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43–659 PDF 2008

S. HRG. 110–561 

PROTECTING CONSUMERS BY PROTECTING 

INTELLECTUAL PROPERTY 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JUNE 17, 2008 

Serial No. J–110–100 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

ARLEN SPECTER, Pennsylvania 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

STEPHANIE A. MIDDLETON, Republican Staff Director 

NICHOLAS A. ROSSI, Republican Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 3 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 1 

prepared statement .......................................................................................... 30 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 4 

WITNESSES 

Monks, Brian H., Vice President, Anti-Counterfeiting Operations, Underwriters Laboratories Inc., Melville, New York ................................................... 7 

Rose, Mike, Vice President, Supply Chain Technology, Johnson & Johnson, 

Fountainville, Pennsylvania ................................................................................ 9 

Thurnau, Jeffrey, Patent Counsel, Gates Corporation, Denver, Colorado .......... 11 

Yager, Loren, Director, International Affairs and Trade, Government Accountability Office, Washington, D.C. ......................................................................... 5 

QUESTIONS AND ANSWERS 

Responses of Brian Monks to questions submitted by Senator Leahy ................ 21 

Responses of Michael P. Rose to questions submitted by Senator Leahy ........... 23 

Responses of Jeffrey Thurnau to questions submitted by Senator Leahy .......... 26 

SUBMISSIONS FOR THE RECORD 

Monks, Brian H., Vice President, Anti-Counterfeiting Operations, Underwriters Laboratories Inc., Melville, New York, statement ............................... 32 

Partnership for Safe Medicines, statement and attachment ............................... 36 

Rose, Mike, Vice President, Supply Chain Technology, Johnson & Johnson, 

Fountainville, Pennsylvania, statement ............................................................. 38 

Thurnau, Jeffrey, Patent Counsel, Gates Corporation, Denver, Colorado, 

statement .............................................................................................................. 42 

Yager, Loren, Director, International Affairs and Trade, Government Accountability Office, Washington, D.C., statement ...................................................... 49 

(1) 

PROTECTING CONSUMERS BY PROTECTING 

INTELLECTUAL PROPERTY 

TUESDAY, JUNE 17, 2008 

U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, D.C. 

The Committee met, Pursuant to notice, at 10:06 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Patrick J. Leahy, 

Chairman of the Committee, presiding. 

Present: Senators Leahy, Cardin, Whitehouse, and Hatch. 

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. 

SENATOR FROM THE STATE OF VERMONT 

Chairman LEAHY. Good morning. I should note that we are going 

to be talking about intellectual property. It is nice to have Senator 

Hatch of Utah here with me. During a number of years, part of the 

time he was Chairman, part of the time I was Chairman, we put 

together bipartisan coalitions on intellectual property issues. It 

turned out to be a pretty effective partnership, so, Senator Hatch, 

I am delighted you are here. 

I do not think there is dispute that our Nation is in economic and 

political turmoil. Gas prices have exceeded our worst fears, especially those of us who live in rural areas, as I do. They are continuing to rise. They highlight the entrenched power of overseas oil 

suppliers. Subprime mortgages have devastated many of our homeowners, and they have revealed serious flaws in our lending systems. Just reading the press again today, you discover more and 

more of this. Health insurance is still only a distant dream for millions of Americans in the wealthiest Nation on Earth. The costs in 

lives and dollars of the Iraq war mount higher by the day. We are 

deep into a Presidential election year, so the debate on these issues 

will only intensify as summer turns to fall and as politics becomes 

even more intense. 

But today the Committee is going to address a significant economic issue confronting our Nation, which actually should have no 

partisan flavor whatsoever. 

Intellectual property, and the creativity and innovation it represents, that is really the fuel in the engine of our economy. For 

the United States to maintain its position as the world’s economic 

leader, we have to focus on protecting its industries’ intellectual 

property. In a year like this, partisan legislation is impossible; even 

bipartisan legislation is unlikely. It is only truly non-partisan legislation that presents an opening for progress, and I want to give intellectual property enforcement legislation that kind of a chance. 

2 

The piracy and counterfeiting of intellectual property has 

reached unprecedented levels in recent years. This theft costs the 

American economy at least $200 billion and results in the loss of 

750,000 jobs per year. Just think of that. Stealing and counterfeiting of intellectual property costs the American economy at least 

$200 billion and loses 750,000 jobs per year. Think how much we 

could use those jobs. While this theft alone is unacceptable, it is 

not the only cost incurred by piracy and counterfeiting. You only 

have to look at reports of poisoned counterfeit toothpaste or dangerous counterfeit automobile parts that are entering U.S. markets. 

Think about that if you have had your brakes repaired. Were they 

counterfeit? Think of that when you suddenly need them in an 

emergency. These things are sold disproportionately to lower-income Americans. And when you see this and you see the fact that 

people’s lives are at stake, you understand how important the enforcement of our IP laws is to protect the health and safety of the 

American people. 

Now, we have representatives of pharmaceutical, automotive, 

and product safety industries here today who can attest to these 

dangers, but also to the vast resources they have to expend not to 

create new products but to protect American consumers from the 

dangers of these counterfeit products. I would like to see, and I suspect every one of them would like to be able to use that money for 

research and development of new products. 

Our other witness today is from the Government Accountability 

Office. I have been troubled by reports from the GAO that have 

shown the ineffectiveness of the current enforcement strategies 

being employed by the Federal Government. The lack of coordination among the Federal agencies responsible for IP enforcement 

seems to be one of the biggest hurdles we face. I want to hear what 

other roadblocks are preventing effective IP enforcement. 

I have worked for years, as has Senator Hatch, to strengthen our 

existing laws and give our law enforcement agents the necessary 

tools to combat infringement. Other Members of Congress have 

been active this session in offering legislation to strengthen the enforcement of IP laws. Even the Chinese Government, which allows 

some of the most rampant theft of intellectual property in the 

world, has suddenly begun to realize the value and the importance 

of IP enforcement now that their own intellectual property has 

been threatened, and they have begun to crack down on infringement of their Olympic copyrights. So it is not ever too late for the 

sinner to come to the church, but I thought I would never see the 

day. 

Justice Kennedy reminded us in his opinion for the Supreme 

Court in the case of Boumediene v. Bush last week that ‘‘the only 

mention of the term ‘right’ in the Constitution, as ratified, is in its 

clause giving Congress the power to protect the rights of authors 

and inventors,’’ referring, of course, to Article I, Section 8 of the 

Constitution. These rights in intellectual property have been fundamental to Americans since our founding and have never been more 

important than they are today. Enforcement and protection of 

these rights is too important to be addressed piecemeal. I think we 

have to examine enforcement efforts from the top down and the 

bottom up. I hope that those testifying today can help us on that. 

