E-Commerce Supplement - Michigan 7 2024 FWZ

Neg---E-Commerce Supplement---FWZ
Advantage Answers
AT: Counterfeiting
1NC---Solvency---General
The plan can’t solve microelectronics – their author says that contributory liability must be applied beyond e-commerce AND that criminal persecution is more important.
Patricia E. Campbell, 2023 - Law School Professor and Director of the Intellectual Property Law Program at the University of Maryland Carey School of Law “Debugging the Trademark Laws: The Lanham Act and Counterfeit Microelectronics,” 31 TEX. INTELL. PROP. L.J. 211 (2023). Hein Online. Accessed via University of Michigan //ER
Counterfeit microelectronics have been a persistent threat for the last twenty years. Counterfeit electronic parts pose serious risks to human health and safety, harm the economy, and jeopardize national security. Although the Lanham Act provides potent civil remedies for trademark counterfeiting, an analysis of trademark filings from 2009 through 2022 reveals that manufacturers of electronic parts almost never pursue civil actions against counterfeiters. The ”material alteration theory” encompasses many types of activity engaged in by counterfeiters, including the sale of used, refurbished, and remarked parts. As a result, the lack of civil enforcement must be attributed to factors such as the cost of filing suit, concerns about the impact on stock values, and the inability to reach anonymous counterfeiters (often in other countries) who sell fake products through online marketplaces. Congress must amend the Lanham Act to recognize contributory liability by intermediaries, including ecommerce platforms and others, that facilitate infringement when they have actual or constructive knowledge that infringing activities are taking place on their sites. Ultimately, however, an enhanced enforcement of criminal penalties may be an even more essential part of the solution to counterfeit microelectronics. Debugging the Trademark Laws II: Criminal Penalties for Trafficking in Counterfeit Microelectronics will explore the apparent underutilization of criminal sanctions against counterfeiters, and it will propose amendments to the federal criminal code that intend to circumscribe their activities.
1NC---Alt Causes---DOD
Alt causes to DoD counterfeiting – Chinese shell companies contract with the DoD to sneak in counterfeit.
Sibley 19, Nate Sibley is a research fellow and director of Hudson Institute’s Kleptocracy Initiative (Nate Sibley, 12/18/2019, "Countering Chinese Communist Party Threats with Corporate Transparency," Hudson Institute, accessed 7/25/2024, https://www.hudson.org/national-security-defense/countering-chinese-communist-party-threats-with-corporate-transparency) ER
The IP Theft Commission further notes that Chinese entities rely on shell companies both to obscure their involvement in IP theft and to shield themselves from potential US sanctions.7 As the China Economic and Security Review Commission has warned, even a strengthened Committee on Foreign Investment in the United States will be unable to detect and properly scrutinize Chinese investments in US technology firms if their ownership is masked by shell companies.8 Chinese entities have also acquired valuable American IP and technology by using shell companies to conceal their participation in US bankruptcy proceedings.9
A Government Accountability Office (GAO) study of 1,406 high-security US federal leases could not identify the owners in about one-third of cases because many of them were shell companies. In cases where the GAO did identify the owners, nine out of fourteen government agencies working on sensitive national security issues were unaware that the buildings in which they were housed were ultimately owned by companies in China and elsewhere.10
A recent NBC investigation found that thousands of Chinese nationals have used US-registered shell companies as phony employers to remain in the United States illegally after their student visas expire. Many go on to work for US firms dealing with sensitive information, and at least one is now being prosecuted for espionage.11
Nearly 90 percent of counterfeit products entering the United States originate in China.12 This poses a unique challenge for defense procurement, where substandard equipment jeopardizes the safety of military personnel and compromised technology provides a window for espionage.
Another recent GAO study found that shell companies are routinely used to facilitate fraud and circumvent restrictions barring foreign contractors, including one whose faulty parts caused the grounding of forty-seven US combat aircraft.13 GAO also noted that “contractors fraudulently misrepresenting themselves to [the Department of Defense] could actually be operated by... adversarial foreign governments [to conduct] sabotage or surveillance.”
Shell company secrecy also incentivizes American importers of counterfeit goods. A New York company currently faces charges of illegally importing Chinese surveillance technology and selling it to US government agencies before laundering the proceeds through shell companies.14
2NC---Alt Causes---DOD
Plan can’t solve – DoD counterfeiting available in both physical and online marketplaces.
