huge amounts of fraud, ripping off of, 

again, this intellectual property. And even if they don’t sell the 

product to the United States, there are markets all over the world 

where that American name or that multinational’s name will be 

bought and bought in huge quantities, and if it is an inferior compound or a ripped off product, obviously that raises very serious 

concerns. 

So my question to you is, how does your office work with the 

FDA to ensure, and on the proactive side, I mentioned two inspectors, I don’t know if that is true, we tried to get information, we 

got all kinds of numbers, but two is like—I mean, that is incompetence if you ask me in terms of sourcing or deploying FDA inspectors, how does your office work with the FDA to ensure that 

on-site inspections actually occur? Because if you don’t go to the 

source, if you check out, how do you know what is going into the 

product as that product is produced, and whether or not it is being 

counterfeited, or they are doing something on the cheap in order 

to put the name on it but not have the effective ingredients? 

And do you do anything when it comes to adverse events that are 

reported to the FDA? Is your office brought in in any way when 

there is a suspicion that these adverse impacts on patients might 

be triggered by a counterfeit or a compound that was pirated, and 

then it came back into the United States? 

It seems to me, I mean, I have met with FDA people over the 

years many times, whether it be on Acutane or other things, and 

I have been shocked at how laissez-faire on some sells products 

they have been developing over the years. And it seems to me that, 

if there is a spike in adverse events, does that trigger anything to 

27

suggest there might be a counterfeit product making its way into 

the United States? 

And this is especially pertinent as more and more of our pharmaceuticals are foreign sourced, especially the manufacturing of that 

product—Pfizer, Astro-Zenica, and Novartis are only the most recent huge companies that are putting more, not less, of their operations in the PRC. 

Ms. ESPINEL. Thank you. So this is an enormously important 

problem. As you pointed out, it has detrimental effects for our economy in terms of intellectual property infringement, but obviously 

the health and safety implications of this problem are enormous, 

and it is something that we care very much about. It is a problem 

that is both domestic in terms of an impact on our domestic economy, and a potentially growing problem in terms of counterfeit 

drugs actually getting into the supply chain in the United States. 

Although I think most Americans probably feel that the U.S. 

supply chain is relatively safe, there are counterfeit pharmaceuticals coming into the United States, which is obviously an enormous problem, and as you pointed out, overseas the scope of this 

problem, particularly in countries located in Africa, is significant 

and reprehensible. So it is something we are very focused on. 

We are setting up an interagency committee that is going—a new 

interagency committee that is going to focus on exactly this set of 

issues. We have been working very closely with FDA actually over 

the past few months as we put together the general strategic plan, 

and we will continue to do that. 

One of the things that we are working with FDA on is seeing if 

there is a way to better track into the U.S. Government supply 

chain particular pharmaceuticals if it become clear that there is a 

problem, for example, counterfeiting, with those pharmaceuticals. 

So we are very focused on that. 

With respect to your question about inspectors in China, I think 

we have grave concerns about the level of quality control in China. 

Mr. SMITH. Is two the right number? 

Ms. ESPINEL. But I was going to say that is something I don’t 

know. So rather than speculate let me look into that and we will 

get back to you. 

Mr. SMITH. I appreciate that. I noted or would note that there 

was a GAO report issued back in 2008 and it did make the point 

that we were spending some $11 million in 2008, fiscal 2008, on 

foreign inspectors. It seems to me that is woefully inadequate. And 

you know, if there could be some kind of collaboration with your 

office to say if we really want to cut down on the piracy but also 

protect the health and well being of your people we need to beef 

up inspections. 

Ms. ESPINEL. Thank you. 

Mr. SMITH. Thank you. 

Chairman BERMAN. The time of the gentleman has expired. The 

gentleman from Virginia, Mr. Connolly, is recognized for 5 minutes. 

Mr. CONNOLLY. Thank you, Mr. Chairman, and thank you for 

holding these hearings. I would ask, if it hasn’t already been done, 

concurrence to at this point put my full statement in the record. 

Chairman BERMAN. Without objection, it will be included. 

28

Mr. CONNOLLY. I thank the chair. Ms. Espinel, if the United 

States is successful in shutting down a Web site like China’s 

Baidu, is there a risk for retaliatory measures for U.S. search engines? 

Ms. ESPINEL. As I have said in the testimony, as we say very 

clearly in the strategy, one of the problems that we have to address 

is this issue of foreign-based Web sites, and the products that are 

being brought into the United States with digital content, but also 

physical products such as counterfeit pharmaceuticals that are 

coming in through foreign-based Web sites. So, we have committed 

to focus on those as a particular problem, and I think John Morton 

is also going to be speaking directly to that issue. 

That said, we are aware of the fact that foreign-based Web sites 

raise a whole host of complicated issues. One of those issues is the 

fact that it is difficult for our law enforcement, it is more challenging for our law enforcement to go after foreign-based Web sites. 

The other is that it is very important to this administration that 

our policies with respect to the Internet in general are ones that 

preserve openness and don’t give other countries excuses to do 

things that we find unacceptable. 

However, this is illegal activity. This is illegal activity that has 

an enormously detrimental impact on our economy, so it is important that we go after it vigorously. 

Mr. CONNOLLY. In May, the Congressional International AntiPiracy Caucus highlighted the problem of foreign Web sites, as you 

just said, that provide access to unauthorized copies of U.S. copyrighted material. Priority sites for China’s Baidu, Canada’s 

isohunt, the Ukraine’s MP3’s fiesta, Germany’s RapidShare, 

Luxembourg’s RMX 4U.com, and Sweden’s The Pirate Bay, what 

sort of collaborative efforts are needed among the original content 

producer and companies that specialize in advertising of payment 

solutions to shutdown these sites, in your view? 

Ms. ESPINEL. I think it is absolutely essential that that cooperation take place and that is something that we have been working 

on facilitating very actively. There are many, many players in the 

Internet economy. Obviously the rightholders have a big responsibility to be enforcing their rights, but in order for us—for us as a 

country to have a solution to this problem that is practical, efficient, and not overly burdensome, it is necessary for us to have cooperation from all the players in the Internet economy, and all the 

people that are benefitting either directly or indirectly from infringement. 

I do want to emphasize though that while we think that cooperation is very important we also know that we as a government need 

to be taking action, so we will not just sit back and wait for the 

private sector to come to an agreement. We are both exploring 

whether there are other measures that we can use to reduce Internet piracy, and we will vigorously investigate and prosecute Internet piracy as we can with the existing law enforcement authorities 

that we have now. 

Mr. CONNOLLY. To what extent do you believe in this effort, Europe’s lack of recognition of the First Sale Doctrine is an impediment? 

Ms. ESPINEL. That my lack of recognition? 

29

Mr. CONNOLLY. No, no. Europe’s, Europe’s lack of recognition of 

the First Sale Doctrine. They have a different view of copyright law 

than we do. 

Ms. ESPINEL. The Europeans have a different view of many 

things compared to what we do. With respect to the First Sale Doctrine and their view of that, would you allow me to find out more 

about that——

Mr. CONNOLLY. Sure. 

Ms. ESPINEL [continuing]. So I can give you a better and more 

complete answer? 

Mr. CONNOLLY. Yes, get back to us. 

And my final question, you know, President Obama has made 

significant expansion, I think, of the doubling of exports, one of his 

major goals, a laudable goal, lots of things have to be in place for 

that to happen—new trade agreements, strengthen and enforce 

trade agreements and so forth, but one of them clearly is this issue 

of intellectual property protection, and especially in a place like 

China. If they are going to be stealing intellectual property left and 

right so that we have nothing to sell them because they sell it and 

manufacture it themselves to the domestic market, it defeats the 

whole purpose of a free trade regime, and significantly impedes the 

ability of the President to achieve his goal. Your comment? 

