    [House Hearing, 116 Congress]
    [From the U.S. Government Publishing Office]

    COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
      TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES

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

                                    HEARING

                                   BEFORE THE

                      SUBCOMMITTEE ON COURTS, INTELLECTUAL
                           PROPERTY, AND THE INTERNET

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   ----------

                                 JULY 18, 2019

                                   ----------

                               Serial No. 116-40

                                   ----------

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Available http://judiciary.house.gov or www.govinfo.gov

     COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
      TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES

     COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
      TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES

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

                                    HEARING

                                   BEFORE THE

                      SUBCOMMITTEE ON COURTS, INTELLECTUAL
                           PROPERTY, AND THE INTERNET

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 18, 2019

                                   __________

                               Serial No. 116-40

                                   __________

             Printed for the use of the Committee on the Judiciary

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Available http://judiciary.house.gov or www.govinfo.gov

                              ______

                 U.S. GOVERNMENT PUBLISHING OFFICE
     39-902               WASHINGTON : 2020

                           COMMITTEE ON THE JUDICIARY

                       JERROLD NADLER, New York, Chairman
    ZOE LOFGREN, California              DOUG COLLINS, Georgia,
    SHEILA JACKSON LEE, Texas              Ranking Member
    STEVE COHEN, Tennessee               F. JAMES SENSENBRENNER, Jr.,
    HENRY C. ``HANK'' JOHNSON, Jr.,          Wisconsin
        Georgia                          STEVE CHABOT, Ohio
    THEODORE E. DEUTCH, Florida          LOUIE GOHMERT, Texas
    KAREN BASS, California               JIM JORDAN, Ohio
    CEDRIC L. RICHMOND, Louisiana        KEN BUCK, Colorado
    HAKEEM S. JEFFRIES, New York         JOHN RATCLIFFE, Texas
    DAVID N. CICILLINE, Rhode Island     MARTHA ROBY, Alabama
    ERIC SWALWELL, California            MATT GAETZ, Florida
    TED LIEU, California                 MIKE JOHNSON, Louisiana
    JAMIE RASKIN, Maryland               ANDY BIGGS, Arizona
    PRAMILA JAYAPAL, Washington          TOM McCLINTOCK, California
    VAL BUTLER DEMINGS, Florida          DEBBIE LESKO, Arizona
    J. LUIS CORREA, California           GUY RESCHENTHALER, Pennsylvania
    MARY GAY SCANLON, Pennsylvania,      BEN CLINE, Virginia
      Vice-Chair                         KELLY ARMSTRONG, North Dakota
    SYLVIA R GARCIA, Texas               W. GREGORY STEUBE, Florida
    JOE NEGUSE, Colorado
    LUCY McBATH, Georgia
    GREG STANTON, Arizona
    MADELEINE DEAN, Pennsylvania
    DEBBIE MUCARSEL-POWELL, Florida
    VERONICA ESCOBAR, Texas

            Perry Apelbaum, Majority Staff Director & Chief Counsel
            Brendan Belair, Minority Staff Director & Chief Counsel
                                     ------

                SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY,
                                AND THE INTERNET

                 HENRY C ``HANK'' JOHNSON, Jr., Georgia, Chair
                       LOU CORREA, California, Vice-Chair
    THEODORE E DEUTCH, Florida           MARTHA ROBY, Alabama,
    CEDRIC RICHMOND, Louisiana             Ranking Member
    HAKEEM JEFFRIES, New York            STEVE CHABOT, Ohio
    TED LIEU, California                 JIM JORDAN, Ohio
    GREG STANTON, Arizona                JOHN RATCLIFFE, Texas
    ZOE LOFGREN, California              MATT GAETZ, Florida
    STEVE COHEN, Tennessee               MIKE JOHNSON, Louisiana
    KAREN BASS, California               ANDY BIGGS, Arizona
    ERIC SWALWELL, California            GUY RESCHENTHALER, Pennsylvania
                                         BEN CLINE, Virginia

                          Jamie Simpson, Chief Counsel
                        Betsy Ferguson, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 JULY 18, 2019

                               OPENING STATEMENTS

    The Honorable Henry C. Hank Johnson, Jr., a Representative in the
      Congress from the State of Georgia, and Chairman, Subcommittee
      on Courts, Intellectual Property, and the Internet.............     1
    The Honorable Martha Roby, a Representative in the Congress from
      the State of Alabama, and Ranking Member, Subcommittee on
      Courts, Intellectual Property, and the Internet................     3

                                    WITNESS
                                    Panel I

    Ms. Mary Boney Denison, Commissioner for Trademark, U.S. Patent
      and Trademark Office
        Oral Testimony...............................................    14
        Prepared Statement...........................................    17

                                    Panel II

    Ms. Jeanne Fromer, Professor of Law, New York University School
      of Law
        Oral Testimony...............................................    60
        Prepared Statement...........................................    62
    Mr. Peter M. Brody, Partner, Ropes & Gray, LLP
        Oral Testimony...............................................   186
        Prepared Statement...........................................   188
    Mr. Joseph Cammiso, President, Automotive Anti-Counterfeiting
      Council, Inc.
        Oral Testimony...............................................   197
        Prepared Statement...........................................   199
    Mr. Robert Barchiesi, President, International AntiCounterfeiting
      Coalition
        Oral Testimony...............................................   201
        Prepared Statement...........................................   203
    Ms. Rebecca Mond, Vice President, Federal Government Affairs, The
      Toy Association
        Oral Testimony...............................................   216
        Prepared Statement...........................................   218

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    A statement from the Honorable Jerrold Nadler, Representative in
      the Congress from the State of New York, Chairman, Committee on
      the Judiciary..................................................     6
    A letter from eBay for the record from the Honorable Henry C.
      Hank Johnson, Jr., a Representative from Georgia, Chairman,
      Subcommittee on Courts, Intellectual Property, and the Internet    49
    A letter from Walmart for the record from the Honorable Henry C.
      Hank Johnson, Jr., Representative from Georgia, Chairman,
      Subcommittee on Courts, Intellectual Property, and the Internet    55
    A letter from International Franchise Association from the
      Honorable Doug Collins, Representative in the Congress from the
      State of Georgia, Ranking Member, Committee on the Judiciary...   298
    A letter from Target Incorporated for the record from the
      Honorable Lou Correa, Representative in the Congress from the
      State of California, Subcommittee on Courts, Intellectual
      Property, and the Internet.....................................    38

                                    APPENDIX

    Questions to witnesses for the record from the Honorable Henry C.
      "Hank" Johnson, Jr., Representative in the Congress from the
      State of Georgia, Chairman, Subcommittee on Courts,
      Intellectual Property, and the Internet........................   246
    Questions to Mary Boney Denison, Commissioner for Trade, U.S.
      Patent and Trademark Office for the record from the Honorable
      Lou Correa, Representative in the Congress from the State of
      California, Subcommittee on Courts, Intellectual Property, the
      Internet.......................................................   248

                                    Panel I

    A response to questions for the record from Mary Boney Denison,
      Commissioner for Trade, U.S. Patent and Trademark Office.......   253

                                    Panel II

    A response to questions for the record from Jeanne Fromer,
      Professor of Law, New York University School of Law............   264
    A response to questions for the record from Peter Brody, Partner,
      Ropes & Gray, LLP..............................................   279
    A response to questions for the record from Mr. Robert Barchiesi,
      President, International AntiCounterfeiting Coalition..........   284
    A response to questions for the record from Ms. Rebecca Mond,
      Vice President, Federal Government Affairs, The Toy Association   294
    A statement from Makalika Naholowaa, Microsoft Corporation for
      the record.....................................................   301
    A letter from the American Bar Association for the record........   304
    A letter from American Intellectual Property Law Association for
      record.........................................................   311
    A letter from International Trademark Association for the record.   321

     COUNTERFEITS AND CLUTTERING: EMERGING THREATS TO THE INTEGRITY OF THE
      TRADEMARK SYSTEM AND THE IMPACT ON AMERICAN CONSUMERS AND BUSINESSES

                                  ----------

                            THURSDAY, JULY 18, 2019

                            House of Representatives

        Subcommittee on Courts, Intellectual Property, and the Internet

                           Committee on the Judiciary

                                Washington, DC.

