[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
ROLE OF VOLUNTARY AGREEMENTS IN THE
U.S. INTELLECTUAL PROPERTY SYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 18, 2013
__________
Serial No. 113-49
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina ROBERT C. ``BOBBY'' SCOTT,
LAMAR SMITH, Texas Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania KAREN BASS, California
TREY GOWDY, South Carolina CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Courts, Intellectual Property, and the Internet
HOWARD COBLE, North Carolina, Chairman
TOM MARINO, Pennsylvania, Vice-Chairman
F. JAMES SENSENBRENNER, Jr., MELVIN L. WATT, North Carolina
Wisconsin JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE CHABOT, Ohio Georgia
DARRELL E. ISSA, California JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah KAREN BASS, California
MARK AMODEI, Nevada CEDRIC RICHMOND, Louisiana
BLAKE FARENTHOLD, Texas SUZAN DelBENE, Washington
GEORGE HOLDING, North Carolina HAKEEM JEFFRIES, New York
DOUG COLLINS, Georgia JERROLD NADLER, New York
RON DeSANTIS, Florida ZOE LOFGREN, California
JASON T. SMITH, Missouri SHEILA JACKSON LEE, Texas
Joe Keeley, Chief Counsel
Stephanie Moore, Minority Counsel
C O N T E N T S
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SEPTEMBER 18, 2013
Page
OPENING STATEMENTS
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Chairman, Subcommittee on Courts,
Intellectual Property, and the Internet........................ 1
The Honorable Melvin L. Watt, a Representative in Congress from
the State of North Carolina, and Ranking Member, Subcommittee
on Courts, Intellectual Property, and the Internet............. 2
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Ranking Member, Committee on the
Judiciary, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 3
WITNESSES
Jill Lesser, Executive Director, Center for Copyright Information
Oral Testimony................................................. 7
Prepared Statement............................................. 9
Cary H. Sherman, Chairman and CEO, Recording Industry Association
of America
Oral Testimony................................................. 12
Prepared Statement............................................. 15
Randall Rothenberg, President and CEO, Interactive Advertising
Bureau
Oral Testimony................................................. 25
Prepared Statement............................................. 27
Gabriel Levitt, Vice President, PharmacyChecker.com
Oral Testimony................................................. 35
Prepared Statement............................................. 37
Robert C. Barchiesi, President, The International
AntiCounterfeiting Coalition
Oral Testimony................................................. 50
Prepared Statement............................................. 52
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, Ranking
Member, Committee on the Judiciary, and Member, Subcommittee on
Courts, Intellectual Property, and the Internet................ 5
Material submitted by the Honorable Judy Chu, a Representative in
Congress from the State of California, and Member, Subcommittee
on Courts, Intellectual Property, and the Internet............. 64
Material submitted by the Honorable Doug Collins, a
Representative in Congress from the State of Georgia, and
Member, Subcommittee on Courts, Intellectual Property, and the
Internet....................................................... 85
APPENDIX
Material Submitted for the Hearing Record........................ 121
ROLE OF VOLUNTARY AGREEMENTS IN THE U.S. INTELLECTUAL PROPERTY SYSTEM
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WEDNESDAY, SEPTEMBER 18, 2013
House of Representatives
Subcommittee on Courts, Intellectual Property,
and the Internet
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 2:03 p.m., in
room 2141, Rayburn House Office Building, the Honorable Howard
Coble (Chairman of the Subcommittee) presiding.
Present: Representatives Coble, Marino, Goodlatte, Smith of
Texas, Poe, Collins, Watt, Conyers, Johnson, Chu, Jeffries, and
Lofgren.
Staff Present: (Majority) Joe Keeley, Chief Counsel; Olivia
Lee, Clerk; and (Minority) Stephanie Moore, Minority Counsel.
Mr. Coble. The Subcommittee on Courts, Intellectual
Property and the Internet will come to order. Without
objection, the Chair is authorized to declare recesses of the
Subcommittee at any time. We welcome all of the witnesses and
others in the audience for today's very important hearing I
will now give my opening statement.
Good afternoon, and welcome again to today's Subcommittee
hearing on the Role of Voluntary of Efforts in the U.S.
Intellectual Property System. Copyright owners have been
dealing with the increasing acts of power sales of their
property that is often aided by groups and Web sites that
glorify theft. This Subcommittee has dealt with the issue for
some time.
The Congressional Creative Rights Caucus which I Chair with
the gentlelady from California, Ms. Chu, has also heard from
artists impacted by the outright theft of their works. I am
pleased to learn today of the voluntary efforts now underway to
reduce piracy. These good works are the result of several
companies and trade associations that have invested their time
and effort to cultivate best practice principles that help
direct consumers to legitimate content while making it more
difficult for pirates to operate. These agreements are a step
in the right direction. They promote intellectual property,
they improve the Internet marketplace for consumers and they
have been established through a voluntary process.
I want to especially highlight the efforts by the Center
for Copyright Information as an example of what can be done. By
letting ISP customers know about piracy that may be occurring
using their Internet connections, ISP's consumers may find that
the wireless network has been hacked, or that their teenager
needs to join a family meeting about responsible Internet
usage. I am also pleased that the Center has taken a thoughtful
approach to implementing an appeals system as well as creating
an oversight panel of consumer groups.
While much work has been done, more work is required from
other groups. I am interested in hearing how existing voluntary
agreements can be utilized to foster new agreements in new
areas, and if there is anything we can do to help promote the
best practices. As most of us know, private sector actions are
oftentimes more efficient and effective than some regulation
handed down by the Federal Government.
Thank you, again, for being here, and I look forward to
hearing the testimony from our witnesses on today's panel.
I am now pleased to recognize the Ranking Member from North
Carolina, Mr. Mel Watt for his opening statement.
Mr. Watt. Thank you, Mr. Chairman.
Two years ago, this Subcommittee held several hearings to
address possible legislative solutions to the epidemic of
online piracy and sale of counterfeit goods over the Internet.
Although the Stop Online Piracy Act was itself stopped, the
problem of piracy was not, as I have noted on a number of
occasions.
We are certainly not here to relitigate SOPA, but I do
believe that the SOPA debate we had helped motivate an
important shift in the willingness of some parties to engage
more aggressively in negotiating to develop some of the best
practices we are considering here today.
Indeed, some of the entities that fought vigorously to
defeat SOPA are now constructive parties to voluntary
agreements designed to combat the drain on our economy and the
potential harm to consumers that online piracy and
counterfeiting represent.
Over the past 2 years, government entities, nonprofit
organizations, academic institutions and industry stakeholders
have all issued studies evaluating the problem. Recent examples
include the July 2013 Department of Commerce Internet Policy
Task Force report on copyright policy, creativity and
innovation in the digital economy in which the task force noted
``while the extent of the losses caused by online infringement
is hard to calculate with certainty, the proliferation of
unlicensed sites and services making content available without
restriction or payment impedes the growth of legitimate
services.''
In February, the Administration also reported on the cyber
theft of trade secrets, and in May, the Nonprofit Commission on
the Theft of American Intellectual Property found that the
scale and complexity of the international theft of American
intellectual property is unprecedented, including the rapid
growth in online sales of counterfeit goods.
Earlier this year, Carnegie Mellon professor Michael Smith
released his findings on the impact of the Department of
Justice enforcement against the notorious MegaUpload site. In
general, Professor Smith suggested that providing legitimate
avenues to obtain content online, coupled with effective anti-
piracy policies, represents the best recipe for combating IP
theft online. However, yesterday a report entitled ``Sizing the
Piracy Universe'' by NetNames painted a bleak picture regarding
Internet-based infringement. The report, commissioned by NBC
Universal, found that piracy of entertainment content has
increased dramatically despite the growing number of legal
options available to consumers.
Google also released a report last Friday entitled ``How
Google Fights Piracy,'' outlining its efforts to curtail piracy
and highlighting how its services provide enhanced
opportunities for creators. However, this morning the Motion
Picture Association of America, together with Chairman Coble
and our colleague on the Committee, Ms. Chu, unveiled a study
by Compete, ``Understanding the Role of Search in Online
Piracy,'' which reportedly details how search engines like
Google introduce consumers to Web sites dedicated to
infringement.
The single common thread throughout each of these reports
is the recognition that there is an ongoing vulnerability for
U.S. intellectual property in the online environment. That
threat is not only economic and is not limited to specific
industries represented here. Counterfeit hard goods, especially
pharmaceuticals, may pose an additional threat to safety risk
for American consumers.
Futile efforts to curtail online infringement and
counterfeiting does more than deplete the profits of U.S.
companies and negatively affect the U.S. economy. It also opens
our citizens to a variety of predictable harms like identity
theft, fraud, sickness or even death. Failure to address the
problem may also make our cyber infrastructure less secure and
facilitate individual criminal activity or encourage criminal
enterprises.
So it is important that these voluntary agreements and best
practices are meaningful endeavors, not just window dressing.
It is also important that our values of privacy, free speech,
competition and due process are honored. But it is also
important that those values are not fraudulently turned against
us to invite or justify legislative paralysis.
I applaud the voluntary efforts of the various industry
stakeholders both to confront the challenge and to embrace the
opportunities that permeate the digital era. While these
cooperative measures may or may not be enough, I believe that
our Subcommittee, which has jurisdiction over both intellectual
property and the Internet, should encourage these
collaborations, but it is also our responsibility to consider
whether additional oversight or legislative action is warranted
as well.
I welcome the witnesses and look forward to the testimony.
Mr. Chairman, I yield back.
Mr. Coble. Thank you, Mr. Watt.
The Chair now recognizes the distinguished gentleman from
Michigan, the Ranking Member for the full Judiciary Committee,
Mr. Conyers, for his opening statement.
Mr. Conyers. Thank you, Chairman Coble, and we join in
welcoming our distinguished witnesses today.
Voluntary agreements, intellectual property law, should
facilitate technological advances, while at the same time,
protecting creators, I think that is what the hearing is all
about, and we must continue ways to examine how we can prevent
piracy and fight violations of copyright law. I think that is a
worthwhile issue to examine here today in the Judiciary
Committee.
Although these voluntary agreements have been a positive
step, we must continue to develop solutions to address digital
piracy. A primary goal is that we should have to continue to
inform and change the behavior of the majority of users who
want to enjoy content legally, and I am hoping that these
issues will be examined with the care and experience of our
distinguished witnesses today.
