Intellectual Property: Federal Enforcement Has Generally Increased, but Assessing Performance Could Strengthen Law Enforcement Efforts
Published: 2008-03-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Federal law enforcement actions against criminals who manufacture and distribute counterfeit and pirated goods are important to enforcing intellectual property (IP) rights and protecting Americans from unsafe or substandard products. GAO was asked to: (1) examine key federal agencies' roles, priorities, and resources devoted to IP-related enforcement; (2) evaluate agencies' IP-related enforcement statistics and achievements; and (3) examine the status of the National Intellectual Property Rights Coordination Center. GAO reviewed relevant documents, interviewed officials in five key agencies, and analyzed agency IP enforcement data from fiscal years 2001 through 2006.
section_title: What GAO Found
paragraphs: Five key agencies play a role in IP enforcement, and their enforcement functions include seizures, investigations, and prosecutions. While IP enforcement is generally not their highest priority, IP crimes with a public health and safety risk, such as production of counterfeit pharmaceuticals, is an IP enforcement priority at each agency. Determining agencies' IP enforcement resources is challenging because few staff are dedicated to this area, and not all agencies track staff time spent on IP enforcement. Agencies carry out some enforcement actions through their headquarters, but significant enforcement takes place in the field. Federal enforcement actions generally increased during fiscal years 2001-2006, but the key agencies have not taken key steps to assess their achievements. For example, most have not systematically analyzed their IP enforcement statistics to inform management and resource allocation decisions, collected data on their efforts to address IP crimes that affect public health and safety, or established IP-related performance measures or targets to assess their achievements. Also, Customs and Border Protection's enforcement of exclusion orders, which stop certain IP-infringing goods from entering the country, has been limited due to certain procedural weaknesses. The National Intellectual Property Rights Coordination Center, an interagency mechanism created to coordinate federal investigative efforts, has not achieved its mission and staff levels have decreased. Currently, only one agency participates in the center's activities, which focus on private sector outreach. Agencies have lacked a common understanding of the center's purpose and agencies' roles. The center's upcoming move to a new location presents an opportunity to reconsider its mission.

section_title: Letter
paragraphs: Intellectual property (IP) is an important component of the U.S. economy,  and the United States is an acknowledged global leader in its creation. The  United States grants IP rights through the issue of patents, trademarks,  and copyrights, and regards many types of unauthorized IP use—called  infringement—as a crime. Examples of IP infringement range from the  creation or sale of counterfeit or pirated music and movies to the  manufacturing and sale of counterfeit auto parts and pharmaceuticals; the  poor quality of some of these goods can be dangerous for consumers.  Governments and private companies have cited a recent expansion in IP  crimes, noting that criminal networks have increasingly moved into this  domain due to high profit potential, ease of market entry, and relatively  low risks.
Federal law enforcement actions against those who manufacture and  distribute IP-infringing goods are an important component of U.S. efforts  to protect IP creators and owners and American consumers. Federal  actions range from seizing IP-infringing goods to prosecuting alleged  criminals. Key federal law enforcement agencies that play an active role in  enforcing IP rights are the Department of Homeland Security’s (DHS)  Customs and Border Protection (CBP) and Immigration and Customs  Enforcement (ICE), and the Department of Justice’s (DOJ) Criminal  Division, U.S. Attorney’s Offices, and the Federal Bureau of Investigation  (FBI). The Department of Health and Human Services’ (HHS) Food and  Drug Administration (FDA) also plays a role. Several interagency  mechanisms exist to coordinate federal IP enforcement efforts, including  the National Intellectual Property Law Enforcement Coordination Council  (NIPLECC) and the National Intellectual Property Rights Coordination  Center.
We reported to you in April 2007 on challenges that CBP faces in carrying  out its IP enforcement role to seize IP-infringing goods at U.S. ports of  entry and identified certain steps that it could take to improve its efforts.  You subsequently asked us to broaden this work and examine efforts  undertaken by CBP and other key federal agencies to carry out law  enforcement actions against those who commit violations of U.S. IP laws.  Specifically, this report: (1) examines federal agencies’ roles, priorities,  and resources devoted to IP-related enforcement; (2) evaluates agencies’  IP-related enforcement statistics and achievements; and (3) examines the  status of the National Intellectual Property Rights Coordination Center.
Based on our prior work and background research, we determined that  CBP, ICE, FBI, and DOJ are the four key law enforcement agencies that  play an active role in IP enforcement, and that FDA also plays an  important role. To examine the key federal agencies’ roles and priorities  for IP-related enforcement, we met with agency officials in their  headquarters and in seven field locations and reviewed strategic plans and  other agency documents. To examine agencies’ resources for IP-related  enforcement, we obtained information on staff resources, where available.  To evaluate IP-related enforcement trends and achievements, we reviewed  agency statistics for fiscal years 2001 through 2006, including IP-related  seizures, investigations, and prosecutions. We also reviewed agencies’  internal strategic planning documents to determine their priorities, goals,  and objectives for IP enforcement and compared them to the types of data  agencies collected. To examine the status of the National Intellectual  Property Rights Coordination Center, we met with ICE, FBI, DOJ, and  FDA officials to discuss its evolution, role, and staffing levels; reviewed  agency documents that articulated the center’s purpose; and analyzed  congressional appropriators’ conference reports that directed agencies to  staff and fund the center. Some of the information we reviewed was  considered sensitive for law enforcement purposes, and our report only  discusses publicly available information. We obtained private sector views  on federal IP enforcement efforts through interviews with representatives  from 22 companies and eight industry associations across eight sectors,  such as the entertainment, pharmaceutical, and manufacturing industries.  We conducted this performance audit from December 2006 through March  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. See appendix I for a more  detailed description of our scope and methodology.
subsections: section_title: Background
paragraphs: Intellectual property has become a critical component of our country’s  economy, accounting for an average of 18 percent of the U.S. gross  domestic product from 1998 through 2003. Industries that rely on IP  protection—including the aerospace, automotive, computer,  pharmaceutical, semiconductor, motion picture, and recording  industries—are estimated to have accounted for 26 percent of the annual  real gross domestic product growth rate during this period and about 40  percent of U.S. exports of goods and services in 2003 through 2004.  Further, they are among the highest-paying employers in the country,  representing an estimated 18 million workers or 13 percent of the labor  force.
The economic value of IP-protected goods makes them attractive targets  for criminal networks. Criminal activities have negative effects for U.S.  innovation and investment, the value and reputation of individual  companies, and consumers who are put at risk by substandard or  dangerous products. Such activity is inherently difficult to measure, but  the Organization for Economic Cooperation and Development recently  estimated that international trade in counterfeit and pirated products in  2005 could have been up to $200 billion.
According to industry groups, a broad range of IP-protected products are  subject to being counterfeited or pirated, from luxury goods and brand  name apparel to computer software and digital media to food and  medicine. Evidence of counterfeiting in industries whose products have a  public health or safety component, such as auto and airline parts;  electrical, health, and beauty products; batteries; pharmaceuticals; and  infant formula, presents a significant concern. The World Health  Organization estimates that as much as 10 percent of medicines sold  worldwide are believed to be counterfeit, including essential medicines  such as vaccines, antimalarials, and human immunodeficiency virus  therapies.
The federal government plays a key role in granting protection for and  enforcing IP rights. It grants protection by approving patents or registering  copyrights and trademarks. It enforces IP rights by taking actions against  those accused of theft or misuse. Enforcement actions include both civil  and criminal penalties. U.S. laws criminalize certain types of IP violations,  primarily copyright and trademark violations, and authorize incarceration  or fines. These laws are directed primarily toward those who knowingly  produce and distribute IP-infringing goods, rather than those who  consume such goods. Although U.S. laws do not treat patent violations as  a crime, the federal government does take actions to protect patents and  authorizes civil enforcement actions against infringers. See appendix II for  a detailed list of the U.S. laws that grant IP protection and the criminal and  civil penalties that federal law enforcement agencies are authorized to  impose.
Protection is also provided by the U.S. International Trade Commission,  which investigates allegations of unfair import practices that commonly  involve claims of patent or trademark infringement. For example, in  January 2007, the commission issued an “exclusion order” to cease  importation of certain types of laminated floor panels that it found  infringed on three U.S. patents. Exclusion orders direct CBP to stop  certain goods from entering the United States while the order is in effect.  The commission is also authorized to take other actions, such as issuing  “cease and desist” orders to those engaging in unfair import practices or  assessing civil penalties.
Congress has supported several interagency mechanisms to coordinate  federal IP law enforcement efforts. In 1999, Congress created the  interagency NIPLECC as a mechanism to coordinate U.S. law enforcement  efforts to protect and enforce IP rights in the United States and abroad.  Officials from seven federal entities are members of NIPLECC. A  presidential initiative, called the Strategy Targeting Organized Piracy  (STOP), is the council’s strategy, and it articulates five broad goals. From  2001, Congress supported the creation of the National Intellectual  Property Rights Coordination Center, another interagency mechanism that  aims to improve federal IP enforcement and coordinate investigative  efforts between ICE and FBI (discussed in detail later in this report).
section_title: Multiple Agencies Carry Out IP Enforcement, but Their IP Priorities Vary, and Few Resources Are Dedicated Exclusively to IP Enforcement
paragraphs: For the five key federal agencies with IP enforcement roles, such  enforcement is not a top priority for most of them, and determining their  resource allocations to IP enforcement is challenging. These agencies’ IP  enforcement functions include: (1) seizing IP infringing goods; (2)  conducting investigations; and (3) prosecuting alleged violations. The  overall aim of U.S. government efforts is to stop trade in counterfeit and  pirated goods, and the three functions each present some degree of  deterrent. The key law enforcement agencies—CBP, ICE, FBI, and DOJ— have broad missions with many competing responsibilities, and their IP  enforcement role is not generally their highest priority, while FDA’s  primary mission is to protect public health. We were not able to identify  the total resources allocated to IP enforcement across the agencies  because few staff are dedicated solely to IP enforcement, and only certain  agencies track the time spent on IP criminal investigations by non- dedicated staff who carry out this function. The information we were able  to compile shows declines in IP enforcement resources in several  agencies, and fluctuating or growing resource allocations to IP  enforcement in others. Because federal IP enforcement roles are  interdependent—seizures may launch or contribute to investigations, and  investigations may lead to prosecutions—the emphasis placed on  enforcement of IP at one agency or field office can impact the IP  enforcement efforts of others.
subsections: section_title: Key Agencies Carry Out Three Primary IP-Related Enforcement Functions
paragraphs: Key federal agencies carry out three IP enforcement functions. Seizing IP  infringing goods is primarily performed by CBP. IP-related investigations  are performed by agencies located in three different departments.  Prosecuting IP crimes is carried out by two different entities within DOJ.  Figure 1 identifies the IP enforcement functions and the structure,  including the departments and agencies, in which they are performed.
section_title: Responsible Agencies Have Broad Missions, and IP Enforcement Is Not a Top Priority at Most
paragraphs: The four key federal law enforcement agencies and FDA have broad  missions and many responsibilities, and IP enforcement is not a top  priority at most agencies. CBP and ICE address IP enforcement as part of  their legacy efforts to combat commercial fraud, but their top mission is  securing the homeland. DOJ identifies IP enforcement as one of its top  priorities, but FBI does not. FDA’s role is driven by its public health and  safety mission, not IP enforcement per se. Regardless of the priority  ranking agencies assign to IP enforcement, within their IP enforcement  efforts, they have all given priority to IP-related crimes that pose risks to  public health and safety. Staff in agency headquarters play a role in setting  IP enforcement policies and, at some agencies, carry out certain IP  enforcement actions, but most enforcement activity takes place at the field  office level. Each field office faces a unique set of challenges in its local  environment, balancing IP enforcement efforts with other agency  priorities.
