Stop Counterfeiting in Manufactured Goods Act

Mr. President, I want to take a moment to speak about H.R. 32, the Stop Counterfeiting in Manufactured Goods Act of 2005, sponsored by Representative Knollenberg and 59 House cosponsors. The counterfeiting of goods bearing American held trademarks is an important problem that I am committed to fighting, as reflected by my sponsoring S. 1699, the Senate companion bill to H.R. 32, earlier this year with Senator Leahy and Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich.

H.R. 32, the Stop Counterfeiting in Manufactured Goods Act of 2005 addresses a problem that has reached epidemic proportions as a result of a loophole in our criminal code: the trafficking in counterfeit labels. Criminal law currently prohibits the trafficking in counterfeit trademarks ``on or in connection with goods or services.'' However, it does not prohibit the trafficking in the counterfeit marks themselves. As such, there is nothing in current law to prohibit an individual from selling counterfeit labels bearing otherwise protected trademarks within the United States.

This loophole was exposed by the Tenth Circuit Court of Appeals in United States v. Giles, 213 F.3d 1247 (10th Cir. 2000). In this case, the United States prosecuted the defendant for manufacturing and selling counterfeit Dooney & Bourke labels that third parties could later affix to generic purses. Examining title 18, section 2320, of the United States Code, the Tenth Circuit held that persons who sell counterfeit trademarks that are not actually attached to any ``goods or services'' do not violate the Federal criminal trademark infringement statute. Since the defendant did not attach counterfeit marks to ``goods or services,'' the court found that the defendant did not run afoul of the criminal statute as a matter of law. Thus, someone caught redhanded with counterfeit trademarks walked free.

H.R. 32 closes this loophole by amending title 18, section 2320 of the United States Code to criminally prohibit the trafficking, or attempt to traffic, in ``labels, patches, stickers'' and generally any item to which a counterfeit mark has been applied. In so doing, H.R. 32 provides U.S. Department of Justice prosecutors with the means not only to prosecute individuals trafficking in counterfeit goods or services, but also individuals trafficking in labels, patches, and the like that are later applied to goods.

Congress must act expeditiously to protect U.S. held trademarks to the fullest extent of the law. The recent 10-count indictment of four Massachusetts residents of conspiracy to traffic in approximately $1.4 million of counterfeit luxury goods in the case of U.S. v. Luong et al., 2005 D. Mass. underscores the need for this legislation. According to the indictment, law enforcement officers raided self-storage units earlier this year and found the units to hold approximately 12,231 counterfeit handbags; 7,651 counterfeit wallets; more than 17,000 generic handbags and wallets; and enough counterfeit labels and medallions to turn more than

50,000 generic handbags and wallets into counterfeits. Although the U.S. Attorneys Office was able to pursue charges of trafficking and attempting to traffic in counterfeit handbags and wallets, they were not able to bring charges for trafficking and attempting to traffic in the more than 50,000 counterfeit labels and medallions. As such, these defendants will escape prosecution that would have otherwise been illegal if they had only been attached to an otherwise generic bag. This simply does not make sense. Had the Stop Counterfeiting in Manufactured Goods Act of 2005 been in effect at the time of indictment, U.S. prosecutors would have been able to bring charges against the defendants for trafficking and attempting to traffic in not only counterfeit goods, but also counterfeit labels.

As Assistant Attorney General Alice Fisher said:

Those who manufacture and sell counterfeit goods steal

business from honest merchants, confuse or defraud honest

consumers, and illegally profit on the backs of honest

American workers and entrepreneurs.

This point is underscored by the Bureau of Customs and Border Protection estimate that trafficking in counterfeit goods costs the United States approximately $200 to $250 million annually. With each passing year, the United States loses millions of dollars in tax revenues to the sale of counterfeit goods. Further, each counterfeit item that is manufactured overseas and distributed in the United States costs American workers tens of thousands of jobs. With counterfeit goods making up a growing 5 to 7 percent of world trade, this is a problem that we can no longer ignore.

To be sure, counterfeiting is not limited to the popular designer goods that we have all seen sold on corners of just about every major metropolitan city in the United States. Counterfeiting has a devastating impact on a broad range of industries. In fact, for almost every legitimate product manufactured and sold within the United States, there is a parallel counterfeit product being sold for no more than half the price. These counterfeit products range from children's toys to clothing to Christmas tree lights. More frightening are the thousands of counterfeit automobile parts, batteries, and electrical equipment that are being manufactured and placed into the stream of commerce with each passing day. I am told that the level of sophistication in counterfeiting has reached the point that you can no longer distinguish between the real and the counterfeit good or label with the naked eye. However, just because these products look the same does not mean that they have the same quality characteristics. The counterfeit products are not subject to the same quality controls of legitimate products, resulting in items that are lower in quality and likely to fall apart. In fact, counterfeit products could potentially kill unsuspecting American consumers.

