U.S. Department of Justice Office of Justice Programs Bureau of Justice Statistics Special Report Federal Justice Statistics Program Intellectual Property Theft, 2002 October 2004, NCJ 205800 -------------------------------------------------------------- This file is text only without graphics and many of the tables. A Zip archive of the tables in this report in spreadsheet format (.wk1) and the full report including tables and graphics in .pdf format are available from: http://www.ojp.usdoj.gov/bjs/abstract/ipt02.htm -------------------------------------------------------------- By Mark Motivans, Ph.D. BJS Statistician --------------------------------------------- Highlights Criminal matters referred to U.S. attorneys with an intellectual property (IP)offense, 1994-2002 Civil intellectual property suits filed in U.S. district courts, 1994-2002 Criminal enforcement * The number of suspects referred to U.S. attorneys with an IP theft-related lead charge increased 26% from 1994 to 2002. The number of defendants convicted in U.S. district court with an IP offense increased 51% over this same period (89 in 1994 to 134 in 2002). * During 2002, 88% of defendants with an IP offense as their most serious offense were convicted. Less than half(43%)of those convicted received prison time. The median prison term imposed was 15 months. * More than half of defendants sentenced for copyright/trademark infringement had stolen IP worth over $70,000. One in three defendants received a fine as part of their sentence (median $2,000). Civil litigation * From 1994 to 2002 the number of cases in which plaintiffs sought civil remedies related to patent, trademark, and copyright infringement increased 20% to 8,254. The growth was due largely to increases in patent and trademark cases filed between private parties. * Less than 2% of the 7,445 civil IP disputes disposed in 2002 were resolved by a trial verdict (140). * 83 of the 140 plaintiffs in IP cases disposed of by a trial verdict won, and of these 83, 53 received a monetary settlement. The median award amount in 2002 was $965,000. The median awards by nature of suit were: $84,500 for trademark, $159,000 for copyright, and $2.3 million for patent suits. ---------------------------------------------- Intellectual property-related (IP) cases are handled as both civil and criminal matters in Federal court. During 2002, 134 defendants were sentenced for IP infringement offenses under the U.S. Sentencing Guidelines with more than half convicted of stealing IP worth over $70,000.***Footnote 1: Defendants sentenced under copyright/trademark infringement (sec.2B5.3)as primary guideline.*** Also in 2002, 8,254 civil cases related to intellectual property theft were filed in U.S. district courts (up 20% from 1994). Suspects with copyright violation as the lead charge comprised more than half (52%) of criminal IP referrals to U.S attorneys in 2002; 25% were referred with trademark offenses; and 22%, with trade secret offenses. Eighty-eight percent of defendants adjudicated with IP theft as the most serious terminating offense in 2002 were convicted. Forty-two percent of the 8,254 civil IP complaints filed in U.S. district court during 2002 were trademark suits; 33% were patent-related; and 25% were for copyright infringement. The U.S. Government was plaintiff or defendant in 32 civil cases filed in U.S. district court during 2002 for patent(20)and trademark (12) complaints. Criminal IP offenses include the trafficking of goods with counterfeit trademarks or brands (such as clothing and consumer electronics), software piracy, the distribution of bootleg musical recordings and movies, selling company trade secrets, and derivative copyright violations of intercepting cable/satellite broadcasts. Recent Federal legislation prohibits use of the Internet or other communication technology to distribute pirated intellectual property. Recent laws have targeted counterfeit manufacturing operations, both domestic and international. This report uses data from the Federal Justice Statistics Program (FJSP) and other sources to describe the enforcement of intellectual property rights in the Federal criminal and civil justice systems including private civil remedies. Criminal enforcement From 1994 to 2002, 3,395 suspects were referred to U.S. attorneys for an intellectual property offense as the lead charge. This is under 1% of the more than 1 million total Federal suspects referred to U.S. attorneys over the 9-year period. The number of suspects investigated for an intellectual property offense increased 26% from 322 in 1994 to 405 in 2002 (peaking in 2001 at 455: Highlights figure). The number of suspects in matters referred to U.S. attorneys for copyright offenses increased 47% (from 143 in 1994 to 210 in 2002), surpassing trademark offenses, which decreased 42% (179 in 1994 to 103 in 2002). Following passage of the Economic Espionage Act of 1996, the number of suspects referred for trade secret offenses increased more than threefold from 28 in 1997 to 92 in 2002. ------------------------------------------------------ Protecting intellectual property Intellectual property (IP) rights are rooted in copyright and patent protections in the U.S. Constitution.