    [Senate Hearing 118-576]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-576

                     BACK TO SCHOOL WITH THE SHOP SAFE ACT:
                            PROTECTING OUR FAMILIES
                        FROM UNSAFE ONLINE COUNTERFEITS

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

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON INTELLECTUAL PROPERTY

                                     of the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 3, 2023

                                   __________

                              Serial No. J-118-34

                                   __________

             Printed for the use of the Committee on the Judiciary

                     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                            www.judiciary.senate.gov
                                www.govinfo.gov

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    58-970                    WASHINGTON : 2025

                           COMMITTEE ON THE JUDICIARY

                       RICHARD J. DURBIN, Illinois, Chair

    SHELDON WHITEHOUSE, Rhode Island     LINDSEY O. GRAHAM, South Carolina,
    AMY KLOBUCHAR, Minnesota                     Ranking Member
    CHRISTOPHER A. COONS, Delaware       CHARLES E. GRASSLEY, Iowa
    RICHARD BLUMENTHAL, Connecticut      JOHN CORNYN, Texas
    MAZIE K. HIRONO, Hawaii              MICHAEL S. LEE, Utah
    CORY A. BOOKER, New Jersey           TED CRUZ, Texas
    ALEX PADILLA, California             JOSH HAWLEY, Missouri
    JON OSSOFF, Georgia                  TOM COTTON, Arkansas
    PETER WELCH, Vermont                 JOHN KENNEDY, Louisiana
                                         THOM TILLIS, North Carolina
                                         MARSHA BLACKBURN, Tennessee

                 Joseph Zogby, Chief Counsel and Staff Director
          Katherine Nikas, Republican Chief Counsel and Staff Director

                     Subcommittee on Intellectual Property

                     CHRISTOPHER A. COONS, Delaware, Chair

    MAZIE K. HIRONO, Hawaii              THOM TILLIS, North Carolina,
    ALEX PADILLA, California                 Ranking Member
    JON OSSOFF, Georgia                  JOHN CORNYN, Texas
    PETER WELCH, Vermont                 TOM COTTON, Arkansas
                                         MARSHA BLACKBURN, Tennessee

                     James Barton, Democratic Chief Counsel
                   Seth Williford, Republican General Counsel

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page

    Coons, Hon. Christopher A........................................     1
    Tillis, Hon. Thom................................................     3

                                   WITNESSES

    Kammel, Kari.....................................................     5
        Prepared statement...........................................    32
        Responses to written questions...............................    46

    Lamar, Steve.....................................................     8
        Prepared statement...........................................    50
        Responses to written questions...............................    54

    Schruers, Matt...................................................    10
        Prepared statement...........................................    64
        Responses to written questions...............................    73

    Shapiro, Daniel..................................................     7
        Prepared statement...........................................    79
        Responses to written questions...............................    89

                                    APPENDIX

    Items submitted for the record...................................    31

                     BACK TO SCHOOL WITH THE SHOP SAFE ACT:
                            PROTECTING OUR FAMILIES
                        FROM UNSAFE ONLINE COUNTERFEITS

                                  ----------

                            TUESDAY, OCTOBER 3, 2023

                          United States Senate,
                 Subcommittee on Intellectual Property,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice at 2:34 p.m., in
    Room 226, Dirksen Senate Office Building, Hon. Christopher A.
    Coons, Chair of the Subcommittee, presiding.
        Present: Senators Coons [presiding], Hirono, Ossoff,
    Tillis, and Blackburn.

            OPENING STATEMENT OF HON. CHRISTOPHER A. COONS,
               A U.S. SENATOR FROM THE STATE OF DELAWARE

        Chair Coons. This hearing will come to order. I'd like to
    thank our witnesses for participating today. I'd also like to
    thank Ranking Member Tillis and his staff for working in a
    collaborative way to put this hearing together. And I'd like to
    welcome Senator Hirono.
        This is our fifth hearing of the IP Subcommittee of this
    year. And Senator Tillis, you and your team continue to be
    great partners in moving forward.
        Just to set the stage more broadly on the focus of this
    hearing, online shopping has expanded dramatically, has
    exploded in recent years.
        Last year, U.S. e-commerce sales exceeded a trillion
    dollars for the first time as millions and millions of
    Americans turned to online platforms, from eBay to Amazon, to
    find the brands they trust at prices they could afford.
        Counterfeiters, unfortunately, have moved online right
    alongside American consumers, and their tools are becoming far
    more sophisticated. Counterfeiters are no longer selling fake
    handbags or watches on a street corner or a flea market. New,
    modern online counterfeiting delivers products that look real
    with listings featuring images that show the real product and
    fake reviews that make their knockoffs seem authentic.
        Online counterfeiting efforts are so successful that,
    according to one recent report, two-thirds of American
    consumers surveyed had unknowingly bought a counterfeit product
    online last year.
        This isn't just a matter of tricking consumers into
    spending their money on harmlessly fake products. As the CBP,
    the Customs and Border Patrol, warned earlier this year, fake
    goods can pose real dangers that put the health and safety of
    all Americans at risk.
        Fake lithium batteries, for example, batteries that power
    laptops, can explode or catch fire. They cause 70 deaths and
    350,000 serious injuries in one recent year alone.
    Counterfeiters are also targeting airlines trying to sell fake
    engine parts that have been demonstrated to increase the
    chances of a crash. And counterfeit prescription drugs sold to
    consumers online are at best ineffective and at worst, in some
    cases, deadly to those who purchase them.
        Now, if I unknowingly bought a fake laptop at my local Best
    Buy up on Concord Pike, and it then caught fire in my home,
    Best Buy would be liable for the harm to me, and liable to the
    brand owner for contributing to trademark infringement. This
    framework for liability incentivizes brick and mortar stores to
    thoroughly and proactively vet their supply chains to keep
    counterfeit products out of consumers' hands.
        Now, that same counterfeit battery bought online is met
    with a different liability framework. Platforms don't have the
    same proactive obligations. In fact, they need not remove a
    listing until a brand owner tells the platform specifically
    that the listing is counterfeit. The weight, the onus for
    policing online counterfeits is principally on brands, not
    platforms.
        Under this structure, brand owners have to play a never
    ending game of ``whack-a-mole'' as they monitor a multiplying
    number of online marketplaces for counterfeit listings.
    Platforms know they have a counterfeit problem, and many have
    undertaken laudable anti-counterfeiting efforts.
        But current efforts are neither effective nor sufficient
    because the problem hasn't gone away. In fact, it is
    dramatically increasing. That's why I was proud to reintroduce
    the SHOP SAFE Act last week with Senator Tillis--a bill that
    works to try and balance the rights of brand owners and the
    obligations of online platforms to intercept and stop the sale
    of harmful counterfeit goods.
        The Act opens platforms to liability if counterfeit goods
    affecting health and safety are sold on the platforms, the same
    liability brick and mortar retailers have been subject to for
    decades.
        It requires brand owners to provide platforms with notice
    of their trademarks and a critical point of context so
    platforms can proactively implement an articulated list of best
    practices to keep unsafe counterfeits out of consumers' online
    shopping carts. Those best practices include better vetting
    before goods are listed, quickly removing counterfeit listings,
    terminating repeat counterfeiters, and requiring accurate
    images of the products sold.
        Platforms that follow best practices will have a safe
    harbor from liability. In other words, platforms making genuine
    and good faith efforts to clean up their sites have and should
    enjoy a liability shield.
        Our reintroduction last week came after a fair amount of
    work in the last Congress, hearings in both 2019 and 2021 that
    highlighted the rise in anti-counterfeiting. It is not my
    anticipation that the bill introduced is perfect or final. And
    part of this hearing, those who both support and oppose this
    bill, is to welcome input both critiques and compliments in an
    effort to try and sharpen and shape the bill into something
    worthy of enactment.
        Since Senator Tillis and I first introduced SHOP SAFE,
    we've heard from stakeholders who would be impacted by the
    bill. I appreciate their efforts and the work we've done to
    make changes to the bill based on the feedback we've received
    so far. And I look forward to continuing to work with a broad
    range of stakeholders as we try to move this bill forward this
    year.
        With my Ranking Member's cooperation, we've assembled a
    panel today with a diverse range of views, and I'll introduce
    them in a moment. But first, let me turn to Ranking Member
    Tillis.

