[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                         PIRACY DETERRENCE AND 
                         EDUCATION ACT OF 2003

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

                               H.R. 2517

                               __________

                             JULY 17, 2003

                               __________

                             Serial No. 37

                               __________

         Printed for the use of the Committee on the Judiciary


    Available via the World Wide Web: http://www.house.gov/judiciary





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                      COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
CHRIS CANNON, Utah                   SHEILA JACKSON LEE, Texas
SPENCER BACHUS, Alabama              MAXINE WATERS, California
JOHN N. HOSTETTLER, Indiana          MARTIN T. MEEHAN, Massachusetts
MARK GREEN, Wisconsin                WILLIAM D. DELAHUNT, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
MELISSA A. HART, Pennsylvania        TAMMY BALDWIN, Wisconsin
JEFF FLAKE, Arizona                  ANTHONY D. WEINER, New York
MIKE PENCE, Indiana                  ADAM B. SCHIFF, California
J. RANDY FORBES, Virginia            LINDA T. SANCHEZ, California
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee

             Philip G. Kiko, Chief of Staff-General Counsel
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                      LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
ELTON GALLEGLY, California           JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia              RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
SPENCER BACHUS, Alabama              MAXINE WATERS, California
MARK GREEN, Wisconsin                MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida                  WILLIAM D. DELAHUNT, Massachusetts
MELISSA A. HART, Pennsylvania        ROBERT WEXLER, Florida
MIKE PENCE, Indiana                  TAMMY BALDWIN, Wisconsin
J. RANDY FORBES, Virginia            ANTHONY D. WEINER, New York
JOHN R. CARTER, Texas

                     Blaine Merritt, Chief Counsel

                          Debra Rose, Counsel

                         David Whitney, Counsel

              Melissa L. McDonald, Full Committee Counsel

                     Alec French, Minority Counsel




                            C O N T E N T S

                              ----------                              

                             JULY 17, 2003

                           OPENING STATEMENT

                                                                   Page
The Honorable Lamar Smith, a Representative in Congress From the 
  State of Texas, and Chairman, Subcommittee on Courts, the 
  Internet, and Intellectual Property............................     1
The Honorable Howard L. Berman, a Representative in Congress From 
  the State of California, and Ranking Member, Subcommittee on 
  Courts, the Internet, and Intellectual Property................     2

                               WITNESSES

Ms. Jana D. Monroe, Assistant DIrector of Cyber Division, Federal 
  Bureau of Investigation
  Oral Testimony.................................................     6
  Prepared Statement.............................................     7
Mr. David P. Trust, Chief Executive Officer, Professional 
  Photographers of America
  Oral Testimony.................................................    10
  Prepared Statement.............................................    12
Ms. Linn R. Skinner, Proprietor, Skinner Sisters
  Oral Testimony.................................................    14
  Prepared Statement.............................................    16
Ms. Maren Christensen, Vice President, Intellectual Property 
  Counsel, Universal Studios
  Oral Testimony.................................................    61
  Prepared Statement.............................................    62

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared statement of the Honorable Howard L. Berman, a 
  Representative in Congress From the State of California, and 
  Ranking Member, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................     4
Letter from Marybeth Peters, Register of Copyrights, Library of 
  Congress to Rep. Lamar Smith...................................    71

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared statement of the Honorable Bob Goodlatte, a 
  Representative in Congress From the State of Virginia..........    79
Prepared statement of the Honorable Zoe Lofgren, a Representative 
  in Congress From the State of California.......................    80
Prepared statement of American Free Trade Association............    80
Prepared statement of Gary J. Shapiro, Chairman, The Home 
  Recording Rights Coalition.....................................    82
Prepared statement of Susan Poole................................    85


                         PIRACY DETERRENCE AND 
                         EDUCATION ACT OF 2003

                              ----------                              


                        THURSDAY, JULY 17, 2003

                  House of Representatives,
              Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 1 p.m., in Room 
2141, Rayburn House Office Building, Hon. Lamar Smith (Chair of 
the Subcommittee) presiding.
    Mr. Smith. The Subcommittee on Courts, the Internet, and 
Intellectual Property will come to order. I am going to 
recognize myself and the Ranking Member for our opening 
statements. Other Members, without objection, will have their 
opening statements made a part of the record, after which I 
will introduce the witnesses and we will look forward to their 
testimony.
    I need to make everyone here aware, however, that about 
1:30 we are expecting not 1 but 6 votes on the House floor, and 
so we are going to need to break when those votes are called, 
and it will probably be about a 30- or 40-minute recess that we 
will need to take, but then we will return and resume our 
hearing after that. I will recognize myself for an opening 
statement.
    Today the Subcommittee will consider H.R. 2517, the 
``Piracy Deterrence and Education Act of 2003.''
    The digital revolution has enriched the lives of Americans 
while changing the nature of many crimes, including theft of 
intellectual property. Piracy of intellectual property over the 
Internet, especially by peer-to-peer networks, has reached 
alarming levels. Finding effective means to reduce on-line 
piracy is the subject of intense public debate.
    Although the Copyright Act already provides civil and 
criminal remedies for intellectual property infringement 
online, aggrieved copyright owners have largely chosen not to 
pursue these remedies. Hesitant to initiate prosecutions 
against their customers, copyright owners have instead sued the 
networks facilitating and promoting online piracy in an effort 
to reduce that rampant piracy. That hasn't worked.
    Testimony received at congressional hearings and recently 
issued Federal court rulings have noted the availability of 
civil and criminal remedies and encouraged copyright owners to 
prosecute individuals engaged in online piracy. It is widely 
believed that the successful prosecution of even a few online 
pirates will have a significant deterrent effect on individuals 
who may engage in that practice.
    In fact, almost immediately after the Recording Industry 
Association of America brought lawsuits against four students 
operating file-sharing networks on university computer systems, 
similar student-run networks shut down. As a result, large 
entertainment companies currently are pursuing a more 
aggressive litigation strategy to defend their rights.
    In trying to initiate Federal prosecutions of online 
infringers, copyright owners have often found it difficult to 
persuade law enforcement authorities to investigate and 
prosecute these crimes. Congress has directly and indirectly 
asked the Federal law enforcement agencies to increase 
investigations and prosecutions of intellectual property crimes 
on- and off-line.
    Specific departments devoted to intellectual property and 
the Internet have been created. Increases in funding have been 
authorized. Legislation such as the NET Act have been passed, 
and letters have been written, all to increase the prosecution 
of online intellectual property crimes.
    Law enforcement officials must be more aggressive in their 
enforcement of existing law. We can always strive to improve 
the law--as we are in the process of doing today--regarding 
cooperation, but why should we pass new and tougher laws when 
existing copyright laws are not enforced, or at least not 
enforced adequately?
    Law enforcement devotes its time and resources to other 
crimes, because many believe copyright violations such as 
downloading songs from the Internet are not important. This 
week the ``Today Show'' ran a sympathetic story that quoted a 
parent who approves of her child illegally downloading songs. 
The parent said it was sharing, not stealing. Do I believe this 
parent should go to jail? Of course not. That is because 
penalties in current law are strong. They simply need to be 
enforced.
    H.R. 2517 further increases cooperation among Federal 
agencies and intellectual property owners and assists the 
Department of Justice in its efforts to prosecute intellectual 
property theft. And before I close, I want to commend the FBI 
and the Department of Justice on the investigation and 
prosecution of the individual who made an unauthorized digital 
copy of the movie ``The Hulk'' and uploaded it on to the 
Internet in advance of the movie's commercial release, and we 
are told that cost the producers about $20 million in lost 
revenue.
    I look forward to learning more about why this case was 
successful and how H.R. 2517 will further enhance criminal 
enforcement of intellectual property crimes. Now, that 
concludes my opening statement, and the gentleman from 
California Mr. Berman is recognized for his opening statement.
    Mr. Berman. Well, thank you very much, Mr. Chairman. As you 
mentioned, we have both enforcement of copyright laws through 
civil actions by copyright owners themselves, and under the 
Copyright Act the Federal Government has the power to bring 
criminal cases against egregious infringers. That criminal 
enforcement provides an important deterrent against 
infringement by otherwise judgment-proof defendants.
    Furthermore, as Ms. Skinner will testify today, many 
individual copyright owners simply cannot afford the expense of 
bringing civil copyright cases. Infringers can often better 
afford the expense litigation than individual creators like 
photographers and needlepoint designers. As a result, in many 
cases criminal enforcement provides the only credible deterrent 
to infringement.
    The sheer scale of online infringement indicates that 
millions of Internet users today do not consider credible the 
threat of jail time for copyright infringement. The 4 million 
people publicly trafficking in over 850 million mostly 
copyrighted files on Kazaa at any one time clearly do not fear 
jail time. The folks distributing tens of thousands of pages of 
infringing needlework designs through online affinity groups 
clearly do not fear jail time.
    According to the exhibits appended to Ms. Skinner's 
testimony, many brazenly challenge her in writing to do 
something about it. We need to turn this ship around before the 
pirates scuttle it. We need more aggressive enforcement of 
criminal copyright laws.
    H.R. 2517 will significantly improve the ability of law 
enforcement to enforce criminal copyright laws, and I am proud 
to be a sponsor--cosponsor. Among other things, the bill 
directs the FBI to warn online infringers they may be subject 
to criminal prosecution. Furthermore, such FBI warnings will 
serve an important educational role in an environment where so 
much disinformation leads many file traffickers to believe 
their actions are illegal. Finally, such FBI warnings will 
perform these salutary goals without forcing either law 
enforcement or individual file traffickers to shoulder the 
monetary and social costs of a criminal case.
    I want to highlight section 6(a) of the bill which enables 
the Government to bring a criminal suit with regard to an 
unregistered work. Works are copyrighted from the moment of 
creation, but for a variety of reasons the Copyright Act 
prohibits both civil and criminal infringement suits until the 
work is registered in the Copyright Office. This registration 
requirement poses a substantial barrier to the protection of 
new or pre-released works. Such a huge percentage of revenue 
from work such as books, movies and software is generated in 
the first weeks after their release. Widespread Internet 
infringement of new or pre-released works can eviscerate the 
revenue generated. By letting the Government bring criminal 
actions with regard to unregistered works, section 6(a) will 
ensure that protection is available to copyrighted works when 
they are in their most vulnerable state.
    While H.R. 2517 makes critical contributions to the 
enforcement of criminal copyright laws, I think more can be 
done. It is for this reason that yesterday Representative 
Conyers and I introduced H.R. 2752. I think it complements the 
provisions of H.R. 2517. While this hearing is on H.R. 2517, I 
want to take just a moment to describe the most critical 
portions of H.R. 2752. Section 201 addresses a unique law 
enforcement challenge posed by the increasingly transnational 
character of online copyright infringement. In order to ensure 
that the road across the border does not become an 
investigative dead end, section 201 requires the Attorney 
General to assist the appropriate foreign authority in making a 
case against such online infringers.
    Section 301 of that bill clarifies that the uploading of a 
single copyrighted work to a publicly accessible computer 
network meets the 10-copy, $2,500 threshold for felonious 
copyright infringement. Section 301 simply brings the law into 
accord with the reality that uploading a copyrighted work to a 
place from which millions can download it is equivalent to the 
distribution of 10 or more copies having a value of $2,500. We 
do this because some prosecutors appear skeptical that they can 
successfully pursue cases against many uploaders of copyrighted 
works otherwise.
    Section 302 addresses the well-documented concern that 
popular peer-to-peer software programs sometimes allow third 
parties to hijack personal computers to distribute child 
pornography and copyright infringing material, come bundled 
with spyware, and otherwise jeopardize the privacy and security 
of PC owners.
    Section 302 requires that PC owners receive clear and 
conspicuous notice and provide consent prior to downloading 
software that would allow third parties to store material on 
their personal computer or use that personal computer to search 
for material on other computers.
    Finally, section 305 addresses the all too common 
phenomenon of operators of copyright-infringing Web sites 
providing false domain registration information. If the illegal 
activities on the Web site attract the attention of law 
enforcement or rightholders, the operators often disconnect it 
and pop up elsewhere under another domain name with different 
contact information.
    Section 305 directs the courts to consider the knowing and 
intentional provision of materially false domain registration 
information as evidence of willfulness with regard to copyright 
infringements.
    Mr. Chairman, I thank you. Look forward to working with you 
on the issue and yield back.
    Mr. Smith. Thank you, Mr. Berman.
    [The prepared statement of Mr. Berman follows:]
Prepared Statement of the Honorable Howard L. Berman, a Representative 
                in Congress From the State of California
    Mr. Chairman,
    I commend you for introducing H.R. 2517, and for convening this 
hearing.
    The Copyright Act envisions that enforcement of the copyright laws 
generally falls to copyright owners themselves. However, the Copyright 
Act also provides the federal government with power to bring criminal 
cases against egregious infringers.
    Enforcement of the criminal copyright laws provides an important 
deterrent against infringement by otherwise judgement-proof defendants. 
Furthermore, as Ms. Skinner will testify today, many individual 
copyright owners simply cannot afford the expense of bringing civil 
copyright cases. In fact, infringers often can better afford the 
expense of litigation than individual creators like photographers and 
needlepoint designers. As a result, in many cases, criminal enforcement 
provides the only credible deterrent to infringement.
    The sheer scale of online infringement indicates that millions of 
Internet users today do not consider credible the threat of jail time 
for copyright infringement. The 4 million people publicly trafficking 
in over 850 million mostly-copyrighted files on KaZaA at any one time 
clearly do not fear jail time. The folks distributing tens of thousands 
of pages of infringing needlework designs through online affinity 
groups clearly do not fear jail time. In fact, according to the 
exhibits appended to Ms. Skinner's testimony, many brazenly challenge 
her, in writing, to do something about it.
    We need to turn this ship around before the pirates scuttle it. We 
need more aggressive enforcement of the criminal copyright laws. We 
also need to ensure that law enforcement has adequate resources, 
authority, and incentives to pursue online infringers.
    H.R. 2517 will significantly improve the ability of law enforcement 
to enforce the criminal copyright laws, and I am proud to be a sponsor. 
Among other things, the bill directs the FBI to warn online infringers 
that they may be subject to criminal prosecution. An FBI warning is 
likely to grab the attention of even your most defiant file-trafficker. 
Furthermore, such FBI warnings will serve an important educational role 
in an environment where so much disinformation leads many file-
traffickers to believe their actions are legal. Finally, such FBI 
warnings will perform these salutary goals without forcing either law 
enforcement or individual file-traffickers to shoulder the monetary and 
social cost of a criminal case.
    I also want to highlight Section 6(a), which enables the government 
to bring a criminal suit with regard to an unregistered work. Works are 
copyrighted from the moment of creation, but for a variety of reasons, 
the Copyright Act prohibits both civil and criminal infringement suits 
until the work is registered with the Copyright Office.
    This registration requirement poses a substantial barrier to the 
protection of new or pre-release works. Since a huge percentage of 
revenue from works such as books, movies, music, and software is 
generated in the first weeks after their release, widespread Internet 
infringement of new or pre-release works can thus eviscerate the 
revenue generated. By letting the government bring criminal actions 
with regard to unregistered work, Section 6(a) will ensure that 
protection is available to copyrighted works when they are in their 
most vulnerable state.
    While H.R. 2517 makes critical contributions to the enforcement of 
criminal copyright laws, I believe more can be done. It is for this 
reason that yesterday Representative Conyers and I introduced H.R. 
2752--the ``Author, Consumer, and Computer Owner Protection and 
Security Act.'' I believe H.R. 2752 provides an important complement to 
the provisions of H.R. 2517.
    While this hearing is on H.R. 2517, I want to take a moment to 
describe the most critical portions of H.R. 2752. Section 201 addresses 
the unique law enforcement challenges posed by the increasingly 
transnational character of online copyright infringement. Often, law 
enforcement may devote substantial resources to an investigation, only 
to find that the online infringer is outside our borders. In order to 
ensure that the road across the border does not become an investigative 
dead end, Section 201 requires the Attorney General to assist the 
appropriate foreign authority in making a case against such online 
infringers.
    Section 301 of H.R. 2752 clarifies that the uploading of a single 
copyrighted work to a publicly accessible computer network meets the 10 
copy, $2,500 threshold for felonious copyright infringement. Section 
301 simply brings the law into accord with the reality that uploading a 
copyrighted work to a place from which millions can download it is 
equivalent to the distribution of 10 or more copies having a value of 
$2,500 or more. This clarification is necessary because some 
prosecutors appear skeptical that they can successfully pursue cases 
against many uploaders of copyrighted works, and in any event are more 
likely to prosecute felonies than misdemeanors.
    Section 302 addresses the well-documented concern that popular 
peer-to-peer (P2P) software programs sometimes allow 3rd parties to 
``hijack'' PCs to distribute child pornography and copyright-infringing 
material, come bundled with ``spyware,'' and otherwise jeopardize the 
privacy and security of PC owners. To address these problems, Section 
302 requires that PC owners receive clear and conspicuous notice, and 
provide consent, prior to downloading software that would allow third 
parties to store material on the PC, or use that PC to search for 
material on other computers.
    Section 305 addresses the all-too-common phenomenon of operators of 
copyright-infringing web sites providing false domain name registration 
information. If the illegal activities on the web site attract the 
attention of law enforcement or rights holders, the operators often 
disconnect it and pop up elsewhere under another domain name with 
different contact information. Section 305 directs courts to consider 
the knowing and intentional provision of materially false domain 
registration information as evidence of willfulness with regard to 
copyright infringements committed by the domain name registrant.
    Mr. Chairman, I look forward to working further with you on this 
issue, and hope we can find a way to expeditiously move the salutary 
elements of both H.R. 2517 and H.R. 2752.
    I yield back the balance of my time.