I will put the rest of my statement in the record. Thank
you very much, Chairman Coble.
Mr. Coble. Thank you, Mr. Conyers.
[The prepared statement of Mr. Mr. Conyers follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Coble. We have a very distinguished panel today, and I
will begin by swearing in our witnesses before introducing
them. If you would, please, all rise.
[Witnesses sworn.]
Mr. Coble. Let the record show that each of the panelists
responded in the affirmative.
As I said before, we have a distinguished panel before us,
and I am pleased to introduce them now. Our first witness today
is Ms. Jill Lesser, Executive Director at the Center for
Copyright Information. Ms. Lesser is a long-time consumer
protection, technology and copyright expert, and also serves as
a board member for the Center For Democracy and Technology. She
received her J.D. from the Boston University School of Law, and
her B.A. in political science from the University of Michigan.
Our second witness is no stranger on Capitol Hill, Mr. Cary
Sherman, Chairman and Chief Executive Officer for the Recording
Industry Association of America, the organization representing
the Nation's major music labels. Mr. Sherman received his J.D.
from Harvard School of Law and his B.S. from Cornell
University.
Our third witness today is Mr. Randall Rothenberg,
President and Chief Executive Officer of the Interactive
Advertising Bureau, a trade association representing over 500
leading interactive companies that are responsible for selling
more than 86 percent of online advertising in the United
States. Mr. Rothenberg received his B.S. in classics from
Princeton University.
Our fourth witness today is Mr. Gabriel Levitt, Vice
President of PharmacyChecker.com. Mr. Levitt helped found the
company in 2002, and is responsible for all business and
research operations. Mr. Levitt received his Master's Degree in
International Relations from the American University, and his
bachelor's degree from Roger Williams University.
Our final witness today, Mr. Robert Barchiesi, is President
of the International AntiCounterfeiting Coalition. Mr.
Barchiesi received his M.A. from the University of Alabama and
his B.A. from the John Jay College of Criminal Justice. It is
good to have all of you with us today, gentleman and lady.
There is a timer on the desk that will alert you when your
time is waning, rapidly vanishing. We try to employ the 5-
minute rule. When the green light on the panel turns to amber,
that is your warning that you have 1 minute to wrap up. Now,
you won't be keelhauled if you violate that rule, but try to
wrap up on or about 5 minutes if you would do so.
Ms. Lesser, we will begin with you. I repeat, it is good to
have all of you with us.
TESTIMONY OF JILL LESSER, EXECUTIVE DIRECTOR,
CENTER FOR COPYRIGHT INFORMATION
Ms. Lesser. Chairman Coble, Ranking Member Watt, Ranking
Member Conyers, and Members of the Subcommittee, my name is
Jill Lesser and I am the Executive Director of the Center For
Copyright Information. I am pleased to be testifying on the
issue of voluntary initiatives aimed at protecting copyright in
a digital age, a new area of cooperation and progress in a
policy debate that has long been characterized by sharp
differences of opinion.
The Center for Copyright Information was established in
2011 as part of a groundbreaking initiative among the Nation's
five leading Internet service providers and virtually the
entire movie and music industries. The agreement set out to
stem the tide of digital piracy by accomplishing two goals:
One, establishing the copyright alert system or CAS; and, two,
creating an organization that could educate users about the
importance of protecting digital content while offering them a
better way to find movies, TV and music online safely and
legally.
In the two short years since CCI's formation, we have
successfully implemented the Copyright Alert System and have
begun a series of educational efforts aimed at helping users
make better choices about the way they enjoy creative content.
Still in its early stages, this initiative illustrates the
importance of multi-stakeholder, market-driven solutions, and
more generally serves as a model for addressing challenging
technology policy issues through collaboration.
I have addressed the negotiations that led to the creation
of CCI in my written testimony. Therefore, I will focus here on
CCI's current and future work in bringing our voluntary
initiatives to life.
The Copyright Alert System is an educational program that
enables copyright holders to notify consumers when their
Internet access accounts are alleged to have been used
illegally to download and share movies, music or TV shows over
peer-to-peer networks. CAS notices are designed to be sent in a
manner that respects users' privacy, educates them about how to
correct behavior, and offers them an independent review process
to ensure that users accounts are not inadvertently
misidentified as having been used to engage in digital piracy.
Each of the participating ISP's CAS implementation has
unique elements, but there are several common components.
Notices of alleged infringement are generated by copyright
owners using a methodology that has been reviewed and validated
by technology experts to capture whole works and avoid false
positives. The copyright owners forward notices to
participating ISPs who, in turn, pass on individual notices to
account holders in the form of copyright alerts. Each alert is
one way and no information about individual account holders is
shared with content owners.
The program includes up to six alerts with a 7-day grace
period between each, offering consumers time to identify the
source of and take steps to correct infringing behavior. If a
user reaches the final or what we call the mitigation stage, he
or she becomes eligible to seek an independent review of alerts
received. Administered by the American Arbitration Association,
the process offers users the ability to challenge alerts they
believe were sent in error.
And finally, all of the alerts sent to consumers and CCI's
Web site offer information about how users can find content
through the many legal services now available.
The CAS began operating early this year after nearly 18
months of research and development. Our research helped us
understand what consumers do and do not know about peer-to-peer
technology, and their level of understanding about copyright
laws. We found that most consumers do not understand or
appreciate concepts that many of us take for granted, and our
mandate includes trying to enhance consumer understanding and
change the conversation about digital copyright.
Our research indicates that one of the most important
audiences for our educational effort is young people, and we
have just completed development of a new copyright curriculum
that is being piloted during this academic year in California.
The kindergarten through sixth grade curriculum is as a result
of CCI's partnership with the California School Libraries
Association and iKeepSafe, a leading digital reading literacy
organization. It introduces concepts about creative content in
innovative and age appropriate ways to help children understand
they can be both creators and consumers of artistic content.
A critical element of this entire initiative is our
Consumer Advisory Board. The associations and companies that
created CCI recognize the importance of--that the success of
the program, I am sorry, would depend in large part on whether
it was fair to consumers.
Our advisory board provides an important oversight role and
advises the CCI board on consumer privacy, transparency and due
process. Now that we have completed the challenging task of
initial implementation, we are working on a system to evaluate
the program's impact and over the coming months we will look
internally at the CAS and evaluate user response to the
program. We will also look more broadly at the impact on peer-
to-peer piracy and our educational initiatives.
We hope these self-assessments will allow the CCI to
continue to enhance the effectiveness of the CAS and our
central mission of promoting lawful ways to find and consume
copyrighted content and educating users about the importance of
respecting copyrights.
Once again, thank you for the opportunity to appear before
the Subcommittee, and provide information on this unique effort
among content owners and ISPs in consultation with consumer
advocates. The creation of the Copyright Alert System marks the
beginning of a new age of cooperation and innovation.
[The prepared statement of Ms. Lesser follows:]
Prepared Statement of Jill Lesser, Executive Director,
The Center for Copyright Information
Chairman Coble, Ranking Member Watt, Chairman Goodlatte, Ranking
Member Conyers, Members of the Subcommittee, I appreciate the
opportunity to testify today on the important issue of digital
copyright. My name is Jill Lesser and I am the Executive Director of
the Center for Copyright Information. I am particularly pleased to be
testifying on the issue of voluntary initiatives aimed at protecting
copyright in the digital age, a new area of cooperation and progress in
a policy debate that has long been characterized by sharp differences
of opinion.
The Center for Copyright Information (CCI) was established in 2011
as part of a ground-breaking voluntary initiative among the nation's
five leading internet service providers (ISPs) and virtually the entire
movie and music industries. The agreement among the parties set out to
stem the tide of digital piracy by accomplishing two goals: 1)
establishing the Copyright Alert System (CAS); and 2) creating an
organization that could educate users about the importance of
protecting digital content, while offering them a better way to find
movies and music online safely and legally. In the two short years
since CCI's formation, we have successfully implemented the CAS and
have begun a series of educational efforts aimed at helping users make
better choices about the way they enjoy digital creative content, while
enhancing the ability of recording artists, filmmakers and television
producers to be compensated for the compelling and creative programming
they deliver.
Still in its early stages, this voluntary cooperative initiative
illustrates the importance of multi-stakeholder, market-driven
solutions to address the problem of digital piracy, and more generally,
CCI and its members believe it can be a model for addressing
challenging technology policy issues through collaboration.
background
As the Members of the Subcommittee know well, the last 15 years
have witnessed a sea of change in the creation and delivery of all
manner of content to consumers. After many decades of distribution
through channels easily managed by content owners, like records, DVDs
and on-air broadcasting, the digital revolution has turned distribution
models--and the ability to protect content against piracy--on their
heads. While this wave of innovation in digital delivery wasn't
designed to undermine copyright protection, an unfortunate side effect
has been the dramatic rise in piracy. Exacerbating the effects of these
technological innovations has been the perception by a generation of
consumers that content distributed over the internet is or should be
free, and that the rules that apply to the physical world don't apply
to the virtual world.
Against this backdrop, representatives of the movie and music
industries and major ISPs came together in 2009 to begin discussions
that ultimately led to the creation of the CAS and the CCI. Those
ground-breaking discussions focused on what the parties could do to
stem the tide of piracy online, particularly through the growing use of
peer-to-peer file sharing systems. After three years of negotiations,
the nation's largest ISPs--AT&T, Cablevision, Comcast, Time Warner
Cable and Verizon--along with the Motion Picture Association of America
(MPAA) and the Recording Industry Association of America (RIAA), and
their member companies \1\ signed the Memorandum of Understanding (the
MOU) that established the framework for the CAS and the structure of
CCI. The MOU was the first, and remains the only, purely voluntary,
industry-led agreement of its kind.
---------------------------------------------------------------------------
\1\ In partnership with MPAA and RIAA, the Independent Film and
Television Alliance (IFTA) and the American Association of Independent
Music (A2IM), the representatives of the independent music and film
distributors are also participants in the CAS.
---------------------------------------------------------------------------
the copyright alert system
The CAS, which is overseen by CCI, is an entirely voluntary
educational initiative that enables copyright holders to notify
consumers when their internet access accounts are alleged to have been
used illegally to download and share copyrighted movies, music or TV
shows. Such notices are sent in a manner that respects users' privacy,
educates them about how to correct their behavior and offers them an
independent review process to ensure that users' accounts are not
inadvertently misidentified as having been used to engage in digital
piracy.