***Footnote 1: Article I, Sec. 8, cl. 8.*** As intellectual property grew more important in the U.S. economy, making it an attractive target for individual and organized criminals, Federal lawmakers codified IP protections. Federal legislation targets the use of the Internet and other communication devices used in reproducing/distributing IP material and the importation of counterfeit merchandise. Congress strengthened civil penalties (the primary remedy for IP offenses/disputes) and established new criminal statutes providing penalties that include imprisonment and fines tied to the estimated value of infringed goods. Trademark The Lanham Act of 1946 codified civil law into a national system of trademark protections.***Footnote 2: 15 U.S.C. sec. 1051-1127.*** The act provides for the registration and enforcement of trademarks and prohibits counterfeit merchandise from being imported into the U.S.***Footnote 3: 19 C.F.R. Part 133 (1995). *** The Trademark Counterfeiting Act of 1984 made trafficking in goods and services using a counterfeit trademark a felony (18 U.S.C. sec. 2320) and strengthened civil remedies to allow for statutory and treble damages and attorney fees. It also permitted the destruction of articles bearing counterfeit marks.***Footnote 4: Pub. L. No. 98-473, II sec. 1502(a), 98 Stat. 2178 (1984).*** Trade secrets The Economic Espionage Act (EAA) of 1996 created the first criminal statutes specifically aimed at the theft of trade secrets. Two crimes were codified including: "economic espionage" (18 U.S.C. sec. 1831)prohibiting theft of valued, proprietary information for the benefit of a foreign government and "theft of trade secrets" (18 U.S.C. sec. 1832)which more generally includes offenses involving the conversion of a trade secret for economic benefit, whether foreign or domestic, a company or an individual.***Footnote 5: Pub. L. No. 104-294, 110 Stat.3488.*** The act also authorized the Attorney General to enforce civil actions (18 U.S.C. sec. 1834) and ensure forfeiture of property used in the offense. Copyright The first criminal provision in copyright laws, passed in 1897, made it a misdemeanor to perform dramas or music willfully and for profit without copyright owner's permission.***Footnote 6: The Act of January 6, 1897 (54th Congress, 2d Session, 29 Stat. 481).*** The Copyright Act of 1976 provided the basic framework for today's copyright laws. It also made infringement (for purposes of commercial advantage or financial gain) a misdemeanor offense and stiffened penalties for repeat offenders. The act created Federal preemption of copyright criminal remedies (eliminating most recourse to State criminal laws).***Footnote 7: Pub. L. No. 94-553, 101, 90 Stat. 2451, 2586; 17 U.S.C. sec. 506(a).*** In 1982 Congress passed The Piracy and Counterfeiting Amendments Act, making mass infringement of movies and records a felony.***Footnote 8: Pub. L. No. 97-180, 96 Stat. 91, 92; 18 U.S.C. sec. 2319(b).*** The Copyright Felony Act of 1992 targeted the mass reproduction of computer software and made copyright infringement involving 10 or more copies (value over $2,500) a felony.***Footnote 9: Pub. L. No. 102-561, 106 Stat. 4233; 18 U.S.C. sec. 2319(b).*** The unauthorized recording of live musical recordings or "bootlegging" was made criminal in 1994 (18 U.S.C. sec. 2319A). The Anti-Counterfeiting Consumer Protection Act of 1996 made trademark and copyright counterfeiting predicate offenses under the Racketeering Influenced and Corrupt Organization (RICO) statutes (18 U.S.C. Sec.sec. 1961-1968).***Footnote 10: Pub. L. No. 104-153, 110 Stat. 1386.*** More recently, the No Electronic Theft (NET) Act made distributing copyrighted materials (that is, over the Internet) a Federal crime (total retail value of $1,000).***Footnote 11: Pub. L. No. 105-147, 111 Stat. 2678; 17 U.S.C. sec. 506(a).*** Further, the NET Act spurred changes to the U.S. Sentencing Guidelines, stiffening sanctions for IP theft offenders.***Footnote 12: U.S. Sentencing Commission, USSG Appendix C., Amendment 590, May 1, 2000, promulgated in response to Pub. L. 105-147. Sec. 2(g).*** The Digital Millennium Copyright Act (DMCA), enacted in 1998, established criminal penalties for circumventing copyright protection systems.***Footnote 13: Pub. L. No.105-304, 112 Stat. 2860; 17 U.S.C. sec. 506(a).