Speeches: Intellectual Property Enforcement Critical to Safeguarding Our Security, Promoting Innovation, and Advancing Economic Prosperity

Good morning!

I would like to start first by thanking Secretary General Jurgen Stock and INTERPOL for their kind invitation to join you today. And on behalf of the U.S. Department of State, I would like to thank both INTERPOL and the City of London for co-hosting this important conference.

I would also like to recognize the Secretary General, and Tim Morris, Executive Director Police Service, for their leadership and commitment to making the fight against illicit trade and illicit markets a priority in Lyon. The United States values our partnership with INTERPOL and with its members in combating the array of emerging threats that imperil our collective security.

Mike [Ellis], thank you too for helping organize this wonderful conference, for your commitment over the years at INTERPOL to strengthening international cooperation on these important issues, and to Underwriters Laboratories for your support of this conference, and long-running support of pro-consumer enforcement efforts around the globe.

It is an honor to speak at this most prestigious venue – a meeting place that helped London and the United Kingdom to embark on a remarkable path to prosperity and influence around the world.

In today’s rapidly moving inter-dependent world, which at times can be turbulent, there is no doubt that markets from London to New York to Tokyo will continue to weather challenging storms as we move toward brighter horizons.

No one alone can navigate and solve the multitude of geopolitical risks, security threats, and market shocks that confronts our world. It takes a network of networks to do so.

This morning, I would like to share a few thoughts on some of the important issues that will be discussed over the next two days, and encourage all of us to examine the interconnections of security threats and illicit markets through a prism of convergence.

The Dangers of the Global Illegal Economy and Converging Threats

The growth of the global illicit economy is one of the most daunting challenges we face today.

The global illicit economy is experiencing a boom across a wide spectrum of activities: narcotics, kidnapping-for-ransom, arms trafficking, human smuggling and trafficking, the trade in stolen and counterfeit goods, smuggling of antiquities and cultural artifacts, bribery, and money laundering, to name just a small cross-section.

According to some estimates, the illicit economy accounts for 8 to 15 percent of world GDP and in many developing countries it likely accounts for even higher percentages of economic activity.

The illicit economy distorts legitimate local economies and diminishes legitimate business revenues. If authorities are perceived as ineffective in confronting the problem, or even complicit, it can lead to distrust of institutions, fueling social conflict and a deterioration in the quality of life for millions of citizens.

If we step back, we see the story of the growing illegal economy is also one about “convergence” – how the various threats interact to form a potent mix globally.

This is becoming an all-too familiar story. A story where legal business transactions and legitimate commerce can perpetuate and feed off the illegal economy; a story where illegal arms brokers and criminal kingpins act in practice as the new CEOs and venture capitalists of expanding criminal operations.

In financial centers across the globe, illicit networks are taking advantage of gaps in enforcement to infiltrate and corrupt licit markets, reduce productivity, and dis-incentivize investments in research and development, jeopardizing public health and eroding the security of our institutions.

Enforcement officials who confront these illicit networks realize best what we are dealing with – networks that obey no laws except the law of the strong. Webs of corruption and criminality that thrive upon impunity, coercion and violence.

Protection of Intellectual Property Powers Economic Growth and Security

The vast scope of the threat can be daunting. But there is a good reason why our meeting in London has chosen to focus on a particular aspect, which is the importance of combating intellectual property crimes.

Infringement of intellectual property rights continues to be a significant threat to businesses globally, and to all economies alike resulting in hundreds of billions of dollars lost every year, and an illicit trade in which organized crime gravitates to in expanding illicit markets.

Protection of intellectual property is at the very heart of economic growth and innovation.

When innovators and creators know their creations are safe from theft, they are more inclined to bring new products and ideas to society that enrich and improve our lives.

Weak protection, on the other hand, makes it difficult for private companies to reap the benefits of their investments in R&D and thus reduces their incentive to make those investments.

IP theft also discourages foreign investors from transferring their most innovative technologies and makes mutually beneficial alliances with local innovators to improve and modify technology for local markets difficult, if not impossible. In addition, domestic innovators suffer as much as their foreign counterparts from piracy and counterfeiting.

Albert Einstein once said “Imagination is more important than knowledge”.

Imagination creates new possibilities, spurs new inventions and leads to innovations that not only create jobs but can save lives. New medicines that can cure many ailments and diseases; processes and technologies that increase efficiency.

