[Senate Hearing 111-847]
[From the U.S. Government Publishing Office]
S. Hrg. 111-847
OVERSIGHT OF THE OFFICE OF THE INTELLECTUAL PROPERTY ENFORCEMENT
COORDINATOR
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JUNE 23, 2010
__________
Serial No. J-111-99
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa
ARLEN SPECTER, Pennsylvania JON KYL, Arizona
CHARLES E. SCHUMER, New York LINDSEY GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland TOM COBURN, Oklahoma
SHELDON WHITEHOUSE, Rhode Island
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
AL FRANKEN, Minnesota
Bruce A. Cohen, Chief Counsel and Staff Director
Matt Miner, Republican Chief Counsel
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
prepared statement........................................... 184
WITNESSES
Almeida, Paul E., President, Department for Professional
Employees, AFL-CIO, Washington, DC............................. 20
Bienstock, Caroline, President and Chief Executive Office, Carlin
America, New York, New York.................................... 25
Espinel, Victoria A., Intellectual Property Enforcement
Coordinator, Office of Management and Budget, Washington, DC... 3
Hirschmann, David, President and Chief Executive Office, Global
Intellectual Property Center, U.S. Chamber of Commerce,
Washington, DC................................................. 22
Meyer, Barry M., Chairman and Chief Executive Office, Warner
Brothers Entertainment, Inc., Burbank, California.............. 17
QUESTIONS AND ANSWERS
Responses of Paul E. Almeida to questions submitted by Senators
Coburn and Grassley............................................ 36
Responses of Victoria A. Espinel and Caroline Bienstock to
questions submitted by Senators Coburn, Grassley and Hatch..... 41
Responses of David Hirschmann to questions submitted by Senators
Coburn and Grassley............................................ 77
Responses of Barry M. Meyer to questions submitted by Senators
Coburn and Grassley............................................ 84
SUBMISSIONS FOR THE RECORD
Almeida, Paul E., President, Department for Professional
Employees, AFL-CIO, Washington, DC, statement.................. 88
Bienstock, Caroline, President and Chief Executive Office, Carlin
America, New York, New York, statement......................... 97
Copyright Alliance, Patrick Ross, Executive Director, Washington,
DC, letter..................................................... 108
March 24, 2010, letter....................................... 110
Report....................................................... 133
Espinel, Victoria A., Intellectual Property Enforcement
Coordinator, Office of Management and Budget, Washington, DC,
statement...................................................... 170
Hirschmann, David, President and Chief Executive Office, Global
Intellectual Property Center, U.S. Chamber of Commerce,
Washington, DC, statement...................................... 175
Meyer, Barry M., Chairman and Chief Executive Office, Warner
Brothers Entertainment, Inc., Burbank, California, statement... 186
Yates, James M., Missouri, statement............................. 196
OVERSIGHT OF THE OFFICE OF THE INTELLECTUAL PROPERTY ENFORCEMENT
COORDINATOR
----------
WEDNESDAY, JUNE 23, 2010
U.S. Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:05 a.m., Room
SD-226, Dirksen Senate Office Building, Hon. Patrick J. Leahy,
Chairman of the Committee, presiding.
Present: Senators Whitehouse, Klobuchar, Franken, Hatch,
Grassley, and Coburn.
OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
THE STATE OF VERMONT
Chairman Leahy. There are many things going on on the Hill,
but this whole area of intellectual property is one of great
concern not only to me, but to many here. Intellectual property
fuels the American economy and creates jobs.
The Chamber of Commerce estimates that American
intellectual property accounts for more than $5 trillion. IP-
intensive industries employ more than 18 million workers, many
of them in my own State of Vermont.
Just as intellectual property is crucial to our economy,
counterfeiting and piracy of that American intellectual
property slows our growth. We recognize the value and
importance of IP throughout our Nation's history.
It is actually included in our Constitution; a strong, but
balanced system for protecting intellectual property is not
uniquely a Democratic or Republican priority. It is something
that joins both parties.
The pro-IP bill enacted last Congress was co-sponsored by
22 Senators, 11 Democrats, 11 Republicans, and it passed the
Senate unanimously. Patent reform legislation is another
shining example of our bipartisan work in this area.
Along with Senators Hatch, Sessions and Kyl, we forged
bipartisan consensus, legislation to improve the economy and
create jobs and not add to the deficit. It shows what we can do
when we work together.
Today's hearing is the first oversight hearing with the
Intellectual Property Enforcement Coordinator. It is her first
appearance before this panel since her confirmation hearing
before this Committee last November. And we welcome Victoria
Espinel back to the Committee to discuss the joint strategic
plan for intellectual property enforcement.
She testified here in her confirmation hearing, got a
unanimous vote out of the Judiciary Committee, and was
confirmed unanimously on the floor of the Senate.
Congress created the IP enforcement coordinator position in
response to concerns of numerous agencies within the government
sharing responsibility for protecting intellectual property who
were not sharing information and coordinating as well as they
should.
In order to enforce the laws, we have to have it as
efficient and effective as possible. And intellectual property
crime takes so many different areas. It could be a counterfeit,
an inferior semiconductor that then finds its way into one of
our military aircraft.
It could be the counterfeit and unsafe pharmaceutical
products used to treat an illness, pirated software. Mob-run
Cyberlockers subscription service has stolen American movies,
as Reuters reported just yesterday.
In all these forms, it hurts our economy, results in the
loss of hundreds of thousands of jobs, and billions in tax
revenues. But it can also put our health and safety in jeopardy
here in this country and put the health and safety of our
troops fighting abroad in jeopardy.
So the first important task for the enforcement coordinator
was to create a joint strategic plan, and I applaud Ms. Espinel
for the way she has worked on that and the openness of it.
I am concerned that increasingly the Internet is being used
to steal intellectual property from books and journal articles,
software, movies, music. This is no longer an emerging
nuisance, but a very real threat to our economy.
The AFL-CIO recently cited studies estimating that digital
theft of just movies and music cost more than 200,000 jobs.
That is unacceptable under any economic climate, and it is
devastating today.
So I wish to work with Senator Hatch, Senator Whitehouse
and others on legislation that is going to target those that
profit directly from taking American property.
I thank Ms. Espinel for appearing before the committee. And
something we normally do not do in this committee, if there is
good news to report from the U.S.-Algeria World Cup match, I
will report it.
[Laughter.]
Chairman Leahy. I have been on this Committee for a third
of a century and I think that is the first time such an
announcement has been made.
Ms. Espinel, of course, had previously served as the
Assistant U.S. Trade Representative for Intellectual Property.
She was chief trade negotiator for the United States on
intellectual property issues.
She received her undergraduate and law degrees from
Georgetown. Those of us who got law degrees from Georgetown
appreciate. She has a master of laws degree from the London
School of Economics.
[The prepared statement of Chairman Leahy appears as a
submission for the record.]
Chairman Leahy. Ms. Espinel, please go ahead.
STATEMENT OF HON. VICTORIA A. ESPINEL, INTELLECTUAL PROPERTY
ENFORCEMENT COORDINATOR, OFFICE OF MANAGEMENT AND BUDGET,
WASHINGTON, DC
Ms. Espinel. Thank you. Chairman Leahy, members of the
Judiciary Committee, thank you for your continued leadership on
this important issue.
I sit here today humbled by my recent confirmation and
service to the President as the first Intellectual Property
Enforcement Coordinator on a vital issue facing American
businesses and American consumers in the 21st century.
Congress created my office in an important first step at
reform, and the response has been overwhelmingly supportive. I
feel privileged to have the opportunity to work with you on
this effort.
Congress tasked the Administration with developing and
implementing a U.S. Government strategy to tackle a wide range
of problems associated with intellectual property enforcement,
and today I am pleased to present you with that strategy.
This first strategy reflects the hard work of and
coordination between numerous U.S. Government agencies,
including many dedicated public servants and law enforcement
officials, the public, the private sector, and my small, but
hardworking team. But the release of this strategy marks the
commencement of a long process, and much hard work lies ahead.
Our country needs America's ingenuity now more than ever.
It is America's innovation that drives our economy and keeps
our people working, and that makes our enforcement efforts all
the more critical.
In this strategy, we have attempted to capture the most
significant issues that require immediate attention. We will be
targeting counterfeiters and pirates, not those engaged in
legal and legitimate activities. Increased coordination,
cooperation, and prioritization must accompany this first step;
and, legislative action may be required in order to fulfill our
goals.