        The subcommittee met, pursuant to call, at 8:59 a.m., in
    Room 2141, Rayburn House Office Building, Hon. Henry C.
    ``Hank'' Johnson, Jr. [chairman of the subcommittee] presiding.
        Present: Representatives Johnson of Georgia, Deutch, Lieu,
    Correa, Roby, Collins, Chabot, Ratcliffe, Johnson of Louisiana,
    Biggs, and Cline.
        Staff Present: Jamie Simpson, Chief Counsel, Subcommittee
    on Courts, Intellectual Property, and the Internet; Susan
    Jensen, Parliamentarian; Lisette Morton, Director of Policy,
    Planning and Member Services; MaryBeth Walker, Detailee,
    Counsel; Matthew Robinson, Counsel, Subcommittee on Courts,
    Intellectual Property, and the Internet; Danielle Johnson,
    Counsel, Subcommittee on Courts, Intellectual Property, and the
    Internet; Madeline Strasser, Chief Clerk; Moh Sherma, Member
    Services and Outreach Advisor; Rosalind Jackson, Professional
    Staff Member, Subcommittee on Courts, Intellectual Property,
    and the Internet; Thomas Stoll, Minority Chief Counsel; and
    Andrea Woodard, Minority Professional Staff Member.
        Mr. Johnson of Georgia. The subcommittee will come to
    order.
        Without objection, the Chair is authorized to declare
    recesses of the subcommittee at any time.
        Welcome to this morning's hearing on Counterfeits and
    Cluttering: Emerging Threats to the Integrity of the Trademark
    System and the Impact on American Consumers and Businesses. I
    will now recognize myself for an opening statement.
        Good morning, and welcome to the House Judiciary
    Subcommittee on Courts, Intellectual Property, and the
    Internet's hearing on Counterfeits and Cluttering: Emerging
    Threats to the Integrity of the Trademark System and the Impact
    on American Consumers and Businesses.
        Today's hearing will elicit critical information regarding
    the state of trademark protection in the United States.
    Trademarks are the foundation of a successful commercial
    marketplace. Trademarks ensure that consumers know whose
    product they are buying, in turn the trademark system rewards
    companies that invest in quality which consumers then associate
    with that company. This adds up to an intellectual property
    system that brings tremendous value to our economy according to
    Forbes, the 100 most valuable brands are worth a cumulative
    $2.33 trillion today.
        But it is not just large corporations that benefit from
    trademark protection. About one-third of trademark applicants
    are small businesses or individuals. Threats to the trademark
    system, therefore, impact businesses of all sizes as well as
    consumers. Today's hearing will examine three emerging
    challenges for the trademark system.
        First, we will examine the problem that we are running out
    of new trademarks or, at least, good marketable ones. This
    problem is being exacerbated by the number of marks on the
    register that are not being used, a key legal requirement of
    the United States.
        These unused marks or clutter may be standing in the way of
    others who might want to use some version of that same word or
    phrase for their own trademark. This problem is being made
    worse by a recent spike in fraudulent trademark applications,
    many of which originate in China.
        Second, we will look at some courts' reluctance to award
    injunctive relief to trademark owners who win an infringement
    lawsuit. This is often the key remedy for trademark owners
    because it makes sure that a trademark too close to their own
    is off the market. Moreover, allowing similar marks to stay on
    the market could ultimately lead to more consumer confusion,
    the exact opposite of what the trademark system is designed to
    produce.
        Third, we will examine the misuse of trademarks and
    counterfeit goods sold by third parties through online
    platforms. Instead of hawking fake goods on the street,
    counterfeiters are now becoming sellers on online marketplaces
    where the barrier to entry is low and the mechanisms for
    misleading consumers are plenty. Consumers might not be aware
    that they are buying fakes much less ones that could pose
    safety risks.
        With e-commerce sales expected to reach more than $4
    trillion globally in 2020, this is not a problem that Congress
    can ignore. Last month I held a roundtable with brand owners
    and online platforms so that we could begin to explore these
    challenges.
        I am pleased that this discussion will continue today.
    While these threats to the trademark system are a problem for
    all stakeholders, I am particularly concerned about the impact
    of these issues on small businesses. An inaccurate and
    overcrowded trademark register will prevent small businesses
    from easily registering their marks and getting the benefits of
    Federal registration. The prevalence of online counterfeiting
    means a successful small business operating online runs the
    risk of having its products copied and sold diverting sales.
        While online platforms offer some tools for companies to
    report and remove infringing listings, this often becomes a
    game of whack-a-mole where as soon as you remove one
    counterfeit seller another appears. Small businesses have the
    least amount of resources to engage in this constant
    monitoring. I look forward to hearing from our distinguished
    witnesses on this important day, on these important topics.
        On our first panel, I am pleased to welcome the
    Commissioner of Trademarks from the Patent and Trademark
    Office. I know that the office takes these issues seriously and
    I look forward to hearing more about its work on these topics.
        Our second panel has witnesses from industry, the legal
    community, and academia. For the topic of online counterfeits
    while no larger online marketplaces were able to physically
    attend today's hearing as witnesses, a few have submitted
    statements for the record. I am encouraged and hope that they
    will continue to engage with the subcommittee going forward.
        We all have a stake in making sure that this vibrant sector
    of our economy does not have its reputation tarnished by being
    overrun by counterfeit goods.
        To all of our distinguished witnesses, thank you for coming
    here today and I look forward to your testimony.
        And it is now my pleasure to recognize the Ranking Member
    of the Subcommittee, the gentlelady from Alabama, Congresswoman
    Roby for her opening statement.
        Mrs. Roby. Thank you, Chairman Johnson, and I want to thank
    each of our witnesses for taking the time to share their
    expertise with us today. I think it is amazing when we decide
    to go shopping for a particular product, all we have to do is
    search for it on our computer or our phone and with a few
    clicks, we can buy it and have it delivered at our door. We can
    do all this from the comfort of our home, on a beach, traveling
    in a car, or wherever we are--for us, on an airplane.
        Online shopping has revolutionized the shopping experience
    for all consumers. Worldwide e-commerce sales are expected to
    reach over 4 trillion by 2020. Any commerce retail sales are
    expected to reach nearly 15 percent of overall global retail
    spending in 2020. Amazon, eBay, Apple, Walmart, Home Depot, and
    countless others are making shopping almost effortless and show
    that the popularity and convenience of online retail is
    continuing to increase, but with all of that convenience comes
    risk and responsibility.
        As the GAO detailed in its 2018 report on counterfeits,
    along with an increase in opportunities for consumers to find
    products they want, online marketplaces are also providing
    opportunities for counterfeiters to reach a much broader
    customer base. The report indicates that the volume, value, and
    variety of counterfeit goods entering the United States
    increases each year.
        The GAO reports that counterfeits exploit third-party
    online marketplaces to gain an appearance of legitimacy by
    posting pictures of authentic goods on websites and posting
    fake reviews of their products, all to trick consumers into
    buying their knock-offs.
        In addition to inflicting economic harm, counterfeit goods
    may pose a risk to health and safety of consumers. Twenty of
    the 47 phone chargers purchased by GAO from third-party sellers
    on popular e-commerce websites were counterfeit. Some were so
    defective that they posed a significant risk of catching fire
    or even electrocuting a consumer.
        Custom and Border Protection has seized counterfeit
    versions of personal care products such as contact lenses,
    perfumes, hair removal devices, hair curlers, and skin
    cleansing devices. Any of these products should they contain
    bacteria or dangerous chemicals could cause significant damage
    to a consumer's skin or eyes.
        On a personal note, I mean, I have used online marketplaces
    to purchase cosmetic products, and as I have learned more and
    more about the risks posed by counterfeit cosmetics in
    connection with investigating this issue, I am having to
    reconsider my own purchasing decisions.
        At our counterfeits roundtable we held in June, which I
    thought was great, we heard what happened to a few consumers
    who bought products that posed a significant health or safety
    risk. A contact lens contaminated with bacteria injured one
    person, a counterfeit air bag killed a driver, a faulty toy
    with magnets that caused a child to undergo surgery. We cannot
    let counterfeit products which undergo none of the rigorous
    safety testing often required here in the U.S. to be sold to
    unwitting U.S. consumers.
        I look forward to hearing from our witnesses whether
    marketplaces are taking all of the steps that they should to
    protect consumers from counterfeits or if there are additional
    steps they must take to protect us all.
        I want to know if Congress needs to act to mandate that
    marketplaces establish certain practices designed to protect
    consumers from counterfeits, or if there are any other
    recommendations for Congress to take on combating this issue.
        Another issue that we are addressing today is the
    substantial increase in trademark filings. I have read reports
    that subsidies issued by the Chinese Government to promote the
    registration of marks in the United States has directly led to
    a dramatic increase in the number of U.S. Trademark
    applications. Many of these trademarks have been registered by
    the USPTO and even though these applicants misrepresented that
    the mark was actually used on products for sale in the U.S.
        Today we need to hear from all of our witnesses how to best
    deal with these fraudulent trademark registrations, whether the
    USPTO is doing all that it can to prevent these filings from
    being registered, what, if any, new authority the USPTO needs
    to remove fraudulently obtained registrations.
        Finally, I know that the courts are split on whether
    trademark owners who prove a likelihood of confusion should be
    entitled to a presumption of irreparable harm, making it much
    easier to obtain an injunction.
        In trademark cases, injunctions are the primary source of
    relief. That is because measuring the dollar amount to attach
    to a trademark infringement, the harm to reputation can be very
    difficult to approximate. I want to hear from the witnesses
    whether Congress needs to resolve this circuit split.
        As the Ranking Member of the subcommittee and the co-chair
    of the Congressional Trademark Caucus, I want to make sure our
    trademark system is working effectively. I look forward to
    delving into these very important issues today and I want to,
    again, thank all of our witnesses for being here.
        And I thank you, Chairman Johnson, and I yield back.
        Mr. Johnson of Georgia. Thank you Representative Roby. I
    ask unanimous consent that the statement of the Honorable
    Jerrold Nadler, the Chair of the Committee on Judiciary, that
    his statement be introduced for the record without objection.
        And without objection, so ordered.
        [The statement of Mr. Nadler follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Johnson of Georgia. I will now introduce the witness,
    Mary Boney Denison is the commissioner for trademarks at the
    United States Patent and Trademark Office, the USPTO. In her
    role, Commissioner Denison oversees all aspects of the
    trademarks organization, including policy, operations, and
    budget relating to trademark examination, registration, and
    maintenance.
        Commissioner Denison joined the USPTO in 2011 as deputy
    commissioner for trademark operations where she was responsible
    for the USPTO's trademark application, legal examination, and
    registration processes.
        Before joining the USPTO, Commissioner Denison practiced
    law in the area of trademark prosecution and litigation as a
    founding partner of Manelli, Denison and Selter in Washington,
    D.C. She also served as a member of the Board of Directors of
    the International Trademark Association and as a member of
    USPTO's Trademark Public Advisory Committee.
        Commissioner Denison holds degrees from Duke University and
    the University of North Carolina School of Law, and we welcome
    Commissioner Denison and thank her for participating in today's
    hearing.
        I also understand that Ms. Denison's term as commissioner
    ends later this year. As this may be her last appearance before
    the subcommittee, I wish to thank Commissioner Denison for her
    productive partnership with us and for her nine years of public
    service. We are grateful that she chose to bring her extensive
    trademark expertise to the Federal Government from which we
    have all benefited. I thank you.
        And before proceeding with testimony, I hereby remind all
    witnesses that all of your testimony, written and oral, made to
    the subcommittee in connection with this hearing are subject to
    penalties of perjury, pursuant to 18 U.S.C., Section 1001,
    which may result in the imposition of a fine or imprisonment of
    up to 5 years or both should the individual be found guilty.
        Please note that your written statement will be entered
    into the record in its entirety; accordingly, I ask that you
    summarize your testimony in 5 minutes. To help you stay within
    that time, there is a timing light on your table. When the
    light switches from green to yellow, you have 1 minute to
    conclude your testimony. When the light turns red, it signals
    that your 5 minutes have expired.
        Commissioner Denison, you may begin.

