108TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 108–600 

ANTI-COUNTERFEITING AMENDMENTS ACT OF 2004 

JULY 13, 2004.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. SENSENBRENNER, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

[To accompany H.R. 3632] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to whom was referred the bill 

(H.R. 3632) to prevent and punish counterfeiting of copyrighted 

copies and phonorecords, and for other purposes, having considered 

the same, reports favorably thereon with an amendment and recommends that the bill as amended do pass. 

CONTENTS 

Page 

The Amendment ...................................................................................................... 1 

Purpose and Summary ............................................................................................ 4 

Background and Need for the Legislation ............................................................. 4 

Hearings ................................................................................................................... 6 

Committee Consideration ........................................................................................ 6 

Vote of the Committee ............................................................................................. 6 

Committee Oversight Findings ............................................................................... 7 

New Budget Authority and Tax Expenditures ...................................................... 7 

Congressional Budget Office Cost Estimate .......................................................... 7 

Performance Goals and Objectives ......................................................................... 8 

Constitutional Authority Statement ...................................................................... 8 

Section-by-Section Analysis and Discussion .......................................................... 8 

Changes in Existing Law Made by the Bill, as Reported ..................................... 9 

Markup Transcript .................................................................................................. 13 

THE AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Anti-counterfeiting Amendments Act of 2004’’. 

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SEC. 2. PROHIBITION AGAINST TRAFFICKING IN COUNTERFEIT COMPONENTS. 

(a) IN GENERAL.—Section 2318 of title 18, United States Code, is amended—

(1) by striking the section heading and inserting the following: 

‘‘§ 2318. Trafficking in counterfeit labels, illicit labels, or counterfeit documentation or packaging’’; 

(2) by striking subsection (a) and inserting the following: 

‘‘(a) Whoever, in any of the circumstances described in subsection (c), knowingly 

traffics in—

‘‘(1) a counterfeit label or illicit label affixed to, enclosing, or accompanying, 

or designed to be affixed to, enclose, or accompany—

‘‘(A) a phonorecord; 

‘‘(B) a copy of a computer program; 

‘‘(C) a copy of a motion picture or other audiovisual work; 

‘‘(D) a copy of a literary work; 

‘‘(E) a copy of a pictorial, graphic, or sculptural work; 

‘‘(F) a work of visual art; or 

‘‘(G) documentation or packaging; or 

‘‘(2) counterfeit documentation or packaging, 

shall be fined under this title or imprisoned for not more than 5 years, or both.’’; 

(3) in subsection (b)—

(A) in paragraph (2), by striking ‘‘and’’ after the semicolon; 

(B) in paragraph (3)—

(i) by striking ‘‘and ‘audiovisual work’ have’’ and inserting the following: ‘‘ ‘audiovisual work’, ‘literary work’, ‘pictorial, graphic, or sculptural work’, ‘sound recording’, ‘work of visual art’, and ‘copyright owner’ 

have’’; and 

(ii) by striking the period at the end and inserting a semicolon; and 

(C) by adding at the end the following: 

‘‘(4) the term ‘illicit label’ means a genuine certificate, licensing document, 

registration card, or similar labeling component— 

‘‘(A) that is used by the copyright owner to verify that a phonorecord, 

a copy of a computer program, a copy of a motion picture or other audiovisual work, a copy of a literary work, a copy of a pictorial, graphic, or 

sculptural work, a work of visual art, or documentation or packaging is not 

counterfeit or infringing of any copyright; and 

‘‘(B) that is, without the authorization of the copyright owner— 

‘‘(i) distributed or intended for distribution not in connection with 

the copy, phonorecord, or work of visual art to which such labeling component was intended to be affixed by the respective copyright owner; 

or 

‘‘(ii) in connection with a genuine certificate or licensing document, 

knowingly falsified in order to designate a higher number of licensed 

users or copies than authorized by the copyright owner, unless that certificate or document is used by the copyright owner solely for the purpose of monitoring or tracking the copyright owner’s distribution channel and not for the purpose of verifying that a copy or phonorecord is 

noninfringing; 

‘‘(5) the term ‘documentation or packaging’ means documentation or packaging, in physical form, for a phonorecord, copy of a computer program, copy 

of a motion picture or other audiovisual work, copy of a literary work, copy of 

a pictorial, graphic, or sculptural work, or work of visual art; and 

‘‘(6) the term ‘counterfeit documentation or packaging’ means documentation or packaging that appears to be genuine, but is not.’’; 

(4) in subsection (c)—

(A) by striking paragraph (3) and inserting the following: 

‘‘(3) the counterfeit label or illicit label is affixed to, encloses, or accompanies, or is designed to be affixed to, enclose, or accompany—

‘‘(A) a phonorecord of a copyrighted sound recording or copyrighted musical work; 

‘‘(B) a copy of a copyrighted computer program; 

‘‘(C) a copy of a copyrighted motion picture or other audiovisual work; 

‘‘(D) a copy of a literary work; 

‘‘(E) a copy of a pictorial, graphic, or sculptural work; 

‘‘(F) a work of visual art; or 

‘‘(G) copyrighted documentation or packaging; or’’; and 

(B) in paragraph (4), by striking ‘‘for a computer program’’; and 

(5) in subsection (d)—

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(A) by inserting ‘‘or illicit labels’’ after ‘‘counterfeit labels’’ each place 

it appears; and 

(B) by inserting before the period at the end the following: ‘‘, and of any 

equipment, device, or material used to manufacture, reproduce, or assemble 

the counterfeit labels or illicit labels’’. 

(b) CIVIL REMEDIES.—Section 2318 of title 18, United States Code, is further 

amended by adding at the end the following: 

‘‘(f) CIVIL REMEDIES.— ‘‘(1) IN GENERAL.—Any copyright owner who is injured, or is threatened 

with injury, by a violation of subsection (a) may bring a civil action in an appropriate United States district court. 

‘‘(2) DISCRETION OF COURT.—In any action brought under paragraph (1), the 

court—

‘‘(A) may grant 1 or more temporary or permanent injunctions on such 

terms as the court determines to be reasonable to prevent or restrain a violation of subsection (a); 

‘‘(B) at any time while the action is pending, may order the impounding, on such terms as the court determines to be reasonable, of any article 

that is in the custody or control of the alleged violator and that the court 

has reasonable cause to believe was involved in a violation of subsection (a); 

and 

‘‘(C) may award to the injured party—

‘‘(i) reasonable attorney fees and costs; and 

‘‘(ii) (I) actual damages and any additional profits of the violator, 

as provided in paragraph (3); or 

‘‘(II) statutory damages, as provided in paragraph (4). 

