[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, INTELLECTUAL
PROPERTY, AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
----------
JULY 18, 2019
----------
Serial No. 116-40
----------
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available http://judiciary.house.gov or www.govinfo.gov
COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES
COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, INTELLECTUAL
PROPERTY, AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JULY 18, 2019
__________
Serial No. 116-40
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available http://judiciary.house.gov or www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
39-902 WASHINGTON : 2020
COMMITTEE ON THE JUDICIARY
JERROLD NADLER, New York, Chairman
ZOE LOFGREN, California DOUG COLLINS, Georgia,
SHEILA JACKSON LEE, Texas Ranking Member
STEVE COHEN, Tennessee F. JAMES SENSENBRENNER, Jr.,
HENRY C. ``HANK'' JOHNSON, Jr., Wisconsin
Georgia STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida LOUIE GOHMERT, Texas
KAREN BASS, California JIM JORDAN, Ohio
CEDRIC L. RICHMOND, Louisiana KEN BUCK, Colorado
HAKEEM S. JEFFRIES, New York JOHN RATCLIFFE, Texas
DAVID N. CICILLINE, Rhode Island MARTHA ROBY, Alabama
ERIC SWALWELL, California MATT GAETZ, Florida
TED LIEU, California MIKE JOHNSON, Louisiana
JAMIE RASKIN, Maryland ANDY BIGGS, Arizona
PRAMILA JAYAPAL, Washington TOM McCLINTOCK, California
VAL BUTLER DEMINGS, Florida DEBBIE LESKO, Arizona
J. LUIS CORREA, California GUY RESCHENTHALER, Pennsylvania
MARY GAY SCANLON, Pennsylvania, BEN CLINE, Virginia
Vice-Chair KELLY ARMSTRONG, North Dakota
SYLVIA R GARCIA, Texas W. GREGORY STEUBE, Florida
JOE NEGUSE, Colorado
LUCY McBATH, Georgia
GREG STANTON, Arizona
MADELEINE DEAN, Pennsylvania
DEBBIE MUCARSEL-POWELL, Florida
VERONICA ESCOBAR, Texas
Perry Apelbaum, Majority Staff Director & Chief Counsel
Brendan Belair, Minority Staff Director & Chief Counsel
------
SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
HENRY C ``HANK'' JOHNSON, Jr., Georgia, Chair
LOU CORREA, California, Vice-Chair
THEODORE E DEUTCH, Florida MARTHA ROBY, Alabama,
CEDRIC RICHMOND, Louisiana Ranking Member
HAKEEM JEFFRIES, New York STEVE CHABOT, Ohio
TED LIEU, California JIM JORDAN, Ohio
GREG STANTON, Arizona JOHN RATCLIFFE, Texas
ZOE LOFGREN, California MATT GAETZ, Florida
STEVE COHEN, Tennessee MIKE JOHNSON, Louisiana
KAREN BASS, California ANDY BIGGS, Arizona
ERIC SWALWELL, California GUY RESCHENTHALER, Pennsylvania
BEN CLINE, Virginia
Jamie Simpson, Chief Counsel
Betsy Ferguson, Minority Counsel
C O N T E N T S
----------
JULY 18, 2019
OPENING STATEMENTS
The Honorable Henry C. Hank Johnson, Jr., a Representative in the
Congress from the State of Georgia, and Chairman, Subcommittee
on Courts, Intellectual Property, and the Internet............. 1
The Honorable Martha Roby, a Representative in the Congress from
the State of Alabama, and Ranking Member, Subcommittee on
Courts, Intellectual Property, and the Internet................ 3
WITNESS
Panel I
Ms. Mary Boney Denison, Commissioner for Trademark, U.S. Patent
and Trademark Office
Oral Testimony............................................... 14
Prepared Statement........................................... 17
Panel II
Ms. Jeanne Fromer, Professor of Law, New York University School
of Law
Oral Testimony............................................... 60
Prepared Statement........................................... 62
Mr. Peter M. Brody, Partner, Ropes & Gray, LLP
Oral Testimony............................................... 186
Prepared Statement........................................... 188
Mr. Joseph Cammiso, President, Automotive Anti-Counterfeiting
Council, Inc.
Oral Testimony............................................... 197
Prepared Statement........................................... 199
Mr. Robert Barchiesi, President, International AntiCounterfeiting
Coalition
Oral Testimony............................................... 201
Prepared Statement........................................... 203
Ms. Rebecca Mond, Vice President, Federal Government Affairs, The
Toy Association
Oral Testimony............................................... 216
Prepared Statement........................................... 218
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
A statement from the Honorable Jerrold Nadler, Representative in
the Congress from the State of New York, Chairman, Committee on
the Judiciary.................................................. 6
A letter from eBay for the record from the Honorable Henry C.
Hank Johnson, Jr., a Representative from Georgia, Chairman,
Subcommittee on Courts, Intellectual Property, and the Internet 49
A letter from Walmart for the record from the Honorable Henry C.
Hank Johnson, Jr., Representative from Georgia, Chairman,
Subcommittee on Courts, Intellectual Property, and the Internet 55
A letter from International Franchise Association from the
Honorable Doug Collins, Representative in the Congress from the
State of Georgia, Ranking Member, Committee on the Judiciary... 298
A letter from Target Incorporated for the record from the
Honorable Lou Correa, Representative in the Congress from the
State of California, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 38
APPENDIX
Questions to witnesses for the record from the Honorable Henry C.
"Hank" Johnson, Jr., Representative in the Congress from the
State of Georgia, Chairman, Subcommittee on Courts,
Intellectual Property, and the Internet........................ 246
Questions to Mary Boney Denison, Commissioner for Trade, U.S.
Patent and Trademark Office for the record from the Honorable
Lou Correa, Representative in the Congress from the State of
California, Subcommittee on Courts, Intellectual Property, the
Internet....................................................... 248
Panel I
A response to questions for the record from Mary Boney Denison,
Commissioner for Trade, U.S. Patent and Trademark Office....... 253
Panel II
A response to questions for the record from Jeanne Fromer,
Professor of Law, New York University School of Law............ 264
A response to questions for the record from Peter Brody, Partner,
Ropes & Gray, LLP.............................................. 279
A response to questions for the record from Mr. Robert Barchiesi,
President, International AntiCounterfeiting Coalition.......... 284
A response to questions for the record from Ms. Rebecca Mond,
Vice President, Federal Government Affairs, The Toy Association 294
A statement from Makalika Naholowaa, Microsoft Corporation for
the record..................................................... 301
A letter from the American Bar Association for the record........ 304
A letter from American Intellectual Property Law Association for
record......................................................... 311
A letter from International Trademark Association for the record. 321
COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES
----------
THURSDAY, JULY 18, 2019
House of Representatives
Subcommittee on Courts, Intellectual Property, and the Internet
Committee on the Judiciary
Washington, DC.
The subcommittee met, pursuant to call, at 8:59 a.m., in
Room 2141, Rayburn House Office Building, Hon. Henry C.
``Hank'' Johnson, Jr. [chairman of the subcommittee] presiding.
Present: Representatives Johnson of Georgia, Deutch, Lieu,
Correa, Roby, Collins, Chabot, Ratcliffe, Johnson of Louisiana,
Biggs, and Cline.
Staff Present: Jamie Simpson, Chief Counsel, Subcommittee
on Courts, Intellectual Property, and the Internet; Susan
Jensen, Parliamentarian; Lisette Morton, Director of Policy,
Planning and Member Services; MaryBeth Walker, Detailee,
Counsel; Matthew Robinson, Counsel, Subcommittee on Courts,
Intellectual Property, and the Internet; Danielle Johnson,
Counsel, Subcommittee on Courts, Intellectual Property, and the
Internet; Madeline Strasser, Chief Clerk; Moh Sherma, Member
Services and Outreach Advisor; Rosalind Jackson, Professional
Staff Member, Subcommittee on Courts, Intellectual Property,
and the Internet; Thomas Stoll, Minority Chief Counsel; and
Andrea Woodard, Minority Professional Staff Member.
Mr. Johnson of Georgia. The subcommittee will come to
order.
Without objection, the Chair is authorized to declare
recesses of the subcommittee at any time.
Welcome to this morning's hearing on Counterfeits and
Cluttering: Emerging Threats to the Integrity of the Trademark
System and the Impact on American Consumers and Businesses. I
will now recognize myself for an opening statement.
Good morning, and welcome to the House Judiciary
Subcommittee on Courts, Intellectual Property, and the
Internet's hearing on Counterfeits and Cluttering: Emerging
Threats to the Integrity of the Trademark System and the Impact
on American Consumers and Businesses.
Today's hearing will elicit critical information regarding
the state of trademark protection in the United States.
Trademarks are the foundation of a successful commercial
marketplace. Trademarks ensure that consumers know whose
product they are buying, in turn the trademark system rewards
companies that invest in quality which consumers then associate
with that company. This adds up to an intellectual property
system that brings tremendous value to our economy according to
Forbes, the 100 most valuable brands are worth a cumulative
$2.33 trillion today.
But it is not just large corporations that benefit from
trademark protection. About one-third of trademark applicants
are small businesses or individuals. Threats to the trademark
system, therefore, impact businesses of all sizes as well as
consumers. Today's hearing will examine three emerging
challenges for the trademark system.
First, we will examine the problem that we are running out
of new trademarks or, at least, good marketable ones. This
problem is being exacerbated by the number of marks on the
register that are not being used, a key legal requirement of
the United States.
These unused marks or clutter may be standing in the way of
others who might want to use some version of that same word or
phrase for their own trademark. This problem is being made
worse by a recent spike in fraudulent trademark applications,
many of which originate in China.
Second, we will look at some courts' reluctance to award
injunctive relief to trademark owners who win an infringement
lawsuit. This is often the key remedy for trademark owners
because it makes sure that a trademark too close to their own
is off the market. Moreover, allowing similar marks to stay on
the market could ultimately lead to more consumer confusion,
the exact opposite of what the trademark system is designed to
produce.
Third, we will examine the misuse of trademarks and
counterfeit goods sold by third parties through online
platforms. Instead of hawking fake goods on the street,
counterfeiters are now becoming sellers on online marketplaces
where the barrier to entry is low and the mechanisms for
misleading consumers are plenty. Consumers might not be aware
that they are buying fakes much less ones that could pose
safety risks.
With e-commerce sales expected to reach more than $4
trillion globally in 2020, this is not a problem that Congress
can ignore. Last month I held a roundtable with brand owners
and online platforms so that we could begin to explore these
challenges.
I am pleased that this discussion will continue today.
While these threats to the trademark system are a problem for
all stakeholders, I am particularly concerned about the impact
of these issues on small businesses. An inaccurate and
overcrowded trademark register will prevent small businesses
from easily registering their marks and getting the benefits of
Federal registration. The prevalence of online counterfeiting
means a successful small business operating online runs the
risk of having its products copied and sold diverting sales.
While online platforms offer some tools for companies to
report and remove infringing listings, this often becomes a
game of whack-a-mole where as soon as you remove one
counterfeit seller another appears. Small businesses have the
least amount of resources to engage in this constant
monitoring. I look forward to hearing from our distinguished
witnesses on this important day, on these important topics.
On our first panel, I am pleased to welcome the
Commissioner of Trademarks from the Patent and Trademark
Office. I know that the office takes these issues seriously and
I look forward to hearing more about its work on these topics.
Our second panel has witnesses from industry, the legal
community, and academia. For the topic of online counterfeits
while no larger online marketplaces were able to physically
attend today's hearing as witnesses, a few have submitted
statements for the record. I am encouraged and hope that they
will continue to engage with the subcommittee going forward.
We all have a stake in making sure that this vibrant sector
of our economy does not have its reputation tarnished by being
overrun by counterfeit goods.
To all of our distinguished witnesses, thank you for coming
here today and I look forward to your testimony.
And it is now my pleasure to recognize the Ranking Member
of the Subcommittee, the gentlelady from Alabama, Congresswoman
Roby for her opening statement.
Mrs. Roby. Thank you, Chairman Johnson, and I want to thank
each of our witnesses for taking the time to share their
expertise with us today. I think it is amazing when we decide
to go shopping for a particular product, all we have to do is
search for it on our computer or our phone and with a few
clicks, we can buy it and have it delivered at our door. We can
do all this from the comfort of our home, on a beach, traveling
in a car, or wherever we are--for us, on an airplane.
Online shopping has revolutionized the shopping experience
for all consumers. Worldwide e-commerce sales are expected to
reach over 4 trillion by 2020. Any commerce retail sales are
expected to reach nearly 15 percent of overall global retail
spending in 2020. Amazon, eBay, Apple, Walmart, Home Depot, and
countless others are making shopping almost effortless and show
that the popularity and convenience of online retail is
continuing to increase, but with all of that convenience comes
risk and responsibility.
As the GAO detailed in its 2018 report on counterfeits,
along with an increase in opportunities for consumers to find
products they want, online marketplaces are also providing
opportunities for counterfeiters to reach a much broader
customer base. The report indicates that the volume, value, and
variety of counterfeit goods entering the United States
increases each year.
The GAO reports that counterfeits exploit third-party
online marketplaces to gain an appearance of legitimacy by
posting pictures of authentic goods on websites and posting
fake reviews of their products, all to trick consumers into
buying their knock-offs.