Ms. ESPINEL. I absolutely agree with you. We have a very ambitious goal set by the President to double exports in 5 years. Part 

of what we have to do in order to meet that goal is to make sure 

we have viable export markets. If our export markets are polluted 

by counterfeit and piracy, there is no way for our businesses to be 

able to compete. So, it is critical to the administration that one of 

the things we do, and as you say there are many things that we 

will have to do, but one of these has to be ensuring that our intellectual property rights are being enforced overseas. 

Chairman BERMAN. The time of the gentleman has expired, and 

I believe this is the first time the First Sale Doctrine has ever been 

mentioned in a Foreign Affairs Committee hearing. [Laughter.] 

Mr. Manzullo, the gentleman from Illinois is recognized for 5 

minutes. It is all according to this screen. I just follow the screen. 

Mr. MANZULLO. Well, thank you. 

Maybe this question is over simple, if that is a word. Mr. Smith 

talked about piracy taking place in pharmaceuticals, which is very 

subtle, hard to determine, and takes an enormous amount of people 

and agencies to try and find the source, et cetera. I was in China 

several years ago in Ku-ming, when I led the U.S.-China Interparliamentary Exchange. Congresswoman Jackson Lee was with 

me, and Congresswoman Marcia Blackburn, and we went into the 

town square there, and the people that were our hosts surrounded 

us. Marcia said, ‘‘Don, why don’t you pull the guards with you and 

let me go off and find the stuff?’’

Well, it wasn’t too hard. So I took the guards with me. Congresswoman Blackburn just walked a few feet and there they were, first 

run movies for a buck, everything being openly sold, absolutely no 

desire, no enforcement on the part of the Chinese Government to 

stop that. Interestingly enough when you leave China, when you 

fill out the declarations it says that you are not taking from China 

any CDs or movies or things of that nature. 

30

My question is, if the Chinese are making absolutely no efforts 

to corral piracy within their own country, knowing full well that 

that crap finds its way back to the United States and around the 

world and destroys jobs, what do you do in a case like that? 

You can have all the personnel you want. I mean, how do you 

enforce that? How do you force China to follow their words that 

says that they want to be a player and protect intellectual property 

rights? 

Ms. ESPINEL. So, first, with your permission I would like to refer 

to something that you said in your opening statement. You referred 

to a company in your district that had been having serious problems in China. 

Mr. MANZULLO. Right. 

Ms. ESPINEL. And I wanted to note that I have been talking to 

a number of companies in the manufacturing space and working 

with the National Association of Manufacturers to visit Illinois, in 

particular, to talk to manufacturing companies there so that we understand better the problems that they are facing, and can do a 

better job of trying to address them. 

With respect to your question now, obviously the lack of political 

will in China to address this issue and the lack of it being a significant priority for many parts of the Chinese Government is a real 

challenge that we face. So part of what we need to do to address 

this is to make clear to the Chinese that for this administration at 

this time this is a real problem and the policies that China has put 

in place——

Mr. MANZULLO. No, I understand that it has been a problem all 

along, regardless of who is in the White House or who controls 

Congress. You would agree, this is not a political issue because we 

all agree up here it is a big trade infringement, but how do you 

punish China for doing this? 

I mean, it is so outrageous. You have probably been there and 

seen the piracy taking place. That is why I said it is probably an 

over-simple question, but that goes right to the heart of it. You 

know, unless China enforces these laws internally—I mean, why 

even waste your time sitting at a table with them? There has to 

be a penalty that they have to pay. What would the penalty be? 

Ms. ESPINEL. Well, China needs to enforce its laws domestically, 

but even beyond the domestic market one of the problems that we 

face with China, we as the United States face with China, is the 

fact that they are manufacturing illegal products and then exporting them around the world. Obviously we need to be working very 

closely with the Chinese Government to try to fix this problem 

but——

Mr. MANZULLO. But why would they work with you when they 

allow the open sale taking place in the town squares? I mean, they 

have no desire to crack down. They need to pay a penalty. I mean, 

they know that. They have gamed the system so long. I am sorry. 

I took your time. 

Ms. ESPINEL. But I do want to emphasize that part of—the 

United States is not going to be able to address this problem by 

itself, we are aware of that, and one of the things that we need to 

do as well is working with our trading partners because we are not 

the only country that is facing these problems now, and see if we 

31

can improve the coordination that we have with other governments 

so that we can collectively bring pressure to bear on China. 

Chairman BERMAN. The time of the gentleman has expired. The 

gentleman from California, Mr. Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

I want to agree with the gentleman from Illinois. They are not 

going to do anything unless there is a penalty, but I think that the 

Chinese are right if they assume that Wall Street, Wal-Mart and 

Washington will combine to make sure that they never face a penalty. 

I think the witness is wrong when you tell us that this is a low 

priority for China. It is a high priority. It is very important to them 

that they keep stealing, and for them to say, no, this is a low law 

enforcement priority, no, it is a very high priority that they keep 

stealing our intellectual property. 

Now, the gentleman from Virginia talked about the President’s 

idea of tripling exports. I hope that this is not to be combined with 

quintupling imports. We have got to cut the trade deficit. Increased 

exports when exceeded by increased imports means we lose even 

more jobs. 

I do want to highlight the particular venality of Baidu, which is 

perhaps more than any—well, certainly more than any other company in the IAPC 2010 report responsible for the theft of American 

music, and China is like 99 percent of the online piracy for music, 

and I hope you would respond for the record what you are going 

to do about it, but I suggest that the gentleman from Illinois is 

probably right. Without penalties they are not going to do anything. 

It is your job to summarize for the President all the options, and 

so my concern is whether you are investigating all the options or 

just those that you are allowed to talk about in polite society. For 

example, have you investigated and do you know whether we have 

the technological capacity to take down the illegal site, the sites 

primarily devoted to music piracy or movie piracy? The site is up 

somewhere in the world, God know some hackers at a high school 

in China could take it down. They have taken down our U.S. Government sites, whether it is virus or multiple hit. 

Do we have the capacity to do that? Have you investigated that? 

Ms. ESPINEL. That is something that we are actively investigating because——

Mr. SHERMAN. Oh, good. Go ahead. 

Ms. ESPINEL [continuing]. It is obviously a big concern. It is not 

a simple question and it is not a simple answer. In summary, I will 

say there are technological ways to take down sites, but one of the 

challenges that we face is that even if a site is taking down it is 

not that hard for a site to go back up at a slightly different——

Mr. SHERMAN. Well, if you take down 10 or 20, it makes a statement. You can take them down as quickly as they can put them 

up. But you are saying we have the capacity if somebody has got 

a site, you know, stolenmusic.com, we could take that site down, 

we are just not doing it yet because we figure they will pop up 

as——

Chairman BERMAN. Will the gentleman yield? 

32

Mr. SHERMAN. Yes, I will yield. 

Chairman BERMAN. What about a safe harbor for copyright holders who want to use efforts to deny service to——

Mr. SHERMAN. They will help. 

Chairman BERMAN [continuing]. Intellectual property infringers? 

I heard that idea once. 

Ms. ESPINEL. If I could just make a general comment. I would 

also say our ability and what we can do differs significantly when 

we are talking about domestic versus foreign-based Web sites. 

Mr. SHERMAN. I am talking about foreign-based Web sites. 

Ms. ESPINEL. That is not one of the things——

Mr. SHERMAN. And you are right, I think Universal could hire a 

couple of those high school kids and maybe act more quickly than 

the government. Let me ask and squeeze in one more question. 

What do we do with those who pay money to advertise on sites 

devoted chiefly to music or movie theft? Are they allowed to deduct 

their cost of their advertising? Do they face any penalties based on 

the amount, or what is the penalty for buying an ad on 

stolenmusic.com? 

Ms. ESPINEL. So since your question is with respect to foreignbased Web sites, let me just emphasize that our ability to take 

down——

Mr. SHERMAN. Assume it’s a U.S. company selling vegematics to 

Americans and they buy an ad on this Chinese Web site 

westealmusic.com? 

Ms. ESPINEL. And with respect to your question about penalties 

for ad brokers, it is an interesting one. It is not one that has been 

raised. 

Mr. SHERMAN. I have raised it. Please report back to the committee about it. 

