watch anytime on cspan.org and listen on the go, with the free cspan2 radio app. >> next to a on fraudulent trademarks. the senate judiciary subcommittee on intellectual property from witnesses appointed to china as a primary offender. and in the impact of fraudulent trademarks on businesses innovation and economic growth. >> good afternoon. this hearing will come to order. before i begin on say the witnesses for your accommodating schedule change today. we had just left the senate floor were senator johnny isaacson gave his farewell speech if my friend and colleague ranking member senator kunz, is on the right now getting them farewell. and senator isaac, prolonged time together and dissipating

that he is down there in many respects, a lot of the same attributes of senator ike six in terms of working together particularly on this committee. so when he comes in, let him interject but in the interest of time will make sure that we can continue get your opening statements. we are here today to talk about the issue of fraudulent trademarks. because everyone here knows this back on many operations of the business is pretty good trademark allows the brain to easily identify and distinguish itself from its competitors. the trademark allows companies to build goodwill with and differentiate the goods and services. while trademarks are important to every business, there especially good to retail and small businesses. mom-and-pop shops. unfortunately in recent years the united states has seen a surge in fraudulent trademark applications. according to the wall street journal from 2013, to two thirds

thousand 17, the united states patent and trademark office seen a surge in applications from china. at 12 increase 12 fold increase totaling thousands more than the combined filings from canada, germany, and the uk. this morning join i was preparing for the hearing it reminded me of something that not specifically focused on the we will talk about today but it gives you an idea of the depth and challenge that we have with china on several different levels. there is a company that is generations old. incident north carolina called calvary. it is a factory right down the city center. it is been for your generations. but i will send a couple of years ago, what pops up in china but charlotte and henry. blatantly, just taking the brand that has gone on for your generations, and setting up shop

in china. in this particular case, they went to the chinese courts and as you would expect, trying to get the trademark rights just in the leaving part. actually counterfeited products and sell them and they have lost trade cases on dumping. so off of were here to talk about trademarks and applications in the united states, things are important to understand our major threat is china. and they are fighting their economic war on several different fronts. this is another front that i intend to come back to and subsequent hearing. today we just want to know that the people know that the chinese government are paying citizens to fraudulently obtain u.s. trademarks. i am concerned that the surge in china trademark filings where fraudulent trademarks are slowing down u.s. people to get

their trademarks and protect the reputation. our counterparts in the house judiciary committee earlier this year, heard how the agency is widths software capable of detecting alternate trademark pitcher. and how increased training is being provided to examiners to identify and more closely scrutinize this vicious assessment. those are all great efforts. an directory should be commended for your his work however i say the congress who also has a brawl to play in addressing this problem. that is why we are holding this hearing today. we want to hear from experts about their experiences with fraudulent trademarks and how they are negatively impacting american businesses and consumers. i've also interested in the recommendations in your recommendations, unless steps congress should take to combat the problems.

and finally while this is our first hearing on the subject in the senate, our counterparts in the house representatives have been vigorously working on the issue for your months. house judiciary committee, chairman jerry nadler, ranking member doug columns have done fantastic work in this area. and i appreciate the work that they have done. i am proud to be part of this bipartisan working group and i look forward to is continuing to work together on monday truly believe can have a significant positive impact. also want to take those moment to thank our staff, led by jamie simpson, and mary beth walker who are actively working on legislation. and our witnesses today will give us your thoughts on the proposed legislation. and finally things again, for you being here today and accommodating our schedule. i look forward to your perspective and i hope you do this, is just one of a series of discussion that we need help to get this right. and the result that ultimately goes to the president's desk. as i've said, join senator kunz

arrived, and he would like to make any opening comments, will certainly allow him to do that. let's get the testimony looking forward though i'll introduce the witnesses. professor of intellectual property. any codirector of englebert, and it rang with glasses. center on innovation laws and policy. he previously taught at yelp law school, stanford law school and the university of hong kong. it is published frequently about trademark law and including authoring trademark casebook and use on 40 law schools worldwide. douglas is the partner in henderson garrett and on, he has his practice on trademark and false advertising and unfair competition and litigation trials appeals and disputes. it is argued the feel for the u.s. a court of appeals in the federal court and eighth circuit

and he also litigates and trademark trial of the united states patent and trademark office. bennington is counsel thank you. - is the member of the intellectual-property media group. she is representing clients before the uspto, trademark trial and appeal board. in the international trade commission. she is active in international trademark association and the section of the market bar association and the american intellectual property law association. thomas williams is the supervising attorney for your new law law school sports wrap ventures clinic. where he works with students who represent early-stage for-profit and nonprofit mental entities. he is also director of the duke university j.d. ma, bioethics and science policies surgery. prior to joining duke law,

