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IP Czar: Voluntary Industry Agreements Could Be Key to Combatting IP Infringement

Thursday, May 17, 2012
By Tamlin H. Bason

Development: Intellectual Property Enforcement Coordinator Victoria A. Espinel tells Senate Judiciary Committee that voluntary industry agreements and best practices standards by the private sector can dovetail with government actions in a way that could 'change the enforcement paradigm.'

 

The types of voluntary industry agreements to deal with online intellectual property theft that began popping up in the United States in 2011 need to be expanded domestically and copied abroad, the White House's Intellectual Property Enforcement Coordinator said during a Senate Judiciary Committee Oversight Hearing May 9.

“I think we have established a good model for other countries, and I want to see other countries encourage these voluntary agreements,” Victoria A. Espinel said during her testimony.

Specifically, Espinel was talking about a June 2011 agreement by the major U.S. payment processors--American Express, Discover, MasterCard, PayPal, and Visa--that developed voluntary best practices designed to withdraw payment processing from websites that sold counterfeit and pirated goods.

One month later, it was announced that six major internet service providers had agreed to voluntarily send a particular subscriber up to six “early alerts” notifying that user electronically that there is suspect activity on his or her account, namely possible unauthorized downloading of copyrighted motion pictures, television programs, or music.

Espinel pointed out that in early May the Association of National Advertisers and the American Association of Advertising Agencies issued a statement recognizing the role that advertising has in online piracy and counterfeiting, and encouraging members to avoid placing their ads on websites that facilitate wholesale IP theft.

These voluntary agreements are pivotal because they can have an impact on websites that are beyond the reach of U.S. law enforcement agencies despite the fact that combatting IP theft is a top priority of the administration, Espinel said.

“We are going to vigorously investigate criminal activity,” Espinel said. “But we need the private sector to work with us. We want to quarantine bad actors and make infringement as difficult as possible. … Together with law enforcement actions, these voluntary agreements by private actors … can help us change the enforcement paradigm.”

China, Trade Secrets Spark Lawmaker Concern.
The hearing marked the third time the Judiciary Committee exercised its oversight over the IPEC since the office was created in 2008 with the passage of the Prioritizing Resources and Organization for Intellectual Property Act, Pub. L. No. 110-403.

Espinel did not face any harsh questioning as most of the lawmakers applauded IPEC's efforts to combat IP theft. However, a few lawmakers asked how the administration planned on making it clear to China that the levels of infringement and piracy that take place in that country are unacceptable.

Espinel said that the president, the vice president, the secretary of state, the head of the FBI, and many other high ranking officials have told China in no uncertain terms that the country must begin to rein in the rampant piracy and infringement that occurs within its borders. Espinel said that she is optimistic that the message is getting through, as evidenced by China's recent commitment to enforcing IP rights that was expressed during the U.S.-China Strategic and Economic Dialogue that took place in Beijing May 3-4.

Espinel, however, said that her office would be watching closely to see if “these commitments turn into action.” She said, “We must continue to press very very hard, and while China has taken small steps, much more still needs to be done.”

Sen. Christopher A. Coons (D-Del.) asked why in the U.S. Commerce Department's recent report, Intellectual Property and the U.S. Economy: Industries in Focus (70 PTD, 4/12/12), when the report broke down how much different IP-driven industries added to the U.S. economy, it failed to measure how much trade secrets add to the economy.

Espinel noted that the report was the first of its kind, and though it did not attempt to measure the impact of trade secrets on the economy, the administration recognizes that the theft of trade secrets is a growing threat that must be taken seriously.

Aleynikov Decision Concerns Sen. Kohl.
Sen. Herb Kohl (D-Wis.) also voiced his concern over increases in trade secret theft by foreign individuals. Moreover, Kohl said he was “troubled” by the U.S. Court of Appeals for the Second Circuit's April 1 decision that overturned a defendant's conviction under the federal Economic Espionage Act, United States v. Aleynikov, 102 USPQ2d 1458 (2d Cir. 2012)(71 PTD, 4/13/12).

Aleynikov determined that the defendant's theft of computer source code to create a competing program did not violate the EEA because the securities trading software at issue was used internally by its owner, Goldman Sachs, and was not itself intended to be sold or licensed. Thus, the court held that the software was not “related to or included in a product that is produced for or placed in interstate or foreign commerce” within the meaning of the EEA.

Kohl suggested that the ruling seemed to “give a free pass to trade secret theft,” and wondered if Espinel though that a legislative fix was needed.

Espinel said that IPEC was “very concerned about the implications of the decision,” and is currently working with the Department of Justice to come up with possible solutions. If legislation is needed, she said she would be happy to work with the committee.

Rogue Website Legislation Briefly Mentioned.
The failure of Congress to pass either the House's Stop Online Piracy Act (H.R. 3261) or the Senate's Protect IP Act (S. 968) was only briefly mentioned. Indeed, Sen. Sheldon Whitehouse (D-R.I.) was the only lawmaker to discuss the bills, and he simply referred to them as “a significant legislative failure,” without mentioning the name of either bill.

Whitehouse agreed that a fix is still needed in order to deal with what he called “the largest transfer of wealth in human history through theft,” a claim that he repeatedly made during the contentious debate surrounding the rogue website bills (215 PTD, 11/7/11).

The committee chairman, Sen. Patrick Leahy (D-Vt.) said, “We are all committed to an open internet … but right now foreign websites are getting a free pass.” He said he hoped that Congress could work with IPEC to find a fix.

Working with the administration was laudable, ranking minority member Sen. Charles E. Grassley (R-Iowa) said, but first “the Judiciary Committee needs to examine how industry and the federal government are dealing with intellectual property crimes.” Then the committee will be in a position to determine where there is overlap, and where its efforts will be best spent, Grassley said.

“If we understand that theft is wrong, then we ought to be able to find a way to accomplish our goals of preventing that theft,” Grassley said. “Because nobody benefits when the rule of law is not respected and when theft is allowed.”

By Tamlin H. Bason

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