New YOrk TraNsCrIpT The Mandarin Oriental Hotel VaLerIe ... · Harper’s Bazaar New YOrk TraNsCrIpT The Mandarin Oriental Hotel February 1, 2007. ... from NYU’s Graduate School

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Welcome to Harper’s Bazaar’s Third Annual Anticounterfeiting Summit. My name is Valerie Salembier, for those of you I have not met, and I have the great fortune of being publisher of Harper’s Bazaar. On behalf of Harper’s Bazaar’s Editor in Chief, Glenda Bailey, and me, we are very proud to welcome you to today’s summit. Thank you for being here. Look in front of you. What you see there is your lunch, so I’d like to suggest that you start eating and enjoy it. The truth is, we don’t mind the clinking of forks against plates while we’re speaking.

I also want to take a moment to thank the sponsor of today’s summit, the International Trademark Association, or INTA, as it’s called. INTA, for those of you who don’t know, is a not-for-profit membership association of more than 5,000 trademark owners and professionals in over 190 countries. INTA’s goal is to represent the trademark community, to shape public policy, and advance professional knowledge and development on a global level. They do a wonderful job and we are very grateful to them. Thank you, INTA, for your generous sponsorship and for the service you provide to all of us. I’d also like to thank the New York City Police Foundation, of which I am chair. The foundation raises money to support key New York City Police Department programs, including raising the money that officers use to make undercover buys.

The goal of today’s summit is threefold. Number one, we need your help and cooperation in educating consumers to the very real dangers associated with the purchase of counterfeit goods. If people knew where their dollars were directed when they buy a fake watch or a fake handbag, there is no question that they would think twice about purchasing a fake. Most people don’t know that by purchasing fakes, they are funding child labor, terrorism, and drug cartels. There is a direct link connecting laundered money to these criminal activities.

I’ve got a quote from a letter we received from a Harper’s Bazaar reader in Los Angeles. Her letter, by the way, was in response to an investigative piece that we ran in our January issue. “The article on faux luxury bags was truly an eye-opener. Thank you so much for publishing it because it really gives a descriptive insight into the horrors of child labor. I think it is true that if women knew anything about how their fake bags were made, they would definitely think twice before buying one.” That’s why Harper’s Bazaar is behind this effort.

Our second objective today – we need your help in enforcing our current anticounterfeiting laws. France, for example, is leading the world in anticounterfeiting law enforcement. If you are caught not just buying or selling a fake, but simply carrying or wearing a fake, you can be jailed and you will be fined up to ¤300,000. That’s a lot of money for carrying a fake handbag or wearing a fake watch. The French take counterfeiting very, very seriously and it’s working for them. The French government reports that there has been a marked reduction in the buying and selling of counterfeit goods. We should lobby for similar legislation and enforcement in America.

Finally, we need intellectual property lawyers to aggressively pursue trademark enforcement, as so many of you do today. We also need luxury companies, luxury goods companies, pharmaceutical manufacturers, automobile supply companies, and other industries that are ripe for being counterfeit targets to explore the development of technological devices that will discourage counterfeiting and can be used to detect counterfeits. None of us wants to be driving an automobile that has counterfeit brake pads. Safety is also a very big issue here.

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February 1, 2007


Three years ago, Harper’s Bazaar committed itself to the fight against the counterfeit industry. We began our initiative by publishing an investigative article. Based on the enormous response we received from readers, we decided to take it a little bit further by holding a summit just as we are doing today. We wanted to put government leaders, luxury company executives, and law enforcement officials in one room to try to develop cooperative programs using all of our resources. Harper’s Bazaar was, and is, the first and only fashion magazine to take a stand and to say to our 3 million readers that buying a fake handbag, a fake watch, or any fake luxury product is not a victimless crime. Our message: Fakes are never in fashion.

At Harper’s Bazaar, we are very proud of the strides we’ve made in raising awareness about this global scourge and we’re proud not just to help protect your precious trademarks, but to preserve a culture that rewards the creative process. But our work is far from over. I’m excited to announce something today. We are officially unveiling a very important initiative. I would like to announce the creation of the Harper’s Bazaar Anticounterfeiting Alliance. The alliance will exist solely to educate consumers about where their money is going when they buy a fake anything. We’ve put together an advisory board for the alliance, which will include Harper’s Bazaar representatives, executives from the luxury sector, international property lawyers, and law enforcement and government officials. Together, our goal is to educate the public about this important issue and help consumers understand why buying authentic luxury products is well worth the price and, as importantly, that by purchasing fakes they are breaking the law and supporting egregious criminal activity.

We’re also – I love this part – we’re also in the process of finalizing a website. Our website is going to be called FakesAreNeverInFashion.com. This is to extend the initiatives of the alliance. The site, which will be up and running next month, in March, will include webisodes – new word – of undercover investigations that result in the capture of those selling fakes. There’s going to be a callout for consumers, our readers, to be members of the Harper’s Bazaar Fashion Police, so any one of us can anonymously report counterfeit sales operations via a special hotline. We’re going to have information on the site to tell you how to distinguish an authentic luxury product from a fake and, best of all, a shopping portal that will allow our readers to shop directly and safely for authentic luxury goods online.

The alliance is part of Harper’s Bazaar’s ongoing anticounterfeiting initiative. I’m extending an open invitation. Besides today, our third annual summit, we’re also holding our first European anticounterfeiting summit in London in just two weeks, February 15th. So if anyone happens to be in London on February 15th, please come see me and you will get a formal invitation. Our keynote speaker there is Christophe Zimmermann, who’s head of the World Customs Organization’s fight against the counterfeiting and piracy sector. And then, of course, there will be a panel of intellectual property experts. There’s more information in the packets that we’ve created for you to take at the close of our luncheon. If you’d like to be involved in our alliance in any way, please contact me personally. Our message is a global one, and the London summit and the alliance are important next steps for the future.

Now, another part I love. It takes a very special kind of person to lead the world’s largest police force. And it’s also a very special kind of recognition to be appointed to that job of police commissioner of the City of New York twice – by two different mayors of two different political parties. That’s a first. I think it says a lot about New York City’s police commissioner, Raymond Kelly, his qualifications, his commitment, and most importantly, his performance. Part of Commissioner Kelly’s success is because he is really smart and really well-educated. He holds a BBA from Manhattan College, a law degree from St. John’s, a master’s in law from NYU’s Graduate School of Law, and an MPA from Harvard’s Kennedy School of Government.

Part of Commissioner Kelly’s success is because he has made an unequivocal commitment to law enforcement and public service. He has devoted not just his career, but his life, to the prevention as well as the resolution of conflicts. He has served as the chief executive officer of two of the largest law enforcement agencies in the world, the U.S. Customs Service and the New York City Police Department. When he was

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commissioner of customs, he ran an agency that employed over 20,000 people and generated more than $20 billion in annual revenue. Commissioner Kelly was also undersecretary for enforcement at the U.S. Treasury Department, supervising all of the department’s enforcement bureaus. He was director of the International Police Monitors in Haiti, a U.S.-led force responsible for ending human rights abuses and establishing an interim police force over there. By the way, for this service Commissioner Kelly was awarded the Exceptionally Meritorious Service Commendation by the president of the United States.

The police commissioner was also a marine, seeing combat during the Vietnam War. He retired as a colonel from the Marine Corps Reserve after 30 years of service. Ray Kelly is a law enforcement visionary, a serious, take-charge and motivating leader, and an extraordinary public servant. He’s exactly what New York City and all New Yorkers need in the very challenging times in which we all live. Now, this is a man who can speak about any subject – including counterterrorism, how to make a great pot of chili, or even rock ’n’ roll from the sixties. But today we’ve asked Commissioner Kelly to talk about something that has been important to him since he took his current job, and that’s how to put a stop to the manufacturing, buying, and selling of counterfeit luxury products. It is my great privilege to introduce New York City’s 41st and 37th police commissioner.

Thank you so much, Valerie. In two weeks, Spanish authorities will begin to try the 29 individuals charged with the March 11th, 2004, terrorist attacks in Madrid. On that day, shortly before 8 a.m., 10 bombs were detonated on commuter trains headed to the central station in Madrid. One hundred and ninety-one people died, thousands were injured. Over the course of the upcoming trial, the public will learn that the terrorist cell that carried out the attacks financed their operations through the sale of drugs, the sale of stolen cars, and, crucial to this summit, through the sale of counterfeit CDs.

Closer to home, a federal grand jury in Michigan recently unsealed the indictment of 19 individuals accused of trafficking in contraband cigarettes, counterfeit brand-name rolling papers, and counterfeit Viagra, and sending a portion of their profits to Hezbollah. They’ve been charged with racketeering to support a terrorist organization. Known associates of those indicted have pled guilty to similar charges in North Carolina. Anyone who considers trademark counterfeiting a victimless crime should know this. And they should be asked to reflect on the question of what we are funding when we support a low-risk, high-profit illegal trade. When we pick up a bootleg copy of Casino Royale, a knockoff Gucci handbag, a pack of ultracheap cigarettes – what enterprise is being funded?

In the case of Madrid, in the case of Michigan and North Carolina, the answer is: terrorism. I speak to you today from the perspective of the police commissioner of New York City, where on the ground every day we’re working to disrupt the manufacture, the distribution, and the sale of counterfeit goods. Our attention is local and that’s intensely so, but we are ever mindful of the global reach of this multibillion-dollar industry. Indeed, New York is a hub for many of the same reasons that we are a terrorist target. We are an international city, a financial capital, a crossroads for tourism, and a center for culture. Seven years ago, in my role as commissioner of the U.S. Customs Service, I was looking at trademark counterfeiting from a federal perspective. I remember one trip to Hong Kong and the tour led by their customs commissioner, who by the way is a native New Yorker and has an accent to prove it. He took me to the customs service warehouse for seized goods. The place was just a massive facility; it was packed from floor to ceiling with counterfeit CDs and DVDs. What I was looking at was the tiniest possible fraction of the trade, and yet it dwarfed anything that I had ever seen.

As long as the flow from China, India, and Pakistan keeps up, and in fact it is speeding up, the United States and the New York City Police Department will have a very challenging job indeed. But as was the case seven years ago, one of our best tools is information sharing and interdisciplinary cooperation, which is precisely what makes this annual summit so important and so remarkable. The diverse investment in combating trademark counterfeiting is well represented by those of you in this room today. So I want to commend all

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of you for your participation and to thank you for your contributions to the various dimensions of this work.

I also want to introduce to you what I consider to be – of course I’m very parochial – a truly fantastic team, the only one of its kind in the country. They have led the New York City Police Department’s efforts in this area for over a decade. They are the members of the Organized Crime Investigation Division, Trademark Infringement Unit. I’m going to ask them to stand up – Inspector Brian O’Neil, Captain Christopher Monahan, Lieutenant Brian Verwoert, Sergeant Julius Morton, and their team of detectives: Jorge Figueroa, James McCarton, Antoine Manson, and Louis Cordero. You do a great job. Thank you.

In the two years since I last addressed this group, they have seized over $18 million in counterfeit goods and U.S. currency. That, by the way, is a conservative number based on street retail values as opposed to estimated industry losses. Along with our peddler task force and various precinct-level teams, they have issued 6,000 summonses and effected 700 felony arrests. With the mayor’s Midtown Enforcement Unit, they’ve helped close down 75 establishments deemed to be criminal nuisances. They are seasoned detectives and proven major-case investigators and they do a tremendous job.

Last year we began to make vigorous use of another civil enforcement tool. In addition to taking everything that we find at the site, including not just goods for sale, but leather cutters, embroidery computers, CD burners, and all the intricate means of production, and in addition to going after landlords and shutting down whole buildings, the department is now going after personal assets. In 2006, we seized $840,000 from personal bank accounts. That’s in addition to the hundreds of thousands of dollars found on the premises in cash stacked in boxes, stashed in drawers, piled up against walls. Some of the danger of trademark counterfeiting results from the sheer enormity of the sums that are handled, the sums that are involved.

