1

STATEMENT OF A. P. HAAKE, ON BEHALF OF THE NATIONAL ASSOCIATION OF FURNITURE MANUFACTURERS, INC., CHICAGO, ILL.

Mr. HAAKE. I am A. P. Haake, managing director of the National Association of Furniture Manufacturers, Inc., of Chicago.

In order to establish authority for saying some of the things I say, unusual as the procedure may seem, because I am going to speak from direct knowledge which enables me to suggest errors in some statements that have been made and may be made, may I point out that what I say is based not merely on my experience as a trade-association secretary, but I have been in manufacturing, in charge of sales, for the largest furniture manufacturer in the country, have been the advertising agent, and in that period of something more than 30 years, have been active in the business.

I have just completed the trusteeship of an upholstery manufacturer which was to pay 15 percent when he got into difficulties, and I have just cleaned up and paid 80 percent, and left a substantial net for the owners of the business. You will pardon my saying that, but I say that because back of this statement is more than sometimes may be back of what is said by a trade-association executive.

Now why do we ask for this Duffy bill with the Vandenberg amendment, or for the Daly bill, which has the same protection for us? Either would be acceptable to us. It is not in order to secure a monopoly. And may I interpolate there the suggestion that Mr. Fox is in error when he points out that this design protection would provide us with a monopoly under which the larger manufacturers might survive, and the smaller manufacturers pass out. That is not correct. In the first place, we have very few large manufacturers in the industry. The average sales for the manufacturers is $388,000 a year. That is not a large manufacturer. There are less than a dozen of our people who have sales of as much as a million dollars a year. Macy themselves are larger than a large percentage of the total manufacturing industry. It is an industry of small units, and the desire for this protection comes not from the large manufacturers, but comes from the small manufacturers and there is no thought of monopoly there whatever.

The point is we have been losing our shirts, not only through normal competition, but because this design piracy is so frightfully expensive. A manufacturer will lose as high as 10 percent of a year's sales, due to the piracy of a few designs. While I will not take the time now to do it, I will point out in my brief what those losses amount to. It is a frightful thing for us, and this desire for design copyright comes from our industry as a whole in order to protect themselves against this piracy. I respectfully suggest if there is danger of monopoly the danger comes in that in the absence of design protection a monopoly is created for the large retailers.

As I will indicate to you, on authority that is better than mine in that respect, in a few minutes, the larger retailer is the one who very often has these designs deliberately copyrighted, and he can offer a sufficient volume to make an inducement worth while for the manufacturer to do it for him. The smaller dealer cannot do that. It happens time and time again that the smaller dealer who is buying from a legitimate creator of designs, finds his sales destroyed because

the larger retailer is able to undersell him with a thing he has copied. In New York right now Macy goes to this concern, a certain manufacturer, and brings out a suite that retails for around $250; another retailer in New York sends some one to look at that window, copies the suite and has it reproduced to sell for approximately one-half of the earlier price. The first retailer comes back to the manufacturer and insists there must be a rebate, and there is an important loss. Very often it happens that the entire sale of that cutting is destroyed.

I could name you manufacturer after manufacturer who has actually been put out of business-and 40 percent of our manufacturers have passed out of business in the past few years-who have been put out of business because of the designs on which he was making a decent sale have deliberately been torn out from under him. There is where the danger of monopoly lies.

I was on the floor of a Pittsburgh retailer not long ago, who was explaining to me his interest in the prevention of piracy of designs, giving a lot of serious thought to the idea-I am willing to name the man to anyone who wants to know who it was-and, while I was standing there with him, a furniture manufacturer's salesman approached him and he mentioned the name and said "So-and-so, that chair you gave us to copy we will have here for you on Friday." The retailer deliberately took something he know he had no right to take and asked the manufacturer to reproduce it. Of course the manufacturer was just as guilty; I draw no distinctions between them. But the point is it is not a question of establishing a manufacturer's monopoly. But we want it and we want this thing desperately.

Now, then, the Vandenberg amendment, I think, may be misunderstood. As I understand the Vandenberg amendment, what it does is not to specify in detail the application of copyright to industrial design; but, in effect, it takes care of industrial design and places it under copyright and thereby all that has to do with copyright, from that moment on, applies to industrial design. That being the case, Mr. Fox's disturbance over these many, many designs, is a fantasy; it does not exist. We know quite well there are thousands and thousands of designs of furniture of the periods of Duncan Phyfe, Adam, and all the rest of them-I could name 50 or 60 of them for you. They can not be copyrighted. We know they cannot be copyrighted.

Therefore, the retailer and consumer has got in the public domain now a vast number of designs which never will be copyrighted. We do not intend that they shall. But we have actually demonstrated it is possible, it has been done, to create furniture designs that are sufficiently distinctive to meet the already established court test and the practical test for that purpose, and it is those designs that we wish to protect. The great mass of them that already exist, we are not concerned about: they belong to everybody; but now and then, when some furniture manufacturer actually conceives something original and takes the tremendous risks involved in setting it upit may cost as high as $20,000; $2,000 would form an average; rarely under a thousand, just to initiate that cutting when he takes that risk he is entitled to a measure of protection. I am not thinking only of the manufacturer. If the manufacturer were utterly selfish,

he might say to himself, "We do not care about the designer; we do not want all of these registrations filed; but we would like to have it so that the designer who has ideas and copyright registrations must come to us and those will become effective after he has assigned them to us." It might be a good thing for us; it would put us in an excellent position to bargain with the designer, but that would not be right; because, under the Constitution, the manufacturer or he who applies the design has no property right in the design beyond that which is assigned to him.

And at this point I beg to differ with Mr. Fox when he points out it was never intended to put designs under the copyright law.

The fact is that the founders of the Constitution put it there in plain English and, if you please, the giving of the power to Congress to promote art and progress by giving the exclusive right in design to the author or inventor, is more than just empowering Congress to do something; because, if it were not, then Congress would not be under the obligation to raise taxes to take care of the Army and Navy, and all of the other powers given to it. My point is that in giving Congress the power to do specific things, there is an implied recognition of a need for the application of that power, and a duty on the part of the Congress to recognize that thing, which, in effect, means that the founders of the Constitution recognized there should be a property right in design and they put "design" where it belonged, under copyright.

It was not until 1842 when the patent design law was passed and, under the conditions of that time, when we had not yet created a genius which developed designs. That is of fairly recent development, in the last 10, 15, or 20 years. We are not a copying industry, as Mr. Fox pointed out, but we have used common property in designing our furniture, and only in the last decade has our industry, which has been somewhat backward-has been backward in some respects-actually begun to create new designs, and we have now new designs which are as easily distinguishable from the traditional designs as the sun is from the stars. And I mean that literally; nobody could possibly mistake them.

In 1842 that condition did not exist; consequently the emphasis that was laid on invention. We were then a country which was developing inventions, mechanical devices; we were not yet developed aesthetically and art and design, as such, did not have schools to tell how to create it. But we were creating inventions and it was a simple thing and I think an excusable thing for Congress, in 1842, to make a mistake and put designs under the patent law. But since then the situation has changed; today, there is in this country the genius for the creation of designs in furniture and in many other items of manufacture, and the point we make is that since design was originally included under copyright, the Constitution intended that it should be, and since it was removed in error in 1842 [excusable, to be sure, but an error nevertheless], it seems to us that the furniture industry, quite as well as the textile or anything else, is entitled to its consitutional right of having designs properly protected. And in the Constitution itself originally it was conceived that should be as a copyright and not a patent.

We know that a design, the artistic thing, cannot be protected if it must rely upon a mechanical feature. You can take the Ford fender, for example, and they turn up the end a little bit underneath. There is "design" there, to be sure; but the purpose of that is when the car is running along in wet weather, the water runs along the top of the fender and, instead of coming around the fender on top and getting sloppy, it is caught by that little groove and carried down to the bottom of the fender. There is a mechanical feature about such a design. But that is not true of that chair [indicating]; it is not true of that table [indicating], and, if those remain under patent design, it would be utterly impossible to give us protection to which we are entitled.

I want to point out to you and I will include this in my brief, that the Retail Ledger in Philadelphia, which has no axes to grind, except it wants to get as many subscribers as possible and is particularly interested in the smaller dealer, rather than in the larger dealer, because there are many more of them, I happen to know a year or so ago made a survey of what the retailers actually thought about protection of designs by copyright, and I took the liberty of wiring Mr. Guernsey and asking him to give us a statement of the facts. What he was going to reply, I did not know; but I knew such a survey had been made and I asked him to give us the facts, and this is his telegram:

Retailers generally favor design copyright. In the furniture field the recent improvement in original designs

And he tells the truth there

In the furniture field the recent improvement in original designs has greatly stimulated sales, and retailers would be buying more heavily from those originating good designs if they did not feel quite sure that copyists would bring out cheap imitations within 2 or 3 months. Lack of design protection results in inability of retailers to advocate and promote real innovations because their very action in concentrating attention on such improvements now invites cheap imitations which lack qualities that permit of their giving satisfaction. Same applies to apparel or any merchandise in which line proportion and expert selection of color are vital parts of design and satisfaction in use. In a survey last summer of 100 outstanding retail leaders, more than 70 percent definitely favored design protection; 12 percent opposed; balance undecided. Hesitancy arises from feeling that decision on whether or not copyright might be cumbersome. All insist that retailer be permitted to sell present stocks bought in good faith regardless of infringement and merely be stopped from further purchases after notification. You can put it down in the book that most of the opposition comes from a few volume retailers of great weight with associations who insist on right to continue the copying practices which were big factor in their growth.

That telegram comes from Mr. John Guernsey, who was editor of Retail Ledger of Philadelphia.

One word more and I shall stop. It has been pointed out or suggested that if the automobile industry, a great industry like that, is opposed to placing design protection under the copyright statute, why would it be a good thing for other industries? The answer is simple as I see it. I cannot speak for that industry, but looking at the thing in an unbiased way I see this: In the first place, when the automobile industry objects to design protection, it is objecting not as a manufacturer, but as a purchaser-a purchaser of some parts

that it does not make, but assembles; a purchaser of textiles, of the radiator cap, and a few things like that, and it does not want the annoyance, just as the retailers do not want the annoyance, that may grow out of multiple registrations. So it is not as a manufacturer of automobiles that they object on that score.

In the second place, the automobile industry does not need this kind of protection, as the rest of us do. A great deal of the design that goes into the automobile, air dynamics, and so forth, is directly connected to some mechanical feature, and under the design patent the automobile manufacturer can far more nearly approximate protection than can the rest of us.

Finally, they are so well knitted as a group that with their pooling arrangement of patents they do not require any protection by registration.

But we are not so organized; never can be, and I do not think it is quite a fair parallel to say because the automobile industry is not for this thing, therefore it is not good for any other industry.

I thank you.

(The following paper was submitted for the record by Mr. Haake:)

TESTIMONY OF DR. A. P. HAAKE, MANAGING DIRECTOR OF NATIONAL ASSOCIATION OF FURNITURE MANUFACTURERS, INC., OF CHICAGO, ILL.

My name is A. P. Haake, and I am the managing director of the National Association of Furniture Manufacturers, with headquarters in Chicago, Ill. Our association represents a section of the industry which comprises roughly two-thirds of the entire industry in production and probably three-fourths in numbers of manufacturers. I am speaking in behalf of the association and also in behalf of several manufacturers who were unable to accommodate themselves to the sudden change in the date set for hearing us. In response to the further request of the clerk of the committee, we are trying to confine our presentation to one speech, although I should like to have a very few minutes given to Mr. C. M. Ehehalt, who represents the Red Lion Table Co., of Red Lion, Pa., and the York County Furniture Manufacturers Association. He also represents our association in eastern Pennsylvania, the York County group being an affiliated group.

May I point out that I have had more than 33 years of academic and business experience, as a professor of economics in two universities, as a sales manager, an advertising analyst, and in several other capacities which enable me thoroughly to understand the problems of manufacturers in several industries, particularly in furniture. I say this to indicate that what I say may have somewhat more authority than is sometimes conceded to the professional association executive.

We favor the Duffy bill with the Vandenberg amendment, or the Daly bill, which carries the same provision for taking the protection of designs out from under the design-patent statute and placing it under the copyright statute, where it properly belongs.

We seek two things: The recognition, effectively, of property rights in applied design, and a simple, prompt, and inexpensive method of recording priority. Why we do this: We need a remedy.

Until about 10 years ago, furniture design in this country was, practically speaking and with few exceptions, not original. The better manufacturers made so called "period" furiture, taken out of printed books, or copied from museum pieces or imported furniture. Designers made some variations, but the designs were essentially period designs. Then there was "just furniture”, so much wood, glue, and the rest, which provided seats, table tops, etc. The public was not greatly style-conscious of furniture, and in the better homes period furniture was quite adequate.

It is since that time, and particularly during the past 6 years or so, that the industry has become truly creative and the public more and more style conscious on furniture.