Transcripts For CSPAN Advocates 20240703

We bring you unsafe count of projects, from the judiciary subsidy of intellectual properties. You are watching live coverage on cspan 3. I would like to welcome the senator. This is the fifth hearing of the subcommittee of this year. Senator, union team continue to be great partners moving forward. Im setting the stage on the focus on the hearing. Online shopping has expanding dramatically. Has exploded in recent years. Last year, sales exceeded 1 trillion for the first time as millions and millions of americans turn to Online Platforms from ebay to amazon to find the brands they trust and prices they can 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 and modern online counterfeiting delivers products that look real, with listings featuring images that show the real product and fake reviews that make the knockoffs seem authentic. Online counterfeiting efforts are so successful, according to one recent report, two thirds of American Consumers surveyed had unknowingly bought a counterfeit product online last year. This is not just a matter of tricking consumers and spending their money on harmlessly fake products. As the cdp, warned earlier this year, fake goods can pose real dangers that for the health and safety of all americans at risk. Fake lithium batteries for example, batteries that power laptops, can explode or take fire. They caused 70 debts and 350,000 serious injuries. Counterfeiters are also targeting air wines, fake engine parts, demonstrated to increase the chances of a crash. Counterfeit escription drugs, so to consumers online, are best and effective and deadly to those who purchase them. If i bought a fake laptop at my local best buy on record, and it caught fire in my home, best buy would be liable for the harm to me and liable to the brand owner for chipping to trademark infringement. This framework for liability and so devises brickandmortar stores to thoroughly and proactively that the supply chains to keep counterfeit products out of consumers hands. That same counterfeit battery of online was met with a different library framework. The weight, for policing online counterfeit, principally on brands, not platforms. They have to plan a render game of walkable as they monitor of Online Marketplaces including counterfeit listings. They have a counterfeit problem and many have undertaken law efforts. But current efforts are neither effective nor sufficient because the problem hasnt gone away. It is dramatically increasing. That is why i was proud to reintroduce the shop s. A. F. E. Act last week with the senator, a bill that tries to 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 brickand mortar retailers have been subject to for decades. It requires brand owners to provide proper forms and a critical point of contact so that platforms can implement and articulate so to keep them out of consumers hands. Quickly removing counterfeit listings, terminating repeat counterfeiters and requiring accurate images of the products sold. Products that follow best practices will have a safe harbor from liability. Platforms taking genuine and good faith efforts to Cleanup Sites and should enjoy a liability shield. The reintroduction must be came after a fair amount of work. In the last hearing in 2019 2021, highlighted the rising anti counterfeiting. It is not my anticipation that the bill introduced is perfect or final, part of the hearing, both who support and oppose us to welcome input both critiques and contacts in an effort to try to sharpen and shape the bill into Something Worthy of enactment. Since senator first introduced us, we heard from stakeholders would be affected by the bill. I appreciate the efforts and the work that we have done to make changes to the bill based on the feedback that weve received so far. And i look forward to work with a broad range of stakeholders as we move this for this year. With my Ranking Members cooperation, we assembled the panel today, with a diverse range of use, i will introduce the minimum. The meeting Ranking Member tillis. Thank you. Thank you so much for having, thank you for the series of bring hearings for strengthening electoral Property Rights and addressing many of the challenges that we have in front of us. We have a lot of things wrong with the intellectual property system. And when we talk about counterfeit goods, its the worst of both worlds. Somebodys ripping off intellectual property. They are doing in a way that is very dangerous. Which is why im very glad that we are having this hearing, and taking concrete steps to address the problem. I cannot get out of my mind, i mentioned the story before. I am an avid mountain biking. Its the reason i got into politics. Accidentally. I wanted the Mountain Bike trail. Next thing i know im in the statehouse. But in this very room, just a few years ago, i have a specialized product. People have dependent upon your background, chevy or ford. Im a specialized consumer. I say specialized helmet clearly counterfeit, under the weight of about 180 foot person, jumping the foot off the ground. Somebody was had two serious accidents and a specialist settlement, it was not what it was supposed to do. It cracked but it did not prevent me from getting a concussion or having any serious injuries. So, i think that is just one example of several examples that we hear about. We hear about them in airplane parts, you see this in children, toys, et cetera. There is no question with this problem. I think the bill that we are going to have a hearing on today is a just first step. It is never going to end. We have the same problem that we have with general intellectual property theft. It is following on the back of the rights holder to find out who is ripping off the intellectual property. If you tell us, we are taking it down. The model does not work. With the scale and the number of transactions. I wish that it could. It simply does not work. I hope this hearing could give them some more, could give us additional information, to get the stakeholders together, so that we can give up a reasonable compromise. We do know that there are some consequences that we want to avoid. And that is why we are going through a very thoughtful process that we go through today. But i think the senator, i dont think the witnesses told them, one of the reasons why i like this cumbersome committee so much is that you dont really expect witnesses to go after each other because they are so part of our nature. Its more about how you weaves together a reasonable legislative fix, that addresses some of the concerns that exist on either side. In this hearing, i hope we get the productive feedback. I hope that those that are out there to kill this bill need to understand that i want you as a table to make it better. But if there is anyone out there that thinks that theyre going to slow this down, they probably need to think again. If all you are here to do and if all youre doing is you figure out how to stop this effort, you are not at the table that makes what you wanted. Lets Work Together and recognize the public safety. The intellectual property infringement challenges we have to deal with and come together and work with us. I appreciate that you are working together and i appreciate how frequently senator shows up for the subcommittee hearings. No matter what day it is on. Thank you for your persistent interest on the topics of the hearing. I appreciate the introduction on how briefly introduce the witness panel. We assemble the pounds talk about strategies for protecting American Families for son on online profit. The first witness is tyre campbell, the professor for education and outreach at Michigan State university. The center for anticounterfeiting and private protection, or a cap if im not perception. She has written extensively on legal issues pertaining to counterfeiting on ecommerce. Next we have daniel shapiro, senior vp at red point, the Service Business that helps brands Police Counterfeit