mr. williams was a corporate attorney and served as assistant counsel to a physician practice. and finally stimulated, he serves as the chief intellectual property counsel for the arctic operation. hills the position of senior director and assistant general counsel. prior to joining target, mr. lee worked in private practice at two minnesota law firms. i got a swearingen stigma here. i'm not going to swear you in. i note your passionate run this issue. i trust to be truthful. you promised me. that's restoring in. so why do we start with your opening stigma. >> good afternoon and thank you for your inviting me to be a witness today. my name is barton beebe, and that professor of intellectual property law in new york and university school a lot. my testimonies are open research with professor jeannie, also of ny you school a lot. so long with a written testimony

for the records, i've submitted a recent harvard law article entitled are we running out a fox. an empirical study of congestion. at its best, trademark law promotes fair and efficient competition. in hopes new market entrants and small businesses in particular to compete on a loophole playing field. this benefits american consumers. however, in the empirical research report in our articles, we show in essence, that it is becoming increasingly difficult for your businesses to find a good trademark that someone else hasn't already claimed. and it is especially difficult for your new and small businesses to do so. trademark law has long assumed that there is inexhaustible supply of trademarks. in much of trademarks policy is built on this assumption. the assumption that if the market company has a retaking of the company has a voice find a different market is just as good. but we have reached a stage of

economic development of which is no longer true. devious is what we are talking about, our research shows that it and using conservative matching protocol 89 percent of the time, and we speak english, we are using a word that is already been registered, as a trademark or is confusingly similar with an already registered mark. consider there at least 68 percent of americans carry this for your which the same is true. her surname has already been registered or is confusingly similar with an already registered one. they have more or less than likely been born is it too late to register their own name is and more. in certain categories in goods or services. meanwhile, new applicants are increasingly shifting towards going towards. another more complex and less effective marks. yet even these efforts are increasingly failing. in our research shows the pto with his rights, for your confusing similarities to an already registered mark,

continue to rise. this problem is particularly acute for your small businesses. which typically lacked the sophistication and resources find unclaimed competitively effective marks and prosecute those marks to registration. this problem of what we termed trademark. has been significantly worsened in recent years by a search of fraudulent applications originating from china. except in rare instances, trademark must be used in u.s. commerce to qualify for your registration of the pto. to make the use in commerce requirements, numerous chinese applicants have been submitting during the process fraudulent evidence of use. typically the forum of doctor photographs. in a written testimony, we conducted on the issue, we shared that at least with respect, two thirds of chinese applications filed in 2017, contained apparently

fraudulently use. 60 percent of these are nevertheless approved for your publication and 39 percent then proceeded to registration. join these applications are allowed to proceed registration, they contribute to clutter on the registry. clutter is the term that trademark law describes them that is not actually used in commerce. let's defend the integrity of the trademark registry, support a mix of reforms to trademarks. including processes for your re-examination and expungement of registrations of trademarks not being used in commerce. specialization of trademark examiners, and requiring the pto to study and report annually. function will it trademark registers. thank you and i look forward to your questions. >> thank you. apparently my staff was watching this. i got glasses and got me a

mountain dew two. [laughter] [inaudible conversation] [background sounds] >> thank you for your inviting me to testify. today i will discuss whether a replicable harm, which is required for your an injunction, should be presumed in these cases where the moving party is able to establish success on the merits of his claim. i believe the presumption is need it, for the trademark system to function properly and fairly and effectively. to start, it's useful to discuss the important brawl trademarks play in our society and how they differ from other forms of intellectual property including patents, copyrights. patents for the part, copyrights protect altered works. in both of those are meant to encourage innovation and science and our spy giving authors and

inventors limited economic monopolies. if trademarks are quite different. and join they protect, and how they protect it and why the protected. a trademark is the word in a civil or a device that is used to identify one party news good and distinguish one them from others for your in the trademark law serves several unique objectives. first, trademark ensures that join a consumer sees a friend, that they recognize they know what they are getting. economically, this creates marketplace efficiencies because it reduces consumer search cause. for your example, my eyes are very good but join i saw that soft drink that you are taking him i can tell just from the colors and the thought exactly that that was a mountain dew. that went out more, i knew that immediately. note the same time trademark law also protects the owner's investment in the rents. and it incentivizes that investment and owners to invest more in the goodwill but a trademark should not given their due protection, all of this falls apart.

that went out recourse, the cost of copying someone else's trademark is quite low in the upside is very high. that is why, the trademark law prohibits as a forum of trademark infringement, the use of marks that are likely to cause confusion and best day or deception. join that happens, join somebody uses the mark because his confusion and best day or deception, the trademark owner loses the control over its goodwill and its reputation. and even though monetary damages are available in those cases, they can't fix these reputational harms. courts have historically acknowledged that they are virtually impossible to ascertain and measure. also monetary damages are notoriously difficult to prevent to collect in those cases. so none of this is new or revolutionary decades. nearly every circuit has recognize the pernicious reputational harm that flows from those violations. and for your that reason, the circuits have recognized a

presumption of irreparable harm once somebody proves the likelihood of success or success on the merits of claim. this change in 2006 join the supreme court ruled in ebay market change, that it presumption of the harm does not exist in patent cases. but ebay was not a patent case and it has it was an patent case and it is her name that landscape. . . . and failing to ever decide

presumption is also needed, if there is an infringement and continues without an injunction confuse unwitting consumers into paying hard, their pillow filling out their hard-earned money for products that are not with understood to be. all the while, the trademark has trust control over its brand. it's essentially merchants. the presumption already applied for the priority of on the assumption of whether it applies in certain cases it's unknown now what exactly you need to do to prove irreparable harm.

