[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
DESIGN LAW--ARE SPECIAL PROVISIONS NEEDED TO PROTECT UNIQUE INDUSTRIES? 

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 14, 2008

                               __________

                           Serial No. 110-107

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                 HOWARD L. BERMAN, California, Chairman

JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia               TOM FEENEY, Florida
ROBERT WEXLER, Florida               LAMAR SMITH, Texas
MELVIN L. WATT, North Carolina       F. JAMES SENSENBRENNER, Jr., 
SHEILA JACKSON LEE, Texas            Wisconsin
STEVE COHEN, Tennessee               ELTON GALLEGLY, California
HANK JOHNSON, Georgia                BOB GOODLATTE, Virginia
BRAD SHERMAN, California             STEVE CHABOT, Ohio
ANTHONY D. WEINER, New York          CHRIS CANNON, Utah
ADAM B. SCHIFF, California           RIC KELLER, Florida
ZOE LOFGREN, California              DARRELL ISSA, California
BETTY SUTTON, Ohio                   MIKE PENCE, Indiana


                     Shanna Winters, Chief Counsel

                    Blaine Merritt, Minority Counsel








































                            C O N T E N T S

                              ----------                              

                           FEBRUARY 14, 2008

                                                                   Page

                            OPENING REMARKS

The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Chairman, Subcommittee on Courts, 
  the Internet, and Intellectual Property........................     1
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Ranking Member, Subcommittee on 
  Courts, the Internet, and Intellectual Property................     3

                               WITNESSES

Mr. William T. Fryer, III, Professor of Law, University of 
  Baltimore School of Law, Baltimore, MD
  Oral Testimony.................................................     6
  Prepared Statement.............................................     9
The Honorable William D. Delahunt, a Representative in Congress 
  from the State of Massachusetts
  Oral Statement.................................................    19
  Prepared Statement.............................................    19
Mr. Narcisco Rodriguez, Designer, on behalf of the Council of 
  Fashion Designers of America, New York, NY
  Oral Testimony.................................................    21
  Prepared Statement.............................................    24
Mr. Steve Maiman, Proprietor, Stony Apparel, Los Angeles, CA
  Oral Testimony.................................................    30
  Prepared Statement.............................................    31
Mr. Carl L. Olsen, President, Ark Design, on behalf of the 
  Alliance of Automobile Manufacturers, Washington, DC
  Oral Testimony.................................................    33
  Prepared Statement.............................................    35
Mr. Jack Gillis, Director of Public Affairs, Consumer Federation 
  of America, Washington, DC
  Oral Testimony.................................................    36
  Prepared Statement.............................................    38

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Howard L. Berman, a 
  Representative in Congress from the State of California, and 
  Chairman, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................     1
Prepared Statement of the Honorable Howard Coble, a 
  Representative in Congress from the State of North Carolina, 
  and Ranking Member, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................     3
Prepared Statement of the Honorable Bob Goodlatte, a 
  Representative in Congress from the State of Virginia, and 
  Member, Subcommittee on Courts, the Internet, and Intellectual 
  Property.......................................................    51

                                APPENDIX

Material Submitted for the Hearing Record........................    63


DESIGN LAW--ARE SPECIAL PROVISIONS NEEDED TO PROTECT UNIQUE INDUSTRIES?

                              ----------                              


                      THURSDAY, FEBRUARY 14, 2008

              House of Representatives,    
      Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:14 p.m., in 
Room 2237, Rayburn House Office Building, the Honorable Howard 
Berman (Chairman of the Subcommittee) presiding.
    Present: Representatives Conyers, Berman, Delahunt, 
Sherman, Schiff, Coble, Smith, Goodlatte, and Issa.
    Staff present: Christal Sheppard, Majority Counsel; Eric 
Garduno, Majority Counsel, Rosalind Jackson, Professional Staff 
Member.
    Mr. Berman. The hearing of the Subcommittee on Courts, the 
Internet, and Intellectual Property will come to order, if 
Congressman Russo is okay with that?
    I would like to begin by welcoming everyone to this 
hearing, entitled, ``Design Law--Are Special Provisions Needed 
to Protect Unique Industries?'' We are not sure what the 
schedule is like, but the situation is this. One party in this 
place did something. The other party is mad about it. We are 
not clear whether the strategy coming up is lots of motions on 
the House floor or passive resistance, so we are not quite 
clear about how much uninterrupted time we will have before we 
have to go for votes.
    So what we decided to do, the Ranking Member and I, is to 
dispense with our opening statements, to include them in the 
record. Is everybody else on the Subcommittee okay with that? 
Then that is what we will do. But first, just for a few 
comments, I will turn it over to the Ranking Member, Mr. Coble.
    [The prepared statement of Mr. Berman follows:]
Prepared Statement of the Honorable Howard L. Berman, a Representative 
in Congress from the State of California, and Chairman, Subcommittee on 
            Courts, the Internet, and Intellectual Property
    Our hearing today is about design rights. I must profess I am no 
expert in the art of design--however, design rights are a longstanding 
and fundamental area of intellectual property law. Like patents and 
copyrights, design protection fosters the creation of original designs 
by providing exclusive rights in a design to its creator.
    In the United States, while trade dress and copyright can in some 
cases provide protection for unique designs, the chief means of 
protecting designs is through patents. Design patents, like other 
patents, must pass a substantive examination by the United States 
Patent and Trademark Office before being granted. The subject matter of 
a design patent must be novel, non-obvious, original, ornamental, and 
applied to an article of manufacture for it to qualify for protection. 
Design patents have existed since 1842 and have a well developed 
jurisprudence, though there may be changes in the near future. The 
Federal Circuit has agreed to review en banc the Egyptian Goddess case, 
which could lead to some significant changes in how design patent 
infringement will be analyzed. Nevertheless, design patents are widely 
used by various industries. According to the latest statistics, almost 
21,000 design patents were granted in 2006 and companies like Sony, 
Nike, and Black & Decker were among the top recipients.
    However, some argue that design patents are ineffective, either 
because the hurdles to securing design patents are too onerous, or 
because it takes too long to get a design patent. Since at least the 
1970's there has been a policy debate in Congress as to whether to 
expand design protection beyond design patents. The record leading up 
to the 1976 Copyright Act shows that Congress seriously considered 
establishing a broad, sui generis design right. After multiple 
attempts, a limited design right in the form of the Vessel Hull Design 
Protection Act was passed in 1998.
    The Vessel Hull Design Protection Act protects only original vessel 
hull designs. Unlike design patents, the Copyright Office administers 
registrations and there is no substantive examination to ensure 
applications meet the originality requirement. Instead, originality is 
left to be determined at trial by a court. Additionally, vessel hull 
design protection lasts 10 years while design patents may last up to 14 
years.
    So today, we have a number of mechanisms which provide design 
protection--design patents, vessel hull design protection, trade dress 
and copyright. Each sets out different standards in order to qualify 
for protection, a different scope of protection, and a different term 
of protection. Given this backdrop, there are a number of questions I'd 
like to cover today.
    The language of the Vessel Hull Design Protection Act was 
``designed'' to accommodate additional subject matter should Congress 
decide it was necessary. Therefore, if we are to consider the Act as 
the starting point for a broad design right, we must ask whether it has 
been effective for vessel hulls. Are vessel hull makers using the 
protection? Is the protection adequate? Are the amendments made by S. 
1640 necessary? How have courts dealt with determining originality and 
infringement? And, are there other ways to improve the Act?
    Depending on the answer to these questions, we may consider if and 
how to expand design rights under the Vessel Hull Design Protection Act 
to fashion designs. Coming from the Los Angeles area, I am particularly 
interested in what impact it may have on the local fashion industry. 
According to the California Fashion Association, in Los Angeles County 
alone, there are over 68,000 jobs in apparel manufacturing and it 
constitutes the largest manufacturing sector in the county. There are 
also over a 1000 independent fashion designers in the region.
    Therefore we need to ask some general questions: Do fashion 
designers need design protection to be motivated to produce new 
designs? What impact would extending protection to fashion designs have 
on the apparel companies, designers and retailers of the Los Angeles 
area and throughout the country? And then some specific questions which 
can also be asked about H.R. 2033: How similar must a design be before 
you can enforce the design right? How does a court determine whether 
placement of the zipper on the left vs. the right is an original idea?
    Finally, other industries may want to consider making use of the 
Vessel Hull Design Protection Act. At one time car makers were 
interested in including exterior car parts within the scope of the Act 
because they feared that their design patents would not stand up to the 
scrutiny of a trial. However, it seems that a recent decision by the 
International Trade Commission has increased their confidence in design 
patents as a means to protect car parts. This decision has led to a 
backlash by generic part manufacturers, insurance companies and 
consumer advocacy groups. They recommend instituting a repair clause 
exception that would prevent a design patent holder from enforcing the 
patent against generic replacement auto parts. However, what is the 
cost of such an exception to the intellectual property system? Is there 
a solution which allows for robust patent protection while maintaining 
an adequate secondary market? And, more fundamentally, are design 
patents the right mechanism for protecting auto parts? Should auto 
parts be protected under the Vessel Hull Design Protection Act?
    There must be careful consideration given to the balance inherent 
in intellectual property rights. On one hand, we want to encourage 
innovation and creativity. On the other, we do not want to stifle the 
free flow of ideas nor place burdens so great that the public does not 
benefit from the innovation and creativity we hope to inspire. Finding 
the right balance is never easy. But, I believe that the testimony of 
our witnesses today will aid us in crafting that balance for design 
rights in vessel hulls, fashion and auto parts.

    Mr. Coble. I think you pretty well said it, Mr. Chairman. 
The future is nervously uncertain right now procedurally. I am 
pleased that you and I will waive our opening statements. I 
have no problem with that at all. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Coble follows:]
 Prepared Statement of the Honorable Howard Coble, a Representative in 
    Congress from the State of North Carolina, and Ranking Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Berman. All right. Five of the six witnesses are here. 
The other one I think is voting on the House floor, and that is 
Congressman Delahunt. So when he gets in, we will introduce 
him. But let me start in terms of the order of testimony.
    William Fryer is a professor of law at the University of 
Baltimore, where he teaches several courses on intellectual 
property law. He has been a patent examiner, a patent attorney, 
and a Professor of Law at three other institutions. Professor 
Fryer has chaired the Industrial Design Committee of the ABA's 
Intellectual Property Law Section, and he played an important 
advisory role in the crafting of the Vessel Hull Design 
Protection Act.
    Narcisco Rodriguez is an acclaimed fashion designer and a 
Member of the Board of Directors of the Council of Fashion 
Designers of America. After graduating from the Parsons School 
of Design, in my area, he worked for several of the biggest 
names in the fashion industry before launching his own label in 
1998. He was the first designer ever to win back-to-back CFDA 
awards for outstanding achievement in fashion, and he also 
holds a Vogue VH1 Fashion Rocks award for best designer.
    Steve Maiman is a co-owner of Stony Apparel, an apparel 
design and manufacturing firm based in Los Angeles, California. 
Stony Apparel employs about 140 people and designs, 
manufactures and distributes women's and children's apparel to 
Sears, J.C. Penney, Dillard's and others. Mr. Maiman has worked 
in the fashion business for more than 30 years.
    Carl Olsen is Director of Ark Design, an industrial design 
firm based in Detroit, Michigan. Mr. Olsen's work for the last 
13 years has been exclusively in vehicle design, though 
throughout his career he has worked on designing a variety of 
capital and consumer goods. Mr. Olsen has won several 
international awards for his auto designs. For 14 years, Mr. 
Olsen also served as chair of Transportation Design at the 
College for Creative Studies.
    Jack Gillis is director of public affairs for the Consumer 
Federation of America, the Nation's largest consumer advocacy 
organization. He is the author, coauthor or editor of over 60 
books, including ``The Car Book,'' ``The Car Repair Book,'' and 
``The Armchair Mechanic.'' Mr. Gillis has served as a 
contributing consumer correspondent for the Today Show. He also 
serves as the executive director of the Certified Automotive 
Parts Association, a nonprofit organization that sets standards 
and certifies the quality of automobile body parts.
    I think we will start with the panel. All of your entire 
statements will be included in the record in their entirety. We 
would ask you to try to limit your comments to about 5 minutes, 
and then after all of you have finished, the Committee will 
bring questions to you.
    Mr. Fryer?