Our teams can pick up $10,000 executing a search warrant very easily. That kind of money never fails to attract violent criminals who themselves want a quick buck and know that a fellow outlaw makes an easy target. Counterfeit vendors have been shot, they’ve been robbed, they’ve been slashed with box cutters, and the shoppers aren’t necessarily safe either. A year and a half ago a woman on a one-day visit from Baltimore was shot in the chest by a bullet intended for a vendor. Looked at this way, victimless hardly seems the word to describe the industry.

The threat to public safety is also embedded in the products themselves. In April our Trademark Infringement Unit followed up on a tip that shoddy electrical supplies were being sold with the phony stamp of Underwriters Laboratory, UL, that you see on so many electrical appliances. Now, Underwriters Laboratory is a reputable nonprofit organization that reviews the safety of electrical products. Our detectives made undercover purchases of smoke detectors and extension cords. Subsequent analysis showed that they did not at all meet UL standards. The holographic UL labels attached to the items were counterfeit. When the cords were pulled apart, it was seen that the wires were simply too small to protect against shock or fire. The cords failed to extinguish after a 60-second flame test.

The UL label implies tests for insulation, temperature control, and many other safety features. None of these goods had actually passed such tests. Instead, under the UL name, flagrant fire hazards were being pushed on the public. Because the warehouse was located in New Jersey, our Trademark Infringement Unit worked closely with the New Jersey State Police. On the last day of July, four tractor-trailers full of goods were seized. Among the loot, 46,000 bad power strips, 65,000 faulty electrical outlets, 34,000 weak extension cords – 180,000 items in all – or to put it another way, a lot of fires averted.

Counterfeiters are making and selling auto and aircraft parts, baby food, and pharmaceuticals. The health and safety risks are alarming. So are the threats to intellectual property and to the public trust. In this area, the city itself is not exempt. In addition to the estimated $1 billion in lost sales tax revenues, the city’s own brand name has been seized upon for its cachet. In June, the department shut down the Queens shop that

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was selling hats, shirts, bags, and other items unlawfully emblazoned with the NYPD and FDNY insignia. And we know from experience the kind of terrible things that can happen when police badges and uniforms are stolen or faked. These are symbols that the public relies upon to protect themselves. The sham world of counterfeiting turns all of that on its head. But the penalties are so low and the profits so huge that criminals are willing to take the risk.

The scale of what they can accomplish is simply staggering. Consider our recently concluded operation at 1225 Broadway, a notorious location. The place was massive; a counterfeit Wal-Mart or Kmart, if you will – one-stop shopping for movies, for music, and for luxury accessories. We closed down 15 rooms on five different floors, all crammed with high-end counterfeits – Gucci, Rolex, Christian Dior, and Kate Spade. It was like flipping through a copy of Harper’s Bazaar. They replicated some items right down to the zipper, the inside labels, the tags, all the little brand indicators, and they were made to order. As fashions changed, the counterfeiters changed, too. Or as one of our investigators said, if a customer wants a particular brand, they never have to walk away without it.

We’re doing everything that we can to stay ahead of the counterfeiters, including on occasion setting up our own undercover warehouses to make plausible the kind of large-scale buys that are necessary to net the kingpins. In this, we’ve been assisted by the Police Foundation, of course, so ably headed by our host, Valerie Salembier. Under Valerie’s leadership, the foundation has, among other projects, helped fund these undercover purchases and also, in other areas, helped us launch our real-time crime center and helped us station 10 liaison police officers overseas in foreign countries. In short, Valerie has led the foundation into a new era of public-private cooperation, and the success of the city’s anticounterfeiting efforts speaks directly to that cooperation. So thank you, Valerie, for your work on behalf of this issue.

In the end, it is incumbent upon all of us who care about the city, who care about its safety and its economy to call it like it is. Trademark counterfeiting is a $500 billion industry. It is virtually all profit and it isn’t funding anything good. It is a threat to democracy and it’s a threat to the rule of law and it is best fought through public, private, and international cooperation. In other words, the kind of dedicated coalition that is in this room today. So let me thank you for all you do and let’s keep up this great work together. Thank you all for being here today.

Thank you, Commissioner Kelly. It’s my pleasure now to introduce you to the moderator of today’s panel, Alan Drewsen. Alan is the executive director of the International Trademark Association, INTA, that you’ve been hearing about today, and our sponsor today. Alan assumed his position with INTA in September of 1998 after spending 25 years as a lawyer in New York City, as the senior vice president and general counsel of Empire Blue Cross & Blue Shield, as well as in private practice. Throughout his legal career, Alan has represented trade associations in a variety of industries. He served on the board of directors of the Blue Cross & Blue Shield Association and on other not-for-profit boards as well. Fortunately, he is a frequent speaker at trade association programs because he has a lot to say and he addresses the public policy issues that are the focus of INTA’s activities. Welcome, Alan Drewsen.

Thank you very much for the kind introduction. I couldn’t help but notice it was a lot shorter than the introduction for Commissioner Kelly. But as I think about it, he was in combat in Vietnam, I was a clerk in Germany. He was in the service for 30 years, active duty and reserve, I got an early out just short of two years to go back to school. He left as a colonel, I left as a SP5. He has three degrees, I only have two. He was appointed by two mayors to be police commissioner, I voted for both of them. I know nothing about chili. I will say I take some comfort from knowing that perhaps later today we can get together and talk about the Stones and Led Zeppelin.

The International Trademark Association is particularly proud to be the sponsor of the 2007 Harper’s Bazaar

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summit. It’s an honor in itself, but one that produced an additional benefit for me and INTA, and that was the ability to get to know and to work with Valerie Salembier and her excellent staff here at Harper’s Bazaar. I also want to thank the INTA staff, most of whom are at Table 1, for all their work on this event. Both Valerie and I are very fortunate in the support that we receive. I don’t need to take up any time today to tell you about INTA. Valerie hit the high spots. We have information that will be given to everybody on the way out that includes INTA’s special bulletin on anticounterfeiting. Also, you can go to www.inta.org and learn about the organization. I’m pleased to say that most of the brand owners here are already members of INTA; for those of you who are not, I have membership coordinators disguised as waiters passing among you.

This is the third Harper’s Bazaar summit devoted to the harm produced by the epidemic of anticounterfeiting. In the first two years at the summit itself and in its journalism, Harper’s Bazaar did a great job of raising awareness about the dangers of counterfeiting, including the threat to the health and safety of consumers, the exploitation of children in the factories and workshops, and the illegal profits destined to fund organized crime and terrorism, as so persuasively outlined just a moment ago by Commissioner Kelly. As a result, the readers of Harper’s Bazaar and the public in general know a whole lot more about the harm caused by these knockoffs in the street or in darkened stores, and about the loss of legitimate jobs and the loss of tax revenue, and the hit to the bottom line of so many companies, and the general weakening of respect for the law. Harper’s Bazaar is to be congratulated for all its good work in this area.

The global threat posed by counterfeiting has also received a great deal of high-level attention just since last year’s summit. In March, the president signed the Stop Counterfeiting in Manufactured Goods Act, which made several improvements in the anticounterfeiting laws of this country, including making it a crime to traffic in counterfeit labels even before they get attached to the goods. In June, the EU-U.S. Action Strategy for the Enforcement of Intellectual Property Rights was announced. In July, the G8 leaders adopted a joint statement on combating piracy and counterfeiting. In September, the U.S. Chamber of Commerce held its Third Annual Anticounterfeiting and Piracy Summit, and on Tuesday and Wednesday, just yesterday and the day before, the third Global Congress on Counterfeiting met in Geneva under the auspices of the World Intellectual Property Organization, which is the arm of the United Nations devoted to the protection of IP; Interpol and the World Customs Organization, with the support of INTA; the Global Business Leaders Alliance Against Counterfeiting, which is GBLAAC for those of you who follow acronyms; the International Chamber of Commerce, and the International Security Management Association. It will be very interesting to see what recommendations come out of those meetings over the last two days.

Obviously, as Commissioner Kelly said and as Valerie said, there’s much, much more to be accomplished in the areas of public education, enforcement, and corporate protection of IP assets in the public-private partnership against counterfeiting. For that reason, it was very exciting to hear about the Harper’s Bazaar Anticounterfeiting Alliance that Valerie just announced a minute ago. INTA wants in. I think it’s a great initiative. So in the next hour or so with the panel, we’re going to assume your familiarity, though, with the harms of counterfeiting and we’ll talk about what the federal government and industry are doing and can do to turn counterfeiting from a high-profit, low-risk business into just the opposite. To accomplish that task, we’ve assembled an excellent panel and I want to invite them up to the stage now and we will get going on this.

I’ve asked each of the panelists to give opening remarks and then answer some questions that I hope will trigger further discussion. We thought it would be interesting to begin with a presentation on design piracy and then hear from representatives of the Department of Justice and the Department of Commerce, who will discuss the array of tools that the federal government has to fight counterfeiting, what has been accomplished thus far, and what plans are in place for future success in this area. Our goal is for you to leave here with a better understanding of what the government is doing for industry and the consumers and what industry can do to facilitate the government’s work and to protect its own assets. So let’s get started.

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As many of you know, a bill to ban design piracy was introduced in Congress last year as a result of the work of the Council of Fashion Designers of America and its European partners. We are very pleased to have the principal drafter of that legislation with us today. Alain Coblence, founder of Coblence & Associates, is an international corporate lawyer who represents clients, probably many of you in this room, in a broad range of commercial matters, with an emphasis on corporate law and intellectual property. He is a frequent speaker and writer on legal topics, particularly comparative law, and the contrast between the common law and the civil law. Please welcome to the podium Mr. Coblence.

Thank you very much. I’d like to start, of course, by thanking Harper’s Bazaar and INTA for giving me a platform to explain the relevance of the fight against design piracy. As you will discover, this is a subject which must be dear to the heart of an attorney who practices on both sides of the Atlantic and it is also very high on the agenda of the Council of Fashion Designers of America. Why discuss design piracy in a forum on counterfeiting? The difference between the two concepts is clear. Counterfeiting involves the fraudulent use of a trademark. Design piracy involves the fraudulent use of a shape. But the two are linked.

Counterfeiting cannot be fought efficiently without prohibiting design piracy because design piracy is counterfeiting without the label. The counterfeit article will not find a buyer unless its shape is identical to the original, label or no label. In addition, prohibiting design piracy is a must if we want to stop counterfeiting at our borders. U.S. Customs has to be empowered to stop the import of counterfeit goods even though no fraudulent label has been affixed yet, or it will be added on in the back of some shop on Canal Street.

Even though it is undisputable that fashion designs fit the definition of copyright law – an original form of artistic expression – unlike French law, U.S. law does not provide any protection to designers. This is because of the long-standing belief that the design of a functional object must remain in the public domain in order to better encourage free competition and to prevent monopolies. Needless to say, the prohibition of design piracy has not stifled competition or created monopolies in Europe. On the contrary.

Our reform of copyright law is limited in scope. It will not provide copyright protection to ordinary day-to-day garments like button-down-collar shirts and it will not protect designs that are already in circulation, like bell-bottom pants. These will remain in the public domain. Already, in 1998, in an amendment to the Copyright Act, the U.S. Congress made a significant step in the direction of giving protection to the designs of functional objects. It did that by adding the principle of the protection of original designs of useful articles and it is now a separate section, Chapter 13, of the Copyright Law. The good news is that this new statute provided a comprehensive framework to enable the protection of all designs of useful articles. The bad news is that it went on to define useful articles as boat hulls.

Now, in case you wonder, boat hulls are the immersed part of the sailboat. The law gave a protection of 10 years to these designs, while our bill simply extends the definition to include fashion designs, except that instead of a 10-year term, it only provides for a three-year term. This is a very conservative period. In the European Union, where the protection applies to all unregistered designs, three years is what you obtain for designs which have not been registered. When the designs have been registered, the protection is valid for five years and can be renewed for up to 25 years. It should be noted, by the way, that although America does not grant European designers any protection against piracy, European regulations protect American fashion designs when they are shown there.