Several companies and associations we interviewed remarked that the  federal IP enforcement structure is not clear. For example, one association  remarked that agency responsibilities are unclear and may overlap, while  another said that there is no formal process for referring cases for federal  action. This structure was seen as especially challenging for small  companies who need federal assistance but lack the resources or expertise  to navigate the federal system. Additional information on private sector  views about federal IP enforcement is contained in appendix III.
Information is presented below on each agency’s IP enforcement function,  the priority assigned to IP enforcement, and the structure within which  such enforcement is carried out.
section_title: CBP - Seizures, Penalties and Exclusions
paragraphs: Function: CBP is the primary federal agency authorized to seize goods,  including IP-infringing goods, upon their arrival in the United States. CBP  is also responsible for preventing the entry of goods into the United States  that are subject to exclusion orders and assesses penalties against IP  infringers when warranted.
Priorities: CBP’s primary mission is to protect the homeland. CBP is also  responsible for carrying out its legacy Customs functions, including trade  enforcement. CBP has identified six Priority Trade Issues, one of which is  IP enforcement. Within its IP enforcement efforts, CBP gives priority to  large value seizures and violations that affect public health and safety or  economic security or that have ties to terrorist activity.
Structure: CBP’s Office of International Trade develops IP enforcement  policies and plans, develops national instructions for targeting shipments  suspected of carrying IP-infringing goods, writes guidance for assessing  penalties and enforcing exclusion orders, and maintains data on IP-related  seizures. The Office of Field Operations oversees implementation of these  policies and procedures at 325 U.S. ports of entry. While much of CBP’s  IP enforcement activity is carried out by the ports, headquarters staff play  an integral role in supporting those efforts, including providing policy and  guidance on enforcement priorities and developing systems and  technologies to enhance enforcement.
section_title: ICE Criminal Investigations
paragraphs: Function: ICE conducts investigations of IP-related criminal activity,  including infringement of trademark and copyright law.
Priorities: ICE’s primary mission is to protect the homeland. It is also  responsible for combating commercial fraud, which includes IP  enforcement. ICE’s interim agency-wide strategic plan and its plan for  commercial fraud are law enforcement sensitive and not available to the  public. However, according to ICE officials, the top priorities within  commercial fraud enforcement are public health and safety violations and  IP infringement.
Structure: Within ICE’s Office of Investigations, the Critical  Infrastructure and Fraud Division develops the agency’s IP policies and  oversees its IP enforcement efforts. The division’s IP responsibilities are  handled by the Branch for Commercial Fraud and Intellectual Property  Rights, which also houses the National Intellectual Property Rights  Coordination Center. Although the center is officially an interagency  coordination body, it plays a lead role in developing and carrying out ICE’s  IP enforcement policies. In addition, ICE has a Cyber Crimes Center that  focuses on Internet-based crimes, including IP piracy, and provides  referrals and investigative assistance to ICE’s field offices. IP  investigations are carried out by agents located in about 100 U.S. cities,  organized under ICE’s 26 field offices.
section_title: FBI Criminal Investigations
paragraphs: Function: FBI conducts investigations of IP-related criminal activity,  including infringement of trademark and copyright law, as well as theft of  trade secrets.
Priorities: The FBI’s principal mission is to investigate criminal activity  and defend the security of the United States. It has identified 10 priority  enforcement areas, including cyber crime. IP enforcement is included in  the cyber crime area, but it is ranked 5th out of FBI’s 6 cyber crime  priorities. Within its IP enforcement efforts, FBI’s priorities are, in order,  trade secret theft, copyright infringement, trademark infringement, and  signal theft, and one of FBI’s IP enforcement goals is for its field offices to  initiate IP investigations that affect public health and safety.
Structure: FBI’s Cyber Division oversees the agency’s IP enforcement  efforts even though not all of its IP investigations are cyber-related. A  single unit within the Cyber Division, called the Cyber Crime Fraud Unit,  has operational and management oversight for all of FBI’s cyber crime  activities. IP-related investigations are primarily carried out in FBI’s 56  field offices.
section_title: FDA Criminal Investigations
paragraphs: Function: FDA investigates illegal activity pertaining to food, drugs,  medical devices, and other products because of the impact on public  health.
Priorities: FDA’s primary mission is to protect public health by assuring  the safety, efficacy, and security of human and veterinary drugs, the food  supply, medical devices, and other products. IP enforcement is not part of  FDA’s mission or its enforcement priorities; however, FDA carries out IP- related enforcement actions in fulfilling its mission to protect public  health and safety, such as investigating criminals that traffic in counterfeit  pharmaceuticals.
Structure: FDA’s Office of Regulatory Affairs, in collaboration with other  agency components, carries out the agency’s enforcement activities. This  office houses, among other entities, FDA’s Office of Criminal  Investigations and the Division of Import Operations. The Office of  Criminal Investigations, with six field offices and presence in 25 U.S.  cities, has the primary responsibility for all criminal investigations  conducted by the FDA. The Division of Import Operations provides  guidance on the agency’s import policy to FDA field staff, including at  numerous ports around the country. FDA field staff that discover  suspected counterfeit imports of products that are regulated by FDA  would refer these to the Office of Criminal Investigations for further  action. In addition, Office of Regulatory Affairs laboratories play a role by  analyzing samples of suspected counterfeit products.
section_title: DOJ - Prosecutions
paragraphs: Function: DOJ prosecutes IP cases referred from ICE, FBI, and FDA, as  well as from private sector representatives and other sources.
Priorities: According to DOJ officials and documents, IP enforcement is  one of the department’s highest priorities. In March 2004, the Attorney  General announced the creation of a DOJ Task Force on Intellectual  Property, with a mission of identifying ways to strengthen the  department’s IP enforcement efforts. The Task Force produced 31  recommendations for improving IP enforcement and provided a progress  report on those recommendations in its 2006 report. The Task Force made  numerous short- and long-term recommendations, including increasing the  number of DOJ prosecutors and FBI agents that focus on computer crime  and IP cases and prosecuting IP cases involving a threat to public health  and safety. In addition, DOJ developed an internal IP enforcement  strategy for 2007 with six strategic objectives designed to help it meets its  larger goal of reducing IP theft. DOJ shared this document with us, but its  contents are for official government use only.
Structure: DOJ’s IP enforcement is carried out primarily by the 94 U.S.
Attorney’s Offices located throughout the country as well as its Criminal  Division’s Computer Crime and Intellectual Property Section (CCIPS).  Under DOJ’s Computer Hacking and Intellectual Property (CHIP)  program, each U.S. Attorney’s Office has one CHIP coordinator who is  trained in prosecuting IP enforcement cases. In addition, 25 U.S  Attorney’s Offices have CHIP units, usually comprised of 2 or more  attorneys (a few units have as many as 8 attorneys), who focus solely on  prosecuting computer hacking or IP crimes. IP crimes prosecuted by the  U.S. Attorney’s Office are not limited to CHIP units, but may be prosecuted  as part of a larger case, such as one involving organized crime. CCIPS,  located in DOJ headquarters, is responsible for supporting IP prosecutions  by U.S. Attorney’s Offices, as well as prosecuting their own cases. CCIPS is  also responsible for developing DOJ’s overall IP enforcement strategy and  coordinating among U.S. and foreign law enforcement officials on  domestic and international cases of IP theft.
section_title: Determining the Total Resources Allocated to IP- Related Enforcement Is Challenging
paragraphs: Determining the total resources that agencies have allocated to IP  enforcement is challenging because agencies have few staff exclusively  dedicated to IP enforcement, and only the agencies that conduct criminal  investigations estimated time spent on this activity. Most agencies have  some headquarters staff exclusively dedicated to IP enforcement.  However, staff in the field, where most IP enforcement activity occurs, are  generally not dedicated exclusively to IP enforcement. The information we  were able to compile shows declines in IP enforcement resources in some  agencies and fluctuating or growing resource allocations to IP  enforcement in others. Agencies’ ability to allocate staff to IP enforcement  is affected by not only the priority they assign to this function but also  their overall resource situation. Some agencies have faced resource  challenges in recent years.
Private sector representatives we interviewed across various sectors  expressed concern about the federal government’s ability to carry out IP  enforcement due, in part, to a lack of resources. While several companies  said that federal IP enforcement efforts have increased, 14, or nearly half,  of the representatives we contacted said there is a shortage of resources to  carry out IP enforcement. Appendix III provides further detail on private  sector views.
Information on each agency’s resources for IP-related enforcement are  detailed below.
section_title: CBP - Seizures, Penalties, and Exclusions
paragraphs: Various types of CBP staff play a role in IP enforcement. The only staff  that are dedicated exclusively to IP enforcement are international trade  specialists, attorneys, and paralegals assigned to the Office of  International Trade, and their numbers have fluctuated over time.  International Trade Specialists are responsible for performing nationwide  targeting for all CBP ports of incoming shipments suspected of carrying  IP-infringing goods and for analyzing IP seizure data. The number of  international trade specialists remained relatively flat from fiscal year 2003  through 2006, at about 11, before increasing to 17 in 2007. However, the  number of these specialists that were performing targeting in 2003 through  2006 actually declined. Attorneys are responsible for advising ports on  how to carry out CBP’s IP enforcement authorities and have sole  responsibility for developing exclusion order enforcement guidance, a  highly complex and labor intensive task. The number of attorneys devoted  to IP enforcement declined from 11 in 2003 to 9 in 2006 and remains at that  level. Other CBP staff perform IP enforcement activities, but are not  exclusively dedicated to it; CBP does not track the amount of time these  staff spend on IP enforcement. In addition, within the Office of  International Trade, CBP auditors perform targeted audits on selected  companies to assess their internal controls for preventing the importation  of IP-infringing goods. CBP does track hours spent on IP audits. As of  December 2007, CBP reported that slight over 14 “man years” have been  charged to IP audits since fiscal year 2005, when such audits were  initiated.