     TESTIMONY OF WILLIAM T. FRYER, III, PROFESSOR OF LAW, 
      UNIVERSITY OF BALTIMORE SCHOOL OF LAW, BALTIMORE, MD

    Mr. Fryer. Thank you, Mr. Chairman. I will try to be 
efficient. I know you have time constraints.
    My job is to bring you up to date on the basic laws related 
to designs. That is the first part. The second part is to 
discuss briefly the Vessel Hull Design Protection Act in 
general, and specifically as to its amendment. Then I will 
discuss the fashion design bill that is pending. Finally, I 
will look ahead to see what is going on around the world in 
related events.
    My introduction to design law in the United States is 
fairly simple. We have design patents which take time to 
obtain. They don't protect things right away, and they are 
expensive usually. We have trademarks that do not usually 
protect designs, and certainly they take time to get the 
protection. We have copyright, which actually has some 
significant specific areas of design protection that are 
useful, but it has built into it separability that you can not 
have protection for designs that are associated with the 
functional parts of products. This requirement pretty much 
eliminates copyright protection.
    Congress in its wisdom decided to set up two separate sui 
generis, or independent laws. They are not copyright. They are 
not trademark. They are not patent. The first one was the 
Semiconductor Chip Act. I do not know whether you remember that 
law. The industry came to Congress and said, ``We really have a 
tremendous economic value here in this country for our chip 
design.'' Basically these chips were images. They were images 
of the chip layers. They used the design concept to protect 
them.
    As far as I know, it has been very successful. The basic 
idea was that once you make it, you put it on the market and it 
was protected. Then after it was in the market within 2 years 
you had to file an application for registration, which just 
basically showed the design and then the Copyright Office, 
which is a very efficient administrative agency, would just 
look to see that it was within the statute and then register it 
in a few months.
    They had a very efficient law that was working. Then when 
the next industry came to them, the boating industry--and I 
have to confess I have a boat, and I am Coast Guard crew-
trained, auxiliary member, so I have knowledge in that area. 
The boat industry has the problem of the molding processes that 
made it so easy to copy the design of the boat.
    Congressman Coble was the leading person on this 
legislation, and he and others were able to put together a 
bill. Actually, they just took the same bill that the chip bill 
used and added the specifics for the boat hull. The word 
``hull'' is a little confusing. We think of deck and hull. The 
statute had it written out, but the traditional uses of these 
words were a little bit confusing, and that is one of the 
problems.
    But the statute worked. A boat design owner would go and 
file within 2 years, and register, and get the protection for 
up to 10 years. So it was essentially like the chip law. And 
that chip law actually went back to legislation that had not 
passed, but had been considered and that was basically what was 
the structure of the vessel hull law.
    So now we are here today. Why are we here? We are basically 
looking at a very small amendment to clarify what is a hull, 
what is a deck, and basically provide clarity that boat 
manufacturers can get protection for the hull separately. They 
can get protection for the upper part of the boat, the super-
structure included. It is almost a procedural point that we 
have to kind of clarify. So that is where we are today. Believe 
it or not, I have finished with the vessel hull part.
    The next part to address is the design for fashion that 
came along recently. All these industries have their unique 
concerns. Some people ask, well, why do we do it industry-by-
industry? Well, they have significant concerns and they come to 
Congress with these concerns. The fashion design people have 
been inundated with copying, piracy and so forth. So they said, 
well, what could we do?
    What they did was to take the same legal structure more or 
less that the Chip Act had and the Vessel Hull Act had, but 
they set up a structure which was flexible or limited--not as 
much protection. They have 3 months to file their application, 
but while the design is in the market, at the beginning, it is 
protected. This point is the important thing. The pirates 
cannot come in and basically rip them off, so the fashion 
design legislation uses the same concepts of the other two 
laws: chip and boat.
    Basically that is the picture we are looking at now. They 
have up to 2 years protection. I know that I probably should 
finish at this point, but I just want to say that I have 
written an article and other things about the fact that this 
design protection--protection when you go into the market, the 
entry-level protection, is really a trend across the world that 
countries are using. The European Union has put it in its 
community design.
    For that reason, I will not go through my conclusions. I 
will just end at that point.
    Thank you.
    [The prepared statement of Mr. Fryer follows:]
              Prepared Statement of William T. Fryer, III

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Berman. Thank you.
    We have a quorum call up. My guess is we will be around 
here during that time.
    Mr. Issa. I suggest we pair and stay here, Mr. Chairman. 
[Laughter.]
    Mr. Berman. This is one case where the pairing concept 
doesn't quite work. [Laughter.]
    Okay. So we are going to have to recess. Maybe we can hear 
Congressman Delahunt. I am going to skip the introduction of 
Congressman Delahunt. I am just going to say it is probably 
better than the introduction I would give if I were giving one. 
[Laughter.]
    Mr. Delahunt. I am sure it is. I will achieve brevity here. 
I have a rather lengthy statement----
    Mr. Berman. It will be entered in the record.

       STATEMENT OF THE HONORABLE WILLIAM D. DELAHUNT, A 
   REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS

    Mr. Delahunt [continuing]. That I will submit for the 
record. I will waive my oral testimony. It is self-explanatory. 
Let me just say that the issue facing the fashion design 
industry now is critical. We hear much about the economy. The 
debate as to whether we are in recession or on the cusp of 
recession is ongoing. Whatever it is, if we don't take steps 
now to protect intellectual property and deal with the issue of 
piracy, we are putting our entire national economy at risk.
    Clearly, in the area of intellectual property concerns, it 
is that segment of our national economy that produces a surplus 
in terms of trade balance. The estimate of piracy in terms of 
the issue that is the subject of one of the bills before us 
today amounts to $12 billion. For us to have passed a stimulus 
package and not recognize that we need to further protect those 
sectors that are producing a surplus for us is absurd and 
doesn't make sense.
    With that, I will yield back.
    [The prepared statement of Mr. Delahunt follows:]
      Prepared Statement of the Honorable William D. Delahunt, a 
       Representative in Congress from the State of Massachusetts
    Chairman Berman, Ranking Member Coble, Members of the 
Subcommittee--thank you for holding this hearing today and for inviting 
me to testify in support of H.R. 2033, the Design Piracy Prohibition 
Act, introduced by Congressman Goodlatte and myself.
    Yesterday, Congress and the President enacted into law a 
significant piece of legislation--the economic stimulus package. 
Notwithstanding some disagreement over what constitutes an effective 
stimulus, this legislation represents a consensus--a consensus that our 
nation's economy is in trouble and that Congress has a vital role in 
stemming the tide. In this effort, we must take seriously the 
protection and promotion of America's competitiveness, both in its 
traditional and emerging industries. To this end, it is critical that 
we lend our attention, and promptly, I would argue, to strengthening 
our nation's intellectual property laws to protect some of the most 
important emerging innovators in America today--fashion designers.
    The Chamber of Commerce, in its recent report, ``Economic Analysis 
of the Proposed CACP Anti-Counterfeiting and Piracy Initiative'', 
reminds us that ``the health of the US economy depends on a wide range 
of industries that rely on intellectual property to create and produce 
state-of-the-art products, and how . . . counterfeiting and piracy, 
therefore, serve to undermine the long-run competitiveness of the US 
economy.'' According to the Chamber, counterfeiting and piracy cost 
U.S. businesses $225 billion in revenue each year; of that, fashion and 
apparel piracy and counterfeiting account for a minimum of $12 billion.
    We have laws against counterfeiting apparel and footwear brands and 
pirating fabric designs; however, within these laws, a glaring hole 
exists which is putting at risk the very innovation we seek to 
encourage: we must enact laws against pirating fashion designs, which 
after all, is counterfeiting without the label.
    America has become the world leader in fashion design. This is not 
just an LA / NY phenomena, it's happening across America.
    Fashion design businesses are proliferating and growing. As they 
grow, so do the manufacturing, transportation, marketing, and 
publishing industries that support fashion design. This is not even 
including the television shows, cable networks, and internet sites 
devoted entirely to fashion, and most importantly, the innovations and 
creative works of American designers. I have even read that it's even 
reviving real estate values in areas where garment manufacturing 
businesses lost their jobs to Asian competitors.
    In my home state of Massachusetts, the Massachusetts College of Art 
and Design (MassArt) is now offering a bachelor's degree in Fashion 
Design to 4-year students. Some of these students have even gone on to 
win scholarships and recognition from the Council of Fashion Designers 
of America's merit-based Scholarship Program. Massachusetts' schools 
are not alone in recognizing the countless numbers of American students 
who strive to pursue fashion design as an academic and professional 
career.
    But of course--as we know from experience in other important areas 
of American intellectual property--when we lead the world in a creative 
industry, it soon will become the world's leading counterfeit and 
piracy victim.
    FBI, Justice and Commerce Departments report that China is growing 
an industry based on copying and exporting American fashion designs. 
This job drain is fostered by the speed with which a 3D picture can be 
sent across the globe to machines that can take a picture and perfectly 
copy the pattern, the DNA of the design.
    Sadly, the growth of the Chinese fashion piracy industry is also 
spurred by our lack of laws against it. It's legal!
    I read in the Wall Street Journal that in China, one city is 
devoted to making socks, another--kids' clothes, etc. We need to make 
sure we don't wake-up to find a Garment Knock-off City! They can create 
infrastructure in minutes.
    We are in tough economic times, as we were reminded during the 
holidays. Retail is a closely-watched barometer of the country's 
economic health. This January was the worst January for retail sales 
since 1969 (the year the International Council of Shopping Centers 
started keeping track of such). Though, as Women's Wear Daily reports, 
retailers are looking to designers to create unique and exciting 
designs to bring them out of the slump or otherwise improve their 
numbers, as they have in the past.
    So we really must ask ourselves: here we are with a real and proven 
growth opportunity for new jobs in America, new exports--ll based on 
the kind of intellectual property that has always advantaged our 
balance of trade. Why aren't we protecting it in the same way we 
protect and promote our other creative industries that are so important 
to our economy?
    Europe, Japan and India have protection for 15-25 years for 
registered designs and we have nothing. Clearly, it has fueled their 
success; one doesn't have to be a fashion expert to know that the 
European fashion industries are robust industries that play important 
roles in their economies.
    And in Europe (where in some countries they've had protection for 
over 100 years), their 15-25 year copyright protection for registered 
designs has spurred negligible litigation. According to the EU, out of 
some 308 appeal cases concerning infringements of protected Designs in 
2005, only 10 out of 308 related to registered designs in the fashion 
category.
    The U.S. fashion industry is vibrant, but it is young. We cannot 
just stand by and watch yet another industry migrate out of the U.S. We 
need to pass H.R. 2033 to prevent others from growing an industry that 
Americans create.
    As this committee proceeds to beef up the enforcement of our 
counterfeiting regimes, we should take the time to plug this loophole 
in our anti-counterfeiting regime.
    As reported in the media, law enforcement is being thwarted in its 
apparel anti-counterfeiting efforts because the pirates are taking 
clever advantage of the fact that we don't have laws against design 
piracy. To circumvent crackdowns on smuggling by customs, 
counterfeiters have taken to openly and legally importing goods with 
pirated designs--``blanks''--only to put on the label that makes a 
blank an official counterfeit either at the point of sale or in 
clandestine operations here in the U.S.
    Last April, a storage unit raid in Massachusetts netted nearly 
20,000 counterfeit handbags and wallets, plus more than 17,000 generic 
handbags and wallets, and enough counterfeit labels and medallions to 
convert more than 50,000 generic handbags and wallets into 
counterfeits. Clearly, storage units are not easy to find. Harder yet 
(or impossible) would be having an FBI agent at each sale. This bill 
proposes an easier way to prohibit design piracy and thwart 
counterfeiting.
    I'd like to quickly highlight another aspect of counterfeiting that 
is less discussed but deserves serious attention, and that is its link 
to organized crime and terrorism. Newsweek contributor Dana Thomas 
succinctly summed up the issue in an August, 2007 New York Times Op-Ed; 
``Most people think that buying an imitation handbag or wallet is 
harmless, a victimless crime. But the counterfeiting rackets are run by 
crime syndicates that also deal in narcotics, weapons, child 
prostitution, human trafficking and terrorism. Ronald K. Noble, the 
secretary general of Interpol, told the House of Representatives 
Committee on International Relations that profits from the sale of 
counterfeit goods have gone to groups associated with Hezbollah, the 
Shiite terrorist group, paramilitary organizations in Northern Ireland 
and FARC, the Revolutionary Armed Forces of Colombia.''
    This bill introduced by myself and Congressman Goodlatte and 
several colleagues on the Committee, provides a framework for more 
comprehensive and seamless intellectual property enforcement. It would 
provide three years of copyright protection for fashion designs--not 
those that staple, standard or prevalent, but rather only those designs 
that truly unique. The protective time period is a fraction of that 
provided by other nations, but would serve as an important first step 
toward putting our young designers on equal footing with those abroad.
    I am aware that there have been fruitful negotiations with those 
who want to improve the bill, and I would hope, Mr. Chairman, that we 
can soon sit down to connect the ideas that have been proffered. 
However, I also believe that we must move expeditiously toward 
providing America's artists and entrepreneurs with the tools they need 
to build their future and, in turn, America.

    Mr. Berman. Thank you.
    I think we still have time here for at least one of the 
witnesses before the two of us have to leave for a while. We 
will be back.
    Mr. Rodriguez?