‘‘(3) ACTUAL DAMAGES AND PROFITS.—

‘‘(A) IN GENERAL.—The injured party is entitled to recover—

‘‘(i) the actual damages suffered by the injured party as a result 

of a violation of subsection (a), as provided in subparagraph (B) of this 

paragraph; and 

‘‘(ii) any profits of the violator that are attributable to a violation 

of subsection (a) and are not taken into account in computing the actual damages. 

‘‘(B) CALCULATION OF DAMAGES.—The court shall calculate actual damages by multiplying—

‘‘(i) the value of the phonorecords, copies, or works of visual art 

which are, or are intended to be, affixed with, enclosed in, or accompanied by any counterfeit labels, illicit labels, or counterfeit documentation or packaging, by 

‘‘(ii) the number of phonorecords, copies, or works of visual art 

which are, or are intended to be, affixed with, enclosed in, or accompanied by any counterfeit labels, illicit labels, or counterfeit documentation or packaging. 

‘‘(C) DEFINITION.—For purposes of this paragraph, the ‘value’ of a phonorecord, copy, or work of visual art is—

‘‘(i) in the case of a copyrighted sound recording or copyrighted musical work, the retail value of an authorized phonorecord of that sound 

recording or musical work; 

‘‘(ii) in the case of a copyrighted computer program, the retail value 

of an authorized copy of that computer program; 

‘‘(iii) in the case of a copyrighted motion picture or other audiovisual work, the retail value of an authorized copy of that motion picture or audiovisual work; 

‘‘(iv) in the case of a copyrighted literary work, the retail value of 

an authorized copy of that literary work; 

‘‘(v) in the case of a pictorial, graphic, or sculptural work, the retail 

value of an authorized copy of that work; and 

‘‘(vi) in the case of a work of visual art, the retail value of that 

work. 

‘‘(4) STATUTORY DAMAGES.—The injured party may elect, at any time before 

final judgment is rendered, to recover, instead of actual damages and profits, 

an award of statutory damages for each violation of subsection (a) in a sum of 

not less than $2,500 or more than $25,000, as the court considers appropriate. 

‘‘(5) SUBSEQUENT VIOLATION.—The court may increase an award of damages 

under this subsection by 3 times the amount that would otherwise be awarded, 

as the court considers appropriate, if the court finds that a person has subsequently violated subsection (a) within 3 years after a final judgment was entered against that person for a violation of that subsection. 

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‘‘(6) LIMITATION ON ACTIONS.—A civil action may not be commenced under 

section unless it is commenced within 3 years after the date on which the claimant discovers the violation of subsection (a).’’. 

(c) CONFORMING AMENDMENT.—The item relating to section 2318 in the table 

of sections for chapter 113 of title 18, United States Code, is amended to read as 

follows:

‘‘2318. Trafficking in counterfeit labels, illicit labels, or counterfeit documentation or packaging.’’.

SEC. 3. OTHER RIGHTS NOT AFFECTED. 

(a) CHAPTERS 5 AND 12 OF TITLE 17; ELECTRONIC TRANSMISSIONS.—The amendments made by this Act—

(1) shall not enlarge, diminish, or otherwise affect any liability or limitations on liability under sections 512, 1201 or 1202 of title 17, United States 

Code; and 

(2) shall not be construed to apply—

(A) in any case, to the electronic transmission of a genuine certificate, 

licensing document, registration card, similar labeling component, or documentation or packaging described in paragraph (4) or (5) of section 2318(b) 

of title 18, United States Code, as amended by this Act; and 

(B) in the case of a civil action under section 2318(f) of title 18, United 

States Code, to the electronic transmission of a counterfeit label or counterfeit documentation or packaging defined in paragraph (1) or (6) of section 

2318(b) of title 18, United States Code. 

(b) FAIR USE.—The amendments made by this Act shall not affect the fair use, 

under section 107 of title 17, United States Code, of a genuine certificate, licensing 

document, registration card, similar labeling component, or documentation or packaging described in paragraph (4) or (5) of section 2318(b) of title 18, United States 

Code, as amended by this Act.

PURPOSE AND SUMMARY

H.R. 3632, the ‘‘Anti-counterfeiting Amendments Act of 2004,’’ 

would expand the criminal provisions of 18 U.S.C. § 2318 to combat 

the trafficking of counterfeit intellectual property products. 

BACKGROUND AND NEED FOR THE LEGISLATION

Counterfeiting of intellectual property continues to grow because 

of its high profitability and the difficulty of prosecuting individuals 

and groups connected with it. H.R. 3632 arises from a new activity 

associated with software counterfeiting. To deter counterfeiting, 

software companies increasingly use sophisticated identification 

features to verify product authenticity. Since the authentication 

features cannot be added to the actual product, they are bundled 

with, or placed on, the product packaging. Many of these features 

are found in U.S. and foreign currency, including holograms, microprinting, and special ink. 

Because of the enormous opportunities for profits and the low 

risk of prosecution and significant punishment, the bundling of authentic labeling components with counterfeit software has become 

part of an intricate web of international organized crime. Although 

crime groups based in Asia produce the largest quantity of sophisticated counterfeits, manufacturing and distribution centers exist 

throughout the world. In fact, the State of California is a major 

entry and assembly point for counterfeit software, CD-ROMs, and 

components. In November 2001, Operation ‘‘White Horse’’ led to a 

U.S. Customs seizure of approximately $100 million in counterfeit 

software that was brought into the port of Long Beach, California. 

However, other such components were not seized by U.S. Customs 

in northern California due to questions surrounding the existence 

of legal authority to seize such components that were not affixed 

to or bundled with counterfeit items. 

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Consumers are now accustomed to looking for these authentication features to protect themselves from being defrauded into buying counterfeit products. Legitimate authentication features are in 

high demand by those who seek to pass off counterfeit software as 

authentic. There has been a sharp increase in the theft of legitimate authentication features from factories that produce them and 

from shipment facilities that store and transport them. One American software company estimates that over 500,000 of its legitimate 

authentication features have been stolen from authorized 

replicators. These features are then bundled with counterfeit products. At times, the legitimate authentication features are trafficked 

online so that the person or groups who originally obtained the authentication features have no actual knowledge of how the authentication feature will be used in the future. The Committee is also 

aware of a recent case in which U.S. Attorneys declined to prosecute an individual trafficking in legitimate authentication features 

due to the difficulty in proving his intent to bundle them with 

counterfeit software. The Committee believes that in almost all instances, those who handle counterfeit authentication features are 

extremely likely to be engaged in fraudulent activity. 

The Committee was primarily aware of this problem in crimes 

involving software counterfeiting, although there have been occurrences where it exists with other types of intellectual property. The 

Committee fully intends that this law apply to other products not 

just software. 