Ms. ESPINEL. One of the things that my office can do is take exactly this kind of input and concerns and make sure that we are 

investigating it and discussing it internally as an administration. 

So, I thank you for that, and I thank you for any input you might 

have in the future. 

Mr. SHERMAN. Thank you. 

Chairman BERMAN. The time of the gentleman has expired. The 

gentleman from California, Mr. Rohrabacher, is recognized for 5 

minutes. 

Mr. ROHRABACHER. First and foremost, let me identify myself 

with the line of questioning and the statements made by Mr. Manzullo or Mr. Sherman. Mr. Sherman, as some of us have dealt with 

in the past, understand that he is an accountant by profession, and 

thus accountability actually means something to him, and he has 

a career of looking at cost/benefit and calculating that out, and so 

I think that really leads to reality at times, although I disagree 

with him on some thing. [Laughter.] 

Now with that said let me note that there were some things that 

I disagreed with Members of Congress a few years ago when they 

were proposing that our patent system change so that the actual 

publication of patents even before they were issued was mandated. 

Do you think that if we would have mandated the publication of 

our patent applications before the issuance of those patents would 

have increased the theft of American intellectual property rights? 

33

Ms. ESPINEL. The type of domestic patent reforms that you refer 

to are not ones that my office has directly focused on. 

Mr. ROHRABACHER. That is not what I am asking you. I am asking you as someone who understands intellectual property theft. 

The law mandating the publication of a person’s patent application 

before it was issued would it increase the chances of theft? 

Ms. ESPINEL. Well, in truth since that is not what my office focuses on, and since it’s not deeply familiar with the background of, 

I don’t want to give an answer. However, I am happy to take those 

concerns back and——

Mr. ROHRABACHER. Okay, got it. Now, how long have you been 

in your position now? 

Ms. ESPINEL. A little over 6 months. 

Mr. ROHRABACHER. 6 months? And what consequences have you 

determined were applicable to people in countries that we actually 

find blatantly and continuing even after being notified involved the 

intellectual cost of American property, or the cost of American intellectual property I should say? 

Ms. ESPINEL. So I came into this office about 6 months ago with 

three main goals. 

Mr. ROHRABACHER. I am not asking that. What are the consequences, I don’t care what main goals you came in with, what are 

the consequences you have determined after 6 months plus you 

have a background in this for years, what consequences are you 

suggesting that someone or some government that continues to acquiesce or involves themselves in intellectual property theft should 

face? 

Ms. ESPINEL. I think with respect to individuals that are engaged 

in intellectual property, that are engaged in criminal activities, we 

need to be prosecuting them. Investigating them and then prosecuting them. 

Mr. ROHRABACHER. In other countries. So we demand that the 

other countries prosecute them. What are we doing now? The other 

countries know this intellectual property theft is going on. They 

have not prosecuted. What if they continue to refuse to prosecute 

those people? What consequences are you suggesting that people 

who blatantly go along with this intellectual property theft or are 

involved in it will suffer? 

You have been there 6 months. You would have a whole career 

based on this. What are your recommendations? 

Ms. ESPINEL. One of the things that we need to do is see whether 

or not our own domestic law enforcement, which is very focused on 

the situation now, as John Morton and others can testify to is to 

make sure that they have the authorities that they need. There 

may be additional legislative authorities in order to be able to go 

after effectively people that are in overseas markets so that we are 

not entirely dependent on the government of those countries to act. 

Mr. ROHRABACHER. And if indeed the other government refuses 

to permit our jurisdiction, our people doing this, what are the consequences that you believe that we should do as a nation to those 

nations that are refusing to go along with us and are acquiescence 

to this $100 billion rip off of the American people? 

34

Ms. ESPINEL. Well, obviously, if other government are not respecting our rights, we need to make clear to them that the United 

States considers this to be——

Mr. ROHRABACHER. No, no, what are the consequences? Making 

clear, they know what they are doing, we know what they are 

doing. What are the consequences that you are suggesting that our 

Government do to a government like China that is blatantly permitting this rip off of the American people? 

Ms. ESPINEL. One of the areas where there can be consequences 

is to use our trade policy tools, including as the ranking member, 

Ms. Ros-Lehtinen said. 

Mr. ROHRABACHER. What retaliation in those trade rules would 

you suggest that we implement? 

Chairman BERMAN. The time of the gentleman has expired. 

Unanimous consent if there is no objection heard, I will give the 

gentleman another minute. 

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. 

So what would you suggest that when the President has seen the 

leadership in China four times so far in his presidency, what do 

you think the President—now you say we are getting serious—

what should the President say, if you don’t do this, you have 

known all along they are ripping us off, what should the President 

suggest we are going to do this if you don’t crack down? 

Ms. ESPINEL. Well, as you are aware, our ability to impose penalties on other countries is limited, it is shaped by the laws that 

Congress put in place. So as I alluded to before, and maybe I 

should be more explicit about this, it may be necessary for us to 

make legislative changes both so that we have more teeth in our 

trade policy tools, and so that our domestic law enforcement——

Chairman BERMAN. Would the gentleman yield for 10 seconds? 

Mr. ROHRABACHER. Of course I will. 

Chairman BERMAN. In the late 1990s, rampant continues, at another time when there was rampant piracy in China with the manufacturing of counterfeit CDs, we proposed countervailing tariffs on 

a variety of items that we thought equaled the value of the stolen 

property. Just the threat of that caused three plants to be destroyed. Unfortunately the piracy continued in other places. 

Mr. ROHRABACHER. Let me reclaim my time. The chairman has 

come up with a great suggestion of what we can consider. Would 

you think that this is something that we should do and threaten 

other countries that are acquiescent to this type of rip off of the 

American people? 

Chairman BERMAN. Unfortunately, the time has expired 40 seconds, but we can hear back from you later. 

Ms. ESPINEL. Those types of suggestions from Members of Congress are enormously helpful. 

Chairman BERMAN. The gentlelady from Texas, Ms. Sheila Jackson Lee, is recognized for 5 minutes. 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman, and 

thank you for the hearing, and that of the ranking member. 

This is an issue that many members have been addressing from 

the 1990s, and as Congressman Manzullo said, it is not an issue 

that is partisan. I remember working with Chairman Hyde, the 

late Chairman Hyde from Illinois on the Judiciary Committee and 

35

as well Chairman Berman over the years on this question of intellectual property. 

I think it is important to note that the cost of this abuse is jobs, 

and I have never seen an administration more committed to creating job than the Obama administration. The true cost to the 

American people is seen in the 750,000 jobs that have been lost as 

a result of intellectual property violations. Worst of all the statistics have indicated that the scale of these illegal activities is rising 

despite efforts from both the government and private sector by billions of dollars a year. 

One of the most troubling, my colleagues have spoken about the 

pharmaceuticals, but I remember the tooth paste scare, counterfeit 

tooth paste that contained a dangerous chemical that was distributed and sold to consumers under the trademark of ColgatePalmolive. Of course, that company lost reputation and millions of 

dollars. 

So, I think what we are trying to glean from you, Ms. Espinel, 

is what is the enthusiasm, the energy? I am going to yield to you 

for an answer but as I do that I note that my friend John Morton 

will be testifying, and let me just as an aside compliment him for 

an innovative and new approach to ICE’s immigration efforts with 

respect to employers. I know this is not that hearing, but I want 

to put that on the record. It has achieved, I think, a better approach. 

I use that as an example that the government can be effective, 

but I am not hearing the sense of urgency in grabbing after this 

crisis of losing jobs in an economy that cannot afford to lose the 

jobs, and I know that you work with the USTR (U.S. Trade Representative), a very competent part of your competent team and 

your own competence. 

So let me yield to you to allow you to energetically give us some 

meat and potatoes. What would you be doing with respect to your 

efforts at the WTO, at the IPR? Would you seek stronger commitments? Where is, as my colleagues have been asking, where is the 

hammer? Where is the recognition that this is a crisis? 

