Category Archives: Proposed Legislation

Alternative to PROTECT IP Act and SOPA Proposed by Bipartisan, Bicameral Group

by Christina Frangiosa


On December 8, 2011, a group of Senators and Representatives proposed an alternative bill aimed at combating foreign websites that engage in counterfeiting or infringement of U.S. trademarks or copyrights. The new bill, entitled “The Online Protection and Enforcement of Digital Trade Act” (the OPEN Act) was launched by U.S. Senators Cantwell, Moran, Warner and Wyden and U.S. Representatives Chaffetz, Campbell, Doggett, Eshoo, Issa, Lofgren and Polis. (Senator Wyden had previously announced his intent to block any request for unanimous consent to consider the currently-pending PROTECT IP Act in the Senate, but has proposed this bill as an alternate.)

What’s so unusual about this bill? It’s not currently available on Thomas.gov, although a recent press release available on Sen. Wyden’s website has identified the bill as having been “introduced.”  [Searches of Thomas.gov indicate that the bill will be numbered S. 2029 and will be available once received from the Government Printing Office.]  Instead, the current text of the bill can be accessed through a website called http://www.keepthewebopen.com/. Visitors to the site can create an online profile and submit suggestions for improvement of the bill. At the site, in big red letters is a button inviting users to “PARTICIPATE” and the press release announcing the launch of the website describes it as “providing an unprecedented opportunity for members of the public and stakeholders to participate in the legislative process.”

The text of the bill can be found in PDF format, and a summary document entitled, Fighting the Unauthorized Trade of Digital Goods While Protecting Internet Security, Commerce and Speech, explains the purpose of the bill. (An additional section-by-section summary of the bill can be found on the Keep the Web Open site.)

The bill sponsors explained that this bill is intended to place jurisdiction over policing imports into the U.S. from these foreign web sites back in the hands of the International Trade Commission (ITC), thereby allowing this process to use already existing ITC procedures instead of creating new frameworks – thus potentially increasing due process protections and consistency of rulings among the arbiters. The bill also authorizes the dramatic increase of staffing in the ITC in order to permit it to absorb the new responsibilities.

Here’s how it would work:  a U.S. rights holder who believes that a particular web site violates its rights may submit a complaint to the ITC, which will launch an ITC investigation into the operation of the site. If the ITC determines that the site indeed qualifies as an “Internet site dedicated to infringing activities,” it may generate a cease and desist order directing that the site stop its infringing activities. This order can then be served on financial transaction providers or Internet advertising services. The ITC will also submit its determination, the record upon which it is based, and any cease and desist order that it generates to the President, who may “disapprove” of the determination and cease and desist order, causing the order to be terminated. [These provisions were present in a version of the bill available on http://www.keepthewebopen.com/ as of December 28, 2011.]

In some respects, this bill follows the main tenets of the PROTECT IP Act and the Stop Online Piracy Act and adopts some of its structure, with a major difference being the use of the ITC as arbiter over the allegations made against the allegedly infringing website, instead of the myriad federal district courts across the country. (Additional differences are summarized in this chart.) The theory seems to be that the ITC is used to disputes over IP claims, and therefore would be an appropriate judge of the presence of infringing or counterfeiting content – where not all district courts and district court judges are experienced in intellectual property disputes.

Related Bills

Somewhat simultaneously, a manager’s amendment to the Stop Online Piracy Act was introduced on December 12, 2011, prior to the House Committee on the Judiciary’s December 15 and 16, 2011 markup meetings. More on that revision in the next post.

‘Tis the Season for . . . Anti-Counterfeiting Legislation?

by Christina Frangiosa


In the past several weeks, several major legislative proposals have been introduced in both the House and the Senate to provide additional anti-counterfeiting enforcement tools for law enforcement and private rights holders alike. Two of these bills – the PROTECT IP Act (S. 968) and the Stop Online Piracy Act (H.R. 3261) – have already been discussed in detail in this blog. (See posts under the Online Piracy tag.)

Details about the remaining legislative proposals follow (listed chronologically):

  • Protect American Innovation Act of 2011 – introduced in the Senate on November 8, 2011 as S. 1830 by Sen. Deborah A. Stabenow (D-Mich.)
    • Focuses on the Treasury Department, and particularly U.S. Customs and Border Protection (“CBP”) and U.S. Immigration and Customs Enforcement (“ICE”)
    • Contains provisions relating to coordinating IP rights enforcement, enhancing training in the Treasury Department and amending 19 U.S.C. § 1526 (Tariff Act; Merchandise Bearing American Trademark) to expand prohibitions on importation, exportation and transshipment of counterfeit or pirated goods.
    • Of particular note are the following provisions:
      • Coordination of IP Rights Enforcement (Subtitle B)
        • Requires coordination of CBP and ICE IP enforcement efforts through a new Director of IP Rights Enforcement (within the U.S. Department of the Treasury) (§ 111)
      • Regulatory and Policy Improvements re Combating Counterfeiting and Piracy (Subtitle C)
        • Allows CBP to set up regulations about making information and samples of seized goods available to IP owners for purposes of inspection and analysis. (§ 123)
        • Creates a system to identify “low risk importers” who could be subject to reduced inspections by CBP. (There would be a self-certification and third-party verification process put in place.) (§ 125)
        • Creates a “watch list” database of participants in import, export and transshipment process “whose activities [CBP] determines merit special scrutiny at ports of entry because of the risk of importation or transshipment of goods that violate” IP rights or exclusion orders. (The Secretary of the Treasury will have 180 days from enactment to develop a plan to implement the database.) (§ 126)
        • Provides that civil fines imposed by 19 U.S.C. § 1526(f) may not be mitigated, dismissed or vacated except in extraordinary cases or when ordered by the court. (§ 127)
      • New Legal Tools for Border Enforcement (Subtitle E)
        • Amending 19 U.S.C. § 1526 (Tariff Act) to apply the definition of counterfeiting that comes from the crimes code (18 U.S.C. § 2320) and to provide for enhanced penalties for counterfeiting (§ 141)
        • Makes conforming amendments to copyright law to include “exports and transshipments” along with imports as regulatable conduct (§ 141(b)).
        • Enhances the requirements for declarations required under the Tariff Act (§ 142)
        • Permits the seizure and forfeiture of devices designed to circumvent intellectual property rights protections (§ 143)
      • Administrative Provisions (Subtitle F)
        • Requires establishment of an advisory committee to provide advice to the Secretary of the Department of Treasury, to CBP and ICE on all matters involving the enforcement of import safety standards and IP rights by CBP and ICE (§ 151)
        • Requires the advisory committee to submit an annual report describing the operations of the Committee in the past year and set forth any recommendations about the enforcement of import safety standards and IP rights by CBP and ICE (§ 151).
        • Allows for staffing enhancements at both CBP and ICE (§§ 152 and 153)
      • Title II – Increased Penalties for Certain Unfair Trade Practices
        • Expands the exclusion orders. In addition to banning the importation of certain goods into the U.S. this provision also provides that the Secretary of State shall deny a visa to the U.S. and the Secretary for Homeland Security shall exclude from the U.S. “any alien that is an officer or member of the board of directors of the person that violated this section or an exclusion order under this section.” (§ 201)
        • Enhances penalties for each day on which the importation or sale of counterfeited goods occurred (19 U.S.C. § 1337(f)) from “$100,000 or twice [the domestic value of the articles entered or sold on such day in violation of the cease and desist order]” to “$500,000 or three times [the same domestic value].” (§201(b))
    • Status: Referred to the Committee on Finance on November 8, 2011.
       
  • American Growth, Recovery, Empowerment and Entrepreneurship Act (“AGREE Act”) – introduced on November 15, 2011 in the Senate as S. 1866 by Sen. Chris Coons (D-Del.) (text, as introduced, is here) and on November 18, 2011 in the House as H.R. 3476 by Rep. Richard L. Hanna (R-NY) (text, as introduced, is here).
    • Amends the Trade Secrets Act to explicitly allow U.S. Customs and Border Patrol to share suspected counterfeit materials with rights holders in order to determine authenticity.
    • Specifically, these bills provide:
      • if U.S. Customs and Border Protection (“CBP”) suspects a product of being imported or exported in violation of 15 U.S.C. § 1124, the Secretary of Homeland Security would be authorized to “share information on, and unredacted samples of, products and their packaging and labels, or photos of such products, packaging and labels, with the rightholders (sic) of the trademark suspected of being copied or simulated, for purposes of determining whether the products are prohibited from importation under that section.” § 601(1).
      • Further, once items are seized by CBP under 17 U.S.C. § 1201(a)(2) or (b) (both relating to devices allowing users to circumvent digital rights management information), the Secretary of Homeland Security is “authorized to share information about, and provide samples to affected parties, as to the seizure of material designed to circumvent technological measures or protection afforded by a technological measure that controls access to or protects the owner’s work protected by copyright under such title.” § 601(2).
      • Both of these provisions are made “subject to applicable bonding requirements.”
    • Under current law, these materials could not be disclosed for any purpose to rights holders.
    • Current Status of Each Bill:
      • The Senate Bill was referred to the Committee on Finance on November 15, 2011. Senator Coons’ remarks in introducing the Bill appear in the Congressional Record at pages S7594-7596.
      • The House Bill was referred to the House Committee on Ways and Means, Committee on the Judiciary and Committee on Financial Services for consideration. No hearings have yet been announced.
         
  • National Defense Authorization Act for Fiscal Year 2012 – introduced in the Senate on November 15, 2011 as S. 1867 (H.R. 1540 in the House). (Text of the current version of the Senate bill as passed has not been published yet.)
    • The majority
      of this Bill has nothing to do with counterfeiting, and in fact is an appropriations bill relating to military spending.
    • However, Amendment No. 1092 (text available here at S7966-7967) was agreed to in the Senate by Unanimous Consent on November 29. This Amendment inserted a provision (based closely on S. 1228 (Combating Military Counterfeits Act of 2011), which was reported favorably by the Senate Judiciary Committee in July) entitled “Detection and Avoidance of Counterfeit Electronic Parts.”
    • Among other provisions, this Amendment adds the following requirements:
      • Secretary of Homeland Security shall “establish a risk-based methodology for the enhanced targeting of electronic parts imported from any country . . .” (§ 848(b)(1) – S7966).
      • If CBP “suspects a product of being imported or exported in violation of section 42 of the Lanham Act [15 U.S.C. § 1124], and subject to applicable bonding requirements, the Secretary of the Treasury is authorized to share information appearing on, and unredacted samples of, products and their packaging and labels, or photographs of such products, packaging and labels, with the rightholders of trademarks suspected of being copied or simulated, for purpose of determining whether the products are prohibited from importation pursuant to such section.” (§ 848(b)(2) – S7966).
      • Amends 18 U.S.C. § 2320 by adding provisions relating to military goods or services such that
        • If a qualifying offense is committed (by trafficking or attempting to traffic in goods or services and knowingly uses a counterfeit mark, the use of which is likely to cause confusion, to cause mistake or to deceive), AND
        • The good or service “malfunctioned, failed or was compromised” AND
        • Could reasonably be foreseen to cause serious bodily injury or death, disclosure of classified information, impairment of combat operations or other significant harm to a member of the Armed Forces or to national security AND
        • The offender had knowledge that the good or service was falsely identified as meeting military standards or is intended for use in a military or national security application;
        • THEN the following penalties will apply:
          • Maximum fines increased from $2 million to $5 million or maximum sentence is increase from no more than 10 years to no more than 20 years, or both (for individuals)
          • For subsequent offenses, individuals would be subject to fines up to $15 million, imprisoned for not more than 30 years, or both.
          • Or, if the offender is other than an individual, the maximum fine remains at $15 million.
          • For subsequent offenses, non-individual offenders would be subject to a fine of up to $30 million.
      • Sentencing Commission required to determine whether Federal Sentencing Guidelines should be amended to reflect the “intent of Congress that penalties for such offenses be increased for defendants that sell infringing products to, or for the use by or for, the Armed Forces” or law enforcement or “for use in critical infrastructure or in national security applications.” § 848(f)(2).
      • This Bill did not provide a definition for “counterfeit electronic part,” instead requiring the Secretary of Defense to provide such definition. § 848(g)(1).
    • Status: S. 1867 as amended was agreed to in the Senate by a vote of 93-7 on December 1, 2011.
       
  • Counterfeit Drug Penalty Enhancement Act of 2011 – introduced in the Senate on November 17, 2011 as S. 1886 by Sen. Patrick J. Leahy (D-Vt.) (text, as introduced, is here) and in the House as H.R. 3468 by Rep. Patrick L. Meehan (R-Pa.)
    (text, as introduced, is here)
    • Amends 18 U.S.C. § 2320(a) to double the maximum fine to be assessed for trafficking in “counterfeit drugs” (defined under the Food, Drug and Cosmetic Act, 21 U.S.C. § 321(g)(2) to the following: 1) $4 million for individual defendants; and 2) $10 million for “persons other than individuals” (e.g., entities of any sort, including corporations, companies, associations and organizations).
    • Both bills provide that repeat offenses incur increased penalties of $8 million, with a 20 year prison term (individuals) and $20 million (entities), respectively.
    • Differences between the House and Senate Bills
      • The Senate Bill recommends increasing the maximum prison sentence of 20 years, and mandates that the U.S. Sentencing Committee re-evaluate the recommended sentences for all counterfeiting crimes.
      • The House bill recommends that the prison sentence be increased to “life or any term of years.” The House bill does not direct any evaluation by the Sentencing Commission.
    • Current law provides that these limits are 1) $2 million with a maximum prison sentence of 10 years for individuals; and 2) $5 million for entities. Repeat offenders incur a maximum fine of $5 million and 20 years imprisonment for individuals, and $15 million for entities. 18 U.S.C. § 2320.
    • Current Status of Each Bill
      • The Senate Bill is scheduled to be considered by the Senate Judiciary Committee on December 8, 2011, at 10:00am in SD-226. (Hearing notice is here – with a link to the webcast, when it’s prepared.)
      • The House Bill has been referred to the House Committee on the Judiciary, but a hearing has not yet been scheduled.

Clearly, both houses of Congress have “counterfeiting” on the mind, and it will be interesting to see where these various proposals go. Of course, only if one can keep up.

Stop Online Piracy Act Introduced to Combat Online Piracy and Counterfeiting

by Christina Frangiosa

This is the second in a series, discussing the two new Bills proposed in Congress to deal with online pirates and counterfeiters. (View the first article relating to the PROTECT IP Act here.)

On October 26, 2011, Representative Lamar Smith introduced the Stop Online Piracy Act (H.R. 3261) (“SOPA”). Other sponsors of the Bill upon its introduction were Ranking Member John Conyers, IP Subcommittee Chairman Bob Goodlatte, Rep. Howard Berman, Rep. Marsha Blackburn, Rep. Mary Bono-Mack, Rep. Steve Chabot, Rep. Ted Deutch, Rep. Elton Gallegly, Rep. Tim Griffin, Rep. Dennis Ross, and Rep. Lee Terry.

The Bill followed several public hearings this year alone (one in the Senate and two in the House), each focused on the problems created by unfettered counterfeiting and piracy, including by foreign web sites, of U.S. rights holders’ marks and copyrighted works and aimed at crafting mechanisms to combat that significant loss in U.S. income.

SOPA proposes two additional sections that were not included in the PROTECT IP Act. First, it provides “savings clauses” that mandate that this bill should not be construed to enlarge or diminish the legal obligations or liabilities imposed by 1) the First Amendment; or 2) copyright law (Title 17 of the U.S. Code). Notably absent is a similar provision relating to trademark law (Title 15 of the U.S. Code).

Second, it provides a new mechanism to require qualifying plaintiffs seeking to initiate a private action against the piratical/counterfeiting web site to provide pre-suit notification to certain Internet intermediaries. (More on this is below, in the section on the private right of action.)

INJUNCTIONS PERMITTED

The SOPA provides for injunctions against any continued activities by an owner of a domain name used by an Internet site found to be engaging in prohibited activities. Under the Attorney General’s cause of action, this site must be a “foreign infringing site” while under the private right of action, this site must be “dedicated to the theft of U.S. property.” There are different tests for each type of site that must be analyzed separately. Once an order is obtained declaring the Internet site in question to qualify for action under this Bill, the order can be served upon the owner, operator or registrant of the site, but also upon certain Internet intermediaries requiring them to stop doing business with these sites.

Under the private right of action section, qualifying plaintiffs must provide pre-suit notification (which recipients are required to act on within 5 days), followed by a formal complaint and a motion for an injunction.  This pre-suit notification can only be provided to two of the four intermediaries:  Internet advertisers or payment network providers.

ATTORNEY GENERAL’S ACTION (Section 102)

The U.S. Attorney General may only obtain injunctions against “foreign infringing sites,” which are: 1) “U.S.-directed sites used by users in the United States,” 2) have owners/operators who: traffic in counterfeit or illicit labels, or counterfeit documentation/packaging; commit criminal copyright infringement; traffic in counterfeit goods or services; or steal trade secrets in violation of the Economic Espionage Act; and 3) would be subject to seizure if they were domestic.

Once the Attorney General obtains an injunction against a site deemed to be a foreign infringing site, it may serve the injunction order on service providers (i.e., domain name registrars), Internet search engines (called “information location tools” under the PROTECT IP Act), payment network providers (i.e., MasterCard, Visa or PayPal, called “financial transaction providers” under the PROTECT IP Act), and Internet advertising services (i.e., Google or Yahoo!) requiring that they prevent access by subscribers located within the U.S., prevent the site from being served as a direct hyperlink in a search result, refuse to process payments from users of the site, or decline to distribute advertising to U.S.-based Internet users.

PRIVATE RIGHT OF ACTION (Section 103)

The most notable difference between the PROTECT IP Act and SOPA is the pre-suit notification requirement in order to invoke a private right of action. Under SOPA, a qualifying plaintiff must provide advanced notification to the designated agent of a payment network provider or Internet advertising service before filing suit. The payment network provider and Internet advertising service then has 5 days in which to disable payment transactions from U.S. users or refuse to deliver advertising relating to the Internet site in question to U.S. users.

There is a counter-notification system that allows a defendant to accept jurisdiction in a U.S. court and then to proceed to litigation. If no counter-notification is received, the qualifying plaintiff may simply file suit against the registrant (although if he/she cannot be located, the qualifying plaintiff may take action directly against the web site in an in rem action).

Private rightsholders can obtain injunctions against either foreign or domestic sites, but may only serve the resulting court orders on payment network providers and Internet advertisers as well as the owner, operator or registrant of the domain name – and only after the notification/counter-notification process has been completed.

Some immunity is provided to insulate these Internet intermediaries from liability for certain voluntary enforcement efforts. Monetary damages against either the intermediary or the web site owner/operator/registrant are not available, and monetary sanctions are not available if an intermediary ignores the initial court order and continues doing business with the site named in the court order.

This notification provision mirrors closely § 512 of the Digital Millennium Copyright Act (DMCA), but leaves out certain safe harbors that had been carefully negotiated as part of the drafting of the DMCA over a decade ago. For this reason alone, many copyright practitioners, copyright owners, educators and businesses have opposed the introduction of SOPA, claiming that the bill as currently drafted undermines the protections that have been part of copyright law for the last decade. Some have also claimed that the notification provisions fail to impose certain safeguards that could prevent frivolous litigation or blatantly baseless claims – yet still require the intermediaries to disable access within 5 days of receipt of the notification, perhaps leading to the irreversible loss of income and consumer goodwill by a U.S.-based commercial web site engaged in legitimate operations.

ADDITIONAL PROVISIONS (Title II)

SOPA also provides that unauthorized streaming of copyrighted works qualifies as a crime under Title XVIII, and provides enhanced criminal penalties for such infringement. The Bill also contains provisions relating to inherently dangerous goods (such as military counterfeits) and counterfeit pharmaceuticals. It also mandates the appointment of additional foreign service officers to aid in the enforcement of U.S. intellectual property rights around the world.

STUDY REQUIRED (Section 106)

Under SOPA, the Register of Copyrights, working together with other agencies, is required to issue a report on “the enforcement and effectiveness of this title and on any need to amend the provisions of this title to adapt to emerging technologies.” (Note that the Director of the U.S. Patent and Trademark Office is not included specifically – although participation is implied because it would be one of the “other agencies” – in the development of the study.) This report is due to the judiciary committees of both the House and the Senate within two years of the enactment of this legislation.

NOTORIOUS INFRINGERS (Section 107)

SOPA also provides that the Intellectual Property Enforcement Coordinator (“IPEC”) shall “conduct an analysis of notorious foreign infringers whose activities cause significant harm to holders of intellectual property rights in the United States.” The IPEC shall “solicit” public input “and give consideration to the views and recommendations of members of the public.” The IPEC shall provide the results of this analysis to the judiciary committees of both the House and the Senate within six months of enactment of this bill.

This report shall include the following:

(1) An analysis of notorious foreign infringers and a discussion of how these infringers violate industry norms regarding the protection of intellectual property.
(2) An analysis of the significant harm inflicted by notorious foreign infringers on consumers, businesses, and intellectual property industries in the United States and abroad.
(3) An examination of whether notorious foreign infringers have attempted to or succeeded in accessing capital markets in the United States for funding or public offerings.
(4) An analysis of the adequacy of relying upon foreign governments to pursue legal action against notorious foreign infringers.
(5) A discussion of specific policy recommendations to deter the activities of notorious foreign infringers and encourage foreign businesses industry norms that promote the protection of intellectual property globally, including addressing—
(A) whether notorious foreign infringers that engage in significant infringing should be prohibited by the laws of the States from seeking to raise capital United States, including offering stock to the public; and
(B) whether the United States Government should initiate a process to identify designate foreign entities from a list of notorious foreign infringers that would be prohibited raising capital in the United States.

 

HOUSE HEARINGS PRIOR TO INTRODUCTION OF BILL 

The House of Representatives Committee on the Judiciary, Subcommittee on Intellectual Property, Competition and the Internet has held two hearings on this topic. The first was held on March 14, 2011 entitled “Promoting Investment and Protecting Commerce Online:  Legitimate Sites v. Parasites, Part I.” The testifying witnesses were (hyperlinks link to prepared statements provided by each witness in advance of the hearing):

  • Maria A. Pallante, then-Acting Register of Copyrights, U.S. Copyright Office
  • David Sohn, Senior Policy Counsel, Center for Democracy and Technology (CDT)
  • Daniel Castro, Senior Analyst, Information Technology and Innovation Foundation (ITIF)
  • Frederick Huntsberry (Chief Operating Officer, Paramount Pictures).

The second hearing (entitled conveniently “Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites, Part II“) was held on April 6, 2011. Testifying witnesses during this hearing included:

·        Hon. John Morton, Director of the U.S. Immigration and Customs Enforcement
·        Floyd Abrams, a First Amendment expert who testified on his own behalf
·        Kent Walker, Senior Vice President and General Counsel for Google
·        Christine Jones, Executive Vice President and General Counsel for the GoDaddy Group.  

Chairman Lamar Smith’s prepared remarks were published at the end of the hearing. A webcast of the hearing is available on the Senate Judiciary Committee’s site.

HOUSE HEARING TO CONSIDER MODIFICATIONS TO BILL

The House Committee on the Judiciary also held a third hearing to consider the Bill on November 16, 2011, which lasted about three and a half hours. The webcast is still available on the Committee on the Judiciary’s web site. The witnesses were:

  • Maria Pallante, Register of Copyrights, U.S. Library of Congress
  • John Clark, Chief Security Officer and VP of Global Security, Pfizer
  • Michael O’Leary, Senior Executive Vice President, Global Policy and External Affairs, Motion Picture Association of America (MPAA)
  • Linda Kirkpatrick, Group Head, Customer Performance Integrity, MasterCard
  • Katherine Oyama, Policy Counsel, Google
  • Paul Almeida, President, Dept. of Professional Employees, AFL-CIO

MasterCard was thanked repeatedly for its voluntary efforts at combating these criminals. Google was frequently lambasted for what the various legislators described as Google’s participation in the counterfeiting system for its own financial gain.

The overall take-away from the session was that the efforts to involve various Internet intermediaries in the enforcement of U.S. intellectual property rights were a good start. Legislators asked the panelists for recommendations of specific fixes to the current bill, noting that the more participation by affected industries or businesses in the drafting process, the better the bill would end up being. For instance, Rep. Goodlatte asked Google, through Ms. Oyama, its Policy Counsel, to work with the technology committee to help fix the bill rather than referring broadly to alleged technical problems that the bill created.

He and others lamented the broad challenges to the bill that merely complained that the bill would “break the Internet” without providing any specifics about how it would be broken so that the Congressmen could address those issue. The congressmen overwhelmingly agreed that they did not want to break the Internet, but requested specific details so that they could redraft where appropriate and avoid any disruption to service.

It remains to be seen how the bill will be amended, but it seems as if the legislators are intent on “getting it right” before the bill is enacted so that the dual goals of the bill are effectuated: 1) enforcing U.S. intellectual property rights against erosion by criminals (both foreign and domestic) and 2) ensuring that due process of law and other U.S. constitutional rights are not abrogated by the effort. At the conclusion of the hearing, Chairman Smith indicated that a new version of the bill would be introduced as soon as possible, and would take into account the testimony given during the hearing as well as other comments received to date.

PROTECT IP Act Introduced to Combat Online Piracy and Counterfeiting

by Christina Frangiosa


This is the first in a series, discussing the two new Bills proposed in Congress to deal with online pirates and counterfeiters.

On May 12, 2011, Senator Leahy introduced the PROTECT IP Act (S. 968 as reported), aimed at creating additional tools to combat rampant online infringement and counterfeiting. With some amendments, this Bill rocketed through the Senate Judiciary Committee, achieving unanimous bipartisan approval on May 26. The Bill was immediately placed on “hold” by Senator Wyden. It is unclear when or under what conditions the hold may be lifted, but this Bill still garners strong bipartisan support.

The Bill followed several public hearings this year alone (one in the Senate and two in the House), each focused on the problems created by unfettered counterfeiting and piracy, including by foreign web sites, of U.S. rights holders’ marks and copyrighted works and aimed at crafting mechanisms to combat that significant loss in U.S. income. It does not purport to fix all of the problems in this area and instead only addresses only the “worst of the worst” offenders.

The PROTECT IP Act provides for injunctions against any continued activities by an owner of a domain name used by an Internet site “dedicated to infringing activities” (or its registrant or operator). This order can be served upon the owner, operator or registrant of the site, but also upon certain Internet intermediaries requiring them to stop doing business with these sites.

ATTORNEY GENERAL’S ACTION (Section 3)

The U.S. Attorney General may only obtain injunctions against “nondomestic” domain names, but may serve the resulting orders on information location tools (i.e., search engines), operators (i.e., domain name registrars), financial transaction providers (i.e., MasterCard, Visa or PayPal), and Internet advertising services (i.e., Google or Yahoo!) requiring that they omit these sites from search results, block access to the site, refuse to accept payment from users of the site, or decline to distribute advertising to U.S.-based Internet users.

PRIVATE RIGHT OF ACTION (Section 4)

Private rightsholders can obtain injunctions against either domestic or nondomestic domain names, but may only serve the resulting court orders on financial payment processors and Internet advertisers as well as the owner, operator or registrant of the domain name.

Some safe harbors are provided to insulate these Internet intermediaries from liability for certain voluntary enforcement efforts. Monetary damages against either the intermediary or the web site owner/operator/registrant are not available, and monetary sanctions are not available if an intermediary ignores the initial court order and continues doing business with the site named in the court order.

SENATE HEARING PRIOR TO INTRODUCTION OF BILL 

The Senate Judiciary Committee held a public hearing entitled, “Targeting Websites Dedicated to Stealing American IP” on February 16, 2011. The witnesses were (hyperlinks lead to prepared statements submitted in support of the hearing, as available from the Senate Judiciary Committee):

Representatives for both Google and Yahoo were invited to attend, but declined to appear. At the end of the hearing, Senator Leahy announced that a new version of what had been introduced in the prior term as the Combating Online Infringement and Counterfeits Act (S. 3804) (“COICA”) would be reintroduced during the current Congressional term.

A webcast of the hearing is available on the Senate Judiciary Committee’s site.

SENATE JUDICIARY COMMITTEE ISSUED REPORT
After Sen. Wyden placed his hold on the Bill (by announcing that he would oppose any attempt to move the Bill to a floor vote under a unanimous consent), Sen. Leahy issued a committee report explaining the Bill and its purpose. S. Rep. 112-39 (issued July 22, 2011).

No further action has yet been taken on this Bill, but because a companion Bill (the Stop Online Piracy Act, H.R. 3261) has been introduced in the House, we may see some activity on the Senate’s version shortly.

Senate Judiciary Committee Issues Report on PROTECT IP Act

by Christina Frangiosa


As previously reported in this Blog, Senator Leahy introduced on May 12, 2011, the “Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011” (S. 968) (the “PROTECT IP Act of 2011”). Just last week, Senator Leahy published the Committee’s Report on the Bill (S. Rep. 112-39, released July 22, 2011). In this Report, he explains why a legislative solution is necessary.

He identifies the “footwear, clothing, consumer electronics and pharmaceutical industries” as being frequent victims of such counterfeiting enterprises. S. Rep. at 3. He explains that “the music, motion picture, television, publishing and software industries” face continual threats from copyright infringement in the digital world. Id.

Indeed, the President and CEO of Rosetta Stone testified during the February 16, 2011 Judiciary Committee Hearing on this topic that pirated copies of the newest versions of Rosetta Stone software are made available through sites that at least facially appear legitimate, causing confused customers to purchase (essentially) defective software bearing Rosetta Stone’s name. Prepared Statement of Tom Adams, Feb. 16, 2011 at 2.

Author Scott Turow (speaking on behalf of the Authors’ Guild) testified that he published a new book in May of 2010, and within a week or two of its release, friends informed him that pirated copies of his book were available for sale online. Webcast of Scott Turow’s Tesimony is available through the Committee’s hearing notice. This type of counterfeiting poses not only additional costs on the authors/publishers, but can also cause physical harm to the customer if what is counterfeited is pharmaceutical, but yet is distributed bearing legitimate trademarks and other indicia of legitimacy.

The Committee Report summarized the various harms that result from this type of activity:

  • First, online infringement harms the content and trademark owners themselves in the form of lost sales, lost brand value, increased costs to protect their intellectual property, and decreased incentives to invest in research and development.
  • Second, online infringement harms consumers who receive lower quality products, inauthentic products, or, in a worst case scenario, products that cause physical harm or health risks.
  • Third, online infringement harms Federal and State Governments in the form of lost tax revenues, higher law enforcement costs, and the harm caused by the effects of the Government’s own purchase of counterfeit products.
  • Fourth, online infringement harms U.S. trade by lessening its ability to partner with countries that have weaker intellectual property enforcement regimes.21 Fifth, online infringement reduces the incentives to create and disseminate ideas which, as the United States Supreme Court has recognized, harms the free expression principles of the First Amendment.
  • Finally, as Victoria Espinel, U.S. Intellectual Property Enforcement Coordinator (IPEC), noted in a hearing before the Senate Committee on the Judiciary, online infringement supports international organized crime syndicates, which pose risks to our national security. 

S. Rep. at 5 (footnotes omitted).

While a large portion of the Bill relates to government action that can be taken by the Attorney General, the private right of action included in this Bill provides separate benefits to rightsholders, allowing them to enforce their rights, independent of any action that the government may take against the wrongdoer. This private right of action is more limited than the enforcement tools provided to the AG.

As the Committee Report explains, while the private right of action can extend to websites operating outside of the U.S., “the resulting remedies are more limited [than those reserved for the Justice Department]. A qualifying plaintiff may only seek the court’s permission to serve a court order resulting from an action brought under this provision on a payment processor or online advertising network. Neither a DNS operator nor a search engine can be required to take action as the result of an order issued under this provision.” Id. at 8. As a result, private rightsholders cannot use this process to require that web hosting companies or search engines disable access to the domain name when it is found to be a “rogue Internet site.”

Moreover, when court orders are served on third parties (such as payment processors or search engines), no ongoing duty on the part of the third-party – for instance, to ensure that the infringing domain does not pop up again under a different name at a later time – will be established. Id. at 9. Instead, the third-party’s obligations begin and end with the court order served upon it – even then, the third party is only required to comply to the extent such compliance is “technically feasible and reasonable.” Id. This safe harbor allows third parties to avoid significant expenses that might result from having on-going, extensive obligations to police against the re-appearance of these rogue sites when they resuscitate themselves after a successful enforcement action.

This Bill also limits the remedies that a qualifying plaintiff can seek against a third-party who “knowingly and willfully” fails to comply. Id. Specifically, actions to enforce the order at issue will be limited to requiring compliance with it – “These provisions do not open the door to fishing expeditions in the form of frivolous litigation brought simply to initiate broad discovery.” Id. Monetary damages are also not available in these situations.

Notably, the drafters did not intend the Bill to deter voluntary action by third parties to police their own networks for infringing or counterfeiting activity, nor does it intend to allow the Bill to act as a substitute for such voluntary action. Id. at 10.

Overall, the Bill would provide needed assistance to rightsholders to continue to fight the battle against infringement and counterfeiting. It is not a complete solution, however. Even Senators who support this Bill recognize that it’s only the first step – but an important one nonetheless. See Prepared Statement of Sen. Leahy, May 26, 2011 (“The PROTECT IP Act targets the most egregious actors, and is an important first step to putting a stop to online piracy and the sale of counterfeit goods.”).

Background

In general, this Bill provides a remedy both to the Attorney General and to certain private rights holders (“Qualified Plaintiffs,” as specifically defined) to combat copyright infringement and counterfeiting against websites whose primary purpose is infringement or counterfeiting. The statutory definitions make this a bill of somewhat limited application (not every infringement will qualify, nor will every infringer, involved third-party or level of conduct), but it undoubtedly would provide rightsholders with another tool in the toolbox to enforce their valuable copyright and trademark rights.

In effect, this Bill constitutes an amendment to the COICA bill introduced last session, which did not reach a floor vote in the Senate before the session ended. (More on the COICA bill and related hearings can be found here.)

Senators Hatch, Grassley, Schumer, Feinstein, Whitehouse, Graham, Kohl, Coons and Blumenthal co-sponsored the PROTECT IP Bill, which was referred to the Committee on the Judiciary on May 12. The Committee scheduled an executive business meeting on May 19, which was rescheduled for May 26 to consider the bill and to review proposed amendments. The Committee accepted both amendments and approved the bill unanimously by a voice vote. (The audio recording of the session – very short – can be found here: http://judiciary.senate.gov/webcast/5-26-11_Exec_Bus_Mtg.mp3. It also appears on the meeting announcement changing the date of the session to May 26.)

Following the announcement that the bill had passed the Committee on the Judiciary and was moving to the full Senate floor for consideration, Senator Wyden announced a hold on the motion to proceed to the bill, thus perhaps indefinitely tabling consideration of what seems to have been a substantial bi-partisan effort to combat a very real threat to American commerce.

The Bill has received both praise and criticism, with interest groups and other organizations going on record with their opinions about the Bill and its anticipated impact. (See my prior post for a short summary of some of the opinions that had already been made public before the Judiciary Committee voted on the bill on May 26. Undoubtedly, more groups have made their opinions public in the intervening months, but I have not searched since.)