goods offered for sale on Online Platforms and had a memorable weekend. Congratulations. Next is steve lamarr, president of the american footwear association, also a delorean. A trade association, representing more than 1000 brands in the foot willing. Industries, at the top of the cbp seizure list. And lastly hear from that shears, the president of the computer and industry association. The trade association representing many different Significant Players but in particular Online Platforms and concluding well known and friendly my home use platforms like amazon and ebay. So, after i swear in the witnesses, each of you will have five minutes to provide an Opening Statement to the committee, then we will proceed to questioning, each senator having five minutes and i will expect you will take three rounds given lots of things that we need to talk about. Please stand. Raise your right hand and repeat after me. Do you swear and affirm that the testimony you are about to give before the committee will be the truth of the whole truth and nothing but the truth so help you god. Thank you. Let the record reflect the business. You may proceed with your Opening Statement. The members of the subcommittee, thank you for inviting me to testify in front of you today on the shop s. A. F. E. Act. Protecting families from counterfeit. I am representing my self, and the reviews are my own. My work at the center engage with over 500 organizations in brand protection professionals on trademark counterfeiting. As a loosely Multidisciplinary Research teams, education and outreach to examine these issues from an academic but practicals perspectives. Companies of all sizes, in particular, Small Businesses, and has exploded in the last decade. Counterfeiters find success by using another company or trademarks on a product or package without prior authorization to sell a fake or dangerous good. They rely on the goodwill of the brand to make the illicit profit. Counterfeiters are tied to other criminal activities such as online fraud and organized crime. Many owners struggle to get platforms to respond, and many find the lacrimal effect occurring with more postings taking their place. They do not have a dedicated Brand Protection Team or department or have limited resources to protect trademarks online. According to the multitude of visionary research, on e Commerce Platform, there must be a meeting in time and space, the counterfeiters posting, and the eCommerce Platform. The most effective way to disrupt this is to remove the factor proactively before they ever reach the medium time and place on the platform. Although the legal liability in the brickandmortar spaces provides contributor liability for Service Providers such as flea markets or malls, when they havent taken the steps to disrupt the sale of counterfeits to consumers, we do not find the same parallel. The current state of the law arrest primarily on the Second Circuit case. Which no says they need to act if they have specific knowledge of the counterfeit posting. There is no proactive requirement of counterfeit postings or monitoring of the platforms for counterfeit even though they have the most control over the platforms they created. Brand owners and brand protection Service Providers taking down counterfeit postings but they cannot get at the root of the issue and are constantly chasing postings online. They will give basic transparency, listen to the seller, and the online transactions. Results of the 17 country consumer, 66 of consumers surveyed bought counterfeit unintentionally. 13. 4 experiences the negative Health Effects after using the negative products. 60 of the surveyed bought products on social media prop forms. Additionally, the consumer is do not see a clear mechanism on what to do when they discover a counterfeit. These findings on the engagement, across the industries, even product lines. The number one challenge relates to sellers online. On a personal note, despite working in the skill, my impact is on counterfeit goods. My mother who is the 72yearold retired Public School teacher was informed that a vitamin that she ordered on ecommerce form that allows Third Party Sellers have been taking it for several months. She did get a refund. The communication from the platform was confusing and she was given the runaround by Corporate Executives until finally fired on the wedding day. That was the last straw. And, others, that the risks of thirdparty sellers of counterfeit and that was not limited to one platform or product. We want to address the evergrowing sale of counterfeit goods to the shop s. A. F. E. Act and the support and collaboration between academia and other stakeholders. I look forward to your questions. Thank you. Mr. Shapiro . Thank you. Thank you the steamed members of the committee to be here today. A quick overview of redwing. We are a Technology Company that is helping making the internet safer for both brands and consumers. Use Ai Technology to detect and remove hundreds, if not thousands of markets around the world. I began working 13 years ago while working at ebay, working with some of the Worlds 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. This boom has attracted counterfeiters who exploit the platforms endangering consumer safety, tarnishing brand reputation, and causing considerable economic loss. Contrary to popular belief, online counterfeit is not restricted to electronic goods. Counterfeiters do not discriminate when selling safe fake products. They can target any brand regardless of size. We are talking about everything from baby products, cosmetics, automotive, fashion, and even industrial commitment wind turbines. Even in the context of backtoschool shopping, students and parents are vulnerable to counterfeit electronics, backpacks, clothing, footwear, these are essential for these upcoming academic years. These products may not be harmful but rather extremely poor quality which takes hard earned money out of families because we have to rebind these products before the end of the academic year. As a testament, read point, we witnessed over 1000 increase in these detected incidences for the brands in which we represent over the year 2022 and 2021. For reference, read point serves over 1200 brands which rely on the platform to combat online fraud. They 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 the clients. The statistics underscore the depth and challenge before us. The sophistication of online scares continue to evolve with fraudsters harnessing technologies creating websites, mastering social engineering, and the battle against the ever adapting threats resembles the wellknown game of lacrimal. As we go into the complexities of digital age, it is crucial to consider the existing response of Online Platforms, marketplaces, brands, legislative action, and Third Party Providers like what point. Are all of us aligned . Are we collaborating well enough to combat this greater evil . After all, the target is in fact the criminals that are exploiting the marketplaces and the consumers. Many Commerce Platforms have been ramping up the anticounterfeiting initiatives and recently. Recently knocking off. Scammers are looking to get you bigger audiences to sell to. Yearoveryear rapid growth of ecommerce users has a unique opportunity for bad actors to expand the operations and further challenge combating counterfeits, as a persistence due to the adaptability and persistence of criminal organizations. Brands regardless of their size find it challenging to address all of the infringing images of the intellectual property. To effectively combat online counterfeits, brands must prioritize and must invest and implement a clear online brand protection strategy. Not having an online brand protection strategy today has a grave consequence 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 Companies Business teams. However, when it comes to the fight against counterfeits, in our opinion, is collaboration. This is not