Sullivan and Wilson 17, Brandon Sullivan is a Criminal Justice PhD, Eagle Scout, educator and researcher, Jeremy Wilson is a Professor of the School of Criminal Justice and Founding Director of the Police Staffing Observatory at Michigan State University (MSU), where he also founded and directed the Center for Anti-Counterfeiting and Product Protection and the Program on Police Consolidation and Shared Services, (Brandon Sullivan and Jeremy Wilson, 05/23/2017, "An empirical examination of product counterfeiting crime impacting the U.S. military," Trends in Organized Crime, Volume 20, accessed 7/25/2024, https://link.springer.com/article/10.1007/s12117-017-9306-7) ER
Product counterfeiting is a serious transnational crime with staggering impacts on public health and safety, economic stability, innovation, and national security. Hundreds of billions of dollars are lost from consumers, companies, and governments on an annual basis. Recent estimates have identified the international trade in counterfeit goods to be high as $461 billion USD, or 2.5% of world trade (OECD and EUIPO 2016). Although the extent of the problem is notoriously difficult to measure (Wilson et al. 2016; Chaudhry and Zimmerman 2009; U.S. GAO 2010b), a variety of factors indicate that product counterfeiting is a growing global problem, including the emergence of counterfeits in a broader range of industries (UNICRI 2007; OECD 2008) and the persistent widespread availability of counterfeit goods in both physical and online marketplaces (Satchwell 2004; Phillips 2005; Heinonen et al. 2012; Wilson and Fenoff 2014). Another important factor is an upward trend in seizures by customs agencies, as the number of border seizures has increased dramatically from 3586 in 2000 to 19,959 in 2010 to 31,560 in 2016 (U.S. CBP 2017).
Counterfeiting in the DoD has been happening long before the explosion of e-commerce, and it’s unrelated to e-commerce.
Sullivan and Wilson 16, Brandon Sullivan is a Criminal Justice PhD, Eagle Scout, educator and researcher, Jeremy Wilson is a Professor of the School of Criminal Justice and Founding Director of the Police Staffing Observatory at Michigan State University (MSU), where he also founded and directed the Center for Anti-Counterfeiting and Product Protection and the Program on Police Consolidation and Shared Services, (Brandon Sullivan and Jeremy Wilson, 2016, "Counterfeit Parts in the U.S. Department of Defense Supply Chain,", Michigan State University, accessed 7/26/2024, https://a-capp.msu.edu/article/counterfeit-parts-in-the-u-s-department-of-defense-supply-chain/) ER
Several attempts have been made to qualify and quantify the risk. Hearings held by the U.S. Senate Committee on Armed Services in 2011 and 2012 identified more than 1800 cases of counterfeit electronic parts and one million individual suspect parts in 2009 and 2010 (U.S. Senate, 2012). A U.S. Department of Commerce (DOC) survey of counterfeit parts in the electronics industry noted an increase in incidents from 3,369 in 2005 to 8,644 in 2008 (U.S. DOC, 2010).
Of course, counterfeiting is not limited to electronics. Various counterfeit parts have been identified involving various weapon systems and other equipment. The Defense Logistics Agency (DLA) cited 19 different counterfeit parts used in over 100 different military systems, including aircraft and missile defense (U.S. Senate, 2012). Other examples include fasteners, titanium used in engine mounts, Kevlar® used in body armor plates, seatbelt clasps, oscillators for navigation systems, and part packaging (U.S. GAO, 2010).
Undoubtedly, the true extent of the risk is far greater. No products are immune from counterfeiting and the vast scale and complexity of the DOD global supply chain opens up various opportunities for their introduction, making those identified likely a lower-bound estimate. These counterfeit products pose a direct threat to military service members and the operations in which they are engaged.
One way of further understanding how counterfeits make their way into the DOD supply chain is to identify what product counterfeiting schemes have been identified, investigated, and charged in criminal courts. This is difficult given the limited access to data. Therefore, our approach to identifying these schemes is to collect open-source information on known cases of product counterfeiting and evaluate several key characteristics of those cases, including how, where, and by whom the schemes are conducted and how they are handled by the legal system. To illustrate how we set out to accomplish this task, we next outline the data collection, searching, and coding criteria for the A-CAPP Center Product Counterfeiting Database (PCD), then describe three criminal cases identified through these efforts.