    Mr. Smith. I want to thank all seven Members who are 
present, both for their interest in the subject at hand and 
also for taking the time out of a busy schedule to be here 
today. We always have a good attendance, and today is no 
exception.
    I will introduce the witnesses, and our first witness is 
Jana Monroe, Assistant Director of the Cyber Division of the 
Federal Bureau of Investigation. Prior to her current 
assignment, Ms. Monroe was the Special Agent in Charge with 
management responsibility for counterterrorism, 
counterintelligence and white collar crime in the Los Angeles 
division. Ms. Monroe received a B.S. Degree in criminology from 
California State University, Long Beach, and a master's degree 
in public administration from La Verne University.
    The next witness is David P. Trust, Chief Executive Officer 
of Professional Photographers of America. PPA has 14,000 
members who represent the entire spectrum of the photography 
and imaging profession. Mr. Trust joined the staff of PPA in 
1998 and has been the Association's CEO since 1999.
    Our next witness is Linn Skinner, proprietor of Skinner 
Sisters. Ms. Skinner, embroiderist and embroidery historian, 
teaches and exhibits in Europe and the United States. She 
publishes booklets and designs based on or replicating historic 
textiles through her commercial enterprise, Skinner Sisters. 
Skinner Sisters also publishes an online magazine of embroidery 
history.
    Our last witness is Maren Christensen, Senior Vice 
President and intellectual property counsel for Universal 
Studios. A growing portion of her practice is devoted to 
protecting Universal's digital content from worldwide piracy. 
Before joining Universal, Ms. Christensen was a partner at the 
law firm of Rosenfeld, Myer & Sussman in California, 
specializing in intellectual property litigation.
    Welcome to you all. We have written statements from all the 
witnesses as well, which, without objection, will be made a 
part of their record in their entirety, and we look forward to 
hearing from each of you all. Just a reminder, we do need to 
limit testimony to 5 minutes, and Ms. Monroe, we will begin 
with you.

   STATEMENT OF JANA D. MONROE, ASSISTANT DIRECTOR OF CYBER 
           DIVISION, FEDERAL BUREAU OF INVESTIGATION

    Ms. Monroe. Good afternoon. I would like to thank Chairman 
Smith, Ranking Member Berman and Members of the Subcommittee 
for the opportunity to testify today. We welcome your 
Subcommittee's leadership in dealing with the serious issues 
associated with the theft of intellectual property. My 
testimony today will address the activities of the FBI's Cyber 
Division in relation to the theft of intellectual property, 
including music and movies.
    A July 11 story in the Chicago Tribune relates only a small 
segment of a crime on the Internet. The article discusses the 
thousands of computers that have been hijacked by purveyors of 
pornographic Web sites. The hijackers use computers with high-
speed connections to host their pornographic sites unknown to 
the people who own the computers. The hijackers could have 
found those computers through observation of peer-to-peer 
networks where users can take advantage of high-speed 
connections to rapidly download copyrighted music and videos. 
Hijacking someone's computer, though, is just one of the 
secondary crimes resulting from theft of intellectual property.
    Your Subcommittee correctly notes that trafficking in 
copyrighted works has a great impact in many segments of our 
economy. When you point out that over 2 billion files are 
transferred each month, it is easy to see why so few believe 
there will be consequences for sharing copyrighted files. Few 
realize that their security and privacy are at risk when they 
share files. The vast majority of file sharing occurs over 
peer-to-peer networks.
    Peer-to-peer networks primarily serve as a ``come and get 
it'' resource on the Internet, and using such a utility, the 
user specifically searches for the item they want, for example, 
music, images or software. The most significant criminal 
activity involving peer-to-peer sharing centers largely on 
music and software piracy, an area in which the FBI has been 
working closely with the private industry already.
    The FBI has also seen an increase in peer-to-peer sharing 
for child pornography files. Your Subcommittee's bill offers 
the FBI to develop--orders the FBI to develop a deterrence 
program and facilitate information sharing among law 
enforcement agencies, Internet service providers and copyright 
owners of information. We agree that the FBI must work together 
with the private sector, and we agree that education and 
deterrence are the first two moves in this war on intellectual 
property theft.
    You will be pleased to hear that the FBI has been working 
on this problem for quite some time now. The FBI and the 
Recording Industry Association of America are now in the final 
stages of completing a memorandum of understanding regarding 
the FBI intellectual property rights warning program. This MOU 
allows for the recording industry's use of the FBI seal, in the 
same way that it has been used as a warning on videotapes for 
years.
    We have also drafted a document entitled ``An Open Letter 
Regarding Illegal Uses and Vulnerabilities Associated with 
Peer-to-Peer Networks.'' this document will serve as the first 
step in educating users and the parents of users of peer-to-
peer networks.
    Theft of intellectual property is only one aspect of cyber 
crime, and it continues to grow at an alarming rate. Through 
the efforts of your Subcommittee and our cooperative deterrence 
and education programs, we hope to stem the tide and strive for 
a safer and more secure Internet. If we are not successful, the 
consequences can range from economic damage to espionage.
    The FBI is grateful for the efforts of your Subcommittee 
and others dedicated to the safety and the security of our 
Nation's families and businesses.
    Again, I thank you for your invitation to speak to you 
today, and on behalf of the FBI I look forward to working with 
you on this very important topic.
    Mr. Smith. Thank you, Ms. Monroe.
    [The prepared statement of Ms. Monroe follows:]
                  Prepared Statement of Jana D. Monroe
    Good morning. I would like to thank Chairman Smith, Ranking Member 
Berman, and members of the Subcommittee for the opportunity to testify 
today. We welcome your Subcommittee's leadership in dealing with the 
serious issues associated with the theft of intellectual property. Your 
Subcommittee's bill, the ``Piracy Deterrence and Education Act for 
2003,'' is a positive step toward making Americans aware of the 
security, privacy and criminal issues related to trafficking in 
copyrighted works. My testimony today will address the activities of 
the FBI's Cyber Division in relation to the theft of intellectual 
property, including music and movies.
    A July 11th story in the Chicago Tribune relates only a small 
segment of crime on the Internet. The article discusses the thousands 
of computers that have been hijacked by purveyors of pornographic web 
sites. The hijackers use computers with high speed connections to host 
their pornographic sites, unknown to the people who own the computers. 
The hijackers could have found those computers through observation of 
peer to peer networks, where users can take advantage of high speed 
connections to rapidly download copyrighted music and videos. Hijacking 
someone's computer though, is just one of the secondary crimes 
resulting from theft of intellectual property.
    Your Subcommittee's bill, the ``Piracy Deterrence and Education Act 
of 2003,'' is an important bill because it focuses on several aspects 
of Internet theft. You correctly note that trafficking in copyrighted 
works has a great impact in many segments of our economy. When you 
point out that over two billion files are transferred each month, it is 
easy to see why so few believe there will be consequences for sharing 
copyrighted files. Few realize that their security and privacy are at 
risk when they share files. The vast majority of file sharing occurs 
over peer to peer networks.
                              p2p sharing
    P2P networks primarily serve as a ``come and get it'' resource on 
the Internet. In using such a utility, the user specifically searches 
for the item they want, e.g. music, images, or software. The most 
significant criminal activity involving P2P sharing centers largely on 
intellectual property rights (music and software piracy) matters, an 
area in which the FBI has been working closely with private industry. 
The FBI has also seen an increase in P2P sharing of child pornography 
files.
    The FBI has seen an increasing number of instances where a victim 
has determined that a Trojan/back door was installed on their computer 
during a download from a P2P network. In some cases, the victim also 
learned that personal and financial information had also been removed 
from their computer via the back door.
    In addition to traditional Trojans/back doors, the FBI has seen an 
increase in matters where certain ``bots'' (active Trojans) have been 
installed inadvertently via a P2P download. In these instances, the 
victim computer, via the bot, essentially reports to a designated 
Internet relay chat (IRC) site, awaiting further instructions from its 
creator. The creator of the bot will often use the compromised 
computers to launch coordinated denial of service attacks against a 
targeted site or sites. These bots could also be used to retrieve 
sensitive information from victim computers in furtherance of an 
identity theft scheme.
    A person using P2P utilities for unauthorized or illegal purposes 
is not as likely to tell the FBI that an exploit (back door) was found 
on their system, or that as a result, certain personal or financial 
information may have been taken. The FBI has been made aware of 
instances where Trojans or bots have been found on computer systems 
where P2P programs are present, and where certain personal, financial 
or other sensitive information has been taken.
          the ``piracy deterrence and education act of 2003''
    The ``Piracy Deterrence and Education Act of 2003'' orders the FBI 
to develop a deterrence program and facilitate information sharing 
among law enforcement agencies, Internet service providers and 
copyright owners of information. We agree that the FBI must work 
together with the private sector, and we agree that education and 
deterrence are the first two moves in this war on intellectual property 
theft. We hope you will be pleased to know that the FBI has been 
working on this problem for quite some time. The FBI and the Recording 
Industry Association of America are now in the final stages of 
completing a Memorandum of Understanding regarding the FBI Intellectual 
Property Rights Warning Program. This MOU allows for the Recording 
Industry's use of the FBI seal in the same way that it has been used as 
a warning on videotapes, DVDs and movies for years.
    We have also drafted a document titled: ``An Open Letter Regarding 
Illegal Uses and Vulnerabilities Associated with Peer to Peer 
Networks.'' This document will serve as the first step in educating 
users and parents of users of peer to peer networks. We will distribute 
this document nationwide, and it will be posted on the FBI's website. 
The letter leaves no doubt as to the illegality of sharing copyrighted 
works without authorization and distributing child pornography or 
obscene materiel over the Internet. The letter also addresses the 
vulnerabilities exposed when using P2P networks.
    Investigation of intellectual property rights violations is only a 
small part of what the Cyber Division is charged with accomplishing. 
The FBI is in a unique position to respond to cyber crimes, because it 
is the only Federal agency that has the statutory authority, expertise, 
and ability to combine the counterterrorism, counterintelligence, and 
criminal resources needed to effectively neutralize, mitigate, and 
disrupt illegal computer-supported operations.
                        the fbi's cyber division
    The FBI's reorganization of the last two years included the goal of 
making our cyber investigative resources more effective. In July 2002, 
the reorganization resulted in the creation of the FBI's Cyber 
Division. In prioritizing Cyber Crime, the FBI recognizes that all 
types of on-line crime are on the rise.
    The Cyber Division addresses cyber threats in a coordinated manner, 
allowing the FBI to stay technologically one step ahead of the cyber 
adversaries threatening the United States. The Cyber Division addresses 
all violations with a cyber nexus, which often have international 
facets and national economic implications. The Cyber Division also 
simultaneously supports FBI priorities across program lines, assisting 
counterterrorism, counterintelligence, and other criminal 
investigations when aggressive technological investigative assistance 
is required. The Cyber Division will ensure that agents with 
specialized technology skills are focused on cyber related matters.
    At the Cyber Division we are taking a two-tracked approach to the 
problem. One avenue is identified as traditional criminal activity that 
has migrated to the Internet, such as Internet fraud, on-line identity 
theft, Internet child pornography, theft of trade secrets, intellectual 
property rights violations and other similar crimes. The other, non-
traditional approach consists of Internet-facilitated activity that did 
not exist prior to the establishment of computers, networks, and the 
World Wide Web. This encompasses ``cyber terrorism,'' terrorist 
threats, foreign intelligence operations, and criminal activity 
precipitated by illegal computer intrusions into U.S. computer 
networks, including the disruption of computer supported operations and 
the theft of sensitive data via the Internet. The FBI assesses the 
cyber-threat to the U.S. to be rapidly expanding, as the number of 
actors with the ability to utilize computers for illegal, harmful, and 
possibly devastating purposes is on the rise.
    The mission of the Cyber Division is to: (1) coordinate, supervise 
and facilitate the FBI's investigation of those federal violations in 
which the Internet, computer systems, or networks are exploited as the 
principal instruments or targets of terrorist organizations, foreign 
government sponsored intelligence operations, or criminal activity and 
for which the use of such systems is essential to that activity; (2) 
form and maintain public/private alliances in conjunction with enhanced 
education and training to maximize counterterrorism, 
counterintelligence, and law enforcement cyber response capabilities, 
and (3) place the FBI at the forefront of cyber investigations through 
awareness and exploitation of emerging technology.
    To support this mission we are our cyber training program and 
international investigative efforts. Consequently, specialized units 
are now being created at FBI Headquarters to provide training not only 
to the 60 FBI cyber squads, but also to the other agencies 
participating in existing or new cyber-related task forces in which the 
FBI is a participant. This training will largely be provided to 
investigators in the field. A number of courses will be provided at the 
FBI Academy at Quantico.
    The importance of partnerships like law enforcement cyber task 
forces and alliances with industry can not be overstated. Those 
partnerships help develop early awareness of, and a coordinated, 
proactive response to, the crime problem. The cyber crime problem is 
constantly changing, requiring law enforcement to develop a flexible 
and dynamically evolving approach as well. Critical infrastructures and 
e-commerce are truly on the ``front lines'' and most often better 
positioned to identify new trends in cyber crime. Similarly, because of 
the actual and potential economic impact of cyber criminals, private 
industry has a vested interest in working with law enforcement to 
effectively detect, deter and investigate such activity.
    The Cyber Division is also embarking on an effort to improve our 
overseas investigative capabilities by sending FBI personnel to help 
investigate cyber crimes when invited or allowed by a host country. We 
believe this high tech training and overseas investigations is the 
increasing internationalization of on-line crime and terrorist threats.
    Through the Internet Fraud Complaint Center (IFCC), established in 
1999 in partnership with the National White Collar Crime Center (NW3C), 
the FBI has appropriately positioned itself at the gateway of incoming 
intelligence regarding cyber crime matters. The IFCC receives 
complaints regarding a vast array of cyber crime matters, including: 
computer intrusions, identity theft, intellectual property rights 
violations, economic espionage, credit card fraud, child pornography, 
on-line extortion and a growing list of internationally spawned 
Internet fraud matters. The IFCC received 75,000 complaints in 2002, 
and is now receiving more than 9000 complaints per month. We expect 
that number to increase significantly as the American and international 
communities become more aware of our mission and capabilities. Later 
this year, the IFCC will be renamed as the Internet Crime Complaint 
Center (IC3) to more accurately reflect its mission.
    The FBI and the United States Customs Service (USCS) co-lead the 
National Intellectual Property Rights Coordination Center (IPR Center). 
The IPR Center strives to be the FBI and USCS hub for the international 
collection , analytical support and dissemination of intelligence 
involving IPR violations. These violations include Theft of Trade 
Secrets, Copyright Infringement, Trademark Infringement and Signal 
Theft. Specifically, the IPR Center gathers IPR intelligence from a 
variety of sources, analyzes the intelligence, and provides a 
coordinated flow of information for use by the FBI and USCS field 
components.
    Cyber crime continues to grow at an alarming rate, and intellectual 
property rights violations are a major part of the increase. Criminals 
are only beginning to explore the potential of crime via peer-to-peer 
networks while they continue to steal information by hacking, insider 
exploitation and social engineering. The FBI is grateful for the 
efforts of your Subcommittee and others dedicated to the safety and 
security of our Nation's families and businesses. The FBI will continue 
to work with your Committee and aggressively pursue cyber criminals as 
we strive to stay one step ahead of them in the cyber crime technology 
race.
    I thank you for your invitation to speak to you today and on behalf 
of the FBI look forward to working with you on this very important 
topic.