     STATEMENT OF MARY BONEY DENISON, COMMISSIONER FOR TRADEMARKS,
               UNITED STATES PATENT AND TRADEMARK OFFICE

        Ms. Denison. Chairman Johnson, Ranking Member Roby, members
    of the subcommittee, good morning and thank you for holding
    this hearing to highlight the problem of inaccurate trademark
    filings, the USPTO's aggressive efforts to address this problem
    and the USPTO's efforts to well combat counterfeits, I have
    worked on these issues for a number of years and the USPTO
    welcomes the subcommittee's attention to these important
    issues.
        The U.S. trademark system is the global gold standard and
    is a fundamental component of our economy and a driver of
    economic growth and job creation. The USPTO is committed to
    maintaining the integrity of the trademark system and all its
    benefits for businesses, consumers, and the U.S. economy that
    an accurate trademark register brings.
        Generally, a trademark is eligible for registration if it
    is used in commerce. Apart from limited exceptions for a mark
    to be federally registered, the applicant must provide an
    example called a specimen. That specimen must show how their
    mark is actually being used in commerce in connection with the
    goods or services in the application.
        In addition, to maintain a registration, the registration
    owner periodically has to file a sworn declaration listing all
    of the goods and services in the registration for which the
    mark continues to be in use in commerce and they must also
    include a specimen of use.
        Unfortunately, in recent years, the USPTO has seen a
    significant increase in the number of applicants who are not
    fulfilling their legal and ethical obligations to file
    accurately and in good faith. Specifically, the USPTO has
    increasingly been receiving trademark filings involving false
    use claims and fake or digitally altered specimens that purport
    to, but do not actually show, use of the mark in commerce as
    required by law.
        While some of these problematic filings are domestic, a
    significant and increasing number come from overseas, primarily
    from China. Often those applicants are represented by
    unauthorized Chinese individuals who evade USPTO sanctions.
    Because there is no one silver bullet to solve these issues, we
    have taken a multi-pronged approach to combat this problem,
    including, number one, requiring foreign domiciled applicants
    to be represented by U.S. counsel. The USPTO will have a U.S.
    lawyer who can be held accountable for improper filings even
    when those applications are filed from overseas.
        Number two, auditing post registration maintenance filings
    to ensure that the mark is being used in commerce in connection
    with all of the goods and services in the registration.
        Number three, updating examination guidance and training on
    questionable specimens of use that instructs examiners to issue
    refusals when they discover fake or suspicious specimens of use
    rather than just requesting additional specimens as was the
    past practice.
        And four, creating a special task force to develop and
    implement additional policies, procedures, and technology
    solutions.
        And we plan to do more, including building an electronic
    database of specimens to help examiners locate specimens that
    use virtually identical pictures for different trademarks from
    different applicants.
        Number two, revising the requirements for specimens.
        Number three, proposing additional incentives for trademark
    owners to voluntarily update their registrations when they are
    no longer using their marks on particular goods and services.
        And fourth, providing more education to applicants and
    their lawyers on what use in commerce is.
        As you can see, the USPTO is aggressively working to
    address these problems. To my left and in front of each of you
    in your packages are examples of specimens in five different
    applications for different marks we received, real and fake. As
    you can see, the digitally altered images are quite
    sophisticated. Through our updated specialized examination
    training, our examiners were able to reject the fake specimens
    in these examples. The USPTO is taking every step within the
    current statutes to fashion solutions to the problem of false
    claims of use in commerce. We are doing all we can to ensure
    that the U.S. trademark system remains the world gold standard.
        My written testimony also details USPTO's efforts to combat
    domestic and international counterfeiting. The USPTO is
    actively involved in the policy development process within the
    administration related to combating online counterfeiting
    including the report required by President Trump's memorandum
    on combating trafficking.
        It also continues its strategy to provide technical advice
    and capacity building to foreign governments and to provide
    public outreach in education, including through the IP attache
    program and the China team.
        Thank you for this opportunity to testify about these
    important matters. I look forward to answering your questions.
        [The statement of Ms. Denison follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Johnson of Georgia. Thank you, Commissioner Denison. We
    will now proceed under the 5-minute rule with questions. I will
    begin by recognizing myself for 5 minutes.
        Commissioner Denison, I am concerned about the rise of
    fraudulent trademark applications. What happens if a trademark
    application with a fake specimen has already gone through
    registration and can the USPTO pull that registration back, on
    its own, if it becomes aware of the problem?
        Ms. Denison. Thank you, Chairman Johnson, for that
    question. We do our best to register high-quality trademarks.
    We issued about 270,000 registrations in fiscal year 2018. In
    the event that we discover a mistake that we made in
    examination in a timely fashion, we will correct the mistake.
    However, for the most part, the statute requires that third
    parties petition to cancel problematic registrations at the
    Trademark Trial and Appeal Board.
        Mr. Johnson of Georgia. When you say you correct the
    mistake, what do you mean?
        Ms. Denison. For example, if we find something before the
    registration has issued, then we are able to stop it from
    issuing.
        Mr. Johnson of Georgia. But after it is issued, there is
    basically no statutory authority for you to do anything?
        Ms. Denison. We largely rely on third party's ability to
    cancel registrations at the TTAB, the Trademark Trial and
    Appeal Board.
        Mr. Johnson of Georgia. Thank you. I understand that it can
    take a year or more for a trademark application to be examined
    and that an existing application will block a later filed
    application for a similar mark. Part of the reason it can take
    a year is because of the 6-month response period when the PTO
    issues a refusal. Does the PTO have any flexibility with that
    6-month response period?
        Ms. Denison. Thank you for the question. The 6 months for
    response to an office action is provided for in the statute, so
    we do not have flexibility to change that.
        Mr. Johnson of Georgia. Do you have flexibility to lessen
    the 6-month response period?
        Ms. Denison. No, Chairman Johnson, we do not have
    flexibility to change that. That is a statutory mandate.
        Mr. Johnson of Georgia. All right. Thank you.
        Commissioner Denison, what are the consequences of lying in
    a trademark application or registration and can applicants be
    sanctioned for lying to the PTO?
        Ms. Denison. Registration is subject to cancellation if it
    was obtained by false material statements and the registrant
    could be subject to civil penalties. They do file declarations
    under penalty of perjury. If there was an attorney who was
    involved in the case, be--and they made material false
    statements, they could be subject to an investigation by the
    U.S. Patent and Trademark Offices, Office of Enrollment and
    Discipline, and they could face sanctions such as exclusion
    before--from practicing before the USPTO.
        Mr. Johnson of Georgia. So what about if the registration
    has been issued and then the PTO learns thereafter that the
    registrant has lied. Does the PTO have any authority to take
    away the registration at that point?
        Ms. Denison. At that point we have to rely on third parties
    to seek a cancellation at the Trademark Trial and Appeal Board.
        Mr. Johnson of Georgia. Thank you. That concludes my
    questions for this witness.
        I will now turn to the Ranking Member for her questions.
        Mrs. Roby. Thank you, Chairman.
        Commissioner Denison, thank you again for being here. Does
    the PTO know how many applications that it filed in the wave of
    filings from China that it granted but that now has determined
    that they should not have?
        Ms. Denison. Thank you for that question. Unfortunately, we
    have no way of tracking what registrations may have been issued
    with fake specimens. We receive more than 400,000 applications
    a year with about 60,000 of those coming in from China. Of
    those, about half of the Chinese applications received either a
    refusal to register or an additional request for information.
        In fiscal year 2017, we issued about 20,000 registrations
    to Chinese applicants and in fiscal year 2018 we issued about
    38,000 registrations. Hopefully most of those were for
    legitimate businesses.
        Mrs. Roby. So the PTO stated that from 2013 to 2017
    applications from China increased by a thousand percent.
        Ms. Denison. I believe it was actually 1,200 percent.
        Mrs. Roby. Okay. So while this increase in numbers is not
    in and of itself proof of fraudulent filings, did this not set
    off any red flags or alarm bells within the PTO?
        Ms. Denison. Absolutely, it did, and we have been taking
    quite a few steps to address the issues.
        Mrs. Roby. Okay. So now that the PTO has registered an
    unknown number of trademarks based on--per your own testimony
    just now, an unknown number of trademarks potentially based on
    fraudulent evidence of use, many from China, what can the PTO
    do to remove those fraudulently obtained trademarks?
        Ms. Denison. Well, as I mentioned, there have been
    thousands of registrations to Chinese applicants and many of
    those are for legitimate businesses, so we have to balance the
    large amount of work that would be required to review every
    single registration issued to a Chinese applicant and consider
    that even if we were to find certain registrations should not
    have been issued, we would have to rely on a third party to
    seek cancellation at the Trademark Trial and Appeal Board.
        Mrs. Roby. So it is my understanding, and this is just
    putting an exclamation point on it, that the application fees
    for a large number of fraudulent trademarks were paid for by
    only three credit cards, so is the PTO not able to review all
    of the trademarks paid for by those credit cards since it seems
    that there is a high likelihood that they are fraudulent?
        Ms. Denison. Yes. The three credit cards did set off alarm
    bells at the PTO and we are taking this very seriously. We have
    formed a special task force and their job is to look at the
    whole problem; we have IT people working on it, we have lawyers
    working on it in a team, and their goal is to identify problems
    as they come in and to propose solutions for us. I get a weekly
    report.
        Mrs. Roby. Is there a timeframe under which this task force
    is operating?
        Ms. Denison. It will be ongoing.
        Mrs. Roby. Okay. So what I would just ask, Mr. Chairman, is
    that we get pretty regular updates about the progress of that
    task force. I think that would be helpful for us in light of
    our line of questioning here this morning.
        But my next question is, does the PTO need additional
    statutory authority to remove fraudulent trademarks it
    mistakenly registered?
        Ms. Denison. Thank you for that question. We administer the
    laws that you pass, and we are happy to provide technical
    assistance to you and we have been doing that on a variety of
    topics.
        Mrs. Roby. So we are just asking if there is roadblocks
    based on the chairman's questions, if there are things that are
    inhibiting you from doing so that you do offer those
    recommendations to us so that we could make changes, if
    necessary, so that we could be helpful in that.
        Several of the examples that I have seen for incorrectly
    registered trademarks have clearly doctored photos and very
    obvious indications that the application is fraudulent, so what
    is the PTO doing to ensure that examiners are properly trained
    and have the resources to avoid registering these trademarks
    going forward?
        Ms. Denison. We have been doing specialized training for
    the examining corps. They are faced with a very difficult
    situation as you can see from these examples here. It is hard
    to tell. One will come in and they will have to look at it very
    carefully, and they are on production, so they don't have 3
    hours to spend on this.
        I think they are doing a great job doing this, and we have
    issued an examination guide, it is number 3-19 and it gives
    them a list of things that they should look for.
        For example, is there pixelization around the wording, does
    the mark appear to float over the product, that kind of thing?
    We have a long list of things that they are now taking into
    account and in the past, we have asked them if they saw
    something suspicious to ask for more information.
        Now, we are saying, if you see something suspicious, issue
    a refusal and then you can also ask for more information, we
    are being more aggressive now about this.
        Mrs. Roby. Good. So my time is expired, but again, Mr.
    Chairman, I would just ask that in light of the task force that
    you mentioned that this committee be given somewhat regular
    follow-up on the progress of that task force, I think, is very
    important for us to be aware of any progress and then look
    forward to your recommendations of how Congress can be helpful.
        So thank you. I apologize for going over. I yield back.
        Mr. Johnson of Georgia. Thank you, Representative. Next we
    will have questionings from Mr. Ted Deutch, the gentleman from
    Florida.
        Mr. Deutch. Thank you, Chairman Johnson, for holding this
    hearing and thanks Commissioner Denison for taking time to be
    here with us. As co-chair of the congressional trademark caucus
    with my friend and judiciary colleague Martha Roby, we know
    that trademarks play a critical role in enhancing innovation
    and helping our economy grow and thrive and that we have got to
    be vigilant in protecting intellectual property to ensure the
    health of our innovative system.
        I want to go back to where Congresswoman Roby left off and
    the combination of the task force that you have created and the
    training you identify, this specimen rule. Can you tell us
    either the role that technology is playing in this task force,
    the attention paid to it, who has been brought in with the
    technological expertise?
        And the reason I ask is, because I think it certainly
    sounds worthwhile to have some guidance that talks about
    floating marks and pixelization and how to identify them, but
    it certainly seems as if this is the kind of thing that we
    ought to be able to use technology in a very serious and
    advanced way to help identify.
        Can you just speak to that, please?
        Ms. Denison. Yes, thank you for that question. In fact, we
    have been piloting some software that we hoped we could give to
    examiners so they could run a specimen through it to see if it
    worked or not. What we have found is that you kind of need to
    be a computer expert to interpret the results, so we are
    continuing to work with the software company and just yesterday
    I saw a chart showing that they could rank it as to how much it
    had been altered and that kind of thing.
        So right now we don't have a technology solution that is
    usable on a widespread basis by our examining corps, but we are
    continuing to work on that solution. We are also able currently
    to use reverse image searching, so if the examiner sees an
    image, they can use a reverse image tool and see if there is
    something highly similar on the internet.
        Mr. Deutch. Okay. I appreciate that.
        Ms. Denison. Could I raise one other thing?
        Mr. Deutch. Sure. Of course.
        Ms. Denison. We have a database of trademarks. We have
    never had a database of specimens of use and so we are also
    working towards building a database of specimens. That would
    mean that if we had that, then we could see that the scarf on
    the left in the poster, that actually looks like a good
    specimen, but it is not a good specimen because it came in with
    ten different files from ten different applicants for ten
    different marks and the database of specimens will help us to
    find that.
        Mr. Deutch. Have you, at this point in the work that has
    been done, have you been able to detect any commonalities in
    the suspicious specimen applications?
        Ms. Denison. What do you mean by ``commonalities''? Many of
    them are coming from Shenzhen.
        Mr. Deutch. In this case you have identified the same image
    used in multiple applications. Are there other commonalities
    that have come up perhaps geographical, perhaps in the image
    itself.
        Ms. Denison. Yes. Okay. So if you see the bottle on the
    lower right, that is a computer-generated image, again, not
    showing the mark in use in commerce, so that is another way
    that they are doing things.
        If you look at the Instamarket photograph on the right,
    that is one that was--I believe we have a specimen protest
    pilot where people can send in images to us, and so that was
    picked up by a third party. They sent it to us and it turns out
    that it was a Walmart store and they had taken Walmart off of
    it and put Instamarket up there, so those are three different
    examples.
        Mr. Deutch. Under your existing authority, Section 9043.3,
    examiners have the authority to issue refusals rather than
    inquiries where an item or specimen doesn't appear to show
    actual use in commerce in the U.S. market. Have you considered
    reviewing pending or approved registrations to confirm that
    they are in use in the U.S. as a method to declutter the
    register?
        Ms. Denison. We have instructed examining attorneys to
    refuse now if the specimen is suspicious. Due to the volume of
    work, I would say we have not discussed going through every
    single one--we get over 400,000 applications a year, going
    through every single one to see--to do a second check on it. We
    have to trust the examiners to get it right. There are quality
    checks done, however.
        Mr. Deutch. I am hopeful that as you go forward that
    decluttering the existing granted trademarks should be a
    priority as well because it takes so long in order for an actor
    to file a challenge to a pending application, I hope this is a
    focus of your efforts as well.
        And I thank you for being here.
        Ms. Denison. Thank you.
        Mr. Johnson of Georgia. Thank you. The committee will next
    hear from the Ranking Member of the full committee, the
    gentleman from Georgia, Mr. Collins.
        Mr. Collins. Thank you, Mr. Chairman. I appreciate that.
        Before I get started on my statement basis--this is going
    to be a statement because this is something that we have--I am
    glad the Chairman and the Ranking Member have such passion in
    this and this is something we need to be talking about.
        But I am also going to be talking about who is not here.
    And I do this not in any other way except we need to have
    everybody to the table, so I know that Amazon, eBay, and
    Walmart are listening. They are friends. We know each other,
    but we cannot hide from this discussion, and I need them to be
    a part of the discussions at the table. This is not new for
    this subcommittee, it is not new for this committee, and it is
    definitely not new for anybody who knows me that the way you
