INTELLECTUAL PROPERTY CRIMES

INTELLECTUAL PROPERTY CRIMES

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1152

II. TRADE SECRET THEFT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1154

A. Economic Espionage Act of 1996 . . . . . . . . . . . . . . . . . . . . . 1154

1. Def‌inition of Trade Secret . . . . . . . . . . . . . . . . . . . . . . . 1155

2. Elements of the Criminal Offenses . . . . . . . . . . . . . . . . . 1156

a. Economic Espionage . . . . . . . . . . . . . . . . . . . . . . . 1156

b. Theft of Trade Secrets . . . . . . . . . . . . . . . . . . . . . . 1158

3. Applicability to Conduct Abroad . . . . . . . . . . . . . . . . . . 1159

4. Prosecutions Under the EEA . . . . . . . . . . . . . . . . . . . . . 1159

5. Defenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1161

a. Independent Development . . . . . . . . . . . . . . . . . . . 1161

b. Reverse Engineering . . . . . . . . . . . . . . . . . . . . . . . 1162

c. Lack of Secrecy . . . . . . . . . . . . . . . . . . . . . . . . . . . 1162

d. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . 1162

B. National Stolen Property Act . . . . . . . . . . . . . . . . . . . . . . . . 1163

1. Transported in Interstate or Foreign Commerce . . . . . . . 1163

2. Goods, Wares, or Merchandise . . . . . . . . . . . . . . . . . . . 1164

3. Minimum Value of $5,000. . . . . . . . . . . . . . . . . . . . . . . 1165

4. Knowledge of the Same. . . . . . . . . . . . . . . . . . . . . . . . . 1166

5. Stolen, Converted, or Taken by Fraud . . . . . . . . . . . . . . 1166

C. Trade Secrets Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1166

D. Mail and Wire Fraud Statutes . . . . . . . . . . . . . . . . . . . . . . . 1167

E. Computer Fraud and Abuse Act . . . . . . . . . . . . . . . . . . . . . . 1168

F. State Law Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1170

III. TRADEMARK COUNTERFEITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1170

A. Trademark Counterfeiting Act . . . . . . . . . . . . . . . . . . . . . . . 1171

1. Relation to the Lanham Act . . . . . . . . . . . . . . . . . . . . . . 1171

2. The 2006 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 1172

3. The PRO-IP Act of 2008 . . . . . . . . . . . . . . . . . . . . . . . . 1173

4. Elements of the Criminal Offense . . . . . . . . . . . . . . . . . 1173

5. Defenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1175

B. RICO and Money Laundering Acts . . . . . . . . . . . . . . . . . . . . 1175

C. Other Federal Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1176

IV. COPYRIGHT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1177

A. Copyright Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1177

1. Elements of the Offense . . . . . . . . . . . . . . . . . . . . . . . . 1181

a. Existence of a Valid Copyright . . . . . . . . . . . . . . . . 1181

b. Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1182

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1184

1151

d. Financial Gain or Threshold Violation . . . . . . . . . . . 1184

B. The Internet and the First Sale Doctrine . . . . . . . . . . . . . . . . 1185

C. Internet Service Provider Liability . . . . . . . . . . . . . . . . . . . . 1187

V. PATENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1190

A. False Marking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1190

B. Counterfeiting or Forging Letters Patent . . . . . . . . . . . . . . . 1191

VI. CABLE TELEVISION AND SATELLITE DESCRAMBLING . . . . . . . . . . . . . . . 1191

VII. SENTENCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1192

A. Economic Espionage Act of 1996 . . . . . . . . . . . . . . . . . . . . . 1193

B. National Stolen Property Act . . . . . . . . . . . . . . . . . . . . . . . . 1194

C. Trade Secrets Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1194

D. Mail and Wire Fraud Statutes . . . . . . . . . . . . . . . . . . . . . . . 1195

E. Racketeer Inf‌luenced and Corrupt Organizations Act. . . . . . . 1196

F. Trademark Counterfeiting Act and Copyright Felony Act . . . . 1196

G. False Marking and Counterfeiting or Forging Letters Patent . 1199

H. Cable Television and Satellite Descrambling. . . . . . . . . . . . . 1199

I. INTRODUCTION

Intellectual property (“IP”) constitutes a substantial portion of today’s American

economy.

1

IP rights are critical to both industry and government, so the govern-

ment has made the protection of IP rights a priority.

2

But civil sanctions rarely

deter infringement of intellectual property.

3

Some intellectual property thieves

view civil damages simply as a cost of doing business.

4

Moreover, forms of IP

1. See ECON. & S TATISTICS ADMIN. & THE U.S. PATENT & TRADEMARK OFFICE, INTELLECTUAL

PROPERTY AND THE U.S. ECONOMY: 2016 UPDATE (2016), https://www.uspto.gov/sites/default/f‌iles/

documents/IPandtheUSEconomySept2016.pdf (describing “IP-intensive industries” as “a major, integral

and growing part of the U.S. economy” and noting that as of 2014, IP-intensive industries constitute 38.2%

of U.S. GDP); see also Ocean Tomo, Intangible Asset Market Value Survey (Sept. 22, 2020), https://www.

oceantomo.com/intangible-asset-market-value-study/ (f‌inding that the implied intangible asset value of the

S&P 500 grew to over 90% by July 1, 2020).

2. Jon Gelinne, J. Donald Fancher & Emily Mossburg, The Hidden Costs of an IP Breach: Cyber Theft and

the Loss of Intellectual Property, DELOITTE INSIGHTS (July 25, 2016), https://www2.deloitte.com/insights/us/en/

deloitte-review/issue-19/loss-of-intellectual-property-ip-breach.html#endnote-2.