If we were to go and find ‘‘Avatar’’ for $1 in China, recognizing 

all that the director and others put in that amazing picture, if 

nothing else because of the magnitude of it, I use that as an example that is most in our minds that it is a huge cost of putting that 

together, and then to find that in China, then I would say this is 

dish banging time on the table. This is time to show that kind of 

‘‘I am going to get them’’ in an obviously civil manner. 

I am going to yield to you for the enthusiasm, the action items 

that the administration is doing and thinking about it in terms of 

stopping the loss of almost 1 million jobs from counterfeit activities 

going on. 

I yield to you, Ms. Espinel. 

Ms. ESPINEL. Thank you, and thank you for your kind words to 

my colleague, John Morton, and all the excellent work that ICE, 

the whole ICE team, is doing under his leadership which is indeed 

innovative and a real significant step forward in terms of the 

progress and priorities. 

Let me assure you this administration is enormously committed 

to this problem. As you pointed out, the President’s number one 

36

priority is getting our economy back on track, and enforcement of 

intellectual property is critical to protect the jobs that we talked 

about and to promote our exports as we have already talked about. 

Ms. JACKSON LEE. Will you look for stronger language in a WTO 

TRIPs agreement specifically? 

Ms. ESPINEL. That is an interesting question. That is, again, one 

that has not come up in the 6 months, but those kinds of suggestions are interesting to us. I think, you know, beyond the TRIPs 

agreement, which is not to downplay the importance of it because 

it is enormously important, it is clear that we need a stronger 

international standard on enforcement, and whether we do that at 

the WTO or whether we do that working with our trading partners 

directly, I completely agree with you that the legal framework, the 

international agreements that we have right now on intellectual 

property enforcement, while good, are not good enough. 

Ms. JACKSON LEE. So you would ask for stronger intellectual 

property rights enforcement? 

Ms. ESPINEL. Yes, absolutely. 

Chairman BERMAN. The time of the gentlelady has expired, and 

the gentleman from Texas is recognized for 5 minutes. 

Ms. JACKSON LEE. Thank you very much. 

Mr. POE. Thank you very much, Mr. Chairman. Thank you for 

being here. Appreciate your comments. I have several questions. 

But first, I just want to make it clear to you that in my other life 

I used to be a judge and prosecutor and I hate thieves. There is 

just nothing worse than a thief, whether it is an individual or a nation. 

China seems to me to have a culture of thievery. It is culturally 

and politically acceptable, in my opinion, in China to have theft of 

American products and intellectual property, and I know they are 

big trading buddies, but how do we hold them accountable specifically. I like the tariff idea. 

What about until China gets their thievery in order not allowing 

visas for their citizens not to come to the United States? If we 

mean business about not stealing business, what do you think 

about that idea? 

Ms. ESPINEL. I think we do mean business. I think we absolutely 

need to make sure that China is being held accountable. 

Mr. POE. Do you like the idea of withholding visas until they 

start cracking down on the organized crime in their country of 

stealing intellectual property? 

Ms. ESPINEL. I think it is an interesting idea. I think we need 

to make sure in everything that we do that we are taking steps 

that benefit our economy as a whole. And so one of the things that 

makes dealing with China complicated is the fact that we do have 

many different connections with China in our economy, and while 

we absolutely need to make sure that the violations of American 

intellectual property rights, the fact that China is taking our research and development, the fact that China is building an innovation industry basically on the backs of our own industries, we need 

to make sure that stops, but we need to make sure that stops in 

a way that doesn’t have a significant detrimental impact on other 

parts of our economy. 

37

Mr. POE. Well, I don’t know that prohibiting visas from the Chinese that wants to come to school here hurts our economy as much 

as the thievery that takes place in China with the intellectual 

property. I understand that the piracy of movies, the piracy of 

songs has prohibited the development of more movies, the development of more music in the music industry because of the cost to 

our industry because of piracy, not just in China, but the former 

Soviet Bloc and Eastern European countries are involved in all of 

this as well. So there needs to be some consequences. 

I agree with all of those who have stated, you know, we can try 

the diplomatic channels. Well, that doesn’t work. 

Next question: Have you had any input, influence, encouragement or discouragement from the State Department not to be so 

tough on the Chinese because they are our trading buddies? 

Ms. ESPINEL. No. The State Department, among other agencies, 

works very closely with us on the plan. I think they are well aware, 

as are we, of the problems that we face in China. I think the short 

answer to that question is no. 

Mr. POE. Good. Good to hear. 

Google was real concerned about the Chinese and their intellectual property theft of Google. Now that has sort of been resolved. 

I understand that Google is not too concerned about their blog site 

being a venue for intellectual property theft. Do you want to comment on that? That their blogs are being used as a basis for developing piracy, international piracy. 

Ms. ESPINEL. Well, I won’t comment or speak for Google in terms 

of their views on intellectual property enforcement or intellectual 

property infringement. I will tell you that we are discussing with 

Google, as we are with a number of the companies that are involved in making the Internet work and making the Internet the 

great thing for American commerce as it has been, to see whether 

or not there are additional things that we could be doing to address 

one of the negative effects of the Internet, which has been this proliferation of counterfeiting and piracy. 

Mr. POE. I have two more questions in my 30 seconds. Master 

Card and Visa, how cooperative are they in all of this process? 

When people use Master Card, pirate company allows Master Card 

or uses Master Card and Visa, are they cooperative in trying to 

bring down these sites, refuse payment? Are you getting cooperation from Master Card and Visa or are they slow? 

Ms. ESPINEL. We are talking to Master Card and Visa about 

what their operations are. Again, I don’t want to speak for them 

but I don’t believe they want their services to be used for illegal 

activity, so I am hopeful that we will be able to move the ball 

there. 

Chairman BERMAN. The time of the gentleman has expired. The 

gentleman from New Jersey, Mr. Sires, and I do remind the members we have the second panel. Mr. Sires. 

Mr. SIRES. Thank you, Mr. Chairman, and I apologize for not 

being here earlier but I had other commitments. 

I will just be very blunt with you. Is there anything that they 

don’t steal or copy in China from us or from the rest of the world? 

Can you think of anything? 

38

Ms. ESPINEL. Certainly the scope of what is manufactured in 

China in various ways is vast. 

Mr. SIRES. Okay. So how can I as a consumer in New Jersey feel 

that it is safe for me to take it off the shelf if they don’t cooperate? 

They obviously are not embarrassed by it because I assume that 

you have approached this subject with them, and I would like to 

know of their reaction, but how can I as a consumer feel that it 

is safe to take that product off the shelf that comes from China? 

I mean, just the other day I saw medicine. You know, it just goes 

on and on and on. So what can you assure me that we are doing 

everything we can to make sure that the product that I am going 

to purchase is safe? 

Ms. ESPINEL. I can assure you that this is an issue that we care 

deeply about, and we have already talked in this hearing quite a 

bit about the importance of intellectual property enforcement to our 

jobs and to our exports, and to restoring our economy. But the 

issues that you raise, the issues of health and safety and that sort 

of basic issue of consumer confidence in the system is one that I 

think is enormously important. Part of what intellectual properties 

do for us as a society has helped give our consumer that certainty, 

that predictability, that faith that our products are what they purport to be. 

So, we need to have our laws, but we also need to make sure that 

those laws are being enforced so that consumer can have confidence. 

I think the U.S. Government supply chain is certainly the focus 

of this committee. There are other countries overseas that struggle 

even more with the issue of their supply chain being infiltrated, 

but we are very focused on making sure that our own supply chain 

into the United States Government and to our United States consumers is as secure as it can be. 

Mr. SIRES. And I will just share this with you in less than 1 

minute. The other day I was having lunch—this happened a couple 

of months ago—I was having lunch and I was having a piece of catfish, and another member sat next to me, and he said—I won’t 

mention his name. He said, you know, we have to do something in 

the agriculture bill because most of the catfish that is imported 

into the United States are grown by sewage outflows in Vietnam. 

