Mr. BUDNITZ. No, I think I have made all the points that I intended to.

Mr. SAWYER. Thank you very much. We appreciate you taking the time to come here and give us the benefit of your views on this.

Mr. BUDNITZ. Thank you.

Mr. SAWYER. All right, our next panel consists of Kenneth R. Umans and Richard A. Wallen. Mr. Umans is a partner of Nims, Howes, Collison & Isner, of New York, a firm specializing in the field of intellectual property protection. He is a member of the New York Patent, Trademark and Copyright Law Association, United States Trademark Association and the International AntiCounterfeiting Coalition. He has spent approximately 13 years specializing in the protection of trademarks, copyrights and patents, with a particular expertise in the trademark counterfeiting area.

Also, we will hear from Richard A. Wallen, who is a partner in the law firm of Harris, Kern, Wallen & Tinsley in Los Angeles, CA, where he specializes in patent, trademark and copyright law. He has chaired many bar association committees in the trademark law area, and has spoken on the issue at various bar association conferences and seminars.

Gentlemen, welcome to the Subcommittee on Crime. We have received copies of your statements which, without objection, will be made a part of the hearing record and you may proceed as you see fit.

Mr. WALLEN. Thank you.



Mr. UMANS. Thank you, Congressman Sawyer, for inviting us to express our views to you today. Dick and I have always liked batting cleanup, going back to our childhoods, except we now know what it must feel like for a woman to see somebody with the same dress. Most everything I might have said to you in a more organized form has already been said, so I am not going to bore you.

I will say to you that I have tussled with street vendors, with wholesalers, with mothers, with retail chains, all with respect to counterfeiting in 15 or 20 States, and I have sued over 200 people over an 8-year period, strictly in trademark counterfeiting, but 13 years ago I started out by undressing little dolls that were coming in from Taiwan to see if they had tattoos on their back and they were counterfeit in the copyright area. (Laughter.]

Mr. UMANS. So you might say that-
Mr. SAWYER. That is what you were doing. (Laughter.]

Mr. UMANS. I also won't tell you about my childhood, which really qualifies me to tell you about the counterfeiting area. I always say it takes one to know one. [Laughter.]

I would say to you, Congressman, that with respect to all this experience, when I first started out-this goes back to 1970—we utilized Customs quite a bit and Customs has always cooperated. That was very helpful with respect to the copyright field.

About 1976 or so, Cartier and Levi began having trademark counterfeiting problems. Prior to that, there were sporadic counterfeiting problems in the trademark area, but it became a state-ofthe-art industry starting in about 1976. At first-the first 4 yearswe were able to get TRO's with notice. We were incredibly ineffective.

I became very friendly with the counterfeiters. They would immediately start a new corporation. I got to know them over a period of years. I kept suing them; they kept starting new corporations.

In 1980, in the Vuitton case, we finally convinced the second circuit that under the rules, particularly rule 65, that that would encompass TRO's without notice. Of course, that theoretically sounds nice, but when you go in and you enjoin somebody and they have got a back room full of merchandise, it doesn't guarantee that these nice citizens will keep that merchandise available for you. So let's talk practicalities. They don't.

Then the rock stars did us a favor when they started trying to seize T-shirts that were cutting into their profits at their concerts. That proved to be very effective. The seizure order was starting to be granted with a TRÒ without notice and that became the state of the art for us practitioners. Now we had some equal weapons to fight the counterfeiters for the first time.

I can state for you categorically that the ex parte TRO, with seizure, has made major, major inroads on counterfeiting and I can tell you that with respect to at least five major Fortune 500 companies that I have represented.

The reason that has made inroads is that you are taking capital away from counterfeiters. These are people, by the way, that are not your good people paying taxes, Congressman Sawyer. These are people that deal in cash, in no records.

We take capital away without notice, yes. It sounds harsh, but what they are doing is harsh. We do it as best we can pursuant to due process. I have had conversations with a number of judges in at least 15 or 20 States, and I will tell you that about 98 percent of all Federal judges will grant the TRO seizure order, and you ask for precedent, come to my office, I will show you 200 case files. I have gotten them for 8 years, tons of them. I think I have as good an idea as anyone in this country, perhaps except with respect to Mr. Wallen, as to what these judges think, what they want and I think that in 99 percent of the instances, we give them what they want, which is probable cause and due process.

Now, having said that, I want to say that we do need a bill very, very badly, because there is that few percent of judges that will not grant, or feel queasy about granting ex parte TRO's with notice. There has always been a need in the law for uniformity and there has always been a need for both the defendant and plaintiff to know what to expect.

That is the reason a bill like this, which would codify what 98 percent of the Federal judges are doing, is necessary. I don't want to have to worry about which judge I am getting in Florida or which judge I am getting in California or is there a way of getting around that judge in South Carolina, which is what we do, quite frankly.

Having said we need a bill, I want to tell you that I don't want this bill if it is going to water down what I have already got. You

have heard this before, but I am one of the ones who shouted loudest about it. I can't stand the idea of the intertwining of the criminal and civil provisions of this bill.

