The Prioritizing Resources and Organization for Intellectual Property Act (the “PRO-IP Act”), signed into law by President Bush on October 13, 2008, significantly increases penalties for trademark and copyright infringement, and substantially expands government resources for fighting intellectual property violations.

The PRO-IP Act contains numerous tools that strengthen the hands of both governmental and private enforcers of intellectual property rights. These include:

  • Doubling the minimum and maximum statutory damage awards for counterfeiting claims
  • Expanding the treble damages provisions for trademark infringement
  • Enhancing civil and criminal forfeiture measures for criminal copyright and trademark violations
  • Authorizing new expenditures for intellectual property-related prosecution and enforcement
  • Establishing an executive-level position for the oversight of federal efforts to combat domestic and international trade in infringing and counterfeit goods

Trademark Provisions

The PRO-IP Act increases statutory damages in trademark counterfeiting claims to a minimum of $1,000 and a maximum of $200,000 per mark (up from a minimum of $500 and a maximum of $100,000 per mark). Willful violations can now result in a maximum statutory damage award of $2,000,000 per mark, up from $1,000,000 per mark under previous law.

The PRO-IP Act also increases the availability of treble damage awards for trademark violations. Treble damages were previously available only from defendants who had actually used a counterfeit mark. Now, treble damages can also be obtained from defendants who merely provided goods or services necessary for the commission of a counterfeiting violation, if they did so with the intent that the goods or services be put to such a use. Part of a larger trend toward expanding the types of defendants who can be held liable for intellectual property violations, this measure is analogous to the Digital Millennium Copyright Act’s anti-circumvention provisions, which make manufacturers and sellers of devices or components used to circumvent copyright protection technology liable for any related copyright infringement.

These provisions significantly enhance the ability of registered trademark holders to leverage their marks. As trademark holders cannot reap the benefits of these civil penalties without a federal trademark registration, the amendments make it more important than ever for trademark holders to register their marks. Conversely, the heightened penalties highlight the critical importance of clearing marks before use, as users now risk increased liability if marks they employ are later found to be infringing.

Criminal penalties for trademark violations have also been enhanced. Federal authorities in counterfeiting actions can now seek civil and criminal forfeiture of any property used to facilitate counterfeiting, and any property derived from the violation, in addition to the forfeiture of the infringing articles themselves.

Further, anyone convicted of counterfeiting can be ordered to pay restitution to the victim of the counterfeiting. Additionally, the Act creates entirely new and distinct criminal offenses under the United States criminal code, punishable by fine or imprisonment, for serious bodily injury or death that occurs in connection with trafficking in counterfeit goods.

Lastly, the PRO-IP Act prohibits the transfer of infringing goods from one vessel or carrier to another, and prohibits the export of infringing goods. Pre-existing law only prohibited the import of such goods.

Copyright Provisions

On the copyright side, the PRO-IP Act introduces a “harmless error” exception to the requirement that a copyright claimant have a proper copyright registration before bringing an infringement action. Under the new law, a plaintiff can bring suit based upon a certificate of registration, even if it contains inaccurate information, unless the registrant knowingly provided the inaccurate information and the inaccuracy would have prevented the registration from issuing. The Act further amends the copyright law by specifying that the copyright registration requirement applies only to civil claims rather than to criminal actions. Thus, it will now be easier for plaintiffs to bring claims and for the government to prosecute them, and harder for defendants to defend against such claims based on defects in the formalities and technicalities of the plaintiff's copyright registration.

A court may now impound not only infringing items and materials used to make them, but records documenting the manufacture, sale or receipt of allegedly infringing goods. The right to impound records will enable copyright holders to learn more about the origin and distribution chains of infringing goods.

For criminal actions, the PRO-IP Act lowers the standard for the imposition of heightened penalties on repeat felony copyright infringers. As in the amendments to the trademark laws, anyone convicted of copyright infringement is now required to pay restitution to the crime’s victim. As it does for trademark counterfeiting actions, the Act authorizes the government in copyright infringement cases to seek both civil and criminal forfeiture of any property used or intended to be used to facilitate infringement, and any property derived from the infringement.

