Hearing of the Senate Judiciary Committee - Chairman Grassley's Opening Statement on "Counterfeits and Their Impact on Consumer Health and Safety"

Hearing

Good morning everyone. We're here to discuss an intellectual property crime that's growing in
magnitude across the United States and around the globe: counterfeiting and, in particular, the impact
of counterfeits on consumer health and safety. This is an important consumer protection issue, and a
timely one, considering that yesterday was World IP Day. We have an excellent panel of witnesses
that will be able to provide us with their invaluable insights into this serious problem that affects us
all. I thank them for being here today.

The production and sale of counterfeit goods is a world-wide problem with tremendous economic
and health ramifications. Governments, industries and consumers all are impacted by "fakes."

Counterfeiters operate elaborate global networks to manufacture, export, import, and distribute their
illegitimate products. They exploit border control weaknesses, poor regulatory frameworks, and
overwhelmed law enforcement agencies to advance the sale of their illicit goods. While
counterfeiters profit in the billions from their criminal activities, millions of consumers are at risk
from their unsafe and ineffective products.

Counterfeits are a real threat to our economy, to job creation, and to innovation. According to some
sources, counterfeiting costs the global economy over 2.5 million jobs per year and drains tax
revenue. Counterfeits undermine the ability of American businesses to compete in foreign markets,
and they expose American companies to increased liability.

In recent years, there has been a tremendous increase in the manufacturing, trade and consumption of
these products. For example, last year, the Department of Homeland Security's Customs and Border
Patrol seized over 28,000 items that infringed on intellectual property with a value of $1.3 billion.

According to an OECD Report on counterfeiting released just last week, in 2013, counterfeit and
pirated goods represented up to 2.5% of world trade, or as much as $461 billion. Further,
counterfeits help fund criminal gangs, organized crime, and even terrorism.

Enforcement efforts are having a tough time keeping pace with the ever changing tactics of these
criminals. Moreover, criminals are taking advantage of advances in technology to increase their
sales to unsuspecting consumers.

However, possibly the most nefarious impact of counterfeit goods is the danger they present to the
consumer health and safety. Hazardous counterfeit products, like counterfeit medicines, electronics,
and automotive and military parts, put the public at tremendous risk of harm, and even death.

Criminals have ramped up their production of counterfeit items like airbags, smoke detectors,
computer chips, and cancer medication--products that have an immense impact on everyday life.
These kinds of counterfeits have lasting and potentially fatal consequences for consumers' health and
safety. Americans expect that their brakes will work and stop their cars in the rain, or that their
prescription drugs will contain the correct mix of active ingredients to cure an illness.

But with increased counterfeiting of so many everyday products, this presumption of quality and
effectiveness is becoming less and less certain, often times with devastating results.

I've been interested in the issue of unsafe counterfeits for some time. In fact, I worked with the
Ranking Member a few years back to address the problem of counterfeit pharmaceuticals and
medical devices. Unfortunately, consumers unwittingly buy counterfeit medicines that have been
manufactured in unlicensed, unregulated, uninspected, and frequently unsanitary sites.

These medicines often have inactive or harmful ingredients. Counterfeit medicines are estimated to be a
multi-billion industry worldwide, one of the most profitable commodities for criminal organizations.

Because counterfeit medicines are particularly dangerous to public health and impact the most
vulnerable in our society -- the sick, the elderly, the very young -- Senator Leahy and I authored
legislation that became law to enhance the criminal penalties for the trafficking of counterfeit
medicines and devices. We need to do all we can to keep consumers safe in this area.

So counterfeiting has gone beyond just another cost of doing business. It now strikes at the core with
its direct impact on the public's health and safety. In order to address this growing problem, we need
programs in place to educate businesses and consumers about how to deal with counterfeits and the
criminals that make them. Law enforcement should take a tough and proactive stand. They should
work with their foreign counterparts, as well as with international organizations and public health
authorities.

Federal agencies should cooperate with each other and with industry to secure supply and
distribution chains, and bolster detection and enforcement efforts.

Voluntary and best practices must be encouraged amongst the various government, industry, and
consumer stakeholders. Governments need to strengthen global IP protection and enforcement
through stakeholder and law enforcement coordination in key countries. Data sharing will help
inform everyone about the scope of the threat.

We in Congress also must strive to work together with law enforcement and industry to raise
awareness and keep consumers safe from counterfeit products in the marketplace. In my capacity as
a Co-Chair of the Congressional Trademark Caucus, we've tried to inform our colleagues about the
value of trademarks and their impact on society and the economy.

Consumers and businesses alike must understand the scale of the counterfeiting problem, and they
should be constantly vigilant of the threat.

So, it's important for us to know what the state of play is with respect to not only the impact of
counterfeits on the economy, but also their impact on the health and safety of American consumers.

We have a great panel of witnesses from the government and private industry ready to tell us about
the extent of the problem, the current and emerging challenges they face, and the strategies that will
help put an end this scourge. I look forward to their testimony.

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