    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

                       INNOVATIVE DESIGN PROTECTION AND
                             PIRACY PREVENTION ACT

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             INTELLECTUAL PROPERTY,
                         COMPETITION, AND THE INTERNET

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 2511

                                   __________

                                 JULY 15, 2011

                                   __________

                               Serial No. 112-46

                                   __________

             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

                          LAMAR SMITH, Texas, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        HOWARD L. BERMAN, California
    HOWARD COBLE, North Carolina         JERROLD NADLER, New York
    ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
    BOB GOODLATTE, Virginia                  Virginia
    DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
    STEVE CHABOT, Ohio                   ZOE LOFGREN, California
    DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
    MIKE PENCE, Indiana                  MAXINE WATERS, California
    J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
    STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
    TRENT FRANKS, Arizona                  Georgia
    LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
    JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
    TED POE, Texas                       JUDY CHU, California
    JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
    TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
    TOM MARINO, Pennsylvania             DEBBIE WASSERMAN SCHULTZ, Florida
    TREY GOWDY, South Carolina
    DENNIS ROSS, Florida
    SANDY ADAMS, Florida
    BEN QUAYLE, Arizona
    [Vacant]

          Sean McLaughlin, Majority Chief of Staff and General Counsel
           Perry Apelbaum, Minority Staff Director and Chief Counsel
                                     ------

      Subcommittee on Intellectual Property, Competition, and the Internet

                       BOB GOODLATTE, Virginia, Chairman

                       BEN QUAYLE, Arizona, Vice-Chairman

    F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
    Wisconsin                            JOHN CONYERS, Jr., Michigan
    HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
    STEVE CHABOT, Ohio                   JUDY CHU, California
    DARRELL E. ISSA, California          TED DEUTCH, Florida
    MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
    JIM JORDAN, Ohio                     JERROLD NADLER, New York
    TED POE, Texas                       ZOE LOFGREN, California
    JASON CHAFFETZ, Utah                 SHEILA JACKSON LEE, Texas
    TIM GRIFFIN, Arkansas                MAXINE WATERS, California
    TOM MARINO, Pennsylvania             DEBBIE WASSERMAN SCHULTZ, Florida
    SANDY ADAMS, Florida
    [Vacant]

                         Blaine Merritt, Chief Counsel

                       Stephanie Moore, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 JULY 15, 2011

                                                                       Page

                                    THE BILL

    H.R. 2511, the ``Innovative Design Protection and Piracy
      Prevention Act''...............................................   133

                                   WITNESSES

    Lazaro Hernandez, Designer and Co-Founder, Proenza Schouler
      Oral Testimony.................................................     3
      Prepared Statement.............................................     5
    Jeannie Suk, Professor of Law, Harvard Law School
      Oral Testimony.................................................    13
      Prepared Statement.............................................    15
    Christopher Sprigman, Professor of Law, University of Virginia
      School of Law
      Oral Testimony.................................................    74
      Prepared Statement.............................................    77
    Kurt Courtney, Manager, Government Relations, American Apparel &
      Footwear Association
      Oral Testimony.................................................    91
      Prepared Statement.............................................    92

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Prepared Statement of the Honorable Bob Goodlatte, a
      Representative in Congress from the State of Virginia, and
      Chairman, Subcommittee on Intellectual Property, Competition,
      and the Internet...............................................     1
    Prepared Statement of the Honorable Melvin L. Watt, a
      Representative in Congress from the State of North Carolina,
      and Ranking Member, Subcommittee on Intellectual Property,
      Competition, and the Internet..................................    10

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Response to Post-Hearing Questions from Lazaro Hernandez,
      Designer and Co-Founder, Proenza Schouler......................   102
    Response to Post-Hearing Questions from Jeannie Suk, Professor of
      Law, Harvard Law School........................................   105
    Response to Post-Hearing Questions from Christopher Sprigman,
      Professor of Law, University of Virginia School of Law.........   116
    Response to Post-Hearing Questions from Kurt Courtney, Manager,
      Government Relations, American Apparel & Footwear Association..   125
    Letter from Stephanie Lester, Vice President, International
      Trade, Retail Industry Leaders Association.....................   130

             INNOVATIVE DESIGN PROTECTION AND PIRACY PREVENTION ACT

                                  ----------

                             FRIDAY, JULY 15, 2011

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

        The Subcommittee met, pursuant to call, at 10:08 a.m., in
    room 2141, Rayburn House Office Building, the Honorable Bob
    Goodlatte (Chairman of the Subcommittee) presiding.
        Present: Representatives Goodlatte, Quayle, Coble, Chabot,
    Marino, Watt, Conyers, Chu, Lofgren, and Jackson Lee.
        Staff Present: (Majority) Blaine Merritt, Subcommittee
    Chief Counsel; Olivia Lee, Clerk; and Stephanie Moore, Minority
    Subcommittee Chief Counsel.
        Mr. Goodlatte. Good morning.
        The Subcommittee on Intellectual Property, Competition, and
    the Internet will come to order. I want to welcome our
    witnesses for this hearing on the ``Innovative Design
    Protection and Piracy Prevention Act.''
        I am going to submit my opening statement for the record
    and I believe that the Ranking Member, Mr. Watt, who I believe
    will be here shortly, and the Ranking Member of the full
    Committee, Mr. Conyers, have indicated an interest in doing the
    same in order to get to our witnesses as quickly as possible.
        Our reason for doing that is because we are expecting votes
    around 11. Once they come, they are going to be very lengthy,
    and we may have to conclude before then. We will gauge that at
    11.
        [The prepared statement of Mr. Goodlatte follows:]
    Prepared Statement of the Honorable Bob Goodlatte, a Representative in
      Congress from the State of Virginia, and Chairman, Subcommittee on
              Intellectual Property, Competition, and the Internet
        Article I, section 8, of the 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 such an
    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.
        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 regimes. 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,
    a thief violates Federal law when he steals a creator's design,
    reproduces and sells that article of clothing, and attaches a fake
    label to the garment for marketing purposes.
        But it is perfectly legal for that same thief to steal the design,
    reproduce the article of clothing, and sell it, provided he does not
    attach a fake label to the finished product. This loophole allows
    pirates to cash in on the sweat equity of others and prevents designers
    in our country from reaping a fair return on their creative
    investments.
        The production lifecycle for fashion designs is very short. Once a
    design achieves popularity through a fashion show or other event, a
    designer usually has a limited number of months to produce and market
    that original design. Further complicating this short-term cycle is the
    reality that once a design is made public, pirates can immediately
    offer identical knockoffs on the Internet for distribution.
        Again, under current law, this theft is legal unless the thief
    reproduces a label or trademark. And because these knockoffs are
    usually of such poor quality, they damage the designer's reputation as
    well. Common sense dictates that we should inhibit this activity by
    protecting original fashion works.
        Our undertaking is similar to action taken by Congress in 1998 when
    we wrote Chapter 13 of the Copyright Act, which offers protection for
    vessel hull designs. The ``Innovative Design Protection and Piracy
    Prevention Act'' amends this statutory template to include protections
    for fashion designs. Because the production lifecycle for fashion
    designs is very short, this legislation similarly provides a shorter
    period of protection of three years that suits the industry.
        The bill enjoys support among those in the fashion and apparel
    industries. While concerns have been expressed about the scope of
    previous versions of this legislation, my office has engaged in
    discussions through the years with interested parties to ensure that
    the bill does not prohibit designs that are simply inspired by other
    designs; rather, the legislation only targets those designs that are
    ``substantially identical'' to a protected design. Other provisions,
    including a ``home-sewing'' exception and a requirement that a designer
    alleging infringement plead with particularity, ensure that the bill
    does not encourage harassing or litigious behavior.
        H.R. 2511 is identical to legislation reported by the Senate
    Judiciary Committee last December. Between this event and the growing
    coalition of stakeholders coalescing around our bill, I am optimistic
    that we can enact fashion piracy reform in the 112th Congress.
        I look forward to hearing from our witnesses, and I now recognize
    the Ranking Member from North Carolina for his opening statement.
                                   __________

        Mr. Goodlatte. In the meantime, let me go ahead and welcome
    our witnesses and introduce them. We have a very distinguished
    panel of witnesses today.
        Each of the witnesses' written statements will be entered
    into the record in its entirety. I ask that each witness
    summarize his or her testimony in 5 minutes or less.
        To help you stay within that time, there is a timing light
    on your table. When the light switches from green to yellow,
    you will have 1 minute to conclude your testimony. When the
    light turns red, it signals that your 5 minutes have expired.
        And it is the custom of this Committee to swear in our
    witnesses.
        So I would ask that the witnesses rise.
        [Witnesses sworn.]
        Mr. Goodlatte. Thank you very much. Please be seated.
        Our first witness is Lazaro Hernandez, who co-founded
    Proenza Schouler, a New York-based modern luxury women's wear
    and accessory label, in 2002. The company has won a number of
    industry honors from the Council of Fashion Designers of
    America, including the 2003 Perry Ellis Award for New Talent,
    the 2004 Vogue Fashion Fund Award, and the 2007 and 2011
    Women's Wear Designer of the Year Award.
        Proenza Schouler is sold in more than 100 outlets worldwide
    and has collaborated with Target and J Brand Jeans, among other
    retailers. The company has also developed working relationships
    with a number of celebrities such as Kristen Stewart, Sarah
    Jessica Parker, Gwyneth Paltrow, Kirsten Dunst, and Julianne
    Moore.
        Originally a pre-med student from South Florida, Mr.
    Hernandez dropped out of the University of Miami and enrolled
    in the Parsons School of Design, from which he graduated 9
    years ago.
        Our next witness is Jeannie Suk, professor of law at
    Harvard Law School. Professor Suk specializes in criminal law
    and family law, while also teaching art and entertainment law.
    Prior to her current duties, Professor Suk served as a law
    clerk for Judge Harry Edwards of the U.S. Court of Appeals for
    the D.C. Circuit and for Justice David Souter on the United
    States Supreme Court. She also worked as an Assistant District
    Attorney in Manhattan and was a fellow at the New York
    University School of Law.
        Professor Suk studied ballet at the School of American
    Ballet and piano at the Juilliard School before earning her
    B.A. From Yale, a Doctor of Philosophy from Oxford as a
    Marshall Scholar, and her law degree from Harvard.
        Our next witness is Christopher Sprigman, professor of law
    at the University of Virginia School of Law. He teaches
    intellectual property, antitrust, competition policy, and
    comparative constitutional law. Prior to joining the Virginia
    faculty in 2005, Professor Sprigman clerked for Judge Steven
    Reinhardt of the Ninth Circuit Court of Appeals and for Justice
    Lawrence Ackerman of the Constitutional Court of South Africa.
    He also taught law in Johannesburg, worked in the Antitrust
    Division of the U.S. Department of Justice, practiced law in
    Washington, and served as a residential fellow at the Center
    for Internet and Society at Stanford Law School. Professor
    Sprigman earned his B.A. From the University of Pennsylvania
    and his law degree from Chicago.
        Our final witness is Kurt Courtney, manager of government
    relations at the American Apparel & Footwear Association since
    2007. In that capacity, he handles a wide variety of issues
    affecting the industry. That includes intellectual property,
    health care, taxes, ports, and government contracts.
        Before joining AAFA, Mr. Courtney spent 5 years on Capitol
    Hill working for Representatives Zack Wamp, Buck McKeon, and
    Ileana Ros-Lehtinen. A native of Los Angeles, Mr. Courtney
    graduated from the George Washington University in 2000 with a
    Bachelor of Arts Degree in International Affairs.
        I want to welcome all of you.
        Mr. Hernandez, we will begin with you.

