COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON LICENSES & INSPECTIONS - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, October 26, 1999 10:25 p.m. - - - BILL 960085 - An ordinance amending Chapter 9 of The Philadelphia Code relating to "Regulation of Businesses, Trades, and Professions," by amending Chapter 9-200, entitled "Commercial Activities on the Streets" and by amending various sections on the chapter prohibiting the sale and distribution of goods bearing counterfeit trademarks, and providing for seizure and forfeiture of such goods, under certain terms and conditions. PRESENT: COUNCILMAN JAMES F. KENNEY, Chair COUNCILMAN DAVID COHEN COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK DICICCO COUNCILMAN DARRYL L. CLARKE COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 10/26/99 L&I COMM. - BILL 960085 I N D E X Otis Haigler, Jr. . . . . . . . . . . . . . . 5 Legislative Regulatory Affairs Manager Department of Licenses and Inspections Gerald Richards, the Manager. . . . . . . . . 11 Business Compliance Unit Department of Licenses and Inspections M. Kelly Tillery, Esq. . . . . . . . . . . . 22 Partner - Leonard, Tillery & Sciolla 3 10/26/99 L&I COMM. - BILL 960085 P R O C E E D I N G S
Good morning, ladies and gentlemen. This is the Council Committee on Licenses and Inspections. We have a quorum present, with Councilmembers Nutter, Rizzo and Councilman Clarke, and myself, Chairman Jim Kenney. We have one bill to deal with today, which is Bill No. 960085, which is an ordinance 11 amending Chapter 9 of The Philadelphia Code relating to "Regulation of Businesses, Trades, and Professions," by amending Chapter 9-200, entitled "Commercial Activities on the Streets" and by amending various sections on the chapter 16 prohibiting the sale and distribution of goods bearing counterfeit trademarks, and providing for seizure and forfeiture of such goods, under certain terms and conditions. This bill was introduced on February 19, '96, so it's quite old. We've had numbers of discussions over the years about this issue. The primary problem is that people have taken it upon themselves to see basically steal copyrighted trademarked material and resell it on the streets 4 10/26/99 L&I COMM. - BILL 960085 of our city, whether it's at a rock concert, at a sporting event, or just generally out on the street selling bogus and bootleg tapes and other types of items. Some people may argue that that is not exactly a serious crime, but I would argue, in the reverse, that people in the city are being ripped off of the cost to trademark goods, I think that escalate as a result of this theft of -- basically theft of services, theft of trademarking and copyright protections. The materials that are often sold are of poor quality. Once the person buys the poor-quality merchandise or tape or video, they have no place to return it, as they would in a normal established store in our city. And I think, long term, our problem generally is that we are attempting to attract businesses to the city to establish proprietorships and businesses in our neighborhoods and in our downtown, and they are being undercut by people who are basically stealing the items, stealing the trademark, and stealing the goodwill that goes along with those trademarks and undercutting established stores in 5 10/26/99 L&I COMM. - BILL 960085 the city that employ people who pay taxes, that pay property and wage and unemployment compensation taxes in favor of people who are outside their own store sometimes, selling that exact item, which is not a legal item, for much less of a cost, undercutting that business and destabilizing our economy. So what I'd like to do is to ask Licenses and Inspections to put on the record their position on this issue, and then we'll go forward with Mr. Tillery, who has a short tape and some testimony of his own. So would you please identify yourself for the record.
Yes. I'm Otis Haigler, Jr., Legislative Regulatory Affairs Manager for the Department of Licenses and Inspections.