                 OPENING STATEMENT OF HON. THOM TILLIS,
            A U.S. SENATOR FROM THE STATE OF NORTH CAROLINA

        Senator Tillis. Thank you, Chairman Coons. Thank you for
    really just a series of great hearings on strengthening
    intellectual property rights and addressing many of the
    challenges. We have a lot of good with our intellectual
    property system. We have a lot of opportunities to make it even
    better.
        And I think when you're talking about counterfeit goods,
    it's really the worst of both worlds. Number one, somebody is
    ripping off intellectual property. Number two, they're doing it
    in a way that could be very dangerous. Which is why I'm glad
    we're having this hearing and taking concrete steps to actually
    address the problem.
        You know, I was--I can't get it out of my mind, I've
    mentioned this story before. I'm an avid mountain biker.
    Actually, it's the reason why I got into politics,
    accidentally. I just went on a mountain bike trail and next
    thing you know, I'm in the State House.
        But in this very room just a few years ago--I have
    Specialized products. You know, people have, depending upon
    your background, it's kind of like Chevy or Ford. So I'm a
    Specialized consumer. And I saw a Specialized helmet, clearly
    counterfeit, break under the weight of about 180-pound person
    only jumping about a foot off the ground.
        Well, as somebody who's had two serious accidents in a
    Specialized helmet, that helmet did what it was supposed to do.
    It cracked, but it didn't--it prevented me from getting a
    concussion or having any serious injuries. So I think that's
    just the one example of several examples. We hear about them in
    automobile parts, in airplane parts. You see this in children's
    toys, that the official version may be safe, the counterfeit
    version is very dangerous.
        There's no question that we've got to fix this problem. And
    I think that the bill that we've--that we're going to have the
    hearing on today is a good first step, but it's never going to
    end.
        And we also have a lot of the same problems that we have
    with general intellectual property theft. It's falling on the
    back of the rights holder to figure out who is ripping off
    their intellectual property, what platform are they selling it
    on, and if you tell us, we'll take it down.
        That model does not work with the scale and the number of
    transactions that we're talking about. I wish that it could,
    but it simply doesn't work.
        So today, I hope this hearing gives us some more--gives us
    additional information to get the stakeholders together so that
    we can come up with a reasonable compromise.
        I do know that there are some consequences that we want to
    avoid, and that's why we're going through the very thoughtful
    process that we go through today.
        But I'd find it hard to believe, but Senator Coons, before
    you came down, I went and thanked the witnesses. I told them
    one of the reasons why I like this Subcommittee so much is you
    don't really expect the witnesses to go after each other
    because they're so far apart. The nature of our hearings are
    more about how do you weave together a reasonable legislative
    fix that addresses some of the concerns that may exist on
    either side.
        So in this hearing today, I hope that we get that, that
    productive feedback. And I hope that those who are out there to
    kill this bill need to understand, I want you at the table to
    make it better.
        But if there's anyone out there that thinks that they're
    going to slow this down, then they probably need to think
    again. And if all you're here to do, and if all you're doing is
    watching to figure out how you stop this effort, then you're
    not at the table that may put you on it.
        So let's work together. Recognize the public safety, the
    intellectual property infringement, challenges we have to deal
    with, and come together and work with us. And Senator Coons,
    again, I appreciate the years that you and I have worked
    together. And I especially appreciate how frequently Senator
    Hirono shows up for these Subcommittee hearings no matter what
    day it's on.
        Senator Hirono. Go figure.
        [Laughter.]
        Senator Hirono. No, you're doing--both of you are doing a
    good job. Thank you very much.
        Chair Coons. Senator, thank you for your persistent
    interest and engagement on the topics of this hearing. Ranking
    Member Tillis, thank you. I appreciate that introduction. I'll
    now briefly introduce our witness panel.
        We've assembled a panel to talk about strategies for
    protecting American families from unsafe counterfeit products
    sold in online platforms, and specifically to discuss the SHOP
    SAFE Act we just reintroduced.
        Our first witness is Kari Kammel, adjunct professor and
    director for education and outreach at Michigan State
    University, the Center for Anti-Counterfeiting and Product
    Protection, or A-CAPP, if I'm not mistaken. Professor Kammel
    has written extensively on legal issues pertaining to
    counterfeiting on e-commerce platforms.
        Next, we have Daniel Shapiro, senior VP of Brand
    Relationships at Red Points, a service business that helps
    brands police counterfeit goods offered for sale on online
    platforms, and who I think had a memorable weekend.
    Congratulations.
        Next, we have Steve Lamar, president, CEO of the American
    Apparel & Footwear Association--also a Delawarean--a trade
    association, the AAFA, representing more than a thousand brands
    in the footwear and apparel industries, an industry at the top
    of the CBP's counterfeit seizure list.
        And last we'll hear from Matt Schruers, president of the
    Computer & Communications Industry Association, a trade
    association representing many different significant players.
    But in particular, online platforms including well-known and
    frequently--in my home--used platforms like Amazon and eBay.
    Welcome.
        So after I swear in these witnesses, each of you will have
    5 minutes to provide an opening statement to the Committee.
    Then we'll proceed to questioning, each Senator having 5
    minutes. And I would expect we'll take two, maybe three rounds,
    given lots of things we need to talk about. So if you'd please
    stand, raise your right hand, and repeat after me.
        [Witnesses are sworn in.]
        Chair Coons. Thank you. Let the record reflect the
    witnesses have been sworn in. Professor Kammel, you may proceed
    with your opening statement.

        STATEMENT OF KARI KAMMEL, DIRECTOR AND SENIOR ACADEMIC
        SPECIALIST, CENTER FOR ANTI-COUNTERFEITING AND PRODUCT
    PROTECTION, ADJUNCT PROFESSOR OF LAW, MICHIGAN STATE UNIVERSITY
                 COLLEGE OF LAW, EAST LANSING, MICHIGAN

        Professor Kammel. Chair Coons, Ranking Member Tillis, and
    Members of the Subcommittee, thank you for inviting me to
    testify this afternoon on the SHOP SAFE Act, protecting
    families from counterfeits.
        I'm representing myself at today's hearing and the views I
    express are my own. My remarks draw on my work at the A-CAPP
    Center, engaging with over 500 organizations and brand
    protection professionals on trademark counterfeiting, as well
    as leading multidisciplinary research teams, education, and
    outreach to examine this issue from an academic yet practical
    perspective.
        We know that the sale of counterfeit goods online impacts
    national economies, companies of all sizes, in particular small
    and medium-sized businesses, and consumers, and has exploded in
    the past decade. And particularly, more since COVID-19.
        Counterfeiters find success by using another company or
    brand owner's trademark on a product or package without
    authorization, to sell a fake and usually substandard or even
    dangerous good. They rely on the good will and reputation of
    that brand in order to make an illicit profit. Often
    counterfeiters are tied to other criminal activities, such as
    online fraud and organized crime.
        Many trademark owners struggle to get some platforms to
    respond to notice and take down requests, or if they do, many
    find the whack-a-mole effect occurring with more postings
    taking their place. Particularly impacted are small and medium-
    sized businesses with their own products who do not have a
    dedicated brand protection team or department, and have limited
    resources to commit to protecting their trademarks online.
        According to our multidisciplinary research, in order for a
    counterfeit to be sold to a consumer on an e-commerce platform,
    there must be a meeting, and time, and space of one, the
    consumer, two, the counterfeiters posting, and three, the e-
    commerce platform.
        The most effective way to disrupt this is to remove one of
    these factors from the situation proactively before they ever
    reach that meeting and time and place on the platform.
        Although the legal liability in the brick and mortar space
    provides contributory liability for trademark counterfeiting
    for service providers such as flea markets or malls when they
    haven't taken the steps to disrupt the sale of counterfeits to
    consumers in their space, we don't find the same parallel in
    the law in the e-commerce space.
        The current state of the law rests primarily on the 2010
    Second Circuit case of Tiffany v. eBay, which notes that an e-
    commerce platform only needs to act if they have specific
    knowledge of a counterfeit posting from a brand, not
    constructive knowledge.
        There is no proactive requirement for platforms' prevention
    of counterfeit postings or monitoring of their own platforms
    for counterfeit, even though they have the most control over
    the platforms that they've created.
        Thus, an imbalance has evolved where brand owners and brand
    protection service providers attempt to take down counterfeit
    postings. But they cannot get at the root of the issue, and are
    constantly chasing counterfeit postings online. Well-informed
    consumers will give some basic transparency to who is listed as
    a seller. In these online transactions, more is needed.
        The results of a 17-country consumer survey that we
    completed last month note that, in our study, nearly 66 percent
    of U.S. consumers surveyed bought counterfeits unintentionally.
    And 13.4 percent experienced a negative health effect after
    using a counterfeit product. And 15.6 percent experienced
    personal injury. Sixty-eight percent of those surveyed said
    they'd bought counterfeits on either e-commerce or social media
    platforms.
        And additionally, our findings show that the consumers do
    not see a clear mechanism on what to do when they discover they
    have bought a counterfeit. These findings reflect what I know
    from my engagement with IP rights holders across industries,
    companies, and even product lines. The number one challenge
    right now relates to third-party sellers of counterfeit online.
        On a personal note, despite working in this field for some
    time, even my family is impacted by counterfeit goods. Just a
    few weeks ago in September, my mother, who is a 72-year-old
    retired public school teacher, was informed that a vitamin that
    she ordered on an e-commerce platform that allows third-party
    sellers was counterfeit. And she had been taking it for several
    months and experienced negative health effects.
        While she did get a refund, the communication from the
    platform was confusing. And she was told conflicting messages
    that she could dispose of it, or even give it away, or donate
    it.
        My mother's experience is reflective of what I've heard
    from IP rights holders in regard to their consumers and others
    in the risks of third-party sellers of counterfeit, and it's
    not limited to one particular platform or product.
        So my recommendations are to continue to address the ever-
    growing sale of counterfeit goods by third-party sellers in
    online marketplaces through the SHOP SAFE Act, and to support
    continued and expanded collaborations between academia and
    other stakeholders. Thank you, and I look forward to your
    questions.
        [The prepared statement of Professor Kammel appears as a
    submission for the record.]
        Chair Coons. Thank you, Professor Kammel. Mr. Shapiro.

