[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
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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
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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?
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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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