Outside Europe, most of the developed industrialized nations have adopted design piracy laws, starting with Japan, but also countries like India. Today American fashion needs this protection because without domestic legislation forbidding piracy, U.S. Customs will never have the authority to stop the huge influx of pirated goods coming from the Far East. In truth, we know that anticounterfeiting laws alone are not sufficient to protect the public against fakes. In that respect, until we adopt domestic legislation in harmony with our trade partners in Europe and in Japan, the U.S. will remain the weak link, a sort of Trojan horse of design piracy

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in the industrialized world.

Moreover, in a globalized environment, American fashion cannot survive and jobs cannot be preserved if its creations are pirated by Chinese manufacturers and the knockoffs reach our shores at one-tenth of the price before the original American designs are even released on the market. With the recent disappearance of quotas and the triple-digit increase of textile imports from China, which it provoked, this protection has become a matter of life and death for the U.S. fashion industry. Let’s remember that the fashion industry here used to be based on designs delivered from Europe, whether licensed or plagiarized. In recent years, however, the American fashion industry has grown independently. It has only been a few years since our industry has gained a global leadership role and, as a result, it has only been a few years that American fashion has been pirated abroad.

Meanwhile, fashion design has gained an unprecedented level of interest among the public. The media coverage of the red-carpet show prior to the Oscar® ceremony compares to that of the awards. Who wore what makes the front pages. In that context, it has become unacceptable that knockoff artists go on television the next day to offer, for a couple of hundred dollars, pale imitations of the great gowns worn at the Oscars. Both up-and-coming and renowned American fashion designers suffer significantly from the damage from this lack of protection, as their newest and most original creations are imitated and duplicated literally hours after having been presented to the public for the first time.

In Europe the originality of the creation, what we sometimes call the individual brand DNA, constitutes the foundation on which successful businesses are built. Here, in the last 40 years, too many original American fashion designers have had their careers destroyed by the generalized [knock-off practice], which deprives them of that necessary foundation. Likewise, today countless young creative designers are being wiped out by the same piracy pandemic before we will ever hear of their existence, not to mention their style. This is how the lack of protection for original and distinctive fashion designs is eroding the innovation and the competitiveness of U.S. designers and manufacturers.

The development of new technologies in recent years has considerably worsened this problem. Today, via the Internet, counterfeiters and pirates have immediate access to all fashion creations the minute they are viewed by the public under the tents. Technology has revolutionized the speed and the precision of each of the phases of the manufacture of pirated goods. Within minutes, perfect 360-degree photos are transmitted from the runway via the Internet to China or other places where they are manufactured by sophisticated robots that cut and assemble clothes, which are then shipped back here within a very short time frame. Whereas it used to take six weeks to create the prototype of a dress from a sketchy drawing, now it takes just three hours. As a result, the knockoffs are offered to the public weeks, sometimes months, before the originals reach their legitimate distribution outlets.

Today in Congress the Design Piracy Prohibition Act has obtained the support of a broad bipartisan coalition and we are hopeful that the law may be passed by the new Congress within a matter of months. Once it is passed, this law will force the professionals of the industry to be more creative, which, after all, is why we have an intellectual property system in the first place. The law will ensure that the creator of the original design has a chance to amortize the huge investment made in the design and in the launch of its higher-priced collections by having for two seasons the exclusive right to market his own derivative, lower-priced products. Finally, the law will act here as the same powerful deterrent as in Europe, where the level of design piracy litigation is extremely low and very, very few cases are ever brought to court.

Shortly after the Copyright Act of 1976 was adopted, Barbara Ringer, then register of copyrights, said that the full range of design protection issues stands as one of the most significant and pressing items of unfinished business on the congressional agenda. Well, more than 30 years later, here I am today preaching the need to finish that business in order to preserve our fashion industry, in order to enhance the creativity

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of fashion design, in order to elevate the profession as a whole and, at the same time, for our country to harmonize its legislation with that of the rest of the world and restore some balance in the development of trade with its partners. Thank you.

Thank you for that very interesting summary. I certainly wish the CFDA well in this effort. I will say this, that INTA worked on the Trademark Dilution Revision Act of 2006, which President Bush signed in October, for about three and a half years before we were able to get it passed. Right until the end, we really didn’t have much opposition to the statute. So I’m familiar, perhaps too familiar, with the legislative process that goes on and it’s a very tough, tough haul. So CFDA is fortunate to have Mr. Coblence and other advocates because they will need them to steer this legislation through Congress.

Our next speaker is Sigal Mandelker, the deputy assistant attorney general in the Criminal Division of the U.S. Department of Justice. She oversees the Computer Crime and Intellectual Property Section, which is the second area that concerns us today, but also the Child Exploitation and Obscenity Section, the Domestic Security Section in the Office of Special Investigations. So a very full portfolio. Previously Ms. Mandelker was the counselor to the secretary at the Department of Homeland Security and an assistant U.S. attorney in the Southern District of New York. She clerked for the Hon. Edith Jones on the Fifth Circuit and the Hon. Clarence Thomas at the United States Supreme Court. She received her bachelor’s degree from the University of Michigan and her law degree from the University of Pennsylvania. Please welcome Ms. Mandelker.

Thank you for that introduction and thank you to Harper’s Bazaar for holding this very important summit. We’re always very pleased to hear of new initiatives of industry and the press to counterfeiting and we look forward, of course, to working with you in the development of that important effort. As has already been mentioned today, the intellectual capital of the United States is among our country’s greatest resources and most valuable assets. Through the development of new ideas, rapidly changing technology and an expanded worldwide consumer base, and a worldwide distribution network made instantly available through the Internet, intellectual property plays an increasingly prominent role in the U.S. and global economies.

Unfortunately, of course, this unprecedented growth of technology has converged to provide unprecedented opportunities for criminals. You need only take a quick walk down Canal Street to see the rampant sale of fake goods. I was also recently in Beijing, where it is all the more apparent. I didn’t visit a big warehouse like Commissioner Kelly, but I did take the opportunity to do my own little investigative work as I was walking the markets. In the open street markets of Beijing, I came across a fellow who was sitting on his crate and he had a box of counterfeit DVDs. I quickly, as a prosecutor, took out my camera to take a shot of a criminal and he actually started yelling at me, which is the shot that I have, and charging after me. No need to worry, I got away, he didn’t catch up to me. I left unscathed with no fake DVDs. But it’s an image that’s sort of branded in my mind because he had no shame. As soon as I took out my camera, he didn’t cover up the goods. To the contrary, he started running after me.

These goods are sold everywhere on the open streets. Whether it’s here in New York City or in the streets of Beijing, it’s fake, it’s criminal, and we’ve got to stop it. As you know all too well, this underground economy costs legitimate businesses billions of dollars every year and threatens U.S. economic security. It’s been estimated that intellectual property theft costs American companies $250 billion in annual losses. But the harm, as has already been mentioned, is not only economic. Counterfeit goods can also present significant health and safety risks. In fact, we had a case that we worked jointly with the Chinese in which we seized over 400,000 tablets of pharmaceutical drugs. We had the FDA analyze those drugs and they found that they contained zero to five times the active ingredient in the FDA-approved drug. So it’s an enormous risk to our most vulnerable members of society.

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For that reason, the attorney general has made prosecuting intellectual property cases one of our top priorities. I’d like to tell you a little bit today about what we are doing to rapidly increase our enforcement efforts. First, we’re an integral part of the president’s Strategy Targeting Organized Piracy, or STOP, initiative. This comprehensive initiative seeks to involve all stakeholders – industry, law enforcement agencies, the Department of Commerce and other members of the executive branch, as well as our internal partners. In 2004 the attorney general also created a task force on intellectual property. In October of that year, that task force made a series of 31 recommendations as to how we can increase our efforts, and I’m pleased to say that in June of last year the attorney general reported that all 31 of those recommendations had in fact been implemented.

For example, from 2004 to 2005 the department nearly doubled the number of defendants charged with IP offenses. From 2005 to 2006 the department convicted 57 percent more defendants of criminal copyright and trademark offenses, and 39 of the those defendants received terms of imprisonment of 25 months or more. That’s a 130 percent increase. And finally, we have rapidly increased the number of federal prosecutors that we have working on these crimes. In fact, we’ve created computer hacking and intellectual property units all over the country, which are teams of specialized prosecutors who are specifically focused both on computer crimes and intellectual property. Right now we have 25 such teams. We’ve also got prosecutors in each one of our U.S. attorney’s offices who are specifically designated to work on these crimes, for a total of 230 federal prosecutors. We also have a section in the Criminal Division of the Department of Justice, which I supervise, which has over 35 prosecutors, again, working on computer crimes and intellectual property.

We also recognize the importance of strong relationships with industry. Indeed, it would be difficult for us to prosecute these crimes without the assistance of victim rights holders. It is your help that is essential in prosecuting these crimes in criminal referrals, and down the road as well in sentencing. To that end, I should also note that there are a number of excellent resources at your disposal. First, you can visit a website maintained by the Department of Justice at www.cybercrime.gov, which has a wealth of information on many aspects of the department’s enforcement efforts concerning intellectual property crime. Second, we have resources – I’ve left some here for you today – it’s a checklist of how you can report these sorts of crimes to law enforcement.

Let me take a minute, too, to tell you a little bit about what we’re doing internationally because this is truly a global problem. We work cooperatively, of course, with law enforcement all over the world. We recently deployed an experienced prosecutor to Southeast Asia, just focused specifically on intellectual property crimes. We’ll be doing the same soon to Eastern Europe. That prosecutor will be located in Sofia, Bulgaria. In the last year alone, we’ve also trained and provided technical assistance to numerous foreign judges, prosecutors, and investigators, with the number in the last year alone reaching 3,300 individuals from 107 countries. In short, we’re devoting more criminal law enforcement resources than ever before.

Our work is paying off. In the past two and a half years, the department successfully led the two largest international enforcement actions ever undertaken against online piracy – Operation FastLink and Operation Site Down. Together these investigations involved more than 16 countries across five continents. These U.S.-led operations synchronized the execution of more than 200 search warrants, the confiscation of hundreds of computers and illegal online distribution hubs, and the removal of more than $100 million worth of software, games, movies, and music from illicit distribution channels. To date, more than 75 defendants have been convicted of felony copyright infringement arising from these operations.

Of particular significance to those of you here today, we’ve also increased prosecutions involving the illegal manufacture and distribution of counterfeit goods, including counterfeit luxury goods. For example, in June of 2006, two Massachusetts residents pled guilty to money laundering and trafficking in over $1.4 million in luxury handbags, wallets, and other items in one of New England’s largest counterfeit goods operations. The

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defendants admitted to using 13 self-storage units to hold approximately 12,000 counterfeit handbags, 7,000 counterfeit wallets, more than 17,000 generic handbags and wallets, and enough counterfeit labels and medallions to turn more than 50,000 generic handbags into counterfeits. And of course, we’re also prosecuting exactly these sorts of cases on the streets of New York.

With that said, I welcome your questions. Again, I cannot emphasize enough the importance of our industry and law enforcement partnerships.

Thank you. While the personal image is that of a counterfeiter chasing Sigal down the street, institutionally we have Sigal chasing the counterfeiters, which is as it should be, I think. The story reminded me that a couple of years ago INTA had a forum on anticounterfeiting. We invited law firm members from jurisdictions around the world to come in and talk about how enforcement was going in their country. Our member from India reported that what they frequently encounter is that the counterfeiters will hire a poor person to sit there, and when the officials burst in and ask who is responsible for this, this poor fellow raises his hand and he is carted off, and the counterfeiters just move one house over. So those were the kinds of enforcement problems that were being faced in India.

To talk about some international enforcement issues, our next speaker is Stephen Pinkos, who is the deputy undersecretary of commerce for intellectual property and deputy director of the United States Patent and Trademark Office, which is a particularly important office to the members of INTA and an office which in recent years has been given a very prominent role in the broad federal response to counterfeiting. Mr. Pinkos advises the president and the secretary of commerce and the administration generally about intellectual property matters and, as deputy director of the U.S. PTO, administers this $1.7-billion, 8,000-employee organization. Steve received his bachelor’s degree from Miami University, and his law degree from DePaul University. He will tell us how the U.S. PTO is using its worldwide influence and the support of the U.S. trade rep to increase the protection for IP by this country’s trading partners. Stephen Pinkos.