Importantly, the CAS is intended to educate consumers and is
largely targeted to the casual infringer. Indeed, large-scale pirates
looking to game the system will undoubtedly be able to find other ways
to engage in illegal activity. Our system, instead, seeks to inform and
change the behavior of the vast majority of users who want nothing more
than to enjoy the content they love when and how they desire. It is not
intended to be punitive in nature but to assist users in finding
digital content legally and understanding the consequences of sharing
content illegally over P2P networks.\2\
---------------------------------------------------------------------------
\2\ The CAS as an educational program does not require any ISP to
terminate any account holder's internet service. However, the program
does not affect any obligations ISPs may have pursuant to the DMCA, nor
does it alter existing provisions in ISPs' terms-of-service relating to
illegal behavior using their accounts.
---------------------------------------------------------------------------
While each participating ISP's CAS implementation has unique
elements, the key common components of the CAS present in each program
are as follows:
Copyright owners use a methodology that has been
reviewed and validated by technology experts to identify
instances of copyright infringement over P2P networks and
generate notices associated with particular IP addresses;
Copyright owners forward those notices to the ISP to
which the IP address has been assigned;
The ISP, in turn, matches the identified IP address
to a particular account holder and passes on the copyright
owner notice to the primary account holder in the form of a
Copyright Alert (Alert). Each Alert is a one-way notice and no
information about the individual account holders is sent back
to the content owners;
Primary account holders may receive up to six Alerts
with a seven-day grace period in between each Alert to allow
the consumer time to correct his or her behavior or to identify
who in the household (or through an external hack of the
account) might be intentionally or unintentionally engaging in
copyright infringement;
Within those six Alerts, there are three levels of
notice--Educational, Acknowledgement and Mitigation--each
designed to offer increasingly clear educational messages about
how the user can ensure his or her account is not used for
illegal purposes and where and how to find legitimate, licensed
sources of movies, music and TV shows;
If a user reaches the Mitigation Stage, (which
happens after receiving either three or four previous Alerts)
he or she becomes eligible to seek an independent review of the
Alerts received. Our review process, administered by the
American Arbitration Association, offers users the ability to
challenge the Alerts they received if they believe the Alert
were sent in error.
The CAS began operating early in 2013, after 18 months of research
and development. Each ISP invested significant resources to design its
implementation of the CAS, including the creation of consumer
interfaces that would not simply identify instances of digital piracy,
but help users understand how P2P technology works, when its use might
be illegal and how to find content legally and safely.
To support the companies' work, the CCI engaged in consumer
research that helped us understand what consumers do and do not know
about P2P technology and their level of understanding about the
copyright laws. We found that most consumers do not understand or
appreciate concepts that many of us in the policy and legal communities
take for granted--like the meaning of copyright. This research is
helping us to better understand the drivers of consumer behavior around
piracy and, we hope, will help us to improve the CCI's effectiveness in
communicating our messages and ultimately reduce the level of online
piracy and increase content consumption through legal means.
consumer advisory board
Another very important aspect of the CAS is our consumer advisory
board. The member associations and companies that designed the CAS
recognized that the success of the program would depend, in large part,
on whether the program was fair to consumers and was perceived as such
by the user community. While, the MOU signatories had worked hard to
build in strong privacy protections, and to make each stage of the
program (including the independent review process) fair, accurate and
impartial, the participants recognized that external review and
validation was critically important. Thus, the MOU provided for the
establishment of a consumer advisory board, to be comprised of outside
industry experts and consumer advocates, who would work with the CCI
and its members to ensure that the interests of consumers were
adequately considered and protected as the CAS was implemented. The
consumer advisory board has provided and continues to provide an
important oversight role and valuable advice to the CCI board on
consumer privacy and other issues, including the building of a fair
independent review mechanism for challenging Alerts.
cci's educational activities
CCI's initial work has focused on implementation of the CAS and the
creation of online support for the CAS, including helping users find
better ways to access movies, music and television programming.
However, an equally important part of our mandate includes helping to
change the conversation about digital copyright--to enhance consumer
understanding of and respect for creative content in the digital age.
Based on our research, we believe one of the most important
audiences for our educational efforts is young people. As a result, we
have developed a new copyright curriculum that is being piloted during
this academic year in California. The kindergarten through sixth grade
curriculum, entitled ``Be A Creator''TM, is the result of
CCI's partnership with the California School Libraries Association and
iKeepSafe, a leading digital literacy organization. The curriculum
introduces concepts about creative content in innovative and age-
appropriate ways. The curriculum is designed to help children
understand that they can be both creators and consumers of artistic
content, and that concepts of copyright protection are important in
both cases. We hope to use this pilot period to enhance the curriculum
and ultimately encourage schools across the country to integrate it
into their digital literacy programs.
evaluation
Now that we have completed the challenging task of the initial
implementation of the CAS and begun expanding our educational
initiatives, we are working on a system to evaluate the impact of this
innovative partnership among content owners and ISPs. Over the coming
months, we will look internally at the CAS in order to evaluate user
response to the program, including the impact it is having on the
behavior of those receiving Alerts. We will also look more broadly at
the impact on P2P piracy of the CAS and our broader educational
activities. We hope these self-assessments will allow the CCI to
continue to enhance the effectiveness of the CAS and our central
mission of promoting lawful ways to find and consume copyrighted
content and educating users of all ages about the importance of
respecting copyrights.
We are aware that stakeholders around the world are watching the
program with interest and we have been sharing our lessons-learned so
far when asked. We also stand ready to expand here in the U.S. to
additional members and will continue to look for additional
opportunities to raise awareness and that our educational messages will
expand consumers' respect for copyrights beyond P2P software to other
methods of online piracy.
Once again, thank you for the opportunity to appear before the
Subcommittee and provide information on this unique effort among
content owners and ISPs, in consultation with consumer advocates. The
creation of the Copyright Alert System marks the beginning of a new age
of cooperation and innovation, as we all work to stem the tide of
digital piracy and enhance consumers' ability to find the movies, music
and TV shows they love in a safe and legal manner.
__________
Mr. Coble. Thank you, Ms. Lesser.
Mr. Sherman.
TESTIMONY OF CARY H. SHERMAN, CHAIRMAN AND CEO, RECORDING
INDUSTRY ASSOCIATION OF AMERICA
Mr. Sherman. Thank you. Chairman Coble, Ranking Member
Watt, Ranking Member Conyers, Members of the Subcommittee,
thank you for inviting me to testify today. I am Cary Sherman,
Chairman and CEO of the Recording Industry Association of
America.
The creative industries are undergoing a complete digital
transformation. It was not long ago the consumers had limited
choices for accessing the music they wanted. Today, the music
industry is leading the way beyond the physical CD, licensing
hundreds of services worldwide offering tens of millions of
songs with digital now making up nearly two-thirds of our
revenue.
For the digital marketplace to truly work, we must ensure
that these vibrant new services are not undermined by illegal
activity. Voluntary initiatives with Internet businesses are a
key component of that objective.
So what has been done? First, as Jill Lesser just
discussed, the content community and major Internet service
providers collaborated to address infringing activity over
peer-to-peer networks, resulting in a new Copyright Alert
System administered through the Center For Copyright
Information.
Second, as Bob Barchiesi will describe, Visa, MasterCard,
American Express, Discover and PayPal and now others have
collaborated with content and product owners to establish a
process for terminating relationships with Web sites that
persist in selling illegitimate products.
Third, with regard to advertising on the Internet, Randall
Rothenberg will discuss the IAB's new quality assurance
guidelines for ad networks and exchanges. We applaud IAB for
this effort, although we are a little disappointed that
complaints about IP infringement do not yet affect
certification.
Grand advertisers and their ad agencies and several ad
networks have also established best practices to deter the
advertising of products on rogue sites. Information from
companies such as Mark Monitor, Double Verify and White Bullet
can provide useful data and metrics to measure the
effectiveness of these programs.
Fourth, as part of the rollout of new generic top-level
domain names, ICANN recently passed a resolution requiring
registrars to prohibit domain name holders from engaging in
trademark or copyright infringement or other deceptive
practices and to impose consequences if they do, including
suspension of the domain name.
Fifth, a series of principles relating to user generated
content were negotiated by leading commercial copyright owners
and UGC services. The parties addressed such issues as the use
of effective content identification technology to eliminate
infringing uploads, removing or blocking links to sites that
are clearly dedicated to infringement, all while accommodating
fair use.
So what is missing? Search engines are the roadmaps,
indeed, the turn-by-turn directions to rogue sites online. They
can be a key partner in addressing infringing activity, and yet
there is no voluntary agreement regarding search results. There
is certainly many actions that could be taken. Google has tools
in its Chrome browser to warn users if they are going to sites
that may be malicious. Perhaps that technology could be used to
warn users of rogue sites. Imagine if search results linking
authorized content were labeled with a certification mark or
badge indicating that the site is licensed and actually pays
royalties to creators. That educational message could have a
profound impact on user behavior.
Similarly, there are no best practices for storage or
locker services. Unfortunately, some storage companies appear
to be the go-to host for rogue Web sites, and some locker
services have an abundance of infringing content available for
distribution.
The notice and take-down process under the DMCA would also
benefit from collaboration. As interpreted by service providers
and the courts, the law requires copyright owners to monitor
millions of Web sites and networks every day and send detailed
notices to all of them specifically identifying each and every
individual infringing file and requesting that each be removed
with nothing to prevent the same works from being immediately
reposted.
Shouldn't stakeholders sit down and negotiate practical
solutions that will make notice and takedown more meaningful
and effective? For more stringent repeat infringer policies to
takedowns that don't automatically repopulate, many
programmatic solutions can be devised. Also, voluntary
activities today to focus on Web and wire line activity. With
the rapid adoption of mobile devices, we need to focus our
efforts on the mobile space and deal with unique challenges it
presents.
We are encouraged by the growing support for voluntary
initiatives. We are grateful for this hearing which shines
light on the current efforts underway. We urge the Subcommittee
to do even more; to further encourage collaborations by using
its good auspices to monitor data from ad verification
companies to see whether the programs are working effectively,
monitor best practices that may develop among registries and
registrars to implement the ICANN resolution; encourage and
facilitate discussions with search engines and locker services
leading toward voluntary best practices; and convene
discussions of practical means to improve the notice and
takedown process under the DMCA.