    Mr. Smith. Mr. Trust.

     STATEMENT OF DAVID P. TRUST, CHIEF EXECUTIVE OFFICER, 
             PROFESSIONAL PHOTOGRAPHERS OF AMERICA

    Mr. Trust. Thank you, Mr. Chairman, Ranking Member Berman 
and Members of the Subcommittee, thank you for this opportunity 
to testify regarding H.R. 2517, the ``Piracy Deterrence and 
Education Act of 2003.'' As previously mentioned, I am here 
representing professional photographers. This country's 130,000 
photographers are quite literally the copyright owner next 
door. They are Middle America. They work on average 49 hours a 
week. They earn something about $30,000 a year. They drive 
carpools, and they cut their own grass. They love making 
beautiful images, and they try to scratch out a living while 
they do it. They are the recorders of America's visual history. 
They make our lives and the lives of our families richer.
    Unfortunately, once photo-quality printers and scanners 
came into widespread use, a photographer's ability to sell 
images was reduced significantly. Worse yet, they have 
discovered that even when a photographer catches someone making 
copies, they have little or no ability to enforce their rights. 
We believe that H.R. 2517 has the potential to change that by 
creating a real deterrent to intellectual property theft and by 
removing unnecessary barriers to prosecution when deterrence 
fails.
    The deterrence elements of this bill are a significant 
improvement over the status quo. We applaud your vision. Much 
like the teenager whose friends convince him that shoplifting 
is a victimless crime, a significant portion of the general 
public has been trained to believe that stealing is simply 
sharing when it comes to copyrighted works. The combination of 
warnings and consumer education, the better coordination of 
information and the use of visual symbols--like the FBI seal--
contained in H.R. 2517 should provide a powerful deterrent that 
teaches consumers the truth about intellectual property theft.
    However, we point out that all of the deterrence efforts in 
the world will fail unless they are backed up by strong 
enforcement. This makes sections 4 and 6 the most vital 
elements of this bill for professional photographers. There is 
no question that someone who intentionally makes unauthorized 
copies of a photographer's work is guilty of stealing, period. 
However, photographers are often shocked to discover that, 
unlike the clothing retailer next door to their studio, they 
have little resource through law enforcement when someone 
steals from them.
    Attaching intellectual property investigators to CHIPS 
units will ensure that claims of criminal infringement are 
given their proper weight. In addition to giving copyright 
owners some real protection, this move will also serve to deter 
infringers by making sure that intellectual property theft in 
whatever form it takes is handled seriously and pursued when 
appropriate.
    For photographers, the greatest value of H.R. 2517 is the 
elimination of the registration requirement for criminal 
prosecutions. We cannot emphasize enough the importance of this 
change, which is absolutely vital for granting all copyright 
owners the full protection of the law. As it stands, 93 percent 
of all professional photographers have never registered 
anything with the Copyright Office. That is not because 
photographers don't want protection; it is simply a function of 
the photographic business. Unlike most creators who might 
produce a handful of works each year, a professional 
photographer can easily create 20,000 images in a single year. 
The burden of completing the registration forms and compiling 
and depositing copies of that many images and events is an 
unintentional Mount Everest of procedure that bars almost all 
photographers from participating in the copyright system.
    Now, while the talented and professional staff of the 
United States Copyright Office has taken steps to help simplify 
the process, there is a limit to what can be done through 
regulatory change. It is for this reason that we wholeheartedly 
support amending title XVII, section 411(a), to permit the 
Government to bring criminal infringement action without the 
work being registered. Without this change, the other provision 
of the bill become much less useful for photographers.
    In short, electronic piracy--no, electronic theft has 
brought us to a point reminiscent of the computer hackers of 
the 1980's. Originally hackers were viewed as more of an 
annoyance than anything else. However, as time progressed, the 
American people and Congress realized the economic harm caused 
by hackers and passed laws to deter and punish such conduct. We 
firmly believe that the time has come to do the same in regard 
to intellectual property theft. Let me repeat that: 
intellectual property theft. It would be no less damaging to 
photographers if the criminals were wearing masks and carrying 
bags of money out of their photography studios. It is with that 
in mind that we strongly urge this Subcommittee to move this 
legislation forward as quickly as possible.
    Mr. Chairman, Ranking Member Berman, we thank you again for 
the opportunity to tell you our side of the story. 
Photographers, the small copyright holders of the world, cannot 
fight this battle on their own. We need your help.
    Thank you very much.
    Mr. Smith. And thank you, Mr. Trust
    [The prepared statement of Mr. Trust follows:]
                  Prepared Statement of David P. Trust
    Mr. Chairman, Ranking Member Berman and members of the 
Subcommittee, I appreciate the opportunity to testify before you on the 
important issues raised by the ``Piracy Deterrence and Education Act of 
2003'' (H.R. 2517).
    As the Chief Executive Officer of Professional Photographers of 
America, I am honored to be here speaking on behalf of our 14,000 
members. PPA is the oldest and largest trade association for 
professional photographers; our members are engaged in all facets of 
photography and imaging including wedding, portrait, advertising and 
commercial specialties. I have also been authorized to speak on behalf 
of two other photography organizations, the International Association 
of Professional Event Photographers and the Student Photographic 
Society.
    Photographers are the copyright owners that do not make the 
headlines every day. They are not glamorous individuals who get large 
corporate endorsements. No one cares which cola they drink or what 
brand of shoes they wear. Instead, photographers are the creators who 
help capture the memories of children and families by telling their 
story through images. They are the ones who help business owners and 
the media sell their products and tell their stories. In short, 
photographers are the creators and the caretakers of America's visual 
history.
    As such, photographers are an integral part of communities 
throughout the United States. They are literally, the ``copyright owner 
next door.'' Most photographers are small business owners simply trying 
to earn a living. Some 69% of our members are sole proprietors. They 
work an average of 45 hours a week and earn less than $35,000 a year. 
Each year, these small business owners create thousands of copyrighted 
works and rely on the sale of copies of those works for their 
livelihood.
    And every year, thousands of those works are knowingly and 
willfully copied for commercial advantage or gain. Since photo-quality 
color copying equipment and scanners became widely available in the 
mid-90s, our members have faced declining reprint sales which have led 
to a reduction in their ability to earn a living and support their 
families.
    As small business owners, photographers have made adjustments to 
accommodate the reality that their work can be stolen with impunity. 
This has led to higher prices for paying consumers to make up for the 
lost revenue. As an example many portrait and wedding photographers 
have been forced to go to a ``minimum order'' pricing strategy, knowing 
that their ability to protect their work once it leaves the studio is 
nil.
    Every day, our members contact us for help with copyright 
infringement issues. Based on those experiences, PPA and its 
photographers have come to several conclusions regarding the problems 
we face as copyright owners.
    First, technology is a neutral element. While it makes stealing far 
easier than ever before, it is not the root of the problem. To borrow a 
phrase: Technology doesn't steal intellectual property. People do.
    Second, different infringers can be dealt with in different ways. 
Individuals whose infringements are truly innocent, as well as those 
involved in genuine disputes regarding the interpretation of licensing 
agreements, can be dissuaded from committing future infringements by 
education and direct negotiation. The other category of infringer is 
the willful and knowing thief. This category includes both individuals 
and commercial enterprises who know the work is copyrighted, but deem 
the risks of prosecution or civil liability to be so small as to be 
immaterial. Unfortunately, their assumption is usually correct.
    If an infringer has access to competent legal advice, then they 
know that the costs of pursuing a copyright claim are beyond the reach 
of almost all photographers, giving the infringer a de facto license to 
steal. This is compounded by copyright registration requirements that 
make it nearly impossible for photographers to obtain statutory damages 
or attorney's fees.
    While the possibility of a civil lawsuit is so remote as to be 
almost laughable, the thought of a criminal prosecution is so unheard 
of that it probably never even crosses the willful infringer's mind.
    So we now find ourselves at a point not entirely dissimilar to what 
our nation and Congress went through with computer hackers in the 
1980s. Originally, computer hackers were viewed as more of annoyance 
than anything else. However, as time progressed and technology became 
better understood, the American people and Congress realized the 
economic harm caused by hackers and passed laws to deter their conduct, 
and when deterrence failed--to punish their wrongdoing. We firmly 
believe that the time has come to do the same in regard to intellectual 
property theft.
    We now move to our comments on sections three to six of H.R. 2517 
the Piracy Deterrence and Education Act.
                 section 3: deterrence and coordination
    It has been the experience of Professional Photographers of America 
that education and deterrence are successful in stopping the vast 
majority casual copyright infringements. Much like any other law, 
ordinary citizens generally have no qualms about violating copyright 
law until they are educated regarding the potential penalties. Once 
this education takes place, it serves as a strong deterrent to future 
infringements.
    Part of ensuring a proper deterrent to intellectual property theft 
is the ability to uncover illicit copying and distribution when it 
takes place. In the past a great number of infringement reports we 
received at PPA came in the form of a photographer being in a local 
store and seeing a store employee helping a client make the copies. 
However, as electronic means of distribution and copying become more 
prevalent, intellectual property theft is becoming ever more difficult 
for copyright owners to discover and address.
    The facilitation of information sharing between the government, 
Internet service providers and copyright owners is absolutely vital to 
the enforcement of copyright law. Without this feature, infringements 
will become almost undetectable, once again rendering copyright 
enforcement meaningless.
 section 4: designation and training of agents in computer hacking and 
                      intellectual property units
    There is no question in a photographer's mind that someone who 
makes unauthorized copies has stolen from them. However, they are often 
shocked to discover that unlike other business owners, they have little 
recourse through law enforcement when their property is taken. 
Obviously, local law enforcement has no jurisdiction over the matter. 
In those cases where a photographer contacts the Federal Bureau of 
Investigation, they are almost always turned aside there as well.
    Professional Photographers of America favors the attachment of 
intellectual property investigators to CHIPS units to ensure that 
claims of potential criminal infringement are given their proper 
weight. With the vast array of skills already required of federal 
agents, we believe the addition of a team member well-versed in 
intellectual property theft would be an invaluable asset. By providing 
such officers as resources, intellectual property owners can be sure 
that intellectual property theft--in whatever form it takes--will be 
handled seriously and pursued when appropriate.
                      section 5: education program
    As mentioned in our comments on section 3, Professional 
Photographers of America and its members believe strongly in the power 
of education and deterrence. We believe that the Internet Use Education 
Program would serve the interests of copyright owners and consumers 
alike.
    Much like the teen shoplifter whose friends convince him or her 
that shoplifting is a victimless crime that harms no one, portions of 
the general public have been convinced that stealing is simply sharing 
when it comes to copyrighted works.
    While the efforts of individual copyright owners and trade 
associations can go a long way toward eliminating this false 
perception, the Internet Use Education Program would have far greater 
effect through its superior reach and access to students, corporations 
and members of the general public.
                     section 6: customs recordation
    It has long been our contention that sections 411 and 412 of the 
U.S. Copyright Act violate the letter, if not the spirit, of our 
nation's obligations under the Berne Convention by placing a 
``formality'' requirement on the civil and criminal enforcement of 
copyright law. These requirements are particularly onerous when one 
realizes that foreign authors are exempt from this registration 
requirement--giving them greater access our court system than our own 
citizens who own copyrights.
    The registration requirement also places an unfair burden on 
professional photographers. Unlike most other creators who might 
produce a handful of works that need to be registered each year, a 
professional wedding photographer can easily create about 800 new works 
each weekend. A conservative estimate of a professional photographer's 
annual creative output is somewhere in the 20,000 plus range. The 
burden of completing registration forms and sending copies of these 
images to the U.S. Copyright Office for deposit has created an 
impossible barrier to the full participation and protection of 
photographers in the U.S. Copyright system.
    In fact, our research has shown that 93% of professional 
photographers have never registered a single image with the U.S. 
Copyright Office--and that less than 1% regularly register more than 
half of their work.
    In looking for ways to eliminate this barrier we have worked with 
the very talented and professional staff at the U.S. Copyright Office. 
The Copyright Office has been very sympathetic to the logistical 
impossibility that the current registration regime presents to 
professional photographers, and has implemented regulations that reduce 
those burdens. However, there is a limit to what can be accomplished 
through regulation.
    As mentioned previously, PPA contends the requirement that a work 
be registered in order to bring a civil suit or to obtain statutory 
damages and attorney's fee in a civil suit should be eliminated. 
However, since civil litigation is outside the scope of H.R. 2517 we 
leave that issue for another day. In the meantime, PPA fully supports 
the amendment of Title 17, section 411(a) which permits the government 
to bring a criminal infringement action without the work being 
officially registered with the U.S. Copyright Office. Likewise, the 
clarifications of Sections 602(a) and 603(a) will remove unnecessary 
procedural barriers to enforcement of the law.
                 section 7: infringement warning notice
    As part of PPA's commitment to deterrence and education, we believe 
that granting creators the right to use the FBI seal on their works 
will go a long way toward placing the seriousness of intellectual 
property theft in the minds of the American public. An excellent 
example of this is the FBI warning placed on videos. While we doubt 
that very many consumers could quote you the content of that warning, 
recognition of the warning and its implications are almost universal. 
We have little doubt that consumers are aware that unauthorized 
reproduction of videotapes is a federal crime.
    Our only comment on making the FBI seal available copyright owners 
is to make certain that the criteria created by the Attorney General 
may be met by individual creators who are the most vulnerable to 
infringement and have the greatest need for such deterrence tools.
                               conclusion
    Over the last several years, our existing laws have proven to be an 
ineffective deterrent to the widespread, wholesale infringement of 
copyrighted works. While civil remedies are technically available, the 
cost of obtaining such remedies is so high as to prevent their use by 
the vast majority of independent creators. Likewise, the mechanisms for 
dealing with criminal infringements appear to have been overtaken by 
time and technology.
    The Professional Photographers of America believes that if passed 
and implemented, H.R. 2517 may provide an adequate deterrent to all but 
the most determined copyright infringers. For those who willfully 
refuse to obey the law and continue to steal from others, H.R. 2517 
removes unnecessary procedural barriers to prosecution.
    Mr. Chairman and Mr. Ranking Member, we thank you for the 
opportunity to bring the problems of independent copyright owners to 
your attention and for your efforts in developing legislation that will 
finally give the owners of intellectual property adequate protection 
from theft.
    Professional Photographers of America strongly urges the 
Subcommittee to move this legislation forward.
    Thank you.

    Mr. Smith. Ms. Skinner.

