RealTime IT News

House Closes Counterfeiting Loopholes

The U.S. House on Monday voted to close two loopholes in federal law that allow counterfeiters to avoid prosecution and profit from illegal activities.

The House passed the Stop Counterfeiting in Manufactured Goods Act, sponsored by Rep. Joe Knollenberg (R-Mich.), and it now moves to the U.S. Senate.

Under current law, when a counterfeiter is convicted, their products are destroyed but not the equipment used to make those products. In addition, the law now only forbids trafficking trademarks, such as labels, patches and medallions, when the labels are physically attached to goods.

Counterfeiters are exploiting both of these loopholes, according Knollenberg. Not destroying counterfeit manufacturing equipment "leaves the door wide open for other criminals to take advantage of the equipment."

The current labeling law allows counterfeiters to legally ship counterfeit labels to warehouses holding illegal unlabelled goods.

Knollenberg's bill authorizes the destruction of counterfeiting equipment and criminalizes trafficking counterfeit labels.

"This legislation will help put an end to the constant cycle of counterfeiting and dampen the fraud within our borders," Knollenberg said in a statement. "By being an example for the rest of the world to follow, we can strengthen our trade negotiations with other countries, curb international trade of fake manufactured goods and control the dangerous side effects of fraud."

The U.S. Chamber of Commerce immediately hailed the passage of the legislation and urged the Senate to move quickly on the same bill.

"Lawmakers have taken the essential step of ensuring that federal laws keep pace with the growing sophistication of counterfeiting activities in this country," Mike Zaneis, chamber director of Congressional and Public Affairs, said in a statement. "These criminal acts have significant personal, economic and social consequences, and we must stop the trade in fake products from expanding."

According to the FBI, counterfeiting costs U.S. businesses as much as $250 billion a year and results in the loss of as many as 750,000 jobs.

Internationally, the World Customs Organization and Interpol estimate that the annual global trade in illegitimate goods has increased from $5.5 billion in 1982 to roughly $600 billion today.