*** ---------------------------------------------------- ---------------------------------------------------- In 2002 U.S. Customs and Border Protection (CBP) reported nearly 5,800 seizures of IP worth over $99 million U.S. Customs and Border Protection (CBP) seizes illegal intellectual property at 317 U.S. ports of entry.***The Homeland Security Act of 2002 (P.L. 107-296) created the Bureau of Customs and Border Protection (CBP) by merging most of U.S. Customs with immigration inspectors from the former Immigration and Naturalization Service, the Border Patrol, and agricultural border inspectors from the Department of Agriculture's Animal and Plant Health Inspection Service. The CBP took effect on March 1, 2003, under the newly created Department of Homeland Security (DHS). *** Ports of entry are locales designated for the movement of merchandise and people in and out of the country. Customs has the authority to determine trademark and copyright violations, to search and seize property, and to arrest suspects. (See the Tariff Act.) The number of Customs' seizures increased 177% from 2,091 in 1995 to 5,793 in 2002 (not shown in table). In 2002 counterfeit cigarettes were 38% of all CPB seizures, followed by media (movies, software, and music) at 29%,and watches, consumer electronics, apparel, and handbags at 21%. Among exporting countries of origin, China accounted for a quarter of all seizures and half of the total value seized in 2002. Cigarettes made up 75% of the seizures from China. Taiwanese IP comprised less than 2% of seizures and 27% of the total value (media being 88% of seized material). ----------------------------------------------------- ----------------------------------------------------- Computer Hacking and Intellectual Property (CHIP) prosecution units By fiscal year-end 2002, the Attorney General had designated Federal CHIP prosecution units in 13 U.S. cities. CHIP units specialize in the enforcement of a wide range of intellectual property theft including copyright and trademark violations, theft of computer components, theft of trade secrets and economic espionage. They also specialize in prosecuting computer hacking, fraud, and other Internet crimes. Cities were selected based on concentrations of high tech industries and other likely targets of IP theft or computer crimes. The CHIP units work with the FBI and other investigatory agencies to foster relationships with the technology community for enforcement efforts. The units also train members of Federal, State, and local law enforcement agencies in detection of cybercrime and intellectual property theft. Source: Computer Crime and Intellectual Property Section (CCIPS), U.S. Department of Justice. --------------------------------------------- The Computer Crime and Intellectual Property Section (CCIPS) in the Criminal Division of Justice oversees the Federal prosecution of IP theft and advises on policies related to infrastructure protection and global IP theft enforcement. CCIPS also supports the CHIP program.***Footnote 2: The U.S. Attorney General announced the creation of the Intellectual Property Task Force in March 2004 to strengthen IP theft enforcement. The task force focuses attention on coun-tering international piracy and counterfeiting by organized crime.*** -------------------------------------------- Commercial suspects of IP theft In 2002 businesses were 9% of suspects (37) referred to U.S. attorneys for an IP offense. During 1994 businesses comprised 12% of the suspects referred to U.S. attorneys with IP theft as lead charge. As IP theft referrals increased over 9 years, the number of organizational suspects remained about the same (38 in 1994; 37 in 2002). Three organizations were adjudicated for an IP offense in 2002 (one for a copyright offense and two for trademark offenses), and two were convicted (one organization received a 12-month term of supervision and the other, a suspended sentence). ------------------------------------------- In 2002 more than 15 Federal, State, and local agencies provided referrals to U.S. attorneys for IP theft. The majority were from agencies of Treasury and Justice. The FBI, with primary authority to investigate IP theft, referred 63% of suspects to U.S. attorneys, followed by the U.S. Customs Service (23%) (USCS). Following the Homeland Security Act of 2002, the USCS is made up of the CBP, which monitors the movement of merchandise and people into and out of the country (text box on page 3), and the U.S. Immigration and Customs Enforcement (ICE), which conducts intelligence and investigations pertaining to IP smuggling. Various agencies made up the remaining 14% of referrals in 2002 (including the Secret Service and the U.S. Postal Service). From 1994 to 2002, 32% of IP matters were referred from seven Federal judicial districts. These districts were the Central and Northern Districts of California (7% and 6%, respectively), the Southern and Eastern Districts of New York (5% and 3%, respectively), the