an issue that can be sold to one stakeholder. Is a shared responsibility and needs a united front of Third Party Providers and legislative action to ensure a secure e commerce environment, moderation and expertise. And our response is greater than some of the parts. Our hope is that the legal system will continue to hold sellers liable for the counterfeit sale online. As they do for brickandmortar retailers. And we welcome ongoing dialogue in the Brand Protection Committee on legislation. To find the best practices to tackle the online counterfeiting problem. Thank you mr. Shapiro. Mr. Lamarr. Thank you. Ranking member tellis, members of the subcommittee. Nobody wants to purchase closers accessories that will sicken their kids. Destroying the environment or produced in sweatshops. But thats what happens when consumers purchase counterfeit fashion. Thats why this law is so important for congress to consider. The members of afa invest is to build a train and inspect supply chains to ensure that there accessories bought and worn by American Families is not only fashionable and affordable, but also ethically and sustainably sourced and made and are safe for consumers. This is an area of Continuous Improvement and each day we are looking for supply chains and implement increasingly complicated transparency, traceability, and product safety requirements to make sure that the accessories used by everybody in this room and everybody in this country are responsibly made. On top of the considerable investment in social and ethical compliance, u. S. Brands and retailers of all sizes spend considerable resources to police the marketplaces. Try through shady red sites, take on fraudulent ads and admission to grow the counterfeit problem and protect consumers. Country problems not only harness reputations and sales, but they also put numbers of customers and harms way that could sicken them or create other risks. Part of a broad industry coalition. The first sectors of the economy that has a reasonable arms of the growing danger brought on by counterfeit easily allowed into the front steps and into the living rooms. Headlining about the dangerous counterfeit airbags batteries in the descriptions, by counterfeits, everywhere. Apparel, footwear, accessories claims, and everywhere. As a commissioned a study of 47 counterfeit loads and other accessories. These are everyday items. We found that 17 of these products, just over 36 had dangerously high levels of poisonous materials like lead, asbestos, and arsenic. Not only did they fail safety rules but they make consumers ill if they had bought use them. Counterfeit skill is not an exaggeration. Counterfeiters have a dangerous view of the world. The entire Business Model is based on stealing somebody elses and division and hurting them in the process physically and mentally. They split workers, engaging in wage theft, hazardous waste, and using dangerous chemicals. When they lure folks into purchasing fake products, they expose consumers to financial scams. The fact that authentic scams invest so much, only widens the Profit Margins of counterfeiters , since they are often able to score cell without paying for any of the compliance that they are duping customers into believing that the has occurred. What happens to the profit of these illgotten gains, it becomes the capital for or gone gang. Protecting consumers, and american jobs, from counterfeits has been and should be a bipartisan issue. Like many, we celebrate the growth of the ecommerce environment and we cherish the opportunities the internet has created to interact with the industry and for our industry to thrive during the pandemic. With great opportunity comes great responsibility which is why uncle ben told spiderman that very quote. U. S. Law contains many guardrails, containing many sizes. Not selling counterfeit items. They do not have to visit every store across the country. Brands must monitor every platform out there. When brands found counterfeits, fake websites, fraudulent ads, promoting these websites. We must get those products and websites removed. As the platform moves at all, it could be weeks or months, all the time, allowing the counterfeiters to profit within days. And this is likely to a game of whackamole because counterfeiters are a wild bunch. Theyre constantly developing creative approaches to avoid detection. And it has been rapidly outpaced itself. They often note many thirdparty marketplaces can hide within that framework. Interests in some of the same platforms that end up hosting counterfeits are themselves pioneering amazing Technological Advancements to put up effective road blocks. Many of them talked about zero tolerance for counterfeits. A value thats commendable. Weve been hearing that for years when the epidemic has been allowed to flourish, while these actions are now insufficient. It is now time to update and create stronger things dependent it for the ecosystem and with what we have in a physical world. So they will do just that. Holding third party Online Platforms accountable to be incentivized to make these necessary changes. As they are easily achieving the steps, asking them for key pieces in implementing the measures for screening listings, before displaying the goods, denying the platforms, they will clean up their own sites and achieve the safe harbor from the legislations tough liability divisions, not provide safe harbor for dangerous fake goods. Thank you for inviting us to testify today, and i look forward to your questions. Thank you, mr. Lamar. Chairman kuehns, thank you for your time today. Im matt schruers, im president of the industry association. Cci has advocated on Technology Policy for over 50 years, and 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 safe goods, while engaging extensively with brand owners to identify and report to Law Enforcement counterfeit products. This is why ccia, many Online Marketplaces, and retailers jointly endorsed and supported the consumers act that was passed last year. This law has been in effect for less than 100 days. We should give time for informed to work, but before judging whether or not additional legislative interventions are required. Ccia has concerns about s2934 had, recently reintroduced shop safe act. This 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 the trademark owners are in the best position to accurately and efficiently identify counterfeit goods from authentic goods. But shop safe places major liabilities and burdens on sellers, 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 have cracked down on the bonus challenges. And the Public Notice requirements, actually burdens smallerrer retailers, more than large ones. In shifting these legal responsibilities through new liability rules, it is not going to prevent counterfeiting, but it would stifle legitimate commerce and innovation and reduce ongoing crosssector cooperation. Marketplaces and the vast majority of small sellers, operate legitimately. We should not place the compliance burdens on any size, but particularly not small and mediumsized businesses. These sellers lack the bandwidth and the resources to spend multiple days investigating the concerns from brands when the trademark owner is in possession of the information that will help them identify counterfeits. That definition turns on nonPublic Information about whether or not the goods was manufactured under license. The burdens of shop safe fall broadly. The scope of the statutes definition is expansive. Defying the Commerce Platform as far broader than marketplaces, encompassing virtually every online forum, where people could connect. And the bill presumes any such sight is liable for infringement and requires it to prove its innocence by mandating compliance with the requirements to escape what is effectively stripping the liability. The shop safe also employees an expansive definition of goods that implicates health and safety. That would encompass virtually every product in todays