The legislation creates a new definition of illicit labels as genuine 

labels that are:

1) being used or otherwise distributed without the authorization of the copyright owner, or

2) knowingly falsified to indicate a higher number of licensed 

users or copies than authorized by the copyright owner unless the certificate or document is used by the copyright 

owner solely to monitor or track the copyright owner’s distribution channel.

H.R. 3632 also requires the forfeiture and destruction of any 

equipment, device, or material used to manufacture, reproduce, or 

assemble the counterfeit labels or illicit labels. The Committee intends this requirement to apply broadly to ensure that illegal actors do not resurface months or years after conviction using the 

same equipment another individual used previously. 

The Committee consulted with the Justice Department to ensure 

that the legislation does not create additional burdens for legitimate businesses. The Committee accepted all of the recommendations of the Justice Department, except its recommendation to 

place the civil provisions in Title 17. Noting the existence of other 

civil provisions in Title 18, the Committee felt that placement of 

the civil provisions in the legislation in Title 18 instead of Title 17 

would avoid the potential for confusing the traditional Title 17 civil 

actions regarding online activities with those engaged in the illicit 

trafficking of authentication features. 

The ‘‘grey-marketing’’ community alerted the Committee to their 

concerns that early drafts of this legislation might penalize the sale 

of ‘‘grey-market’’ goods. The legislation is drafted in a manner to 

avoid any potential impact on the ‘‘grey-marketing’’ community, 

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with the following exception: the legislation would prohibit the 

changing of a label that would indicate an increase in the number 

of authorized users. For example, it would be illegal under this act 

to add a ‘‘0’’ to a ‘‘10-user’’ license authentication label in an attempt to make the label appear to be for a ‘‘100-user’’ license. It 

is not the Committee’s intent at this time to expand, limit, or otherwise modify existing jurisprudence of Congressional intent on 

grey marketing operations. 

The Committee does not intend that a legitimate, general-purpose Internet marketplace site, such as eBay, Amazon, Froogle, or 

Yahoo!, through which third parties may list a wide variety of 

items for sale be considered to ‘‘otherwise dispose’’ of those items 

within the meaning of section 2318(b)(2) if the Internet marketplace site does not direct or request the offer or sale of the specific 

item, but rather it is initiated by an unaffiliated third party, and 

the Internet marketplace site does not own or take custody of the 

item. The Committee expects that such legitimate sites will have 

terms of service that prohibit the use of their sites to sell illegal 

items and reasonably implement these terms of service. 

Similar legislation was not enacted during the last Congress because of a dispute over its application to digital authentication features. Some advocacy groups were concerned that unintended consequences would arise if digital authentication features were covered. The Committee is not aware of any digital authentication features that have been counterfeited at this time and did not include 

them in the scope of the legislation at this time. The Committee 

is likely to hold additional hearings and possibly introduce legislation related to this issue if it is made aware of such activity actually occurring. This legislation does not cover goods distributed or 

sold electronically. 

HEARINGS

The Committee’s Subcommittee on Courts, the Internet, and Intellectual Property held one hearing on H.R. 3632 on February 12, 

2004. Testimony was received from four witnesses representing 

four organizations: Richard C. LaMagna, Senior Manager, Worldwide Investigations, Law and Corporate Affairs, Microsoft Corporation, Emery Simon, Counsel, Business Software Alliance, Brad 

Buckles, Executive Vice President, Anti-Piracy Recording Industry 

Association of America, David Green, Vice President, Technology 

and New Media. 

COMMITTEE CONSIDERATION

On March 31, 2004, the Subcommittee on Courts, the Internet, 

and Intellectual Property met in open session and ordered favorably reported the bill H.R. 3632 with an amendment by a voice 

vote, a quorum being present. On June 23, 2004, the Committee 

met in open session and ordered favorably reported the bill H.R. 

3632 with an amendment by voice vote, a quorum being present. 

VOTE OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the Committee notes that there were no 

recorded votes during the Committee consideration of H.R. 3632. 

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COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee reports that the findings 

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. 

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives is inapplicable because this legislation does not provide new 

budgetary authority or increased tax expenditures. 

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 3632, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974:

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, July 2, 2004. 

Hon. F. JAMES SENSENBRENNER, Jr., Chairman, 

Committee on the Judiciary, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3632, the Anti-counterfeiting Amendments Act of 2004. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Mark Grabowicz, who 

can be reached at 226–2860. 

Sincerely, 

DOUGLAS HOLTZ-EAKIN.

Enclosure

cc: Honorable John Conyers, Jr. 

Ranking Member 

H.R. 3632—Anti-counterfeiting Amendments Act of 2004. 

CBO estimates that implementing H.R. 3632 would have no significant cost to the Federal Government. Enacting the bill could affect direct spending and revenues, but CBO estimates that any 

such effects would not be significant. H.R. 3632 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act, and would not affect the budgets of 

State, local, or tribal governments. 

H.R. 3632 would establish new Federal crimes against trafficking 

in licensing documents or other authentication components for 

sound recordings, computer programs, audiovisual works, and similar products, and would permit copyright owners to bring civil actions in Federal court for violations of these laws. Thus, the government would be able to pursue cases that it otherwise would not 

be able to prosecute. However, we expect that H.R. 3632 would 

8

apply to a relatively small number of additional offenders, so any 

increase in costs for law enforcement, court proceedings (including 

new civil actions), or prison operations would not be significant. 

Any such costs would be subject to the availability of appropriated 

funds. 

Because those prosecuted and convicted under H.R. 3632 could 

be subject to criminal fines, the Federal Government might collect 

additional fines if the legislation is enacted. Collections of such 

fines are recorded in the budget as revenues, which are deposited 

in the Crime Victims Fund and later spent. CBO expects that any 

additional revenues and direct spending would not be significant 

because of the small number of cases involved. 

The CBO staff contact for this estimate is Mark Grabowicz, who 

can be reached at 226–2860. This estimate was approved by Peter 

H. Fontaine, Deputy Assistant Director for Budget Analysis. 

PERFORMANCE GOALS AND OBJECTIVES

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 3632 is designed 

to reduce counterfeiting activities by penalizing trafficking in illicit 

labels as defined in the bill. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in article 1, section 8, clause 8 of the Constitution. 

SECTION-BY-SECTION ANALYSIS AND DISCUSSION

Section 2318 of Title 18 currently prohibits trafficking in counterfeit labels for phonorecords and copies of computer programs or 

audiovisual works, as well as trafficking in counterfeit documentation or packaging for a computer program. The proposed bill would 

amend § 2318 to prohibit knowingly trafficking in genuine authentication components in cases where such genuine authentication 

components are: (i) distributed or intended for distribution on a 

standalone basis; (ii) fraudulently bundled with counterfeit copies 

or copies not intended by the copyright owner; or (iii) in the case 

of a computer program, altered or removed in order to falsify the 

number or type of users or the type of computer program. The key 

provisions of the bill are summarized below: 

Sec. 1.—Short Title. The Act may be cited as the ‘‘Anti-counterfeiting Amendments Act of 2004.’’