3 

Orrin, if you would just allow me to tell just a quick story, we 

have a manufacturer, actually one of the preeminent in the world, 

of snowboards, Burton Snowboards, in Vermont. I remember getting on an airplane years ago in Chicago with Jake Burton, and the 

two of us were squeezed back in the cheap seats, way in the back 

of this airplane. 

And we are both fairly good size guys. And Jake said, ‘‘See that 

guy going up there into first class?’’ I said, ‘‘Yes.’’ 

He said, ‘‘You know, he represents a Chinese company that stole 

our design for ski boots that we spent hundreds of thousands of 

dollars to design for the safety and everything else. He can afford 

to fly first class because it does not cost him anything to steal the 

design and use it. We had to pay to develop it.’’ 

That has always stuck in my mind. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Senator Hatch? 

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 

THE STATE OF UTAH 

Senator HATCH. Well, thank you, Mr. Chairman, for the opportunity to say a few words this morning on the enforcement of intellectual property rights. I regret I have to go to another meeting in 

the Leader’s office and will not be able to stay for much of the 

hearing. But we are paying strict attention to what you have to 

say. 

The protection and the enforcement of intellectual property 

rights are crucial components that foster ingenuity and innovation, 

which in turn drive our economy. Without meaningful intellectual 

property rights protection, our artists, our innovators, our entrepreneurs, and workers will all suffer. But we should be mindful 

that abuse of IP rights is not just about downloaded music, pirated 

software, or fake designer handbags. All sectors of our economy are 

affected because of this, including pharmaceuticals, auto parts, and 

the quality and safety of our food, and so many other things. 

Indeed, robust IP protection promotes the health and safety of 

every American person. Far too often, enforcement of these rights 

has not been as strong a priority as it should be. As a result, we 

have an environment in which the IP rights of others are treated 

casually or without any regard. This pervasive nonchalance stems 

not only from inadequate enforcement but also because of an inadequate education about the law. 

For example, some believe that if it is on the Internet, it is free. 

Well, our Nation must take the lead in this endeavor, but everyone 

here already knows that this is a global problem, and the solution 

will require a commitment not only to beef up domestic enforcement, but it will also require a concentrated governmentwide effort 

to prevent intellectual property rights abuse. 

Furthermore, I believe any meaningful solution will need to take 

an integrated approach with both domestic and international 

prongs which incorporate educational, judicial, and enforcement 

components to help this insidious attack on our intellectual property. 

4 

In order to accomplish this task, all stakeholders must cooperate 

and work in an integrated fashion with State, Federal, and international governments. In the Senate, we face the challenge of 

working with multiple committees that have jurisdiction over various aspects of the integrated approach I just outlined. Coordinating efforts may take extra time, but doing nothing seems to me 

to not be an option. 

As technology advances and becomes more sophisticated, so does 

the enemy. As many of you already know, I am working on legislation in the Finance Committee that will provide our Government 

with the tools necessary to combat this very real and growing 

threat to our economy. And although I am not prepared to discuss 

the particulars of my legislative approach today, I hope upon introduction to work closely with this respective Committee to enact a 

comprehensive and well-balanced bill that will protect both the creators and the consumers of intellectual property. 

This is an important hearing. These are important issues. We 

take a tremendous interest in them. I have particularly enjoyed 

working with Senator Leahy over the years and others on this 

Committee, but particularly Senator Leahy, on intellectual property issues. And we have consistently been able to get together in 

the best interests of our country, and for that I am very grateful 

to him. 

And I am grateful to have all of you here today for the wisdom 

that you can provide to us in helping us to understand these issues 

better. 

Thank you, Mr. Chairman. 

Chairman LEAHY. Thank you very much. 

Did you want to say anything, Senator Whitehouse, or we will 

just go right to the witnesses? 

STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. SENATOR 

FROM THE STATE OF RHODE ISLAND 

Senator WHITEHOUSE. I will have to go to the floor during the 

course of this hearing, so if I get up and leave, it is not because 

of anything anybody said. I am very interested in this hearing. I 

appreciate very much that the Chairman has held it. And when the 

time comes for questions, I would be particularly interested in the 

extent to which the cyber attack that the country is sustaining relates to efforts to steal intellectual property and take advantage of 

it in foreign countries. 

Thank you, Chairman. 

Chairman LEAHY. Thank you. 

Shortly after the signing of the peace agreement between Egypt 

and Israel, Anwar Sadat, the President of Egypt, and Menachem 

Begin, the Prime Minister of Israel, came—that famous photo of 

the signing ceremony at the White House. They came up onto the 

Hill. We met separately with them in big receptions and a luncheon. When Prime Minister Begin was speaking, he started off with 

remarks that were a little bit critical of something that the Egyptians had done, and three Senators got up and walked out. He did 

not realize that the lights had gone off and that we had votes. 

He looked a little bit nervous, and he said, ‘‘However, I must say 

this about President Sadat.’’ And it was very favorable. Then it 

5 

goes on a while longer, and he says something else, and three more 

get up. The poor man is getting very, very nervous until Frank 

Church, who was then the Chairman of the Foreign Relations Committee, whispers to him what is going on. He said, ‘‘Oh. Of course, 

as Prime Minister, I am also a member of Knesset, the parliament, 

and I understand.’’ Things went along a lot better. So we do explain to witnesses if we leave, it is not because of what you said. 

Dr. Loren Yager is the Director of International Affairs and 

Trade at the U.S. Government Accountability Office. It is a position 

he has held since 2000. He has been at GAO since 1998. He previously directed the Office of the Chief Economist. Prior to his work 

with the GAO, Dr. Yager was an economic analyst with the Rand 

Corporation studying high-technology trade issues. He has completed several reports on Government agencies involved in intellectual property protection. He has offered congressional testimony on 

a variety of topics, including China import remedies and container 

security. 

Dr. Yager, you are always welcome on Capitol Hill. 

Please go ahead, sir. 

STATEMENT OF LOREN YAGER, DIRECTOR, INTERNATIONAL 

AFFAIRS AND TRADE, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C. 

Mr. YAGER. Thank you very much, Mr. Chairman. Good morning, 

Mr. Chairman and members of the Committee. Thank you for the 

opportunity to discuss our work on U.S. efforts to protect and enforce intellectual property rights. 