Middle District of Florida (5%), and the Northern and Southern Districts of Texas (3% each). Matters prosecuted The number of suspects prosecuted for IP theft by U.S. attorneys increased 41% from 129 in 1994 to 182 in 2002. In 2002, 48% of 383 suspects in matters concluded with an IP theft offense as lead charge were prosecuted in U.S. district courts -- a slightly greater share than in 1994 (46%). Suspects referred for copyright offenses (56%) were more likely than trademark (50%) or trade secret (22%) suspects to be prosecuted in 2002. The most common reasons given by U.S. attorneys for declining to prosecute in 2002 were weak/insufficient admissible evidence (20%), agency request (17%), lack of evidence of criminal intent (12%), and civil/administrative action/prosecution by other authorities (11%). Twenty-three suspects in IP matters concluded in 2002 were organizational defendants (6%); three were prosecuted in U.S. district courts (see text box above). Criminal case outcomes Eighty-eight percent of criminal defendants with an IP offense as their most serious offense at case conclusion were convicted in 2002. This is comparable to the overall conviction rate of 89% for the 80,000 criminal defendants adjudicated in 2002. Ninety-three percent of copyright defendants, 85% of adjudicated trademark offenders, and 75% of trade secret offenders were convicted in 2002 (not shown in table). During 2002, 72% of IP theft offenses were disposed within 1 year (time from case filing to disposition). The mean for all IP offenses was 10.6 months (not shown in table). IP defendants sentenced under the U.S. Sentencing Guidelines The Sentencing Reform Act of 1984 eliminated parole, restricted good time that could be earned, and authorized the U.S. Sentencing Commission to create guidelines that consider a broad variety of factors. The guidelines take into account offense-specific characteristics which are scored and used to determine sentencing ranges. The number of defendants sentenced for IP theft (as primary guideline) increased 54% from 1995-2002 (87 in 1995 to 134 in 2002) peaking at 137 in 1998. During 2002, 141 defendants were sentenced for IP theft as a primary or secondary guideline. The bulk (134 or 95%) of defendants convicted of IP theft in 2002 were sentenced with IP theft as the primary guideline. In 2002 IP theft offenders comprised less than 1% of the 64,366 defendants sentenced under the Sentencing Reform Act of 1984. During 2002 sentenced defendants were predominantly male(93%),white(65%) or Asian (15%), 35 or older (60%), U.S. citizens (78%), and college educated (50% with some college or a degree). Three-fourths of defendants did not have prior convictions used in determining sentence. Relatively more males, whites, persons under age 35, and persons with some college (or graduate) were convicted of IP offenses in 2002 than in 1998. A similar percentage of IP defendants convicted in 2002 pleaded guilty (97%) as in 1998(96% pleaded guilty). In response to the NET Act of 1997, the USSC modified the IP theft guidelines (effective May 1, 2000). The USSC increased the base offense score for IP theft from 6 to 8, added three offense-specific characteristics, and changed the definition of value of infringed IP from being based on the value of counterfeit goods to being based on the legitimate retail value of infringed items. For example, prior to the 2000 amendment, if an offender sold 10 fake name brand watches at $35 each, when the retail value of a legitimate watch was $1,000, the loss calculation would be $350 (‘value of infringing items'). Under the post-2000 guidelines, the total loss calculation would be $10,000 (based on the retail value of legitimate watches or ‘infringment amount'). During 2002 more than half of IP theft defendants were convicted with an infringement value of over $70,000. Given the change in the definition of IP loss effective in 2000, the loss value for most IP defendants sentenced in 2002 was calculated as the legitimate retail value of infringed goods.***Footnote 3: In 2001 USSC also amended the IP theft guidelines (§2B5.3) to include a new loss table that associates increased offense levels with most loss amount categories. The combined effect of this amendment and the new loss definition has increased the severity of sanctions for IP theft. *** During 2002,13 of the 15 defendants in cases with infringement amounts of over $2.5 million did not have a prior criminal history(that is, prior convictions used for computation of sentence)(not shown in table). In 2002,10 defendants sentenced under the IP theft guideline (7.5%) received an adjustment for abuse of position of trust. Ten defendants (7.5%) received an adjustment for an organizing or managing role in the offense, down slightly from 11% in 1998. Six percent of defendants received a mitigating adjustment for