Sec. 2.—Amendment to 18 U.S.C. § 2318. Section 2 of H.R. 3632 

significantly expands 18 U.S.C. § 2318. The scope of works covered 

includes ‘‘illicit labels,’’ designed to be affixed to works identified in 

the existing statute. The scope of works covered is also expanded 

to include counterfeit and illicit labels designed to be affixed to literary works; pictorial, graphic, or sculptural works; works of visual 

art; or counterfeit documentation and packaging for all types of 

works. 

The definition of ‘‘illicit label’’ also specifically excludes labels 

that are solely used by the copyright owner for the purpose of monitoring or tracking the copyright owner’s distribution channel and 

not for the purpose of verifying that a copy or phonorecord is nonVerDate jul 14 2003 21:53 Jul 13, 2004 Jkt 029006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6601 E:\HR\OC\HR600.XXX HR600
9

infringing. This exclusion ensures that legitimate ‘‘grey-market’’ activities are not covered by the legislation, although the Committee 

is unaware of any activity that occurs currently that would implicate such activity. 

The bill would authorize forfeiture of equipment, devices, or materials used to manufacture, reproduce, or assemble counterfeit or 

illicit labels. 

In addition to existing criminal penalties provided under § 2318, 

the bill would provide civil remedies for violations of the Act, including the following:

1. Civil damages, including both actual damages and profits, 

or upon election of the plaintiff, statutory damages. Damages are measured by the retail value of the authorized 

copyrighted work. In addition, the plaintiff may seek treble 

damages in the event of repeat violations made within 3 

years of the original violation;

2. Attorneys’ fees and costs;

3. Injunctive relief; and

4. Impoundment of articles that violate the Act.

The bill would provide for a 3-year statute of limitations from the 

date upon which the person injured discovers the violation. 

Sec. 3.—Savings Clauses. Section 3 of the legislation makes clear 

that its provisions:

1. Do not modify in any way §§ 512, 1201, or 1202 of Title 17 

concerning online infringement, copyright protection systems, and integrity of copyright management information.

2. Do not apply to the electronic transmissions of a genuine 

certificate, licensing document, registration card, similar labeling component, or documentation or packaging described 

in paragraphs (4) and (5) of 18 U.S.C. § 2318(b), as amended.

3. Do not apply to civil suits under 18 U.S.C. § 2318(f) to the 

electronic transmission of a counterfeit label or counterfeit 

packaging defined in paragraphs (1) or (6) of 18 U.S.C. 

§ 2318(b), as amended.

4. Do not apply to any fair use under 17 U.S.C. § 107 of a genuine certificate, licensing document, registration card, similar labeling component, or documentation or packaging describer in paragraphs (4) or (5) of 18 U.S.C. § 2318, as 

amended. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 

existing law in which no change is proposed is shown in roman):

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CHAPTER 113 OF TITLE 18, UNITED STATES CODE

CHAPTER 113—STOLEN PROPERTY

Sec. 

2311. Definitions. 

* * * * * * *

ø2318. Trafficking in counterfeit labels for phonorecords, copies of computer programs or computer program documentation or packaging, and copies of 

motion pictures or other audio visual works, and trafficking in counterfeit computer program documentation or packaging.¿

2318. Trafficking in counterfeit labels, illicit labels, or counterfeit documentation or 

packaging.

* * * * * * *

ø§ 2318. Trafficking in counterfeit labels for phonorecords, 

copies of computer programs or computer program 

documentation or packaging, and copies of motion 

pictures or other audio visual works, and trafficking in counterfeit computer program documentation or packaging 

ø(a) Whoever, in any of the circumstances described in subsection (c) of this section, knowingly traffics in a counterfeit label 

affixed or designed to be affixed to a phonorecord, or a copy of a 

computer program or documentation or packaging for a computer 

program, or a copy of a motion picture or other audiovisual work, 

and whoever, in any of the circumstances described in subsection 

(c) of this section, knowingly traffics in counterfeit documentation 

or packaging for a computer program, shall be fined under this title 

or imprisoned for not more than five years, or both.¿

§ 2318. Trafficking in counterfeit labels, illicit labels, or 

counterfeit documentation or packaging 

(a) Whoever, in any of the circumstances described in subsection 

(c), knowingly traffics in—

(1) a counterfeit label or illicit label affixed to, enclosing, or 

accompanying, or designed to be affixed to, enclose, or accompany—

(A) a phonorecord; 

(B) a copy of a computer program; 

(C) a copy of a motion picture or other audiovisual 

work; 

(D) a copy of a literary work; 

(E) a copy of a pictorial, graphic, or sculptural work; 

(F) a work of visual art; or 

(G) documentation or packaging; or 

(2) counterfeit documentation or packaging, 

shall be fined under this title or imprisoned for not more than 5 

years, or both.

(b) As used in this section—

(1) * * *

(2) the term ‘‘traffic’’ means to transport, transfer or otherwise dispose of, to another, as consideration for anything of 

value or to make or obtain control of with intent to so transport, transfer or dispose of; øand¿

11

(3) the terms ‘‘copy’’, ‘‘phonorecord’’, ‘‘motion picture’’, 

‘‘computer program’’, øand ‘‘audiovisual work’’ have¿ ‘‘audiovisual work’’, ‘‘literary work’’, ‘‘pictorial, graphic, or sculptural 

work’’, ‘‘sound recording’’, ‘‘work of visual art’’, and ‘‘copyright 

owner’’ have, respectively, the meanings given those terms in 

section 101 (relating to definitions) of title 17ø.¿;

(4) the term ‘‘illicit label’’ means a genuine certificate, licensing document, registration card, or similar labeling component— 

(A) that is used by the copyright owner to verify that 

a phonorecord, a copy of a computer program, a copy of a 

motion picture or other audiovisual work, a copy of a literary work, a copy of a pictorial, graphic, or sculptural 

work, a work of visual art, or documentation or packaging 

is not counterfeit or infringing of any copyright; and 

(B) that is, without the authorization of the copyright 

owner— 

(i) distributed or intended for distribution not in 

connection with the copy, phonorecord, or work of visual art to which such labeling component was intended 

to be affixed by the respective copyright owner; or 

(ii) in connection with a genuine certificate or licensing document, knowingly falsified in order to designate a higher number of licensed users or copies than 

authorized by the copyright owner, unless that certificate or document is used by the copyright owner solely 

for the purpose of monitoring or tracking the copyright 

owner’s distribution channel and not for the purpose of 

verifying that a copy or phonorecord is noninfringing; 

(5) the term ‘‘documentation or packaging’’ means documentation or packaging, in physical form, for a phonorecord, 

copy of a computer program, copy of a motion picture or other 

audiovisual work, copy of a literary work, copy of a pictorial, 

graphic, or sculptural work, or work of visual art; and 

(6) the term ‘‘counterfeit documentation or packaging’’ 

means documentation or packaging that appears to be genuine, 

but is not.