Implementing voluntary initiatives will never be a silver
bullet, but as reports have shown, taking action against
infringing services can have a major positive impact on the
usage of licensed services. Working together, we can grow
legitimate commerce for everyone.
We look forward to working with this Subcommittee and all
our partners in the Internet marketplace to make these
initiatives a success. Thank you.
[The prepared statement of Mr. Sherman follows:]
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__________
Mr. Coble. Thank you, Mr. Sherman.
Mr. Rothenberg.
TESTIMONY OF RANDALL ROTHENBERG, PRESIDENT
AND CEO, INTERACTIVE ADVERTISING BUREAU
Mr. Rothenberg. Chairman Coble, Ranking Member Watt, Senior
Member Conyers, Members of the House Judiciary Subcommittee on
the Courts, Intellectual Property and the Internet, thank you
for the opportunity to testify at this important hearing. My
name is Randall Rothenberg and as you heard, I am the President
and Chief Executive Officer of the Interactive Advertising
Bureau and I am very honored to be here.
IAB is the trade association for ad-supported digital media
in the United States. IAD's more than 500-member companies
account for 86 percent of the interactive advertising sold in
the U.S. Our members include many of the recognized names, most
of the recognized names of the media world, AOL, CBS, Facebook,
Google, Microsoft, The New York Times, Time, Inc., Walt Disney,
Yahoo among them, as well as scores of smaller publishers,
advertising networks and specialists in such areas as digital
video advertising and mobile advertising.
I am also here for a personal reason. Prior to joining the
IAB, I spent the first two-thirds of my career as an author and
writer. I have written several books, hundreds of newspapers
and magazine articles. I own hundreds of copyrights. I continue
to be a contributor to many publications.
Having spent my career in the creation of intellectual
property, I firmly believe the meaningful protection of
intellectual property rights is the foundation on which the
U.S. economy depends. As the Framers of the U.S. Constitution
understood, if we wish to remain the world's leader in
innovation and entrepreneurship, we must reward both hard work
and risk-taking through the protection of intellectual
property.
On behalf of our member companies, IAB is dedicated to the
growth of the interactive advertising marketplace. IAB drives
toward this end by educating marketers, advertising agencies,
media companies and the wider business community about the
value of interactive advertising, and we recommend technical
standards and best practices for this evolving marketplace.
In this regard, we are proud of our efforts to bring
together the most significant representatives of this digital
marketing supply chain to develop strong protections for
intellectual property and greater trust in the digital
advertising marketplace.
The vibrant online advertising ecosystem that was created
by innovative and legitimate individuals and companies has
gained the attention of illegitimate actors that wish to
undercut the market for creative content through the illegal
activity of copyright infringement. This is a major reason, a
foundation reason, the IAB developed the quality assurance
guidelines that Mr. Sherman referred to.
The guidelines were created to help establish trust between
the buyers and sellers of advertising in a very complex and
ever-evolving digital advertising ecosystem. The program helps
promote the flow of advertising budgets into digital
advertising by establishing industry principles that offer a
framework for increasing brand safety.
We consider the piracy of intellectual property
antithetical to the concept of brand safety. For that reason,
the IAB guidelines provide specific prohibitions against
selling certain types of advertising inventory, including ad
inventory on sites involved in intellectual property violations
such as Web sites hosting and streaming infringing copyrighted
content, torrent sites and peer-to-peer sites.
In April of 2013, IAB released an update to the guidelines
for public comment. This revision focuses on increasing the
applicability, visibility and influence of the guidelines
program as well as the advancement of other vital program
elements. I would like to identify three important changes we
made.
First, we took a program that was originally designed for
ad networks and exchanges solely and expanded it into a true
multi-stakeholder process by including all buyers and sellers
of digital advertising. The program will now represent the full
diversity of the industry and reinforce the role all parties
play in building a more accountable, transparent and safe
marketplace.
Second, the guidelines now explicitly include an option for
the lodging of intellectual property infringement complaints by
rights holders to the IAB which will then direct the complaint
to the relevant contact at each company participating in the
guidelines. The IAB is committed to working with all parties to
strengthen the protection of intellectual property rights
through the guidelines including through a strengthened
complaints process.
Third, the program was also strengthened with the
introduction of the option of independent third party
validation of a company's certification to create a new level
of trust in the marketplace.
Going forward, we will continue to evolve, strengthen and
drive adoption of the guidelines. The program has received a
tremendous amount of exposure because of recent acknowledgments
by Victoria Espinel, the former U.S. Intellectual Property
Enforcement Coordinator. We would welcome additional public
support from you and other Members of Congress.
Thank you for considering the views of the IAB on these
issues. We greatly appreciate your focus on our work and the
work of all the others on this panel to strengthen the
protection of intellectual property and understanding the role
of the advertising industry in creating additional strengths to
those protections. Thank you.
[The prepared statement of Mr. Rothenberg follows:]
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__________
Mr. Coble. Thank you, Mr. Rothenberg.
Mr. Levitt.
TESTIMONY OF GABRIEL LEVITT, VICE PRESIDENT,
PHARMACYCHECKER.COM
Mr. Levitt. Chairman Coble and Ranking Member Congressman
Watt and Ranking Member Conyers, I am Gabriel Levitt, the Vice
President of PharmacyChecker.com, which for the past 10 years,
has been helping Americans find affordable medication from safe
online pharmacies by checking and verifying the credentials of
these pharmacies and posting price comparisons.
We believe that voluntary agreements can be a useful tool
in protecting Americans from counterfeit products, but they can
also be misused in anti-competitive ways which scare and thwart
Americans from accessing affordable medications. This leads to
poor medication compliance with negative health consequences
and also goes against the Administration's desire that
voluntary agreements not be used to impede competition. I will
present recommendations which can keep this from happening.
Last year, 50 million Americans, ages 19 to 64, did not
fill a prescription due to cost, up from 48 million in 2010,
according to the Commonwealth Fund. We also know that nearly 5
million Americans have been buying their medication from
outside the U.S. in order to get affordable prices because the
cost to buy brand name medicine is often 80 percent lower in
other countries than in the U.S.
Independent studies and over a decade of experience have
demonstrated the safety of domestic and international online
pharmacies approved in rigorous programs such as
PharmacyChecker's. A voluntary agreement of particular concern
is one established by a group of Internet and credit card
companies called the Center For Safe Internet Pharmacies, or
CSIP. While CSIP has been effective at taking down some rogue
pharmacies, it also acts to discourage Americans from accessing
safe affordable medications outside the United States.
CSIP uses a company called Legit Scrips to help it identify
rogue sites for takedown and to power an online tool for
consumers to look up the status of an online pharmacy.
Unfortunately, if you use this tool to look up any online
pharmacy operating in any country other than the U.S., such as
Canada, it will tell you that the pharmacy is unapproved,
regardless of the fact that it may be licensed, require a
prescription and safely selling only genuine medication.
The CSIP Web site has become a clearinghouse for
information from the pharmaceutical-funded groups such as the
Partnership For Safe Medicine and the National Association of
Boards of Pharmacy with scare campaigns conflating all non-U.S.
pharmacies with rogue pharmacies. In fact, any pharmacy outside
the U.S. which sells to Americans is labeled by NABP as a
rogue.
To keep voluntary agreements from misleading Americans, we
ask that your Committee make sure that CSIP does not discourage
Americans from accessing safe and affordable medication online.
In particular, we would urge that the basis for defining a
rogue pharmacy include any of the following, but not simply
whether or not it is licensed in the U.S. It intentionally
sells adult rated or counterfeit medication; sells prescription
medication without requiring a prescription; engages in
fraudulent and deceptive business practices; does not follow
generally accepted safety standards of pharmacy practice; and
sells medication that is not regulated.
We would also like to see CSIP and other institutions
established under voluntary agreements be more transparent by
providing the following information: Clearly state what
recourse companies and people have if their businesses are shut
down by actions taken by CSIP; provide information on those
sites that were shut down and the reasons they were shut down
based on applicable intellectual property laws and identify the
precise public health risk of the Web site.
Last, it is important to recognize that voluntary
agreements are being afforded considerable market power. To
ensure these powers are used properly, we recommend the
appointment of an independent ombudsman to oversee these
agreements. The ombudsman would analyze voluntary agreements to
make sure private sector actions aren't blocking Internet
competition and are consistent with the Administration's other
goals of due process, free speech and transparency.
I have provided the Committee with a transcript of this
presentation and included our public comments submission to the
U.S. PTO in Exhibit A. Thank you for your time.
[The prepared statement of Mr. Levitt follows:]
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__________
Mr. Coble. Thank you, Mr. Levitt.
Mr. Barchiesi.
TESTIMONY OF ROBERT C. BARCHIESI, PRESIDENT,
THE INTERNATIONAL ANTICOUNTERFEITING COALITION
Mr. Barchiesi. Chairman Coble, Ranking Member Watt, Members
of the Subcommittee, thank you for the opportunity to appear
before you today. I am proud to be representing the
Intellectual AntiCounterfeiting Coalition and our partners from
the financial industry. My testimony today will address our
ongoing collaboration regarding the trafficking of counterfeit
and pirated goods online.
With over 230 members that span across industries, the
International AntiCounterfeiting Coalition is one of the
world's largest organizations representing the interests of
companies concerned with trademark counterfeiting and
intellectual property theft.
While legitimate retailers increasingly leverage the
Internet as a platform for sales, the same is true of
counterfeiters. Once confined to brick and mortar shops, the
Internet has created new opportunities for the sale of illegal
goods as well as an ever-widening pool of customers.
Additionally, the shift to online distribution has raised a
variety of practical difficulties for our enforcement against
criminals who operate with anonymity and beyond the
jurisdiction of U.S. courts or law enforcement.
The proliferation of this illicit trade threatens consumer
confidence in the legitimacy of the Internet as a commercial
platform. Consumers expect and deserve the honest cooperation
of all of the players in the e-commerce ecosystem. That point
of view has driven our partnership with the financial industry
and informed the development of our ongoing collaboration.
In January 2012, the IACC launched its payment processor
program in collaboration with some of the largest multi-
national brands and leading financial companies. This launch
followed the establishment of a set of best practices
facilitated by the Administration's Intellectual Property
Enforcement Coordinator, Victoria Espinel.