           STATEMENT OF LINN R. SKINNER, PROPRIETOR, 
                        SKINNER SISTERS

    Ms. Skinner. Thank you. I am an embroidery historian 
specializing in the study of embroidery and social history of 
16th and 17th century Western Europe. I teach classical 
embroidery techniques and design embroidery for execution for 
others. I market my copyright designs to individual consumers, 
to needlework shops and to needlework distributors in the U.S. 
and internationally. My work has been published in magazines. 
My fiberart has been exhibited in London and I have appeared on 
BBC radio on the issues of needlework aesthetics.
    In the summer of 2000 I became entangled in an absolute 
morass of copyright infringement of needlework designs on 
Internet sites. At that time, a concerned consumer contacted a 
designer to make the designer aware of a photo site where scans 
of commercially published needlework charts were being uploaded 
and distributed to all who cared to download them. An 
enthusiastic participant in these infringing activities, a 
Carla Conry of Palmdale, California, created a series of e-
groups hosted by e-groups.com. She later in May of 2002 
consolidated these groups into an omnibus pattern uploading 
group named ``Pattern Piggies Unite'' because of their avowed 
greed for infringed needlework charts.
    This group and those following in its wake transmit designs 
primarily as scanned e-mail attachments sent as messages to a 
host group. By July 2002 this group had already posted 12,364 
messages, most having infringed material as attachments, and 
other groups have begun to form as the infringing community 
hustled to have the largest, the best and the most ``sharing'' 
of groups.
    Mr. Smith. Go ahead and continue. We are going to wait 
about 5 minutes before we take a recess.
    Ms. Skinner. E-group services for affinity groups are a 
boom to many honest hobbyists. They can be found on Yahoo, MSN, 
Topica, AOL and other sites. However, they are a haven for 
infringers. Infringers often post messages on groups requesting 
specific patterns, and they are soon uploaded to not only one 
group but multiple groups, increasing the loss immensely.
    Infringers were soon storing needlework designs on photo 
sites, e-groups, Web sites and even family history groups. Some 
infringers simply list their entire pattern collection that is 
available upon request. Charts are then sent as e-mail 
attachments to requesting fellow infringers. Some infringers 
offer lists of designs they will e-mail upon request or provide 
on a CD by mail. Some infringers sell the copies of infringed 
material.
    At first the affinity groups were public and open and 
designers joined the groups demanding that they remove 
infringed material. These designers were deemed by infringers 
to be ``Trolls.'' trolls were seen as the enemy, and list 
owners constantly tried to make their groups safe from these 
disturbing copyright fanatics.
    Although groups were being occasionally closed, mostly 
through annoyance, they simply morphed into a new group and 
continued on their merry way. The new group was normally closed 
to general membership and required approval to join. Even if a 
hosting site occasionally closed a group, the average time for 
getting back on line with a previous membership was 
approximately 4 hours.
    I, and other consumers and designers, believed that we 
needed to make the effort to maintain membership in these 
clandestine groups and began joining them using an alias. 
Several of us created an alias and joined several groups. As 
time went on, groups were added and I was soon a member of 60-
plus infringing groups, using several languages, and located on 
several host services.
    Most infringing groups soon began requiring infringing 
activity of prospective members. I was required to create a 
PhotoPoint and Picture Trail site, and some designers allowed 
the use of a design for uploading so that I could remain a 
member of infringing groups. I was required to create a photo 
site to bolster my credibility with these groups. Running some 
of my vacation snapshots through a stitch design program and 
uploading the resultant charts and a few crochet patterns from 
an 1886 publication kept them at bay until I revealed myself to 
these groups.
    In the summer of 2001, a group of needlecrafters, mostly 
crocheters and knitters, joined in the battle. I felt we needed 
more than anecdotal evidence of the infringement problem and 
asked for volunteers to completely survey one public group. Ten 
volunteers from the United Kingdom, the U.S., Australia, Canada 
and Israel looked at 35,000-plus messages posted to the group 
and identified 49,500-plus pages of infringed material.
    The group identified insofar as possible the owner of each 
of these uploaded pages and provided the information to the 
rightsholders so they could ask for removal under the act. The 
contents of that survey can be found on my Web site.
    Mr. Smith. Ms. Skinner, I would like to hear from Ms. 
Christensen before we go vote. Are you to the end of your 
testimony?
    Ms. Skinner. Just one last bit. And that is, I would like 
to say that I am very much encouraged by the provisions of H.R. 
2517, especially sections 3, 4 and 7, and the educational 
component and support its enactment. Stronger criminal 
enforcement of the copyright laws is absolutely necessary, 
particularly to protect individual creators such as needlework 
designers. We simply can't afford to undertake civil 
litigation. The rampant infringement and unrepentant nature of 
the infringers makes criminal enforcement the only credible 
deterrent.
    Mr. Smith. Thank you, Ms. Skinner. I am glad we made time 
for you to say that about the bill. I appreciate those 
comments.
    [The prepared statement of Ms. Skinner follows:]
                 Prepared Statement of Linn R. Skinner
                              introduction
    I am an embroidery historian specializing in the study of 
embroidery and social history of 16th and 17th century embroidery of 
Western Europe. I teach classic embroidery techniques and design 
embroidery for execution by others. I market my designs to individual 
consumers, to needlework shops and to needlework distributors in the US 
and internationally. My work has been published in Piecework Magazine, 
amongst other periodicals. My fiberart has been exhibited in London and 
I have appeared on BBC Radio on the issue of needlework aesthetics.
    I have been an active member of the internet community for many 
years. My online experience began as volunteer staff on one of the 
first fiberarts discussion groups--Fibercrafts Forum on CompuServe. 
These were early days of online groups. We were using DOSCim at first 
and finally began using Windows platform in this content group. We've 
come a long way since then but some of the journey has been most 
unpleasant.
    The pleasant bits have been the presence the internet has provided 
to cottage industry designers in the leisure arts industry. We can 
participate in affinity groups, exchange ideas and graphic images with 
our designer colleagues, provide educational materials to our consumers 
and sell our products from a website.
                a little history of needlework patterns
    The first needlework instructions are found in the Bible. The first 
needlework pattern book was published in 1523 by an Augsburg Germany 
printer named Schonsperger. By 1527, a printer based in Cologne (Peter 
Quentell) had copied several of the designs of Schonsperger and this 
practice of copying continued for many years as the concept of 
intellectual property was still far over the horizon.
    The next great golden age of needlework pattern publishing came 
with the development of 19th century ``ladies magazines.'' They were 
published in many languages and contained instructions and graphs for 
needlework along with other material deemed proper for Victorian age 
ladies. Publishing of needlework patterns progressed technically as did 
all graphic arts printing. Photolithography was a big step and the 
computer as a compositor took us into a new age. Today desktop 
publishing capabilities make is possible for individual designers to 
create charts, stitch diagrams; to insert these designs into 
publication and to print the final product right in their own home 
office.
                   infringement of needlework designs
    Copying of needlework designs was at first discouraged by the sheer 
effort involved. It was much easier to simply purchase a design rather 
than go to the trouble of copying it by hand. Technology made copying 
and photocopied needlework charts easier to pass around to friends and 
relatives. The needlework industry tried to cope with these 
infringements by producing colored charts as color copies were not then 
generally available and when available fairly expensive.
    Although new technology (personal computers, scanners, CD burners, 
etc.) was a boon to designers, it also opened a floodgate for 
infringement of needlework designs. Now an infringer did not have to 
leave the comfort of their own home. They could scan and print a 
colored needlework chart for pennies.
    With the advent of easy web access, the needlework infringers 
gained a new platform. Photo Sites and e-groups mushroomed. All of 
these venues offered free storage for graphic images and access to 
large numbers of downloaders of those images.
                              a few terms
Anonymous FTP
    Anonymous File Transfer Protocol (FTP) permits downloads of files 
by users who don't have to enter a password to access files stored on a 
website.
Download
    Transferring a file or other information from one computer to 
another
Posting
    Sending a message to a newsgroup or other online system for 
communications from one computer to another.
Share
    To scan and upload copyrighted material for redistribution via 
electronic and online sources for other participants without charge. 
Lastly, we share patterns because many patterns are out of print. Most 
are unavailable elsewhere. We do not post them to the Internet websites 
for everyone who wants a copy. We post them for our friends in private 
groups so that our sharing can continue from the friends we know to the 
needy we may never know. Occasionally, a pattern that is still 
available may go through. Nothing in this world is perfect.
R.C.T.N
    Rec Crafts Textiles Needlework A Usenet group for the discussion of 
needlework topics in an open, public forum
USENET
    A global network of discussion groups, with messages posted from 
one machine visible to other computer users via a central holding 
system.
Thread
    An ongoing discussion in a Usenet newsgroup that contains a main 
message and subsequent replies generally arranged in chronological 
order.
Troll
    A Usenet expression describing a person who joins a group for the 
specific purpose of posting messages in an inflammatory style to cause 
maximum disruption of the group. The term was co-opted by the ``Pattern 
Piggies'' to describe anyone who wants copyright infringements stopped
    the dark side of the internet as it affects needlework designers
    In the Summer of 2000, I became entangled in the morass of 
copyright infringement of needlework designs on internet sites. At that 
time a concerned consumer contacted a designer to make the designer 
aware of a photo site (freecharts) where scans of commercially 
published needlework charts were being uploaded and distributed to any 
and all who cared to download them.
    An enthusiastic participant in these infringing activities, Carla 
Conry of Palmdale, California created a series of e-groups hosted by 
egroups.com. She later (May 2002) consolidated these groups into an 
omnibus pattern uploading group named ``Pattern Piggies Unite'' 
1 because of their avowed greed for infringed needlework 
charts.2 This group, and those following in its wake, 
transmit designs primarily as scanned e-mail attachments sent as 
messages to the host group.3 By July 2002, this group had 
already posted 12,364 messages (most having infringed material as 
attachments) and other groups had begun to form as the infringing 
community hustled to have the largest, best and most ``sharing'' of 
groups.
    E-group services for affinity groups are a boon to many honest 
hobbyists. They can be found on Yahoo, MSN, Topica, AOL and other 
sites. However, they are a haven for infringers.4 Infringers 
often post messages on groups requesting specific patterns and they are 
soon uploaded to not only one group but multiple groups increasing the 
loss immensely. Infringers were soon storing needlework designs on 
photo sites, e-groups, websites, and even family history groups.
    Some infringers simply list their entire pattern collection that is 
available upon request. Charts are sent as e-mail attachments to 
requesting fellow infringers. Some infringers such as 
[email protected] offer lists of designs they will e-mail upon 
request or provide on a CD by mail.5,6 
Some infringers sell the CD's of infringed material.7
                                fair use
    I am a firm believer in fair use. I provide free charts to guild 
groups and allow them to copy them freely and distribute them to their 
members. I upload small free designs to my website. I don't object when 
sellers scan the covers of my designs when selling the originals on e-
Bay. However, uploading an entire usable product for free distribution 
is not fair use. If a consumer could attach a Ford pickup or a load of 
I-bar or a washing machine to an e-mail and give them away to 1,000 of 
their closest online friends, I think the idea of an entire product 
being sent as an attachment would quickly be discovered to not be fair 
use.
                  reaction of the needlework industry
    At first the affinity e-groups were public and open and designers 
joined the groups demanding that they remove infringed material. These 
designers were deemed by infringers to be ``Trolls.'' 8 
``Trolls'' were seen as ``the enemy'' and list owners constantly tried 
to make their groups ``safe'' from these disturbing copyright 
fanatics.9
  my schizophrenic life as a designer by day and infiltrator by night
    Although groups were occasionally being closed (mostly through 
annoyance), they simply ``morphed'' into a new group and continued on 
their merry way. The new group was normally closed to general 
membership and required approval to join. Even if a hosting site 
occasionally closed an entire group, the average time for getting back 
online with the previous membership was approximately four hours.
    I, and other designers and consumers, believed that we needed to 
make the effort to maintain membership in these clandestine groups and 
began joining them using an alias. Yahoo staff encouraged this sort of 
monitoring of groups by designers. Several of us created alias personae 
and joined several groups. As time went on, groups were added and I 
soon was a member of 60+ infringing groups using several languages and 
located on several host services.
                       infringing to gain access
    Most infringing groups soon began requiring infringing activity of 
prospective members.10 Designers who joined groups under an 
alias determined that they would forfeit membership rather than 
infringe themselves. I created a PhotoPoint and a Picture Trail site 
and some designers allowed use of a design for uploading so that I 
could remain a member of infringing groups.11 I was required 
to create a photo site to bolster my credibility with infringing 
groups. Running some of my vacation snapshots through a stitch design 
program and uploading the resultant charts and a few crochet patterns 
from an 1886 publication kept them at bay until I revealed myself to 
the groups. At that time, one of the list owners was still certain I 
had uploaded infringed material--not my own photographs turned into 
incredibly vile cross stitch charts and patterns in the public 
domaine.12
                              non-us sites
    Non-US sites are particularly difficult to deal with. A group of 
Russian sites was identified in May 2002.13 Chinese language 
sites pop-up often and are brought to my attention although I have 
absolutely no useful suggestions for designers.14 The French 
are active needleworkers and have had sites for infringing from time to 
time.15
                    education of needlework industry
    I have found many members of our industry have ``fuzzy'' sorts of 
ideas about intellectual property issues, particularly as relating to 
the internet. I have consistently encouraged them in e-groups for 
designers to take responsibility for learning about the DMCA and 
enforcing their rights under the act.16 Our largest 
publisher is Leisure Arts (Southern Living) a Time Warner/AOL company. 
They came late to the battle and have never funded staffing or other 
resources to combat infringement of needlework designs in a meaningful 
way.17
    In August 2000, I felt the issue required a public airing and 
contacted the Los Angeles Times' leading reporter on Napster issues. I 
offered my alias so she and her staff could research the issue and an 
article followed. Designers were interviewed, opinions of intellectual 
property attorneys sought, and a committee on internet piracy formed by 
one of our trade associations. A project was completed of a book of 
designs contributed by international designers to raise money for 
dealing with the issues of internet infringement of needlework designs. 
Unfortunately there was no mandate given to the committee as to use of 
the funds and other than a poster on the issue of copyright printed for 
distribution to retail shops, there has been no action by needlework 
industry trade groups.
    In the Summer of 2001, I was ready to throw in the towel when a 
group of needlecrafters, mostly crocheters and knitters, joined in the 
battle and asked what they could do. I felt that we needed more than 
anecdotal evidence of the infringement problem and asked for volunteers 
to completely survey one public Yahoo group that had been active for 
nearly a year, had not been called to task by designers and had a 
representative membership for the groups of that time. Ten volunteers 
from the UK, the US, Australia, Canada and Israel looked at 35,000+ 
messages posted to the group and identified 49,500+ pages of infringed 
material.
    The group identified insofar as possible the owner of each of these 
uploaded pages and compiled a list of the designers/publishers 
furnishing them with thousands of URL's so the owners of the 
intellectual property identified could file a complaint under the 
provisions of the DMCA. A CD was created with the results of the survey 
and educational materials for designers concerning internet piracy of 
designs. (The contents of the CD can be found at 
www.skinnersisters.com/copyright) Copies of the CD were provided to 
members of the needlework industry at a trade show in July 2001.
    Again, there was no meaningful response to the problem and groups 
and websites continued to proliferate. I continued to attempt to notify 
rights holders of infringements. Some designers saw me as a ``copyright 
scold'' not a helpful ally.18 Discouragement with fellow 
designers was taking over my love of my art.19 At this time 
only a few designers and stitchers were monitoring groups and then our 
watchgroup dwindled to virtually three people--Su Poole, an American 
designer residing in the UK, Barbara Horton, a concerned stitcher and 
myself.
                            civil litigation
    One federal civil action has been filed concerning uploading of 
infringed needlework patterns to a photo-site.20 This has 
not deterred pirating whatsoever.
            begging for attention from all the wrong places
    By May 2002, I was a member of a large number of infringing 
groups.21 I was discouraged and tried battering at any door 
no matter how unlikely any attention would be paid to the issues facing 
designers. These contacts included the Library of Congress22 
and the FBI 23 The Library of Congress did at least respond 
saying ``not our job'' but I have to date not received a response from 
the FBI.
                          giving up the chase
    By 2002, I was convinced watching the groups and trying to 
encourage designers and publishers to act was futile and Barbara 
Horton, Su Poole and I unsubscribed from a number of infringing groups 
after sending them a swan song ``gotcha'' message.24 The 
pirates remained unrepentant.25
    When I stopped following the groups, I offered my identity and 
archives to those I felt might have resources available to make use of 
these tools, but there was no interest evidenced.26
                          is there a solution?
    I am not silly enough to believe that all infringement of 
needlework designs is within reach nor do I believe putting a halt to 
all internet piracy of needlework designs is an achievable goal. 
Widespread infringement is too well entrenched. I do believe that 
criminal enforcement of well written legislation can deter infringers 
and help contain piracy to a great extent. I am most hopeful that 
providing the criminal justice system with resources by way of staff 
and expanding their knowledge of the issues of intellectual property, a 
decrease in piracy online will be achieved and that they can take on 
this task that is far beyond any industry or individual. Cease and 
desist letters from rights holders are simply ignored by infringers 
27 and civil litigation is far beyond the means of 98% of 
needlework designers.
    I am encouraged by the enforcement provisions of H.R. 2517, as 
contained in Sections 3, 4 and 7, and the Educational component, 
contained in Section 5, and support its enactment.
















































































    Mr. Smith. Ms. Christensen.