Good day, Councilman Kenney and members of the committee. , Legislative Regulatory Affairs Manager for the Department of licenses and inspections. Today I appear to provide additional testimony on Bill 25 35, which relates to the confiscation and 6 10/26/99 L&I COMM. - BILL 960085 forfeiture of counterfeit goods. The Department has no objections to the enactment of this bill because, in spirit, we are already enforcing provisions of the bill under other sections of The Philadelphia Code regulating businesses, trades, and professions, in Chapter 8 9-200. The Department of Licenses and Inspections, through its Business Compliance Unit, currently enforces the provisions of Title 9. Under Chapter 9-200 -- Sections 9-203, Subsection 9; 9-204, Subsection 12; 9-205, Subsection 9; and 9-206, Subsection 12 -- our department, subsequent to inspections conducted by inspectors in the Business Compliance Unit, can revoke or suspend the licenses of an offender who engages in deceptive businesses practices. Also Sections 9-204, Subsection 12(b), and 9-206, Subsection 12(b) governing sidewalk vendors in Center City and sidewalk vendors in neighborhood business districts respectively gives our inspectors the power to confiscate stands, equipment, goods, wares, merchandise, and any other article or thing held for sale by any licensee who uses the sidewalk or street in 7 10/26/99 L&I COMM. - BILL 960085 violation of this section. 2, which deals with fraud, misrepresentation, or knowingly making false statements in the course of carrying on the licensed activity, and the goods would be subject to confiscation under those subsections. Additionally, if the person is not licensed, it is a moot issue because we would confiscate their goods since they are operating without the required license, regardless of whether the items were counterfeit or not. Bill 35, if enacted, will expand our ability to confiscate goods outside of the Center City boundaries and neighborhood business districts to include the entire city. We believe there is no question of this, under the current requirement of the code regarding our powers to enforce this bill. We would like to clarify the policy of the Department to enforce the provisions of the bill. Our policy will be to enforce the provisions of this bill on a complaint-only basis when we are accompanied by 8 10/26/99 L&I COMM. - BILL 960085 the manufacturer's representative, who will have the responsibility for identification of the counterfeit items prior to confiscation, and a uniformed police officer. Now, the reason for this policy is twofold: First, due to the manpower limitations and other enforcement responsibilities of our Business Compliance Unit, we need to limit the number of inspections to complaints received concerning counterfeit items where there is a manufacturer's representative who has the expertise to identify the various trademarks and specifically the violations of their trademark. Secondly, we will only confiscate the goods in the presence of a uniformed police officer. This provision is good for the protection of our personnel; and also, since the items in question are in violation of the Pennsylvania Crimes Code, the police, at their discretion, can arrest the individual. The manager of our Business Compliance Unit will coordinate our response to the complaint with the manufacturer's representative and the police 9 10/26/99 L&I COMM. - BILL 960085 department. Presently, the Department, on many occasions such as sporting events and concerts, already enforces provisions of Bill 35 regarding trademark violations and the confiscation of goods. S. marshals or private detectives, who make the identification of the counterfeit merchandise prior to its confiscation. In summary, we have cooperated in the past with Mr. Tillery's organization and we will continue to do so to address the concerns regarding the illegal distribution of counterfeit goods. Thank you.
Thank you very much. Councilman Rizzo has a question, but I want to ask Mr. Tillery, after listening to the gentleman's testimony that should cover some of the areas that he talked about as related to the 10 10/26/99 L&I COMM. - BILL 960085 potential implication of legislation that's being embodied in this, why you think this bill is necessary as opposed to what is already in place, and also talk about some of the issues relative to personnel and manpower needed to do this and what the industry is willing to provide to assist us in that. The Chair recognizes Councilman Rizzo for a question of L&I at this time.
Thank you, Mr. Chairman. Could you please describe -- one of the concerns that I have is the confiscation. Could you describe presently, when L&I, in the presence of the uniformed officer, confiscates 200 T-shirts that are counterfeit, or videotapes, could you describe how that's managed and how we know that this material that's confiscated does not wind up going out the back door. How does that work?
I have with me Mr. Gerald Richards, who is the Manager of our Business Compliance Unit. I would ask that he --
Mr. Richards, if you could just move that chair forward so that you 11 10/26/99 L&I COMM. - BILL 960085 can participate in the discussion. Please identify yourself for the record before you proceed.
Yes. My name is Gerald Richards. I'm the Manager of the Business Compliance Unit of the Department of Licenses and Inspections.
Yes, I can repeat it. If presently L&I has the ability to confiscate in the Center City district the -- any person selling items without a license, you can presently, even if it's legitimate things, confiscate it. And if it's not, you can also confiscate it and you want to broaden this. Your L&I people go to a particular table, and in the presence of a uniformed officer, confiscate 100 videos, 200 T-shirts and other unlicensed materials where the person doesn't have a license 12 10/26/99 L&I COMM. - BILL 960085 -- did I do that correctly, that scenario?
Okay. Presently, we store them. We have a warehouse in South Philadelphia. And, periodically, we just destroy them and take them right to the incinerator and get people from our Clean and Seal Unit of Licenses and Inspections, with big trucks, round them up, and take them in and destroy them.