  TESTIMONY OF NARCISO ROGRIGUEZ, DESIGNER, ON BEHALF OF THE 
     COUNCIL OF FASHION DESIGNERS OF AMERICA, NEW YORK, NY

    Mr. Rodriguez. Good afternoon, Chairman Berman, Ranking 
Member Coble, and other Members of the Subcommittee. I am 
pleased to be here today on behalf of the Council of Fashion 
Designers of America. I am currently serving on the board.
    First, I would like to thank----
    Mr. Berman. Let me interrupt you here.
    Mr. Rodriguez. Yes?
    Mr. Berman. Only because I was given some wrong 
information. This isn't a quorum call. It is a motion to 
suspend the rules. There are eight of those. My guess is the 
ones that follow will be 5 minutes each. So this is going to 
mean about close to an hour that we are going to have to go. It 
looks to me like everyone is participating in this vote.
    So I hate to do it, but talk among yourselves. [Laughter.]
    I am going to recess. We will be back. Thank you.
    [Recess.]
    Mr. Berman. The Committee will come to order.
    We have only finished four of those eight votes I told you 
about, but there was a privileged motion for which there can be 
an hour of debate. We don't know if there will be, so we 
decided let us move ahead in the meantime. But at any moment, 
those bells could go off and we will have to recess again.
    Well, we can do one or two. We can certainly do one witness 
now. So, Mr. Rodriguez?
    Mr. Rodriguez. Okay, I will continue. I am going to cut out 
the first part where I thanked you for having us here. I feel 
very welcomed here by everyone, and again thank you.
    I have a few things to say. The more acclaimed America's 
fashion designs become, the more they are copied. The Chamber 
of Commerce estimates the lost revenues due to the 
counterfeiting and piracy in the fashion and apparel industry 
to be $12 billion annually. They also indicate that they 
believe it may be higher due to the fact that design piracy is 
not outlawed. Every counterfeit garment starts as a pirated 
design. It is a big problem and it is growing.
    I am an American designer with a unique story. I am the son 
of Cuban immigrants. I grew up in north New Jersey. From the 
time I was a teen, I dreamed of being a great American 
designer. It took a lot for me to become a designer. To train 
me, it took a lot of hard work. I borrowed a lot of money to go 
to school, and I worked very hard to get my business open, 
which was opened in 1998.
    I also want to add that when I work, I not only design 
garments, I design fabrics. I design materials. I get very into 
the design process--new construction, inspiration from 
architecture, photographs, daily life--the way a city breathes, 
moves, lives. All that is filtered into my work.
    Often my work is compared to architects, to painters, to 
sculptures. I am always very flattered by that comparison 
because it makes my work all the more unique. It makes it 
separate from everything else that is out there. It takes a 
great deal of capital to finance a collection and fabricate 125 
pieces that I would show twice a year. That is 250 pieces a 
year, not inclusive of $800,000 to stage a fashion show, 
$800,000 in fabric, pattern-makers, sewers, manufacturers here 
in the United States that we work with. It is our way of 
creating each collection.
    Back in 1996, I designed a dress for a very good friend who 
I loved very much. Her name was Carolyn Bissette Kennedy. She 
had asked me to design her wedding dress for John F. Kennedy, 
Jr. I designed something with great love for the most important 
person in my life. That dress spawned somewhere in the 7 
million to 8 million copies. I got to sell 40 of those dresses.
    You know, it was a very personal thing for me, that dress, 
so I never looked at it like something was stolen from me 
because I would have made that dress anyway. But all that 
publicity and the knockoffs didn't pay my bills or get me to 
where I am today.
    Unfortunately, the piracy story is not unique. There is no 
way under the current legal system in the U.S. for designers to 
beat the pirates to market. Other developed countries such as 
Europe, Japan and India all provide 15 to 20 years of 
protection for fashion designs. Since there is no protection in 
the U.S., companies have emerged with piracy as their business 
model. It is like the guy who takes a shortcut at the race. We 
all start at the beginning, but he cheats and is the first to 
walk across the finish line.
    With no human or capital investments to make when pirates 
copy, they spend nothing. They can afford to make the copy in 
such quantities and low price levels that just one of my 125 
styles, they could recoup what I make on my entire collection. 
Some designers have created diffusion lines--a mass market line 
using their own designs with machine-sewing and less expensive 
fabrics. Isaac Mizrahi has licensed a line at Target. Nicole 
Miller has one at J.C. Penney. I have been pirated so much that 
my brand is already diffused.
    Mr. Berman. Mr. Rodriguez, the 5 minutes has expired, but 
if you would just wrap it up because we are going to have to go 
vote.
    Mr. Rodriguez. Sure.
    Really, we need your help to pass this bill because there 
are a lot of young, emerging talents here in the United States 
that need to be protected. I was lucky enough to survive and 
have a partner now that will protect me, but there are a lot of 
young people, truly talented, gifted designers that will not 
have that opportunity if this bill does not pass.
    Thank you.
    [The prepared statement of Mr. Rodriguez follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Berman. Thank you very much.
    Mr. Maiman, we are going to have to vote and come back. We 
have four more 5-minute votes, I think. If we insult more of 
our colleagues, we will have a few more questions of privilege.
    [Recess.]
    Mr. Berman. The hearing will come back to order. I think we 
are to be uninterrupted now.
    Mr. Maiman?

            TESTIMONY OF STEVE MAIMAN, PROPRIETOR, 
                 STONY APPAREL, LOS ANGELES, CA

    Mr. Maiman. Our company designs, manufacturers and 
distributes women's and children's apparel to department stores 
and major specialty chain stores nationwide. Extending the 
copyright laws to the fashion industry is thoroughly a bad 
idea. This bill is misguided and unnecessary for several 
reasons.
    Over many years, the fashion industry has done very well. 
It has grown into a huge, competitive, innovative and vibrant 
industry, all without the help or interference from this 
particular type of copyright law. From my perspective, nothing 
new has occurred in the recent past to cause there to suddenly 
be a need for copyright protection of the design of a garment.
    Designer clothes are still selling for hundreds and even 
thousands of dollars. The big-name designers are not cutting 
their prices to respond to the so-called copyists. If anything, 
prices people are willing to pay for the top designers are 
going up. There really is no problem here to fix.
    This proposal will harm the fashion industry, reduce 
designers' creativity, hurt consumers and the economy as well. 
This bill also threatens our firm and the rest of the industry 
because the bill will stifle creativity and innovation in 
fashion design, which I believe is the opposite of its intent.
    The law already protects against the copying of print and 
artwork, but it is impossible to determine the originality of a 
design because all designs are inspired by existing designs and 
trends. Under this bill, every time a designer wants to work 
with a current trend, they will be afraid that such a new look 
is somehow owned or monopolized by another designer. What is 
clear to me is that if this bill passes, we have an upcoming 
nightmare of litigation, including bogus claims that would have 
to be defended and most likely settled out of court in order to 
avoid massive legal bills.
    It will become very difficult for a manufacturer to obtain 
financing. When the manufacturer sells merchandise that is 
alleged to be infringing, the retailer will be forced to return 
it no matter what the truth. Retailers will refuse to do 
business unless a manufacturer will be able to provide 
effective indemnification against potential infringement, which 
many firms--especially new ones--are unable to do.
    This bill will create uncertainty and raise costs across 
the garment industry. Every designer, manufacturer and retailer 
will be worried about liability. This proposal will benefit a 
handful of rich, well-established designers at the expense of 
others. The rich, big-name designers have the money to pay for 
the legal support to create a copyrighted line of products. 
Most other designers won't be able to afford to do that, or 
more importantly, to defend themselves against claims of 
infringement. If this bill passes, the fashion industry could 
lose a generation of young designers with fresh ideas.
    Retailers just had the worst January in 40 years, and given 
the state of the economy right now, this is no time to be 
passing laws that will raise the price of clothing and layer on 
legal expenses. The fashion industry is very competitive and 
competition encourages lower prices, better looks, which of 
course benefits the American consumer. If this bill passes, we 
could see a future where only the wealthy will look up-to-date 
in the very latest fashions.
    The legislation threatens to split Americans into two 
classes of people: those with the money who can buy copyrighted 
designs, and those who can't quite afford them. If we turn the 
fashion industry over to the lawyers and the courts, as this 
bill will do, firms like ours are going to slowly, but surely, 
disappear. The average manufacturers are the backbone of this 
industry.
    We are in this business to make cute garments at a fair 
price for the average American, not to sit in depositions and 
copyright lawsuits arguing with lawyers over who invented an 
original particular style of a kid's top for $14.99 retail, and 
that is before it even goes on sale. If that is the way the 
business is going to be, we and many others like us are going 
to be forced out and thousands of jobs will be lost in the 
process.
    I personally can't think of any reason why Congress or the 
American people would want that to occur.
    Thank you.
    [The prepared statement of Mr. Maiman follows:]
                   Prepared Statement of Steve Maiman
    1. My name is Steve Maiman. I am the co-owner of Stony Apparel, an 
apparel design and manufacturing firm based in Los Angeles, California. 
I have worked in the fashion business for more than 30 years. We employ 
140 people designing, manufacturing, and distributing womens and 
children's apparel to many of the stores in which Americans shop--
Sears, J.C. Penney, Dillard's, Belk, and many other retailers. I know 
this business--it is my life. And I am here today to tell you that 
extending the copyright laws to the fashion industry is a thoroughly 
bad idea. I oppose H.R. 2033, which proposes to do just that. This bill 
is misguided, for several reasons.
    2. First, the proposed legislation is unnecessary. Over many years, 
the fashion industry has done very well--it has grown into a huge 
industry, a competitive industry, an innovative and vibrant industry--
all without any help--or interference--from copyright law. The clothing 
business is currently thriving in the United States, and from my 
perspective, nothing new has occurred in the recent past to cause there 
to suddenly be a need for copyright protection of the design of 
apparel. Unlike the music industry or the movie business, digital 
improvements in communications have not contributed to any 
revolutionary changes in the way apparel is designed, distributed or 
marketed. The internet is not destroying my business, or anyone else's 
in this industry. You can see this for yourself. Come visit my 
business. You will see people working hard to put affordable apparel in 
the department stores. And then go take a look at a fancy boutique--
there you will see designer clothes selling for hundreds and even 
thousands of dollars. I don't see them cutting their prices to respond 
to the so-called ``copyists''--if anything, the prices people are 
willing to pay for the top designers is going up. There is no problem 
to fix.
    3. Second, and very importantly, I know--based on my experience--
that the proposal will harm the fashion industry, reduce designers' 
creativity, and hurt consumers and the economy. This bill threatens my 
firm and the entire fashion industry in several ways:
    a. First, this bill will make it very difficult for firms like mine 
to obtain financing. When a manufacturer sells merchandise that later 
is alleged to be infringing, retailers will return it, no matter what 
the truth. Manufacturers' invoices for that merchandise, which serve as 
collateral for loans most fashion firms rely on (factoring), will be 
rendered valueless. This will undermine the value of invoices as 
collateral and make financing of apparel companies much more difficult. 
Additionally, if this bill should pass, when a designer or manufacturer 
sells apparel through to a retailer, that retailer is going to demand 
indemnification--because the bill, as I understand it, also says that 
retailers can be liable. Given the millions of dollars in damages that 
are possible in cases of copyright infringement--damages which, as I 
understand it, this bill seeks to raise further for fashion designs--
retailers will refuse to do business unless a firm like mine can 
provide effective indemnification. This demand for indemnification will 
create a large and difficult-to-finance risk for designers and 
manufacturers. It will impose an additional layer of risk on the 
industry as a whole and make it even more difficult and costly for 
fashion firms to obtain financing--because my financial backers and 
everyone else's in this industry will have to reckon with the 
possibility of frivolous lawsuits, injunctions, and ruinous damages.
    b. Second, this bill will raise uncertainty and costs across the 
fashion industry. Every designer, every manufacturer, every 
distributor, every retailer, will be worried that he or she is going to 
get sued because there is no way of knowing reliably what design has 
and hasn't been copyrighted. The technology for computer searches for 
visual objects like fashion designs is not at a point where the 
industry can rely on the copyright registry that is supposed to be 
established under this bill. And even if the technology were to improve 
in the future, everyone in the industry will be forced, before 
approving any design, to hire lawyers to interpret whether the proposed 
design is likely to violate any one of potentially millions of new 
designs claimed to be copyrighted. If a designer wanted to avoid 
copyright infringement, how would he/she do it? Will the Copyright 
Office create a system that enables a person to look up ``sheath 
dresses'' or ``wrap dresses''? A firm like mine may consider hundreds 
of designs a year. Any registry, to be practical, would have to allow a 
designer--or, more likely, the designer's lawyer--to find the relevant 
needle in a potentially gigantic haystack, and to do so quickly and 
cheaply. Just exactly how is that going to work? What will it cost to 
create this system, if it can even be created? Who will pay for it? How 
long will it take to implement? How will that designer access the 
system and at what cost? If Congress wants to load search and legal 
costs onto the fashion industry, if Congress wants to raise the costs 
of apparel for consumers, if Congress wants to put the brakes on growth 
and innovation in the fashion industry, and cost the taxpayers more 
money, it should pass this bill. Otherwise, it should leave well enough 
alone.
    c. Third, this bill will interfere with one of the most important 
sources of innovation in the fashion industry--the practice of 
designers interpreting a trend. Every time a designer wants to work 
with a current trend, she will be afraid that such a new look is 
somehow ``owned'' by another designer. (Would every fraction of an inch 
of a lower hemline belong to a different designer?) And as I understand 
the law, even designs that were created before the new law aren't 
entirely safe. My understanding is that someone could claim a copyright 
even in a design that's been around a while--they'll just claim that 
they didn't copy it from the pre-existing design but re-invented it 
themselves! What's clear to me is that if this bill passes we've got a 
looming litigation nightmare in the fashion industry. And--very 
importantly--if designers are prohibited from interpreting trends--or 
are too afraid to do so--we cut off one of the most important ways in 
which the fashion industry appeals to customers and gets them to buy 
clothes.
    d. Fourth, this proposal will benefit rich, well-established 
designers at the expense of new designers. The rich designers have the 
money to pay for the legal support to create a copyrighted line of 
products. The young and poor designers won't be able to afford to do 
that, or, more importantly, to defend themselves against claims of 
infringement. Additionally, the rich designers and large design firms 
will be better able to deal with retailers' demands for indemnity. The 
young and poor designers won't. I have heard some people who support 
this bill claim that it will help young, new, and small designers. 
Exactly the opposite is true--this bill will hurt young and small 
designers and manufacturers the most. If this bill passes, the fashion 
industry could lose a generation of young designers with fresh ideas. 
And the fashion manufacturing business that's left in this country 
could move out to China and elsewhere.
    e. Fifth, but no less importantly, this bill will hit consumers 
right in the pocket--and given the state of the economy right now, in 
my opinion this is no time to be passing laws that will raise the price 
of clothing. New fashions have been interpreted by companies such as 
Stony Apparel to enable ordinary middle-class and working-class 
Americans to dress in up-to-date styles. The fashion industry is 
competitive, and competition encourages lower prices and better 
quality. The big point here is that competition in the fashion industry 
benefits consumers. We can measure those benefits in dollars saved by 
shoppers, but there's more to it than that. The availability of 
inexpensive but fashionable clothing allows every American to feel 
worthy, hip, and stylish. It's a matter of pride and the clothes 
produced by firms like mine give people with a limited budget a sense 
of self-worth. But if this bill passes, we could see a future where 
only the wealthy will look up to date. This legislation threatens to 
split America into two classes of people: those with money who can buy 
copyrighted designs, and those who can't afford them.
    At this point the problems with this bill should be clear. 
Extending the copyright laws to the fashion industry is unnecessary. It 
also threatens real harm. Fashion copyright will hurt designers. It 
will hurt manufacturers. It will hurt distributors, retailers, and 
consumers. There's only one group I can think of that's going to win 
out of this--and that's the lawyers. If we turn the fashion industry 
over to the lawyers--and that's what this bill will do--firms like mine 
are going to slowly but surely disappear. Firms like mine are the 
backbone of this industry. We are in this business to make good 
clothes, and sell those clothes for a fair price that people can afford 
to pay, and hopefully make some money in the process. If this bill 
passes, that hope will also dwindle. I'm not in this business to sit in 
depositions in copyright lawsuits arguing with lawyers over who 
invented a particular design of a kids shirt for $14.99 retail before 
it goes on sale. If that's the way the business is going to be, I and 
many others like me are going to be forced out. And thousands and 
thousands of jobs will be lost in the process. Many designers will lose 
their jobs, not because they are bad designers, but because they are 
good designers, knowing what the American consumer wants next.
    I can't think of any reason why Congress and the American people 
would want that to occur.
    Thank you.