The United States has always been a global leader in
developing new technologies. We lead the way in bringing new
pharmaceuticals to consumers, inventing tires that keep
families safe on the road, developing environmentally conscious
technologies, creating innovative software, and producing
films, music and games that are craved by consumers around the
world.
However, our leadership in the development of innovative
technology and creative works also makes us a global target for
theft. Counterfeiting and piracy affects a vast range of
businesses and industry sectors. As part of our efforts to
develop the strategic plan, we asked the public for input so
that we could understand directly their concerns, and we
received over 1,600 responses. My office reviewed all of those
responses and posted them all on our Website.
I also met with companies across a broad range of America's
industries, as well as unions, academics, and consumer groups,
to engage them about where the problems in intellectual
property enforcement lie and to find out what we can do to make
things better for the many Americans and American industries
that depend on intellectual property for their success. This
strategy reflects the recommendations that came from the
public.
I want to emphasize that the development of this strategy
was an interagency collaboration. The Department of Justice,
Homeland Security, Commerce, USTR, HHS, State and others all
worked tirelessly to make this an excellent and forward-leaning
strategy.
The overarching mission is to ensure that all of the
agencies that have a hand in enforcing intellectual property
are working together in a coordinated fashion and in a manner
that is consistent with the priorities of this Administration.
With increased cooperation and coordination, this plan has
the ability to alter our approach to enforcement for the better
for many years to come. To do so, we are taking some bold new
steps and we look forward to working with you.
Just to highlight a few items. The U.S. Government will
launch an initiative to collect and analyze data to determine
the jobs and the exports that are generated by the intellectual
property industries.
We will also collect data on the resources that we spend on
intellectual property enforcement to make sure that we are
using those resources as efficiently as possible. This
information will be valuable to better inform our approach for
years to come.
We will lead by example. We are establishing a
governmentwide procurement working group which will prepare
recommendations on how to reduce the risk of the purchase of
counterfeit products. We will also review our policies and
practices to promote the legal use of software by those who are
doing business with the U.S. Government.
This Administration is strongly committed to transparency
in our policymaking. Both the process through which the
strategy was developed and the substance of the strategy
reflect that. We will increase information-sharing with right-
holders. We will work to ensure that victims of crime and the
public are appropriately informed of our activities.
In order to reduce duplication and waste, we will ensure
that Federal agencies are coordinating, cooperating, and
offering broad participation on this issue. We will improve the
effectiveness of our personnel that are overseas to combat
intellectual property infringement. We will strive to station
those personnel in the countries of top concern, and we will
improve coordination of our capacity and training so that the
foreign governments have the tools necessary to strengthen
enforcement on their own.
We will work with foreign governments to increase foreign
law enforcement efforts, and we will promote enforcement of our
rights through our trade policy tools, such as trade agreements
and the special 301.
We are establishing a counterfeit pharmaceutical
interagency Committee to examine the numerous problems
associated with unlicensed Internet pharmacies, health and
safety risks in the United States due to the distribution of
counterfeit pharmaceuticals, and the proliferation of
counterfeit drugs abroad.
To further guard against counterfeit drugs, we will
increase our enforcement efforts in cooperation with relevant
agencies, including Customs, the Food and Drug Administration,
and DEA.
In order to reduce counterfeit goods coming into our supply
chain, we want to encourage voluntary disclosure; to encourage
importers to come forward when they learn that counterfeit
drugs have infiltrated their supply chain without their
knowledge.
We also need to facilitate cooperation to reduce
infringement occurring over the Internet. It is important for
the private sector to work together to find practical and
efficient solutions to the problems on their own.
In the meantime, we will be, also, exploring alternative
measures to reduce piracy online. For example, we will go after
foreign-based Websites and Web services that violate our
intellectual property rights using a combination of tools,
including law enforcement, diplomatic measures, and
coordination with the private sector.
We will also conduct a comprehensive review of our laws to
determine if there are deficiencies that are hindering our
enforcement efforts and to make sure that we are addressing
those deficiencies.
Finally, we will undertake a comprehensive review of our
efforts to support our businesses, big and small, when they are
navigating in overseas markets, including in China.
I have stated some ambitious goals. This Committee has been
steadfast in its fight for justice for the American people. I
commend your leadership on these issues, and I look forward to
working closely with this Committee in the coming months on
improving our enforcement efforts here and abroad.
Thank you very much.
[The prepared statement of Ms. Espinel appears as a
submission for the record.]
Chairman Leahy. I believe in balanced copyright laws. The
same day the Senate passed the Pro-IP Act, the Senate also
passed legislation that Senator Hatch and I had to make it
easier to use orphan works.
When I look at online piracy, the criminal enterprises are
stealing full-length feature movies made in the U.S., and then
that money is being used to fund other criminal activity.
Organized crime used to be involved in things like bootleg
liquor and that generations ago. Now, they are involved in
these things.
Will you work with us on legislation that we can enact to
allow us to shut down these kinds of Websites that are being
used by organized crime?
Ms. Espinel. Yes. This is an issue of great concern to us
and we would look forward to working with you on such
legislation.
Chairman Leahy. Now, one of the concerns we had and one of
the reasons why, again, several on this committee, in both
parties, wanted to do this coordination, is that, we were
afraid that some of the actions that should be taken were not
being taken, because there was not good enough coordination
among the various agencies.
Are you finding you are able to bring these agencies
together or are you finding resistance? And be frank.
Ms. Espinel. Thank you, Senator. I have found, in the
process of putting together this strategy, that there has been
a tremendous amount of coordination and excellent input from
the agencies.
I really want to underscore actually how committed the
agencies have been to this process. We worked very, very
closely with many of them, including the Department of Justice,
Homeland Security, Commerce, the USTR, State, HHS, and they
have worked very closely and collaboratively with us to make
this strategy as strong as possible.
There are a number of things in the strategy that go to
exactly the issue that you raised. I will highlight just a few,
but we have committed to increase coordination of our domestic
law enforcement agencies to make sure that they are working
together as well as possible, including increased information-
sharing.
Chairman Leahy. If I could just go on that a bit. That
coordination, the local law enforcement, there are a lot of
things they could do if they had the tools, the expertise, and
the coordination; am I correct?
Ms. Espinel. Yes, you are correct. And, in fact, there are
items in the strategy that go to that issue very directly;
coordination with our state and local law enforcement, so that
we can maximize the resources that we have and help support the
Federal law enforcement efforts that we have ongoing.
We also want to make sure that our personnel that are
stationed overseas are well coordinated both in country, so
they are working together well as teams in country, and that
they are getting good, clear guidance and priorities from the
Administration back at home.
We have committed to make sure that our training efforts
are coordinated; that we are focusing on the countries of most
concern. We are also establishing four new working groups. So
in addition to the interagency Committee that we have created
on intellectual property enforcement, we will be creating four
new working groups on government procurement, counterfeit
pharmaceuticals, economic analysis, and our international
capacity-building and training efforts.
Chairman Leahy. One of the things I am very concerned
about--I am trying to say this based on just what has been in
the press, obviously. If there is a closed session--and I am
sure you have seen some of the classified material on it.
But if we are having counterfeit microchips and other
materials in our Department of Defense chain or acquisition
chain, I worry what that might do to our men and women who are
on the front lines, and we are in two wars, and we have other
responsibilities around the world.
Is that something that you and the Department of Defense
are looking at?
Ms. Espinel. Yes, Senator. We share your concern. Selling
counterfeit products to our military is reprehensible and must
be stopped. We are working with the Department of Defense, as
well as other relevant agencies to address this problem.
Chairman Leahy. Well, I think it is safe to say that if you
need help from this Committee or any other Committee on that,
you will get strong bipartisan help.
Ms. Espinel. Thank you.
Chairman Leahy. Then, last, you raised the issue of IP
theft and international organized crime. The Attorney General
has stressed that.
Is this a priority in trying to coordinate between Homeland
Security and Department of Justice? I know you have referred to
this already in your department, because if organized crime
gets their hands into this, we have a real, real problem.
Ms. Espinel. We share that concern, as well. We are
concerned that this type of activity is very attractive to
organized crime, because the profit margins are high and the
risk is low.
I think many of the things that we are doing in the
strategy, including the increased coordination efforts that I
mentioned, will help us better target all types of intellectual
property crime, including those that are linked to organized
crime.
Chairman Leahy. Thank you very much.
Senator Hatch.
Senator Hatch. Well, thank you, Mr. Chairman.
Welcome to the committee. We are very pleased with your
work and what you are doing, and I really appreciated your
comments, your opening comments.
Today's hearing is really history-making, because this is
the first oversight hearing of the Office of the Intellectual
Property Enforcement Coordinator. So I think that is a good
thing.