Also in parallel to the amendments to the trademark laws, the PRO-IP Act now prohibits the export, as well as the import, of infringing copies.

Federal Coordination, Planning and Funding

The PRO-IP Act establishes an Intellectual Property Enforcement Coordinator (“IPEC”), to be appointed by the President and confirmed by the Senate, to provide policy guidance to the various departments and agencies involved in the enforcement of intellectual property rights. The IPEC will chair an intellectual property advisory committee, to be composed of representatives from numerous federal government departments and agencies, charged with developing a Joint Strategic Plan for the reduction of counterfeit and infringing goods. This Strategic Plan is to be presented to Congress every three years. The plan is to include, among other things, methods of working with foreign countries to promote intellectual property enforcement.

The Act authorizes the appropriation of whatever sums might be necessary to carry out the foregoing provisions and provides funding for specific intellectual property enforcement initiatives. For each fiscal year from 2009 to 2013, the section authorizes $25,000,000 to the Department of Justice for state grants to combat computer crimes, including the infringement of copyrighted works over the Internet; $25,000,000 to the Department of Justice for local law enforcement grants to combat intellectual property crimes; and $10,000,000 each to the Director of the Federal Bureau of Investigation and the Attorney General of the Criminal Division of the Department of Justice for the hiring and training of enforcement officers and the procurement of advanced tools to investigate and prosecute intellectual property crimes.

The section also authorizes $10,000,000 a year for the next five years for the Attorney General to hire and train additional FBI agents and to create a comprehensive plan to investigate and prosecute international crime syndicates involved in intellectual property crimes.

Finally, the Act directs the Attorney General to submit comprehensive annual reports on intellectual property enforcement efforts and directs the Comptroller General to conduct a study on the effects of counterfeit goods on the United States manufacturing industry.

Dispelling the Myths

Readers looking for additional information about the PRO-IP Act should exercise caution: many recent articles simply get it wrong. Some articles concerning the Act charge that it too drastically increases the penalty for copyright infringement of compilations by allowing courts to make multiple awards of statutory damages when compilations are infringed. That provision, however, was removed from the bill before it became law. Another controversial provision that received much attention during the drafting of the bill would have allowed the Justice Department to pursue civil copyright lawsuits. This provision was also dropped, however, after being opposed by the Department of Justice and criticized for essentially placing federal prosecutors in the role of pro bono attorneys for private business.

Practical Advice for Intellectual Property Owners

The PRO-IP Act significantly increases penalties for trafficking in counterfeit goods and subjects property to forfeiture if it is used to facilitate infringement or is derived from the proceeds of infringement. Whether this is good or bad depends on whether a company is more likely to be enforcing its intellectual property rights or defending against other companies trying to enforce their rights. The new laws clearly underscore the importance of obtaining trademark registrations in order to avail oneself of the new tools, and the importance of properly clearing intellectual property rights before use, in order to avoid defending an infringement action in which one is exposed to significantly increased liability.

The impoundment and forfeiture provisions have potential collateral consequences even for bystanders to infringement actions. For example, if computer servers used in a shared facility are used by one user to infringe, all users of those servers (as well as the service provider) could lose data or access to data when the servers are impounded. If a manufacturer makes goods or packaging for multiple clients and one client’s design is infringing, the manufacturer’s equipment is subject to forfeiture, leaving the manufacturer and even innocent clients of the manufacturer without the ability to continue operating. In a business environment when many such functions are outsourced, companies need to consider these new risks, and deal with them appropriately at the time of contracting.

The Act directs substantial attention and resources to the fight against intellectual property crimes and puts the battle against counterfeit goods front and center on the national agenda. The provisions for heightened damages should certainly aid businesses in their efforts to protect their trademarked brands and intellectual property content, and the provisions for increased governmental funding and strategic efforts should make the federal government a stronger partner in the fight against intellectual property crime.

Intellectual property holders should take advantage of the significant new leverage the PRO-IP Act affords by registering their trademarks and copyrights and vigilantly monitoring any potential violations of their intellectual property rights. Holders likewise need to be careful to properly clear their intellectual property before use, in order to avoid facing the newly enhanced penalties.