    Mr. Berman. Thank you very much.
    Mr. Olsen?

TESTIMONY OF CARL L. OLSEN, PRESIDENT, ARK DESIGN, ON BEHALF OF 
    THE ALLIANCE OF AUTOMOBILE MANUFACTURERS, WASHINGTON, DC

    Mr. Olsen. Good afternoon. My name is Carl Olsen. I am 
testifying on behalf of the Alliance of Automobile 
Manufacturers. The Alliance is the auto industry's leading 
trade association, representing 10 auto manufacturers.
    When a product becomes easier to make than it is to sell, 
design or style, if you like, assumes paramount importance. 
Bang and Olufsen, the trendsetting Danish audiovisual product 
manufacturer, could not exist if it were not for their 
innovative refined design. Apple's success grows not only 
because of their technical innovation, but also their design 
policy, which is the coolest in the industry, covering 
products, advertising, retail outlets and packaging.
    The second-generation Prius is sleek and aerodynamic, with 
a strong identity. In 2007, it had impressive U.S. sales of 
181,221 vehicles. Other hybrid-powered vehicles--those based on 
existing sedans and SUVs--had only modest sales. The reason? 
Their designs did not express their technical innovation, thus 
the price premium necessary on these hybrid vehicles was not 
apparent to the customer.
    The 2004 Chrysler 300, with its radical exterior 
appearance, has been a runaway success. About 6 percent of the 
300 sales were captured from prestigious brands like Mercedes 
Benz, BMW, and Lexus. Strong innovative design with details 
that express high quality spearheaded this unparalleled success 
story.
    Designing a new vehicle is not cheap. It requires a team of 
well-trained designers working in competition with each other, 
proposing a large number of creative solutions. Each part--from 
headlamps to door handles--receives tender-loving care. This 
methodology assists management to make rational decisions on 
the final appearance of a new vehicle. It costs hundreds of 
millions of dollars to create unique, distinctive exterior 
designs for vehicles.
    Ford Motor Company estimates the overall cost of a typical 
new vehicle program to be between $500 million to $1 billion. 
These investments translate into desirable jobs. Based on 
recent studies in Europe, it has been reported that the loss of 
exterior automotive design protection alone would cost upwards 
of 50,000 jobs. Ford recently obtained an exclusion order from 
the International Trade Commission protecting seven exterior 
parts of the F-150 pickup truck, the largest-selling vehicle in 
America.
    This shows that a recognized right to protect the 
intellectual property embodied in exterior vehicle components 
exists. The ITC ruled that seven of the ten Ford patents were 
valid and infringed, thus allowing Ford to block the 
importation of copycat parts from overseas manufacturers. This 
victory for Ford further demonstrates the focused nature of 
this problem and the limitations of the patent design solution.
    Industrial design protection for the auto industry protects 
numerous high-paying design and manufacturing jobs, and also 
the automobile industry's huge investment in the United States. 
It is consistent with the underlying policy goals of the U.S. 
intellectual property law and it mirrors the intellectual 
property rights protection provided to auto manufacturers in 
Brazil, France, Germany, Japan and other countries.
    Respecting intellectual property rights does not limit 
consumer choice. Consumers are encouraged to use re-
manufactured parts, salvage parts and even new parts having 
their own unique designs. Protecting the exterior appearance of 
a vehicle does not affect customizers or after-market companies 
offering products of their own design as substitutes for OEM 
parts. In fact, OEMs encourage such customizing because it 
increases consumer loyalty to the brand itself.
    Those seeking to weaken American IP protection do not 
create their own designs. They exist only to make exact copies 
of parts of designs they did not create.
    In conclusion, there is a confluence of developments that 
makes it imperative to have more effective protection for 
exterior automobile designs. Technology has made it easy and 
inexpensive for counterfeiters to make knockoff products. A 
migration of the copycat industry almost entirely overseas, 
where cheap labor prevails, has further reduced the cost of 
intellectual piracy. Without protection, we are likelyo see 
rapid growth in this immoral activity.
    There is a demand that we enforce our property rights 
abroad, and this argues for us to strengthen and enforce them 
here at home in the U.S. America's manufacturing sector is 
under serious threat. Without IPR protection, American 
manufacturers are caught in a race to the bottom with copycat 
producers from low-cost countries.
    Can the U.S. manufacturing sector continue to survive such 
an exodus? Is it something we want to encourage, or do we want 
to take steps to discourage the blatant copying of American 
design and American-made products? Congress must not waiver in 
its resolve and obligation to protect the intellectual property 
rights that exist in exterior automotive design.
    Thank you.
    [The prepared statement of Mr. Olsen follows:]
                  Prepared Statement of Carl L. Olsen
    Good afternoon. My name is Carl Olsen and I am testifying on behalf 
of the Alliance of Automobile Manufacturers. The Alliance is the auto 
industry's leading trade association representing ten manufacturers 
including BMW, Chrysler, Ford Motor Company, General Motors, Mazda, 
Mercedes Benz USA, Mitsubishi, Porsche, Toyota and Volkswagen.
    When a product becomes easier to make than it is to sell, design 
(or style if you like) assumes paramount importance.
    Bang and Olufsen, the trend-setting Danish audio/visual product 
manufacturers could not exist if it were not for their innovative, 
refined designs. Apple's success grows not only because of their 
technical innovations but also their design policy, which is the 
`coolest' in the industry covering products, advertising, retail 
outlets and packaging.
    The second generation Prius is sleek and aerodynamic with a strong 
identity. In 2007 it had impressive U.S. sales of 181,221 vehicles. 
Other hybrid-powered vehicles, those based on existing sedans & SUVs, 
had only modest sales. The reason? Their designs did not express their 
technical innovation--thus the price premium necessary on these hybrid 
vehicles was not apparent to the customer.
    The 2004 Chrysler 300 with its radical exterior appearance has been 
a run-away sales success. About 6% of the 300's sales were captured 
from prestigious brands like Mercedes Benz, BMW and Lexus. Strong 
innovative design with details that expressed high quality spearheaded 
this unparalleled success story.
    Designing a new vehicle is not cheap! It requires a team of well-
trained talented designers working in competition, proposing a large 
number of creative solutions.
    Each part, from headlamps to door handles, receives tender-loving-
care. This methodology assists management to make rational decisions on 
the final appearance of a new vehicle. It costs hundreds of millions of 
dollars to create unique distinctive exterior designs for vehicles.
    Ford Motor Company estimates the overall cost of a typical new 
vehicle program to be between $500 million to $1 billion. These 
investments translate into desirable jobs. Based on recent studies in 
Europe, it has been reported that the loss of exterior automotive 
design protection alone would cost upwards of 50,000 jobs.
    Ford recently obtained an exclusion order from the International 
Trade Commission protecting seven exterior parts of the F150 pickup 
truck, the largest selling vehicle in America, from copy-cat foreign 
imports. This shows that a recognized right to protect the intellectual 
property embodied in exterior vehicle components exists! The ITC ruled 
that 7 of the 10 Ford patents were valid and infringed, thus allowing 
Ford to block the importation of `copy-cat' parts from overseas 
manufacturers. This victory for Ford further demonstrates the focused 
nature of this problem and the limitations of the patent design 
solution.
    Industrial design protection for the auto industry protects 
numerous high-paying design and manufacturing jobs and also the 
automobile industry's huge investment in the United States; is 
consistent with the underlying policy goals of U.S. intellectual 
property law; and mirrors the intellectual property rights protection 
provided to auto manufacturers in Brazil, France, Germany, Japan and 
other countries.
    Respecting intellectual property rights does not limit consumer 
choice. Consumers are encouraged to use re-manufactured parts, salvaged 
parts and even new parts having their own unique designs. Protecting 
the exterior appearance of a vehicle does not affect `customizers' or 
after market companies offering products of their own designs as 
substitutes for OEM parts--for the simple reason that these are not 
exact copies of the original parts. In fact OEMs encourage such 
customizing because it increases consumer loyalty to the brand itself. 
Those seeking to weaken American IP protection do not create their own 
designs. They exist only to make exact copies parts of designs they did 
not create.
                             in conclusion
    There is a confluence of developments that makes it imperative to 
have more effective protection for exterior automotive designs. 
Technology has made it easy and inexpensive for counterfeiters to make 
`knock-off' products. The migration of the copy-cat industry almost 
entirely overseas, where cheap labor prevails, has further reduced the 
cost of intellectual piracy. Without protection, we are likely to see 
rapid growth in this immoral activity.
    There is a demand that we enforce our property rights abroad; this 
argues for us to strengthen and enforce them here at home in the U.S. 
America's manufacturing sector is under serious threat. Without IPR 
protection, American manufacturers are caught in a race to the bottom 
against with copycat producers from low cost markets.
    Can the U.S. manufacturing sector continue to survive such an 
exodus? Is it something that we want to encourage or do we want to take 
steps to discourage the blatant copying of America-designed and 
American-made products? Congress must not waiver in its resolve/
obligation to protect the Intellectual Property Rights that exist in 
exterior automotive design.
    I would like to close with a simple example of the double standard 
that some are seeking to force onto the U.S. auto industry. Let us 
assume a vehicle collision has occurred. Its front fenders must be 
replaced, its CD player and its CDs are destroyed, and a book inside 
the car is also lost.
    Which of these items does a consumer have a right to a copy for a 
replacement? The answer should be none. We must be careful to ensure 
that IP continues to mean intellectual property--not intellectual 
piracy--for the American auto industry.

    Mr. Berman. Thank you very much, Mr. Olsen.
    Mr. Gillis?

TESTIMONY OF JACK GILLIS, DIRECTOR OF PUBLIC AFFAIRS, CONSUMER 
             FEDERATION OF AMERICA, WASHINGTON, DC

    Mr. Gillis. Mr. Chairman, Mr. Coble, Members of the 
Committee, I am Jack Gillis, director of public affairs for the 
Consumer Federation of America. I am also here representing the 
Advocates for Highway and Auto Safety, Public Citizen, 
Consumers Union, and the Center for Auto Safety. We all are 
grateful for this invitation to appear before this Committee on 
a subject of incredible importance to the American consumer, 
and that is the repair and maintenance of our automobiles.
    Consider the following experiences, which many of you have 
had. You back into a pole at a shopping mall or someone stops 
short in front of you and your bumpers collide. Fortunately, 
few of those fender-benders result in serious injuries, but 
they often result in totally shocking effects on our 
pocketbooks.
    Why are these repair bills for these minor accidents so 
high? One reason is the cost of the parts that we need to get 
these repairs done. For example, Ford charges the same price 
for a simple sheet-metal fender as Dell charges for a computer 
with a flat screen monitor. An unpainted door from Chrysler 
costs the same as a Sears refrigerator. And amazingly, with a 
Sears refrigerator, you not only get one door, you get two 
doors that are both painted and installed. The fact is, 
computers and refrigerators are cheaper and better today for 
one simple reason: competition.
    In the early 1990's, the car companies came to Congress and 
asked you for special design copyright protection on these 
replacement parts, and Congress said no. Our concern today is 
that the car companies are now using design patents not for the 
important and legitimate protection of the overall design of 
their vehicles, but to prevent competition when it comes to 
getting the parts that we need to get our cars repaired.
    Over the past several years, there has been an enormous 
spike in the number of design patents on crash parts obtained 
by companies like Honda, Toyota and Ford. In December of 2005, 
Ford actually filed a case at the ITC for alleged infringement 
on design patents for parts for their 150 pickup. The result? 
The ITC banned the importation of these parts and eliminated 
competition for seven needed repair items.
    Now, there are hundreds and thousands of owners of F-150 
pickups who have no choice other than Ford when it comes to 
replacing a headlight or any of the other six parts. Ford can 
now charge consumers whatever they want in the absence of 
competition.
    What is particularly disturbing about this new business 
strategy is that the car companies are only selectively putting 
design patents on those parts where competition, albeit 
limited, is available. So what does this mean for consumers? 
First of all, there is the cost. High repair costs will lead to 
more cars being totaled. Consumers who owe more on a car than 
it is worth will be left with debt payments on a non-existent 
car. More totals means fewer jobs for body shops, and 
needlessly totaled vehicles can harm our environment.
    However, the most tragic irony in the lack of competition 
is what I call the automaker's double-whammy. Not only will the 
lack of competition allow the car companies to charge whatever 
they want for the parts that we need to fix our cars, but when 
they charge so much that the car is totaled, our only recourse 
is to go back to them and buy another one of their products.
    High repair costs will also lead to higher insurance 
premiums, and then there is the safety factor. As the cost of 
needed repair parts rises, many consumers will be forced to 
forego or delay replacing a headlight, a side mirror, or a 
brake light, leaving them with a vehicle that may not offer the 
needed safety.
    I am not surprised to hear that the car companies come 
before you today and say they don't want competition. First of 
all, the mere presence of competition reduces the price that 
they charge us for the parts that we need. The elimination of 
competition from the independent-brand crash repair parts would 
add an estimated $1 billion a year to their coffers. And guess 
who will be paying that $1 billion?
    There is a solution, and we are asking for congressional 
leadership to keep the market open to competition by providing 
a repair clause in design patent law. Such a repair clause 
would establish a narrow, practical exemption to the design 
patent law so that the car company receives a design patent on 
a product. Independent companies could still make competing 
parts for the sole purpose of repairing that vehicle.
    Such an exemption to the design patent law would not, and 
rightly should not, interfere with an automaker's right to 
prevent competing car companies from using their patented 
vehicle and part designs. We understand that design does play 
an important role in a consumer's original choice of cars. 
However, when we plunk down our hard-earned dollars for a new 
car, we are doing just that--buying a car, not a lifetime of 
indenture to the car companies to buy their parts.
    Finally, other markets have successfully addressed and 
solved this problem. Nine European countries, the European 
parliament, and Australia have enacted laws that specify that 
making a matched exterior auto part to repair an automobile is 
not an act of infringement, even though the original part is 
patented. The American consumers deserve no less.
    Thank you very much.
    [The prepared statement of Mr. Gillis follows:]
                   Prepared Statement of Jack Gillis