Thank you, Alan, and thank you and Valerie for hosting us today. It’s been an enlightening event already. Commissioner Kelly, your remarks were particularly insightful and inspiring, and it’s great to see leaders like you engaged in this global struggle, as you mentioned. The stakes really are high and it’s really incumbent upon us to make that case to everybody, because it’s not readily apparent. Not everybody makes the connection to organized crime and understands the consequences of this type of criminal activity.

I’m from the Patent and Trademark Office so I don’t have a badge, I don’t carry a gun, and we don’t get to do any of that fun type of stuff. But what we do, we’re sort of the genesis of intellectual property. Not the genesis, so to speak, but we’re the first recipient of intellectual property. Obviously the genesis is with the creators and inventors around the globe and particularly in the United States. So I’m going to take a little bit of a step back and talk a little bit about the front end of the process because there’s nothing to enforce if companies and individuals don’t take the first step of trying to protect their intellectual property. I hope you do get the message by the time I’m finished, and I know that oftentimes this is viewed with skepticism, but we are here from the government and we are here to help. That’s what we really want everybody to know; that there’s not an adversarial process here within the government or at the Patent and Trademark Office. We are looking to try to work very efficiently and help people protect their rights.

I think what’s important to remember – and we studied this, and a lot of sophisticated companies are represented in the room today, sophisticated lawyers – but a lot of folks don’t realize that your intellectual property protection that you may obtain in the United States doesn’t travel with you. It’s not good in China, it’s not good in Malaysia or elsewhere around the world. So we want to help people protect their intellectual property from the very outset and help businesses to understand that you need to obtain registrations for your trademark, not just here in the United States, but where your goods and services are marketed, where

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the products are manufactured, where research and development takes place, where products are transshipped, where businesses might expand in the future, so you’re trying to look outward to where counterfeiting is likely to be a problem.

That’s a pretty long list. There are a lot of things to think about as far as your business planning goes and what the environment is around the globe. So we’re trying to help that by working with other countries and improving their systems and working through international treaties and international organizations to make it easier on you to seek that type of protection, particularly in the trademark world, through things like the Madrid Protocol, or there’s a new Singapore Treaty on Trademarks that was signed this year. It sounds very governmental and state department, et cetera, but once adopted it will make it a lot easier for businesses to get that protection in all these different places, because we do know it’s not just an issue in China that your product can be manufactured in China illicitly or trademark-violated and it can be shipped all over the globe. It’ll show up in the Middle East, it’ll show up in South America, maybe where you didn’t even anticipate. So in some respects, you have to try to forecast the future. We’re trying to make it easier for you to get that protection.

Quicker acquisition of your registration as well – quicker and more efficient – means that you have the ability to enforce and there’s greater certainty with your enforcement options. The Patent and Trademark Office has people on the ground in China, trying to, one, reform the system there, seek greater enforcement, but also directly service U.S. companies that are having problems. But sometimes we realize there’s not much we can do because they haven’t taken that initial step to protect themselves. It’s very difficult to go forth to the various Chinese officials and advocate for a case where there is no trademark protection from the beginning.

We also are trying to be very efficient here in the U.S. because I know that’s where many of you begin in protecting your trademarks, so we are implementing a lot of initiatives at the Trademark Office, hiring a lot of examiners. We have over 400 now and we’re trying to examine applications in a very timely fashion, which is down to about four months, and also in a very high-quality fashion, so that the trademark you get is not subject to litigation or questioned elsewhere. Again, if you avail yourself of the international processes, it’ll help you when you go to other countries to have a good course of action from the United States.

What Alan mentioned that we’re also particularly engaged in, outside of the operational aspects of our responsibilities, is promoting consistent enforcement throughout the globe. We had training seminars in over a hundred countries last year, over 250 different events where we’re training thousands of intellectual property officials from around the globe. The Department of Justice is deeply involved with this as well in order for them to, one, have the right system, and two, enforce their laws. We’ve established a new academy here in the United States at the PTO in Alexandria. We’re going to have a nice little grand opening in a couple of weeks and bring people from around the globe to learn about the best practices here. And it’s not just the PTO who are engaged in this. Folks from Justice come over, folks from Customs and other parts of the government come over to spread the right message. And then we, of course, go to their countries to try to inform them of some of the best practices or persuade them how their systems could be best implemented.

I think I would be remiss if I didn’t speak a little bit more about China, because I know that a lot of the intellectual property theft issues emanate from China. It’s no secret and there’s been a massive effort for several years at the very highest levels of the government to help thwart the counterfeiting, to help stop counterfeiting in China. It’s been raised by President Bush in his summit meetings with Chinese leaders that it’s just – our trade relationship cannot continue along the lines where we’re receiving billions of dollars in counterfeit goods coming from China, not only into the United States, but around the rest of the globe. So we’re working with them, encouraging them to increase prosecutions, to increase funding for what is now the biggest trademark office in the world. We’re encouraging people to go to that office. We also want that

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office to work well, so we’re helping to train them, we’re encouraging the Chinese government to fund them because what we’re seeing is that they’re so overloaded that they’re just not doing a particularly good examination. That doesn’t help you, again, when you’re trying to enforce that right over there.

We’re also working with them to try to reduce counterfeiting on the Internet. Fortunately, the Chinese have a fairly robust system – in this realm it’s fortunate – a very robust system of regulating the Internet. If you’re a pro-democracy advocate, it’s not very fortunate. We can use it to our advantage from the standpoint of suggesting, since all these Internet sites are licensed, they can help police the sites that are dealing in counterfeit goods. The counterfeiters there are figuring out every mechanism through which to distribute goods and they’re embracing the Internet as well. We are also trying to help U.S. businesses function well in China, and we’re doing IP conferences specifically geared to China around the country and inviting anybody – lawyers, company representatives, independent inventors – to come join us at these conferences. This year we’ll be in San Francisco, Philadelphia, Kansas City, Dallas, I believe, and one or two other places before the year is out. So we publicize that on our website.

We are also working with the Chinese to address the issue of trademark squatting, which is becoming more and more of a problem in China. But as far as getting the information you need, Sigal mentioned some of it. We’ve come together as an administration to try to work much better than we ever have before on this issue. We’ve established a government-wide website, www.stopfakes.gov, that has the information you need to send you to the right agency within the government, but also tool kits on how to protect your intellectual property in other countries. So we’re trying to have that helpful information there. We have a hotline that people can call at the PTO, 866-999-HALT, where you get an actual government PTO lawyer/advisor on the line. If the problem happens to be that you think you know of a shipment coming in, we know that we can refer you to Customs.

PTO is cooperating a lot with Customs, trying to facilitate when you get your trademark registration. Go to Customs, because if you register with them, as the commissioner knows, you actually provide certain information and it makes it a lot easier to stop those goods when they’re coming into the country. So we’re trying to make sure trademark registrants understand that from the beginning, and we send them a little notice and also place that online.

Lastly, a new initiative where we’re trying to help overseas is by placing attachés abroad. As Sigal mentioned, DOJ has a couple. We have placed three people in China. Some of you who work there may know of Mark Cohen, who’s been there for over two years. He had a profile in The Wall Street Journal recently with one of the little grainy photos, and he’s gotten a lot of publicity. We’ve added two more in China, one in Beijing and one in Guangzhou. These attachés are there to assist you as businesses to advocate for strong IP policies and conduct IP training. They are a great link and an asset for Americans who are trying to do business. We have one in Brazil, in India, and in Egypt for the Middle East, Southeast Asia and Bangkok, and also one about to be deployed to Russia. So those of you who are doing business overseas, please take advantage of them.

Like Sigal, we’ve brought a handout and a lot of this information I just talked about will be on there. Again, I emphasize that there are a lot of sophisticated people in this room; a lot of very smart lawyers and others. But we are trying to partner on these issues and a lot of times it’s information we need from you. We need to know how to help, we need to know where the problems are. So we want you to know who to contact. I know it often seems mysterious in government. I’ve got a problem, where exactly do I go. There’s nine agencies that work on this. There’s definitely bureaucracy involved. We want to help you navigate that, all for the purpose of helping to protect your intellectual property, because we realize that a lot of it, the fashion industry, many industries here in the United States, pharmaceuticals, high tech, are so dependent on that intellectual property, and that’s where our economy is going.

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We need to continue to be the leaders and the innovators of all sorts of new products and designs, and they need to be protected here and abroad, and that’s our goal and our mission. We’re trying to do it to the best of our ability and we want to work with you to realize those goals. So thanks for inviting me and having me here today, and I also look forward to questions as part of the panel.

Thank you, Steve. I think Steve made a whole slew of practical points. I think the one I’d emphasize is the registration of the trademarks with Customs. Customs obviously is doing a lot of work on homeland security issues and probably, like every other agency, is underfunded, but nonetheless, if you call their attention to your trademarks and the problems that your brands have, there’s a much better chance that they will be able to intercept counterfeit products earlier in the process.

So let’s ask the panel a few questions arising out of what they said and maybe just one or two things that have been on my mind anyway. Let’s start by talking about China. Steve kind of answered the question of where he thinks things are going in China. INTA had its board of directors in Brussels in September and we had somebody from the Chinese delegation to the EU address the board. The woman said that 90 percent of the complaints the Chinese government receives about counterfeiting come from Chinese enterprises. Even allowing for some exaggeration in that figure, I felt that it was a very positive development and might in fact lead China to crack down more on counterfeiting when a lot of the complaints are coming from their own businesses, particularly as their own businesses get more competitive and more global.

Sigal and Steve, in particular, what have you seen in China in the last few years and, more importantly, what do you think over the next five years with respect to enforcement in China? Because China has a very good set of intellectual property laws, comparatively. It’s in enforcement that we have found sometimes they’ve fallen short. So what do you think?

For the Department of Justice, the bottom line for us is that it’s critical that we make more cooperative joint cases with the Chinese. That’s where the rubber meets the road, basically. We need them to crack down on counterfeiters, we need them to crack down on counterfeiters that are shipping massive amounts of goods into the United States. To that end, we have had a couple of recent successful large-scale operations in which we’ve cooperated with the Chinese. One was that case I mentioned earlier involving over 400,000 tablets of pharmaceutical drugs and other pharmaceutical goods. We’ve had similar success in piracy. We’ve also as of last summer established an enhanced relationship with Chinese law enforcement. At the Department of Justice, we have a working relationship with the Chinese; it’s called the Joint Liaison Group, and we specifically established a group to focus with Chinese law enforcement on international piracy. We’ve heard very good things from them; they’re very interested in working with us. We have a delegation actually coming to the United States in March. Again, the bottom line for me, for us at the Department of Justice, is we need to make more cases with you. We need to have more joint operations. We’re hearing some good things, but there’s no question that we must do a lot more, that we must engage with you more. We’re making inroads, but it’s certainly not enough.

Steve, I tend to be a little bit of a Pollyanna on this issue and I’m sure most of my members would disagree with me. But in the years that I’ve been going to China, not only do our corporate members report their own counterfeiting problems, but I feel that the level of activity and the sincerity of the Chinese officials have increased. Am I nuts?

Not on that subject. I think that’s true. They have demonstrated a will, they’ve changed their laws, they’ve increased prosecutions. The problem is that the scope of the IP problems is still massive and it’s going to require even more dedicated effort. A stronger will has been evident at times and especially, as you mentioned, with some of their own domestic industries. A year or so ago, counterfeit 2008 Olympics

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products were suddenly sprouting in China. That was shut down pretty quickly. You literally don’t see them anymore because they sent a message and got the job done. I think even stronger leadership and will are needed from the top, although a change has been evident.