As you mentioned in your opening statement, the illegal importation and distribution of counterfeit and pirated goods poses a 

threat to the health and safety of U.S. citizens, as well as enormous costs to the U.S. economy. 

However, the challenges involved in IP protection are also significant and include the technological advances that facilitate piracy as 

well as the need for effective coordination among a wide range of 

policy and law enforcement agencies. 

In my summary today, I will address two topics: first, the need 

for greater leadership and permanence in our national IP enforcement structure and strategy; and, second, the need for key agencies 

to improve their data collection and analysis on issues related to 

IP enforcement. 

My remarks are based on numerous assignments that GAO has 

conducted on intellectual property protection over the past 5 years 

and, most recently, a report issued to Senator Voinovich regarding 

U.S. agencies’ enforcement efforts. 

Let me first talk about the leadership issue. The current U.S. 

Government coordinating structure that has evolved for protecting 

and enforcing U.S. intellectual property rights lacks permanence, 

presenting challenges for effective and viable coordination over the 

long run. At present, we have a combination of leadership mechanisms. 

The National Intellectual Property Law Enforcement Coordination Council, called NIPLECC, is responsible for coordinating IP 

protection and enforcement across multiple agencies. And the 

White House’s Strategy for Targeting Organized Piracy, called 

6 

STOP, is the strategy that guides this council. NIPLECC has struggled to define its purpose and retains an image of inactivity within 

the private sector. It continues to have leadership problems despite 

enhancements made by Congress in December of 2004 to strengthen its role. 

From the beginning of NIPLECC in 1999, Congress’s goal has 

been to institutionalize law enforcement coordination. But our work 

suggests this goal has not yet been met. In contrast, STOP has a 

positive image but lacks permanence, and the momentum that it 

helped create could disappear after the current administration. 

We have recommended that the IP coordinator and the STOP 

agencies clarify the relationship between the council and the White 

House strategy, but also recognize that some of the legislative proposals under consideration by the Congress call for more fundamental changes in this relationship. 

Let me now briefly summarize the second issue, the potential for 

improvement in agencies’ data collection and analysis on IP enforcement. 

Federal IP enforcement functions include seizures, investigations, and prosecutions, and while IP enforcement is generally not 

the highest priority for agencies such as the Department of Justice, 

Department of Homeland Security, or Health and Human Services, 

addressing IP crimes with a public health and safety risk has become an important enforcement activity at each of those agencies. 

Our report also provides some good news in that Federal IP enforcement actions generally increased during the years 2001 

through 2006. Given the importance of this issue, there are some 

ways that the agencies can improve their data and analysis to enable Congress and others to better assess agency achievements. Let 

me give just a few examples. 

Despite the fact that many agencies identified IP related to 

health and safety as a priority, we found that some agencies lacked 

the data to report or to analyze their efforts to address these types 

of crimes. We also found a few field offices were driving a huge 

share of some of the agencies’ overall enforcement activity. But 

agencies had not always considered the implications of these patterns. 

Most agencies had not established IP performance measures or 

targets to assess their achievements, making it more difficult for 

the Congress and for agency managers to make informed resource 

decisions and assess whether they are achieving their enforcement 

objectives. And, finally, the IPR Center was created with the mission to collect, analyze, and disseminate information about IPR enforcement. But the center has never achieved those goals. 

We made a number of recommendations to the agencies regarding improvements, and these were similar to earlier recommendations made to the IP coordinator to improve accountability measures. We continue to work with the agencies in terms of their response to those recommendations. 

Mr. Chairman, as you noted in your opening statement, a number of legislative proposals are before the Congress that would 

modify the Federal IP enforcement structure. As the Committee 

continues to consider this issue and these proposals, we would be 

7 

happy to provide additional information where we believe the proposals address the weaknesses that our work has identified. 

Mr. Chairman, this concludes my prepared remarks, and I would 

be happy to answer any questions that you or other members of the 

Committee have. 

[The prepared statement of Mr. Yager appears as a submission 

for the record.] 

Chairman LEAHY. Thank you. 

I would mention that Dr. Yager is very familiar with Capitol 

Hill. He ended within the time. 

What I am going to do is have each witness testify, and then we 

will ask questions. 

Brian Monks is the Vice President of Anti-Counterfeiting Operations at Underwriters Laboratories, something that is more than 

a full-time job, I am sure. 

Underwriters, of course, is a nonprofit company that certifies 

public safety. In his role at UL, Mr. Monks works closely with the 

Bureau of Customs and Border Protection, the FBI, Interpol, as 

well as other international law enforcement agencies to identify 

and seize products bearing counterfeit UL marks. He has written 

numerous articles in industry journals, frequently addresses anticounterfeiting conferences around the world. He is also a member 

of several anti-counterfeiting organizations, including the International Anti-Counterfeiting Coalition, where he is an executive 

board member. 

Mr. Monks, thank you for coming, and please go ahead, sir. 

STATEMENT OF BRIAN H. MONKS, VICE PRESIDENT, ANTICOUNTERFEITING OPERATIONS, UNDERWRITERS LABORATORIES INC., MELVILLE, NEW YORK 

Mr. MONKS. Chairman Leahy, distinguished members, thank you 

for this opportunity for Underwriters Laboratories to appear before 

you today. I am pleased to provide UL’s perspective on our work 

to keep counterfeit products out of the marketplace. 

Counterfeiting is a serious threat to our economy and to the safety of U.S. consumers. A variety of counterfeit products enter the 

stream of commerce every day, many posing unsuspectingly serious 

fire and electrical hazards that endanger the American public. 

For 114 years, UL has built a reputation on the integrity of the 

UL mark and what it represents to consumers. The UL mission is 

the protection of human life and property from product risks and 

hazards. In 2007, an estimated 21 billion products entered the 

global marketplace carrying the UL mark. To put this in perspective, the average American consumer’s home contains 120 products 

bearing the UL mark. Everything in this room today you touched 

electrically probably has a UL mark on it. 

Like other brand leaders, the UL mark is being counterfeited— 

leaving consumers with a false sense of security about the safety 

of the products they purchase. To minimize this risk, UL maintains 

a zero tolerance policy, working aggressively with law enforcement 

to seize product and to prosecute counterfeiters. 

There can be no doubt about the correlation between counterfeiting and product safety. Counterfeiters do not discriminate in 

their selection of products. They care about profit. In 2007 alone, 

8 

UL issued warnings about fire extinguishers, smoke alarms, extension cords, holiday lights, lamps, power strips, and surge protectors 

bearing counterfeit UL certification marks. Penetration of product 

and certification mark counterfeiting in electrical and fire protection categories increase the risk of fire, shock, and other hazards 

to American consumers, their homes, and their workplaces. 