But it is conceivable that if there are 500, 600, 1,000 videotapes, are they locked up in a cage or -- how do you --
Sure. This is a secure warehouse that only two people have access to -- myself and another supervisor.
I want to address the Chair for a moment. It seems as though, even though it's counterfeit, there's lots of kids out there that would never get a legitimate licensed T-shirt. Rather than destroy them, I would hope that we 13 10/26/99 L&I COMM. - BILL 960085 could think of a better way of utilizing this stuff.
Well, part of the problem is, I think -- and I come down on the other side of this issue because I think this stuff should be destroyed. Part of the problem is, if we continue to allow, even at a giveaway, these items to be flooding into the market, we're still undercutting the legitimate retailer who will never sell that. 'Cause if someone has a bogus, say, Nike jacket, okay, and perhaps the person being given it to can't afford to buy a regular Nike jacket -- and that's understandable, there's a lot of people in those circumstances -- that retailer who couldn't sell that Nike jacket, the legitimate trademarked Nike jacket, won't be able to sell that jacket and will still, regardless of whether the illegal vendor gets the benefit or not, the illegal counterfeit item is still within the community. So it's still undercutting a legitimate retailer. I guess my concern is -- and this is the reason who this is here -- is that it's very difficult to run a store, to run an operation, to 14 10/26/99 L&I COMM. - BILL 960085 have a bricks-and-mortar type of business and comply with all of the things that we require people to comply with, pay all their taxes, pay their employees, and try to eke out a living when you have some guy who put's out a folding card table with some stolen merchandise and is basically undercutting you.
Well, with this proposed legislation, I think that quickly this problem would go away if they start confiscating the materials. And my point being -- and I understand where you're coming from, but it kind of troubles me just to see this stuff dumped. Also, what I would like to see, 'cause I don't want to see a person that works for government tempted by a room full of T-shirts and videotapes, would -- I think there should be a better plan on paper on how this material is dealt with. I hear what Mr. -- What Joel's saying, but I would --
Yes, it's a bonded warehouse. 15 10/26/99 L&I COMM. - BILL 960085
Well, the Commissioner, the Deputy Commissioner of Business Regulatory essentially has access, I have access, and one other employee. So, if they need to go there, then I'm not aware of anybody else that has access to this warehouse.
I think we face this same problem with the confiscation of drugs, with police officers with handguns and any other stolen merchandise that goes to the property room. And anyone, I guess, has that temptation, but the key is not to succumb to that temptation. That's why we have a DA's office, I guess.
Could you just describe -- and I'll finish with this last question. Could you please describe the quantity of merchandise that you presently confiscate from either unlicensed vendors or -- how much stuff is in this room?
Presently, the volume is down. Four, five years ago, before a lot of the new legislation establishing these districts and 16 10/26/99 L&I COMM. - BILL 960085 regulations, it was a massive body. Right now, it's not much, it's not much. You might confiscate regularly every two weeks or so. So it's not -- we're not talking about a massive amount of merchandise and materials stored at this location at any one time.
Thank you, Mr. Chair. In your testimony, you indicate that you enforce this on a complaint-only basis. Could you elaborate on that? What's the process -- a phone call, a written complaint? Where does the complaint go to -- to the police, to L&I?
We would be responsible to respond on a complaint-only basis. And my testimony -- our policy would be to respond on the complaint-only basis, and that would be on the basis of the manufacturer or their representative giving us a call, sending in some documentation as to the fact that there are counterfeit goods being 17 10/26/99 L&I COMM. - BILL 960085 sold on the sidewalk in violation of the bill. We would respond with our inspectors, with Mr. Richards' office coordinating the response with the police department as well as the manufacturer's representative to go out. And the manufacturer's representative would identify the goods for us, and Mr. Richards would enforce the provisions of the bill.
So is that only from the manufacturer? Because I've seen in the past, talking to Mr. Richards on several occasions, a store owner thought somebody was selling goods. Is that a part of the process?
Well, we would anticipate that it would be a two-way process. If we got a complaint from a citizen, then we would contact the necessary representative to verify that it is, in fact, a counterfeit item before we would respond. I mean, as far as enforcing it. If a store owner calls and says, We have a vendor outside of my location that's selling counterfeit goods, then I will contact the manufacturer's representative and anybody else involved in that and say, I received this 18 10/26/99 L&I COMM. - BILL 960085 complaint, could you verify this for us? And once that happens, we would take action. And, of course, he has people out in the street who are working this all the time, so they would also contact us.
