Secure America's Homes and Businesses Act of 2005

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.

Mr. Speaker, I rise in support of this legislation that concerns such an important matter that affects interstate commerce as referenced in Article I, Section 8 of the United States Constitution. The Committee on the Judiciary rightly exercised oversight over the issue of counterfeiting products and conspiring to commit retail theft, and I applaud the gentleman from Michigan for having crafted legislation that has garnered bipartisan support.

Similar legislation, namely H.R. 3632, the ``Anti-Counterfeiting Amendments Act of 2003'' in the 108th Congress, passed under suspension of the rules and became law, and I supported it. That measure regulated the trafficking of certain security components of products, for example, Certificates of Authenticity (COAs). Now that it has become law, piracy of these security markers, which are the source of each product's value, will be discouraged by way of criminal consequences.

In the context of discussing H.R. 3632, I cited a situation in Texas in which a crime ring was implicated for the import of over 100 million counterfeit cigarettes by mislabeling shipping documents and indicating that they were importing toys or plastic parts. That crime threatened the copyright royalties of property owners.

However, this legislation extrapolates that aspect of criminal activity by inserting the possibility that unsafe products as well as counterfeit products could be circulated in the flow of interstate commerce.

Last year, U.S. Immigration and Customs Enforcement officials seized fake goods valued at $22 million in the Houston area alone. Federal inspectors now work to curtail the flow of fake Louis Vuitton and Coach handbags and other items coming from Houston, which lags behind only New York and Los Angeles in supplying counterfeit products to the rest of the nation. Furthermore, during Super Bowl XXXVIII that was held in Houston this past year, NFL investigators seized about 1,000 counterfeit products in Houston that were peddled by two vendors.

Therefore, the subject matter of this bill is of great importance to me. This bill is largely bi-partisan; however, we have a duty to ensure that its provisions are narrowly tailored before passing them into law.

At the Committee level, I had questions regarding the intended scope of search and seizure law and how H.R. 32 proposes to change it. One question that I posed relates to the property forfeiture provision found on page 3, line 21 of the bill as drafted. Subparagraphs (A) and (B) are conjunctive so as to require both findings before a forfeiture would follow--how proposes to prevent law enforcement from seizing the property of an innocent person (assuming it is in possession or use by the perpetrator of the underlying offense). I hope that this legislation is clear in its provisions to jurists in order to prevent future appellate litigation that can be both costly and time consuming--to the detriment of bona fide claimants.

Another question I posed goes to the matter of restitution. Section 2, page 4, lines 15-16 would require one convicted of the offense in question to pay restitution damages to the ``victim'' as defined in Title 18, Section 3663(A)(2):

a person directly and proximately harmed as a result of the

commission of an offense for which restitution may be ordered

including, in the case of an offense that involves as an

element a scheme, conspiracy, or pattern of criminal

activity, any person directly harmed by the defendant's

criminal conduct in the course of the scheme, conspiracy, or

pattern.

(emphasis added). I queried whether the drafter of this bill contemplate those proximately harmed by the perpetration of the crimes enumerated to include state governments. As I cited earlier in my statement, criminals trafficked over 1,000 counterfeit products in the stream of commerce and caused the State of Texas, among others, to lose significant revenues.

I believe that H.R. 32 can provide much needed legislative protection of the American consumer and of the owners of intellectual and licensed property.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and to include extraneous material on H.R. 32, the bill currently under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 32, the Stop Counterfeiting in Manufactured Goods Act. This legislation will facilitate efforts by the Department of Justice to prosecute those who exploit the good names of companies by attaching counterfeit marks to substandard products.

This is a serious problem. Legitimate businesses work hard to build public trust and confidence in their products. When a legitimate company's name is attached to counterfeit products that are not authorized by the company to bear that name, the company suffers losses not only to its bottom line but to its reputation as well.

In addition, counterfeit products are often purchased unwittingly by consumers who have come to rely on the quality of the product by a company they know and trust. Instead, what they receive is a low- quality, often dangerous imitation. Some of these products are such poor imitations of the original that they have caused physical harm to consumers.

The FBI has identified counterfeit goods in a wide range of products, including pharmaceuticals, automobile parts, airport parts, baby formulas, and children's toys. The U.S. automobile industry has reported a number of instances of brake failure caused by counterfeit brake pads manufactured from wooden chips. Counterfeits of other products, such as prescription or over-the-counter medications, may have serious health consequences if they are used by an unsuspecting consumer.

Under this legislation, section 2320 of title 18 would be expanded to include penalties for those who traffic in counterfeit labels, symbols, or packaging of any type knowing that a counterfeit mark has been applied. Additionally, this legislation would require the forfeiture of any property derived directly or indirectly from the proceeds of the violations as well as any property used or intended to be used in relation to the offense. The legislation also requires that restitution be paid to the owner of the mark which was counterfeited.