CBP staff that carry out the agency’s IP enforcement activities operate in  an environment that is plagued by staffing challenges, including staffing  shortages, difficulty hiring and retaining staff, and fatigue among its  workforce. For example, in November 2007, we reported that CBP  estimates it may need several thousand more CBP officers to operate its  ports of entry. In April 2007, we also reported that staff resources at CBP  for customs revenue functions have declined since the formation of DHS.
section_title: ICE, FBI, and FDA - Criminal Investigations
paragraphs: Among the agencies that conduct criminal investigations, only ICE has  staff dedicated exclusively to IP enforcement. These include ICE staff  assigned to the National Intellectual Property Rights Coordination Center  and a commercial fraud team in one of its field offices that focuses solely  on IP enforcement. As discussed later in this report, the number of ICE  staff assigned to the center declined from 15 in 2004 to 8 in 2007. Neither  FBI nor FDA have any staff dedicated exclusively to IP enforcement. A  senior FBI Cyber Division official said the size of FBI’s IP enforcement  effort is small relative to other FBI efforts and has limited resources.
However, ICE, FBI, and FDA all track the amount of time that their  investigators spend on IP-related investigations (see fig. 2). By converting  ICE and FDA investigative hours to full-time-equivalent (FTE) positions,  and using a similar measure (average on board) for FBI, we determined  that ICE spent an average of 154 FTEs on IP enforcement during 2001  through 2006, while FBI averaged 53 agents on board for IP enforcement,  and FDA spent an average of 16 FTEs. ICE investigative resources spent  on IP enforcement increased from 2001 to 2003 before falling off, while the  estimated number of investigator FTEs spent on IP cases at FBI and FDA  experienced little change over the 6-year period.
DOJ dedicates staff to IP enforcement in headquarters and within its U.S.  Attorney’s Offices. The number of staff dedicated to IP enforcement has  grown in recent years. For example, DOJ’s CHIP units, first created in  February 2000, grew from 13 units as of 2002 to 25 units as of 2007. Most of  the CHIP units have approximately two or more attorneys who focus on  prosecuting IP and high-technology crimes, with as many as eight in at  least one of the units. As the number of units has grown, so has the  number of attorneys assigned to working IP cases. As of July 2007, DOJ  had 101 Assistant U.S. Attorneys assigned to CHIP units. Another 122  Assistant U.S. Attorneys have been specially trained to prosecute  computer crime and IP offenses, with at least one such CHIP prosecutor  located in every U.S. Attorney’s Office. DOJ began tracking the time  attorneys spend on IP enforcement in May 2006, but we did not collect this  data. In addition, according to DOJ, it had 14 attorneys working on IP  enforcement in its CCIPS. Despite having these dedicated and trained  staff, however, officials from the U.S. Attorney’s Offices we visited noted  that, over the past few years, their offices have experienced high turnover  and have been generally understaffed, with vacant positions left unfilled.
section_title: Agency Enforcement Roles and Actions Are Often Interdependent
paragraphs: Given the interdependent nature of federal IP enforcement and the central  role played by the field offices, the emphasis placed on IP enforcement at  one location can affect the IP enforcement efforts of others. For example,  investigative agency officials at some locations we visited said that their  decisions about beginning or continuing an IP-related investigation were  influenced by the willingness of the local U.S. Attorney’s Office to  prosecute the case. Some field office officials we interviewed stated that  local U.S. Attorney’s Offices set minimum value thresholds for taking IP  cases, in part because the U.S. Attorney’s Offices also have limited  resources. However, officials at the U.S. Attorney’s Offices we visited said  that they did not have specific thresholds for IP prosecutions, particularly  when it comes to public health and safety, and that they evaluate cases on  their individual merits. Similarly, the degree to which an ICE field office  can accept and work on IP enforcement referrals from CBP may depend  on the field office’s other priorities, such as money laundering or  smuggling enforcement. Officials at most of the agencies noted other  factors that influence their IP-related enforcement decisions, including the  number or value of items seized, the health or safety impacts of the crime,  and the organizational structure of the entities involved.
section_title: IP Enforcement Generally Increased, but Agencies Have Not Taken Key Steps to Assess Enforcement Efforts
paragraphs: Federal IP enforcement activity generally increased from fiscal year 2001  through 2006; however, most agencies have not taken key steps to assess  their achievements. Specifically, most agencies have not: (1) conducted  systematic analyses of their IP enforcement data to inform management  and resource allocation decisions, (2) clearly identified which of their  efforts relate to a key IP enforcement area—IP crimes that affect public  health and safety—nor collected data to track these efforts, and (3)  established performance measures or targets to assess their achievements  and report to Congress and others.
subsections: section_title: IP Enforcement Statistics Show an Increase in Activity
paragraphs: Our review of agency statistics for fiscal years 2001 through 2006 indicated  that IP enforcement actions generally increased over the period, with  some fluctuations in activity. The number of CBP seizure actions and the  value of such seizures has increased significantly. Investigative agencies’  enforcement outcomes—arrests, indictments, and convictions—also  increased during the time period. The number of DOJ prosecutions  hovered around 150 cases per year during fiscal years 2001 to 2005 before  increasing to about 200 cases in fiscal year 2006, with the number of  defendants charged with IP crimes fluctuating.
subsections: section_title: CBP Seizure Activity Has Grown, but Penalty Collections Remain Low
paragraphs: CBP’s primary IP enforcement efforts involve seizing IP-infringing goods  that individuals attempt to import through U.S. ports of entry. In April  2007, we reported that the total number of CBP’s seizure actions has  grown since fiscal year 2001, nearly doubling from fiscal years 2005 to  2006; however, most of these actions involved numerous small-value  seizures made from air-based modes of transport while significantly fewer  seizure actions have been made from sea- or land-based modes of  transport. We reported in 2007 that CBP officials said they believed the  trend reflects growing Internet sales and the ability of manufactures to  directly ship their merchandise to consumers through mail and express  consignment. At that time, some CBP officials stated that this trend may  reflect a shift in smuggling techniques toward the use of multiple small  packages rather than large shipments in cargo containers, possibly to  reduce the chance of detection. See figure 3 for trends in the number of  CBP seizure actions and estimated domestic values.
After CBP seizes the counterfeit goods, it may also assess penalties that  result in monetary fines imposed against the violator. CBP officials  reported that processing penalty cases is resource-intensive, but noted  that few penalties are collected and such enforcement has little deterrent  effect. We found that less than 1 percent of the penalty amounts assessed  for IP violations in each fiscal year were collected. See table 1 for IP- related penalties assessed and collected in each fiscal year from 2001  through 2006. Various factors contribute to CBP’s limited collection rates  on IP penalties, including petitions for mitigation or dismissal by the  violator, dismissal due to criminal prosecutions, and the nature of  counterfeit importation.
CBP does not maintain statistics on all of its exclusion order activities, but  available information indicates that its exclusion activities have declined,  in part due to procedural weaknesses. While the U.S. International Trade  Commission issues relatively few exclusion orders each year, these orders  can affect large volumes of trade, according to CBP officials. As of July  2007, 66 exclusion orders were in effect, according to CBP. CBP takes two  basic steps to enforce these orders: (1) CBP posts written guidance, called  Trade Alerts, to its intranet to inform ports about new orders, and (2) it  creates electronic targeting instructions that alert ports about incoming  shipments that need to be examined for potential infringing goods related  to the order. When its exams identify goods that should be excluded, CBP  does not allow the goods to enter the country and issues a notice of  exclusion to the importer. According to CBP officials, CBP does not  maintain data on the number of exclusion notices, either in total or by  order, nor does it alert the rights holder of the exclusion. However, CBP  does maintain data on the total number of exclusion order exams it  conducts and the number of times these exams reveal any IP  discrepancies. As shown in figure 4, the number of exclusion order  exams have declined since fiscal year 2002, and a very small number of  discrepancies have been found. CBP explained that the decrease in  exams from fiscal years 2002 to 2004 was due to the termination of  targeting for one exclusion order that had been generating most of the  exams.
CBP’s limited and declining enforcement of exclusion orders has been of  concern to certain private sector representatives, notably the companies  that have sought such orders or the attorneys that represent them.  Representatives said companies spend millions of dollars in legal fees to  win a U.S. International Trade Commission ruling for their products, but  that the effectiveness of the ruling is weakened by poor enforcement at  CBP. Private sector representatives also stated that CBP’s enforcement of  the orders is not transparent because CBP does not notify companies of  any exclusions that have occurred, impeding their ability to follow through  on the matter. This differs from CBP’s practices when it detains or seizes  IP-infringing goods: CBP notifies both the importer and IP rights owner of  such detentions or seizures. CBP officials said the agency does not have a  regulation to permit the notification of exclusions to affected rights  owners, and they did not know whether CBP had legal authority under the  relevant statute to make such notifications.
We found several procedural weaknesses in CBP’s exclusion order  enforcement, including a lack of intranet Trade Alerts for about half of the  orders currently in force, delays in posting Trade Alerts to its intranet,  minimal use of electronic targeting, and no procedures for updating Trade  Alerts when the status of exclusion orders changes or expires. The effect  of these weaknesses has been to limit or delay the degree to which  exclusion orders are enforced; details are provided below.
CBP does not have Trade Alerts on its intranet for all orders currently in  effect and lacks information to develop Trade Alerts for some orders. Of  the 66 orders in effect as of July 2007, CBP had posted Trade Alerts to its  internal website for 24 of them and was developing such guidance for 5  others. CBP said it had paper records for 15 older orders that it had not yet  converted to Trade Alerts due to limited resources, but lacked records for  enforcing most of these remaining orders.
Although CBP officials said the agency is required to enforce the orders  from the date they are issued, we found that CBP’s enforcement may be  considerably delayed. According to CBP officials, this is because CBP  must review and interpret large amounts of complex information  generated by the administrative process, but only two attorneys at CBP are  presently qualified to carry out this review. We determined that it took  CBP more than 60 days to post Trade Alerts for 14 of 18 orders for which it  could provide such data. According to CBP officials, work to establish  the intranet platform for IP issues began in 2003, but CBP did not have the  capability to actually begin posting Trade Alerts to its Web site until April  of 2004. Prior to that date, text-only Alerts were published to an internal  electronic bulletin board that housed them for 90-day renewable periods.