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Berman. Thank you very much, Mr. Gillis.
    I am going to recognize the Ranking Member initially for 5 
minutes.
    Mr. Coble. Thank you, Mr. Chairman.
    Gentlemen, good to have you all with us.
    Mr. Rodriguez and Mr. Maiman, I am told that fashion groups 
are attempting to negotiate a compromise. What is the status of 
this exercise and what are the parameters?
    Mr. Rodriguez. As I understand, there has been a 
negotiation over the past 1\1/2\ years. I am hopeful that 
something could be worked out within the next month.
    Mr. Coble. That is encouraging. I am glad to hear that.
    Mr. Rodriguez. Yes. I am very excited about that.
    Mr. Coble. Mr. Maiman, do you want to weigh in on it?
    Mr. Maiman. I think there may be something in the area of 
compromise on this bill. I just wonder what it is that can be 
done to avoid a litany of litigation in a business that in the 
last 5 years has had more litigation than ever.
    Mr. Coble. Well, hopefully maybe that can be resolved as 
the compromise progresses. I am the eternal optimist. Mr. 
Berman I think is as well.
    Mr. Gillis?
    Mr. Gillis. Yes?
    Mr. Coble. I am told that there was a significant spike or 
increase in the number of design patents on crash parts 
obtained by the major auto marketers, I think beginning in 2003 
and I believe continuing today. Why all of a sudden the 
increase in 2003, (A), and is it possible that the ITC, the 
International Trade Commission, may have had an impact. If so, 
what was it?
    Mr. Gillis. I think there are two things, Mr. Coble. First 
of all, the car companies are desperate to keep competition out 
of the market. They suddenly discovered with the recent ITC 
case, when Ford filed that case, which was around 2002 or 2003, 
that this had the potential for keeping other companies from 
competing in the marketplace. So there is no question that 
there is a relationship between the ITC decision, which was 
very, very damaging to the American consumer, and the fact that 
car companies are seeing an opportunity here to prevent 
competition by what I consider hijacking design patent laws.
    Mr. Coble. Mr. Olsen, do you want equal time?
    Mr. Olsen [continuing]. The ITC case, because the vehicle 
didn't come out until 2004, so the dates of the ITC case I 
think was 2006. I don't know why patents were spiked in 2003, 
as you allege. I have no idea. I am a designer, not a lawyer. I 
represented Ford in the ITC case and found that--well, for me, 
the single most important ingredient is art or design is an 
activity that needs protecting. The cost of developing these 
products is in excess of $100 million just for the design 
patent end of the work. Just let me complete with one----
    Mr. Coble. Thank you, Mr. Olsen. Let me go to my friend the 
professor, who was with us, Mr. Chairman, some years ago. Mr. 
Fryer, it is good to see you.
    Professor, it is obvious that expanding protection to 
automotive or fashion designs benefits individuals who work 
within the confines of these industries. What is the impact on 
businesses and workers who compete against these brand 
designers? What about the impact on consumers? Many consumers--
they don't like this idea at all.
    I see more good than bad in it--but what do you think?
    Mr. Fryer. It is a tough call. You have friends on both 
sides.
    Mr. Coble. And so do we.
    Mr. Fryer. Yes. Well, as a consumer myself, I see the 
impact, but the intellectual property law has many purposes, 
and for limited periods of time it is to prevent the unfair 
business practices that might give a certain advantage to 
people who actually have access to the tools and equipment to 
make low-cost products. That gives them really a distinct 
advantage and discourages people from innovating and creating. 
So on balance, I think you have to give some respect to both 
sides.
    Could I make a comment about the ITC?
    Mr. Coble. If you hurry, because I want to beat that red 
light before the Chairman admonishes me, but go ahead.
    Mr. Fryer. Okay. ITC is a procedure. Basically it follows 
the same laws. What they do is allow you to essentially 
approach the litigation collectively and deal with it swiftly. 
So it really is not any change. The increase shows ITC activity 
on designs. There are more imports and more copies coming in. 
This fact is why the ITC court has been successful.
    Mr. Coble. Thank you, sir.
    Let me come back to Mr. Gillis with a final question, Mr. 
Chairman.
    Mr. Gillis, I have heard it said by several observers: Why 
don't manufacturers of non-OEM or non-name brand crash parts 
simply modify their designs to hopefully avoid infringement? 
What do you say to that?
    Mr. Gillis. Well, the problem, Mr. Coble, is the fact that 
we consumers want that part to look exactly the same. We want 
the car to look the same, to perform the same, and have the 
same quality characteristics. You wouldn't want to put a Ford 
headlight, a different type of headlight, in the Ford F-150 
that doesn't look like the original headlight.
    Mr. Coble. Thank you, sir.
    Mr. Chairman, do you award credit? I just barely beat the 
red light. [Laughter.]
    Mr. Berman. For you, Mr. Coble, always. You would be the 
last person I would ever admonish. [Laughter.]
    Mr. Coble. Thank you, sir.
    Mr. Berman. I will recognize myself for 5 minutes.
    Maybe this is sort of between Mr. Rodriguez and Mr. Maiman. 
This whole notion--I mean, Mr. Rodriguez, in your testimony, 
you talk about your traveling to get ideas and inspiration for 
your designs. You are affected by what you see out there. My 
guess is you are not out there to copy what somebody else has 
done. For you, it is like so much else, I am sure. Previously 
written music affects new music, but it is not copied.
    Mr. Maiman, you talk about--well, let me ask you. In your 
business, do you sell products which you have essentially, ``I 
saw this hot design out there; we are going to sell this''--my 
designers go out and basically copy that design because we 
think this will sell.
    Mr. Maiman. What we do is----
    Mr. Berman. If I could just get both of you engaging on 
this whole notion of where is the line between inspiration and 
copy.
    Mr. Maiman. Well, we do what most other designers do, and 
even the high-end designers. We send a staff to Europe five 
times a year. They go to Japan. We subscribe to fashion reports 
out of Europe and trend services. Trend services is similar to 
this, where they send pictures of runway reports from Europe 
and sketches of the trends that are running in Europe.
    I think we all go to Europe right about at the same time. 
We all rush back to our design rooms and we take these trends 
and interpret them into what we think is next. We are not 
trying to interpret them into what is happening today, but we 
have to figure out what is next.
    So we are all doing it the exact same way. All design 
inspiration is not internal, but it comes external. Personally, 
I don't think anything is truly original. It is just an 
interpretation of something. At our company particularly, we 
don't interpret things exactly because we are on to what the 
next phase is anyway.
    Mr. Berman. Mr. Rodriguez?
    Mr. Rodriguez. Well, I know what it feels like to design 
something truly from a voyage to Asia and scouting temples, not 
scouting stores. I don't subscribe to any of those services 
which basically show my clothes to people who have--maybe not 
designers who can create things that are original, but want to 
be in the swing of things.
    I want to clarify something. I think there are two issues 
that I don't know if Mr. Maiman knows about or not. One is a 
trend. One is something that is a feeling. We all feel things. 
All the designers, whether it is at a high level or a low 
level, we want floral prints for spring, and everybody does 
them because everybody feels them wherever we saw it. That is a 
trend. That is fine.
    For me, it is a bigger problem when you buy my dress and 
you take it apart and copy the pattern pieces and sell it 
exactly the way that I made it, because it took me a long time 
to create that dress. That to me is theft.
    Mr. Berman. ``Pattern piece'' means something different 
than a print, I take it.
    Mr. Rodriguez. Yes. I am sorry. A pattern piece is like the 
actual bits and pieces that you cut to put it together. That to 
me is theft. I have seen it. I am not talking about 
inspiration. People draw inspiration in very different ways. 
For me, the inspiration is more ethereal, and I can create 
something completely new, even though it is still a skirt.
    Mr. Berman. You don't call xeroxing an inspirational act?
    Mr. Rodriguez. No. [Laughter.]
    Or when the manufacturer that you have entrusted to make 
your shoes, makes two copies--one with your label in it and one 
with his label in it. His is in his store before yours is ever 
shipped to the United States. That is bad. We are now protected 
against anything like that.
    Mr. Berman. My time has expired.
    Mr. Schiff?
    Mr. Schiff. Thank you, Mr. Chairman.
    Whoever designed this podium didn't design it with these 
chairs in mind. I feel like I have lost several inches in 
height. I know nobody at this table would be responsible for 
that.
    It seems to me that what we are really debating--and I want 
to focus, I guess, on the outmoded design issues or more of the 
technology than the fashion, at least for the moment--is a 
balance. We want to encourage innovative design on the one 
hand, and not discourage it by allowing people to copy the 
design and undermine the creative effort that went into it.
    On the other hand, where there isn't a substantial design 
component, or the design is of a far less significance than the 
function, we don't want to undermine the ability of people to 
supply a useful part and bring about that competition in price. 
The question I have is, it seems to me that we have had a 
patent system that was rarely used in this field until 
recently.
    Is the standard that is out there striking the right 
balance? Is it not striking the right balance because of the 
increased prevalence of design patent litigation? I think the 
ultimate question is how do we maximize this for the consumers, 
but that doesn't necessarily mean that you allow every copy, 
because you don't want to undermine the design process.
    So I guess the question is, how do we set up a standard for 
our patent judges to apply, or the patent examiners? Do we have 
the right standard? How do we encourage that kind of 
innovation? At the same time, how do we keep costs reasonable 
where the design component, the style component, is really of 
far less significance than the functional component.
    So I would open up anyone who would care to comment.
    Mr. Olsen. Could I just come back to this. I got cut off 
and I was----
    Mr. Schiff. As long as it won't be on my time.
    Mr. Olsen [continuing]. This august Committee.
    No, it is great to say that the automobile industry is 
abusing the privilege of the design patents by charging 
exorbitant prices, when the copycatters have not paid any 
development costs. They are working in low labor-cost 
countries, so naturally they have a built-in price advantage.
    If anything is going to discourage innovation, it is the 
fact that the automobile manufacturer can't get a reasonable 
return to reinvest in new product.
    Mr. Schiff. Of course, I haven't framed the issue that way 
at all. I am asking you, what is the proper standard to be 
applied? Does the law today set up enough guidance where we 
maximize the consumer benefit, both from encouraging innovation 
and also allowing competition? Or are we too skewed I one 
direction or the other? That is really, at least for me, the 
question that I am wrestling with.
    Mr. Gillis. Well, Mr. Schiff, if I may, Consumer Federation 
of America and the other consumer groups really believe that 
the design patent laws provide very important consumer 
protection. It is important to protect the designers of a car 
from keeping another automobile manufacturer from copying that 
car. That is a very important design protection that needs to 
be preserved.
    What we are calling for is something slightly different in 
that when the European Community looked at this problem and 
they saw these carmakers charging outrageous prices for small 
components of the car, they said, well, let us allow consumers 
some choice in terms of shopping around for those parts, but 
still protect the design that Mr. Olsen, for example, has 
worked on. That is an important protection.
    Mr. Schiff. But is it all or nothing? Is it an issue where 
you can design and patent a car, but not any part of the car? 
Are there some components of the car that are far more design-
oriented than functional, and in fact may not have a functional 
component at all? They may be completely a design attribute.
    Mr. Gillis. I think again it is important to allow the 
carmakers to patent parts of a car as well. For example, Ford 
needs to patent certain parts of its car to keep General Motors 
from copying those parts of its car. What we think is important 
is that we as consumers need the right for choice when it comes 
to repair that car. That is the beauty of a repair clause. It 
allows the carmakers to patent the car. It allow them to patent 
the individual parts, but keeps the market open for competing 
manufacturers for the simple repair parts that we need and 
gives consumers choice on those simple repair parts.
    Mr. Schiff. Are you saying that the current law doesn't 
permit you, because of the way the courts have recently been 
interpreting design patents, doesn't allow you to provide 
replacement parts?
    Mr. Gillis. Well, the recent decision by the ITC has caused 
a great deal of consternation among those limited competitors 
that there are right now. What the ITC has essentially done is 
inhibited the importation of these parts so consumers have no 
choice.
    Mr. Schiff. Can I ask one last question, Mr. Chairman?
    Mr. Sherman. [Presiding.] One more.
    Mr. Schiff. Thank you, Mr. Chairman. The Chairman has 
changed.
    Mr. Sherman. They have been confusing Berman and Sherman 
for so long, I am surprised you were able to notice the 
difference.
    Mr. Schiff. The Chairman is now better looking. The 
Chairman is more astute. The Chairman is more generous with the 
time for his Committee Members. [Laughter.]
    That will buy me about 45 seconds.
    Should there be a different legal standard for a repair 
shop or a parts manufacturer that is different in kind than a 
different automotive manufacturer? Why should the standard for 
the Acme Repair Company and its ability to produce a part, be 
different than the rival GM Company's ability to produce that 
part?
    Mr. Gillis. Primarily because they are two totally 
different functions. The function that we want to keep open is 
our ability to have choice in getting our cars repaired where 
we want, when we want, and with whatever parts we want. When we 
don't have those choices, then the cost of car repair is going 
to go up.
    On the other hand, the carmakers themselves need protection 
from their competitors--that is, other carmakers from copying 
the designs that they have invested, as Mr. Olsen said, 
enormous amounts of money in.
    Mr. Schiff. Of course, they consider you one of their 
competitors--not you, but the people you are advocating for.
    Do you want a chance to answer?
    Mr. Olsen. I would like a chance, yes, because the total 
cost--I mean, Mr. Gillis has used the word ``repair.'' If he is 
going to be more accurate, it is ``replace.'' ``Repairing'' 
means putting a bit of Bondo on a fender or polishing a 
headlamp lens. The point I would like to make is that the cost 
of the part after an accident, relative to the overall cost of 
the repair, is relatively small. It is the labor costs, the 
finishing of the part, that adds the cost up. So the 
differential between what the companies charge and the foreign 
copycat rip-offs charge is relatively small in terms of the 
overall cost of a typical body repair.
    One more point I would like to make. J.D. Power did 
research on automobile repairs after accidents, and 62 percent 
of all the people who had the accident want OEM parts. They 
don't want knockoff parts. People feel they have been ripped 
off by having knockoff parts installed. For the insurance 
company, they are likely to lose renewal business, and the job 
shop who has done the job is likely to lose any new business 
they are going to get from them because they feel cheated they 
don't have OEM parts.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Sherman. Thank you.
    The gentleman from Virginia?
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Chairman, I have an opening statement I would ask be 
submitted for the record.
    Mr. Sherman. Without objection, it will be entered in the 
record.
    [The prepared statement of Mr. Goodlatte follows:]
Prepared Statement of the Honorable Bob Goodlatte, a Representative in 
   Congress from the State of Virginia, and Member, Subcommittee on 
            Courts, the Internet, and Intellectual Property
    Mr. Chairman, thank you for holding this important hearing on 
design protection.
    Article I Section 8 of our Constitution lays the framework for our 
nation's copyright laws. It grants Congress the power to award 
inventors and creators, for limited amounts of time, exclusive rights 
to their inventions and works. The founding fathers realized that this 
type of incentive was crucial to ensure that America would become the 
world's leader in innovation and creativity. This incentive is still 
necessary to maintain America's position as the world leader in 
innovation. However, most types of designs do not enjoy this 
protection.
    The specific area I would like to focus on today is fashion 
designs. Most industrialized nations provide legal protection for 
fashion designs. However, in the United States--the world's leader in 
innovation and creativity--fashion designs are not protected by 
traditional intellectual property protections. Copyrights are not 
granted to apparel because articles of clothing, which are both 
creative and functional, are considered ``useful articles,'' as opposed 
to works of art. Design patents are intended to protect ornamental 
designs, but clothing rarely meets the criteria of patentability. 
Trademarks only protect brand names and logos, not the clothing itself, 
and the Supreme Court has refused to extend trade dress protection to 
apparel designs.
    Thus, if a thief steals a creator's design, reproduces and sells 
that article of clothing, and attaches a fake label to the garment to 
market it, he would be violating federal law. However under current law 
it is perfectly legal for that same thief to steal that same design, 
reproduce and sell the article of clothing if he does not attach a fake 
label to it. This loophole allows pirates to cash in on others' efforts 
and prevents designers in our country from reaping a fair return on 
their creative investments.
    Furthermore, the production life cycle for fashion designs is very 
short. Once a design gains popularity through a fashion show or other 
event, a designer usually has only a limited number of months to 
effectively produce and market that original design. Further 
complicating this short-term cycle is the fact that once a design is 
made public, pirates can now virtually immediately offer an identical 
knock-off piece on the Internet for distribution. Again, under current 
law this theft is legal unless the thief also reproduces a label or 
trademark. Because these knock-offs are usually of such poor quality, 
these reproductions not only steal the designer's profits, but also 
damage his or her reputation. It is simply common sense that these 
creators' works be protected.
    Chapter 13 of the Copyright Act offers protection for the designs 
of vessel hulls. I have introduced, along with my friend Representative 
Bill Delahunt, H.R. 2033, the Design Piracy Prohibition Act, which 
protects designers by amending Chapter 13 of the Copyright Act to 
include protections for fashion designs. Because the production life 
cycle for fashion designs is very short, this legislation similarly 
provides a shorter period of protection that suits the industry--three 
years. This legislation further establishes damages for infringing a 
fashion design at the greater of $250,000 or $5 per copy.
    A hearing was held on this legislation last Congress and it has 
broad support among those in the fashion and apparel industries. 
However, constructive criticism has been expressed by some fashion 
manufacturers, and I am pleased to report that negotiations are ongoing 
to address those concerns. Indeed, I am hopeful that that an agreement 
may be reached in the next few weeks to address many of the concerns of 
those manufacturers.
    While I agree that the Subcommittee is right to examine the design 
protection issue in general, it is my hope that the Subcommittee would 
move forward with consideration of H.R. 2033, which is the product of 
almost three years of discussion and debate, and is a modest effort to 
help protect a creative, developing industry in the U.S.
    As America's fashion design industry continues to grow, America's 
designers deserve and need the type of legal protections that are 
already available in other countries. The Design Piracy Prohibition Act 
establishes these protections.
    Thank you again for holding this important hearing. I look forward 
to hearing from our expert witnesses today.