In addition to closing the ``counterfeit label loophole,'' the Stop Counterfeiting in Manufactured Goods Act strengthens the criminal code and provides heightened penalties for those trafficking in counterfeit marks. Current law does not provide for the seizure and forfeiture of counterfeit trademarks, whether they are attached to goods or not. Therefore, many times such counterfeit goods are seized one day, only to be returned and sold to an unsuspecting public. To ensure that individuals engaging in the practice of trafficking in counterfeit marks cannot reopen their doors, H.R. 32 establishes procedures for the mandatory seizure, forfeiture, and destruction of counterfeit marks prior to a conviction. Further, it provides for procedures for the mandatory forfeiture and destruction of property derived from or used to engage in the trafficking of counterfeit marks.

When this legislation was sent over to the Senate from the House, concerns were raised to Senator Leahy and myself about the language in Section 2(bbb)(1)(B) of this bill pertaining to the forfeiture authority of the U.S. Department of Justice. In focusing our attention to this section, we discussed the scope of the facilitation language, which parallels the drug and money laundering forfeiture language in 21 U.S.C. 853 and 18 U.S.C. 982, respectively, and how it might relate to Internet marketplace companies, search engines, and ISPs. Specifically, we were aware of concerns regarding the potential misapplication of the facilitation language in Section 2(b)(1)(B) to pursue forfeiture and seizure proceedings against responsible Internet marketplace companies that serve as third-party intermediaries to online transactions.

I say to Senator Leahy, as the Senator is aware, periodically Congress directs the Sentencing Commission to update the Federal sentencing guidelines upon the periodic directive of Congress to reflect and account for changes in the manner in which intellectual property offenses are committed. The recent amendments to which you refer were promulgated by the Sentencing Commission pursuant to the authorization in the Family Entertainment and Copyright Act of 2005, also known as FECA. These amendments to the Federal sentencing guidelines, which took effect on October 24, 2005, address changes in penalties and definitions for intellectual property rights crimes, particularly those involving copyrighted pre-release works and issues surrounding ``uploading.'' For example, these guidelines provide for a 25 percent increase in sentences for offenses involving pre-release works. In addition, the Commission revised its definition of ``uploading'' to ensure that the guidelines are keeping up with technological advances in this area.

I would like to make it clear for the record that the directive to the Sentencing Commission in section 3 of H.R. 32 is not meant as disapproval of the Commission's recent actions in response to FECA. Rather, section 3 covers other intellectual property rights crimes that Congress believes it is time for the Commission to revisit. Specifically, section 3 directs the Commission to review the guidelines, and particularly the definition of ``infringement amount,'' to ensure that offenses involving low-cost items like labels, patches, medallions, or packaging that are used to make counterfeit goods that are much more expensive, are properly punished. It also directs the Commission to ensure that the penalty provisions for offenses involving all counterfeit goods or services, or devices used to facilitate counterfeiting, are properly addressed by the guidelines. As it did in response to the No

Electronic Theft Act of 1997 and FECA, I am confident that the Commission will ensure that the Federal sentencing guidelines provide adequate punishment and deterrence for these very serious offenses and I look forward to the Commission's response to this directive.

At this point, I would like to take this opportunity to thank Representative Jim Sensenbrenner, chairman of the House Judiciary Committee, and Representative Joe Knollenberg for their leadership in the House with regard to H.R. 32. In January of 2005, Representative Knollenberg introduced H.R. 32 in the House. When the bill was in committee, he fostered negotiations between the Department of Justice, the U.S. Chamber of Commerce, and the International Trademark Association to ensure that it passed the House. I would also like to thank my colleague Senator Leahy, ranking member of the Senate Judiciary Committee, and Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich for their cosponsorship of S. 1699, the companion legislation to H.R. 32. It is through the hard work of all of these Members that we were able to achieve truly bipartisan support for language that will ensure the protection of American-held trademarks.

Mr. President, I will to take a moment to speak about H.R. 32, the Stop Counterfeiting in Manufactured Goods Act of 2005, sponsored by Representative Knollenberg and 59 House cosponsors. The counterfeiting of goods bearing American held trademarks is an important problem that I am committed to fighting, as reflected by my sponsoring S. 1699, the Senate companion bill to H.R. 32, earlier this year with Senator Leahy and Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich.

H.R. 32, the Stop Counterfeiting in Manufactured Goods Act of 2005, addresses a problem that has reached epidemic proportions as a result of a loophole in our Criminal Code: the trafficking in counterfeit labels. Criminal law currently prohibits the trafficking in counterfeit trademarks ``on or in connection with goods or services.'' However, it does not prohibit the trafficking in the counterfeit marks themselves. As such, there is nothing in current law to prohibit an individual from selling counterfeit labels bearing otherwise protected trademarks within the United States.