       STATEMENT OF DANIEL SHAPIRO, SENIOR VICE PRESIDENT, BRAND
    RELATIONSHIP AND STRATEGIC PARTNERSHIPS, RED POINTS, SALT LAKE
                               CITY, UTAH

        Mr. Shapiro. Thank you, Chairman Coons, and Ranking Member
    Tillis, and the esteemed Members of the Committee for inviting
    me to be here today.
        A quick overview of Red Points. We are a technology company
    that's helping making the internet safer for both brands and
    consumers. We use AI technology to detect and remove hundreds,
    if not thousands, of marketplaces around the world. I began
    working in this space some 13 years ago while working at eBay,
    specifically working with some of the world's largest brands to
    combat this problem, which is obviously significant.
        In recent years, we have witnessed an unprecedented rise in
    e-commerce offering consumers convenience and variety like
    never before. This, like everything, brings life into life,
    both opportunities and challenges, that this boom has attracted
    counterfeiters who exploit these platforms, endangering
    consumer safety, tarnishing brand reputation, and causing
    considerable economic loss.
        Contrary to popular belief, online counterfeit is not
    restricted in luxury goods. Counterfeiters do not discriminate
    when selling fake product online. They can target industries
    and they can target any brand regardless of their size. We are
    talking about everything from baby products, cosmetics,
    automotive, fashion, and even industrial equipment like wind
    turbines get counterfeited.
        In the context of back-to-school shopping, students and
    parents are particularly vulnerable to counterfeit electronics,
    backpacks, clothing, footwear, as these are essential for the
    upcoming academic year. Some of these products may not be
    harmful, but rather extremely poor quality, which takes hard-
    earned money out of families because they have to rebuy these
    products before the end of the academic year.
        As a testament to this, Red Points, we witnessed over 1,000
    percent increase in the detected counterfeit incidences for the
    brands in which we represent over the year 2022 versus 2021.
        For a reference, Red Points today serves over 1,200 brands
    who rely on our platform to combat online fraud, which provide
    us with a vast amount of valuable information.
        Last year alone, we processed over 35 million links per
    day, and safeguarded over $2.2 billion in potential revenue
    loss for our clients. These statistics underscore the depth and
    challenge before us.
        The sophistication of online scams continues to evolve with
    fraudsters harnessing technologies, creating websites,
    mastering social engineering. And the battle against these
    ever-adapting threats resembles the well-known--as Chairman
    Coons mentioned, the well-known game of whack-a-mole.
        As we delve into the complexities of counterfeiting in the
    digital age, it is crucial to consider the existing response of
    online platforms, marketplaces, brands, legislative actions,
    and even third-party providers like Red Points.
        Are all of us aligned? Are we collaborating well enough to
    combat this sort of greater evil? After all, the target here
    is, in fact, the criminals who are exploiting both the
    marketplaces and the consumers.
        Now, many e-commerce platforms have been ramping up their
    anti-counterfeiting initiatives in recent years in efforts to
    rid their sites of knockoffs. However, scammers are continually
    looking for bigger audiences to sell to. The rapid year-over-
    year growth of e-commerce users has offered a unique
    opportunity for bad actors to expand their operations and
    further challenge of combating counterfeits as they persist to
    do to the adaptability and persistence of criminal
    organizations.
        Brands, regardless of their size, find it challenging to
    address all the infringing images of their intellectual
    property. To effectively combat online counterfeits, brands
    must prioritize, must invest, and implement a clear online
    brand protection strategy.
        Not having an online brand protection strategy today has
    grave consequences for both its brand itself and its consumers,
    particularly in the area of detection and enforcement. This can
    be made even more challenging based on the distribution
    decisions made by their companies' business teams.
        However, when it comes to the fight against counterfeits,
    in our opinion, the path forward is collaboration. This is not
    an issue that can be solved by one stakeholder. It's a shared
    responsibility and needs a united front of industries,
    marketplaces, third-party providers, and legislative action to
    ensure a secure e-commerce environment.
        Collaboration amplifies our resources, amplifies our data
    and expertise, and our response is greater than the sum of its
    parts. It is our hope that the legal system will continue to
    hold sellers liable for the sale of counterfeit product online
    as they do for brick and mortar retailers. And we welcome
    ongoing dialogue in the brand protection community and
    legislation to find the best practices to tackle this online
    counterfeiting problem. Thank you.
        [The prepared statement of Mr. Shapiro appears as a
    submission for the record.]
        Chair Coons. Thank you, Mr. Shapiro. Mr. Lamar.

        STATEMENT OF STEVE LAMAR, PRESIDENT AND CHIEF EXECUTIVE
     OFFICER, AMERICAN APPAREL & FOOTWEAR ASSOCIATION, WASHINGTON,
                                   DC

        Mr. Lamar. Thank you Chairman Coons, Ranking Member Tillis,
    and Members of the Subcommittee.
        Nobody wants to buy clothes, shoes, or accessories that
    will sicken their kids, or that were made by forced labor, or
    that were produced in sweatshops, or that destroy the
    environment. But that's exactly what happens when consumers are
    duped into buying counterfeit fashion. And that's why the SHOP
    SAFE Act is so important for Congress to consider and pass.
        The members of AAFA invest millions to build, train, and
    inspect supply chains to ensure that the clothes, shoes, and
    accessories bought and worn by American families are not only
    fashionable and affordable, but are also ethically and
    sustainably sourced and made, and are safe for consumers.
        This is an area of continuous improvement as each day we're
    looking further back in our supply chains and implementing
    increasingly complicated transparency, traceability, and
    product safety requirements to make sure that the clothes, and
    shoes, and accessories used by everybody in this room, and
    everybody in this country, are responsibly made.
        On top of their considerable investment in social and
    ethical compliance, U.S. brands and retailers of all sizes
    spend considerable resources to police third-party
    marketplaces, try to remove shady websites, take down
    fraudulent ads in a mission to address the growing counterfeit
    problem and protect consumers.
        Counterfeit products not only harm our members' reputations
    and hurt their sales, but they also put our members' customers
    in harm's way with fake products that could sicken them or
    create other risks.
        We're part of a broad industry coalition supporting the
    SHOP SAFE Act, spanning diverse sectors of the economy that
    have been raising alarms about the growing danger posed by
    counterfeits that are too easily allowed into our front steps
    and into our living rooms.
        While headlines scream about the dangers of counterfeit
    airbags, batteries, and prescriptions, the dangers posed by
    counterfeits are everywhere, including apparel, footwear,
    accessories, toys, personal care products, and more.
        In 2022, AAFA commissioned a study of 47 counterfeit
    clothes, shoes, and other accessories. These were everyday
    items that we would wear or use daily. And we found that 17 of
    these products, just over 36 percent, had dangerously high
    levels of poisonous materials like lead, arsenic, and
    phthalates.
        Not only did these items fail U.S. safety rules, but they
    also could have made consumers seriously ill if they had bought
    or used them. To say that counterfeits kill is not an
    exaggeration.
        Counterfeiters have a different view of the world. Their
    entire business model is based on stealing somebody else's
    innovation and identity. So it's with little remorse that they
    exploit workers, engage in wage theft, employ shoddy factories,
    dump hazardous waste in the rivers and lakes, and use dangerous
    chemicals.
        When they lure folks into buying their fake products, they
    often dabble in more thievery, exposing consumers to financial
    scams. The fact that authentic brands invest so much in social
    and ethical effort only widens the profit margins of
    counterfeiters since they are often able to score sale without
    paying for any of the compliance that they're duping customers
    into believing that has occurred.
        What happens to the profit of these ill-gotten gains? They
    become the seed capital for organized crime, terrorist
    activities, and yet more counterfeit activity. Protecting
    consumers, businesses, and American jobs from counterfeits has
    been and should be a bipartisan issue.
        And like many, we celebrate the growth of the e-commerce
    environment and cherish the opportunities the internet has
    created to enable consumers to interact with our industry, and
    to enable our industry to thrive, especially during the
    pandemic.
        With great opportunity comes great responsibility, and
    that's why the accountability and proactive measures required
    by SHOP SAFE are vital. U.S. law contains many guardrails to
    make sure brick and mortar retailers of all sizes do not sell
    counterfeit items.
        Authentic brands don't have to visit every store across the
    country to make sure that these brick and mortar locations are
    only selling legitimate goods. They don't have to go through
    lengthy take-down fights with these physical stores only to
    find fake goods pop up again, shielded by a new name.
        In the online world, things are very different. Brands must
    monitor every platform out there, with new platforms popping up
    every day. And when brands find counterfeits, fake websites,
    dupe influencers, or fraudulent ads promoting these websites,
    they must beg and fight the platforms to get those products,
    ads, and websites removed. If the platform removes them at all,
    it can be weeks or months, all the time allowing the
    counterfeiters to profit. And often, the infringers pop up
    within days.
        We can't think it's simply okay to let brands and retailers
    shoulder the burden and monitor these websites. Inefficient at
    best and Sisyphean at worse, this is likened to a game of
    whack-a-mole because counterfeiters are a wily bunch.
        They're pioneers in the latest technology and are
    constantly developing creative approaches to evade detection,
    knowing also that the legal framework that is deployed to stop
    them has been rapidly outpaced by the internet itself. They
    also know that many third-party marketplaces can hide within
    that framework, avoiding responsibility for the fake goods they
    allow to be sold.
        Interestingly, some of the same platforms that end up
    hosting counterfeiters are themselves pioneering amazing
    technological advancements. They can put up more effective
    roadblocks against illicit actors. Many of them talk about zero
    tolerance for counterfeits, a value that is commendable. But
    we've been hearing that for years while the counterfeit
    epidemic has been allowed to flourish.
        While these actions now are insufficient, it's now time to
    update and create stronger Federal incentives appropriate for
    the e-commerce ecosystems and consistent with what we have in
    the physical world.
        So SHOP SAFE will do just that: holding third-party online
    platforms accountable so they will be incentivized to make the
    necessary changes. And if these platforms take commonsense,
    easily achievable steps, like asking sellers for key pieces of
    needed information, implementing proactive measures for
    screening listings before displaying the goods, and denying the
    platform to repeat infringers, they will clean up their own
    sites and achieve safe harbor from the legislation's tough
    liability provisions--not provide safe harbor for dangerous
    fake goods.
        Thank you for inviting us to testify today, and I look
    forward to your questions.
        [The prepared statement of Mr. Lamar appears as a
    submission for the record.]
        Chair Coons. Thank you, Mr. Lamar. Mr. Schruers.