    Mr. Goodlatte. I welcome all the witnesses. This is a very 
interesting hearing, but I feel like it is a bifurcated hearing 
almost. The issue is quite different between fashion design and 
automobile parts design. I am very interested in what you have 
been discussing, but I would say that over here in the fashion 
design industry, there is not the same consideration. There is 
not, to my knowledge, any significant after-market for 
shirtsleeves or pants legs that would be replacement parts to 
go on a designer piece of clothing.
    As many of you know, I have joined my friend Bill Delahunt 
in reintroducing the Design Piracy Prohibition Act, which 
protects fashion designers by amending chapter 13 of the 
Copyright Act to include protection for fashion designs. This 
Subcommittee has held a hearing on this legislation.
    There has been constructive criticism expressed by some 
fashion manufacturers. I am pleased that those negotiations are 
going forward, and I am hopeful that an agreement may be 
reached in a few weeks that would address many of those 
concerns. I hope that that will allow this Subcommittee to move 
forward on the legislation that Congressman Delahunt has 
introduced, because I think this is an important issue dealing 
with the question of piracy.
    In that regard, I would like to turn to a few questions. 
First, Mr. Maiman, you stated in your testimony that creating 
new copyright protection for fashion designs threatens to split 
America into two classes of people--those with money who can 
buy copyrighted designs and those who can't afford them. I 
wonder, you have noted that much of the information about new 
designs--you showed us the magazines and so on--came from 
Europe.
    Have you seen evidence of this splitting into two classes 
in Europe, the Europeans, where there is protection for fashion 
designs, have good choices when it comes to fashion? Or is the 
European market a one-size-fits-all market that is dull when it 
comes to new fashion designs?
    Mr. Maiman. The European market surely is not dull. And no, 
in Europe I have not seen any evidence of that. But I think 
over here, what is going to happen is when you have to 
copyright your designs, and you will probably have to copyright 
every one of them just as a matter of course when you design a 
garment, you have to copyright it, and to do the research.
    What we are questioning in our company is how do we 
determine if a design that we come out with is copyrightable. 
Even if, let us say, we have never actually bought a garment, 
taken someone else's garment apart, put it back together with 
our fabrics----
    Mr. Goodlatte. But in answer to my question, the 
consequence has not occurred in Europe, where they do have 
fashion design protection.
    Mr. Maiman. Not to my knowledge, no.
    Mr. Goodlatte. Mr. Rodriguez, would you be interested in 
answering that?
    Mr. Rodriguez. You know, I think it has actually helped 
because the lower markets in Europe have great design 
integrity. So a person who is following the trends and wants to 
look fashionable can go to whatever store she shops at, buy 
beautifully made, good quality, inexpensive stylish clothes.
    Mr. Goodlatte. I was going to say, we are starting to see 
that in the United States, too, where you have fashion design 
labels----
    Mr. Rodriguez. Yes, it is happening here.
    Mr. Goodlatte [continuing]. In Wal-Mart and Target and 
other department stores that appeal to a broader cross-section 
of the population. So I am not of the opinion that attempting 
to protect these original designs would yield the result that 
you describe.
    Mr. Maiman, let me follow up on that. Do you believe that 
manufacturers should be able to make exact copies of a fashion 
design for profit without obtaining the permission of the 
original designer--an exact copy? I know you talked about 
trends and whether you could see what was coming next, but I 
also know that you can go online virtually the day after the 
Academy Awards and order an exact copy of some of the designs 
that went right down the runway. I wonder if you would think 
that that should be prohibited--that exact copy?
    Mr. Maiman. Well, it is hard to say because what you have 
to do is you have to wonder where the inspiration for that 
Academy Award design came from. Did that person just wake up 
and create it in their mind? Or did they look at someone 
else's----
    Mr. Goodlatte. Well, let us assume we had a system where 
that designer would be accountable to somebody else for that. 
But the person who is now making an exact copy of the design 
that came down the runway, and assuming it was an original that 
didn't violate somebody else's rights--an exact copy--would we 
be well advised to prohibit that?
    Mr. Maiman. Well, I think an exact copy of a dress--let us 
say it is a dress we are talking about--would most assuredly 
end up in a different market segment than the people who can 
afford to pay for the original design. So I would not be 
against copying designs that are out there.
    Mr. Goodlatte. So you would say that being able to do that, 
which is perfectly legal today and which is why we have 
introduced this legislation--you wouldn't prohibit even an 
exact copy?
    Mr. Maiman. I would not. No, sir.
    Mr. Goodlatte. Mr. Rodriguez, do you want to respond to 
that?
    Mr. Rodriguez. I am appalled. I mean, that is appalling. I 
mean, that is theft. You know, I do wake up and I do work on a 
mannequin, as do many other creators. They create original 
garments and those garments do go down red carpets or wedding 
aisles. They are copied the next day, before I can 
commercialize that gown and put it on my collection and sell it 
at a better price, at a lower price, or at a very high price, 
it has already flooded the market.
    So to steal something, to copy it, whatever you want to 
call it, to copy my DNA and diffuse it into a lot of prints--I 
mean, I think it is just completely wrong. I think it is very 
honorable that companies like Target have hired creators to 
create good product and sell them in mass quantities.
    Mr. Goodlatte. And in most of the other developed countries 
of the world, particularly Europe, you could take steps to 
protect that.
    Mr. Rodriguez. Everywhere. Nothing gives me greater 
pleasure than to go to Spain and buy cheap underwear at the big 
chain store there because their quality, their design is far 
superior to some of the most expensive underwear in Europe.
    Mr. Goodlatte. And it is protected under the law.
    Mr. Rodriguez. And it is protected under the law. It is 
unique. It is wonderful. It is not to say someone else can't 
make a great white plain T-shirt, and I am not going to buy it 
from them, for more money or less money. It is a plain white T-
shirt. But that particular one is fantastic and it is respected 
and not copied by anyone.
    Mr. Goodlatte. Thank you.
    Thank you, Mr. Chairman.
    Mr. Sherman. I will now turn to the Chair of the full 
Committee, Mr. Conyers.
    Mr. Conyers. Thank you very much.
    I apologize for not being here. I had committed myself to 
Liz Robbins to be here from the very opening of the first 
witness. The previous Chairman and I had business on the floor. 
We stayed until the end. I apologize.
    I see our former Illinois colleague Marty Russo. I don't 
know what part of the industry he is in now, but he championed 
the universal single payer health care bill for many years when 
he represented his state of Illinois so ably. I am glad that he 
is here.
    Thus far we have received mixed reaction on this proposed 
legislation Part of the automobile industry is not that keen on 
it. People representing the consumers I think, not having heard 
your testimony, don't seem to be that keen on it either.
    Have I reached too quick of an assumption about what is 
happening here?
    Mr. Gillis. Well, Mr. Chairman, from the Consumer 
Federation of America's perspective, we are really not 
commenting on the fashion design issue. As Mr. Goodlatte said, 
these are two pretty different issues and pretty distinct 
issues. Our concern is simply from the consumer perspective in 
that we really believe the car companies have the right to 
copyright their cars or to design-right their cars, to the 
design of certain parts, but we just think the consumers need 
the choice in the marketplace to shop around for different 
parts.
    The best example of this is really in the mechanical parts 
arena. Thank goodness we have the choice of Midas muffler 
versus Chrysler mufflers, or certain types of shock absorbers. 
These choices provide not only consumers with fair prices, but 
they establish competition and they get these manufacturers to 
start competing against each other, and the quality ends up 
better. We would like to see that same competition in the area 
of fenders and hoods and the things that we need after a crash.
    Mr. Conyers. Well, are you in agreement, Mr. Olsen?
    Mr. Olsen. Not at all.
    Mr. Conyers. Not at all. Okay. Explain yourself.
    Mr. Olsen. I think that we are dealing with a competitive 
situation that is untenable for the OEMs. The people who are 
making the parts, which as I already have mentioned, in terms 
of the total costs of a crash repair, they are a relatively 
small part of it. So the advantage or disadvantage of having 
OEM in financial terms is relatively small.
    I got lost on my point here. Excuse me. I will rest there.
    Mr. Conyers. Okay.
    It seems, Mr. Rodriguez, that there is some unanimity 
around the fashion aspect of this legislation. I want to 
commend you for that.
    Mr. Maiman, do you have anything positive to say about this 
legislation?
    Mr. Maiman. Well, one of my main things about this 
legislation is that I think it might stifle some of the 
creativity that is coming out of, maybe not the designers at 
Mr. Rodriguez's level, but certainly a lot of the designers 
that are coming into the industry and selling to middle 
America.
    Mr. Rodriguez is higher in the design industry, and 
probably accounts for less than 5 percent of the annual 
American volume spent on clothing. Everybody else does get--
most of the styles do trickle down. They don't trickle up. The 
higher-end designers are not going to go to Target stores, 
Macy's, Dillard's, Kohl's and Sears and Penney's to get their 
inspiration. It all works from the top down.
    Mr. Conyers. Let me just get a reaction from Mr. Rodriguez 
before my time is expired.
    Mr. Rodriguez. A reaction? Well, you know, I do not agree 
with that at all because the young talent in the United States 
that is emerging would be hurt if they didn't have a bill like 
this in place. They are creating new things. I myself have had 
a struggling company for 10 years, until recently, and I have 
big partners now who can protect me.
    But the young designers in America need this bill more than 
the big designers in America--not the wealthy designers. They 
are creating and they are bringing freshness and newness to 
middle America. They are inspiring us bigger companies to do 
new things and think of things, and think of our work 
differently. That is fantastic. That is a trend. That is 
inspiration.
    What happens is with the new emerging talent that Mr. 
Maiman may have misunderstood, what happens is the companies 
come in and cannibalize them, cannibalize their aesthetic, 
their design ethic, their everything--their look--and sell it, 
manufacture it overseas.
    Jobs are lost and two talents, three talents, many talents 
are lost and never have an opportunity. I have seen it with a 
really, really talented denim manufacturer, a couple of artists 
who lived and worked in L.A. They lost the most beautiful denim 
line I ever saw. It was stolen from them. It was stolen from 
their dryers and they couldn't work anymore. Now, they have to 
work for someone else.
    I don't want that to happen anymore. It is too painful to 
create something and see it mass produced for $14 by someone 
else, and your career is gone. So that is a very heartfelt 
answer to your question.
    Mr. Conyers. Well, thank you so much.
    I thank all the witnesses.
    Thank you, Mr. Chairman.
    Mr. Sherman. Thank you.
    I recognize the gentleman from North Carolina.
    Mr. Coble. I have already been heard, Mr. Chairman.
    Mr. Sherman. You have already been heard? Okay.
    Mr. Rodriguez, and I will also ask Mr. Maiman. I am trying 
to get a feel for where we draw the line between original 
designing, which is of course influenced by everyone else. I 
mean, I see Mr. Rodriguez is wearing black. Other people have 
worn black. It has been done.
    So let us go back to Levi Strauss. The story is that he was 
the first man to take canvas and make pants. He made them blue, 
and he had a particular design. Let us say we had good laws in 
this country and it was back at the Gold Rush, and he filed for 
the appropriate protection.
    Should we allow somebody else to make canvas pants? Should 
somebody else be allowed to make blue canvas pants? Should 
somebody else be allowed to make blue canvas pants that were 
indistinguishable by a lay person from Levi's own design? 
Assuming everything Levi did was unique, what do we let the 
next person do?
    Yes, Mr. Rodriguez?
    Mr. Rodriguez. I was dying to answer that. I have traveled 
quite a bit and worked with many different mills in South 
America, in Europe, and seen----
    Mr. Sherman. I will ask you to give the abbreviated 
version.
    Mr. Rodriguez. Yes, I know. I have seen that blue canvas, 
which was made for decades by everyone.
    Mr. Sherman. I am going to ask you to think back as if you 
were right there at the Gold Rush. You have never seen blue 
canvas pants before.
    Mr. Rodriguez. Should he be the only one allowed to make 
it?
    Mr. Sherman. Yes.
    Mr. Rodriguez. No. Blue canvas is fabric. Blue canvas was 
out there. He just chose to make a certain style of pants out 
of it.
    Mr. Sherman. But no one else had ever used that fabric for 
pants, so it would be okay to do blue canvas pants. If somebody 
comes up with the first idea of using blue canvas pants, now he 
had a particular stitching on the pocket. Would you allow 
somebody else to use that same stitching?
    Mr. Rodriguez. Maybe not if it had my name on it.
    Mr. Sherman. Well, obviously, if you are able to integrate 
your trade name into your physical good, you are going to get 
the maximum possible protection. But assume it is just a 
geometric design on blue canvas. Nobody had ever made blue 
canvas pants before. Nobody had ever used that design before. 
What do we let the next person do?
    Mr. Rodriguez. Whatever they want. If they are inspired by 
blue canvas pants, they can make blue canvas pants. You respect 
Mr.----
    Mr. Sherman. They use the exact same design--the pocket 
exactly as wide, the stitching the same squares and circles 
interlocking, or whatever? I am making that up. Levi didn't do 
that.
    Mr. Rodriguez. Well, the design----
    Mr. Sherman. One of your handlers is trying to correct your 
answer. While you take a look at your notes, I will ask Mr. 
Maiman.
    Mr. Maiman. I do believe one of Levi's---- [Laughter.]
    Mr. Sherman. Perhaps we need the lobbyist testifying. Go 
on. Go ahead.
    Mr. Maiman. I am sorry. Was it not my turn?
    Mr. Sherman. It is your turn. Go ahead.
    Mr. Maiman. Okay. What I do believe as far as it applies to 
Levi Strauss, he was probably the first one to come out with--
you are talking about blue denim, the canvas.
    Mr. Sherman. Yes.
    Mr. Maiman. Everybody, everybody, everybody does blue 
denim, and we know that. Levi Strauss, if we come out with a 
five-pocket western, which Levi was the first to come out with, 
with the four pockets and the little coin pocket, the five-
pocket western has been the mainstay of the industry and Levi 
did invent it. Should we all--and I don't make denim jeans so I 
am just talking about the rest of the business--should the 
denim manufacturers have to pay a royalty, or be subject to 
litigation from the Levi Strauss estate when they make a five-
pocket western? Should he have been able to copyright that?
    Mr. Sherman. You are doing a good job of asking the 
questions, but we are elected to do that.
    Mr. Maiman. Okay.
    Mr. Sherman. I need some answers, or at least your own 
opinion, obviously.
    Mr. Maiman. The opinion is, fashion always regenerates 
itself and people will do versions of the Levi pant. I agree 
that it should be entirely illegal and protected by trademark 
and copyright to put a tag on there that resembles Levi or 
resembles Guess With the little triangle, because then it will 
create a likelihood of confusion between who made the product. 
But as far as the fabric, the shape of the garment, the fit of 
the garment, I think it is fair game in the world, not just the 
United States.
    Mr. Sherman. Okay. Let me ask Mr. Gillis, if I go buy a car 
and they tell me a lot about the car. There is a sticker on the 
car. One of the things they don't tell me is, we have a 
monopoly right to make the replacement hood panel on this car. 
So if you dent this car and you need a new hood, be prepared to 
pay monopoly prices for the replacement.
    Should we require that those who are selling cars to inform 
consumers when they are using our intellectual property laws to 
give themselves monopoly power and monopoly pricing over 
replacement parts, and some idea as to which replacement parts 
there isn't going to be a competitive market for?
    Mr. Gillis. Absolutely. But the better solution, Mr. 
Sherman, is to simply allow the competition to exist, as this 
country is well known for. That would solve the problem. Again, 
they have a right----
    Mr. Sherman. So you are saying, for replacement parts, 
allow--but you don't draw the same line with regard to newly 
manufactured cars. In other words, you can make the argument, 
you know, if we only got rid of these design patents, Sherman 
can replace his dented bumper cheaper, which is moderately 
important to me. But if we took it all the way, we would say, 
well, get rid of all the patents, then I could buy a car 
cheaper. Why allow some rival company to give me a cheaper 
hood, but not to give me a cheaper car?
    Mr. Gillis. Because fundamentally, design patents are very, 
very important corporate protections, and as a result, consumer 
protections. That creates competition between General Motors, 
Ford, Toyota and Honda. And that competition is good for 
consumers and consumer depend on those different designs in 
order to pick a car. So it is not right to allow Honda to copy 
Toyota's overall design.
    The problem, though, is if we had a repair clause, you 
wouldn't have to have the disclosure that you are talking about 
because then there could be competition on simply the parts we 
need to repair the car, not the car itself.
    Mr. Sherman. Well, I would like to save 80 bucks on a 
replacement hood, but if I could get something that looks like 
a Bentley and only pay $30,000 for it, that would be even 
better. I know Chrysler comes close.
    Mr. Gillis. Well, interestingly enough, Mr. Chairman, if 
you ever looked at the cars today, it is pretty hard to tell 
one from the other, so that design difference is kind of 
melding together, but that is the choice of the carmakers to 
have those cars look very similar.
    Mr. Sherman. Why don't I yield----
    Mr. Olsen. Can I respond to that?
    Mr. Sherman. My time has expired. We are going to hear from 
the gentleman from North Carolina, and then I will ask a couple 
more questions, then we will adjourn.
    Mr. Coble. Thank you for your generosity, Mr. Chairman. I 
just failed to mention this earlier. I want to revisit Mr. 
Gillis and Mr. Olsen.
    The Europeans have implemented an exemption to the design 
protection known as design clause. Now, I don't know whether 
that would be appropriate or not, but what do you two say about 
the design clause feature, maybe to better understand the ins 
and outs of design law in the auto parts market?
    Mr. Gillis. Well, I have to say at the outset that I am not 
a design patent attorney. I am a consumer advocate. However, 
all we are asking for is actually a repair clause. Design 
patents are fine. We just want consumers to be able to have 
choices when it comes to repair those cars, and Mr. Sherman's 
dented bumper. If he has two choices, not only will he get a 
fairer price, but those two companies will compete with each 
other and produce a better quality product.
    Mr. Coble. Do you want to be heard, Mr. Olsen?
    Mr. Olsen. Yes, I would like to make two points.
    Mr. Coble. Thank you, Mr. Gillis.
    Mr. Gillis. Thank you.
    Mr. Olsen. The European Automobile Manufacturers 
Association did costs on replacement parts for the Volkswagen 
Golf, the largest-selling car in Europe. They have the prices 
from countries like Britain, which don't subscribe to design 
protection in their country, and Germany and France. The 
interesting thing is that the lowest cost parts for the 
Volkswagen Golf come from the countries that are protected, and 
not from the countries that are not protected.
    Another point I would like to make is that when you design 
a car, and you are in the clay model stage and you are in a 
design studio trying to get out a car, you know what this car 
is going to retail for. The corporation brings in their 
insurance lawyers, adjusters, to look at that design, analyze 
it, and project what will be the repair costs on that car.
    If the insurance man--the person representing the insurance 
industry analyzing the design--gives a price which is higher 
than the class the manufacturer wants to be in, then design 
staff are obliged to change that design and get it into a 
situation where the costs meet the requirements to have the 
proper insurance rating.
    Mr. Coble. Thank you, Mr. Olsen.
    I see Mr. Gillis is writing rapidly. Do you want to be 
heard, Mr. Gillis?
    Mr. Gillis. Thank you, Mr. Coble.
    I just want to say that for the car companies to say that 
to give them a monopoly would assure consumers the lower prices 
and high quality simply flies in the face of any economic logic 
theory that I have ever heard of. Competition is the consumer's 
best friend, and that is what we are calling for.
    Mr. Sherman [continuing]. Car manufacturing business 
expects to get a certain profit from selling the car and a 
certain profit from selling the parts. They have certain design 
rights with regard to selling the car and they expect a certain 
profit. And then they will know that I am going to dent the 
thing, and then they expect certain profits there. All those 
profits to into designing the car, and one wonders whether we 
want to tell them, okay, go ahead and you get intellectual 
property protection for when you sell the car, and you can make 
your profit there, but you have to make a smaller profit when 
you sell the replacement parts.
    I am just beginning to learn these issues. One thing I do 
know and should announce is that we are going to keep the 
record of this hearing open through the close of business 
Wednesday for submissions by both witnesses and Members. 
Perhaps there are even others that would make submissions, but 
that would be at the discretion of the Chair who, as Mr. Schiff 
has pointed, is almost as good looking as I am.
    Mr. Fryer, I am glad you haven't fallen asleep. We haven't 
asked you any questions yet, but with Mr. Coble's permission, I 
will ask a couple.
    Mr. Coble. Sure.
    Mr. Sherman. Regarding vessel hull designs, how do you 
foresee applicants applying for protection under the Senate 
amendment? Will one be able to secure protection for a hull, a 
deck, a hull and deck, all in one application? Is this your 
understanding? Will applicants have to do something to indicate 
that they want protection for each of these elements? Or do 
they want them only as they fit together? What is your 
understanding?
    Mr. Fryer. Mr. Chairman, this vessel hull law is 
administered by the Copyright Office. It is a separate statute. 
The regulatory part will be determined by them. My vision--I 
think I put it in my statement--was that to make it simple for 
the person who is applying. The people applying are the boat 
companies. Usually, they are not attorneys, sophisticated 
design patent attorneys. So my suggestion would be to have a 
choice, if you want the bottom part or you want the upper part, 
which is now the hull or the deck, or both. So you can choose. 
And that is exactly what the statute now provides, and it would 
be supported by the statute.
    In the alternative, the present regulation says that you 
can show the whole design and then use what is called a 
``broken line'' technique. They use it in trademarks and design 
and patent, and you can actually show what you don't want to 
protect, kind of like a white-out thing. That would then give 
them an option. That would be the patent attorney or someone 
who is skilled in that an option. But I would give them both 
options. This approach would be my advice.
    Mr. Sherman. Thank you. You mention that there has been 
little litigation over vessel hull design protection. My 
question is, is that relevant to determining how much 
litigation we would see if we provided protection for fashion 
designs?
    Mr. Fryer. That is an excellent question. I feel like I am 
in the classroom with you, as my professor. It is a nice 
change.
    The point is, I think all these questions that you have 
asked about various industry concerns are important. They have 
to focus on is what does the statute really say. There are 
absolutely minimum limits of what can be protected. You can not 
protect common design. You can not protect purely functional 
features.
    By the time you go through analysis, you get to a design 
that is distinctive--something that you can recognize. I think 
a lot of this discussion is operating down in the lower level 
where frankly these features are not going to be protected. As 
is true for fashion, since they all basically have a common 
mother--you know, the origin of the Chip Act and the Vessel 
Hull Act. They all came from the same cut. And so what we are 
looking at now is the standard is substantially the same.
    When you are thinking about that, I suggest what you are 
saying is that an infringing design looks the same. You say 
``identical.'' I say ``similar.'' But what I am really saying 
is, it is the same. It is like Mr. Rodriguez--I couldn't do it 
better--he said, you know, you are going to take my dress apart 
and you are going to lay it out and you are going to make a 
copy and reproduce it. I mean, that is identical, but it is a 
visual kind of an observation.
    It is very easy to work with designs because you can kind 
of visually see it is the same. There is really not much doubt. 
You don't really have to go through the Patent Office delay 
problem. That led to the other question, that I wanted to 
answer, which is why are we having trouble with the design 
patent system? Why do we need something more? The fact is that 
design patents do not protect anything until the patent issues.
    Right now in the Patent Office, we have a lot of backlog. 
It is all part of the same system. You don't have a separate 
window you go to to buy your design protection. You go to one 
office, one filing system. You do not have protection for maybe 
2 years. We really need something in between or before, I guess 
is what I am saying.
    Mr. Sherman. Thank you.
    I will just make a closing comment. I think the professor 
is right, that anything we do in the fashion industry has got 
to have immediate effect before government review, as do 
copyright, for example. Because I think there will be a lot of 
people who will want to buy a copy of whatever is worn on the 
red carpet at this coming Academy Award. But I don't know 
anybody who is scurrying around trying to find a copy of what 
was worn two red carpets ago.
    The other thing I will point out is that if we wanted to 
provide an absolute minimum level of protection, because it is 
hard for me to say what is inspired by going to Spain and 
looking how people are dressed, versus what is a copy of a 
particular original item, that there are at least two 
indications that something is a dead-ringer copy. One is, if 
you sell it that way. If you are up on the Internet saying, 
``this is a copy of what Britney--no, somebody else--wore, or 
this is a copy of----''
    The other thing that would indicate it is if you put the 
garment next to the other garment and a lay person could not 
point to a design difference. The harder part will be what if 
somebody takes a dress and they make it just like some of the 
other dress, but they put one tassel in a different place, or 
they make a pair of pants without belt loops and the original 
had belt loops.
    I don't want to put our courts or our administrative 
agencies in a position to try to say, well yes, I can tell the 
difference between this and that, but they are damned similar. 
It is clear that whoever made that was looking at this.
    I will allow a comment from any witness on that, who has a 
real strong desire, because all fashion is inspired by other 
fashion. All fashion mimics other fashion. If you can tell the 
difference between two garments, but it is clear that one was 
highly inspired by the other, should we prohibit that?
    I see Steve has a question. Yes?
    Mr. Maiman. Well, I was just going to say that I think we 
are getting into very nebulous territory to try and establish 
what is substantially similar, versus what is sort of similar. 
Like you say, sure, we could see the inspiration, but at what 
point can the law actually quantify what is ``substantial.''
    Mr. Sherman. Right. I think ``substantially similar,'' you 
are going to need brighter people than me to know where to draw 
that line. Indistinguishable by a lay person or claiming to be 
a replica--those are two tough legal standards. If we are going 
to go beyond that, we are going to need some really clever 
legal draftsmanship from people that we will have to hear at 
another hearing because this hearing is over.
    Thank you.
    [Whereupon, at 5:19 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