This loophole was exposed by the Tenth Circuit Court of Appeals in United States v. Giles, 213 F.3d 1247, 10th Cir. 2000. In this case, the United States prosecuted the defendant for manufacturing and selling counterfeit Dooney & Bourke labels that third parties could later affix to generic purses. Examining title 18, section 2320, of the United States Code, the Tenth Circuit held that persons who sell counterfeit trademarks that are not actually attached to any ``goods or services'' do not violate the Federal criminal trademark infringement statute. Since the defendant did not attach counterfeit the marks to ``goods or services,'' the court found that the defendant did not run afoul of the criminal statute as a matter of law. Thus, someone caught redhanded with counterfeit trademarks walked free.

H.R. 32 closes this loophole by amending title 18, section 2320 of the United States Code to criminally prohibit the trafficking, or attempt to traffic, in ``labels, patches, stickers'' and generally any item to which a counterfeit mark has been applied. In so doing, H.R. 32 provides U.S. Department of Justice prosecutors with the means not only to prosecute individuals trafficking in counterfeit goods or services but also individuals trafficking in labels, patches, and the like that are later applied to goods.

Congress must act expeditiously to protect U.S. held trademarks to the fullest extent of the law. The recent 10- count indictment of 4 Massachusetts residents of conspiracy to traffic in approximately $1.4 million of counterfeit luxury goods in the case of U.S. v. Luong et al., 2005 D. Mass., underscores the need for this legislation. According to the indictment, law enforcement officers raided self- storage units earlier this year and found the units to hold approximately 12,231 counterfeit handbags; 7,651 counterfeit wallets; more than 17,000 generic handbags and wallets; and enough counterfeit labels and medallions to turn more than 50,000 generic handbags and wallets into counterfeits. Although the U.S. Attorney's Office was able to pursue charges of trafficking and attempting to traffic in counterfeit handbags and wallets, they could not able to bring charges for trafficking and attempting to traffic in the more than 50,000 counterfeit labels and medallions. As such, these defendants will escape prosecution that would have otherwise been illegal if they had only been attached to an otherwise generic bag. This simply does not make sense and had the Stop Counterfeiting in Manufactured Goods Act of 2005 been in effect at the time of indictment, U.S. prosecutors would have been able to bring charges against the defendants for trafficking and attempting to traffic in not only counterfeit goods but also counterfeit labels.

As Assistant Attorney General Alice Fisher said, ``Those who manufacture and sell counterfeit goods steal business from honest merchants, confuse or defraud honest consumers, and illegally profit on the backs of honest American workers and entrepreneurs.'' This point is underscored by the Bureau of Customs and Border Protection estimate that trafficking in counterfeit goods costs the United States approximately $200-$250 million annually. With each passing year, the United States loses millions of dollars in tax revenues to the sale of counterfeit goods. Further, each counterfeit item that is manufactured overseas and distributed in the United States costs American workers tens of thousands of jobs. With counterfeit goods making up a growing 5 to 7 percent of world trade, this is a problem that we can no longer ignore.

To be sure, counterfeiting is not limited to the popular designer goods that we have all seen sold on corners of just about every major metropolitan city in the United States. Counterfeiting has a devastating impact on a broad range of industries. In fact, for almost every legitimate product manufactured and sold within the United States, there is a parallel counterfeit product being sold for no more than half the price. These counterfeit products range from children's toys to clothing to Christmas tree lights. More frightening are the thousands of counterfeit automobile parts, batteries, and electrical equipment that are being manufactured and placed into the stream of commerce with each passing day. I am told that the level of sophistication in counterfeiting has reached the point that you can no longer distinguish between the real and the counterfeit good or label with the naked eye. However, just because these products look the same does not mean that they have the same quality characteristics. The counterfeit products are not subject to the same quality controls of legitimate products, resulting in items that are lower in quality and likely to fall apart. In fact, counterfeit products could potentially kill unsuspecting American consumers.

In addition to closing the ``counterfeit label loophole,'' the Stop Counterfeiting in Manufactured Goods Act strengthens the Criminal Code and provides heightened penalties for those trafficking in counterfeit marks. Current law does not provide for the seizure and forfeiture of counterfeit trademarks, whether they are attached to

goods or not. Therefore, many times such counterfeit goods are seized one day, only to be returned and sold to an unsuspecting public. To ensure that individuals engaging in the practice of trafficking in counterfeit marks cannot reopen their doors, H.R. 32 establishes procedures for the mandatory seizure, forfeiture, and destruction of counterfeit marks prior to a conviction. Further, it provides for procedures for the mandatory forfeiture and destruction of property derived from or used to engage in the trafficking of counterfeit marks.

When this legislation was sent over to the Senate from the House, concerns were raised to Senator Leahy and myself about the language in Section 2(b)(1)(B) of this bill pertaining to the forfeiture authority of the U.S. Department of Justice. In focusing our attention to this section, we discussed the scope of the facilitation language, which parallels the drug and money laundering forfeiture language in 21 U.S.C. 853 and 18 U.S.C. 982, respectively, and how it might relate to Internet marketplace companies, search engines, and ISPs. Specifically, we were aware of concerns regarding the potential misapplication of the facilitation language in section 2(b)(1)(B) to pursue forfeiture and seizure proceedings against responsible Internet marketplace companies that serve as third party intermediaries to online transactions.