Let me just ask a few questions here that hopefully will
help us a little bit.
When you appeared before this Committee last year, I
expressed reservations about placing your position in the
Office of Management and Budget. As you know, I believe that
the IP enforcement coordinator position would have been better
suited with an organization that had a clear nexus to
intellectual property concerns.
Could you give us an update on how things are working with
OMB and how many are working with you on your staff, and what
is your annual budget?
Ms. Espinel. Yes. So just let me start by saying that the
Office of Management and Budget coordinates policy in a number
of areas, and one of their roles is to make sure that the
agency's activities are consistent with the President's
priorities and the Administration's priorities, and that is the
role of my office, as well.
I am lucky in this effort in that I am not alone. There are
many agencies that are committed to this effort, and so I have
the resources and the expertise of those Federal agencies to
call on, as well as the resources and the expertise inside of
OMB.
Some of those agencies have been generous enough to supply
me with temporary details in order to help with the development
of this strategy. So I have a small, but very hardworking team.
We are a new office, as you know. So we will be assessing
our needs on an ongoing basis. But I would also just like to
say I think I came into this job with a choice either to put
together a very modest plan that would be easy to implement or
put together an ambitious plan.
It was my choice and the choice of the agencies that worked
with me to put together a very ambitious plan, and I am
confident that we will be able to implement it.
Senator Hatch. Thank you. I noticed in the joint strategic
plan that the first enforcement strategy action item is the
establishment of a U.S. Government-wide working group to
prevent U.S. Government purchase of counterfeit products.
As you are well aware, counterfeiting and piracy are not
just about downloading music or pirated software, although
that's bad enough. These crimes affect all sectors of our
economy, including high tech, pharmaceuticals, auto parts, the
quality and safety of our food, just to mention a few.
Take the semiconductor industry, for example. If fake chips
find their way into many critical parts of our infrastructure,
they can threaten the safety of not only our military and first
responders, but the general public who rely on semiconductors
to control their cars, planes, trains, medical equipment, or
even power systems.
What do you recommend we do to immediately halt this
illicit and dangerous trade of illegal counterfeit imports?
Now, you have given us some indications here and I have
appreciated what you have said so far.
Ms. Espinel. Thank you very much. The health and safety
risks that are posed by counterfeit products are significant
and of serious concern to us.
Obviously, counterfeit products coming into the U.S.
Government procurement supply chain, particularly our military
and our law enforcement, is completely unacceptable and
something that we need to address as a matter of immediate
concern.
As we say in the strategy, we have committed to working
with the Department of Defense, as well as many, many other
agencies, to make sure we are getting a handle on this problem
and that it stops.
There are other things in the strategy, as well, that I
think will help us in this effort, including seeking to give
more law enforcement authority so that FDA, CVP and others can
help stop counterfeit products, including counterfeit
pharmaceuticals that are coming into our country.
Senator Hatch. Thank you. There seems to be a lot of
misinformation regarding the Anti-Counterfeiting Trade
Agreement, or ACTA. In some cases, those who are intimately
familiar with the actual text of the publicly available draft
treaty documents have done the misreporting.
Now, I recognize that you are not actively negotiating
ACTA, but I would like your comments on whether ACTA would
indeed change existing law and what role do you see ACTA
playing in increasing the quality of international IP
enforcement?
Ms. Espinel. The ACTA negotiations are ongoing, as you
know. I can say, and let me say very clearly, that the USTR and
the Administration do not see ACTA as a vehicle for changing
existing law.
Let me also say that the ACTA negotiations, I think, are a
critical component of our strategy to increase cooperation with
foreign law enforcement and our trading partners in other
countries, and the Administration is committed to concluding an
ACTA that has strong intellectual property enforcement
provisions as part of that effort.
Senator Hatch. Well, thank you. Mr. Chairman, I want to
compliment you for your leadership in the IP world and the
things that you have done ever since I have been on this
committee.
I have appreciated working with you. You are an excellent
leader in this area, and I just want to personally compliment
you for your work.
Chairman Leahy. Thank you. We have worked together on these
things. As we have tried to demonstrate, it is not a partisan
issue. We think we have some of the most innovative geniuses in
the world here in the United States. We just want to protect
what they do.
Senator Franken.
Senator Franken. Thank you, Mr. Chairman. Thank you for
your leadership in this area.
Ms. Espinel, I want to thank you for coming to this hearing
to speak with us again today. As I mentioned to you at your
confirmation hearing, I am extremely concerned about Net
neutrality.
Today, a young kid in his basement in Owatonna, Minnesota
can create a song and can, via the Internet, become an
international sensation. If some company can pay for priority
Internet access, that kid might not be able to have a shot.
But Net neutrality is and must also be a matter of
protecting lawful content and usage, and I am also extremely
concerned about piracy on the Internet. I do not want what
happened to the record industry to happen to the motion picture
industry. I know that people sometimes in those industries get
nervous when you talk about Net neutrality that lip service is
given to piracy, but they do not believe it. ``No, you are
talking about Net neutrality, you cannot be concerned about
piracy.''
What I want to know is how do you put in place--and I asked
this kind of last time--measures to protect against privacy
that do not impede the free flow of information on the
Internet?
Ms. Espinel. We recognize the need for legal certainty and
effective measures both to promote investment in the Internet
and for our right-holders. Let me also say, as you pointed out
and as the Chairman of the FCC has pointed out, that Net
neutrality does not apply to unlawful content, including
distribution of illegal copyrighted products.
I felt when I took this job and I feel having now been in
the job for a few months even more strongly that it is possible
for us to preserve Net neutrality while still going after the
type of illegal infringing activity that you refer to that is a
priority for this Administration.
Senator Franken. I understand that. And maybe we can do
this further down the road, talk about the kind of architecture
in the Internet that we need to do that. You also talked about
legislative action that might be needed to achieve our goals.
And the Chairman talked a little bit about that, but I would
like to pursue that further.
But I do want to talk about medical device manufacturers in
my home state of Minnesota. New ideas in medical devices can be
a huge source of hope and a big help for Americans with medical
conditions, and I want to make sure that we protect those
intellectual property rights that encourage this innovation.
But recently, people in India and China have been making
counterfeits of these devices. Now, how are we going to enforce
those rights there internationally? That is what I want to
know. How are we going to enforce on medical devices?
Ms. Espinel. Medical devices, among many industries, are
facing significant challenges overseas, including in the
markets that you just mentioned. There is a whole--that is a
great priority for us and a great concern for us.
There is a whole section of this strategy that speaks to
exactly that, to enforcing our rights overseas, and there are a
number of recommendations in the strategy that go to that.
Let me highlight one in particular. I think it is very
clear to me, to our Attorney General, to the Administration as
a whole, that we need to have the cooperation of our trading
partners if we are going to effectively address intellectual
property.
We can pour resources and commitment into this issue, but
unless we have their cooperation, it is possible for the United
States to address this problem around the world effectively on
our own.
So there are a number of things in the strategy that go to
exactly that issue, to make sure that we are making very clear
to our trading partners that it is a priority for us that they
enforce American intellectual property rights; that we work
with our trading partners to ensure that they have the tools
that they need in order to enforce our rights.
There is good activity already happening now there, but I
think there is more that could be done and this is our plan for
getting that done.
Senator Franken. I just want to make sure that when we are
doing our trade agreements and talking to our trading partners,
that we have the leverage to be able to make that happen, and I
know that is what you did in your last job.
So thank you very much. And thank you, Mr. Chairman.
Ms. Espinel. Thank you.
Chairman Leahy. Senator Coburn.
Senator Coburn. Thank you. Welcome. Following up on a
little bit of what the Senator from Minnesota asked you.
Do we have the cooperation of China now in enforcement of
our intellectual properties?
Ms. Espinel. Obviously, China is an issue of great concern.
Obviously, there is much improvement on intellectual property
that needs to happen with respect to China.
There is much in this strategy that goes to that issue, but
I also want to emphasize that this strategy is part of a larger
Administration strategy with respect to China; and, in fact, I
believe there are senior officials, Ron Kirk and Secretary
Locke, that are testifying, I believe, at this moment on our
overall China approach.
Senator Coburn. But the answer is no. Is that correct?
Ms. Espinel. The answer is that we need to see improvement
in China, absolutely.
Senator Coburn. The answer is we do not have the
cooperation of the Chinese government. Matter of fact, in a
meeting there 2 years ago, the secretary of commerce of China
told me personally he had no intent of honoring those
properties, because they were a developing nation, even though
they are a signatory to the WTO, which requires them to honor
it.