The bottom line is, I think they need to bring more criminal cases with more meaningful sentences, and yes, the more their industries become dependent upon intellectual property and become harmed by it themselves, like they are experiencing with some cybersquatting in other countries around the world, the more we believe they’ll appreciate it. But there are still the countervailing pressures there, especially at the provincial level, to provide jobs and for the mayors and the leaders there to do whatever it takes to provide for the people. So I don’t think that that alone will cause a fundamental shift in five or 10 years. I think it’s going to be a combination, with the continued political pressure potential. They’re a member of the WTO now, they have WTO obligations, and the U.S. may have to avail themselves of that to see further progress.

Let me take a sharp turn here. Based on your references to sentences, let me ask Sigal. I think some of the cases you referred to give a partial answer to this question, but do you find that judges in the United States are willing to impose significant sentences on counterfeiters? I can remember INTA struggling with an issue with sentencing guidelines a number of years ago, where the sentencing guidelines we felt weren’t tough enough with respect to intellectual property crimes and in fact there was a proposal on the table to make them less tough. We had quite a struggle with that. So are the judges – and, for that matter, the prosecutors – now understanding the significant harm that counterfeiting poses and willing within the legal structure of the United States to act on that?

Yes, I think we are seeing higher sentences in these IP crimes. In fact, I think that we as prosecutors are doing a better job in terms of educating the judges about the impact of these sorts of crimes. Of course, in the health and safety area, it’s frankly an easy case to make. In other areas, we’re talking about economic crime and that certainly has a major impact on the U.S. economy and, again, we have to continue to educate judges about the harm that it’s causing. But in a couple of recent cases we had individuals sentenced to seven and eight years’ imprisonment, which is a significant sentence in this area. But frankly, what we really need is to get industry more involved in our sentencing. You have a right to file victim impact statements in counterfeiting cases. You do and we appreciate it. You have a right to be heard by the judge whether in testimony or by writing letters. It’s this joint partnership between the prosecutor and the victim in our presentation to the judges that’s really going to make a significant impact here.

Thanks. Steve, it’s not your area, do you want to jump in on that at all?

Just as with judges, I think there’s developing a greater appreciation on Capitol Hill as well that I’ve been able to discern from conversations with members. As we start to describe the vast network and the impact of counterfeiting, they’re starting to get that it’s just not people peddling fake jewelry or purses on the streets, that the folks behind this really are involved with something pretty sinister.

I think that’s an excellent point. We certainly found that the members of the House of Representatives, the members of the Senate with whom we dealt on the dilution bill were very appreciative of intellectual property issues. And of course, they’re very sensitive to pressures from their constituents. So it’s another way that industry can play a significant role working with organizations like mine, working on your own, working with the other associations to which you belong. Organized political pressure, and education, both help a great deal.

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Let’s go to another large topic that permits you to answer any way you want, and that’s the Internet. For many brand owners, the acceleration of growth on the Internet has brought undreamed-of sales and undreamed-of counterfeiting problems. What’s the Department of Justice doing to deal with criminals who are abusing the Internet?

I would say we are constantly seeking to improve our ability to detect criminals on the web. It’s obviously a difficult challenge. Criminals are becoming increasingly more sophisticated in terms of how they hide their identities, et cetera, on the web. Just in the Criminal Division, we have a specialized unit of computer experts who we rely on quite heavily to seek new mechanisms to detect criminals online. Frankly, a problem that we’ve noticed is that when we bring these big cases in the United States, the criminals move offshore, and when they move offshore and there’s no U.S. nexus, we don’t have the ability to charge them. But we are constantly investing more in this problem.

In another one of the sections that I oversee, which is the Child Exploitation and Obscenity Section, we have to think smart. We are bringing smart people into the department to think these sort of complex issues and questions through, and we’re certainly getting better, but so are the criminals, and we’ve got to keep pace with them.

Steve, anything you want to add?

At the PTO we’re trying to use the Internet in a positive way, just for efficiencies of operations, and that’s not what you’re really getting at. But 95 percent of trademark applications are coming in electronically. It helps facilitate global applications as well. We don’t have the same type of problems that Sigal is trying to solve involving those criminal syndicates.

I’ll put a plug in for electronic trademark registration. It was only a couple of years ago, three or four, that you had about 5 percent that were trickling in, and now it’s 95 percent trademark applications submitted electronically. For those of you not involved in the business, it doesn’t seem too important, but for those who are, it’s a gigantic thing really and it’s helped that office tremendously. Steve was talking about the resources of the China trademark office. That’s certainly one of the problems they have. The largest trademark office in the world is completely understaffed, completely overwhelmed, and they need a lot more help and assistance when it comes to things like electronic filing.

Let me ask you a question I really should ask myself actually. It’s been on my mind and then I was talking to David Heckler, who’s from Corporate Counsel magazine, about this at the cocktail hour. With the increased attention being paid to this problem – and I think it really has increased – by governments, by trade associations, by industry associations, by private enterprises, I have a concern – I think a lot of people have a concern – that these overlapping initiatives will to some extent lead to a waste of resources. Now, some of that is inevitable. But do you have any views on what should be done to coordinate these efforts? You can touch on how you’re coordinating, too, within the federal government.

Within the federal government, as I mentioned, we have this strategy initiative targeting organized piracy in which we meet quite regularly. Steve and I sit in meetings; I think we were just in one last week in which we discussed the efforts that we’re undertaking to coordinate. We have different missions, but obviously it’s overlapping, and we conduct training and attend conferences, et cetera, together. From the law enforcement perspective, you can’t do too much in this area because it is such a massive problem. So coordination is important and helpful, but actually I would turn to Steve because I think you’ve got more experience with industry associations and that sort of thing.

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sTepHeN pINkOs From the government side, Sigal is right. There’s a coordinator for international intellectual property enforcement that’s been appointed by the president that really is bringing these agencies together. So we discuss on a regular basis what we’re doing so there’s less duplicity and more coordination. I think it has had an effect, and it even helps for when we go to China that everyone who’s going there is doing their part on this message, saying the right things. So that’s been really helpful. Basically, it’s leadership from the top. You have a big federal bureaucracy, you need somebody with the charge of the president – from the White House, really – to be ultimately responsible for it and for all of us to be responsible, too.

I think with industry as well, there’s a lot going on and it’s very exciting to see and it’s a matter of communication. I know that the Chamber of Commerce has taken a lead role in Washington on this, but other organizations are doing the same. It always is a fear because there are a lot of resources out there just on the public education campaigns. You have RIAA doing one thing and consumer electronics doing another. I think it’s helpful, maybe through some of the umbrella organizations, to try to get a handle on who’s doing what and how, and who can play the best role in which area.

This is just something that we all have to stay alert to as we go on, and make sure that the amount of attention devoted to this is done in as systematic a way as possible to be most effective and least wasteful. I was very impressed by the amount of training that both of your departments do of officials from governments outside the United States. I just had a passing small question as to whether you encounter any reluctance by various governments to accept training? But then add anything you’d like to say to expand on how you coordinate that training, where you put your training dollars, and what subjects you think are most important in this training. So either Steve or Sigal.

We’re trying to be very targeted with the training, trying to hit the right countries and, importantly, the right people in those countries that can make a difference for us. It’s really three or four levels. You kind of start off with the policymakers, trying to convince them they should adopt particular laws that are helpful with intellectual property. Then we train a lot very technically because, again, when you all go to protect your intellectual property abroad, we want that office to be functioning well. So U.S. PTO has sort of been the leader in the world for a couple hundred years. Don’t want to sound like I’m bragging too much, but it’s sort of a matter of fact. So we help on a lot of operational issues, so when you do approach that office, it’s running well. Then we help coordinate enforcement training, and that’s where Justice comes into play.

Of course, we work closely with PTO in terms of resources and joining each other in conferences and that sort of thing, as I mentioned. This past year we trained and provided technical assistance to 3,300 foreign prosecutors, judges, and investigators. That serves multiple functions. First, it gives us an opportunity to interact with law enforcement abroad so that, again, where the rubber meets the road, we want to bring joint cases with these international or foreign investigators and prosecutors. So that’s proved to be extremely valuable. We also have done a lot of training with respect to technology – what sorts of techniques, et cetera, do we use that they can use in order to detect these criminals that are using the Internet and other technological means to counterfeit, to attack counterfeiting.

We also have targeted programs in specific regions. For example, we’ve done some good work in Brazil because there’s a big problem in Brazil. We’ve been working with judges in India in order to encourage them to accept plea bargains. From what I understand, there’s been a backlog in their criminal IP cases because they don’t plea bargain. We’ve had some good success in working with judges there in that effort. We’re doing a lot of work in Africa because we think we have a real opportunity to curb piracy coming from Africa before it explodes, so to speak. We’ve got regional training programs with various countries. This year we’re also going to be doing a one-week program in Botswana and we’ve done a lot of work with Botswana. So we’re thinking strategically, we’re targeting hot spots and educating and building important law enforcement

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And we’re trying to measure results, which is exceedingly important. Oftentimes training can seem somewhat amorphous: Are laws changing? Is the counterfeiting situation improving? Are there more customs seizures? Et cetera.

Thank you. Before we wrap this up, let me see if there are any questions from the floor so that I don’t completely monopolize the questioning. Yes, ma’am.

What are three things that the industry representatives in this audience can do to facilitate the work of your department? Can you give us insight?

Absolutely. The most important thing that you can do really is when you detect that you may be a victim of crime, you reach out to law enforcement, whether it’s the NYPD or the FBI, Immigration or Customs. That’s the number one thing. Let us know so that we can work with you to develop your cases. You need to preserve your evidence, so even if you see something online, print it out immediately. Find out what the website was so that, again, we can help you and go back with you in pursuing those criminal cases. So let us know, preserve your evidence, document what you’ve done – those three elements are crucial.

Globally, I would say share information with us, specific information that we can take to foreign governments, specific cases, and then continue to do great things like you’re doing here today. Use your networks to get the word out, especially in the media world, obviously Harper’s Bazaar, and get the television networks, et cetera, to pay attention to this. That’s obviously the way the public learns about it.

I think that was a great question on which to end. I want to, obviously, thank the panel for a great series of presentations and candid responses to questions. Thank you very much. Now it’s a pleasure for me to turn this program back to Ms. Salembier.

We’re done. But I want to tell you one quick story. Glenda Bailey, Editor in Chief of Harper’s Bazaar, was in China I guess two summers ago. She was going through the Shanghai art museum, and after her tour she stopped in the gift shop and in the gift shop were hordes of designer handbags. When she was in Paris a couple of months later speaking to the executive who runs that business, she told him. By the next day, 15 Chinese art museum gift shops had been closed down. So she has done her part. Thank you, Glenda.

Thank you all very, very much – the panelists, Alan Drewsen, INTA, which is a better way of saying it. Most of all, to New York City’s police commissioner, Raymond W. Kelly. Thank you. As you leave today, don’t forget there are some interesting packets for you. If you’d like to receive a full transcript of today’s summit for distribution to people you work with, just leave your business card and we will send you one. Again, thanks so much.

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Raymond W. Kelly New York City Police Commissioner

Alan C. Drewsen Executive Director, International Trademark Association

Alain Coblence, Esq. Coblence & Associates

Sigal P. Mandelker Deputy Assistant Attorney General, U.S. Department of Justice, Criminal Division

Stephen M. Pinkos Deputy Under Secretary of Commerce for Intellectual Property Deputy Director, United States Patent and Trademark Office

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Welcome to the first Harper’s Bazaar International Anticounterfeiting Summit. I would like to say hello and to salute my colleague at the National Magazine Company, Tess Macleod Smith, who is my sister publishing director of Harper’s Bazaar UK. If you are wondering why the publisher of a United States fashion magazine has flown all the way across the ocean to host this anticounterfeiting summit today, let me explain. Harper’s Bazaar takes the protection of the intellectual property of our advertisers very seriously. As a partner to major fashion, beauty, and luxury goods manufacturers throughout the world, and as the authority publication for the industries that we serve, we have recognized that Harper’s Bazaar is in a unique position to educate consumers about the impact of purchasing counterfeit goods. Three years ago, Harper’s Bazaar hosted the first summit in New York City. Three years and three summits later, we are now bringing the same commitment to increased consumer awareness of the impact of global counterfeiting to the UK and Europe.