the ninth circuit has said otherwise. finally, a presumption that it's rebuttable. and alleges can come forward and also with irreparable harm, that doesn't mean an injection will issue a litigant must still show the hardship is in their favor. and that injunction would favor the public. in the end, time tested doctrine has well serve the trademark owners, consumers in the marketplace for years. not to be taken away. thank you for your time, welcome your questions. good afternoon. i am megan van again counsel it were my practice includes protecting and enforcing and defending the trademark rights and other intellectual copyrights. i'm honored to be here today for

fraudulent trademarks and the importance of the trademark register. while we all agree protection of trademark is critically important for the american economy and competitiveness in the world, and has negative repercussions. the trademark register is the important function of providing notice of a trademark in use. we allow these to be invalid innovation by providing this information to companies whether they could use a marker not use a mark. for instance, this might cause a company that is planning to use the mark to abandon it if that mark is arty in use. famine may instead get a mark that is less productive and less effective. it's a real problem.

and fraud we knows one of the causes. the proof of fraud and to have a mark in the register on the basis of fraud has to meet a very high standard. a third party has to show willful intent. and as aleut litigator i can tell you that's a really hard standard to meet. in order to prove that and has to have discovery which is forensic depositions, and a really time-consuming difficult process. these proceedings can take upward to two years. that's just not okay if your new brands to enter the market. you don't have three years to wait for trademark. and the courts you can see, the courts agree this is really difficult. in fact, the last ten years has only canceled one mark on the grounds of fraud. and there's only a handful of federal courts that have found

the same. as of the question becomes what do we do about this fraudulent trademarks? how to get them off the register? course on the first suggestions that many said is that we need to lower. but there are real risk to doing that. as you risk harming innocent people who've made innocent mistakes. and you know, they risk while backup. before 2,009 the standard was actually lower. you can prove fraud by showing the registration. serve numerous registrations were canceled based on this information. this led to situation that put a ton of pressure on practitioners and trademark owners, and filing registration they had to do so with such exact detail or risk canceling the entire registration.

even when they are legitimately using the trademark. that is a consequence we don't want to see. and that's just not the intended outcome. we don't want to make applying for trademarks so complex that it in turn causes trademarks to go unprotected. we need a balanced approach that promotes and protects them while at the same time protecting against overbroad and invalid. there has to be a good line of division between intentional fraud and making a mistake. while there surely some ways we can improve the standards, perhaps even by lowering the penalty and not lowering the standard. perhaps a better solution would be to look at how we address this problem as a whole. and those are marks whether it's fraud due to innocent mistakes

or something in between, that exists on the register. the pto has been working on this as noted, they have implemented various solutions and have been very effective. my clients pay more attention to the trademark filing. there still a ways to go. some potential approaches include requiring applicants and registrants to submit specimens of usage for all services, requiring applicants and registrants to re- be represented by u.s. counsel, making it a more streamlined procedure and alternative, these are not mutually exclusive. there are pros and cons of each. but a clear trademark register

is critical in importance. and i would love to answer questions. thank you. >> mr. williams. >> good afternoon and thank you for the opportunity to be here today. my name is thomas williams i currently serve as election in fellow and attorney at duke law school. and today i'm here to advocate for to advocate for the tool for small businesses an equal footing for trademark protections. i would like to thank the committee staff to make this possible. small business is the backbone of the united states economy. according to the 2018 small business profile, there are a lot of small businesses in this community. every business in this world was

a small community at one point they create economic possibilities and the communities they serve. and they are responsible for 60 million jobs. reducing costs related to trademark protection can help boost that number. but it can also create flexibility and economic promise for the communities. i'm here primarily to relate the stories of the clients are student serve. their stories are critical to good policy part dissipation and how we can enforce them. through their stories we can see the trends, we can ask questions, we can create a policy to support them. our clinic advises a broad range. a sample in any given semester is in a nonprofits, tech companies, healthcare startups come in a retail venture too. often our students are the ones who direct our clients.