So just for the record, we do not have the cooperation of
China. They are stealing our intellectual property. They are
stealing our future today.
Which services do you believe have made the most progress
in strengthening intellectual property enforcement?
Ms. Espinel. In terms of the agencies of the U.S.
Government?
Senator Coburn. Yes, in terms of the agencies.
Ms. Espinel. I can say with great sincerity that I feel the
agencies that we work with most closely, and I will name those,
have shown a tremendous commitment to this issue over the last
6 months, and I expect that to continue.
In fact, as much work has gone into developing this plan,
the much harder work of implementing it lies ahead of us. So I
want to thank them for the commitment they have shown, but also
thank them for all the hard work, the increasingly hard work
that they will be committing to this process as we move
forward.
We have worked very closely with the Department of Justice,
with the Department of Homeland Security, with State, USTR,
Commerce, Health and Homeland Services, particularly the Food
and Drug Administration, and all of them have shown a great
deal of commitment to this effort.
Senator Coburn. Is it your plan to focus more on domestic
intellectual property enforcement more so than international
enforcement?
Ms. Espinel. That is an interesting question. So I think in
many cases, it is very hard, frankly, I think to draw sort of a
bright line between them.
For example, one of the things that we are focused on is
coordinating our domestic law enforcement, but much of what our
domestic law enforcement does is work to stop products that are
coming in from overseas from entering our borders. So while
that is a domestic coordination effort, it is going to support
our international efforts.
That is also true with the Internet, obviously. That is a
tool for global distribution. So while there may be domestic
efforts that we are undertaking there, much of that activity is
going to address Internet activity that is taking place outside
of our borders.
There is an entire section of the strategy that focuses
just specifically on actions to enforce our rights overseas,
but I want to emphasize that much of what we are doing
domestically will also have a positive impact on infringement
that is occurring abroad.
Senator Coburn. I want to thank you for the report, and I
know it was not your responsibility to deliver it on time. It
was due in 2008 to the committee. But I do thank you for the
effort that you put forward in that regard.
Tell me what your comments are on the newly reconstituted
Intellectual Property Task Force of the Justice Department.
Ms. Espinel. We were very pleased that Attorney General
Holder relaunched the task force. The task force has attacked
this problem with vigor, and they have worked very, very
cooperatively with us, with the other Federal agencies, with
the Administration as a whole. I think it is a very good
effort.
Senator Coburn. How many enforcement actions have you seen
carried out by them?
Ms. Espinel. The task force that has been set up by the
Attorney General is not--it is not their responsibility to take
on operational cases. In other words, what the task force is
doing is informing the overall policy approach and the
prioritization and resources the Department of Justice will put
into this effort.
And in that regard, I think there has been a great deal of
energy and commitment to this.
Senator Coburn. But do you recall or are you aware of the
number of actions that the Justice Department has filed in
terms of intellectual property?
Ms. Espinel. I would rather not take the risk of giving you
an imprecise answer. So if it is all right with you, I can
check on a precise number and be back to you shortly.
Senator Coburn. Thank you. Mr. Chairman, I want to thank
you for holding the hearing. We are a nation that is suffering
a lack of jobs right now and one of the reasons we are
suffering a lack of jobs is tens of billions of dollars in
productivity and jobs that should be in this country have been
stolen by those that violate international intellectual
property rights, chief of which is China.
Chairman Leahy. You will get no disagreement here. Senator
Hatch and I were just talking back and forth, because the two
of us have worked on this for decades now. I know in my own
state, so many of our jobs are based on intellectual property,
we have become a high tech state, and the constant concern we
have in that area.
Senator Whitehouse, I am going to step out for a few
minutes. But then if you would take the gavel, I will be right
back.
Senator Whitehouse [presiding]. I would be happy to. And I
want to thank you, before you go, for holding this hearing. I
want to join all of my colleagues in applauding your leadership
on this issue and emphasizing how important this is, as Senator
Coburn has just said, to our economy.
In that context, Ms. Espinel, you indicate in your
testimony that it is our leadership in the development of
innovative technology and creative works that makes us a global
target for theft. I would hazard that we are ``the'' global
target for theft, not ``a'' global target for theft.
But I wonder if you have any quantification of the loss to
our economy from the piracy and theft of intellectual property,
not just in the entertainment industry, but across biotech,
high tech, pharmacy, consumer, defense, all these other areas
in which we are at the wrong end of the intellectual property
drain.
Ms. Espinel. So I would say it is very difficult to
quantify precisely the impact of infringement on our economy,
because infringement----
Senator Whitehouse Orders of magnitude?
Ms. Espinel [continuing]. Because infringement is illicit
activity and it is difficult to quantify. Counterfeiters and
pirates tend not to keep excellent records.
That said, I think it is very clear and indisputable that
we have a very significant problem on our hands, which is why
the Administration is focused on fixing it.
Senator Whitehouse. Orders of magnitude, tens of millions
of dollars, tens of billions of dollars, trillions of dollars?
Ms. Espinel. It is not my nature or inclination to
speculate without precise data. I think it is--from what we
hear, from what we hear every day from industries across this
incredibly broad range of American industries--and I should
say, even though I have done this work for a long time, I
myself was surprised when we went out to the public and asked
to hear concerns and as I traveled around the country talking
to companies how broad the spectrum of American industries was
to come forward to tell us that they were suffering, both small
companies and big companies.
So I think it is fair to say that it is an enormous
problem. I think it is having a significant impact on the U.S.
economy.
I am aware, as you may be, as well, that the ITC is doing
some analysis of this issue, particularly with respect to
activities that are ongoing in China, and we look forward to
the outcome of that.
I will also mention in this regard that one of the things
that we have committed to do in this strategy is launch an
initiative by the U.S. Government to start collecting
comprehensive data across all the spectrums of American
industry that depend on intellectual property so that we can--
--
Senator Whitehouse. Well, let me jump in and ask that you
conclude your answer on that in the form of a written response
to a question for the record, to get back with whatever data
you have.
The reason that I am asking this question is because from
my point of view, it very much appears that this is an issue
that average Americans do not appreciate, because the
information is not out there about how significant it is.
When it is defense contractors that are hacked and plans of
fighter planes that are stolen, it is classified. When it is a
biotech company that has its process stolen and replicated in
China, it is not in their interest to disclose that or even
really find out about it. They just want to kind of keep doing
what they are doing.
I think we have a significant under-appreciation of this.
It would not surprise me if we are on the losing end of the
biggest transfer of wealth, the biggest criminal transfer of
wealth in the history of the planet right now. We are just
being--every industry--just hoovered out of intellectual
property, and I think, frankly, we do very little about it.
So I think the more we can push on the enforcement, it will
help our trade policies if we are showing really strong
enforcement at home.
Why is it that I can go, in four or five mouse clicks, to a
pirated movie on a Website and find MasterCard and Visa
supporting that criminal activity by having themselves there on
the Website to pay? Why is it that we had testimony on this
Committee that if you go to the Chinese competitor to Cisco,
you can find the little personal quirks that people wrote into
the software that they designed it for Cisco in the Chinese
software, proving that they stole it, and we are OK with that,
we have not done anything about that?
Over and over again, you see an acceptance of piracy of our
intellectual property that I think exists, the tolerance
exists, because we have not been clear about how hard this hits
our economy and how many industries it hits and how big the
number is of what we are losing.
So my time is going to run out on that, but I really hope
that you will dedicate some effort to trying to get as solid
answer as you can to my question and, in your important role as
the IP coordinator, dedicate as much of your energy as you can
to getting this message out to people. And you cannot do that
if you cannot tell stories or give data. If all you can do is
say words like ``enormous''--we hear the word ``enormous'' 50
times a day. It does not mean anything.
We need stories, we need data, and then we can become very
strong advocates for you and help you solve this problem.
Senator Grassley.
Senator Grassley. Mr. Chairman, I am not going to be able
to stay very long. But this is such an important issue, I
wanted to come by and explain that I had conflicts and could
not be here.
I think it is very, very important that we have this
oversight hearing, because the situation is as serious as
Senator Whitehouse has just stated. I am very interested in
making sure that intellectual property rights are protected
here in the United States and abroad.
Because of that, I was engaged in the drafting of the
legislation that created the IPEC position a few years back. I
support improved coordination between U.S. Government agencies
to go after bad actors and strengthen enforcement of our
intellectual property laws. And I also want to make sure that
we are doing our best to efficiently utilize limited resources
and reduce duplication and waste.
So I am looking forward to reviewing this proposed strategy
and hearing how it can be improved for enforcement efforts
against counterfeiting and piracy. And I am going to submit
some questions for answers in writing.