           STATEMENT OF MATT SCHRUERS, PRESIDENT, COMPUTER &
          COMMUNICATIONS INDUSTRY ASSOCIATION, WASHINGTON, DC

        Mr. Schruers. Chairman Coons, Ranking Member Tillis,
    Members of the Subcommittee, thank you for your time today.
        My name is Matt Schruers. I'm president of the Computer &
    Communications Industry Association. CCIA has advocated on
    technology policy for over 50 years. I'm pleased to be here
    today to talk about protecting consumers online.
        Keeping consumers and communities safe online and safe from
    dangerous products is a broadly shared goal. Responsible
    services, including CCIA members, invest significant resources
    in protecting users from illegal and unsafe goods, while
    engaging extensively with brand owners to identify and report
    to law enforcement counterfeit products.
        This is why CCIA, and many online marketplaces and
    retailers, jointly endorsed and supported the INFORM Consumers
    Act that was passed last year. This law has been in effect for
    less than 100 days. We should give time for INFORM to work
    before judging whether or not additional legislative
    interventions are required.
        CCIA has concerns about S. 2934 of the recently
    reintroduced SHOP SAFE Act. This concept was previously opposed
    by dozens of civil society groups, businesses, associations,
    and legal scholars for good cause. Fighting counterfeits
    requires substantial cooperation between brand owners and
    retailers.
        Existing law recognizes that trademark owners are in the
    best position to accurately and efficiently identify
    counterfeit goods from authentic goods. But SHOP SAFE places
    major new burdens and liabilities on sellers of all sizes while
    requiring no significant new contribution from brand owners.
        In fact, the new version of SHOP SAFE deletes a section
    from the previous version that would've cracked down on bogus
    trademark challenges. And the legislation's public notice
    requirements actually burden smaller retailers more than large
    ones.
        And shifting these legal responsibilities through new
    liability rules is not going to prevent counterfeiting. But it
    would stifle legitimate commerce and innovation, and reduce
    ongoing cross-sector cooperation.
        Marketplaces and the vast majority of small sellers operate
    legitimately. And we should not place unreasonable compliance
    burdens on businesses of any size, but particularly not small
    and medium-sized businesses.
        These sellers lack the bandwidth and the resources to spend
    multiple days investigating putative concerns from brands when
    the trademark owner is in possession of the information that
    will help them identify counterfeits. That definition,
    incidentally, turns on non-public information about whether or
    not a good was manufactured under license.
        The burdens of SHOP SAFE fall broadly. The scope of the
    statute's definitions is incredibly expansive. It defines
    electronic commerce platform as far broader than marketplaces,
    encompassing virtually every online forum where people could
    connect. And the bill presumes that any such site is liable for
    infringement and requires it to prove its innocence by
    mandating compliance with prescriptive requirements to escape
    what is effectively strict liability.
        SHOP SAFE also employs an expansive definition of good that
    implicates health and safety. That definition would encompass
    virtually every product in today's consumer household.
        And finally, while the bill is framed as a safe harbor, it
    is, in fact, an unsafe harbor. It flips on its head standard
    notions of liability in favor of a novel, strict contributory
    liability scheme whereby if a service does not adhere to a set
    of obligations that are not accurately characterized as best
    practice, then they will be held liable.
        So in summary, we recommend that the Senate seek updated
    data on the efficacy of INFORM before moving forward on an
    unbalanced proposal that is not going to solve the problem it
    purports to address, but would place substantial regulatory
    burdens on small businesses, on e-commerce providers, and on
    retailers.
        Ultimately, we recommend that Congress approach retail
    regulation in its totality. Brick and mortar, e-commerce, big-
    box, bodega, mom and pop stores, all the same should be
    regulated under a coherent model that applies to businesses
    equally. And this, we believe, will provide a better path
    forward.
        I thank you for the invitation today. Thank you for your
    time, and I look forward to your questions.
        [The prepared statement of Mr. Schruers appears as a
    submission for the record.]
        Chair Coons. Thank you. Thank you, Mr. Schruers, and thank
    you to all of the witnesses.
        Let me just open where we concluded there. Professor
    Kammel, you testified that there's a different liability
    standard, different approach for brick and mortar stores versus
    online platforms. Mr. Schruers concluded by saying we should
    have one approach. One common approach to how we regulate
    commerce online, large, small, brick and mortar.
        Help me understand. Square that circle for me. Doesn't SHOP
    SAFE try to apply a similar liability standard online as
    already exists in brick and mortar, or do I misunderstand?
        Professor Kammel. So, in my opinion, it does attempt to do
    a similar contributory liability in the e-commerce space. So in
    the brick and mortar space--and we've seen that through several
    cases starting back in 1992 with Hard Rock v. Concession
    Services before the Seventh Circuit--that people who were
    running flea markets or landlords, they were considered service
    providers. They were responsible for reasonable--reasonably
    looking around their property to determine if counterfeiting
    was taking place or other activities.
        So what happened with the Tiffany v. eBay case, and a few
    other cases, too, is the court decided at that time--which,
    again, is about 13 years ago--that it was unreasonable for an
    e-commerce platform to be able to look through their own
    platform to find these postings.
        And I think we've seen through the changes in technology,
    particularly AI and machine learning, that that has shifted.
    And it's no longer unreasonable for a platform to be able to
    see what's on its own platform, but also to vet proactively
    sellers, and those postings, and the images that are going up
    to make sure once something's posted that it's actually safe
    for the consumer to purchase.
        Chair Coons. Mr. Lamar, one of the things that SHOP SAFE
    would do, one of the attempts at definitions for sort of best
    practices to define a safe harbor would be to have a
    standardized set of, ``If you do these things you would avoid
    any contributory liability.''
        Your members sell their products on all different
    platforms. All different sizes. You have small, medium, and
    very large companies selling on platforms of all different
    sizes.
        Each of these platforms have different rules, different
    programs, different approaches to addressing counterfeiting.
    Some laudable and very sophisticated, engaged. Some virtually
    not at all.
        Would it benefit brand owners to have a standardized menu
    that says this is the kind of cooperation you need to provide
    to platforms?
        Mr. Lamar. Yes, I think you hit the nail on the head,
    Senator. There is a lack of consistency about what exists.
    We've actually created tools to kind of tell people, our
    members, when you go to this platform, here are the things you
    can experience. When you go to this platform, here are the
    things you can experience.
        And it'll be much better if there were very clear, simple
    Federal guidelines. If you want to do business in this country,
    here's the way you need to approach the U.S. consumer and
    create that very common sense set of proactive. Right now, it
    is reactive. It is after the fact, and it is inconsistent.
        So something that actually creates a very common, central
    approach is exactly what we need.
        Chair Coons. Mr. Schruers, you said SHOP SAFE--you have a
    number of criticisms of it. One is that it puts no new
    obligations on brands. What would you suggest as, in your view,
    one of the most important things we could do to achieve a
    better balance of responsibilities and liabilities online?
        Mr. Schruers. Thanks for that. The bill, as it stands,
    indicates that information sharing should occur. But then
    states that it's not necessary, effectively, if information
    about trademarks is publicly available online, which is
    effectively every trademark by virtue of the fact that all of
    this information is available through the Patent and Trademark
    Office website.
        So the statute, as it presently stands, creates a null set.
    It's a--it regulates zero companies. What we would want to see
    is an obligation on brand owners to share more granular
    information about products, and provide information about, for
    example, new products being introduced, imagery that they have
    that's legitimate, that--and whether or not that's been
    licensed.
        But it's important to sort of step back and recognize that
    the Trademark Act currently defines counterfeit as products--it
    requires the definition, that is whether or not the product has
    been manufactured under license. And that is information that
    only the brand owner has.
        And so having availability to that information would go a
    long way toward allowing e-commerce platforms to implement the
    kinds of take-down requests that they're getting.
        Chair Coons. Thank you, Mr. Schruers. Mr. Shapiro,
    uniquely, you sit sort of in the middle of all this, mediating
    oceans of data going back and forth between brands and
    platforms. I think you said 35 million incidents a year.
        Mr. Shapiro. A day.
        Chair Coons. A day.
        Mr. Shapiro. A day.
        Chair Coons. Right. A day.
        So it's only today with modern technology, with AI, with
    incredibly capable technology that we can begin to examine and
    process things like whether this image is a trademarked and
    protected image of the actual product, or it is something fake.
        How would you strike the balance here between putting more
    obligations on trademark holders, licensors, and putting more
    obligations on platforms?
        Mr. Shapiro. Yes. I think it's a combination--thank you,
    Chairman. I think it's a combination of a lot of challenges
    coming together today--today in the marketplaces around the
    world.
        My former company I worked with--somewhere, I read online
    recently that there was 1.7 billion listings currently
    available. Amazon is probably double or triple that. Alibaba is
    probably adding close to a billion items a day in a conference
    that I was at not too long ago in terms of suggesting that's
    how many listings. I certainly can't verify about it. That's
    just what I heard. But at that volume, the ability for brands
    to monitor that--monitor that on their own, impossible.
        Today, unless you deploy some level of technology, you
    can't get there. And with platforms today with that many
    listings on their sites, and with brands having two and three
    million SKUs--there are some very big brands with lots of
    SKUs--there probably isn't one person in the company that knows
    every product in which they make.
        And so when we deal with brand protection teams at a
    particular brand, they're often an IP legal counsel, very
    sophisticated in the world of IP, but they work for a company
    with a million SKUs. They don't know which items are authentic
    and which are counterfeit. If they've only been there a year,
    they might not even know of the product previously that----
        Chair Coons. Understood.
        Mr. Shapiro [continuing]. Was out.
        Chair Coons. What suggestions might you have for us about
    how to better balance----
        Mr. Shapiro. Well----
        Chair Coons [continuing]. The obligations of brands and
    platforms?
        Mr. Shapiro [continuing]. Yes. So I think to answer your
    question, then, I think that there has to be an investment from
    the brands to help. Right? There's the unwillingness today to
    share too much information with platforms because there's a
    lack of trust with the platforms. That if they told them their
    intellectual property, that maybe somehow that would get to a
    counterfeiter. So if today we could get----
        Chair Coons. In other words----
        Mr. Shapiro [continuing]. The brands----
        Chair Coons [continuing]. If brands are required to get
    well into the granularity of how to make their product, not
    just have we registered the trademark----
        Mr. Shapiro. Yes.
        Chair Coons [continuing]. And are we making it under
    license, but exactly, all the schematics, and the details,
    and----
        Mr. Shapiro. Yes. And that's how we work.
        Chair Coons [continuing]. There are, in fact, actions
    against some platforms for manufacturing.
        Mr. Shapiro. Exactly. And that's how we work. They share
    with us their IP, we use that IP to crawl and find that
    product. And we keep that. We don't share that with the
    platform, but we have that. Right?
        So that's the first step of trying to solve this is, a bit
    more comfortable level of sharing that IP and sort of trusting
    one another that we could do this together if we think about a
    good commonplace on how to do it.
        Chair Coons. Thank you. I need to yield to my Ranking
    Member, Senator Tillis.
        Senator Tillis. Thank you, Mr. Chair. Mr. Chair, I hope you
    don't take or didn't take my comments earlier about people who
    are opposed to the bill we're talking today as being bad
    people. I just see a bad pattern of behavior here that we need
    to fix.
        Chair Coons. Yes.
        Senator Tillis. And I hear your comments about the INFORM
    Act. But let's assume that INFORM Act performs at 100 percent
    of its wildest expectations. Is the problem solved?
        Mr. Schruers. Well, I think this problem will never be
    solved----
        Senator Tillis. Right.
        Mr. Schruers [continuing]. It is a ongoing process by
    which----
        Senator Tillis. But, bend the curve----
        Mr. Schruers. I----
        Senator Tillis [continuing]. To me, it just seems like it's
    indisputable that this is growing and bad actors, particularly
    China--I should have mentioned that in my opening comments.
        Look, there are a variety of strategic economic, health,
    and safety reasons why we need to be attacking this. China
    being first among them. I've seen far too many instances of
    North Carolina-based companies where they've been victims of
    counterfeit goods.