If we do not make protection of intellectual property rights a priority, we will, in essence, be ceding the future to bad actors whose methods destroy wealth and create insecurity, destabilizing whole communities.

The harms posed by transnational organized crime, including in some cases terrorist groups, and their involvement in the production and trafficking of counterfeit and pirated goods represents a significant threat to global security and economic development.

Intellectual Property Enforcement Safeguards Our Prosperity

How can we meet this challenge? It all starts with enactment and implementation of strong and effective laws. But beyond that, governments, businesses and citizens need to cooperate across national boundaries to defend our shared interests and values.

Key to achieving that is marrying our government-to-government efforts with public-private partnerships and increased citizen awareness – and real pro-consumer action on the part of consumer organizations.

Let me touch on this issue of building awareness further, including on some of the ways that the U.S. Department of State is strengthening our diplomatic efforts.

First, as the Chair of the OECD Task Force on Countering Illicit Trade, under the auspices of the High-Level Risk Forum, we are working with INTERPOL and many partners to elevate global understanding of the harms and impacts of illicit trade globally.

We must first establish a shared vocabulary on the threat environment if we are to build a collaborative response.

Earlier this year, the OECD released two important reports prepared in the context of the Task Force:

  • Illicit Trade: Converging Criminal Networks
  • Trade In Counterfeit and Pirated Goods: Mapping the Economic Impact (which was jointly prepared with the EU Intellectual Office Property Office)

In these reports, the OECD and the EU IPO estimated that imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5 percent of global imports.

With a specific focus on the EU, thanks to DG TAXUD data, the joint OECD-EU IPO report found that up to 5 percent of goods imported into the European Union are fakes, with US, Italian, and French brands hit the hardest.

The report on Trade in Counterfeit also noted: “any product for which IP adds economic value to right holders and that creates price differentials becomes a target for counterfeiters….[including] high-end consumer luxury goods such as watches, perfumes or leather goods, to business-to business products such as machines, chemicals or spare parts, to common consumer products such as toys, pharmaceuticals, cosmetics and foodstuffs.”

Every IP-protected product can be counterfeited. We see, therefore, that IP protection is really something that reaches into every aspect of human activity. Not just high-end handbags, but airplane parts and construction materials.

Not just Hollywood movies, but falsified medicines. It is important to note this because often the fight against IP crime is inaccurately portrayed in “Robin Hood” terms – as simply a wealth transfer from the “haves” of big corporations to the “have-nots” who would otherwise not have access to these products.

The dangers of counterfeiting are overlooked or over-shouted as consumer organizations often fight, rather than support, the efforts.

Work by the OECD, INTERPOL and others has made some progress in changing these mistaken attitudes by drawing attention to the role of organized criminal networks that are enriched by illicit forms of commerce.

But we have farther to go if we are to spread the truth, which is that rampant IP crime destroys jobs, weakens institutions and harms health and human safety.

To win this fight, we will need both good analysts and strong enforcement moving forward.

Recent operational efforts by both Interpol and Europol, in coordination with national law enforcement agencies, have helped to better publicize the growing amounts of dangerous fake and counterfeit goods being confiscated in operations across over 50 countries. These seized products include Italian olives painted with copper sulphate solution, Sudanese sugar tainted with fertilizer, chemical-doused seafood, and anti-freeze mixed into toothpaste.

These cases highlight a growing trend – counterfeiting in certification labelling – that can affect everything from food stuffs to consumer electrical products to manufacturing components and machinery.

Counterfeit medicines in both the developed and the developing world kill many thousands of people annually seeking to treat malaria, tuberculosis, heart disease, and other medical conditions. In many of these cases, the fakes either did not contain the right medicinal ingredients or, in other instances, contained high levels of impurities, contaminants and toxic chemicals.

Reporting has also shown how online pharmacies are a growing threat, as they provide criminals an opportunity to make online sales of counterfeit medicines to innocent consumers, without subjecting themselves to any enforcement risks.

According to the World Health Organization (WHO), more than 50 percent of the medicines purchased over the internet from illegal sites that conceal their physical addresses are counterfeits. The majority of these drugs are produced in a handful of countries and distributed through websites with global reach, while their operators sit in safe havens, often comfortably outside the reach of law enforcement.

Greater public awareness is needed of international coordinated efforts such as INTERPOL’s Operation Pangea, where 200 enforcement agencies from 111 countries worked together to target criminal networks that sell counterfeit medicines on-line and which has led to over 235 arrests and 9.4 million doses of fake and illicit medicines seized.