    solve problems is not by avoidance, but by actually taking the
    issues on and I want to help that. It will be something that we
    can do, but we cannot discuss issues around issues when we
    don't have a lot of times the players here. And I am so glad
    the PTO office is always here. It is always good to see you
    guys as being a part.
        Those are the kinds of things that we need to talk about.
    One of the things I am concerned about many times is when we
    avoid things, then we have misunderstandings. We could clear
    those up early in the process and we could also remember that
    while we are doing it, it is just not only for these companies
    that I named and not out of shame or anything else, but why
    shouldn't you be here because we are trying to make this better
    for you and for the end result and for the customer who is at
    the bottom line our constituents and we need to be a part of
    that as well.
        So with that, I appreciate the opportunity and what we have
    to understand is the rampant sale of counterfeits online is not
    just a threat to U.S. jobs and innovation. It also poses a
    threat to consumers. Through the third-party marketplaces
    platforms are selling contact lenses contaminated with
    bacteria, bacteria that catches fire, cheaply made toys that
    allow children to swallow magnets and force them to undergo
    surgery, and even air bags that kill a driver.
        The list of counterfeit products as being sold online is
    endless, so just imagine how often we exposed ourselves and our
    loved ones to harm when we are tricked into buying counterfeits
    online. Online marketplaces have the choice to aggressively
    protect consumers from counterfeits show respectful for other
    property rights, but brand owners argue some of making merely a
    cosmetic effort.
        Certainly, marketplaces could do more to stop their sites
    from being used to sell counterfeits, which is why we would
    need to hear from them.
        We recently held a roundtable to hear from brand owners and
    platforms on this issue which platform has demonstrated it is
    truly committed to stopping the sale of counterfeit and by
    protecting consumers by most account it is Alibaba.
        At the roundtable we learned that Alibaba's
    anticounterfeiting policies and programs are significantly more
    effective than their U.S. counterparts. They are working very
    closely with all complaining brand owners and are using
    cutting-edge technology to scan for and detect counterfeits. I
    find it shocking the U.S. platforms are so far behind.
        Marketplaces must aggressively protect U.S. customers and
    IP rights holders from sellers who seek to trick consumers into
    buying counterfeits. Marketplaces must have effective policies
    and products to detect, block the sale of counterfeits
    automatically and are immediately responsive to complaints by
    consumers and brands quickly remove counterfeiters from their
    sites and detect and prohibit confirmed counterfeiters from
    returning under another name.
        The marketplace must apply these anticounterfeiting
    policies and practices with equal rigor to protect all brands,
    particularly our small businesses, and not reserve their best
    protections for a few companies that bring huge profits to the
    marketplace.
        Platforms must do a better job of vetting sellers and
    sharing information with brands, consumers, and law enforcement
    so these thieves can be brought before U.S. courts. Marketplace
    should not allow sellers to trick consumers into buying a
    counterfeit by using a product's image without the brand
    owners' consent.
        Marketplaces should not promote counterfeit sellers'
    products by highlighting the products to sellers offering the
    same item at a counterfeit price. These solutions are well
    within the grasp of our large online marketplaces and practices
    they should have already implemented on their own.
        I hope the witnesses will--wish that we had the witnesses
    here to also talk about this, which we don't, and I say that
    just from an encouraging way so we can find a way forward.
        And I appreciate the work that the PTO office has done on
    this. I will continue to encourage what you are doing because
    we have to find an answer.
        At the end of the day, this is not about--and from my
    perspective and for those who have worked with me, this is not
    about labeling bad and good. This is about labeling that we
    have a problem; let's fix it. We have issues that need to be
    discussed. Let's discuss them. It is not about avoidance, and
    when we have avoidance, then we have misunderstanding.
        Misunderstanding leads to bad law. Bad law means that I
    have to sit through hearings after hearings after hearings on
    this while we have bad law. So let's get it right the first
    time. Let's have it right the first time, let's have honest
    conversation, and let's do this the right way to begin with.
        I thank the Chairman, I thank the Ranking Member of the
    Subcommittee who have done outstanding work together on this
    and I appreciate the witnesses that are going to be showing
    examples of that today, and, of course, always the friends at
    the PTO office.
        And with that, I yield back.
        Mr. Johnson of Georgia. Thank you, sir.
        With that, we will now hear from the gentleman, Mr.
    Stanton, for 5 minutes.
        Mr. Stanton. Thank you very much, Chairman, and I agree
    with the Ranking Member Collins, a lot of things he just said
    and about the need to get the right players here, and to get
    this right. Obviously, today's testimony is mostly about the
    trademark system closely related to counterfeits online, so
    those are very appropriate comments.
        Look, I want to thank the witness for being here today,
    Commissioner Denison. It is essential for big business, small
    business, all business to be able to successfully apply and
    receive appropriate trademarks. There are important mechanisms
    by which companies can identify themselves to consumers and
    within the marketplace and, of course, consumers can build
    trust with the business in part by way of appropriate
    trademarks.
        When that trust is broken by counterfeit or fraudulent
    trademarks, a great deal of harm can be done, not only to the
    business, but to the consumer marketplace as well. It is
    important that Congress address these issues head on and that
    we work with stakeholders to make appropriate changes to ensure
    that our American trademark system is the best in the world and
    is as effective as possible.
        Commissioner, the fiscal year 2018 USPTO performance and
    accountability report indicated a trademark quality would be a
    top concern for the department. What is the goal for trademarks
    in fiscal year 2019 and will you provide updates to this
    committee on the progress to address this important issue?
        Ms. Denison. Thank you for that question. Yes, we will be
    happy to provide updates to the committee and we are highly
    focused on quality. As I mentioned earlier, we have had
    advanced examiner training on specimen detection and we had
    that in June. We had it previously and we had it again in June,
    and we are bringing all the examiners into the office in August
    and we will have training again on specimens at that point.
        In addition, we have issued the examination guide I
    referenced earlier, Examination Guide 3-19, which has now been
    issued to the public and you can see a list of things that we
    are carefully looking for in addition to looking for IT that
    can help us enhance our quality. We are always looking to
    improve.
        Mr. Stanton. You mentioned IT in your recent report
    indicating that you are trying to transform USPTO with next
    generation technology and services. Talk about those technology
    and services. Do they allow you to keep track of the bad actors
    that continue to submit fraudulent trademark applications?
        Ms. Denison. Yes. We know who the bad guys are. We don't
    really have jurisdiction over many of them, but yes, we
    generally know who they are. We do have a sort of a whack-a-
    mole problem. I have issued exclusion orders and people change
    their names.
        Mr. Stanton. When a trademark is found to be fraudulent,
    what is the remedy? What is the system for a remedy of that
    currently?
        Ms. Denison. Well, if there is a specimen that is
    submitted, the examiner reviews it. If they think the specimen
    is suspicious, they will refuse registration.
        Mr. Stanton. And what about fines? Is there fines imposed
    upon the fraudulent actor?
        Ms. Denison. We do not have the ability to impose fines.
        Mr. Stanton. Is that something you would like to have?
        Ms. Denison. If Congress would like to give it to us, we
    would be happy to talk to you about it.
        Mr. Stanton. Have you had a chance to calculate the effect
    of fraudulent trademarks from actors in other countries in
    relation to lost revenue for businesses in the United States?
        Ms. Denison. No. I would say I do not have that
    information, perhaps someone in my office would. I would have
    to get back to you on that.
        Mr. Stanton. And then talk to us about the process of
    third-party reporters, companies that see fraudulent trademarks
    or doctored specimen, what is the process for them to report
    that to you?
        Ms. Denison. We have something that we started more than a
    year ago, I think about a year and a half ago, called a
    specimen protest pilot. So they can send--say they see the
    Walmart--the Instamarket photo up there, that was something
    that came in through the specimen protest pilot, because they--
    somebody saw that and knew it was a Walmart building that had
    been digitally altered. And so they sent that into our mailbox.
    In addition, if they want to go more formal, they could file a
    letter of protest and that is during the application process.
        If the register--if it has already been registered, then
    they could seek cancelation. Oh, and there is one more option.
    If it has been published but not yet registered, they could
    seek to oppose it at the Trademark Trial and Appeal Board.
        Mr. Stanton. Thank you for your testimony. I yield back.
        Mr. Johnson of Georgia. Thank you. We will now recognize
    Representative Biggs for 5 minutes.
        Mr. Biggs. Thank you, Mr. Chairman.
        Commissioner, thank you for being here. I am just going
    to--I want to get to a very rudimentary level because that is
    where I operate most of my life, so I was looking at your
    testimony summarizing it. We are talking about China leads in
    the number of pro se filings, 80 percent, why is that?
        Ms. Denison. I can't give you a definite answer. I suspect
    it is because of the filing factories that are coming in. I am
    not sure how familiar you are with the situation, but we
    believe that there are filing factories that have been set up
    to obtain subsidies that are being offered by certain regional
    and local governments in China and those filing factories may
    be Chinese lawyers, may be Chinese paralegals, may just be
    people off the street. I don't know who they are.
        Mr. Biggs. Thank you for getting there, because that is
    where I wanted to go for part of this any way. The filing
    factories, they are supported by reasonable and local
    government in China with subsidies. Is that correct?
        Ms. Denison. The filing factories per se are not. The
    filing factories--excuse me--the regional subsidies or local
    subsidies that come from a number of different places in China,
    not just Shenzhen, they offer these subsidies and they are
    quite high, and so I suspect that the filing factories grew up
    as a result of the subsidy, but I don't really have any
    information to support that.
        Mr. Biggs. Okay. So let's--you mentioned incentives and I
    want to talk about incentives for a second. Obviously, the
    large scale economy of America, largely reliant on trademarks
    to do business, what incentives do we have in place besides our
    markets and what you have described is enforcement seems to be
    weak, not necessarily your fault, but what we have done, what
    other incentives are out there for people to file fraudulent
    marks?
        Ms. Denison. Well, with regard to China, my understanding
    is that the central committee in China sort of put out an
    edict. We want people to protect IP and that then led the
    regional/local governments to do this. And so that is one
    incentive that is driving this. The Chinese Government is so
    into this that now apparently the Chinese equivalent of the
    SAT, the Gao Kao now has IP questions on it. It is a college
    entrance exam.
        But, in addition, you have to couple this with the rise of
    purchasing on the internet. So there are many legitimate
    companies that want to be part of this that just want to sell
    on the internet to U.S. consumers and so there is a legitimate
    business reason that Chinese citizens would want to file here.
    In addition I am told, this is anecdotal that it is very
    prestigious in China to say that you have a U.S. trademark
    registration, but that is just anecdotal.
        Mr. Biggs. So along that line we have heard from companies
    like Target, which is the largest trademark filer in the U.S.,
    that when the PTO allows fraudulent trademarks to be
    registered, those registrations block companies from
    legitimately using those trademarks. While big companies can
    afford to hire law firms to file applications for their marks,
    what is a small business with a limited budget supposed to do?
        Ms. Denison. I am sorry. I didn't catch the last part of--
    what is a small business what?
        Mr. Biggs. Supposed to do if they have a limited budget.
    They can't go around like Target can and just create a new
    mark.
        Ms. Denison. Well, we are doing everything we can to stop
    the fake specimens from getting through and we have to give
    people 6 months once something comes in to respond to us, so we
    are doing everything we can. We also have many staff working on
    outreach to small businesses and they go around the country and
    help them understand what their rights are and what they need
    to do.
        Mr. Biggs. And so what is the remedy for a small business
    that is--basically, they are denied registration based on a
    mark that is falsely registered? What are they supposed to do--
    --
        Ms. Denison. They could oppose it if it was in the
    opposition period or they could seek cancelation at the
    Trademark Trial and Appeal Board.
        Mr. Biggs. And how long does that take and what does that
    cost?
        Ms. Denison. The filing fee I think is $400 U.S. and you
    could be pro se if you wanted to. One of the things that we are
    doing to remedy some of these problems is, the U.S. counsel
    rule, are you familiar with that yet, sir?
        Mr. Biggs. Yes.
        Ms. Denison. So what we are trying to do is have all
    foreign domiciled applicants have a U.S. lawyer and that way
    there will be somebody acting as a filter and someone we can
    talk to and someone over whom we have jurisdiction to help us
    with this very important problem.
        In addition, we are auditing some of the registrations; we
    started this a while back, and we found that over 50 percent of
    the time people were deleting goods they had just sworn were in
    use, so that is another one of our programs that is very
    important.
        Mr. Biggs. Thank you.
        Mr. Johnson of Georgia. We will now recognize the gentleman
    from California for 5 minutes, Mr. Lieu.
        Mr. Correa. Thank you, Mr. Chairman, and Commissioner
    Denison, thank you very much for being here and testifying.
    Very important issue for my small businesses, growing
    businesses in my county, my State, my district and, of course,
    for this country. It is interesting listening to the questions
    and your testimony and the issue of foreign filers, the issue
    of cancelation proceedings, and I think to myself, you got a
    small entrepreneur sinks in their pension, a lot of work, and
    to coming up with trademark brand protection and all of a
    sudden they have got to go through a cancelation proceeding,
    probably is going to break their back.
        And now you are talking about foreigners, China, filing
    factories, China's policy of moving ahead and encouraging
    people in China to file and yet I am going to follow some of
    the questions that my colleague from Arizona had which is the
    remedy.
        Now you are asking that they be represented by American
    attorneys, win or lose, what is the remedy? Can you enforce a
    judgment? Can you enforce damages on a China, a foreign-based
    firm beyond that attorney? Is that close--think about an
    attorney, they have maybe errors and omissions insurance, but
    beyond that, how do you guarantee, how do you assure, what is
    the legal environment that we can come up with to protect
    Americans that have worked really hard to come up with these
    inventions, trademarks, and all of a sudden they have no
    protection?
        Ms. Denison. Thank you for that question. Just for your
    information in these nonuse challenges at the TTAB, in the
    majority of the cases there is a default, so you would file a
    paper and they would default and that would be the end of it,
    so it would not, in most cases, be an expensive litigation, but
    we do not have the authority to award damages to anyone. That
    is not something that the USPTO trademark operation or the TTAB
    has the ability to do.
        Mr. Correa. Let me interrupt you. I think what we have here
    is your agency--and you recognize the importance of free flow
    of commerce, trade, entrepreneurship, and you assume everybody
    comes in with good faith and is going to file this paperwork
    and is moving ahead, yet we have a situation now that, for lack
    of a better term, we have a trade war going on and maybe there
    is governments that are encouraging their firms in helping them
    and China, it is very blurry to talk about government versus
    the private sector. I don't think there is a difference.
        You don't have that in the U.S., so I am trying to figure
    out how we put our American firms on equal footing when it
    comes to these trade wars. You don't have a lot of authority.
    You are talking about putting together a special task force.
        Do you work with the FBI now? Do you work with Interpol,
    some of these other organizations? Do you have, lack of a
    better term here, databases where you can figure out--you got
    three credit cards that were the source of payment to a lot of
    these applications.
        You are investigating. We should have been doing this a
    long time ago. I am not saying it is your fault. I am saying
    that maybe our attitude, our disposition to the new environment
    is not one that we are responding to fast enough.
        Ms. Denison. Well, we are trying to do everything we can
    within our current power to help people----
        Mr. Correa. And that is really the key, within your current
    power, so I would almost ask Mr. Chairman here and I will ask
    him, can we come up with our own perspective on what powers you
    need to be an effective enforcer to protect U.S. free commerce
    within an open free market system where people have to have
    consequences when you abuse the system, whether it is criminal
    or other kinds of liability.
        Ms. Denison. Thank you for that. We very much appreciate
    your support and we have been brainstorming with the committee
    staff to talk about different options that you would like us to
    pursue, so, of course, we are happy to continue to cooperate
    and offer any kind of technical assistance we can to you on
    remedies.
        Mr. Correa. And finally, Mr. Chairman, I would like to
    offer this letter from Target, for the record, and I also have
    some questions as well that I would like to have answered.
        And seeing my time almost out, again, I just want to thank
    you, Commissioner, for being here and look forward to working
    with you to protect American ingenuity, entrepreneurship, and
    job growth in this country.
        Thank you very much.
        Ms. Denison. Thank you. We welcome your cooperation.
        Mr. Johnson of Georgia. Without objection, so ordered.
        [The information follows:]