By mid-fiscal year 2003, the Department of Homeland Security had already reported 3,117 seizures of counterfeit-branded goods, including cigarettes, books, apparel, hand bags, toys, and electronic games, with an estimated street value of $38 million. Fortune 500 companies are spending between $2 million and $4 million each and every year to fight counterfeiters.

The counterfeiting of manufactured goods produces staggering losses to businesses across the United States and around the world. Counterfeit products deprive the Treasury of tax revenues, add to the national trade deficit, subject consumers to health and safety risks, and leave consumers without any legal recourse when they are

financially or physically injured by counterfeit products.

In addition, established links between counterfeiting, terrorism, and organized crime have made this a priority for Federal law enforcement agencies. H.R. 32 will provide another tool for the Federal Government to stop the wave of counterfeit products flooding the marketplace.

This legislation has broad bipartisan support. It was amended in the Committee on the Judiciary to ensure only those individuals who are operating with an intent to deceive or confuse the consumer by attaching counterfeit labeling or packaging will be held criminally liable.

I urge my colleagues to support this very important piece of legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentleman from Virginia (Mr. Goodlatte).

Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. Knollenberg), the principal sponsor of the bill.

(Mr. KNOLLENBERG asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I rise in support of this legislation and thank the Chairman and his staff for working with us to ensure the bill does not overreach.

The bill was designed to target illegitimate actors who trade in counterfeit marks. We all agree that manufacturers have a right to ensure that fake goods are not marketed in their names and that their own goods are not marketed under fake names.

The bill as originally written, however, could have been construed by some as going further than that. It left as an open question whether someone other than the manufacturer could affix marks to goods that correctly identify the source of the goods. This ambiguity could have had a negative impact on the parallel market, in which third parties lawfully obtain goods and make them available in discount stores. Not only has this practice been upheld by the Supreme Court, but it also saves consumers billions of dollars each year.

Fortunately, H.R. 32 was amended in the full committee pursuant to an amendment offered by Representative Wexler to clarify that the legislation is not intended to be relied upon as a weapon against the secondary discount marketplace to the detriment of American consumers-- consumers dependent upon the price options and competition afforded by alternative sources of genuine goods.

In particular, H.R. 32 was amended to specifically protect lawful repackaging of genuine goods by ensuring that any such third party repackaging, not intended to deceive or confuse, is specifically saved from criminal prosecution under this Act. The Committee specifically agreed that combining single genuine products into gift sets, separating combination set of genuine goods into individual items for resale, inserting coupons into original packaging or repackaged items, affixing labels to track or otherwise identify genuine products and removing genuine goods from original packaging for customized retail displays were not covered by the legislation as they provide important value to American consumers.

I am happy to report that the final language ensures that H.R. 32 adequately protects lawful American businesses, including those servicing the discount marketplace, while, at the same time punishes illicit counterfeiting activity. As a result of these good faith negotiations, we now have a bill that protects manufacturers, targets illegitimate actors, and leaves a legitimate industry unscathed.

I urge a ``yes'' vote on this legislation.

Mr. Speaker, I yield myself such time as I may consume.

I rise in support of this legislation. H.R. 32 is aimed at criminals who traffic in counterfeit labels and packaging rather than the products themselves.

Many counterfeit products are labeled with brand names or trademarks that consumers know and trust. However, under current law, trafficking in counterfeit labels is not illegal if the labels are not affixed to the counterfeit products. Counterfeiters have exploited this by importing the counterfeit labels and products separately, and then affixing the labels in the United States.

This bill expands criminal penalties to include those who traffic in counterfeit labels and packaging. It also requires forfeiture of any property derived from the proceeds of the violation and requires restitution to the trademark owner.

At the same time, H.R. 32 now includes language that will ensure that criminal sanctions do not reach legitimate businesses that repackage goods or services with no intent to deceive or cause confusion.

The original bill left open the question of whether someone other than the manufacturer could affix marks to goods that could correctly identify the source. This confusion struck at the very heart of the parallel market in which third parties lawfully obtain goods and make them available in discount stores. Not only has this practice been upheld by the Supreme Court, but it also saves consumers billions of dollars each year.

I appreciate that the majority worked with us to address this concern. We now have a bill that protects manufacturers, targets illegitimate actors, protects consumers, and leaves the legitimate parallel market unscathed. Therefore, I urge a ``yes'' vote on this legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from Michigan (Mr. Levin), an original cosponsor of this bill.

Mr. Speaker, I yield back the balance of my time.