In addition to inflicting economic harm, counterfeit goods
may pose a risk to health and safety of consumers. Twenty of
the 47 phone chargers purchased by GAO from third-party sellers
on popular e-commerce websites were counterfeit. Some were so
defective that they posed a significant risk of catching fire
or even electrocuting a consumer.
Custom and Border Protection has seized counterfeit
versions of personal care products such as contact lenses,
perfumes, hair removal devices, hair curlers, and skin
cleansing devices. Any of these products should they contain
bacteria or dangerous chemicals could cause significant damage
to a consumer's skin or eyes.
On a personal note, I mean, I have used online marketplaces
to purchase cosmetic products, and as I have learned more and
more about the risks posed by counterfeit cosmetics in
connection with investigating this issue, I am having to
reconsider my own purchasing decisions.
At our counterfeits roundtable we held in June, which I
thought was great, we heard what happened to a few consumers
who bought products that posed a significant health or safety
risk. A contact lens contaminated with bacteria injured one
person, a counterfeit air bag killed a driver, a faulty toy
with magnets that caused a child to undergo surgery. We cannot
let counterfeit products which undergo none of the rigorous
safety testing often required here in the U.S. to be sold to
unwitting U.S. consumers.
I look forward to hearing from our witnesses whether
marketplaces are taking all of the steps that they should to
protect consumers from counterfeits or if there are additional
steps they must take to protect us all.
I want to know if Congress needs to act to mandate that
marketplaces establish certain practices designed to protect
consumers from counterfeits, or if there are any other
recommendations for Congress to take on combating this issue.
Another issue that we are addressing today is the
substantial increase in trademark filings. I have read reports
that subsidies issued by the Chinese Government to promote the
registration of marks in the United States has directly led to
a dramatic increase in the number of U.S. Trademark
applications. Many of these trademarks have been registered by
the USPTO and even though these applicants misrepresented that
the mark was actually used on products for sale in the U.S.
Today we need to hear from all of our witnesses how to best
deal with these fraudulent trademark registrations, whether the
USPTO is doing all that it can to prevent these filings from
being registered, what, if any, new authority the USPTO needs
to remove fraudulently obtained registrations.
Finally, I know that the courts are split on whether
trademark owners who prove a likelihood of confusion should be
entitled to a presumption of irreparable harm, making it much
easier to obtain an injunction.
In trademark cases, injunctions are the primary source of
relief. That is because measuring the dollar amount to attach
to a trademark infringement, the harm to reputation can be very
difficult to approximate. I want to hear from the witnesses
whether Congress needs to resolve this circuit split.
As the Ranking Member of the subcommittee and the co-chair
of the Congressional Trademark Caucus, I want to make sure our
trademark system is working effectively. I look forward to
delving into these very important issues today and I want to,
again, thank all of our witnesses for being here.
And I thank you, Chairman Johnson, and I yield back.
Mr. Johnson of Georgia. Thank you Representative Roby. I
ask unanimous consent that the statement of the Honorable
Jerrold Nadler, the Chair of the Committee on Judiciary, that
his statement be introduced for the record without objection.
And without objection, so ordered.
[The statement of Mr. Nadler follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. I will now introduce the witness,
Mary Boney Denison is the commissioner for trademarks at the
United States Patent and Trademark Office, the USPTO. In her
role, Commissioner Denison oversees all aspects of the
trademarks organization, including policy, operations, and
budget relating to trademark examination, registration, and
maintenance.
Commissioner Denison joined the USPTO in 2011 as deputy
commissioner for trademark operations where she was responsible
for the USPTO's trademark application, legal examination, and
registration processes.
Before joining the USPTO, Commissioner Denison practiced
law in the area of trademark prosecution and litigation as a
founding partner of Manelli, Denison and Selter in Washington,
D.C. She also served as a member of the Board of Directors of
the International Trademark Association and as a member of
USPTO's Trademark Public Advisory Committee.
Commissioner Denison holds degrees from Duke University and
the University of North Carolina School of Law, and we welcome
Commissioner Denison and thank her for participating in today's
hearing.
I also understand that Ms. Denison's term as commissioner
ends later this year. As this may be her last appearance before
the subcommittee, I wish to thank Commissioner Denison for her
productive partnership with us and for her nine years of public
service. We are grateful that she chose to bring her extensive
trademark expertise to the Federal Government from which we
have all benefited. I thank you.
And before proceeding with testimony, I hereby remind all
witnesses that all of your testimony, written and oral, made to
the subcommittee in connection with this hearing are subject to
penalties of perjury, pursuant to 18 U.S.C., Section 1001,
which may result in the imposition of a fine or imprisonment of
up to 5 years or both should the individual be found guilty.
Please note that your written statement will be entered
into the record in its entirety; accordingly, I ask that you
summarize your testimony in 5 minutes. To help you stay within
that time, there is a timing light on your table. When the
light switches from green to yellow, you have 1 minute to
conclude your testimony. When the light turns red, it signals
that your 5 minutes have expired.
Commissioner Denison, you may begin.
STATEMENT OF MARY BONEY DENISON, COMMISSIONER FOR TRADEMARKS,
UNITED STATES PATENT AND TRADEMARK OFFICE
Ms. Denison. Chairman Johnson, Ranking Member Roby, members
of the subcommittee, good morning and thank you for holding
this hearing to highlight the problem of inaccurate trademark
filings, the USPTO's aggressive efforts to address this problem
and the USPTO's efforts to well combat counterfeits, I have
worked on these issues for a number of years and the USPTO
welcomes the subcommittee's attention to these important
issues.
The U.S. trademark system is the global gold standard and
is a fundamental component of our economy and a driver of
economic growth and job creation. The USPTO is committed to
maintaining the integrity of the trademark system and all its
benefits for businesses, consumers, and the U.S. economy that
an accurate trademark register brings.
Generally, a trademark is eligible for registration if it
is used in commerce. Apart from limited exceptions for a mark
to be federally registered, the applicant must provide an
example called a specimen. That specimen must show how their
mark is actually being used in commerce in connection with the
goods or services in the application.
In addition, to maintain a registration, the registration
owner periodically has to file a sworn declaration listing all
of the goods and services in the registration for which the
mark continues to be in use in commerce and they must also
include a specimen of use.
Unfortunately, in recent years, the USPTO has seen a
significant increase in the number of applicants who are not
fulfilling their legal and ethical obligations to file
accurately and in good faith. Specifically, the USPTO has
increasingly been receiving trademark filings involving false
use claims and fake or digitally altered specimens that purport
to, but do not actually show, use of the mark in commerce as
required by law.
While some of these problematic filings are domestic, a
significant and increasing number come from overseas, primarily
from China. Often those applicants are represented by
unauthorized Chinese individuals who evade USPTO sanctions.
Because there is no one silver bullet to solve these issues, we
have taken a multi-pronged approach to combat this problem,
including, number one, requiring foreign domiciled applicants
to be represented by U.S. counsel. The USPTO will have a U.S.
lawyer who can be held accountable for improper filings even
when those applications are filed from overseas.
Number two, auditing post registration maintenance filings
to ensure that the mark is being used in commerce in connection
with all of the goods and services in the registration.
Number three, updating examination guidance and training on
questionable specimens of use that instructs examiners to issue
refusals when they discover fake or suspicious specimens of use
rather than just requesting additional specimens as was the
past practice.
And four, creating a special task force to develop and
implement additional policies, procedures, and technology
solutions.
And we plan to do more, including building an electronic
database of specimens to help examiners locate specimens that
use virtually identical pictures for different trademarks from
different applicants.
Number two, revising the requirements for specimens.
Number three, proposing additional incentives for trademark
owners to voluntarily update their registrations when they are
no longer using their marks on particular goods and services.
And fourth, providing more education to applicants and
their lawyers on what use in commerce is.
As you can see, the USPTO is aggressively working to
address these problems. To my left and in front of each of you
in your packages are examples of specimens in five different
applications for different marks we received, real and fake. As
you can see, the digitally altered images are quite
sophisticated. Through our updated specialized examination
training, our examiners were able to reject the fake specimens
in these examples. The USPTO is taking every step within the
current statutes to fashion solutions to the problem of false
claims of use in commerce. We are doing all we can to ensure
that the U.S. trademark system remains the world gold standard.
My written testimony also details USPTO's efforts to combat
domestic and international counterfeiting. The USPTO is
actively involved in the policy development process within the
administration related to combating online counterfeiting
including the report required by President Trump's memorandum
on combating trafficking.
It also continues its strategy to provide technical advice
and capacity building to foreign governments and to provide
public outreach in education, including through the IP attache
program and the China team.
Thank you for this opportunity to testify about these
important matters. I look forward to answering your questions.
[The statement of Ms. Denison follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. Thank you, Commissioner Denison. We
will now proceed under the 5-minute rule with questions. I will
begin by recognizing myself for 5 minutes.
Commissioner Denison, I am concerned about the rise of
fraudulent trademark applications. What happens if a trademark
application with a fake specimen has already gone through
registration and can the USPTO pull that registration back, on
its own, if it becomes aware of the problem?
Ms. Denison. Thank you, Chairman Johnson, for that
question. We do our best to register high-quality trademarks.
We issued about 270,000 registrations in fiscal year 2018. In
the event that we discover a mistake that we made in
examination in a timely fashion, we will correct the mistake.
However, for the most part, the statute requires that third
parties petition to cancel problematic registrations at the
Trademark Trial and Appeal Board.
Mr. Johnson of Georgia. When you say you correct the
mistake, what do you mean?
Ms. Denison. For example, if we find something before the
registration has issued, then we are able to stop it from
issuing.
Mr. Johnson of Georgia. But after it is issued, there is
basically no statutory authority for you to do anything?
Ms. Denison. We largely rely on third party's ability to
cancel registrations at the TTAB, the Trademark Trial and
Appeal Board.
Mr. Johnson of Georgia. Thank you. I understand that it can
take a year or more for a trademark application to be examined
and that an existing application will block a later filed
application for a similar mark. Part of the reason it can take
a year is because of the 6-month response period when the PTO
issues a refusal. Does the PTO have any flexibility with that
6-month response period?
Ms. Denison. Thank you for the question. The 6 months for
response to an office action is provided for in the statute, so
we do not have flexibility to change that.
Mr. Johnson of Georgia. Do you have flexibility to lessen
the 6-month response period?
Ms. Denison. No, Chairman Johnson, we do not have
flexibility to change that. That is a statutory mandate.
Mr. Johnson of Georgia. All right. Thank you.
Commissioner Denison, what are the consequences of lying in
a trademark application or registration and can applicants be
sanctioned for lying to the PTO?
Ms. Denison. Registration is subject to cancellation if it
was obtained by false material statements and the registrant
could be subject to civil penalties. They do file declarations
under penalty of perjury. If there was an attorney who was
involved in the case, be--and they made material false
statements, they could be subject to an investigation by the
U.S. Patent and Trademark Offices, Office of Enrollment and
Discipline, and they could face sanctions such as exclusion
before--from practicing before the USPTO.
Mr. Johnson of Georgia. So what about if the registration
has been issued and then the PTO learns thereafter that the
registrant has lied. Does the PTO have any authority to take
away the registration at that point?
Ms. Denison. At that point we have to rely on third parties
to seek a cancellation at the Trademark Trial and Appeal Board.
Mr. Johnson of Georgia. Thank you. That concludes my
questions for this witness.
I will now turn to the Ranking Member for her questions.
Mrs. Roby. Thank you, Chairman.
Commissioner Denison, thank you again for being here. Does
the PTO know how many applications that it filed in the wave of
filings from China that it granted but that now has determined
that they should not have?
Ms. Denison. Thank you for that question. Unfortunately, we
have no way of tracking what registrations may have been issued
with fake specimens. We receive more than 400,000 applications
a year with about 60,000 of those coming in from China. Of
those, about half of the Chinese applications received either a
refusal to register or an additional request for information.
In fiscal year 2017, we issued about 20,000 registrations
to Chinese applicants and in fiscal year 2018 we issued about
38,000 registrations. Hopefully most of those were for
legitimate businesses.
Mrs. Roby. So the PTO stated that from 2013 to 2017
applications from China increased by a thousand percent.
Ms. Denison. I believe it was actually 1,200 percent.
Mrs. Roby. Okay. So while this increase in numbers is not
in and of itself proof of fraudulent filings, did this not set
off any red flags or alarm bells within the PTO?
Ms. Denison. Absolutely, it did, and we have been taking
quite a few steps to address the issues.
Mrs. Roby. Okay. So now that the PTO has registered an
unknown number of trademarks based on--per your own testimony
just now, an unknown number of trademarks potentially based on
fraudulent evidence of use, many from China, what can the PTO
do to remove those fraudulently obtained trademarks?
Ms. Denison. Well, as I mentioned, there have been
thousands of registrations to Chinese applicants and many of
those are for legitimate businesses, so we have to balance the
large amount of work that would be required to review every
single registration issued to a Chinese applicant and consider
that even if we were to find certain registrations should not
have been issued, we would have to rely on a third party to
seek cancellation at the Trademark Trial and Appeal Board.
