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U.S. Department of State

Diplomacy in Action

U.S. Government Efforts to Combat Intellectual Property Theft

Matthew H. King, Deputy Director for Homeland Security Investigations, National IPR Coordination Center
Washington, DC
January 13, 2011

Date: 01/13/2011 Location: Washington D.C. Description: Matthew H. King, Deputy Director for Homeland Security Investigations, National IPR Coordination Center, briefs on the U.S. Government Efforts to Combat Intellectual Property Theft at the Washington Foreign Press Center. - State Dept Image


Deputy Director King: Hi everyone, I’m Matt. I’m a Special Agent with Homeland Security Investigations within ICE, and I’ve brought some of my people with me, but in particular Richard Halverson who is my Unit Chief for Outreach and Training. He works extensively with a lot of our partners.

I’m the Deputy Director of the IPR Center. I want to chat with you a little bit about what we are and then we can get into specific questions afterwards.

Let me tell you a little bit about ICE. We’re pretty large. We’ve got over 20,000 employees and a budget of $5.7 billion. We have offices in every U.S. state and we have 67 offices in 47 countries, so I think that’s the largest footprint for the Department of Homeland Security overseas.

We’re the principal investigative arm of the department with over 7,000 Special Agents. We’re responsible for conducting a wide array of criminal investigations, and that includes everything from intellectual property rights or IPR, guns, weapons, drug smuggling, child exploitation, sex trafficking document fraud, criminal street gangs, illegal trafficking of art and antiquities, and we have a very broad mandate and we carry that out across our portfolio. We do that through the directorate of Homeland Security Investigations within ICE.

We have the broadest international footprint, as I mentioned, and we have ICE attachés conducting multi-faceted international investigations with our foreign counterparts, both bilaterally and multilaterally.

We have offices in nine of the eleven priority watch list countries on the U.S. Trade Representative’s Special 301 Report on Intellectual Property Rights, and that’s a force multiplier for us, to be where everyone thinks the problem stems from.

We’re also a leading voice in the international customs enforcement community working with police and customs officials. We have an office in Brussels, headquarters of the World Customs Organization. We hold the position there of Vice Chair for the Enforcement Committee and Chair of the Commercial Fraud Working Group. So our international footprint lets us leverage these relationships overseas, which is quite important.

Why is it important? It’s because IP theft, intellectual property theft, is a global problem. Intellectual property moves across borders by definition, and that’s where we step in. We’ve demonstrated a link between IP theft and other criminal activities to include transnational organized crime.

Criminal organizations are drawn to IP theft because there’s a very high profit margin and fairly light penalties. Low penalties for getting caught compared to more traditional crimes like narcotics smuggling where the penalties can be draconian.

Perhaps the greatest tool in the U.S. government’s IP theft arsenal is our center, the IPR Center. Its mission is crucial to combat predatory and unfair trade practices that threaten our economic stability and national security, restrict the competitiveness of U.S. industry and world markets, and place the public’s health and safety at risk.

We have included team members’ agencies with us from 17 key domestic and foreign investigative agencies. The government of Mexico Tax Administration Service joined the IPR Center as our first international partner; and just this week the Royal Canadian Mounted Police joined us. Interpol is on board, which joined in July, and they assist the IPR Center by facilitating cross-border police cooperation and provide support to us to combat international IP theft.

We also have the Defense Criminal Investigative Service, the Navy Criminal Investigative Service, Army Criminal Investigations Command, and the General Services Administration Inspector General. That strengthens investigations related to fraud in the federal procurement process protecting the supply chain and our procurement for government.

The IPR Center focuses its efforts on three broad topics. There are three buckets that we look at. One is our economic security. So if you’re looking at not only the revenue question, but businesses, profit margins, everything that’s affected by IP theft, we address that.

We also address health and safety. That’s very important when you’re talking about counterfeit pharmaceuticals, if you’re talking about things that don’t work when you plug them in, risks of fire, et cetera, and I’ll have some examples of that in a minute.

Then the third is our federal supply chain. We’ve seen a profusion lately of counterfeit items going to the battlefield in particular, everything from counterfeit Kevlar vests, counterfeit tourniquets, counterfeit chips in communication system. And so these are the three buckets that we look at in our enforcement effort.

Let me give you a few quick examples of some of the things we do. We don’t have enough time today to talk about all of our efforts, but these are the big brush strokes.

