Hearing of the Courts, the Internet and Intellectual Property Subcommittee of the House Judiciary Committee - Intellectual Property Act of 2007

Interview

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REP. BRAD SHERMAN (D-CA): Thank you, Mr. Chairman.

Theft of intellectual property and counterfeiting costs U.S. businesses $250 million annually.

REP. ISSA: No, billion.

REP. SHERMAN: It is 6 to 9 --

REP. ISSA: Billion.

REP. SHERMAN: Did I say billion?

REP. ISSA: You should say.

REP. SHERMAN: I should say billion. Thank you, Mr. Issa.

And it accounts for 6 to 9 percent of world trade annually. It steals 750,000 American jobs, including 200,000 in the auto industry and the auto parts industry and 106,000 jobs just in the Los Angeles area, robbing our area of $5.2 billion in productivity, according to a Gallup study.

As Chairman Conyers pointed out, it's also a consumer safety issue. Worldwide, some 10 percent of all pharmaceuticals are counterfeit, 2 percent of all airplane parts counterfeit as well. And finally it is a threat to national security. The 1993 World Trade Center bombings were partially financed through the sale of counterfeit goods, and just a couple years ago over a million dollars -- this time million, Mr. Issa -- of counterfeit brakes were found in Lebanon, with the profits earmarked for Hezbollah.

So clearly we ought to do all we can. I commend the chairman for introducing this legislation. Several months ago I introduced, along with Mr. Chabot, Cohen and Donnelly, The Intellectual Property Rights Enforcement Act. We had the -- have the support of the National Manufacturers Association and the AFL-CIO. I take, however, no particular pride of authorship in this bill, because it's a 100 percent rip-off of the Bayh-Voinovich bill introduced in the Senate.

This does not mean that I don't respect intellectual property rights. I am a fully licensed user of the Bayh-Voinovich bill. But whether we take -- we could spent a lot of time worrying about the differences between the two approaches.

Frankly, I think those can get ironed out rather quickly, and I think the greatest sage in America today is Larry the Cable Guy when he said, " Git-R-Done." Let's move forward and get a bill passed that organizes the American government to deal with this major problem.

I yield back.

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REP. SHERMAN: Mr. Chairman, I'm one person in this room who supports Section 104 and I think we ought to try to emerge with as strong a bill as possible. But I'm going to focus my attention on Title 4, which deals with the international provisions.

And Mr. Hoffa, we have kind of a procedure here under our wonderful free trade agreements. And under this bill we're going to have 10 new intellectual property attaches for the whole world. And it will go something like this: One of these attaches will go talk to the Chinese and yell and beg and point to them where it's their legal obligation -- because we're good lawyers and we believe that paper matters -- and point to them how they're supposed to enforce intellectual property.

Then he or she will leave the room. The Chinese will explode into laughter, because they're good enough diplomats to be able to suppress that laughter while we're actually in the room. Then they'll put back on their earnest faces. They'll have a press conference. They'll announce that they're going to do something. They may actually go out and grab a few counterfeit products, put them in a warehouse until they resell them later. And then we repeat the whole process at the beginning of the next year.

And I wonder whether you think that we need to instead think of some things that go beyond the text of these free trade agreements and actually, for example, take a boatload or two of goods coming in from China and turn them around in order to demonstrate our concern on this issue.

MR. HOFFA: Well, I think the problem is that, you know, in this country if you find a clear copyright and you buy the counterfeit goods, you can sue. And there's a legal system here where you can enforce rights. That isn't really true in China. You're subject to a completely different system.

And if you do find, you know, a copyright infringement in China, you really are in tough shape. And our agreements have not done anything to give you any type of rights to enforce your rights over there.

You might go to the communist government and they might say, "Okay, we found 1,000 DVDs." And then they'll run a steamroller over them, you know, for the TV cameras. Or they'll set some DVDs on fire when -- the video cameras. And that has nothing to do with enforcement.

There isn't really a way to bring lawsuits over there that can be effective to stop this. And when there are violations found in China, it isn't the Chinese government that finds them -- and I don't want to single out the Chinese; it's true in India, it's true in Mexico -- the problem is it's an industry that finds them.

Every major manufacturer has a part of their company that is devoted to find knockoffs or copyrights. So they go and find these and they show, you know, the Chinese or the Indians: "Look what you're doing. What are you going to do about that?" And then you can bring a lawsuit and then there will be some type -- they'll shut down two or three factories. But the two or three they shut down, there's 10 more. So somehow we've got to have in our trade agreements some way either to reciprocate or some type of way to protect our products from being copied.

And of course, the best example is the dog food example, where we had that this summer where we went through, the dog food came in and the dogs were dying because, you know, it had different products in it. And then we had the issue of the copyright Colgate with the antifreeze in it. Now, these were dreadful examples of what can happen, because there isn't anybody in these countries looking for these violations.

Anything goes in these new economies. Unfortunately, they're really at their early economies; anything to make money goes. Over here we don't have that problem. We have consumer safety. We have the Justice Department. We have a lot of enforcement. We have individual lawsuits and we have damages. If somebody does do this and we identify them, they can be sued for millions of dollars. You really can't do that in China and you can't do that in India.

So the problem is, how do we put that into a trade agreement? And I think until we figure that out we ought to stop doing trade agreements for a while, realize the problems that we're losing jobs --

REP. SHERMAN: Should we be --

MR. HOFFA: And we ought to figure it out.

REP. SHERMAN: -- forcing a renegotiation of the trade agreements we have now or just leave those on the books the way they are?

MR. HOFFA: I think that all of them should be -- you know, we've talked about renegotiating NAFTA or terminating it and starting over. People cringe at that. You know, think about it. All the trade agreements that we've done, have you ever known one that's ever expired or that we've stopped? I mean, once they're on the books they're like no one can ever stop them.

You talk about, "Well why don't we just void that agreement?" And every one of these agreements has a provision that ends that agreement. You know, it's a 60-day --

REP. SHERMAN: I would also point out that every single one of them has increased our trade deficit with the country involved.

We've talked a little bit about the need to inspect these containers. Should the cost of inspecting these containers fall upon all taxpayers, even the businesses that are in competition with imports? Or should we have at least the fair cost of examining the containers fall upon those who are bringing the containers into the country?

MR. HOFFA: Well, there are billions of dollars in profits being made by these large shipping companies. I don't think it would be wrong that they pay part of this cost. They're the ones that are bringing in these shiploads of goods in these containers that are coming from the Far East and all over the world. And if you've been to the ports, and most of you have, you see how they're piled so high.

And the odd thing is, there are shiploads of containers coming in, but when they go out, they go out empty. And that is really a story about what's wrong with our trade agreements. It's a one-way deal. They're not buying our products, but we are bringing their products in.

So we have talked about the fact that large shippers should pay a small portion or at least, you know, a per-container cost of inspection, rather than have it put on the American taxpayer.

REP. BERMAN: The time of the gentleman has expired.

REP. SHERMAN: Thank you.

REP. BERMAN: I have an idea. We've been doing it with terrorism laws, non-proliferation laws. You and I have been doing it with laws dealing with Iran. We have extraterritorial application of our copyright and trademark laws.

REP. SHERMAN: Mr. Chairman, you surprise me. You're going one step beyond what I thought was already a pretty extreme position.

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