As Senator Leahy is aware, periodically the Sentencing Commission has sought to update the Federal sentencing guidelines upon the periodic directive of Congress to reflect and account for changes in the manner in which intellectual property offenses are committed. The recent amendments to which you refer were promulgated by the Sentencing Commission pursuant to the authorization in the Family Entertainment and Copyright Act of 2005, also known as FECA. These amendments to the Federal sentencing guidelines, which took effect on October 24, 2005, address changes in penalties and definitions for intellectual property rights crimes, particularly those involving copyrighted prerelease works and issues surrounding ``uploading.'' For example, these guidelines provide for a 25 percent increase in sentences for offenses involving prerelease works. In addition, the Commission revised its definition of ``uploading'' to ensure that the guidelines are keeping up with technological advances in this area.

I would like to make it clear for the record that the directive to the Sentencing Commission in section 3 of H.R. 32 is not meant as disapproval of the Commission's recent actions in response to FECA. Rather, section 3 covers other intellectual property rights crimes that Congress believes it is time for the Commission to revisit. Specifically, section 3 directs the Commission to review the guidelines, and particularly the definition of ``infringement amount,'' to ensure that offenses involving low-cost items like labels, patches, medallions, or packaging that are used to make counterfeit goods that are much more expensive are properly punished. It also directs the Commission to ensure that the penalty provisions for offenses involving all counterfeit goods or services or devices used to facilitate counterfeiting are properly addressed by the guidelines. As it did in response to the No Electronic Theft Act of 1997 and FECA, I am confident that the Commission will ensure that the Federal sentencing guidelines provide adequate punishment and deterrence for these very serious offenses, and I look forward to the Commission's response to this directive.

At this point, I would like to take this opportunity to thank like to thank Representative Jim Sensenbrenner, Chairman of the House Judiciary Committee, and Representative Joe Knollenberg for their leadership in the House with regard to H.R. 32. In January of 2005, Representative Knollenberg introduced H.R. 32 in the House. When the bill was in Committee, he fostered negotiations between the Department of Justice, the U.S. Chamber of Commerce, and the International Trademark Association to ensure that it passed the House. I would also like to thank my colleague Senator Leahy, ranking member of the Senate Judiciary Committee, and Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich for their cosponsorship of S. 1699, the companion legislation to H.R. 32. It is through the hard work of all of these Members that we were able to achieve truly bipartisan support for language that will ensure the protection of American-held trademarks.

Mr. President, I want to take a moment to speak about S. 1699, the Stop Counterfeiting in Manufactured Goods Act of 2005, a bill I have sponsored with Senator Leahy and fifteen other cosponsors-- Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich.

The Stop Counterfeiting in Manufactured Goods Act addresses a problem that has reached epidemic proportions as a result of a loophole in our criminal code: the trafficking in counterfeit labels. Criminal law currently prohibits the trafficking in counterfeit trademarks ``on or in connection with goods or services.'' However, it does not prohibit the trafficking in the counterfeit marks themselves. As such, there is nothing in current law to prohibit an individual from selling counterfeit labels bearing otherwise protected trademarks within the United States.

This loophole was exposed by the Tenth Circuit Court of Appeals in United States v. Giles, 213 F.3d 1247--10th Cir. 2000. In this case, the United States prosecuted the defendant for manufacturing and selling counterfeit Dooney & Bourke labels that third parties could later affix to generic purses. Examining Title 18, section 2320, of the United States Code, the Tenth Circuit held that persons who sell counterfeit trademarks that are not actually attached to any ``goods or services'' do not violate the federal criminal trademark infringement statute. Since the defendant did not attach counterfeit marks to ``goods or services,'' the court found that the defendant did not run afoul of the criminal statute as a matter of law. Thus, someone caught red-handed with counterfeit trademarks walked free.

S. 1699 closes this loophole by amending Title 18, section 2320 of the United States Code to criminally prohibit the trafficking, or attempt to traffic, in ``labels, patches, stickers'' and generally any item to which a counterfeit mark has been applied. In so doing, S. 1699 provides U.S. Department of Justice prosecutors with the means not only to prosecute individuals trafficking in counterfeit goods or services, but also individuals trafficking in labels, patches, and the like that are later applied to goods.