In 2007 we implemented Operation Guardian to target, interdict and investigate substandard, tainted and counterfeit products being imported into the U.S. that pose a health and safety risk to consumers. There have been so far under this umbrella 270 spinoff investigations under the Guardian umbrella. We’ve seen everything from counterfeit toothpaste containing antifreeze; counterfeit drugs containing too little, too much or none of the active ingredient; tainted animal feed containing melamine which is a product contained in plastics and cleaning products; counterfeit circuit breakers that can explode; counterfeit food products containing antibiotics that have been banned for human consumption. So that goes into the health and safety bucket and we’re looking at all of those issues under the operation we call Guardian.

History has shown that we can be considerably more successful when we work with our international partners. That’s one reason we have 17 partners at the Center and it’s another reason why we try to leverage our international footprint. One of our most recent collaborations with the World Customs Organization and Interpol was Operation Pangea III. We carried that out in October 2010. Forty-five countries took part in that under the WCO banner. Now with 30 countries reporting their results, internet monitoring revealed nearly 820 web sites engaged in illegal activity including those offering controlled or prescription-only drugs. Of those, 297 web sites have now been taken down by our international partners.

Worldwide, interesting statistics, more than 278,000 packages were inspected, of which more than 11,000 were seized. In those packages were 2.3 million illicit and counterfeit pills. During the operation 87 individuals were arrested and we’ve got those people under investigation for a range of offenses.

Even when the products themselves aren’t considered dangerous or pose a threat to health and safety there are those that harm our economy, the first bucket that we talked about. That’s why we conducted an operation called In Our Sites, and I believe you have information in your packets on that. Let me just talk a little bit about that. It’s an on-line internet effort that we have.

During the operation law enforcement agencies worked in conjunction with us, the IPR Center, to seize domain names of web sites selling counterfeit and pirated material. During the course of the operation federal law enforcement agents made undercover purchases from these sites. So we would go out working with our rights’ holders and the trade community and on our own, and we would target sites selling what we thought to be counterfeit goods -- Coach handbags, Louis Vuitton, and also media (the downloads).

Then we went to a federal magistrate judge after proving up that these articles that we had purchased in an undercover capacity were in fact counterfeit or illegal and a federal magistrate judge issued us a seizure warrant. So we had the third party neutral body saying that we just didn’t go out and do this. We did it according, like we did any law, any violation of law, through the court system.

A lot of the goods were being sent through the international express mails into the U.S. and we had our partners in the U.S. from Customs and Border Protection, ICE, FBI, some of the others, looking at these parcels as they came in. Then we obtained the seizure orders for the domain names of the web sites that sold the goods from the U.S. magistrate judge.

What we did then was we would take down the web site and we put up a seizure banner saying that the site had been seized by the IPR Center, Homeland Security Investigations. This is very similar to the old days. If a vessel was coming in smuggling narcotics, we would seize that vessel as a conveyance for the illegal activity and we’d put a seizure banner on there, or a warehouse. So the same thing, but on the internet world.

So we’ve conducted two of these “In Our Sites” blitzes. The first one resulted in the seizure of nine domain names of web sites illegally selling movies and television shows, often within hours of their release. The second operation which we did on Cyber Monday, November 29th, which everyone says is the largest internet shopping day of the year, we went after 82 infringing domain names selling items, everything -- holiday gifts such as golf clubs, handbags, sports jerseys.

We turned the tables, we think, on people using the internet to sell the illegal wares. Gone are the days -- well, not gone, but we’ve seen a decrease in the days where large containers would come into a port and in there would be counterfeit. We still do see that, but more and more we have a lot of smaller seizures of items ordered over the internet. You’ve got a very wide public audience if you’re selling wares on the internet, and the stuff is brought in through express mail. So it’s very hard to go after these numerous little seizures.

So it’s been successful. And why? We worked with industry, we worked with our partners, and we worked with international partners to take a look, and we plan to do more of these.

In 2011 going forward, as I said, we’ll do more of the “In Our Sites” type operations. We’ll do more of the global hoax type operation. We have numerous of those out there under various operational names, whether it’s targeting health and safety or the economy or protecting the federal supply chain. We hope to publicize those when they’re accomplished so that there’s awareness about it. And we want to sort of help protect the population. It’s one of our jobs, to protect, from counterfeit pharma, from knock-off goods that pose a threat to health and safety, and protect industry, their intellectual property, put plainly.