Common household extension cords can typically be purchased 

for under a dollar at discount stores nationwide. They are often 

targeted by counterfeiters. Producing them requires basically copper and plastic. To maximize their profit, counterfeiters use extra 

plastic and reduce the amount of copper. Reducing the amount of 

copper means that when the electrical current is applied—for example, plugging in a hair dryer—these products can overheat, melt, 

and catch fire. 

In 2007, Customs and Border Protection made over 150 seizures 

of products bearing counterfeit UL marks. When examined, many 

of these products posed an unacceptable risk to the public. 

Even more disturbing is the recent appearance of counterfeit 

marks on fire safety devices, such as smoke detectors, heat detectors, sprinkle heads, and fire extinguishers. Senator, these devices 

are designed to save your life in case of a fire. 

Aggressive, proactive measures need to be taken to prevent the 

entrance of these products into the marketplace. They need to be 

stopped before a failure becomes another fatality statistic. We cannot overstate the importance of enforcement authorities and lawmakers working together with the private sector to combat these 

criminal activities. For over a decade, UL has worked closely with 

the Department of Justice, the Federal Bureau of Investigation, 

and other enforcement agencies to identify and seize products bearing counterfeit UL marks and to prosecute offenders to the fullest 

extent of the law. 

UL’s goal is to continue working with enforcement agencies to 

prevent these products from ever reaching the hands of the consumer. Ultimately, UL hopes that increased enforcement will deter 

counterfeiters. In 2006, the U.S. Attorney’s Office of the Southern 

District of Florida announced that two defendants found guilty of 

trafficking in a range of products, including extension cords bearing 

counterfeit marks, were each sentenced to more than 7 years in 

Federal prison. The rights holders worked in partnership with Government to assist in successful prosecution, sending a message that 

counterfeiters that compromise the safety of American citizens will 

be pursued and punished. 

As these examples show, some success has been achieved in combating the serious and growing threat of product counterfeiting. 

There is more to be done. Additional resources are necessary in 

order to continue this positive track record. We believe that additional staffing and resources for the DOJ and FBI that are dedicated solely to combating IP crimes would be a step in the right 

direction. This means things like dedicated FBI agents for existing 

or new Computer Hacking and Intellectual Property units; it 

means additional Assistant U.S. Attorneys dedicated to the prosecution of IP cases; and it means staffing available for the formation of ad hoc task forces that can be mobilized quickly to address 

short-term situations and threats to combat these dangers. These 

9 

ad hoc task forces have proven effective in New York, Newark, and 

recently Los Angeles, where the combined effort of Federal and 

local authorities were able to take down large-scale counterfeiting 

operations. 

Let me leave you with a parting thought. Last Friday, Federal 

authorities seized $1.5 million in counterfeit circuit breakers. Circuit breakers are found in our home electrical panels and protect 

against electrical current overloading and fire. Had they not been 

seized, these breakers could have ended up in our homes. Senator, 

one shipping container holds 186,000 circuit breakers. To put that 

in perspective, that is the potential of 186,000 house fires. 

Thank you very much. 

[The prepared statement of Mr. Monks appears as a submission 

for the record.] 

Chairman LEAHY. Thank you, Mr. Monks. We will get back to 

questions in a moment, but thank you for emphasizing two things: 

One, that counterfeiting is not just stealing money; it could cost 

you your life. You can go out and buy a product that you think is 

very reputable—my wife and I always look for the UL mark on 

electrical things we buy—but it could cost you your life. And, second, I like the emphasis you put on prosecution. As a former prosecutor myself, I think sometimes—I probably expect the finest motives of people, but sometimes the thought that the jail door may 

clang shut with them behind the door, that sometimes motivates 

them to be even more conscientious about following the law. 

Mike Rose is the Vice President of Supply Chain Technology at 

Johnson & Johnson. He has been with them for over 30 years in 

a variety of positions within the company, including Chief Information Officer. Mr. Rose works with several industry associations on 

supply chain issues, including the Pharmaceutical Research and 

Manufacturers of America’s Supply Chain Work Group. He is cochair of the Health Care Distribution Management Association Industry Relations Council. 

Mr. Rose, thank you very much for coming here. Please go ahead, 

sir. 

STATEMENT OF MIKE ROSE, VICE PRESIDENT, SUPPLY CHAIN 

TECHNOLOGY, JOHNSON & JOHNSON, FOUNTAINVILLE, 

PENNSYLVANIA 

Mr. ROSE. Thank you, Mr. Chairman. 

Mr. Chairman, on behalf of the nearly 120,000 employees of the 

Johnson & Johnson family of companies, thank you for the opportunity to speak here today. 

Violation of intellectual property through counterfeit health care 

products presents a significant risk to patients and consumers. Mr. 

Chairman, there are three points I would like to underscore this 

morning. 

First, we believe that there should be one national standard for 

ensuring the integrity of the health care products supply chain. 

Second, coordination among the various governmental agencies 

and industries involved in combating counterfeiting, as well as aggressive enforcement of existing laws, is essential. 

10 

Third, we must acknowledge that the lack of international enforcement of intellectual property laws allows counterfeiters to 

thrive. 

According to the FDA, while the United States pharmaceutical 

supply chain is one of the safest in the world, counterfeiting of 

health care products is a growing concern. The World Health Organization estimates that 8 to 10 percent of pharmaceutical products 

outside the United States are counterfeit. In some countries, counterfeit products may represent 50 percent of medicines. 

The Internet is fast becoming the marketplace of choice for counterfeiters where counterfeit pharmaceutical, consumer products, 

and medical devices can be purchased from unregulated Internet 

sites. Counterfeiters can easily sell their products via website and 

distribute them to unsuspecting U.S. consumers. This problem is so 

widespread that, according to the Pharmaceutical Security Institute, seizures of bogus prescription medicines jumped 24 percent to 

1,513 incidents in 2007, and illicit versions of 403 different prescription drugs were confiscated in 99 countries. 

Another avenue for counterfeiters is diversion, which refers to 

merchandise that is distributed into markets other than originally 

intended. Diverted products, so-called gray market products, frequently are past dated or expired, have been previously marked for 

destruction, have not been properly stored, or are counterfeit. 

Counterfeiters show total disregard for the safety of consumers, 

patients, doctors, and nurses. They have no regard for intellectual 

property rights and take advantage of countries with gaps in intellectual property laws or where enforcement of IP laws is non-existent or lax. 