consumer households. Final lyric while the bill is framed as a safe harbor, it is, in fact, an unsafe harbor. It will flip on its head, the standard notions of liability in favor of a novel strict contributory scheme that are not accurately characterized as best practice. And 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 the unbalanced proposal that is not going to solve the problem that reports to address, but would place the substantial regulatory burdens on the Small Businesses, the ecommerce providers, and retailers. Ultimately we recommend that congress approach retail regulation in its totality. Brick and mortar, ecommerce, bodega, mom and pop stores, all the same should be regulated under the coherent model that applies to businesses equally. And in this we believe will provide a better path forward. I thank you for the invitation today. I thank you for your time, and i look forward to your questions. Thank you, thank you mr. Schruers. Let me open where we concluded there. You testified there is a difficult liability standard for brickandmortar stores verses Online Platforms. And by concluding and 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. And doesnt shop safe try to apply a similar liability standard online as already exists in brick and mortar or do i misunderstand . In my opinion it does attempt to do a similar contributory liability in the ecommerce space. In the brick and mortar space, and weve seen that through several cases starting back in 1992 with hard rock verses Concession Services before the seventh circuit, that people who were running flea markets or landlords, they were considered surface 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 verses ebay case, and a few other cases too is the court decided that that time, which again is about 13 years ago, that it was unreasonable for an eCommerce Platform to be able to look through their own platform to find these postings. And i think weve seen through the changes in Technology Particularly a. I. And Machine Learning that that has shifted. And it is no longer unreasonable for a platform to be able to see whats on its own platform, but also to vet proactively, sellers and those postings and images that are going up to make sure once something is posted that it is actually safe for the consumer to purchase. Mr. Lamar, one of the things that shop safe would do, one of the attempts at definitions for sort of best practices to define the safe harbor would be to have a standardized set of if you do these things. You would avoid any contributory liability. And your members would sell their products on all different platforms and different sizes that you have small, medium, very large companies, selling on the platforms of all different sizes. Now each of these platforms have different roles, different programs, different approaches to addressing the counterfeiting. Some laudable and very sophisticated engaged, some virtually not at all. And it would benefit the brand owners to have a standardized owner to say this is the kind of cooperation that you need to provide to platforms . Yeah, you hit the nail in the head, senator. Theres a lack of consistency about what exists. We actually created tools to kind of help people, our members, when you go to this platform, here is the thing to experience and the thing to experience, and it will be much better if there was a very clear, simple, federal guideline if you want to do business in this country. Here is the way that youll need to approach the u. S. Consumers 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. And you said shop safe. You have a number of criticisms, one that puts no new obligations on brands. What would you suggest in your view, one of the most important things we could do to achieve a better balance of responsibilities and liabilities online . Thanks for that. The bill as it stands indicates that information sharing should occur. But then it states its not necessary, effectively. If information about trademark is available online, which is effectively every trademark by virtue of the fact that all this information is available through the patent and Trademark Office website. And so the statute as it presently stands creates a null set. 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 is legitimate and whether or not thats been licensed. But its important to sort of step back and recognize that the trademark act currently defines counterfeit as products that will require the definition, whether or not the product has been manufactured under the real license. And that is information that only the brand owner will have. So having availability to that information would go a long way towards allowing the eCommerce Platform to implement the kinds of takedown requests that theyre getting. You said in the middle of all of this, the oceans of data that are going back between the brands and platforms and i think you said 35 million incidents a year. A day. Right. A day. And only today with modern technology and a. I. And incredibly Capable Technology that we can begin to examine and process and things like whether this image is a trademark of the actual product or it is something fake. And how would you strike the balance here between putting more obligations on holders and putting more obligations on platforms . Yeah, its a combination of a lot of challenges that are coming together today. Today and in marketplaces around the world, the former company that i work with and somewhere i read online recently that there is 1. 7 billion listings currently available. Amazon has probably tripled that. Probably adding close to a billion items a day at a conference i was at not too long ago in terms of suggesting that is how many listings. I certainly cant verify it. But thats what i heard. At that volume and the ability for brands to monitor that on their own is impossible. Today unless you deploy some level of technology, you cant get there. And with platforms today and that many listings on their sites, and with brands that are having two or three million, there are some big brands with a lot of skus. There probably isnt one person in the company that knows every product in which theyve made. And so when we deal with the Brand Protection Team in that particular brand, theyre often in that legal counsel. Very sophisticated in the world of i. P. , but they work in a company with a million spus, and if they have only been there for a year, they might not even know of the product previously. And what suggestions might you have for us on how to better balance the obligations . Yes. To answer your question, i think that there will have to be an investment from the brands to help and to share too much information with the platforms because there is a lot of trust with the platforms that if they told them they are intellectual properties. If theyre required to get into the granularity of how to make their products . Yes. That were making it under the license. But exactly all the schematics and the details. Yes. And that is what we have looked at for the manufacturers. Exactly. And that is how we work. They will share with us their i. P. We use that to crawl and find that product. And we keep that. We dont share that with the platform, but we will have that, right . So thats the first step of trying to solve this and it is a bit more comfortable level of sharing that i. P. And sort of trusting one another that we can do that together if we think about a good common place on how to do it. Thank you. I need to yield to my Ranking Members. Thank you, mr. Chair. And mr. Chair, i hope you dont take, or you didnt take my comments earlier about people that were opposed to the bill were talking today as being bad people. I just see a bad pattern of behavior that we need to fix. And i hear your comments about it. And lets just assume that they perform at 100 of their wildest expectations. Is the Problem Solved . Well, i think this problem will never be solved. It is an ongoing process. And it would have been the curve. To me, it just seems like it is indisputable that this is growing and the bad actors, we should have mentioned that in the opening comments. But look, theres a variety of strategic Economic Health and safety reasons on why we need to be attacking this. China being first among them. Ive seen far too many instances of the North Carolina based companies, where they have been victims of the counterfeit goods. Im not here to attack you. But im here because we are going to go to a second round, and im going to yield to senator blackburn here fairly quickly, so she can ask, and then ill come back around. But i find to find out more about the 35 million links a day, the methodology be used for that, what the trending is. I also want to understand a little bit more about the 17 country survey, i think professor camel, you may have mentioned that. Ill get back to the specific suggestions, but right now im going to defer to senator blackburn it if i may. Senator blackburn . Thank you, mr. Chairman. 