So as the methods of the counterfeiters morph as they use the internet, domain names, every methodology known and some as yet unknown, we hope to be there lock-step with them. We can’t do that alone. That’s why we’ve partnered up together in the IPR Center to get this accomplished.

I think that’s the end of my formal comments, but I would entertain any questions you’ve got. Rich is here. He’s a great resource. Please, anything.

JiJi Press, Japan: I wanted to go back to one of the comments you were making about the large international footprint and how you’ve been working with so many partners across the globe. If I could ask about a specific case. I know you probably won’t be able to get into details, ongoing investigation, but now there’s this scandal going on in France about Renault, and they’re claiming that they’re the victims of industrial sabotage and that their electronic vehicles schematics have been stolen and sold to possibly a Chinese firm. It’s still ongoing. I just want to know if there’s been any contact with your department, with French authorities.

And on a larger scale, you spoke a lot about counterfeit goods, but I’m wondering on a more high end -- If we’re not talking about knock-off handbags but industrial theft, through cyber means or either case. It’s a different level of theft.

Deputy Director King: It is. A slightly different aspect of the same general topic.

JiJi Press, Japan: If you can address both this case and in the larger scale, that would be great.

Deputy Director King: Let me start with the larger scale because I’m not aware of the details of the Renault case. However our partners at the IPR Center, the FBI work on theft of trade secrets and I’d think that falls squarely under their portfolio. They might know more about it. And if it’s an ongoing case, you’re correct, I probably wouldn’t be able to talk about it.

But it does bring up the larger issue of what valued is it to have us stationed overseas? Not only ICE, with our big footprint, but the FBI with their legats, any investigative agency from DEA to anyone else.

There was a lot of discussion a few years ago about the expense. We’re in tight budget years and it’s awfully expensive to maintain an office overseas. Rich was in London. I was in Singapore. And I can tell you that the housing and the travel, everything you can imagine, adds up to a healthy sum. Then people say well show us the metrics so that we can prove up your budget. Unfortunately overseas if there’s an arrest by say Singaporean authorities or UK authorities, I’m not claiming that as a statistic. So it’s very hard for me to show people above us that in fact we are effective.

But no one would argue with the fact that when it comes to international fora like APEC, WCO, some of the others that we’re involved in, that if you’re not in place then you’re dealing with an unknown person over email. And the value-added in being able to pass leads to our foreign counterparts, to be able to receive leads, and we have numerous hundreds of those every year, prove up the value. I think our Director, Mr. Morton, recognizes that, the department recognizes that, and that’s why we’re expanding.

Rich and I were overseas, I think we were in 47 offices; now we’re in 67. We’ve got one in Islamabad. Looking at different issues in the office than say Paris. But I wouldn’t be surprised if our attaché in Paris was involved in the investigation, only because when you’re overseas you work for the State Department, you’re a tenant of the State Department, and they have a Law Enforcement Working Group and everyone sits around the table to deconflict. I don’t want to be working something and six months later find out that it belonged to FBI or DEA. So a very collaborative enterprise not only within the USG but also with our bilateral partners.

I hope that answers it.

Press Trust of India: Can you give us a sense of the type of relationship you have with the Indian authorities. The Bollywood movies, the U.S. has a lot of concerns about Bollywood. How are you working with that?

Deputy Director King: Sure. And Rich, chime in. But I can tell you’ we’ve got an office in New Delhi. In fact the attaché there is coming to work for us in the IPR Center which we think is a win/win to increase the international presence we have there.

We do a lot with counterfeit pharma and the active pharmaceutical ingredients coming out of India. We have a very good relationship with Indian authorities trying to work collaboratively on some of the issues. Not only the Bollywood films and the content, but also on API.

Now realize that if you’re talking about API, the pharmaceuticals, and you’re talking bulk, you’re not sending that through the mail facilities. You’re using containers. That’s where our expertise with customs authorities, police authorities. If you move a container, there has to be paperwork. It’s much easier to track than say a first release Bollywood film that immediately is out on the internet.

And two, when you look at the level of sophistication of how people are grabbing these films, you no longer see a hand-held camera with people walking in front of the movie screen. These are really first-rate, to include 3D, sound, every language, immediately, and it’s out there before the release in India or the release in the U.S. of our films.

So it’s complicated. I think in 2011 going forward, one of the things we’d really like to explore with the Indian authorities, with all of our partners, if we’re doing an operation like “In Our Sites”, going after the internet, would Indian authorities like to work with us on an operation. Maybe they know a few sites and we could go after them collaboratively. Obviously within the purview of our law and to the extent that we can. So that’s some of the things that we’re looking at, but I know it’s a huge problem in the film industry.