Thank you, Mr. Chairman. I think the only real question I have about this is, how can you or anyone determine what is, in fact, either a counterfeit, a reproduction, a copy, or a colorful variation? How do determine that?
We don't. That's the purpose of having bonded identifiers for us. They would supply us with the documentation that we would use as our backup for the confiscation. But right now, we don't. I mean. . .
All right. And who is this bonded agent, and what's the nature of their relationship with us, the government?
Well, I work personally with Mr. Tillery and several -- a couple of other 19 10/26/99 L&I COMM. - BILL 960085 agencies that I don't know right offhand. And basically, right now, there's just a complaint issued, and the complaint comes to us and says Well, we know of people who are selling counterfeit items, could you verify that for us?
Mm-hmm, thank you. And didn't I read somewhere recently where -- and this might be a touchy subject, but didn't I read a story somewhere recently, two weeks ago or so, where the NFL sent people to Philadelphia to make sure that, I guess, bars and other locations were not inappropriately, I guess, receiving a signal that they weren't supposed to receive? What happened in that situation? Did we have any involvement or jurisdiction in this particular matter? Or was that strictly handled by the NFL?
Okay, all right. So, as I think Councilman Clarke raised the issue, somebody calls the Department and says, I believe somebody outside is selling something that is in 20 10/26/99 L&I COMM. - BILL 960085 fact counterfeit -- or maybe it actually is. You don't send someone out first, you don't immediately call this agent person?
Well, we would go out and check for the license in an offending situation like that.
So first you would go out to see if they're properly licensed.
Yes. And then we would contact one of these agencies or something like that.
Then the agent comes out and the agent says, yes, these are, in fact, counterfeit items, because I'm bonded, I know my business, I'm expertly trained on all this. Next what happens?
We go to the vendor location identified and we can cite them on 205, fraud and misrepresentation, and it's subject to confiscation.
Okay. And do we 21 10/26/99 L&I COMM. - BILL 960085 have any particular provision -- I know there's mention in here maybe of a hearing. Let's say that the person who bought the goods or somehow came in possession of the goods bought those goods in good faith from somebody who obviously sold them in bad faith. Do we try to elicit the information as to where did these goods come from and make any pursuit of that particular person? Or does it just stay with the person who's out there selling?
In the past, we've worked with (inaudible) government agencies. And in the past, they have made arrangements. Licenses and Inspections was not directly involved in that part of it, but I know that they have made arrangements saying, if you tell me who the suppliers are, you won't have to pay the fine. (Inaudible.) It's a private agency. So I know that happens. L&I is a part of it.
Thank you. Could you -- and I'll just throw this 22 10/26/99 L&I COMM. - BILL 960085 out at the table because I'm not sure who will answer this. Could you describe, when an item is licensed, if I want to get around this proposal, if I want to create a T-shirt that says "Philadelphia Eagles," "Philadelphia Phillies," "Philadelphia Flyers," is there a legal way that I can reproduce an item and change it just enough to make it legal and get around this legislation?
I'm M. Kelly Tillery, a partner from the law firm of Leonard, Tillery & Sciolla, in Philadelphia. And I represent many owners of famous trademarks and copyrights. I'm here to testify in support of the bill. You're asking me to give legal advice to assist someone to break the law, or to come close to it and not actually break the law. Is there a way to alter a trademark so much such that it is no longer a trademark violation? Yes, but the question is, when you alter it that much, it is no longer recognizable as the trademark and, 23 10/26/99 L&I COMM. - BILL 960085 therefore, not attractive to the purchaser. If it is recognizable to the consuming public as the trademark -- say, the Eagles or the Phillies or some rock-n-roll performer -- then it is a trademark violation. The law test is whether or not it is a colorful variation or whether or not it is confusingly similar. It does not have to be identical, but if it is confusing similar to the average consumer, that's the test of the law that applies. And the problem is that if you're a counterfeiter, you're trying to make it as similar as possible in order to get the consumer to buy it, to think that it is a legitimate good. So if you're trying to get far away to make it legal, you're not going to have a customer that's going to buy it.