Mrs. Roby. So it is my understanding, and this is just
putting an exclamation point on it, that the application fees
for a large number of fraudulent trademarks were paid for by
only three credit cards, so is the PTO not able to review all
of the trademarks paid for by those credit cards since it seems
that there is a high likelihood that they are fraudulent?
Ms. Denison. Yes. The three credit cards did set off alarm
bells at the PTO and we are taking this very seriously. We have
formed a special task force and their job is to look at the
whole problem; we have IT people working on it, we have lawyers
working on it in a team, and their goal is to identify problems
as they come in and to propose solutions for us. I get a weekly
report.
Mrs. Roby. Is there a timeframe under which this task force
is operating?
Ms. Denison. It will be ongoing.
Mrs. Roby. Okay. So what I would just ask, Mr. Chairman, is
that we get pretty regular updates about the progress of that
task force. I think that would be helpful for us in light of
our line of questioning here this morning.
But my next question is, does the PTO need additional
statutory authority to remove fraudulent trademarks it
mistakenly registered?
Ms. Denison. Thank you for that question. We administer the
laws that you pass, and we are happy to provide technical
assistance to you and we have been doing that on a variety of
topics.
Mrs. Roby. So we are just asking if there is roadblocks
based on the chairman's questions, if there are things that are
inhibiting you from doing so that you do offer those
recommendations to us so that we could make changes, if
necessary, so that we could be helpful in that.
Several of the examples that I have seen for incorrectly
registered trademarks have clearly doctored photos and very
obvious indications that the application is fraudulent, so what
is the PTO doing to ensure that examiners are properly trained
and have the resources to avoid registering these trademarks
going forward?
Ms. Denison. We have been doing specialized training for
the examining corps. They are faced with a very difficult
situation as you can see from these examples here. It is hard
to tell. One will come in and they will have to look at it very
carefully, and they are on production, so they don't have 3
hours to spend on this.
I think they are doing a great job doing this, and we have
issued an examination guide, it is number 3-19 and it gives
them a list of things that they should look for.
For example, is there pixelization around the wording, does
the mark appear to float over the product, that kind of thing?
We have a long list of things that they are now taking into
account and in the past, we have asked them if they saw
something suspicious to ask for more information.
Now, we are saying, if you see something suspicious, issue
a refusal and then you can also ask for more information, we
are being more aggressive now about this.
Mrs. Roby. Good. So my time is expired, but again, Mr.
Chairman, I would just ask that in light of the task force that
you mentioned that this committee be given somewhat regular
follow-up on the progress of that task force, I think, is very
important for us to be aware of any progress and then look
forward to your recommendations of how Congress can be helpful.
So thank you. I apologize for going over. I yield back.
Mr. Johnson of Georgia. Thank you, Representative. Next we
will have questionings from Mr. Ted Deutch, the gentleman from
Florida.
Mr. Deutch. Thank you, Chairman Johnson, for holding this
hearing and thanks Commissioner Denison for taking time to be
here with us. As co-chair of the congressional trademark caucus
with my friend and judiciary colleague Martha Roby, we know
that trademarks play a critical role in enhancing innovation
and helping our economy grow and thrive and that we have got to
be vigilant in protecting intellectual property to ensure the
health of our innovative system.
I want to go back to where Congresswoman Roby left off and
the combination of the task force that you have created and the
training you identify, this specimen rule. Can you tell us
either the role that technology is playing in this task force,
the attention paid to it, who has been brought in with the
technological expertise?
And the reason I ask is, because I think it certainly
sounds worthwhile to have some guidance that talks about
floating marks and pixelization and how to identify them, but
it certainly seems as if this is the kind of thing that we
ought to be able to use technology in a very serious and
advanced way to help identify.
Can you just speak to that, please?
Ms. Denison. Yes, thank you for that question. In fact, we
have been piloting some software that we hoped we could give to
examiners so they could run a specimen through it to see if it
worked or not. What we have found is that you kind of need to
be a computer expert to interpret the results, so we are
continuing to work with the software company and just yesterday
I saw a chart showing that they could rank it as to how much it
had been altered and that kind of thing.
So right now we don't have a technology solution that is
usable on a widespread basis by our examining corps, but we are
continuing to work on that solution. We are also able currently
to use reverse image searching, so if the examiner sees an
image, they can use a reverse image tool and see if there is
something highly similar on the internet.
Mr. Deutch. Okay. I appreciate that.
Ms. Denison. Could I raise one other thing?
Mr. Deutch. Sure. Of course.
Ms. Denison. We have a database of trademarks. We have
never had a database of specimens of use and so we are also
working towards building a database of specimens. That would
mean that if we had that, then we could see that the scarf on
the left in the poster, that actually looks like a good
specimen, but it is not a good specimen because it came in with
ten different files from ten different applicants for ten
different marks and the database of specimens will help us to
find that.
Mr. Deutch. Have you, at this point in the work that has
been done, have you been able to detect any commonalities in
the suspicious specimen applications?
Ms. Denison. What do you mean by ``commonalities''? Many of
them are coming from Shenzhen.
Mr. Deutch. In this case you have identified the same image
used in multiple applications. Are there other commonalities
that have come up perhaps geographical, perhaps in the image
itself.
Ms. Denison. Yes. Okay. So if you see the bottle on the
lower right, that is a computer-generated image, again, not
showing the mark in use in commerce, so that is another way
that they are doing things.
If you look at the Instamarket photograph on the right,
that is one that was--I believe we have a specimen protest
pilot where people can send in images to us, and so that was
picked up by a third party. They sent it to us and it turns out
that it was a Walmart store and they had taken Walmart off of
it and put Instamarket up there, so those are three different
examples.
Mr. Deutch. Under your existing authority, Section 9043.3,
examiners have the authority to issue refusals rather than
inquiries where an item or specimen doesn't appear to show
actual use in commerce in the U.S. market. Have you considered
reviewing pending or approved registrations to confirm that
they are in use in the U.S. as a method to declutter the
register?
Ms. Denison. We have instructed examining attorneys to
refuse now if the specimen is suspicious. Due to the volume of
work, I would say we have not discussed going through every
single one--we get over 400,000 applications a year, going
through every single one to see--to do a second check on it. We
have to trust the examiners to get it right. There are quality
checks done, however.
Mr. Deutch. I am hopeful that as you go forward that
decluttering the existing granted trademarks should be a
priority as well because it takes so long in order for an actor
to file a challenge to a pending application, I hope this is a
focus of your efforts as well.
And I thank you for being here.
Ms. Denison. Thank you.
Mr. Johnson of Georgia. Thank you. The committee will next
hear from the Ranking Member of the full committee, the
gentleman from Georgia, Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman. I appreciate that.
Before I get started on my statement basis--this is going
to be a statement because this is something that we have--I am
glad the Chairman and the Ranking Member have such passion in
this and this is something we need to be talking about.
But I am also going to be talking about who is not here.
And I do this not in any other way except we need to have
everybody to the table, so I know that Amazon, eBay, and
Walmart are listening. They are friends. We know each other,
but we cannot hide from this discussion, and I need them to be
a part of the discussions at the table. This is not new for
this subcommittee, it is not new for this committee, and it is
definitely not new for anybody who knows me that the way you
solve problems is not by avoidance, but by actually taking the
issues on and I want to help that. It will be something that we
can do, but we cannot discuss issues around issues when we
don't have a lot of times the players here. And I am so glad
the PTO office is always here. It is always good to see you
guys as being a part.
Those are the kinds of things that we need to talk about.
One of the things I am concerned about many times is when we
avoid things, then we have misunderstandings. We could clear
those up early in the process and we could also remember that
while we are doing it, it is just not only for these companies
that I named and not out of shame or anything else, but why
shouldn't you be here because we are trying to make this better
for you and for the end result and for the customer who is at
the bottom line our constituents and we need to be a part of
that as well.
So with that, I appreciate the opportunity and what we have
to understand is the rampant sale of counterfeits online is not
just a threat to U.S. jobs and innovation. It also poses a
threat to consumers. Through the third-party marketplaces
platforms are selling contact lenses contaminated with
bacteria, bacteria that catches fire, cheaply made toys that
allow children to swallow magnets and force them to undergo
surgery, and even air bags that kill a driver.
The list of counterfeit products as being sold online is
endless, so just imagine how often we exposed ourselves and our
loved ones to harm when we are tricked into buying counterfeits
online. Online marketplaces have the choice to aggressively
protect consumers from counterfeits show respectful for other
property rights, but brand owners argue some of making merely a
cosmetic effort.
Certainly, marketplaces could do more to stop their sites
from being used to sell counterfeits, which is why we would
need to hear from them.
We recently held a roundtable to hear from brand owners and
platforms on this issue which platform has demonstrated it is
truly committed to stopping the sale of counterfeit and by
protecting consumers by most account it is Alibaba.
At the roundtable we learned that Alibaba's
anticounterfeiting policies and programs are significantly more
effective than their U.S. counterparts. They are working very
closely with all complaining brand owners and are using
cutting-edge technology to scan for and detect counterfeits. I
find it shocking the U.S. platforms are so far behind.
Marketplaces must aggressively protect U.S. customers and
IP rights holders from sellers who seek to trick consumers into
buying counterfeits. Marketplaces must have effective policies
and products to detect, block the sale of counterfeits
automatically and are immediately responsive to complaints by
consumers and brands quickly remove counterfeiters from their
sites and detect and prohibit confirmed counterfeiters from
returning under another name.
The marketplace must apply these anticounterfeiting
policies and practices with equal rigor to protect all brands,
particularly our small businesses, and not reserve their best
protections for a few companies that bring huge profits to the
marketplace.
Platforms must do a better job of vetting sellers and
sharing information with brands, consumers, and law enforcement
so these thieves can be brought before U.S. courts. Marketplace
should not allow sellers to trick consumers into buying a
counterfeit by using a product's image without the brand
owners' consent.
Marketplaces should not promote counterfeit sellers'
products by highlighting the products to sellers offering the
same item at a counterfeit price. These solutions are well
within the grasp of our large online marketplaces and practices
they should have already implemented on their own.
I hope the witnesses will--wish that we had the witnesses
here to also talk about this, which we don't, and I say that
just from an encouraging way so we can find a way forward.
And I appreciate the work that the PTO office has done on
this. I will continue to encourage what you are doing because
we have to find an answer.
At the end of the day, this is not about--and from my
perspective and for those who have worked with me, this is not
about labeling bad and good. This is about labeling that we
have a problem; let's fix it. We have issues that need to be
discussed. Let's discuss them. It is not about avoidance, and
when we have avoidance, then we have misunderstanding.
Misunderstanding leads to bad law. Bad law means that I
have to sit through hearings after hearings after hearings on
this while we have bad law. So let's get it right the first
time. Let's have it right the first time, let's have honest
conversation, and let's do this the right way to begin with.
I thank the Chairman, I thank the Ranking Member of the
Subcommittee who have done outstanding work together on this
and I appreciate the witnesses that are going to be showing
examples of that today, and, of course, always the friends at
the PTO office.
And with that, I yield back.
Mr. Johnson of Georgia. Thank you, sir.
With that, we will now hear from the gentleman, Mr.
Stanton, for 5 minutes.
Mr. Stanton. Thank you very much, Chairman, and I agree
with the Ranking Member Collins, a lot of things he just said
and about the need to get the right players here, and to get
this right. Obviously, today's testimony is mostly about the
trademark system closely related to counterfeits online, so
those are very appropriate comments.
Look, I want to thank the witness for being here today,
Commissioner Denison. It is essential for big business, small
business, all business to be able to successfully apply and
receive appropriate trademarks. There are important mechanisms
by which companies can identify themselves to consumers and
within the marketplace and, of course, consumers can build
trust with the business in part by way of appropriate
trademarks.
When that trust is broken by counterfeit or fraudulent
trademarks, a great deal of harm can be done, not only to the
business, but to the consumer marketplace as well. It is
important that Congress address these issues head on and that
we work with stakeholders to make appropriate changes to ensure
that our American trademark system is the best in the world and
is as effective as possible.
Commissioner, the fiscal year 2018 USPTO performance and
accountability report indicated a trademark quality would be a
top concern for the department. What is the goal for trademarks
in fiscal year 2019 and will you provide updates to this
committee on the progress to address this important issue?
Ms. Denison. Thank you for that question. Yes, we will be
happy to provide updates to the committee and we are highly
focused on quality. As I mentioned earlier, we have had
advanced examiner training on specimen detection and we had
that in June. We had it previously and we had it again in June,
and we are bringing all the examiners into the office in August
and we will have training again on specimens at that point.
In addition, we have issued the examination guide I
referenced earlier, Examination Guide 3-19, which has now been
issued to the public and you can see a list of things that we
are carefully looking for in addition to looking for IT that
can help us enhance our quality. We are always looking to
improve.
Mr. Stanton. You mentioned IT in your recent report
indicating that you are trying to transform USPTO with next
generation technology and services. Talk about those technology
and services. Do they allow you to keep track of the bad actors
that continue to submit fraudulent trademark applications?
Ms. Denison. Yes. We know who the bad guys are. We don't
really have jurisdiction over many of them, but yes, we
generally know who they are. We do have a sort of a whack-a-
mole problem. I have issued exclusion orders and people change
their names.
Mr. Stanton. When a trademark is found to be fraudulent,
what is the remedy? What is the system for a remedy of that
currently?