Question: Have you had a crackdown on those web sites which run such movies? You had one [inaudible]. Does that come under that, or you’re planning to do it now?

Deputy Director King: The original “In Our Sites” which was this last June 30th was movie sites and we worked with the MPAA, Motion Picture Association of America. They are very aggressive in looking for their clients on where these are being downloaded from. Great in-house investigative departments. And they work with us collaboratively to help identify the sites. So we did that.

Then in the one on November 29th there were five additional sites. Music downloads. So that’s a little more contentious, because some artists release their things so that it goes viral so that they get known. So a little trickier than working with a major studio.

Mr. Halverson: With the first “In Our Sites” we did not necessarily focus on international films, per se. What you will see with a number of these web sites is that if they’re infringing upon let’s say U.S. studios, movies, they’re probably infringing upon international studios as well. The same thing with products, with hard goods, et cetera. What you’re going to see on these internet sites, because they are international in scope, is if they’re going to infringe upon a particular company’s trademark or a particular company’s IP, they’re going to do it to others as well. And that’s what you see internationally. A lot of countries have very similar issues. There are certain countries that you would say are probably the greatest source of these goods, and then there are a number of countries that are recipients of the goods or destination countries, if you will. And we work with all these countries. But we understand there are differences and where we can tam up and partner together to tackle the issue, that’s what we’re going to do.

Business Personal Life, Slovakia: How do you implement the intellectual property rights in the relationship with China, and what is the Chinese response? Would you describe the cooperation with China?

Deputy Director King: That’s a very big question, for obvious reasons. We’ve made a lot of efforts. Our Director went out and signed a Letter of Cooperation with the Chinese Ministry of Public Security. We hope to do another one with the GACC, their Customs Authority. We have a very large presence in China, both our attaché in Beijing, and we designated our assistant attaché in Guangzhou as the IPR point of contact not only for rights-holders but for the U.S. government so that they have a focal point to come in.

If you’re talking about the source, I think traditionally if you look at our statistics, just seizure statistics alone without making a political statement, most of the infringing goods are coming from China. The Chinese are well aware of this. We’ve had some great cooperation working with the NPS and Customs. We’ve done some undercover operations with them. And we’ve had a lot of other cases that aren’t as successful.

The ones that prove to be most successful right now target either U.S. violators that are living in China or working in China, and third party nationals, organized crime, that type of thing. The NPS is very aggressive, and they’re aggressive in their own right, not just bilaterally, but unilaterally. They go out and they hit markets. I think they hit one the other day that had quite a large seizure.

Now it’s not just us -- the IPR Center, ICE, Homeland Security Investigations. This is all of government is looking, from the State Department, and you’d have to talk to them about the larger efforts, the Joint Liaison Group, and some of the others. Department of Justice. We have meetings all the time not only internally but with the Chinese.

So it’s a complicated situation like all things related to intellectual property, but we’re sorting it out. Baby steps. The paradigm for measurement, the metrics there are a little different than they would be in say India or in the Netherlands.

Question: So you are satisfied with the level of cooperation right now?

Deputy Director King: Well, I’m satisfied that we’re doing everything that we can when we can to keep going forward.

Mr. Halverson: The Chinese recently announced that they’re doing a new, I believe it’s a six month program to tackle IP enforcement. I think that’s a positive step and it’s something that we welcome.

Another thing that we’re looking to do this year in 2011 is to conduct some joint training with them as well. The State Department announced where our international training efforts are going to be done with the money from last year. There are two programs specifically that we, the IPR Center, are looking to lead, to work with our Chinese counterparts on. So I think that as we start to work together more and more, I think we’ll start to see more and more successes.

Deputy Director King: Rich brings up one additional good point but on a broader topic. I was talking about investigations, but remember what I said about the metrics. How do we get measured? A lot of what we do overseas is capacity building, and we work with State Department who funds a lot of our efforts; we work with all the agencies. But we go out to our police and customs and border partners on a range of topics from money laundering to counterproliferation, but to include intellectual property, and Rich’s shop handles that. We work with them not only to teach them maybe some new techniques that they might not have thought about, but to show our faces and to personalize it. Then hopefully they remember oh, I’ve got a case, and they pick up the phone or email and we get something going.

Associated Press: Could you please characterize the most common offenses in IP related coming into the U.S. from Latin America? What are the main products or modus operandi, or the main country offenders? Would you please speak in general?