Congress must act expeditiously to protect U.S. held trademarks to the fullest extent of the law. The recent ten count indictment of four Massachusetts residents of conspiracy to traffic in approximately $1.4 million of counterfeit luxury goods in the case of U.S. v. Luong et al., 2005 D. Mass. underscores the need for this legislation. According to the indictment, law enforcement officers raided self-storage units earlier this year and found the units to hold approximately 12,231 counterfeit handbags; 7,651 counterfeit wallets; more than 17,000 generic handbags and wallets; and enough counterfeit labels and medallions to turn more than 50,000 generic handbags and wallets into counterfeits. Although the U.S. Attorneys Office was able to pursue charges of trafficking and attempting to traffic in counterfeit handbags and wallets, they could not bring charges for trafficking and attempting to traffic in the more than 50,000 counterfeit labels and medallions. As such, these defendants will escape prosecution that would have otherwise been illegal if they had only been attached to an otherwise generic bag. This simply does not make sense and had the Stop Counterfeiting in Manufactured Goods Act of 2005 been in effect at the time of indictment, U.S. prosecutors would have been able to bring charges against the defendants for trafficking and attempting to traffic in not only counterfeit goods, but also counterfeit labels.

As Assistant Attorney General Alice Fisher said, ``Those who manufacture and sell counterfeit goods steal business from honest merchants, confuse or

defraud honest consumers, and illegally profit on the backs of honest American workers and entrepreneurs.'' This point is underscored by the Bureau of Customs and Border Protection estimate that trafficking in counterfeit goods costs the United States approximately $200 to $250 million annually. With each passing year, the United States loses millions of dollars in tax revenues to the sale of counterfeit goods. Further, each counterfeit item that is manufactured overseas and distributed in the United States costs American workers tens of thousands of jobs. With counterfeit goods making up a growing 5-7 percent of wor1d trade, this is a problem that we can no longer ignore.

To be sure, counterfeiting is not limited to the popular designer goods that we have all seen sold on comers of just about every major metropolitan city in the United States. Counterfeiting has a devastating impact on a broad range of industries. In fact, for almost every legitimate product manufactured and sold within the United States, there is a parallel counterfeit product being sold for no more than half the price. These counterfeit products range from children's toys to clothing to Christmas tree lights. More frightening are the thousands of counterfeit automobile parts, batteries, and electrical equipment that are being manufactured and placed into the stream of commerce with each passing day. I am told that the level of sophistication in counterfeiting has reached the point that you can no longer distinguish between the real and the counterfeit good or label with the naked eye. However, just because these products look the same does not mean that they have the same quality characteristics. The counterfeit products are not subject to the same quality controls of legitimate products, resulting in items that are lower in quality and likely to fall apart. In fact, counterfeit products could potentially kill unsuspecting American consumers.

In addition to closing the ``counterfeit label loophole,'' the Stop Counterfeiting in Manufactured Goods Act strengthens the criminal code and provides heightened penalties for those trafficking in counterfeit marks. Current law does not provide for the seizure and forfeiture of counterfeit trademarks, whether they are attached to goods or not. Therefore, many times such counterfeit goods are seized one day, only to be returned and sold to an unsuspecting public. To ensure that individuals engaging in the practice of trafficking in counterfeit marks cannot reopen their doors, S. 1699 establishes procedures for the mandatory seizure, forfeiture, and destruction of counterfeit marks prior to a conviction. Further, it provides for procedures for the mandatory forfeiture and destruction of property derived from or used to engage in the trafficking of counterfeit marks.

In crafting the language in Section 2(b)(I)(B) of this bill pertaining to the forfeiture authority of the U.S. Department of Justice, Senator Leahy and I discussed the scope of the facilitation language, which parallels the drug and money laundering forfeiture language in 21 U.S.C. 853 and 18 U.S.C. 982, respectively, and how it might relate to Internet marketplace companies, search engines, and ISPs. Specifically, we were aware of concerns regarding the potential misapplication of the facilitation language in Section 2(b)(1)(B) to pursue forfeiture and seizure proceedings against responsible Internet marketplace companies that serve as third party intermediaries to online transactions. To this end, I would like to make it clear for the record that this bill is not intended to apply to ``good actor'' Internet service providers that serve as third party intermediaries to online transactions and take demonstrable steps to prevent the exchange or trafficking of counterfeit goods on their networks.

Does Senator Leahy agree?

As the Senator is aware, the Sentencing Commission has sought to update the Federal sentencing guidelines upon the periodic directive of Congress to reflect and account for changes in the manner in which intellectual property offenses are committed. The recent amendments to which you refer were promulgated by the Sentencing Commission pursuant to the authorization in the Family Entertainment and Copyright Act of 2005, also known as FECA. These amendments to the Federal sentencing guidelines, which took effect on October 24, 2005, address changes in penalties and definitions for intellectual property rights crimes, particularly those involving copyrighted pre-release works and issues surrounding ``uploading.'' For example, these guidelines provide for a 25-percent increase in sentences for offenses involving pre-release works. In addition, the Commission revised its definition of ``uploading'' to ensure that the guidelines are keeping up with technological advances in this area.