Well, that's what I wanted to understand. Is there -- as what you just described, there has to be a significant difference which would not be attractive. So I believe you've answered my question. There's not just a minor modification to the Eagles' logo that 24 10/26/99 L&I COMM. - BILL 960085 would make it legal for a person to sell it on a table.
No, because it would still be confusingly similar. And the kinds of product we're talking about are identical, and they're purposely identical. They are made by the counterfeiters to be identical in order to deceive the customers.
What happens if Licenses and Inspections goes to a location, and the vendor says, Well, this is not a duplicate of what is sold by a licensed vendor? At that point, how would you deal with that if it were to became a dispute? Would you back away, would you move forward? What would you do?
Well, presently, that's what the -- the situation we would be in because we are not trained agents or trained to identify or to verify that something's illegal. So if there's a licensee -- currently, right now, if we go to a location and there's Eagles T-shirt on there and somebody has made complaints that it's a bootleg, I have no way of knowing that, the inspector's got no way of knowing. So we go there 25 10/26/99 L&I COMM. - BILL 960085 strictly looking for the licensing, whether or not it's a legally licensed location.
But they say -- not to go on much further with this, but what if they say, But, L&I, this is not a copy, you don't see a trademark insignia on here, this is different than theirs, you would have to rely on the bonding agent? What position does that put you in if you're challenged? Could you be sued? Obviously, you can.
Oh, absolutely, absolutely, yes, yes. And that's certainty the chance that the trademark or copyright owner will take in making a complaint. If one of my clients made a complaint told and L&I that it was counterfeit and it turned out not to be counterfeit, my client would be exposed to a legal procedure or any other kind of lawsuit for wrongfully accusing someone of violating the law. But I can almost guarantee that that's not going to happen because my people are trained and they know what's counterfeit and what's not counterfeit. Do human beings make mistakes? 10/26/99 L&I COMM. - BILL 960085 Could it happen? Of course.
Thank you, Mr. Chairman. Mr. Tillery, I notice in some of the information that was provided to this committee on you and your company, it talked about software piracy and other things. In parts of my district, there's a larger percentage of what we may call videotape piracy or T-shirt piracy. I'm wondering if there's any statistical data available that show that the cost associated with the losses of legitimate sellers of those items could be provided. I mean, is it such that the legitimate businesses will overwhelmingly absorb the cost of increased and enhanced enforcement?
It is an enormous problem, Councilman, and I will show you the videotape, and you will see some statistics. But certainly, the Recording Industry Association of America has given Councilman Kenney a support 27 10/26/99 L&I COMM. - BILL 960085 letter in support of this bill, as well as the Motion Picture Association of America has provided those statistics -- and I'll provide them to you -- to show that the cost of every motion picture, the cost of every CD that's put out, includes the cost of policing counterfeiting both at the state and local and federal levels. The expense of policing counterfeiting is enormous. It is continual, it is like cock roaches -- you have continue to keep them away. And it's a problem that's going to continue.
It is a problem that the expense gets passed on to the consumer because when you buy the legitimate videotape, you are paying in part for the expenses of enforcing anti-counterfeiting throughout the country. So that expense is passed on.
Okay. So potentially now, would you be passing on some of that expense to the government for the enhanced 28 10/26/99 L&I COMM. - BILL 960085 enforcement?
Well, in asking the government to, on behalf of people who produce a lot of jobs and taxes to assist them in enforcing the existing federal, state, and local laws, to that extent, yes. And, of course, that's the nature of government -- that the government in some way, has to protect itself.
Well, let's put it this way. These industries produce an enormous amount of money. I'll tell you, Ricky Martin is going to be in town tonight, down at the First Union Center. It's a packed house of 22,000 people, and the gross revenue of T-shirts and merchandising sales, for which this city will get a nice chunk based on taxes, could exceed $300,000 in one night. And I would also guarantee you, Councilman, that there will be at least 2 or 300 counterfeiters outside, selling counterfeit Ricky Martin T-shirts. There will be enforcement efforts to stop it -- private-industry efforts, and there will be no government efforts, 29 10/26/99 L&I COMM. - BILL 960085 unfortunately. I would hope that there will be in the future. But the revenue that is produced by those kinds of people is -- we're going to have DisneyQuest here hopefully in the future, at Eighth and Market, we have a Warner Brothers store, Ralph Lauren, Rolex stores, and they produce an enormous amount of jobs and revenue for this city, and they are citizens and taxpayers too that need to be protected, and that's what we're asking for here.
