October 1, 2018 Mr. Sung Chang Director for Innovation and Intellectual Property Office of the United States Trade Representative 600 17th Street NW Washington, D.C. 20508 RE: 2018 Special 301 Out-of-Cycle Review of Notorious Markets Docket Number: USTR-2018-0027 Submitted electronically at: www.regulations.gov Dear Mr. Chang: On behalf of the member companies of the American Apparel & Footwear Association (AAFA), we appreciate this opportunity to submit comments to the United States Trade Representative’s (USTR) 2018 Special 301 Out-of-Cycle Review of Notorious Markets. We are grateful to USTR for its strong and unfaltering commitment to the protection of American intellectual property rights around the world. AAFA is the national trade association representing apparel, footwear, travel goods, and other sewn products companies, and their suppliers, which compete in the global market. Representing more than 1,000 world famous name brands, AAFA is the trusted public policy and political voice of the apparel and footwear industry, its management and shareholders, its nearly four million U.S. workers, and its contribution of $384 billion in annual U.S. retail sales. AAFA’s Brand Protection Council (BPC) vigorously pursues brand protection efforts, with a focus on the global war against counterfeit apparel, footwear, accessories and other supplier products. Stolen intellectual property costs our members billions in lost sales, damage to brand reputation, and substantial legal expenses. Ultimately, these costs lead to U.S. job losses and higher costs for U.S. consumers. On this note, we would like to highlight our concerns over the recent imposition of tariffs under Section 301, specifically as they may stimulate trade of counterfeit goods. The new tariffs announced by the Administration will impose a tax on legitimately traded goods from China and these taxes will be paid by U.S. branded companies (who also take steps to ensure their products comply with applicable laws and taxes). Counterfeiters, on the other hand, will likely avoid these duties, driving up the delta between legitimately traded items and their illegal knockoffs. This could have the unintended, adverse impact of driving certain consumers to purchase counterfeit goods as a cheaper alternative. These tariffs, which are being imposed following an investigation designed to arrest intellectual property rights abuses in China, could ironically make the problem worse. 1 Below you will find the online and physical markets flagged by our members for engaging in and facilitating substantial trademark counterfeiting and copyright piracy. Online Markets The rise of e-commerce has connected consumers in the U.S. and around the world with an ever- growing network of criminal counterfeiters, especially on third-party marketplaces. Counterfeiters have adopted an array of tactics to deceive consumers and have exploited online platforms to gain an appearance of legitimacy. It is for this reason that online markets must be proactive in their approach to combat intellectual property theft and misuse. AAFA recommends the following online markets to USTR for its 2018 Notorious Markets List: 1. AMAZON: amazon.co.uk (United Kingdom), amazon.ca (Canada), and amazon.de (Germany)1 Amazon dominates as an online global marketplace for apparel and footwear. As the platform continues to grow, AAFA members recognize the significant opportunities to utilize the platform to connect with consumers around the world. Some brands have partnered with Amazon to set up official storefronts and others have ongoing working relationships with the platform. At the same time, our members are growing increasingly frustrated with how the platform protects their intellectual property. Brands report that the proliferation of third-party sellers on the platform has led to the widespread availability of counterfeit goods. According to Amazon, in 2017, for the first time in Amazon’s history, more than half of the units sold on Amazon worldwide were from third-party sellers.2 Not all third-party sellers facilitate the sale of counterfeit goods on Amazon. However, there is a growing concern—which many members have validated through experience—that Amazon’s selling structure limits the ability of both brands and consumers to verify the authenticity of goods. AAFA has had regular and consistent dialogue with Amazon over the past year to address the intellectual property related concerns of our members. We have also facilitated numerous opportunities for our members to engage with Amazon. In May, AAFA held an in-person meeting at Amazon headquarters for our member brands to discuss recurring issues on the platform with the Customer & Brand Protection team. It is our hope that the dialogue we have established with Amazon will not only continue, but that it will result in actual improvement. Many of our members report that little, if anything, has changed regarding the protection of intellectual property on the platform over the past twelve months, despite these open channels of communication as well as updates to Amazon’s brand protection programs and functionalities. Members have been dealing with recurring issues, as detailed below, and have not seen progress. This is particularly frustrating given Amazon’s leadership as a technology and retail company. Members consider Amazon.co.uk, Amazon.ca, and Amazon.de to be the most unresponsive and non-compliant Amazon marketplace extensions. Below are the concerns members have flagged for the attention of USTR: 1 While USTR’s Notorious Markets List is concerned with foreign markets that engage in and facilitate substantial trademark counterfeiting and copyright piracy, it is important to emphasize that many of AAFA’s members report the same issues detailed in this section also persist on Amazon.com. 2 https://www.sec.gov/Archives/edgar/data/1018724/000119312518121161/d456916dex991.htm 2 • Fake Brands: Members report coming across products that use their trademarks and brand names to identify product, but that are in no way associated with the actual brand. These “fake brands” infringe on registered trademarks. Members report Amazon is aware of this problem, and sometimes takes steps to interdict them, yet the same “fake brands” resurface on the platform, sometimes months later. • “By [Brand]”: Amazon’s use of a brand’s trademarks “by [brand]” in product listings is a source of frustration for members and a source of confusion for consumers. For brands, especially those brands that do not sell directly on Amazon, having products listed as “by [brand]” is at best unauthorized and at worst counterfeit. Moreover, this is confusing for consumers shopping on Amazon, who may believe they are receiving product from the authentic brand or an authorized third-party seller—especially as these listings often include a copyrighted image from a legitimate website. • Inconsistencies in Reporting and Responding to Notice of Complained Infringement (NOCI): Members report that after a notice of complained infringement (NOCI) has been submitted, inconsistencies exist in the handling of submissions. Members also report inconsistencies in Amazon’s removal of identical items on the platform. For example, Amazon’s review team may determine that one set of 50 ASINs—Amazon Standard Identification Numbers—is infringing and will therefore remove the content. However, the review team could then determine that the next set of 50 ASINs for the exact same product and brand are not infringing and will therefore take no action for those ASINs. This leaves brand protection and legal teams with scattered results and uncertainty as to how to engage with Amazon to protect their brands. • “Just Launched” Sellers and Recidivist Sellers: Often, members see ASINs—that had previously been reported as infringing—surface again with “Just Launched” sellers. Typically, a “Just Launched” seller’s name is made up of a sequence of letters and/or numbers otherwise not in recognizable English syntax. These “Just Launched” sellers usually come down within 1-3 days, but the ASIN remains live with “no” offers. New sellers attach themselves to that ASIN immediately. One member reports encountering ASINs with over thirty sellers attached, where only a handful of sellers are authorized. Amazon seems to have little or no control over new sellers. Amazon claims to “vet” their sellers, but there have been days where members encounter dozens of new sellers listing counterfeit products. Members report they must repeatedly follow up with Amazon when they need a problem seller or network of sellers—with the same or similar listings— removed. • Pushback on Copyright and Design Rights: The unauthorized use of a licensed image in a listing misleads consumers who do not know that the product is not coming from an authorized seller. On Amazon.co.uk, members continue to locate and report copyright infringement, noting that they have received pushback on almost all their requests. Pushback refers to e-mails from Amazon notifying a brand or vendor that they are not going to remove the listings or requesting more information before they can do so. • Brand Registry: Members have had mixed experiences with Amazon’s Brand Registry. Amazon’s Brand Registry program is designed to help protect registered trademarks on 3 Amazon.3 Some AAFA members have elected to enroll in this program on behalf of their brands. They have reported some progress; however, they have seen little improvement on the functionality and effectiveness of Brand Registry overall.