Judiciary
HomepageThe International Trademark Association (INTA) (formerly known as the United States Trademark Association), appreciates and welcomes the opportunity to submit a statement in support of H.R. 2511, the "Anticounterfeiting Consumer Protection Act of 1995". INTA believes strongly that this legislation represents a step forward in insuring that owners of trademarks and the public are protected from the dangers associated with counterfeit goods.
The "Trademark Counterfeiting Act of 1984" has been unable to completely stem the tide of counterfeit goods moving into and within the United States. According to the October 25, 1993 issue of Forbes magazine, counterfeiting had grown to become a $200 billion worldwide enterprise.
It is clear that counterfeiting has a devastating impact on our economy. [The U.S. auto industry alone, said it would employ another 210,000 people if it could manage to put counterfeit parts suppliers out of business.]
More often than not, counterfeit goods are poorly constructed and are unable to perform the functions for which they were designed. They may even pose a risk to consumers' health and safety. Two recent examples of counterfeit goods with the potential to cause harm are:
Counterfeit Louis Vuitton handbags lined with heroine (as cited by Congressman Goodlatte); and
The investigation by the FDA into the distribution of counterfeit baby formula.
To help put a stop to counterfeiting schemes, a number of proposed amendments contained in H.R. 2511 strengthen the power of federal law enforcement. Counterfeiters will pay greater fines and spend more time in jail -- the greatest deterrent against future acts of counterfeiting. The bill also recognizes that the ills of counterfeiting extend far beyond the borders of the United States.
While counterfeiters get richer and richer, U.S. companies are losing billions of dollars as a result of counterfeiting. To help trademark owners recover their losses, H.R. 2511 provides for increased civil penalties and introduces the concept of statutory damages. These provisions will help put a dent in the pocketbooks of counterfeiters who may contemplate setting up shop again some time in the future.
INTA urges the Subcommittee to report out the bill as promptly as possible. The Association looks forward to continuing to work with members of the panel and its staff in assuring passage of the measure.
Mr. Chairman, the International Trademark Association (INTA) (formerly known as the United States Trademark Association), appreciates and welcomes the opportunity to submit a statement in support of H.R. 2511, the "Anticounterfeiting Consumer Protection Act of 1995." INTA believes strongly that this legislation represents a step forward in ensuring that owners of trademarks and the public are protected from the dangers associated with counterfeit goods.
My name is Catherine Simmons-Gill, and I presently serve as President of INTA. I am employed by INTA member General Media International as general counsel. Like all the officers, board members, committee chairpersons, and committee members of the Association, I serve on a voluntary basis.
INTA is a 117-year-old not-for-profit membership organization. Since its founding in 1878, its membership has grown from twelve New York based manufacturers to approximately 3,000 members that are drawn from across the United States, and from 110 countries.
Membership in INTA is open to trademark owners and to those who serve trademark owners. Its members are corporations, advertising agencies, professional and trade associations, and law firms. INTA's membership crosses all industry lines, spanning a broad range of manufacturing, retail and service operations. Members include both small and large businesses who have been both plaintiffs and defendants in disputes involving trademark rights, and all sizes of general practice and intellectual property law firms. What this diverse group has in common is a shared interest in trademarks, and a recognition of the importance of trademarks to their owners and to consumers.
HISTORY
Since the Lanham Act was passed in 1946, trademark counterfeiting has grown tremendously. This growth reflects consumers' increased desire for brand name products, the ability of counterfeiters to adapt to trends in the public's appetite, and the enormous profits that can be
Founded in 1878 as The United States Trademark Association
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made from the sale of counterfeit goods. The inability to deter counterfeiters effectively, has enabled them to develop sophisticated and often multinational networks of manufacturing and distribution.
The "Trademark Counterfeiting Act of 1984" was a move in the right direction in an attempt to stem the manufacture, importation, and distribution of counterfeit goods in the United States. It represented Congress' initial efforts to protect American businesses and consumers against counterfeiting. Federal prosecutors and trademark owners now have at their disposal both civil and criminal remedies that make enforcement against counterfeiting more effective. The Act:
Created Sec. 2320 of the U.S. Criminal Code, which imposes severe penalties for intentional trafficking in counterfeit goods and services.
Amended Sec. 34 of the Lanham Act to provide for ex parte seizures. The Act allows trademark owners bringing a civil suit to obtain a court order to seize counterfeit goods and related business records without notice to defendant.
Amended the Lanham Act to provide enhanced civil penalties for trademark counterfeiting. A successful plaintiff in an action for counterfeiting ordinarily is entitled to recover treble damages and court costs.
INTA supported the introduction of the Anticounterfeiting Act of 1984 and applauded its passage. As a result of the provisions contained in the Act, trademark owners have greater protection against unlicensed uses and the public has greater assurance that the goods they purchase are genuine.