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 doesnt matter if it is autoparts or ever aftermarket autoparts. It doesnt matter if it is guitars or clothing or shoes, baseballs, ink pens. Those are all items that have come to us, and they have been knocked off by a factory over in china. And then that brand name is grabbed, and that brand, this counterfeit merchandise is sold under that brand name. And mr. Shapiro, youve 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. Let me come to you, mr. Schruers. Senator tillis was talking about the impact of the informed act. So answer that in a more fulsome way. As we look at shop safe, should we wait for the informed act . And how far are we 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 in to other areas. So lets talk about the merits and the impact that the format could be or should be . And thank you for that. So we have had informed enforced for barely three months. We have yet to see that full effect. And retail is seasonal and you could spend some time collecting data before we could see its full impact and assess whether or not it is doing what we need it to do. But we know a lot of counterfeiters and bad actors online operates by obscuring information and, of course, inform creates greater transparency, encourages, compels platforms to collect, verify, and disclose information from highvolume sellers. It also creates a mechanism for individuals to report suspicious transactions. These mechanisms have barely been available to the public. We should give them time. I think we should also acknowledge that what is best practice is an evolving standard, right . From which we should determine by talking to the practitioners. We can see 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. And well, i think we need platforms to be more diligent in pulling things that they suspect are counterfeit. I think we should acknowledge there are millions of legitimate transactions online every day, and the vast, vast majority of platforms, ecommerce providers, 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. Online platforms dont want to be associated with these transactions anymore than brand owners want them to happen. These are bad experiences for consumers. Nobody wants to be associated with selling a dangerous good. The question is how do we get there . We need to get there through cooperation because if 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. And i was talking with someone in tennessee and they were talking about using etsy, and putting something they had created on etsy. And they were trying to get a patent on this, and they said my concern is im going to put it up, and then its going to be knocked off before i have the ability to actually commercialize on this. So how do we use the informed 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 theyre trying to move it into commercialization, but theyre afraid of what will happen if they go online . I think thats a great question. And obviously different platforms provide different services, so i cant speak to anyone specific platform. But i think it bearers noting that these platforms are often the first vehicle by which small sellers and entrepreneurs like this constituent youre referring to are able to reach a worldwide audience. But for access to a platform that allows them to ship across the country and around the world, they simply wouldnt have the ability to scale beyond their community. So we dont want to impose obligations on either the platform or these individuals that cannot be sustained and that might have the affect of driving someone like this small entrepreneur out of the marketplace. Yes. And thank you for that. I see my time has expired. Thank you. Thank you, senator blackburn. Senator verona. Having just returned. And im happy to ask a question if you would like for a moment. Its okay. Thank you very much. So this is for mr. Camel, am i pronouncing your name correctly . So this has to do with some definition. So your Research Center has a website that defines the action of counterfeiting generally as, and i quote, to forge, copy, or shape something without a right to do so and without the purpose of deceiving and defrauding. The federal definition different, but its serious, meaning one that is not genuine or authentic. So as we deal with this issue of counterfeiting, do we need to have better definition of what constitutes counterfeiting . Were 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. Thats not counterfeiting, is it . Thats 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 trademark counterfeiting act about this various mark. We believe that is what legally defines what a counterfeit mark is. And 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 in the bill is very broad, isnt it . Have you had a chance to review the bill . I have, yes. Youre referring to the health and safety provision . Yes. And doesnt the bill pretty much refer to those kinds of items that compromise or endanger the health and safety, thats what were getting at. But the 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 compromising or whatever the health and safety . Thank you for that question. So my understanding is that it implicates a counterfeit good, which in, itself, would impact the health and safety. As we know and as several of my colleagues here have testified. We know goods, if theyre legitimate, may not implicate the health and safety. If theyre counterfeit, they can. A lot of people are often surprised by that. I mean we get asked that question, you know, whats the harm in purchasing this counterfeit, you know, there is nothing wrong with it. We know from a lot of testing, for example, that there can be lead or poisonous materials that were made in these products. So from my perspective, the fact that it says a good that implicates the health and safety would encompass a counterfeit that can endanger a Persons Health and safety. The definition is really broad. Thats why i have some concerns about it. Just about anything can compromise or endanger someones health and safety. You testified that over a third closed in a case that contained dangerous substances. Did you get into what kind of substances that these are . Thank you for the question. They contained high levels of dangerous chemicals like cadmium and lead. And they also had other product safety failures that have been associated with the injuries. The but the buttons and draw strings that are coming on. They go to Great Lengths to make sure they meet those requirements. Counterfeiters that are not going through in addition to a health and safety issue, although they do an obvious one. But they get a benefit because they are selling something that is roughly the same price even though they dont have to go through the compliance and testing. And which will lead me to a question of those counterfeit products. Are they associated with certain countries that do not have to abide