Passage 3
Commercial Piracy
Commercial Piracy Cases
The Food and Drug Administration recalled 357 heart pumps used in hospitals across the country because these $ 200 intra-aortic balloon pumps, which help maintain heartbeat during open-heart surgery, were believed to contain potentially dangerous, cheap counterfeit parts.
The American Medical Association has become concerned over phony look-alike narcoticsso called because they are the color, size, and shape of legitimate tranquilizers and amphetamines and even display forged trademarks. Look-alikes are believed responsible for at least 12 deaths, including a 17-year-old New Mexico boy who fell into a coma after swallowing two phony biphetamines.
Some counterfeit parts were discovered in the space shuttle, in NATO aircraft, and were reportedly installed in personal helicopters of Queen Elizabeth II and the late Egyptian Pres. Anwar Sadat.
What Is Commercial Piracy?
The list goes on. Commercial piracy is the trafficking in counterfeit products or services which incorporate characteristics of authenticity in order to deceive.
One typetrademark counterfeitinginvolves the attachment of seemingly real trademarks or brand names to bogus products or services, thereby fooling consumers into thinking they have bought the legitimate item. Fake designer jeans and cosmetics of poor quality, but carrying the well-known label, are examples.
Every day, American companies see their valuable patents, copyrights, and trademarks ignored, misused, and blatantly ripped off by commercial pirates. While $ 35,000,000,000 may sound like a payment on our national debt, it is what Americans will probably pay for licensed products this year.
The rapidly growing problem of commercial piracy also threatens the health and safety of consumers, costs American jobs, and sabotages the ability of US businesses to compete. Explained Sen, Matthias: Commercial counterfeiting...has the potential for killing people. Commercial counterfeiting used to be limited to high fashion luxury items, but today...such things as prescription drugs and automobile parts have become targets for counterfeiting. For example, bogus brake drums have caused fatal car accidents.
Rip-offs of American intellectual property rights take different shapes, but the harm to American industry always is enormous. The variety of counterfeit goods is limited only by the fertile imagination of the commercial pirate. The auto parts industry alone estimates that it suffers $ 3,000,000 worth of damage yearly. One study estimated that trade in pirated goods accounts for two percent of total world trade!
Counterfeit Apples
The flood of pirated computers into world markets graphically shows what commercial pirates can do to a companys copyrights and patents. Apple II has the dubious honor of being the pirates favorite because it is so popular and has a vast number of software programs. According to Albert Eisenstat, vice president and general counsel of Apple, look-alike Apple Us began showing up in the Far East in early 1982, mostly assembled in tiny, household-sized shops. Counterfeit Apples, virtually identical to the real thing, reached the US market within a few months. Despite the Apple Companys registering trademarks and copyrights with Customs, filing lawsuits, and bringing an action before the International Trade Commission, the volume of phony Apples has grown. Large piratical firms invaded the US market, ready, willing, and able to make and distribute look-alike Apples by the thousands.
Apple pirates can be as clever as they are greedy. They have contrived sly schemes to trick Customs. Duplicators change the physical design and name. Moreover, disassembled or partially assembled bogus computers have been importedlegallybecause, if they are not accompanied by semiconductor chips containing copyrighted Apple software, they are allowed to enter the US. Once past Customs, it is smooth sailing to add the infringing chips. One pirate included a separate mini-program that scrambled the pirated Apple program so the theft couldnt be spotted by Customs!
What Is Behind the Commercial Piracy?
This mess was created by a Customs decision not to detain computers unless they also contained patented chips. According to a 1984 report by the House Subcommittee on Oversight and Investigations, Unfair Foreign Trade Practice: Stealing American Intellectual Property: Imitation Is Not Flattery.
This decision has created a hole in the regulations large enough to drive a truck full of counterfeit computers through. Piratical computer importers also vary their ports of entry. After one company had 10 to 15 computers seized in San Francisco, it tried elsewhere... It is not known if shipment to other, less vigilant ports went undetected.
Osborne, IBM, and Radio Shack computers are being copied as well.
Furthermore, according to the Subcommittee Report, this contributes to our balance of payments deficit.
In some countries, commercial piracy has become the de facto national industrial strategy!
Pirates can prevent a company from recouping its research and development investment, thus killing a small firm. For example, in 1970, Stanford Ovshinsky, head of a small high-tech company, obtained patents on a process that showed promise in upping computer memory storage. His firms RD created the process.
Then, in 1983, a giant Japanese firm boldly announced at a New York press conference that it had discovered the same process. Ovshinsky, enraged, testified that his patented process was well-publicized in Scientific American, a National Academy of Sciences report, and his own lectures. Ovshinsky claimed he had made trips to Japan and held technical discussions with that Japanese company in the mid-1970s regarding a licensing arrangement for his process. Thus, when the Japanese company made its announce-ment 13 years later, Ovshinsky remarked, It was just incredible, in fact, unbelievable to me...because of the arrogance.
Ovshinsky and his company had no choice. We had to sue, he said, The appropriation of property is theft. Ovshinsky believed the Japanese companys plan was to tie him up in litigation until his patents expired, then to flood the market with their pirated product. Because his firm was relatively small, the litigation cost would siphon funds needed for RD of new technologiesthe essence of his enterprises survival. Without punishment, Ovshinsky explained, this practice would continue against small American high-tech concerns.
More Deterrence Is Needed
US laws protecting intellectual property rights are weak and dont threaten the ballooning avalanche of pirated goods. For example, there are virtually no criminal penalties for trademark or patent rip-offs. Massive changes are necessary in civil and criminal statutes relating to copyrights, trademarks, and patents. Penalties must be made more severe, and the coverage of protection under these laws should he expanded and updated.
Despite the best-laid plans of US Customs personnel, there arent enough of them or sufficient funds to stop the flow of pirated goods into the US. Moreover, laws to protect intellectual property rights of goods marketed by American companies in Third World nations are notoriously weak, and enforcement is lackadaisical or absent, especially against local companies who violate an American firms trademark,
If little is done to combat the problem, it will undoubtedly spread. For example, organized crime is now taking its chunk out of commercial piracy, particularly in the sale and distribution of electronics and clothing. According to the subcommittee report, Given the high profit in such activity, the role of organized crime is expected to increase.
Progress has been made in bilateral and multilateral efforts to increase protection afforded intellectual property rights and to encourage foreign governments to crack down on pirates.
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