Countries that do not enforce IP laws for products made for export provide counterfeiters a safe haven. The active ingredient can 

be manufactured in one country, exported to a second, where the 

product is packaged; exported to a third country, where it is labeled 

and placed in finished packaging; and exported for final sale. 

Both health care manufacturers and Government regulators are 

taking action to combat counterfeiting and to protect consumers 

and patients. Many health care manufacturers have invested in 

measures to tighten the security of supply chains and products. 

Here are some examples where manufacturers are focusing their 

efforts: monitoring market activities and trading practices; collaborating with Customs and police to investigate suspected cases of 

counterfeiting or tampering; working with Government agencies to 

ensure trademark and IP laws are enforced and prosecuting infringements; applying overt and covert features to products and 

packaging to aid in product identification; and, last, investigating 

and piloting track and trace and pedigree systems to communicate 

the product’s chain of custody. These systems are intended to add 

greater clarity into where products have been and where they are 

moving. 

One area of special focus has been a product’s pedigree, which 

documents the chain of custody of a specific product. More than 30 

U.S. States have enacted legislation requiring pharmaceutical pedigrees. As a consequence, we have a patchwork quilt of pedigree 

laws and regulations that could defeat the purpose of improving 

supply chain security. 

11 

We believe legislative efforts should eliminate the complexity of 

multiple pedigree laws and implement a simple and potentially effective solution—the electronic pedigree, otherwise known as 

ePedigree. 

Making the distributors produce ePedigrees would increase the 

effectiveness of law enforcement. The Federal Government can and 

should take the lead in establishing a single Federal standard for 

electronic pedigree. 

We have submitted additional testimony and our recommendations to the Committee. Johnson & Johnson is committed to working with Congress, the FDA, and other Government agencies on 

counterfeit challenge and is ready to make our company experts 

available to assist with legislative and regulatory efforts. 

Thank you for allowing Johnson & Johnson to share our perspective on this critical issue with you today. I am happy to answer 

your questions. 

[The prepared statement of Mr. Rose appears as a submission for 

the record.] 

Chairman LEAHY. We will go into those, but also, listening to 

your testimony makes me realize, too, that when you have a company like Johnson & Johnson that is a well-recognized name, like 

General Motors or something like that in cars. If somebody counterfeits your product and illness or death results from that, the billions of dollars that have been invested to buildup a basic product 

name is severely damaged. Is that not correct? 

Mr. ROSE. That is correct. 

Chairman LEAHY. I saw Mr. Monks shaking his head. The same 

would be with UL where an enormous amount of time has been 

spent to get into consumers’ minds that this is a seal of approval, 

and there you are. 

Jeffrey Thurnau is a patent attorney for the Denver-based Gates 

Corporation, where he has worked since 1999. Mr. Thurnau is responsible for assisting the administration of Gates’ worldwide intellectual property portfolio, including preparation and prosecution of 

patent applications, trademark registrations, and licensing. Prior to 

joining Gates, Mr. Thurnau was a private attorney representing clients before the American Arbitration Association, the New York 

Stock Exchange in various State and Federal courts. He is a founding member of the Motor and Equipment Manufacturing Association Brand Protection Council. 

Mr. Thurnau, please go ahead, sir, and thank you for being here. 

STATEMENT OF JEFFREY THURNAU, PATENT COUNSEL, 

GATES CORPORATION, DENVER, COLORADO 

Mr. THURNAU. Chairman Leahy, thanks very much, other distinguished members of the Judiciary Committee, thank you for this 

opportunity to testify on ‘‘Protecting Consumers by Protecting Intellectual Property.’’ Gates is headquartered in Denver, Colorado. 

We have 5,000 employees at 25 facilities across America. The motor 

vehicle parts suppliers are the Nation’s largest manufacturing sector, directly employing 783,100 people and contributing to 4.5 million jobs in private industry across the Nation. 

Today I am going to focus my comments on the safety implications of counterfeit parts. I will begin with an overview of the counVerDate Aug 31 2005 12:52 Oct 27, 2008 Jkt 043659 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43659.TXT SJUD1 PsN: CMORC
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terfeit challenges facing the auto parts industry, give you an idea 

of the issues facing Gates Corporation, and then offer some ideas, 

legislative and otherwise, that help move this important legislation 

forward. 

Counterfeit parts and components for cars, trucks, buses, and 

commercial vehicles pose a critical problem to the American economy. Chairman Leahy mentioned the $2 million in annual losses 

to counterfeit sales, and in the auto parts industry, approximately 

250,000 fewer jobs as a result of counterfeit parts in the marketplace. 

Vehicle performance and safety can be severely impacted by 

counterfeit products such as brakes, brake pads, timing belts, automotive lighting, and tires. The use of counterfeit parts can result 

in sudden, catastrophic engine failure, brake failure, and other system malfunctions. 

Trademark and brand infringement is the most immediate problem we face at Gates Corporation. That is because this represents 

the easiest method by which pirates can get their products sold in 

the marketplace. 

Another issue we confront is trade dress infringement. 

Trade dress relates to the unique or distinctive appearance of 

products or packaging. Often, the consumers are unable to distinguish the difference between the authentic goods and counterfeit 

goods and may mistakenly make a purchase of counterfeit products. 

We have tested pirate timing belts and find they simply do not 

rise to industry standards. As I have said, failure of a timing belt 

can lead to catastrophic engine damage. This saddles the consumer 

with thousands of dollars in repairs, as well as presenting a significant safety risk when one considers where the failure may occur, 

for example, on a busy highway. 

Let me give you some other examples. In March 2008, Taiwan 

customs contacted Gates with respect to a suspect shipment of 

counterfeit timing belts. Gates confirmed that they were counterfeit, and we are in the process of working with Taiwanese officials 

to move the case forward. 

In November 2006, a Puerto Rican distributor was caught selling 

counterfeit timing belts. The supplier was located in China. The 

supplier had 600 timing belts in his possession and had been selling them on the Internet. 

In October 2006, a Polish distributor was caught selling counterfeit timing belts. Warsaw authorities brought a criminal complaint 

against the distributor. 

As you can see, a company like Gates faces a myriad of challenges to its intellectual property. I urge you to consider some of 

the following ideas to address the range of concerns I have expressed today on behalf of Gates and the Motor Equipment Manufacturers’ Association. 

