Crime, Department of Justice, Intellectual Property, Tobacco / Smoking

Criminal Intellectual Property Prosecutions and Corporate Police Work

Hiring a former FBI agent to work up an investigation has got to be cheaper than hiring a law firm to litigate.

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There’s a new sheriff in town, and it’s corporate America.

Companies face pressure to make sure their market competitors aren’t getting a jump on them. And, in an effort to do that, some large companies have noticed that if they can get the United States Department of Justice to help, they have a big advantage.

Take, for example, this new blog about black market cigarettes. I heard a radio interview with the guy who writes it — Richard Marianos. He seems very passionate about the problems of black market cigarettes being trafficked on Interstate 95. His blog argues that I-95 is the new tobacco road.

(The old tobacco road, apparently, was Interstate 40 in North Carolina, which didn’t traffic in tobacco but, rather, collegiate sports, but, still, it’s a catchy name for a blog. Both tobacco roads seem to be separate from David Lee Roth’s understanding of the term.)

Marianos explained on the radio that black market cigarettes are a huge problem.

Often, he says, folks who traffic in cigarettes aren’t treated as seriously by judges as people who traffic, say, heroin, even though, when you think about it, they’re both drugs. (Though, of course, at the same time, an outhouse and the Louvre are both buildings, so I’m not sure how far that kind of reasoning goes.) Marianos is outraged that some cigarette traffickers only get probation.

He strongly suggested that black market cigarette sales are being used to fund terrorists.

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Normally, when I hear the word “terrorist” I stop thinking and just hope the government throws money at combating whatever is being talked about. So, at first, I though black market cigarettes might be a very serious problem that the government needed to fund a response to.

Until I realized that a Marianos’s blog is another example of a disturbing development that I’ve been seeing in criminal intellectual property cases lately….

Marianos is, as his byline on his blog entries says, the “Assistant Director — Retired” of the Bureau of Alcohol, Tobacco, Firearms and Explosives. He’s former federal law enforcement, and at a pretty high level.

And his blog is funded by RAI Services Company. RAI Services Company sounds pretty innocuous. Until Google tells me that RAI Services Company, is a subsidiary of Reynolds America, which owns R.J. Reynolds.

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So, in essence, big tobacco has hired a former law enforcement officer to launch a campaign to prosecute folks who are moving black market cigarettes and cutting into its profit margins.

He’s lobbying police stations on behalf of tobacco companies.

It seems that tobacco companies aren’t the only folks doing this. In the criminal IP space, I’m seeing and hearing about the same thing — large corporations hiring former federal law enforcement to convince DOJ to protect their intellectual property.

Here’s how it works:

Some large company has a product that it alone has the right to sell — from a DVD to a t-shirt to a prescription medicine.

The company finds a small competitor. Instead of suing that competitor, or sending a cease and desist letter, the company hires a former FBI agent who works up a criminal case. The agent then wraps a bow around the results of his investigation and hands it to DOJ.

The former FBI agent knows how to do an investigation and present it in a way that will get it picked up by DOJ. And AUSAs and law enforcement like these cases because they get an easy stat — someone else has done a lot of the heavy lifting so there’s less work for them to do to get a conviction.

Hiring a former FBI agent to work up an investigation has got to be cheaper than hiring a law firm to litigate one of these cases.

There’s a whole Center set up to protect corporate interests from intellectual property crimes — the National Intellectual Property Rights Coordination Center. It’s news page touts prosecutions against flea market operators who have sold DVDs and professionals who have sold counterfeit pharmaceuticals.

The Center even has a video where the director waxes self-righteous about the loss of American jobs by people bringing in purses, DVDs, and t-shirts made overseas. I don’t really think we make those products in the United States anymore. I think there are two kinds of people making them — folks overseas making them for the entity that owns the intellectual property rights, and folks overseas making them for an entity that doesn’t own the intellectual property rights. I don’t see how American jobs are lost by someone buying a product made by the wrong kind of overseas worker, but, then again, I don’t appear in a video striding briskly through a warehouse.

I do admire the director’s restraint in not saying that these intellectual property crimes fund terrorists.

But, regardless of whether American jobs are being lost, corporate profits sure are. And that’s apparently enough for the federal law enforcement mechanism to swing into action.

This isn’t saying that all criminal IP prosecutions are the result of an investigation by some company. But it looks from where I’m sitting that a number of them are.

What’s troubling about this trend is the danger that law enforcement priorities are being hijacked by corporate interests. Companies that have a complaint about a competitor using their intellectual property can sue that person. That’s what courts are there for. Instead, they’re turning these into criminal cases.

A corner of our criminal justice system is being privatized. We have limited bandwidth in our court system. There are a lot of people who could be prosecuted — especially since we’ve overcriminalized so dramatically in this country.

If there’s a thumb on the scales to go after folks to protect the interests of a few, then there are fewer resources to pursue other priorities. Like where there are people being hurt who may not have another means to remedy what’s happened to them.

Matt Kaiser is a partner at The Kaiser Law Firm PLLC, a boutique litigation firm in Washington DC, which handles government investigations, white-collar criminal cases, federal criminal appeals, and complex civil litigation. You can reach him by email at mattkaiser@thekaiserlawfirm, and you can follow him on Twitter: @mattkaiser.

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