Ms. Denison. Well, if there is a specimen that is
submitted, the examiner reviews it. If they think the specimen
is suspicious, they will refuse registration.
Mr. Stanton. And what about fines? Is there fines imposed
upon the fraudulent actor?
Ms. Denison. We do not have the ability to impose fines.
Mr. Stanton. Is that something you would like to have?
Ms. Denison. If Congress would like to give it to us, we
would be happy to talk to you about it.
Mr. Stanton. Have you had a chance to calculate the effect
of fraudulent trademarks from actors in other countries in
relation to lost revenue for businesses in the United States?
Ms. Denison. No. I would say I do not have that
information, perhaps someone in my office would. I would have
to get back to you on that.
Mr. Stanton. And then talk to us about the process of
third-party reporters, companies that see fraudulent trademarks
or doctored specimen, what is the process for them to report
that to you?
Ms. Denison. We have something that we started more than a
year ago, I think about a year and a half ago, called a
specimen protest pilot. So they can send--say they see the
Walmart--the Instamarket photo up there, that was something
that came in through the specimen protest pilot, because they--
somebody saw that and knew it was a Walmart building that had
been digitally altered. And so they sent that into our mailbox.
In addition, if they want to go more formal, they could file a
letter of protest and that is during the application process.
If the register--if it has already been registered, then
they could seek cancelation. Oh, and there is one more option.
If it has been published but not yet registered, they could
seek to oppose it at the Trademark Trial and Appeal Board.
Mr. Stanton. Thank you for your testimony. I yield back.
Mr. Johnson of Georgia. Thank you. We will now recognize
Representative Biggs for 5 minutes.
Mr. Biggs. Thank you, Mr. Chairman.
Commissioner, thank you for being here. I am just going
to--I want to get to a very rudimentary level because that is
where I operate most of my life, so I was looking at your
testimony summarizing it. We are talking about China leads in
the number of pro se filings, 80 percent, why is that?
Ms. Denison. I can't give you a definite answer. I suspect
it is because of the filing factories that are coming in. I am
not sure how familiar you are with the situation, but we
believe that there are filing factories that have been set up
to obtain subsidies that are being offered by certain regional
and local governments in China and those filing factories may
be Chinese lawyers, may be Chinese paralegals, may just be
people off the street. I don't know who they are.
Mr. Biggs. Thank you for getting there, because that is
where I wanted to go for part of this any way. The filing
factories, they are supported by reasonable and local
government in China with subsidies. Is that correct?
Ms. Denison. The filing factories per se are not. The
filing factories--excuse me--the regional subsidies or local
subsidies that come from a number of different places in China,
not just Shenzhen, they offer these subsidies and they are
quite high, and so I suspect that the filing factories grew up
as a result of the subsidy, but I don't really have any
information to support that.
Mr. Biggs. Okay. So let's--you mentioned incentives and I
want to talk about incentives for a second. Obviously, the
large scale economy of America, largely reliant on trademarks
to do business, what incentives do we have in place besides our
markets and what you have described is enforcement seems to be
weak, not necessarily your fault, but what we have done, what
other incentives are out there for people to file fraudulent
marks?
Ms. Denison. Well, with regard to China, my understanding
is that the central committee in China sort of put out an
edict. We want people to protect IP and that then led the
regional/local governments to do this. And so that is one
incentive that is driving this. The Chinese Government is so
into this that now apparently the Chinese equivalent of the
SAT, the Gao Kao now has IP questions on it. It is a college
entrance exam.
But, in addition, you have to couple this with the rise of
purchasing on the internet. So there are many legitimate
companies that want to be part of this that just want to sell
on the internet to U.S. consumers and so there is a legitimate
business reason that Chinese citizens would want to file here.
In addition I am told, this is anecdotal that it is very
prestigious in China to say that you have a U.S. trademark
registration, but that is just anecdotal.
Mr. Biggs. So along that line we have heard from companies
like Target, which is the largest trademark filer in the U.S.,
that when the PTO allows fraudulent trademarks to be
registered, those registrations block companies from
legitimately using those trademarks. While big companies can
afford to hire law firms to file applications for their marks,
what is a small business with a limited budget supposed to do?
Ms. Denison. I am sorry. I didn't catch the last part of--
what is a small business what?
Mr. Biggs. Supposed to do if they have a limited budget.
They can't go around like Target can and just create a new
mark.
Ms. Denison. Well, we are doing everything we can to stop
the fake specimens from getting through and we have to give
people 6 months once something comes in to respond to us, so we
are doing everything we can. We also have many staff working on
outreach to small businesses and they go around the country and
help them understand what their rights are and what they need
to do.
Mr. Biggs. And so what is the remedy for a small business
that is--basically, they are denied registration based on a
mark that is falsely registered? What are they supposed to do--
--
Ms. Denison. They could oppose it if it was in the
opposition period or they could seek cancelation at the
Trademark Trial and Appeal Board.
Mr. Biggs. And how long does that take and what does that
cost?
Ms. Denison. The filing fee I think is $400 U.S. and you
could be pro se if you wanted to. One of the things that we are
doing to remedy some of these problems is, the U.S. counsel
rule, are you familiar with that yet, sir?
Mr. Biggs. Yes.
Ms. Denison. So what we are trying to do is have all
foreign domiciled applicants have a U.S. lawyer and that way
there will be somebody acting as a filter and someone we can
talk to and someone over whom we have jurisdiction to help us
with this very important problem.
In addition, we are auditing some of the registrations; we
started this a while back, and we found that over 50 percent of
the time people were deleting goods they had just sworn were in
use, so that is another one of our programs that is very
important.
Mr. Biggs. Thank you.
Mr. Johnson of Georgia. We will now recognize the gentleman
from California for 5 minutes, Mr. Lieu.
Mr. Correa. Thank you, Mr. Chairman, and Commissioner
Denison, thank you very much for being here and testifying.
Very important issue for my small businesses, growing
businesses in my county, my State, my district and, of course,
for this country. It is interesting listening to the questions
and your testimony and the issue of foreign filers, the issue
of cancelation proceedings, and I think to myself, you got a
small entrepreneur sinks in their pension, a lot of work, and
to coming up with trademark brand protection and all of a
sudden they have got to go through a cancelation proceeding,
probably is going to break their back.
And now you are talking about foreigners, China, filing
factories, China's policy of moving ahead and encouraging
people in China to file and yet I am going to follow some of
the questions that my colleague from Arizona had which is the
remedy.
Now you are asking that they be represented by American
attorneys, win or lose, what is the remedy? Can you enforce a
judgment? Can you enforce damages on a China, a foreign-based
firm beyond that attorney? Is that close--think about an
attorney, they have maybe errors and omissions insurance, but
beyond that, how do you guarantee, how do you assure, what is
the legal environment that we can come up with to protect
Americans that have worked really hard to come up with these
inventions, trademarks, and all of a sudden they have no
protection?
Ms. Denison. Thank you for that question. Just for your
information in these nonuse challenges at the TTAB, in the
majority of the cases there is a default, so you would file a
paper and they would default and that would be the end of it,
so it would not, in most cases, be an expensive litigation, but
we do not have the authority to award damages to anyone. That
is not something that the USPTO trademark operation or the TTAB
has the ability to do.
Mr. Correa. Let me interrupt you. I think what we have here
is your agency--and you recognize the importance of free flow
of commerce, trade, entrepreneurship, and you assume everybody
comes in with good faith and is going to file this paperwork
and is moving ahead, yet we have a situation now that, for lack
of a better term, we have a trade war going on and maybe there
is governments that are encouraging their firms in helping them
and China, it is very blurry to talk about government versus
the private sector. I don't think there is a difference.
You don't have that in the U.S., so I am trying to figure
out how we put our American firms on equal footing when it
comes to these trade wars. You don't have a lot of authority.
You are talking about putting together a special task force.
Do you work with the FBI now? Do you work with Interpol,
some of these other organizations? Do you have, lack of a
better term here, databases where you can figure out--you got
three credit cards that were the source of payment to a lot of
these applications.
You are investigating. We should have been doing this a
long time ago. I am not saying it is your fault. I am saying
that maybe our attitude, our disposition to the new environment
is not one that we are responding to fast enough.
Ms. Denison. Well, we are trying to do everything we can
within our current power to help people----
Mr. Correa. And that is really the key, within your current
power, so I would almost ask Mr. Chairman here and I will ask
him, can we come up with our own perspective on what powers you
need to be an effective enforcer to protect U.S. free commerce
within an open free market system where people have to have
consequences when you abuse the system, whether it is criminal
or other kinds of liability.
Ms. Denison. Thank you for that. We very much appreciate
your support and we have been brainstorming with the committee
staff to talk about different options that you would like us to
pursue, so, of course, we are happy to continue to cooperate
and offer any kind of technical assistance we can to you on
remedies.
Mr. Correa. And finally, Mr. Chairman, I would like to
offer this letter from Target, for the record, and I also have
some questions as well that I would like to have answered.
And seeing my time almost out, again, I just want to thank
you, Commissioner, for being here and look forward to working
with you to protect American ingenuity, entrepreneurship, and
job growth in this country.
Thank you very much.
Ms. Denison. Thank you. We welcome your cooperation.
Mr. Johnson of Georgia. Without objection, so ordered.
[The information follows:]
MR. CORREA FOR THE RECORD
=======================================================================
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. We will now hear 5 minutes of
questions from the gentleman from Louisiana, Mr. Johnson.
Mr. Johnson of Louisiana. Thank you, Mr. Chairman, and
thank you, Commissioner, for being here today.
I used to be a constitutional law attorney, practice in
that area and it is hard not to just remark on the brilliance
of the founders' vision about all this, you know, when they
gave us Congress under Article I, the ability to creative laws,
to protect American intellectual property.
And it is really because of that vision that we have been
the extraordinary exceptional Nation that we are in part
because we take care of that creativity and ingenuity and it
has become part of the American identity, so your work is
really important. We appreciate it.
Of course, trademarks are a key national asset and I know
you are doing what you can to protect that in this brave new
world that we are in. You have been asked some great questions.
I want to followup on a couple of those things. First line
of question is about the local counsel rule. You were asked
about the enforcement mechanisms, but for those back home here
watching, this is the proposal requires each foreign-based
trademark filer to hire a U.S. attorney, the idea is, the
attempt is to ensure that future applications don't contain
doctored evidence, but as you know there has been some critics
of this and some people say, well, this is just the PTO just
looking to other people to help solve the problem.
How do you respond to that? Do you respond to the people
who say, well, those resources, that time, that attention might
be better used if they would just develop better tools and
systems inside rather than, sort of, farming it out to other
attorneys? What is the response to that?
Ms. Denison. We are not farming it out to anybody. What we
are trying to do is trying to stop these people who come in
appearing to be pro se who are actually engaged in the
unauthorized practice of law and we believe that by bringing in
a U.S. attorney they will be able to review filings and they
will ensure more likelihood of compliance with the law.
So we feel very strongly that the U.S. bar can help us. We
are not dumping this on them. We are trying to ensure that the
trademark system is as decluttered as possible and that people
are actually complying with the laws and their ethical
obligations which is not the case right now.
Mr. Johnson of Louisiana. So it is a bit ironic, but, you
know, there is some cases already, there is some articles we
researched and read about how signatures of U.S. attorneys are
being forged on these things, right? So now you need a whole
new mechanism to try to prevent that.
So what are you doing about that or what is the plan there?
Ms. Denison. The law's not in effect yet, first of all. It
is not going into effect until August 3rd, but we are keenly
aware that the U.S. Counsel Rule is not going to solve every
problem and we are aware that people could forge signatures,
people who want to do bad things spend all day long thinking of
new ways to be creative criminals, and so that is just--so we
are certainly aware of that and we are talking.
Mr. Johnson of Louisiana. Apparently, there is already been
some examples cited. I know it doesn't go into effect until
August 3rd, but there are people preparing already to break the
new rule, so here we go. Regarding the task forces you have
piqued our interest on that.
Have you engaged or has the task force engaged directly
with private sector stakeholders or to what extent have they
done that so far.
Ms. Denison. No, it has not yet at this point. It is
internal to trademarks right now. It has members who are IT
gurus and then we have trademark lawyers also working together
and so we have not engaged with the private sector yet.
Mr. Johnson of Louisiana. I am sure you would agree that if
there are--going forward, if there are more avenues for
stakeholders to engage directly with your office that we can
have, I guess, better recommendations to meet the IP rights--
the needs of the IP rights holders, so I hope that is in the
plans, you know. We would encourage that.
Ms. Denison. We can certainly discuss that. Thank you.
Mr. Johnson of Louisiana. You mentioned earlier that you
are developing software to help catch bad actors. Has the task
forced explored using artificial intelligence or other real-
time methods if you covered that already?
Ms. Denison. Yes, that is under discussion.
Mr. Johnson of Louisiana. Okay. And do you have a time line
for when your software that you mentioned will be finished and
ready to be engaged with by the marketplace?
Ms. Denison. No, I do not have that because so far it is
not ready so it is hard for me to predict when the IT
development would satisfactorily be concluded.
Mr. Johnson of Louisiana. You mentioned you don't have
jurisdiction over many of the bad actors. I know that is a
great point of frustration. Do you think there are steps that
Congress, that we ought to take to strengthen enforcement? I
know that is kind of the spirit, the idea of this hearing, but
if you had to boil it down to a couple of bullet points, what
would you say?