Just to expound on what you're saying, part of the reason we're moving on -- why I want to move this legislation forward is not just Rick Martin and Ricky Martin's production company, but it's for John Smith and his wife who have a store on Chestnut Street or in Manayunk or in West Philadelphia, that are trying to run a legitimate bricks-and-mortar business and employe people and pay taxes. Their price costs of what they have to buy wholesale and the price they have to sell at retail and the reputation that they may unfairly achieve because of bogus and inappropriate material being sold, you know, 30 10/26/99 L&I COMM. - BILL 960085 it just all goes on from there. And that's one of the problems that we face from a small mom-and-pop retail side is that they're dealing with somebody who may have illegitimate items on a stand outside their store, selling counterfeit material that they have inside for 10, 15, dollars less. I 8 mean, I don't know how our businesses can 9 continue. 10 An example I would give, which is 11 common in the City of Philadelphia, which is very 12 upsetting to me, is the theft of services from 13 cable television. I would think that the cost of 14 cable TV in this city would be much less if every 15 chip illegally in a box were not in there and 16 everybody was paying for the cost of cable 17 television service. People think that that 18 service is a commonplace, no-big-deal thing. 19 However, the people who don't have chips in their 20 boxes are paying much higher cable bills than they would be if the entire universe of Philadelphians were following the law. So, I mean, I think when you're dealing with high-end entertainers, high-end industries that make a lot of money, people say, Well, what's 31 10/26/99 L&I COMM. - BILL 960085 the difference if we rip them off a little bit? I think the principle is wrong, number one. And, number two, it does affect, in the end, the local business people that are trying to follow the rules and do what's necessary to run their business. Councilmember Rizzo?
Unfortunately, these hearings are to gather information so that you can make an intelligent decision in voting on legislation. So, occasionally, I have to ask a question I might not want to ask. Could you explain, other than people setting up a table or working off the tailgate of a truck, once this legislation passed, is this going to force the unlicensed material to become available in another way? Can people buy right now through the Internet unlicensed materials?
Yes, Councilman. Unfortunately, it's like mercury; if you press it here, it pops up over here. If you stop the street vendors, will they flood to the flea markets? Yes. Will you stop them completely? Never. Is it on the Internet? Yes, absolutely. 32 10/26/99 L&I COMM. - BILL 960085 I'm filing three lawsuits in the next couple of days against people counterfeiting software on the Internet. It is rampant. The street vendor problem has been a problem. Traditionally in this city, it is rampant. All you have to do is walk outside of this building, and in five minutes, I could show you any of the items here being sold on the streets, and they're all illegal, it's all theft of intellectual property. So we are regularly permitting thieves to sell stolen property on the streets of our city right outside our new Convention Center, where we'll have the Republicans coming in next year, right outside DisneyQuest or the Warner Brothers store or Polo Ralph Lauren stores. We're permitting that to happen, and this bill will -- at least I believe -- go a long way to solve that problem. Will it solve all others? No, it won't.
What concerns me -- and I'll address this to L&I -- is, if a person has a license, a vending license, and they're caught selling some unlicensed goods, other than just confiscating and -- confiscating the 33 10/26/99 L&I COMM. - BILL 960085 materials, is their license suspended, revoked? What happens to their license?
Well, if the bill is passed, it would be, but our enforcement here has not been (inaudible) because of our inability to identify.
But if this legislation passes, you're telling me that if a licensed vendor is apprehended with unlicensed merchandise, then their license will be suspended or revoked?
Well, the process -- what I think you're trying to say, and correct me if I'm wrong, is that there is a process in place now for license revocation.
But there is also a process that gives that individual due process to appeal that. I mean, maybe it happened once, and for some legitimate reason, the person was misled. There's the L&I Review Board, there's other processes that people go through to get a fair hearing, and we need to do that before we revoke any license. So it is part and parcel of what we do now, and if it is one of the violations, you can potentially have your license revoked.
Mr. Tillery, would you like give your testimony or do want to play the video now?