    TESTIMONY OF LAZARO HERNANDEZ, DESIGNER AND COFOUNDER, PROENZA
                                SCHOULER

        Mr. Hernandez. Hello. Good morning, Chairman Goodlatte,
    Members of the Subcommittee.
        I am pleased to be here today to testify in support of H.R.
    2511, or the ID3PA, on behalf of the Council of Fashion
    Designers of America. The CFDA is the leading trade
    organization representing the American fashion industry. Over
    85 percent of its members are small businesses that are
    creating jobs across the country, as fashion has grown to a
    $340 billion industry in the United States.
        My design firm, Proenza Schouler, began as a senior project
    simply at Parsons School of Design. In 1998, I met my design
    partner, Jack McCollough, who is here today. In our senior year
    at Parsons, we designed our first collection. And the entire
    collection was, remarkably, bought by Barney's New York. As a
    result, at the age of 23, we launched our independent label,
    Proenza Schouler, which is named after our mother's maiden
    names.
        I would like to thank the Committee for taking up the
    important issue of fashion piracy in this legislation. The
    fashion business is already a tough business, and it is getting
    tougher because of piracy. It takes tens of thousands of
    dollars to start a business and even more to sustain it. Just
    one of our collections--and we produce four collections a
    year--cost about $3.8 million. The cost of a typical show is
    approximately $320,000. So you can see a significant amount of
    money has been spent before a designer has received their first
    order.
        As designers, we expect many challenges. And we can handle
    most of them. However, we are helpless against copyists who
    prey on our ideas. Established or undiscovered, all designers
    have been touched by fashion design piracy. Fashion design is
    intellectual property that deserves protection.
        Fashion is different from basic apparel. Our designs are
    born in our imaginations. We create something from nothing at
    all. But by far, the majority of apparel is based on garments
    already in the public domain. Nothing about this proposed
    legislation will change that. Nobody will ever be able to claim
    ownership of a T-shirt or something as simple as a pencil
    skirt.
        When designers produce basic garments that complement their
    original designs in their collection, we know the difference
    between that and what is new. And so do the design pirates.
    This bill is intended to protect only those designs that are
    truly original.
        Our PS 1 satchel has been knocked off repeatedly. We have
    attempted to assure our rights and fight this piracy, but
    without success, because, unfortunately, it is currently legal
    under U.S. law to pirate a design that happens to be the key to
    our business. Every other developed country other than China
    has a law on the books to protect fashion, except the U.S. As a
    result, the U.S. has become a haven for copyists who steal
    designers' ideas and sell them as their own with no fear of
    consequences. It has also become the weak link of international
    IP protection and the first if not only market for Chinese
    exporters of pirated designs. This is completely unacceptable.
        The problem is worsening with new technologies. Today,
    digital images from runway shows in New York or red carpet in
    Hollywood can be uploaded to the Internet within minutes,
    viewed at a factory in China, and be copied and offered for
    sale online within days, which is months before the designer is
    able to deliver the original garments to stores.
        Piracy can wipe out young careers in a single season. The
    most severe damage from lack of protection falls upon emerging
    designers, such as ourselves, who everyday lose orders and
    potentially our entire businesses. While salvage designers and
    large corporations with wide recognized trademarks can better
    afford to absorb these losses caused by copying, very few small
    businesses can compete with those who steal their intellectual
    capital. It makes it harder for young designers to start up
    their own companies. And isn't that the American Dream?
        Ever designer must develop their own DNA in order to make a
    lasting and recognizable impact on consumers. It is like
    developing their hit song. Imagine if a starting songwriter's
    first song was stolen and recorded by someone else, with no
    credit to the songwriter. And worse, it becomes a hit. They
    hear it on the radio every day, and they are never credited.
    That is what happens to many young designers whose ideas are
    stolen and rendered by others. It is very hard to survive when
    you become the victim of this type of theft.
        I thought it would be helpful to talk a little bit about
    the economics of the industry. Designers don't make a profit
    selling a small number of high-priced designs, but only after
    they offer their own more affordable ready-to-wear lines based
    on their high-end collections. Just like other businesses, they
    can lower their prices based on volume. Design piracy makes it
    difficult for a designer to move from higher-priced fashion to
    developing affordable renditions for a wider audience. It also
    makes it impossible to sell collections to stores when the
    clothes have already been knocked off for less. And licensing
    deals are then no longer an option. In other words, fashion
    designers should have the chance to knock off their own designs
    before others do it for them.
        Proenza Schouler is an example of successful licensing
    deals. Several years ago, we designed a collection for Target.
    There are many more examples of successful partnerships between
    American designers and large American retailers, including
    discount retailers. There is no reason that real innovation,
    rather than knockoffs, shouldn't be available for everyone. The
    average consumer can wear affordable new designs created by
    true designers rather than poor copies of the real thing made
    by pirates in China.
        In order for this bright future to happen, we desperately
    need the ID3PA passed into law. The ID3PA has been narrowed
    significantly from previous Congresses. Apparel manufacturers
    had legitimate concerns, so designers began negotiations with
    the association representing U.S. apparel and footwear
    manufacturers, the AAFA. We are pleased that the results of
    those negotiations is the legislation recently introduced.
        We will need this bill to be enacted. Our industry is
    growing opportunities all across the country and many in your
    districts. We can't compete against the pirates. And piracy is
    worsening. Without this legislation, this creativity and
    innovation that has put American fashion in the position of
    leadership will dry up. We ask you to please pass this
    legislation quickly. Thank you for your time.
        [The prepared statement of Mr. Hernandez follows:]
                    Prepared Statement of Lazaro Hernandez,
                 Fashion Designer & Co-Founder, Proenza Shouler
                                  introduction
        Good morning Chairman Goodlatte, Ranking Member Watt and other
    Members of the Subcommittee. I am pleased to be here today to testify
    in support of the Innovative Design Protection and Piracy Prohibition
    Act, or ID3PA, on behalf of the Council of Fashion Designers of America
    (CFDA). CFDA is a leading trade organization representing the American
    fashion industry. Our members are prominent household names and
    primarily up and coming talent. The vast majority--over 85%--are small
    businesses. These small businesses are creating jobs across the country
    as fashion has grown to a $340 billion industry in the U.S. The CFDA
    also counts among its fashion constituents publishing, communications,
    retail, manufacturers and production whose success is contingent on the
    success of designers.
        My design firm, Proenza Schouler, began simply as a senior project
    at Parsons School of Design. It was there that, in 1998, I met my
    design partner Jack McCollough. For three years we each designed
    independently. During those years we were fortunate to have our talent
    cultivated by some of the great names in the fashion industry; Jack was
    mentored by Marc Jacobs, I by Michael Kors. In our senior year at
    Parsons, we designed our first collection. It received the Golden
    Thimble award for best student collection and remarkably, the entire
    collection was bought by Barneys New York. As a result, at the age of
    23, we launched our own independent label, Proenza Schouler, named
    after our mothers' maiden names.
        In just five years, we grew from a company of three people to fifty
    with total annual operating costs of $15.2 million. Ours is not a
    typical story and it may sound like success came easily for us. It
    didn't. Proenza Schouler is the result of tens of thousands of hours of
    very hard work, a lot of determination, talent and a little luck.
                         costs of the fashion business
        The fashion business is a tough business. With each new season,
    designers put their imagination to work, and their resources at risk.
    It takes tens of thousands of dollars to start a business and even more
    to grow and create new collections and shows to showcase them. Just one
    of our collections--and we produce 4 collections a year--costs $3.8
    million. The cost of a typical show is approximately $320,000. So,
    before a designer has even received that first order, they've spent a
    significant sum of money.
        As designers we expected many of the challenges we face; the
    challenges of securing funding, convincing retailers to carry our
    collections, meeting deadlines, delivering our clothes in time to
    stores, finding studio space, attracting talented employees. We can
    handle all of those. However, we are helpless against copyists who prey
    on our ideas. Our story of long hours and sacrifice, pinching pennies
    to grow a business, is the same story told by countless small designers
    who are working as entrepreneurs to build businesses based on their own
    intellectual capital. We were fortunate to win awards and gain
    notoriety early but there are countless, undiscovered small designers
    across America working in their studios waiting to have someone buy
    their clothes or accessories. Established or undiscovered--we all have
    been touched by fashion design piracy. We luckily survived despite its
    disastrous effects, but many colleagues whose names you will never
    hear, had to close down.
                 fashion, inspiration and intellectual property
        I thought it might be helpful to describe the fashion design
    process and how it is so much like other creative pursuits that today
    enjoy copyright protection. Fashion is not protected under current law
    because of the general rule exclusion of useful articles from the scope
    of copyright protection. In other words, we all must wear clothes.
    While there are other means of protecting various components of
    intellectual property relative to fashion, the protection of fashion
    design falls between the cracks: neither trademark (protecting the
    brand) or trade dress (requiring such recognition as constituting
    secondary meaning), or design patent (which involves such a lengthy
    process that it offers no protection against the fast creative fashion
    cycle) provide adequate protection.
        But designing a fashion collection is no different from the
    intellectual process involved in creating a painting or a song except
    perhaps its lengthy process. The development of a collection usually
    begins 10 months before it is launched. We draw inspiration from the
    world around us. Personally, we do research and development, not in a
    lab, but through the cultures we observe through travel, the books we
    read or the music we listen to. For example, work on our fall
    collection took place in the American West. We spent time in Wyoming,
    Colorado and New Mexico exploring Native American history and their
    crafts and were inspired by Navajo textiles. When you look at our
    designs you won't see knockoffs of Navajo crafts. Instead you will see
    that we incorporated their feel and some of their elements to create
    our own originals.
        Our designs are born in our imaginations, unlike the production of
    most basic apparel. While we create something from nothing, by far, the
    majority of apparel is based on garments already in the public domain.
    Nothing about the proposed legislation will change that. Nobody will
    ever be able to claim ownership of the t-shirt or the pencil skirt.
    When designers produce basic garments to complement the original
    designs in our collections and create complete outfits, we know the
    difference between what is new and what is based on a common template--
    and so do design pirates. The bill is intended to protect only those
    designs that are truly original.
               new technologies & lack of a u.s. law fuels piracy
        In recent years America's fashion designers have become some of the
    most sought after throughout the world. The level of originality seen
    on runways each season continues to surpass and surprise. However, with
    the accolades American designers are receiving comes the devastating
    blow of fashion piracy.
        One of our most popular designs has unfortunately become a typical
    example of the problem we highlight. Our PS1 satchel is one of the most
    knocked off designs on the market today. We have attempted to assert
    our rights and fight this piracy--but without success--because
    unfortunately it is currently legal under U.S. law.
        Current U.S. intellectual property law supports copyists at the
    expense of original designers, a choice inconsistent with America's
    position in fields of industry like software, publishing, music, and
    film. Internationally, design protection is the norm. Every other
    developed country, other than China, has a law on the books to protect
    fashion except the U.S. As a result the U.S. has become a haven for
    copyists who steal designers' ideas and sell them as their own with no
    fear of consequences. It also has become the weak link of international
    IP protection and the first, if not only, market for Chinese exporters
    of pirated designs.
        With every passing year, the problem of copying worsens. It is
    growing with new technologies. Just as the Internet has transformed
    industries like music, books and motion pictures, and created new
    opportunities for piracy, it has done the same for fashion. Today,
    global changes in both the speed with which that information is
    transferred and the location where the majority of clothing and
    textiles are produced have resulted in increased pressure on creative
    designers. Digital photographs from a runway show in New York or a red
    carpet in Hollywood can be uploaded to the Internet within minutes, the
    360 degrees images viewed at a factory in China, and copies offered for
    sale online within days--months before the designer is able to deliver
    the original garments to stores.
                             piracy harms designers
        I have heard the argument that somehow fashion piracy doesn't harm
    the industry, but rather helps it. This is akin to the concept that
    stealing from legitimate owners encourages them to replace their
    property and thus boosts the Gross National Product. Those suggesting
    that it helps designers to have their works knocked off have certainly
    never stood in my shoes. Far from helping the designer, design piracy
    can wipe out young careers in a single season. The most severe damage
    from lack of protection falls upon emerging designers, who every day
    lose orders, and potentially their businesses, because copyists exploit
    the loophole in American law. While established designers and large
    corporations with widely recognized trademarks can better afford to
    absorb the losses caused by copying, very few small businesses can
    compete with those who steal their intellectual capital.
        Every designer must develop their own DNA in order to make a
    lasting and recognizable impact on consumers. It's like developing
    their ``hit song'' or anthem. Imagine if a starting songwriter's first
    song was stolen and recorded by someone else with no credit to the
    songwriter and worse, it becomes a hit. They hear it on the radio every
    day and they are never credited. That's what happens to many young
    designers whose ideas are stolen and rendered by others. It's very hard
    to survive when you become a victim of this type of theft.
                           the economics of fashion--
                    licensing deals make fashion accessible
        Some designers make their names in high end collections, where they
    sell a very small number of rather expensive designs. While the designs
    can be high priced, the designer never recoups development costs for
    the designs because he or she sells so few garments. Designers are only
    able to recoup their investments when they later offer their own
    affordable ready-to-wear lines based on those high end collections.
    They then can lower the prices at which their designs are sold because
    they sell more of them. Just like other businesses--it's dependent on
    volume. Design piracy makes it difficult for a designer to move from
    higher priced fashion to developing affordable renditions for a wider
    audience. It also makes it impossible to sell collections to stores
    when the clothes have already been knocked off. Licensing deals are
    then no longer an option. In other words, fashion designers want the
    chance to knock off their own designs before others do it for them.
        Proenza Schouler is an example of successful licensing deals.
    Several years ago we designed a capsule collection of clothing and
    accessories for the Target GO International campaign. To those who
    argue that protecting fashion will drive up costs, accessibility and
    ultimately harm consumers, our experience disproves this myth. In the
    past few years we have seen a proliferation of partnerships between
    American designers and large American retailers including discount
    retailers. In addition to us, some other American designers who have
    collaborated with such retailers are Isaac Mizrahi at Target, Isabel
    Toledo at Payless, Norma Kamali at Wal-Mart, Mary Kate and Ashley Olsen
    at JC Penney, Billy Reid at J.Crew, Diane von Furstenberg at Gap and
    Vera Wang at Kohl's. These stores have all seen the value of making the
    works of American designers available in their stores through licensing
    deals so that designers get paid for their innovation and creativity.
    This proves that the real growth of American fashion is in the lower to
    mid price range.
        This bill will make it easier for all designers, not just the big
    names, to make their designs available at a variety of prices in a
    variety of stores. There are some in the industry who have become
    comfortable with the status quo. They see no need for a new law and
    fear that they might have to change the way they do business. To those
    companies I say, talk to all of the small designers put out of business
    by your current practices and business models.
        There is no reason that real innovation, rather than knockoffs,
    shouldn't be available for everybody. Consumers can have more choices
    precisely because of innovation. The average consumer can wear new
    designs, created by true designers rather than poor copies of the real
    thing made by pirates in China. As I stated before, fashion in America
    is a $340 billion industry, in n this economic downturn we should
    encourage growth in this sector. More competition and growth won't
    occur simply by everybody distributing the identical product around the
    world because copying isn't illegal. Growth won't occur because
    somebody can steal a designer's creation and then go sell it for a
    third of the price. Because innovation is the fuel of the U.S. economy,
    in the long term, lack of protection will shrink American businesses
    and provoke the loss of American jobs.
                        the id3pa is desperately needed
        Congress has passed laws to protect against counterfeits. One in
    three items seized by U.S. Customs is a fashion counterfeit. Congress
    has made it illegal to traffic in the labels that are used in
    counterfeit goods. But a copy of a design is really a counterfeit
    without the label. If no design piracy existed, there could not be
    counterfeiting. Both must be addressed or else the small designer with
    no brand recognition is left defenseless to the devastating problem of
    piracy, leaving only famous brands and big companies protected.
        It is for all these reasons that we are here today to strongly
    support your efforts to pass the Innovative Design Protection and
    Piracy Prevention Act.
        The legislation will provide three years of protection to designers
    for original designs. That is far less than the life of the author plus
    70 years granted to other copyrighted works. However, because of the
    unique seasonality of the fashion industry, a shorter term of
    protection is reasonable. In three years a designer will have time to
    recoup the work that went into designing the article, develop
    additional lines, or license lines to retailers.
        The CFDA first came to Congress five years ago to ask for a new
    law. At the time we heard legitimate criticisms from apparel
    manufacturers who were fearful of the impact of new legislation.
    Designers began negotiations with the association representing U.S.
    apparel and footwear manufacturers--the AAFA. We are pleased that the
    result of those negotiations is the legislation recently introduced by
    Chairman Goodlatte, and Representatives Nadler, Sensenbrenner, Coble,
    Sanchez, Issa, Jackson Lee, Waters and others. In short, we:

              Addressed concerns that a new law could encourage
            needless and expensive litigation by crafting a special pre-
            trial proceeding--pleading with particularity--during which a
            plaintiff would have to prove the copied design is protected
            and that the alleged copyist had the opportunity to have seen
            the design or an image of it. Designers as well as
            manufacturers had concerns that they could be on the receiving
            end of lawsuits and this new procedure provides important
            protection.

              Included penalties for false representations to deter
            frivolous lawsuits.

              Protected only unique and original designs. Anything
            already created by the time of its enactment would be in the
            public domain and available to copy. It is a high standard to
            qualify for protection, amounting to originality plus novelty.
            New and unique designs will qualify for protection, while
            everything else remains in the public domain.

              Addressed concerns that it is too difficult to tell
            if something is infringing by limiting the scope to copies that
            are ``substantially identical.''

              Included the doctrine of independent creation as a
            defense to infringement. This makes clear that if someone
            independently designs an article of apparel that meets the
            standard for infringement, (without any knowledge of the
            protected design) no infringement occurs.

        I am not a lawyer but we have relied on one who is an expert in
    fashion law heavily during this process, Professor Susan Scafidi of
    Fordham, the academic director of the Fashion Law Institute. As she
    told this subcommittee in 2006, the first version of this bill was ``a
    measured response to the modern problem of fashion design piracy,
    narrowly tailored to address the industry's need for short-term
    protection of unique designs while preserving the development of
    seasonal trends and styles.'' The lengthy negotiations between the CFDA
    and the AAFA have resulted in an even more narrowly and precisely
    tailored way to support the entire American fashion industry.
        We need your help to get back to the business of designing. We're
    all entrepreneurs who create our fashion with the hope of designing
    something that will catch on and capture the imagination of U.S.
    consumers. Success that starts in our individual design studios grows
    opportunities all across the country for fabric manufacturers,
    printers, pattern makers, the shippers and truckers who transport the
    merchandise, design teams, fabric cutters, tailors, models,
    seamstresses, sales people, merchandising people, advertising people,
    publicists, and those who work for retailers. This is a big employment
    business today. We are creating jobs across this country.
        However, we can't compete against piracy. Without this legislation,
    the creativity and innovation that has put American fashion in a
    leadership position will dry up. Innovation is an investment but we
    can't innovate without protection and urge you to quickly pass this
    legislation. Thank you for your time.
                                   __________

        Mr. Goodlatte. Thank you, Mr. Hernandez.
        Before we go on to Professor Suk, I want to acknowledge the
    presence of the Ranking Member. The gentleman from North
    Carolina, Mr. Watt--the Ranking Member of the full Committee
    and I have submitted our testimony for the record.
        If you are satisfied with that, we will proceed to the next
    witness.
        [The prepared statement of Mr. Watt follows:]

                                   __________

        Mr. Conyers. Mr. Chairman, can we recognize the presence of
    Judy Chu as well?
        Mr. Goodlatte. We absolutely welcome her and the other
    gentlewoman from California, Ms. Lofgren.
        And the gentleman from Ohio, Mr. Chabot.
        We will now turn to Professor Suk.
        Welcome.