CBP develops targeting instructions for most, but not all, of the exclusion  orders it receives. Of 10 randomly selected orders for which CBP had  posted Trade Alerts as of July 2007, we found that it had developed  targeting instructions for only 4. Also, although CBP officials said that the  agency is to enforce exclusion orders until they expire, we found that its  actual targeting instructions for an order may expire far sooner. CBP  officials said that targeting instructions that have not generated any exams  or found any IP violations after 90 days are removed from CBP’s targeting  system. CBP provided data on the number of exclusion orders for which it  had targeting instructions in place in each of fiscal years 2003 through  2006. The number of orders with targeting instructions dropped from 25 in  fiscal year 2003 to 10 in fiscal year 2006—far fewer than the number of  orders in force at that time.
CBP has no process for ensuring that its Trade Alerts are adjusted to  reflect changes in the status of exclusion orders. For example, CBP  initially provided data to indicate that it had issued Trade Alerts for 29  orders, but we determined that 5 of the Trade Alerts were for orders that  had expired or been rescinded. CBP concurred with our findings and said  it would adjust its Trade Alerts accordingly.
section_title: The Number of Investigative Agency IP Cases Have Fluctuated, but Arrests, Indictments, and Convictions for IP Crimes Have Generally Increased
paragraphs: The number of criminal IP enforcement cases opened annually by ICE,  FBI, and FDA during fiscal years 2001 through 2006 have fluctuated, but  the enforcement outcomes—arrests, indictments, and convictions—from  those cases grew during that same time period. As shown in figure 5, ICE  opened the most IP cases each year, averaging 445 cases per fiscal year,  compared to FBI’s and FDA’s average of 306 and 39 cases per fiscal year,  respectively. The number of IP cases that ICE and FBI opened during the  period fluctuated, with the number of ICE cases lower in 2006 than in 2001  and the number of FBI cases in 2006 about the same as their 2001 level. In  general, the number of FDA cases grew during this time period.
Despite the fluctuations in numbers of IP cases by the two major  investigative agencies, the number of arrests, indictments, and convictions  stemming from ICE and FBI investigations of IP-related crimes generally  increased for fiscal years 2001 through 2006 (see fig. 6), as they did for  FDA. For some enforcement actions, the agencies’ investigative activity  showed fairly steady growth. For other actions, investigative activity  peaked in fiscal year 2004, but had levels in 2006 that were still well above  their 2001 levels.
As figure 6 illustrates, each agency’s enforcement activity generally  increased from fiscal year 2001 to 2006; however, activity levels within and  across agencies varied over the 6-year period.
section_title: DOJ’s IP Enforcement Has Generally Increased
paragraphs: DOJ tracks its IP enforcement activity in terms of the number of cases  filed, the number of defendants in cases filed, and the number of  defendants convicted. While the number of IP cases filed by DOJ  fluctuated around 150 from fiscal years 2001 through 2005, the number of  cases grew to 204 in fiscal year 2006 (see fig. 7).
The results of IP-related cases that DOJ filed during fiscal years 2001  through 2006 varied. Table 2 shows that for fiscal years 2001 through 2006,  DOJ received referrals for 3,548 defendants in IP matters from the  investigative agencies and filed charges against a total of 1,523 defendants.  During this period, a total of 891 defendants were convicted and 373  received prison sentences. According to DOJ officials, the data for the  number of IP-related defendants referred to federal prosecutors from  investigative agencies should be considered independent of the data for  defendants charged with IP violations. Additionally, the difference  between the number of referred IP defendants and the number of  defendants charged with IP offenses in a given year, or period of years,  may be explained in part by the fact that IP suspects may never be charged  with IP offenses because they are instead charged with crimes carrying  higher statutory maximum sentences, or because the IP charges are  dismissed pursuant to plea agreements to more serious charges. We  found that over the 6-year period of our review, about 17 percent of the  total number of defendants received prison sentences of more than 3  years, while about 45 percent were sentenced to imprisonment of 12  months or less.
section_title: Agencies Have Not Taken Steps to Assess IP Law Enforcement Efforts
paragraphs: Agencies have not taken key steps to assess IP enforcement achievements.  Specifically, most agencies have not (1) conducted systematic analysis of  their enforcement activity, (2) clearly identified which of their efforts  relate to a key IP enforcement area—IP crimes that affect public health  and safety—nor collected data to track these efforts, or (3) set  performance measures or targets for carrying out IP enforcement. These  steps are an important part of agencies’ ability to effectively plan and  assess their performance and report to Congress and others.
Although agencies’ statistics show general increases in the level of  seizures, investigations, and prosecutions, they have not taken steps to  understand the drivers behind these increases in ways that could better  inform management and resource allocation decisions. For example, while  all the agencies reported using IP enforcement statistics to compare  outputs from one year to the next, our discussions with agency officials  revealed that little has been done to systematically examine enforcement  statistics. Such analysis might include looking at field offices or regions  with higher or lower levels of activity to identify effective enforcement  practices and inform resource allocation decisions. It might also include  identifying the types of IP crimes that agency staff are enforcing to  understand criminal activity and help focus enforcement efforts.
Agencies are already collecting some data that could be used to examine  enforcement efforts more systematically. In April 2007, we reported that  CBP has not analyzed variations in its IP enforcement activity by port or  conducted analysis of ports’ relative enforcement outcomes. By analyzing  available CBP data, we found pockets of enforcement activity in some  areas. For example, a majority of CBP’s seizure actions took place in a  limited number of locations, with nearly three-fourths of aggregate seizure  value accounted for by only 10 of more than 300 ports. These are a mix of  ports, including a few of the nation’s largest and some that are smaller. In  this report, we made recommendations to CBP to improve upon and better  understand its IP enforcement activity through better analysis. We  performed a similar analysis for DOJ using data on the number of  defendants charged and number of cases filed by U.S. Attorney’s Offices  and also found concentrations of activity for prosecution activity. For  example, about 50 percent of IP-related cases were filed by around   10 percent of U.S. Attorney’s Offices during fiscal years 2001 through 2006.  The same results were true for the number of defendants charged with IP  crimes.
We also compared the U.S. Attorney’s Offices with the highest IP  enforcement activity with the locations where CHIP units were created as  of fiscal year 2006. Of the top 10 offices, ranked by number of IP cases  filed in 2006, 7 had CHIP units, and the 2 most active offices had the  largest CHIP units, measured by the number of attorneys working in the  unit. This analysis suggests that the number of resources in a particular  field office contributes to higher levels of activity; however, according to  DOJ, other factors, such as crime level, can also affect activity levels. Our  analyses illustrate the types of analysis that agencies can perform using  their data, and insights they can obtain, to better inform management and  resource allocation decisions. DOJ said that it performed similar analysis  before deciding where to place CHIP units, but did not provide evidence  that it conducts such analysis on a routine basis.
While all the agencies collected statistics to report broadly on their IP- related enforcement activities, most of the agencies have not clearly  identified which IP enforcement actions relate to public health and safety  and do not have data to track their efforts in this area, despite making this  a priority enforcement area. By virtue of its mission, FDA’s data on IP- related enforcement specifically reflects its efforts to address IP violations  that affect public health and safety. CBP has recently begun to monitor IP  seizures related to public health and safety. In January 2008, it released  seizure data for fiscal year 2007 that for the first time identified seizures in  product categories that may involve public health and safety, e.g.,  pharmaceutical, electrical articles, and sunglasses. CBP officials told us  that defining public health and safety seizures is difficult because not all  seizures in a given category pose public health and safety risks, and such  risks can be found across a broad range of products.
The other agencies lack data for identifying IP enforcement actions related  to public health and safety. For example, ICE records IP enforcement  under a general data field that applies to all types of IP cases. FBI and DOJ  have some sub-categories for the types of IP investigations and  prosecutions they pursue, but none is specific to public health and safety.  Without specific data and definitions for IP-related enforcement efforts  that impact public health and safety, agencies are unable to effectively  track outcomes, inform management and resource allocation decisions,  and report to Congress on an area of significant public importance.
Agencies have also taken few steps to clearly identify performance  measures specifically for their efforts related to IP-related enforcement  activities or establish performance targets to track their progress towards  these efforts.  We reviewed agencies’ strategic plans and, while none had  specific goals on IP enforcement, the CBP and DOJ plans listed IP  enforcement as one issue to be addressed as part of working toward  broader enforcement goals. We also examined agencies’ public and  internal planning documents or memos for IP enforcement and found that  some had goals and objectives, but contained few performance measures  or targets.  Moreover, most of these are internal agency documents that  are not available to the public. Neither ICE nor FDA have any additional  planning documents for IP enforcement.
We asked agencies how they monitor their performance of IP enforcement  activities. Most said they regarded their increasing trends in aggregate IP  statistics (or outputs) as indicative of their progress. However, without  performance measures related to these statistics, it is not clear how these  statistics should be assessed because it is not clear what the agencies  sought to achieve. We recognize that establishing measures and setting  specific targets in the law enforcement area can be challenging. It is  important that agencies carry out law enforcement actions that are based  on merit and avoid the appearance that they strive to achieve certain  numerical quotas, regardless of case quality. By definition, performance  measures are a particular value or characteristic used to quantify a  program’s outputs – which describe the products and services delivered  over a period of time – or outcomes – which describe the intended result  of carrying out the program. A performance target is a quantifiable  characteristic that establishes a goal for each measure; agencies can  determine the program’s progress, in part, by comparing the program’s  measures against targets.
The Government Performance and Results Act of 1993 incorporated  performance measures as one of its most important features, and the  establishment and review of performance measures are a key element of  the standards for internal control within the federal government. We  believe that measures and targets remain important components of  measuring agency performance and enhancing accountability, particularly  setting outcome-based measures that provide insight into the effectiveness  of agencies’ efforts, not just levels of activity. More refined performance  measurements that include outcome measures would allow agencies to  better track their IP enforcement performance against their goals and give  managers crucial information on which to base their organizational and  management decisions. Performance assessment is also important in  reporting progress to others, such as the IP Coordinator and NIPLECC.