I would like to make it clear for the record that the directive to the Sentencing Commission in Section 3 of S. 1699 is not meant as disapproval of the Commission's recent actions in response to FECA. Rather, Section 3 covers other intellectual property rights crimes that Congress believes it is time for the Commission to revisit. Specifically, Section 3 directs the Commission to review the guidelines, and particularly the definition of ``infringement amount,'' to ensure that offenses involving low-cost items like labels, patches, medallions, or packaging that are used to make counterfeit goods that are much more expensive, are properly punished. It also directs the Commission to ensure that the penalty provisions for offenses involving all counterfeit goods or services, or devices used to facilitate counterfeiting are properly addressed by the guidelines. As it did in response to the No Electronic Theft Act of 1997 and FECA, I am confident that the Commission will ensure that the Federal sentencing guidelines provide adequate punishment and deterrence for these very serious offenses and I look forward to the Commission's response to this directive.

I would like to take this opportunity to thank Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow and Voinovich for their co-sponsorship.

I would also like to thank Representative Jim Sensenbrenner, chairman of the House Judiciary Committee, and Representative Joe Knollenberg for their leadership in the House with regard to H.R. 32, counterfeiting legislation directly related to S. 1699. In January of this year, Representative Knollenberg introduced H.R. 32, the initial draft of the Stop Counterfeiting in Manufactured Goods Act of 2005, in the House. When the bill was in Committee, he fostered negotiations between the Department of Justice, the U.S. Chamber of Commerce, and the International Trademark Association to craft language nearly paralleling S. 1699. I commend to my colleagues the Housing Judiciary Committee Report on H.R. 32, as amended.

Mr. President, Section 2(b)(1)(B) authorizes U.S. Attorneys to pursue civil in rem forfeiture proceedings against ``any property used, in any manner or part, to commit or to facilitate the commission of a violation of subsection (a).'' The intent of this language is to provide attorneys and prosecutors with the authority to bring a civil forfeiture action against the property of bad actors who are facilitating trafficking or attempts to traffic in counterfeit marks. The forfeiture authority in Section 2(b)(1)(B) cannot be used to pursue forfeiture and seizure proceedings against the computer equipment, website or network of responsible Internet marketplace companies, who serve solely as a third party to transactions and do not tailor their services or their facilities to the furtherance of trafficking or attempts to traffic in counterfeit marks. However, these Internet marketplace companies must make demonstrable good-faith efforts to combat the use of their systems and services to traffic in counterfeit marks. Companies must establish and implement procedures to take down postings that contain or offer to sell goods, services, labels, and the like in violation of this act upon being made aware of the illegal nature of these items or services.

It is the irresponsible culprits that must be held accountable. Those who profit from another's innovation have proved their creativity only at escaping responsibility for their actions. As legislators it is important that we provide law enforcement with the tools needed to capture these thieves.

I say to Senator Specter, it is also my understanding that the U.S. Sentencing Commission recently promulgated new Federal sentencing guidelines to account for the changes in how intellectual property crimes are committed. Could the Senator clarify for the record why we have authorized the U.S. Sentencing Commission to further amend the Federal sentencing guidelines and policy statements for crimes committed in violation of title 18, section 2318 or 2320, of the United States Code?

I say to Senator Specter, thank you for that clarification. As you are aware, there has been overwhelming support for this legislation. It has been very heartening to see such overwhelming support for this important bill. Counterfeiting is a threat to America. It wreaks real harm on our economy, our workers, and our consumers. This bill is a tough bill that will give law enforcement improved tools to fight this form of theft. The bill is short and straightforward, but its impact should be profound and far reaching.

Some of our most important legislation is produced not only when we reach across the aisle in the name of bipartisanship, but when we work across Chambers and reach true consensus. I would also like to thank Senators Alexander, Bayh, Brownback, Coburn, Cornyn, DeWine, Durbin, Feingold, Feinstein, Hatch, Kyl, Levin, Reed, Stabenow, and Voinovich for their cosponsorship of the Senate companion legislation. Counterfeiting is a serious problem that does not lend itself to a quick and easy solution. This legislation is an important step towards fighting counterfeiting. I hope we can build on the success of this law.

Mr. President, I am pleased to join with Senator Cornyn in another of our bipartisan efforts to improve the lives of Americans through effective and efficient Government. The Protecting American Goods and Services Act of 2005, which was passed unanimously out of the Senate last November as S. 1095, is now part of a package that includes the Stop Counterfeiting in Manufactured Goods Act, which I co-sponsored with Senator Specter as S. 1699. The Protecting American Goods and Services Act strengthens our ability to combat the escalating problem of counterfeiting worldwide. In order to effectively fight intellectual property theft, we need stiff penalties for counterfeiters and those who are caught with counterfeit goods with the intent to traffic their false wares. Ours is a short bill--indeed, it is only two pages long-- but it will have global implications in the fight against piracy.

Counterfeiting is a growing problem that costs our economy hundreds of billions of dollars every year and has been linked to organized crime, including terrorist organizations. According to the International Anti-Counterfeiting Coalition, counterfeit parts have been discovered in helicopters sold to NATO, in jet engines, bridge joints, brake pads, and fasteners in equipment designed to prevent nuclear reactor meltdowns. The World Health Organization estimates that the market for counterfeit drugs is about $32 billion each year.