(c) The circumstances referred to in subsection (a) of this section are—

(1) * * *

* * * * * * *

ø(3) the counterfeit label is affixed to or encloses, or is designed to be affixed to or enclose, a copy of a copyrighted computer program or copyrighted documentation or packaging for 

a computer program, a copyrighted motion picture or other 

audiovisual work, or a phonorecord of a copyrighted sound recording; or¿

(3) the counterfeit label or illicit label is affixed to, encloses, 

or accompanies, or is designed to be affixed to, enclose, or accompany—

(A) a phonorecord of a copyrighted sound recording or 

copyrighted musical work; 

(B) a copy of a copyrighted computer program; 

(C) a copy of a copyrighted motion picture or other 

audiovisual work; 

12

(D) a copy of a literary work; 

(E) a copy of a pictorial, graphic, or sculptural work; 

(F) a work of visual art; or 

(G) copyrighted documentation or packaging; or

(4) the counterfeited documentation or packaging øfor a 

computer program¿ is copyrighted. 

(d) When any person is convicted of any violation of subsection 

(a), the court in its judgment of conviction shall in addition to the 

penalty therein prescribed, order the forfeiture and destruction or 

other disposition of all counterfeit labels or illicit labels and all articles to which counterfeit labels or illicit labels have been affixed 

or which were intended to have had such labels affixed, and of any 

equipment, device, or material used to manufacture, reproduce, or 

assemble the counterfeit labels or illicit labels. 

* * * * * * *

(f) CIVIL REMEDIES.— (1) IN GENERAL.—Any copyright owner who is injured, or is 

threatened with injury, by a violation of subsection (a) may 

bring a civil action in an appropriate United States district 

court. 

(2) DISCRETION OF COURT.—In any action brought under 

paragraph (1), the court—

(A) may grant 1 or more temporary or permanent injunctions on such terms as the court determines to be reasonable to prevent or restrain a violation of subsection (a); 

(B) at any time while the action is pending, may order 

the impounding, on such terms as the court determines to 

be reasonable, of any article that is in the custody or control of the alleged violator and that the court has reasonable cause to believe was involved in a violation of subsection (a); and 

(C) may award to the injured party—

(i) reasonable attorney fees and costs; and 

(ii) (I) actual damages and any additional profits 

of the violator, as provided in paragraph (3); or 

(II) statutory damages, as provided in paragraph 

(4). 

(3) ACTUAL DAMAGES AND PROFITS.— (A) IN GENERAL.—The injured party is entitled to recover—

(i) the actual damages suffered by the injured 

party as a result of a violation of subsection (a), as provided in subparagraph (B) of this paragraph; and 

(ii) any profits of the violator that are attributable 

to a violation of subsection (a) and are not taken into 

account in computing the actual damages. 

(B) CALCULATION OF DAMAGES.—The court shall calculate actual damages by multiplying—

(i) the value of the phonorecords, copies, or works 

of visual art which are, or are intended to be, affixed 

with, enclosed in, or accompanied by any counterfeit 

labels, illicit labels, or counterfeit documentation or 

packaging, by 

(ii) the number of phonorecords, copies, or works of 

visual art which are, or are intended to be, affixed 

13

with, enclosed in, or accompanied by any counterfeit 

labels, illicit labels, or counterfeit documentation or 

packaging. 

(C) DEFINITION.—For purposes of this paragraph, the 

‘‘value’’ of a phonorecord, copy, or work of visual art is—

(i) in the case of a copyrighted sound recording or 

copyrighted musical work, the retail value of an authorized phonorecord of that sound recording or musical work; 

(ii) in the case of a copyrighted computer program, 

the retail value of an authorized copy of that computer 

program; 

(iii) in the case of a copyrighted motion picture or 

other audiovisual work, the retail value of an authorized copy of that motion picture or audiovisual work; 

(iv) in the case of a copyrighted literary work, the 

retail value of an authorized copy of that literary work; 

(v) in the case of a pictorial, graphic, or sculptural 

work, the retail value of an authorized copy of that 

work; and 

(vi) in the case of a work of visual art, the retail 

value of that work. 

(4) STATUTORY DAMAGES.—The injured party may elect, at 

any time before final judgment is rendered, to recover, instead 

of actual damages and profits, an award of statutory damages 

for each violation of subsection (a) in a sum of not less than 

$2,500 or more than $25,000, as the court considers appropriate. 

(5) SUBSEQUENT VIOLATION.—The court may increase an 

award of damages under this subsection by 3 times the amount 

that would otherwise be awarded, as the court considers appropriate, if the court finds that a person has subsequently violated 

subsection (a) within 3 years after a final judgment was entered 

against that person for a violation of that subsection. 

(6) LIMITATION ON ACTIONS.—A civil action may not be 

commenced under section unless it is commenced within 3 years 

after the date on which the claimant discovers the violation of 

subsection (a)

* * * * * * *

MARKUP TRANSCRIPT

BUSINESS MEETING 

WEDNESDAY, JUNE 23, 2004

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:09 a.m., in Room 

2141, Rayburn House Office Building, Hon. F. James Sensenbrenner, Jr. [Chairman of the Committee] presiding. 

[Intervening business.] 

Chairman SENSENBRENNER. The next item on the agenda is H.R. 

3632, the ‘‘Anti-counterfeiting Amendments of 2003.’’ The Chair 

recognizes the gentleman from Texas, Mr. Smith, the Chairman of 

14

the Subcommittee on Courts, the Internet, and Intellectual Property. 

Mr. SMITH. Thank you, Mr. Chairman. Mr. Chairman, the Subcommittee on Courts, the Internet, and Intellectual Property reports favorably the bill H.R. 3632 with a single amendment in the 

nature of a substitute and moves its favorable recommendation to 

the full House. 

Chairman SENSENBRENNER. Without objection, the bill will be 

considered as read and open for amendment at any point. 

[The Amendment in the Nature of a Substitute to H.R. 3632 follows:]

15

1

H.L.C.

AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO H.R. 3632, AS REPORTED BY THE

SUBCOMMITTEE ON COURTS, THE INTERNET, AND

INTELLECTUAL PROPERTY

Strike all after the enacting clause and insert the

following:

1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Anti-counterfeiting

3 Amendments Act of 2004’’.

4 SEC. 2. PROHIBITION AGAINST TRAFFICKING IN COUNTER5 FEIT COMPONENTS.

6 (a) IN GENERAL.—Section 2318 of title 18, United

7 States Code, is amended—

8 (1) by striking the section heading and insert9 ing the following:

10 ‘‘§ 2318. Trafficking in counterfeit labels, illicit labels,

11 or counterfeit documentation or pack12 aging’’;

13 (2) by striking subsection (a) and inserting the

14 following:

15 ‘‘(a) Whoever, in any of the circumstances described

16 in subsection (c), knowingly traffics in—


A3632.AAB
16

2

H.L.C.