Mr. Halverson: I think what we see when you’re talking about Latin America is there are a couple of issues. You’ve got DVD piracy, movie piracy. That’s one thing that we’ve seen a lot involving between the U.S. and Mexico, a lot of optical discs going down there and then the movies coming forward.

You also see some hard goods as well. There are a lot of smuggling schemes that these criminals will engage in involving especially the U.S. and Mexico, trying to take advantage of NAFTA and other Free Trade Agreements. So we work to try to identify those infringements and then see if we can identify the violators and make enforcement actions and arrests.

We’ve seen things like counterfeit medicines coming out of Latin America as well. Whether they’re destined for the U.S. or elsewhere. In some instances we’re just a transshipment point for the goods moving on. In some instances we’re going to be the recipient point. So it does run the gamut of goods. We’ve seen counterfeit shoes, for example, coming from China transiting the United States going down into Latin America. Two years ago we were able to work with the Mexican customs authorities and they were able to make seizures of three containers of shoes that were heading down to Latin America.

So you’ve just got this fluid situation with goods moving back and forth. And as much as we can, we want to partner with all those countries down there to build what we can as a good, solid wall to try to stop it.

Question: But by what you just said, Mexico would be the main player then? In the hemisphere.

Mr. Halverson: Mexico will be one of the main players because obviously they’re one of our key trading partners and we share a common border with them, and we do have a lot of goods going back and forth. And we work very well. And one thing, as Matt pointed out, Mexican Customs is actually at the IPR Center. We’ve done a couple of operations with them where they have seized hundreds of tons of counterfeit goods during these surge operations.

So I think what we’re seeing is there’s a willingness and a lot of cooperation going on between us and Mexico.

Deputy Director King: And if you look at the map, geographically. If you’re talking about stuff coming in through the mail, yes, that can come from anywhere through the express mail, international mails. But if you look at containers moving up, other than shipped into the ports, and we have very robust offices with our partners from CBP in Los Angeles, New York, Miami, all along the seaboard. But if you look at the containers moving by truck from anywhere, the choke point, if you will, is Mexico. That’s the last stop before you hit the U.S.

So if you’re looking at seizures from Mexico, on paper it might say from Mexico, but I think one has to dig a little deeper and say okay, Brazil has a problem with IP. We know that. Or the tri-border area down there.

So it’s very hard to say in a casual conversation that there’s a problem coming from Guatemala or El Salvador or what have you, but if you look at the statistics with our Mexican partners and the seizures at the Mexican border, we’ve got a fairly robust program going.

Press Trust of India: Going back to the movies, do you also work with sites like Google, YouTube or Yahoo Movies? These sites also have pirated movies.

Deputy Director King: Yes.

Question: How do you make sure that they don’t --

Deputy Director King: We’ve had numerous discussions with all of those. Let me take a step back from your question for a second. Most of the interaction has come up over on-line pharmaceutical sales. The White House Intellectual Property Enforcement Coordinator, Victoria Espinel, called for all of the players to come together. Not only the Google’s and the Go Daddy’s and all of that, but the pharmaceutical companies, the registrars and registries, to say isn’t there something that we can do to address this problem?

In other words, if I were to put into Google or a search engine “child pornography” I shouldn’t be able to get a hit on that. We might come up with the laws and stuff, but I shouldn’t be able to see actual child pornography. It’s illegal, per se.

Google and the Go Daddy’s in being search engines and being competitive enterprises, pride themselves on giving you so many hits within so many seconds. It tells you right at the top. So we’re looking at working with them at the possibility of saying look, if I put in “pharmaceuticals without a prescription”, maybe the first thing that comes up is a public service announcement saying that’s illegal, at your own risk, caveat emptor, and maybe what you should be doing is going to these legitimate sites. I think Google is funding a 501(3)(c) third party NGO to help look at some of the on-line pharma.

Now when it comes to infringement of content, your question, that’s a little more difficult. If a site that’s on there is also selling legitimate things, which is legit, which is illegit, and it’s not such a simple linear inquiry to say this site is doing. They’ve got affiliates, they’ve got cyber lockers, they’ve got streaming. Then is it the responsibility of Google to address that or not? I would say probably not. But if I were to go to them and say I’ve got information and it violates your terms of service, then maybe you say well you signed on the dotted line when you bought your domain name, and we’re going to take you down for a violation of term of service.