Doing so could help NIPLECC address its strategic planning weaknesses  that we previously identified in our November 2006 report.
section_title: The National Intellectual Property Rights Coordination Center Has Not Achieved Its Mission, and Staff Levels Have Decreased
paragraphs: The National Intellectual Property Rights Coordination Center, an  interagency mechanism created by the executive branch to improve  federal IP enforcement and coordinate investigative efforts between ICE  and FBI, has not achieved its mission or maintained the staffing levels set  for it upon its creation. The center—intended to collect, analyze, and  disseminate IP-related complaints from the private sector to ICE and FBI  field offices for investigation—has suffered from a slow start, a lack of  common understanding about its purpose and agencies’ roles, and limited  private sector complaint information. As a result, the center has gradually  shifted its focus toward educating the private sector about federal IP  enforcement efforts. Congressional appropriators expressed support for  the center’s original concept through various conference reports, which,  over time, directed participating agencies to allocate appropriated funds to  staff and operate the center. However, staffing levels have declined and  the FBI no longer participates in the center. Plans are underway to move  the center to a new location in early 2008, and according to officials from  the other four key agencies, they have met with ICE to discuss what role  their agencies might play in the center in the future.
subsections: section_title: Created to Improve and Coordinate IP Enforcement, the Center Focuses Primarily on Private Sector Outreach
paragraphs: The National Intellectual Property Rights Coordination Center is one of  several interagency mechanisms for coordinating federal IP enforcement  efforts. Unlike NIPLECC, which was established in law by Congress in  1999, the idea for creating the center arose from the work of the National  Security Council’s Special Coordination Group on Intellectual Property  Rights and Trade Related Crime, co-chaired by the FBI and legacy  Customs. This group was formed in order to implement Presidential  Decision Directive 42, issued in 1995, concerning international crime. In  1999, a consensus of the group members resulted in a multi-agency plan to  improve the U.S. government’s efforts in IP enforcement, and the center  was created. According to ICE officials at the center, the center was  directed by legacy Customs and included staff from Customs and FBI.  After the formation of DHS, ICE took over legacy Customs’ role in  directing the center and providing most of the DHS staff that were  assigned to the center.
While the center and NIPLECC were both created to improve coordination  among law enforcement agencies, the concept for the center gave it a  greater operational focus than NIPLECC. The executive branch intended  that the center would act as a hub for the collection, analytical support,  and dissemination to investigative agencies of IP-related complaints from  the private sector, including copyright infringement, trademark  infringement, and theft of trade secrets. It envisioned that the center  would coordinate and direct the flow of criminal referral reports on IP  violations to the participating agencies’ investigative resources in  headquarters and the field. In carrying out these roles, the center was  expected to help integrate domestic and international law enforcement  intelligence, consult regularly with the private sector, and generally act as  a resource for IP complaints.
Congressional support for the center’s creation and role was noted  through directives in various conference reports related to appropriations  laws in fiscal years 2001 through 2004. These reports indicate that  Congress also expected the center to be a dedicated effort to improve  intelligence and analysis related to IP rights violations and gather IP  enforcement information from other federal and state law enforcement  agencies to augment investigations.
Like NIPLECC, the center has had difficulty defining its purpose and  carrying out its law enforcement coordination mission. According to ICE,  FBI, and DOJ officials and our analysis, the center has not achieved its  original mission for several reasons:    The center got off to a slow start with limited operations in fiscal year  2000, and it took several years for it to become fully operational. For  example, in 2004, we reported that many center staff were reassigned after  the events of September 11, 2001, according to an FBI official. In  addition, a change in leadership after the formation of DHS and the  relocation of the center to new physical space in 2006 further impacted the  continuity of the center’s operations.
The flow of complaint information from the private sector to the center  never materialized sufficiently to make the concept work, according to  ICE and FBI officials. We reported in 2004 that the center was not widely  used by industry, and this situation has persisted. For example, few of the  private sector representatives that we contacted described working  through the center to address their IP complaints.
Participating agencies never reached agreement on how the center would  operate and what their respective roles would be. FBI provided us a copy  of a draft memorandum of understanding that it said it presented to ICE in  fiscal years 2003, 2004, and 2005, to clarify operating procedures and  agency roles. FBI also provided a copy of a 2004 letter from ICE  acknowledging receipt of the draft memorandum and associated  documents and indicating its intent to meet with FBI to discuss the matter.  However, FBI officials said that neither ICE nor DHS followed up with FBI  on this issue. ICE officials acknowledged having seen the memorandum of  understanding in draft form but had no record or recollection of any  discussions being held with FBI to discuss the memorandum.
Over time and in the absence of complaint information, the center began  focusing on educating the private sector about federal IP enforcement  agencies, approaches, and contacts, according to ICE officials at the  center. Center staff participate in conferences, training programs, and  trade shows around the country in which they disseminate information  about federal IP enforcement to the private sector. For example, center  staff participated in 60 outreach and training events in fiscal year 2006 and  95 in fiscal year 2007. In addition, in 2007, ICE officials said the center  began scheduling training sessions in selected cities around the country in  which they bring together appropriate federal, state, and local law  enforcement agencies and private sector representatives. The purpose of  the training is to explain the region’s IP enforcement structure and  strengthen involvement of the participants.
section_title: Despite Congressional Expectations, the Center’s Staffing Levels Have Declined
paragraphs: Through various conference reports, congressional appropriators  supported the creation and staffing of the center by FBI, legacy Customs,  and ICE, but agencies’ staffing levels at the center have declined.  According to ICE officials, the center’s original concept envisioned 24  staff—16 from Customs and 8 from FBI. They said staff were to include a  Director, investigative agents, intelligence analysts, and administrative  support. The types of staff envisioned for the center further distinguish it  as an operational entity compared to NIPLECC, which is not designed to  carry out law enforcement. After the formation of DHS, the 16 Customs  positions were transferred to DHS and taken over by as many as 16 ICE  staff and 2 CBP staff. However, according to ICE and FBI officials, each  agency’s staffing allotment has only periodically met the envisioned levels,  and total staff currently at the center are about one-third of the level  originally envisioned.
Conference reports for fiscal years 2001 through 2004 appropriations bills,  at various times, indicated a desire for FBI, legacy Customs, and ICE to  allocate funding for staffing and/or operations of the center. For example,  in fiscal year 2001, the conference report directed FBI to allocate $612,000  to provide eight positions to the center. In fiscal years 2002, the  conference report directed legacy Customs to allocate $5 million to  support the hiring of agents dedicated to IP enforcement and to support  and enhance the operation of the center. In fiscal year 2003, the  conference report directed legacy Customs to allocate $5 million to  continue center operations and $1.4 million to expand the center and its  staffing. Congressional conferees encouraged Customs to use a portion of  the funds to establish the clearinghouse for referrals. In fiscal year 2004,  the conference report directed ICE to allocate $6.4 million to the center.
We asked agencies how they responded to the conference report  directives, with agencies responding as follows:    FBI officials told us that the funding enabled them to authorize and begin  filling positions noted in the congressional conference reports. FBI filled  or nearly filled all eight positions during fiscal years 2001 through 2005. In  fiscal year 2006, FBI continued to fill six of the positions, but removed its  computers from the center due to security concerns and gradually had its  staff spend less time working out of the center. Since fiscal year 2007,  due to resource constraints, none of the FBI positions has been filled, and  the FBI no longer participates in the center.
CBP officials said that their records showed that in fiscal year 2002 legacy  Customs placed seven staff (including two agents and four intelligence  research specialists) in the center and assigned additional agents and  intelligence research specialists to certain field offices and overseas  locations to carry out IP enforcement. In fiscal year 2003, Customs  officials told us they placed more agents and intelligence analysts in  certain field locations and headquarters, but could not provide us with  specific numbers. According to the Director of the center, following the  formation of DHS, the two CBP positions were filled in 2004 but have been  vacant for several years.
ICE provided data indicating that, since fiscal year 2004, it spent about   $3 million on investigative activities, set aside about $1.9 million for future  construction costs for the center, spent about $1.2 million on direct salary  costs, and spent the remainder on operating costs for the center. ICE  staffing levels at the center have declined from 15 in 2004 to 8 in 2007.
section_title: ICE Views Center’s Relocation as an Opportunity to Revisit Center’s Purpose and Agency Roles
paragraphs: In early 2008, ICE plans to move the center to a new location that is being  configured specifically for the center and some additional functions.  According to ICE officials, the new center will continue to focus on private  sector outreach. The role that the center will play in coordinating  referrals and investigations among the IP enforcement agencies, however,  remains unclear. ICE officials said they view the relocation as an  opportunity to return the center to its original concept and purpose.  NIPLECC’s IP Coordinator said that as an entity staffed by, and located in,  a law enforcement agency, the center can play a role in facilitating law  enforcement coordination at an operational level that NIPLECC cannot.  However, the IP Coordinator agreed that there are mixed views among IP  enforcement agencies about the usefulness of the center.
In preparation for the move, ICE officials said they had met with FBI, DOJ,  CBP, and FDA to offer them space in the center and ask them to  permanently assign staff there; however, agencies’ reactions are mixed.  FDA plans to staff one special agent at the center initially and will send  additional agents later if its workload at the center justifies additional  staff. FDA officials said that the agency decided to staff an agent at the  center despite its limited resources because counterfeit drugs pose a  significant threat to the public health and are a high priority to FDA.  According to an official in FDA’s Office of Criminal Investigations, a  significant portion of FDA’s counterfeit drug investigations are conducted  jointly with ICE, and the center may facilitate a coordinated law  enforcement approach.
According to DOJ and FBI officials, staff will not be placed at the center  unless there is a more operational focus in addition to the training and  outreach currently provided. More specifically, DOJ and FBI would like  there to be some initial analysis and investigation after an industry referral  is received at the center before information is passed on to field  investigative agents. Further, even if FBI sees the center taking a more  operational focus, the agency would have to request additional staff  resources to be able to assign personnel, since currently none is available.  CBP officials said they do not plan to allocate any staff to the center.
According to ICE and FDA officials, no discussions have taken place to  outline the purpose of the new center or define how agencies would  coordinate their enforcement activities at the center.
section_title: Conclusions
paragraphs: Federal IP enforcement agencies confront growing challenges in  protecting the United States against counterfeit and pirated goods. IP  crimes appear to be on the rise, and the key law enforcement agencies and  FDA need to work efficiently and effectively to contend with this trend.  Most federal IP enforcement activity has increased in recent years.  However, because IP enforcement is generally not a top agency priority,  few resources are dedicated solely to this task, and agencies may spend  fewer resources on IP enforcement than on higher priority issues. Despite  the general increases in IP enforcement activity, agencies have taken little  initiative to improve their data or evaluate their enforcement activity in  ways that would enable them to identify and track certain trends or  enforcement outcomes, like regional variations in enforcement activity  and types of IP-infringing goods commonly enforced. Performing this type  of analysis could help the agencies make further improvements in their IP  enforcement activity by making more effective management decisions and  resource allocations. At the same time, setting performance measures and  targets for IP enforcement activities could help the agencies better assess  their progress toward their goals. Finally, collecting better data, analyzing  them, and reporting on progress toward goals could help make the key IP  enforcement agencies more accountable to the public and Congress,  particularly regarding their efforts to address IP-infringement that affects  public health and safety. The need for such improvements among IP  enforcement agencies mirrors weaknesses we found previously with  NIPLECC, in which the lack of clarity over performance measures,  resource requirements, and oversight responsibilities limited NIPLECC’s  ability to prioritize, guide, implement, and monitor the combined efforts of  multiple agencies to protect and enforce IP rights.