 STATEMENT OF MAREN CHRISTENSEN, VICE PRESIDENT, INTELLECTUAL 
              PROPERTY COUNSEL, UNIVERSAL STUDIOS

    Ms. Christensen. Thank you, Mr. Chairman. Mr. Chairman, 
Congressman Berman, Members of the Committee, it is a pleasure 
to appear before you today. My name is Maren Christensen. I am 
Senior Intellectual Property Counsel for Vivendi Universal 
entertainment. I appreciate the work that the Members of this 
Committee and your predecessors have done to protect the rights 
of creators and to foster an environment where companies like 
Universal Studios can invest in new creative works.
    As this Committee knows, piracy is the single greatest 
threat to America's creative industries. We face huge amounts 
of piracy, both in the United States and abroad. To an 
increasing degree, online piracy has become more prevalent 
through peer-to-peer distribution systems where one illicit 
copy of a film can be made available almost instantaneously to 
millions of users around the globe.
    Those who traffic in or use pirated materials erode the 
financial underpinnings of this uniquely creative, 
collaborative and capital-intensive process. They affect those 
in front of and behind the camera and threaten the future of 
popular entertainment, as the unfortunate reality is that some 
80 percent of the films and television shows do not recoup 
their investment.
    This is a hit-driven business where the successes have to 
pay for those that don't make it, and of course it is the hits 
that the pirates most often steal.
    Mr. Chairman, I would like to relay a recent experience 
regarding a pirated film, and as this is still a pending live 
case, there is certain information I cannot discuss in open 
session. The following account mainly comes from the 
information made public by the U.S. Attorney's Office in its 
June 25 criminal information as well as from its press release.
    On June 6, 2003, 2 weeks before the film ``The Hulk'' was 
scheduled to open in movie theaters, Universal's antipiracy 
team discovered that an incomplete work print of the film had 
been illegally uploaded onto the Internet. Having invested over 
a $150 million to produce, market and distribute ``The Hulk,'' 
we were extremely alarmed to find that this work print, with 
only an early version of the state-of-the-art computer graphics 
and an incomplete version of the musical score, had been 
stolen, posted to the Net and made available to PCs around the 
world. Within days, the original posting turned into tens of 
thousands of sources from which countless downloads could be 
made.
    The threat to Universal and the film was obvious. People 
who watch a film for free do not have to go to the theater. 
Pirates who get a film for free can reproduce it in DVD format, 
translate it into any number of languages and sell it on street 
corners around the world for just a few dollars.
    The fact that this was an unfinished version of the film 
also created an additional threat. As an industry we depend on 
the subjective reaction of individual consumers and critics and 
on positive word of mouth. It is critical that audiences see 
our films, particularly films like ``The Hulk,'' where the 
visual effects and the music are so important in their final 
and ultimate form.
    The studio has many external and internal procedures to 
protect a film during production, including physical and 
technological standards. Each work print of every film carries 
unique identifying characteristics to help us trace the source 
of any leak. Universal had supplied such a work print to an 
advertising agency in New York that we and other Hollywood 
studios have worked with many times over the years. The agency, 
like all other outside vendors, had committed to a strict set 
of security guidelines; but in spite of this agreement, an 
employee of the ad agency loaned the work print to someone who 
in turn loaned it to Mr. Kerry Gonzales.
    Mr. Gonzales attempted to defeat the security markings 
embedded in the print. He obliterated some but not all of its 
unique markings. He then uploaded the digitized copy of the 
film to an Internet site hosted from the Netherlands, and soon 
it was available all over the Net.
    Fortunately, we were able to recover identifying 
information from the Internet copy and work backward. Through 
the quick and aggressive action of the FBI's Computer Hacking 
and Intellectual Property Squad and the U.S. Attorney's Office, 
Mr. Gonzales was identified and found and pled guilty to felony 
copyright infringement. His sentencing is set for September, 
and he faces time in prison.
    Mr. Chairman, we are deeply grateful to the FBI, the 
Justice Department and the Copyright Office. Their prompt 
action led to this unprecedented conviction. We applaud the New 
York U.S. Attorney's Office for bringing this important 
criminal action. The entire copyright community welcomed the 
message that it sent to people who upload, download and trade 
movies on the Internet. The crime is not anonymous harmless 
fun. You will get caught, and you will be punished to the 
fullest extent of the law.
    We commend you, Mr. Chairman, and the other Members of the 
Committee, for sending a strong message that theft, whether on 
or offline will not be tolerated.
    Universal studios and the other members of the MPAA support 
H.R. 2517 because further measures to address the illegal 
distribution of copyrighted material on the Internet will 
foster legitimate Internet distribution and business models. 
H.R. 2517 focuses on two of the most basic elements of the 
effort to stop piracy----
    Mr. Smith. Ms. Christensen, I have to interrupt you. We are 
going to need to go vote, and perhaps we can pick up with your 
testimony on some of the questions to our--a little bit later 
on. But thank you for your testimony very much.
    As I explained earlier, we will need to recess for about 40 
minutes, and then we will reconvene at that time.
    [Recess.]
    [The prepared statement of Ms. Christensen follows:]
                Prepared Statement of Maren Christensen
    Mr. Chairman, Congressman Berman, Members of the Committee, it is a 
pleasure to appear before you today. My name is Maren Christensen. I am 
Senior Intellectual Property Counsel for Vivendi Universal 
Entertainment. This is the first time that I have appeared before this 
Subcommittee--although I have followed its accomplishments for the past 
twenty years both in private practice and as in-house counsel 
specializing in copyright law. I appreciate the work that the Members 
of this committee and your predecessors have done to protect the rights 
of creators and to foster an environment where companies like Universal 
Studios can invest in new and innovative audiovisual works. Your work 
has enabled American filmmakers to entertain the world.
    Universal is proud of its recent Oscar winners such as The Pianist, 
A Beautiful Mind and Gladiator This year we are enjoying great success 
with films like Bruce Almighty and TV programming including American 
Dreams and the shows within the Law and Order family. We are looking 
forward to the opening of Seabiscuit next week, and hope to have many 
more successful movies for years to come.
    What is a time of great anticipation for us is also a time of some 
apprehension. Today, movie studios not only have to find an audience 
for their films; they also have to stop the pirates who would hijack 
our audiences using our own product.
    As this Committee knows, piracy is the single greatest threat to 
America's creative industries. We face huge amounts of piracy both in 
the U.S. and abroad--traditional physical goods piracy where organized 
enterprises reproduce and distribute VHS tapes and DVDs, and digital 
piracy exacerbated by the wonders of the Internet. To an increasing 
degree, on-line piracy is accomplished through peer-to-peer 
distribution systems where one illicit copy of a film can be made 
available almost instantaneously to millions of users around the globe.
    Those who traffic in or use pirated materials erode the financial 
underpinnings of this uniquely creative, collaborative and capital 
intensive process. Quite simply, producers cannot invest their capital 
if they cannot recoup their investment and make a profit. Tens of 
thousands of creative artists--most of whom work off camera and are by 
no means celebrities or household names--stand to lose their 
livelihoods, and movie fans stand to lose a major source of popular 
entertainment.
    Despite the headlines, blockbusters are rare. We forget about the 
films that fail to find an audience or the TV shows that do not survive 
even one season. We are an optimistic community always looking for new 
ways to tell a story and enthrall audiences. But the unfortunate 
reality is that some 80% of the films and TV shows that we make do not 
recoup the money invested in production, marketing and distribution. 
This is a hit driven business where the successes have to pay for those 
that do not make it. This is not a problem for the pirates: they make 
money by stealing the hits and ignoring the misses--a great business 
model.
    Technology has always presented us with enormous opportunities as 
well as risks and challenges. Anyone who has seen movies like ``The 
Hulk,'' or ``The Mummy'' knows how enthusiastically the motion picture 
industry has embraced technology. My colleagues at Universal work 
tirelessly to reap the benefits of digital technologies, but also to 
keep tech savvy pirates at bay. Thanks to the committed teams of 
professionals at the Justice Department, FBI, Copyright Office, Patent 
and Trademark Office, United States Trade Representative, Customs 
Service, Federal Communications Commission and other agencies, motion 
pictures will continue to be one of America's preeminent trade assets, 
employers and contributors to the GNP.
    I have been asked to describe a recent example of the kinds of 
threats facing the industry, as well as to discuss H.R. 2517, 
legislation designed to help ensure that the law keeps up with 
technological developments and that law enforcement has the tools it 
needs to protect America's creators.
                              ``the hulk''
    Mr. Chairman, the following account mainly comes from information 
made public by the U.S. Attorney's Office in its Criminal Information 
dated June 25 as well as its press release. As I mentioned to the 
subcommittee staff, there are some facts that I will not be able to 
reveal in this open session.
    On June 6, 2003--two weeks before the film ``The HULK'' was 
scheduled to open in movie theatres--a member of Universal's anti-
piracy team discovered that an incomplete work print version of the 
film had been illegally uploaded onto the Internet.
    The studio invested over $150 million dollars to produce, market 
and distribute ``The Hulk.'' That is not unusual for big summer films 
with expensive computer-generated graphics. But even films without 
special effects are expensive to make and release. Recent MPAA 
statistics indicate that the average--the average film released by a 
major American studio costs $90 million--some $60 million to make and 
another $30 million to market and distribute.
    With this kind of a capital investment you can imagine how alarmed 
we were to find that a ``work print'' of the Hulk with only an early 
version of the state-of-the-art computer graphics, and an incomplete 
version of the musical score--had been stolen, posted to the net and 
made available for downloading to PCs around the world. Within days, 
the original posting turned into tens of thousands of sources from 
which countless numbers of downloads could be made. And within those 
same few days, street vendors all over the world were selling DVDs made 
from a download of this stolen work print. All of this occurred a week 
before the film was released in theaters.
    The threat to Universal and the film was obvious. People who watch 
a film for free do not have to go to the theatre. Pirates who get a 
film for free can reproduce it in VHS and DVD, translate it into any 
number of languages, and sell if for a few dollars. The fact that this 
was an unfinished version of the film created an additional threat: In 
an industry that depends on the subjective reaction of individual 
consumers and critics and positive word of mouth, we never want people 
to see a film until it is in its final, best form, and particularly not 
a film like this for which the visual effects and the music are so 
important.
    The studio takes many steps to protect its films. There are 
internal and external procedures, and we are constantly improving 
physical and technological safeguards. Each work print of every film 
carries unique identifying characteristics to help us trace the source 
of any leaks. Universal had supplied such a work print to an 
advertising agency in New York that we and other Hollywood studios have 
worked with many times. The agency, like all other outside vendors who 
work with early versions of films, had committed to a strict set of 
security guidelines. The agency had obligated itself to keep the print 
secure and not to permit anyone to make or distribute a copy. In spite 
of this agreement, an employee of the ad agency loaned the work print 
to someone, who in turn loaned it to Mr. Kerry Gonzalez.
    Mr. Gonzalez used his home computer to make an unauthorized digital 
copy of the work print, and then ran a special program designed to 
defeat the security markings embedded in it. He was able to obliterate 
some, but not all, of the unique markings on the print. He uploaded the 
digitized copy of the film to an Internet website chat room hosted from 
the Netherlands. The site is popular among movie enthusiasts who 
routinely gather there to post and trade copies of bootleg movies. Soon 
it was available all over the Internet.
    Fortunately, we were able to recover identifying information from 
the Internet copy and work backward. Through the quick and aggressive 
action of the FBI's Computer Hacking and Intellectual Property Squad 
and the U.S. Attorney's office, Mr. Gonzalez was identified and found, 
and pled guilty to felony copyright infringement [17 USC 506]. He will 
be sentenced on September 26, 2003. He faces a maximum sentence of 
three years in prison, and a fine of $250,000.
    Mr. Chairman, we are deeply grateful to the FBI and Justice 
Department--their prompt action led to this unprecedented conviction. 
We applaud the NY U.S. Attorney's Office for bringing this important 
criminal action against those who would demolish the creation and 
investment in a motion picture such as The Hulk. The entire copyright 
community welcomed the message that it sent to people who upload, 
download and trade movies on the Internet--the crime is not anonymous, 
harmless fun. You will get caught and you will be punished to the 
fullest extent of the law. As Chairman Smith said, ``while ``The HULK'' 
is a comic book hero known to millions, copyright pirates practice 
their illegal trade in relative anonymity. In this case the FBI brought 
the face of copyright piracy public, and for that they are to be 
commended.''
    The truth is that more criminal actions like this are necessary in 
order to send the message that Internet theft will not be tolerated 
under the law. Had the Congress not authorized additional resources for 
this case, this investigation would have foundered. Had Members of this 
committee not encouraged law enforcement officials and copyright owners 
to prosecute and punish this kind of behavior, we would not be sending 
the strong anti-piracy message that we are able to send today.
       h.r. 2517--the piracy deterrence and education act of 2003
    Universal Studios and the other members of the Motion Picture 
Association of America support H.R. 2517 because further measures to 
address the illegal distribution of copyrighted material on the 
Internet will foster legitimate Internet distribution and business 
models. H.R. 2517 focuses on two of the most basic elements of the 
effort to stop piracy--consumer education and deterrent penalties. If 
piracy is to be abated, consumers must know that theft of movies, sound 
recordings and other copyrighted works is wrong, and that there are 
real consequences to unauthorized reproduction and distribution.
    The sponsors of H.R. 2517 correctly recognize that that more work 
needs to be done to protect America's creators. Had the facts of The 
Hulk theft taken a different twist or turn, this investigation could 
have ended quite differently.
    Our company's experience indicates that the Justice Department 
still needs additional human and technical resources so that forensic 
investigations into the tools of the piracy trade can be completed 
promptly and comprehensively. H.R. 2517 allows for enhanced programs to 
deter computer users from committing act of copyright infringement. We 
particularly applaud the provision of the bill that assigns at least 
one agent to be responsible for investigating intellectual property 
crimes within the Department of Justice's Computer Crime and 
Intellectual Property Section.
    Our company's experience also teaches that the law may need to be 
revised to recognize that some very valuable works may be stolen before 
the work is finished and registered at the Copyright Office. Under 
current law, prosecutors require not only that the registration process 
has been initiated by the filing of the application, but that the 
certificate has issued from the Copyright Office--something that 
ordinarily takes many months due to the volume of registrations at the 
Copyright Office. Although there is an expedited ``special handling'' 
procedure, even this requires 5-7 business days to obtain a 
certificate. As we found, in this age of pre-release Internet piracy of 
major motion pictures, this can be too long. While the swift action of 
the FBI and the federal prosecutors allowed them to identify and find 
the pirate very quickly, it was not possible to secure the plea until 
the prosecutor had the completed copyright registration in hand. Only 
due to the efforts of the Copyright Office and its staff were we able 
to get a registration certificate issued in time for the prosecutor to 
proceed.
    We commend the sponsors of H.R. 2517 for providing that a copyright 
registration should not be necessary for instituting a criminal 
copyright action. In fact, requiring a registration is not practical 
today for criminal or civil infringement actions, particularly for pre-
release cases. Usually in these cases the copyright owners have not yet 
filed their copyright registration applications because the films have 
not been completed or published. It is neither fair to the Copyright 
Office's staff (requiring extraordinary time and resources), nor 
necessary for the courts to require such registrations before 
commencing a case. The facts provided by the registration, such 
copyrightability of the work or the identity of its owner, if 
challenged by a defendant, can be easily proven in court without a 
certificate. In short, requiring a registration before commencement of 
an action would not improve criminal (or civil) prosecutions or 
judicial efficiency and would not deter piracy. Delay while a 
registration certificate is obtained significantly diminishes the 
effectiveness of these cases, and is unnecessary.
    This is not to say that registration itself, including the 
requirement of supplying a deposit copy for the Library of Congress, is 
unnecessary. It is simply a question of timing. There are many 
incentives for registration that will lead most copyright owners to 
register their works within three months of release whether or not it 
is a prerequisite for instituting a judicial proceeding. We would 
welcome the opportunity to explore with the Subcommittee ways in which 
the registration requirements can evolve to better meet the threat of 
Internet piracy.
    There is no doubt that an effective government deterrence program, 
coupled with more prosecutions such as the one regarding ``The Hulk,'' 
will be a tremendous help in the war on piracy. Law enforcement and 
private industry must use our collective efforts to make infringers of 
copyright understand that they are not anonymous and that they will be 
prosecuted.
    For that reason, the educational provisions of H.R. 2517 stress the 
need to inform users of the potential serious risks they face from 
participating in peer-to-peer network activities. Many people do not 
understand that trafficking in copyrighted works on the Internet is a 
Federal crime, or appreciate the risks associated with the use of peer-
to-peer (P2P) file sharing networks.
    For example, studies and recent congressional hearings have 
highlighted that many users of P2P networks have no idea that they are 
not only sharing music and movies, they are frequently sharing their 
entire C drive. In many cases, a P2P program installed on your computer 
can make all your files available to other P2P users. If your son or 
daughter downloads music through KaZaA during the afternoon, the 
information you work on at night--private tax returns, medical records, 
financial portfolios and private communications--may also be available 
to other P2P users on the network. Furthermore, P2P network use creates 
significant exposure to viruses and other security threats.
    Fortunately, research indicates that consumers may change their 
behavior with regard to Internet theft if they are warned about legal 
action and if they perceive a risk of being caught. According to a 
recent nationwide survey conducted by Edison Media Research, 33% of 
downloaders said they would disable their file sharing software if they 
received a pop-up message warning they are at risk for legal penalties 
for downloading from file-sharing services. The educational programs 
established under Section 5 of H.R. 2517 will help to accomplish the 
critical task of alerting users about the dangers they face from 
participating on P2P networks.
    Finally, by facilitating coordination among law enforcement 
agencies and removing procedural barriers to prosecution, H.R. 2517 
will stimulate greater law enforcement activity against pirates and 
increase their effectiveness
    Today the interests of honest consumers, as well as the livelihood 
of thousands of hard working artists, crafts persons and others 
employed in the creative industries are being threatened by a 
relatively few malicious, ignorant or uncaring people. H.R. 2517 will 
help inform these people that piracy is wrong, and where education is 
not sufficient, it will impose consequences in response to their 
illegal acts. It is a good measure that should become law.
    I thank you Mr. Chairman for this opportunity to testify before the 
Subcommittee today on this thoughtful legislation. I look forward to 
discussing these important issues in greater detail.