I would also like to thank the sponsors of today’s summit, the International Trademark Association (INTA) and Walpole. INTA is a non-profit membership association of more than 5,000 trademark owners and professionals in over 190 countries. Their goal is to represent the trademark community, shape public policy, and advance professional knowledge and development on a global level. They do a great job, and we are very grateful to them. Walpole is also a non-profit organization that promotes, develops, and represents the British luxury industry in partnership with over 100 of Britain’s most prestigious brands. They also do more than that. Walpole helps to further educate their members on issues the industry faces through conferences very much like this one today. Thank you, INTA and Walpole, for your generous sponsorship.

We need your help and cooperation in educating consumers to the very real dangers associated with the purchase of counterfeit goods. Believe me: If people knew where their dollars were going when they buy a fake watch or a fake handbag, there is no question they would think twice about buying a fake again. Most consumers still do not know that by purchasing fakes, they are funding child labor, terrorism, and drug cartels. There is a direct link connecting laundered money to these criminal activities.

At our New York City summit two weeks ago, New York’s police commissioner, Ray Kelly, spoke about the horror of the Madrid train bombings. He learned from law enforcement agencies in Spain that the money supporting this cowardly act of terrorism came directly from the sales of counterfeit CDs and other items. That is a very harsh reality. The money that comes from counterfeit sales is laundered and comes back to fund child labor, drug cartels, and terrorism. I would like to quote from a letter we received at Harper’s Bazaar in response to an anticounterfeiting piece we ran last year.

“I just read your article about knockoff bags. I am horrified by it. I own several of these bags, and so does everyone I work with. We have had parties at our day spa where we sell fake handbags. We even have one scheduled for next month. I would love to get a downloadable copy of this article to share with my staff, clients, and friends. We will be canceling the upcoming party and will not be allowing future ones. I may be able to make only a small difference, but I am committed to making whatever difference I can. Child labor is one of the worst crimes on this planet.”

We need your help in enforcing the laws that already exist around counterfeit products. France, for example, is leading the world in anticounterfeiting law enforcement. If you are caught not just buying or selling a fake, but simply carrying or wearing a fake, you will be taken to the police station and fined up to ¤300,000. The French take counterfeiting very seriously and their enforcement strategy is working, so it is possible. The French government reports that there has been a marked reduction in the buying and selling of counterfeit

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goods since they began to crack down on enforcement. We need to continue to lobby for similar legislation in America and internationally.

Finally, we need intellectual property lawyers to aggressively pursue trademark enforcement, as so many of you do today. We also need luxury goods companies, pharmaceutical manufacturers, automobile supply companies, music organizations, and other industries that are ripe for being counterfeited to explore this whole new world of technological devices that will discourage counterfeiting and can be used to detect counterfeits.

Three years ago, Harper’s Bazaar committed itself to the fight against the counterfeit industry. We began by publishing an investigative article. Based on the enormous response we got from readers, we decided to take it further by holding our first summit, just as we are doing today. We wanted to put government leaders, luxury company executives, and law enforcement officials in a room to develop cooperative programs using all of our available resources. We were the first, and we still are the only fashion magazine to take a stand and to say to our 3 million readers that buying a fake handbag or luxury item, like a watch, is not a victimless crime. Our message: Fakes are never in fashion. At Harper’s Bazaar, we are really very proud of the strides we have made in raising awareness about this global problem, and we are proud not just to help protect your precious trademarks, but to preserve a culture that rewards the creative process.

However, our work is far from over. I am excited to announce that we have officially unveiled a very important initiative with the creation of the Harper’s Bazaar Anticounterfeiting Alliance. The alliance will exist solely to educate consumers about where their money is going when they buy a fake. We are putting together an advisory board for the alliance, which will include executives from luxury companies, intellectual property lawyers, law enforcement officials, and, of course, representatives from Harper’s Bazaar. Together, our goal is to educate the public about this issue and help consumers understand why buying authentic luxury goods is well worth the price. As importantly, we are also trying to educate them that by purchasing fakes, they are supporting egregious criminal activity.

I am very excited that we are also introducing a website, hopefully by the middle to end of March, called FakesAreNeverInFashion.com, to extend the efforts of the alliance. The site will include webisodes of undercover investigations that result in the capture of those selling fakes and a callout for consumers to be members of the Harper’s Bazaar Fashion Police. Consumers will be able to anonymously report counterfeit sales, such as the purse parties that our reader spoke about before, via a special hotline. The website will also include information on how to tell a luxury product from a fake, as well as a shopping portal that will allow readers to shop directly and safely for authentic luxury goods online. Our message really is a global one. This London summit and the alliance are the important next steps for us.

I now have the pleasure of introducing our keynote speaker today. It is an honor to have Christophe Zimmermann with us. Mr. Zimmermann’s formal title is Administrator, Fight Against Counterfeiting and Piracy for the World Customs Organization (WCO). For those of you who do not know, the WCO began in 1952 with 17 participating countries; today, it has 169 members around the world, with headquarters in Brussels. It is an independent intergovernmental body whose mission is to enhance the effectiveness and the efficiency of customs administrations. Christophe Zimmermann has been an official of French customs, with responsibilities at French airports for 15 years, specializing in fraud, meaning counterfeiting, piracy, and narcotics. Mr. Zimmermann is an anticounterfeiting expert and works with the World Intellectual Property Organization, Interpol, and now World Customs.

If you are expecting a political discussion, you will be disappointed. Customs officers on the ground, even at three o’clock in the morning, are seeing things we never saw in the past, which means that we are losing – or have already lost – the battle against fakes. Why is that? That is a good question. I was impressed by something I read a couple of days ago: Luxury goods are the tip of the iceberg. That is correct, so what do

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we see? If you go outside and take 10 consumers, they will be wearing luxury counterfeit goods, and we are seeing increasingly more counterfeit goods. In the EU in 1998, the Customs Administration seized 10 million counterfeit goods; in 2004, they seized 104 million. Does that mean we have improved 1,000 percent? It means the trade is increasing, and we are losing – and we are losing not just on luxury goods, but on everything. I always bring with me samples because they speak so much louder than words, and if we want to win this battle, it is much better to act than to speak. Unfortunately, we speak a lot and do not act enough.

If you go outside and ask a consumer whether it is normal to buy counterfeit shoes, they will say, “Yes, of course.” If you tell them they will get three years in jail, they will still buy things; when they travel, they buy counterfeits, and are happy doing so. To the consumer, it is normal to buy counterfeit luxury goods. If we are to work together to find a solution, it must be to have a clear message persuading the consumer not to buy counterfeit luxury goods. We make websites and try to generate public awareness, but it does not work. Look at one plane from Bangkok, which I did for 15 years: Every passenger will have counterfeit goods. That is the reality. We have to modify our strategy, or we will lose.

We are losing in a different way, because we have to consider the fight against counterfeiting and piracy as an evolving problem. Every day, the nature of the goods being counterfeited changes. Twenty years ago, luxury goods were everywhere. Does that mean that we do not have luxury goods now? No; we still have the same level, and more. But what do we see now? A purse from the Beijing Olympic Games 2008 was seized four years ago, and counterfeit chocolate is being produced. A 2010 World Cup souvenir was seized during the 2006 World Cup. If we follow the trade of luxury goods, we know where we are, and we are in trouble, believe me.

We smile at such things, but medicine is also being counterfeited. I once said to somebody that I did not talk about the Internet out of politeness because I have a lot of things to say against the Internet. Buying medicines through the Internet is the latest trend. A couple of weeks ago in the UK, they seized 400 kilograms of counterfeit medicine, but not the traditional counterfeit medicine, Viagra; this case was much more impressive. The medicine was for breast cancer – we are not talking anymore about Viagra; we are talking about breast cancer. The medicine was for growing your hair, but those pills had been contaminated by sildenafil ciltrate, the active ingredient in Viagra and Cialis.

I have worked in this field for more than 20 years, but in that time I never saw what I am seeing now. When we are talking about counterfeiting, in the UK you are more or less well protected. You have an efficient customs administration, so it is no problem. When we are talking about Europe, there is little problem, and when we are talking about the U.S., there is little problem. However, go to Africa or Japan. We are now spending our time in those countries because there has been a very interesting trend. Fraud organizations are now changing their strategy according to improvements in legislation and in customs control. They are not coming to the UK directly from China anymore; they are passing through the U.S. and Japan. They are changing the means of transport. They do what they want, exactly like cocaine traffic. They use exactly the same techniques. They will use at least three or four countries or one or two different continents. They do not care. It costs about ¤2,000 to send one container by sea from China to Europe, so they do not care. They will travel all around the world. If we wish to win, we will be obliged to modify our strategy. We have to consider that as a real crime.

Our secretary general, Mr. Michel Danet, said this is the crime of the 21st century, and that is true. When you imagine that it represents $500 billion per year, does that go into your pocket? No. Does it go into the customs officer’s pocket? No – I would hope not. You will earn more money selling one kilo of pirated CDs than one kilo of marijuana. It is easy.

I will come back to sildenafil ciltrate because it is important for you to understand the mechanism. Between



January and June 2006, India exported a little bit more than six tons of this active ingredient. With six tons of sildenafil ciltrate, you can create more than 40 million little blue pills. One pill then costs $10. Multiply 40 million pills by $10, with just six tons of sildenafil ciltrate. Welcome on board. There are plenty of examples like this, so we will not win just by talking or changing the legislation because they do not care. One full container of 30 tons is exported every two seconds from Shanghai. I do not know how often you go to Shanghai, but go. We are 1 million customs officers around the world, and we have 400 million containers – and we are just talking about maritime containers, not planes, trucks, or cars. Globalization means fraud globalization, and they will follow it easily.

In France, we have fantastic legislation, but we do not have great results – they could be much better. We therefore have to begin at the beginning; the continent on which the fraud is happening. A ship contains 11,000 containers. When it arrives in the harbor at three o’clock in the morning, a customs officer and his colleague have 11,000 containers to control. How can they do it? Okay, perhaps we are not very clever; we are customs officers. Nevertheless, have you seen a maritime container? Have you ever opened one? You will see that when we are asking for your help, it is not “blah, blah, blah.” We need your help. Can you explain why? If there is one industry where everyone must be motivated, where everybody must be irreproachable, I do not know what it is. You do not have the option of committing one mistake in the luxury industry.

Perhaps you are not an expert on the customs issue and do not know there is one document that we expect in order to help you, which is what we call the application form. This is the document whereby you give us the right to control your product to be sure whether it is a fake or not. Can you explain the reason why most of the brands in the luxury industry do not cooperate with us? We cannot, on the one hand, say that it is a problem we have to fight against, but on the other hand do nothing about it. It is very frustrating for customs officers. Our goal is not to criticize, but we have to see the fight against counterfeiting and piracy on the ground at three o’clock in the morning. I know that it is simple; I know that it is a caricature. However, that is the reality. [Hands a participant a tube of toothpaste.] Is this genuine, or is it a fake?

It is a fake. There is something about the squeeze.

That is a good answer; you could be a customs officer. Of course it is a fake; everything can be faked. Do you want us to be able to tell if something is a fake or not? When you control a container or when we check something, we do not have that knowledge – we are not experts in everything, and everything can be faked, even chocolate. We can manage it, however, though the application form and through your concrete cooperation. We know the brands which cooperate and those which do not, and it is very frustrating for all the customs officers. I have thousands of friends who walk around on the ground asking, “Why am I obliged to fight against counterfeiting when the rights holders do not care?” It would be so easy to close our eyes and say, “It’s too complicated; I don’t care.” This is what is happening, even if it has really improved in the last couple of years. But it is not enough, and everyone in the luxury sector has to lodge an application form. Give us the right to protect your intellectual property rights.

