The White House's top intellectual property cop outlined the administration's plans to crack down on piracy at a Senate oversight hearing Wednesday morning, pledging stronger coordination with domestic and foreign law-enforcement authorities and committing to elevate IP issues in negotiations with U.S. trade partners, particularly China.
Victoria Espinel, who serves as the country's first intellectual property enforcement coordinator, told the panel that the abuse of intellectual property has an effect well beyond the industries that are often at the forefront of the debate, such as software, entertainment and pharmaceuticals.
"The risks posed by counterfeit products are significant," Espinel said, describing a trickle-down effect where knock-off goods circulate throughout all corners of the economy, raising particular concern for IT buyers both in industry and the government. One senator noted with alarm that a Chinese competitor to Cisco (NASDAQ: CSCO) has managed to filch unique and proprietary software that powers the networking giant's routers to include in its own offerings.
Similarly, Judiciary Committee Chairman Patrick Leahy (D-Vt.) expressed concern about the vulnerabilities in the supply chain that could see fake semiconductors infiltrate military systems through Defense Department procurements.
Espinel said that her team is working with the DoD to establish more rigorous oversight of the influx of high-tech equipment into military and to develop systems to safeguard intellectual property within the branches to combat high-profile leaks, such as the gaffe last year that saw the Pentagon's plans for the $300 billion Joint Strike Fighter Project surface on a peer-to-peer network.
"Selling counterfeit products to our military is reprehensible and must be stopped," she pledged.
Today's hearing, the first oversight proceeding of the newly formed office, comes a day after Espinel released the administration's joint strategic plan on intellectual property enforcement.
In developing that report, Espinel said that she and her team crisscrossed the country hearing from businesses of all sizes, and described the economic impact of intellectual property theft as "enormous," though, when pressed by the panel, she declined to offer even a ballpark estimate of the economic effect.
"It is very difficult to quantify precisely the impact of infringement on our economy," she said.
However, there was round agreement that intellectual property enforcement is a pocketbook issue, both for individual businesses and innovators as well as the macroeconomic picture and the U.S. trade deficit. Rhode Island Democrat Sheldon Whitehouse went so far as to suggest that the expropriation of U.S. IP at the hands of foreign entities constitutes the "biggest transfer of wealth" in history.
A panel of witnesses drawn from industry and labor -- normally feuding camps that are in rare alignment on the issue of intellectual property -- that followed Espinel's testimony praised the efforts of the administration and Congress to move toward a more aggressive stance toward intellectual property enforcement.
Warner Bros. Chairman and CEO Barry Meyer captured the spirit of their testimony when he told the panel: "It is not an overstatement to say that rampant theft of intellectual property strikes at the heart of our nation's economy."
The administration's IP enforcement plan calls for strong coordination with U.S. trading partners and global organizations to bolster the efforts of American companies to protect their intellectual property overseas. Espinel today told the panel that the administration will "make sure that we are focusing on the countries of most concern," and she's not pulling any punches about which nation tops that list.
"Obviously China is an issue of great concern," she said. "We need to see improvement in China."
She also said that the United States will exercise its diplomatic and law-enforcement channels to crack down on foreign websites identified as engaging in piracy of digital content or the trafficking of knock-off goods. "It is clear to us that foreign-based websites are a particular concern," Espinel said.
She said that her office will pursue a strategy of broad cooperation with governments and law enforcement at the federal, state and local levels. In developing the enforcement strategy, Espinel's team canvassed input from officials in agencies across the government involved in IP issues, including the departments of State, Commerce, Justice and Defense, the U.S. Trade Representative and the Food and Drug administration, which is actively engaged in the fight against knock-off pharmaceuticals.
The U.S. stance on intellectual property enforcement, particularly with regard to the import of knock-off goods and the flow of pirated content on the Internet, is by definition an international issue.
"Unless we have [other nations'] cooperation it's impossible for the United States to address this problem effectively around the world on our own," she said.
Efforts such as the Anti-Counterfeiting Trade Agreement, which is currently in the advanced stages of negotiations involving the U.S. and nearly three dozen other countries, aim to harmonize the international approach toward IP enforcement, though Espinel assured the panel today that the agreement would not preempt U.S. law, as some critics have warned.
She did say, however, that her office will be reviewing and evaluating the current U.S. statutory framework for dealing with intellectual property crimes, which could result in a White House push for a legislative overhaul.