Online Counterfeiting Talk Heats Up; Rep. Smith Says Legislation in Two Weeks

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House Judiciary Committee Chairman Lamar Smith (R-Texas) said April 4 at a press conference held by leading members of the Senate and House Judiciary Committees at the U.S. Capitol that he hopes to have an online infringement bill drafted and ready for action within the next two weeks.

“The success of our economy is in part tied to the success of America's intellectual property industries, with IP providing an estimated 19 million jobs to American workers and accounting for more than 60 percent of U.S. exports,” Smith said at the press conference. “Unfortunately, the online theft of America's IP results in billions of dollars in lost revenue and thousands of jobs.”

Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) said that IP is crucial to the American economy and that its theft “threatens our prosperity, costs us billions of dollars, and is unacceptable, certainly in this economic climate.”

“This is not a Republican or Democratic issue, not a labor or business issue, it is an issue that impacts every one of us,” he said. Leahy added that online infringement is not the only bicameral IP issue currently in the works, referencing the recent push in both the House and Senate for patent reform (81 PTCJ 697, 4/1/11; 81 PTCJ 593, 3/11/11).

House Judiciary Committee Ranking Member John Conyers (D-Mich.) offered three suggestions as to how to deal with rogue websites:

• Financial. Cut off the money flow.

• The Department of Justice could “take some action” and get court orders to take down rogue sites throughout the country.

• Right to private action. Industries and companies should be allowed to take rogue websites and counterfeiters to court.

Rep. Bob Goodlatte (R-Va.) said that he hopes the ongoing discussions of online infringement “give everyone involved the ability to present ideas before legislation is drafted.” He did add that, in addition to action by Congress, the private sector needs to change its business models and technology to help stop counterfeiting.

Rep. Howard Berman (D-Calif.) added that global piracy cost the city of Los Angeles alone a loss of tax revenues approaching half a billion dollars in 2005 and firms in the city over $5.2 billion in lost revenue.

A hearing is currently scheduled for April 6 in the House Judiciary Committee's Subcommittee on Intellectual Property, Competition, and the Internet to further discuss the issue.

Bill Introduced Last Term Did Not Move Past Full Senate.

Last September, Leahy and Sen. Orrin G. Hatch (R-Utah) introduced the Combating Online Infringement and Counterfeits Act (S. 3804), which sought to authorize the U.S. Department of Justice to file an in rem civil action against a domain name, and seek a preliminary order from a federal court that the domain name is being used to traffic infringing material (80 PTCJ 679, 9/24/10). The bill would also have provided for safeguards allowing the domain name owner or site operator to petition a court to lift the order, and safeguards against abuse by allowing only the Justice Department to initiate an action, and by giving the court the final say about whether any particular website would be cut off.

In November, the Senate Judiciary Committee reported favorably a substitute version of the bill (81 PTCJ 103, 11/26/10), but the full Senate failed to act on the legislation before the congressional term ended.

COICA was not without criticism, with one commentator stating that it would fail because it would not, at a technical level, block rogue websites nor curtail their funding (81 PTCJ 579, 3/4/11).

Hearings Held on Rogue Websites Issue.

In “Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites, Part I”--the first of the hearings held by the House Judiciary Committee's Subcommittee on Intellectual Property, Competition, and the Internet to address the question of websites that host massive amounts of unauthorized material, particularly streaming motion pictures--members of the panel said March 14 that Congress should act to enable the government to “follow the money” in attempts to shut down rogue websites that host infringing material (81 PTCJ 634, 3/18/11).

Rep. John Conyers Jr. (D-Mich.), ranking minority member of the full Judiciary Committee, offered a draft definition of “rogue site” at the March 14 House hearing:  

An Internet site is 'a rogue site' if-- 

(A) such site is primarily structured in order to, and has no demonstrable, or significant commercial purpose or use other than to offer goods or services in violation of title 17, including by offering or providing access to, in a manner not authorized by the intellectual property owner or otherwise by operation of law, copies of, or public performance or display of, works protected by title 17, in complete or substantially complete form, by any means, including by means of download, streaming or other transmission, or otherwise; and

(B) the activities described in subparagraph (A) are central to the activity of the Internet site.


In February, the Senate Judiciary Committee held a hearing titled “Targeting Websites Dedicated to Stealing American Intellectual Property,” where Leahy said that rogue websites facilitating illegal behavior cost jobs and the U.S. economy billions of dollars a year, and that legislation is going to be reintroduced in this Congress to help curb such activity (81 PTCJ 513, 2/25/11). At the same hearing, Sen. Tom A. Coburn (R-Okla.) called for “more aggressive” congressional action, singling out internet service providers like Google and Yahoo! for their absence at the hearing.

Other senators at that hearing pointed out health and safety concerns created by piracy and counterfeiting and called for legislation to help curb such illegal acts.

Free Speech and Other Concerns.

Asked at the April 4 press conference about First Amendment concerns in last year's COICA and how they would be addressed, Leahy said that, although he is very concerned about First Amendment rights, he was “also concerned about theft.”

“It is much easier to put people away in the physical world,” he said, referring back to his days a prosecutor in Vermont. “We can still [put people away] and protect the First Amendment.”

“There is no First Amendment right that protects thieves,” he added.

When asked for a time frame for the introduction of new legislation that would combat online infringers like the COICA, Leahy said that he was working closely with Smith and said that all the lawmakers involved want to “get it done and get it on the President's desk” as soon as possible.

Asked whether companies should charge less for digital content in efforts for people to actually buy legitimate products and not counterfeit or pirated goods, Leahy shot back saying that the question was akin to asking if a businessman should lower his prices to try to compete with a thief trying to sell products he stole out of the businessman's store. “No one should have to compete against stolen property or criminals” Leahy concluded.

Support of Congressional Action.

Support for congressional action against rogue websites and online infringers seemed to come from all sides.

Speaking at the press conference, the general counsel for Columbia Sportswear, Peter Bragdon, said that his company is chasing thousands of counterfeiters who are selling millions of products. “This results in a loss of sales, a high cost of enforcement--where enforceable--and a loss of jobs,” he said. “At the end of the day, it is a problem for consumers who are tricked into paying for phony products.”

He said that his and other companies are increasingly finding out about rogue sites through warranty departments as consumers try to replace defective products that, unbeknownst to them, are counterfeits.

Paul E. Almeida, president of the Department for Professional Employees at the AFL-CIO, said that it showed how important the issue was if both business and labor are on the same side.

Paralleling Almeida's statements, David Hirschmann, president of the U.S. Chamber of Commerce's Global Intellectual Property Center, said in a statement that “The sight of Republicans and Democrats, business and labor joined in unity is a tangible demonstration of the overwhelming support for action against rogue websites.”

“The criminals behind these sites are laughing all the way to the bank, stealing the best of American creativity and innovation at the expense of our jobs and consumers,” Hirschmann added.

Copyright Alliance Executive Director Sandra Aistars said in a press statement, “Reasoned, common sense tools for law enforcement to deal with criminals online will be welcome by everyone whose livelihoods depend on copyrights, and by everyone who believes a safe and lawful Internet is an integral and vital part of America's future.”

“Like any other right, copyright is meaningless if it can't be enforced,” David Israelite, president of the National Music Publishers' Association said in a press statement. “Law enforcement's tools must keep pace with criminal tactics.”

The American Federation of Television and Radio Artists, Directors Guild of America, International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts of the United States, Its Territories and Canada, and Screen Actors Guild issued a joint statement of support for action in fighting internet theft, in which they said:  

Professional content is a driving force behind the massive popularity of the Internet. Our members … embrace the possibilities of the digital age and the many opportunities offered by new technologies. However, along with the explosive growth of the Internet has come an equally explosive proliferation of profiteers who knowingly traffic in content they have obtained illegally and played no role at all in creating or financing. 

Our industry has historically been one of the strongest American exports worldwide. The content created by our members is recognizable all over the world …. As creators of content, we believe that the theft of copyrighted works is the ultimate discouragement of content. Protecting jobs and fostering creativity and American ingenuity should be the first order of business for the United States government.


By Nathan Pollard