White House Forum on Intellectual Property Theft - Tuesday December 14, 2010, Eisenhower Executive Office Building, Washington, DC

December 14, 2010

Good morning everyone. Andrew [Klein], thank you so much for the kind introduction, and thank you Victoria [Espinel] for the invitation to speak at this important forum.

 

For those of you who may be unfamiliar with the Consumer Product Safety Commission, we are an independent agency that prevents deaths and serious injuries in and around the home by regulating the safety of thousands of consumer products.

 

Occasionally, those products are found to be counterfeit.

 

Now, you may know of CPSC through the recalls that we announce on the news, but we also set performance standards, detain dangerous goods at ports of entry, conduct inspections in the marketplace, and work with foreign regulators to promote best manufacturing practices and compliance with U.S. safety laws.

 

We are a stronger agency today, better equipped to protect the safety of all consumers, including children, than in years past. We are also more focused on injury prevention and tackling emerging hazards than in the past.

 

This forum today is invaluable because we do not want counterfeit consumer products that can maim or kill to become an emerging health and safety issue for CPSC. At this time, they are not; but, we need to take steps toward prevention, rather than relying on reaction.

 

The threshold for CPSC’s involvement in counterfeiting goes beyond mere intellectual property theft. In order for CPSC to act, there also must be false representation of a brand and risk of physical harm to a consumer.

 

Fortunately, at CPSC we have not experienced a wave of dangerous counterfeits; nor have we encountered a counterfeit consumer product that has caused fatalities.

 

Yet, our eye is always on electrical products, because our experience tells us that is where the greatest risk to consumers exists.

 

Over the past 10 years, we have announced 12 recalls due to counterfeiting. These recalls involved circuit breakers, power cords, a power washer, lithium ion cell phone batteries, and conference phone batteries.

 

The highest profile cases handled by CPSC occurred in 2004. In the midst of media attention on incidents involving overheated cell phone batteries, Kyocera and Verizon Wireless discovered that more than one million potentially counterfeit cell phone batteries had made their way into the marketplace.

 

Between the two companies there were more than 30 reports of incidents, including smoke, property damage, and minor burn injuries. Both companies moved to address the issues swiftly and worked in concert with CPSC staff in doing so.

 

The apparent counterfeiting of the Verizon Wireless and Kyocera cell phone batteries was one of the key factors in CPSC teaming up with the wireless industry to recommend that consumers buy replacement cell phone batteries and chargers only from the company that sold them the phone.

 

With the other counterfeit product recalls, we uncovered cases where consumers were at risk of fires or shock. In addition, there was one case in which a pressure washer had a counterfeit shock protection device. This put consumers at risk of electrocution.

 

Think about it—counterfeiters undermined the confidence that consumers should have had in a device that is intended to protect them when working with electricity and water.

 

We are gathered at this forum in the midst of the holiday season, at a time when Christmas lights are being hung and extension cords are being used to power up decorations and new appliances.

 

These are two product lines that CPSC and Customs and Border Protection always focus on at this time of year.

 

The possibility that counterfeiters might use undersized wiring in holiday lights and extension cords is a serious concern when it comes to fire safety and the potential for electric shock injuries. The ability of counterfeiters to create a fake marking of an independent testing laboratory—even a fake hologram—poses another avenue for them to undermine consumer confidence.

 

The need for consumers to have confidence in these markings is critical. For years, the CPSC has advised the public to look for these markings before purchasing lights and extension cords.

 

Keith Williams, president of Underwriters Laboratories, will address this issue during the next panel. His company has made investments to stay ahead of the counterfeiters.

 

In addition to those products that have been subject to recalls, CPSC also keeps an eye on surge protectors, lamps, light bulbs, and alkaline batteries, all of which also could be counterfeited.

 

CPSC field investigators are increasing their attention to signs of counterfeiting in the marketplace. As one of our senior officials has stated, “Think about the process for a moment. You are a manufacturer, likely located overseas, with a goal of illegally replicate another manufacturer’s electrical product such as a power cord or a toaster. You want the counterfeit product to be undetectable; yet your goal is to manufacture the product at a much lower cost to increase your per unit profit. Piece by piece, you look for vendors who can provide similar components to those used in the authentic product, but at the very lowest cost. Of course, reducing the cost is easier if you don’t have to use the higher quality components required to meet U.S. voluntary and mandatory safety standards.”