Thank you, Mr. Chairman.
Ms. Espinel. Thank you, Senator. I look forward to it.
Senator Whitehouse. Thank you, Senator Grassley.
Senator Klobuchar.
Senator Klobuchar. Thank you very much, Senator Whitehouse.
And thank you for your work today, and to all the witnesses.
I am very glad we are holding this hearing today. It is
incredibly important to our state. In addition to the medical
device industry that Senator Franken spoke about, we are now
seventh in the country for Fortune 500 companies. We make a lot
of things in Minnesota and we care very much about the
protection of our products.
In fact, as we move forward, I believe one of the ways we
are going to get out of this economic rut we are in is through
innovation and through actually even more innovation and more
products and more new things.
So I am very concerned about this international
counterfeiting and the piracy that is going on.
My first question is a specific one. I head up the
American-Canadian Inter-Parliamentarian Group, and Senator
Grassley sometimes goes to the meeting, and every time we push
on this issue with the Canadians. And I know the Harper
government actually asked the Prime Minister about this.
I know they want to do more on this. But do you know
anything about the status of the Canadian counterfeiting laws?
Because there is a major problem, I know, for our movie
industry and music industry and others with what is going on in
Canada.
Ms. Espinel. So let me first just say I completely agree
with you on the importance of innovation and IP enforcement to
our economy.
The President has made clear that it is the No. 1 priority
for this Administration to get our economy back on track, and
we feel very strongly that enforcement of our intellectual
property rights will help support our jobs and promote our
exports. So we are in complete agreement on that fact.
Turning to your specific question with respect to Canada,
we share your concerns with the Canadian system, and I
appreciate your raising it. You may be aware that the Canadians
have recently introduced new legislation.
Senator Klobuchar. It seems like they do every year.
Ms. Espinel. It has been an ongoing process with the
Canadians. And you are right, the legislation has been
introduced on this issue before.
I think the latest bill that has been introduced is
different from earlier bills in significant ways. One of those
ways is it is focused on enablers. But we are still in the
process of assessing that legislation.
I think it is very important that Canada move forward to
address the deficiencies in its system. I think it is important
that they, in addition to the type of legislation that they
have introduced, that they pass the WIPO Internet Treaties.
As long as we are discussing Canada and given your interest
in medical devices, I think it is also important that Canada
make progress on its own border control. As you may know, they
do not have sufficient law enforcement authorities for their
border control. That has made it harder for their law
enforcement officials to act, and we continue to encourage
Canada to fix that problem.
Senator Klobuchar. All right. Thank you. Senator Thune and
I recently introduced a P2P Cyber Protection and Informed User
Act, which focuses on these peer-to-peer file sharing programs,
which are often a method for transporting copyrighted works.
And I have been shocked at some of the stories we have heard
more on the fraud front from our state of people who--someone
goes home and they are working from home on the accounting for
their company, a company of 100 people, and then they do not
know their kid has one of these programs on and suddenly all
the employees' data is there stolen and basically used for
identity theft.
But my focus here is on copyrighted works with peer-to-
peer. Do you know if that is addressed in the strategic plan
and if there is a focus on that kind of computer theft?
Ms. Espinel. So there are a few things in the strategy I
would point to that go to this issue of the distribution of
pirated material over the Internet, including with respect to
P2P.
First, we believe it is essential for the private sector to
work together. So we are and have actively encouraged Internet
service providers and others to work with the right-holders to
come up with solutions that are practical and efficient to try
to address this problem, and we believe that type of
cooperation is very important.
However, I also want to emphasize that it is not our
position that we will sort of sit back and let the private
sector deal with this problem on their own. We are also
committed to taking action ourselves.
In that regard, I would mention a couple of things. The
foreign-based Website commitment that we have made, it is clear
to us that foreign-based Websites are a particular problem that
we need to address, both in terms of the products that are
coming into our country from those foreign-based Websites and
the particular law enforcement challenges that they pose
because they are overseas. So that is a problem that we are
committed.
As we say in the strategy and there has been some allusion
in ths hearings to we are also undertaking assessment of our
laws to see if there are deficiencies there that are hindering
our enforcement efforts with respect to the issues that we
raise and what we need to do to address those.
Senator Klobuchar. Thank you very much. I will submit some
other medical device questions, I know that has been covered,
for the record. But I want to thank you for that and just say I
really believe if we are going to continue with this innovation
economy in the direction I think we need to go for our entire
country, this is going to be a major component of it.
So thank you for your work.
Ms. Espinel. Thank you.
Chairman Leahy [presiding]. Thank you very much for being
here. If there are other questions, we will submit them for the
record. I appreciate you being here. I appreciate having your
father here in the audience.
Ms. Espinel. Thank you, Chairman Leahy. And thank you and
the other members of the Committee for continuing to bring
attention to this issue and for your leadership.
Chairman Leahy. Thank you. Staff will set up for the next
panel. Thank you very much.
Ms. Espinel. Thank you.
Chairman Leahy. Incidentally, in the soccer game, we
actually did score, but it was disallowed. So it is still zero-
zero. As you may have noticed, that has happened to the U.S. in
a couple of these things. I do not want to suggest anything,
but there is a strong feeling among some of the staff watching
that, and doing it solely as a professional aid to the
chairman, that it was not the world's best call. And those
comments had absolutely nothing to do with the hearing.
Now, we have four witnesses here. The first will be Barry
Meyer, the Chairman and CEO of Warner Brothers, a position he
has held since 1999. He first joined Warner Brothers in 1971.
He has gone sort of up through the lines, including executive
vice president and chief operating officer; has brought Warner
Brothers into being one of the best companies in America.
He is a member of many industry boards and associations,
including the Motion Picture Association of America, the Museum
of Television and Radio, and the Academy of Motion Pictures
Arts and Sciences.
He received his undergraduate degree from the University of
Rochester, law degree from Case Western University School of
Law.
What I am going to do, if nobody has any objection, we will
have each witness testify and then we will ask questions, and I
am aware of the fact that Mr. Hirschmann is suffering from
laryngitis.
Mr. Hirschmann, I can assure you, I sympathize. With all
the pollen in the air, my voice leaves a lot to be desired.
But, Mr. Meyer, we will start with you, and thank you very
much. I know you and Dr. Smith came in here last night and I
appreciate having you here; and, Carol Melton, appreciate you
being here.
STATEMENT OF BARRY M. MEYER, CHAIRMAN AND CEO, WARNER BROTHERS
ENTERTAINMENT, INC., BURBANK, CA
Mr. Meyer. Thank you. Thank you, Chairman Leahy, and thank
you, members of the committee. I appreciate the opportunity to
appear before you today.
And I want to start, first, by thanking all of you and your
colleagues for passing the Pro-IP Act to establish this
critical role of intellectual property enforcement coordinator,
and thereby to strengthen our government's commitment to
copyrights, American creativity, and innovation.
As the release of the joint strategic plan and her
testimony this morning demonstrates, consumers are being well
served by the appointment of Victoria Espinel. She hit the
ground running and, in our opinion, she is doing an incredible
job of bringing together the many resources of the Federal
Government to coordinate and share information.
The plan she presented represents another important step
forward in achieving a higher level of cross-agency
collaboration on intellectual property issues, and we are
particularly pleased to see a call for greater cooperation in
the business community in reducing the spread of online
infringement, as well as the proposal for a comprehensive
initiative to pursue foreign-based websites that infringe and
steal American intellectual property.
Encouraging all stakeholders in the online ecosystem to
help reduce copyright crime and combating illegal online
activity from abroad are appropriately identified as top
priorities in this plan.
We commend the efforts of all those in the Administration
who played a role in developing this plan, and especially thank
President Obama and Vice President Biden for their deep
commitment and their strong and thoughtful leadership.
We stand ready to work with Ms. Espinel to implement this
ambitious blueprint for strengthening the government's
coordinated IP enforcement activities.
Mr. Chairman, the work being undertaken by the intellectual
property enforcement coordinator goes to the heart of what we
and others in the creative community do to inform, educate and
entertain.
We at Warner Brothers are engaged in virtually every aspect
of the entertainment industry, from feature films to
television, home entertainment, animation, comic books,
interactive games, product and brand licensing, international
cinemas, and others. Now more than ever, technology and media
in all of these businesses are seamlessly integrated into
consumers' lives.
While today's average consumer still spends more time
watching content on television than over the Internet, that is
changing. Online video views were up more than 200 percent at
the end of 2009. We continue to see double-digit growth in time
spent with online media as consumers continue to shift their
behaviors and their habits.