        I'm not here to attack you, but I am here about that--
    because we are going to go to a second round, I'm going to
    yield to Senator Blackburn here, fairly quickly, so that she
    can ask, and then I'll come back around.
        I want to find out more about the 35 million links a day--
    the methodology being used for that, what the trending is. I
    also want to understand a little bit more about the 17-country
    survey. I think Professor Kammel, you may have mentioned that.
    I'll get back to specific suggestions, but right now I'm going
    to defer to Senator Blackburn, if I may.
        Chair Coons. Of course. Senator Blackburn.
        Senator Blackburn. And thank you, Mr. Chairman. And I thank
    Senator Tillis. Welcome. We are delighted that you all are
    here.
        I represent Tennessee. And in Tennessee, we have looked at
    this issue of copyright and patent infringements for years. And
    it doesn't matter if it is auto parts or aftermarket auto
    parts. It doesn't matter if it is guitars, or clothing, or
    shoes, baseballs, ink pens.
        Those are all items that have come to us, and they've been
    knocked off by a factory over in China. And then they are--that
    brand name is grabbed, and that brand--this counterfeit
    merchandise is sold under that brand name.
        And Mr. Shapiro, you mentioned how difficult it is to
    track, and how difficult it is to find these, and that due
    diligence needing to be done as you crawl the web and try to
    search out these items.
        Mr. Schruers, let me come to you. Senator Tillis was
    talking about the impact of the INFORM Act. So answer that in a
    more fulsome way. As we look at SHOP SAFE, should we wait for
    the INFORM Act and see what we're going--how far we're going to
    get there?
        Because, you know, this issue has been around for a long
    time. And it started out and it was knocking off designer
    clothing, and handbags, and music, and videos, and movies. And
    then you saw it creep into other areas. So let's talk about
    what you think the merit and the impact of the INFORM Act could
    be, or should be.
        Mr. Schruers. Yes. Thank you for that. So we have had
    INFORM in force for barely 3 months, and we have yet to see its
    full effect. Retail, of course, is seasonal and cyclical. And
    so we would want to spend some time collecting data before we
    can see its full impact and assess whether or not it's doing
    what we need it to do.
        But we know that a lot of counterfeiters and bad actors
    online operate by obscuring information. And, of course, INFORM
    creates greater transparency, encourages and compels platforms
    to collect, and verify, and disclose information from high-
    volume sellers. It also creates a mechanism for individuals to
    report suspicious transactions. These mechanisms have barely
    been available to the public, and we should give them time.
        I think we should also acknowledge that what is best
    practice is an evolving standard. Right? And from which we
    should determine by talking to the practitioners. And we can
    see that technology is regularly being deployed in this place
    where it can.
        But at the end of the day, we need cooperation. We need
    brand owners and platforms working hand in glove because----
        Senator Blackburn. Well, and I think we need platforms to
    be more diligent in pulling things that they suspect are
    counterfeit.
        Mr. Schruers. I think we should acknowledge that there are
    millions of legitimate transactions online every day. And the
    vast, vast majority of platforms of e-commerce providers and
    small sellers are legitimate actors engaged in lawful commerce.
        That being said, there is a very small sliver of bad actors
    out there who we need to take action against. And online
    platforms don't want to be associated with these transactions
    any more than brand owners want them to happen. These are bad
    experiences for consumers, and nobody wants to be associated
    with selling a dangerous good.
        The question is how do we get there? And we need to get
    there through cooperation. Because as the bill currently
    stands, the parties who have the obligation to act actually
    have the least information in this transaction. And we need to
    fix that problem.
        Senator Blackburn. I was talking with someone in Tennessee.
    And they were talking about using Etsy, and putting something
    that they had created on Etsy. And they were trying to get a
    patent on this, and they said, ``My concern is I'm going to put
    it up, and then it's going to be knocked off before I have the
    ability to actually commercialize on this.''
        So how do we use the INFORM Act? How do we fight this
    proliferation of counterfeit goods and not harm these small
    manufacturers, these small entities that have a great idea or a
    great product? They're trying to move it into
    commercialization, but they're afraid of what will happen if
    they go online.
        Mr. Schruers. I think that's a great question. And
    obviously, different platforms provide different services, and
    so I can't speak to any one specific platform.
        But I think it's--bears noting that these platforms are
    often the first vehicle by which small sellers and
    entrepreneurs, like this constituent you're referring to, are
    able to reach a worldwide audience. And, but for access to a
    platform that allows them to ship across the country and around
    the world, they simply wouldn't have the ability to scale
    beyond their community.
        And so we don't want to impose obligations on either the
    platform or these individuals that cannot be sustained, and
    that might have the effect of driving someone like this small
    entrepreneur out of the marketplace.
        Senator Blackburn. Yes. And thank you for that. And I see
    my time's expired. Thank you.
        Chair Coons. Thank you, Senator Blackburn. Senator Hirono,
    are you prepared to question, having just returned from an
    important----
        Senator Hirono. Having just----
        Chair Coons [continuing]. Ceremony?
        Senator Hirono [continuing]. Sat down.
        Chair Coons. I'm happy to ask a question if you'd like for
    a moment while you----
        Senator Hirono. It's okay. Thank you very much.
        Chair Coons. Please proceed.
        Senator Hirono. So this is for Ms. Kammel. Am I pronouncing
    your name----
        Professor Kammel. Yes.
        Senator Hirono [continuing]. Correctly? So this has to do
    with some definitions. So your research center has a helpful
    glossary on its website that defines the action of
    counterfeiting generally as, and I quote, ``To forge, copy, or
    initiate something without a right to do so, and with the
    purpose of deceiving or defrauding,'' end quote. And the
    Federal definition is different, but starts with a spurious
    mark, meaning, one that is not genuine or authentic.
        So as we deal with this issue of counterfeiting, do we need
    to have a better definition of what constitutes counterfeiting?
    Because we're not talking about those instances where someone
    goes and buys something at a discount, a genuine article at a
    discount, and then proceeds to sell that item for a lesser
    price. That is not counterfeiting. Is it?
        Professor Kammel. That's correct. I do not believe it is.
    And thank you for your question. While that definition under
    the glossary is meant to be descriptive, I would refer back to
    the definition in the Lanham Act or in the Trademark
    Counterfeiting Act about the spurious mark. We believe that is
    what legally defines what a counterfeit mark is.
        Senator Hirono. So the focus of this bill, I think, has to
    do with items that can be deemed that can compromise the health
    and safety of the user. And I think the definition of the bill
    is very broad. Isn't it? Have you had a chance to review the
    bill?
        Professor Kammel. I have. Yes. You're referring to the
    health and safety provision?
        Senator Hirono. Yes. And doesn't the bill pretty much refer
    to those kinds of items that compromise or could endanger
    health and safety--that that's what we're getting at? But the
    bill's definition is quite broad. It could be anything, pretty
    much from what I read. So do we need to better define what we
    mean by the compromising or whatever--the health and safety?
        Professor Kammel. Thank you for that question. So my
    understanding is that it implicates a counterfeit good which in
    itself would impact health and safety. And as we know, and as
    several of my colleagues here have testified, we know that
    goods, that if they're legitimate, may not implicate health and
    safety, but if they are counterfeit they can.
        And a lot of people are often surprised by that when--I
    mean, we get asked the question, you know, what's the harm in
    purchasing this counterfeit? You know, there's nothing wrong
    with it. And we know from a lot of testing, for example, that
    there can be lead or, you know, poisonous--poisonous materials
    that were made in these products.
        So from my perspective, the fact that it says that a good
    that implicates health and safety would encompass a counterfeit
    that could endanger a person's health and safety. And we see
    that across industries, across product lines.
        Senator Hirono. Well, the definition is really broad, and
    that's why I have some concerns about just about anything can
    compromise or endanger someone's health and safety.
        For Mr. Lamar, you testified that over a third of the
    counterfeit clothes that you tested in a case study contained
    dangerous substances. Did you get into what kind of substances
    these are?
        Mr. Lamar. Yes. Thank you for the question, Senator. They
    contained high levels of dangerous chemicals like cadmium, and
    lead, and phthalates. They also had other product safety
    failures that have been associated with injuries: buttons
    coming off, other kinds of things--draw strings--that the
    industry that is pushing for compliance go to great lengths to
    make sure that they meet those requirements.
        And so counterfeiters that are not going through, in
    addition to creating products that do have a health and safety
    issue even though you might not think of it with an article of
    clothing, they do have a very obvious one.
        They also get a--those counterfeiters get a benefit because
    they're selling something at roughly the same price even though
    the--they don't have to go through the expenditure of the
    expense of compliance and testing and so forth.
        Senator Hirono. Which leads me to question where these
    counterfeit products are coming from. Are they associated with
    certain countries that do not have to abide by health and
    safety considerations?
        Mr. Lamar. Many of them come from China. And interestingly
    in China, a lot of those same health and safety considerations
    exist as well. We lead compliance programs in China to educate
    factories on that, as well.
        What's happening is the counterfeiters are ignoring
    everyone's health and safety. They're not putting anyone's
    first. So they're ignoring the U.S. laws, they're ignoring
    Chinese laws, they're ignoring laws in other countries, as
    well.
        Senator Hirono. So does the bill that the Chair and Ranking
    Member filed--will they help to get at these counterfeit
    products that are made in foreign countries such as China?
        Mr. Lamar. Absolutely. Yes.
        Senator Hirono. How so?
        Mr. Lamar. We definitely think it'll put any counterfeiter
    on notice. It will also create a set of very proactive steps
    that will be taken to make sure that the goods don't even get
    offered to U.S. consumers in the first place. So we deny the
    market to the counterfeiters. So the financial incentive for
    the counterfeiters to even start down the path immediately
    dries up.
        Senator Hirono. Just one more question, Mr. Chairman. So
    how do we get at these counterfeiters if they're not even in
    our country? I assume that these goods are somehow--that
    they're being sold by entities that are in China, for example.
    How do we even get jurisdiction over those folks?
        Mr. Lamar. One of the proactive measures--a set of
    proactive measures that's in SHOP SAFE talks about establishing
    jurisdiction for these individual companies through the
    platform. So that's a measure that we don't have right now that
    would be a huge improvement.
        Senator Hirono. Does a country have to--a country of
    origin, i.e. China, have to accept our jurisdiction over their
    people?
        Mr. Lamar. No, but the entities that are doing business
    with these platforms would.
        Senator Hirono. Okay. Thank you.
        Chair Coons. Thank you, Senator Hirono. Let me, if I could
    just, Professor Kammel, could you just briefly and concisely
    summarize the difference between the INFORM Act and SHOP SAFE,
    and why both might be necessary, and what impact it would have
    on the contours of SHOP SAFE if we let INFORM go for a couple
    of years and then sort of see what the impact is?
        Professor Kammel. Sure. Thank you for the question,
    Senator. From my perspective, they're complimentary but they
    are--they are not the same.
        So the INFORM Act briefly requires e-commerce platforms to
    get seller information, and to verify that in advance, and to
    share some of that information with the consumer at the latest
    time--at the point of receipt of purchase so that they can get
    that information.
        That's very helpful because currently, some platforms do
    not even share seller information at all. And that's kept sort
    of behind the wall that the e-commerce platform can see, but
    the consumers cannot.
        Chair Coons. So in the case of your mother who purchased
    counterfeit or faulty vitamins online that actually harmed her,
    she'd now have some information on record on the online
    platform about where it came from?
        Professor Kammel. She has a name and an address. Correct.
        Chair Coons. And that's it.
        Professor Kammel. That's it.
        Chair Coons. Okay. And then what's the difference in the
    bill we're discussing today?
        Professor Kammel. So with SHOP SAFE, we are talking about
    reasonable measures that platforms can take that my colleagues
    here have already been discussing, particularly proactively.
        So from our perspective, at least with our research, this
    is one of the important things to really disrupt the sale of
    goods online, is that proactive measures need to take place.
    And those are listed throughout the SHOP SAFE bill.
        And if those proactive measures take place, and that's
    reasonable, depending on the size of the e-commerce platform,
    and the resources, and technology, then they have a safe