PROBLEMS OF TODAY
Unfortunately, the "Trademark Counterfeiting Act of 1984" has been unable to completely stem the tide of counterfeit goods moving into and within the United States. In 1988, the International Trade Commission estimated that, at a minimum, counterfeiting had become a $60 billion worldwide enterprise. More recent estimates place the number as high as $200 billion (see Forbes, 10/25/93, p. 170). In addition, countless American jobs are lost as a result of counterfeit goods. The U.S. auto industry alone, estimated it could employ another 210,000 people if it could manage to put counterfeit parts suppliers out of business (Forbes, p. 170).
The impact of counterfeit goods on trademark owners is overwhelming. A trademark serves to distinguish one's business products from all the others used in commerce and represents an investment in both dollars and time. To the consumer, a trademark symbolizes quality and characterizes confidence in the product.
For many companies, their trademark is their most valuable asset. In a 1994 study published in Financial World, for example, the "Coca-Cola"- mark was valued at $35.9 billion; the
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"Kodak" mark at $10 billion; and the "Microsoft" mark at $9.8 billion. These numbers demonstrate the major importance of trademarks to a healthy and growing economy.
Counterfeiting, on the other hand, has a devastating impact on our economy. Lost sales revenues, jobs, taxes, and customs duties, along with the significant cost of enforcement against counterfeiting, contribute to an exponential increase in the losses sustained by the U.S. economy.
Counterfeit goods also have the ability to destroy the reputation and good will associated with the marks of legitimate owners. Gradually the public begins to lose confidence and respect for reputable companies due to the appearance of counterfeits in the marketplace. More often than not, these goods are poorly constructed and are unable to perform the functions for which they were designed. They can even pose a risk to consumers' health and safety.
Mr. Chairman, in the past members of Congress have cited several instances where counterfeit goods have caused, or have had the potential to cause, loss of life and/or injury. In his statement of October 19, 1995, Congressman Goodlatte mentioned a very troubling incident involving counterfeit Louis Vuitton 8 handbags that were lined with heroine.
A second illustration involves metallic fasteners, which connect mechanical parts in automobiles, armored tanks, aircraft, the space shuttle, and industrial equipment such as above ground oil tanks and nuclear power plants. Counterfeit fasteners made in the United States and overseas continue to cause serious accidents involving vehicles and machinery. The "Fastener Quality Act of 1990" (P.L. 101-592) was intended to curb the production, sale, and importation of defective counterfeit fasteners by imposing civil and criminal penalties on those who dealt illegally in these materials. Manufacturers are also required under the law to register with the government a particular designation or mark for use on its product as a means to identify the company responsible for the manufacture of defective parts.
Unfortunately, regulations for the "Fastener Quality Act of 1990" have never been implemented and the potential for serious injury continues to grow. In 1992, the United States Department of Transportation (DOT) investigated 219 cases involving counterfeit fasteners, and related equipment such as brakes, wing flaps, turbine engines, and spacer seals. Defective counterfeit fasteners for example, have the potential to cause explosions and lead to the shut down of airplane engines in mid-air. One of the most serious cases investigated by the DOT involved a raid on a California based supplier of airplane parts. There, federal law enforcement officers were searching for alleged faulty counterfeit fasteners that were destined to be used in Boeing 747-400's, passenger jets that carry thousands of passengers all over the world, everyday of the year (Aviation Week and Space Technology, 5/4/92, p. 18).
A final example of the physical harm caused by counterfeit goods is the on-going investigation by the Food and Drug Administration (FDA) into the sale and distribution of counterfeit baby formula, as reported by the New York Times on September 6, 1995. In February, 1995
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officials seized 45,000 pounds of counterfeit baby formula in the State of California. The probe has since expanded into eight states and continues to uncover potential health threats. As a result of imitation baby formula, FDA investigators believe some infants may suffer allergic reactions, or become severely malnourished. When counterfeiting affects our children, truly the most innocent of consumers, we must redouble our efforts to ensure their safety.
PROVISIONS CONTAINED IN H.R. 2511
In order to put a stop to counterfeiting schemes, a number of the proposed amendments contained in H.R. 2511 strengthen the power of federal law enforcement. For example, the bill makes trafficking in counterfeit goods and services "predicate acts" for purposes of the Racketeer Influenced and Corrupt Organization Act (RICO). As a result, counterfeiters will pay greater fines and spend more time in jail -- the greatest deterrent against future acts of counterfeiting. Counterfeiters will have less opportunity and less capital in which to start another criminal enterprise. In addition, federal law enforcement will be permitted to seize nonmonetary assets, preventing counterfeiters from continuing to practice their nefarious activities. Mr. Chairman, this provision should help put many trademark counterfeiters out of business permanently.