The international law enforcement community is also working to warn the public on items like counterfeited auto parts, such as airbags, tires and brakes, a booming illicit business that seriously threaten the lives of consumers and their families.

But we all need to do better together. Consumer groups can also play a critical role in educating potential victims on how to steer clear of dangerous counterfeits sold in physical and online marketplaces.

Converging Threats: Dark Side of Globalization

The challenge of building awareness feeds back into the reality of convergence. Due to the fact we are dealing with crime networks that interact across boundaries, the response needs to be collaborative. Convergence highlights the greater risks of unchecked criminality in today’s globalized economy.

On the dark side of globalization, illicit trade, blood money, and corruption not only cause economic and social harms, they converge to create rogue states, permissive sanctuaries, safe havens, and illicit financial hubs.

From a geopolitical perspective, insecurity and destabilization in one market can have a devastating ripple effect. Converging threats operating across borders threaten shared agendas for development and managing and ending conflicts.

The same bad actors and networks that profit from crime in one area will reinvest their blood money into the legal economy elsewhere, spreading chaos and insecurity. This has a devastating impact in the developing world in particular, where even the best-intended efforts of dedicated public servants and businesses to spur ethical, rule-of-law based markets and to broaden prosperity across communities can be overwhelmed by outside flows of dirty money.

Without collaborative responses, these bad actors and networks will continue to jump from weak spot to weak spot, seeking out and exploiting vulnerabilities.

The sad reality today is that the lucrative returns from IP crime are helping to finance the dark side of globalization, expanding the tentacles of illicit networks to all parts of the world, infiltrating public and market-based institutions alike.

In building awareness we must hammer home the point that IP crime impacts not just growth and innovation. IP crime perpetuates modern slavery and human trafficking. Men, women, and children are forced into sweatshop conditions. Many are physically abused, and forced to pay their bondage debts, sometimes through sex trafficking.

Moreover, the reality is also that IP crime and demand for fake handbags, shoes, perfumes, cosmetics, apparel and other luxury products help to expand the illegal economy and make it harder for legitimate business to compete against these imported fake products.

In these instances, illicit trade results in lost profits for companies, and job displacements for workers. With business closures, governments are economically impacted as less revenue is brought into the treasuries to fund public services to help build roads, hospitals, schools, and housing and healthcare projects.

Consumers need to understand that there is a real human tragedy behind illicit goods.

To increase such understanding, the Department of State’s Office of Intellectual Property Enforcement uses its public diplomacy programs to educate consumers about the harm counterfeiting and piracy bring to society. Every year, our Posts around the world use exhibits and concerts to reach out to host country citizens for this very purpose.

U.S. and International Efforts to Combat TOC and Illicit Trade

I’d like to elaborate further on the point of the importance of a collective response to the illicit threat.

Earlier today, you heard from Danny Marti, the Intellectual Property Enforcement Coordinator (IPEC) at the White House on ways that the United States is cooperating with other partners internationally on combating counterfeit and pirated goods.

Recognizing the expanding size, scope, and influence of TOC and its impact on U.S. and international security and governance, in July 2011 the United States released the Strategy to Combat Transnational Organized Crime: Addressing Converging Threats to National Security.

The State Department is expanding its efforts to work together across the international community to combat transnational crime and illicit markets, and take that fight to the next level by breaking their corruptive power, attacking their financial underpinnings, stripping them of their illicit wealth, and severing their access to the financial system.

We are also carrying forth a new program established by the U.S. Congress, the Transnational Organized Crime Rewards Program (TOCRP). This program aims to assist efforts to dismantle transnational criminal organizations by helping build the cases that will bring their leaders and members to justice.

The new TOCRP program offers rewards up to $5 million for information on significant transnational criminal organizations involved in activities beyond drug trafficking, such as human trafficking, money laundering, trafficking in arms, counterfeits and pirated goods, and other illicit trade areas.

We anticipate that by rewarding informants who provide leads and tips that help hobble transnational criminal organizations, we can protect our citizens, economies, and homeland. We see this program as a strong tool for combating IP crimes by TOC.

I’d like to move to describe some efforts by the organization I work with, the Bureau of International Narcotics and Law Enforcement Affairs, or INL. INL is tasked with managing State Department foreign assistance programs in support of our law enforcement partners.

