Issues: U.S. Customs Service Enforces Intellectual Property Rights

BG9539E | Date: 1995-12-24

Los Angeles -- The U.S. Customs Service balances enforcement of laws prohibiting intellectual property piracy with facilitation of legitimate trade, Customs officials say.

"Protection of intellectual property rights is a national trade-enforcement priority for the U.S. Customs Service," Anthony Votsis, a Customs special agent, recently told journalists at the Port of Los Angeles.

According to some estimates, piracy of copyrights, patents, trademarks and other intellectual property costs the U.S. economy some $200,000 million a year in lost revenue.

Yet Customs inspects only about 3 percent of the cargo arriving at U.S. seaports and airports because of limited money and staff, said Michael Fleming, an agency spokesman for the Pacific region.

If Customs tried to inspect all incoming cargo, Fleming said, legitimate trade would be shut down.

Therefore, Customs uses automation and certain criteria to select which high-risk cargoes should be inspected, Fleming said. At Los Angeles, he said, the main sources of counterfeit goods are China, Hong Kong, South Korea and Taiwan, and the main counterfeit products include toys, apparel and footwear.

Selective inspections and investigations have been relatively successful, Votsis said. In September 1995, for example, as a result of a 30-month U.S. Customs Service investigation, 43 Korean nationals were indicted for manufacturing, importing and distributing counterfeit goods. More than $27 million in counterfeit goods were seized, including imitation Georgio Armani purses and designer pens.

Customs cargo examiner Sue Paul showed journalists some devices that counterfeiters use to avoid detection. For example, one sewed a felt decal over the imitation Ocean Pacific logo on shirts, she said. Another sewed inexpensive fabric over the entire surface of counterfeit Louis Vuitton purses.

U.S. distributors who receive such goods know what they're getting, removing the decal or covering material to market the counterfeits, Paul said.

U.S. companies are helpful in training Customs Service agents to identify goods that violate their trademarks or copyrights, spokesman Fleming added. One famous producer of ladies' purses imprints a unique number on each item; a load of counterfeits was identified because the purses all had the same number, he said.

According to Votsis, Customs Service investigations resulted in 106 arrests, 60 indictments and 58 convictions in 1994 as well as seizures of merchandise valued at $37 million.

Owners of registered trademarks and registered copyrights can record these rights with the Customs Service for a small fee, said Votsis, and 1,800 have been registered. Given the multitude of registered trademarks and copyrights, creation of a record at Customs increases the vigilance with which the right can be protected, added Customs Import Specialist Sean Frankel.

In general, items that violate the trademark or copyright of a good are essentially identical to it, while items that infringe the trademark or copyright are similar enough to the good to cause confusion.

Imports of items that violate these rights are subject to seizure and forfeiture as prescribed by Customs regulations. Items that infringe registered trademarks or copyrights are detained for 30 days while Customs seeks additional information, Frankel said.

Frankel noted that Customs also enforces the U.S. International Trade Commission's exclusion orders denying entry to imports that violate a patent or a semiconductor mask work.

Customs officials check advance shipping documents to determine whether expected cargoes pose a high risk of piracy, Fleming said, based on such factors as types of goods commonly counterfeited, locations known as common sources of counterfeits, and even manufacturers and distributors with a certain reputation.

The documents are compared with information on arriving airline passengers to determine whether individuals with a history of illegal activity are arriving about the same time as questionable cargo, Fleming added.

Votsis said that goods seized in Customs Service raids are sometimes destroyed. If possible, however, Fleming said, Customs arranges with intellectual property rights holders to donate seized goods to charity. Last year, he said, Customs released to charities goods valued at approximately $1 million from merchandise seized in Los Angeles. For example, about 1,000 counterfeit parkas were donated to the people of Bosnia.

"Customs refers all violations of the intellectual property rights cases to the U.S. attorney here in Los Angeles and throughout the country," Votsis said. U.S. law sets the penalty for a first offense at up to 10 years imprisonment and a fine of up to $2 million. For a second offense the penalties increase to not more than 20 years imprisonment and a fine of up to $5 million, he said.

Votsis said that anyone with information on goods being imported that infringe or violate intellectual property rights can contact the Customs Service at 1-800-ITS-FAKE.

Intellectual property rights such as patents, copyrights and trademarks are extended to the owners of ideas, inventions and creative expression, giving them the authority to exclude others from access to or use of their property. When the property is reproduced, used or distributed without permission, an infringement or violation of intellectual property rights has occurred.

Counterfeits are usually regarded as any goods, including packaging, bearing without authorization a trademark which is essentially identical to a validly registered trademark. Registered trademarks are used by manufacturers or traders to distinguish their goods from competing goods.

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