              TESTIMONY OF JEANNIE SUK, PROFESSOR OF LAW,
                           HARVARD LAW SCHOOL

        Ms. Suk. Chairman Goodlatte, Ranking Member Watt, and
    Members of the Subcommittee, thank you for holding this hearing
    and for inviting me to speak to you today.
        I am Jeannie Suk, professor at Harvard Law School, where I
    conduct research on law and innovation in the fashion industry.
    My testimony today is based on my scholarly work with Professor
    Scott Hemphill of Columbia Law School, and I have submitted our
    article, ``The Law, Culture, and Economics of Fashion,'' which
    was published in the Stanford Law Review. I have submitted that
    along with my written testimony.
        Like all of the arts, fashion design involves borrowing and
    influence from existing works and themes in our culture. Even
    the most original creation in the arts is indebted to prior
    work. And so, appropriately, Federal copyright law does not
    consider most of the similarity or even copying in the arts to
    be copyright infringement.
        When there is a trend in fashion, just as in movies, books,
    music, and culture, many people are converging on similar ideas
    through conscious and unconscious influence by work from the
    past and the present.
        But these common forms of borrowing do not require blatant
    replication of another's work product, a practice that takes
    profits from the original producer and thus undermines the
    incentive to create that Federal copyright law aims to foster.
        The ID3PA protects the incentive to create but also
    safeguards designers' ability to use a large domain of creative
    influences and to participate in fashion trends. Deviating from
    the ordinary copyright infringement standard with a much
    narrower substantially identical standard for infringement, the
    Act allows plenty of room for designers to draw inspiration
    from others, much more room than producers of books, movies,
    and music currently have. At the same time, it prohibits
    copyists from selling near exact copies of original designs. In
    short, the ID3PA strikes an effective balance between the
    significant public interest in incentivizing the creation of
    original design and the equally important public interest in
    leaving designs largely available for free use.
        A key distinction to recognize is the distinction between
    products that are inspired by a designer's work and products
    that replicate or knock off a designer's work without any
    effort at modification. For simplicity, I am going to call
    these ``inspired-bys'' and ``knockoffs.''
        If you have difficulty telling the difference between two
    designs, you are looking at a copyist's
        Knockoff, not an inspired-by. This is a crucial difference
    as a matter of innovation policy because knockoffs cannot
    plausibly claim to be forms of innovation, whereas inspired-bys
    can. Knockoffs directly undermine the market for the original
    designs and reduce the designer's incentive to innovate in ways
    that inspired-bys do not.
        The ID3PA is therefore a highly moderate bill that only
    targets businesses that produce and sell knockoffs of original
    designs. The vast majority of the apparel industry will not be
    affected. If retailers are not selling knockoffs, they have
    nothing to fear from this bill. And even if they are, they are
    still safe if the design that they knock off is in the public
    domain or is not itself original, or if they are unaware that
    the items that they sell are knockoffs. And even if the copied
    design is original, knockoff sellers can simply wait 3 years
    for the copyright term on a particular original design to end.
        The ID3PA reflects a judgment that knockoffs are not
    necessary to the business model of high-volume sellers of
        on-trend clothing at a low price point. This judgment is
    correct. Current knockoff sellers would need to adapt their
    businesses to focus on selling inspired-bys instead. They would
    have to innovate and invest somewhat in design rather than only
    replicate others' work in full.
        Does this mean consumers would no longer have low-price
    access to designs by great designers? No. Many extremely
    talented designers, such as Mr. Hernandez and his colleagues,
    have partnered with high-volume retailers, such as Target and
    H&M, to offer their designs in large numbers at a low price.
    The ID3PA encourages this kind of partnership because this
    allows designers to profit from the creative labor they invest
    in their original designs. If retailers wish to sell these
    designs with minimal or no modification, under the Act, they
    would have to reach an arrangement with the designer to do so,
    or face liability.
        Our current intellectual property system unintentionally
    creates an unfortunate bias in favor of the most established
    famous fashion firms and against smaller emerging designers who
    have the most potential for innovation in design. Established
    firms like Louis Vuitton have the benefit of trademark and
    trade dress protection. Their advertising promotes and protects
    their brand image, as does the use of high-end materials and
    workmanship that are very difficult to copy at a low cost. They
    have a clientele that does not often overlap with the discount
    shoppers. And all of this means that the established luxury
    firms suffer comparatively less from the design knockoffs than
    their smaller, not as established counterparts.
        Emerging designers do not have the advantages just
    described. Their products are not well enough recognized to
    qualify for trademark or trade dress protection, nor do they
    have the money to advertise and reinforce their brand image.
    But what these designers do have to offer consumers is their
    innovative designs. They cannot command the same prices as the
    famous luxury firms. Thus, emerging designers are more likely
    to be in competition with their copyists as their consumer
    bases are more likely to overlap. A design that retails for
    hundreds instead of thousands is within the reach of many
    consumers who might well opt for the still less expensive
    knockoff. Thus, knockoffs are particularly devastating for
    emerging and mid-range designers who face significant entry
    barriers and struggle to stay in business.
        This act helps level the playing field, which is currently
    skewed to the protection of luxury and brands rather than
    innovation in design. The ID3PA strikes an appropriate balance
    between giving incentives to create and leaving designers free
    to draw upon influences. If enacted, it would serve its purpose
    to push the fashion industry toward innovation rather than
    substantially identical copying. It represents a wisely
    balanced and a carefully tailored response to the problems of
    this industry.
        Thank you, and I look forward to your questions.
        [The prepared statement of Ms. Suk follows:]
             Prepared Statement of Jeannie Suk, Professor of Law,
                               Harvard Law School
        Chairman Goodlatte, Ranking Member Watt, and Members of the
    Subcommittee, I am Jeannie Suk, Professor of Law at Harvard Law School.
    Thank you for this opportunity to testify about the Innovative Design
    Protection and Piracy Prevention Act (``IDPPPA''). My remarks draw on
    my ongoing research with Professor Scott Hemphill of Columbia Law
    School on law and innovation in the fashion industry.\1\ Along with my
    testimony, I submit our Stanford Law Review article, The Law, Culture
    and Economics of Fashion. We have also written on the Act's
    predecessors: two iterations of the Design Piracy Prohibition Act,\2\
    and the Innovative Design Protection and Piracy Prevention Act
    introduced in the Senate last Term.\3\ I submit one of these articles,
    published in the Wall Street Journal.
    ---------------------------------------------------------------------------
        \1\ C. Scott Hemphill & Jeannie Suk, The Law, Culture, and
    Economics of Fashion, 61 Stan. L. Rev. 1147 (2009); C. Scott Hemphill &
    Jeannie Suk, Reply: Remix and Cultural Production, 61 Stan. L. Rev.
    1227 (2009); C. Scott Hemphill & Jeannie Suk, The Squint Test, How to
    Protect Designers like Jason Wu from Forever 21 Knockoffs, Slate, May
    13, 2009, http://www.slate.com/id/2218281/(last visited Jul. 10, 2011);
    C. Scott Hemphill & Jeannie Suk, Schumer's Project Runway, Wall Street
    Journal, Aug. 24, 2010, available at http://online.wsj.com/article/
    SB10001424052748704504204575445651720989576.html (last visited Jul 10,
    2011).
        \2\ Design Piracy Prohibition Act, S. 1957, 110th Cong. (2007);
    Design Piracy Prohibition Act, H.R. 2033, 110th Cong. (2007)
        \3\ Innovative Design Protection and Piracy Prevention Act, S.
    3728, 111th Cong. (2010).
    ---------------------------------------------------------------------------
        Like all of the arts, fashion design inevitably involves degrees of
    borrowing and influence from both specific existing works and general
    themes in our culture. Even the most original creative work in the arts
    has important debts to prior work. Appropriately, federal copyright law
    does not consider most of the borrowing and similarity that occurs in
    the course of creative production to be copyright infringement. A trend
    in fashion--just as in movies, books, music, and culture--is the
    convergence on similar themes by many different producers who are
    consciously and unconsciously influenced and inspired by other work
    from the past and the present. But these common forms of borrowing in
    the arts do not require blatant replication of another's work, a
    practice that most directly takes profits from the original producer
    and thus most undermines the incentive to create that federal copyright
    law aims to foster.
        The goal of a law addressing copying in fashion design should
    indeed be to give an incentive to create, but also to safeguard
    designers' ability to draw upon a large domain of creative design
    influences and to participate in fashion trends. The IDPPPA, in its
    current form, achieves this goal. By deviating from the ordinary
    copyright infringement standard with the much narrower ``substantially
    identical'' standard for infringement, it allows plenty of room for
    designers to innovate by drawing inspiration from others--much more
    room than producers of books, music, and film currently have. At the
    same time, it prohibits copyists from making exact or near-exact copies
    of original designs. It rewards designers who produce original work
    with legal protection against copyists, but limits frivolous litigation
    through heightened pleading requirements. It protects creative
    designers' ability to profit from their original work, but maintains,
    or even expands, consumer choice. In short, the IDPPPA strikes an
    effective balance between the significant public interest in
    incentivizing the creation of original design and the significant
    public interest in making existing design vocabularies largely
    available for free use.
                              effects on retailers
        A key distinction that must frame an analysis of the IDPPPA is the
    difference between products that are inspired by a designer's work and
    products that replicate a designer's work without effort at
    modification. The IDPPPA most squarely affects clothing producers and
    sellers known as ``fast fashion'' firms. Many simply think of these
    firms as blind copiers of the latest trendy designs, but fast fashion
    firms actually fall into two distinct categories: designers and
    copyists. Fast fashion designers, like H&M and Zara, usually take the
    latest trends and adapt or interpret them. The result is a relatively
    inexpensive product that is clearly inspired by, but not identical to,
    other designers' products. By contrast, fast fashion copyists, like
    Forever 21, choose particular designs to copy, and replicate those
    specific designs as best they can. These firms make no effort to modify
    the original design.
        I am going to call fast fashion designers' products ``inspired-
    bys,'' and fast fashion copyists' products ``knockoffs.'' Put simply,
    if you have difficulty telling the difference between two designs, you
    are looking at a copyist's knockoff, not a designer's inspired-by. The
    difference between inspired-bys and knockoffs is crucial. It is a
    distinction that can be easily grasped by designers, retailers, and
    consumers. We need to allow the inspired-bys while stopping the