H.R. 2511 increases the power of federal law enforcement in another vital area. The bill clarifies that, in addition to U.S. Marshals and state and local law enforcement officers, any federal law enforcement officer (including agents from the Federal Bureau of Investigation, Secret Service, and Customs Service) may accompany civil plaintiffs in the ex parte seizure of counterfeit trademarked goods. This provision will allow for swifter execution of ex parte seizure orders issued by the court, since civil plaintiffs will have more of the federal government's resources at their disposal.
To ensure that Congress is aware of the level of effort being undertaken by federal law enforcement to thwart trademark counterfeiters around the nation, H.R. 2511 requires that the U.S. Attorney General obtain current information concerning counterfeiting cases from U.S Attorney's offices throughout the United States. This information would include statistics such as: the number of open investigations; the number of cases referred by the United States Custom Service; the number of cases referred by other agencies; and the number and outcome of all prosecutions brought under sections 2318, 2319, and 2320 to title 18. The Attorney General would then be required to include this information in the yearly report submitted to Congress by the Department of Justice.
To help curb the introduction of imported counterfeit goods, the bill appropriately states that federal officers shall require such information on entry documentation as to allow for a determination regarding whether the imported merchandise bears a counterfeit trademark. The bill also eliminates the current provision in Customs law requiring the re-export of seized goods. Agents of the Custom Service would have the option to destroy the merchandise, thereby
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preventing further economic injury to U.S. companies and physical detriment to the consumer. Both provisions recognize that the ills of counterfeiting extend far beyond the borders of the United States.
In trademark counterfeiting cases, as in all other cases, the plaintiff has the burden of proving damages. Most often, the defendant is difficult to locate and has retained few, if any, business records. As a result, proof of damages is difficult, if not impossible. These so-called "fly-by-night" operations are mobile, with no permanent base, and utilize cheap equipment to make their products. Counterfeiters continue their enterprise because it is relatively inexpensive for them to do so, and very lucrative given their lack of overhead and marketing expenses, and in most cases, non-payment of taxes.
While the counterfeiters get richer and richer, U.S. companies are losing billions of dollars as a result of counterfeiting. To help businesses recover their losses, a section of H.R. 2511 states that trademark owners could opt for an award of statutory damages of up to $1,000,000 per mark. Another section of the bill provides for the imposition of additional civil penalties on persons implicated in counterfeiting. Not only do these increased civil penalties and statutory damages help trademark owners recover from financial damage, but they also help to put a dent in the pocketbooks of counterfeiters who may contemplate setting up shop again in the future.
Each one of these provisions, Mr. Chairman, demonstrates the willingness of Congress to take counterfeiting seriously and to direct more resources to fighting this chronic problem.
AMEND THE "TARIFF ACT OF 1930"
The provisions contained in the House version of the "Anticounterfeiting Consumer Protection Act of 1995" and those of the Senate's version (S.1136) attempt to achieve the same goals. However, there are particular sections of H.R. 2511 which inappropriately seek to amend the "Lanham Act". They are Section 6, the "Disposition of Merchandise Bearing Counterfeit American Trademark and Civil Penalties"; and Section 9, "Recordkeeping Requirements". INTA believes that the provisions in these sections are more analogous to the "Tariff Act of 1930", as recognized in the Senate's version.
As you know, Mr. Chairman, INTA does not support attempts to use the "Lanham Act" to accomplish non-trademark functions. INTA has consistently, throughout the "Lanham Act's" history, worked to keep the statute a purely trademark and related unfair competition law.
The "Tariff Act of 1930" was designed to account for the seizure, forfeiture, and disposition of merchandise bearing a counterfeit mark; as well as for reports concerning manifests and the unloading of vessels and vehicles (see 19 U.S.C.A 1431, 1484, 1526). Clearly, the provisions contained in Section 6 and Section 9 (the disposition of counterfeit merchandise, additional civil penalties for the importation of counterfeit goods, requirements for information on entry documentation to determine whether goods are counterfeit, and the disclosure of aircraft
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Guests are more appropriate to the "Tariff Act of 1930". They do not address rights in registration as intended by the "Lanham Act". Instead, these provisions refer to the procedures involved in monitoring illegal trade activities within the United States, in the nation's airports, and on our loading docks.
The seizure of vehicles also does not pertain to the registration of trademarks. Therefore, in addition to amending the "Tariff Act of 1930", INTA believes that the provision referring to the seizure of vehicles used by counterfeiters (see H.R. 2511, Section 5) would be a more suitable amendment to 49 U.S.C.A., App. 781, as identified in S.1136.
CONCLUSION
INTA believes that the "Anticounterfeiting Consumer Protection Act of 1995" is consistent with Congress' efforts to stamp out crime in whatever form it assumes. This legislation not only addresses the physical well-being of our citizens, but the health of our economy.
INTA urges the Subcommittee to report out the bill as promptly as possible. The Association looks forward to continuing to work with the members of the panel and its staff in assuring passage of the measure.