                           MR. CORREA FOR THE RECORD

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        Mr. Johnson of Georgia. We will now hear 5 minutes of
    questions from the gentleman from Louisiana, Mr. Johnson.
        Mr. Johnson of Louisiana. Thank you, Mr. Chairman, and
    thank you, Commissioner, for being here today.
        I used to be a constitutional law attorney, practice in
    that area and it is hard not to just remark on the brilliance
    of the founders' vision about all this, you know, when they
    gave us Congress under Article I, the ability to creative laws,
    to protect American intellectual property.
        And it is really because of that vision that we have been
    the extraordinary exceptional Nation that we are in part
    because we take care of that creativity and ingenuity and it
    has become part of the American identity, so your work is
    really important. We appreciate it.
        Of course, trademarks are a key national asset and I know
    you are doing what you can to protect that in this brave new
    world that we are in. You have been asked some great questions.
        I want to followup on a couple of those things. First line
    of question is about the local counsel rule. You were asked
    about the enforcement mechanisms, but for those back home here
    watching, this is the proposal requires each foreign-based
    trademark filer to hire a U.S. attorney, the idea is, the
    attempt is to ensure that future applications don't contain
    doctored evidence, but as you know there has been some critics
    of this and some people say, well, this is just the PTO just
    looking to other people to help solve the problem.
        How do you respond to that? Do you respond to the people
    who say, well, those resources, that time, that attention might
    be better used if they would just develop better tools and
    systems inside rather than, sort of, farming it out to other
    attorneys? What is the response to that?
        Ms. Denison. We are not farming it out to anybody. What we
    are trying to do is trying to stop these people who come in
    appearing to be pro se who are actually engaged in the
    unauthorized practice of law and we believe that by bringing in
    a U.S. attorney they will be able to review filings and they
    will ensure more likelihood of compliance with the law.
        So we feel very strongly that the U.S. bar can help us. We
    are not dumping this on them. We are trying to ensure that the
    trademark system is as decluttered as possible and that people
    are actually complying with the laws and their ethical
    obligations which is not the case right now.
        Mr. Johnson of Louisiana. So it is a bit ironic, but, you
    know, there is some cases already, there is some articles we
    researched and read about how signatures of U.S. attorneys are
    being forged on these things, right? So now you need a whole
    new mechanism to try to prevent that.
        So what are you doing about that or what is the plan there?
        Ms. Denison. The law's not in effect yet, first of all. It
    is not going into effect until August 3rd, but we are keenly
    aware that the U.S. Counsel Rule is not going to solve every
    problem and we are aware that people could forge signatures,
    people who want to do bad things spend all day long thinking of
    new ways to be creative criminals, and so that is just--so we
    are certainly aware of that and we are talking.
        Mr. Johnson of Louisiana. Apparently, there is already been
    some examples cited. I know it doesn't go into effect until
    August 3rd, but there are people preparing already to break the
    new rule, so here we go. Regarding the task forces you have
    piqued our interest on that.
        Have you engaged or has the task force engaged directly
    with private sector stakeholders or to what extent have they
    done that so far.
        Ms. Denison. No, it has not yet at this point. It is
    internal to trademarks right now. It has members who are IT
    gurus and then we have trademark lawyers also working together
    and so we have not engaged with the private sector yet.
        Mr. Johnson of Louisiana. I am sure you would agree that if
    there are--going forward, if there are more avenues for
    stakeholders to engage directly with your office that we can
    have, I guess, better recommendations to meet the IP rights--
    the needs of the IP rights holders, so I hope that is in the
    plans, you know. We would encourage that.
        Ms. Denison. We can certainly discuss that. Thank you.
        Mr. Johnson of Louisiana. You mentioned earlier that you
    are developing software to help catch bad actors. Has the task
    forced explored using artificial intelligence or other real-
    time methods if you covered that already?
        Ms. Denison. Yes, that is under discussion.
        Mr. Johnson of Louisiana. Okay. And do you have a time line
    for when your software that you mentioned will be finished and
    ready to be engaged with by the marketplace?
        Ms. Denison. No, I do not have that because so far it is
    not ready so it is hard for me to predict when the IT
    development would satisfactorily be concluded.
        Mr. Johnson of Louisiana. You mentioned you don't have
    jurisdiction over many of the bad actors. I know that is a
    great point of frustration. Do you think there are steps that
    Congress, that we ought to take to strengthen enforcement? I
    know that is kind of the spirit, the idea of this hearing, but
    if you had to boil it down to a couple of bullet points, what
    would you say?
        Ms. Denison. Well, I would say that we enforce the laws
    that Congress has passed and we are continuing to brainstorm
    with the staff to think about what would be the best
    approaches. Thank you.
        Mr. Johnson of Louisiana. Thank you. I am out of time. I
    yield back.
        Mr. Johnson of Georgia. Thank you.
        The gentleman yields back.
        We will next hear from the other gentleman from California,
    Mr. Lieu, for 5 minutes.
        Mr. Lieu. Thank you, Mr. Chair, for holding this hearing.
        And thank you, Commissioner Denison, for being here.
        I have always thought protecting intellectual property is
    one of the most important things that legislatures can do,
    because our economy, in part, relies on intellectual property.
    It is something that America can do well.
        And when I was in the California State legislature, one of
    the laws I passed allowed prosecutors to use a nuisance statute
    to take down counterfeit goods. It made it much easier to
    prosecute those kinds of cases.
        I am also now co-chair of the Toy Caucus in Congress. And
    we know that there has now been a significant rise in e-
    commerce. According to a recent survey, 79 percent of Americans
    have made a purchase online. And we also know there is an
    increase in counterfeiting in e-commerce.
        So my first question to you is: What has your engagement
    been with e-commerce platforms, specifically around the
    fraudulent use of trademarks when it comes to toys?
        Ms. Denison. Well, as you know, President Trump issued a
    memorandum on combating online counterfeiting of trademarks and
    that there is a--I believe it is DHS that is in charge of
    preparing a report, but the USPTO is heavily involved in
    developing that report.
        And that report is going to cover quite a few things. It is
    going to identify how online platforms are used to facilitate
    counterfeits, identify what those platforms are doing to
    minimize counterfeits, evaluate the effectiveness of the U.S.
    Government and foreign government actions, recommend changes to
    data collection, and identify changes that could reduce
    trafficking.
        So I think that that report is going to be very helpful,
    and that will be out, I believe, October 30. So that is one of
    the things that we are doing right now on the counterfeit
    front.
        Another thing that we are doing on the counterfeit front is
    we have just engaged the National Crime Prevention Council, and
    we are going to do a multiyear, nationwide campaign to educate
    consumers about what to look for. We think that it is really
    important for us to have an educated consumer base.
        In addition, we work with foreign governments on capacity-
    building and technical guidance for foreign statutes.
        Mr. Lieu. Thank you.
        As you know, it is not just businesses that lose money from
    counterfeits from other countries; it is also a safety issue. A
    Tennessee family had their home burn down when there was a
    counterfeit hoverboard that they bought.
        So let me ask you right now, let's say you know that a
    particular hoverboard is fake or it is a fake trademark, it is
    a counterfeit. What do you do? What is the process?
        Ms. Denison. If we find that there is a fake specimen in
    the file, the examiner will refuse registration and request
    additional information. That is what we would do, is refuse the
    registration.
        Mr. Lieu. Let's say it has----
        Ms. Denison. We would also----
        Mr. Lieu [continuing]. Already been registered----
        Ms. Denison. Okay.
        Mr. Lieu [continuing]. And then you realize later it is
    fraudulent or fake. Then what is the process?
        Ms. Denison. The process is for a third party to file a
    cancellation proceeding at the Trademark Trial and Appeal
    Board.
        Mr. Lieu. And we have been given some evidence from various
    businesses in America that that proceeding can take quite a
    long time and it is somewhat cumbersome. So how long would it
    take to get that fake item removed?
        Ms. Denison. Well, as I mentioned a moment ago, there are
    about--I think more than 50 percent of those cases go through
    to default, and so that will not take very long. It would just
    take a few months.
        If it were to go through the process--I would have to get
    you the statistics. I don't recall what the average is. I think
    it is more than a year, but, honestly, I don't recall that
    figure.
        Mr. Lieu. Now, let's say someone registers a trademark and
    doesn't use it for, let's say, 2 years. Does anything happen?
    Are they allowed to keep it there forever?
        Ms. Denison. For--did you say 2 years?
        Mr. Lieu. Two years.
        Ms. Denison. Three years is the golden standard. So, after
    3 years, someone could seek to cancel it and remove it from the
    register.
        Mr. Lieu. I see. But if no one moves to cancel it, it just
    sort of sits there.
        Ms. Denison. That is correct. And then they are required to
    file a document between the fifth and sixth year after
    registration. And if they fail to file that or if their filing
    is rejected, then it would be removed from the register.
        Mr. Lieu. Thank you.
        And then my last question to you is: Are there any changes
    in the law that you think would make your life easier and make
    it easier to deal with counterfeits?
        Ms. Denison. Well, again, we are brainstorming with your
    staff and would be happy to work with you on any technical
    assistance that we could provide.
        Mr. Lieu. Okay. Thank you.
        I yield back.
        Mr. Johnson of Georgia. Thank you.
        We will now hear from the gentleman from Virginia, Mr.
    Cline, for 5 minutes of questions.
        Mr. Cline. Thank you, Mr. Chairman.
        Thank you, Ms. Denison, for being here.
        I want to pick up on something that was just alluded to by
    Mr. Lieu, the report between the fifth- and sixth-year filing,
    and how effective that is, in light of the recent audits that
    you all have made permanent.
        And I think that that can be an effective tool, but the
    audits are--as the audits are making clear, what you have are
    situations where people are complying in the fifth and sixth
    year, producing specimens, and then you have, for whatever
    reason, a very high percentage of the inability to verify use
    for at least some of the goods or services in the registration,
    upwards of 50 percent.
        Can you lead me through a timeline? Because I am relatively
    new. You began the 2-year pilot program in 2012. Is that
    correct?
        Ms. Denison. Correct.
        Mr. Cline. Okay. So, in 2014, what happened to the program?
    Because I am reading that it wasn't made permanent until 2017.
    What happened between 2014 and 2017?
        Ms. Denison. So we started the program with 500 post-
    registration documents that we pulled, 500 different files,
    randomly chosen. And those files all had to go through the
    process. So I am not sure if it was 2014 or 2015 that they all
    went through the process. After that, we had to analyze the
    data. We also had to meet with stakeholders.
        And after we did all that, we decided to propose a
    rulemaking, so then we had to go through the rulemaking
    process. So, as you know, the government can't always move as
    quickly as we might like. So that is what happened in terms of
    making it permanent.
        So we started November 1 of 2017 with the permanent
    program. And we started off with, I believe, 10 staff working
    on it, and we have recently increased that to 19 so that we can
    audit more registrations.* So we believe that, going forward,
    we will have approximately 5,000 of the post-registration
    filings pulled each year. And so we hope that that will be a
    deterrent.
    ---------------------------------------------------------------------------
        * While the number of staff varies, these are part time work
    assignment that currently result in approximately 125 staff hours per
    week dedicated to post-registration audits.
    ---------------------------------------------------------------------------
        We are also considering whether to charge people what we
    will call a zero fee if they delete prior to an audit or prior
    to the Trademark Trial and Appeal Board, you know, saying they
    aren't using something and then charging them a fee for each
    item they have to delete if they are caught.
        Mr. Cline. Uh-huh. So November 1 of 2017, 10 staff started.
    Did 2018 see 5,000 pulled?
        Ms. Denison. No. We have probably pulled--I don't have an
    exact number for you. I believe it is in the range of 6,500 to
    date. But, as I said, moving forward, it will be approximately
    5,000 per year. Because we have just recently double the staff,
    a couple months ago.
        Mr. Cline. That is great.
        The note I have says the results of the permanent audit
    programs have continued with approximately the same results. Do
    you have results from 2018? Are you seeing just----
        Ms. Denison. We are still--over 50 percent of the people
    are deleting goods. So we do not know whether that is from
    ignorance. Some people, you know--maybe it is sloppiness. Maybe
    they are trying to cheat. It is really not clear. Some people
    have come to us and said, ``Well, my client is really selling
    this, but they can't be bothered to go and find all the
    specimens. It is too much work.''
        You know, I don't know what the answer is, but it is a
    problem.
        Mr. Cline. Sounds like the fee or the fine or whatever you
    are considering might be the appropriate response there.
        So thank you. That sounds like a good program. And I am
    glad to hear you are increasing staff and increasing efforts in
    that area.
        Mr. Chairman, I yield back.
        Mr. Johnson of Georgia. Thank you.
        This concludes the first panel of today's hearing. I want
    to thank Commissioner Denison for participating in this
    hearing.
        We will now take a short recess to set up our second panel
    of witnesses. The subcommittee will stand in recess for 5
    minutes.
        [Recess.]
        Mr. Johnson of Georgia. The Subcommittee will reconvene to
    hear testimony of our second panel.
        To follow up on the comments from the Ranking Member, Mr.
    Collins, I would like to submit the fact that we received from
    eBay and Walmart statements that I would like to enter into the
    record, without objection. And we appreciate their engagement
    with the subcommittee. And, without objection, those comments
    will be submitted for the record.
        [The information follows:]

                        MR. JOHNSON (GA) FOR THE RECORD

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

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        Mr. Johnson of Georgia. I will now introduce our second
    panel of witnesses.
        Professor Jeanne Fromer is a professor of law at New York
    University School of Law, where she specializes in intellectual
    property, including copyright, patent, trademark, trade secret,
    and design protection laws, and is a faculty co-director of the
    Engelberg Center on Innovation Law and Policy.
        She has written extensively in all fields of intellectual
    property law. Some of her recent and forthcoming scholarship
    studies trademark registrations empirically to examine whether
    we are running out of effective trademarks.
        Before joining NYU, Professor Fromer served as a law clerk
    for Justice David H. Souter of the U.S. Supreme Court and for
    Judge Robert D. Sack of the U.S. Court of Appeals for the
    Second Circuit. She also worked at Hale and Dorr, now
    WilmerHale, in the area of intellectual property law.
        Thank you for being here.
        Professor Fromer has degrees from Harvard Law School,
    Barnard College, and the Massachusetts Institute of Technology.
        Mr. Peter Brody is a partner at the law firm Ropes & Gray,
    LLP. He is an expert on intellectual property law and has been
    successfully litigating IP cases for more than 30 years.
        As a Member and Former Chair of Ropes & Gray's intellectual
    property litigation group, Mr. Brody has wide-ranging
    experience with all types of IP cases--patent, copyright, trade
    secret, trademark, and false advertising.
        Mr. Brody writes extensively, including on intellectual
    property, and is an editorial advisor to Bloomberg BNA. Mr.
    Brody also serves as chair of the Legislation and Regulation
    Committee of the International Trademark Association.
        Mr. Brody holds degrees from Princeton University and
    Harvard Law School.
        Thank you for being here, sir.
        Joseph Cammiso is the president of the Automotive Anti-
    Counterfeiting Council, the A2C2, and brand protection manager
    at Toyota Motor North America, headquartered in Plano, Texas.
        In 2015, Mr. Cammiso was instrumental in the formation of
    A2C2 and is a champion of the council's mission to promote
    cooperation among automakers to eliminate the sale of
    counterfeit parts that can be dangerous to U.S. consumers and
    threaten public health and safety.
        In his current roles, Mr. Cammiso has worked with Homeland
    Security investigations, U.S. Customs and Border Protection,
    and other law enforcement agencies to help stop the flow of
    counterfeit parts into the U.S. He has engaged online market
    places to increase awareness of the risks of counterfeits,
    promote consumer safety, and enhance efforts to keep
    counterfeit parts, especially counterfeit airbag parts, off
    marketplaces entirely.
        Mr. Cammiso earned his master's degree in business
    administration and management from California State University,
    Long Beach, and has nearly 25 years of automotive operations
    and supply-chain experience.
        Welcome, sir.
        Mr. Robert Barchiesi is president of the International
    AntiCounterfeiting Coalition, IACC, where he joined the
    leadership team in 2008.
        Mr. Barchiesi works with numerous organizations, both
    foreign and domestic, to stem the tide of counterfeit products
    that can harm consumers. He serves on the board of Europol's IP
    Crime Coordinated Coalition and on the editorial panel for the
    World Intellectual Property Organization.
        Before joining IACC, Mr. Barchiesi was in law enforcement,
    working in various capacities throughout the country. Mr.
    Barchiesi holds degrees from John Jay College of Criminal
    Justice and the University of Alabama.
        Thank you for being here, sir.
        And last but not least is Rebecca Mond, who is vice
    president of Federal Government affairs at The Toy Association,
    a not-for-profit trade association that represents businesses
    that design, produce, license, and deliver toys for children in
    the United States.
        In her capacity at The Toy Association, Ms. Mond has led on
    issues relating to counterfeit and unsafe toys entering the
    U.S. market. Ms. Mond has engaged with the Federal Government
    in numerous ways to ensure that toys are safe for children by
    reducing the sale of counterfeit and knockoff toys.
        Ms. Mond received a bachelor's degree in government from
    Georgetown University and a certificate in advanced product
    safety management from Saint Louis University.
        Thank you for being here, Ms. Mond.
        We welcome all of our distinguished witnesses and thank
    them for participating in today's hearing.
        Before proceeding with testimony, you are hereby reminded
    that all of your testimony and written and oral statements made
    to the subcommittee in connection with this hearing are subject
    to penalties of perjury pursuant to 18 U.S.C. Section 1001,
    which may result, upon conviction, in the imposition of a fine
    or imprisonment of up to 5 years or both.
        Please note that each of your written statements will be
    entered into the record in its entirety. Accordingly, I ask
    that you summarize your testimony in 5 minutes. To help you
    stay within that time, there is a timing light on your table.
    When the light switches from green to yellow, you have 1 minute
    to conclude your testimony. When the light turns red, it
    signals your 5 minutes have expired.
        Professor Fromer, you may begin.