I can tell you that I will never eat another piece of catfish for the 

rest of my life. But this is just the kind of thing that we are not 

aware of, and this happened to me a couple of months ago. Thank 

you. 

And what is the reaction of the Chinese when you approach them 

on some of these issues? 

Ms. ESPINEL. Well, with respect to the catfish story for a moment. My husband’s family is from Louisiana, and I am deeply attached to Louisiana, so you know, catfish is something near and 

dear to me as well. 

Mr. SIRES. I said Vietnam, not Louisiana. I will buy that. 

Ms. ESPINEL. With respect to China, it is clear Chinese needs to 

take this more seriously. Regardless of what their sort of official reaction is, they need to be doing more, and that is a priority for us 

to make that happen. 

39

Mr. SIRES. Just tell your husband to put on it Louisiana grown. 

Thank you. 

Chairman BERMAN. The time of the gentleman has expired. I 

guess it is choice of Vietnamese sewage or American oil on the catfish. 

The gentleman from Massachusetts. 

Mr. DELAHUNT. Well, Mr. Chairman, you can always come to 

New England where things are clean and clear and tasty. 

You know, I agree clearly it is about jobs and it is about balance 

of things and it is about the economy, but at one level it is really 

about our national security, and I think we should not lose sight 

of that, and I think it is clear from the comments that we hear 

there is an anger, justifiable anger that exists, and I think it is also 

clear that it is perceived that China is the most significant aspect 

of this problem, and that it would appear that you don’t have the 

tools to motivate the Chinese from rhetoric to action. 

I think it is absolutely essential that the administration propose 

to the Congress those tools or those mechanisms that will get the 

attention of the Chinese and actually motivate them to match their 

actions with their rhetoric. I am sure different moments there have 

been optics as far as enforcement is concerned, but this conversation has been going on every since I came to Congress and that is 

some 14 years, and it is getting to the point where it is just totally 

unacceptable. 

I think we are losing credibility as well as jobs because we have 

not taken hard sufficient action. There has to be real consequences, 

and if they are not it is just simply going to continue. I bet if you 

took a vote of this committee, that would receive unanimous support, and it is up to this administration now to move expeditiously 

in a way that is respectful but if we do not respond forcefully and 

hard against China until they clean up their act it is going to send 

a message to the rest of the world that, you know, we are just spinning our wheels. 

I applaud the good efforts that are being made. I think task force 

comments headed by task for concepts headed by ICE, the work 

that you are doing is fine, but it is going to require something of 

a different order of magnitude. I think we ought to consider this 

economic terrorism. We are at risk if we do not address this problem, and I think you are hearing that, you know, from both sides, 

Republic and Democrat. This has got to become a high priority 

right up there with job creation and health care, and all of the 

other issues that we are confronting. If we do not do something 

about protecting our intellectual property, we are at risk. Care to 

make a comment? 

Ms. ESPINEL. I fully agree with that. I appreciate your suggestion 

about proposals to Congress because I look forward to working with 

you and with the committee as a whole to figure out more what we 

can do there. 

Mr. DELAHUNT. Let me just get to Mr. Poe’s idea about withholding visas, but, first of all, we want them to come here so that 

they will spend some money here. I want those students to come 

to schools in New England because for every international student 

it generates 50 trips from overseas by family members and friends 

which helps our economy. 

40

So this has got to be directed along the lines that were suggested 

earlier by the chairman, about having clear countervailing tariffs 

that are painful and will keep Chinese goods from coming into this 

country. My instinct tells me that is the answer. You know, jobs 

are leaving China now going to other countries that are undercutting, so it is not like there is not a market out there. That, I think, 

is a suggestion that should be taken up expeditiously. 

Chairman BERMAN. The time of the gentleman has expired. Others are saying no more small ball, but the fact is, Ms. Espinel, you 

are unwavering in a number of things that are going to make incremental improvements, and the question is, is there something 

bigger? And we appreciate you being here, and what you are doing, 

and thank you very much. We will now have a second panel. We 

will hear from Mr. Morton who will talk about what ICE has done 

that have some real consequences. 

We have our second panel. Our first witness will be Assistant 

Secretary John Morton, Assistant Secretary of Homeland Security 

for the U.S. Immigration and Customs Enforcement, known as 

ICE. In this capacity, he directs the principal investigative component of the Department of Homeland Security, the second largest 

investigative agency in the Federal Government. 

Mr. Morton has an extensive background in Federal law enforcement. He has held a variety of positions within the Department of 

Justice, including those of trial attorney, special assistant with the 

general counsel in the former INS, and counsel to the deputy attorney general. Mr. Morton received his law degree from the University of Virginia, School of Law. 

Our second witness is Chris Israel. He is the former U.S. Coordinator for International Intellectual Property Enforcement, which 

was located then at the Department of Commerce. 

Appointed by President Bush in 2005, Mr. Israel was responsible 

for coordinating resources within the Federal Government to defend intellectual property rights domestically and internationally. 

Prior to this appointment Mr. Israel served in the Department of 

Commerce, first as deputy assistant secretary for technology policy, 

and later as deputy chief of staff to two commerce secretaries. Prior 

to that time he was deputy director for international policy at Time 

Warner. Mr. Israel has a B.A. from the University of Kansas and 

an MBA from the George Washington University. 

Thank both of you for being here today, and Secretary Morton, 

why don’t you start. 

STATEMENT OF THE HONORABLE JOHN T. MORTON, ASSISTANT SECRETARY, U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT (ICE), U.S. DEPARTMENT OF HOMELAND SECURITY 

Mr. MORTON. Well, Mr. Berman, and Ms. Ros-Lehtinen, and Mr. 

Sires, thank you very, very much for inviting me here today to appear before you. This is my first time, Mr. Chairman, before the 

committee and I very much appreciate the invitation, and the ranking member as well. 

Let me just note for the committee how much I have enjoyed 

working with Victoria in her short time. She has brought a lot of 

41

energy and enthusiasm to her job, and it is very much appreciated. 

We are lucky to have her as the IPEC. 

I also want to thank the work of the Department of Justice. We 

have worked very, very closely recently with the United States Attorney offices, the Computer Crime and Intellectual Property Section in the Criminal Division led by Assistant Attorney General 

Lanny Breuer, and they have been good partners. 

And a final note of thanks before I get started to the industry 

that has been victimized and has worked with us on a number of 

our enforcement efforts. The motion picture industry, the music industry, and the pharmaceutical industry, in my view, a strong 

partnership between the affected businesses and government is essential if we are going to make any headway in bringing real consequences to people who violate the law. 

Mr. Chairman, let me just be direct. We need to focus on strong 

intellectual property enforcement from Los Angeles to Asia. Simply 

put, American business is under assault from criminals who knowingly pirate copyrighted material or counterfeit and trademark 

goods. American ideas, American products are being stolen and 

sold. Sold on the corner of 4th and Main, sold over the Internet. 

From the counterfeit pharmaceuticals and electronics, to pirated 

movies and software, organized criminals are undermining the 

United States economy on a grand scale. 

Why should we care? Well, here is why. American jobs and 

American innovation are being lost. Public health and safety are at 

risk. Pirates and counterfeiters don’t pay wages or taxes. They 

don’t fund pensions and health care plans. They don’t invest in new 

movies or TV shows. They don’t develop new drugs to cure diseases. They don’t invent the next iPhone or flat-screen TV. They 

don’t employ Americans. They don’t make America great. Counterfeiting and piracy hurt American workers and American industry, 

pure and simple. 

Take the music industry, for example, home to extraordinary 

American talent and creativity over the years. In the past 10 years, 

the industry has experienced a dramatic decline in legitimate sales 

and employment due to piracy and counterfeiting, hurting our 

major music capitals like Nashville, New York and Miami. 

So what do we need to do in the face of this crime, Mr. Chairman? In my view, we have to change the face of intellectual property enforcement. We can’t just seek marginal changes. Incremental improvements, a few extra cases here or seizures there are 

welcome but they are ultimately a losing cause. We have to think 

through and address the root causes and the long-term cures. In 

short, we need enforcement marked by innovation and by energy. 