The program is, in laymen's terms, a ``follow the money''
approach that seeks to diminish the ability of criminal
counterfeiters to turn a profit. Our program is dependent on
the financial partners' policies which prohibit merchants from
using financial services for illegal transactions. Merchants
that sell counterfeit goods violate those policies and as such,
subject themselves to remedial action, including termination of
their merchant accounts. Because those policies apply to
merchants regardless of their jurisdiction, the program has a
global reach.
At its inception, the IACC and its partners identified
several goals for the IACC payment processor program. These
include increasing the cost of doing business for and
decreasing the profits to the counterfeiters; shrinking the
universe of merchant banks willing to do business with those
sellers; facilitating an efficient use of resources by both
rights holders and our financial partners; and dismantling
counterfeit networks by developing deeper intelligence on those
networks' methods of operating.
In the context of these goals, the program has been a
resounding success. We have referred nearly 7,500 Web sites for
investigation, resulting in the termination of over 2,100
individual counterfeiters' merchant accounts which likely
correspond to a much higher number of affected sites.
The collaboration between the IACC and its partners has
resulted in opportunities to provide training to banks and
others all around the world. While there remain challenges to
quantifying the impact of this program on the overall
availability of counterfeit and pirated goods online, there is
significant anecdotal evidence that online sales of such elicit
product are becoming more difficult.
Further, the program has created a growing pool of data
that may be leveraged by both public and private sectors. Since
the launch of our program, we have seen a number of trends,
including a decline in the use of traditional credit card
payments in favor of alternate payment methods; the misuse of
anti-fraud measures in an attempt to thwart legitimate
investigations by law enforcement and private industry; and the
shift from the use of individual merchant accounts to reliance
on illegitimate and sophisticated payment service providers who
provide full service infrastructure for illegal sales and
promise bulletproof processing.
It is our hope that this paves the way for further cross-
industry collaboration. The success of this program proves that
when rights holders and others work side-by-side to ensure a
safe and trusted marketplace, everyone wins.
[The prepared statement of Mr. Barchiesi follows:]
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__________
Mr. Coble. Mr. Barchiesi, I know you weren't advised that
you were going to be here until rather late in the game, but
you brought it up to speed. Folks, we try to apply the 5 minute
rule to ourselves so I will keep my questions in a very terse
way.
Mr. Sherman, are voluntary agreements a better approach to
solving issues in lieu of legislation for companies that want
to do the right thing on the one hand in contrast to companies
that simply want to take advantage of intellectual property
owners?
Mr. Sherman. I am sorry, I heard the first part of the
question but not the last.
Mr. Coble. Are voluntary agreements a better approach in
resolving these problems?
Mr. Sherman. I have been a big fan of voluntary agreements.
We have seen what happens with legislation. We are carving in
stone certain standards, certain processes, certain
expectations, and everybody gets nervous on each side. It
becomes very, very difficult to agree on that.
With voluntary agreements, you can be flexible. You can
agree on things, knowing that they can change without going
back to Congress. You have the ability to learn from the
marketplace what is working and what is not and modify the
agreement, so there is flexibility, there is an ability to
change as you go, and there is an ability to learn from
experience. I think it makes people a lot more willing to try
things and it begins to build trust.
So, yes, I think that for a start, voluntary measures are a
great way to begin basically closing the gap between the
business side of the Internet and the content side of the
Internet.
Mr. Coble. Thank you, Mr. Sherman.
Ms. Lesser, what role, if any, should the U.S. Government
agency exercise with these arrangements are being negotiated
while they are in effect?
Ms. Lesser. I am sorry, Mr. Chairman, what role are the
agencies playing now?
Mr. Coble. What role should there be, if any, for U.S.
agencies while these agreements are playing out or are in
effect?
Ms. Lesser. As several of the witnesses have said, you
know, the leadership of Victoria Espinel, when she was the
Intellectual Property Enforcer at the White House, was very,
very important and continued to be important not only as the
negotiators came up with this agreement, but as we moved toward
implementation.
I think as Federal agencies, Congress has a very important
oversight role in helping us do what we want to do well. At the
same time, as we look to evaluating the program and what
changes need to be made, we are doing that on an ongoing basis,
and as Mr. Sherman just said, we are very able to be very
nimble and respond to the needs of the program on really a
regular basis.
So I think oversight should continue. There should be
hearings like this. I don't think there should be a rubric
where there are consistent requirements for voluntary programs
to report to the government however.
Mr. Coble. Mr. Rothenberg, what say you to this?
Mr. Rothenberg. It would be very hard for me to improve on
the way Mr. Sherman articulated, although I am forced to try a
little bit. But the voluntary agreement, self-regulation by
industry has the benefit of being able to be more flexible in
the pursuit of its objectives. Legislation and regulation have
a tendency to fix in stone certain methods by which
infringements have to be identified and punished. And
technology, especially the infringers and especially those
infringers outside our borders, will find new ways to evade
them. It can be much, much more effective, certainly in the
short and medium term, to get widespread adoption of voluntary
agreements, in turn, industry participants, especially the
largest and the most legitimate industry participants, into the
police of the industry itself. We think that could uncover lots
of infringements and help create a self-reinforcing system of
abeyance.
Mr. Coble. I thank you for that. Mr. Levitt, do you want to
weigh in on this?
Mr. Levitt. Once again, I think that commonsense voluntary
agreements can be helpful. I come with a perspective that over
time you could see entrenched interests who come together in
carrying out these voluntary agreements could take actions that
will stifle the emergence of other companies if there is not
oversight. So I think that all of the people here have given
good examples of how voluntary agreements can work and have
worked, but there is an inherent risk when you deputize the
private sector to take on a roll that I think you guys, I am
sorry, you had tried to do through passing other laws, and I
think there should be some oversight, there should be an
independent ombudsman who is reviewing all of these voluntary
agreements to make sure that they are transparent and not
stifling competition.
Mr. Coble. Well, my red light has illuminated, so I will
recognize Mr. Watt from North Carolina.
Mr. Watt. Thank you, Mr. Chairman. As has been my practice,
I am going to defer and go last in the queue and defer to Mr.
Johnson. Mr. Conyers disappeared on me. He was there and then
he disappeared.
Mr. Johnson. Well, your pause gave me a moment of concern.
Mr. Watt. You mean, you thought I had forgotten your name?
Mr. Johnson. Or something worse.
Mr. Watt. I defer to whoever this guy is. I defer to Mr.
Johnson and I will go last in the queue.
Mr. Johnson. Thank you, Mr. Ranking Member, and thank you,
Mr. Chairman.
Today's hearing represents another opportunity for this
Subcommittee to discuss how innovative market-place solutions
are protecting copyright holders. Recently the White House
Office of the IP Enforcement Coordinator joined with Google,
Yahoo, AOL, Microsoft and the Interactive Advertising Bureau
and other ad networks to announce the completion of voluntary
best practices guidelines for ad networks to address piracy and
counterfeiting. These industry guidelines are also the product
of several years of coordinated efforts and represent a follow-
the-money approach to stopping rogue sites dedicated to
intellectual property theft.
To demonstrate the magnitude of this problem, in 2012,
Google disabled ads that served 46,000 sites for violating
Google's policies on copyright infringing content. Google shut
down more than 82,000 accounts for attempting to advertise
counterfeit goods, which were almost entirely discovered
through Google's engineering to protect copyrighted works.
So I want to--and I also commend Victoria Espinel, the
former U.S. Intellectual Property Enforcement Coordinator, on
her hard work during her tenure.
Needless to say, copyright theft hurts everyone.
Songwriters and artists depend on royalties for their
livelihood and companies depend on protection so that they can
make new content and products, and consumers want to know that
when they purchase a good that it isn't counterfeit.
Alarmingly, a recent study commissioned by NBC Universal
indicates that copyright infringement grows proportionally with
Internet usage. But this isn't altogether surprising. There is
a strong temptation to illegally download a copyrighted work
without accessible alternatives to infringement. Regardless,
there are serious challenges that continue to face movie
studios, music companies and other industries.
Mr. Sherman, please describe some of the challenges facing
artists, producers and songwriters, and also how does copyright
infringement affect the ability for music labels to cultivate
new and unproven talent?
Mr. Sherman. Well, the challenge is how you make a living
when one of the basic forms of revenue for musicians,
songwriters, publishers, labels is basically going away as
people are able to get for free what they previously had to pay
for. It just means that you are going to be doing a lot more
live touring. You are going to be looking at alternative
revenue streams. You are no longer going to be relying on CD
sales or downloads in order to make a living. And because live
touring is a hard life and because these alternative revenue
streams are growing very slowly, it means the opportunities to
be able to make a living in music is compromised.
Hopefully it will get better, and certainly the Internet
has provided a level playing field where any musician can find
a worldwide audience, so there is great opportunity. There is
just a lot of difficulty in monetizing that opportunity so that
you can actually eat and raise a family and send your kids to
college.
So it is tough. And the labels, which are now 40 to 50
percent the size that they used to be, and about 40 percent the
number of employees, have less money to invest in new artists.
They have less money to promote them, less money to market them
and less money to keep them on the label hoping that the next
album will do a little bit better or the third album will do a
little bit better. It is just a much tougher business.
Mr. Johnson. I see. So becoming a full-time musician,
songwriter, performer, is getting much more difficult, and for
the labels to be able to exploit that talent, it is very
difficult to do when all of your product is being distributed
in a way that you cannot collect any revenue from?
Mr. Sherman. Exactly right.
Mr. Johnson. So how has this access to illegitimate means
of capturing this content, explain the consumer behavior that
is behind that?
Mr. Sherman. Consumers, especially the younger generation,
have grown up to believe that anything on the Internet is free.
It is the way it started and it has become an expectation. It
is something that has to change over time, not only for music,
but for all the content industries to be able to flourish, and
I think it will change over time, but it will take awhile until
there is a cultural shift on that.
So at this point the ease with which a music fan can get an
illegal copy of music or illegal streams of movies or
television shows has basically changed the expectation with
respect to the value of music and entertainment. And that is a
devastating thing when the value of music and other forms of
entertainment are killed off because at that point, the pricing
that legitimate services can charge becomes not enough to
support the infrastructure necessary for investment and
artists, new content, movies, television shows and the like.