1 ‘‘(1) a counterfeit label or illicit label affixed to,

2 enclosing, or accompanying, or designed to be af3 fixed to, enclose, or accompany—

4 ‘‘(A) a phonorecord;

5 ‘‘(B) a copy of a computer program;

6 ‘‘(C) a copy of a motion picture or other

7 audiovisual work;

8 ‘‘(D) a copy of a literary work;

9 ‘‘(E) a copy of a pictorial, graphic, or

10 sculptural work;

11 ‘‘(F) a work of visual art; or

12 ‘‘(G) documentation or packaging; or

13 ‘‘(2) counterfeit documentation or packaging,

14 shall be fined under this title or imprisoned for not more

15 than 5 years, or both.’’;

16 (3) in subsection (b)—

17 (A) in paragraph (3)—

18 (i) by striking ‘‘and ‘audiovisual work’

19 have’’ and inserting the following: ‘‘,

20 ‘audiovisual work’, ‘literary work’, ‘pic21 torial, graphic, or sculptural work’, ‘sound

22 recording’, ‘work of visual art’, and ‘copy23 right owner’ have’’; and

24 (ii) by striking the period at the end

25 and inserting a semicolon; and


A3632.AAC
17

3

H.L.C.

1 (B) by adding at the end the following:

2 ‘‘(4) the term ‘illicit label’ means a genuine cer3 tificate, licensing document, registration card, or

4 similar labeling component—

5 ‘‘(A) that is used by the copyright owner

6 to verify that a phonorecord, a copy of a com7 puter program, a copy of a motion picture or

8 other audiovisual work, a copy of a literary

9 work, a copy of a pictorial, graphic, or sculp10 tural work, a work of visual art, or documenta11 tion or packaging is not counterfeit or infring12 ing of any copyright; and

13 ‘‘(B) that is, without the authorization of

14 the copyright owner—

15 ‘‘(i) distributed or intended for dis16 tribution not in connection with the copy,

17 phonorecord, or work of visual art to which

18 such labeling component was intended to

19 be affixed by the respective copyright

20 owner; or

21 ‘‘(ii) altered or removed to falsify the

22 number of authorized copies or users, type

23 of authorized user, or edition or version;

24 ‘‘(5) the term ‘documentation or packaging’

25 means documentation or packaging, in physical


A3632.AAD
18

4

H.L.C.

1 form, for a phonorecord, copy of a computer pro2 gram, copy of a motion picture or other audiovisual

3 work, copy of a literary work, copy of a pictorial,

4 graphic, or sculptural work, or work of visual art;

5 and

6 ‘‘(6) the term ‘counterfeit documentation or

7 packaging’ means documentation or packaging that

8 appears to be genuine, but is not.’’;

9 (4) in subsection (c)—

10 (A) by striking paragraph (3) and insert11 ing the following:

12 ‘‘(3) the counterfeit label or illicit label is af13 fixed to, encloses, or accompanies, or is designed to

14 be affixed to, enclose, or accompany—

15 ‘‘(A) a phonorecord of a copyrighted sound

16 recording;

17 ‘‘(B) a copy of a copyrighted computer

18 program;

19 ‘‘(C) a copy of a copyrighted motion pic20 ture or other audiovisual work;

21 ‘‘(D) a copy of a literary work;

22 ‘‘(E) a copy of a pictorial, graphic, or

23 sculptural work;

24 ‘‘(F) a work of visual art; or


A3632.AAE
19

5

H.L.C.

1 ‘‘(G) copyrighted documentation or pack2 aging; or’’; and

3 (B) in paragraph (4), by striking ‘‘for a

4 computer program’’; and

5 (5) in subsection (d)—

6 (A) by inserting ‘‘or illicit labels’’ after

7 ‘‘counterfeit labels’’ each place it appears; and

8 (B) by inserting before the period at the

9 end the following: ‘‘, and of any equipment, de10 vice, or material used to manufacture, repro11 duce, or assemble the counterfeit labels or illicit

12 labels’’.

13 (b) CIVIL REMEDIES.—Section 504 of title 17,

14 United States Code, is amended by adding at the end the

15 following:

16 ‘‘(f) CIVIL REMEDIES FOR VIOLATION OF SECTION

17 2318 OF TITLE 18.—

18 ‘‘(1) IN GENERAL.—Any copyright owner who

19 is injured, or is threatened with injury, by a viola20 tion of section 2318 of title 18 may bring a civil ac21 tion in an appropriate United States district court.

22 ‘‘(2) DISCRETION OF COURT.—In any action

23 brought under paragraph (1), the court—

24 ‘‘(A) may grant 1 or more temporary or

25 permanent injunctions on such terms as the


A3632.AAF
20

6

H.L.C.

1 court determines to be reasonable to prevent or

2 restrain a violation of section 2318 of title 18;

3 ‘‘(B) at any time while the action is pend4 ing, may order the impounding, on such terms

5 as the court determines to be reasonable, of any

6 article that is in the custody or control of the

7 alleged violator and that the court has reason8 able cause to believe was involved in a violation

9 of section 2318 of title 18; and

10 ‘‘(C) may award to the injured party—

11 ‘‘(i) reasonable attorney fees and

12 costs; and

13 ‘‘(ii) (I) actual damages and any addi14 tional profits of the violator, as provided in

15 paragraph (3); or

16 ‘‘(II) statutory damages, as provided

17 in paragraph (4).

18 ‘‘(3) ACTUAL DAMAGES AND PROFITS.—

19 ‘‘(A) IN GENERAL.—The injured party is

20 entitled to recover—

21 ‘‘(i) the actual damages suffered by

22 the injured party as a result of a violation

23 of section 2318 of title 18, as provided in

24 subparagraph (B); and


A3632.AAG
21

7

H.L.C.

1 ‘‘(ii) any profits of the violator that

2 are attributable to a violation of section

3 2318 of title 18 and are not taken into ac4 count in computing the actual damages.

5 ‘‘(B) CALCULATION OF DAMAGES.—The

6 court shall calculate actual damages by

7 multiplying—

8 ‘‘(i) the value of the phonorecords,

9 copies, or works of visual art which are, or

10 are intended to be, affixed with, enclosed

11 in, or accompanied by any counterfeit la12 bels, illicit labels, or counterfeit docu13 mentation or packaging, by

14 ‘‘(ii) the number of phonorecords, cop15 ies, or works of visual art which are, or are

16 intended to be, affixed with, enclosed in, or

17 accompanied by any counterfeit labels, il18 licit labels, or counterfeit documentation or

19 packaging.

