(Sandler and Travis)
Without fanfare, U.S.
Customs and Border Protection (CBP) has launched a new audit or post-entry verification program to determine if companies have sufficient internal controls to avoid importing goods in violation of
intellectual property rights (copyrights, trademarks, and patents). The new audit/verification program appears to be independent and separate from existing audit programs and their criteria (e.g., Focused
Assessment and Importer Self-Assessment). The remedial and punitive measures for importers scoring badly under the new program are under discussion.
A June 14 hearing before the Senate Committee on
Homeland Security and Governmental Affairs highlighted this and several other new measures that CBP is taking under the Strategy Targeting Organized Piracy (STOP) initiative to crack down on IPR violations.
Daniel Baldwin, Acting Assistant Commissioner for Strategic Trade, stressed that the increasing flood of infringing imports has prompted CBP to diversify its enforcement portfolio and move beyond traditional
methods.
Baldwin said that the audit/verification program is designed to (a) identify business practices that increase vulnerability to IPR violations and (b) determine the scope of a company's IPR
violations. CBP auditors review a variety of internal documentation, such as purchase records, product specifications, general and subsidiary ledgers, and payment records, and may also review other records
kept specifically by small businesses. Approximately two dozen companies have already been audited this year, and preliminary findings have uncovered violations among importers of electronics, toys,
textiles, and recreational motorized cycles.
CBP is conducting these audits based in part upon risks identified by a new statistical model for assessing IPR risks at U.S. borders. This model gives
significant emphasis to CBP's IPR enforcement and import data but also utilizes other government agency assessments on IPR risk (e.g., the USTR's Special 301 Report) as well as input from industry.
Other efforts CBP has undertaken as part of STOP include collaboration with the PTO to ease the recordation of registered marks with CBP and the issuance of proposed regulations that would facilitate better
enforcement of copyrights in sound recordings and motion pictures at the border.
Tuesday's hearing indicated that CBP could also be granted even more power to combat IPR violations. With piracy and
counterfeiting such a massive problem for U.S. companies, who rely heavily on their intellectual property innovations to distinguish themselves in the global marketplace, several Senators expressed concern
that existing enforcement measures might not be sufficient. They raised the possibility of implementing additional measures, such as prohibiting a company from importing if it is found to have an
overabundance of IPR infringing imports. CBP officials indicated that while they have no authority for such enforcement at this time, they would encourage Congress to pass laws providing them with such
authority.
STOP was launched in October 2004 as a joint program by the USTR and the Departments of Justice, Commerce, and Homeland Security. It aims to coordinate the IPR enforcement efforts of U.S.
and other government agencies, as well as industry participants, in response to the rising number of infringing products entering the U.S. According to the testimony given at the June 14 hearing, since 2000
the volume of CBP seizures of allegedly infringing imports has risen 124 per cent and the value of those seizures has jumped over 300 per cent. Testimony in favour of stronger government IPR enforcement
efforts was heard from representatives of CBP, the Department of Justice, the USTR, the U.S. Chamber of Commerce, the National Association of Manufacturers, and the PTO.
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