by the health and safety consideration . And many of them will come from china and a lot of those same health and safety considerations will exist as well as we would lead them in china to educate the factors on that as well. And they are not putting anyone first in the other countries as well. And so there is a bill that the chair and Ranking Member filed. Would they help to get at these counterfeit products that are made in Foreign Countries such as china . Absolutely. Yeah. We definitely think that it will put any counterfeiter on notice. It will also create a set of very proactive steps that will be taken to make sure they dont get offered in the first place. So we denied the market to the counterfeiters for the counterfeiters to even start down that path immediately to dry up. Just one more question. So how do we get at these counterfeiters if they are not in our country . I assume that they are being sold by entities that are it in china. How do we get the jurisdiction over those folks . And one of those set of proactive measures, they will talk about establishing the jurisdiction for these individual companies through the platforms. So that is a measure that we dont have right now that will be a huge improvement. Do they feed to accept the jurisdiction over those people . No, but the entities that are doing business with these platforms would. Okay. Thank you. And thank you, senator hiron, o. If i could real quick. Could you just briefly and concisely summarize the difference between the shop safe and the informant and why both might be necessary and what impact it would have on the contours of shop safe if we let them go for a couple of years and then sort of see what that impact is . And sure and they are not the safe and it will require the eCommerce Platforms to get the seller information into verifying that in advance and to share some of that information with the consumer at the latest time. And so they could get that information. Thats very helpful. Currently some platforms, they do not share the seller information at all and that has kept sort of behind the wall that the eCommerce Platform could see. But the consumers, they cannot. So in the case of your mother who purchased the counterfeit vitamins online, that she would now have some information on the record on the Online Platform about where it came from . She has a name and an address, correct. And thats it . Thats it. So with shop safe, we are talking about reasonable measures that they could take that my colleagues here have been discussing, particularly proactively. From our perspective, at least with our research, this is one of the important things to really disrupt the sail of goods online that they will need to take place and those are listed throughout the shop safe bill and if they take place and that is reasonable, depending on the size of the eCommerce Platform and the resources and the technology, then they will have a safe harbor. If they are not willing to do that proactively, then they could be liable for secondary liability for trademark counterfeiting in a similar way that the brickandmortar store might, such as a Shopping Mall or a flea market, which we have talked about. And one issue that all of you have raised is the potential impact on Small Businesses. There is a threshold below which potential companies are not covered . And its important to point out too that were talking about Small Businesses. Theres the Small Business who is selling the others products. Which i believe the senator was referring to that they work really hard. They get this great idea. They will go to register their i. P. Then ecommerce is a great place for them to start their business and sell if they are in that small town or somewhere they might not have access to a lot of consumers. Many of them find quickly that the products are being counterfeited. Because theyre a small company, maybe one to two people that they dont have the brand protection resources to do the massive amounts of searching the web, looking for the counterfeiters. And there is a difference on the panel about how big of an issue this is. You took a survey of thousands of consumers, coming up with the conclusion that they purchased that item online. Given the volumes of the trillion dollars last year. That is an enormous dollar value in number. They report roughly 3 billion. Thats a relatively small number compared to the volume. Now help me understand. How big of an issue do you think this is . And hes had a very small sliver in a sea of legitimate transactions that i suggested were somewhere in between . How big of a problem is this . Why is it deserving of a legislative attention . And you pointed out a lot of the sources for data that we know that we could get a hold of from customs to takedowns on the brand side or such as my colleagues side. They see whats out there as we know from the oecd and the organization for development will give a lot of estimates that are ranging in 2. 5 of the global gdp, the counterfeit sales. Some other organizations, they have also published the studies now, and that the problem of the counterfeit goods financially has surpassed that of the google drug trade and human trafficking. So we know it is a major problem. And were going to hang on in a second. More money according to this source is generated in the sale of counterfeit goods than in drugs or selling and moving people . And that is what the study says, yes. Okay, interesting. And thank you for the opportunity to address that and that this is a problem that needs attention as we are just talking about the scales. I would note that all the statistics that were looking at are by their own terms, relative to the problem that were talking about. So first of all, many of them are the upper range. So we will get a sight of between the x and y and thats the top figure and then it becomes the figure, so we need to realize that the outer bound is not the figure. Now secondly, most of these figures, they will apply and include Copyright Piracy and infringement. Ill be the first to acknowledge that infringement with the weak rule of law is a serious policy problem and that is not a problem that we are talking about now and that it will not prevent the infringement and it is not going to prevent the sale of the handbags in moscow and it is just about regulating the Online Platforms. Now those numbers, they are inclusive based on what were talking about here. And having said that professor kammels study is suggesting the twothirds of the consumers may have purchased a counterfeit item . Well, i dont want to speak specifically about the methodology, but what i would say is that we know the vast majority of these transactions are legitimate as they just want to make the consumers happy with their products. So the question is how do we do that and facilitate all these lawful transactions while dealing with the small sliver of bad actors . And mr. Shapiro to close out this round. Is red point a very small startup with a handful of customers . No . It was reference to 35 million. What new listing today do we bring into the platforms on half of the brands that we represent . And the new listings . And listings that are needing to be reviewed and what do you have as the basis to be deemed counterfeit . It is the small prevayiers. Well today, its not a small number. But today, well send them out somewhere and it is a small number at 300,000 to 400,000 notices of the takedowns as we represent the 1,200 customers. Senting in almost 4h,000 notices. You have 1,200 customers . Correct. How many customers do you have, mr. Lamar . About 350 representing the famous brands. Youre one small segment of every industry that will sell online . And the shop safeco ligament if you can make it, you can counterfeit it. And it represents all sectors of the economy. And mr. Shapiro, any general observation about whether the scale online is increasing, stable, or decreasing to the point that my colleague made. How do we bend that