I cannot live, as a civil litigant, on a practical basis with an intent to deceive or knowledge standard in the civil section. I cannot live with having to contact the U.S. attorney every time I want to make a move. I would rather not have the bill.

This is the greatest weakness of this bill, the intertwining of criminal and civil. There can be different standards, different remedies, and different situations involved with both, but there has got to be a bifurcation, and it is a severe weakness in both the House and the Senate versions.

Also, it has been mentioned today that it would be highly impractical to think that you can go in there and do a seizure without some limited search. I have almost gotten killed, shot, knifed, pushed in doing these things. I know what is involved.

There has to be a limited search. There are ways that we do it; there are ways we draft the order to allow it, but take my word for it, Congressman Sawyer, when you go in and there is a counterfeiter there in a back room full of merchandise, he doesn't label his boxes “counterfeits.”_When you go in there, you have got to look and see where it is. They have gotten very sophisticated. We have dealt with detectives who spend months becoming friends, dating their girlfriends, getting involved in this. It is a very, very difficult business.

I may sound a little bit flippant, but I thought you might be getting bored. It is a difficult business and it is a tough business. The realities of the situation are such that you must make a search. You need those business records. We have always gotten the business records and this is not the Lanham Act I am talking about; this is state of the art court-made law that has evolved to fit a new cottage industry, mainly counterfeiting.

Now, one other thing I will mention and I will turn it over to Mr. Wallen, and that is the definition of "grey market." I just happen to be the attorney for the defendant in the leading case in the field right now in grey market merchandise and I am very unpopular in this room because of it because usually I represent the plaintiffs and the corporations in their counterfeiting. I have chosen to represent the importers with respect to the grey market issue and I have won in the second circuit.

Grey market definition has not been correctly stated today. It has nothing to do with counterfeiting. It has to do with the alienation of genuine goods, and I stress the word "genuine,” by the people who make them or sell them or who are licensing people to make them or sell them. They are not counterfeit; it is a totally distinct issue and anytime you would like to break bread and talk to me for 5 hours on grey markets, I would be happy to. It has nothing to do whatsoever with counterfeiting. It is not counterfeiting.

Overruns do have something to do with counterfeiting, and I have a very strong disagreement with what has been said on overruns. There is no distinction in my mind between a Taiwanese manufacturer that was licensed by the Izod shirt company to make shirts, makes a million extra and then sells them out the back

door. Once that Taiwanese person, in a unauthorized way, sells those million shirts out the back door, without giving Izod the right to have quality control, you have counterfeiting to the nth degree and it is a major, major problem.

To give you an example, Congressman Sawyer, there is a major distinction between a genuine contract dispute and backdoor sales in an unauthorized way by a Taiwanese manufacturer. That is counterfeiting. I cannot see how you can make a distinction between somebody who has a license and chooses to sell out the backdoor with overruns and somebody who never had that license, makes the exact same quality goods, and does the same thing.

There is the Monte Carlo shirt case in the ninth circuit and it is just in line with 40 years of precedent with regard to contractual disputes where manufacturers have exercised their quality control or have authorized the making of the goods. Backdoor sales, by my definition, is not that.

So with respect to grey market, if you have any questions, I would be happy to answer them. With respect to backdoor sales, you now know my definition, and I think they should be included under the definition of counterfeiting.

Having given you those few words, I thank you and I turn it over to Mr. Wallen.

[The statement of Mr. Umans follows:]




H.R. 2447 and S. 875




Trademark counterfeiting is a relatively recent phenomenon and constitutes a major problem in the United States. One of the salient reasons that trademark counterfeiting flourished was the ineffectiveness of traditional legal remedies as tools to deal with the said problem. The use against counterfeiters of the Ex Parte Temporary Restraining and Seizure Order has been highly effective and has had great deterrent value. Although most Federal Judges will issue Ex Parte Temporary Restraining and Seizure Orders, some will not. The lack of nationwide uniformity on this matter can and has led to unsettling as well as unjust results. It is highly desirable for Congress to codify the granting of the aforesaid Ex Parte Orders so that the law regarding counterfeiting will be settled and predictable.




My main criticism of both the House and Senate Bills is that
the same "intent" or "knowing" standard is applicable both
to the Criminal and Civil Sections of the proposed Bills.
There is no valid reason why a civil litigant should have
to prove intent or knowledge when seeking ex parte relief.
It should be sufficient if the offer for sale, sale, or
distribution of counterfeit merchandise is initially proved
by a given plaintiff.


Neither the Senate or House Bill provides for a limited
"search" as well as seizure, nor is there a provision for a
limited document seizure. The lack of a "search" provision
is unrealistic, and the lack of a document seizure section
will needlessly detract from the effectiveness of the
procedure in question. Finally, the definition of who may
apply for an Order under the Senate and House versions of
the Act is too limiting as are the sections relating to
civil remedies.

Other criticisms of the Bills in question are set forth in more detail in my full written statement.

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