Technological advances, coupled with market changes and
consumer behavior, have required us to constantly rethink our
models. We do this more than willingly. We use such events as
opportunities to innovate.
Warner Brothers has developed many new digital delivery
models that enable consumers to access content across numerous
platforms and devices. Our goal is straightforward--to deliver
content to consumers in the highest quality, with the most
choices, with reliable convenience and portability, at
reasonable price points, while at the same time diminishing the
risks of unauthorized reproduction and distribution.
Beginning more than 15 years ago, Warner Brothers led the
effort to work with consumer electronics and technology
companies in the development of the DVD. We continue to
collaborate with the technology industries to deliver content
in new, smart, consumer-friendly ways.
For example, today we include with our Blu-ray titles a
standard definition version that can be used on a PC, MAC or
mobile device. We have launched numerous products that allow
users to incorporate their social networks into functions like
BD-Live to coordinate online movie screenings with friends and
post commentaries via Internet-connected Blu-ray players.
With recent data showing that 58 percent of television-
Internet households use television and the web simultaneously
at least a third of the time, incorporating these experiences--
connecting them--is a key component of our digital strategy.
We have partnered with Apple, Microsoft, Amazon, Sony, and
many others to distribute our products to personal computers,
media servers, gaming consoles, and mobile devices. Our content
is available on a wide variety of video-on-demand subscription
and electronic sell-through services over the Internet, cable
and satellite platforms, and mobile networks.
At the same time that we release our films in physical form
on DVD and Blu-ray, electronic copies are available for
purchase online and can be enjoyed on a variety of devices.
Warner Brothers is also at the forefront of modifying the
traditional distribution windows. Typically, studios released
motion pictures on DVD at least 2 months before they were
available electronically via video-on-demand rental services.
Today, Warner's video-on-demand window coincides with our
packaged media release dates so consumers can access both
physical and digital options of our content sooner.
Furthermore, as a result of the FCC's recent decision
promoting the use of secure digital outputs, we are now
actively pursuing opportunities for an early window release of
our films over cable and satellite systems in advance of DVD
and Blu-ray.
My point here, Mr. Chairman, is that the image of the
entertainment industry as one that is simply circling the
wagons around old outmoded business models despite the
explosion of new technology is simply not true. Our industry
has been changing and innovating with remarkable speed.
It is clear to all of us that none of this innovation would
be possible without the tireless efforts of millions of
talented professionals working in the film and television
industries, which extends far beyond just the studio lots in
California or the streets of New York.
Last year, the motion picture industry employed over 2.4
million people and paid over $41 billion in wages across all 50
states. Our on-location production activity also supports more
than 115,000 small businesses across the country, 80 percent of
which employ fewer than 10 people. And when film productions
roll into a local community, they average $225,000 a day of
economic input into the local economy.
Nationwide, the motion picture industry generated $15.7
billion in public revenues in 2008, and we consistently boast a
positive balance of trade in virtually every country in which
we do business.
While high-speed broadband networks bring immense
opportunities for the exchange of information and ideas, the
inappropriate use of these networks can facilitate the
anonymous theft and rapid, ubiquitous, illegal distribution of
copyrighted works.
It is not an overstatement to say that rampant theft of
intellectual property strikes at the heart of our Nation's
economy. It strikes at the heart of the core values of reward
for innovation and hard work and our ability to complete
globally.
In short, Internet theft puts at risk one of America's
great export industries. We at Warner Bros. are doing
everything we can to combat piracy, spending tens of millions
of dollars annually to do so. We have secured our production
and distribution chains such that there has been no pre-
theatrical release of a Warner Bros. movie in over 5 years.
We are working with technology companies to develop
technical tools and reaching out to Internet service providers
and online intermediaries to enlist their assistance in
reducing the vast amounts of digital piracy that clog their
networks.
We hope the government will continue to encourage Internet
service providers, online payment processors, search engines,
advertising networks and others to cooperate with copyright
owners and take reasonable proactive measures to disable or
disrupt digital piracy.
While the release of the joint strategic plan is a critical
step forward with respect to government-led efforts, we
acknowledge that no silver bullet exists either in the public
or private sector that can fully eradicate the problem of
piracy.
Rather, the problem must be pursued on a variety of levels
and through multiple approaches, which include providing robust
legitimate alternatives, ensuring cross-industry cooperation to
prevent infringement, and vigorous enforcement efforts at home
and abroad. But there is no doubt that continued and hopefully
increasing government support regarding the value of copyright
protection and the responsibility of all participants to
address the issue of piracy is crucial.
As the Administration's plan recognizes, Warner Bros. and
others in our community play a significant role in the vibrancy
of the American economy. Enforcement of laws to ensure that
consumers enjoy what we create has broad benefits, as
recognized by today's hearings and the effort described by the
coordinator.
In closing, I would like to again thank Ms. Espinel for her
hard and thoughtful work to date, and to thank you, Mr.
Chairman, and the members of your committee for allowing me the
opportunity to address this really important topic for our
industry.
I am happy at this point to answer any questions you may
have.
[The prepared statement of Mr. Meyer appears as a
submission for the record.]
Chairman Leahy. Thank you very much. Of course, all of the
statements will be placed in the record in full.
Paul Almeida is the President of the Department for
Professional Employees at the AFL-CIO. He has been there since
2001. Mr. Almeida serves on several AFL-CIO policy committees,
including the legislative public policy committee, the
international affairs committee, and the immigration committee,
where he serves as vice chair.
Prior to joining the Department for Professional Employees,
Mr. Almeida served as president to the International Federation
of Professional and Technical Engineers. He has a degree in
engineering from the Franklin Institute of Boston.
Mr. Almeida, I am delighted to have you here. Please go
ahead.
STATEMENT OF PAUL E. ALMEIDA, PRESIDENT, DEPARTMENT FOR
PROFESSIONAL EMPLOYEES, AFL-CIO, WASHINGTON, DC
Mr. Almeida. Good morning, Chairman Leahy and distinguished
members of the committee. My name is Paul Almeida. I am the
President of the Department for Professional Employees, a
coalition of 23 national unions affiliated with the AFL-CIO.
I am honored to speak today on behalf of the more than 4
million professional and technical people whom our affiliated
unions represent. On their behalf, permit me to commend and
thank you. Many of you participated in passing the Pro-IP Act.
My message is simple. Numerous industries are adversely
impacted by the theft of intellectual property. Intellectual
property equates to jobs and income for American workers. Theft
of intellectual property raises unemployment and cuts income.
For too many workers in the United States today, both jobs
and income are hard to come by. If the United States allows
attacks on intellectual property to go unanswered, it puts good
livelihoods at risk.
With regards to the arts, entertainment and media
industries, I am especially pleased to deliver today a
statement that the executive council of the AFL-CIO unanimously
adopted in March.
I would ask that this statement, ``Piracy is a Danger to
the Entertainment Industry Professionals,'' be made part of the
hearing record.
Chairman Leahy. Without objection, it will be.
[The statement appears as a submission for the record.]
Mr. Almeida. As you will see, the Department for
Professional Employees proposed this statement on behalf of the
nine affiliated unions representing professionals, both
performing artists and craft workers in arts, entertainment and
media industries.
At the core of this statement is a recognition that digital
theft diminishes incentives to invest and prompts a downward
spiral for U.S. jobs and our economy. Digital theft imperils
jobs and income.
In the words of this statement, combating digital theft and
the sale of illegal CDs and DVDs is nothing short of defending
U.S. jobs and benefits. Estimates of the number of jobs lost to
piracy in this one sector alone runs in the hundreds of
thousands.
While exact numbers are difficult to find, there can be no
question about the magnitude of the problem for the entire
United States--billions of dollars of revenue for U.S.
industries and millions of lost U.S. jobs.
Online access continues to accelerate and expand. As it
does so, it increasingly displaces traditional models for
distributing content and, thus, heightens the potential for
digital theft.
The efforts of the Screen Actors Guild and the American
Federation of Television and Radio Artists, along with the
Motion Picture Association of America, to conclude an
international treaty that will protect the economic and moral
rights of audiovisual performers will provide additional
support in this battle.
The losses of income arise because entertainment
professionals depend on compensation at two points; first, when
the professionals do the work, and, later, when others use and
reuse the intellectual property that the professionals created.
In the words of the statement, entertainment professionals
may work for multiple employers on multiple projects and face
gaps in their employment. Payments for the work that they have
completed helps sustain them and their families through under-
employment and unemployment.