curve . And without killing what is one of the most popular and efficient. I mean if it werent for amazon, then by household would cease to function and with them every day and discourages more products. Ill make them count. And yes, it is growing. I mentioned in my testimony that year over year, our counterfeits have increased on behalf of our customers. A 103 . I said 100 . But its about 103 over one year. Its growing at a substantial rate. Let me defer it and conclude this round. I hear across all four of you that cooperation and collaboration between platforms and brands is critical. Are proposed legislation shifting the incentives . In a way that will try to come up with the framework thats common across brick and mortar and Online Platforms . I recognize the difference of opinion about whether it will underperform. And as we move forward, and i think, you know, its amazing. I bought a counterfeit good. The minute i opened the good, i threw it away. It turned out to be a ripoff, but it looked like something that was going to suit the task. My daughter thought she bought a pair of nikes that looked like crap when she opened up the box. It took her forever to gate refund. I get because of the shear volumes of transactions, it looks pretty small. And so it is a problem that touches all of us. Its bad enough when youre ripping off intellectual property and it is worse when you get into the health and safety factors. But weve got to do something to fix it. So im going to move until i could debate that round here, which i do from time to time and it is another reason why i love this committee. Number one, is there any jurisdictions thats gotten this right . And by saying do what they have done . And is there any best practices out there that we should follow or is there an overreach that has been very, very disruptive to your members . I mean who is getting it right and wrong . And well start with you, professor kammel. So in my perspective, so far no one has it exactly right and a lot of different areas are grappling. Has anybody ever gotten it wrong . Well, i think what i would say is the approach that we have had thus far is as close to getting things right that we can see. And the fact of the matter is the thriving sector is located in the United States and that is not an accident. And it is quite possible that it could dry up that marketplace and it means it does not only impact the Small Business and what we wrote. Nobody would want that to happen. But the business that youre engaged in, you made a very important point that a part of the way that youre able to identify the potential infringement is because the data is shared with you all. And that you used in order to crawl the internet and to find the potential suspicious offerings . Correct. How long have you been in business . We have been operating since 2014. And so with the fundamental technology absent, the data that your customers, 1,200 or so customers are willing to share with you and is that the platforms that you should be doing any way . I came from the platform, so i know that there is technology there and that they are doing things every single day. And im assuming that it is a lot better than the last six years ago. And i can tell you that ours is a lot better than six years ago. Certainly the technology is allowing us to find things. Here is the challenge. Ive been at this thing for 13 years. Sometimes when we have a new customer sign up and i look at what we are going to protect, i would look at it and go are you kidding me . Theyre counterfeiting that . Most people who would work for the platforms, they dont have a very big brand or breath of knowledge. If youve never seen that before, then you may never know that it is actually a brand, right . So its a challenge for platforms to think about how to protect that when they didnt know it was a brand. Now you might argue that its a brand, but not Everybody Knows its a brand. So when they hire us and they share that intellectual property knowledge, that we can deploy all sorts of technology from the fingerprinting, the Machine Learning. And we are able to scale it in a very high speed and actually finding and removing. With our partnership with the big platforms, facebook, instagram, twitter, that were able to take those down in hours, right . And that is how we help brands. And what would that industry be to develop of being the one platform that doesnt allow most to get through . And why wouldnt they just own that space by saying dont believe in the upstarts because we spend billions of dollars a year identifying the potential counterfeit transactions. Are they doing it or have they not caught up yet . They are doing it for the brands in which they probably know. And im going to finish it, so they can go to it the other line of questioning. But guys, we are talking about the titans of technology. We are talking about people who have been proud to have identified through the analytics, anticipating your next purchase before you even make the decision to do it. Some of the problems, not all of it. I can give you the countless of data on the analytics. Now let me just back up. And i came from the hightech sector. I worked in Artificial Intelligence in the late 80s. It was a lot less smart back then, but still Artificial Intelligence and just remarkable to me. Even when i get into the discussion about the notice and the takedown of content, the creator content that it has to be a part of your Business Model. They did not exist until it became an online book retailer and now it is just an enormously important consequential american business. But youve got to take care of some of the ill effects of the very model that will make you a billionaire, mr. Bezos. So being a part of what i would like to see here, now let me tell you that i dont like doing the heavy regulations. And ive probably been responsible for appealing more regulations than i have ever voted for in my 16, 17 years in public office. But the industry will need to find a role to play here, and it cant be lets wait for them and then maybe we will come back with the feedback on the next if it is not safer. We need the industry Led Solutions and collaborations here because i do believe that all the people representing the table are good people. Particularly the communist party of china who is taking advantage of our lack of progress in this space. And it is costing us economically. And that you have my commitment, my dide open. Lets come up with the leanest, most effective approach to protect the consumers and hold what i think the historic counterfeiter of china is accountable. Thank you, mr. Chair. Thank you, senator tillis. And again, it is a very interesting situation. Im trying to grasp the need for regulation and what that would look like verses the how were going to enforce such legislation. I know you oppose this legislation and the current form and as i understand the previous form of this version included, a mechanism to hold accountable brands that have abused the process by filing multiple false infringement claims. Can you speak a little more about those provisions, whether you would support Something Like that . Thank you for that. The previous version of the bill and in previous years did acknowledge the fact when you create a mechanism to suppress the information online, a and theres no accountability that it will get abused. And right now, shop safe has no accountability mechanism for misuse of their notice provision. And that is a recipe for disaster that weve seen in other context here in europe and that these mechanisms will get misused both by good actors and bad actors who want to suppress the information that they are complaining about. Here you could easily imagine the competitors are filing the notices about their competitors in that hope to knock them offline. We dont want to see that happening. We want to have an accountability mechanism in any kind of system like this. And so what kind of accountability