 

As Chairman of the CPSC, I have made numerous visits to China to ensure that Chinese suppliers and the Chinese government understand what is at stake. During meetings with my counterparts in the Chinese government, I have stressed the importance of complying with U.S. safety standards in designing and manufacturing goods intended for our marketplace. And we now have an agreement with the Chinese government on this approach to manufacturing.

 

If we can move foreign markets to adhere to and check for compliance with U.S. standards, we not only can make imports safer, but we also can minimize the risk of injury if an imported product is a counterfeit.

 

We know that intellectual property theft can have a terrible impact on the economy and affect companies’ bottom lines. For those reasons and more, intellectual property theft must be stopped. Thankfully, many of the counterfeits that come into the country do not pose a safety risk to consumers.

 

Because this forum is being broadcast on the White House’s website, I want to send a clear message to overseas regulators: we need your help in shutting down businesses and factories that are stealing reputable U.S. brands and making dangerous counterfeits.

 

In 2007 and 2008, factories were closed that were found to be using lead paint on toys. I say to my counterparts in other countries, we need the same action taken against those who are corrupting the supply chain with counterfeit materials and markings.

 

In the next panel, you will hear from Brett Brenner, the president of the Electrical Safety Foundation International. ESFI is one of this nation’s leading voices in educating the public about the telltale signs of counterfeit electrical products and what steps must be taken to address the problem.

 

Visit the website ESFI.org as there is a whole section dedicated to building awareness and providing strategies for combating the problem of counterfeit electrical products.

 

At CPSC, we have a steady eye on and a noticeable presence in three key places where we can try to detect and stop counterfeiting: at the ports, on the Internet, and in brick and mortar retailers.

 

In 2009, CPSC collected nearly 1,800 samples at the ports and determined that more than 55 percent were violative or dangerous consumer products. We keep adding new tools and technologies to our import safety strategy, which has helped us sort through more products at the ports without the need to send the samples on our laboratory.

 

The nearly 1,000 products that we stopped from reaching the market last year were more than the total number of import samples we collected in the years before we joined Customs and Border Protection in collocating staff at the ports.

 

Online, our Internet Surveillance Unit is stopping nearly 1,000 auctions each year that involve previously recalled or dangerous products.

 

And in the marketplace, we are empowering our field investigators with more information about what to look for on packaging and markings. If a field investigator believes that a product may be counterfeit and hazardous, a sample can be sent to our laboratory for further inspection and testing.

 

Finally, it is my hope that in the very near future, CPSC will establish a formal partnership with the National Intellectual Property Rights Coordination Center in Arlington, Virginia.

 

Partnering with the NIPRC will help CPSC pool our investigative resources and be more in tune with seizures of counterfeits that may pose a substantial product hazard.

 

So, as you can see, we have a multilayered strategy to address counterfeiting—a strategy that aims to protect U.S. businesses as well as consumers.

 

Before turning the podium over to the outstanding panel that will follow, I wanted to share with you that 2010 has been a year of positive change at CPSC.

 

At the beginning of this year, I spoke to a gathering of the international product safety community, and I made a prediction. I predicted that 2010 would be the Year of the Consumer.

 

Well that prediction proved to be correct, and CPSC took a number of steps to help make sure it was indeed a good year for consumers.

 

Well, my prediction was correct, and CPSC took a number of steps to ensure that 2010 was a good year for consumers.

 

We continued to ensure that makers of children’s products complied with the stringent lead limits that we have in this country. As a result, in 2010, there were only three recalls of toys due to lead violations. Now that’s progress.

 

We worked throughout the year at CPSC to make sure that we are on time and on budget to launch a new, searchable public database of product incidents. This consumer database will be launched in March as part of the SaferProducts.gov website. Consumers will be able to use the database to report product incidents to the government and will have open access to search for incidents reported by consumers. This is another example of how CPSC is creating tools to empower consumers.

 

And in keeping with a promise I made to parents, we are on pace to approve new crib safety rules before year’s end. These rules are intended to usher in a new generation of safer cribs in 2011.

 

From stopping dangerous counterfeits, to creating more safeguards for children’s products, CPSC Stands for Safety.

 

Thank you for allowing me to speak today, and thank you for the efforts that many of you are making to protect the business community and consumers.