Product Counterfeiting Database
The PCD assembles information on product counterfeiting using an open-source methodology to gather evidence pertaining to product counterfeiting schemes, offenders, and victims. The database serves as a foundation for developing evidence-based lessons on preventing, detecting, investigating, and responding to product counterfeiting.
To identify these product counterfeiting schemes, we searched the websites of various government agencies and industry organizations that monitor product counterfeiting. From these websites, we reviewed all reports, case studies, press releases, speeches and other documents related to product counterfeiting. We also conducted keyword searches at these websites as well as online databases and news outlets.
After developing an initial list of schemes, we utilized two web-based meta-search engines to capture as much open-source information as possible on each scheme and determine the number of offenders involved. The source of information uncovered originates from court and government records, industry reports, news media, videos, blogs, books, and scholarly accounts. We also uncovered additional schemes during these searches which were then subjected to additional searching and evaluation to determine if they met our inclusion criteria.
Once the schemes were fully searched, we created unique databases for the schemes, offenders, and victims. These databases describe the characteristics and processes associated with the chemistry of these crimes, establishing the basic parameters of the problem (e.g., the number and attributes of suspects and the quantification of harm in terms of seized goods and victims) as well as the response to it (e.g., which agencies identified and investigated the offenses and for what the suspects were charged, convicted, or sentenced). These data provide empirical insights into the counterfeiting of parts and equipment in the DOD supply chain.
To date, we have identified a number of schemes that have been indicted in U.S. courts. While we are at the initial stages of the coding process, these three cases provide an overview of the broad scope of the problem, including the different types of parts that have been counterfeited and those who have been criminally charged.
Counterfeit Helicopter Parts
One major criminal case from the early 2000s involved counterfeit helicopter parts. A California man sold flight-critical rubber seals intended for the H-60A (Black Hawk) and H-60 (Sea Hawk) helicopters to the Air Force, Army, Navy, and NASA. He was required by contract to purchase the parts from a DOD-approved Chicago-based supplier, but instead, purchased them from a Taiwanese company for roughly $1 each and mislabeled them, giving the appearance that the parts came from the approved supplier. These substandard quality parts may have failed when installed, placing the lives of U.S. military service members at risk. The perpetrator pled guilty in 2004 and was sentenced to two and half years in prison along with three years of supervised release, and ordered to pay nearly $55,000 in restitution to DOD. A similar scheme occurred from 2005 to 2008 involving counterfeit helicopter parts, where the perpetrator sold microprocessor chips with fake markings to an aerospace contractor.
Counterfeit Integrated Circuits Intended for Nuclear Submarines
As noted above, counterfeit electronics represent a substantial risk. One example of this was the scheme perpetrated by a Massachusetts man who imported thousands of counterfeit integrated circuits (ICs) from China and Hong Kong. From 2007 to 2012 he sold these counterfeits to U.S. customers, one of which was the U.S. Navy, who unknowingly purchased the counterfeits for use in nuclear submarines stationed in Groton, Connecticut. These ICs contained counterfeit marks from major electronics manufacturers, including Motorola, Xilinx, and National Semiconductor. While he specifically stated the ICs were new products manufactured in Europe, product testing by the U.S. Navy revealed the data code had been altered to hide the fact that they were refurbished and branded with counterfeit marks. The perpetrator pled guilty in 2014 and was sentenced to 37 months in prison. In addition, he was ordered to pay $352,076 in restitution to the 31 companies whose products he counterfeited and forfeit $70,050 in currency and over $35,870 worth of counterfeit ICs. In addition to this case, several others involving counterfeit ICs have been identified in recent years.