Ms. Denison. Well, I would say that we enforce the laws
that Congress has passed and we are continuing to brainstorm
with the staff to think about what would be the best
approaches. Thank you.
Mr. Johnson of Louisiana. Thank you. I am out of time. I
yield back.
Mr. Johnson of Georgia. Thank you.
The gentleman yields back.
We will next hear from the other gentleman from California,
Mr. Lieu, for 5 minutes.
Mr. Lieu. Thank you, Mr. Chair, for holding this hearing.
And thank you, Commissioner Denison, for being here.
I have always thought protecting intellectual property is
one of the most important things that legislatures can do,
because our economy, in part, relies on intellectual property.
It is something that America can do well.
And when I was in the California State legislature, one of
the laws I passed allowed prosecutors to use a nuisance statute
to take down counterfeit goods. It made it much easier to
prosecute those kinds of cases.
I am also now co-chair of the Toy Caucus in Congress. And
we know that there has now been a significant rise in e-
commerce. According to a recent survey, 79 percent of Americans
have made a purchase online. And we also know there is an
increase in counterfeiting in e-commerce.
So my first question to you is: What has your engagement
been with e-commerce platforms, specifically around the
fraudulent use of trademarks when it comes to toys?
Ms. Denison. Well, as you know, President Trump issued a
memorandum on combating online counterfeiting of trademarks and
that there is a--I believe it is DHS that is in charge of
preparing a report, but the USPTO is heavily involved in
developing that report.
And that report is going to cover quite a few things. It is
going to identify how online platforms are used to facilitate
counterfeits, identify what those platforms are doing to
minimize counterfeits, evaluate the effectiveness of the U.S.
Government and foreign government actions, recommend changes to
data collection, and identify changes that could reduce
trafficking.
So I think that that report is going to be very helpful,
and that will be out, I believe, October 30. So that is one of
the things that we are doing right now on the counterfeit
front.
Another thing that we are doing on the counterfeit front is
we have just engaged the National Crime Prevention Council, and
we are going to do a multiyear, nationwide campaign to educate
consumers about what to look for. We think that it is really
important for us to have an educated consumer base.
In addition, we work with foreign governments on capacity-
building and technical guidance for foreign statutes.
Mr. Lieu. Thank you.
As you know, it is not just businesses that lose money from
counterfeits from other countries; it is also a safety issue. A
Tennessee family had their home burn down when there was a
counterfeit hoverboard that they bought.
So let me ask you right now, let's say you know that a
particular hoverboard is fake or it is a fake trademark, it is
a counterfeit. What do you do? What is the process?
Ms. Denison. If we find that there is a fake specimen in
the file, the examiner will refuse registration and request
additional information. That is what we would do, is refuse the
registration.
Mr. Lieu. Let's say it has----
Ms. Denison. We would also----
Mr. Lieu [continuing]. Already been registered----
Ms. Denison. Okay.
Mr. Lieu [continuing]. And then you realize later it is
fraudulent or fake. Then what is the process?
Ms. Denison. The process is for a third party to file a
cancellation proceeding at the Trademark Trial and Appeal
Board.
Mr. Lieu. And we have been given some evidence from various
businesses in America that that proceeding can take quite a
long time and it is somewhat cumbersome. So how long would it
take to get that fake item removed?
Ms. Denison. Well, as I mentioned a moment ago, there are
about--I think more than 50 percent of those cases go through
to default, and so that will not take very long. It would just
take a few months.
If it were to go through the process--I would have to get
you the statistics. I don't recall what the average is. I think
it is more than a year, but, honestly, I don't recall that
figure.
Mr. Lieu. Now, let's say someone registers a trademark and
doesn't use it for, let's say, 2 years. Does anything happen?
Are they allowed to keep it there forever?
Ms. Denison. For--did you say 2 years?
Mr. Lieu. Two years.
Ms. Denison. Three years is the golden standard. So, after
3 years, someone could seek to cancel it and remove it from the
register.
Mr. Lieu. I see. But if no one moves to cancel it, it just
sort of sits there.
Ms. Denison. That is correct. And then they are required to
file a document between the fifth and sixth year after
registration. And if they fail to file that or if their filing
is rejected, then it would be removed from the register.
Mr. Lieu. Thank you.
And then my last question to you is: Are there any changes
in the law that you think would make your life easier and make
it easier to deal with counterfeits?
Ms. Denison. Well, again, we are brainstorming with your
staff and would be happy to work with you on any technical
assistance that we could provide.
Mr. Lieu. Okay. Thank you.
I yield back.
Mr. Johnson of Georgia. Thank you.
We will now hear from the gentleman from Virginia, Mr.
Cline, for 5 minutes of questions.
Mr. Cline. Thank you, Mr. Chairman.
Thank you, Ms. Denison, for being here.
I want to pick up on something that was just alluded to by
Mr. Lieu, the report between the fifth- and sixth-year filing,
and how effective that is, in light of the recent audits that
you all have made permanent.
And I think that that can be an effective tool, but the
audits are--as the audits are making clear, what you have are
situations where people are complying in the fifth and sixth
year, producing specimens, and then you have, for whatever
reason, a very high percentage of the inability to verify use
for at least some of the goods or services in the registration,
upwards of 50 percent.
Can you lead me through a timeline? Because I am relatively
new. You began the 2-year pilot program in 2012. Is that
correct?
Ms. Denison. Correct.
Mr. Cline. Okay. So, in 2014, what happened to the program?
Because I am reading that it wasn't made permanent until 2017.
What happened between 2014 and 2017?
Ms. Denison. So we started the program with 500 post-
registration documents that we pulled, 500 different files,
randomly chosen. And those files all had to go through the
process. So I am not sure if it was 2014 or 2015 that they all
went through the process. After that, we had to analyze the
data. We also had to meet with stakeholders.
And after we did all that, we decided to propose a
rulemaking, so then we had to go through the rulemaking
process. So, as you know, the government can't always move as
quickly as we might like. So that is what happened in terms of
making it permanent.
So we started November 1 of 2017 with the permanent
program. And we started off with, I believe, 10 staff working
on it, and we have recently increased that to 19 so that we can
audit more registrations.* So we believe that, going forward,
we will have approximately 5,000 of the post-registration
filings pulled each year. And so we hope that that will be a
deterrent.
---------------------------------------------------------------------------
* While the number of staff varies, these are part time work
assignment that currently result in approximately 125 staff hours per
week dedicated to post-registration audits.
---------------------------------------------------------------------------
We are also considering whether to charge people what we
will call a zero fee if they delete prior to an audit or prior
to the Trademark Trial and Appeal Board, you know, saying they
aren't using something and then charging them a fee for each
item they have to delete if they are caught.
Mr. Cline. Uh-huh. So November 1 of 2017, 10 staff started.
Did 2018 see 5,000 pulled?
Ms. Denison. No. We have probably pulled--I don't have an
exact number for you. I believe it is in the range of 6,500 to
date. But, as I said, moving forward, it will be approximately
5,000 per year. Because we have just recently double the staff,
a couple months ago.
Mr. Cline. That is great.
The note I have says the results of the permanent audit
programs have continued with approximately the same results. Do
you have results from 2018? Are you seeing just----
Ms. Denison. We are still--over 50 percent of the people
are deleting goods. So we do not know whether that is from
ignorance. Some people, you know--maybe it is sloppiness. Maybe
they are trying to cheat. It is really not clear. Some people
have come to us and said, ``Well, my client is really selling
this, but they can't be bothered to go and find all the
specimens. It is too much work.''
You know, I don't know what the answer is, but it is a
problem.
Mr. Cline. Sounds like the fee or the fine or whatever you
are considering might be the appropriate response there.
So thank you. That sounds like a good program. And I am
glad to hear you are increasing staff and increasing efforts in
that area.
Mr. Chairman, I yield back.
Mr. Johnson of Georgia. Thank you.
This concludes the first panel of today's hearing. I want
to thank Commissioner Denison for participating in this
hearing.
We will now take a short recess to set up our second panel
of witnesses. The subcommittee will stand in recess for 5
minutes.
[Recess.]
Mr. Johnson of Georgia. The Subcommittee will reconvene to
hear testimony of our second panel.
To follow up on the comments from the Ranking Member, Mr.
Collins, I would like to submit the fact that we received from
eBay and Walmart statements that I would like to enter into the
record, without objection. And we appreciate their engagement
with the subcommittee. And, without objection, those comments
will be submitted for the record.
[The information follows:]
MR. JOHNSON (GA) FOR THE RECORD
=======================================================================
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. I will now introduce our second
panel of witnesses.
Professor Jeanne Fromer is a professor of law at New York
University School of Law, where she specializes in intellectual
property, including copyright, patent, trademark, trade secret,
and design protection laws, and is a faculty co-director of the
Engelberg Center on Innovation Law and Policy.
She has written extensively in all fields of intellectual
property law. Some of her recent and forthcoming scholarship
studies trademark registrations empirically to examine whether
we are running out of effective trademarks.
Before joining NYU, Professor Fromer served as a law clerk
for Justice David H. Souter of the U.S. Supreme Court and for
Judge Robert D. Sack of the U.S. Court of Appeals for the
Second Circuit. She also worked at Hale and Dorr, now
WilmerHale, in the area of intellectual property law.
Thank you for being here.
Professor Fromer has degrees from Harvard Law School,
Barnard College, and the Massachusetts Institute of Technology.
Mr. Peter Brody is a partner at the law firm Ropes & Gray,
LLP. He is an expert on intellectual property law and has been
successfully litigating IP cases for more than 30 years.
As a Member and Former Chair of Ropes & Gray's intellectual
property litigation group, Mr. Brody has wide-ranging
experience with all types of IP cases--patent, copyright, trade
secret, trademark, and false advertising.
Mr. Brody writes extensively, including on intellectual
property, and is an editorial advisor to Bloomberg BNA. Mr.
Brody also serves as chair of the Legislation and Regulation
Committee of the International Trademark Association.
Mr. Brody holds degrees from Princeton University and
Harvard Law School.
Thank you for being here, sir.
Joseph Cammiso is the president of the Automotive Anti-
Counterfeiting Council, the A2C2, and brand protection manager
at Toyota Motor North America, headquartered in Plano, Texas.
In 2015, Mr. Cammiso was instrumental in the formation of
A2C2 and is a champion of the council's mission to promote
cooperation among automakers to eliminate the sale of
counterfeit parts that can be dangerous to U.S. consumers and
threaten public health and safety.
In his current roles, Mr. Cammiso has worked with Homeland
Security investigations, U.S. Customs and Border Protection,
and other law enforcement agencies to help stop the flow of
counterfeit parts into the U.S. He has engaged online market
places to increase awareness of the risks of counterfeits,
promote consumer safety, and enhance efforts to keep
counterfeit parts, especially counterfeit airbag parts, off
marketplaces entirely.
Mr. Cammiso earned his master's degree in business
administration and management from California State University,
Long Beach, and has nearly 25 years of automotive operations
and supply-chain experience.
Welcome, sir.
Mr. Robert Barchiesi is president of the International
AntiCounterfeiting Coalition, IACC, where he joined the
leadership team in 2008.
Mr. Barchiesi works with numerous organizations, both
foreign and domestic, to stem the tide of counterfeit products
that can harm consumers. He serves on the board of Europol's IP
Crime Coordinated Coalition and on the editorial panel for the
World Intellectual Property Organization.
Before joining IACC, Mr. Barchiesi was in law enforcement,
working in various capacities throughout the country. Mr.
Barchiesi holds degrees from John Jay College of Criminal
Justice and the University of Alabama.
Thank you for being here, sir.
And last but not least is Rebecca Mond, who is vice
president of Federal Government affairs at The Toy Association,
a not-for-profit trade association that represents businesses
that design, produce, license, and deliver toys for children in
the United States.
In her capacity at The Toy Association, Ms. Mond has led on
issues relating to counterfeit and unsafe toys entering the
U.S. market. Ms. Mond has engaged with the Federal Government
in numerous ways to ensure that toys are safe for children by
reducing the sale of counterfeit and knockoff toys.
Ms. Mond received a bachelor's degree in government from
Georgetown University and a certificate in advanced product
safety management from Saint Louis University.
Thank you for being here, Ms. Mond.
We welcome all of our distinguished witnesses and thank
them for participating in today's hearing.
Before proceeding with testimony, you are hereby reminded
that all of your testimony and written and oral statements made
to the subcommittee in connection with this hearing are subject
to penalties of perjury pursuant to 18 U.S.C. Section 1001,
which may result, upon conviction, in the imposition of a fine
or imprisonment of up to 5 years or both.
Please note that each of your written statements will be
entered into the record in its entirety. Accordingly, I ask
that you summarize your testimony in 5 minutes. To help you
stay within that time, there is a timing light on your table.
When the light switches from green to yellow, you have 1 minute
to conclude your testimony. When the light turns red, it
signals your 5 minutes have expired.
Professor Fromer, you may begin.