Several years ago, Senator Hatch joined me in sponsoring the Anti- Counterfeiting Consumer Protection Act of 1996, which addressed counterfeiting by amending several sections of our criminal and tariff codes. That law made important changes, particularly by expanding RICO, the Federal antiracketeering law, to cover crimes involving counterfeiting and copyright and trademark infringement: Then, as now, trafficking in counterfeit goods hurts purchasers, State and Federal Governments, and economies at every level.

Perhaps most disturbingly, the U.S. Customs Service reports that terrorists have used transnational counterfeiting operations to fund their activities: The sale of counterfeit and pirated music, movies, software, T-shirts, clothing, and fake drugs ``accounts for much of the money the international terrorist network depends on to feed its operations.''

Last year, as in years past, I worked with Senator Allen on an amendment to the Foreign Operations bill that provides the State Department with vital resources to combat piracy of U.S. goods abroad. The bill we ultimately passed included $3 million for this important purpose. Yet more work both at home and abroad remains. When you consider that the economic impact of tangible piracy in counterfeit goods is estimated to be roughly $350 billion a year and to constitute between 5 percent and 7 percent of worldwide trade, a few million dollars is a worthwhile investment.

We have certainly seen how this form of theft touches the lives of hard-working Vermonters. Burton Snowboards is a small company, whose innovation has made it an industry leader in snowboarding equipment and apparel. Unfortunately, knock-off products carrying Burton's name have been found across the globe. Vanessa Price, a representative of Burton, testified about counterfeiting at the Judiciary Committee's March 23, 2004, hearing on this topic. In addition to learning about the economic costs of counterfeiting, I asked her after the hearing about the risks posed to consumers by these goods. Her answer was chilling:

In the weeks since my Senate testimony, I discovered a

shipment of counterfeit Burton boots for sale through a

discount sports outfit . . . After examining the poor quality

of the counterfeit boots, we determined that anyone using the

boots for snowboarding risks injury due to a lack of

reinforcement and support in the product's construction.

Customers and businesses lose out to counterfeiters in other ways, too. SB Electronics in Barre, VT, has seen its capacitors reverse engineered and its customers lost to inferior copycat models. Vermont Tubbs, a furniture manufacturer in Rutland, has seen its designs copied, produced offshore with inferior craftsmanship and materials, and then reimported, so that the company is competing against cheaper versions of its own products. And Hubbardton Forge in Castleton, VT, has seen its beautiful and original lamps counterfeited and then sold within the United States at prices--and quality--far below their own. This is wrong. It is unfair to consumers who deserve the high quality goods they think they are paying for, and it is unfair to innovators who play by the rules and deserve to profit from their labor.

This bill helps to combat this growing scourge.

S. 1095 criminalizes the possession of counterfeit goods with the intent to sell or traffic in those goods, and it expands the definition of ``traffic'' to include any distribution of counterfeits with the expectation of gaining something of value--criminals should not be able to skirt the law simply because they barter illegal goods and services in exchange for their illicit wares. Finally, the bill will criminalize the importation and exportation of counterfeit goods, as well as of bootleg copies of copyrighted works into and out of the United States.

By tying off these loopholes and improving U.S. laws on counterfeiting, we are sending a powerful message to the criminals who belong in jail, and to our innovators.

Mr. Speaker, I rise today in support of my bill, H.R. 32, the ``Stop Counterfeiting in Manufactured Goods Act.'' This legislation will help stop the scourge of counterfeit manufactured goods.

Let me thank the Committee on the Judiciary in its entirety, particularly the gentleman from Wisconsin (Chairman Sensenbrenner) for all of his assistance, the subcommittee chairmen, the gentleman from North Carolina (Mr. Coble) and the gentleman from Texas (Mr. Smith), and the majority leader for his leadership in bringing the bill to the floor today.

Most people understand that counterfeit goods is a problem, but many people do not understand how severe the problem is and how severe it has become. Counterfeiters are endangering consumers, are stealing jobs and money away from legitimate companies, destroying brand names and requiring costly investigations. The numbers are staggering, in addition to safety issues, and it has been mentioned about counterfeit auto parts, but they cost the automotive supplier over $12 billion annually. It has been estimated if these losses were eliminated, the industry could hire some 200,000 additional workers.

The impact of counterfeiters affects almost every manufacturing industry in the country, including clothing, batteries, electronics and even pharmaceuticals. When it comes to the economy, the U.S. Customs Service has estimated that counterfeiting resulted in the loss of some 750,000 jobs and cost the U.S. around $20 billion annually. It is estimated almost 7 percent of world trade is counterfeit.

My bill has two key provisions that will help address the problem. The first provision is the most important. It requires the mandatory destruction and forfeiture of the equipment and materials used to make counterfeit goods.

