I. INTRODUCTION

During the summer of 1986, I arrived in Seoul, Korea, with a damaged suitcase. To replace it I went to the street near the U.S. Air Force Base where inexpensive luggage is readily available. Finding a reasonably priced Louis Vuitton "look-alike" with the familiar LV trademark and conspicuously marked "Made in France", I was assured that it was, as I had suspected, made in Korea. Satisfying my immediate needs, I thought nothing of the purchase until I returned to clear U.S. Customs where I dutifully reported the full price of my purchase (about one tenth the price of Louis Vuitton originals). The Customs officer looked at me with scorn and announced that I could not buy Louis Vuitton luggage for such a price. I assured her that it was not LV luggage. She called in the counterfeit products expert, who spent 30 minutes proving to her that it was not Louis Vuitton luggage. Then he turned to me and announced, "Of course, you know that it is illegal to import these counterfeits into the United States."

For a moment I was stunned, expecting the official to pour my personal possessions onto the floor and to confiscate the offending product. However, he soon chuckled and said, "We only take legal action when the purchase is for commercial resale." I was relieved but not satisfied and went to the trouble of attending a legal symposium on the subject of counterfeit products at the Franklin Pierce Law School in Concord, N.H., soon thereafter. There I discovered that the statute (enacted in 1984)1 required that I be "trafficking" in the offending product. To confiscate would require a court order.

This personal story highlights the efforts of the United States to protect the intellectual property of companies with valuable assets. It also underlines the difficulties of dealing domestically with a problem which is global in scope and growing more complex as technological progress brings more and more complex intellectual products to market. Although the U.S. Customs might be able to stem some of the tide of illegal and offending copies of our own most desired products, it has no authority over the importation of such products into the multitude

1 Trademark Counterfeiting Act of 1984, Title 18 U.S.C Chapter 113 §1502(a) as amended by §2320.

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of nation states around the world. Our officials must cajole or threaten others through negotiation, reciprocity, and retaliation to protect U.S. interests in its own creative products.

My purchase is replicated worldwide thousands of times a day as computer clones, watches, agricultural chemicals, pharmaceuticals, clothing with designer labels, jewelry, records, tapes, leather goods, auto and aircraft parts, and countless other copies of popular proprietary products make their way into the international markets. Not only

is there a financial loss to the originators of the copied products, but there is also danger of legal liability from the inadequacies of the products that are held out to be "originals" of a trademarked item. Further, the products often disappoint customers who purchase clones that purport to function in a manner identical to or compatible with the originals but do not meet the design specifications.

Intellectual property laws establish certain proprietary rights in works generated by intellectual productivity such as books, films, inventions, trademarks, industrial and artistic designs, and computer software. The purpose of this study is to assess the status of intellectual property with respect to the impact of new information technologies by:

taking a whirlwind trip through the maze of legal regimes used to protect the economic value of intellectual property on the global market;

examining the inconsistencies in the various intellectual property systems;

· identifying the challenges to established law from the impact
of new information technologies;

· locating forums in which discussions of public policy are
taking place;

· identifying targets of opportunity where action is needed to
modify, reconcile, and harmonize the laws of our own and other
countries. This paper focuses on developments through mid-1988,
with addenda updating it through late 1988.

It is never too early to contemplate changing the laws that govern intellectual property. As Woody Allen has so aptly characterized the

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problem confronting us, "'Our technological capabilities are far in advance of our intellectual development and our moral development.'"2

A. Size of Problem

Opening the technological Pandora's box releases economic consequences as well. Global trade in engineered products has grown 15 fold over the last 20 years to $500 billion in the early 1980s 25% of this is for high tech products in which the U.S. excels. There is an even greater growth to $700 billion in the "invisible trade" which includes consulting, data processing, insurance, and other financial services.3

The International Anticounterfeiting Coalition estimated that some $20 billion or about 18% of world trade in 1980 was lost to unauthorized copies of U.S.-originated works."

A recent study by the International Trade Commission reported a $23.8 billion loss in world trade in 1986. As only 431 companies responded, of the 736 companies sent the questionnaire, U.S. Trade Representative Clayton Yeutter estimates the loss from inadequate protection of intellectual property to be somewhere between $43 billion

and $61 billion. 5 The study included 47 computer firms and 52 software firms, which reported some $4.1 billion in lost trade. 6

Lotus Development Corporation, makers of Lotus 1-2-3, the most successful electronic spreadsheet, claims that over half of its

Miller, Michael W., "Creativity Furor: High-Tech Alteration of Sights and Sounds Divides the Art World," Wall Street Journal, September 1, 1987, p. 1.

Szuprowicz, Bohdan O., "Battle Lines Being Drawn for Global Technology Markets," High Technology, October 1984, p. 59.

James B. Koff, Esquire, Baker & Hofstetler, Washington, D.C., past president, International Anticounterfeiting Coalition, presentation at conference on "Counterfeiting of Trademarks, Copyrights, and Patents: What Lawyers Should Know," Franklin Pierce Law Center, Concord, N.H., March 20, 1987.

5 Raum, Tom, "Trade Panel Decries Piracy of Patents, Trademarks, Copyrights," AP, February 26, 1988.

6

Betts, Mitch, "High-tech pirates said to reap billions," Computerworld, March 14, 1988, p. 79.

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potential sales are lost to pirated copies ($161 million worth pirated in contrast to $157 million in sales worldwide).7

The makers of Wordstar, the most copied word processing software, estimate that in 1984 $177 million in sales were diverted to unauthorized copies compared with $67 million in revenues. 8 Overall the software industry estimates that at least one unauthorized copy exists for every authorized sale. According to Ken Wasch, executive director of the Software Publishers Association, "The industry would be fifty 9 percent larger if it were not for piracy.

Videotaped copies of Hollywood films are often released in foreign markets even before the U.S. release at a loss estimated by the Motion Picture Association of America to be approximately $6 billion annually.10 Computer clones are marketed in Hong Kong and Singapore simultaneously with their general availability in the U.S. Moreover, they are loaded with pirated software for which no payment is made. An estimated 17 million "Eveready" batteries are marketed in China without licensing or authorization.12 Pharmaceuticals in 26 countries have

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been identified by the U.S. Department of Commerce as a serious

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problem. The American Association of Publishers estimates 560 titles of unauthorized reference books (primarily technical) are published in

7 Lindsey Kiang, former general counsel of Lotus Corp., presentation at conference on "Counterfeiting of Trademarks, Copyrights, and Patents," Franklin Pierce Law Center, March 20, 1987.

8 Kiang, supra, note 7.

Antonoff, M., "Can We End Software Piracy?" Personal Computing, May 1987, p. 144.

10 Statement of Professor Homer Blair at "Counterfeiting of Trademarks, Copyrights, and Patents," Franklin Pierce Law Center, March 20, 1987.

11 Computer clones may be "reverse engineered" by manufacturing the product from design specifications rather than "copied" with direct access and are not necessarily illegal.

12 Blair, supra, note 10.

13 Edward Rozynski, Far East Regional Director, Pharmaceutical Manufacturers, Assoc., Washington, D.C., at "Counterfeiting of Trademarks, Copyrights, and Patents," Franklin Pierce Law Center, March 20, 1987.