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Coble. The gentleman's time has expired.
The distinguished gentleman from Texas, Mr. Poe, is
recognized for 5 minutes.
Mr. Poe. Thank you, Mr. Chairman. Thank you all for being
here.
There is a phrase that brings fear and trepidation into the
hearts and souls of men and women across the country and that
is ``We are from the government and we are here to help you.''
Whether it is a business or whether it is an individual, I
mean, I have always thought that and I am part of the
government and I really think that now, that that is a great
concern among people.
We have in your all's situation a process that is working
where different entities get together and follow contract law,
something that is preserved in the Constitution, the right to
contract.
I think it is working fairly well in your situation.
My question is does the government--should we legislatively
now jump in the middle and sort things out and make it better?
I mean, by ``better,'' I mean that facitiously. Would it make
it worse, or would it make it better? Or should we continue to
encourage the ability to contract and work out in the
marketplace disagreement and compromise, something that we
don't do too well here, Congress, compromise.
So I just kind of open that question up, and I would like
to hear all five of your opinions on that role of government,
if any. Ladies first.
Ms. Lesser. Well, I will speak from the perspective of my
program, which, as I said during my testimony, has only been in
operation for 6 months. I think what we found during the
implementation process, which took more than 18 months, was
that the negotiators who were at the table for 3 years coming
up with the framework for our contract, our Memorandum of
Understanding, and for the copyright alert system, didn't
really know all of the elements that should ultimately go into
the program. And so the 18 months we spent doing research,
looking at the implementation, looking at the words in the
contract, and in some cases changing those words so that we
could make sense of the implementation, I think shows me that
that collaborative process really allowed us to respond to the
needs of the marketplace, to be flexible, and, most
importantly, to work with our consumer advisory board.
Many people on that advisory board were really the people
sitting across the table from the content industry during the
renowned SOPA debate, and here they were at a table with us
envisioning and constructing a program that we think is working
well.
Now, we only have 6 months under our belt, so the next part
of the answer is that we have to wait and see. We are already--
I will give you an example. We have, as I said, an appeal
process. The American Arbitration Association is overseeing
that process. So if a consumer thinks that an alert has been
sent in error, and they file an appeal, the American
Arbitration Association is assigning copyright lawyer neutrals
to adjudicate that appeal, not in a traditional sense of
adjudication, but within the confines of our program. What we
found early on is that indications were that our defense
explanations were not that clear. And so immediately----
Mr. Coble. Ms. Lesser, if you could wrap it up.
Ms. Lesser. Within a month we went back in and redid those
defense explanations. So we are changing the program as we go.
Mr. Poe. I want everybody to answer that question. Now, you
all are down to a minute, 25 seconds apiece or so. So, Mr.
Sherman.
Mr. Sherman. Do not underestimate the value of government
encouragement. I certainly understand the difference between
legislation and the imposition of rules. But the role of
encouragement can be very, very helpful in getting parties
together.
Mr. Poe. Get it done, or we are going to do it. And then
everybody's going to be----
Mr. Sherman. That often helps. Hopefully it won't be
necessary, but it does help. So encouragement is important.
Mr. Poe. Okay. Mr. Rothenberg.
Mr. Rothenberg. Sir, the ad-supported Internet contributes
$530 billion to the U.S. economy. It is responsible for about
5.1 million jobs. Those are based on platforms that have been
built on the backbone of the Internet, platforms like eBay and
Facebook and Google. They are responsible for jobs. One of most
important things this Congress can do is promote our voluntary
guidelines in global trade agreements to assure that the rest
of the world doesn't shut down these platforms irresponsibly.
Mr. Poe. Thank you.
Mr. Levitt.
Mr. Levitt. I would like to answer that how I think a
consumer will--what they might want you to hear. There is a
group called RX Rights. That is RxRights.org. It is a coalition
that has about 40- to 50,000 people, and they buy drugs, often
from Canada, online from verified and safe sites. They don't
want the government stopping them from being able do that,
because they know that it is safe because that is what they
have been doing. And I think there has to be a balance when we
are taking actions to shut down sites selling counterfeit drugs
that we don't overreach where real people end up getting hurt
because they can't afford their medications.
Mr. Poe. Lastly.
Mr. Barchiesi. We firmly believe in the efficacy of
voluntary agreements and this proof of concept. What we do, it
works. Our partnership with the financial industry works. But
the operative word is it takes a willingness on the other
party's side to work together, roll your sleeves up and get it
done. We were able to go over to China and recently put
together an agreement with Tow Bow and Alibaba Group.
So I think there is a role with government. I am a bit
frustrated that I can't go over to--in California to Google and
do the same thing. So I agree with Cary Sherman that I think
there is a role for government to play to help encourage these
groups to get together and get it done.
Mr. Poe. Thank you, Mr. Chairman.
Mr. Coble. The gentleman's time has expired.
I am pleased to recognize the lady with whom I cochair the
Creative Rights Caucus, the distinguished lady from California,
Ms. Chu for 5 minutes.
Ms. Chu. Thank you, Mr. Chair.
Before I begin, I would like to submit testimony for the
record on behalf of the Copyright Alliance on the role of
voluntary agreements. The Copyright Alliance has been a great
advocate for the rights of individual creators. So I am happy
that they are weighing in on this very, very important hearing.
And so that is this. And I would also like to submit for the
record this study entitled ``Understanding the Role of Search
in Online Piracy,'' commissioned by the Motion Picture
Association of America. This report indicates that search
engines play a facilitating role, even if inadvertently.
Mr. Coble. Without objection, they will be received.
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__________
Ms. Chu. Thank you.
This morning Mr. Coble and I did indeed participate in a
press conference with the Motion Picture Association for the
release of this study that found that search is a major gateway
to the initial discovery of infringing content online. In fact,
74 percent of consumers surveyed cited using a search engine as
the navigational tool that they use to find infringing content
for the first time.
And so I would like to ask Mr. Sherman or Ms. Lesser, we
know that the largest search engine, Google, made an effort
last year to change the algorithm to take into account the
number of copyright takedown notices the site has received,
which is a positive step, but we have a long way to go.
Unfortunately, there isn't anyone here today to represent them.
But could you give your thoughts on what more search engines
can do to reduce online infringement? What proactive steps do
you think they could take?
Mr. Sherman. There are lots of practical steps that they
could be taking when you think about the various ways in which
search is leading people to infringing content. They did
promise to demote sites that received a lot of takedown
notices. We were very taken with that approach. We commended
it. But 6 months, a year later, we have seen basically no
difference whatsoever. The most rogue of rogue sites are still
showing up on the first page of search results. We have sent
about a million and a quarter notices on one site called MP3
Skull, yet it still shows up regularly on the first page of
search results. Clearly, even though their intention was good,
it hasn't been implemented well.
We also think they could be promoting more effectively,
promoting the legitimate sites. I mentioned before the
possibility of a certification mark or a badge. If we can
provide a white list of sites that are licensed and actually
pay creators, and they could put an indication like that in the
search result, it could make a huge difference in the way that
consumers use the search engine.
They could provide warnings about rogue sites. Just like
they do when they encounter malware on a site in their own
browser, they give a warning notice. Maybe they could do it
with respect to rogue sites that are identified by third
parties as sites they should be suspicious about.
They could also do things about autocomplete. Right now, if
you enter in the name of an artist and a track, it will suggest
to you MP3. And if you click on MP3, it will give you basically
6 to 8 illegal sites in the first 10 results.
And also the fact that we are sending millions of notices,
and they are just going right back up again without any
limitation. We send 100 notices about URLs with the same song
on the same site, but you would think, therefore, that the
other 1,000 songs on the same site would be taken down. But,
no, we have to send each one individually.
We ought to be able to sit down and work out more efficient
means for us and for them and for the piracy problem generally.
There is a lot of motion, but what we need is impact.
Ms. Lesser. The only thing that I would add, since my
program applies primarily--exclusively really at this point--to
peer-to-peer is that I think when the negotiators who came up
with this Memorandum of Understanding first sat down, there was
very little optimism about the ability to get not only to a
sense of agreement, but also to actually create an existing
real program that is changing consumer behavior. So I would say
to Google and other search engines, it is important to come to
the table and not see this as an ``us versus them.'' This is a
problem that we all need to solve. And the 5-year dialogue and
agreement among these parties is just evidence that can be
done.
Ms. Chu. Let me follow up and talk about the copyright
alert system, which is a successful voluntary system where ISPs
alert Internet subscribers when they have downloaded pirated
content and point them to legitimate sites. It is successful
because, for one thing, the largest ISPs committed a
significant amount of their own resources to this effort and
invested significant resources to its design. And, secondly,
the voluntary initiative took into account the views of all the
key stakeholders.
While it is a great step forward, it does have limited
impact unless other players like search engines get involved.
How could they be integrated into this system? Mr. Sherman, you
have ideas on that?
Mr. Sherman. Well, the copyright alert system is really
based on peer-to-peer piracy, which is not something where
search has a big role to play. So the ISPs are the appropriate
party for that kind of operation. But because we have been more
successful with peer-to-peer, because peer-to-peer has actually
declined, other forms of piracy are increasing, Web site
piracy, and certainly search engines would have a huge role to
play there, one of the reasons we would like to be able to sit
down with a multistakeholder process and see if we can come up
with some improved mechanisms.
Ms. Chu. Thank you. I yield back.
Mr. Coble. Gentlelady has expired--time is expired.
The distinguished gentleman from Georgia Mr. Collins is
recognized for 5 minutes.
Mr. Collins. Thank you, Mr. Chairman. I appreciate the
opportunity to be back here. And seeing this panel, it reminds
me of one of my favorite movies of all time, ``Groundhog Day,''
because we see you here again as we go through this.
Mr. Chairman, I would ask unanimous consent to enter
Google's report on how they fight online piracy into the
record.
Mr. Coble. Without objection.
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__________
Mr. Collins. And would have also entered the Motion Picture
of America's filing as well, but my distinguished colleague,
Ms. Chu, beat me to it.
Mr. Coble. Without objection.
Mr. Collins. As we look on this.