       Prepared Statement of the Honorable Sheila Jackson Lee, a 
    Representative in Congress from the State of Texas, and Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property
    Thank you, Mr. Chairman, for your leadership in convening today's 
very important hearing on intellectual property. I would also like to 
thank the ranking member, the Honorable Coble, and welcome our 
panelists. I look forward to their testimony.
    The subject of today's hearing is ``Are Special Provisions Needed 
to Protect Unique Industries?'' It will focus upon whether the current 
means of protecting designs are adequate for industries that make 
significant use of new designs to attract customers and whether the 
scope of vessel hull design protection should be expanded to include 
other subject matter like auto parts and apparel.
    This hearing could not be more timely, Mr. Chairman.
    This hearing will explore the necessity of comprehensive 
intellectual property reform to minimize piracy and counterfeiting, and 
will address whether inadequacies in the current intellectual property 
system hamper innovation and hurt the American economy. Deficiencies in 
the current system have the ability to erode the innovation and 
competitiveness of U.S. designers and manufacturers, whose newest and 
most original creations are imitated and duplicated within hours of 
first being presented to the public.
    The Constitution mandates that we ``promote the progress of science 
and the useful arts . . . by securing for limited times to . . . 
inventors the exclusive right to their . . . discoveries.'' In order to 
fulfill the Constitution's mandate, we must examine the system 
periodically to determine whether there may be flaws in the system that 
may hamper innovation and competitiveness, including the problems 
described as decreased quality, prevalence of knock-offs and 
counterfeit merchandise, and increased litigation.
    Europe is more advanced in its intellectual property protections, 
and specifically in its protection of fashion design, than the United 
States. International obligations to establish industrial design 
protection were called for in the 1887 Paris Convention on Industrial 
Property. In the U.S. intellectual property system, we have the 
following protections: design patents, trade dress or trademarks, 
copyright and vessel hull design protection. None of these types of 
protections apply to fashion design.
    Fashion design is not protected under current U.S. law because of 
the general rule of exclusion of ``useful articles'' from the scope of 
Copyright protection. Generally, industrial designs are applied to, 
found on, or otherwise part of useful articles to make them more 
attractive or appealing. However, copyright is meant to protect 
artistic and literary expressions, not useful articles. As such, the 
Copyright Act prohibits the use of copyrights in protecting useful 
articles. This is done by requiring the work of authorship to be 
physically or conceptually separable from the article on which it is 
found. For instance, copyright protection can be used to protect an 
artistic silkscreen image on a t-shirt (i.e., a picture of a rose), but 
if the work is the physical design of the t-shirt (i.e., the t-shirt 
has a unique cut, sleeves, etc.), copyright protection may not apply.
    While there are many ways in which industrial designs may be 
protected in the United States, groups have argued that the products of 
their industry often cannot be effectively protected by the available 
mechanisms. This argument has been made by automakers, furniture 
makers, and more recently fashion designers.
    In spite of the general rule excluding copyright of ``useful 
articles,'' in 1998 Congress passed an amendment to the Copyright Act 
to provide limited statutory protection for useful articles. The first 
design enumerated for this protection was the design of a vessel hull. 
In the 110th Congress, the Design Piracy Prohibition Act, HR 2033, was 
introduced and amends the underlying vessel-hull language to extend the 
protection it provides to unique and original articles to apparel. The 
bill is intended to protect only those original designs that are unique 
and it bars third parties from manufacturing or importing for sale or 
use in trade protected designs. The bill provides exclusions for 
sellers and distributors who act without knowledge and for reproduction 
for teaching or analysis. In addition, there are other broad exclusions 
for acts without general knowledge. The bill has features which provide 
for frivolous lawsuits, such as the exclusion from protection of 
commonplace designs like button-down shirts or bell-bottom pants, which 
are commonplace, lacking in originality, and part of the public domain.
    I laud the principles underlying this bill. I believe that there 
should be an end to piracy of intellectual property, especially in the 
areas of fashion and apparel. I would like to bring an end to knock-
offs, counterfeiting, and the importation of pirated designs in 
apparel, where after importation in the United States, a label is 
affixed to the apparel, and the good is subsequently sold. I like 
fashion and the absence of such protections is not good for American 
creativity, innovation, or the economy. I believe that there is room 
for improvement in our design protection laws.
    Mr. Chairman, if these improvements are properly implemented, they 
would bring the American intellectual property protections up to speed 
for the twenty-first century and may also bring American law into a 
closer harmony with that of foreign countries. Instead of remaining a 
hindrance to innovation and economic growth, the U.S. intellectual 
property system should work for innovators and with competitive market-
forces, ensuring America's intellectual property protection will be one 
of the best in the world and prevents risks to innovation.
    Again, thank you Mr. Chairman for holding this hearing. I look 
forward to hearing from our distinguished panel of witnesses. I yield 
back my time.