that attention is usually focused on protecting the interest in their name or trademark protection. doing this requires our students to learn more about intellectual properties. they spent a good amount of time learning how to navigate the system. in working with international property specialists. use of these tools provides with a particular type of knowledge, namely if there is a trademark or if that name is free and clear. but even only know i trademark is owned by someone else, it may not be fraudulent or abandon. but based on the discussions and the information available we have to work with our clients. in some cases we advise clients to create another name and to do so quickly. for some clients that's already

spent a lot of money it's usually problematic. but other clients it's much easier. some of these businesses are already out in the world and they have to answer some critical questions that legal counsel alone cannot of them their. one option for the client is to knowingly infringe with the hope that the trademark holder will not care. some times the cost is more to it's hard to know. the cost of indecision, rebranding, a loss of business occur with respect rebranding wall offices clear. what is clear is there is definitely a cost. trademark issues can be the proverbial straw that breaks the camel's back. just a few thousand dollars for these companies can make a huge difference. in fact for some of our clients to apply for trademark

protection alone gives them assured financial safeness. this would prove a critical aid to small emergency companies. financing business strategies and the list goes on and on. finding fraudulent still trademarks would allow room for the small businesses. it seems reasonable that when someone else has a great idea and the timing is right, they should be able to seek refuge in trademark for their work product and logo. no matter how long ago they gained this right. some form of a well structured and fair less burdensome playing field for small businesses in the u.s. one important component is some form anonymity when challenged. when a small business owner can take on a trademark or well-established company without retribution.

the current system, allows for challenges, setting them up in the line of fire for litigation. most small businesses cannot bear. in closing there's no question that are trademarks that provides protection for innovation and helps to build a culture of entrepreneurship for us all. with that being said we should be driving on fairness. part of creating this system is to think of the small business and how they play in our economy and they need to gain access to protections to value the work they do. thank you for the opportunity to speak i look forward to your questions. thank you mr. williams mr. lee. thank you for holding a hearing on emerging trademarks. for u.s. businesses.

my name is steven lan i'm chief intellectual property. target is one of america's largest retailers with more than three and 60,000 members supporting almost 1900 stores. as of company were in a multi- your transformation strategy. invested in changing our stores, increasing wages creating or designing brands. in fact in 2,017 more than three dozen new brands with food to apparel to home goods. makes target a high trademark filer in the united states. intellectual property and a strong means to protect us as a key to our success. but we are concerned about fraudulent trademarks flooding the u.s. i'm here today to share these facts with you on our behalf.

when the uspto approved the fraudulent occupation. it can effectively block our legitimate efforts for trademarks. target has been moving with exceptional speed with a number of new brand products lines to market. each new brand has thousands of concepts and names for choosing the right one. the process develops and adopts who owns the brand is time intensive and the related costs are significant. we became aware of the fraudulent filings when we were in the process of filing an a new trademark for a product launch. we landed on a preferred name, and we were stopped by a prior authorization. we could not locate the company and since moved on to another market costing us millions of dollars. after this finding the audited

trademarks on other brand launches. nearly all cases at least one filing was blocked. a more comprehensive review of the filing uncovered a hallmark of fraudulent. first use of the same photographs submitted for the trademark. a second photoshopped images noticeable on site. third photography submitted as original preuss of the trademark food finally images other companies trademarks used. the vast majority were simply registered. it reached the conclusion that we'd stumbled upon an epic problem. the uspto has taken to address the problem. within registration audit program in u.s. counsel require. all of these are well-intentioned and buy some reason they are largely effective.

and they are doing so at alarming rate. we believe the uspto must do more. asked the committee to consider the following concept to strengthen the nation's practices. first modernize the uspto for reviewing fraudulent and applications. uspto should create a specialized to more effectively look at applications. develop a more stringent review. seconds. give the uspto the flexibility and timeline. today in the u.s. pta has allowed applicants six months time to finish their work. shortening the time to respond or bring issues resolution.

third period allow a third party to object during pending applications. today a third party has no effective evidence of bad faith or challenging pending applications or for that matter issue registration. these remedies need to be improved or new solutions developed to allow the third party to raise challenges with the application and registration. the avenues could become a viable means for the third party. thank you again for providing me the opportunity. i want to continue working with you as you develop policies to address the integrity of the united states trademark registry. >> thank you mr. lee all at the panel know you are absent for noble cause. >> thank you chamber and tell us as it was just stated a treasured colleague of ours just

gave a farewell speech and this is the first democrat to speak. we've had a long and significant friendship and collaboration and i appreciate you. trademarks and brands as you have all testified thrive and protect the public from the dangerous counterfeit products. as the cochair was senator grassley of the special trademark caucus i am glad chairman tillis has convened this hearing to address the issue on fraudulent trademarks and i appreciate your testimony and apologize for missing the first three witnesses testimony which i will review the writings following this hearing. the uspto's register include something like two and a half million in trademark issues. as clutters of marks not actually in use and in many cases fraudulent and we have

seen a recent surge in frivolous findings from china. the commissioner recently testified to the house the uspto is experiencing a thousand% increase in chinese filings many of which are suspicious. so the result is register is cluttered with unused marks, and incoming applications and the frustrations. i applaud the pto for taking steps and i look forward to questioning on that. we are working on legislation and look forward to more detailed response to your what you feel what steps we should take for the house ip subcommittee. more than anything i look forward to hearing your answers. here are your remarks and i appreciate your frustrations. >> thank you very much, i