For AFTRA recording artists, in 2008, 90 percent of income
derived from sound recordings was directly linked to royalties
from physical CD sales and through paid digital downloads.
SAG members working under the feature film and TV contract
that same year derived 43 percent of their total compensation
from residuals. Residuals derived from the sale of secondary
markets funded 65 percent of the International Alliance of
Theatrical and Stage Employees, the motion picture industry
health plan, and 36 percent of the SAG health and pension fund.
Writers Guild of America East-represented writers often
depend on residual checks to pay their bills between jobs, and,
in some cases, the residual amounts can be as much as the
initial compensation.
Online theft robs hard-earned income and benefits from
professionals who create the works. So digital theft and
counterfeiting threatens U.S. jobs and income. That is the bad
news. The good news is that you have taken action and have had
the wisdom to confirm Victoria Espinel to fill the position you
have created.
Permit me to add a final observation. The arts,
entertainment and media industries are some of the all too few
U.S. industries that generate a trade surplus in the midst of
growing U.S. trade deficits. Professionals in the arts,
entertainment and media industries organized in labor unions at
a rate far above the private sector generally.
These facts belie the ill-founded and thoughtlessly
repeated misconception that unions somehow undercut union
competitiveness. Years of research at the Department for
Professional Employees showed that professional and technical
people want a chance to do their job right.
The unions that these people organize help them to achieve
that goal. With innovation through intellectual property,
heavily unionized industries not only compete globally, but
enable the United States to lead the world.
Thank you for inviting me to participate in this hearing,
and I look forward to answering questions.
[The prepared statement of Mr. Almeida appears as a
submission for the record.]
Chairman Leahy. I thank you, also, for being here. It is
helpful. One of the interesting things about your testimony,
sir, is that it is nice when we see labor and business sitting
side-by-side on something where there is this agreement.
I just hope that we can make sure that not only the
policymakers here on the Hill, but on the other end of
Pennsylvania Avenue know how important this is.
David Hirschmann is President and CEO of the Global
Intellectual Property Center, U.S. Chamber of Commerce. He is
also Senior Vice President of the Chamber. He has been with the
Chamber since 1992.
Prior to his work for the Chamber, he served as a staff
member in the House of Representatives, as a graduate of Duke.
One thing he and I have in common is we are both losing our
voice today.
But, Mr. Hirschmann, obviously, your full statement will be
in the record. Please go ahead, however you care to.
STATEMENT OF DAVID HIRSCHMANN, PRESIDENT AND CEO, GLOBAL
INTELLECTUAL PROPERTY CENTER, U.S. CHAMBER OF COMMERCE,
WASHINGTON, DC
Mr. Hirschmann. Thank you very much, if you put up with the
voice. If this does not hold up, I can either have somebody
read it or maybe we will just stand with what the AFL-CIO said
on this issue.
Chairman Leahy. See the lights dim.
[Laughter.]
Mr. Hirschmann. Mr. Chairman, the leadership you have
provided on this issue really is exemplary. It is truly this
committee's jobs agenda and it is why labor and business can
join together on this issue.
The enactment of the Pro-IP Act 2 years ago was a landmark
event. We are very pleased that the----
Chairman Leahy. Would you like one of the staff to read
the--I would be happy to, either from your office or--I realize
it is your statement, but it is an important statement.
Would you please identify yourself?
Mr. Esper. Sure, Mr. Chairman. My name is Mark Esper, and I
am the Executive Vice President of the Global Intellectual
Property Center.
Chairman Leahy. At the Chamber.
Mr. Esper. At the Chamber, yes, sir.
Chairman Leahy. Thank you.
Mr. Esper. So I am pinch-hitting right now.
Let me begin with a statement. As David Hirschmann was
saying, the enactment of the Pro-IP Act in the fall of 2008 was
a landmark event that was accomplished on a bipartisan basis,
with the support of a diverse group of stakeholders, including
both business and organized labor.
Without that legislation, we would not be having today's
important session.
We are very pleased that the Administration yesterday
released the first national IP enforcement strategy. We applaud
the White House intellectual property enforcement coordinator,
Victoria Espinel, for undertaking this thorough review of the
government's IP enforcement efforts with alacrity following her
Senate confirmation late last year.
Congress and the Administration should focus now on
implementing and building up on this plan to approve the
effectiveness of Federal IP enforcement. As a first step,
Congress should help ensure that Ms. Espinel and each of the
agencies responsible for a portion of this strategy have the
requisite authority, budget and staff to implement and expand
upon this plan.
U.S. competitiveness has become directly and inextricably
linked to our Nation's ability to adequately and effectively
enforce IP rights. That is why we must do more to address
counterfeiting and piracy in both the physical and the online
environments. Businesses invest heavily in measures to prevent
and investigate IP theft, but the private sector can only do so
much.
Congress and the Administration must also be committed to
implementing sound IP policies and sustaining strong
enforcement efforts in the U.S. and abroad.
In working to implement and build upon this plan, we urge
this Committee to keep three goals at the top of the list.
First, aggressively cracking down on the growing problem of IP
theft online by making it harder for criminals to use the
Internet to distribute stolen American ideas and to harm
consumers.
Second, make the United States the toughest, most capable
enforcer of IP laws in the world, building on the Pro-IP Act,
by further expanding the dedicated, effective, full-time
resources at both the state and Federal level to fight IP
theft. For example, the Customs reauthorization bill, which
provides structure, resources, tools and direction necessary to
bolster Customs and Border Protection and ICE's capacity to
prevent counterfeit goods form entering the United States.
And third, protecting IP rights globally. We must resist
all efforts to create unwarranted exceptions to strong IP
protections, hold our trading partners accountable, and work
with ally countries to raise the global bar for IP protection.
For example, we should complete an ambitious and comprehensive
anti-counterfeiting trade agreement, ACTA, with strong IP
protection and enforcement provisions this year.
Let me offer a couple of additional thoughts on the need to
thwart online theft of IP. Intellectual property thieves are,
above all else, distribution experts. They do not spend money
on innovating new products. They do not spend money on testing
products for safety.
Instead, they focus all their efforts on building world
class distribution channels for their illicit activities. These
are highly organized criminal networks, often with global
reach.
So it is no surprise that these thieves have migrated their
illegitimate enterprises to the Internet. This includes both
physical goods and digital services. It includes everything
from knock-off pharmaceuticals and auto parts to illegal copies
of movies, music and digital books.
Rogue sites offer stolen, live broadcasts of sporting
events and the latest movies available as digital streams in
high definition. This is why we welcome the steps outlined in
the national strategy to ensure our IP enforcement efforts
adapt to the digital age. Determining the best way to address
this problem without impeding legitimate online commerce will
not be easy.
But it is clear that we must move beyond the perception
held by some that if it is online, it is not a crime. We
believe that a serious discussion about how to best foster
continued innovation while protecting IP in the online
marketplace is long overdue.
The Global IP Center and our members will continue to
vigorously pursue voluntary business-to-business solutions,
where practicable. However, we also believe that Congress and
the Administration should examine this problem and consider new
and creative efforts to fight counterfeiting and piracy online.
A reasonable starting point for addressing IP theft online
is identifying and shutting down Websites, many of which are
situated overseas, but many of which are also here in the
United States, whose business models are indisputably centered
on the sale or distribution of counterfeit and pirated
products.
We look forward to working with the Committee and with the
Congress to explore creative and effective methods that would
make it more difficult for such sites to sustain a business
model built on facilitating IP theft.
In concluding, let me reiterate that protecting IP rights
is a critical component of our economic resurgence and vitally
important to America's future and job creation. While we
anticipate that the IP enforcement coordinator will work to
further refine this plan, it is imperative that she begin
implementing it now, given all that is at stake.
Thank you for this opportunity to share our perspectives on
these important issues. The Global IP Center looks forward to
working with you, Mr. Chairman, and the Committee and the
Congress in the future.
Thank you.
[The prepared statement of David Hirschmann appears as a
submission for the record.]
Chairman Leahy. Thank you very much.
Our last witness is Caroline Bienstock, the President and
CEO of Carlin America, a music publishing company that was
founded by her father, Freddy Bienstock. Ms. Bienstock first
joined the company in 1989. She is a member of numerous
industry boards, such as the American Society of Composers,
Authors and Publishers, the National Music Publishers
Association.
She received her bachelor's degree from Yale College, her
law degree at the Boston University School of Law, and her MBA
from Wharton.
Ms. Bienstock, please go ahead.