The uncomfortable part with that is, are they doing that on my say-so? That’s why when we went after the sites in “In Our Sites” we did it with a federal magistrate. Probable cause; here’s the evidence; yes, it’s violating; yes, here’s your seizure order. It’s a little more difficult writ large to go to Google and say take it down because I’m from the government. So there are a lot of issues there with privacy, freedom of speech, all kinds of things.

Then too, if that’s looked at as some sort of censorship, then what is China? What leverage do we have there when they do want to censor, for lack of a better term, some of their sites. So a very tricky, delicate situation.

Mr. Halverson: To add to Matt’s point there, something you have to keep in mind is that when we’re talking about IP infringement and IP theft, the majority of how it’s enforced is actually done civilly and it’s done by the rights-holders. The federal government and law enforcement, we only get involved in a very small amount, somewhere I believe around five percent that we actually get involved in. So we’re looking at that very very small amount where we’re going to go after people for criminal violations for the most part. So we actually encourage rights-holders and these folks to take actions proactively to protect themselves and see what they can do. And what can, for example, in the case of movies what can the MPAA do by working with these search engines, by working with these other registrars, et cetera. What can they do, as an example, to help stop the IP theft that’s going on there? Then we will come in, and we’re looking at, again, a small portion of it and we’ll do what we can as well.

So it’s a two-prong strategy, really, to be able to tackle it. We need the rights-holders to take actions themselves.

Associated Press: Would you please elaborate on the relationship between IP theft and money laundering or traffic of narcotics or immigrants, illegal immigrants, especially on the border?

Mr. Halverson: If you look at --

Question: Is it getting bigger, getting smaller?

Mr. Halverson: With IP theft, for us, it is a predicate offense for money laundering violations. So if you are getting proceeds or earning money from the sale of counterfeit goods and then you are doing something with that money, you are in effect conducting money laundering.

As Matt said, it is a low risk/high profit type crime. We are seeing more and more organized crime groups move into it because of that, because there is high dollar value to it.

If you take Mexico, for example, there was an article in the New York Times and it’s accurate. It talks about how in Reynosa, I believe, the Zedas, a narcotics organization down there. They actually stamp the counterfeit pirated DVDs that they sell. They put their own brand on it. “The Z”. They’re letting everyone know we’re involved in counterfeit DVD piracy.

We have a case that was reported to us of the MS-13 Gang down in El Salvador that was involved in DVD piracy, again. They may still be involved in narcotics trafficking, but they’re going to use this IP theft and the sale of counterfeit goods to fund a lot of their other illicit activities.

I’ve been to several presentations where I’ve heard, for example, the sheriff out of LA County, Lee Baca, talk about what they’re seeing on the street level with the street gangs and how the street gangs are selling counterfeit goods to fund their other illegal activities that they’re involved in. So it’s something that we are starting to see worldwide. It’s not just something that we see in the U.S., but we see it worldwide.

So it is a problem. And again, if we can cut off the goods, cut off the money, that’s what we’re going to try to do.

Question: Is there a dollar amount from the region? A figure or --

Mr. Halverson: No, that’s something that the government, the U.S. government I know is trying to take a look at and trying to figure out exactly what is the actual amount of loss. There have been a number of figures put out there over the last ten years, really, and I could go back and recite a lot of those, but as of today we don’t really have a good handle on the total value of what is happening out there.

Deputy Director King: In Customs and Border Protection, let’s say they take a snapshot, 2009, 2010. The value of the seizures that they intercepted at the ports and mail facilities, they use a value called domestic value which is the cost of making it and shipping it in. For prosecution purposes we use manufacturer’s suggested retail price, so the full price. So our dollar values differ.

So if you ask Person A, its $188 million; and if you ask us, it’s $300 million, just of the seizures. But what we can’t do is prove the negative, say therefore the loss to the industry.

Each individual industry trade organization, the MPAA, whomever, says well we think that we’re losing so many billions in revenue and all of this, but it’s very hard to stick a figure to it.

Question: What I’m trying to find, like a reference. We don’t have a dollar amount to say that the IP theft from these narco organizations are bigger than X or -- I’m trying to put that into context some way. If we don’t have a dollar amount --

Deputy Director King: I don’t know how to answer that.

Mr. Halverson: I’ve never really thought of it in those terms per se.

Question: We can say it’s growing, but compared to what?

