President Bush on Monday, October 13, signed into law a controversial bill that strengthens the enforcement of anti-counterfeiting laws and increases penalties for piracy and counterfeiting. Copyright and Trademark owners have been given significant new tools with which to combat the losses they suffer from unauthorized copying. The new law, coined the Prioritizing Resources and Organization for Intellectual Property Act of 2008, ("PRO IP Act"), among other significant changes, contains a forfeiture clause that could result in seizing computers, servers, and storage devices implicated in copyright infringement cases, increases statutory damages for trademark counterfeiters, and provides for trebling of damages in certain counterfeiting cases. The Motion Picture Association of America and the Recording Industry Association of America, as well as the U.S. Chamber of Commerce campaigned strongly for the new law. Key provisions were strenuously opposed by digital rights organizations such as the Electronic Frontier Foundation ("EFF"), which argued that the new provisions would intimidate consumers from doing what they are permitted to do under fair use principles and asserted that the industries are in fact going to less-restrictive distribution models that do not inhibit legitimate copying.

Key Provisions of the Act

A. Copyright

To combat copyright piracy, the PRO IP Act enhanced remedies for antipiracy and counterfeiting as follows:

  • Copyright certificates of registration with harmless errors are deemed to satisfy the statutory registration requirements, unless inaccurate information was included with knowledge that it was inaccurate and the inaccuracy would have caused the Register of Copyrights to refuse registration.
  • Courts may impound not only infringing copies and the instrumentalities used in the unlawful reproductions, but also the records and receipts relating to the infringement.
  • Importation to or exportation from the United States of copies of copyrighted material without the authority of the copyright owner constitutes an actionable infringement of the exclusive right to distribute copies.
  • Civil and criminal forfeiture provisions have been both heightened and amended to create a more consistent approach to trafficking of counterfeit goods.
  • The Act imposes a possible ten-year sentence for repeat copyright felony offenders, regardless of whether the two felonies are the same type of copyright crime. Prior to passage of the Act, in order to receive a ten-year sentence, the two violations had to be the same type of infringement.

B. Trademark

To assist companies in their fight against trademark counterfeiting, the PRO IP Act has doubled the amount of statutory damages available to trademark holders under the Lanham Act, 15 U.S.C. § 1117(c), authorizing courts to award statutory damages up to $2,000,000 against those found liable for intentionally counterfeiting. The law also increased a trademark holder's ability to seek treble damages against "secondary" actors – such as corporate officers – who intentionally assist or aid in the efforts of counterfeiters. In sum, in the trademark arena the Act provides as follows:

  • Doubling the baseline amount of statutory damages that a Court may award for a successful counterfeiting claim from $500 to $1000;
  • Increasing statutory damages "cap" available to a mark holder for unintentional counterfeiting from $100,000 to $200,000;
  • Doubling the statutory damages "cap" under 15 U.S.C. § 1117(c)(2) for intentional counterfeiting from $1,000,000 to $2,000,000;
  • Increasing a trademark holder's ability to seek treble damages against "secondary" actors that (a) provide goods or services necessary to commit a counterfeiting violation under the Lanham Act, and (b) intend that the goods or services be used to violate the Lanham Act.

The Act also creates a new Executive Branch position called the Intellectual Property Enforcement Coordinator ("IPEC"). The IPEC will be appointed by the President and confirmed by the Senate. The IPEC will chair a committee comprised of representatives from the Justice Department, the Commerce Department, the Office of the United States Trade Representative, the State Department, Homeland Security, Health and Human Services, the Agriculture Department, and the U.S. Copyright Office. While the IPEC cannot control how the agencies investigate or prosecute infringement cases, the IPEC will lead the committee's effort to develop a "Joint Strategic Plan" to combat copyright infringement and counterfeiting.

The Enactment of the New Bill Was Not Without Controversy

Before it was enacted, a particularly controversial provision that would have allowed the DOJ to litigate civil proceedings on behalf of intellectual property rights holders was eliminated. As opposed to punishing counterfeiters, expanding the PRO IP Act's reach to civil violations was seen as potentially inhibiting legitimate competition. That measure was actively opposed by the EFF which said that it effectively turned the Department of Justice into pro bono attorneys for the copyright industries. However, another of the law's most controversial provisions, the creation of a cabinet level position for an intellectual property representative operating out of the Executive Office of the President ("EOP"), survived. This provision had been opposed by the Justice Department on constitutional grounds. It argued that creating the EOP Coordinator and placing it in the Executive Branch was a legislative intrusion into the President's internal operating structure and therefore transgressed the principle of separation of powers. Nonetheless, the bill, as signed by President Bush, retains the EOP Coordinator.

The forfeiture provisions have also caused protests by digital rights advocates who urged that they sweep too much within the piracy net by allowing the removal of servers that carry pirated material, not only punishing the transmitters for their acts.

Conclusion

How the PRO IP Act will be implemented remains to be seen. In the present atmosphere of economic turbulence, it may receive support as a key protection for American technology, creativity, and innovation. The need to address concerns against counterfeiting and piracy by creating stiffer criminal penalties for violators and more protections for intellectual property holders has long been debated in Congress.