appreciate it. and i appreciate my work with senator with the trademark committee as well. i'm going to start with bb because i've got some answers on what's going on in china. in your opinion what is advising the chinese to engage in such widespread fraud on trademark filings? >> senator grassley thank you for your question. in my opinion what is driving the chinese to do so is partially local firms were certain municipal governments want to report but they are engaging in economic conduct. those in charge of these municipal governments in the eyes of the government, i do think there is a degree of how to put it politely, there is a

degree of not finding that the american trademark registry is the most effective. chairman tellis had mentioned something about economic warfare. and i agree with the chairman that that is that probably an aspect of it. >> and i ask you also if the les paden trademark office doing a thing to address the problem? and if they are not what else should they be doing? >> thank you, senator grassley, has been said the pto is doing well. it is a good agency that works. it is taking proactive measures to address this problem. however, i think we all agree that it needs to do more. in some of the things with my co-author that we propose our specialization of trademark examiners, perhaps by a class of

goods and services. examiners that would come familiar with the kinds of fraudulence that they're seeing especially in certain classes of services. we also strongly supported these supposed expungement and ex parte, the examination and other proposals we think are important are asking the pto require to report annually. on fraud on the principal register. >> i'll ask you again and then alas the panel if they wanted comment the same way. is it your sense that the number of fraudulent trademarks is a growing problem or has it leveled off for a while? do you see the number continuing to grow? or level off? go ahead and then anybody else who wants to comment on that can. >> thank you, the pto post important reform effective

august 3 of this year which requires foreign applicants to use local u.s. counsel to file their application. this is the way the pto can try to enforce fraud and post penalties on local counsel. the results as news reports indicate as there is been a decline in the number of fraudulence applications from china. but they have not stopped. they are still applying. so it seems here that we need to do more in order to address this problem. and stop it entirely. >> okay i'm in a donor call in specific people but does anybody else want to comment on that? >> yeah i would just say for small businesses that are really our clients is just very difficult to find out what's fraudulent. ended by the necessary resources define the in-depth investigation that mr. lee spoke

of. it's just really a hot high high burden. >> and did you want to comment? >> i would add that is the global counsel is on the decrease the number we are seeing in these foreign fraudulent trademark applications. i think it is too early to tell, just when in place there was a massive hike right before the rule was adopted. and they think that is actually one of their strategies. when the pto and from the outside counsel they are already trying to circumvent. there's an e-mail floating around asking attorneys to use their credentials to file trademark applications. the pto has said there are people's legitimate attorneys are being used without their knowledge. your also seeing unscrupulous or unknowing u.s. attorneys filing trademark applications on behalf of their clients.

we think the problem is going to continue, and even if we are to stop the problem, the actual clutter that's already on the register, tens of thousands we've seen increase of the past couple years is a problem. >> thank you for your courtesy. >> senator coots. mr. chairman you are is ever gracious. let me just make sure and i may have missed this previously and forgive me if i did. for your client, what is the average person that's watching this, what is the cost to file versus the cost to challenge all the way through. so you got a business of the good startup that's very well engage. eve got a product and you come up with the trademark, your rate of file, you're ready for market, and you search the field and you think it might be fraudulent but you're not sure. what does that cost and time

currently to figure that out. what is successful post grip challenge. anybody? >> i can take the easy one. the cost of file is $275 you've got a little bit of legwork on the front end. doing the things that are students are learning to do. the cost of challenge is quite high. i would say hundreds of thousands of dollars in many cases. i will leave that to micah witnesses to answer. but for our clients at least it's unclear, but certainly high that makes it hard to even step into the ring. >> did you have a rough number? >> i don't have a rough number but it could be in the hundreds of thousands of dollars if you have to get forensics experts, look at documents, get desk depositions, takes a long time. it can take up to two years and

cost a lot of money. >> if i might professor bb, how do you think that impacts the business decision that companies are making. a mr. lee if you'll talk about how that impacts. >> thank you, we actually have precise numbers international trademark association has estimated that the cost could be anywhere from a hundred and 50 to $500,000. the average numbers at $95,000. this is a lot of money for small businesses. i think it's fair to say that it's too much money. mr. williams had testified to agree that many businesses are based on limited resources. they are just not able for the opposition in the capitalization process. mr. lee how does that work with

the trademarks. what kind of impact does it have on your business making decision? her thousand dollars? >> nothing. but i'm more concerned how it impacts your brand a lot of products launch an extension. for the question senator, yes while the financial fact is significant. it's not so much is the cost of filing. it's a private label of target that costs over 30 of those brand. i brand doesn't come up in a room with a bunch of lawyers. a proximally over the process of a year with the actual product, the name, the packaging the marketing, before we start a product launch. includes merchandise, marketing, creative, research scientist, whole gamut of people research the brand that will resonate and have the wow factor. something new that they come to

target for new products. but a cluttered register costs us a lot. zero well research name and moved to the secondary name that cost us time and expense in the millions of dollars. i would also say the opposition for company like target's were well-versed in that is really not just the money, it's the time. it's the wait time to get to that resolution and if there's a cancellation at six to eight months years to get resolved. it limits our choice and undermines the nics trademark system. >> let me ask three questions. one option is to have a rebuttable presumption of litigation where you're seeking