their minimal/minor participation in the offense (down slightly from 9.5% in 1998). Almost all IP defendants sentenced in 1998(93%) and 2002(96%) accepted responsibility for their crime. Forty-one (46%) of the 92 defendants sentenced under post-May 2000 amendments received an aggravated adjustment to their sentence for manufacturing, importing, or uploading infringing items to the Internet (for example, causing goods to enter stream of commerce)(not shown in table). --------------------------------------------- Trademark, copyright, and patent protections Trademarks are brand names distinguishing manufactured goods. Registration with the U.S. Patents and Trademark Office establishes Federal jurisdiction in a criminal prosecution. From 1983 to 2001 registrations increased 148% (41,200 in 1983 to 102,300 in 2001). Copyright registration establishes ownership in criminal and civil infringement deliberations. From 1983 to 2001, the number of registrations increased from 1983 to a peak of 663,700 in 1991 and then decreased to 601,700 in 2001. From 1990 to 2002, copyright registrations increased for monographs (including computer software and machine readable works), decreased for serials and musical works (including dramatic works, accompanying music and motion pictures), and remained at about the same level for sound recordings and works of visual arts (including fine and graphic art and photographs). The number of patents granted increased by 197% from 62,000 in 1983 to 184,000 in 2001. Unlike trademark and copyright laws, U.S. patents are enforceable only against infringements occurring in the United States. ------------------------------------------- Most defendants were sentenced within the guideline range in 2002 (59%); 31% received a downward adjustment for providing substantial assistance to the prosecution; and 11% received a downward departure for other reasons. IP defendants were less apt to be sentenced within the guidelines in 2002 (59%)***Foontnote 4: See appendix table 1 for differences by the guideline amendment year applied for defendants*** sentenced in FY 2002. than in 1998 (72%), attributable in part to increased use of substantial assistance (20% of cases received in 1998 compared to 31% in 2002) and other downward departures (4% in 1998 compared to 11% in 2002). Forty-three percent of defendants received some prison time in 2002, up from 34% in 1998. In 2002 a smaller share of defendants (29%) received probation only, compared to 1998 (42%), and a greater share received probation with confinement(27% in 2002 and 24% in 1998). Of the 134 IP theft defendants sentenced in 2002, 58 (43%) received some imprisonment with a term ranging from 1 to 46 months and a median of 15 months. In 1998, 34% of defendants were sentenced to prison with a range of 1 to 30 months and median of 10 months. Fifty-seven percent received probation as some part of their sentence in 2002 and 35% of defendants received a fine in 2002(compared to 47% in 1998). Restitution was ordered for 37 (28%) defendants in 2002 (amounts imposed ranged from $600 to $10 million with a median of $25,200). Civil litigation Civil remedies can include injunctions used to halt further infringement, forfeiture, or monetary relief to include a defendant's profits, damages sustained, costs of actions, and trebled damages. In 2002 a total of 274,841 civil cases were filed in U.S. district courts (up 9.5% from 2001). The scope of civil IP cases differs from criminal as it includes patent but excludes trade secret offenses. The 8,254 IP cases filed comprised 3% of this total in 2002. IP case filings increased 20% from 1994 to 2002 (6,902 to 8,254). From 1994 to 2002 patent filings grew at the greatest rate (67%), followed by trademark filings (42%). Copyright filings decreased 26%. Between 1994 and 2002 the number of intellectual property complaints between private parties increased 20% (from 6,872 in 1994 to 8,222 in 2002) due to increases in patent and trademark filings (up 67% and 42%, respectively). Copyright complaints decreased 26% (from 2,828 in 1994 to 2,084 in 2002). U.S attorneys have authority to pursue civil litigation on behalf of the United States. In 2002 the United States Government was plaintiff or defendant in 32 intellectual property complaints filed (63% patent and 37% trademark cases). In 2002, 7,445 copyright, patent, and trademark suits were disposed of (down 5% from 2001). Federal judicial districts with the largest share of cases included the Central and Northern Districts of California (13% and 5%, respectively), the Southern District of New York (9%), and the Northern District of Illinois (5%). Most civil cases were dismissed (76%), rather than disposed of by judgment (24%) (table 7). Overall, 40% were settled, 22% were voluntarily dismissed, and 22% received judgment other than trial (such as judgment