Deputy Director King: We base that off of, if you look at the trends. And I can answer this partially. If you look at the trends of seizures and the trends of values from let’s say 2007, 2008, 2009, 2010. We’re just starting fiscal year ’11. The amount of seizures are going up; the amount of values are going up.

So if we’re increasing our enforcement efforts with all of our international partners yet the uptick is still occurring, one could assume, one could conclude that it’s a growing problem, just on its face. There’s one anomaly that Rich always points out, and that is that the dollar value in 2010 jumped up; but the amount of -- Sorry. The amount of seizures went up, the dollar value went down. So how do we explain that? The only explanation we have is exactly what we referred to before, that we’re seeing fewer containers coming in, and more of the smaller parcels through the mail facilities. So the numerous packages, but they don’t have the value of say a container load of Nike shoes.

I guess the partial answer to you then is there’s been an uptick over a period of years, an increase in the activity, in our enforcement, in the values --

Question: You’re talking about general or specifically related to narco organizations?

Mr. Halverson: In general.

Deputy Director King: But what we have seen in the last couple of years is we’ve gotten more and more information and intelligence that these organized crime groups like narcotics organizations, et cetera, are moving into IP theft as a means of funding themselves. That’s the information we’re getting. To put it into context as to how many groups were involved in it five years ago versus now? We don’t have that.

Question: And the fact that these narco organizations are related to this, would that change in any way the strategy to combat that?

Deputy Director King: Not really.

Question: Would that change matters in any way for you --

Deputy Director King: No. If I’m addressing counterproliferation or money laundering or any of the other crimes that we look at, some 400 statutes that we enforce, the methodology is basically the same. At the end of the day, you start an investigation through whichever means, whether you have a seizure or you have an informant. You investigate, you gather your evidence. You take it to a prosecutor, you package it up for the courts, you develop probable cause to effect an arrest or a seizure or go after the money, go after a bank, whatever it is. And then, hopefully a conviction -- arrest, indictment, conviction. So the methodology, the MO is the same.

Question: So the current cooperation from Mexican authorities are enough to combat this growing trend?

Deputy Director King: Let’s just say that they’re really putting a lot of energy into it. When you look at the tonnage that they’re seizing, the level of cooperation, we’re just leaps and bounds beyond where we were even a year ago, two years ago. To the amount of effort and focus on it. It’s not the Wild West. People are very energized about weapons across the border. If you’re looking for weapons and you come across a container load of Nikes, fair game. We take a look at that, we take a look at the money, and we just go into a different direction with the investigation. So there’s a lot of focus and effort down there.

Notimex, Mexico: Can you comment on your present operation, Safe Summer, the origin of the items or the value? You didn’t mention the value.

Mr. Halverson: The value of Safe Summer, I’m trying to remember what the value was.

I don’t have the value for you. That’s something we would have to get back to you with, but there were several hundred tons of counterfeit goods that were seized by the Mexican authorities. We made about 800 seizures in the U.S. The wide variety of goods that were seized was kind of astonishing, because you’re talking about air bags and rifle sights and battery cell phones and chargers, et cetera. I just don’t have a value for you.

Question: And the origin of these items is China or what country?

Mr. Halverson: The majority of seized products that we get do come from China. I’d have to go back and actually look at each of those particular seizures to break it down, but roughly 80 percent of what we seize in the United States originates from China. It’s just a fact. That’s been the number for the last five years, roughly.

The last EU study, European Union study that I saw, had fairly similar numbers, somewhere between 60 and 70 percent, I believe. They’re seen coming from China as well.

Deputy Director King: Into Europe.

Mr. Halverson: Yeah, into Europe. So very similar issues.

Question: Are you worried about increasing presence of China in Latin America? It’s going to be a growing --

Mr. Halverson: We’ve seen goods coming out of China going into Latin America. We’ve helped get some of those interdicted. Some of those we haven’t been able to. We know there are trade routes between China and to the groups down there.

Deputy Director King: It’s an available market.

Mr. Halverson: It’s something that we are keeping an eye on and something that we’re going to continue to take a look at. And if and where we can, work with our counterparts down there to try to facilitate the interdiction of these goods and the arrest of the individuals that are involved. We’re going to do it.

Press Trust of India: Is it too far-fetched to ask a question that terrorist artists like al-Qaida, Taliban are also moving into this theft of industrial property to sustain the movements? Do you have any indication of that?

Deputy Director King: We’ve seen a few ties to some terrorist organizations. Yes. And those investigations are ongoing. There are only so many ways to make money if you’re a bad guy. You can rob a bank or --

Question: -- narcotics.