    harbor. If they're not willing to do that proactively, then
    they can be liable for secondary liability for trademark
    counterfeiting in a similar way that a brick and mortar store
    might, such as a shopping mall or a flea market, which we've
    talked about.
        Chair Coons. And one other thing, all--one issue all of you
    have raised is the potential impact on small businesses.
    There's a threshold below which a potential company's not
    covered a platform.
        Professor Kammel. Correct.
        Chair Coons. A platform.
        Professor Kammel. So, $500,000, from my understanding. And
    I think it's important to point out, too, we're talking in some
    ways about small businesses. But from two different
    perspectives, I believe.
        So there's the small business who is selling others'
    products, and then there's the small business who's the
    intellectual property rights holder, which I believe Senator
    Blackburn was referring to.
        That they work really hard, they get this great idea, they
    go to register their IP, and e-commerce is a great place for
    them to start a business and sell, particularly if, you know,
    they're in a small town or somewhere where they might not have
    access to a lot of consumers.
        Many of them find very quickly that their products are
    being counterfeited. And because they're a small company, maybe
    one to two people, that they don't have brand protection
    resources to do massive amounts of searching the web looking
    for the counterfeiters.
        Chair Coons. One last question to you and then I'll yield
    to my Ranking Member. There's a difference on this panel about
    how big an issue this is. You took--A-CAPP took a survey of
    thousands of consumers and came up with the conclusion that
    two-thirds of all American customers had unwittingly purchased
    a counterfeit item online.
        Given the volume of online transactions, I think it was a
    trillion dollars last year, that's an enormous dollar value and
    number. CBP reports roughly $3 billion in interdicted
    counterfeits. That's a relatively small number compared to the
    volume.
        Help me understand. How big of an issue do you think this
    is? Mr. Schruers has said a very small sliver in a sea of
    otherwise completely legitimate transactions. The truth, I
    suspect, is somewhere in between. And I don't mean to
    mischaracterize, Mr. Schruers, I'll give you a chance to also
    share.
        How big a problem is this? Why is it deserving of
    legislative attention?
        Professor Kammel. So this is a great question, and it is
    challenging to get an exact number. And you pointed out a lot
    of the sources for data that we know that we can get ahold of
    from customs, to takedowns on the brand side, or such as my
    colleague, Mr. Shapiro's side. They see how many counterfeit
    postings are out there.
        We also know from organizations such as the OECD, the
    Organisation for Economic Co-operation and Development, give a
    lot of estimates ranging in 2.5 percent of global GDP is
    counterfeit sales. Some other organizations such as Frontier
    Economics have also published studies saying now that the
    problem of counterfeit goods financially has surpassed that of
    the global drug trade and human trafficking. So we know it's a
    major problem.
        Chair Coons. Let me just----
        Professor Kammel. Yes.
        Chair Coons. I'm just going to hang on a second. More
    money, according to this source, is generated in the sale of
    counterfeit goods than in drugs, or selling and moving people.
        Professor Kammel. That is what this study says. Yes.
        Chair Coons. Okay. Interesting. Mr. Schruers.
        Mr. Schruers. Thank you for the opportunity to address
    this. Let me start by saying there's no dispute that this is a
    problem that needs attention.
        Chair Coons. Right.
        Mr. Schruers. We're just talking about the scale of the
    problem. And I would note that all of these statistics that
    we're looking at are by their own terms wildly inflated
    relative to the problem that we're talking about.
        So, first of all, many of them are the upper range. And so
    we get a site of between X and Y, and Y is the top figure, and
    then Y becomes the figure. So we need to realize that--that the
    outer bound is not the median figure.
        Second, most of these figures apply and include copyright
    piracy, patent infringement. And I'll be the first to
    acknowledge that infringement in foreign markets that have weak
    rule of law is a serious policy problem. That is not the
    problem that we're talking about here.
        This bill is not going to do anything about pirated
    software in China. It's not going to prevent patent
    infringement. It's not going to prevent the sale--a physical
    sale of a bootleg handbag on the streets of Moscow. Right? This
    is just about regulating online platforms, and those numbers
    are wildly over-inclusive based on what we're talking about
    here. So I think we have to take these numbers with many grains
    of salt.
        Chair Coons. Could----
        Mr. Schruers. Having said that, we----
        Chair Coons [continuing]. You speak to Professor Kammel's
    study suggesting two-thirds of American consumers may have
    unwittingly purchased a counterfeit item?
        Mr. Schruers. Yes, I--well, I don't want to speak
    specifically about the methodology of that study. I think what
    I would say is we know the vast majority of these transactions
    are legitimate by legitimate businesses who just want to make
    consumers happy with their products.
        And so the question is how do we--how do we do that? How do
    we facilitate all of these lawful transactions while dealing
    with this small sliver of bad actors?
        Chair Coons. Mr. Shapiro, to close out this round, is Red
    Points a very small startup with a handful of customers?
        Mr. Shapiro. No.
        Chair Coons. No. Your reference to 35 million, was 35
    million what?
        Mr. Shapiro. New listings a day we bring into our platform
    on behalf of the brands we represent.
        Chair Coons. Thirty-five million new listings of----
        Mr. Shapiro. Well, listings that are--need to be reviewed
    for being suspicious of counterfeits.
        Chair Coons. And what percentage of them do you ultimately
    conclude have any basis to be deemed counterfeits?
        Mr. Shapiro. Well, it's a small----
        Chair Coons. Purveyors of counterfeit.
        Mr. Shapiro. Yes. It's a small number. Today--well, it's
    not a small number. But I'll tell you today, we send out
    somewhere----
        Chair Coons. That's exactly my question. Is it a small
    number?
        Mr. Shapiro. Three to four hundred thousand notices and
    takedowns per month on behalf of our customers. So we represent
    1,200 customers. We're sending out almost 400,000 notices every
    single month on behalf of those customers.
        Chair Coons. To wrap this up, you have 1,200 customers?
        Mr. Shapiro. Correct.
        Chair Coons. How many members do you have, Mr. Lamar?
        Mr. Lamar. About 350 representing between 1,000 to 1,200
    famous brands.
        Chair Coons. And you are one small segment of every
    industry that sells online?
        Mr. Lamar. The SHOP SAFE Coalition. If you can, you know,
    if you can make it, you can counterfeit it. And it represents
    all sectors of the economy.
        Chair Coons. Mr. Shapiro, any general observation about
    whether the scale of counterfeit activity online is increasing,
    stable, or decreasing?
        To the point my colleague made, how do we bend the curve--
    --
        Mr. Shapiro. Yes.
        Chair Coons [continuing]. Without killing what is one of
    the most popular, and efficient, and--I mean, if it weren't for
    Amazon, my household would cease to function. A truck pulls up
    every day and----
        Senator Tillis. And I'd have a lot----
        Chair Coons [continuing]. Disgorges more profits.
        Senator Tillis [continuing]. More money in my bank account.
        [Laughter.]
        Mr. Shapiro. Yes, it is growing. I mentioned in my
    testimony that year over year, our counterfeits have increased.
    Our detections on behalf of our customers, they're up 1,003
    percent--excuse me, 103 percent. I said 100 percent. But it's
    about 103 percent growth over 1 year. It is growing at a
    substantial rate, without question.
        Chair Coons. Let me conclude this round by just saying, and
    then defer to Senator Tillis, I hear across all four of you
    that cooperation and collaboration between platforms and brands
    is critical.
        Our proposed legislation shifts the incentives in a way
    that tries to come up with a liability framework that is common
    across brick and mortar and online platforms. I recognize
    differences of opinion about whether it underperforms or over
    performs. I look forward to active engagement as we move
    forward. Senator Tillis.
        Senator Tillis. Yes. Mr. Shapiro, I was actually going to
    follow up along the same lines that Senator Coons did.
        I think--you know, it's amazing. I bought a counterfeit
    good. The minute I opened the box, I threw it away. It turned
    out to be like a Dremel ripoff, but it looked like something
    that was going to suit the task that I had for the weekend.
        My daughter thought she bought a pair of Nikes that looked
    like crap when she opened up the box. It took her forever to
    get a refund.
        Your mother [points to Professor Kammel].
        I get, because of the sheer volume of transactions, it
    looks pretty small. But it's touched more than half of probably
    the consumers in the United States today. So it's a problem
    that touches all of us.
        It's bad enough when you're ripping off intellectual
    property. It's worse when you get into the health and safety
    factors. We've got to--we've got to do something to fix it. So
    I'm going to move into like a debate round here, which I do
    from time to time. That's another reason why I love this
    Committee.
        Number one, is there any jurisdiction that's gotten this
    right? Should we just be filling in the blanks by saying do
    just what--fill in the blank--country has done? Are there any
    emerging best practices out there that we should follow? Or the
    converse, is there an overreach that's been very, very
    disruptive to your members, CCIA members?
        I mean, who's getting it right? Who's gotten it wrong, and
    what do we need to learn from it? And we'll start with you,
    Professor Kammel.
        Professor Kammel. Thanks for the question. So in my
    perspective, so far no one has it exactly right. I think a lot
    of different areas are grappling with this----
        Senator Tillis. Has anybody gotten it kind of wrong----
        Professor Kammel [continuing]. Similar issue.
        Senator Tillis [continuing]. Mr. Schruers?
        Mr. Schruers. Well, I think what I would say is the
    approach that we have had thus far is as close to getting
    things right as we can see. And the fact of the matter is that
    the thriving e-commerce sector is located in the United States,
    and that's not an accident.
        And it's quite possible that a ill-considered policy
    decision could dry up that marketplace. Right? And that means
    impacting not only U.S. businesses, but all the small
    businesses----
        Senator Tillis. Exactly. And nobody----
        Mr. Schruers [continuing]. That rely on them.
        Senator Tillis [continuing]. Wants that to happen.
        Mr. Schruers. Right.
        Senator Tillis. Mr. Shapiro, the business that you're
    engaged in, you made a very important point that a part of the
    way that you're able to identify potential infringements is
    because proprietary data is shared with you all, that you use
    in order to crawl--crawl the internet, find potential
    suspicious offerings.
        Mr. Shapiro. Correct.
        Senator Tillis. And how long has it been in business?
        Mr. Shapiro. We've been operating since 2014.
        Senator Tillis. So with the fundamental technology absent,
    the data that your customers, 1,200 or so customers are willing
    to share with you, is that the only difference between the
    analytics you can do and the analytics that most of these
    platforms should be doing anyway?
        Mr. Shapiro. Well, I would--I came from a platform. So I
    know there's----
        Senator Tillis. Yes----
        Mr. Shapiro [continuing]. Technology there.
        Senator Tillis. That's why I was----
        Mr. Shapiro. I know that they're doing things every single
    day. I'm assuming it's a lot better since I left 6 years ago. I
    can tell you ours is a lot better today than it was 6 years
    ago. So certainly, the technology is allowing us to find
    things.
        Here's the challenge. There are--I've been at this thing
    for 13 years. Sometimes when we have a new customer sign up and
    I look at what they just--what we're going to protect, I look
    at it and go, ``Are you kidding me? They're counterfeiting
    that?''
        Most people who work for platforms don't have a very big
    brand breadth of knowledge. And so if you've never seen this
    pen before, you may never know that it's actually a brand.
    Right? So it's a challenge for platforms to think about how to
    protect that when they didn't know it was a brand. And you
    might argue someone in the company might know it's a brand, but
    not everybody knows it's a brand.
        So for us, when brands hire us and share that intimate
    intellectual property knowledge, we can deploy all sorts of
    technology from logo recognition, image recognition, image
    fingerprinting, machine learning. And we take those tools, now
    that we have that knowledge, and we're able to scale at a very
    high speed of actually finding and removing.
        And with our partnership with big platforms like Amazon,
    eBay, Alibaba, Facebook, Instagram, Twitter, we're able to take
    those down in hours. Right? That's how we help brands.
        Senator Tillis. Why wouldn't the industry be naturally
    incented to develop the reputation of being the one platform
    that doesn't really allow much counterfeit to get through?
        In other words, why wouldn't Amazon just own this space by
    saying, ``Don't believe any of the upstarts because we spend
    billions of dollars a year identifying counterfeit, potentially
    counterfeit transactions, and we've got the seal of approval.''
    Why isn't the industry already doing that, or are they and they
    just haven't caught up yet?
        Mr. Shapiro. Well, I think they are doing it for the brands
    in which they probably know, and some of the things they don't
    know they can't do. Right?
        Senator Tillis. I know. But it is--I'm going to finish so
    Senator Hirono can go to another line of questioning.
        But guys, we are talking about the titans of technology. We
    are talking about people who have been proud to identify