        STATEMENTS OF JEANNE FROMER, PROFESSOR OF LAW, NEW YORK
      UNIVERSITY SCHOOL OF LAW; PETER M. BRODY, PARTNER, ROPES &
         GRAY, LLP; JOSEPH CAMMISO, PRESIDENT, AUTOMOTIVE ANTI-
      COUNTERFEITING COUNCIL, INC.; ROBERT BARCHIESI, PRESIDENT,
     INTERNATIONAL ANTICOUNTERFEITING COALITION; AND REBECCA MOND,
    VICE PRESIDENT, FEDERAL GOVERNMENT AFFAIRS, THE TOY ASSOCIATION

                       STATEMENT OF JEANNE FROMER

        Ms. Fromer. Chairman Johnson, Ranking Member Roby, and
    members of the subcommittee, thank you for inviting me to be a
    witness today. I am Jeanne Fromer, professor of law at New York
    University School of Law, where I teach and publish on
    intellectual property.
        My remarks on trademark depletion and clutter draw on
    research with Professor Barton Beebe, also of NYU School of
    Law. Along with our written testimony, I have submitted our
    recent Harvard Law Review article, ``Are We Running Out of
    Trademarks? An Empirical Study of Trademark Depletion and
    Congestion.''
        ``Trademark depletion'' is the term we use in our article
    to describe the decreasing supply of unclaimed competitively
    effective trademarks available to new market entrants.
        Although trademark law has operated on the assumption that
    there exists an inexhaustible supply of unclaimed trademarks,
    the empirical results we report confirm the opposite. It is
    becoming increasingly difficult for new businesses to find a
    trademark that is competitively effective but that has not yet
    been claimed by another business.
        To give you a sense, now, nearly three-quarters of the time
    we speak, we are using a word that someone has already claimed
    as a trademark. Also, a majority of Americans carry a surname
    that is already claimed as a mark, meaning that they might have
    been born too late to claim their own name as a mark.
        Even using a conservative similarity-matching protocol,
    nearly all the words we use on a daily basis and the surnames
    of a high proportion of American people are already registered
    or are confusingly similar to an already-registered mark.
        Meanwhile, new applicants are increasingly shifting toward
    coined words and longer, more complex, and, thus, less
    effective marks.
        Yet even these efforts are increasingly failing. PTO
    refusal rates for confusing similarity to an already-registered
    mark continue to rise. This problem is particularly acute for
    small businesses, which typically lack the sophistication and
    resources to find unclaimed competitively effective marks and
    prosecute those marks to registration.
        Trademark depletion undermines trademark law's goal of
    promoting fair competition by raising entry barriers for new
    businesses with regard to finding and claiming unclaimed
    competitively effective marks.
        Trademark depletion has been exacerbated in recent years by
    an inflow of applications originating from China. Media reports
    suggest that a significant number of these applications contain
    fraudulent statements of use and, therefore, fail to meet
    trademark law's use-in-commerce requirements.
        In fact, commercially available reverse-image-search
    technology reveals that some of these specimens of use being
    filed are clearly fraudulent yet are not detected as such by
    the PTO.
        When these applications are allowed to proceed to
    registration, they contribute to clutter on the register.
    ``Clutter'' is the term trademark law uses to describe marks
    that are registered but are not actually used in commerce.
        It is important to declutter the trademark register, both
    to abate rates of trademark depletion and to maintain the
    register's integrity. Doing so ensures that barriers to entry
    are not heightened in a way that protects incumbent businesses
    at the expense of new entrants and protects large businesses at
    the expense of smaller ones.
        To address the problems of trademark depletion and clutter,
    we support a mix of reforms to trademark law, including less
    costly processes than current possibilities for reexamination,
    cancellation, or opposition, which typically cost in the six
    figures; to clear the register of marks that are not being used
    in commerce; increase fees charged to non-small-businesses to
    register, maintain, and renew their marks; and the institution
    of a lower standard for fraud on the PTO rather than the
    current heightened standard.
        Thank you, and I look forward to your questions.
        [The statement of Ms. Fromer follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Mr. Johnson of Georgia. Thank you.
        We will next hear from Mr. Brody, 5 minutes. Thank you.

                      STATEMENT OF PETER M. BRODY

        Mr. Brody. Chairman Johnson, Ranking Member Roby, and
    members of the subcommittee, thank you for this opportunity to
    testify before you today.
        I am Peter Brody, a partner in the law firm of Ropes & Gray
    in Washington, D.C., and an intellectual property litigator
    with a substantial focus on trademark cases. I am also
    testifying today for the International Trademark Association,
    where I serve as chair of the U.S. Subcommittee of the
    Legislation and Regulation Committee.
        I am pleased to be here this morning to discuss proposed
    legislation to amend the Lanham Act. This legislation would
    remove unwanted obstacles to obtaining injunctive relief in
    appropriate cases involving trademark counterfeiting,
    infringement, dilution, false advertising, and cyber-squatting.
        As a number of the members of the subcommittee have
    observed in their comments this morning, trademarks are
    invaluable to the owners of businesses large and small. They
    enable businesses to develop a reputation and goodwill
    symbolized by their brand.
        But trademarks are also invaluable to consumers. We all use
    trademarks every day, as Congresswoman Roby mentioned, to make
    purchasing decisions, and we rely on them to lead us to
    products that we have come to know and prefer.
        But, as Congresswoman Roby also noted, our ability to rely
    on trademarks assumes that we can trust them to identify the
    same source and quality every time we place an order or we
    reach for a box on a store shelf or we stop at a chain
    restaurant for a quick meal.
        As the Chairman suggested, the stakes in trademark cases
    are unique. The kind of harm that violations of the Lanham Act
    cause--harm to a business's reputation and goodwill--cannot be
    readily or effectively remedied with an award of monetary
    damages. In fact, courts very infrequently provide for such
    awards. The harm to consumers from trademark confusion also is
    not remedied by damages. Trademark harm must therefore be
    mitigated primarily by stopping the confusion at its source,
    through an injunction.
        As many of you know, traditionally, injunctive relief is
    governed by a four-part standard. The plaintiff must show that
    it is either likely to succeed on the merits of its claim at
    the preliminary injunction stage or has prevailed at the
    permanent injunction stage. The plaintiff must also show that
    it is likely to suffer irreparable harm absent an injunction.
    The plaintiff also must show that the balance of hardships tips
    in favor of issuance of the injunction rather than not
    issuance. And, finally, the plaintiff must show that the public
    interest favors the issuance of an injunction.
        Recognizing the unique harms from trademark confusion, U.S.
    Federal courts, for decades, virtually uniformly applied a
    rebuttable presumption of irreparable harm upon a finding of
    liability--that is, likelihood of confusion--at the permanent
    injunction stage or that a plaintiff was likely to be able to
    prove that liability at the preliminary injunction stage. In
    other words, such findings led to a presumption, rebuttable by
    the defendant, that the irreparable-harm prong of the
    traditional test for injunctive relief had been met. With this
    presumption, the plaintiff could obtain injunctive relief,
    assuming the other prongs of that test were also met.
        Recent developments in the law of the Lanham Act remedies,
    however, have resulted in Federal court rulings that hinder
    trademark owners' ability to obtain that injunctive relief. In
    particular, over the past decade, a number of Federal appellate
    and trial courts have reversed course and discarded the
    longstanding presumption of irreparable harm, even when they
    have found a likelihood of confusion or, at the conclusion of
    the case, actual confusion.
        These courts based their decisions on a Supreme Court
    decision involving unrelated issues of patent infringement, not
    the Lanham Act. The analogy, however, is deeply flawed. Unlike
    the Lanham Act, the Patent Act provides for a guaranteed
    monetary remedy in the form of a reasonable royalty, and patent
    infringement does not cause the kind of unquantifiable harm to
    goodwill or reputation the Lanham Act is intended to address.
        Legislation reestablishing a presumption of irreparable
    harm under the Lanham Act will eliminate this unwarranted
    obstacle to injunctive relief.
        I want to highlight, in my few seconds remaining, that
    there are three key safeguards embedded in the proposed
    legislation to ensure its fairness and equity in application.
        First, the presumption only arises if the plaintiff has
    proven a probability of success in establishing likelihood of
    confusion at the preliminary injunction stage or a likelihood
    of confusion at the conclusion of the case.
        Second, even if the presumption arises, it is still
    rebuttable.
        And, finally, the proposal would not alter the remaining
    prongs of the test. The court would still have to find the
    balance of equities and the public interest favor the
    injunction.
        Mr. Chairman and members of the committee, thank you for
    this opportunity to express our views.
        [The statement of Mr. Brody follows:]

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        Mr. Johnson of Georgia. Thank you.
        Next, Mr. Cammiso, you may begin. And I have just butchered
    that name. I am sorry.

                      STATEMENT OF JOSEPH CAMMISO

        Mr. Cammiso. Thank you, Chairman Johnson, Ranking Member
    Roby, and other members of the subcommittee. I appreciate the
    opportunity to speak before you today.
        I am Joseph Cammiso, frontline manager at Toyota
    responsible for fighting counterfeit parts and the impact that
    they have on my company, our customers, and the public. To
    assist in this ongoing battle, I collaborate with my peers at
    10 other U.S. automakers. Together, we make up the Automotive
    Anti-Counterfeiting Council, better known as A2C2, of which I
    currently serve as president.
        The threat of the counterfeit auto parts is significant in
    many ways. First and foremost, they give rise to serious public
    health and safety concerns. They often fail to perform as
    intended, resulting in catastrophic failures with potentially
    fatal consequences.
        I have a short video that will illustrate this far better
    than I can, and now, with the chairman's indulgence, I would
    like to share this video with the committee.
        [Video shown.]
        Mr. Cammiso. This is a NHTSA video showing catastrophic
    failure of an airbag. Shrapnel in the passenger's seat.
        This was a test buy off an e-commerce platform by my peer
    at Hyundai. They conducted the testing, along with Homeland
    Security.
        This speaks to the tight specifications that genuine
    airbags are built to.
        In this case, the bag opens, but fractions of a second
    late.
        This, again, speaks to our specifications in how bags are
    supposed to unfold once detonated.
        This is a standard bench test that our wheels, genuine
    wheels, go through. Imitation wheel fails miserably.
        This shows our car's performance with counterfeit brake
    pads. And this is a bench test with counterfeit brake pads.
    After a few applications, the pads actually ignite, potentially
    igniting the car as well.
        Unfortunately, counterfeit safety components like the
    airbags, wheels, and brake pads that you just saw are
    commonplace, as are counterfeit windshields, filters, engine
    components, and spark plugs. Simply put, almost every type of
    auto part can be and has been counterfeited.
        There are over 265 million vehicles in this country, and
    nearly every citizen either drives a car or is a passenger in
    one. Counterfeit auto parts are a threat to each of us.
        Of course, this problem has a significant financial impact
    as well. Using recent data from the Organization for Economic
    Cooperation and Development, the estimated financial impact of
    fake auto parts entering our country exceeds $1 billion, and
    that is just for A2C2 members.
        Much of this financial activity is fueled by online
    marketplaces. A2C2 members have reported tens of thousands of
    infringing and counterfeit listings to marketplaces. And for
    those listing removed, we don't know how many resulted in prior
    sales of fake parts to unsuspecting consumers or repair shops.
        As our friends in Homeland Security have said, A2C2 is a
    group of the committed, not the curious. To illustrate, since
    forming in 2015, we have trained almost 1,000 CBP officers; we
    have collaborated with Homeland Security on dozens of criminal
    and civil investigations, and we have enlisted the support of
    the IPEC office and the IPR Center to increase awareness; and
    we have engaged with multiple e-commerce platforms to prevent
    the sale of counterfeit auto parts.
        But, moving forward, we remain concerned with the level of
    fake parts offered for sale through online marketplaces. We
    have several recommendations that we believe could help,
    including such things as increasing consumer awareness; having
    platforms proactively share information about bad actors with
    industry, law enforcement, and other stakeholders; and to
    notify buyers of counterfeit auto parts.
        Platforms could also work to increase seller and product
    vetting, and they could strengthen penalties for repeat
    offenders of health and safety products such as auto parts. E-
    commerce marketplaces have effectively linked counterfeiters
    with unsuspecting consumers, and the burden of stopping these
    criminals should not fall disproportionately on the brands that
    they are victimizing. Ultimately, marketplaces should be held
    accountable for the product that they sell.
        Since our formation, A2C2 members have banded together as
    an industry to mitigate this growing threat to public health
    and safety. We are excited to participate in the creation of a
    framework that will enable real and scalable solutions, and we
    are pleased to support your efforts however we can.
        Thank you for the opportunity to testify today, and I will
    be happy to answer any questions the subcommittee may have.
        [The statement of Mr. Cammiso follows:]

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        Mr. Johnson of Georgia. Thank you.
        We will now hear 5 minutes testimony from Mr. Barchiesi.