-- how would that assumption changed. >> that assumption would help if they're doing an infringement action and would stop the use of the mark. the problem is the opposition or cancellation proceeding that doesn't matter. one of the difficulties we talked about his time is money. time is a big problem to stop lunches. the opposition in the cancellation is a mini litigation. so fraudulent file or if they don't default, default may be a goes away for several thousand dollars. but they don't default all they have to do is file and then the case goes in to litigation it goes into years and several hundred thousand dollars. so the irreparable harm and helps for district court litigation in the stoppage uses, but not bottle it all up. the proposal together pto director to re-examine

trademarks on his or her own own initiative. and then have expunged proceedings for trademarks that have never been used or visually fraudulent. i would be interested, this is my last question and from anybody on the panel. >> we believe those are good starts for legislation and the proposed legislation in the house. getting at the application and for expungement. we want to say one thing on the expungement so far there is a clause with language it gives a serious pause we believe it creates actual loophole that the filers could actually expose and allow the extension of time to actually prove use from the time of registration all the way to the filing of expungement happens. that extends the right of many

fraudulent filings. when we know these applications by law require a time of filing. we are eager to work with members of congress to understand why the languages in there. we went help come up with something different. thank you mr. lee any other comments? >> i agree that expungement is a great start, and that it would be very helpful. a low-cost, low burden, alternative. it would allow many more people to challenge these marks. but you're still relying on third parties to challenge the marks. there still has to be a reasonable basis than to think it's a fraudulent mark. i doesn't completely solve the problem. >> thank you well thank you, mr. chairman. >> actually senator were not missing you, i let some to go

before me and then deferred. i'm going in turn, but i want to enter into the record but china's unfairly competing with that objection. i want to make sure senator koontz and chairman, professor bb, if you went back and would go through the research that people studied in two thirds soft fraudulent. could you run through that for the purposes of my colleagues? >> yes thank you with professor i did research on chinese applications in class 25. trademark applications in the apparel sector. we looked at the year 2,017. applications from china then took a random sample of those applications and then each of us

studied each application, coded each application according to very different areas of fraud. to the course of this process became to see that at least one quarter of the applications we were looking at contained doctored photographs. clearly doctored photographs. and this was consistent with press reports. the degree to which these applications have photoshopped items. we also changed as mr. lee testified to come up and place it brand name cards on top of a t-shirt, take a photograph, then submit this as a special abuse. we sometimes had the impression that people had taken things from their closet, from their kitchens, depending upon what contents we were seeing outside of class 25 in order to engage in this application process was

a big deal. and so the ultimate results of our work was the estimation that two thirds of the applications filed in 2,017, solely in class 25 apparent peril were fraudulent in nature. nevertheless my opening testimony 60% of these were approved for publication by pto. 39% proceeded to registration. these are very sturdy disturbing statistics. and we suspect would find similar numbers in other classes. >> to what extent did the changes need to be made? what would the impact number be if we did it. if we go back and look after the first part of august, what extent is positive. >> i think it would probably cut the number by half. i'm really estimating. but now we only have one third of the applicants.

it has been explained the fraudulence of pliers are now seeing other ways to circumvent what's been done. using u.s. local counsel, so i'm not sure be that effective. >> you were talking a lot in your comments for everybody of the panel about you said you need to make sure that you don't have unintended consequences. how do you strike a balance for any action we would take? >> that's hard to take a balance. protecting the trademark and clearing the register. i think that some of the suggestions that the pto has put out are part of the issue. we need to look at how to address this as a whole. so not just going to fraud, not just going after fakes, but just looking for the best solution to

get the registration clearing at these marks available for businesses. the most best way to do this would be to have applicants submit everything. but that's a very burdensome on the filer and the pto. >> if you'd help me out with that with all goods concerning the trademark. >> see registered trademark, you register a classes of goods. which is very broad. so in class 25 clothing. you register in class 25 then you also specifically name the goods that you intend to use the mark four. you can do one application and register sweaters, pants, coats. in order to get the registration

has to be approved through one of those. so if you send a picture in showing your mark on a t-shirt you can get it in all three categories. what i am suggesting here is you could require the applicants to use all three categories and it creates more work. >> just generally for those that have been able to study maybe down the line any of you have other than what you've already stated the good stuff. for the rest to enable you have the opportunity to look at any of their proposals would be interested in what you think is good ideas and what you think is problematic. >> i've looked at the legislation for irreparable harm senator, and nothing there very good. because it not only is the presumption of irreparable, but also makes the bottom line.