                                

 Prepared Statement of the Honorable Lamar Smith, a Representative in 
  Congress from the State of Texas, Ranking Member, Committee on the 
   Judiciary, and Member, Subcommittee on Courts, the Internet, and 
                         Intellectual Property
    Today we revisit design protection to determine whether the 
Subcommittee should expand existing law to help the fashion and 
automotive industries.
    Proponents of greater protection argue that current law provides 
insufficient help for innovators who want to prevent the misuse of 
their designs.
    For example, Chapter 16 of the Patent Act allows an inventor to 
earn a design patent for any new, original, and ornamental design for 
an article of manufacture.
    However, the chief limitation on the patentability of designs is 
that they must be primarily ornamental in character.
    If the design is dictated by the performance of the article, then 
it is judged primarily functional and ineligible for protection.
    Combined with the high cost of patenting, this reality explains why 
some inventors, such as automobile companies, file for relatively few 
design patents.
    In addition, Chapter 13 of the Copyright Act provides 10-year term 
protection for the owner of an original design that makes a useful 
article attractive or distinctive.
    The law defines ``useful article'' as a ``vessel hull.'' This was 
done in 1998 to combat ``hull splashing,'' a method by which copycat 
manufacturers would attempt to duplicate the hull designs of luxury 
yachts.
    The statute is nonetheless a template--it can be easily amended to 
include design protection for other useful articles.
    And both the fashion and automobile designers want the vessel hull 
law amended to cover their industries.
    In fact, one bill, H.R. 2033, the ``Design Piracy Prohibition 
Act,'' has been introduced at the behest of fashion designers.
    Fashion designers claim that apparel and footwear anti-
counterfeiting costs them billions in lost sales each year.
    They believe their creativity, labor, and risk-taking go 
unrewarded.
    Similarly, auto manufacturers assert that automotive suppliers lose 
upwards of $12 billion annually to counterfeit products.
    And at least one prominent car company invests $100 million or more 
in the design of each new car line.
    Like the fashion designers, car manufacturers want a higher return 
on their investments.
    But the legislative process is like Newton's Third Law of Motion: 
for every action there is an equal and opposite reaction.
    Amending either the Copyright or Patent Act invites opposition from 
others who work in the fashion world and automotive after-parts 
industry.
    We heard from the fashion critics at a Subcommittee hearing in 
2006.
    They maintain no one can define originality in the fashion world 
because current fashion is the product of generations of designers 
refining and redeveloping the same items and ideas over and over.
    This is the ultimate intellectual property paradox: they argue that 
design protection would inhibit innovation since the fashion world is 
driven by unfettered access to styles and trends that are later 
reinterpreted.
    Likewise, garage owners who are not affiliated with the auto makers 
fear they will go out of business if Chapter 13 of the Copyright Act is 
extended to auto designs.
    They represent only 15% of the after-parts market; enhanced design 
protection has the potential to put them out of business, granting a 
monopoly to the auto makers.
    The Subcommittee must therefore weigh these competing interests and 
the consequences of establishing such a precedent.
    All of us understand the Constitutional mandate to protect the 
intellectual property rights of American citizens and those who fairly 
deserve to reap the benefits of their creative contributions.
    At the same time, we must also ensure that our legislative efforts 
do not have an adverse impact on economic growth for other segments of 
the economy.
    When we allow goods to be taken out of the marketplace and assign 
ownership rights to one individual or company, we should examine the 
fairness of doing so and the impact it will have on the market.
    We must explore the economic impact of expanding designer 
protection for the fashion and automotive industries and the related 
burdens placed on the Copyright Office and the federal court system.
    I remain open-minded on this issue and look forward to the 
testimony we will receive.
    Thank you, Mr. Chairman.

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