AT: Money-Laundering
1NC---Alt Causes---Funding
Tax evasion funds illicit economies and global terror more widely than e-commerce
Kemsley and Morgan 20 (Tulane University - A.B. Freeman School of Business, University of Texas at Austin - Department of Accounting,11/17/2020, “Tax Evasion and Money Laundering: A Complete Framework,” DA: 7/24/2024, https://www.bvagroup.com/files/files/Tax%20Evasion%20and%20Money%20Laundering%20-%20A%20Complete%20Framework%20-%20Journal%20of%20Financial%20Crime.pdf)
Income tax evasion and money laundering are both widespread and costly. Feige and Cebula (2011) estimate that tax evasion costs the US Treasury approximately US$500bn in lost revenue per year. Murphy (2012) and Schneider et al. (2015) estimate the cost approaches US$1tn per year in the European Union alone. This lost tax revenue strangles services, swells budget deficits, places an unfair burden on honest taxpayers and hurts the general welfare by distorting economic competition. In regard to money laundering, the United Nations Office on Drugs and Crime (2011) estimates that approximately US$1.6tn in criminal gains were laundered in 2009, equal to 2.7% of global gross domestic product (GDP). These illicit funds distort resource allocation by crowding out licit sectors, while successful money laundering foments more criminal enterprise.
Policymakers have long recognized that an overlap exists between tax evasion and money laundering. Both crimes are often concurrently committed and both crimes often rely upon similar techniques. Corporate shell companies and fraudulent business records/ accounting journal entries are often the tools of both offenses. Further, both tax evasion and money laundering commonly use opaque offshore tax havens where offenders hide assets, estimated at 10% of global GDP (Alstadsaeter et al., 2018). Given the interrelated nature of tax evasion and money laundering, prosecutors in many nations frequently initiate legal action by levying both charges (as well as fraud) for a single offense. To some degree, this array of charges reflects the ill-defined judicial boundaries between tax evasion and money laundering, which is at least partly because of an uncertain understanding of the fundamental nexus between the two crimes.
2NC---Alt Causes---Funding
The lack of regulations around art and antiquities creates loopholes for money laundering and kleptocracies
Gottlieb 23 (Ariane Gottlieb is CIMA’s Assistant Program Officer. In this capacity, she is responsible for coordinating convenings, overseeing communications, and providing analytical and administrative support. She previously worked with NED’s International Forum for Democratic Studies, supporting the Forum’s portfolios on countering authoritarian influence and combatting transnational kleptocracy. Prior to joining NED, she completed internships with the Gilder Lehrman Institute of American History, the American Iranian Council, the office of former U.S. Representative Nita Lowey, and J Street. She also worked as a student mentor at Mount Holyoke College’s Speaking, Arguing, and Writing Center. She graduated Phi Beta Kappa and magna cum laude with a B.A. in international relations and history from Mount Holyoke College., 10/31/2023, “Kleptocracy in the Arts and Antiquities Trade,” DA: 7/26/24, https://www.ned.org/countering-kleptocracy-october-2023/)
In “Ode on a Grecian Urn,” the poet John Keats asserts “Beauty is truth, truth beauty, — that is all / Ye know on Earth, and all ye need to know.” Indeed, the enormous popularity of the arts and antiquities market speak to its ability to immortalize beauty and impart knowledge. Yet, underneath its ornate paintings and gilded treasures, the art world hides an ugly secret. Global kleptocrats have leveraged portions of the art and antiquities trade to launder money, subvert sanctions, and fund their malign activities. Transactions can be conducted amid high levels of secrecy. Due to a lack of rigorous safeguards, the true identity of buyers and sellers (i.e. beneficial ownership) is often difficult to discern, and oligarchs often rely upon shell companies or intermediaries to conduct transactions. Despite this weak link within rule-of-law frameworks, democracies can respond by closing loopholes within counter-kleptocracy safeguards, empowering law enforcement to combat this challenge, and supporting civil society to address knowledge gaps.
Despite its artistic and historical value, the arts and antiquities trade has emerged as a veritable playground for malign actors. In 2021, the market was valued at $65 billion. Its enormous potential and a lack of sufficient anti-money laundering (AML) requirements incentivize kleptocrats to launder money by purchasing, storing, or selling art and antiquities. For example, financier Jho Lo—who siphoned billions of dollars from Malaysia’s state investment fund to enrich himself and his cronies—used his ill-gotten gains to buy $200 million worth of artwork. Even transactions at prominent auction houses can be conducted via intermediaries who do not disclose beneficial ownership, enabling sanctioned individuals to access the market. Russian oligarchs Arkady and Boris Rotenberg were able to circumvent sanctions enacted in 2014 by purchasing art via a U.S. intermediary and a network of shell companies. The funds generated from such activities are often used to bolster repressive actors via elite 

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