so an accuser can at least come forward with something to counter whether there is in fact irreparable harm like delayed. it strikes a nice balance and it pleases everybody's objectives. particular trademark and consumers. >> anyone else. >> i'll just say that i reviewed irreparable harm propose legislation as well and completely agree. it is such an improvement and helpful if we could pass the legislation. >> also quickly we think the legislation is very good but we share the same concern about the expungement action. >> i would rather lose early, i'm sorry for your loss, said. [laughter]

>> thank you for you in the ranking members of being so active on this. it's been very impressed by the energy and comprehensiveness approach to this area. as all the snow here, and around the nation, millions of americans purchase a lot of goods online yesterday, which was cyber monday. but also every day of the year end particularly going into the holiday season. it's good to have other platforms to police their marketplaces for more fraudulent as we all know too often sellers often exploits innocent buyers with low-quality goods in counterfeit goods. many times these sellers, take well known companies unlawfully

to hang their trademark logo creating false impressions on retailers. the genuine brand-name products. there is considered for significant cost to consumers have gotten the dangerous products, and businesses. the businesses in connecticut and all around the country suffer loss sales and damages. trademarks are really him horton to the markets and my question to you, i'm concerned companies like amazon are insufficiently staffed to police their sites against trademark fraud in counterfeit goods. there platforms which are throughout the nations to combat counterfeit goods. my question is twofold are we

doing enough, including amazon? and have you noticed any noticeable fraudulent. i'm an open the floor to whoever on the panel. >> and i can't believe no one has an answer. >> also we confront the senator with products being sold on these retail websites the difficulty is of course that a lot of times the retailers are being scammed by those selling goods and their somata goods being sold. part of the problem is we are seeing results on different platforms. they have different brand qualities and they work with brand owners. but it's not always enough. so sometimes the retailer will end up being sued because their own policy doesn't take down the

fraudulent good. but it's a difficult issue because a lot of times the retailer doesn't want to be the arbiter of whether it's an infringement or not. >> teaming the the platform doesn't would be the arbiter. yes. >> they could if they expended more resources to do it. >> certainly and in some cases their obvious cases. in some of the platforms like amazon are very good about taking down obvious counterfeiters. it's very difficult given the number of things that are being sold on these networks. so it's an ongoing process, it's an ongoing struggle. i think brand owner doesn't get relief of the platform and sometimes they end up having no choice but to flute through the platform. >> in your experience is in that litigation is an effective

deterrent? >> i think more is always needed. i do think lawsuits are ineffective, but in the problem we now open commerce to the electronic market there is a flood of different sellers. it's hard for the brand owner and admittedly it's hard for the platforms to figure out genuine and what's not genuine. because a lot of times these products are being resold through third parties and they may actually be legitimate. but that depends upon whether or not that's permissible but there's always room for improvement. and there is a need for cracking down on counterfeiting and online sales on different platforms. not target. >> thank you. >> i have another question which may be more of you will want to answer or maybe not. as you all know, months after donald trump's inauguration the chinese government, went through

trademark for for the president of the united states and his businesses. all three when the president's own name. correct me if i'm wrong, these registrations ended in multiyear legal battles between trump and the chinese government. coincidentally right after he took office, beijing has continued trademarks for trump -related businesses throughout his presidency and for his daughter ivonne. i am deeply concerned at the chinese government using or was using its trademark system to improperly influence you nine states policy. and by the way, he's in located in the constitutional subject of a lawsuit that i

p. 200 member members of the knights is congress want me and that effort. trademarks are far from the central.of that but they are implicated. and these trademark interfere with its own intellectual property system. so let me ask you, do such trademarks create harms potentially for our competitors who may be seeking trademarks also? would you agree that a political company is treated differently with respect to trademark law? and create the appearance and reality of unfair competition.

we can't order you to answer, right. >> senator it's a delicate question but i think based on my knowledge of the chinese registration practices it's highly irregular. the trademark registrations you mentioned, it was obviously an effort to embrace president trump. but one would, i'm certain pto would never do anything of that nature. and so it is disk discouraging to those who wish to trade in china for this conduct. it also reminds us how our own trademark company is. >> i think that's a good.that's well stated. thank you.

>> you one stump the panelist today. >> i don't not that's a compliment or. >> i want to go back, and you want to ask anything? >> my last question are there any proposals that are not being considered that you think will be relevant and helpful. either how to de- clutter the existing registry or how to determine applications are fraudulent. >> baby and i have both, nonspecialized review. there is a number of signs for these fraudulent there is a lot of five to ten different attributes that you can find these applications. they all seem to be filed for use income gross.

they are single class applications and their 40 different platforms. all are filed single class, all are photoshopped. they use duplicative images that can be easily found with technology. it's kind of index card type tags attached to the items on top of a cardboard box. they attest that is using commerce in the united states. some tags earn foreign currency not even in u.s. dollars. all these telltale signs can be identified and we take it a step further and the examiners are taking an old case by case basis. and it's hit or miss. but instead if there was a specialized review team that could pull their common knowledge over time, develop consistency and rigor in their investigation and share that knowledge across different groups.