    through analytics, anticipating your next purchase before you
    even make the decision to do it.
        So seriously, we can't figure out a way to take the edge
    off of some of this problem. Not all of it. I mean, I can give
    you countless examples of data analytics where--and let me just
    back up.
        I'm not going to--I came from the high-tech sector. I
    worked in artificial intelligence in the late 1980s. It was a
    lot less smart back then, but it was still artificial
    intelligence.
        It's just remarkable to me--even when I get into this
    discussion about notice and take down of creators' content--
    guys, this has to be a part of your business model. Amazon
    didn't exist until it became an online book retailer. Now, it's
    just an enormously important, consequential American business.
    But you've got to take care of some of the ill effects of the
    very model that made you a billionaire, Mr. Bezos.
        So, I mean, a part of what I'd like to see here are some
    industry-led solutions. Mr. Schruers, let me tell you, I don't
    like doing heavy regulation. I don't even like regulations.
    I've probably been responsible for repealing more regulations
    than I've ever voted for in my 16, 17 years in public office.
        But the industry needs to find a role to play here. And it
    can't be that let's wait for the INFORM Act, and then maybe
    we'll come back with feedback on the next tranche if it's not
    safer.
        We need industry-led solutions in collaboration here,
    because I do believe most of the people--all the people
    represented at this table are good people. But we've got bad
    people, particularly the Communist Party of China, who is
    taking advantage of our lack of progress in this space. And
    it's costing us economically. And I actually think it's costing
    us in terms of health and safety.
        But you have my commitment. My door is wide open. Let's
    come up with the leanest, most effective approach to protect
    consumers and hold what I think the historic counterfeiter, is
    China, accountable. Thank you, Mr. Chair.
        Chair Coons. Thank you, Senator Tillis. Senator Hirono.
        Senator Hirono. Thank you. So this is yet again a very,
    very interesting situation. So I am trying to grasp the need
    for regulation and what that would look like versus the how
    we're going to enforce such legislation.
        So for Mr. Schruers, I know you oppose this legislation, at
    least in his current form. And as I understand, the previous
    versions of this bill included a mechanism to hold accountable
    brands that abuse the process by filing multiple false
    infringement claims. Can you speak a little more about those
    provisions and whether you would support something like that?
        Mr. Schruers. So thank you for that. The previous version
    of the bill in previous years did acknowledge the fact that
    we've seen in other contexts, that when you create a mechanism
    to suppress information online----
        Senator Hirono. Mm-hmm.
        Mr. Schruers [continuing]. And there is no accountability
    for misuse of that mechanism, it gets abused.
        Senator Hirono. Mm-hmm.
        Mr. Schruers. And right now, SHOP SAFE has no
    accountability mechanism for misuse of its notice provision,
    and that is a recipe for disaster.
        We've seen in other contexts, in here, in Europe, that
    these mechanisms get misused both by nominally good actors who
    just don't know what they're doing and bad actors who want to
    suppress the information that they're complaining about.
        And here, you could easily imagine competitors filing
    notices about their competitors in a hope to knock them
    offline. And we don't----
        Senator Hirono. Yes.
        Mr. Schruers [continuing]. Want to see that happening. We
    want to have an accountability mechanism in any kind of system
    like this.
        Senator Hirono. So what kind of accountability system would
    you suggest----
        Mr. Schruers. Well----
        Senator Hirono [continuing]. In the SHOP SAFE Act?
        Mr. Schruers. Right. So for starters, we want to ensure
    that brands and platforms are cooperating hand in glove and
    working together, sharing the information that's needed to
    eliminate problematic transactions.
        And that's everything from the who is the licensed
    manufacturer to what are common product configurations that is
    Mr. Shapiro is describing, or it's often non-public
    information. And so knowing we don't put the stripes on our
    product in this fashion is valuable information that platforms
    often simply can't get.
        And unfortunately, the bill actually affirmatively
    discourages inter-platform brand collaboration----
        Senator Hirono. Mm-hmm.
        Mr. Schruers [continuing]. By saying you cannot have a
    mechanism that requires brands to participate. And obviously,
    the how we structure that can vary, but what we don't want to
    do is undermine existing brand platform collaboration that's
    going on today.
        Senator Hirono. Can any of the rest of the panelists talk
    about the concern about collaborating among brands so that we
    can get to one of the concerns that Mr. Schruers has?
        Mr. Lamar. I think if SHOP SAFE were to become law, I think
    you would still have very, very robust brand platform
    collaboration and cooperation--that's been going on for a
    number of years, that will continue to go on regardless of the
    shifting of the liabilities. Because it's in the brand's own
    interest to continue to make sure that their platform partners
    are educated.
        At the same time, the platforms need to avail themselves of
    the public information that's out there. For example,
    trademarks are filed with the Patent and Trademark Office,
    which is what the legislation talks about.
        So, you know, relying on a U.S. Government body that is the
    central repository of trademarks in the United States, I don't
    think is a difficult ask and certainly something that platforms
    with their incredible technological prowess, I think, would be
    able to do.
        I think that the key thing and--you know, we keep talking
    about should we allow INFORM more time to work, INFORM's been
    around for 100 days. The beautiful part about the internet is
    we already know right now whether INFORM is working and bending
    the curve. And clearly it's not. I mean, I think Mr. Shapiro
    gave some numbers that have already suggested that that's not
    the case.
        And, you know, what we, I think, probably need to ask
    ourselves the question, you know, what is an acceptable level
    of counterfeits? What's an acceptable level of dangerous
    counterfeits? How many more people do we want to see injured
    before we are able to take action? And I think the answer all
    of us would say is none.
        We have an opportunity to change the dynamic. Right now,
    we're at a reactive process. We are waiting for bad stuff to
    happen and hoping the brands can discover the bad things before
    the consumers get their hands on them. That's literally the
    mechanism that we have right now. We have to change that.
    That's not working. It hasn't worked for 20 years. It's not
    going to work over the next 20 years.
        SHOP SAFE, I think, is a very, very reasonable approach to
    try and change the dynamic to bend that curve. And, you know,
    we look forward to working to see it enacted or, you know,
    modified if necessary to----
        Senator Hirono. So the way that SHOP SAFE would change that
    dynamic is by placing the burden, some level of burden, on
    these e-platforms?
        Mr. Lamar. Correct. A level of burden on e-platforms----
        Senator Hirono. Yes.
        Mr. Lamar [continuing]. To make sure the dangerous products
    don't get on the platforms and marketed.
        Senator Hirono. Well, I'm for that.
        [Laughter.]
        Senator Hirono. Thank you.
        Chair Coons. And let me just make a brief comment and then
    turn to my Ranking Member for any concluding comments.
        There is a campaign underway now in partnership between the
    USPTO and the National Crime Prevention Council. It's called
    the Go for Real campaign, which is trying to protect trademarks
    and recognize the scale of it. And their comment, in launching
    the next phase of this campaign, was that ``the sale of
    counterfeit products is a $2 trillion criminal enterprise that
    affects every industry. Causes fires, skin rashes, and even
    death.'' And international organized criminals use counterfeits
    to fund illegal activities like gang violence, child labor,
    human trafficking.
        We can debate whether that scope and scale, that number is
    accurate. But one of the things Mr. Lamar laid out was that
    many of the products coming from a wide range of countries, but
    in particular the PRC, that are faulty, that don't perform the
    way branded products would, but that actually take advantage of
    forced labor, sweatshops, and that are laced with harmful
    content, are getting into American households through an
    intersection between brands and online platforms that is not
    yet as tightly interwoven as we would like it to be.
        It's exceptionally rare to go to a mall, walk into a DICK's
    Sporting Goods, and buy a bicycle helmet that is fake and that
    doesn't actually protect you. That almost never happens.
        We want to figure out a way that doesn't crush innovation,
    that doesn't shut down the American role in online innovation,
    but that also realigns some of the incentives in a way that is
    clear, balanced, and fair. And that provides defensible,
    articulated, safe harbor standards that are in fact safe
    harbors that are not overbroad, that are not unreasonable.
        But I was grateful for the articulation of his posture by
    my colleague, Senator Tillis. He's not a fan of regulation. I'm
    a Democrat. We're typically fans of regulation. In this space,
    I want to make sure that we are not overregulating, but that we
    are protecting consumers.
        Both of our households have experienced purchasing
    counterfeit goods through online platforms. My hunch is if we
    surveyed every Senator, we'd probably find that a significant
    majority of Senators, their own families, have purchased
    defective goods.
        The question is, as you put it, Mr. Lamar, how much of this
    is acceptable--an acceptable tradeoff for the remarkable
    convenience, breadth, and affordability of product offerings
    that online platforms provide?
        So with that, I want to say we conducted this as a hearing
    with genuine interest in your input, both critical and
    supportive. And I'll read before we conclude a list of the
    different organizations that have also offered input in
    writing, in advance of this hearing. But before I do so, I want
    to invite my Ranking Member to make any concluding comments.
    Senator Tillis.
        Senator Tillis. Yes, I'll be very brief. I don't think
    we're as far apart as the--and really, I don't think we're that
    far apart even based on the face of the discussion here. It's
    all in the details.
        And anytime you get into something like this, you could
    overreach. We don't want to overreach. But for anybody to take
    the position it isn't broke or INFORM may fix it in the face of
    the growing numbers and the growing thread, it just doesn't
    seem rational to me.
        So the reason that I continue to use the ``get on the''--
    ``get to the table so that you're not on the table'' in so many
    of these intellectual property discussions is that I think the
    sweet spot is usually somewhere in the middle. You don't want
    to slow down, and you don't want to hamper our country's
    dominance in so many areas of innovation.
        And I mean, we're the innovators in online retailing back
    in the day, now it seems old. We want to stay ahead of it, and
    the only way that we do stay ahead of it is to stay ahead of
    these threats. And the only way that we're going to make
    progress is to have everybody at the table to inform us of
    maybe some of the unintended consequences if we go too far. But
    then, maybe also to inform the industry of the real
    consequences if we don't go far enough.
        So this is an iterative process. We're going to continue to
    get people to work together in hearings and in work groups. And
    we hope that everyone--thanks to the witnesses today who
    participated and those who are watching.
        But I invite everybody on either side of this equation to
    come work with an honest commitment to improving the situation.
    The status quo is unacceptable. The status quo is going to get
    worse. We've got to sit here and do something about it. Thank
    you, Mr. Chair.
        Chair Coons. Thank you, Senator Tillis. And I would welcome
    more input, and we, in particular, need and would value
    specific and concrete input about how to improve this
    legislation.
        Before we conclude, I'll submit for the record without
    objection seven letters we've received from a wide range of
    stakeholders, both in opposition to the legislation and in
    support of it, from the PASS Coalition, from Joy Woodruff of
    Sound of Tri-State--I think that's a Delaware concern--the
    Association of Home Appliance Manufacturers, the Alliance for
    Safe Online Pharmacies, the Vehicle Suppliers Association, the
    Personal Care Products Council, and the National Association of
    Manufacturers.
        [The information appears as submissions for the record.]
        I'd like to thank my colleagues who joined us today and
    asked questions. I'd like to once again thank Ranking Member
    Tillis and his staff. This is our fifth IP Subcommittee hearing
    of this year. It says, I think, one of the most active and
    purposeful Subcommittees in the entire Senate.
        I think we've reviewed the fact that the rapid growth of
    counterfeiting on e-commerce platforms, which matches the very
    rapid growth in online commerce, raises the challenge of harms
    of counterfeiting, harms to brands, harms to consumers. And
    that that precipitated our discussion about how the current
    liability framework does not adequately address the situation.
        We do not have a final solution yet, or a path forward that
    we can all embrace. But I think SHOP SAFE is moving us in a
    good direction, and I look forward to more specific and
    concrete input from today's witnesses, and the other
    organizations I referenced.
        If any Member wants to submit a question for the record for
    the witnesses, they must do so by a week from today, by October
    10th by 5 p.m. Let me thank, again, our witnesses for
    participating in everyone who watched here and online. With
    that, today's hearing is adjourned.
        [Whereupon, at 3:37 p.m., the hearing was adjourned.]
        [Additional material submitted for the record follows.]