20 ‘‘(C) DEFINITION.—For purposes of this

21 paragraph, the ‘value’ of a phonorecord, copy,

22 or work of visual art is—

23 ‘‘(i) in the case of a copyrighted

24 sound recording, the retail value of an auVerDate jul 14 2003 21:53 Jul 13, 2004 Jkt 029006 PO 00000 Frm 00021 Fmt 6659 Sfmt 6601 E:\HR\OC\HR600.XXX HR600

A3632.AAH
22

8

H.L.C.

1 thorized phonorecord of that sound record2 ing;

3 ‘‘(ii) in the case of a copyrighted com4 puter program, the retail value of an au5 thorized copy of that computer program;

6 ‘‘(iii) in the case of a copyrighted mo7 tion picture or other audiovisual work, the

8 retail value of an authorized copy of that

9 motion picture or audiovisual work;

10 ‘‘(iv) in the case of a copyrighted lit11 erary work, the retail value of an author12 ized copy of that literary work;

13 ‘‘(v) in the case of a pictorial, graphic,

14 or sculptural work, the retail value of an

15 authorized copy of that work; and

16 ‘‘(vi) in the case of a work of visual

17 art, the retail value of that work.

18 ‘‘(4) STATUTORY DAMAGES.—The injured party

19 may elect, at any time before final judgment is ren20 dered, to recover, instead of actual damages and

21 profits, an award of statutory damages for each vio22 lation of section 2318 of title 18 in a sum of not less

23 than $2,500 or more than $25,000, as the court

24 considers appropriate.


A3632.AAI
23

9

H.L.C.

1 ‘‘(5) SUBSEQUENT VIOLATION.—The court may

2 increase an award of damages under this subsection

3 by 3 times the amount that would otherwise be

4 awarded, as the court considers appropriate, if the

5 court finds that a person has subsequently violated

6 section 2318 of title 18 within 3 years after a final

7 judgment was entered against that person for a vio8 lation of that section.

9 ‘‘(6) LIMITATION ON ACTIONS.—A civil action

10 may not be commenced under section unless it is

11 commenced within 3 years after the date on which

12 the claimant discovers the violation of section 2318

13 of title 18.’’.

14 (c) CONFORMING AMENDMENT.—The item relating

15 to section 2318 in the table of sections for chapter 113

16 of title 18, United States Code, is amended to read as

17 follows:

‘‘2318. Trafficking in counterfeit labels, illicit labels, or counterfeit documentation or packaging.’’.

18 SEC. 3. OTHER RIGHTS NOT AFFECTED.

19 (a) CHAPTER 12 OF TITLE 17; ELECTRONIC TRANS20 MISSIONS.—The amendments made by this Act shall not

21 enlarge, diminish, or otherwise affect any liability under

22 section 1201 or 1202 of title 17, United States Code, or

23 be construed to apply to the electronic transmission of a

24 genuine certificate, licensing document, registration card,


A3632.AAJ
24

10

H.L.C.

1 similar labeling component, or documentation or pack2 aging described in paragraph (4) or (5) of section 2318(b)

3 of title 18, United States Code, as amended by this Act.

4 (b) FAIR USE.—The amendments made by this Act

5 shall not affect the fair use, under section 107 of title 17,

6 United States Code, of a genuine certificate, licensing doc7 ument, registration card, similar labeling component, or

8 documentation or packaging described in paragraph (4)

9 or (5) of section 2318(b) of title 18, United States Code,

10 as amended by this Act.


A3632.AAK
25

Chairman SENSENBRENNER. The Subcommittee amendment in 

the nature of a substitute, which the Members have before them, 

will be considered as read and considered as the original text for 

purposes of amendment and open for amendment at any point. 

The Chair recognizes the gentleman from Texas, Mr. Smith, to 

strike the last word. 

Mr. SMITH. Mr. Chairman, in that case, I would move to strike 

the last word. 

Chairman SENSENBRENNER. The gentleman is recognized for 5 

minutes. 

Mr. SMITH. Mr. Chairman, counterfeiting, in all of its guises, is 

a mask of deceit. It is the functional equivalent of a lie, often intended to dupe an unwitting consumer into buying something they 

do not want. Multiplied by millions of transactions, the result to legitimate businesses is lost profits, lost jobs and lost tax revenue on 

a scale that compromises the health of otherwise vibrant industries. 

For many years, software publishers have attempted to thwart 

counterfeiting activity by developing physical authentication components called COAs that help consumers and law enforcement 

agencies distinguish between genuine software and sophisticated 

counterfeits. Due to the increasing sophistication of genuine physical authentication components, counterfeiters are now combining 

pirated CD-ROMs in packaging with genuine components obtained 

through theft or fraud. 

For example, Microsoft has reported thefts of more than 540,000 genuine certificates of authenticity with an estimated value of $50 

million. Genuine COAs and other physical authentication components are in high demand among counterfeiters because they significantly increase the marketability and selling price of counterfeit 

software. 

Even though standalone COAs have no intrinsic value or legitimate use other than to authenticate the software publisher’s genuine software, they sell on the open market for upwards of $90 or 

$100 or even $200 apiece because of their value to counterfeit operations. 

One Website recently advertised a Microsoft Office COA for $225 

with the statement, quote, no software included. Clearly, the 

broker offering the standalone COA knew full well that the component would be purchased by a counterfeiter and ultimately resold 

to an unsuspecting consumer in combination with pirated software. 

Nevertheless, because Federal law does not prohibit trafficking 

in genuine physical authentication components, prosecutors find it 

impossible to take any legal action against these brokers. As a result, this activity has become a highly profitable and largely riskfree business for an increasing number of brokers, who act with 

complete disregard for the obvious effect of their actions on counterfeit sales and consumers. 

This loophole in Federal law has frustrated anti-counterfeiting 

enforcement efforts throughout the United States. H.R. 3632 will 

close this loophole and empower Federal authorities to prosecute 

counterfeiting activity on a greater scale with better results. 

At the appropriate time, I will offer a manager’s amendment to 

ensure that the concerns of gray marketers and online service providers are addressed, but I urge my colleagues to support the manVerDate jul 14 2003 21:53 Jul 13, 2004 Jkt 029006 PO 00000 Frm 00025 Fmt 6659 Sfmt 6601 E:\HR\OC\HR600.XXX HR600
26

ager’s amendment and the underlying bill, and I yield back the balance of my time. 

Chairman SENSENBRENNER. In the absence of the gentleman 

from California, Mr. Berman, who wishes to give the Democratic 

opening statement, the gentleman from California, Mr. Schiff, is 

recognized for 5 minutes. 