    Mr. Smith. The Subcommittee will reconvene. I would like to 
thank our witnesses for their patience. Obviously the votes 
were unavoidable, but we appreciate your understanding that.
    Let me direct my first question to Ms. Christensen. And Ms. 
Monroe, we are going to get to you, working this way, and give 
you a chance to respond to some of the other answers because I 
will be asking a lot of them about law enforcement.
    Ms. Christensen you described the successful prosecution in 
``The Hulk'' case. Obviously that is something that you would 
like to see more of. What was it, in your opinion, that was 
done by the Department of Justice that helped you? What can we 
expect to see more of, given your experience?
    Ms. Christensen. I think one of the things that made it 
right is that we, through our internal procedures, were able to 
track the source of the leak, and we had people who got on it 
right away at the studio. And when they found it, it was sort 
of a code blue; in the case of ``Hulk,'' a code green perhaps, 
and everybody really went into action. We were very very 
serious about finding this person and we were fortunate enough 
that the FBI--we contacted the FBI right away and they were 
very serious about helping us. And we were able to turn over a 
certain amount of evidence to the FBI through our own efforts 
and they really ran with it.
    Mr. Smith. It just seems to me--and that is interesting to 
hear, because it seems to me it was a combination of your 
efforts and the FBI efforts that led to this prosecution, and 
maybe that says something about mutual effort in the future. 
But it is perhaps likely that the law enforcement officials 
would not have been so interested had you not been able to get 
them the information that they needed or that attracted their 
interest or whatever.
    Ms. Christensen. Well, it is hard for me to speak for the 
FBI.
    Mr. Smith. I don't want you to, because we have a witness 
from the FBI and I will ask her.
    Ms. Christensen. They can do that.
    Mr. Smith. I will check with her in a second. Thank you for 
that answer.
    Ms. Skinner and Mr. Trust, both of you have had experiences 
dealing with law enforcement officials in regard to copyright 
infringement. What was your experience, briefly, in your 
dealings? Ms. Skinner, why don't you go first and then we will 
go to Mr. Trust.
    Ms. Skinner. Not greatly favorable at this point, although 
I am feeling that even this hearing will bring better rapport 
in that regard. I have reported our problems to my L.A. Office 
of the FBI in 2002 and got no response from them.
    Mr. Smith. Okay. Mr. Trust.
    Mr. Trust. I think, Chairman, it's safe to say that 
photographers generally feel so hopeless, in some ways 
disenfranchised, that truthfully there is--there is very little 
that goes on. That is not to say law enforcement hasn't been 
helpful. They have been, and I am sure that they continue to be 
helpful. But photographers don't register their works for the 
most part because they just find it to be too difficult of a 
process. And then once--even those who do register their work, 
they just find it almost impossible to do anything about 
someone stealing a photograph, that it drops basically right 
there. So it is really a--in some ways, just a very hopeless 
sort of mentality for professional photographers.
    Mr. Smith. And frankly, the law enforcement personnel, they 
have to pick and choose and set priorities, and not every case 
of copyright infringement can be prosecuted, necessarily.
    But still I think, Ms. Monroe, and this leads to couple of 
questions for you, I think it is safe to say that almost 
everyone agrees that we expect law enforcement officials, FBI, 
Department of Justice and others, to do more than they have 
been doing and to do a better job of enforcement than they have 
been doing. In regard to ``The Hulk'' case, is that the first 
time that there has been a prosecution of a pre-release piracy, 
to your knowledge?
    Ms. Monroe. To my knowledge, yes.
    Mr. Smith. Okay. The reason I am asking is quite obvious, 
and that is why don't we prosecute more often? Why don't we 
prosecute more examples of infringement?
    Ms. Monroe. Well, yes, sir. To indicate how seriously the 
FBI is taking this crime problem, it was in June of 2002 that 
the Director did create our Cyber Crime Division, so we are 
sort of in the embryonic stages, if you will, with this whole 
cyber umbrella, and we do take that very seriously.
    And part of our Cyber Crime, our criminal branch--we have 
two branches, which is Computer Intrusion is number one, which 
that deals with our national security. The other part of this 
is our Cyber Crime, which is criminal violations. And our 
number one criminal violation within that section is copyright 
violations, intellectual property rights.
    Mr. Smith. Would you expect--would you reassure us and tell 
us that in the future you would expect to see many more 
prosecutions of piracy?
    Ms. Monroe. Yes, definitely. I can't, of course, attach a 
number to that, but that is what division is about, and 
creating the section. We have a unit called the Public and 
Private Alliance, which is dealing with private industry, and 
that is what the section, the unit, will be doing, is reaching 
out and working with partnering with private industry.
    Mr. Smith. Okay. Thank you, Ms. Monroe.
    The gentleman from California, Mr. Berman, is recognized 
for his questions.
    Mr. Berman. Well, thank you, Mr. Chairman.
    In H.R. 2517, Ms. Monroe, one of the provisions of the bill 
relates to eliminating the registration requirements. There are 
some people who think that the registration requirement now 
only applies to civil actions on copyright infringement and 
that there is no obligation before criminal prosecution. Are 
you familiar with this issue and do you have an opinion on 
that?
    Ms. Monroe. Excuse me just a moment. The element of the 
writ is that there has to be a valid U.S. Copyright for a 
criminal violation.
    Mr. Berman. And you could have a valid U.S. copyright 
without a registration.
    Ms. Monroe. While pending, there can be a valid U.S. 
copyright.
    Mr. Berman. In other words, there has to be an application 
for registration and----
    Ms. Monroe. Correct.
    Mr. Berman. All right. And then on section 7, infringement 
warning notice, Ms. Christensen, how do you--this will direct 
the Attorney General to provide these warning notices? Since we 
are authorizing and, in fact, directing the FBI, who--does the 
motion picture company for instance, now, or entertainment 
company put out these warnings, under what authority?
    Ms. Christensen. My understanding of that, Congressman, is 
that there is a--has been an agreement in place for many years 
between the FBI and the Motion Picture Association which allows 
us to use an FBI warning at the--at least at the opening of the 
VHS and the DVD. Maybe it allows other things.
    Mr. Berman. All right. Now, turning to a provision in this 
bill that Mr. Conyers and I introduced, the single upload 
provision, it provides, again, that the single upload of a 
copyrighted work to a publicly accessible computer network 
meets the copy and value thresholds for a felony. I am curious 
about your opinion on whether this will be helpful in 
combatting piracy.
    Ms. Christensen. Congressman, we certainly welcome any 
tools that will help us in protecting against the illegal 
trafficking in our works. Clearly, the uploading, if it were to 
the Internet where it is made available for hundreds of 
thousands, if not millions, of copies to be made, creates a 
situation where the valuation exceeds the felony threshold. On 
the other hand, the fact that it is so unique to find a 
prosecution such as ours, even though so many pre-release films 
are all over the Net, means that a clarification along these 
lines would be helpful.
    Mr. Berman. Thank you.
    Ms. Skinner, you touched on--you may have touched on this 
issue in your testimony, but the infringers that you have 
spoken about, the ones that are writing these nasty e-mails all 
the time, the boldness suggests that they have no fear of civil 
liability. I am curious about your views about their fears of 
private actions and the extent to which anything less than 
criminal prosecution will end these practices.
    Ms. Skinner. I think their lack of fear is well founded. We 
have had one civil case brought that was settled out of court. 
And I have heard from them consistently, We will stop this when 
the cop is at the door.
    Mr. Berman. And one last question on this round for Ms. 
Monroe. The issue of false domain name registration 
information, WHOIS data, we know from previous hearings that we 
have had, that law enforcement investigators frequently use 
WHOIS data and that false WHOIS data substantially impairs law 
enforcement investigation. Would increased accuracy and 
completeness of the WHOIS database be helpful to FBI 
investigations of cyber crime?
    Ms. Monroe. Yes, it would be, sir.
    Mr. Berman. Okay. Thank you very much, Mr. Chairman.
    Mr. Smith. Thank you, Mr. Berman.
    The gentleman from Florida, Mr. Keller, is recognized for 
his questioning.
    Mr. Keller. Thank you, Mr. Chairman.
    Ms. Monroe, can you tell us a little bit more about what 
the FBI is doing to make it easier for the copyright owners to 
use that FBI seal to let online pirates know that what they are 
about to do will cause them to suffer some--or make them 
subject to penalties?
    Ms. Monroe. Yes. The FBI is combatting the problem of 
intellectual property rights in kind of a three-pronged 
approach, and that is through investigation, education and 
training. And what we are doing within the education realm is 
we are formulating a letter to relate to the general public the 
dangers of peer-to-peer technology. And this letter also 
informs individuals of the illegality of trading in copyrighted 
material, whether it be music, movies, software. This letter 
will be posted on the FBI Web site and it is also going to be 
made available to private industry to include in any 
publication that they will have on the Internet.
    Mr. Keller. What about that seal? Aren't these folks really 
looking for the use of the seal, just like if you rent a movie 
down at Blockbuster, the seal comes up showing that there are 
penalties for, you know, making copies of this movie? Aren't 
they looking for some sort of protection like that and they 
want to use your seal?
    Ms. Monroe. Yes. We are working on that direct issue with 
them and coming up with a memo of understanding for that usage.
    Mr. Keller. Okay. Let me walk you through a hypothetical 
and ask how the FBI would be involved. Next week, for example, 
a major movie called ``Sea Biscuit'' is going to be opening up 
by Universal, I think. Let's say that today it was posted on 
the Internet somehow, that an advance copy got out similar to 
what happened with ``The Hulk'' movie, and that the folks down 
at Universal Studios in Orlando, Florida in my district found 
out about it through their own internal investigation. What 
would be their procedure for dealing with the FBI? Would they 
contact the Orlando FBI office, or is there some specialized 
FBI unit, some other location they would contact?
    Ms. Monroe. If this was originating in the Universal 
Studios in Orlando, they could contact the--Orlando is one of 
our resident agencies out of the Tampa office. They would 
contact the Tampa office.
    Mr. Keller. I am wondering if there should be some sort of 
like an online intellectual property SWAT team in place that 
people like that could contact if they know that there is an 
imminent up loading of their movies, some group of FBI 
officials somewhere that this is their expertise, rather than 
some generic agent in Tampa.
    Ms. Monroe. To address that, we actually--we are working on 
several things within the Cyber Division to have some 
uniformity. But at this point what we have in each one of our 
field divisions are agents that are specifically trained in 
cyber matters, so they do have the knowledge, the intake 
knowledge as to how to work these cases.
    Mr. Keller. So there would be someone in every field 
division that has that expertise?
    Ms. Monroe. Yes.
    Mr. Keller. Okay. And they would handle it there. And then 
let's say they collect the evidence from someone like 
Universal, then they would then turn over it to the local 
prosecutor for the Middle District of Florida.
    Ms. Monroe. It is basically situational, depending on how 
large or voluminous of a case this would be. We also have 
regional offices where we have additional agents if we needed 
more manpower resources on this, that they could assist in that 
office and it could be handled that way. So it kind of depends 
situationally how large of a case that we are talking about.
    Mr. Keller. Okay. A couple of months ago we had Attorney 
General Ashcroft here, and I asked him if there had ever, at 
that time, been a single prosecution of an Internet pirate for 
theft of music or movies over the Internet based on the peer-
to-peer file-sharing. And he admitted that there had not been, 
although there are other intellectual property crime victories 
that the FBI and Attorney General's Office have had, but not in 
that area. Since then we have ``The Hulk'' prosecution, which 
is worthy of merit and praise. Do you see there the potential 
to be additional prosecutions in the future for these type of 
crimes now that we have some precedent for this?
    Ms. Monroe. Yes, I do. Definitely. And as I indicated, the 
FBI is very--the emphasis is working with private industry on 
these specific issues.
    Mr. Keller. Okay. Thank you Ms. Monroe. And Mr. Chairman, I 
yield back the balance of my time.
    Mr. Smith. Thank you, Mr. Keller. The Committee has also 
received a letter from Marybeth Peters, Register of Copyrights; 
and, without objection, that will be made a part of the record. 
We will go now to the gentleman from Virginia, Mr. Boucher, for 
his questions.
    [The material referred to follows:]
    
    
    
    
    