First, better coordination among executive branch enforcement 

agencies. Current legislation provides three options worth looking 

at: Senate bill 522, with its OMB-centered Coordinating Committee; next, legislation recently passed in the House creates an IP 

czar at the Department of Justice; and last, but certainly not least, 

Mr. Chairman, your legislation, S. 2317, which provides for a speVerDate Aug 31 2005 12:52 Oct 27, 2008 Jkt 043659 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43659.TXT SJUD1 PsN: CMORC
13 

cial unit at the FBI, as well as increased penalties for trafficking 

in counterfeit labels. 

We also support increased enforcement resources at the Department of Homeland Security and the Department of Justice. This 

would be directed toward additional personnel, training, and technology for detecting counterfeit parts at U.S. ports. 

Finally, we support increased coordination and cooperation 

among U.S. law enforcement agencies and the law enforcement 

agencies of like-minded countries so that the IP laws in those countries might be more vigorously enforced. 

Mr. Chairman, thanks very much for the opportunity to testify 

today. I am glad to take any questions. 

[The prepared statement of Mr. Thurnau appears as a submission for the record.] 

Chairman LEAHY. Well, thank you, and I think you agree with 

me that prosecution alone is not the answer, but it is good to have 

some pretty tough teeth if you do catch people and prosecute them. 

Mr. THURNAU. Yes. 

Chairman LEAHY. Dr. Yager, let me ask you, the National Intellectual Property Law Enforcement Coordination Council, 

NIPLECC, as we have said, is an interagency group that is supposed to coordinate U.S. domestic and international IP enforcement 

activities. We had the former coordinator of NIPLECC, Chris 

Israel, before this Committee several times, and he was doing as 

well as he could. But NIPLECC itself is often criticized as being 

ineffective. In contrast, we have the Strategy Targeting Organized 

Piracy, or STOP. It seems to have done a little bit better in bringing in the Departments of Commerce, Justice, Homeland Security, 

State, Food and Drug, Office of the U.S. Trade Representative together. 

Has STOP been more effective and why? And if it has been more 

effective, how can we make it even more effective than that? 

Mr. YAGER. We believe that STOP actually did add quite some 

energy and some momentum to the efforts among agencies to work 

together to improve IP enforcement. I think there are a couple reasons for that. One, it was a very highly visible effort, not only inside the Government but in terms of outreach to the private sector. 

There was also some additional reporting and a little bit more in 

terms of accountability features, providing information to the Congress and other stakeholders as to what their goals were, and what 

was the purpose. They set some targets for performance. So I think 

there were a number of factors that made STOP more effective, including some fairly vigorous support from the White House. So it 

being an important effort within the administration gave it some 

additional prominence, and, frankly, it got the attention not just internally in the United States but also abroad. So there were some 

features about it that made it more effective than its predecessor. 

On the other hand, one of the problems with a Presidential initiative is it is certainly possible that that initiative will go away 

with the new administration. So one of the points that I made in 

my statement and my written report was about the permanence of 

this particular entity, because after achieving some momentum 

along the lines of the things that I mentioned, as well as, frankly, 

some increased prosecutions at Justice. This problem obviously will 

14 

not be solved by the end of this administration, and there needs 

to be some discussion about how to make that group and that function more permanent to continue to make some progress on this 

difficult subject. 

Chairman LEAHY. I wear another hat as Chairman of the Subcommittee that funds all of the State Department and its overseas 

operations. I have been pushing very hard to make sure we have 

people in our embassies who can work on these issues and train 

to. 

I should probably ask Mr. Monks, and Mr. Rose and Mr. 

Thurnau, has the coordination worked well? It is one thing to have 

our agencies coordinate with each other. They are coordinating 

with the industry. Mr. Monks? 

Mr. MONKS. I think the reach-out is mutual. You know, from private industry we reach out to the Department of Justice, to the Bureau, to ICE, whoever it may be, and educate, talk about the problem how we can work together to combine our resources to get effective enforcement, get effective prosecution. So it is a two-way 

street. From UL’s vantage point, it has worked on many occasions 

where we have had some good prosecutions. We are certainly not 

catching all the crooks, but, you know, we are out there pushing 

the envelope. 

So it has worked. There are some limitations. There is communication problems here and there. But overall we are quite happy 

with the outcome. 

Chairman LEAHY. Mr. Rose? 

Mr. ROSE. We have coordinated with various governmental agencies, and they are very important resources to us. In our industry, 

we work very closely with the FDA and also with the group in the 

FDA, the Office of Criminal Investigation. They are very important 

to us, and they have been great resources, as well as Homeland Security and ICE. 

Coordination always is a difficult thing. As we look at counterfeiting, we have to also be cognizant that counterfeiting is occurring outside the U.S.; we need to have better coordination with regulatory agencies, and enforcement agencies overseas. 

Chairman LEAHY. Mr. Thurnau? 

Mr. THURNAU. Thank you. Let me take that segue in terms of 

international efforts. From the Gates Corporation’s point of view, 

our primary issues are offshore, and we have had some success in 

dealing with U.S. agencies, but at the moment, we also are trying 

to beef up our contacts with other governments, other law enforcement agencies in those governments, so that they are familiar with 

us and familiar with the products and the automotive industry 

products. So to the extent that U.S. agencies can assist in that coordination effort between U.S. and other governments, it would be 

appreciated. 

Chairman LEAHY. Well, thank you. And, you know, I would hope 

that each one of you would feel free, after you think further on this, 

to write to me if you have ideas, concrete things that you feel that 

could be done, and write to both myself and Senator Hatch, who 

is interested in this. This really is not a partisan issue. It is one 

that we all have a stake in. I have a lot of small companies but 

very big companies in my own State of Vermont that have interVerDate Aug 31 2005 12:52 Oct 27, 2008 Jkt 043659 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43659.TXT SJUD1 PsN: CMORC
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national work, many in the electronic areas, other types of areas, 

and one that does circuit breakers that you have certified, Mr. 

Monks, your company has. And they are constantly being faced 

with counterfeit products labeled as theirs, and they do not begin 

to match the quality of theirs. 

Mr. Rose, we just touched on this earlier, but just give us some 

idea of what you have to do in your company, a brand that we all 

recognize, what you have to do just to protect your brand name 

that people are counterfeiting and thinking they are buying a Johnson & Johnson brand. I am sure that what you would say is probably could be said by just about every large corporation in this 

country. 

Mr. ROSE. I will speak on behalf of the health care industry. I 

am sure Mr. Thurnau could comment on the automotive industry 

as well. 

What we are seeing is a huge investment of resources and time. 

If you go back 30 years ago, this was not an issue on anyone’s 

agenda. We were developing products and marketing products. 