                     STATEMENT OF ROBERT BARCHIESI

        Mr. Barchiesi. Chairman Johnson, Ranking Member Roby,
    members of the subcommittee, thank you for the opportunity to
    appear before you today and to share my thoughts and experience
    on this important topic.
        Forty years ago, a handful of companies came together to
    build a community in the fight against fakes, realizing that
    the trafficking of counterfeit goods was a problem too large
    for any of them to solve on their own.
        Today, the IACC's members span across industry sectors and
    include some of the world's most famous brands. And though we
    have grown considerably over the past four decades, our
    philosophy remains the same: We leverage the strength and the
    abilities of the IP community to do together that which we
    could not accomplish alone.
        We welcomed the news of today's hearing and the much-needed
    attention that it brings to the trafficking of counterfeit
    goods in e-commerce.
        Without question, the growth of counterfeit sales in recent
    years has had a devastating effect on consumers, putting their
    health and safety at risk. Further, the loss to businesses
    cannot be measured in mere dollars and cents but by lost jobs,
    reputation, and morale. Everyone benefits from a safe and
    trusted e-commerce marketplace, and the robust enforcement of
    IP rights online is an essential component to ensuring such a
    healthy marketplace.
        Unfortunately, ``robust'' is not always a word that we can
    use to describe the current level of enforcement. Too often,
    platforms' own policies serve as obstacles to the meaningful
    protection and enforcement of IP rights.
        Both my written testimony and the ICC's most recent
    submission to the U.S. Trade Representative for its annual
    ``Notorious Markets'' review highlight the range of challenges
    that rights-holders often face online.
        For the past decade, the IACC has addressed online
    trafficking by pursuing constructive engagement with a range of
    partners, including those in the payment sector, e-commerce
    platforms, registrars, registries, and the express shipping
    industry. Our guiding principle is to find practical solutions
    to intractable problems.
        Our follow-the-money approach to online enforcement that we
    developed in partnership with the credit card companies and
    money-transfer companies has helped to choke off the flow of
    money to criminals anywhere in the world online and to thwart
    their business operations. Whether the consumer is in the U.S.
    and the seller is in China, we have worked with the credit card
    companies to close down merchant accounts around the world.
        Similarly, our partnership with the Alibaba Group, which we
    have had since 2012, significantly addressed rights-holders'
    concerns with China's largest e-commerce platforms. In regard
    to that, I have four native-speaking Chinese folks working in
    my office working together with a team in China from Alibaba,
    and we have seen significant progress since 2016 when we put
    that program together.
        Unfortunately, the challenges faced by businesses and
    consumers are not limited to foreign marketplaces. They are
    right here in our own backyard too. That is why we have also
    engaged with a number of U.S. marketplaces and established a
    formal relationship with Amazon which shows some promising
    results so far. Our engagement serves as proof of concept that
    when committed stakeholders share a common interest we can make
    a real change.
        We have also encountered some, though, who disclaim
    accountability, viewing their legal obligations as a ceiling
    for what they are willing to do rather than a floor for what
    they are capable of doing. So, while liability is an important
    piece of the puzzle, we must not forget that this is also about
    responsibility. All of us have a responsibility to use every
    tool at our disposal to fight this insidious problem.
        We at the IACC take that responsibility seriously. We see
    these folks, that they have to be at the table. They are an
    integral part of the solution, and we found that, when they are
    committed, they can make a tremendous difference.
        While we are pleased with the progress that we have had
    with our partners, there is more work to be done. This includes
    ongoing greater cooperation and investment of resources by
    willing partners. It requires new policies and creative
    strategies that adapt to the ever-changing tactics of the
    counterfeiters. And it will undoubtedly require the assistance,
    support, and encouragement of Congress and our law enforcement
    partners.
        As global commerce and e-commerce grow increasingly
    synonymous, we commend the subcommittee for shining a light on
    these issues. I thank you for the opportunity to address our
    members' concerns today and look forward to working with you to
    ensure that consumers and legitimate businesses are able to
    benefit from a safe and vibrant online marketplace.
        Thank you.
        [The statement of Mr. Barchiesi follows:]

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        Mr. Johnson of Georgia. Thank you.
        We will now have 5 minutes of testimony from Ms. Mond.

                       STATEMENT OF REBECCA MOND

        Ms. Mond. On behalf of The Toy Association, thank you for
    the opportunity to testify before the subcommittee to share our
    concerns with counterfeit toys sold through e-commerce
    marketplaces. We appreciate your attention to this important
    matter.
        As background, The Toy Association represents more than
    1,100 businesses, including toy manufacturers, importers,
    retailers, toy inventors, designers, and licensors, all
    involved in bringing safe, fun, and educational toys to market.
        Mr. Johnson of Georgia. And if you could move that
    microphone over. Yeah. Thank you.
        Ms. Mond. The U.S. toy industry supports over 690,000 U.S.
    jobs. Approximately 3 billion toys are sold in the United
    States each year, totaling $27 billion at retail.
        Importantly, over 95 percent of U.S. toy companies are
    small businesses.
        Curbing the flow of counterfeit goods in e-commerce is an
    issue of critical importance to us due to the safety concerns
    of counterfeit toys.
        Consumers have come to rely on e-commerce platforms to
    provide discounted pricing and a wide selection of name-brand-
    quality toys also found at brick-and-mortar retail. However,
    under the current third-party marketplace system, illicit
    sellers with little or no accountability take advantage of this
    consumer faith by offering inferior and unsafe counterfeit toys
    that put our children at risk.
        Meanwhile, intermediaries are making substantial profit
    from these sales. Any business selling toys in the United
    States must be held to the same high safety standards that
    apply to toy brands in brick-and-mortar retailers that
    consumers have come to know and trust.
        By law, all toys sold in the United States must comply with
    mandatory product safety requirements, must be tested by an
    accredited independent testing facility, and must have
    certification. Legitimate toy companies spend significant
    resources to ensure the safety of their products.
        Suffice it to say, counterfeit toy sellers do not submit to
    these safety and testing regulations. For these sellers,
    bypassing safety regulations is a competitive advantage to
    provide toys cheaper and quicker.
        Unfortunately, the counterfeit business on e-commerce is
    flourishing, and enforcement efforts and platform initiatives
    have thus far been insufficient to stop the flow of IP-
    infringing goods sold in the United States. Without significant
    changes to the existing framework, brands will continue to lose
    the war on fake toys.
        This hearing is timely, with the holiday season around the
    corner, during which around 50 percent of the toy industry's
    annual sales are conducted. When I asked one of our larger toy
    company members with a robust IP program for their overall
    thoughts of the state of play of counterfeits, their response
    was, ``We are gearing up to be run over in the fall.''
        The Toy Association has been working with e-commerce
    platforms and brand owners to improve communication and discuss
    our concerns. Toy Association members Amazon and Walmart and
    nonmember Alibaba have been directly engaged with our members
    in an effort to reduce the number of unsafe counterfeit toys on
    their marketplaces.
        In January of this year, The Toy Association released a
    paper, ``The Real Threat of Fake Toys,'' exploring the factors
    contributing to the rise of counterfeit goods sold through e-
    commerce platforms and some possible solutions. Specifically,
    the white paper looked at the following:
        First, e-commerce creates a low hurdle to sellers, giving
    illicit sellers near-unfettered access to U.S. consumers. More
    must be done to ensure the legitimacy of sellers and to provide
    transparency into who is selling on the marketplaces. And more
    must be done to prevent identified illicit sellers that have
    been taken down from reappearing on marketplaces, selling the
    same exact products.
        Increased and improved vetting of sellers prior to joining
    marketplaces, consistent data requirements across platforms,
    and improved information-sharing would all be possible
    solutions to address this issue.
        Second, the burden of enforcement is disproportionately
    placed on the rights-holders. Small businesses are at a
    significant disadvantage when it comes to tackling
    counterfeits.
        While platforms have established programs to help brands
    remove counterfeit listings, many of these programs are
    reactive and require constant vigilance and engagement of the
    brand owner within each individual platform. Moreover, some
    platforms offer added protections to more important brands,
    putting small businesses at a further disadvantage.
        We encourage Congress to explore whether marketplaces
    should have greater liability to ensure the authenticity and
    the safety of the products they sell. Without liability, the
    incentive for platforms to police their own marketplace is
    weak, as they are profiting from the sales of counterfeit goods
    with little to no risk.
        And, third, consumer awareness is a critical component to
    reducing the prevalence of counterfeits, as consumers are
    largely unaware of the scope of the problem and are often
    unable to distinguish between known and illicit sellers on
    marketplaces. Some suggestions to solve this problem include
    increasing transparency into the identity of the seller and
    educating consumers on smart online shopping.
        We appreciate that platforms have been willing to engage
    with us on these concerns and have taken some meaningful steps
    in a positive direction. However, as it stands today,
    legitimate toy brands that sell in brick-and-mortar stores are
    playing by one set of rules and foreign sellers that exploit
    marketplaces are playing by another set of rules or are not
    playing by rules at all. Without significant changes to level
    the playing field, we will be fighting a losing battle.
        Thank you again for your attention to this matter. I look
    forward to any questions you might have.
        [The statement of Ms. Mond follows:]