Keep in mind that a Christian Dior handbag costs six months’ salary of an Algerian customs officer. When we ask an Algerian, Moroccan, or African customs officer to check that, the value of a genuine one is at least six to 10 times his salary. We have to talk frankly, we have to say the truth, and we have to cooperate on a concrete basis. We can say that it is a big problem all around the world, but nothing will change if we do not really cooperate. You have to give us the right to protect your intellectual property rights because in front of you – in front of us – are fraud organizations that have more money than us, they are more clever than us, and they do what they want, when they want. If we do not cooperate on the ground, in 10 years’ time I will be here saying exactly the same thing.

Two-thousand-seven is the year of the fight against counterfeiting. It is a top priority, greater than the fight



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against drugs, which gives you an idea of the importance of the phenomenon. We will really focus on this issue for 2007 and 2008. Around the world are at least 60 countries that do not have any legislation; there is nothing at all. From a customs point of view, customs in Europe seized 90 percent of the counterfeit goods seized by customs administrations. From a customs point of view, 60 countries do not control counterfeits – they do not have the power to do it.

In the first instance, we will therefore try to quantify and qualify this phenomenon. We will publish aggressive figures and statistics because everybody is talking about it and everyone has figures, but it is quite complicated to have a clear idea. We will also try to highlight the legislation. However, our most important action will be around training. Our secretary general decided to have at least 30 training periods for the customs administrations, which means that with you, the rights holders, we will go into harbors and ports to train people, which will be followed up. If the country asks us to go there, they will be obliged to publish figures during the six months after to see the impact of the training. So, it is a big priority.

As usual, I am going to strongly attack the TRIPS Agreement. The 1994 Marrakesh TRIPS Agreement defined special provisions for customs administrations. The Customs Administration is the only administration quoted as nominative; for the rest, they talk about the competent authority. However, the Customs Administration had been designated a key player not because we are clever, but because we are at the border and can immediately touch the goods and the people.

The TRIPS Agreement is an annex of the World Trade Organization, which sets the minimum standard for protecting intellectual property. Article 51 states that all WTO members must control under import site, which means that all the customs administrations of WTO members have to control under import site. There are two types of intellectual property rights, trademarks and copyright, which is the only obligation. That means, officially, that China can say, “I respect the TRIPS Agreement; I control my importation.” However, it is very well known that there is a huge importation of counterfeit goods from China; they have no obligation to control exports. They have no obligation to control the transit of transshipments. They have no obligation to control the patents for medicines, which is quite a problem.

Since 1994 we have been in a desert, and while we can improve the legislation, we are not obliged to. The only reference is the TRIPS Agreement, and nothing will change. When I was working for the EU Commission, I went to the TRIPS council for communication, and the president told me it was a Pandora’s box; stop. That means that while counterfeiting and piracy are important, they are not the most important elements of the TRIPS Agreement. If we do not change the minimum standard at the international level, in 20 years we will have the same problem. Now, the least developed countries will not be obliged to apply the TRIPS Agreement until 2013. So, we close some doors but we open the window.

We will not win this war – and we are talking about war – with words. We will not win this battle with meetings alone. We will not win this battle without cooperation, and it is really time to react. One day, you will take fake medicine or you will have a problem with foodstuffs. Imagine that you have counterfeit mineral water, counterfeit apples, or counterfeit waffles. We have already found that. We found counterfeit medicines in the pharmacy. It is time to react, ladies and gentlemen.

Thank you, Christophe. I would like to introduce the moderator of today’s panel, Dr. Frederick Mostert. While he is the past president of INTA and is currently the Chairman of the Walpole Intellectual Property and Brand Protection Group, he is best known as one of the world’s foremost authorities on combating counterfeits. Fred has given me quite an education over the past three years, particularly about child labor. I am very grateful to him for agreeing to moderate our panel today.

Thank you for that kind introduction. Let me start by welcoming you to this panel discussion at the first


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Harper’s Bazaar Anticounterfeiting Summit here in London. Everything known to mankind can be faked. For example, everything that I am wearing is fake: a fake Armani suit, a fake Versace tie, a fake Rolex, a fake “Häagen-Dazs” belt, fake Louis Vuitton shoes, and fake Hugo Boss socks, and I have a fake Mont Blanc pen. I was walking in the rain yesterday, which I do not suggest doing, especially in these shoes, and unfortunately I am always late for meetings. Another thing, which really boggles the mind, is that not only pharmaceuticals, but an entire car can be faked. We picked up a fake Ferrari in Thailand, and the entire car, including the engine, is fake. We discovered that the petrol tank can explode, the brakes do fail, and I still have not been able to get the car into third gear.

Let me start with the first question. On the educational front, is there scope for something constructive in this area?

Yes, I think there is. When we have this kind of meeting, it may sound boring or as if we are repeating the same thing, and we are going to go over the same thing today, but there are still a lot of people who do not know what we are talking about; there are a lot of people who do not know what is behind counterfeiting. The world of counterfeiting is not just the street seller who is trying to make a living; there is much more to it. I think there is a lot we can do about education.

I teach intellectual property at the University of Florence, and invariably I start my first lesson of the year by asking my students if they buy counterfeit goods or download music for free from the Internet. They all say, “Yes, of course,” and they think it is a normal thing to do. I then ask them if they have ever stolen anything small from a friend or a store, and they all cringe and say they would never do anything like that. That clearly shows there is a misconception in the way that people look at counterfeiting; it is still the wrong way. They do not look at it as theft of innovation and creativity, and I think there is a lot of space for that. We recently saw Microsoft and the Finnish government come out with very powerful ad campaigns, both of which can raise consumer awareness and make people understand what is behind the world of counterfeiting.

On a separate note, I think there is space for education even at the level of magistrates and public prosecutors, because the result of this misconception at the general level gets translated to the public prosecutors and magistrates. They still view counterfeiting as a less important crime not worth the dedication of their time. I think even in that area there is something we can do.

What we were hearing from Christophe was about the difficulty in controlling the supply of fakes. There is another opportunity, to try to control, limit, and restrict the market for fakes. I think there is a real case for hitting the younger generations so that they are aware of the problem and its implications, not just to encourage them not to buy the fakes themselves, but to try to generate some kind of peer pressure so when people are out with their mates shopping, there is peer pressure. As an industry, we are not generating that kind of work.

It is very difficult getting this issue onto the curriculum, but there are some citizenship aspects of the curriculum which have this potential. In the UK, the Patent Office launched an excellent initiative with its “Think kit”, which is aimed at students of business studies and design.

This is part of the intellectual property crime initiative that we started last year, which I am happy to say is a phenomenal program. We have had the great fortune of participating in that, and I agree with you that it is a phenomenal initiative. Moving on to the next question, what is the real cost of fakes to society?

Certainly in this room are a lot of companies who will hear quite often that the brands can afford it; they charge so much for their products that they deserve to get ripped off. When we are talking about loss and

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cost, perhaps the first thing that everyone thinks about is money, but we are actually looking at wider issues. I would say there is the issue of consumer safety, and there is potentially a real cost there. Luxury brands were probably in the forefront of the targets for counterfeiters some time ago, but the sheer range of goods that are now faked has now extended to practically everything you can think of. I think that is a very important point that we always need to get across.

Secondly, there is an economic impact, not just to industry, although that in itself is a very important point to make. We have the loss to the national economy. In the UK, we are in the process of measuring this with the support of the Patent Office, and that is something which the consumer would need to appreciate. No taxes are paid; they do not pay VAT, and they are trading freely across borders, so we are potentially looking at a huge loss. I would not want to put a figure on it, but in the UK alone it is certainly in the billions, and the VAT on that alone, if it went into the coffers of the government, would help fund several schools and hospitals. We are looking at a big impact on society.

Finally, there is the criminality aspect. That is about going into the networks around the world which are pursuing this crime, and I think that is the third plank about which it is important to educate everyone.

I would add that there is a tremendous social cost, in particular to the lost childhoods of the children who are employed in these factories to manufacture these counterfeit goods. This is really a cost you cannot quantify in terms of money, but it is a very serious concern. We must do whatever we can to help the children who produce counterfeit goods to have another choice and to have access to education. It is very difficult, and we need a lot of help. We have to educate our children that buying counterfeit goods is not an innocent act, just as we educate them about global warming these days. I would say that child labor is definitely a terrible aspect in terms of cost.

There are very young children and teenagers around the world working in sweatshops and factories that produce fakes. The first time I came across this was about three years ago. I was happily going along doing a raid with some police officers and I saw children working in a factory. Initially, I was very concerned; my immediate response was, “This is terrible.” However, remember that a raid happens very quickly, and the police are running around carting off machinery. As I walked out, I saw where these children lived on the factory floor and what the conditions were. That evening as I was in the train on my way back to the hotel, I turned around to our lead investigator and said, “Thierry, oh my goodness, we just made those children homeless.” As you may know, when you do a raid, you strip everything out and it is instant bankruptcy for that particular location on that day. I said, “Thierry, what do we do?” Thierry turned around to me and said, “I’ve seen this now once or twice in the last few months, and I am horrified. I would love to go to the parents of these children and ask them to allow us to put them in school, but that is just a dream.”

In response to this, Thierry, someone in Beijing, someone in Hong Kong, and I all formed a small little charity called the Confucius Foundation, which has grown. In our first year, we managed to get children who were in that very position, typically from single-parent families in the country who have to send their children to work in these factories, and we put them in school. We pay their boarding and their tuition for the year. In the second year, we got our first children out of a factory to go back to school and have a proper education. I will ask Corinna to outline how the charity operates.

The charity aims to give a choice to children who have been employed in those dreadful factories working under deplorable conditions. When they close the factories, you have to be psychologically well prepared to deal with them because their whole life is lost, so we try to find out if they would be interested in going to school or if they would like to pursue a different life, because we cannot just impose it on them. This is where we have to be very well prepared. We then talk to the parents and families to see if we can enroll them in a

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different kind of life. Obviously, funding is crucial. If you would like to find out more, visit our website, www.confuciusfoundation.org, which will show you the work with the different children and families. It is on a small scale at the moment, but we are hoping to increase it.

I would like to move on to Pier Luigi, who just had a recent experience in Italy in doing a public awareness campaign.

Unfortunately, Italy has always been one of the leading countries for counterfeiting; we manufacture counterfeits, we sell them, and we buy a lot of them. What we did to counter this problem was, in 2005, pass a new law whereby anytime you buy counterfeits, when the situation of the purchase is such that they should have told you that with the low price, the quality, and the surrounding circumstances you were about to buy a counterfeit and you bought it anyway, you can be sanctioned with an administrative fine of up to ¤10,000. The good thing they did this time was not to take away the criminal penalties. In the past there had been discussions about administrative versus criminal sanctions, and I never thought it was a good idea to get rid of the criminal sanctions; it is good to have them both. Now we have an administrative sanction, and if it is enforced – which is a different question; it was enforced at the beginning, and now it does not seem like it is – it is certainly very helpful because, first of all it, deters the purchase of counterfeit goods, and second, it raises consumer awareness much more quickly than any information we can send to the consumer.

It is an unfortunate situation, but it is one thing to talk about child labor, organized crime, and all the things we are talking about today, but quite another to tell some consumers that if they are buying counterfeits, we are going to fine them with a pretty stiff sanction. On the basis of the administrative sanction we now have, some cities – usually the tourist cities – have started campaigns. One campaign in Florence was done with 90,000 fliers and 10,000 posters scattered around the city that tell you about whatever is behind counterfeiting, but also the fact that you could be fined. Venice has done the same thing with the “Bad Bag” campaign, which was very effective. I think that is definitely a step in the right direction.

The next one is to follow up on what Mr. Zimmermann had to say. Generally speaking, throughout the world law enforcement officials, including customs officials, grapple with the problem of counterfeiting. It is not high up on the list of priorities for many reasons: government resources, and so on. How best can we change that position?

From the UK perspective, the change has to come from the top politically. We are talking here of problems of coordination and resourcing, which in my view are the two main issues for law enforcement in the UK. We have very localized intelligence and law enforcement activity, whereas the criminals operate nationally and globally. We are working on this now with government and making progress, but at the moment it is still a problem. Having said that, change has to come from the top in order to achieve that. There are two main avenues of influencing consumer attitudes. One is the media, which will lead to public opinion influencing MPs, so they realize that it is an issue to which they need to pay attention. The Gowers Review, which reviewed intellectual property in the UK, concluded that government itself was a bit confused at the moment about what IP was and how to protect it. So we clearly have some work to do there. The other way is by lobbying directly, which encourages government to prioritize at both national and local levels.