To the witnesses, I would like to thank, you know, all for
being here. I have listened a great deal. I have been listening
even out of here in a meeting for--and holding this hearing. I
believe we have got to continue to examine the volunteering
issue before the industry, because I believe they are a step
forward. In considering any legislative remedies, we need to
see what is already being done, because the last thing I would
like to see is just come again. What I think we do too many
times in all forms of government, from local to Federal, is we
rush in with the, quote, ``legislative fix,'' and then all of a
sudden that fixes it for all of 6 months. And then somebody is
not happy, let us fix it again. We have got to have some common
sense here.
And also, I think, a little bit of marketplace issue as
well. Government will not, cannot, and should not solve all of
your problems. You need to get this right, and you need to get
it together voluntarily, and then, as is spoken of just a few
minutes ago, then government can step in where need be and help
the process along.
In looking at this, I am encouraged by what I am hearing
and have been encouraged by some meetings that I have had even
this week. But I believe there is still a lot of work that
needs to be done. In fact, even this morning, did a quick
Google search for ``Parks and Recreation'' episodes online, and
at the bottom of the search results on the first page, I read
this: ``In response to a complaint we have received from the
U.S. Digital Millennium Copyright Act, we have removed one
results from this page. If you wish, you may read the DMCA
complaint that caused the removals or removal at
chillingeffects.org.''
Okay. There is a little bit of a political comment right
there. That is fine. I get it. And, look, I would like to have
Google here to discuss this.
Now, in full disclosure, I have talked to Google this week
in one of their offices, and we have brought up some of this as
we went along, because I think they have an already important
role that search engines play in this and the possibility that
they can really dramatically alter the online piracy landscape
for the better.
However, I am concerned that maybe we are not addressing
this or investing in this as much as we should. In fact, I want
to go to you, Mr. Sherman, because out of your written
testimony, you seem to indicate that they are not invested at
all and, in fact, do not seem to be making any effort to
promote legitimate options for streaming content. I just want
to ask you, is that an accurate representation of your
testimony?
Mr. Sherman. No, I don't think so. I think Google has done
things. My problem is that they are measuring their actions by
how much stuff they are doing rather than the impact that it is
having. When they run their own business, I doubt that if they
keep a lot of people busy, they would regard that as
sufficient. They probably want to make sure that it results in
a meaningful revenue impact. We need the same thing.
Mr. Collins. So you are saying quantity doesn't always
recommend to quality.
Mr. Sherman. Right.
Mr. Collins. Okay. Would others like to address this? I
will open it up to the rest of the panel, from Ms. Lesser all
the way down. Anybody want to take a bite?
It is okay, guys. It is afternoon, you can laugh.
Mr. Coble. It is afternoon provided they beat the red
light.
Mr. Collins. Exactly. As we do that. They are saying, we
are going to get in under his minutes as we can.
Here is the question. Look, I am going to actually give
back a little bit of my time today, because this is something
that our office has been heavily involved with and will
continue to be involved with.
I want to go back to my statement just a few minutes ago.
This applies not only in this environment here. There is
definitely a need for this Committee, and we will be heavily in
jurisdiction with the fine folks from both sides of the aisle
here looking at this. I think there are going to be ways that
we can work to protect the owners and protect the rights and
then still provide content, because I believe by protecting
those rights, you actually expand innovation, you expand
productivity, and we are going to be a part of that.
But I think what we also got to come to the conclusion here
is that this is an issue that needs to be addressed, it needs
all parties to the table, and to do so in a long-lasting way.
So, again, to come here is voluntary agreements are fine. Those
are what needs to be happening. We need to continue this
discussion. But I am also not convinced this is going to be
where it ends. So it will continue this process as we go
further.
With that, Mr. Chairman, I yield back.
Mr. Coble. I thank the gentleman.
The distinguished gentleman from New York Mr. Jeffries is
recognized for 5 minutes.
Mr. Jeffries. Thank you, Mr. Chairman.
And let me thank the witnesses for your testimony today.
It is clear to me that reasonable people should be able to
agree that online piracy is a significant problem, deserves to
be addressed. The people who create content, it seems to me,
should have the opportunity to benefit from the fruits of their
labor and encourages creativity moving forward. It is fair, and
it is just as consistent with Article I, Section 8 of the
Constitution designed to promote the progress of science and
useful arts.
But it is also the case, I think, I believe, that the
Internet has been a wonderful field of opportunity for
entrepreneurship, for innovation, for growth beyond which many
could have even contemplated 15 or 20 years ago. And so we
don't want to do anything in the Congress certainly, or even in
the business context, that limits the ability for that
innovation and that growth and that entrepreneurship to
continue to flourish on this field of opportunity called the
Internet.
And you have got a lot of different players in the Internet
ecosystem, I gather. You know, you have the search engines, the
ISPs, content creators, payment processors, ad companies.
And so I guess I will start by asking Ms. Lesser, and then
maybe Mr. Sherman and Mr. Rothenberg can weigh in, from your
perspective, what is the best way to get all of the individuals
in this ecosystem to work together in a manner that deals with
the online piracy, that clearly should be a problem that we
take seriously and confront, but also respects the Internet in
a manner not designed to limit the opportunities that have been
available through the innovation and the entrepreneurship and
the growth in this medium?
Ms. Lesser. What I would say from the experience that we
have had thus far in our small group involving ISPs and the
content industry is that if you look at this in your silo, you
are not going to find a solution. If we start from where you
started with the Constitution, that there is a value in
protecting creative content, something that if you ask people
on the street they agree with, something that we are trying to
teach to kids, I think if you start with that premise and you
move down, what you find is that innovation and the development
and the distribution of content cannot only coexist, but can
help each other. And I think what we are learning in our group,
that there are benefits to both.
So our program is an educational program, is focused on the
attitude toward creative content generally and then helping
people find the legal ways that they can access content.
So I don't think that it should be as hard as it is. And it
is based on, you know, 15 years of back-and-forth in the policy
arena, in the business arena. But everything is really moving
toward the same place, and I think once this group came to the
table, it was very clear that their interests were aligned,
which is why you see companies like the five leading ISPs
investing their own resources in this agreement and bringing
this agreement to fruition.
Mr. Jeffries. Thanks.
Mr. Sherman.
Mr. Sherman. I think there is no substitute for dialogue,
and I mean nonthreatening dialogue where it isn't over
liability, it isn't over responsibility; it is how you can work
together.
When we engaged in conversations with the ISPs, we started
in very different places, but we learned a lot from each other
by just talking it through. And we brought in additional
stakeholders who looked at consumer viewpoints, and privacy
viewpoints, and so on. And the end of that stew was a process
that everybody could buy into and support.
That is the kind of process I think we need to replicate
with respect to multiple industry sectors to get lots of people
involved in solving this. And as soon as you have two groups
and three groups and four groups, more and more people will be
willing to do it.
On the advertising side, because of the best practices that
the ad networks and the IAB did, we have been contacted just in
the last couple of weeks by a number of additional ad networks
asking for our help and for information so that they could do a
better job themselves. You get buy-in because you have had buy-
in, and that is the process we need to get going.
Mr. Rothenberg. Again, thank you for the question, Mr.
Jeffries. And, again, I can't really improve on what Mr.
Sherman and Ms. Lesser have said, but I will try.
You can't get them all in a room. There are hundreds of
millions of people around the world that are part of the
Internet ecosystem. The beauty of the Internet supply chain is
also the great vulnerability of the digital supply chain. It is
basically open source. It allows for enormous innovation from
the smallest players, but it also creates great
vulnerabilities.
You can get the biggest and most significant players in the
room to reach voluntary agreement. And as Mr. Sherman has said,
that process, with encouragement from the Congress and from
other bodies, can actually yield great results.
Importantly, one of the big changes over the past several
years is that many of the biggest players in the digital
technology industry have also become content creators. Google,
Microsoft, AOL all are presenting slates of original digital
video programming, and they are basing a very substantial part
of their evolving business on being content creators. So they
have stakes in this game on all sides.
I think working together among major stakeholder groups to
create a coherent program in which all have skin in the game is
the best way to go about it. Now, I would tell you that my
ideal, and I am not necessarily speaking for all my members,
but certainly what I would like to see happen is the
development of some kind of Good Housekeeping Seal of Approval
program for participation in the digital supply chain, so that
buyers of digital advertising, for example, can look and see
who is a legitimate player and who is not. I would like to see
us push in that direction.
Mr. Coble. The gentleman's time has expired.
Mr. Levitt, if you and Mr. Barchiesi wish to respond very
briefly.
Mr. Barchiesi. From our perspective, I hear a lot about
content, but the International AntiCounterfeiting Coalition, we
represent cross industries, there is health and safety issues,
there is content issues. Ultimately again I will emphasize
voluntary agreements work when there is willing partners. There
is proof of concept. We have had this program for 2 years. And
could I tell you 3 years ago, if I said I want to work with
MasterCard, Visa, or American Express, PayPal, MoneyGram,
Western Union, they wanted to run me out of town. Now we host
events together. We work together on public service messaging.
I think it is a model that could be used and established in
other arenas to move forward.
Mr. Coble. Very briefly, Mr. Levitt. We are running out of
time.
Mr. Levitt. Okay. Well, you know, Pharmacy Checker's area
is not copyright content. It has to do with the purchase of
medication online. And I just think it is important when we
look at these voluntary agreements that different areas should
be treated differently.
Former Intellectual Property Enforcement Coordinator
Espinel, I quote, ``challenged the private sector to
voluntarily address the health and safety issues presented by
rogue online pharmacies.'' And I just want to reiterate that
this is the only way we should engage in this area for shutting
down those sites that endangers a person's health.
Mr. Coble. Gentleman's time has expired.
I am trying to keep this train rolling. You know, of
course, your complete statements are in part of the record. So
even though I may have been accelerating my pace at one time,
your information will be read by all.
I am now pleased to recognize the gentlelady from
California Ms. Lofgren for 5 minutes.
Ms. Lofgren. Thank you, Mr. Chairman.
And thanks to the panel for your testimony.
And I remember just a short time ago, when we were having a
rather raucous discussion of SOPA, that the discussion was
maybe we should follow the money, and it looks like actually
some of that has occurred here, to good effect. So I want to
congratulate those who have worked to try and find solutions.
And I am sure there is lots more to do, but sometimes it is
worthwhile to celebrate what has been achieved, not just
complain about what yet remains to be done.
Just a couple of questions, and I don't want these to be
taken as opposition to making progress, because they are not.