STATEMENTS OF JEANNE FROMER, PROFESSOR OF LAW, NEW YORK
UNIVERSITY SCHOOL OF LAW; PETER M. BRODY, PARTNER, ROPES &
GRAY, LLP; JOSEPH CAMMISO, PRESIDENT, AUTOMOTIVE ANTI-
COUNTERFEITING COUNCIL, INC.; ROBERT BARCHIESI, PRESIDENT,
INTERNATIONAL ANTICOUNTERFEITING COALITION; AND REBECCA MOND,
VICE PRESIDENT, FEDERAL GOVERNMENT AFFAIRS, THE TOY ASSOCIATION
STATEMENT OF JEANNE FROMER
Ms. Fromer. Chairman Johnson, Ranking Member Roby, and
members of the subcommittee, thank you for inviting me to be a
witness today. I am Jeanne Fromer, professor of law at New York
University School of Law, where I teach and publish on
intellectual property.
My remarks on trademark depletion and clutter draw on
research with Professor Barton Beebe, also of NYU School of
Law. Along with our written testimony, I have submitted our
recent Harvard Law Review article, ``Are We Running Out of
Trademarks? An Empirical Study of Trademark Depletion and
Congestion.''
``Trademark depletion'' is the term we use in our article
to describe the decreasing supply of unclaimed competitively
effective trademarks available to new market entrants.
Although trademark law has operated on the assumption that
there exists an inexhaustible supply of unclaimed trademarks,
the empirical results we report confirm the opposite. It is
becoming increasingly difficult for new businesses to find a
trademark that is competitively effective but that has not yet
been claimed by another business.
To give you a sense, now, nearly three-quarters of the time
we speak, we are using a word that someone has already claimed
as a trademark. Also, a majority of Americans carry a surname
that is already claimed as a mark, meaning that they might have
been born too late to claim their own name as a mark.
Even using a conservative similarity-matching protocol,
nearly all the words we use on a daily basis and the surnames
of a high proportion of American people are already registered
or are confusingly similar to an already-registered mark.
Meanwhile, new applicants are increasingly shifting toward
coined words and longer, more complex, and, thus, less
effective marks.
Yet even these efforts are increasingly failing. PTO
refusal rates for confusing similarity to an already-registered
mark continue to rise. This problem is particularly acute for
small businesses, which typically lack the sophistication and
resources to find unclaimed competitively effective marks and
prosecute those marks to registration.
Trademark depletion undermines trademark law's goal of
promoting fair competition by raising entry barriers for new
businesses with regard to finding and claiming unclaimed
competitively effective marks.
Trademark depletion has been exacerbated in recent years by
an inflow of applications originating from China. Media reports
suggest that a significant number of these applications contain
fraudulent statements of use and, therefore, fail to meet
trademark law's use-in-commerce requirements.
In fact, commercially available reverse-image-search
technology reveals that some of these specimens of use being
filed are clearly fraudulent yet are not detected as such by
the PTO.
When these applications are allowed to proceed to
registration, they contribute to clutter on the register.
``Clutter'' is the term trademark law uses to describe marks
that are registered but are not actually used in commerce.
It is important to declutter the trademark register, both
to abate rates of trademark depletion and to maintain the
register's integrity. Doing so ensures that barriers to entry
are not heightened in a way that protects incumbent businesses
at the expense of new entrants and protects large businesses at
the expense of smaller ones.
To address the problems of trademark depletion and clutter,
we support a mix of reforms to trademark law, including less
costly processes than current possibilities for reexamination,
cancellation, or opposition, which typically cost in the six
figures; to clear the register of marks that are not being used
in commerce; increase fees charged to non-small-businesses to
register, maintain, and renew their marks; and the institution
of a lower standard for fraud on the PTO rather than the
current heightened standard.
Thank you, and I look forward to your questions.
[The statement of Ms. Fromer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. Thank you.
We will next hear from Mr. Brody, 5 minutes. Thank you.
STATEMENT OF PETER M. BRODY
Mr. Brody. Chairman Johnson, Ranking Member Roby, and
members of the subcommittee, thank you for this opportunity to
testify before you today.
I am Peter Brody, a partner in the law firm of Ropes & Gray
in Washington, D.C., and an intellectual property litigator
with a substantial focus on trademark cases. I am also
testifying today for the International Trademark Association,
where I serve as chair of the U.S. Subcommittee of the
Legislation and Regulation Committee.
I am pleased to be here this morning to discuss proposed
legislation to amend the Lanham Act. This legislation would
remove unwanted obstacles to obtaining injunctive relief in
appropriate cases involving trademark counterfeiting,
infringement, dilution, false advertising, and cyber-squatting.
As a number of the members of the subcommittee have
observed in their comments this morning, trademarks are
invaluable to the owners of businesses large and small. They
enable businesses to develop a reputation and goodwill
symbolized by their brand.
But trademarks are also invaluable to consumers. We all use
trademarks every day, as Congresswoman Roby mentioned, to make
purchasing decisions, and we rely on them to lead us to
products that we have come to know and prefer.
But, as Congresswoman Roby also noted, our ability to rely
on trademarks assumes that we can trust them to identify the
same source and quality every time we place an order or we
reach for a box on a store shelf or we stop at a chain
restaurant for a quick meal.
As the Chairman suggested, the stakes in trademark cases
are unique. The kind of harm that violations of the Lanham Act
cause--harm to a business's reputation and goodwill--cannot be
readily or effectively remedied with an award of monetary
damages. In fact, courts very infrequently provide for such
awards. The harm to consumers from trademark confusion also is
not remedied by damages. Trademark harm must therefore be
mitigated primarily by stopping the confusion at its source,
through an injunction.
As many of you know, traditionally, injunctive relief is
governed by a four-part standard. The plaintiff must show that
it is either likely to succeed on the merits of its claim at
the preliminary injunction stage or has prevailed at the
permanent injunction stage. The plaintiff must also show that
it is likely to suffer irreparable harm absent an injunction.
The plaintiff also must show that the balance of hardships tips
in favor of issuance of the injunction rather than not
issuance. And, finally, the plaintiff must show that the public
interest favors the issuance of an injunction.
Recognizing the unique harms from trademark confusion, U.S.
Federal courts, for decades, virtually uniformly applied a
rebuttable presumption of irreparable harm upon a finding of
liability--that is, likelihood of confusion--at the permanent
injunction stage or that a plaintiff was likely to be able to
prove that liability at the preliminary injunction stage. In
other words, such findings led to a presumption, rebuttable by
the defendant, that the irreparable-harm prong of the
traditional test for injunctive relief had been met. With this
presumption, the plaintiff could obtain injunctive relief,
assuming the other prongs of that test were also met.
Recent developments in the law of the Lanham Act remedies,
however, have resulted in Federal court rulings that hinder
trademark owners' ability to obtain that injunctive relief. In
particular, over the past decade, a number of Federal appellate
and trial courts have reversed course and discarded the
longstanding presumption of irreparable harm, even when they
have found a likelihood of confusion or, at the conclusion of
the case, actual confusion.
These courts based their decisions on a Supreme Court
decision involving unrelated issues of patent infringement, not
the Lanham Act. The analogy, however, is deeply flawed. Unlike
the Lanham Act, the Patent Act provides for a guaranteed
monetary remedy in the form of a reasonable royalty, and patent
infringement does not cause the kind of unquantifiable harm to
goodwill or reputation the Lanham Act is intended to address.
Legislation reestablishing a presumption of irreparable
harm under the Lanham Act will eliminate this unwarranted
obstacle to injunctive relief.
I want to highlight, in my few seconds remaining, that
there are three key safeguards embedded in the proposed
legislation to ensure its fairness and equity in application.
First, the presumption only arises if the plaintiff has
proven a probability of success in establishing likelihood of
confusion at the preliminary injunction stage or a likelihood
of confusion at the conclusion of the case.
Second, even if the presumption arises, it is still
rebuttable.
And, finally, the proposal would not alter the remaining
prongs of the test. The court would still have to find the
balance of equities and the public interest favor the
injunction.
Mr. Chairman and members of the committee, thank you for
this opportunity to express our views.
[The statement of Mr. Brody follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. Thank you.
Next, Mr. Cammiso, you may begin. And I have just butchered
that name. I am sorry.
STATEMENT OF JOSEPH CAMMISO
Mr. Cammiso. Thank you, Chairman Johnson, Ranking Member
Roby, and other members of the subcommittee. I appreciate the
opportunity to speak before you today.
I am Joseph Cammiso, frontline manager at Toyota
responsible for fighting counterfeit parts and the impact that
they have on my company, our customers, and the public. To
assist in this ongoing battle, I collaborate with my peers at
10 other U.S. automakers. Together, we make up the Automotive
Anti-Counterfeiting Council, better known as A2C2, of which I
currently serve as president.
The threat of the counterfeit auto parts is significant in
many ways. First and foremost, they give rise to serious public
health and safety concerns. They often fail to perform as
intended, resulting in catastrophic failures with potentially
fatal consequences.
I have a short video that will illustrate this far better
than I can, and now, with the chairman's indulgence, I would
like to share this video with the committee.
[Video shown.]
Mr. Cammiso. This is a NHTSA video showing catastrophic
failure of an airbag. Shrapnel in the passenger's seat.
This was a test buy off an e-commerce platform by my peer
at Hyundai. They conducted the testing, along with Homeland
Security.
This speaks to the tight specifications that genuine
airbags are built to.
In this case, the bag opens, but fractions of a second
late.
This, again, speaks to our specifications in how bags are
supposed to unfold once detonated.
This is a standard bench test that our wheels, genuine
wheels, go through. Imitation wheel fails miserably.
This shows our car's performance with counterfeit brake
pads. And this is a bench test with counterfeit brake pads.
After a few applications, the pads actually ignite, potentially
igniting the car as well.
Unfortunately, counterfeit safety components like the
airbags, wheels, and brake pads that you just saw are
commonplace, as are counterfeit windshields, filters, engine
components, and spark plugs. Simply put, almost every type of
auto part can be and has been counterfeited.
There are over 265 million vehicles in this country, and
nearly every citizen either drives a car or is a passenger in
one. Counterfeit auto parts are a threat to each of us.
Of course, this problem has a significant financial impact
as well. Using recent data from the Organization for Economic
Cooperation and Development, the estimated financial impact of
fake auto parts entering our country exceeds $1 billion, and
that is just for A2C2 members.
Much of this financial activity is fueled by online
marketplaces. A2C2 members have reported tens of thousands of
infringing and counterfeit listings to marketplaces. And for
those listing removed, we don't know how many resulted in prior
sales of fake parts to unsuspecting consumers or repair shops.
As our friends in Homeland Security have said, A2C2 is a
group of the committed, not the curious. To illustrate, since
forming in 2015, we have trained almost 1,000 CBP officers; we
have collaborated with Homeland Security on dozens of criminal
and civil investigations, and we have enlisted the support of
the IPEC office and the IPR Center to increase awareness; and
we have engaged with multiple e-commerce platforms to prevent
the sale of counterfeit auto parts.
But, moving forward, we remain concerned with the level of
fake parts offered for sale through online marketplaces. We
have several recommendations that we believe could help,
including such things as increasing consumer awareness; having
platforms proactively share information about bad actors with
industry, law enforcement, and other stakeholders; and to
notify buyers of counterfeit auto parts.
Platforms could also work to increase seller and product
vetting, and they could strengthen penalties for repeat
offenders of health and safety products such as auto parts. E-
commerce marketplaces have effectively linked counterfeiters
with unsuspecting consumers, and the burden of stopping these
criminals should not fall disproportionately on the brands that
they are victimizing. Ultimately, marketplaces should be held
accountable for the product that they sell.
Since our formation, A2C2 members have banded together as
an industry to mitigate this growing threat to public health
and safety. We are excited to participate in the creation of a
framework that will enable real and scalable solutions, and we
are pleased to support your efforts however we can.
Thank you for the opportunity to testify today, and I will
be happy to answer any questions the subcommittee may have.
[The statement of Mr. Cammiso follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. Thank you.
We will now hear 5 minutes testimony from Mr. Barchiesi.
STATEMENT OF ROBERT BARCHIESI
Mr. Barchiesi. Chairman Johnson, Ranking Member Roby,
members of the subcommittee, thank you for the opportunity to
appear before you today and to share my thoughts and experience
on this important topic.
Forty years ago, a handful of companies came together to
build a community in the fight against fakes, realizing that
the trafficking of counterfeit goods was a problem too large
for any of them to solve on their own.
Today, the IACC's members span across industry sectors and
include some of the world's most famous brands. And though we
have grown considerably over the past four decades, our
philosophy remains the same: We leverage the strength and the
abilities of the IP community to do together that which we
could not accomplish alone.
We welcomed the news of today's hearing and the much-needed
attention that it brings to the trafficking of counterfeit
goods in e-commerce.
Without question, the growth of counterfeit sales in recent
years has had a devastating effect on consumers, putting their
health and safety at risk. Further, the loss to businesses
cannot be measured in mere dollars and cents but by lost jobs,
reputation, and morale. Everyone benefits from a safe and
trusted e-commerce marketplace, and the robust enforcement of
IP rights online is an essential component to ensuring such a
healthy marketplace.
Unfortunately, ``robust'' is not always a word that we can
use to describe the current level of enforcement. Too often,
platforms' own policies serve as obstacles to the meaningful
protection and enforcement of IP rights.
Both my written testimony and the ICC's most recent
submission to the U.S. Trade Representative for its annual
``Notorious Markets'' review highlight the range of challenges
that rights-holders often face online.