INL training efforts help countries build effective rule of law institutions, strengthening criminal justice systems, and strengthening their police, courts, and anti-crime efforts—everything from anti-corruption money laundering, cybercrime, and intellectual property theft to trafficking in goods, people, weapons, drugs, or endangered wildlife.

Recognizing the key aspect of TOC convergence, we have adapted our approach on IP enforcement training. Instead of focusing, as in the past, on one-off bilateral programs, we have instead launched a new network of regional Intellectual Property Law Enforcement Coordinators, or IPLECs. The IPLEC concept recognizes that the borderless nature of TOC requires a long-term commitment to building multilateral cooperation.

The IPLEC concept places experienced DOJ attorneys at U.S. Missions in key regions to enhance foreign law enforcement capacity to investigate and prosecute IPR crimes and to develop regional enforcement networks. Although the IPLEC core mission remains capacity building, the IPLECs also provide operational assistance. By the end of this year, we will have expanded our network to have IPLECs in place in Bucharest, Sao Paulo, Abuja and Hong Kong.

We plan to weave this new network more closely into the activities of other donor countries. We also want to build stronger partnerships with rights holders who already provide training and conduct investigations in the field.

We are also leveraging existing relationships and resources. For example, INL annually provides funding to the National IPR Center of the Department of Homeland Security (DHS) to enable U.S. customs and law enforcement agents to participate as trainers in INTERPOL-managed training workshops delivered around the world. Our Department of Justice is working with the INTERPOL Global Complex for Innovation in Singapore to develop a joint training initiative on cybercrime, and examining ways to enhance cooperation with Europol and other partners that will lead to more successful prosecutions.

We are making these investments with support from the US Congress and US rights holders because of recognition that the future growth of our economy and the health of safety of our citizens depends on confronting the convergence threat.

The mandate to promote international collaboration is reflected in how INL training programs are designed, developed, and delivered.

Our training reinforces shared commitments to legal mechanisms, such the World Trade Organization (WTO) Aspects of Trade-Related Intellectual Property (TRIPS) Agreement and agreements reached under the World Intellectual Property Organization (WIPO) and World Customs Organization.

We promote greater accession to and implementation of standards in multilateral instruments such as the United Nations Conventions against Corruption (UNCAC) and Transnational Organized Crime (UNTOC), and the Council of Europe Convention on Cybercrime (Budapest Convention), all of which have provisions relevant to the fight to protect IP.

And of course diplomatically, we continue to build a global network of networks to strengthen international cooperation between U.S. law enforcement authorities with committed partners across sectors, industries, and markets such as: INTERPOL and other G7 countries, the European Union, the Council of Europe, EUROPOL, the UN Office on Drugs and Crime (UNODC), World Customs Organization (WCO), and through public-private partnerships with the OECD Task Force on Charting Illicit Trade, the APEC Business Advisory Council (ABAC), and with many other inter-governmental, business, and non-governmental organizations and alliances.

Our approach is not to recreate the wheel, but rather to make better use of the existing tools and identify better ones.

We have found that international agreements are the most effective basis for building collaboration because they are based on international consensus and shared understandings. We focus on building political will and technical capacity because without them, the agreements exist only on paper.

Imagining and Innovating a Better World

In closing, convergence defines the global economy today. We live in a world in which legal business transactions and legitimate commerce are challenged by the growth of the illicit economy.

It bears repeating – the convergence threat mandates that countries base their efforts on such collaboration. It is the only way we can make progress.

INTERPOL is an essential player in these efforts – as an actor, a facilitator, a host for others to come together, in settings like this one today. The United States looks forward to continuing to work with INTERPOL, and everyone represented here today, to make illicit trade a greater priority. We call on the INTERPOL Member States to reinforce our shared commitment to develop pragmatic mechanisms in Lyon, and utilize the full potential of such an organization, to elaborate effective long-term strategies and law enforcement endeavors towards tackling illicit markets.

It is not hyperbole to say the convergence of illicit networks is an existential threat to human progress. We must stand together to meet – and defeat – this threat. In the words of a legendary Brit, John Lennon, let me end on a positive note:

“Imagine all the people living life in peace. You may say I’m a dreamer, but I’m not the only one. I hope someday you’ll join us, and the world will be as one.”

When communities unite and act together, they can do more than imagine – they can inspire, shape, and make our world a better place – for today, and for our children’s futures tomorrow.

Thank you.

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