                                A P P E N D I X

    Submitted by Chair Coons:

      Alliance for Automotive Innovation, et al., letter..............    93

      Alliance for Safe Online Pharmacies (ASOP Global), letter.......    96

      Association of Home Appliance Manufacturers (AHAM), letter......    98

      Communications Cable & Connectivity Association (CCCA), news
        release.......................................................   100

      Council for Innovation Promotion (C4IP), letter.................   102

      Footwear Distributors & Retailers of America (FDRA), letter.....   104

      Intellectual Property Owners Association (IPO), letter..........   106

      MEMA. The Vehicle Suppliers Association, letter.................   107

      National Association of Manufacturers (NAM), letter.............   108

      Personal Care Products Council (PCPC), letter...................   110

      Protect America's Small Sellers Coalition (PASS Coalition),
        letter........................................................   111

      Sound of Tri-State, letter......................................   113

      Transnational Alliance to Combat Illicit Trade (TRACIT), letter.   115

    Submitted by Ranking Member Tillis:

      Alliance for Safe Online Pharmacies (ASOP Global), letter.......    96

      Association of Home Appliance Manufacturers (AHAM), letter......    98

      Council for Innovation Promotion (C4IP), letter.................   102

      Intellectual Property Owners Association (IPO), letter..........   106

      MEMA. The Vehicle Suppliers Association, letter.................   107

      National Association of Manufacturers (NAM), letter.............   108

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