For the past decade, the IACC has addressed online
trafficking by pursuing constructive engagement with a range of
partners, including those in the payment sector, e-commerce
platforms, registrars, registries, and the express shipping
industry. Our guiding principle is to find practical solutions
to intractable problems.
Our follow-the-money approach to online enforcement that we
developed in partnership with the credit card companies and
money-transfer companies has helped to choke off the flow of
money to criminals anywhere in the world online and to thwart
their business operations. Whether the consumer is in the U.S.
and the seller is in China, we have worked with the credit card
companies to close down merchant accounts around the world.
Similarly, our partnership with the Alibaba Group, which we
have had since 2012, significantly addressed rights-holders'
concerns with China's largest e-commerce platforms. In regard
to that, I have four native-speaking Chinese folks working in
my office working together with a team in China from Alibaba,
and we have seen significant progress since 2016 when we put
that program together.
Unfortunately, the challenges faced by businesses and
consumers are not limited to foreign marketplaces. They are
right here in our own backyard too. That is why we have also
engaged with a number of U.S. marketplaces and established a
formal relationship with Amazon which shows some promising
results so far. Our engagement serves as proof of concept that
when committed stakeholders share a common interest we can make
a real change.
We have also encountered some, though, who disclaim
accountability, viewing their legal obligations as a ceiling
for what they are willing to do rather than a floor for what
they are capable of doing. So, while liability is an important
piece of the puzzle, we must not forget that this is also about
responsibility. All of us have a responsibility to use every
tool at our disposal to fight this insidious problem.
We at the IACC take that responsibility seriously. We see
these folks, that they have to be at the table. They are an
integral part of the solution, and we found that, when they are
committed, they can make a tremendous difference.
While we are pleased with the progress that we have had
with our partners, there is more work to be done. This includes
ongoing greater cooperation and investment of resources by
willing partners. It requires new policies and creative
strategies that adapt to the ever-changing tactics of the
counterfeiters. And it will undoubtedly require the assistance,
support, and encouragement of Congress and our law enforcement
partners.
As global commerce and e-commerce grow increasingly
synonymous, we commend the subcommittee for shining a light on
these issues. I thank you for the opportunity to address our
members' concerns today and look forward to working with you to
ensure that consumers and legitimate businesses are able to
benefit from a safe and vibrant online marketplace.
Thank you.
[The statement of Mr. Barchiesi follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. Thank you.
We will now have 5 minutes of testimony from Ms. Mond.
STATEMENT OF REBECCA MOND
Ms. Mond. On behalf of The Toy Association, thank you for
the opportunity to testify before the subcommittee to share our
concerns with counterfeit toys sold through e-commerce
marketplaces. We appreciate your attention to this important
matter.
As background, The Toy Association represents more than
1,100 businesses, including toy manufacturers, importers,
retailers, toy inventors, designers, and licensors, all
involved in bringing safe, fun, and educational toys to market.
Mr. Johnson of Georgia. And if you could move that
microphone over. Yeah. Thank you.
Ms. Mond. The U.S. toy industry supports over 690,000 U.S.
jobs. Approximately 3 billion toys are sold in the United
States each year, totaling $27 billion at retail.
Importantly, over 95 percent of U.S. toy companies are
small businesses.
Curbing the flow of counterfeit goods in e-commerce is an
issue of critical importance to us due to the safety concerns
of counterfeit toys.
Consumers have come to rely on e-commerce platforms to
provide discounted pricing and a wide selection of name-brand-
quality toys also found at brick-and-mortar retail. However,
under the current third-party marketplace system, illicit
sellers with little or no accountability take advantage of this
consumer faith by offering inferior and unsafe counterfeit toys
that put our children at risk.
Meanwhile, intermediaries are making substantial profit
from these sales. Any business selling toys in the United
States must be held to the same high safety standards that
apply to toy brands in brick-and-mortar retailers that
consumers have come to know and trust.
By law, all toys sold in the United States must comply with
mandatory product safety requirements, must be tested by an
accredited independent testing facility, and must have
certification. Legitimate toy companies spend significant
resources to ensure the safety of their products.
Suffice it to say, counterfeit toy sellers do not submit to
these safety and testing regulations. For these sellers,
bypassing safety regulations is a competitive advantage to
provide toys cheaper and quicker.
Unfortunately, the counterfeit business on e-commerce is
flourishing, and enforcement efforts and platform initiatives
have thus far been insufficient to stop the flow of IP-
infringing goods sold in the United States. Without significant
changes to the existing framework, brands will continue to lose
the war on fake toys.
This hearing is timely, with the holiday season around the
corner, during which around 50 percent of the toy industry's
annual sales are conducted. When I asked one of our larger toy
company members with a robust IP program for their overall
thoughts of the state of play of counterfeits, their response
was, ``We are gearing up to be run over in the fall.''
The Toy Association has been working with e-commerce
platforms and brand owners to improve communication and discuss
our concerns. Toy Association members Amazon and Walmart and
nonmember Alibaba have been directly engaged with our members
in an effort to reduce the number of unsafe counterfeit toys on
their marketplaces.
In January of this year, The Toy Association released a
paper, ``The Real Threat of Fake Toys,'' exploring the factors
contributing to the rise of counterfeit goods sold through e-
commerce platforms and some possible solutions. Specifically,
the white paper looked at the following:
First, e-commerce creates a low hurdle to sellers, giving
illicit sellers near-unfettered access to U.S. consumers. More
must be done to ensure the legitimacy of sellers and to provide
transparency into who is selling on the marketplaces. And more
must be done to prevent identified illicit sellers that have
been taken down from reappearing on marketplaces, selling the
same exact products.
Increased and improved vetting of sellers prior to joining
marketplaces, consistent data requirements across platforms,
and improved information-sharing would all be possible
solutions to address this issue.
Second, the burden of enforcement is disproportionately
placed on the rights-holders. Small businesses are at a
significant disadvantage when it comes to tackling
counterfeits.
While platforms have established programs to help brands
remove counterfeit listings, many of these programs are
reactive and require constant vigilance and engagement of the
brand owner within each individual platform. Moreover, some
platforms offer added protections to more important brands,
putting small businesses at a further disadvantage.
We encourage Congress to explore whether marketplaces
should have greater liability to ensure the authenticity and
the safety of the products they sell. Without liability, the
incentive for platforms to police their own marketplace is
weak, as they are profiting from the sales of counterfeit goods
with little to no risk.
And, third, consumer awareness is a critical component to
reducing the prevalence of counterfeits, as consumers are
largely unaware of the scope of the problem and are often
unable to distinguish between known and illicit sellers on
marketplaces. Some suggestions to solve this problem include
increasing transparency into the identity of the seller and
educating consumers on smart online shopping.
We appreciate that platforms have been willing to engage
with us on these concerns and have taken some meaningful steps
in a positive direction. However, as it stands today,
legitimate toy brands that sell in brick-and-mortar stores are
playing by one set of rules and foreign sellers that exploit
marketplaces are playing by another set of rules or are not
playing by rules at all. Without significant changes to level
the playing field, we will be fighting a losing battle.
Thank you again for your attention to this matter. I look
forward to any questions you might have.
[The statement of Ms. Mond follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Georgia. Thank you.
We will now proceed under the 5-minute rule with questions,
and I will begin by recognizing myself for 5 minutes.
Professor Fromer, do you think there are gaps in the
current trademark law that would prevent the PTO from
effectively addressing trademark cluttering?
Ms. Fromer. Thank you.
Yes, I do. I think that one of the challenges that
currently face businesses that are trying to operate is the
ability to cost-effectively remove unused marks from the
register.
The studies that are out there indicate that the average
cost of a trademark opposition ranges from $150,000 to
$500,000, whereas another one estimates the median cost to be
$95,000, which means that many small businesses will throw up
their hands and give up before actually challenging a mark that
is not being used.
In addition, as we heard in the previous panel, I think it
would be helpful for the PTO to have more authority, take more
initiative to audit crowded parts of the register to cull marks
that are not being used.
Mr. Johnson of Georgia. Thank you.
What are the impacts on consumers of trademark cluttering?
Ms. Fromer. So consumers are thought to have the advantage
from trademarks of having minimized cost--that is that they can
locate quality products more effectively through the shortcut
of a mark without having to investigate that.
The more crowded the trademark register is, the harder it
is for a consumers effectively to do that, because marks are
closer together, there are many more marks they have to
process, and they have to try to remember marks that are more
cumbersome, longer, more complex. And so trademark law does not
do its job of helping consumers in the way that it could with a
less crowded register.
Mr. Johnson of Georgia. Thank you.
Mr. Brody, as you stated, some courts that have discarded
the rebuttable presumption of harm say that the Supreme Court's
logic in eBay is not limited to patent cases but that it
applies to all types of cases involving injunctive relief.
Why should trademarks be held to a different standard if
the principles in eBay are applied across all types of cases
and not just patent infringement cases?
Mr. Brody. Thank you, Mr. Chairman.
Trademark harm, as members of the subcommittee have noted
today, is a unique type of harm to businesses and also includes
harm to consumers. This is a component that does not exist in
patent law. And it is, as a result of the unique type of harm,
very difficult to compensate trademark owners for infringement
or dilution when it arises. And it also doesn't do anything for
the consumer, even if the trademark owner is compensated for
infringement.
That is why embedded in the Lanham Act is strong injunctive
relief and the availability of injunctive relief.
The eBay case looked at a statutory structure in which
there already was a guaranteed monetary compensatory relief for
patent owners who proved infringement in the form of a
reasonable royalty. There doesn't exist any such guarantee in
the trademark law.
And so what happens, if money damages are far from
guaranteed and are, in any event, an inadequate remedy and
courts are making it more difficult to obtain injunctions,
trademark owners really have a situation where they have no
effective relief available at all. It is an injury without an
effective remedy. And that is what we are asking to be
corrected.
Mr. Johnson of Georgia. All right. Thank you.
In the interest of time, I am going to yield now for 5
minutes to the ranking member of the subcommittee, Mrs. Roby.
Mrs. Roby. Thank you, Mr. Chairman.
For Mr. Cammiso and Mr. Barchiesi and Ms. Mond, when
looking at all of the online marketplaces, are there
marketplaces that are more effective in combating counterfeits?
And what best practices should marketplaces ploy to stop the
sale of counterfeits? And are there specific actions or
programs that more effective marketplaces have in place that
you believe have shown success in combating this issue?
So if you would just go down the line and share your
thoughts, please.
Mr. Cammiso. Thank you, Ranking Member Roby.
All the marketplaces we deal with have programs in place.
Some of those programs are more effective than others, and some
are more aggressive than others.
What we found is that most of them, if not all of them,
require brand-holder, rights-holder participation, and to
participate in each of those programs requires time and
resources. It is very cumbersome, and we don't think that the
solutions that are provided are scalable to the extent that
they need to be.
Mrs. Roby. Okay.
Mr. Barchiesi. What we have found is our initial program,
going back to 2010, working with the credit card companies to
follow the money around the world and shut down merchant
accounts has been the most effective program. It is touted over
in Europe and other places.
And the reason I say that is, the reason we have
partnerships with Amazon, with Alibaba, is because we started
to work with the credit card companies to impact the merchant
accounts on those platforms, and then they came forward, and
then we started programs with them.
Just in regard to the specific platforms, we have had much
success with Alibaba. We stood by them when they were the worst
platform out there, and we have seen so much progress because,
number one, I deal with the people at the top of Alibaba;
number two, they have made substantial financial and resource
investment to come up and be probably, you know, one of the
more progressive platforms.
Mrs. Roby. Thanks.
Ms. Mond. I would echo the comments of the previous two
responses.
Certainly I think that one of the biggest challenges that
our members have is that they have to engage with each
individual platform, and that it is very resource-intensive.
And even if one platform clears up all the counterfeits, then
all the counterfeits move to another one or they move to the
new platform. We are hearing about new issues that keep on
popping up.
So I think that one of the big issues with each of these
programs is that they are reactive, that the counterfeits are
already on the website. And so what we would like to see all
the platforms do is do more investment into a proactive
approach to prevent the counterfeits and prevent the
counterfeiters from being online and from staying online in a
lot of cases.
Mrs. Roby. Yeah. Thank you. I appreciate that.
Mr. Brody, in a court decision published earlier this
month, the Third Circuit held that Amazon may be found liable
for defective products sold by third-party vendors through its
marketplace. In that case, Oberdorf v. Amazon, the court noted
that, even though a third-party vendor had listed for sale the
defective product, Amazon could not look the other way and
escape responsibility, given its degree of involvement in
marketplace transactions.
What are your views on whether online platforms should be
responsible for what they sell and distribute just like
physical marketplaces? And shouldn't the same reasoning apply
regardless of whether the defective products at issue are
physical items or digital goods?
Mr. Brody. Thank you, Congresswoman Roby.
Under the Lanham Act, certainly resellers are equally
liable for infringing marks or for counterfeiting, so there is
a statutory basis for seeking relief against those parties.
Whether they are typically the most effective target for
enforcement efforts or not, I think, depends a lot on the
particular facts of the case.
Mrs. Roby. Okay.
Mr. Chairman, also, in the interest of time, I am going to
ask this question, and then if everyone on the panel wants to
submit an answer for the record, that probably would be best.