One area where IP enforcement has not increased is CBP’s enforcement of  exclusion orders. U.S. companies spend millions of dollars to argue their  allegations of IP infringement before the U.S. International Trade  Commission, but the Commission relies on CBP to enforce its decisions.  CBP has allocated few resources to carry out its role in this complex area,  lacks data to track its enforcement of exclusion orders, and has not given  sufficient attention to addressing the procedural weaknesses that we  identify. Given the potential for these orders to affect large volumes of  trade, CBP has a responsibility to improve its enforcement of exclusion  orders.
As agencies consider ways to further improve federal IP enforcement, the  relocation of the National Intellectual Property Rights Coordination  Center presents an opportunity for NIPLECC and the key IP enforcement  agencies to reassess the need for law enforcement coordination in this  area and the best way to achieve it. As part of this discussion, NIPLECC  and the agencies need to examine the center’s mission, what outcomes  they expect from the center, and what role key agencies should play, if  any, in the center’s future. Given Congress’ sustained interest in improving  federal IP enforcement and its past support for the center, providing this  information to Congress could help better inform Congress about what  contributions to IP enforcement it should expect from the center.
section_title: Recommendations for Executive Action
paragraphs: To better inform management and resource allocation decisions and  report on agency achievements, we recommend that the Attorney General  and the Secretaries of Homeland Security and Health and Human Services  direct their agencies to take the following four actions:  For ICE, FBI, FDA, and DOJ:    systematically analyze enforcement statistics to better understand  variations in IP-related enforcement activity.   continue to take steps to better identify IP seizures that pose a risk to the  public health and safety of the American people, and collect and report  this data throughout the agency and to Congress.
For ICE, FBI, and DOJ:  take steps to better identify enforcement actions against IP-infringing  goods that pose a risk to the public health and safety of the American  people, and collect and report this data throughout each agency and to  Congress.
For CBP, ICE, FBI, and DOJ:    establish performance measures and targets for IP-related enforcement  activity and report such measures, targets, and actual performance to  NIPLECC and Congress.
To better inform Congress and affected rights holders regarding its  enforcement of exclusion orders and address certain procedural  weaknesses, we recommend that the Secretary of Homeland Security  direct the Commissioner of CBP to take the following three actions:  identify factors currently limiting their enforcement capabilities and  develop a strategy for addressing those limitations along with a timeline  for implementing the strategy;   begin collecting data on the number of exclusions, in total and per    examine CBP’s ability to develop regulations to allow notification of  exclusions to affected rights holders, and if authorized, develop such  regulations.
To clarify the mission and structure of the National Intellectual Property  Rights Coordination Center, we recommend that the Attorney General and  the Secretary of Homeland Security, in consultation with NIPLECC, direct  their IP enforcement agencies to take the following three actions:  reassess the National Intellectual Property Rights Coordination Center’s  mission and how its future performance will be assessed;   define agencies’ role in the center and the number and types of resources  needed to operate the center; and report to Congress on the center’s redefined purpose, operations, required  resources, and progress within 1 year of the center’s relocation.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DHS, DOJ, and HHS for their review  and comment. CBP and ICE provided comments through DHS. DHS, CBP,  and ICE concurred with our recommendations. DOJ did not indicate  whether it agreed or disagreed with our recommendations. HHS  commented that it disagreed with our recommendation that FDA develop  performance measures and targets for IP enforcement. In light of the  agency’s public health and safety mission, we determined that it was  inappropriate to require FDA to develop law enforcement-related  measures and targets, and no longer recommend this. However, given the  importance of understanding the nature of IP violations that affect public  health and safety, we now recommend instead that FDA more  systematically analyze its IP enforcement statistics (see p. 43). We believe  this is a more appropriate recommendation because FDA said that it  already monitors its IP enforcement criminal investigations to discern  trends. In response to other comments the agencies made, we also  modified two recommendations to give the agencies more flexibility in  identifying which of their IP enforcement actions relate to public health  and safety. Instead of recommending that the agencies create categories  and definitions of such actions, as we did in the draft report, we  recommend that they take steps to better identify these actions   (see p. 43). A summary of each agency’s comments and our evaluation  follows.
CBP commented that the report inaccurately states that it lacks data and  definitions for IP-related enforcement efforts that impact public health and  safety, saying it reported this data in its fiscal year 2007 seizure statistics.  In response, we modified the final report to note that CBP began reporting  on IP seizures related to public health and safety for the first time in  January 2008 (see p. 33). CBP also commented that the report’s finding  that it lacks performance measures for IP enforcement is not completely  accurate and cited its “National IPR Trade Strategy.” We added  information to the final report about this document (see p. 34), but  continue to believe that CBP needs to incorporate IP enforcement  measures and targets into its agency-wide strategic plan, which it has said  it intends to do. Finally, CBP repeated comments made about our April  2007 report regarding an analysis that we proposed it could undertake to  better understand its enforcement outcomes. We disagreed with CBP’s  comments at that time and continue to believe that CBP, and the other  agencies, can make better use of existing data to understand their IP  enforcement efforts and outcomes. DHS’s written comments and our  detailed response appear in appendix IV.
DOJ made several comments about ways in which it believes the report  understates its IP enforcement achievements. For example, DOJ cited  percent increases between select years for certain indicators to  demonstrate its increased enforcement results. However, the report takes  a more systematic approach to evaluating overall federal IP enforcement  efforts by examining multiple indicators at multiple agencies over a 6-year  period. We believe that the report’s approach and assessment is fair and  valid. DOJ also commented we did not sufficiently acknowledge increases  in training and resource allocations for IP enforcement, particularly as  relates to its CHIP units. In fact, as was true for the draft report, the final  report discusses growth in CHIP units and numbers of IP-trained attorneys  (see p. 20). Finally, DOJ commented that the report inaccurately  characterizes its efforts to analyze IP enforcement statistics by district. We  modified the report to add information that DOJ analyzed IP enforcement  statistics when deciding where to place CHIP units; however, DOJ never  provided evidence that it conducts such analysis on a routine basis   (see p. 33). We continue to believe that systematically conducting such  analysis can help DOJ determine whether its allocation of resources is  producing the kind of increases in IP enforcement outcomes that it  desired.
DOJ commented that the report inaccurately describes its efforts to  establish performance measures or goals to assess its IP enforcement  achievements. In response, we added information to the discussion of  performance measurement about certain DOJ documents that contain  such goals and measures, and cited again the DOJ task force reports on IP  enforcement, which had been mentioned earlier in the report (see p. 34).  However, the task force reports contain only recommendations for DOJ  action, not goals with associated performance measures. A few of these  recommendations are structured like performance goals, such as “target  large, complex organizations that commit IP crime” or “prosecute IP  offenses that endanger the public’s health or safety,” but the task force  report provides no indication of how DOJ will measure progress toward  these recommendations. DOJ commented that developing numeric or  percentage targets linked to its performance measures could create the  potential for case quotas or thresholds. We agree that setting performance  measures and targets in the law enforcement arena is difficult, and we  added information to the report to further clarify the sensitivities  associated with doing this (see p. 35). However, we continue to believe  that it is important, and possible, for DOJ to develop performance  measures and targets to help it, and others, determine whether its overall  IP enforcement efforts are achieving performance goals and focused on  the right issues, and whether its resource allocations devoted to this area  are contributing to the desired results. DOJ’s written comments and our  detailed response appear in appendix V.
HHS expressed concerns about setting performance measures and targets  that were similar to those raised by DOJ. While we no longer direct this  recommendation to FDA, we continue to believe that is it important and  possible for law enforcement agencies to set useful performance measures  and targets to guide and assess their efforts. FDA’s written comments and  our detailed response appear in appendix VI.
DHS, DOJ, and HHS also provided technical comments, which we  incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to appropriate congressional  committees and the Secretaries of the Departments of Homeland Security  and Health and Human Services; the Attorney General; the Chairman of  the U.S. International Trade Commission; and NIPLECC’s IP Coordinator.  We will also make copies available to others on request. In addition, the  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-4347 or yagerl@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VII.
section_title: Appendix I: Scope and Methodology
paragraphs: The Ranking Minority Member of the Senate Subcommittee on Oversight  of Government Management, the Federal Workforce and the District of  Columbia, Committee on Homeland Security and Governmental Affairs,  asked us to (1) examine federal agencies’ roles, priorities, and resources  devoted to intellectual property (IP) enforcement, (2) evaluate agencies’  IP-related enforcement statistics and achievements, and (3) examine the  status of the National Intellectual Property Rights Coordination Center.
Based on our previous work and background research, we determined that  the key federal law enforcement agencies carrying out IP enforcement are  Customs and Border Protection (CBP), Immigration and Customs  Enforcement (ICE), the Federal Bureau of Investigation (FBI), and the  Department of Justice (DOJ). In addition, we included the Food and Drug  Administration (FDA) due to its role in investigating counterfeit versions  of products it regulates. To describe the federal structure that carries out  IP enforcement, we met with CBP, ICE, DOJ, FBI, and FDA officials at the  agencies headquarters, and, for all agencies except FDA, met with officials  in multiple field locations. The locations we visited are not disclosed in  this report for law enforcement reasons. We also met with the  International IP Enforcement Coordinator (IP Coordinator). We reviewed  agency documents to understand policies and practices related to IP  enforcement and discussed the processes by which these agencies interact  with each other in conducting IP enforcement. We also reviewed prior  GAO reports that examined the federal IP enforcement structure, agencies’  role, and key coordinating mechanisms. To determine agencies’ IP  enforcement priorities, we examined strategic and other planning  documents, including agency memos detailing goals and objectives related  to IP enforcement. In some instances, agency documents were law  enforcement sensitive; therefore, the details have not been included in the  report and only information that was discussed openly in interviews or in  public documents and forums has been used.