it's being done on the patent side you have patent examiners that are dedicated. it even have it on the trademark side. it's on the uspto with no extra funding legislative requirement under the new farmville adopted a special review team on cannabis related items. so it can be done, and murawski in that it would be dead in this case as well. >> professor beebe, let's just say we eliminated the future flow of fraudulent trademark application from china. to what extent we have solved the problem? >> to a very large extents i think based on our understanding of the data. there are still applicants from other countries and domestic applicants who are engaging in some degree of fraud on pto in order to establish an early priority dates for their application. but i think the main source of this problem, the root cause of the clutter problem appears to

be sourced out of china. >> is are many research done on how they actually, how they're actually doing this? is this just an industry that bubbled up organically or is it something that is clearly entities within china are promoting, prompting and compensating for this sort of activity? >> we are only going on media reports which we sites in our written testimony on the wall street journal article and other articles. and that's fairly thin information that we have at the moment. and it may be something worth investigating further on by the media over a government teams. but it does appeared to be an organized effort. cottage industry is probably too light of a term, i think it's more organized than that. sabotage is too strong of a term, probably, but this does seem to be an organized effort. with many motives behind it.

mr. williams again, the thing i worry most about appear are the small businesses. if you take a look at targets has to budget for the litigation at all the work that are going to have to do, and they have the skill to deal with it. not that i'm diminishing the significance to you while in your ability to bring products to market. but if we don't fix this, this is just going to devastate any sort of innovation of the small businesses, the next target, the next big enterprises start small. you agree with that? >> i'm not sure that will completely prevent them succumbing to market, but it will surely slow them down. and slow them down the ways that mr. lee has spoken about once they begin to grow. and so i think it's really valuable to be considering these kind of x partake actions, the idea of being able to file claims anonymously to prevent kind of beat retaliation from

folks. and so hopefully those entrepreneurs stick with it and keep moving, and move forward. but with certain financial situations in place, it really might take out some companies who have great promise. >> mr. lee a question from sue senator blumenthal about, i forget who it was, but the platform, if you think about the e-commerce providers they may or may not know about the legitimacy of the trademark on a retail platform for which they are selling the product. but at target, not everything you sell is your brand. there are product that have their own trademarks associated with it. before you put something on the shelf on target or before you make it available online, what sort of due diligence do you all do justice a large corporation to make sure what you're selling is actually something that is protected by a legitimate trademark? >> particularly for our recently

launched marketplace, we are not going full in with the marketplace and launching to any third party can just start selling. to date there haven't been any allegations of counterfeiting going on. counterfeiting for target would be a lesser is too because the price.of more of most of the items we sell. the issue were confronted with, which this hearing is about is actually the reverse of that. it's not an infringement counterfeiting of our round or own brands or the third-party brands. it's actually the reserve reverse. you have such a cluttered registry that businesses can't get their marks registered because there is a mine field of fraudulent trademarks blocking them and blocking their businesses to coming to market. whether that's on a large scale, is not a size issue. it's not a size issue fraudulent trademarks affect everyone. it's not just to make targets

work to work better it's just to be more rigorous. >> so not being a skilled attorney as my colleagues to the left over here, i'm fairly new to politics. i may be asking, i know i'm asking a dumb question or when i don't of the answer to. but i'm thinking more about a product that has, that's operating under a fraudulent trademark and yet they are still selling it. what obligation does that retailer who benefits from the transaction being a part of that sales transaction. what obligation do they have now is a matter of law to do the homework to make sure they are not, they're not actually promoting a product was a fraudulently obtained trademark and benefiting from it? >> targets policy is first by

contract for every vendor, supplier, agrees the product they sell certain non- only good for what they are supposed to be sold for, but don't infringe the intellectual property right of others. but to say we go in vet hundreds of thousands and 9,000 skus in our scores, we don't do that. but once we do get a claim, we take it very seriously. we work with the vendor to verify that and if it's found to be its infringing they take it down until the issue. >> okay thank you. >> you have any other tough questions? look i want to thank the panel, as i sat on my opening statement i hope this is a continued dialogue. you've given us something to think about beyond the language is being vetted in the house. i hope that were moving forward with the mark here shortly and in the interest of working with her colleagues in the house, it will be something that ultimately produces a bipartisan positive outcome. your testimony has been very

enlightening in a particular interested in digging deeper into the research professor bb that you've done. you're watching what were doing here and not waiting for us to call you for feedback is welcome. make sure you stand touch with our staff who do a lot of the work. i think senator coons agrees and the staff on the house side, we are very interested in your feedback and your comments and new things that come up. we will hold the record open for a week for any information that any of the members would like to submit. and again thank you all for being hear! hear! at indulging us here in the calendar change. committee is adjourned. in. [inaudible]

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