on default, consent, motion before trial, and award of arbitrator). Less than 2% of cases were disposed by trial verdict. Among types of IP offenses, patent (3.2%) suits were more likely than copyright (1.5%) and trademark (1.2%) suits to terminate with a trial verdict. Copyright suits were slightly more likely to end in settlement (42%). Of the 140 IP cases terminated by trial verdict in U.S. district courts in 2002, patent cases comprised 52% (73); trademark cases, 28% (39); and copyright cases, 20% (28). Of the 140 complaints terminated by trial, 61% were disposed of by jury verdict, 35% by decision of judge or magistrate, and 4% by directed verdict. Juries decided 69% of patent trials, 64% of copyright trials, and 46% of trademark trials. During 2002 plaintiffs were winners in 59% (83) of the 140 cases terminated by trial. Of the 83 plaintiff winners, 52% (43) were patent cases, 19% (16) copyright cases, and 29% (24) trademark cases. Of the 83 plaintiff winners, 53 (64%) received a monetary award. The median award was $965,000 with 42% less than $500,000, 31% between $500,000 and $5 million, and 27% greater than $5 million. Monetary awards varied by type of IP suit: The median award for patent suits was $2.3 million, followed by copyright ($159,000) and trademark ($84,500) suits. The median case processing time (from case filing to disposition) for all IP theft cases terminated in 2002 was 7 months. Median case processing time varied by type of IP complaint: patent (9 months), copyright(7 months), and trademark (6 months) cases. ---------------------------------------------- Selected Federal criminal intellectual property theft statutes and maximum penalties Criminal IP theft offenses in this report are defined according to copyright, trademark, and trade secrets statutes: Copyright 17 U.S.C. sec. 506 & 18 U.S.C. sec. 2319 Criminal infringement of a copyright. Statutory maximum penalty of 5 years in prison and $250,000 fine and 10 years in prison for repeat copyright offenders. 18 U.S.C. sec. 2318 Trafficking in Counterfeit Labels for phonograph records, copies of computer programs, and similar materials. Maximum penalty of 5 years in prison and $250,000 fine. 18 U.S.C. sec. 2319A Unauthorized Fixation of and Trafficking in Sound Recordings and Music Videos of Live Musical Performances. Maximum penalty of 5 years in prison and $250,000 fine for first time offender and 10 years in prison for repeat "bootlegging" offender. 17 U.S.C. sec. 1201-1205 Circumvention of copyright protection systems. Maximum penalty of 5 years in prison and $500,000 fine for first time offender and 10 years in prison and $1,000,000 fine for repeat offender. 47 U.S.C. sec. 553 Unauthorized reception of cable services. Maximum penalty of 6 months in prison and $1,000 fine for individual use and 2 years in prison and $50,000 fine for commercial/financial gain with first time offender and 5 years in prison and $100,000 fine for repeat offender. 47 U.S.C. sec. 605 Unauthorized publication or use of communications. Maximum penalty of 6 months in prison and $2,000 fine for individual use and 2 years in prison and $50,000 fine for commercial/financial gain with first time offender and 5 years in prison and $100,000 fine for repeat offender. Trademark 18 U.S.C. sec. 2320 Trafficking in Counterfeit Goods of Services. Maximum penalty of 5 years in prison and 10 years in prison and $5,000,000 fine for repeat offenders. Corporations subjects to fines up to $15,000,000. Trade secrets 18 U.S.C.sec. 1831 Economic espionage. Maximum penalty of 15 years in prison and $500,000 fine for individual and $10,000,000 fine for corporate offender. 18 U.S.C. sec. 1832 Theft of trade secrets. Maximum penalty of 10 years in prison and $250,000 fine for individual and $5,000,000 fine for corporate offender. -------------------------------------------- Property associated with the IP offense is subject to civil forfeiture pursuant to civil forfeiture statutes unique to IP theft and as a predicate offense to money laundering under 18 U.S.C. sec. 981. The CPB can seize, forfeit, and destroy imported products which violate copyright infringement (see 17 U.S.C. sec. 603(c)), trafficking in bootleg musical performance recordings (18 U.S.C. sec. 2319A(c)), and trademark infringing products (19 U.S.C. sec. 1526(e)). Criminal forfeiture is mandatory for trafficking in counterfeit labels (18 U.S.C. sec. 2318)and for copyright infringement can include all copies of infringing articles as well as the equipment used to manufacture items after court order following judgment of conviction (see 17 U.S.C. sec. 506(b)). Methodology The source of the data used in this report is the BJS Federal Justice Statistics Program (FJSP) database. The FJSP compiles comprehensive information on individuals and corporations processed through the Federal justice system