    
    Mr. Boucher. Well, I thank you very much, Mr. Chairman. I 
want to join with you in welcoming these witnesses and thanking 
them for their testimony here today. I share the concern of 
everyone who has spoken here about the inappropriate use of 
peer-to-peer file-sharing, the use of it for the commission of 
piracy across the Internet, and I also think that more should 
be done in order to stem that use.
    I want to commend the Department of Justice for the recent 
prosecution of ``The Hulk'' incident and I was glad to hear Ms. 
Monroe say that her office, the Department of Justice, 
generally does intend to step up its effort for law enforcement 
in this area. I think that is very appropriate.
    Having said that, I have some concerns with this bill, d I 
want to highlight just a couple of the areas that give me 
concern in the brief time that I have available, and ask these 
witnesses what their reaction to these problems--that to me are 
apparent--is.
    First of all, section 3 of the bill directs the FBI to 
deter the obtaining by the public of unauthorized copies of 
copyrighted works from the Internet. I think that is a quote 
from the Director. Can anyone on the panel tell me what 
``unauthorized'' means in this context? Does it mean that the 
consent of the owner of the copyright has not been obtained for 
the download? Or is ``unauthorized'' in this context a synonym 
for unlawful? And there is a very substantial difference 
between the two? Would anyone like to venture an opinion? Ms. 
Christensen?
    Ms. Christensen. Congressman Boucher, I notice that section 
3 begins with the language that the Director of the Federal 
Bureau of Investigation shall, one, develop a program to deter 
members of the public from committing acts of copyright 
infringement. Copyright infringement would, of course, contain 
all of the normal and usual defenses that any copyright 
infringement violation would have attached to it, and there is 
no reason I can see to believe that it would be any different 
with regard to this bill.
    Mr. Boucher. So when the word ``unauthorized'' is used 
here, your interpretation is that it really means unlawful, 
meaning that the download does constitute an infringement; is 
that correct?
    Ms. Christensen. I think the download has to constitute an 
infringement.
    Mr. Boucher. Okay. So if someone is downloading for the 
exercise, for example, of their fair-use rights to excerpt a 
section from something that they see on the Internet that is 
copyrighted, that would not be conduct that the FBI should be 
deterring. That is unauthorized in the sense that the copyright 
owner has not given his direct permission to download that 
excerpt. But your opinion would be that in that particular 
instance, the FBI should not deter. Is that stated correctly? A 
simple answer is needed here, just a sort of a yes or no. I 
think I have fairly summarized what you said. Is that correct?
    Ms. Christensen. Well, except that I would like to add that 
in the context of this bill, when you are talking about file-
trading on a public peer-to-peer network, you are almost never 
going to find an instance in which it is fair use to upload 
somebody's property onto that network. If you are talking about 
file-sharing----
    Mr. Boucher. I am going to reclaim my time because it is 
limited. I am not suggesting that we alter the definition of 
``fair use'' here or that we expand it into new areas. What I 
am saying is that when something is unequivocally a fair-use 
application, it would not be your intent that this language be 
used in order to deter the downloading of that material; is 
that correct?
    Ms. Christensen. That is correct. But I don't think you are 
going to find a fair use----
    Mr. Boucher. Now let me take you one step further and just 
say that with that understanding, would you agree that we 
should change the language here from ``unauthorized,'' which is 
ambiguous in its interpretation, at least potentially in the 
minds of some, to the simple word ``unlawful?''.
    Ms. Christensen. I don't think it is necessary, 
Congressman.
    Mr. Boucher. Okay. Let me move to another area because my 
time is limited. I am concerned also by the notion that we are 
going to direct the Federal Bureau of Investigation to launch a 
public education campaign about the niceties of copyright law.
    And I am just wondering, and I would ask Ms. Monroe this 
question: Will the agents or the individuals at the Bureau 
responsible for fashioning this public education campaign 
include material on the fair-use rights of consumers and devote 
substantial effort and volume of the communication to that to 
make sure that those rights are also fairly communicated?
    Ms. Monroe. Well, at this point I am not permitted to 
testify on the merits of any legislation.
    Mr. Boucher. All right. Thank you.
    I just have one other question of you, and that is this. I 
see no authorization in this legislation for additional money, 
and so presumably this bill anticipates that you will carry out 
the new responsibilities of mounting an education campaign, 
assigning agents under section 4, mounting this deterrence 
program under section 3, with your existing resources and 
existing personnel. Do you have sufficient existing resources 
and personnel to undertake all of these responsibilities 
without any new dollars from the Congress?
    Ms. Monroe. Once again, I am not able to----
    Mr. Boucher. Thank you very much, Ms. Monroe.
    Thank you, Mr. Chairman.
    Mr. Smith. Thank you, Mr. Boucher.
    The gentleman from Florida, Mr. Wexler, is recognized for 
his questions.
    Mr. Wexler. Thank you, Mr. Chairman. I first would like to 
thank you, Mr. Chairman, and Mr. Berman, for both of your 
tireless campaigns in regard to this issue, in regard to 
protection of intellectual property. And it is not often I 
think that--I will speak for myself--that we get an opportunity 
to applaud the FBI for what seemingly is a first-case very 
aggressive use of law enforcement that has resulted in a very 
positive result. And I, from my perspective if nothing else, 
just wanted to say tremendous applause to the FBI for the 
effort that was brought forth in ``The Hulk'' case.
    And I think the ramifications of the FBI's actions are much 
greater than simply the legal ramifications. In fact, if you 
are talking about the education benefits, as a result of the 
FBI's reaction, you have to really look no further than the 
editorial in ``Ain't it Cool News,'' which ordinarily, as I 
understand it, wouldn't necessarily be a friendly venue for 
what people would view as being intellectual property rights. 
But because of the manner in which the FBI went about its 
business protecting intellectual property, we now I think, I 
hope, see a discussion occurring within the community in 
relation specifically, I think, to some of the concerns that 
Mr. Boucher raised, where even those people who ordinarily may 
not view the protection of intellectual property as might 
Universal, people are beginning to reexamine what intellectual 
property theft really means to society at large and not just in 
economic terms and not just in legal terms. And I wanted to 
applaud the FBI for that.
    Having had the experience of that case, I would be curious 
if Ms. Monroe could share with us how the FBI might recommend 
this Committee further the efforts of the FBI in a legitimate 
way in terms of doing what they did with--I guess my question 
is, Do you have all the tools that you need legally to do, in 
fact, what you did with ``The Hulk''? But anticipating what 
will be coming in the future, in terms of the greater use of 
technology, in the effort to steal intellectual property, in 
the effort to go after people who will be uploading, are there 
recommendations that you could make that this Subcommittee 
might consider so as to make the ability of the FBI greater in 
terms of preventing this kind of theft in the future?
    Ms. Monroe. I would be willing at a later date to give a 
further briefing on that. But one thing I know, we would have 
to have more of our personnel to be trained in these areas to 
address this.
    Mr. Wexler. When you say ``more personnel trained,'' do you 
mean the prosecutors, or are you talking about the people 
investigating or just generally?
    Ms. Monroe. I think in general, but I am specifically 
talking about investigators.
    Mr. Wexler. Okay. If I could to Ms. Christensen, having 
gone through the experience from the person having--or the 
company having their property rights violated, are there any 
suggestions that you might provide to this Committee that we 
specifically should provide to enhance the ability both of 
companies like your own to respond and the ability of companies 
like your own to interact with the FBI that may be the rights 
that you don't already have?
    Ms. Christensen. I think one of the important issues is the 
issue that has already been touched upon and that is the 
registration. It used to be that people couldn't get their 
hands on a motion picture until it had been released and by 
that time it had been registered. Now, as we see, they can get 
their hands on things far before they are registered, because 
they are not ready to be registered at that point. They are not 
finished. And I think that is true both in the criminal context 
and in the civil context.
    So I applaud that part of the statute with regard to 
criminal, and would like to have it considered even with regard 
to civil. I don't, by the way, I don't mean to be misunderstood 
in thinking that registration isn't important. We register all 
of our works, and we will continue to register all of our works 
for other advantages that registration gives us, whether or not 
they had to be registered in order for a proceeding to begin.
    Mr. Wexler. Thank you.
    Mr. Smith. Thank you, Mr. Wexler.
    And let me say to the witnesses that if you have additional 
comments that you want to make to respond to questions that 
have been asked today, you are welcome to submit that to us and 
we will make those a part of the record.
    Thank you all for your testimony. It has been very 
interesting and I have to say to you all that we--oh, Mr. 
Weiner has returned.
    Pardon me. The gentleman from New York, Mr. Weiner, is 
recognized for his questions.
    Mr. Weiner. Thank you, Mr. Chairman. I will take the hint 
and be brief. I just think that in fact, what is noteworthy 
about the prosecution of this whole case is that it is 
noteworthy at all. And I think that Mr. Ashcroft, in response 
to questions that I put to him at our last hearing, and Mr. 
Keller did, frankly did not give a great indication that this 
was a very high priority.
    Let me ask you, Ms. Monroe, if we right now put down a 
computer, connected to the Internet in front of you, how long 
do you think it would take for you to find an illegally pirated 
motion picture?
    Ms. Monroe. Me personally, or one of my staff?
    Mr. Weiner. Well, hopefully----
    Ms. Monroe. Not very long, to answer you seriously. Not 
very long.
    Mr. Weiner. And if you were to discover that, putting aside 
the leg work of the industry, I mean, would there be anything--
would you fire off an e-mail to the person, telling--saying, 
you know, this is the FBI, you are doing something illegal? 
Would you say this clearly is a crime? Let's try to sort this 
out?
    I mean, is there--you know, this was clearly a case that 
Paramount broke and they brought it to you all wrapped and 
bundled.
    Ms. Christensen. That would be Universal.
    Mr. Weiner. I am sorry. Aren't you just one monolithic kind 
of--Universal. This is a case that Universal brought kind of 
packaged, and it was someone who with the technology developed 
by the industry was able to track it down. Isn't this--I mean, 
why don't we have more of these cases when it is just so 
rampant on the Internet?
    Putting aside the international needlepoint issue also that 
has been called to our attention, why is it that the fact that 
there was a prosecution supposed to give us such great--I mean, 
why are we supposed to be here cheering so loud? It is amazing 
that there aren't--you could literally, if you wanted to, 
probably initiate another one every single day, quite easily.
    Ms. Monroe. We do currently have undercover operations that 
are addressing this specifically that will be prosecuted.
    Mr. Weiner. Okay. Is there any effort made, when these 
things are discovered by your team or anyone else, to do some 
kind of notice to the people who are selling them or sharing 
them that this is illegal?
    Ms. Monroe. That is what we are working on currently with 
private industry and with our own agency.
    Mr. Weiner. On having a seal for the industry to do. I am 
asking--I guess my frustration here is, frankly, there is 
absolutely no deterrent value right now to the effort of law 
enforcement. I think Ms. Skinner alluded to it. I mean, you can 
just intuitively--we have laptops here that might be on ``Live 
Fire'' or something. You could probably be doing it right now, 
be downloading a movie. I mean, there is really just no--there 
is no disincentive, because the Government seems to not be 
taking this very seriously.
    Can you give me just numerically, generally, if you had to 
say, since there are thousands of these things that go on every 
day, are there dozens of prosecutions, dozens of investigations 
going on, hundreds, thousands? I mean, give me a sense for how 
likely it is that someone who is currently uploading a stolen 
print of Sea Biscuit, that they are going to get caught. I 
mean, is it--are there that many investigations going on right 
now?
    Ms. Monroe. We address all the investigations that we are 
capable of investigating with the manpower resources that we 
have. But we do take this extremely seriously, and like I had 
mentioned previously, that is why we have created the Cyber 
Division to address these instances in each one of our field 
offices.
    Mr. Weiner. Okay. Thank you.
    Mr. Smith. Thank you, Mr. Weiner.
    Let me make sure no other Members have arrived. And if not, 
I can thank our witnesses again for their testimony.
    I started to say a minute ago that we expect to mark up 
this bill next week, and so your testimony is timely and we 
will take to heart suggestions that you have made and 
suggestions that we have received from others as well.
    Thank you again. And we stand adjourned.
    [Whereupon, at 3:10 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Bob Goodlatte, a Representative in 
                  Congress From the State of Virginia
    Thank you, Mr. Chairman, for holding this hearing on this important 
legislation to combat copyright piracy.
    Article I Section 8 of our Constitution lays the framework for our 
nation's copyright and patent laws. It grants Congress the power to 
award inventors and creators, for limited amounts of time, exclusive 
rights to their inventions and works. The Framers realized that this 
type of incentive was crucial to ensure that America would become the 
world's leader in innovation and creativity.
    These incentives are just as important today as they were at the 
founding of our country. As we continue our journey into the digital 
age, we must be sure to continue to reward our innovators and creators 
with the exclusive rights to their works for limited periods of time. 
This incentive is still necessary to maintain America's position as the 
world leader in innovation.
    However, the proliferation of copyright piracy in America is 
growing and is threatening to undermine the very copyright protections 
the Framers envisioned.
    One area that is of particular concern is piracy via the Internet 
and peer-to-peer networks. When used properly, the Internet and peer-
to-peer networks can provide users with incredible access to vast 
amounts of information in the public domain. When used improperly, they 
can be used as a tool by millions to steal music, movies and other 
copyrighted works. Thieves can easily abuse the access that the 
Internet provides to such vast amounts of copyrighted material to 
commit the kind of widespread theft that could potentially devastate 
huge sectors of our economy and ruin the Constitutional incentives for 
innovators to create new works and products.
    Efforts must begin now to deter these thefts and to educate the 
public about the repercussions of copyright theft. Copyright owners are 
beginning to step up efforts to enforce their rights by deciding to 
bring actions against individuals for copyright infringement. While 
these aggressive tactics may help, any attempt to end widespread 
copyright theft must include equipping federal law enforcement with the 
tools they need to prosecute these criminal acts, as well as increased 
public education of the effects of copyright theft.
    Although on-line copyright piracy is on the rise, federal law 
enforcement efforts to investigate and prosecute those crimes have not 
kept up to speed with the piracy. Strapped by insufficient funding and 
training, these federal law enforcement agencies need additional 
resources to combat intellectual property crimes.
    H.R. 2517, the Piracy Deterrence and Education Act of 2003, is a 
commonsense bill that gives federal law enforcement the tools it needs 
to prosecute intellectual property crimes. The bill also includes 
provisions designed to facilitate public education about the 
devastating effects of copyright crimes. Specifically, the bill (1) 
requires the FBI to create a deterrence program that prevents online 
piracy, (2) encourages information sharing among law enforcement, 
Internet Service Providers, and copyright owners, (3) requires that the 
DOJ specifically dedicate one agent within each Computer Hacking and 
Intellectual Property Unit to investigate intellectual property theft, 
and (4) establishes a program within the Office of the Attorney General 
to educate the public about copyright law, privacy, and security with 
respect to Internet use.
    I believe that H.R. 2517 is an important step in the fight against 
copyright piracy and I look forward to the testimony of the witnesses 
today on this important legislation.A
 Prepared Statement of the Honorable Zoe Lofgren, a Representative in 
                 Congress From the State of California
    We are here once again to discuss ways to deter and punish Internet 
piracy. Online piracy is indeed a threat to America's copyright owners, 
and I'm glad that this Congress is taking the issue seriously.
    But I am becoming increasingly dismayed by the fact that this 
Subcommittee only examines digital issues from one perspective. We have 
had numerous hearings this year on how online piracy affects content 
owners. Today, we are having yet another one, with four witnesses who 
seemingly support the bill we are considering. Among them, we have a 
witness from Universal Studios, who will no doubt tell us of the 
devastating effect that online piracy is having on movie studios. But 
according to statistics I've seen, yearly domestic box office gross has 
increased every year since 1992, including an 8.6% increase last year 
to over $9 billion dollars.
    If you want to see an industry in turmoil, don't look to the movie 
industry, look to the technology industry. Unemployment in Silicon 
Valley is now 8.5%. One-third of households in Silicon Valley have 
experienced a layoff since January 2001. Consumer confidence and 
investment are down. It is not a recession in the tech world, it is a 
depression.
    I do not make this point to downplay the piracy issue, nor to 
suggest that the content industry is not suffering from online piracy. 
My point is that this Subcommittee should examine digital issues from 
all sides, not focus solely on how they affect copyright owners. We 
should look at how our laws affect the technology industry. We should 
examine whether or not the DMCA is chilling investment and innovation.
    My bill, H.R. 1066, the BALANCE Act, which is supported by my 
Judiciary colleagues Rick Boucher and Chris Cannon, seeks to address 
some of these issues. I hope this Subcommittee will hold a hearing on 
this legislation soon, or at the very least look at how laws under our 
jurisdiction affect the technology industry, as well as Hollywood.