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        Mr. Johnson of Georgia. Thank you.
        We will now proceed under the 5-minute rule with questions,
    and I will begin by recognizing myself for 5 minutes.
        Professor Fromer, do you think there are gaps in the
    current trademark law that would prevent the PTO from
    effectively addressing trademark cluttering?
        Ms. Fromer. Thank you.
        Yes, I do. I think that one of the challenges that
    currently face businesses that are trying to operate is the
    ability to cost-effectively remove unused marks from the
    register.
        The studies that are out there indicate that the average
    cost of a trademark opposition ranges from $150,000 to
    $500,000, whereas another one estimates the median cost to be
    $95,000, which means that many small businesses will throw up
    their hands and give up before actually challenging a mark that
    is not being used.
        In addition, as we heard in the previous panel, I think it
    would be helpful for the PTO to have more authority, take more
    initiative to audit crowded parts of the register to cull marks
    that are not being used.
        Mr. Johnson of Georgia. Thank you.
        What are the impacts on consumers of trademark cluttering?
        Ms. Fromer. So consumers are thought to have the advantage
    from trademarks of having minimized cost--that is that they can
    locate quality products more effectively through the shortcut
    of a mark without having to investigate that.
        The more crowded the trademark register is, the harder it
    is for a consumers effectively to do that, because marks are
    closer together, there are many more marks they have to
    process, and they have to try to remember marks that are more
    cumbersome, longer, more complex. And so trademark law does not
    do its job of helping consumers in the way that it could with a
    less crowded register.
        Mr. Johnson of Georgia. Thank you.
        Mr. Brody, as you stated, some courts that have discarded
    the rebuttable presumption of harm say that the Supreme Court's
    logic in eBay is not limited to patent cases but that it
    applies to all types of cases involving injunctive relief.
        Why should trademarks be held to a different standard if
    the principles in eBay are applied across all types of cases
    and not just patent infringement cases?
        Mr. Brody. Thank you, Mr. Chairman.
        Trademark harm, as members of the subcommittee have noted
    today, is a unique type of harm to businesses and also includes
    harm to consumers. This is a component that does not exist in
    patent law. And it is, as a result of the unique type of harm,
    very difficult to compensate trademark owners for infringement
    or dilution when it arises. And it also doesn't do anything for
    the consumer, even if the trademark owner is compensated for
    infringement.
        That is why embedded in the Lanham Act is strong injunctive
    relief and the availability of injunctive relief.
        The eBay case looked at a statutory structure in which
    there already was a guaranteed monetary compensatory relief for
    patent owners who proved infringement in the form of a
    reasonable royalty. There doesn't exist any such guarantee in
    the trademark law.
        And so what happens, if money damages are far from
    guaranteed and are, in any event, an inadequate remedy and
    courts are making it more difficult to obtain injunctions,
    trademark owners really have a situation where they have no
    effective relief available at all. It is an injury without an
    effective remedy. And that is what we are asking to be
    corrected.
        Mr. Johnson of Georgia. All right. Thank you.
        In the interest of time, I am going to yield now for 5
    minutes to the ranking member of the subcommittee, Mrs. Roby.
        Mrs. Roby. Thank you, Mr. Chairman.
        For Mr. Cammiso and Mr. Barchiesi and Ms. Mond, when
    looking at all of the online marketplaces, are there
    marketplaces that are more effective in combating counterfeits?
    And what best practices should marketplaces ploy to stop the
    sale of counterfeits? And are there specific actions or
    programs that more effective marketplaces have in place that
    you believe have shown success in combating this issue?
        So if you would just go down the line and share your
    thoughts, please.
        Mr. Cammiso. Thank you, Ranking Member Roby.
        All the marketplaces we deal with have programs in place.
    Some of those programs are more effective than others, and some
    are more aggressive than others.
        What we found is that most of them, if not all of them,
    require brand-holder, rights-holder participation, and to
    participate in each of those programs requires time and
    resources. It is very cumbersome, and we don't think that the
    solutions that are provided are scalable to the extent that
    they need to be.
        Mrs. Roby. Okay.
        Mr. Barchiesi. What we have found is our initial program,
    going back to 2010, working with the credit card companies to
    follow the money around the world and shut down merchant
    accounts has been the most effective program. It is touted over
    in Europe and other places.
        And the reason I say that is, the reason we have
    partnerships with Amazon, with Alibaba, is because we started
    to work with the credit card companies to impact the merchant
    accounts on those platforms, and then they came forward, and
    then we started programs with them.
        Just in regard to the specific platforms, we have had much
    success with Alibaba. We stood by them when they were the worst
    platform out there, and we have seen so much progress because,
    number one, I deal with the people at the top of Alibaba;
    number two, they have made substantial financial and resource
    investment to come up and be probably, you know, one of the
    more progressive platforms.
        Mrs. Roby. Thanks.
        Ms. Mond. I would echo the comments of the previous two
    responses.
        Certainly I think that one of the biggest challenges that
    our members have is that they have to engage with each
    individual platform, and that it is very resource-intensive.
    And even if one platform clears up all the counterfeits, then
    all the counterfeits move to another one or they move to the
    new platform. We are hearing about new issues that keep on
    popping up.
        So I think that one of the big issues with each of these
    programs is that they are reactive, that the counterfeits are
    already on the website. And so what we would like to see all
    the platforms do is do more investment into a proactive
    approach to prevent the counterfeits and prevent the
    counterfeiters from being online and from staying online in a
    lot of cases.
        Mrs. Roby. Yeah. Thank you. I appreciate that.
        Mr. Brody, in a court decision published earlier this
    month, the Third Circuit held that Amazon may be found liable
    for defective products sold by third-party vendors through its
    marketplace. In that case, Oberdorf v. Amazon, the court noted
    that, even though a third-party vendor had listed for sale the
    defective product, Amazon could not look the other way and
    escape responsibility, given its degree of involvement in
    marketplace transactions.
        What are your views on whether online platforms should be
    responsible for what they sell and distribute just like
    physical marketplaces? And shouldn't the same reasoning apply
    regardless of whether the defective products at issue are
    physical items or digital goods?
        Mr. Brody. Thank you, Congresswoman Roby.
        Under the Lanham Act, certainly resellers are equally
    liable for infringing marks or for counterfeiting, so there is
    a statutory basis for seeking relief against those parties.
    Whether they are typically the most effective target for
    enforcement efforts or not, I think, depends a lot on the
    particular facts of the case.
        Mrs. Roby. Okay.
        Mr. Chairman, also, in the interest of time, I am going to
    ask this question, and then if everyone on the panel wants to
    submit an answer for the record, that probably would be best.
        But do you believe Congress should look at taking
    legislative action to combat counterfeits on online
    marketplaces? And if so, what changes in laws do you each think
    would be effective?
        And I would just appreciate it if you would each take that
    for the record and submit it to this subcommittee for our
    consideration as we move through this very, very, very
    important issue.
        Mrs. Roby. And, Mr. Chairman, thank you so much for this
    hearing today, and look forward to continuing to work with you
    on this issue.
        Thank you all for being here.
        Mr. Johnson of Georgia. Thank you.
        Next, 5 minutes of questions from the gentleman from
    Florida, Mr. Deutch.
        Mr. Deutch. Thank you very much.
        And thanks to the witnesses. My apologies. I had to run to
    another meeting, but glad to be back to spend some time with
    all of you. And I appreciate your written testimony.
        And, Mr. Barchiesi, in your written testimony, you said,
    ``Counterfeiters will take advantage of any available means by
    which to get their products into consumers' hands.'' And so you
    recommend this multifaceted approach to--when companies verify
    their sellers more robustly and data on known counterfeiters is
    shared between law enforcement and CBP and e-commerce sites and
    then among e-commerce sites themselves.
        What do you do to incentivize e-commerce sites to adopt
    these anti-counterfeiting measures when sometimes it is just
    more profitable for them to ignore the counterfeiters
    altogether?
        Mr. Barchiesi. So thank you for that question.
        And, as we speak, the Intellectual Property Center that is
    also overseen by the Department of Homeland Security is hosting
    a meeting today with my staff, with all the major platforms,
    with Amazon, with eBay, with the shippers. And we have been
    working on this project for quite some time.
        And what we are looking to do is basically, collectively,
    build out a database with two buckets in it. The first bucket
    would be private data-sharing between the platforms so that
    they could keep bad actors out to begin with, which is the most
    difficult part. So they would share information so that a bad
    actor is not jumping from one platform to the other, like
    Rebecca had mentioned. The second one is, the bad actors that
    had been confirmed, that information would be pushed over to
    Homeland Security, and then that would be able to do criminal
    investigations.
        So this is a project we have been working on now for
    several years. I think because of the intervention of the White
    House memo, it seems like they have had much more incentive now
    to be there and invest in this. And we are very hopeful that
    this is going to take place in a reasonable amount of time.
        Mr. Deutch. And maybe it is premature and I should wait to
    ask until after the meeting, but with some of your
    suggestions--proof of identity, business organization
    documents, licensing agreements--have you seen a willingness
    from e-commerce sites to adopt any of these regulations, or is
    it an area where Federal policy may be necessary to fill that
    gap?
        Mr. Barchiesi. I think Federal policy is necessary for
    that, because, unfortunately, or fortunately, in China they
    require a national ID. So if you are selling on a Chinese
    platform, you have to provide national ID, whereas U.S.
    platforms, anyone could say they are anybody and sell on these
    platforms. I haven't seen any progress on that.
        Mr. Deutch. That is really helpful.
        Professor Fromer, I appreciate your focus on the dangers of
    having unused trademarks cluttering up the register. My
    understanding is that the process for removing them is
    burdensome, especially for smaller businesses.
        Can you just talk me through the cost of challenging
    trademarks that appear to be fraudulent or, at least,
    ineligible for registration using the process that is in place,
    the opposition process at the Trademark Trial and Appeal Board?
        Ms. Fromer. Sure. Thank you for the question.
        So the current two processes for challenging these
    fraudulent specimens of use are generally opposition and
    cancellation. Opposition, for the most part, has to happen
    within 30 days of publication of a trademark. So it is a
    limited window that third parties have to be vigilant for. If
    they miss that window, they won't be able to oppose that mark
    which is a limitation of opposition. Cancellation can happen on
    any grounds within 5 years of registration but on much more
    limited grounds after 5 years, which is another limitation of
    cancellation.
        Not to mention the cost that goes into this, which I think
    is a challenge for small businesses. It would really be helpful
    to have an ex parte possibility that is much lower-cost in
    nature to challenge fraudulent or unused marks.
        Mr. Deutch. Great.
        Terrific. I appreciate everyone being here. I appreciate
    those really helpful suggestions.
        And I yield back the balance of my time.
        Mr. Johnson of Georgia. Thank you.
        The committee will next hear from Mr. Johnson for 5
    minutes.
        Mr. Johnson of Louisiana. Thank you.
        If you are not familiar with our buzz signal, that is a
    vote. So we are all going to talk real fast here for a few more
    minutes.
        I just want to briefly note, we have discussed Walmart here
    today, and in addition to putting the letter into the record,
    they have sent a top representative, who is present, and we
    appreciate that.
        So thank you for being here.
        Mr. Cammiso, I am encouraged by the fact that the committee
    has chosen to take up this subject today. And in your written
    statement, you touch on the concept of further developing the
    nexus between marketplace sellers and consumers with law
    enforcement to catch bad actors. You were just discussing that
    a few moments ago.
        Could you elaborate briefly to the accountability model you
    suggest in your statement? And do you believe there are
    voluntary steps that could be taken currently between
    marketplace, stakeholders, and law enforcement that would begin
    to curtain the problem?
        Mr. Cammiso. Sure. Thank you, Congressman Johnson.
        There simply has to be higher penalties for sellers that
    are, in essence, criminals. And it can't be just to have them
    delisted and open up another account with another email address
    or another account name. There has to be something more
    substantial.
        At the other end of that, the platforms have this
    information or should have this information on the sellers that
    are selling these dangerous products. As I said, the penalty
    should not be just to remove the listing; the penalty should be
    to pursue prosecution. And the people who can do that are
    Homeland Security with help from the stakeholders.
        Mr. Johnson of Louisiana. What amount of penalty do you
    think would be sufficient to be a deterrent? I mean, I guess it
    depends on the industry or who is involved, at what level. I
    mean, how do we determine that? Do you have a suggestion? It
    bears a lot of thought, I guess, right?
        Mr. Cammiso. I am not prepared to answer that question. It
    has to be higher than what it is now.
        Mr. Johnson of Louisiana. Yeah.
        Mr. Cammiso. We have seen cases where people selling
    counterfeit airbags have been given very light sentences--in
    some cases probation, in other cases very minimal jail time. In
    order to deter these criminals, the penalties should be higher.
        Mr. Johnson of Louisiana. Got it.
        Professor Fromer, does the PTO have the authority to remove
    a mark it should not have registered, or does the agency need
    additional statutory authority to remove fraudulent trademarks
    that it made a mistake with?
        Ms. Fromer. I think that the PTO needs to be given more
    statutory authority in this instance. There is a lot of power
    until registration happens; after that, power becomes much more
    limited.
        The only exception to that that I know of is the recent
    permanent auditing program that was put in place, where the PTO
    has been able to get registrants not using their marks in whole
    or in part to delete parts of their registration. But it would
    be nicer to see that expanded more broadly, given how many
    unused marks seem to be on the register.
        Mr. Johnson of Louisiana. So if Congress gives the PTO more
    authority to remove fraudulent trademarks, what should we
    include in that legislation to ensure that the PTO is not going
    to misuse that authority to remove properly granted trademark
    registrations? I mean, there is a big distinction there, right?
        Ms. Fromer. Yeah. No, it is a wonderful question, because
    of course this has to be balanced.
        And I think one of the things that has emerged today is
    that the PTO is looking forward and becoming better--which is
    great--at using technology, instructing examiners to deploy
    certain resources or lines of inquiry, but that is not
    backward-looking at all, which means that things end up sitting
    on the register that, if they had been applied for now, might
    not have been.
        And I think it would be helpful to instruct the PTO to, at
    least in certain random audits or audits in crowded areas of
    registration, to deploy these new techniques as well in this
    backward-looking way to remove unused marks from the register.
        Mr. Johnson of Louisiana. Thank you.
        I have 50 seconds left. I wonder what Mr. Cammiso, Mr.
    Barchiesi, or Ms. Mond would--how you would respond to this, or
    maybe all three of you could, briefly.
        Should marketplaces share the identity of the seller of
    counterfeits with the company whose brand their counterfeiting,
    with other marketplaces, with customers, law enforcement, et
    cetera? What do you think about that?
        Mr. Cammiso. Yes, I believe so to help us to pursue these
    criminals.
        Mr. Barchiesi. As I just mentioned earlier, we are working
    with all the platforms, the shippers, and Homeland Security to
    do just what you mentioned.
        Mr. Johnson of Louisiana. Good.
        Do you agree?
        Ms. Mond. Absolutely.
        Mr. Johnson of Louisiana. And at what point should a
    marketplace remove a seller? After the sale of one or two or
    three confirmed--I can kind of guess you are going to say after
    the first strike, right? One strike, you are out, right?
        Mr. Cammiso. One strike, you are out.
        Mr. Johnson of Louisiana. I think I agree.
        Would you all agree as well?
        Ms. Mond. That would be the ideal system. We understand
    some sort of leeway in that, but certainly not more than three.
        Mr. Johnson of Louisiana. Thank you. I am out of time.
        Mr. Johnson of Georgia. The gentleman's time has expired.
        Five minutes for Mr. Lieu.
        Mr. Lieu. Thank you, Mr. Chair.
        Mr. Cammiso, the video you showed of counterfeit auto parts
    was highly disturbing, and thank you for showing that video. I
    have a question about how do these parts get into the
    marketplace.
        So let's say you are driving and a warning light comes on
    saying something is wrong with your airbag. If you take it to a
    dealer, am I correct to assume that the chances of the new
    airbag being counterfeit would be low?
        Mr. Cammiso. It would be zero.
        Mr. Lieu. It would be zero. Okay. And is that because the
    dealer is using an OEM part, original equipment manufacturer
    part, or is that a different thing?
        Mr. Cammiso. Dealers get their OE parts directly from us,
    and we are confident in our supply chain.
        Mr. Lieu. Okay.
        So let's say you go to an auto repair shop that says I am
    also going to give you an OEM part, are the chances of that
    being counterfeit higher?
        Mr. Cammiso. I can't speak for independent repair
    facilities. They have multiple avenues from which they source
    their parts. They need to be cognizant of where they are
    getting them from.
        Mr. Lieu. Okay.
        And then, if it is an after-market part, it doesn't pretend
    to be an OEM part, so that is not a counterfeit issue, right?
        Mr. Cammiso. Not at all.
        Mr. Lieu. All right. And so the counterfeiting is appearing
    at non-dealer places; am I right to assume that?
        Mr. Cammiso. Correct.
        Mr. Lieu. Okay. Thank you. That is helpful.
        Ms. Mond, a question for you about the safety of toys. So
    if it is a toy made by a U.S. company here, it has to meet a
    lot of different laws and regulations. So you can't, for
    example, have lead paint in toys, correct?
        Ms. Mond. That is correct. Regardless of where a toy is
    manufactured, if it is sold here in the United States, it needs
    to comply with those toy safety standards.
        Mr. Lieu. So let's say a toy with lead paint is being
    manufactured in a foreign country and then being sold on an e-
    commerce platform, a consumer would not know that, correct?
        Ms. Mond. That is correct. And a lot of the safety
    requirements that apply to toys that are sold in brick-and-
    mortar stores are being completely skirted, and toy
    counterfeiters aren't complying with those requirements.
        Mr. Lieu. If a consumer would buy a toy on an e-commerce
    platform, would they know where it is coming from? Do they have
    any idea?
        Ms. Mond. No, not necessarily. In a lot of cases, a
    consumer might think that they are buying a legitimate toy but
    they are, in fact, purchasing a toy from a third-party vendor
    that is not necessarily--they might be selling a counterfeit or
    they might be selling an unsafe product.
        Mr. Lieu. All right.
        So let's say an e-commerce platform is selling a hovercraft
    that is counterfeit, and they have been told it is counterfeit,
    they know it is counterfeit, and then a family buys it, house
    burns down. Is that e-commerce platform liable for knowingly
    selling an item that they knew was counterfeit?
        Ms. Mond. From what I understand, there was a recent court
    case that has changed the liability for third-party
    marketplaces. And so we are certainly encouraged that that
    conversation is shifting in that direction.
        But that said, in the past, the liability for marketplaces
    has been limited in instances where they are knowingly selling
    unsafe products.
        Mr. Lieu. Thank you.
        And if you could submit to this committee some ideas for
    making our laws better, that would be helpful.
        Ms. Mond. I am happy to do that.
        Mr. Lieu. Thank you.
        With that, I yield back.
        Mr. Johnson of Georgia. I thank the gentleman.
        We shall now hear from Mr. Cline for 5 minutes.
        Mr. Cline. Thank you, Mr. Chairman.
        I thank our witnesses for being here.
        Mr. Brody, can you talk about the challenge of quantifying
    the harm to reputation?
        Mr. Brody. Precisely. That is the problem. The courts long
    recognized that consumer confusion is a type of harm that is
    especially difficult to quantify.
        And it is not surprising that when you look at the vast
    number of trademark decisions that have come down over the
    years, there aren't a high percentage of them that involve
    damages awards. Typically, the relief--and I think the ranking
    member before you noted this, that the game was all about
    getting the injunction, and that is why presumption was so
    important.
        Without that, proving harm typically involves having to
    prove diversion of sales and then tracing back those sales to
    someone who was actually confused. And that is a chain of
    causation that in a court case can be extremely challenging for
    the plaintiff.
        Mr. Cline. Right. Well, I agree with you that, in light of
    the Supreme Court's failure to act, it is time for us to act.
    So I appreciate your comments, appreciate all the witnesses'
    comments.
        Mr. Chairman, I yield back.
        Mr. Johnson of Georgia. Thank you.
        That will conclude today's hearing, and I want to thank
    each witness for your testimony today.
        Without objection, all members will have 5 legislative days
    to submit additional written questions for the witnesses or
    additional materials for the record.
        Mr. Johnson of Georgia. And, once again, thank you very
    much for your time and attention and your testimony today.
        With that, the hearing is adjourned.
        [Whereupon, at 11:14 a.m., the subcommittee was adjourned.]

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