Mr. SCHIFF. Mr. Chairman, I thank you for the opportunity to 

address the bill, and I want to also raise my support for this. The 

counterfeiting of authentication documents is an extraordinarily 

difficult problem, a very costly one for the industry, and I want to 

thank the gentleman from Texas for his work on the issue. 

There is a related issue that I think is also very significant, and 

if the gentleman from Texas would allow me to make an inquiry, 

and that is the problem of the counterfeiting of digital authentication features. Is it the gentleman’s intention to come back in subsequent legislation to address that issue? If it is, it is something I 

would certainly very much like to work with him on, and I would 

be delighted to yield to the gentleman. 

Mr. SMITH. If the gentleman will yield, the digital authentication 

is a problem, and I acknowledge that. We will, I hope, address it 

in future legislation, but one reason for not including it in this legislation, as I think the gentleman understands, is because it is controversial, and we are trying to get this legislation through and 

signed into law in this session of Congress, and by leaving out the 

digital component, that will enable us to be successful with this 

bill. 

We need to still work out some wrinkles in how to address the 

digital, and I will be happy to work with the gentleman from California in doing so. 

Mr. SCHIFF. Reclaiming my time, I thank the gentleman. It is not 

my purpose today to offer an amendment on that issue, because I 

know it would complicate the task at hand, and there is no desire 

to slow down or in any way impede the current contents of the bill. 

But I do look forward to working with the gentleman and appreciate his interest in continuing to work on that issue and with that 

urge my colleagues to support the measure, and I yield back the 

balance of my time. 

Chairman SENSENBRENNER. Without objection, all Members’ 

opening statements will appear in the record at this point. 

[The prepared statement of Ms. Jackson Lee follows:]

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND RANKING MEMBER, SUBCOMMITTEE

ON IMMIGRATION, BORDER SECURITY, AND CLAIMS

I thank Chairman Sensenbrenner and Ranking Member Conyers for holding today’s markup of H.R. 3632, the Anti-counterfeiting Act of 2003. Fortunately, the 

Subcommittee on Courts, the Internet and Intellectual Property successfully marked 

this bill up and reported it out favorably on March 31, 2004, as its provisions will 

address some serious concerns. 

The trafficking of security components, for example Certificates of Authenticity 

(COAs) is a problem that the current law does not adequately address. Logistically, 

since the security components are useless without the actual product, such action 

serves no legitimate business purpose. Furthermore, criminal prosecutors have a 

hard time attaching crimes to the counterfeit sales made by these traffickers. 

To address this problem, H.R. 3632 would amend Section 2318 of Title 18 to prohibit trafficking of these products. With this narrowly-tailored amendment to Section 2318, federal law enforcement and copyright owners will have the tools needed 

to prevent trafficking in genuine physical security components. 

27

The Anticounterfeiting Amendments will help combat the growing threat of international counterfeiting crimes by ensuring that U.S. laws address all aspects of 

counterfeiting activities. 

In Texas, a crime ring was implicated that was believed to have imported over 

100 million counterfeit cigarettes, mislabeling shipping documents by indicating 

that they were importing toys or plastic parts. 

Passage of this important bill with the amendments that will be offered to improve its scope will, in the long run, improve the quality of our intellectual property 

and technological developments. Moreover, with adequate legal checks put in place 

to reduce trafficking of security products will foster a more competitive environment. For the above reasons, Mr. Chairman and Mr. Ranking Member, I support 

this legislation. 

Thank you.

Chairman SENSENBRENNER. Are there amendments? 

The Chair recognizes the gentleman from Texas, Mr. Smith, for 

purposes of offering a manager’s amendment. 

Mr. SMITH. Mr. Chairman, I have an amendment at the desk. 

Chairman SENSENBRENNER. The Clerk will report the amendment. 

The CLERK. Amendment to the amendment in the nature of a 

substitute to H.R. 3632——

Mr. SMITH. Mr. Chairman, I ask unanimous consent that the 

amendment be considered as read. 

Chairman SENSENBRENNER. Without objection, so ordered. 

[The amendment offered by Mr. Smith follows:]

28


3632B1.eps
29


3632B2.eps
30


3632B3.eps
31

Chairman SENSENBRENNER. The gentleman is recognized for 5 

minutes. 

Mr. SMITH. Mr. Chairman, the manager’s amendment represents 

a compromise between content owners, whose interests are harmed 

by the illicit trafficking in legitimate and counterfeit authentication 

labels and two groups: gray marketers and Internet service providers. Gray marketers, who reimport noncounterfeited goods back 

into the United States after they have already been exported, had 

expressed some initial concerns that their activities could be penalized under this legislation. 

In a bipartisan effort, we worked with gray marketers to ensure 

that their activities are not penalized by this legislation so long as 

they do not modify COAs to show a higher number of authorized 

users. 

Internet and online service providers were concerned that this 

legislation could result in some of their routine, day-to-day actions 

as service providers being subject to some additional liability. The 

manager’s amendment clarifies that they do not face any new liability for their routine activities. Several of these groups have also 

submitted letters to the Committee noting that their concerns have 

been addressed. 

Finally, Mr. Chairman, the legislation does not apply to electronic transmissions of authentication features. Trying to address 

electronic transmissions of authentication materials in the last 

Congress is what prevented similar legislation from being enacted. 

By narrowing the scope to nonelectronic transmissions, it is my expectation that this bill will be enacted this Congress with no opposition, and that was the subject that Mr. Schiff asked me about a 

minute ago. 

Mr. Chairman, I urge my colleagues to support the manager’s 

amendment as well as the underlying bill and yield back the balance of my time. 

Chairman SENSENBRENNER. The question is on the manager’s 

amendment offered by the gentleman from Texas, Mr. Smith. 

Those in favor will say aye. 

Opposed, no. 

The ayes appear to have it. The ayes have it. The amendment 

is agreed to. 

Are there further amendments? 

If there are no further amendments, without objection, the Subcommittee amendment in the nature of a substitute laid down as 

the base text as amended is adopted. 

A reporting quorum is present. 

The question occurs on the motion to report the bill, H.R. 3632, 

favorably as amended. 

All in favor will say aye. 

Opposed, no. 

The ayes appear to have it, the ayes have it, and the motion to 

report favorably is agreed to. 

Without objection, the bill will be reported favorably to the 

House in the form of a single amendment in the nature of a substitute incorporating the amendments adopted here today. 

Without objection, the Chairman is authorized to move to go to 

conference pursuant to House rules. 

32

Without objection, the staff is directed to make any technical and 

conforming changes, and all Members will be given 2 days, as provided by the House rules, in which to submit additional, dissenting, 

supplemental or minority views.

Æ