Now we have added another dimension to our supply chain activities where we have to protect our products. So we invest in various 

anti-counterfeiting measures and features for our products, overt 

and covert markers, color-shifting inks and holograms. We have invested in time with our trading partners to reassess our agreements, our trade agreements that we have with them. We are monitoring the marketplace as well. 

These activities are taking a lot of resources, corporate resources, 

that we now have to invest in just to protect products. We manufacture genuine products, and as you rightfully mentioned, the 

Johnson & Johnson name is a very important name to protect. Now 

we have to invest to protect that name even more than we ever 

have in the past. 

Chairman LEAHY. It would be more fun to be spending that 

money on developing new products, I am sure. 

Mr. ROSE. We would all benefit from spending money on new 

products. Many of us would benefit from having new medical products. 

Chairman LEAHY. I am going to yield to Senator Cardin in just 

one moment, but, Mr. Thurnau, when I walked in, I noticed you 

had a belt over there, and I am sitting here intrigued. Would you 

tell me what that is? 

Mr. THURNAU. Absolutely. Thank you. I brought in an authentic 

belt and a counterfeit belt and some authentic and counterfeit 

packaging as well. And the point is that counterfeiters to a certain 

extent have to meet quality standards, as odd as that sounds, because even though it is a point-of-sale issue for the purchase of 

counterfeit products, they still have to get past that initial purchase. So often it is very difficult to distinguish between the authentic goods and the counterfeit goods. I am glad to offer these up 

for inspection by the Committee. 

Chairman LEAHY. Thank you. 

Senator Cardin? 

Senator CARDIN. Well, Mr. Chairman, thank you very much for 

holding this hearing, and I thank our witnesses for their testimony. 

The stealing of intellectual property is a very serious problem. It 

16 

is not only an economic loss. It is a fairness issue. It is a safety 

issue. And I think you all have pointed that out in your testimony. 

And whether we are dealing with pirated goods or we are dealing 

with counterfeit products, it is a huge problem. 

And there is an attitude issue. I think people in this country do 

not realize that when they take a pirated product, it is stealing; or 

that when they use software that they get from a friend without 

a license, it is stealing. When they look for a product that might 

be counterfeit and are not really too concerned about it, it is stealing. And we need to do a much better job on enforcement. 

In the last Congress, I served as the ranking Democrat on the 

Trade Subcommittee of the House Ways and Means Committee. I 

spent a lot of time dealing with intellectual property issues in our 

trade agreements. So I just really want to ask the panel a question. 

This hearing is primarily focused as to how we can strengthen our 

internal enforcement of our intellectual property rights, how we 

can help enforce the laws of this country, strengthen the laws. 

One could say, Are our laws adequate? That is, is it clear what 

is legal and what is not legal? Second, do we have the right enforcement? And we have been talking here and the Chairman has 

been very active as to the coordination of so many agencies that 

are involved here, whether there should not be a better way to coordinate that, either through a central person or through a better 

focus within an agency. And the third is whether we should be 

looking at our trade laws in a different light. 

I remember discovering in regards to counterfeit products that 

other countries that we trade with actually finance the manufacturing operations of counterfeit products. They actually assist in 

getting U.S. product to their country, which they analyze, then 

they set up manufacturing plants that produce that product in a 

counterfeit way for their own economic advantages, which is clearly 

something that should never be tolerated by the United States for 

a trading partner or any other country. So the question really is: 

Do we need to take a new look at our multinational trade agreements or our bilateral trade agreements or our U.S. attitude as to 

which countries we will allow access to our country if they are not 

enforcing basic intellectual property protections for U.S. manufacturers and producers? 

So, yes, we have got to take care of our own domestic laws. We 

have to take care of enforcement here. We have got to take care 

of our trade laws. And if you could just help me a little bit as to 

where we should place our priorities in regards to being the most 

effective in preventing the stealing of intellectual property with 

American companies and individuals. 

Mr. YAGER. If I could answer that, Senator Cardin, I think certainly we will not be successful if our efforts end at the U.S. borders in terms of trying to protect the U.S. from the entry of these 

goods. 

There is a procedure, there is a special 301 process, which includes a number of the different agencies, and the focus of the special 301 process is for Government to get together with different industry representatives and foreign governments to talk about the 

ways that their legislation abroad can be improved. And there also 

17 

has been some discussion about enforcement of those laws within 

the special 301 process. 

So there is an active process within the Federal Government that 

has been relatively successful— 

Senator CARDIN. The United States has been challenged internationally on its enforcement, and in the latest round, there was 

a fear that we might have actually weakened some of our enforcement provisions. We did not get to that point, but it does not seem 

like we are winning in the international arena. 

Mr. YAGER. There certainly have been some situations where the 

special 301 tool has been used against countries like Russia, 

Ukraine, and others to exert pressure. In some cases, there has 

been stronger legislation written in those countries. I have to say, 

though, the real difficulty with working with foreign countries is to 

try to convince them to put resources into this effort because, obviously, stopping the production of pirated goods abroad is a very resource-intensive effort, as it is here. And one of the things that we 

noticed when we did some travel is if there are groups within the 

law enforcement agencies abroad that are serious about seizing 

counterfeit goods, they have a storage problem very quickly. There 

is just so much counterfeit merchandise in many of these other cities that if the agencies, whether they are police or other, get serious about this, in a matter of days of seizures they have trucks full 

of counterfeit goods that they somehow have to try to destroy while 

keeping enough evidence to prosecute. 

So it is an enormous effort where I believe the U.S. Government 

has been somewhat successful in helping them strengthen the 

laws, but the enforcement is still a major challenge. 

Senator CARDIN. I would point out, if a country wants a trade 

agreement with the United States or, as we negotiate the multinational trade agreements, it should be, I think, high on our agenda to deal with how those nations are enforcing protection against 

taking of intellectual property. What resources are they putting behind enforcing the laws they have on the books to protect in this 

area? And certainly—and this is very true in the auto parts area. 

They certainly should not be helping to finance companies in their 

own country that are making counterfeit product. And that has 

been true of some of our trading partners. You at least want them 

to stop encouraging it, and certainly we would like them to enforce 

by confiscating counterfeit products and making sure they do not 

get into commerce. 

Mr. THURNAU. Yes, Senator Cardin, exactly. We agree. 

And enforcement in those countries presents a problem, and it is 

not entirely clear in all instances that enforcement has taken place, 

even when there has been a successful seizure or shutting down of 

a pirate operation. It is not uncommon that they simply reopen 

someplace down the road and put a different label on, and they are 

off and running again. 

So there does seem occasionally to be lack of interest on the part 

of these governments to follow through with the process, either destruction of the physical plant that was doing the counterfeit operation, incarceration of the individuals who were involved, and it is 

a serious problem. We agree. 