from source files provided by the Executive Office for United States Attorneys (EOUSA), the Administrative Office of the United States Courts (AOUSC), the United States Sentencing Commission(USSC), and other agencies. In this report, intellectual property offenders were defined according to selected Federal criminal statutes. (See textbox on page 9.) For suspects in matters referred to U.S. attorneys, the "lead charge" is the basis for investigation and for which at least 1 hour of investigation time was spent. As secondary charges are not available, IP theft is undercounted to the extent it is present as a secondary charge. In table 2 and figure 3, organizational suspects were manually identified in the Executive Office for the U.S. Attorneys central system file by inspecting the name field on suspects in matters referred from 1994-2002 with an IP statute as the lead charge. AOUSC data were used to describe the distribution of IP theft defendants in cases adjudicated resulting in conviction. The "most serious terminating offense" designation is the offense that yields the maximum statutory penalty. For more information see the methodology section in the Compendium of Federal Justice Statistics, 2002 (NCJ 205368). The USSC provided data on IP defendants convicted and sentenced under the Sentencing Reform Act of 1984. The primary guideline (sec.2B5.3) was used to describe defendants as it provided the largest and most representative group of defendants sentenced for IP theft. The guideline, sec. 2B5.3, includes each of the criminal IP theft statutes listed on page 9 with exception of theft of trade secrets (18 U.S.C. sec. 1831) and economic espionage (18 U.S.C. sec. 1832) offenses. These IP offenses are included under the general theft guideline (sec.2B1.1). IP theft defendants sentenced under the guidelines were compared from 1998 and 2002 as these years represented two periods of comparable size as well as points before and after the 2000 guideline amendment to sec.2B5.3. As about a third of IP defendants convicted in 2002 were sentenced under pre- 2000 amendments to the §2B5.3 guideline, appendix table 1 was included to show the break-out by amendment year. The cut-points used in describing loss amounts were the categories which could be collapsed across years of data. The November 1, 2001 guideline amendment changed loss categories and this affected direct comparison with previous years. The source of civil data presented in this report is the Federal Judicial Center's Integrated Data Base (Civil). The database is derived from data provided by the Administrative Office of the U.S. Courts (AOUSC). The Federal intellectual property categories used in this report are based on the codes established by the Administrative Office of the United States Courts(AOUSC). For cases that involved more than one filed action, the most definitive (as determined by the plaintiff's attorney) is recorded, and it is this nature of suit code that was used in the analysis for this report. For more information: Computer Crime and Intellectual Property Section of the Criminal Division of the Department of Justice. see . -------------------------------------------------- IP theft offenders sentenced under Fedreal Sentencing Guidelines by amendment year of guideline applied, 2002 * In 2002, 67% of the 134 IP theft defendants sentenced under Federal sentencing guidelines were subject to two major guideline amendments which went into effect on May 1, 2000, and November 1, 2001, respectively. * Of those sentenced under post-2000 amendments, 55% were sentenced within range of the guidelines compared to 53% of those sentenced under pre-2000 guidelines. * 26% received a substantial assistance motion under post-2000 guidelines compared to 35% under pre-2000 guidelines. * 52% received some prison time under post-2000 guidelines compared to 24% of defendants sentenced under pre-2000 guidelines. -------------------------------------------------- -------------------------------------------------- The Bureau of Justice Statistics is the statistical agency of the U.S. Department of Justice. Lawrence A. Greenfeld is director. Mark Motivans wrote this report under the supervision of Steven K. Smith. The following individuals reviewed this report and provided substantive comments: Eric Klumb and Martha Stansell-Gamm of the Computer Crime and Intellectual Property Section of the Department of Justice; B. Frederick Williams of the U.S. Attorney's Office for the Western District of North Carolina; and Pragati Patrick and Maurice Galloway of the Administrative Office of the U.S. Courts. William Adams, Avi Bhati, and Christine Arriola of the Federal Justice Statistics Resource Center verified this report. Tom Hester edited the report. October 2004, NCJ 205800 C ---------------------------------------------- End of file 09/28/04 ih