                              ----------                              

       Prepared Statement of the American Free Trade Association
    This testimony is offered on behalf of the American Free Trade 
Association (AFTA). The American Free Trade Association is a not-for-
profit trade association of independent American importers, 
distributors, retailers and wholesalers, dedicated to preservation of 
the parallel market to assure competitive pricing and distribution of 
genuine and legitimate brand-name goods for American consumers. The 
parallel market embraces a broad range of products but AFTA's members 
have historically been involved in sale and distribution of fragrances, 
colognes, health and beauty aids (e.g. shampoo, soap, etc.).
    AFTA has been an active advocate of parallel market interests for 
nearly twenty years. It has appeared as amicus curiae in the two 
leading Supreme court cases affirming the legality of parallel market 
trade under the federal trademark, customs and copyright acts (the 1985 
Kmart case and the 1998 Quality King case) and in numerous lower court 
decisions.
                            summary position
    AFTA is concerned by Section 6 of H.R. 2517, which would expand the 
authority of Customs officials to seize genuine articles at U.S. Ports 
of Entry on behalf of U.S. copyright owners to circumstances in which 
the copyright owner has neither recorded its federal registration with 
the Bureau of Customs and Border Protection (CBP) nor, in fact, even 
registered its copyrighted material with the U.S. Copyright Office. By 
removing both of these pre-requisites for border enforcement of 
intellectual property rights, H.R. 2517 eliminates the ability of 
importers and international traders to determine what may or may not be 
permitted entry into the United States and facilitates monopolistic 
control over U.S. distribution and pricing of authentic merchandise by 
U.S. manufacturers alleging to own exclusive rights in intellectual 
property for which there has been no objective determination as to 
copyrightability.
                           general discussion
I.  Any tangible expression of an idea may be copyrightable--whether or 
        not the product itself is eligible for such protection.]
    AFTA members understand that the genesis for H.R. 2517's border 
enforcement provision may be legitimate concerns expressed by the 
entertainment industry about the rise in ``bootleg'' motion pictures. 
However, there is nothing in the existing language which would limit 
the scope of products for which CBP will have this expanded statutory 
seizure authority for alleged infringement of unregistered and 
unrecorded U.S. copyrights. Accordingly, labels on cosmetic bottles 
would be subject to this legislation to the same extent as proprietary 
software; perfume packaging would be as risky an import as unauthorized 
copies of first-run movies. As drafted, Section 6 of H.R. 2517 would, 
without cause, reason or purpose, apply equally to hair barrette 
packaging and unauthorized reproductions of not-yet released 
phonorecords.
    AFTA does not suggest that a mere limitation in scope would be 
sufficient to otherwise remedy its overall concern about elimination of 
the requirement that intellectual property owners invest in at least 
federal copyright registration and recordation in order to enjoy the 
benefits of border enforcement of their private rights by government 
employees. Fair notice to legitimate importers and exporters to avoid 
restricted goods, or to challenge inappropriate claims for restriction, 
must be preserved.
II.  Although federal copyright registration is not a requirement under 
        U.S. law, because it serves the purpose of creating a public 
        record of enforceable IP rights, the U.S. Copyright Act does 
        expressly encourage and reward such federal copyright 
        registration.
    Following is text found in the U.S. Copyright Office's publication 
entitled ``Copyright Basics'' which describes the benefits of federal 
copyright registration (http://www.copyright.gov/circs/circ1.html):
    Even though registration is not a requirement for protection, the 
copyright law provides several inducements or advantages to encourage 
copyright owners to make registration. Among these advantages are the 
following:

          Registration establishes a public record of the 
        copyright claim.

          Before an infringement suit may be filed in court, 
        registration is necessary for works of U. S. origin.

          If made before or within 5 years of publication, 
        registration will establish prima facie evidence in court of 
        the validity of the copyright and of the facts stated in the 
        certificate.

          If registration is made within 3 months after 
        publication of the work or prior to an infringement of the 
        work, statutory damages and attorney's fees will be available 
        to the copyright owner in court actions. Otherwise, only an 
        award of actual damages and profits is available to the 
        copyright owner.

          Registration allows the owner of the copyright to 
        record the registration with the U. S. Customs Service for 
        protection against the importation of infringing copies.

    It is clear that while federal copyright registration is not 
required, it is encouraged. As a type of ``trade-off'' for voluntarily 
creating a public record of enforceable rights, which the U.S. 
Copyright Office makes available to any party interested in researching 
existing U.S. copyrights, the federal copyright registration holder is 
provided with the ability to file an infringement action, recover 
increased damages for infringement and has the right to record its 
copyright registration with U.S. Customs.
    The U.S. Copyright Office recognizes the value of the public record 
for purposes of fair trade, fair use and free circulation of 
copyrighted materials. The U.S. Copyright Office also realizes that 
border enforcement is a privilege reserved only for those copyright 
owners committed to those same ideals. H.R. 2517, however, by 
statutorily removing such incentives for U.S. copyright registration, 
creates no obligation on U.S. intellectual property owners to 
facilitate a competitive marketplace for the benefit of lawful traders 
or American consumers. Moreover, H.R. 2517 eliminates any such public 
record of enforceable U.S. copyrights making such enforcement 
arbitrary, capricious and, in and of itself, a type of non-tariff trade 
barrier.
III.  Without copyright registration, there is no means to verify a 
        copyrightable property and border enforcement of U.S. 
        intellectual property rights becomes solely a measure to 
        territorially control and monopolize product distribution.
    While anything may be claimed to be copyrighted upon creation even 
without federal copyright registration, it is only through the process 
of securing federal copyright registration that any determination as to 
enforceable rights under U.S. Copyright law is determined. This is 
because while a claim to copyright may be automatic, copyright 
registration (and, as a result its concomitant benefits and rewards) is 
not a foregone conclusion upon the mere filing of an application.

        A) Copyright protection is not available to ideas, or 
        information without original content or creation nor does it 
        extend to useful articles. Section 102 of the U.S. Copyright 
        Law specifically provides the following:

                (b) In no case does copyright protection for an 
                original work of authorship extend to any idea, 
                procedure, process, system, method of operation, 
                concept, principle, or discovery, regardless of the 
                form in which it is described, explained, illustrated, 
                or embodied in such work.

        B) At the time of application, the Registrar of Copyrights 
        determines copyrightability. Section 407 of the U.S. Copyright 
        Law provides the following:

                (a) When, after examination, the Register of Copyrights 
                determines that, in accordance with the provisions of 
                this title, the material deposited constitutes 
                copyrightable subject matter and that the other legal 
                and formal requirements of this title have been met, 
                the Register shall register the claim and issue to the 
                applicant a certificate of registration under the seal 
                of the Copyright Office. The certificate shall contain 
                the information given in the application, together with 
                the number and effective date of the registration.

                (b) In any case in which the Register of Copyrights 
                determines that, in accordance with the provisions of 
                this title, the material deposited does not constitute 
                copyrightable subject matter or that the claim is 
                invalid for any other reason, the Register shall refuse 
                registration and shall notify the applicant in writing 
                of the reasons for such refusal.

    Should CBP be permitted to deny importation to products for 
purported violation of U.S. copyright laws without requiring an 
underlying federal copyright registration, CBP will be eliminating 
examination to determine whether any enforceable rights exist. U.S. 
Copyright law provides that federal registration is only granted once 
such an examination has been successfully completed and, without 
federal registration, there is, under existing U.S. law, no ability to 
record a copyright with CBP. To contradict this long-standing U.S. law 
by incorporating in H.R. 2517 a provision doing away with both 
registration and recordation is, at least, of great concern.
                           concluding remarks
    AFTA recognizes the importance of legislation seeking to eliminate 
digital fraud and piracy and, for this reason, requests that Section 6 
of H.R. 2517 be eliminated entirely as a controversial measure that 
must be reconsidered in light of existing U.S. Copyright law and free 
trade objectives. H.R. 2517 was introduced on June 19, 2003 with no 
publication or hearing on its Section 6--a provision that would 
compromise the tenets of long-standing U.S. copyright law and that will 
have a chilling effect on free circulation of articles which 
purportedly are copyright-protected. In this short time, AFTA has not 
been able to consult sufficiently with its members and others operating 
within the parallel marketplace to provide substantive solutions to its 
obvious deficiencies.
    AFTA does, however, look forward to working with the initial 
sponsors and co-sponsors of this legislation on finding a solution to 
the problems and concerns giving rise to Section 6, while not 
prejudicing the legitimate business operations of AFTA's members and 
others within the importing community. If the legislation is to move 
ahead at this point, we urge elimination of the language in H.R. 2517 
in Section 6 for the reason that it would erect a barrier to free 
trade, would eliminate incentives for U.S. copyright registration and 
would encourage CBP's resources to be used for enforcement of 
intellectual property rights that may not even be enforceable under 
U.S. law and would go well beyond the purpose of the legislation.
    Thank you for the opportunity to provide this testimony to the 
Subcommittee.

                              ----------                              

                 Prepared Statement of Gary J. Shapiro
    Since January 17, 1984, it has been settled law that consumers are 
protected by an aura of quiet enjoyment in their use of home 
entertainment technology. On that date, the U.S. Supreme Court found 
that unauthorized recording of an entire audiovisual work may be a 
``fair use,'' and held that a product with a substantial or 
commercially significant non-infringing use may be lawfully distributed 
to consumers.\1\ The Home Recording Rights Coalition (HRRC) hopes that, 
as we approach the 20th anniversary of this decision, the personal 
freedoms it recognized will not be chilled out of reaction to further 
technical advances.
---------------------------------------------------------------------------
    \1\ Sony Corporation of America v. Universal City Studios, 464 U.S. 
417 (1984)--the ``Betamax'' case.
---------------------------------------------------------------------------
    HRRC was founded in October, 1981, when personal use of new 
technology had been cast into doubt by a decision declaring the sale of 
consumer video recorders to be illegal. Originally, a consumer and a 
retailer had been sued along with the device manufacturer. However, 
editorials and editorial cartoons gave such emphasis to the prospect of 
civil and criminal action against ordinary consumers and their children 
that these defendants were dropped. It is now a cliche to point out how 
severely some in the entertainment industry and in the Congress reacted 
to home video and audio recording, and that the consumer electronics 
devices that enable such recording have served as foundations for new 
and enormous content industries. Yet when these industries face 
challenges from even newer technology, the risk of over-reaction 
emerges again.
    The bill being considered today, H.R. 2517, would engage our 
criminal, law enforcement, and border processes in areas that may 
intrude into ordinary consumer conduct:

          It suggests that all unauthorized consumer copies of 
        copyrighted works are infringing;

          It would involve the Federal Bureau of Investigation 
        in development of a program to ``deter'' certain consumer 
        conduct, including unauthorized home recording;

          It would tie up investigational resources, now 
        addressed to serious ``computer hacking'' crimes, with 
        activities that may involve simple consumer home recording;

          It would establish an Education Program within the 
        Office of the Associate Attorney General;

          It would remove registration and recordation 
        requirements with respect to criminal and border enforcement; 
        and

          It would authorize routine use of the FBI Seal on 
        designated copyrighted works (but not on others).

    HRRC must oppose this legislation. We urge further study of these 
proposals. We have strong concerns over any legislation that would 
shrink the aura of personal privacy and security that attaches to home 
use.
    The Internet ties homes and institutions together in some ways that 
are clearly positive and some that are seen as threatening to content 
owners. It is tempting to chill, constrain or even criminalize all ties 
and practices that are considered potentially threatening. But to do so 
would be just as short-sighted as it would have been to outlaw consumer 
tape recorders in 1984.
    First, H.R. 2517 should not brand all unauthorized consumer home 
recording as criminal, or as a copyright infringement, merely because 
the content is obtained ``from the Internet.'' 17 U.S.C. Sec. 107 
assures that certain unauthorized ``fair uses'' of content do not 
constitute copyright infringement, and provides for no exception 
according to source. Indeed, just this week, it was announced that the 
largest Internet Service Provider, which is closely affiliated with a 
major motion picture studio, would facilitate home recording via the 
scheduling information it carries on its service.\2\
---------------------------------------------------------------------------
    \2\ ``TiVo Offers Remote TV Programming to AOL Users,'' Reuters, 
July 14, 2003.
---------------------------------------------------------------------------
    Second, whether the content is from the Internet or otherwise, the 
FBI should not be involved in gathering data on private home recording 
practices of individuals. Federal law prohibits as an invasion of 
privacy the disclosure of data about video rental transactions,\3\ 
which depend for their legality on 17 U.S.C. Sec. 109--another 
exception to general copyright principles. Private noncommercial home 
recording protected by Section 107 is no less lawful than the rental 
transactions protected by Section 109; consumers engaging in this 
practice are entitled to the same measure of consumer privacy. 
Moreover, the ``sharing'' of information on consumer practices, among 
law enforcement agencies and private groups, as also provided for in 
Section 3, has the potential to aggravate privacy abuses with respect 
to lawful behavior.
---------------------------------------------------------------------------
    \3\ See Video Privacy Protection Act, 18 U.S.C. Sec. 2710.
---------------------------------------------------------------------------
    Nor should the FBI or other law enforcement agencies be involved in 
issuing ``warnings'' to consumers about activity that may in fact be 
entirely legal. In HRRC's view this would raise constitutional issues. 
Many such cease and desist ``warnings'' issued in the private sector 
have turned out to be erroneous. Moreover, a new ``deterrence'' 
responsibility would detract from the FBI's traditional roles of 
investigation and law enforcement. Only in the context of national 
security has such a diversion of resources been made.
    Third, HRRC is concerned about the requirement in sec. 4 that 
intellectual property specialists be attached to any unit responsible 
for investigating computer ``hacking.'' A mandatory, administrative tie 
between ordinary consumer practices--or even ordinary piracy--and 
``hacking'' may do justice to neither issue. While content providers 
have been taking steps to improve the security of their theatrical 
editing, distribution, and screening practices, it is widely 
acknowledged that purloining films and distributing them illegally 
commonly does not involve ``hacking'' or, indeed, the circumvention of 
any technical measure. Rather, unprotected copies emerge from the 
distribution chain or from early or overseas theatrical display.
    Even when these vulnerabilities have been addressed through better 
electronic and physical security, it is difficult to see how adding 
specialists in intellectual property crimes to ``hacking'' units will 
improve their efficiency. The protective measures used in the 
entertainment industry are likely to be proprietary and best enforced 
by commercial entities. Any productive use of ``hacking'' resources 
would likely involve a sharing of proprietary ``keys'' and other 
commercial secrets with the government investigators. This would pose 
long term threats both to the content and to the willingness of others 
to rely on these proprietary technologies.
    Fourth, while HRRC has great respect for the Office of the 
Associate Attorney General, we do not believe that law enforcement 
authorities should take the lead in any public education campaign where 
so much of the conduct involved is, in fact, legal. The requisite 
balancing, line-drawing, and recognition of lawful practices involved 
in any appropriate campaign could compromise the ability of the Justice 
Department to prosecute cases in circumstances where it believes such 
prosecution is warranted. DOJ cannot be both arbiter and advocate. 
Either the ``educational'' or the advocacy function of the Justice 
Department would have to be compromised.
    Fifth, in light of the fact that fair use is recognized by both the 
U.S. Code and the Supreme Court, HRRC strongly opposes the notion that 
the FBI Seal be routinely used on content, for the purpose of 
intimidating consumers. Moreover, U.S. law provides that all writings 
are copyrighted when fixed, but the bill would make the seal available 
only for selected writings. It would be grossly discriminatory and 
probably unconstitutional, as a violation of free commercial speech, 
for the Attorney General to award such status only to some writings, 
but not to others, as the bill contemplates. Yet surely the Congress 
would not want the FBI Seal awarded to all writings occurring within 
U.S. borders.
    Finally, HRRC believes that evidence should be adduced as to why 
the registration prerequisite for a criminal copyright case should be 
less than that for a civil case, and as to the need to eliminate 
existing registration and recordation preconditions to border 
enforcement. HRRC, however, agrees that enforcement against commercial 
piracy, at the border and otherwise, is an important law enforcement 
activity and should receive appropriate resources and legal tools.
                                 ______
                                 
    The Home Recording Rights Coalition appreciates this opportunity to 
submit its views. As we have for more than two decades, we look forward 
to cooperating with the Subcommittee and the Committee to help achieve 
a proper balance between public and proprietor interests in copyright.
                   Prepared Statement of Susan Poole














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