I'd like to say a few things first. My name is M. Kelly Tillery. I'm a senior partner in the Philadelphia-based law firm of Leonard, Tillery & Sciolla. I'm a member of the Board of Directors of the International Anti- Counterfeiting Coalition, which is a trade organization based in Washington D.C., on behalf of about 200 owners of intellectual property -- various copyright attorneys and investigators. I've been battling counterfeiting throughout the 35 10/26/99 L&I COMM. - BILL 960085 United States and in the world for twenty years. I'm a frequent author and lecturer on this topic. I've given Councilmembers materials in a folder regarding statistics and information regarding counterfeiting around the country, and more particularly, regarding street vendors, which Bill 35 is going to address. Before I show a brief videotape from the International Anti-Counterfeiting Coalition, I guess I want to address a question of Councilman Rizzo regarding the donation of these items. One item I'd like you to be aware of is that much of the counterfeit items -- not necessarily all of them, Councilman -- are very dangerous. The items I have before you here are -- the T-shirts are extremely flammable and dangerous, and I would hate to see the City of Philadelphia donate dangerous items to poor children who are cold and need a shirt, and I would hate to see them be injured by them. In addition, many of these items are for small children and are not in accord with consumer protection standards. They break off, they're -- little children can swallow them, the sun glasses shatter. Most of the counterfeit 36 10/26/99 L&I COMM. - BILL 960085 goods are seriously inferior products. And if we were to donate those inferior products to children in the community, you might have some serious injuries as a result of that. And so I would hate to see that happen. But I would like to show you a video made by the IACC. It's about seven minutes and will give you some ideas about counterfeiting. (IACC videotape shown.)
As you can see, Councilmembers, the issue here is one of public safety, it's one of consumer protection, it's one of protecting your tax base, it's one of protecting jobs, it's one of protecting big business as well as small business, and a variety of people. And yet it's also an issue for this city, I believe, one of image and integrity, and that should we continue to permit what are thieves, and that these people are selling stolen property on the streets of our city with impunity, especially in the face of us trying to become, and 37 10/26/99 L&I COMM. - BILL 960085 in fact, maybe we are now a world-class city and a world-class destination city, should we continue to permit that. I believe, Councilman Kenney has received, and perhaps some of you have received as well, support letters for this bill from many, many companies, including the International Anti-Counterfeiting Coalition, the Recording Industry Association of America, the Motion Picture Association of America, Nike, Fubu, Adidas, Tommy Hilfiger, Warner Brothers, Disney, the NBA, Children's Television Workshop, Teletubbies, Nautica, Winterland, Nintendo, and perhaps many others. The samples that I have before me here were purchased in a variety of places, but each and every one of them are available within probably about a 10-, 15-minute walk of this hearing chamber. They're all counterfeit, and many of them are, in fact, dangerous. So, as I said, it is a consumer protection issue as well. As far as how this bill will operate, I'm delighted to hear from L&I this year that L&I takes the position that the current law which 38 10/26/99 L&I COMM. - BILL 960085 prevents the sale of goods that misrepresent and commit fraud on the streets of Philadelphia, that they have the power to confiscate those. There was a time when L&I did not take that position, and that really was the genesis of this bill, is that L&I took the position that the provision of the law was not entirely clear that it would address trademark counterfeiting, and that was the genesis of this bill, which does make it specifically clear, that it addresses that. And as the members from L&I have testified, it acts on a complaint basis; that is, if one of my clients or other people in the industry observed a problem on the streets of Philadelphia, we would inform in writing the Department of L&I of the problem and of the locations, and we would take the onus of identifying for them the specific goods that were counterfeit, and we would stand behind that and testify at any hearing procedure if necessary. And I believe this will go a long way in cleaning up the streets of Philadelphia. We have a lot of great law-abiding street vendors out there who can millions and millions of dollars of legitimate goods, and God bless them, I wish them 39 10/26/99 L&I COMM. - BILL 960085 the best, but right now, they're selling a lot of counterfeits, so if they clean it up, we can have people out there who can make money and pay taxes and support the city. Thank you very much.
What efforts are being taken by the industry to get a handle on the manufacturer of all of these various goods? I mean, are you putting a similar emphasis on that?