3. Technological advancement facilitates theft while making it harder to detect. See NAT’L RESEARCH

COUNCIL, THE DIGITAL DILEMMA: INTELLECTUAL PROPERTY IN THE INFORMATION AGE 3 (2000). Even if theft is

detected, state civil remedies are historically diff‌icult to pursue. See THE NAT’L BUREAU OF ASIAN RSCH., THE IP

COMMISSION REPORT: THE REPORT OF THE COMMISSION ON THE THEFT OF AMERICAN INTELLECTUAL PROPERTY 73

(May 2013), https://www.nbr.org/wp-content/uploads/pdfs/publications/IP_Commission_Report.pdf (discussing challenges

for litigants in state courts “including limited access to evidence and diff‌iculty in enforcing judgments”). Criminal

prosecution also remains a limited deterrent. See Eldar Haber, The Criminal Copyright Gap, 18 STAN. TECH. L. REV. 247,

276 (2015) (observing that criminal prosecutions of copyright violation are still rare).

4. See J. Derek Mason, Gerald J. Mossinghoff & David A. Oblon, The Economic Espionage Act: Federal

Protection for Corporate Trade Secrets, 16 COMPUT. L. 14, 15 (1999) (noting that “even if a company does bring

suit, the civil penalties often are absorbed by the offender” and the stolen property simply retained for future

prof‌it); see also COMPUT. CRIME & INTELL. PROP. SECTION, CRIM. DIV., U.S. DEP’T OF JUST., REPORTING

INTELLECTUAL PROPERTY CRIME: A GUIDE FOR VICTIMS OF COPYRIGHT INFRINGEMENT, TRADEMARK

COUNTERFEITING, AND TRADE SECRET THEFT 4 (3d ed. 2018), https://www.justice.gov/criminal-ccips/f‌ile/

1152 AMERICAN CRIMINAL LAW REVIEW [Vol. 58:1151

infringement, like piracy of intangible goods and information, may reduce or

destroy the intellectual property’s value even if the original owner remains in pos-

session of the property.

5

The estimated total annual losses to the United States and

its companies from various forms of IP infringement could be anywhere between

$225 to $600 billion.

6

In addition to causing economic damage and undermining

entrepreneurialism in the U.S., IP infringement may also compromise public safety

when counterfeit materials are used in pharmaceuticals, auto parts, and military

goods.

7

The marked increase in IP infringement—combined with the ineffective deter-

rence of civil remedies—has led federal and state governments to criminalize IP

infringement.

8

The executive branch has also demonstrated a growing commitment to

enforcing IP law: the Trump administration created the White House Intellectual

Property Strategy Group, a multi-agency effort to coordinate domestic and interna-

tional enforcement policies.

9

Notably, in response to perceived Chinese theft of U.S.

intellectual property, the group imposed a twenty-f‌ive percent tariff on $50 billion

worth of Chinese goods, which further escalated to a ten percent tariff on another

$200 billion in Chinese imports in September 2019.

10

Throughout FY 2019, the

Department of Justice (“DOJ”) arrested 305 individuals for IP violations; served 138

state and local IP search warrants; disrupted or dismantled 407 piracy/counterfeiting

organizations, and had 195 pending investigations involving IP crimes.

11

This article examines the key areas of intellectual property law that provide the

bases for criminal prosecutions. Section II examines the theft of trade secrets.

Section III discusses trademark counterfeiting. Section IV examines copyright

infringement. Section V considers patent violations. Section VI looks at cable

891011/download (explaining government efforts to expand criminal sanctions so that IP violators do not see

civil penalty as mere cost of doing business).

5. See COMPUT. CRIME & INTELL. PROP. SECTION, CRIM. DIV., U.S. DEP’T OF JUST., PROSECUTING

INTELLECTUAL PROPERTY CRIMES 174 (4th ed. 2013), https://www.justice.gov/sites/default/f‌iles/criminal-ccips/

legacy/2015/03/26/prosecuting_ip_crimes_manual_2013.pdf [hereinafter IP CRIMES MANUAL] (“Although many

of these means of misappropriation leave the original property in the hands of its owner, they reduce or destroy

the trade secret’s value nonetheless.”).

6. See U.S. INTELL. PROP. ENF’T COORDINATOR, ANNUAL INTELLECTUAL PROPERTY REPORT TO CONGRESS 34

(March 2020), https://www.whitehouse.gov/wp-content/uploads/2020/04/IPEC-2019-Annual-Intellectual-Property-

Report.pdf; see generally OFF. OF THE U.S. TRADE REPRESENTATIVE, SECTION 301 REPORT (2017), https://ustr.gov/

sites/default/f‌iles/301/2017%20Special%20301%20Report%20FINAL.PDF (identifying foreign trading partners that

the Trump Administration believes has insuff‌icient IP protection and enforcement standards).

7. See DEP’T OF JUST., PRO IP ACT ANNUAL REPORT OF THE ATTORNEY GENERAL FY 2018 21–15 (2019),

https://www.justice.gov/iptf/page/f‌ile/1164876/download (listing examples of prosecuted cases involving

counterfeit products dangerous to consumers).

8. See IP CRIMES MANUAL, supra note 5, at 3–6.

9. See U.S. INTELL. PROP. ENF’T COORDINATOR, supra note 6, at 3.

10. See News Release, The White House, Statement by the President Regarding Trade with China (June 15, 2018),

https://www.whitehouse.gov/brief‌ings-statements/statement-president-regarding-trade-china/; U.S. INTELL. PROP.

ENF’T COORDINATOR, supra note 6 at 13.

11. U.S. INTELL. PROP. ENF’T COORDINATOR, supra note 6, at 20.

2021] INTELLECTUAL PROPERTY CRIMES 1153