    knockoffs, which directly undermine the market for the original designs
    that copyists target and which reduce the incentive to innovate. The
    IDPPPA's narrow infringement standard is designed to do just that--to
    distinguish between those who engage in interpretation of others' work
    and participate in a fashion trend, and those who slavishly copy a
    particular original design.
        Retailers who sell clothing that is on trend but not an exact copy
    need not fear this Act. But the IDPPPA would undoubtedly harm those
    retailers whose businesses rely upon selling exact knockoffs of
    particular designs. This is what the Act is intended to do. Those
    retailers would no longer be able to avoid design costs by freely
    taking another's design in its entirety. Current retailers of copyists
    would have to adapt to the IDPPPA's requirements. They could do so in
    several ways. First, knocking off is not necessary to the business
    model of high-volume sellers of on-trend clothing at a lower price
    point. Sellers of knockoffs could become sellers of inspired-bys. They
    could employ designers--or direct the designers they currently employ--
    to engage and modify other designers' original designs. Such work would
    not be infringing, as it would not be ``substantially identical'' to a
    protected original design. And even where the copies are substantially
    identical, the copied design may not meet the high standard for
    originality that is needed for protection under the IDPPPA. Second,
    fast fashion firms could partner with designers, and sell the resulting
    products inexpensively. Fast fashion firms do engage in many such
    partnerships already. The IDPPPA would bring the sellers of knockoffs
    into the fold such that they would need the designers' authorization to
    make knockoffs of original designs.
        While our current intellectual property regime does not provide
    protection for fashion design, it does provide protection for fashion
    firms' trademark and trade dress. Large, well-known firms like Louis
    Vuitton and Chanel have the benefit of trademark and trade dress
    protection. Their advertising promotes and protects their brand-image,
    as does the use of high-end materials and workmanship that are
    difficult to copy at low cost. They also have a wealthy clientele that
    does not often overlap with the shoppers at Forever 21. All this means
    that established luxury firms suffer comparatively less from the
    practice of knocking off than their smaller, not as famous
    counterparts. Young and emerging designers do not have all the
    advantages just described. Young designers' products are generally not
    well enough recognized to qualify for trademark or trade dress
    protection. Nor do they have the money to advertise and reinforce their
    brand image. They cannot command the same premium for their products as
    the famous high-end luxury firms. Thus emerging designers are more
    likely to be in direct competition with their copyists, as their
    customer bases overlap. A designer's dress that retails for $300
    instead of $3000 is within the reach of many consumers who might well
    opt for the still less expensive knockoff. Thus, knockoffs are
    particularly devastating for emerging designers, who face significant
    entry barriers and struggle to stay in business. This Act would help
    level the playing field with respect to protection from copyists and
    allow more such designers to enter the market, create, and flourish.
    Such an increase in emerging and smaller designer market participation
    would ultimately benefit retailers who sell the smaller designers'
    products, such as department stores.
        That many less-established designers may lack resources to hire
    lawyers and sue copyists does not change this analysis. First, even
    under current law, smaller designers already do file suit against
    copyists, attempting to cobble together some semblance of protection
    against design copying by relying on currently existing intellectual
    property protections in trademark and copyright. There is little reason
    to doubt that small designers would utilize protection for design,
    which is after all what they are really after in the lawsuits they
    currently file. Second, litigation by large fashion firms against
    copyists making knockoffs could have positive collateral consequences
    for small designers. For instance, if Forever 21 had to change its
    business model because it could no longer create replicas of products
    by Louis Vuitton--which does have the resources to litigate under the
    IDPPPA--that change in the culture and norms of fashion design would
    also work to small designers' benefit. Such enforcement by larger
    plaintiffs, in other words, may produce systemic changes that would
    work to smaller entities' advantage. Finally, while small designers
    often lack the resources to hire lawyers on an hourly basis, nothing in
    the Act prohibits contingent fee arrangements. Such arrangements would
    allow small designers to vindicate their rights, even if they could not
    afford to pay a lawyer's usual hourly fees.
                           effects on consumer choice
        Unquestionably the IDPPPA would change the consumer's playing
    field. Because fast fashion copyists could no longer sell inexpensive
    knockoffs without authorization, consumers may lose the low-price
    alternative knockoffs now offered. In an IDPPPA regime, such consumers
    may not have access to those exact designs at the knockoff price. For
    some, this will seem a significant limitation, especially since the
    customer who shops for the knockoff of a Louis Vuitton item is not the
    same customer who would buy the genuine article.
        This limitation, however, is not as substantial as it may appear.
    First, the IDPPPA's protections would move fast-fashion designers to
    engage with those designs--that is, innovate--rather than simply
    replicate them. Indeed, the modifications copyists would be required to
    make under the IDPPPA would serve to expand consumer choice as high-
    volume sellers shifted their efforts toward inspired-bys and away from
    knockoffs. The increase in the variety of inspired-by designs would
    more than offset the loss of choice from prohibiting knockoffs.
        Second, many high-end designers have partnered with higher-volume
    discount retailers such as Target and H&M to offer their goods at a
    lower price point. The IDPPPA encourages this kind of partnership.
    Under the Act, discount retailers would have even more incentive to
    pair with designers if they wished to sell others' designs with minimal
    or no modification.
        Therefore, while the IDPPPA would restrict consumer choice in terms
    of easy availability of unauthorized knockoffs at a low price, it would
    increase consumer choice in terms of selection of goods. Fast-fashion
    copyists would have to become fast fashion designers who engage with
    designers' output, and thereby produce new options for consumers.
                             effects on litigation
        Last Term, when the Senate Judiciary Committee considered a version
    of the IDPPPA identical to this Act, one Member raised the concern that
    the IDPPPA might produce a flood of litigation.\4\ The Member pointed
    to two elements of the Act in support of this concern. First, the Act
    gives designers the ability to protect their designs, without any
    registration requirement. Hence, any designer could claim that any
    design was protected, and so could attempt to litigate under the
    statute. Second, some of the statute's language--specifically the
    ``substantially identical'' and ``non-trivial'' requirements--may
    require significant judicial interpretation. Hence, designers and
    copyists alike would have an incentive to litigate, in an effort to
    define their rights and liabilities under the statute. Combined, the
    Member suggested, these factors might lead to a flood of litigation in
    the already busy federal courts.
    ---------------------------------------------------------------------------
        \4\ United States Senate, Committee on the Judiciary, Executive
    Business Meeting 53:14 (Dec. 1, 2010), http://judiciary.senate.gov/
    hearings/hearing.cfm?id=e655f9e2809e5476862f735da
    165262f (last visited Jul. 10, 2011) (comments of Senator John Cornyn).
    ---------------------------------------------------------------------------
        This concern is overstated. First, the Act requires that plaintiffs
    plead each element of a design infringement claim with particularity.
    This requirement will curtail many frivolous lawsuits before they
    begin, and will cull others out at an early stage. Second, the Act's
    ``substantially identical'' standard for infringement is a high bar, as
    is the Act's stringent standard for originality. Litigation under the
    Act will be concentrated around knockoffs, leaving inspired-bys
    relatively untouched. Even under the current intellectual property
    regime, we see far greater numbers of lawsuits by designers against
    sellers of knockoffs than against sellers of inspired-bys. From 2003 to
    2008, at least fifty-three lawsuits alleging trademark and copyright
    infringement were filed against Forever 21.\5\ By contrast, two were
    filed against H&M and none were filed against Zara.\6\ Under the
    IDPPPA, we could similarly expect to see sellers of inspired-bys remain
    relatively untouched, and the sellers of knockoffs would either have to
    adapt their business strategy or face liability.
    ---------------------------------------------------------------------------
        \5\ The Law, Culture, and Economics of Fashion, supra note 1, at
    1173.
        \6\ Id.
    ---------------------------------------------------------------------------
        Nor is it likely that large fashion firms, recognizing less-
    established designers as competition, would succeed in driving those
    designers out of business by saddling them with litigation costs
    through baseless suits. IDPPPA plaintiffs must plead with particularity
    that the allegedly infringing article is ``substantially identical in
    overall visual appearance to . . . the original elements of a protected
    design,'' or is not ``the result of independent creation.'' To plead
    with particularity that a copy is ``substantially identical'' when the
    allegedly offending garment is not easily mistaken for the original
    would be extremely difficult. A baseless suit would be subject to early
    dismissal. Moreover, a suit filed simply to harass or lacking the
    requisite particular facts, might lead to sanctions against the firm
    and its lawyers.\7\ These factors--the ``substantially identical''
    standard, the heightened pleading requirement, and the prospect of
    sanctions--create a strong deterrent against suits meant to drive
    upstart designers out of business by imposing litigation costs.
    ---------------------------------------------------------------------------
        \7\ See Fed. R. Civ. P. 11(b)(1), (c) (imposing sanctions for
    complaints presented for an improper purpose).
    ---------------------------------------------------------------------------
        Of course, there would be litigation under the IDPPPA, and courts
    would have to interpret the language in the Act and sometimes draw
    difficult lines. But this is the natural consequence of Congress's
    passing any law. The IDPPPA's internal controls on litigation would
    discourage litigiousness and stem the flood of litigation that some
    fear.
        The IDPPPA strikes an appropriate balance between giving incentives
    to create original designs and leaving designers free to draw upon
    influences, inspirations, and trends. If enacted, it would serve its
    purpose, to push the fashion industry toward innovation rather than
    substantially identical copying. The new law would harm fast fashion
    copyists but not retailers as a whole--and even then, only by
    compelling firms to change their businesses in ways consistent with
    Act's purpose. It would increase consumers' choice of designs that are
    inspired by other designs and that participate in trends, while
    limiting their ability to buy exact knockoffs of designs. It would not
    promote unnecessary litigation, but to the contrary, represents a
    wisely balanced and carefully tailored response to the problems of a
    distinctive industry.
        Thank you for the opportunity to discuss this important Act with
    the Subcommittee. I look forward to your questions.
        Published works submitted:

      C. Scott Hemphill & Jeannie Suk, The Law, Culture, and Economics of
            Fashion, 61 Stan. L. Rev. 1147 (2009), http://papers.ssrn.com/
            sol3/papers.cfm?abstract
            _id=1323487

      C. Scott Hemphill & Jeannie Suk, Schumer's Project Runway, Wall
            Street Journal, Aug. 24, 2010, http://online.wsj.com/article/
            SB10001424052748704504204
            575445651720989576.html

                                  ATTACHMENT 1

                                  ATTACHMENT 2

                                   __________

        Mr. Goodlatte. Thank you, Professor Suk.
        Professor Sprigman, welcome.

    TESTIMONY OF CHRISTOPHER SPRIGMAN, PROFESSOR OF LAW, UNIVERSITY
                       OF VIRGINIA SCHOOL OF LAW

        Mr. Sprigman. Thank you.
        I want to start by thanking the Subcommittee and especially
    Chairman Goodlatte and Ranking Member Watt for inviting me
    today. For the past 6 years, along with my friend and colleague
    Kal Raustiala from the UCLA Law School, I have studied
    innovation and competition in the fashion industry. Professor
    Raustiala and I have written an academic article on the topic
    entitled, ``The Piracy Paradox: Innovation and Intellectual
    Property in Fashion Design,'' and a followup article, ``The
    Piracy Paradox Revisited.'' I have also given testimony on this
    issue before this submitted before back in 2006. I testified in
    a predecessor to the current ID3PA.
        So I have some new data for you, but before I get
        there--and I have some slides--I want to talk about a bit
    of history. The issue of protection for fashion design is not
    new. Since the end of World War II, Congress has considered
    providing some sort of copyright protection for fashion designs
    on about a dozen occasions. And each time they declined to do
    so, I believe there was wisdom in that.
        The U.S. fashion industry has grown and thrived over the
    past half century--and it continues to do so today. Sales of
    apparel and shoes have registered virtually uninterrupted
    annual increases since 1945, growing during this period more
    than twentyfold. The fashion industry in the U.S. is a leader
    in the world. It produces a huge variety of apparel. Innovation
    occurs at a pace that is unheard of in other industries. Styles
    change rapidly. Goods are produced for consumers at every
    conceivable price point. In short, the fashion industry looks
    exactly as we would expect a healthy, competitive, creative
    industry to look.
        The important point here is that all of the fashion
    industry's growth and innovation has occurred without any
    intellectual property protection in the U.S. for its designs.
    Indeed, never in our history has Congress granted legal
    protections for designs of fashion goods. The fashion industry
    enjoys trademark protection for brands. It enjoys copyright
    protection for its fabric designs. But the shape, the cut, the
    style of a garment is not protected by copyright law or any
    other form of IP in this country.
        But unlike in the music or film or publishing industries,
    copying of fashion designs has never emerged as a threat to the
    survival of the fashion industry. And why is that? Well, it is
    because of something we all know instinctively about fashion.
    And Shakespeare, as usual, put it best: The fashion wears out
    more apparel than the man. That is, many people buy new clothes
    not because they need them but because they want to keep up
    with the latest style. And this simple truth lies at the
    foundation of the fashion industry. It makes copying an
    integral part of that industry's success.
        So why is that? Well, without copyright restrictions,
    designers are free to rework an appealing design. The result is
    fashion's most sacred concept: The trend. Copying creates
    trends. And trends are what sell fashion. Every season, we see
    designers take inspiration from others. Trends catch on. They
    become overexposed. And then they die. New designs take their
    place. This cycle is familiar. But what is rarely recognized is
    that the cycle is accelerated by the freedom to copy.
        In our articles, Professor Raustiala and I explain how
    copying and creativity actually work together in the fashion
    industry. For fashion, copying does not deter innovation. It
    speeds it up.
        Now I want to take a look at some new data that we have
    uncovered that supports our views.
        Can I have the first slide?
        So I have been working data from the Consumer Price Index,
    our government's official measure of inflation. We have been
    looking to see if the changes over time in the prices of
    apparel suggest any significant effect on the fashion industry
    from the copying of fashion designs. To do this, we collected
    data on the prices of women's dresses from 1998 to the present.
    This is hundreds of thousands of observations of prices. We
    then divided the dresses into 10 categories--we created 10
    categories ranging from the cheapest 10 percent of dresses,
    like apparel on discount racks, to the most expensive 10
    percent, like for example, Mr. Hernandez' designs.
        Here is a graph illustrating what we found. What you see is
    price stability over the entire period for every category
    except one, the top category, the most expensive women's
    dresses. What happened there? The average price of the most
    expensive 10 percent of women's dresses went up substantially
    over the data period. Now, actually, the ninth decile, which
    isn't shown here, behaved the same way as the tenth--the most
    expensive 20 percent of women's dresses have gotten much more
    expensive since 1998. Everything else has gotten cheaper or
    stayed the same.
        And what does this mean? Well, if cheap fashion copies were
    competing with the more expensive garments they are imitating,
    we would expect to see some effect on the prices of high-end
    garments. In short, competition from cheap copies would tend to
    depress the prices paid for the high-end origins. But that is
    not happening. The high-end originals are the only garments
    that have any price growth during this period. And the price
    growth of the segments is very healthy.
        This is particularly impressive when you look at this next
    graph. This is in percentage terms. We have a 250 percent price
    growth over the period for the most expensive garments. The
    second decile, the second tenth, behaves about the same. That
    means that for the top designers as well as for the entry
    designers in high-level fashion, prices are very robust.
        So the takeaway from this is I don't think the ID3PA is
    necessary. We have a healthy competitive industry. During the
    question period, I would like to explain, so I don't take too
    much time, why I think the ID3PA could cause some mischief. It
    is not only that it is unnecessary, but it could lead to a lot
    of litigation. This isn't going to create jobs, I think, except
    for lawyers. I can explain more about that if anyone cares to
    know.
        Thank you very much.
        [The prepared statement of Mr. Sprigman follows:]

                                   __________

        Mr. Goodlatte. Thank you, Professor Sprigman.
        We will now turn to Mr. Courtney.
        Welcome.

      TESTIMONY OF KURT COURTNEY, MANAGER, GOVERNMENT RELATIONS,
                AMERICAN APPAREL & FOOTWEAR ASSOCIATION

        Mr. Courtney. Thank you, Chairman Goodlatte, Ranking Member
    Watt, Ranking Member Conyers, and Members of the Subcommittee,
    for inviting the American Apparel & Footwear Association to
    testify today in support of the Innovative Design Protection
    and Piracy Prevention Act.
        My name is Kurt Courtney and I am manager of government
    relations for AAFA, where I work on a range of intellectual
    property rights issues for the apparel and footwear industry.
    My written statement goes into further detail about our
    members. But in summary, AAFA's collective membership
    represents the largest cross section of the fashion industry
    across all price points for consumers worldwide. Our industry
    accounts for more than 1 million U.S. employees and more than
    $340 billion at retail each year.
        Ensuring strong protection of intellectual property has
    always been a key priority for AAFA and its member companies.
    Our members fight endlessly to protect their trademarks and
    brand names in the U.S. And throughout the world. It is with
    this in mind that we are pleased to appear before you today.
        Mr. Chairman, in 2006, you introduced the Design Piracy
    Prohibition Act, the DPPA, which sought to offer new copyright
    protection for original fashion designs. As AAFA's legal team
    evaluated the bill, we wholeheartedly understood the narrow
    problem the legislation was trying to solve, but we
    fundamentally disagreed with its overly broad definitions,
    which industry experts and legal counsel feared would have
    opened a Pandora's box of litigation that would have been very
    detrimental to the industry.
        At that time, Mr. Chairman, we expressed these concerns to
    you and you challenged us to help develop a more targeted bill
    to protect original fashion designs and not increase the
    prevalence of lawsuits in our industry. So we went to work. In
    conjunction with the Council of Fashion Designers of America,
    CFDA, we worked with your office and New York Senator Charles
    Schumer to develop the ID3PA. This legislation represents a
    targeted approach that will solve this narrow design piracy
    problem without exposing any innocent actor in the fashion
    industry to confusing rules and frivolous legal claims.
        Throughout the process, we realize that there were a number
    of misconceptions that had to be dismissed.
        First, many in the media, academia, and even in the
    industry continue to believe that the ID3PA addresses the much
    larger and more virulent problem of trademark counterfeiting.
    It does not. By copying both trademarks and their associated
    designs, whether those designs are original or not, trademark
    counterfeiters attempt to profit on the good names and
    reputations that our members have spent decades building with
    their customers. This practice is illegal worldwide and leads
    to billions of dollars in losses each years. It represents a
    major enforcement priority of the United States Government, as
    Customs and Border Protection recently reported that footwear,
    apparel, and fashion accessories--like handbags--were the
    first, third, and fourth most seized counterfeit items by value
    at our borders last year.
        The second misconception arose concerning the relationship
    between AAFA and CFDA. With our association's initial
    opposition to the CFDA-supported DPPA, it lead many to believe
    that AAFA was protecting the copyists. As we have explained
    previously, CFDA and AAFA have many of the same members, and in
    many instances, CFDA designers often work directly with or
    license their brand name to one or more of our members. Neither
    association wanted to back legislation that would make it
    harder to design apparel and footwear or give lawyers a hand in
    the design process.
        Third, there remains a deep misconception about the scope
    of this legislation. And I want to be very clear on this point.
    The ID3PA will not cover everything in the fashion world. In
    fact, it will only cover those original articles which are so
    truly unique that they come closer to art than functionality.
    To put even a finer point on this, by definition, the bill
    states that nothing in the public domain, which is the
    collective works of thousands of years of fashion history, can
    be protected under this bill.
        Fourth, very few companies will have to worry about
    possible accusations of infringements. To infringe an article
    must, among other things, be substantially identical to an
    original article. The substantially identical standard is
    tighter than what had appeared in the ID3PA and is defined as
    so close in appearance that it would likely be mistaken for the
    original. While the substantially identical standard may be
    easily met for basic garments--the blue jeans or underwear in
    your dresser--it is a very high threshold when compared against
    never-before-seen fashion articles discussed above.
        We address a fifth misconception, that the new legislation
    will lead to frivolous lawsuits. The ID3PA includes a
    heightened pleading process where the burden falls entirely on
    the plaintiff to plead with particularity before any legal
    action can commence. And in that pleading, the plaintiff must
    show, number one, facts that his or her design is original;
    number two, that the potential defendant's design is
    substantially identical to his or her design; and number three,
    facts showing that the defendant had some access to the design
    and must have seen it before making the infringing design.
        In closing, AAFA believes the ID3PA provides a targeted fix
    to the narrow design piracy problem. The legislation provides
    designers with a clear and easily understandable framework so
    they can enforce their own original designs. At the same time,
    it contains multiple protections to ensure that those same
    designers can seek inspiration and harness fashion trends
    without the chilling effect of frivolous lawsuits.
        I want to thank you again for the opportunity for allowing
    me to testimony today, and I look forward to answering any
    questions.
        [The prepared statement of Mr. Courtney follows:]
      Prepared Statement of Kurt Courtney, Manager, Government Relations,
                    American Apparel & Footwear Association
        Thank you, Chairman Goodlatte, Ranking Member Watt and members of
    the subcommittee for inviting the American Apparel & Footwear
    Association (AAFA) to testify today in support of the Innovative Design
    Protection and Piracy Prevention Act or ID3PA.
        My name is Kurt Courtney, and I am Manager of Government Relations
    for AAFA, where I work on a range of intellectual property rights
    issues for the apparel and footwear industry.
        Our membership includes some of the most recognizable apparel and
    footwear brands serving virtually every market segment--ranging from
    haute couture to mass market. Our membership includes a diverse group,
    including some of the largest and some of the smallest companies in the
    industry. They are located in many states, including a number of
    traditional manufacturing hubs in New York, Los Angeles, the North East
    and the Southeast. Our members employ thousands of designers across the
    United States. Collectively, AAFA's membership represents the largest
    cross section of the fashion industry across all price points for
    consumers worldwide. Our industry accounts for more than one million
    U.S. employees and more than $340 billion at retail each year.
        Ensuring strong protection of intellectual property has always been
    a key priority for AAFA and its membership. Our members fight endlessly
    to protect their trademarks and brand names in the U.S. and throughout
    the world. It is with this in mind that we are pleased to appear before
    you today.
        Mr. Chairman, in 2006, you introduced the Design Piracy Prohibition
    Act (DPPA), which sought to offer new copyright protection for original
    fashion designs. As AAFA's legal team evaluated the bill, we
    wholeheartedly understood the narrow problem the legislation was trying
    to solve. But we fundamentally disagreed with its overly broad
    definitions, which industry experts and legal counsel feared would have
    opened a Pandora's box of litigation that would have been detrimental
    to the industry.
        At that time, Mr. Chairman, we expressed these concerns to you and
    you challenged us to help develop a more targeted bill to protect
    original fashion designs and not increase the prevalence of lawsuits in
    our industry. So we went to work. In conjunction with the Council of
    Fashion Designers of America (CFDA), we worked with your office and New
    York Senator Chuck Schumer to develop the Innovative Design Protection
    and Piracy Prevention Act. This legislation represents a targeted
    approach that will solve this narrow design piracy problem without
    exposing any innocent actor in the fashion industry to confusing rules
    and frivolous legal claims.
        Throughout the process, we realized that there were a number of
    misconceptions that had to be dismissed.
        First, many in the media, academia and even in the industry
    continue to believe that the ID3PA addresses the much larger, and more
    virulent problem of counterfeiting. It does not. By copying both
    trademarks and their associated designs (whether original or not),
    counterfeiters attempt to profit on the good names and reputations that
    our members have spent decades building with their customers. This
    practice is illegal worldwide and leads to billions of dollars in
    losses each year. It represents a major enforcement priority of the U.S
    Government, as Customs and Border Protection recently reported that
    footwear, apparel and accessories like handbags were the first, third
    and fourth most seized counterfeited items by value at our borders last
    year.
        I would note that the so-called ``rogue website'' legislation
    currently before the Senate and being separately developed in the House
    will help address one of the more onerous ways counterfeiters steal
    from legitimate companies--by establishing fake websites to fool
    consumers into thinking that they are buying legitimate products. As we
    move forward on ID3PA, we look forward to continue working with you and
    your staff on this very important issue and other ways to combat
    counterfeiting.
        The second misconception arose concerning the relationship between
    AAFA and CFDA. With our association's initial opposition to the CFDA-
    supported DPPA, it led many to believe that AAFA was protecting the
    copyists. As we have explained previously, CFDA and AAFA have many of
    the same members and in many instances CFDA designers often work
    directly with or license their brand name to one or more of our
    members. Neither association wanted to back legislation that would make
    it harder to design apparel and footwear or give lawyers a hand in the
    design process.
        Third, there remains a deep misconception about the scope of the
    legislation. I want to be very clear on this point. ID3PA will not
    cover everything in the fashion world. In fact, it will cover only
    those original articles, which are so truly unique that they come
    closer to art than functionality. To put an even finer point on this,
    by definition, the bill states that nothing in the public domain--the
    collective works of thousands of years of fashion history--can be
    protected under this bill.
        Fourth, very few companies will have to worry about possible
    accusations of infringements. To infringe, an article must, among other
    things, be substantially identical to an original article. The
    ``substantially identical'' standard is tighter than what had appeared
    in the DPPA and is defined as so close in appearance that it would be
    likely mistaken for the original. While this ``substantially
    identical'' standard may be easily met for many basic garments--the
    blue jeans or underwear in your dresser--it is a very high threshold
    when compared against never-before-seen fashion articles discussed
    above.
        We address a fifth misconception--that the new legislation will
    lead to frivolous lawsuits. ID3PA includes a heightened pleading
    process where the burden falls entirely on the plaintiff to plead with
    particularity before legal action can commence. In that pleading, the
    plaintiff must show:

            1) Facts that his/her design is original

            2)  The potential defendant's design is ``substantially
            identical'' to his/her design

            3)  Facts stating that the defendant had some access to the
            design to have seen it, before making the infringing design

        A sixth misconception revolves around the lack of a searchable
    database. Frankly, we felt that a database--especially with the well
    documented problems associated with the Copyright Office--would only
    cause confusion. Searchable databases in use in other countries reveal
    registration for common items like plain white t-shirts. Designers can
    still assert originality by including a symbol on the article and can
    work to enforce those claims, but only if they can meet the high
    threshold established by the three-part pleading process.
        In closing, AAFA believes the ID3PA provides a targeted fix to the
    narrow design piracy problem. The legislation provides designers with a
    clear and easily understandable framework so they can enforce their own
    original designs. At the same time, it contains multiple protections to
    ensure that those same designers can seek inspiration and harness
    fashion trends without the chilling effect of frivolous lawsuits.
        Thanks again for allowing me this opportunity to speak and I look
    forward to answering any questions.
                                   __________

        Mr. Goodlatte. Thank you, Mr. Courtney, for your very
    helpful testimony. We have since been advised that we may be
    extremely short of time. Votes may be called in a matter of 5
    or 10 minutes. As a result of that, Ranking Member Watt and I
    have agreed to defer our questions. We'll either submit them to
    you in writing, or if there is time at the end, we'll come back
    to those.
        In light of that, we'll recognize Members for 3 minutes a
    piece and see how many we can get through. We'll begin the
    Vice-chairman of the Committee, the gentleman from Arizona, Mr.
    Quayle.
        Mr. Quayle. Thank you, Mr. Chairman.
        Professor Sprigman, I was just trying to--in your
    testimony, you were talking about back in the 1920's and
    1930's, there has always been copying, and there has always
    been complaining about copying, yet the design community has
    continued to thrive. And trends become trends because of the
    copying.
        Now, in Mr. Hernandez' testimony, he also stated that if
    you have, right now, because of the Internet and because of
    digital photography, that within minutes or within hours after
    a runway show or a red carpet in Hollywood, that that design
    can actually be put into production overseas within a matter of
    hours and actually make it to the streets prior to the designer
    being able to get his or her design out there. So do you think
    that now is the time to be able to put that forth because of
    the changing with the technology so that the designers can
    actually profit from their own designs?
        Mr. Sprigman. I think speed of copying hasn't really
    changed very much in 20 years. So I think the fax machine
    really changed speed of copying. You could take a photograph at
    a runway show and you could fax it. I think the Internet makes
    photos from fashion shows a bit more available. But within the
    industry--Women's Wear Daily runs a lot of photos. These things
    have been available.
        The industry has a 6-month lead time. All right. So they
    have shows in the fall for apparel that's going to hit the
    stores in the spring, and shows in the spring for apparel
    that's going to hit the stores in the fall. If the speed of
    copying was really a worry, we would see some pressure on that
    6-month lead time that the industry has. We don't see it. The
    6-month lead time has stayed.
        Can I have the slides up again? I would like to have the
    last slide up.
        Mr. Quayle. Actually, one other question. Mr. Courtney was
    stating that he believes that the concise definition in the new
    bill is actually very concise and won't lead to frivolous
    lawsuits. But do you agree or disagree with that? Because in
    your opening statement, you were stating that you believe this
    is going to increase litigation.
        Mr. Sprigman. I disagree. Before I became an academic, I
    spent a long time as a lawyer. And I litigated a lot of
    intellectual property cases. The question in this bill is
    whether the garment that is the defendant's garment is likely
    to be mistaken for the plaintiff's garment. Most people who
    would be on a jury, most Federal judges, are not particularly
    attuned to fashion, not particularly interested in it. If a
    garment looks generally alike, I think in the run of cases
    likely to condemn it, we'll get inconsistent verdicts. We'll
    get lawsuits being threatened. We'll get cease-and-desist
    letters. That is all going to, I think, redound to the
    detriment of the young designer, the new designer, who doesn't
    have the money to fight this.
        Wells Fargo Bank recently, which loans a lot of money to
    the fashion industry, said in a statement a couple of weeks ago
    that they are worried about this bill because if this becomes
    law, they are going to have to check twice, they are going to
    have to check three times before they lend to a design firm
    that can't indemnify them. And it is the small fry that can't
    indemnify. So this will create barriers.
        Mr. Quayle. Thank you.
        Thank you, Mr. Chairman.
        Mr. Goodlatte. The Ranking Member of the full Committee,
    Mr. Conyers, is recognized for 3 minutes.
        Mr. Conyers. I want to beginning by thanking both you and
    Mr. Watt, Mr. Chairman, for your expediency in allowing us to
    question our witnesses. This is fascinating stuff here.
        The passion of Mr. Hernandez can't be undervalued.
        I don't agree with you, but you are very impressive in your
    testimony.
        What I am trying to find out is things are really going
    along. This is a booming industry right now. And I just want to
    ask Professor Sprigman, what other mischief might inadvertently
    be produced if this bill were to become law, sir?
        Mr. Sprigman. I want to show you an example. Could I have a
    picture of those handbags up, please? It is a slide with two
    handbags on it. This is the mischief that I am worried about.
        So on the left, you have the Proenza Schouler PS 1 bag.
    This is the bag Mr. Hernandez talked about. On the right, you
    have the Mulberry Alexa. The Mulberry Alexa appeared on the
    market before the Proenza Schouler PS 1. So, Mr. Hernandez
    says, Well, I create out of nothing. No. No one in the fashion
    industry creates out of nothing. People in the fashion industry
    create out of what happened in the past.
        The Proenza Schouler PS 1 has some substantial similarities
    to the Mulberry Alexa. I think in a world in which the ID3PA
    had been law, when the Proenza Schouler PS 1 came out, I think
    Mr. Hernandez could have found himself on the receiving end of
    a cease-and-desist letter. This is what I worry about.
        When I look at these bags, I see differences. I see a
    lovely bag being made by Proenza Schouler that was hot because
    it was very attractive. But a copyright plaintiff's lawyer is
    going to see a potential settlement. And this is what I worry
    about.
        There's some wedding dresses as well. Could you show those
    wedding dresses?
        Mr. Conyers. As they say in our community, I get your
    drift.
        Mr. Sprigman. I'll leave it there.
        Mr. Conyers. I am with you.
        I want to compliment Professor Suk for her testimony.
        We are always glad, of course, to see Mr. Courtney.
        I yield back.
        Mr. Goodlatte. The gentleman from Pennsylvania, Mr. Marino,
    is recognized for 3 minutes.
        Mr. Marino. I have no questions.
        Mr. Goodlatte. Thank you.
        The gentlewoman from California, Ms. Lofgren, is recognized
    for 3 minutes.
        Ms. Lofgren. Just one additional question for Professor
    Sprigman. You have been very clear about the amount of
    litigation that could result. And what we want to do is take
    steps to promote a healthy economy and creativity and the like.
    So we want to get this right. I am from Silicon Valley, and one
    of the issues that has been of concern there--if you are an IP,
    you know this--is the issue of trolls, where you have got
    rights that are assigned and the only--really, the only thing
    that some of these firms do is they buy it so they can
    litigate. Do you see the potential for that in this arena?
        Mr. Sprigman. I think the unfortunate truth here that is
    the ID3PA is going to give rise to copyright trolls. So think
    about it if you are a retailer. You can be held liable if you
    reasonably should have known that you are dealing in infringing
    garments. So the fashion industry puts out so many thousands of
    designs every year. This bill doesn't create any kind of
    registry as a precondition for claiming protection. I could
    imagine a law firm going into business as a copyright troll,
    basically buying the right to litigate designs against
    department stores. And if you think about the department
    stores' reaction to this, the idea of receiving a whole bunch
    of cease-and-desist letters every season, the department
    store's reaction is going to be, I want indemnification.
        The big guys can live in that world. The little guys are
    going to be the ones that suffer in that world. That is what I
    am worried about--just raising the cost of doing business. If I
    thought that it was necessary to do this in order to get
    innovation in fashion, I would say, Go for it. But we see a
    fashion industry that is about as innovative as it could be,
    and we see people at the high end of the industry raising their
    prices, profiting. There's nothing to fix that I can see.
        Ms. Lofgren. It seems to me, and then I'll stop, that there
    is a legitimate trademark issue, because if somebody thinks
    they are buying a high-end product that is really a cheap
    knockoff, that is a completely different issue than this one.
        Mr. Sprigman. That is fraud.
        Ms. Lofgren. That is fraud.
        Mr. Sprigman. We have a trademark law that helps in that
    case and, you know, enforce that. If people are defrauded, go
    after them.
        Ms. Lofgren. Thank you, Mr. Chairman. I will yield back.
        Mr. Goodlatte. Professor Suk, did you want to respond that
    that point about how this affects smaller designers?
        Ms. Suk. Yes, I did. Yes, thank you. I think that, for one
    thing, the new data that Professor Sprigman presented--first of
    all, everything is in the interpretation. And I believe that
    Christopher Sprigman's interpretation of that data is
    incorrect.
        I would have an alternative explanation. When you are
    seeing high prices at the high end going up, why are rising
    prices at the high end considered signs of health rather than
    signs of splitting consumers so that you have the midrange
    designers in direct competition with the lower-end companies?
    And so, therefore, those midrange companies are less able to
    compete, and so then you have got the higher-end designers