We have heard so much of the growing problem of counterfeiting this morning, and those of us on the coal face see them. Why is counterfeiting more important than in the past?

Because the sheer scale of the trade is growing so fast. As it becomes more prevalent, more widespread,


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and moves into ever new sectors, the implications of the links between counterfeiting and organized crime, the health implications, and all these other negative aspects just get worse. At some stage, we will all come to a tipping point and we will collectively say that now is the time when we really have to do something much more organized, much more collective and global, to actually take action on this. We are already seeing the signs of that happening through the work of a number of organizations to try to generate that collective approach.

Counterfeiting is perceived to be a high-return, low-risk business because penalties are generally low and enforcement is not very good. How can one change this?

I think we all agree that if you wanted to get into some criminal activities, the best field would definitely be counterfeiting, which has very good revenues, is very low-risk, and you basically never end up in jail.

It is almost like the cost of doing business; when you grab them, it is like they are paying their fee and getting their license for doing business this year, and they can continue.

That is pretty much it. In fact, as attorneys we sometimes feel like the only thing we can do is try to make that cost as high as we can with seizures and other things, but that is certainly the way it is viewed. I think there is space in some countries for making stiffer, stricter sanctions and imposing higher penalties. Certainly in Europe we can do more on the criminal side for harmonizing the laws of Europe, but I still think that in the vast majority of countries, the kind of protection of IP rights that we have is satisfactory, at least on paper.

I am not so worried about the sanctions and the penalties, but the actual application of the law. I think this is really the problem we are facing everywhere: A lot of countries that we tend to think have a problem with the way they crack down on counterfeiting, all show pretty decent laws and give us an impression of having IP rights protected well, but in reality, they never apply the laws in such a way that they can be effective. I am not saying that we should not work on making sanctions better, but I think the first priority should definitely be to try to apply the existing laws better.

I agree with that. I think we have a bit of a challenge on our hands in that the judiciary, which is really key to this, certainly in the UK, tends to listen to its own, or possibly sometimes to government, but not terribly often, and so we need more hard evidence. We need evidence of the economic and social harm; we need to show the extent of the criminality and the way it affects our communities in order to persuade the judiciary that they need to apply much more deterrent sentencing. In this country we have a 10-year maximum sentence, which is not low. But the question says it is perceived to be low-risk, and it is not applied.

However, in this country we have the proceeds of the Crime Act, which I just love. It is the best bit of legislation in the whole world, and it is beginning to be applied much more effectively and assiduously by the judiciary now. We are getting cases where the actual offense of counterfeiting carries a suspended sentence and maybe a £200 fine, but then they get to tracing the assets and they end up with fines of £300,000 or £1 million, and if they do not pay, they go to jail for a set time. They are not let off for good behavior, and if they still do not pay when they come out, they go back in. It is marvelous.

We heard from Mr. Zimmermann this morning that you have a whole range of issues, especially in the area of safety and health. What is the real risk to the public? How large is that risk to the buying public for buying fakes?

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If you want to address the subject of health and safety, there is a risk to human life through the use of counterfeits, which could be pharmaceuticals, auto spare parts, food and drink, or aviation spare parts. It is somewhat a different issue because the public who are buying these things are unsuspecting. I do not think anybody in their right mind would deliberately buy fake medicines, fake baby powder, or fake spare parts for a car. That is a real risk, and it is very sizable. I am sure most of you have access to this sort of information, but I think Frederick has some quotes from Police Commissioner Kelly on that subject.

Two weeks ago at the Harper’s Bazaar event in New York, Police Commissioner Kelly said, “Counterfeiters are making and selling auto and aircraft parts, baby food, and pharmaceuticals. The health and safety risks are alarming. So are the threats to intellectual property and the public trust. In this area” – he is talking about New York City – “the city itself is not exempt. In addition to the estimated $1 billion in lost sales tax revenues, the city’s own brand name has been seized upon for its cachet. In June, the department shut down the Queens shop that was selling hats, shirts, bags, and other items unlawfully emblazoned with the ‘NYPD’ and ‘FDNY’ insignia.” I think there was a real stupid criminal. This shows you how pervasive this is, that it goes to all corners of society, and specifically safety and health issues.

The next question is interesting. Right now, the bad guys are using technology better than the good guys, quite frankly. How realistic is it to use technology, and what are your thoughts on using technology to the benefit of the real intellectual property owners?

When you are looking at technology, you are looking at the overt and covert technology that are part of the armory. Encouragingly, technology is moving on all the time. The mechanisms that are available to the brand owner to protect their IP are becoming increasingly sophisticated, and Ruth sent me just the other day information about a company that can now print radio frequency identification (RFID) very cheaply into labels as a means of deploying covert mechanisms, which can actually be quite low-cost. That is still technology that is relatively new and needs to become more reliable, but it is an example of how it is a continually evolving area. I think the area of overt anticounterfeiting mechanisms is more difficult; again, we heard earlier about the counterfeited hologram, so that is a tricky area. If it is overt, it can be copied.

I think that is such an important point. You come across these counterfeit products, and they simply scratch off the ID numbers with laser etching. There are very smart ways that anything that is overt can be copied or eradicated. The really smart thing is to go for covert technology and get that. But, unfortunately, “cheaply” is not so easy.

I do not have any direct experience; all I can talk about is the experience that some of my clients have had. The general feeling is that they are not very satisfactory to the extent that they are either too expensive or it is difficult to implement them because of the manufacturing system you have, the right moment to put them in, or whether you can have your own suppliers do that. I think in the field of luxury goods there are still important things like microchips, especially because the problems we have in the luxury field are different. We have the low-quality counterfeit, with which there is a problem mainly of image, to a certain extent, and people know exactly what they are buying. And then we have a different problem, which is the high-end counterfeits, the counterfeits that look exactly like the real thing and get sold in some markets in really nice stores for pretty much the same price as the real goods. To the consumer, these goods look and feel identical to the real thing, but they are not identical. In the long run, buying this kind of counterfeit, thinking that you are buying the real thing, could really have an impact on the faith you have in the brand. You might start to think that the brand you have loved for so long is not manufacturing up to the standards that it has had, but you are actually buying a counterfeit. In that situation, it is still worth a try to do something on the technology side to be sure that you can tell the original from the counterfeit, especially now that we see the quality of


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counterfeits increasing a lot in various other countries. Italy has always been the best – there is no one like Italy in making counterfeits – but Korea and other countries are catching up quickly.

Can the trade in fake goods ever be stopped?

If you asked me that question two or three years ago when I started the job at ACG, I would have said, “Of course,” but the trouble is that, since I started, the Internet has grown exponentially, and that now poses the biggest threat and the biggest challenge to all of us. I would not like to put my money on it. Sadly, I think I have a job for life.

What can governments do to help stem the proliferation? We have heard about the involvement of governments, and I have always believed this to be a truly private/public initiative – you cannot just have one arm do all the work, or both; you really need them to work together. What can governments do?

Education is first. And certainly key would be the international cooperation of our different organizations, the public organizations, the customs organizations and Interpol, along with a little more exchange of views with the private sector. I think even the public sector could benefit from opening up a little bit more to the private sector. I think one of the problems we then have is that the governments that have been more interested in protecting IP rights are usually those of the wealthiest countries. We have a statistic that 60 percent of the seizures of counterfeits by customs come from five countries in Southeast Asia, and those countries, at least in the past, were not interested in protecting IP rights. However, I think the situation is changing rapidly because some of these countries – for instance, China and India – are coming to realize that protecting intellectual property rights is in their own interest because they are moving towards the direction of technology, of manufacturing technology and of exporting technology, so they need IP rights protection to be able to grow and develop their businesses. Hopefully, we are going to see more attention on the part of these governments in the future.

Everyone in this room who is attached to a brand in any way, or is aware of the problems, will want the answer to the question of what intellectual property owners can do about all of this. Basically, I think there are two challenges. One is to stop the consumers buying fakes, and the other is to stop the others making them, both of which are pretty huge. Initially, you need to protect your IP properly; Christophe referred to protection at the borders and registering your rights with customs, which is one example of what you can do.

Secondly, invest more in brand protection. This may not be a very popular thing to say, but I think it is a valid point to take away. A lot of work still needs to be done within the brands to escalate the issues to CEO level and to get a budget, which need only be a fraction of the money which is spent on advertising and promoting the brand in the first place, to actually protect it once it is out there. It is something which I do not quite understand, and I would look forward to discussing with a CEO one day as to how that is seen to work within any individual company.

I think we need to help to join up with enforcement and contribute where possible to new government intelligence initiatives. A government database is being set up here in the UK where brand owners will be able to put information directly into a database that is accessed by law enforcement. That will be a huge step forward.

I also think multinational companies need that to ensure that their own internal and global operations are effectively communicating to each other and within their own companies. I am aware that sometimes the U.S. offices of a company are not aware of what is going on in its UK branch. I also think there are all of the national

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associations, but we need support, which we get from our brand-owner members and others. We can make a difference at that top level where we are in our helicopter and passing over all the issues at a high level.

I really do want to thank Harper’s Bazaar, which has been at the forefront of this issue. We all need to stand together, not only as an industry, but as the public sector and government. In the years that I have been in this business of chasing pirates around the world, I have not seen anyone so dedicated and so forceful in helping us fight the good fight – the war, as Mr. Zimmermann referred to it. I have rarely seen someone with a cogent and compelling movement – I mentioned a year ago that we have now started a movement thanks to Harper’s Bazaar – to raise public awareness about the real cost to society of fakes.

It is not just a joke to buy a fake on a corner or overseas. We really need to raise awareness. As you see from the letters that have been received in response to these phenomenal articles in Harper’s Bazaar over the last number of years, there is no doubt in my mind that for the first time we are seeing something real. It is not just a question of having conferences or summits, but there is some real action on the ground. There is a long road to go and there are many other things to do, but at a personal level I would like to take this opportunity to thank Valerie, a phenomenal publicist to work with, and the inimitable Jason Lundy for helping pull all this together. I think it has been a tremendous effort. I also have to thank New York Police Commissioner Kelly because he really has been there on the ground for us, for those of us who really need him. He has started spearheading and symbolizing what law enforcement can do throughout the world.

Thank you so much to this panel. What a dialogue. This was a wealth of information. I think we would all agree that we heard a lot of important ideas that are all beneficial for fighting fakes, but I would especially like to thank Fred for organizing this. As I mentioned in my introduction, he is truly one of the world’s foremost authorities on fighting counterfeits. Just this week, he launched his latest book on intellectual property, From Edison to iPod, which is written for us laypeople. The book is a great reference on all of the issues you heard here today.

We have heard about a lot of important strategies today that work for combating counterfeiting. I hope you will not only take away a conviction that more should be done, but will feel armed with some new information on how to make your own anticounterfeiting programs that much more effective. Thank you again to INTA, to Walpole, today’s sponsors, and thank you to everyone in this room for attending. I know it is a huge amount of information to digest, but please think about it. There is a human cost to buying fakes, and fakes are never in fashion.

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Christophe Zimmermann Administrator, Fight Against Counterfeiting and Piracy, World Customs Organization

Dr. Frederick Mostert Past President, International Trademark Association Chairman, Walpole Intellectual Property and Brand Protection Group

John Noble Director, British Brands Group

Ruth Orchard Director-General, The Anti-Counterfeiting Group (ACG)

Pier Luigi Roncaglia Partner, Società Italiana Brevetti (SIB)

Princess Corinna Zu Sayn-Wittgenstein President, Authentics Foundation

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New YOrk TraNsCrIpT The Mandarin Oriental Hotel VaLerIe ... · Harper’s Bazaar New YOrk TraNsCrIpT The Mandarin Oriental Hotel February 1, 2007. ... from NYU’s Graduate School