Intellectual property enforcement is a central part of what we do 

at ICE. Last fiscal year, we arrested a record 265 violators and we 

made 1,750 seizures. This fiscal year, we are well on our way to 

setting new records in both categories of arrests and seizures, and 

we are going to open over 1,000 cases, the most we have ever done 

by a long shot in a given year. In short, our enforcement efforts 

have greatly increased, and they will continue to strengthen while 

I am assistant secretary, I promise you. 

Intellectual property is also a central part of the broader DHS 

mission. Our sister agencies, Customs and Border Protection and 

42

the United States Secret Service, play a very important IP enforcement role, and Secretary Napolitano has been a strong proponent 

of IP enforcement during her entire tenure at DHS. 

We pursue intellectual property enforcement through three ways: 

Through our domestic offices, through our international offices, and 

through the Intellectual Property Rights Coordination Center that 

is based just across the river near National Airport in Arlington, 

Virginia, which ICE leads. 

Let me say very quickly about the IPR Center. We have a total 

of 12 partners from all over the Federal Government and elsewhere. It includes ICE, the FBI, CBP, FDA, the Postal Inspection 

Service, and the Patent and Trademark Office, Defense Criminal 

Investigative Service, the Naval Criminal Investigative Service, the 

Army Criminal Investigation Command, and GSA IG’s office. They 

have all just joined to help bolster our efforts in the defense supply 

chain. We also have for the first time international partners in 

Mexico and Interpol. 

At the IPR Center we receive leads, we generate cases, and we 

de-conflict enormous efforts. This last year has been particularly 

busy with successful initiatives being undertaken against counterfeit holiday goods, counterfeit pharmaceuticals and pirated movies. 

Let me briefly focus on one such initiative focused on the Internet, 

which you will see here on the monitors what is called Operation 

In Our Sites. 

At the end of June, the IPR Center launched Operation In Our 

Sites, a new initiative aimed at counterfeiting and piracy. During 

the first phase of this initiative, ICE agents working with the 

United States Attorney’s Office for the Southern District of New 

York seized domain names of seven Web sites offering first run 

movies, often within hours of their theatrical release. These sites 

on the screen now is a view of what one of them looked like prior 

to June 30, allowed visitors to stream or illegally download current 

and highly popular television shows and movies. You could also on 

some of them buy counterfeit software. 

On June 30, over the course of one of the investigations agents 

observed links to more than 200 movies and more than 300 television programs. I mean, everything is available. On June 30, more 

than 75 ICE agents participated in the enforcement action, resulting in the seizure of assets from bank accounts, from PayPal, investment and advertising accounts. 

Our efforts successfully disrupted the ability of criminals to 

purvey pirated films over the Internet. Industry experts tell us that 

Internet piracy takes about 9 to 15 months when you start a new 

site to develop enough traffic to yield the ad revenue that produces 

a profit. So although these sites can come back up again, it takes 

time to get the advertisers back on board and get the necessary 

traffic. 

The domain names discovered during this operation are now controlled, not by the pirates, but by the United States Government, 

namely, ICE. Instead of pirated content, the Web sites now feature 

a banner announcing the seizure of the site by the government, 

ICE and the Department of Justice, and an explanation of the Federal crime and punishment for copyright theft and distribution. So 

43

if you were to go to the sites today, instead of the original site you 

would see this banner. 

Here is an interesting part of this, Mr. Chairman. As the new 

owners of the domain name, ICE has been able to determine the 

number of visitors these sites have received since the seizures. 

Within 2 days of ICE’s enforcement action against these pirating 

Web sites, over 1.7 million visitors saw just one banner on one site. 

This number is substantially more than the total number of hits 

the sites were receiving when they were selling pirated goods, and 

that was substantial. One site to date has seen over 20 million 

views, people coming to see the government’s seizure banner. 

In other words, we believe the government’s warning banners 

have gone viral and Internet users by the millions are actually 

seeking a Web site out to view what the government has been 

doing because the government hasn’t been doing a lot of it, and 

now all of a sudden the government is doing it and doing it forcefully. 

And so it has been a silver lining unanticipated—I had no idea 

this was going to happen—consequence to our enforcement action, 

so we are getting tremendous——

Chairman BERMAN. Can you sell advertising? [Laughter.] 

Mr. MORTON. We are going to do it for free. We are all about 

being neutral for the taxpayer. 

Operation In Our Sites not only targets Web sites offering pirated films and music, but we are going to go after everything on the 

Internet. 

Very briefly, we have domestic offices in every State in the 

Union, Mr. Chairman. We are going to put the full weight of those 

offices to doing this kind of work. Just 6 days ago, we arrested in 

New York two individuals involved in the distribution of counterfeit footwear and other products. 

Internationally, we have 63 offices in 44 countries wherein nine 

of the 11 countries on the USTR’s priority watch list. We have 

opened an office in Brussels to work directly with the WCO on this, 

and we have got an office, two offices as a matter of fact, in China, 

and we are working hard. It is tough work. Obviously, we have 

heard numerous comments already on how much and deep—how 

deep the challenges are, but we have had some success. 

We have worked with the Chinese in Operation Spring Cleaning. 

They actually extradited an individual from China to the United 

States to face prosecution. The person was sentenced to 4 years in 

prison and ordered to pay almost $900,000 in restitution to the Motion Picture Association of America, and we have had similar successes in China. 

We are also looking to start efforts in Africa. That is the next unfortunate wave of IP problems facing us. We are working with the 

State Department. 

Let me just close by saying this, Mr. Chairman. I really want to 

thank you and the other members of the committee for having this 

hearing and, frankly, highlighting the need for IP enforcement. It 

is an area in my view that has long needed more attention. It isn’t 

a particularly partisan issue from my perspective. It is a problem 

that has been around for decades. It is very serious, and in these 

44

times of economic pressure in the United States it is a problem I 

think we as a nation can ill-afford to ignore. Thank you. 

[The prepared statement of Mr. Morton follows:]


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Chairman BERMAN. Mr. Israel. 

STATEMENT OF THE HONORABLE CHRIS ISRAEL, CO-FOUNDER AND MANAGING PARTNER, PCT GOVERNMENT RELATIONS LLC (FORMER U.S. COORDINATOR FOR INTERNATIONAL INTELLECTUAL PROPERTY ENFORCEMENT) 

Mr. ISRAEL. Thank you, Chairman Berman, Ranking Member 

Ros-Lehtinen, and members of the committee. I really appreciate 

the opportunity to appear before you today and discuss the importance of American intellectual property. 

As the chairman noted, from May 2005 to March 2008, I had the 

privilege of serving as the U.S. Coordinator for International Intellectual Property Enforcement. That previous effort and those we 

are here to discuss today reflect the critical role that IP plays in 

the competitiveness and growth of the U.S. economy. Many of the 

statistics that back this up are well known. Some of them have 

been discussed today, but they certainly deserve noting. 

Particularly relevant to this committee, IP intensive industries in the U.S. create an average $14.6 billion in trade surplus each year. 

U.S. IP is worth between $5 trillion and $5.5 trillion, more than 

the Gross Domestic Product of any other single country. In States 

that are represented by Representatives of congressional districts 

of this committee, the movie industry alone supports 520,000 jobs 

and provides over $33 billion in direct annual wages. Finally, the 

number of U.S. patents for clean and renewable energy sources has 

risen from 720 in 2002 to 1,125 in 2009. 

For policymakers seeking to support our creative and cutting 

edge industries and workers, few things are as important as a 

strong commitment to the protection of their intellectual property. 

Unfortunately, as we are discussing, we are confronting an environment in which counterfeiting and piracy have become sophisticated global enterprises that threaten entire industries, put U.S. 

consumers at risk, and often provide a source of revenue for criminal organizations. 