Absolutely, absolutely, Councilman. We make every effort. It's just like the drug trade, I suppose. The little guy leads you up to the bigger guys -- the manufacturer, the distributor, and the importer. We try certainly, if for no other reason, for purposes of economics, to get the bigger guys. And there is an ongoing effort to do that. We have investigators throughout the world and throughout the country to do that, to shut down manufacturing plants, to 40 10/26/99 L&I COMM. - BILL 960085 shut down distributors. We have a Customs program. Customs works very closely with us to prevent the importation of trademarked goods. Many of these goods are imported without the trademarks on them and then the trademarks are affixed here. On North Fifth Street, unfortunately, in this city, is a haven for businesses who regularly do that. They import goods from the Far East or the Mid East -- inexpensive T-shirts, sweatshirts, and caps and things like that. And so when they get in the country, they don't have the trademarks on them and they pass through Customs and get in here and go into factories and sweat shops in locations around the city or in New York, L.A., and then the trademarks are affixed there. So it is an underground business. The people who do it know that it is illegal; therefore, they take great efforts to hide it. So it is a never-ending battle. But we do, in fact, focus on efforts on getting the larger distributors and manufacturers.
What arm of government do you work with on that? 41 10/26/99 L&I COMM. - BILL 960085
We work with both the United States government, the Department of Justice, who has just actually publicized a new initiative to work with all aspects of law enforcement to enforce the federal trademark and copyright laws, and there are both civil and criminal law at that level, as well as state government. In the last five years, at least fifteen states have increased the penalties for trademark counterfeiting from misdemeanor status to felony status. And, in fact, this state has done that as well. A couple years ago, we were successful in getting a law passed, and trademark counterfeiting is now a felony in this state at a certain level -- if you're a repeat offender, it's a felony. And we have found, however, that, as you find in this city, that the local district attorneys oftentimes are very busy, with limited manpower and resources, dealing with other perhaps more serious, more violent crimes. And oftentimes, that makes us rely upon administrative measures, such as the one we're requesting to be 42 10/26/99 L&I COMM. - BILL 960085 implemented here, as well as civil enforcement, so we go through civil lawsuits as well. But it is a panoply of weapons that we use, both private and governmentally assisted.
Have you had any measurable success in going after the manufacturers, or is it such that you're unable to target those individuals so now you feel the need to deal with the lower-level seller?
No. We actually have a lot of success at hitting manufacturers. I mean, you know, in twenty years of doing this, I have ceased and shut down, you know, scores of manufacturing plants and hundreds and hundreds of million dollars of goods. But, it is -- as I said, it's a never-ending battle. If you shut down one, another one pops up at another location. Because it so lucrative, because people don't pay taxes, there is a great incentive, unfortunately, for people who are willing to break the law to do this. So the reason we're doing it at this level is because it's still an enormous problem, 43 10/26/99 L&I COMM. - BILL 960085 and this is an effective, easy, economical way of addressing the problem, and it's very much in the interest of the people of this city to do that. As Councilman Kenney said, it's not just in the interest of my clients or any wealthy companies who own trademarks and copyrights; it is in the interest of the citizens of this city.
Well, it just happens to be a location -- I can't get more specific about that, probably due to ongoing investigations. But that area happens to be an area of sewing locations, people -- where there are cut-and-sew places that there have been some problems with in the past and there unfortunately may be in the future as well. It just happens to be an area that -- just as if I would describe, there would be six locations where street vendors are a serious problem as well in the city, Center City being one of them. 44 10/26/99 L&I COMM. - BILL 960085
We've had a couple in South Philadelphia that were -- where L&I was helpful with, I think, the District Attorney's Office in shutting down. There were sweatshops and selling operations with illegal aliens and terrible conditions.
And there have been some in Northeast Philadelphia as well, so it's not just one area of the city, unfortunately.
Are there any other questions for Mr. Tillery? (No further questions.)
Thank you very much for your testimony. Is there anyone else here to testify on this bill? (No response.)
That concludes the public hearing of the L&I Committee. - - - 45 10/26/99 L&I COMM. - PUBLIC MEETING
We will now convene a public meeting, and we'll just take a one-minute break until Councilman Nutter's off the phone. (Pause.)
The Chair recognizes Councilmember Nutter for a motion on Bill No. 35, with a request for a suspension of the rules.
Mr. Chairman, I move that Bill No. 35 be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first reading at our next session.
Moved and seconded. All in favor, aye? Opposed? There are none opposed. Bill No. 35 will be reported out of this committee favorably, and an additional request will be made for a rules suspension to allow for first reading at our next 46 10/26/99 L&I COMM. - PUBLIC MEETING Council session. Thank you all very much for your attendance. (Adjourned at 11:13 a.m.) - - - 47 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Tuesday, October 26, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON LICENSES AND INSPECTIONS BILL NO. 960085 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter