Yesterday, the Senate Judiciary Committee held a business meeting which was scheduled for purposes of discussing certain nominations and markups to at least two bills: 1) S.968, Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011 (“PROTECT IP Act”) (sponsored by Leahy, Hatch, Grassley, Kohl, Feinstein, Schumer, Graham, Whitehouse, Klobuchar, Franken, Coons, Blumenthal); and 2) S.978, A bill to amend the criminal penalty provision for criminal infringement of a copyright, and for other purposes (Klobuchar, Cornyn, Coons). A discussion of S. 978 was held over until the next meeting.

The meeting was not open to the public and was not simulcast, but an audio file of the meeting is now available on the Committee’s site, along with the agenda. Senators Leahy and Franken have also published their prepared remarks on the Committee’s site.  (UPDATE:  A webcast of the Executive Business Meeting is now available on the site.)

During the meeting, Senators Leahy, Hatch and Grassley offered an amendment in the nature of a substitute, and Senators Leahy and Grassley offered an additional amendment. Both of these were made available on the Senate Judiciary Committee’s main site, although I imagine they will be moved at some point in the near future (once there is more current news to publish on the main site).

Both amendments passed the Senate Judiciary Committee on a 10-0 Voice Vote. Following the announcement that the Bill had passed the Senate Judiciary Committee, however, Senator Wyden announced a hold on the Bill, commenting that while “I understand and agree with the goal of the legislation, to protect intellectual property and combat commerce in counterfeit goods, . . . I am not willing to muzzle speech and stifle innovation and economic growth to achieve this objective.” An interesting article in Wired.com identifies the “hold” process as “rarely used” in the Senate, but effectively blocking the Bill from “landing” on the Senate floor.

Statements of several organizations on both sides of the fence on this issue can be found as follows (below are excerpts of the various statements, please click the links to their full statements to get complete context):

IN FAVOR

• Microsoft, praising the Bill (5/26/11), issued before the amendments were reported, supports the Bill, but cautions: “Safeguards should be included to ensure that rogue sites are identified clearly and appropriately, and that the responsibilities of companies required to take action to ensure compliance are well defined and their liability appropriately limited. In addition, steps should be taken to ensure that the private right of action is not subject to abuse, and that the new actions and resulting orders do not stifle free speech or the free flow of information.” Brad Smith, General Counsel and Senior Vice President, Legal & Corporate Affairs, Microsoft also issued a statement in support of the Bill.
• U.S. Chamber of Commerce’s Global Intellectual Property Center, praising the Bill (5/26/11), specifically stating: “Rogue sites and their operators contribute nothing to the U.S. economy. They do not innovate, they do not pay taxes, they do not follow safety standards, and they do not follow the law. Today’s vote serves as a wakeup call to those who illicitly profit at the expense of American businesses and consumers—the U.S. will not tolerate your careless, reckless, malicious behavior.”
• Copyright Alliance, praising the Bill (5/26/11), specifically stating: “”The websites targeted by this legislation are draining income from American businesses and misleading consumers with their unregulated, unlicensed and unsafe practices. This bill provides much-needed tools for law enforcement to do its job and we urge the full Senate to consider it in the very near future.”
• National Cable & Telecommunications Association, supporting the Bill (5/26/11), stating “By cracking down on rogue websites that have for too long encouraged the theft of valuable content and intellectual property, the PROTECT IP Act of 2011 sends a strong message that this illicit practice will no longer be tolerated.”
• A group of entertainment professionals jointly issued a statement in support of the Bill, entitled, “Joint Statement from AFM, AFTRA, DGA, IATSE, IBT and SAG Commending Senate Judiciary Committee Passage of the PROTECT IP Act.” Representing “more than 400,000 entertainment industry workers including craftspeople, actors, technicians, directors, musicians, recording artists and others whose creativity is at the heart of the American entertainment industry,” the statement opines,
  • “[W]e believe the PROTECT IP Act is critical to efforts to aggressively combat the proliferation of foreign ‘rogue websites’ that steal US produced content and profit from it by illegally selling it to the American public. Let us be very clear: online theft is stealing. It results in thousands of lost jobs and millions of dollars in lost wages for our members. We reject the claims that shutting down illegal sites may somehow impact legitimate commercial websites. This bill clearly goes after illegal sites; legitimate and law abiding websites are not the target and we would hope that those who advocate against either of these bills are not condoning illegal activity on the Internet any more than they would condone illegal activity in their bank or grocery store. Today’s passage of the PROTECT IP Act is a significant step toward ending the ‘looting’ of the creative and artistic entertainment works that constitute our members’ hard work, and are an invaluable part of our collective cultural heritage.” (Emphasis added.)
  • The groups signing on to this Joint Statement are the American Federation of Musicians (AFM), American Federation of Television and Radio Artists (AFTRA), Directors Guild of America (DGA), International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts of the United States, Its Territories and Canada (IATSE), International Brotherhood of Teamsters (IBT) and Screen Actors Guild (SAG).
• Another group in the entertainment industry (IFTA, NATO and MPAA) jointly supported the Bill, specifically stating, “By helping shut down rogue websites that profit from stolen films, television shows, and other counterfeit goods, this legislation will protect wages and benefits for the millions of middle class workers who bring America’s creativity to life.” (Specific quote was attributed to Michael O’Leary, MPAA).
  • According to the press release, this group includes the Independent Film & Television Alliance® (IFTA), the National Association of Theatre Owners (NATO), and the Motion Picture Association of America, Inc. (MPAA)
• The American Apparel and Footwear Association, supporting the Bill (5/26/11), states “While the current PROTECT IP Act is a significant improvement over previous attempts at legislation to shut down rogue Web sites that sell counterfeit goods, the U.S. apparel and footwear industry believes this bill can be made stronger. We are pleased that language has been included to allow law enforcement the ability to share information with rightsholders.”

OPPOSED

• Center for Democracy and Policy (CDT), opposing the Bill (5/26/11), but noting that improvements were made during the markup session on May 26: “CDT has expressed its concern with this approach, and particularly with the portions of the bill that try to use the domain name system (DNS) to control ‘rogue websites,’ in previous blog posts and congressional testimony. The Committee today made a few modest but generally positive changes, such as improving transparency via annual oversight reports and tightening some language designed to prevent the bill from undermining the crucial copyright liability “safe harbor” under section 512 of the DMCA. But CDT’s core concerns remain.” (Internal hyperlinks omitted)
  • CDT published a letter sent by public interests groups on 5/25/11 to the Judiciary Committee, expressing concern with the Bill. The signatories were the American Association of Law Libraries, Association of College and Research Libraries, American Library Association, Association of Research Libraries, Center for Democracy and Technology, Demand Progress, EDUCAUSE, Electronic Frontier Foundation, Human Rights Watch, Rebecca MacKinnon, Bernard Schwartz Senior Fellow, New America Foundation, Public Knowledge, Reporters sans frontières / Reporters Without Borders and Special Libraries Association.
  • CDT published another letter sent by Internet and payment system companies on 5/25/11 to the Judiciary Committee, objecting to the creation of a private right of action included in the Bill. The signatories were American Express Company, Consumer Electronics Association, Discover, Visa, PayPal, NetCoalition, Yahoo!, eBay and Google.
  • CDT also published a letter sent by various trade associations on 5/25/11 to the Judiciary Committee, expressing concerns about the definition of “dedicated to infringing activities,” application to search engines, creation of a private right of action and DNS blocking. Signatories were Computer and Communications Industry Association (CCIA), Consumer Electronics Association (CEA) and NetCoalition.
• Public Knowledge, opposing the Bill (5/26/11), specifically stating: “We are disappointed that the Senate Judiciary Committee today approved legislation (S. 968) that will threaten the security and global functioning of the Internet, and opens the door to nuisance lawsuits while doing little if anything to curb the issues of international source of illegal downloads the bill seeks to address.”  Public Knowledge also published a paper entitled, “Security and Other Technical Concerns Raised by the DNS Filtering Requirements in the PROTECT IP Bill” (May 2011).
• Google appears to oppose the Bill (according to an article appearing in The Guardian (UK), but I was unable to find a formal press release to that effect. See “Google boss: anti-piracy laws would be disaster for free speech,” The Guardian, May 18, 2011 (i.e., before the measure passed the Senate Judiciary Committee). Note that they signed on to one of the 5/25/11 letters that CDT posted to its site (referenced above).

The House Committee on the Judiciary, Subcommittee on Intellectual Property, Competition and the Internet held a hearing on “Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites, Part II” on April 6, 2011, to further examine methods of theft online – including both copyright infringement and counterfeiting. The webcast can be found on the Committee’s web site. Although a transcript of the proceedings (and any supplemental questions and answers) are not yet available, when they are published, they should appear in the Government Printing Office’s repository: House Committee on the Judiciary: Hearings – 112th Congress.

Testifying before the Subcommittee were 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; and Christine Jones, Executive Vice President and General Counsel for the GoDaddy Group. (Their prepared remarks can be found by following the links associated with each of their names.)

At the opening of the hearing, Rep. Goodlatte (Va.) explained the basic purpose of the hearing (to examine methods of theft online) and clarified a misunderstanding that had arisen after the last hearing on March 14. He explained that although ICE (U.S. Immigration and Customs Enforcement) had seized domain names in the recent few months, those seizures were based on existing law – particularly the Pro-IP Act enacted several years ago.

In contrast, this hearing and any proposed legislation resulting from it was intended to find new tools to address theft online — existing laws did not provide enough enforcement tools. Many of the websites being discussed as “rogue” websites in these hearings are foreign-based and/or -operated. Thus, there is no property in the U.S. at issue, and the sites could not simply be “seized” by ICE. He concluded, “any efforts to pass new legislation will not be based on seizure laws and process because there is no property in the U.S. to be seized. Thus, new tools are needed to address theft online.” (All of the quotes taken from the hearing for this blog post are paraphrased, not exact transcriptions, as a transcript is not yet available. But, they’re close.)

Rep. Watt (N.C.) put the discussion into a neat container: we need to deter “theft of products online as we protected against theft of property on the ground. What might romantically be referred to as ‘piracy,’ we refer in my neighborhood as ‘theft’ or simply, ‘stealing.'”

Rep. Conyers (Mich.) asked simply: “Why don’t we just cut off all the money? Why don’t we eliminate some of the financial incentives by cutting off the funding from customer through the payment processing system, or cut off the funding from some of the advertising networks?” He also suggested considering a private right of action, noting that the suggestion was “almost unheard of.” Finally, he admonished that “[w]e need to use this hearing as another opportunity to come up with some legislation we can be proud of.”

Following these introductions, each of the witnesses was given five minutes to summarize the testimony that they had prepared, and proceeded to answer questions posed to them by the participating representatives of the House. The hearing lasted about 3½ hours, and it’s impossible to do it complete justice here. The questions and answers, and the various speeches made by some participants, were detailed and enthusiastic. I’d encourage you to watch the whole thing.

In the meantime, some highlights:

ICE Director John Morton expressed great concern that all of American industry is “under assault” right now and repeatedly argued that government enforcement should only be one “tool in the toolbox,” but simply could not address effectively every act of infringement or counterfeiting. Industry has to be involved. In essence, he said, “[w]hat you’ve heard, though, is that industry can do a lot more, on a greater scale than the government ever can. We are part of the solution, we are not THE solution, not by a long shot.” He further explained the context in which the ICE domain seizures had occurred, noting that they were made under existing legislation, but are ineffective against a foreign website with foreign operators, because of jurisdictional limits.

Floyd Abrams, Esquire, addressed applicable First Amendment principles and recommended that any legislation must be narrowly drafted so that it’s addressing only those sites that are “all but totally infringing. . . . if the entity is nothing but a transmitter of infringing products, you are permitted to deal with it as long as the remedy is not overbroad.” He recommended that the Committee use existing regimes such as Rule 65 (of the Federal Rules of Civil Procedure) governing injunctions and temporary restraining orders and the Copyright Law’s enforcement mechanisms, and not to “start from scratch.”

Kent Walker, Esquire, explained Google’s point of view, and responded to numerous questions throughout the hearing. Specifically, he testified:

• That the DMCA process was sufficient because it “strikes right balance between free speech and rightsholders.”
• That creating a private right of action should be discouraged because it would allow individuals to “shake-down companies that are making legitimate efforts to comply.”
• That Google’s efforts have already been successful and Google was already doing what it could.
• That Google does not want to be in the position of being “judge, jury or executioner” in deciding what content was infringing or pirated. Instead, he advocated for significant cooperation with the content industry, so that the content industry could identify which web sites contained infringing works or counterfeit products.
• He discouraged the imposition of any new burdens and explained that each method of combating infringement (whether through AdWords/AdSense campaigns on the advertising side or Google’s AutoComplete function and display of results on the searching side) that had been proposed during the hearing was overbroad.
• He denied that Google had benefited from “illicit websites” through advertising revenue: “These sites cost us money, sir. They cost us money to get rid of them, they cost us money when we find them and we have to refund money to advertisers. They cost us money when they use fake credit cards or stolen credit cards to pay for what they’re doing. We have no interest in having advertising on these sites. We have no interest in having advertising leading to these sites.”
• Discussing some practical differences between infringers and counterfeiters, which necessitate different enforcement efforts, he explained:
  • The infringers (generally) had no trouble drawing traffic to their sites because they were offering content for free – their way of making money on these sites was through advertising, which could only be profitable if more people were drawn to their sites.
  • The counterfeiters (generally) were selling products and making money, but they needed to drive traffic so that more sales could be made.
• He recommended “cutting off the money to these guys, cutting off the advertising . . . [and] the financial services. When you talk about cutting off the pure search side of it, the risk is that you are both overbroad and ultimately ineffective in” eliminating the bad conduct.
• He proposed a limited definition of “rogue website” be used to define sites that were subject to takedown or other sanctions under this legislation. He suggested: “1) that the site is knowingly violating copyright law; 2) that it contains complete copies of works or counterfeit goods; 3) that it has a commercial purpose; and 4) it refuses to respond when notified by rightsholders. Within that construct, we’re comfortable with the notion that the site is dedicated to infringement.”

Ms. Jones agreed that input from the content industry was critical, but argued that it did not end the analysis:

• “Like Google and others, we do rely on the content industry to let us know when they find things that are inappropriate.”
• She argued that it was necessary to go further, and achieve cooperation from the other participants in the “broader Internet ecosystem” to make it very difficult for infringers and counterfeiters to achieve profits in the US market.

• Continued assistance from law enforcement was critical to the success of any multi-pronged attack.

• Made some concrete recommendations to combat these rogue sites: 1) “follow the money”; 2) “shut down all chokepoints in the system because we have to disincentivize the bad actors”; and 3) “take away ability to search for, pay for, and ship counterfeit goods.”

• Recommended that any new legislation in this area should not be limited to a specific technology or a specific means of infringing, but instead focus on “top-level concepts.” In other words, there will be technologies in the future that we cannot contemplate now – any legislation should be careful to address the conduct, and not the method of infringing or delivering the counterfeits.
• Suggested that a safe harbor be provided to protect industry participants from liability if they complied with the new statute’s requirements.

• Also advocated in favor of penalties that should be assessed against those who do not comply: “Unless and until we provide a consequence for businesses who facilitate criminals, there will always be criminals who can find a safe harbor [I think she meant “safe haven” here].”

Reaction by various members of the Committee was mixed, and they had their own suggestions of how an enforcement tool could be fashioned and provided observations of some of the challenges to be faced. Among them:

• Rep. Lofgren (Cal.): She explained that she was reminded “how useful it might be to have some of the big tech presences engaged in deep conversations with content holders who are understandably concerned about what’s happening to them. That might yield a successful result that might be far superior than what the non-engineers in the Congress might craft.”
• Rep. Berman (Cal.): Responding to Mr. Walker’s suggestion that the DMCA was adequate to address these concerns, he explained, “if that legislation were really working, I don’t think we’d be having this hearing. I don’t think there’d be a Senate Bill. I don’t think Customs would be undertaking the initiatives it’s undertaking.” At base, however, “billions of dollars and thousands of jobs were being lost because of digital theft and we’re focused on trying to do something about it.”
• Rep. Wasserman-Schultz (Fla.): Expressed concern about the length of time over which Google continues to allow web sites to remain (for instance on its Blogger site) even after receiving a takedown notice. She asked that Rep. Goodlatte include in his investigation an analysis of the amount of time it reasonably takes to act on takedown notices under the DMCA.
• Rep. Sanchez (Cal.): Suggested that ICE direct its symposiums in public education to a younger audience, the ones who might be participating in the infringement, instead of focusing on industry leaders, government officials and congressional staff, as these would already be on board with the concept that this conduct must stop.
• Rep. Jackson Lee (Tx): Asked whether Google has a team or department that deals with implementing the takedowns under the DMCA, as they could give input into crafting the legislation. [Mr. Walker responded that they had such a group of people and they’d be happy to work with the Committee.]

Many more thoughtful comments and suggestions were made by other members of the Committee and the witnesses, and I again encourage you to watch the webcast.

Finally, while it is not clear what the Subcommittee will do with all of this information and these suggestions, Mr. Adams had the right approach when he suggested, “all we can do is everything we can to drain the actions of this sort of the profits that have been building up over the years, and increasing more and more as time passes.” As Director Morton opined, ” We have to do something. My perspective is, do nothing and you fail.”

Prior posts in this blog on other hearings on a potential, new COICA bill (Combating Online Infringement and Counterfeits Act) can be found under the label COICA.