18 

Senator CARDIN. I thank the Chairman. I guess my point is, Mr. 

Chairman, you are absolutely right to put attention in this hearing 

on the jurisdiction of our Committee to enforcement of our IP laws. 

We need to do a much better job here in this country. But we also 

need our trade representatives to put a higher priority on IP protections on the trade agenda so that you do not have to fight as 

hard with other countries as you do only to find when you win 

what you think is a battle, they just move down the street and 

open up another operation and you really have not gained anything 

other than costing a lot of energy and time and resources of your 

company. 

Thank you, Mr. Chairman. 

Chairman LEAHY. Thank you very much, Senator Cardin. 

We talked about the cost of the theft of intellectual property. Mr. 

Rose, do you know offhand how much your company spends to protect your intellectual property a year? 

Mr. ROSE. Mr. Chairman, I do not know the exact number that 

we spend to protect our intellectual property. I think it is hard to 

estimate because we integrate it into so many parts now of our 

company, and we do not look at it as an isolated cost. We can tell 

you some numbers. We have seen from the World Health Organization, we understand the economic impact is about $40 billion just 

to the pharmaceutical industry alone. And as you know, Johnson 

& Johnson is a medical device company, as well as a pharmaceutical company, as well as a consumer products company. So that 

is just one estimate for the whole pharmaceutical industry globally, 

$40 billion, what it costs us and what the economic impact would 

be. What it means specifically for our company, we do not have a 

good estimate for that. 

Chairman LEAHY. Mr. Monks, do you have any idea? 

Mr. MONKS. It is in the several millions of dollars. This is my 

full-time job. This job did not exist with this function UL 15 years 

ago, so it is relatively new. And it is global in its reach. And I 

would just say if we put in, you know, another thousand people 

into the job, it still would not be enough. It is growing at an epidemic level. It is in the millions. And it has to be spent because 

like Johnson & Johnson and everyone else that is in this room, the 

integrity of the UL mark cannot be tarnished, that if people plug 

something in, they expect it to be safe. And so we have to put this 

asset in place and protect the mark. 

Chairman LEAHY. Mr. Thurnau, and I realize that I am jumping 

around here a little bit, but we have heard about organized criminal syndicates, especially in Eastern Europe and China, counterfeiting American goods. Has that been your experience? Are they 

a major force in all of this? 

Mr. THURNAU. It has. We in the past, had instances in Russia, 

for example, where the counterfeiting operation, as far as we understand, was based in organized crime. And it presented problems 

for the investigators and for the individuals who are dealing with 

the counterfeiters. So we have run across that, yes. 

Chairman LEAHY. Should we be looking at changes in our RICO 

statutes or anything in our criminal laws that we should change? 

Or is it simply a case of enforcement and trying to grab people? 

19 

Mr. THURNAU. I think in this case, sir, it is a matter of enforcement, resources being allocated in terms of Federal agents and 

prosecutors to, as you say, put people behind bars. 

Chairman LEAHY. I realize this is kind of a broad-based question, 

but have you found in some of these countries that there is at least 

implicit government support, if not direct? 

Mr. THURNAU. Yes, but not at the central government levels. It 

is usually at the provincial or city levels where the folks who we 

are working with may have an interest in the operation itself, so 

they have got the bias in favor of seeing that it continued to operate. That has happened, but as I said, not at the central government level, primarily provincial and city. 

Chairman LEAHY. You know, I have been following this. I have 

had so many briefings, both public briefings and closed-door briefings of this. It is hard to think of any area of crime, and international crime as well as internal crime, that has grown so fast in 

this whole area. 

Mr. Monks, we try to figure out ways to stop the counterfeiting 

of seals, whether it is the UL seal or any other seal. Should we be 

doing more in that? Do we need more laws in place? I am happy 

to push for laws, but I am also trying, as I—again, we are not trying to bring everything back to one’s own experience as a prosecutor. I recall telling the Vermont Legislature once, when we had 

a rash of armed robberies around the State, I said, ‘‘We need some 

help to get that.’’ They said, ‘‘Well, we will double the penalty.’’ I 

said, ‘‘People do not think they are going to get caught. Doubling 

the penalty does not do anything. You need people to go out there 

and catch them.’’ 

If you wanted to leave me with any last thought, what would it 

be? 

Mr. MONKS. I think the clang of the jail door is really a deterrent. More police tuned into, trained on IP crime. It is quite possible that police officers walk into a warehouse and seize drugs and 

weapons, and then there is a bank of DVR players, and they think 

the guy is into hi-fi. But, really, he is counterfeiting movies and 

making money. 

It is the prosecution of these individuals. You need to create the 

laws that makes a deterrent to steal, because counterfeiting right 

now is all about stealing, and if I am going to steal and bring a 

shipment in of a million dollars and I get caught and the fine is 

$25,000, I will play that game every day with you. It is a win-win 

for the counterfeiter. 

So it is not only prosecution, putting the assets on the ground, 

the police officers, the law enforcement, the customs agents, and 

taking it to them. 

Chairman LEAHY. I think we have to do a better job of letting 

people know that people die from some of these things, not just 

buying a counterfeit article of clothing. And I am not suggesting in 

any way to condone that if somebody has done their own design 

and done the work. But if your seat belt does not meet the standards, if your medicine does not meet the standards, if your brake 

pad does not meet the standards, you can die. 

One of the things that I am glad to see—and I have talked about 

this not being a partisan issue. It is also one where labor and busiVerDate Aug 31 2005 12:52 Oct 27, 2008 Jkt 043659 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43659.TXT SJUD1 PsN: CMORC
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ness have joined together. I know organized labor has joined industry in promoting stronger intellectual property protection. We have 

all got a stake in this. You have got the stake of your reputations. 

We have the stake of our lives. We also have the stake of jobs. And 

we all know that in today’s world, you are going to have international competition anyway. And that is significant. It is a fact of 

life. But I would kind of like to have fair competition. Most of the 

corporations I have known in this country can keep the rules the 

same for everybody. They can compete. You can make tough competition, but they can compete. It is when somebody does not have 

to follow the rules where you have a difficult time. 

Well, gentlemen, I appreciate your being here. You will get a 

copy of the transcript. If you want to add to it, please feel free. But 

also know that almost every member of the Committee has about 

three different meetings going on today, but we are going to be 

talking about this in the Committee. Feel free to add anything you 

want to. 

We will stand in recess. Thank you. 

[Whereupon, at 11:07 a.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

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