To determine resources dedicated to IP enforcement, we spoke with  agency officials, obtained data on the number of staff dedicated to IP  enforcement, and analyzed data, where available, on staff time spent on IP  enforcement. In particular, we obtained data on (1) the number of criminal  investigative case hours that ICE and FDA field offices recorded under  codes used to track IP enforcement; and (2) the average number of agents  on board that were working IP criminal cases, as reported by FBI field  offices. We obtained data covering fiscal years 2001 through 2006, except  for FDA investigative case hours for counterfeit products, which the  agency has only been tracking since fiscal year 2003. We reviewed these  data for obvious errors and consistency with publicly reported data, where  possible. When we found discrepancies, we brought them to the attention  of relevant agency officials and worked with them to correct the  discrepancies before conducting our analyses. On the basis of these  efforts, we determined that these data were sufficiently reliable for our  purposes. To make similar comparisons across the agencies, we converted  ICE and FDA data on criminal case hours into full-time equivalents (FTE)  using information that the agencies provided and confirmed with FBI  officials that we could use FBI’s measurement as equivalent to the FTE  measurement for time spent by ICE and FDA IP investigations.
To examine agencies’ IP enforcement activity, we analyzed data from  fiscal year 2001 to fiscal year 2006 on CBP IP seizures, penalties, and  exclusion activities; the number of criminal cases opened in ICE, FBI, and  FDA’s Office of Criminal Investigation field offices that were recorded as  IP enforcement cases; ICE, FBI, and FDA arrests, indictments, and  convictions stemming from their IP investigations; and the numbers of  referrals of IP cases to DOJ from the investigative agencies, IP cases that  DOJ filed, defendants charged in those cases, defendants convicted of IP  crimes, defendants imprisoned, and sentences awarded. Information on  CBP seizures and penalties is drawn from our April 2007 report. In  addition, we obtained data from CBP on its Trade Alerts as of July 2007, as  well as the number of targeting instructions it had in place for each Trade  Alert in each of fiscal years 2003 through 2006 and the number of exams,  IP violations, and seizures it has recorded as a result of those instructions.  We discussed key law enforcement activities with ICE, FBI, FDA, and DOJ  and determined what data the agencies record and what activities they  report on internally. We then requested them to extract data from their  systems on these key activities when they were performed for IP  enforcement. For the most part, investigative agency data reflect activities  that are coded as IP enforcement, while DOJ data reflect activities in  which key IP enforcement statutes are cited. In general, the agencies said  that the data they provided reflected most, but perhaps not all, of their  activity related to IP enforcement.
In order to collect uniform data on IP enforcement activities, we worked  with each agency to develop the parameters by which we would request  data from their systems. In addition, we worked with officials at each  agency to develop a thorough understanding of the data that we received.  We reviewed the data we obtained for obvious errors and consistency with  publicly reported data, where possible. When we found discrepancies, we  brought them to the attention of relevant agency officials and worked with  them to correct the discrepancies before conducting our analyses. For  example, we determined that CBP provided information on Trade Alerts  that related to Exclusion Orders that were no longer in effect. CBP agreed  and revised the number of Trade Alerts on its Web site. Also, the data we  report on ICE’s arrests, indictments, and convictions are different from  data it has reported publicly in the IP Coordinator’s quarterly IP  enforcement updates. ICE officials said that the system from which it  obtains this data is a “live system,” meaning that data pulled from the  system on different dates may not be the same. ICE officials cited updates  to case information as one reason that data might differ over time. In  addition, the parameters that ICE advised us to use when requesting ICE’s  data on IP enforcement cases differed somewhat from the parameters that  ICE used. Finally, we found some inconsistencies with FBI’s IP  enforcement data. We discussed these discrepancies with FBI and made  changes to the data accordingly. We asked FBI officials familiar with the  agency’s IP enforcement efforts to review the final data set for accuracy.  We did not find discrepancies with FDA or DOJ data and used the most  current data sets they provided for the 6 fiscal years we requested. Based  on our discussions of internal controls and ability to address data  discrepancies with the agencies, we determined that the data are  sufficiently reliable to report IP enforcement activity. To assess federal  agencies’ achievements in IP-related enforcement activity, we reviewed  agency priorities, goals, and objectives and compared them to the types of  data agencies collected. We also asked program officials how they used  their IP enforcement data to assess performance and inform management  and resource allocation decisions.
We also talked to private sector representatives to better understand how  counterfeit and piracy affects their businesses and obtain their views on  federal IP enforcement. We obtained different company contacts from  conferences, federal agencies working with private sector, and our own  research. We developed structured interview questions to understand  industry views regarding federal IP enforcement efforts and private  companies’ own efforts to protect their IP. We selected eight sectors based  on our participation in trade conferences and discussions and information  from organizations such as the U.S. Chamber of Commerce that have anti- counterfeiting campaigns and are affected by counterfeiting and piracy.  We interviewed 22 companies and 8 industry associations across those  sectors. The sectors we selected were: consumer electronics,  entertainment and media, luxury goods and apparel, health and food,  Internet, pharmaceutical, software, and manufacturing. For the most part,  we interviewed at least one industry association and two companies in  each sector. Most of the companies we spoke with were large companies  because the prevalence of their brand in the market has made them targets  for counterfeiting and piracy. We analyzed industry interviews using a  systematic coding scheme to identify common themes and responses to  our questions.
To examine the intended purpose and funding of the National Intellectual  Property Rights Coordination Center, we met with ICE and FBI officials  associated with the center to discuss its evolution, role, and staffing levels;  reviewed agency documents that articulated the center’s purpose; and  analyzed Congressional budget documents that reflected funding related  to the center. Specifically, we reviewed appropriation legislation and  related reports of the House and Senate Committees on Appropriations  and relevant subcommittees for fiscal years 2001 through 2006 to  determine what funds and additional instructions were provided to ICE,  FBI, and legacy Customs related to staffing and operating the center. We  then requested information from ICE, FBI, and CBP about what funds  were received and how the funds were used. We also discussed the  center’s future role with ICE, FBI, FDA, and DOJ officials, and the  NIPLECC IP Coordinator.
We conducted this performance audit from December 2006 through March  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Federal Protection and Enforcement of IP Rights under U.S. Law
paragraphs: The federal government plays a role in granting protection for and  enforcing IP rights. It grants protection by approving patents or registering  copyrights and trademarks. These IP rights grant registrants limited  exclusive ownership over the reproduction or distribution of protected  works (copyright), the economic rewards the market may provide for their  creations and products (trademark), or the right to exclude others from  using, making, and selling devices that embody a claimed invention  (patent). The federal government enforces IP rights by taking actions  against those accused of their theft or misuse. Enforcement actions  include both civil and criminal penalties. U.S. laws criminalize certain  types of IP violations, primarily copyright and trademark violations, and  authorize incarceration or fines. These laws are directed primarily toward  those who knowingly produce and distribute IP-infringing goods, rather  than those who consume such goods. Although U.S. laws do not treat  patent violations as a crime, the federal government does take actions to  protect patents and authorizes civil enforcement actions against infringers.
Table 3 summarizes federal protection and enforcement of IP rights under  U.S. law.
section_title: Appendix III: Private Sector Views on Federal IP Enforcement Efforts
paragraphs: A number of companies have been affected by counterfeiting and piracy,  particularly as criminal activity has increased in recent years. As part of  our review of federal IP enforcement efforts, we identified companies and  industry associations that are actively involved in anti-counterfeiting and  piracy activities. We interviewed 8 industry associations and 22 companies  across 8 sectors, including consumer electronics, luxury goods and  apparel, pharmaceuticals, and software. The views obtained through  these interviews cannot be generalized across sector or industry overall  given that our sample size was small. Industry responses produced a mix  of views on federal efforts to enforce intellectual property rights, with  some companies reporting positively about specific agency actions and  others that were more critical of federal actions. A selection of industry  views by sector are presented below based on analysis and synthesis of  interview responses around common themes. For the most part, each  bullet represents a different company or association representative. These  views are not direct quotes and have been edited as needed for clarity and  readability.
subsections: section_title: Various Companies Are Impacted by Counterfeiting and Piracy
paragraphs: Table 4 highlights industry views on the impact of counterfeiting and  piracy.
Some industry representatives expressed concern about the federal  government’s ability to carry out IP enforcement due, in part, to a lack of  dedicated resources. While several companies said that federal IP  enforcement efforts have increased, 14, or nearly half, of the  representatives we contacted said there is a shortage of resources to carry  out IP enforcement. For example, one company we interviewed said that  CBP has made improvements over the last couple of years, but the scope  of its efforts is still not up to the problem, and that more resources are  needed to perform risk analysis and modeling to determine the origin of  counterfeit goods. Another company representative said that the task is  large compared to the federal resources applied, especially because the  number of counterfeiters is increasing but federal resources have  remained constant. Companies reported increasing their own resources to  focus on IP enforcement, with 15 stating that they employ or contract  private investigators and/or have in-house resources dedicated to IP  investigations and anti-counterfeiting activity. Table 5 highlights specific  representatives’ statements about the level of federal resources dedicated  to IP enforcement.
Representatives from 12 out of 30 companies and associations we  interviewed told us that better information sharing is needed between the  public and private sector; for example, one company representative said  that agencies should let companies know whether the information they  pass on to law enforcement is useful. In the case of CBP seizures, some  representatives remarked on the need to obtain more detailed information  about imports suspected of infringing on their products, such as the origin  of the shipments. One company representative commented that it used to  get information on suspect products from CBP officers, but it has not  received this type of information from CBP recently. One company  representative said that the company has referred information to the  National Intellectual Property Rights Coordination Center, but has rarely  received feedback on whether the information it provided was useful.  Another company said that it has to continuously follow up to get updates.
Several companies and associations we interviewed remarked that the  federal IP enforcement structure is not very clear, and companies,  particular smaller ones, have a hard time knowing who to contact for IP  issues. For example, one association said that there is no formal process  for referring cases to law enforcement and that information on the  structure needs to be clearer and more efficient. While larger companies  may be more familiar with  agencies’ procedures and  contacts, smaller companies don’t know where to begin. Another  association said that agency responsibilities are unclear and may overlap.  Table 6 highlights industry representatives’ general comments on their  coordination with federal IP enforcement agencies.
Several of the company representatives commented that increased training  efforts for federal officials that carry out IP enforcement have  strengthened IP enforcement efforts. Table 7 highlights private sector  comments on this issue.