    raising their prices.
        So if you have a $500 dress that is going away because of
    competition from copyists, then what is left is the higher-
    priced dresses. And in many ways, if you see just the high end
    going up like that, it can be interpreted as a sign of producer
    desperation rather than a sign of health by those designers. So
    I think that the interpretation is definitely up for grabs. I
    think it would be really helpful to have Professor Sprigman's
    data rather than just his interpretation.
        Mr. Goodlatte. Go ahead.
        Ms. Suk. As for the idea of different bags having similar
    looks and there being trolls, for many people who don't know
    classical music, the difference between Bach and Handel, one
    piece of Baroque music is much like any other. It is true that
    for some people, whatever the industry, whether it is painting,
    whether it is books, poetry, you are going to have a problem
    that if you are not that attuned, you might think that it is
    all the same. But that is not unique to the fashion industry.
    There are meaningful differences between products that may look
    similar to some people. And it is because we care about
    innovation within this industry at the level of detail that the
    industry actually produces that we would have a law that says
    ``substantially identical.''
        Mr. Goodlatte. Thank you.
        I want to get to the gentlewoman from Texas, Ms. Jackson
    Lee, for 3 minutes.
        Ms. Jackson Lee. Thank you very much, Mr. Chairman.
        And thank you to the Ranking Member for your courtesies
    extended.
        Mr. Hernandez--and thank you, I was delayed in another
    meeting on debt ceiling issues. But I come to this Subcommittee
    with a great passion about creating jobs.
        Tell me how important and how do you define your work as a
    property right, as something to be protected so that you can
    create jobs and you can have a product that is protected?
        Mr. Hernandez. Well, we employ about 50 designers at the
    moment, who sort of design products all day, every day. We are
    having the problem at the moment where a lot of our designs are
    being copied on a much more accessible price point level. And I
    think an interesting thing, interesting point that is being
    brought up today is this whole point of designers raising their
    prices really high. That is not so much a function of margins
    as it is a function of us having to keep on pushing the design
    level and pushing further and further and kind of pushing
    design and getting a little more experimental and having to
    kind of push the design level further and further and that
    brings the price point up.
        Ms. Jackson Lee. And that's because your product is stolen
    or redone or copied.
        I only have a short period of time. So I want to go to
    Professor Sprigman and just say that when we started out this
    in country, we copyrighted books and maps and charts. But we've
    moved progressively on, for example, into technology and
    otherwise. So what would be the aversion to, as this property
    is being demeaned, to not move in that direction if we had
    protections for those very entities of which you have just
    spoken? It is a valuable asset that fashion designers have.
        Mr. Sprigman. It's a valuable asset. My only argument and I
    think it's the argument that the Framers of our Constitution
    made, we have copyright, we have patent to promote the progress
    of useful arts and sciences.
        The fashion industry has been promoting progress in
    beautifully clothing Americans for a long time without any
    copyright protections for its designs. Progress is being
    promoted through free competition.
        For reasons I explain in my academic work, the fashion
    industry doesn't depend on property rights as the engine of
    innovation.
        Ms. Jackson Lee. But change has come about, has it not?
    Paintings now are protected, and otherwise.
        Mr. Chairman, I'm going to yield back and just simply say I
    think we have a good product here, but I think we need take a
    great interest in the points the professor has made in
    protecting other elements.
        But we need to protect you, Mr. Hernandez. We want you to
    produce, produce, produce, create jobs, and be successful as an
    industry.
        I yield back.
        Mr. Goodlatte. I thank the gentlewoman.
        We have about 5 minutes remaining in the vote that has been
    called. Does the gentleman--well, I'll just ask one question.
        Mr. Hernandez, critics of fashion design protection argue
    that all fashion is derivative of something that came before
    it. They believe that unfettered copying actually drives
    fashion cycles and results in more creativity. So, two
    questions. Is that how it works? And to the extent that it is,
    is that fair? And tell us how that connects to your own----
        Mr. Hernandez. I think, historically, most artists and
    designers are obviously inspired by history and things that
    have happened before that. I don't think anyone is sort of
    speaking about that being a problem. I think that is a normal
    thing that happens amongst artists and designers.
        I think the problem is in someone copying, stitch for
    stitch, what you have already created. There is a difference
    and a very big difference between being inspired by something
    and copying something. And I think what has happened in the
    modern world is the advent of the Internet, as opposed the
    advent of the fax machine, for example, is that there's Web
    sites now where you get a runway show, and they can literally
    zoom in to the garment front and back, copy stitch for stitch,
    and pretty much print it and make it in a couple days flat and
    ship it before we ourselves can even take orders on the
    product.
        And I think that's something that's happened in the last 10
    years that has changed the game 100 percent. The protection
    hasn't caught up to the level of technology. There's been sort
    of a disconnect there. Before, it was a little more--we were a
    little bit more protected in terms of the product wasn't as
    visible to so many people from such an early stage. Now it is.
        Mr. Goodlatte. Thank you. Mr. Courtney, you believe that
    this bill has been substantially changed and improved to
    address it in the manner that Mr. Hernandez describes, maybe
    not literally stitch for stitch, but very close to that, in
    order to get the protection of the bill, as opposed to just
    general ideas and general trends.
        Mr. Courtney. Yes, thank you, Mr. Chairman.
        The thing to remember, as I said in my testimony, this is
    not intended to cover that anything that anyone is wearing
    right now in this room or anything that exists up until
    enactment of this bill. But we have to give designers the
    opportunity once this bill becomes law to, if they can meet the
    very tight definitions that are in the bill of originality,
    that is going to spur innovation. That is going to enable
    designers to come up with something that really is truly
    unique. If they are able to do that, then absolutely they
    should be able to get protection for that for 3 years. That is
    the reason why we are supporting this bill. We have eliminated
    as far as----
        Mr. Goodlatte. I am going to cut you short because I want
    to give the gentleman from North Carolina the last word.
        Mr. Watt. Thank you, Mr. Chairman.
        Let me apologize to the witnesses and to the Chairman for
    being late. I got consumed with this debt ceiling stuff that we
    were involved in and just lost track of time. So I apologize
    because I feel responsible for holding--getting us in the time
    bind that we are in.
        Ms. Suk, Professor Suk, I think you probably won't be able
    to respond to this, except in writing. I practiced law for a
    long time before I got here, 22 years, and I am just trying to
    conceive of a set of jury instructions that you would give to
    12 people sitting on a jury that defines clearly the
    distinction between inspired by--that is one term you used--and
    substantially identical. That is the other term you used. Could
    you give some thought to that at some point and perhaps give me
    a written set of jury instructions? Because I think if we are
    going to respond to Professor Sprigman's concern about
    increasing litigation, which could be a substantial deterrent
    to innovation--and I see that deterrence acting between small
    people like you, Mr. Hernandez, and large people who are
    already out there. I don't want you tied up in protracted
    litigation against Louis Vuitton or whoever you are competing
    against. I guess you don't compete against Louis Vuitton. Maybe
    you do. I don't know. I don't know enough about this industry.
        But that illustrates a point that I'm making because 12
    people sitting on a jury are not going to know a darn thing
    about this industry either. You know the distinctions, and the
    proof in a case is going to rely on 12 uneducated,
    unsophisticated design people making those kinds of
    distinctions. And unless that can clearly be drawn, you're just
    going to have endless litigation about this. And that's the
    concern I have. And that litigation will be more--could be more
    of a deterrent to innovation or bringing things to the market
    because you'll be just afraid that you're going to get into the
    middle of litigation about these things.
        So this can't be resolved right now. Maybe I should ask
    both the professors to think about that and give me their
    thoughts about it in writing. That would be very helpful.
        Mr. Goodlatte. I thank the gentleman. And I thank all of
    the witnesses for their valuable testimony today.
        I apologize also for the Committee for the tightness of the
    time here, but we don't control the action on the floor.
        Without objection, all Members will have 5 legislative days
    to submit to the Chair additional written questions for the
    witnesses, which we will forward and ask the witnesses to
    respond as promptly as they can so that their answers may be
    made a part of the record. Without objection, all Members will
    have 5 legislative days to submit any additional materials for
    inclusion in the record.
        With that, again, I thank the witnesses and the hearing is
    adjourned.
        [Whereupon, at 11 a.m., the Subcommittee was adjourned.]
                                A P P E N D I X

                                  ----------

                   Material Submitted for the Hearing Record

           Response to Post-Hearing Questions from Lazaro Hernandez,
                   Designer and Co-Founder, Proenza Schouler

    Response to Post-Hearing Questions from Jeannie Suk, Professor of Law,
                               Harvard Law School

    Response to Post-Hearing Questions from Christopher Sprigman, Professor
                  of Law, University of Virginia School of Law

            Response to Post-Hearing Questions from Kurt Courtney,
     Manager, Government Relations, American Apparel & Footwear Association

      Letter from Stephanie Lester, Vice President, International Trade,
                      Retail Industry Leaders Association