Deputy Director King: Yeah, drugs. This, as we’ve said several times, is a very low risk method to make a lot of money quickly. So we do have some ties to some terrorist organizations. Those investigations are ongoing.

Question: Are they specific to al-Qaida, Taliban?

Deputy Director King: I --

Question: You don’t want to speak on it.

Deputy Director King: I shouldn’t.

Question: Okay.

Notimex, Mexico: Besides China what will be the main priority for 2011? We know that China is number one, but what other will be the main --

Mr. Halverson: As far as a particular country, I wouldn’t necessarily focus on one country per se. I think what you’ll see is that the U.S. and the IPR Center is going to continue to work with our international partners to try to build capacity where we can and identify partnerships. We find countries that want to work with us to try to stop this.

Now we’ll do that bilaterally, whether it be through our attachés or through contacts that we have here in Washington. Or multilaterally, and we can use organizations like the World Customs Organization and Interpol. We do an awful lot of training with those countries to try to identify, build capacity, especially in key choke points, for example. I think as Matt mentioned earlier, we’re not going to be able to stop every counterfeit good coming out of let’s say China. It’s just not going to happen. But if there are certain countries that we can identify where it’s going to be transshipping through, whether it’s destined for us or some of these partner countries that are in similar situations as us, maybe what we can do is work together to try to identify those choke points and be able to take interdiction to action at those points as well.

Deputy Director King: It’s no secret that the White House through the Intellectual Property Enforcement Coordinator, the IPEC, is very concerned about knock-off pharmaceuticals. And if you go to any country, your level of willingness to participate, you know, some people with the movies they say oh, so what? The actor makes a lot of money, the studios make a lot of money, so what? Well, we don’t look at it that way. We don’t. But it’s very hard to argue when counterfeit malaria medicine or cancer drugs. We’re not even talking lifestyle drugs like Viagra, Lipitor, cancer medications, AIDs medications, malaria prophylaxis is counterfeit. That’s of concern to most everybody.

So I think we’re going to really be looking at that in 2011, not just us but all of government largely.

Mr. Halverson: I was going to add a little bit to the Pangea III that Matt talked about. If you look at Pangea II and you saw the number of countries, there were about 28, 29 countries that participated in Pangea II. Pangea III, that number went up to 45, and I think what you’re seeing is more and more countries are recognizing the importance of stopping IP and especially stopping IP theft that impacts health and safety. They’re getting on board with what -- and that’s an Interpol-led operation. So they’re getting on board with these operations. And as those continue to grow and these countries continue to work with us on these type operations, I think we’ll see more and more success. We’re going to make it harder and harder for the criminals involved in IP theft to operate. That’s one of our goals.

Question: So you mentioned a couple of times how such a low risk venture for these criminal organizations to get into. Have there been any efforts to increase and make the penalties stiffer to try to dissuade them?

Deputy Director King: That’s a good question. We’re looking at that. We’re working not only with the IPEC and the White House, but the Department of Justice and our friends on Capitol Hill. Looking at tweaking not only the laws for the penalties, but the sentencing guidelines, you know, some people say the laws are already on the books. It’s the guidelines that need a tweak. But that’s arguing apples and oranges.

The bottom line is that you have to bring a case that’s worthy to be brought, that has some sort of appeal to the prosecutor and to a jury, and then if you look at the sentences alone, a lot of people want an upward departure. For instance, if you were to look at knowingly providing counterfeit items to the military, knowing that they would go to the military. The knock-off body armor. Should there be an upward departure for that versus well, I was just putting it out there and it ended up with the military. Or knowingly putting out AIDs medicine and it’s filled with road paint and wall board, which we’ve seen. There should be some sort of an upward departure for that.

But we are looking at within the United States. Every different country has a different sentencing regime, so we can only do what we can do here.

Mr. Halverson: And internationally what I would add to that is that our colleagues -- We focus on the investigative piece, that’s what we do for a living. Our colleagues with the Department of Justice and with Patent and Trademark Office, Department of State, and Department of Commerce, through a lot of the international capacity building programs that we do we not only talk to investigators, but they talk to prosecutors, judges, lawmakers, et cetera. So we’re trying to encourage internationally other countries to see that this is a crime that we need to take seriously, and what can we do and what can they do to try to make it to where it’s no longer low risk in their country. And how can they make it to where it’s not a crime that’s going to appeal to the criminal to commit.

Deputy Director King: Thanks.

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