The Obama administration’s 2010 Joint Strategic Plan on Intellectual Property and Enforcement lays out a thoughtful and comprehensive approach to tackling a number of difficult IP policy and 

enforcement challenges. For instance, the strategy recognizes the 

global proliferation of Web sites that traffic in huge volumes of pirated material, and as Assistant Secretary Morton just went 

through in compelling detail, Operation In Our Sites led by ICE 

and DOJ and a number of Federal agencies does really provide a 

compelling example of how law enforcement and industry can collaborate to address the problem. 

Likewise, the strategy recognizes that better cooperation among 

a range of industry players, as Coordinator Espinel mentioned this 

morning, is necessary, and ultimately legislation, as the chairman 

noted in his opening comments, may indeed be required to have a 

meaningful impact on online piracy. 

The strategy also addresses the significance of the Anti-Counterfeiting Trade Agreement. This is a major policy initiative that will 

substantially improve the global climate for IP protection. The administration’s strategy also promises to take the government’s own 

coordination to a new level in terms of agencies involved and their 

59

ability to tackle difficult challenges like counterfeit medicines and 

supply chain management. 

Finally, the importance of sound and relevant data is of tremendous importance to policymakers and industry, and can be sometimes tedious in detail but I think it is a very important thing to 

consider, and the strategy envisions new government data that will 

quantify the true value of IP to our economy. 

The U.S. confronts a range of domestic and international IP 

issues at any given time. However as we discussed this morning, 

China and Russia do present very unique challenges. 

The U.S. has made some progress with China by working bilaterally attempting to enforce trade rules and attacking criminal organizations, but it is clear that we are probably treading water at 

best. The WTO cases brought by the United States against China 

in 2007 may ultimately improve some enforcement efforts and provide additional market access for U.S. content, but we are quickly 

reminded that nearly four out of five software applications running 

on Chinese computers, the biggest PC market in the world by the 

way, are pirated. 

And late last year China significantly raised the stakes for U.S. 

industries from IT to Clean Tech with more aggressive implementation of its indigenous innovation strategy. These policies would 

exclude U.S. companies from large parts of the Chinese market and 

compel transfers of intellectual property as the price of entry when 

they are let in. As Robert Holleyman, CEO Of the Business Software Alliance recently put in the Washington Post, ‘‘This squeezes 

us at both ends, shutting many of our innovative products out of 

the market and stealing the rest.’’

As has been the case for several years, Russia’s desire to join the 

WTO is directly tied to its IP enforcement record. Presidents 

Obama and Medvedev announced at their summit last month that 

they hoped to conclude Russia’s outstanding WTO commitments by 

September 30th of this year. In terms of IP enforcement this means 

Russia must make a range of criminal, civil and customs enforcement improvements that they first committed to in very excruciating detail back in 2006. 

Given the scope of these commitments, it seems to be quite a 

heavy lift. However, the administration has indicated that interactions with Russia have intensified on IP issues of late. 

Mr. Chairman, it has become very clear in recent years that our 

ability to protect and promote intellectual property is a critical 

component of our overall foreign policy and important goals such 

as addressing our competitive issues with countries like China, reducing our dependence on foreign energy sources, promoting exports, and incentivizing foreign investment in the United States all 

depend on our intellectual capital. It is one of our most valuable 

resources and competitive advantages. 

Again, I appreciate the opportunity to come here before you 

today, and I am honored to have this opportunity, and I very much 

look forward to your questions. 

[The prepared statement of Mr. Israel follows:]

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Chairman BERMAN. Thank you very much, and I will give myself 

5 minutes for a few questions. 

The seizing of a domain name, what does ICE have to do to make 

that happen? 

Mr. MORTON. We work with the United States Attorney’s Office. 

We demonstrate that the particular Web site in question is engaged in the illegal distribution of copyrighted material, and then 

we go to the United States District Court, we get a seizure order 

to cease the domain name as an instrument of a crime, and we 

then put up a banner to the world saying we now own this. And 

because the domain registries are largely in the United States and 

are controlled by the intellectual property it is a very effective way 

for us to have a short-term, quick enforcement effort. 

It is important to note that the domain name is different than 

the content that may be hosted on the server, and so you can get 

a new domain name. The server may be overseas. The contents 

may be overseas. That is more of a long-term challenge for us. But 

we go into court and we seize them. 

Chairman BERMAN. I take it the one short-term benefit of this 

process is for people who know that name there is a lag time between them picking up what the new domain name is and shifting, 

although practically speaking do you have any sense that that does 

cut down on the piracy, or are there just so many different alternatives that if one is back they are immediately going to one of the 

other ones that people who do that are totally familiar with? 

Mr. MORTON. First of all, you are right. It makes it more difficult. I mean, all the individual users have their favorite sites and 

their favorites list. You now have got to change all of that. You 

have got to know what the new one is. If there are contractual arrangements with PayPal or with the advertisers, those all have to 

be changed. So it takes—it is definitely a serious hindrance. It obviously shuts the site down. They can start up again, but it is even 

more complicated. 

We saw with a few of the Web sites that we seized the domain 

name they didn’t get all of the links within the new site right and 

so there would be portions of the site of the new site, and if you 

clicked on a link, for example, their policy or about us it would take 

you back to the original site, and it would take you to the government’s seizure banner. So it definitely hurts their ability to do it. 


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Time will tell on the second portion of your question, Mr. Chairman. What we are trying to do in Operation In Our Sites is not 

just seize one site here, one site there. We are trying to do a whole 

wave of sites. We are going to follow those sites. If they reappear, 

we are going to follow them. We are going to seize those domain 

names as well, and we are going to try to do it across whole categories, and just get in the business of letting these folks know we 

are going to follow you wherever you go and we are going to take 

these domain names. We are going to follow you and we expect you 

to try to pull up again and start a new site, but you can expect us 

to be right on your heels. 

Chairman BERMAN. Thank you. Great. 

Mr. Israel, Ms. Espinel is now in a new place and with some new 

authorities has a position you held. Could you describe a couple of 

the most serious challenges you faced? Any thoughts you have of 

how she might overcome those challenges? 

Mr. ISRAEL. Thank you for the question, Mr. Chairman. She is 

off to a great start in clearing the strategy. They have really articulated a number of very key issues. She seems to have great cooperation and collaboration across the range of industries. I personally never found that to be a huge problem. I think there was a 

perception that there were massive stove pipes and heels dug in 

across the Federal Government. I personally found that the people 

wanted to collaborate, wanted to tackle the problem. You are dealing with very eclectic and very different agencies, all the way from 

trade negotiators to Federal investigators and prosecutors. It is a 

challenge to pull all those people together in a way that provides 

leadership and adds value to it. 

I think the biggest challenge that we are facing, and I will 

equate it maybe to China in a strange way, we need to institutionalize our IP enforcement, priorities, methodologies, strategies, 

and tactics in a way that expands beyond just those issues we are 

talking about at the hearing today. They are going to be manning 

the front line today, and this really has to be a long-term systemic 

effort for the U.S. Government. In the way that we see other countries go after IP, we have to go after it just as aggressively. That 

is a huge challenge facing us. 

Chairman BERMAN. Thank you very much. My time has expired. 

The ranking member. 

Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman, and 

thank you, gentlemen, for excellent testimony. I will bunch my 

questions together and let you answer. 

Secretary Morton, you are heading to China in September to discuss intellectual property piracy with Chinese officials and to sign 

a new cooperation agreement. Why do you believe that these new 

discussion and yet another agreement will produce different results 

than the ones in the past, and isn’t the Chinese approach to promise cooperation and then do the minimum, throw us a bone to keep 

us quiet? 

And then, Mr. Israel, on China and Russia you had discussed 

briefly real action that we can take to stop the piracy and to stop 

the theft. Could you elaborate a bit? I wasn’t quite satisfied with 

the previous answer of our previous witness of how we can bring 

66

sufficient pressure to bear on both of these countries to have them 

do the right thing? 

Thank you, Mr. Chairman. 