But one of the things that these voluntary agreements raise is
the issue of due process for people who are legitimate, but
maybe aren't found to be legitimate. For example, and you said,
Ms. Lesser, we start with the Constitution. Yes, we have a
protection for intellectual property, copyright, and patent.
But in the copyright arena we also have the First Amendment and
the fair use doctrine. So how do we make sure that, I mean,
people who are making fair use, that their rights are
protected? How do you address that in your system?
Ms. Lesser. Well, that is one of the very important aspects
of the system. As I said in my testimony, we developed a system
that on the front end is very much focused on notifying
consumers about copyright violations of whole works. So there
is a methodology that has been put in place and streamlined so
that we are very assiduously trying to avoid capturing works
that are not covered by copyright or that would fall into this
fair use category. So on the front end, there has been a lot of
work put into making sure there are not false positives.
At the end of the process, however--and our process does
not end with really a punitive consequence; it ends with a
heightened measure we call mitigation--but just before a user
would have that mitigation measure imposed, they are offered
the right to an appeal. And I put ``appeal'' in quotes.
Ms. Lofgren. If I can interrupt. It is not that I don't
want to hear the whole thing, but we have limited time.
The user has interests, but the speaker also has interests,
and the two are not always perfectly aligned. So if you are the
speaker, and let us say you have a belief, maybe correctly or
incorrectly, I don't know, that what you are doing is a parity,
or it is a political speech, or that it is protected, how do
you protect your rights without relying on the Internet user to
establish your rights?
Ms. Lesser. I am not sure that the protection of that right
actually falls within the program. The program itself assumes
that an alert has been sent to an account holder, and that
account holder has the ability to go during that appeal process
and say, this file was a fair use.
Ms. Lofgren. Right. Right. But what about the person who
created the content that is being dinged? Are they being
notified?
Ms. Lesser. They are not. But I actually think the best way
to protect people engaging in fair use is on the front end,
which is to enforce copyrights against----
Ms. Lofgren. Right.
Ms. Lesser [continuing]. Protected files.
Ms. Lofgren. In terms of payment processing, I remember
during the SOPA discussion we had a substantial discussion
about cutting off credit card payments for infringing sites.
And I remember Visa, which is right outside my district, said
that they would be happy to do that, but they were rarely ever
asked to do so. And it sounds like that has changed
considerably in the time that has processed. And I think that
makes sense. But, again, for example, a notice and takedown,
the person who has an opportunity to dispute that if they feel
that it is incorrect.
You know, cutting off payments is a death sentence for a
Web site. Do they have any opportunity to contest that if they
think that there is an incorrect decision that has been made?
What is the process for that?
Mr. Rothenberg. In our program, which is about cutting off
or helping to choke off advertising revenues, it is basically
an information system between the buyers and the sellers. They
are the ones who are the trading partners; they are the ones in
contract. We don't have a consumer-facing side to it. And I
agree with you that there needs to be some form of due process
in there.
But by the same token, I think what we ought to be most
concerned about are the largest and most persistent violators.
I am less worried, although I, as you do, I worry about smaller
players falling through the cracks deeply. But I think if we
keep our focus on the worst violators and the most persistent
violators, those problems will not--the problem of the--the
small fry being shut off will not be so----
Ms. Lofgren. I just have one final question. I know from
the study that was released this morning that about 30
percent--what was the number--37 percent of the searches for
infringing content were searches for a domain name or a
specific service, like Mega Upload or something like that. So
at least, you know, a big chunk of the people that are looking
for infringing content know what they are looking for, they are
looking for infringing content, and not being confused.
So I guess that leads to the question, and MPAA isn't here.
What further efforts are being made to have digital content
more freely available for a fee? And I will just give you an
example.
You know, there was a movie. It is out on DVD now. I wanted
to watch it streaming. I Googled it. The only place it was
available were infringing sites. I won't do that, but I imagine
other people do. So the more that you could actually pay for
stuff, the more that is out there, I think the less than honest
people will infringe. So I am just wondering what further
efforts are being made. And I think it is probably more for the
movie industry than for the music industry.
Mr. Sherman. Certainly the music industry, we are almost
two-thirds now of our revenues being digital. And all the music
is out there, all the music is up there in every possible way.
We think that movies and TV are getting there quickly. I can't
speak for that.
But that same survey that you mentioned also had a figure
that 58 percent of the people were using search where they
weren't entering anything indicating they were looking for an
illegal copy, but they were led to an illegal copy anyway,
because search engines can be used for discovery. How did they
find out about Mega Upload the first time? Now they know to
go--no longer, fortunately--but how do they know to go to the
Pirate Bay or MP3 Skull? Search takes them there. That is why
we would like to work with them to try and find ways to address
that.
Ms. Lofgren. My time is up, Mr. Chairman. I don't want to
abuse the clock. Thank you.
Mr. Coble. I thank the gentlelady from California.
The distinguished gentleman from North Carolina Mr. Watt is
recognized.
Mr. Watt. Thank you, Mr. Chairman. And I want to thank the
Chairman for having another hearing about this. I want to make
sure that nothing I say gets misconstrued to imply that I don't
believe in these agreements. I think they are great.
I am not sure I agree with Mr. Poe that all of this can be
done without some government involvement. I suppose if private
agreements worked to solve all criminal activity, it would be--
we wouldn't need any enforcement in the non-Internet world. I
think we still need some help in this area.
And the magnitude of the problem, I hope, is going down,
but I assume there is nobody on this panel who believes that
this can all be done by private agreements. If there is, I
certainly want to hear from them and give you the opportunity
to express that opinion, because we need it on the record.
But you were getting ready to press your button?
Mr. Rothenberg. I would just say, Mr. Watt, I think we
would all, or at least most of us, agree that we should start
with the voluntary agreements, and then where there are gaps
that cannot be filled by the voluntary self-regulation, then
and only then would we seek to fill them with legislation and
regulation.
Mr. Watt. Okay. We started our SOPA discussions dealing
with foreign sites. Has any of these private agreements dealt
with that problem effectively? Can somebody address that for
me?
Mr. Barchiesi. The ICC's program does deal with foreign
sites because it doesn't matter where in the world the site is
hosted. These are contractual agreements between credit card
companies and banks and merchants, and it has global terms to
it, and they could terminate merchant accounts regardless of
where they are, anyplace in the world.
Mr. Watt. And it is a voluntary agreement.
Mr. Barchiesi. Yes.
Mr. Sherman. I think it is important to remember that the
voluntary agreements are built on contractual relationships
that already exist. So Visa has contractual relationships with
the people it serves that they will not process payments for
illegal activities. So if illegal activities are called to
their attention, and then they do their own investigation and
confirm that, they have a contractual right to terminate
whether it is domestic or foreign, but it is under their own
contractual relationship.
The voluntary agreement is simply providing a mechanism for
routing all of these complaints through one portal to make it
efficient, to not have duplication of efforts, to have a
standardized system. That is the benefit of these agreements.
It creates a mechanism for everybody to go forward in the same
direction to address the issue in a similar way.
Mr. Rothenberg. And to your specific point about foreign
infringement, again, we would be very much in favor of this
Congress pushing in the direction of incorporating the
frameworks that we are talking about into global trade
agreements. Whether you call that public solutions, or private
solutions, or a quasi public-private, there is definitely a
role for the public sector there.
Mr. Watt. Another major problem that we were trying to
solve with SOPA was the problem of repeat offenders. Sites that
went up one day, got the DNCA notice, they got taken down, they
were back up the next day, how the voluntary agreement is
solving that problem.
Mr. Sherman. That is one of the core elements that we would
like to see in all of these agreements, like with locker
services or search engines who--for example, there are mobile
apps. We asked Google to take it down because it is clearly
infringing. Google takes it down. They go up again a week later
using a slightly different name, but it is the same app.
Repeat infringement policies there would make a difference
where developers could be banned from the app store if they are
going to continue to infringe.
Mr. Watt. But I guess my question is can that be done
through a voluntary agreement?
Mr. Sherman. I don't see why not.
Mr. Watt. Who would be the parties to that agreement?
Mr. Sherman. Well, the policy would be basically
articulated by whoever the platform is. It could be Google, it
could be Visa, it could be a locker service. Basically saying
that if you are----
Mr. Watt. Encourage them to come to the table and enter
into that agreement, I guess.
Mr. Sherman. Exactly. Just that we are going to adopt as a
best practice a repeat infringement police. For one company, it
might be two; for another company, it might be five. But they
are going to have a policy so that they don't basically have
the up, down, up, down, up, down process. But after a while
they are saying----
Mr. Watt. So you would have a ``three strikes and you are
out'' policy----
Mr. Sherman. Whatever number of strikes.
Mr. Watt [continuing]. Or ``five strikes and you are out''
policy that sometimes we apply criminal law.
Mr. Sherman. After all, we are talking about people who are
in business, and they don't want to be in the business of
basically harboring illegal content or dealing with the same
problem over and over again, just like an ISP doesn't want to
have to deal with somebody who keeps violating their terms of
service. They have an absolute right to decide who they are
going to serve if they continue to engage in illegal conduct.
Mr. Watt. Okay. Well, I do want to applaud everybody who
has been parties to these agreements. I think it is great that
the private sector and all of the parties are trying to solve a
problem. I am not sure I believe you are going to be able to
solve all of the problem that way, but I guess if we keep
having hearing after hearing after hearing about whether
something is necessary, maybe it at least keeps the focus on
the issue.
At some point I think we are actually going to have to do
something other than have a hearing about it. So that is kind
of where I come down on this.
But I applaud it. I applaud your efforts. I heard Mr.
Levitt's concerns about--and especially in the pharmaceutical
area. But I encourage all parties to continue to try to work
toward these voluntary agreements so that we don't have to keep
having the hearing after hearing after hearing, and ultimately
so that possibly we don't have to do anything that would
involve the government being involved. Surely that would be the
worst thing that could happen. We could disband the police if
we had enough voluntary agreements.
So anyway, I yield back, Mr. Chairman.
Mr. Coble. Gentleman's time is expired.
I want to thank the very fine panel of witnesses. I also
want to thank those in the audience who have remained for this
entire hearing. This indicates to me that you have more than a
casual interest in this subject matter. And I thank all of you.
This concludes today's hearing. Thanks to all of you for
attending.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
This hearing stands adjourned.
[Whereupon, at 3:41 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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