Smoking Dragon, Royal Charm, and the PRO-IP Act

What do you get when you combine four FBI Agents, 62 Chinese smugglers, and a billion counterfeit cigarettes? Besides the plot of a Hollywood potboiler, you get the tale of an intricate counterfeit cigarette bust that spanned several continents, a slew of agents, six years, 1,000 meetings, and enough fake smokes to supply every American man, woman and child with more than a few carcinogenic puffs.

Writing for the Center for Public Integrity, Te-Ping Chen brings her readers into the murky world of counterfeit cigarettes. Through bribery and sheer volume, Chinese cigarette counterfeiters overwhelm the inspection infrastructure in China and the United States. The numbers are startling. A shipping container of one million counterfeit cigarettes can cost about $120,000 to make, but can sell for as much as $2 million in the United States. A bribe of $20,000 can ensure safe passage out of China, and then it becomes a game of chance stacked in favor of the counterfeiter. Cargo containers are only inspected 22% of the time on average in the United States. While seizures are considered a cost of doing business for these smugglers, a run of bad luck seizures tempted the counterfeiters in the story to attempt to purchase protection from the Italian Mafia. Unfortunately for the villains, the Mafia fixers turned out to be FBI agents.

Te-Ping Chen does an excellent job of detailing the intricate nature of the smuggling world. Through the well-worn trade paths of cigarettes also comes counterfeit money, fake pharmaceuticals, and weapons. Notorious bad actors like the North Korean government profit greatly from the criminality. No doubt, a weapon of mass destruction could conceivably slip through safeguards using these same trade routes.

And what does this have to do with PRO-IP Act? Plenty, in fact. The PRO-IP Act goes to the root of the counterfeiting problem by increasing the price of doing business in counterfeits. Doubling the fines per counterfeit violation is a good start. Increasing diplomatic resources will also help, as it could enhance cooperation with law enforcement at the point of origin. And with counterfeit cigarettes often unhealthier than the real thing, criminal penalties for selling counterfeit items that do bodily harm could possibly ensure long jail sentences for the counterfeiters of cigarettes and other types of potentially harmful contraband.

This is an excellent article - entertaining, informative and even poignant in parts. Towards the end of the tale, two of the counterfeiters at the center of the investigation presented their undercover FBI Agent with two Rolexes as a wedding present for the mock gangster. "These aren't counterfeit, are they?" asked the agent. "No," replied the suspect, "these are the real deal."

You'll think Goodfellas, and you won't be far off - or disappointed. Read the whole thing.

PRO-IP Act

President Bush signed the Prioritizing Resources and Organization for Intellectual Property Act (a.k.a., the PRO-IP Act) earlier this week.

You can read about it here and here. The full text of the PRO-IP Act can be found here.

The PRO-IP Act establishes increased penalties for counterfeiting violations and strengthens America's ability to combat counterfeiting, including by the following means:

• Treble damages in civil actions and a doubling of criminal fines.
• Strengthened penalties against sellers of counterfeit goods that do physical harm.
• Increased seizure ability by law enforcement in copyright cases (normally, pirated media rather than counterfeited manufactured goods).
• Increased diplomatic resources and attention to the problem of counterfeiting and piracy by dedicating ten "Intellectual Property Attaches" to staff American embassies to promote the protection of intellectual property as a formal component of international relations.
• $25 million to help local law enforcement develop anti-counterfeiting law enforcement techniques.

There has been a large amount of online commentary (also here and elsewhere) about the PRO-IP Act and its impact, but the chatter is mostly concerned with the effects of the law on online piracy of music and entertainment.

In addition, there has been some debate on whether the full intent of the law will be carried out. For example, Counterfeit Chic's Susan Scafidi writes that the new Intellectual Property Czar will likely be appointed by the next President. Unless there is a late surge by Senator McCain, Senator Obama is likely to be elected the next President. Scafidi believes that he could then appoint Larry Lessig as the first IP Czar to enforce provisions of the PRO-IP Act. While Lessig advocates a radical loosening of enforcement of copyright, his primary focus is on the intangible world of the internet rather than physical counterfeiting. Lessig has shown relatively little interest in undermining the real world regime, and as such, I must respectfully dissent from Professor Scafidi's analysis (at least in terms of "real world" counterfeit goods).

Wired's Threat Level Blog is polling its readers on who should be the next Intellectual Property Czar here.

And while $25 million dollars sounds impressive, the actual application of the monies (spread over the entirety of the United States) may well be insufficient for the task at hand.

While attention and controversy swirl around the copyright/media portion of the PRO-IP Act, there is little doubt and debate that for the real world manufactured counterfeits, the increased enforcement is very welcome and a very positive step in the right direction.