system would you suggest . Right. For starters, we want to ensure that the brands, the platforms are cooperating, working together, sharing the information thats needed to eliminate the problematic transactions. Thats everything from who is the licensed manufacturer and what are common considerations that they are describing. So often nonPublic Information. So knowing that we dont put the stripes on our product in this fashion is valuable information that they cant get. And that bill will discourage the interplatform brand collaboration by saying you cannot have a mechanism that will require the brands to participate. And obviously how we structure that can vary. What we dont want to do is undermine the existing brand platform collaboration thats going on today. Ken, is any of the rest of the panelists talking about the concern and about collaborating among the brands, and so we can get to one of those concerns that he has . And i think if shop safe were to become law. I think you would still have very, very robust brand platform collaboration and cooperation. And we will continue to go on regardless of the liabilities. Because its the brands 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 thats out there and filed with the Trademark Office, which is what they will talk about. Relying on the u. S. Government body that is the depository, i dont think that it will be an ask and platforms with their incredible paralysis, its something that we would be able to do. And the key thing that we keep talking about it, should we allow more time to work and that the beautiful part about the internet is that we already know right now whether theyre working right now and that it is not and i think that they gave some numbers that we have suggested that it is not the case. And what we probably need to ask ourselves that question, whats an acceptable level of the dangerous counterfeits . How many more people do we want to see injured before we take action . And the answer that all of us would say is none. We have an opportunity to change the dynamics. Right now, we will see the reactive process, as were waiting for some bad stuff to happen and hoping that the brands could discover the bad things and that is literally that mechanism right now and that it is not going to work the next 20 years. Its a reasonable approach to bend that curve. And so the way that the shop safe will change that dynamic is by placing the burden, some level of burden on the eplatforms . Correct. A level of burden on the eplatforms to make sure the dangerous products dont get on the platforms and marketed. Well, im for that. Thank you. And let me make a brief comment and turn to my Ranking Member for concluding comments. There is a Campaign Underway right now and partnership between the us pto and the Crime Prevention platform thats called the go for real campaign, which is trying to protect the trademarks and recognizing the scales. 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 causes fire, skin rashes, even death. And international organized criminals that will use the counterfeits to fund gang violence, child labor, human trafficking. We can debate whether that scope and scale and that number is accurate. But one of the things mr. Lamar laid out, many of the products that are coming from the wide range of country and the prc, that are faulty, that dont perform the way Branded Products would, but that actually they would take advantage of the forced labors, sweat shops that are laced with the harmful content are getting into american households through an intersection between the brands and platforms that are not yet tightly interwoven as we would like it to be. It is exceptionally rare to go to a mall and walk into a Dicks Sporting Goods and buy a bicycle helmet thats fake and that does not actually protect you. That almost never happens. But we want to figure out a way that doesnt crush innovation and that doesnt shut down the american role in online innovation, but that also realigns some of those incentives in a way thats balanced and clear and provides the defensible articulated safe harbor standards that are safe harbors, that are not overbroad or unreasonable, but i was grateful for the articulation of the colleague. And hes not a fan of regulation. Im a democrat. We are typically fans of regulation. In this space, i want to make sure that we are not overregulating, but that were protecting consumers. Both of our households have purchased those counterfeit goods. And my hunch is it if we survey every senator that we will probably find the significant majority of senators, their own families, they have purchased effective goods. The we is as you put it, mr. Lamar, how much of this is acceptable . And the breath and affordability of the Product Offerings that Online Platforms will provide. And so with that, i want to say we conducted this as a hearing with the genuine interest in your input, both critical and supportive. And i will read before we conclude a list of the different organizations that have also offered the input and writing in advance of this hearing. Before i do so, i want to invite my Ranking Member to make any concluding comments. Ill be very brave. I dont think were as far apart as based on the face of the discussions here. Its all in the details. And any time you will get into Something Like this, you could overreach. We dont want to overreach. But for anybody to take the position, it aint broke or that they might fix it in the face of the growing numbers and the growing trends, it doesnt seem rational to me. And the reason that we will continue to get to that table, so youre not on the table. And so many of these properties, discussions, is that i think the sweet spot is usually somewhere in the middle. That you dont want to slow down and you dont want to hamper our countrys dominance in so many areas of the innovation. I mean were the innovators and those on line retails in that day and that it will seem like that we want to stay ahead of it. The reason why we want to stay ahead of it is these threats. And the only way that were 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 that industry of the real consequences if we dont go far enough. And so this is a process that well continue to get people to Work Together and in hearings and in work groups. And those witnesses that would participate today. But i invite everybody on either side of this equation to come, work with an honest commitment to improving the situation. And the status quos that are unacceptable, it will get worse. We have to sit here and do something about it. Thank you, mr. Chair. Thank you, senator tillis. I would welcome more input. We, it in particular, will need and value specific and concrete input about how to improve this legislation. Before we conclude, ill submit for the record without objection. Seven letters that we received from the wide range of stakeholders, both in opposition to the legislation and in support of it from the past coalition and the sound of the tristate. Thats a concern. That the association of the Home Appliance manufacturers, the alliance for the safe online pharmacies, and the vehicle suppliers association, and the personnel Care Products and the council, and the National Association of manufacturers. I would like to thank my colleagues who joined us today and asked questions. I want to thank Ranking Member tillis and his staff. This is our fifth i. P. Subcommittee hearing of this year. Its one of the most active and purposeful subcommittees in the entire senate. I think weve reviewed the fact that the rapid growth of counterfeiting on eCommerce 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 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 todays witnesses and the other organizations that 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 10, by 5 00 p. M. Let me thank again our witnesses for participating, and everyone who watched here and online. With that, todays hearing is adjourned. Thank you