Industry representatives cited various areas that could be improved upon  to increase overall IP enforcement, including a need to better train federal  prosecutors and better inform consumers about the risks posed from  counterfeit and pirated goods. Table 8 highlights areas private sector  representatives identified for improved IP enforcement.
section_title: Appendix IV: Comments from the Department of Homeland Security
paragraphs: The following are GAO’s comments on the Department of Homeland  Security’s letter dated February 26, 2008.
subsections: section_title: GAO Comments
paragraphs: 1.  We discussed health and safety issues with CBP during our review. In  January 2008, CBP released seizure data for fiscal year 2007 that for  the first time identified seizures in product categories that may involve  public health and safety, e.g., pharmaceuticals, electrical articles, and  sunglasses. We commend CBP for taking this step and modified our  report to reflect this new data (see p. 33). These data are publicly  available; therefore, GAO did not have to request them from CBP. We  added information to the draft report to state that CBP officials also  told us that creating a definition of IP seizures that affect public health  and safety is difficult because not all products within a given category  necessarily pose such risks and the potential for such risks cuts across  a broad range of products (see pp. 33-34). We modified our  recommendation to state that CBP should continue to take steps  toward better identifying IP seizures that pose a risk to public health  and safety of the American people, and collect and report this data  throughout the agency and to Congress (see p. 43).  2.  We reported on CBP’s IP Rights Trade Strategy (a document that CBP  refers to in its letter as the National IPR Trade Strategy) in our April  2007 report. We added information to this report to describe this trade  strategy and note that it contains certain measures and indicators  related to IP enforcement (see p. 34.) However, we also noted, as we  did in our April 2007 report, that CBP officials told us this trade  strategy was an internal planning document, and we determined it had  limited distribution across CBP. For example, we found that revisions  to the document had not been distributed to CBP ports since 2003 and  given the document’s status as “For Official Use Only,” it is not  distributed to Congress or the public. Therefore, we concluded in April  2007 that this document, while containing certain measures and  indicators, has limited usefulness for holding CBP accountable for its  performance on IP enforcement. At that time, we recommended that  CBP work with OMB to include IP enforcement-related measures in its  strategic plan and are pleased that CBP states in its current comment  letter that it is in the process of taking such action.  3.  We do not understand why CBP is making comments in this report  about analysis that appeared in our April 2007 report, but that is not  reproduced in this report. That analysis showed that among the top 25  IP-importing ports in fiscal year 2005, many ports’ IP seizure rates  (measured by value of IP seizures over value of IP imports) were lower  than the group average. We did this analysis because CBP had not  attempted to analyze its IP enforcement outcomes in this way. CBP  made these same comments in April 2007; we disagreed with how CBP  characterized our work at that time and continue to stand by our  analysis. In that report, we said that this and other types of analysis  contained in our April 2007 report represented approaches that CBP  could take to better understand variations in IP enforcement outcomes  across ports, inform resource allocations and management decisions,  and further improve its IP enforcement. We continue to believe that  CBP, and the other agencies, can better use existing data to  understand their IP enforcement outcomes across field locations or  product types as a way of further improving overall IP enforcement.  4.  See comment 1.
section_title: Appendix V: Comments from the Department of Justice
paragraphs: The following are GAO’s comments on the Department of Justice letter  dated February 21, 2008.
subsections: section_title: GAO Comments
paragraphs: 1.  We disagree that our report severely understates DOJ’s enforcement  activities. Our analysis of federal IP enforcement efforts is a systematic  evaluation of trends in key agencies’ enforcement indicators over a 6- year period. Although there were fluctuations (i.e., increases and  decreases) in individual indicators from year to year, we concluded  that all the indicators, when taken as a whole, showed a general  increase in federal IP enforcement efforts from the beginning to the  end of the period examined. Moreover, we considered all indicators  together because no single indicator from any one agency sufficiently  reflects overall trends. The DOJ statistics we examined also showed  increases and decreases during the time period. However, in its letter,  DOJ selected statistics that only reflect increases, and it did so in one  instance by comparing the lowest and highest levels for a given  indicator, regardless of the year in which they occurred, which  generated the highest possible percent increase for that indicator. We  do not believe DOJ’s analysis is useful for discerning overall long-term  trends.  2.  Our report is based on agency data covering fiscal years 2001 through  2006. In several cases, fiscal year 2007 data became available as we  were finalizing our report. However, given the challenges we faced in  obtaining sufficiently reliable data from all agencies for the period we  studied (see appendix I, pp. 48-51), we were unable to systematically  update our data in a timely fashion to include fiscal year 2007  statistics.  3.  We disagree that our report gives insufficient attention to resource  increases at DOJ for IP enforcement. Our report discusses the creation  and growing number of CHIP units and also notes that the number of  Assistant U.S. Attorneys trained to prosecute IP cases has grown in  recent years (see p. 20).  4.  We agree with DOJ that statistics alone are not sufficient to accurately  show the quality of improvements in IP enforcement activity. This is  why we recommend that DOJ and the other agencies develop IP  enforcement performance measures and targets to more systematically  measure and report on their efforts. While the examples that DOJ  provides of recent enforcement cases are useful illustrations of the  types of enforcement activity that DOJ has undertaken, they do not  provide a complete picture of DOJ’s overall efforts over time. For  example, as we state in our report, agencies including DOJ could  analyze the types of IP cases it most commonly prosecutes or could  report on the number of cases it has prosecuted involving IP crimes  that posed a health and safety risk (see p. 32).  5.  In section B of its letter (pp. 4-5), DOJ addresses the issue of whether  additional IP enforcement resources necessarily result in more IP  prosecutions. On page 5 of its letter, DOJ provides information that  demonstrates a correlation between increased IP resources in two U.S.  Attorney’s Offices and the number of IP cases prosecuted by those  units, but then goes on to state that it would not necessarily conclude,  as it said GAO did, that more prosecutors in a district results in more  prosecutions. We agree that existing data across all U.S Attorney’s  Offices with CHIP units does not necessarily show a high correlation  between increased CHIP unit resources and increased IP prosecutions,  and removed this language. We modified our report to note that  various factors, including crime levels, can affect the level of IP  enforcement activity (see p. 33).  6.  We modified our report to state that DOJ reviewed its data on U.S.
Attorney’s Office prosecutions when deciding where to place  additional CHIP units. However, at no time during this audit did DOJ  indicate, or provide documentation reflecting, that it routinely  analyzed IP prosecution data by district. We commend DOJ for  examining the fiscal year 2006 IP enforcement activity of two of the  CHIP units. Our analysis of DOJ’s data on IP enforcement activity by  all 94 U.S. Attorney’s Offices showed a mix of activity among field  offices across the 6-year period, including those with CHIP units. We  believe that conducting such analysis on a more systematic basis can  better inform DOJ about whether its allocation of resources is  appropriate and not just inform placement of CHIP units.   7.  See comment 5.  8.  We mentioned in the draft report, under our discussion of agency  priorities that DOJ has established some goals related to its IP  enforcement efforts that are contained in an internal agency document  not available to the public (see p. 15). We added information to refer  again to this in our discussion of performance measures (see p. 35).  However, we disagree that DOJ’s Task Force report is replete with  goals and measures. The Task Force report makes multiple  recommendations for improving IP enforcement efforts, but  recommendations are not the same as performance goals, and the  report does not contain performance measures. Moreover, many of  these recommendations are task-oriented actions rather than outcome- oriented. For example, one of DOJ’s Task Force recommendations is  to prosecute aggressively intellectual property offenses that endanger  the public’s health or safety; yet, DOJ does not provide any details on  how they plan to achieve this recommendation and how they will  measure their progress. Further, as we report, DOJ has not taken steps  to capture enforcement statistics to assess their progress in this area.  As we discuss in our report, strategic planning and assessment  requires agencies to articulate outcome-oriented goals and objectives  and to develop performance measures and targets that will enable  them and others to determine whether they are making progress  toward these goals. We added language to our report to better define  outcome-oriented performance measures.  9.  We added information to the report to further explain the challenges  associated with setting performance measures and targets in the law  enforcement area (see p. 35). Our example of a performance measure  and target was not intended to suggest that the agencies should adopt  numerical case quotas or take any steps that would otherwise  negatively affect the quality of their investigations. However, because  it was interpreted in this way, and distracted attention from the more  important discussion of adopting appropriate performance measures  and targets, we removed the example. We continue to believe that DOJ  can develop reasonable and acceptable measures and targets for IP  enforcement.    10. See comments 1 and 4.
section_title: Appendix VI: Comments from the Department of Health and Human Services
paragraphs: The following are GAO’s comments on the Department of Health and  Human Services letter dated February 25, 2008.
subsections: section_title: GAO Comments
paragraphs: 1.  While we acknowledged in our draft report that setting performance  measures and targets in a law enforcement area is difficult, we added  information to further explain why setting such measures and targets  is a sensitive issue (see p. 35). We continue to believe that setting  performance measures and targets is important, even in the law  enforcement environment. However, because FDA’s primary mission is  to protect public health and safety, we reconsidered our  recommendation that FDA set law enforcement-related measures and  targets, and no longer direct this particular recommendation to FDA.  2.  We modified our report to provide additional information on the  definition of output and outcome performance measures and targets  (see p. 35). Our example of a performance measure and target was not  intended to suggest that the agencies should adopt numerical case  quotas or take any steps that would otherwise negatively affect the  quality of their investigations. However, because it was interpreted in  this way, and distracted attention from the more important discussion  of adopting appropriate performance measures and targets, we  removed the example.    3.  We commend FDA for monitoring the number of criminal  investigations to identify any trends in product areas and to develop an  understanding of the scope of counterfeiting in those areas. FDA  mentioned for the first time in December 2007 that it conducts such  analysis, but given the challenges we faced in obtaining sufficiently  reliable data from all agencies for the period we studied (see appendix  I, pp 48-51), we did not ask FDA to provide this analysis to us. Given  the increasing threat posed by IP-infringing products that affect public  health and safety, we believe it is important that the government  improves its understanding of this threat. Therefore, we modified our  recommendation to ICE, FBI and DOJ that agencies conduct analysis  of their IP enforcement outcomes to also address this recommendation  to FDA and to clarify that such analysis should be done systematically  (see p. 43).
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: Christine Broderick, Assistant Director; Shirley Brothwell; and Adrienne  Spahr made significant contributions to this report. Virginia Chanley,  Karen Deans, Ernie Jackson, Mark Molino, Jackie Nowicki, Dimple  Pajwani, Suneeti Shah, Jena Sinkfield, Stephen Caldwell, Tony DeFrank,  Rebecca Gambler, Michael Simon, Tom Costa, and Jennifer Young also  provided assistance.