Under current law, a convicted trademark counterfeiter is only required to give up the actual counterfeit goods, not the machinery used to make those goods. My bill would prohibit trafficking in counterfeit labels, patches, and medallions.

Passing this bill will send a signal to counterfeiters around the world that the U.S. will fight this growing problem. This bill will give prosecutors more tools to go after the criminals and punish them severely. This legislation also addresses the global problem, and has the widespread support of the MEMA, NEMA, and the U.S. Chamber of Commerce.

Mr. Speaker, I rise today in support of my bill, H.R. 32--the ``Stop Counterfeiting in Manufactured Goods Act.'' This legislation will help stop the scourge of counterfeit manufactured goods.

Let me thank the Judiciary Committee, including Chairman Sensenbrenner, Subcommittee Chairman Coble and Subcommittee Chairman Lamar Smith. They've all provided important leadership to bring this bill to the floor today. I'd also like to thank the leadership, including Majority Leader DeLay, for their help in getting this bill through the process.

The economy of my district is largely centered on the auto industry, particularly auto suppliers. In fact, my district includes the headquarters of over one-fourth of the 100 largest auto suppliers in North America, as well as a host of small suppliers.

To say that the manufacturing sector is important to my district and to the State of Michigan is an understatement. In my district alone, there are more than 1,500 manufacturing entities, and over 90 percent of them have less than 100 employees.

Most people understand that counterfeit goods are a problem. But many people don't understand just how severe the problem has become.

Early last year, I was made aware of the serious and growing problem of counterfeit auto parts. What I found out was the counterfeiters are making all sorts of fake parts including brake pads, spark plugs, old filters, and in one case even an entire car. I was struck by how large an impact counterfeiters are having on the auto supplier industry.

The numbers, in fact, are staggering. In addition to the obvious safety issues, counterfeit automobile parts cost the automotive supplier industry over $12 billion annually. It's estimated that if these losses were eliminated, and those sales were brought into legitimate companies, the auto industry could hire 200,000 additional workers. It's important to remember those numbers, because counterfeiting is not a victimless crime.

In addition to selling bogus products, the counterfeiters are stealing jobs and money away from legitimate companies, destroying brand names, increasing warranty claims, and requiring legal fees and costly investigations.

The fight against counterfeiters is not limited to the automotive industry. The impact of counterfeiters is broad and affects just about every manufacturing industry in the country--including clothing, batteries, electronics, and even pharmaceuticals.

When it comes to the economy overall, the U.S. Customs Service has estimated that counterfeiting has resulted in the loss of 750,000 jobs and costs the United States around $200 billion annually. The International Chamber of Commerce estimates that seven percent of the world's trade is in counterfeit goods and that the counterfeit market is worth $350 billion. We must provide more tools to fight counterfeiters, not only for the economy, but for the safety of our consumers.

My bill has two key provisions that will help stop criminals who use counterfeit trademarks.

The first provision is the most important and gets at the roots of the problem--it requires the mandatory destruction and forfeiture of the equipment and materials used to make the counterfeit goods.

Under current law, a convicted trademark counterfeiter is only required to give up the actual counterfeit goods, not the machinery used to make those goods. If we don't take away the equipment used to make the fake goods, what's to stop the criminals from going back to make more? My bill would require the convicted criminals to give up not just the counterfeit goods, but also the equipment they used to make those goods. This will help to dig up the counterfeiting networks by the roots.

In addition to this provision, my bill also prohibits trafficking in counterfeit labels, patches, and medallions.

Under current law, it is legal to make and sell these items if they are not attached to a particular counterfeit good. This just doesn't make sense. Why would counterfeiters make these labels, if not for the chance at illegal profits?

This bill will send a signal to counterfeiters that the United States is serious about fighting this growing problem. Passing this bill will give prosecutors more tools to go after the criminals here in the U.S. and punish them severely.

This bill is also necessary to address the problem globally. Most of the counterfeit goods are being manufactured in other countries, particularly China. Some countries are better than others at fighting counterfeiting, but we need to have ways to prod the stragglers. However, we can't demand that other countries take steps to combat trademark counterfeiting that we have not taken ourselves.

So, by passing my bill and improving our own law, Congress will empower our trade negotiators to press for stronger anti-counterfeiting provisions in other countries. We will show the world that the United States is serious about putting counterfeiters out of business for good.

This bill has broad support, including the U.S. Chamber of Commerce, the National Association of Manufacturers, the Motor and Equipment Manufacturers Association, the National Electrical Manufacturers Association, the IACC, International Trademark Association and a host of major associations and corporations.

As I have outlined, counterfeiting is a very serious worldwide problem that threatens public safety, hurts the U.S. economy and costs Americans thousands of manufacturing jobs. No one supports counterfeiters, and we must do everything we can to eliminate the problem.

For these reasons, Mr. Speaker, I respectfully urge my colleagues to support H.R. 32, the Stop Counterfeiting in Manufactured Goods Act, and I yield back the remainder of my time.