The Neal Caffery of Intellectual Property: IP and White Collar Crimes (Part-I)


Theft is an age old crime. However theft no longer means just breaking into houses or banks to rob gold and money. It now also includes robbing people of their ideas; and is more commonly referred to as intellectual property theft. Appropriate laws and enforcement agencies in the form of small units of policemen under the Economic Offences Wing and extra powers granted to the Customs Officers, to name a few, are the steps taken by our country for protection of IPR. This suggests that the study of IP laws albeit extensive, is being done in isolation; and the necessary question which follows is that is it enough?

What must be pondered upon is not only the infringement of IP, but also the necessary consequences. IP infringement today constitutes an essential ingredient of a bigger crime- one which has the potential to substantially affect the public and cause enormous losses to corporations and governments: white collar crime.

White Collar Crimes (WCC) were earlier defined as ‘crimes committed by people of high social status’ [1] But recently the definition has been expanded to include ‘Illegal act/acts committed by non-physical means and by concealment of guile to obtain money or property to avoid the payment or loss of money or property, or to obtain business or personal advantage.’[2] Thus the definition not only describes the offence, but also the offender.

Let’s take an example of an average white collar criminal seeking to deceive the public at large. He wants to make quick money. His first step is to convince the public that he is credible and trustworthy. How does he do that? He uses the trademark of a legitimate investment company to deceive people who are genuinely interested in investing in or through that company. And here we have the perfect crime. This trademark infringement has facilitated investment fraud, causing losses in the millions. This example shows the consequences of IP violation, apart from those to the IP owner.

The National White Collar Crime Centre of the USA conducted an extensive research on the coherent linkage between IP violations and WCCs. A few of them identified by the Centre include investment fraud, money laundering (concealing funds acquired by counterfeit goods sales), racketeering (organized efforts to misappropriate IP laws), online scams (fraudulently acquiring donations by using the seal of, say, the American Red Cross) etc.

One of the greatest concerns arising out of WCCs is the threat to public health and safety. In 2003 in the USA, a medical product known as PROLENE (manufactured by ETHICON Inc, a JOHNSON AND JOHNSON Company) is a mesh used to repair hernias and other facial deficiencies. It was counterfeited and sold in the American markets. The healthcare officials were notified by the Company that they could not confirm the mechanical properties, biocompatibility and sterility of this (counterfeit) material. Preliminary tests conducted by the FDA on this counterfeited material concluded that some of them were not sterile.[3] However it was too late because the material had already entered into the US supply chain. Details regarding the differences between the counterfeited material and original material were made available to the public so as to make sure that the consumers are aware about the same.

In 2001, a computer salesman in the USA sold counterfeit or re-marked computer parts and software at a lower market price in a computer trades show earning profits of over 3.1 million dollars. He hid this amount in 4 different bank accounts by making 376 deposits each of which were below 10,000 dollars; the reporting threshold for currency transactions. [4] Initially arrested on charges of money laundering and conspiracy in connection with a counterfeit software and computer parts distribution ring, the defendant pleaded guilty to structuring currency transactions, i.e., money laundering. [5]

Due to the prevalence of this association, the US government amended several of its laws to help combat the rise of WCC by offering enhanced enforcement measures and new remedies to the victims. The Federal Money Laundering statute now includes specific references to copyright infringement and trafficking in counterfeit goods and services. The RICO (Racketeer Influenced and Corrupt Organizations) statutes were implemented to prosecute offenders conducting criminal activities through organized behavior supplemented by IP violations.

It is extremely important therefore, for India to recognize the growing concerns about WCCs and implement effective changes for the control of the same. Further research regarding the nexus between IP and WCCs is necessary so that IP and criminal laws are amended to ensure better enforcement. It is also necessary to educate the masses on this topic, along with providing constant updates to the consumers regarding counterfeit materials which may be entering the market.

In the recent times, The International Anti-Counterfeiting Coalition (IACC) which is a component of the Department of Homeland Security, USA, has noticed a disturbing connection between IP violation and terrorism as well. As all are aware, terrorism is a subject of immense international concern. The reasons for this growing concern and the possible solutions regarding the same will be discussed in Part II of this series.

[1][Sutherland, Edwin H., White-Collar Crime: The Uncut Version, ed., G. Geis and C. Goff, New Haven, CT: Yale University Press, 1983. (Originally published 1949)]

[2] [Edelhertz, Herbert, The Nature, Impact and Prosecution of White-Collar Crime, Washington, DC: U.S. Government Printing Office, 1970: 3.]

[3]  [Department of Health and Human Services, U.S. Food and Drug Administration. “FDA Public Health Notification: Counterfeit Polypropylene Mesh” [FDA Public Health Web Notification], December 19, 2003.]

[4] [Lee, Henry K., “Salesman Caught in Trade Show Sting: Vendor Accused of Hiding Profits,” San Francisco Chronicle, February 28, 2001 ]

[5] [U.S. Department of Justice, United States Attorney, “Silicon Valley Businessman Pleads Guilty to Hiding Proceeds of Sales of Counterfeit Computer Software” [Press Release], March 6, 2001

Nikita Panse
ILS Law College, Pune


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