But do you believe Congress should look at taking
legislative action to combat counterfeits on online
marketplaces? And if so, what changes in laws do you each think
would be effective?
And I would just appreciate it if you would each take that
for the record and submit it to this subcommittee for our
consideration as we move through this very, very, very
important issue.
Mrs. Roby. And, Mr. Chairman, thank you so much for this
hearing today, and look forward to continuing to work with you
on this issue.
Thank you all for being here.
Mr. Johnson of Georgia. Thank you.
Next, 5 minutes of questions from the gentleman from
Florida, Mr. Deutch.
Mr. Deutch. Thank you very much.
And thanks to the witnesses. My apologies. I had to run to
another meeting, but glad to be back to spend some time with
all of you. And I appreciate your written testimony.
And, Mr. Barchiesi, in your written testimony, you said,
``Counterfeiters will take advantage of any available means by
which to get their products into consumers' hands.'' And so you
recommend this multifaceted approach to--when companies verify
their sellers more robustly and data on known counterfeiters is
shared between law enforcement and CBP and e-commerce sites and
then among e-commerce sites themselves.
What do you do to incentivize e-commerce sites to adopt
these anti-counterfeiting measures when sometimes it is just
more profitable for them to ignore the counterfeiters
altogether?
Mr. Barchiesi. So thank you for that question.
And, as we speak, the Intellectual Property Center that is
also overseen by the Department of Homeland Security is hosting
a meeting today with my staff, with all the major platforms,
with Amazon, with eBay, with the shippers. And we have been
working on this project for quite some time.
And what we are looking to do is basically, collectively,
build out a database with two buckets in it. The first bucket
would be private data-sharing between the platforms so that
they could keep bad actors out to begin with, which is the most
difficult part. So they would share information so that a bad
actor is not jumping from one platform to the other, like
Rebecca had mentioned. The second one is, the bad actors that
had been confirmed, that information would be pushed over to
Homeland Security, and then that would be able to do criminal
investigations.
So this is a project we have been working on now for
several years. I think because of the intervention of the White
House memo, it seems like they have had much more incentive now
to be there and invest in this. And we are very hopeful that
this is going to take place in a reasonable amount of time.
Mr. Deutch. And maybe it is premature and I should wait to
ask until after the meeting, but with some of your
suggestions--proof of identity, business organization
documents, licensing agreements--have you seen a willingness
from e-commerce sites to adopt any of these regulations, or is
it an area where Federal policy may be necessary to fill that
gap?
Mr. Barchiesi. I think Federal policy is necessary for
that, because, unfortunately, or fortunately, in China they
require a national ID. So if you are selling on a Chinese
platform, you have to provide national ID, whereas U.S.
platforms, anyone could say they are anybody and sell on these
platforms. I haven't seen any progress on that.
Mr. Deutch. That is really helpful.
Professor Fromer, I appreciate your focus on the dangers of
having unused trademarks cluttering up the register. My
understanding is that the process for removing them is
burdensome, especially for smaller businesses.
Can you just talk me through the cost of challenging
trademarks that appear to be fraudulent or, at least,
ineligible for registration using the process that is in place,
the opposition process at the Trademark Trial and Appeal Board?
Ms. Fromer. Sure. Thank you for the question.
So the current two processes for challenging these
fraudulent specimens of use are generally opposition and
cancellation. Opposition, for the most part, has to happen
within 30 days of publication of a trademark. So it is a
limited window that third parties have to be vigilant for. If
they miss that window, they won't be able to oppose that mark
which is a limitation of opposition. Cancellation can happen on
any grounds within 5 years of registration but on much more
limited grounds after 5 years, which is another limitation of
cancellation.
Not to mention the cost that goes into this, which I think
is a challenge for small businesses. It would really be helpful
to have an ex parte possibility that is much lower-cost in
nature to challenge fraudulent or unused marks.
Mr. Deutch. Great.
Terrific. I appreciate everyone being here. I appreciate
those really helpful suggestions.
And I yield back the balance of my time.
Mr. Johnson of Georgia. Thank you.
The committee will next hear from Mr. Johnson for 5
minutes.
Mr. Johnson of Louisiana. Thank you.
If you are not familiar with our buzz signal, that is a
vote. So we are all going to talk real fast here for a few more
minutes.
I just want to briefly note, we have discussed Walmart here
today, and in addition to putting the letter into the record,
they have sent a top representative, who is present, and we
appreciate that.
So thank you for being here.
Mr. Cammiso, I am encouraged by the fact that the committee
has chosen to take up this subject today. And in your written
statement, you touch on the concept of further developing the
nexus between marketplace sellers and consumers with law
enforcement to catch bad actors. You were just discussing that
a few moments ago.
Could you elaborate briefly to the accountability model you
suggest in your statement? And do you believe there are
voluntary steps that could be taken currently between
marketplace, stakeholders, and law enforcement that would begin
to curtain the problem?
Mr. Cammiso. Sure. Thank you, Congressman Johnson.
There simply has to be higher penalties for sellers that
are, in essence, criminals. And it can't be just to have them
delisted and open up another account with another email address
or another account name. There has to be something more
substantial.
At the other end of that, the platforms have this
information or should have this information on the sellers that
are selling these dangerous products. As I said, the penalty
should not be just to remove the listing; the penalty should be
to pursue prosecution. And the people who can do that are
Homeland Security with help from the stakeholders.
Mr. Johnson of Louisiana. What amount of penalty do you
think would be sufficient to be a deterrent? I mean, I guess it
depends on the industry or who is involved, at what level. I
mean, how do we determine that? Do you have a suggestion? It
bears a lot of thought, I guess, right?
Mr. Cammiso. I am not prepared to answer that question. It
has to be higher than what it is now.
Mr. Johnson of Louisiana. Yeah.
Mr. Cammiso. We have seen cases where people selling
counterfeit airbags have been given very light sentences--in
some cases probation, in other cases very minimal jail time. In
order to deter these criminals, the penalties should be higher.
Mr. Johnson of Louisiana. Got it.
Professor Fromer, does the PTO have the authority to remove
a mark it should not have registered, or does the agency need
additional statutory authority to remove fraudulent trademarks
that it made a mistake with?
Ms. Fromer. I think that the PTO needs to be given more
statutory authority in this instance. There is a lot of power
until registration happens; after that, power becomes much more
limited.
The only exception to that that I know of is the recent
permanent auditing program that was put in place, where the PTO
has been able to get registrants not using their marks in whole
or in part to delete parts of their registration. But it would
be nicer to see that expanded more broadly, given how many
unused marks seem to be on the register.
Mr. Johnson of Louisiana. So if Congress gives the PTO more
authority to remove fraudulent trademarks, what should we
include in that legislation to ensure that the PTO is not going
to misuse that authority to remove properly granted trademark
registrations? I mean, there is a big distinction there, right?
Ms. Fromer. Yeah. No, it is a wonderful question, because
of course this has to be balanced.
And I think one of the things that has emerged today is
that the PTO is looking forward and becoming better--which is
great--at using technology, instructing examiners to deploy
certain resources or lines of inquiry, but that is not
backward-looking at all, which means that things end up sitting
on the register that, if they had been applied for now, might
not have been.
And I think it would be helpful to instruct the PTO to, at
least in certain random audits or audits in crowded areas of
registration, to deploy these new techniques as well in this
backward-looking way to remove unused marks from the register.
Mr. Johnson of Louisiana. Thank you.
I have 50 seconds left. I wonder what Mr. Cammiso, Mr.
Barchiesi, or Ms. Mond would--how you would respond to this, or
maybe all three of you could, briefly.
Should marketplaces share the identity of the seller of
counterfeits with the company whose brand their counterfeiting,
with other marketplaces, with customers, law enforcement, et
cetera? What do you think about that?
Mr. Cammiso. Yes, I believe so to help us to pursue these
criminals.
Mr. Barchiesi. As I just mentioned earlier, we are working
with all the platforms, the shippers, and Homeland Security to
do just what you mentioned.
Mr. Johnson of Louisiana. Good.
Do you agree?
Ms. Mond. Absolutely.
Mr. Johnson of Louisiana. And at what point should a
marketplace remove a seller? After the sale of one or two or
three confirmed--I can kind of guess you are going to say after
the first strike, right? One strike, you are out, right?
Mr. Cammiso. One strike, you are out.
Mr. Johnson of Louisiana. I think I agree.
Would you all agree as well?
Ms. Mond. That would be the ideal system. We understand
some sort of leeway in that, but certainly not more than three.
Mr. Johnson of Louisiana. Thank you. I am out of time.
Mr. Johnson of Georgia. The gentleman's time has expired.
Five minutes for Mr. Lieu.
Mr. Lieu. Thank you, Mr. Chair.
Mr. Cammiso, the video you showed of counterfeit auto parts
was highly disturbing, and thank you for showing that video. I
have a question about how do these parts get into the
marketplace.
So let's say you are driving and a warning light comes on
saying something is wrong with your airbag. If you take it to a
dealer, am I correct to assume that the chances of the new
airbag being counterfeit would be low?
Mr. Cammiso. It would be zero.
Mr. Lieu. It would be zero. Okay. And is that because the
dealer is using an OEM part, original equipment manufacturer
part, or is that a different thing?
Mr. Cammiso. Dealers get their OE parts directly from us,
and we are confident in our supply chain.
Mr. Lieu. Okay.
So let's say you go to an auto repair shop that says I am
also going to give you an OEM part, are the chances of that
being counterfeit higher?
Mr. Cammiso. I can't speak for independent repair
facilities. They have multiple avenues from which they source
their parts. They need to be cognizant of where they are
getting them from.
Mr. Lieu. Okay.
And then, if it is an after-market part, it doesn't pretend
to be an OEM part, so that is not a counterfeit issue, right?
Mr. Cammiso. Not at all.
Mr. Lieu. All right. And so the counterfeiting is appearing
at non-dealer places; am I right to assume that?
Mr. Cammiso. Correct.
Mr. Lieu. Okay. Thank you. That is helpful.
Ms. Mond, a question for you about the safety of toys. So
if it is a toy made by a U.S. company here, it has to meet a
lot of different laws and regulations. So you can't, for
example, have lead paint in toys, correct?
Ms. Mond. That is correct. Regardless of where a toy is
manufactured, if it is sold here in the United States, it needs
to comply with those toy safety standards.
Mr. Lieu. So let's say a toy with lead paint is being
manufactured in a foreign country and then being sold on an e-
commerce platform, a consumer would not know that, correct?
Ms. Mond. That is correct. And a lot of the safety
requirements that apply to toys that are sold in brick-and-
mortar stores are being completely skirted, and toy
counterfeiters aren't complying with those requirements.
Mr. Lieu. If a consumer would buy a toy on an e-commerce
platform, would they know where it is coming from? Do they have
any idea?
Ms. Mond. No, not necessarily. In a lot of cases, a
consumer might think that they are buying a legitimate toy but
they are, in fact, purchasing a toy from a third-party vendor
that is not necessarily--they might be selling a counterfeit or
they might be selling an unsafe product.
Mr. Lieu. All right.
So let's say an e-commerce platform is selling a hovercraft
that is counterfeit, and they have been told it is counterfeit,
they know it is counterfeit, and then a family buys it, house
burns down. Is that e-commerce platform liable for knowingly
selling an item that they knew was counterfeit?
Ms. Mond. From what I understand, there was a recent court
case that has changed the liability for third-party
marketplaces. And so we are certainly encouraged that that
conversation is shifting in that direction.
But that said, in the past, the liability for marketplaces
has been limited in instances where they are knowingly selling
unsafe products.
Mr. Lieu. Thank you.
And if you could submit to this committee some ideas for
making our laws better, that would be helpful.
Ms. Mond. I am happy to do that.
Mr. Lieu. Thank you.
With that, I yield back.
Mr. Johnson of Georgia. I thank the gentleman.
We shall now hear from Mr. Cline for 5 minutes.
Mr. Cline. Thank you, Mr. Chairman.
I thank our witnesses for being here.
Mr. Brody, can you talk about the challenge of quantifying
the harm to reputation?
Mr. Brody. Precisely. That is the problem. The courts long
recognized that consumer confusion is a type of harm that is
especially difficult to quantify.
And it is not surprising that when you look at the vast
number of trademark decisions that have come down over the
years, there aren't a high percentage of them that involve
damages awards. Typically, the relief--and I think the ranking
member before you noted this, that the game was all about
getting the injunction, and that is why presumption was so
important.
Without that, proving harm typically involves having to
prove diversion of sales and then tracing back those sales to
someone who was actually confused. And that is a chain of
causation that in a court case can be extremely challenging for
the plaintiff.
Mr. Cline. Right. Well, I agree with you that, in light of
the Supreme Court's failure to act, it is time for us to act.
So I appreciate your comments, appreciate all the witnesses'
comments.
Mr. Chairman, I yield back.
Mr. Johnson of Georgia. Thank you.
That will conclude today's hearing, and I want to thank
each witness for your testimony today.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
Mr. Johnson of Georgia. And, once again, thank you very
much for your time and attention and your testimony today.
With that, the hearing is adjourned.
[Whereupon, at 11:14 a.m., the subcommittee was adjourned.]
APPENDIX
=======================================================================
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]