Mr. MORTON. I don’t have any illusions about the trip that I am 

going to take to China. I think it is important, though, because we 

have had a number of conversations with the Chinese here. I try 

to be fairly straightforward in my dealings as a law enforcement 

agency. The Chinese know my views, and we have had a number 

of successful operations with the Chinese, and we have very good 

cooperation with Chinese authorities in Hong Kong. Now, obviously, Hong Kong has a separate charter and status right now. 

And so I, while not underestimating the challenge, and it is sobering, my view is while I am in this job I need to do everything 

I can as part of a larger coordinated effort to bring about a change 

result and meaningful consequences. I am all about meaningful 

consequences for criminals who are stealing American products and 

services. And we have had some successes with the Chinese. 

I am going to try to push those successes to particularly where 

we have found the Chinese to be willing to work with us where 

there is an international component to the case, where there are 

Americans involved as well as Chinese, and I am going to do everything in my power to increase the number of cases that we are 

working to, and take it as far as I can. 

Ms. ROS-LEHTINEN. I believe that you will. Thank you, Mr. Secretary. Mr. Israel? 

Mr. ISRAEL. Thank you for the question. 

I think in terms of China, as Assistant Secretary Morton mentioned, the impression I always receive from speaking to our law 

enforcement officials who are working directly with China is that 

when you got to the actual level of enforcement officials, cops working with cops, the rest of China, the level of cooperation is pretty 

good. 

The risk that China runs with this strategy is that at some point 

they are dealing with criminal organizations that are engaging in 

this high-level, sophisticated intellectual property theft. That is a 

problem and a threat to them internally as well. I mean, it is kind 

of a hard thing to manage, so I think working directly with their 

law enforcement agencies to bring cases, to go after transnational 

crime is a compelling place, an important place to start and remain. 

The international groups, the G–8, Lyon-Roma infrastructure, we 

initiated some things working through there, working through 

Interpol, I think attacking it as a criminal problem; the issue of, 

you know, potentially looking into what types of cases we might be 

able to bring to the WTO to create the authority to bring the type 

of countervailing duty based on IP losses to the United States that 

some members were speaking about earlier certainly is an interesting theory to pursue, an idea to pursue. 

This is at the end of the day in economic security issue for China, 

and I think we need to make sure that we try to find leverage 

points that will recognize that. 

With Russia, I think this seems to have all crystallized in the 

WTO question. I do think that is a point of leverage for us. I do 

think there appears to be tremendous consistency between the 

67

Bush administration and the Obama administration on the question of holding to the line on WTO accession for Russia and making 

sure they complete commitments that have been on the table now 

for a very long time. I think that is important to remain consistent 

there. 

There seems to be some renewed incentive in Russia. They are 

trying to evolve their economy into a more innovative place so they 

are compelled by that, I think. 

Ms. ROS-LEHTINEN. Thank you very much. Thank you, gentlemen. Thank you, Mr. Chairman. 

Chairman BERMAN. Mr. Manzullo, 5 minutes. 

Mr. MANZULLO. Thank you. The first time I went to China was 

in 1997 with Congressman Behrider, Congressman Hastings, and 

actually Rick Kessler was along with a group, and we met with a 

Chinese group called Moffet, which was the—I don’t know if they 

call it the same—the intellectual property protection agency that 

was set up at the time, and I returned to China several times after 

that. Nothing gets done. 

You know, I don’t think it’s a matter of political will. Perhaps 

Mr. Sherman said it correctly that there is a high priority to do 

nothing, and my question is, in terms of the remedies has anybody 

ever thought about the fact that if a country stands by and knowingly sees the private sector engage in a crime, in this case the 

pirating of most especially movies and songs of that nature, does 

it ever reach a point when the inactivity of a government leads to 

the criminal activity of the private sector being imputed to the government for purposes of enforcement? 

Mr. MORTON. I am unaware of any circumstance in which that 

has happened in the intellectual property world, and in the case of 

China there have been a number of enforcement actions over the 

years, joint enforcement actions between the United States and 

government authorities to shut down offending factories and to arrest and prosecute individuals. It is a small number, far fewer than 

we want, and I am not going to challenge Mr. Israel’s characterization of us treading water, which is what you have observed yourself, but I am not aware. 

Mr. MANZULLO. Well, it may be more drowning than treading 

water. The area that I represent is so heavily involved in manufacturing intellectual property—the Chinese will take something and 

they will do a knock off in such a short period of time. I was told 

that one of the reasons we have no golf club manufacturers in this 

country, with the exception, I think, of PING that does some assembly here, is that they will come out with a real great golf club 

and within 12 hours there is a knock off being manufactured in 

China. 

I just don’t know how we are going to be able to get our arms 

around this thing. You know, we talk about how there is no political will on the part of the Chinese. I just don’t think private property rights are within their vocabulary. It is not in their culture. 

Mr. ISRAEL. Indeed, Congressman, private property is a new concept in China, and I think we are still in the process of that being 

fully adopted into the rule of law and through the judicial system 

in China, and I think what we see in the indigenous innovation 

proposals that are coming out of China that are drawing such apVerDate 0ct 09 2002 09:12 Sep 28, 2010 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6633 F:\WORK\FULL\072110\57607 HFA PsN: SHIRL
68

propriate scrutiny because we are seeing the intellectual property 

policies, weakness in enforcement tied directly to an overt economic 

strategy. It is clearly designed to promote domestic champions. It 

is clearly designed to build those domestic champions upon the innovation and input of primarily U.S. companies, but other global 

companies as well, in position in a way in which they are directly 

competitive to——

Mr. MANZULLO. But when the Olympics were in China they knew 

how to protect their trademarks of everything associated with the 

Olympics. I mean, I don’t know how long this system can be gamed 

like this, and you wonder how much we are going to lose to China. 

If you lose on an even playing field, that is competition. I know you 

don’t have an answer for me and I am not expecting one, but I just 

want to thank you guys for all the hard work that you put in on 

this. 

Chairman BERMAN. The time of the gentleman has expired. You 

know, the ranking member, in her first round of questions, raised 

this issue of the leverage point, and in this case she was talking 

about Russia, and accession to WTO. One does start to think that 

we didn’t drive a tough enough bargain when we let China into 

WTO in terms of not just laws but enforcement of those laws. I 

mean, there is an acceptance of a certain culture in WTO that 

China did not have to incorporate in order to get into that organization. 

You talked about a footprint, I am just going to finish up and 

then anybody else who wants, but you talked about a footprint in 

other countries. We are not talking here about people meeting with 

top government officials and heads of enforcement agencies. 

Are you talking about people who are doing enforcement and how 

do they operate in another country? Run around and seize stuff? 

Mr. MORTON. No. Mr. Chairman, we have a very large footprint 

overseas, the largest in the Department of Homeland Security, and 

it is because we are essentially a criminal investigative agency 

dedicated to transnational crime. That is our business—investigating the illicit movement of people, money, goods into the 

United States and out of the United States in efforts to steal our 

goods and services, whether it is export control or intellectual property. 

So, we have special agents. They are investigators posted 

throughout the world. They obviously do not have direct law enforcement authority in the country in question, so their job is to 

work very, very closely with their law enforcement counterparts to 

educate them, to train them, and wherever possible, to engage in 

joint investigations. Some countries we have a great deal of success, others we don’t have so much success. 

China is a fascinating study in that we have a lot of work to do 

in mainland China. We have a tremendously good working relationship on intellectual property with Hong Kong authorities. So it 

is critical to us—one of the things I am very interested in, we don’t 

receive a specific appropriation for intellectual property, although 

that may change because this year for the first year the President’s 

budget calls for specific investigative agents in ICE for this purpose, in creating a dedicated corps of overseas ICE investigative attaches that line up with the IP resources of USTR and the State 

69

Department in those countries that are not only the areas of concern, but also the countries where we have some like-minded views 

and an ability to carry out additional enforcement. 

Chairman BERMAN. I thank both of you very much. Very interesting, very important and I appreciate your being here and sharing your thoughts with us, and with that the committee hearing is 

adjourned. 

[Whereupon, at 12:12 p.m., the committee was adjourned.] 

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