STATEMENT OF CAROLINE BIENSTOCK, PRESIDENT AND CEO, CARLIN
AMERICA, NEW YORK, NEW YORK
Ms. Bienstock. Good morning, Chairman Leahy and members of
the committee. I am Caroline Bienstock, President and Chief
Executive Officer of Carlin America, Inc. I am also a member of
the National Music Publishers Association.
I want to thank you for inviting me to testify today about
oversight of the Office of the Intellectual Property
Enforcement Coordinator. NMPA strongly supported the Pro-IP Act
of 2008 and the appointment of Victoria Espinel as the first
intellectual property enforcement coordinator.
We are encouraged by the release of the first IPEC report
yesterday, which sets the stage for the development of a joint
strategic plan for intellectual property. NMPA has not had a
chance to analyze the report in detail, but based on a
preliminary review, it reflects our views on what the
government must do to effectively enforce copyright protections
domestically and internationally. We will finalize our review
quickly and to the extent we have additional comments, we will
supplement my written testimony.
At the outset, I want to thank you, Mr. Chairman, and the
members of the Committee for all you have done to protect music
in your support of intellectual property. You have long
recognized that the property rights of intellectual property
deserve no less protection than physical property.
My company, Carlin America, is a family owned music
publishing business founded by my father, Freddy Bienstock. The
Carlin catalog includes more than 150,000 songs, including Body
and Soul, Chantilly Lace, Dedicated to the One I Love, Fever, I
Got You, I Feel Good, and the scores of ``Cabaret'' ``Company''
and ``Follies.''
For more than 80 years----
Chairman Leahy. You realize, half the people in the
audience, these songs are now going through their minds.
Ms. Bienstock. As they should be.
[Laughter.]
Ms. Bienstock. Need I say more. For more than 80 years, the
NMPA has been the principal trade association representing
music publishers like us, over 2,500 music publishers and their
songwriter partners in the United States. To put it simply,
music publishers represent the interests of the songwriter and
the song.
Songwriters, in particular, are especially vulnerable to
harm from online music theft, because they generally do not
have the option of earning money from ancillary income streams,
such as live performance, touring, merchandise sales, or
acting.
The songwriter and music publisher must rely on the old-
fashioned, traditional sources of revenue for their money in
song, as well as while the marketplace is changing everyday.
Despite the extensive copyright laws in place right now,
online digital theft is rampant. Millions of copyrighted songs
have been and continue to be downloaded illegally from the
Internet. We have seen at least one source that said at this
time, 95 percent of downloaded music on the Internet is
illegal.
For every illegal download or stream, a songwriter is
denied compensation for his or her creative work. This stuff is
no different in concept from the burglary of a home or
shoplifting from a store.
As we move further into the digital and wireless age, music
publishing can continue to flourish, but only if combating
online theft remains a top priority of our government. Without
strong copyright laws, music publishing companies would not
risk investing in new writers or acquiring new songs; and,
therefore, existing jobs would be lost and new songs and new
jobs would not be created.
To safeguard the songwriter and the music publisher, the
government must substantially increase their efforts to combat
online digital theft. We believe the strategic plan will be a
huge step in the right direction. To be effective, funding and
implementation will be key. We urge the Committee to support
IPEC's efforts in this regard.
The music publishing community is willing and happy to work
closely with this Committee and Ms. Espinel and her staff to
ensure that copyright enforcement measures are enhanced and
streamlined. If Congress properly funds the initiatives and
enacts the proposals recommended by IPEC, online music theft
will be minimized and music will flourish well into the
foreseeable future. And most importantly, songwriters will
continue to write the songs that are so dear to those on this
Committee and to the rest of the country.
I thank you again for this opportunity to testify, and I am
happy to answer any questions you may have.
[The prepared statement of Ms. Bienstock appears as a
submission for the record.]
Chairman Leahy. Thank you very much.
I will put in the record a submission from the Copyright
Alliance, with information from all 50 states on the importance
of intellectual property.
[The information appears as a submission for the record.]
Chairman Leahy. I note that there are 114 professional
photographers employed in the whole State of Vermont.
Let me ask just one question. I sat here and I have spent
so much time on this over the years, I watch all the changes.
You have encryption, you watch films and they will open and
within a few days, somebody is selling bootleg copies,
certainly in the record business, with so much online. You see
the problem there.
But there are a lot of other things. It is software,
medicine. I talked about the real concern I have with the
Department of Defense getting material that is going to be
vital for our people in the field and getting counterfeit
matters.
What happens when you get counterfeit brake pads in your
car? I just bring it right down to something that would affect
every one of us, when you are driving to work.
Assuming the will--and I think there is the will of the
bipartisan group here--assuming the will, can you believe that
we can write legislation tough enough to go after this and then
have the enforcement mechanism tough enough to go after this?
I realize we may not get all of it, but given the
legislation and given the will and our law enforcement and our
trade representative and everything, can we make a significant
dent in this?
I will begin with you, Mr. Meyer. What do you think?
Mr. Meyer. Thank you, Mr. Chairman. I think that we can
make a significant dent in it, and I think the first step,
which has really been taken now, is the support of the
government.
We are firm believers in having the private sector work
cooperatively between content owners and ISPs, certainly, in
the United States to try to work out whatever the proper
protections are.
But key to that is a knowledge that the government is
supporting all of these actions. And I do think starting with
the issue of education, of making people understand what is
legal and what is not legal, and what is infringing content and
what is not. It will not be an easy task, especially as the
technology evolves.
Starting with that educational component can make an
enormous difference. And using technology to bolster that
education will help to address the issue.
Chairman Leahy. In fact, I would urge all our colleges and
universities, during freshmen orientation, would not allow--
they do not want to see their students going down to the local
stores and stealing things off the shelf. It is also stealing
if you take it off the Internet.
Mr. Almeida.
Mr. Almeida. I think you are right. I think a key point is
a process of educating the public. You just made the point,
Caroline made the point. You would not tell your children to go
in and take something off a shelf. But somehow, on the
Internet, it is all right to do that.
It is all right to also pick something up off the street
that is a bootleg copy of something. And there is a disconnect
that what people's work for our entertainment is not views as
real work. There is kind of a disconnect.
It is our entertainment when we go to a movie or when we
listen to music, but it is real work for people who do that,
and I think there is a disconnect there, as well, and I think
we need to do that education process. And the same with
products, as well, that the safety is critical to our well
being.
Chairman Leahy. Mr. Esper.
Mr. Esper. Yes, Mr. Chairman. I agree, as well. I think not
only can we make a significant dent in the problem, we cannot
afford not to try. There is just simply too much at stake.
As the United States continues to move up the value chain
more to a knowledge-based economy, this is where our future is.
This is where we are uniquely competitive in the international
environment. So we really have to tackle this.
I believe that with sufficient action by the
Administration, some clear legal framework from the Congress,
that I think all industries, including those that we call the
intermediaries, will get on board with this.
Everybody wants to solve this problem. The challenge is
how. And as the colleagues here on the panel have pointed out,
the big challenge is how do you deal with the culture that has
emerged, has developed over the Internet, the sense that if it
is online, it is not a crime.
That is going to be the real challenge to tackle.
Chairman Leahy. Ms. Bienstock, I assume you agree, too.
Ms. Bienstock. Of course, I do. I think the importance is
the enhanced enforcement also sets an important tone that
combats an attitude that has been developing that the Internet
is somehow a superior vehicle than intellectual property and as
they are balanced against one another.
We have a generation of young people that have grown up
believing that music ought to be free, because it is able to be
available for free. And I think increased enforcement will do
something to develop the conversations in the home and at
universities about what is OK to do, and, also, what you open
your computer to when you bring your computer to file sharing.
So, yes, I think increased enforcement has a very important
role both to actually address the problem, but also to
denominate and make clear what our interests are and that we
value intellectual property.
Chairman Leahy. Thank you very much.
Senator Franken, did you have any questions?
Senator Franken. Yes, thank you. Mr. Almeida, as I said
before, even though I am on this committee, I am not a lawyer,
but I was in show business. The entertainment--yes, I was. I
know it is hard to believe, considering what a productive
member of this Committee I am.
[Laughter.]
Senator Franken. The entertainment industry is truly an
American industry and, as you put it, one of the all too few
American industries that generates a substantial trade surplus.
American culture, music, movies, TV shows, books, is one of
our Nation's greatest assets, literally, and I am proud to have
been a part of that industry. And I am actually a member of
three of those unions that signed on to the executive council
of the AFL-CIO statement. I am a member of the Writers Guild,
the Screen Actors Guild, and AFTRA.
I can tell everybody firsthand that those residuals that
you are talking about that you get when you are either between
jobs or under-employed or over-employed, as I am now, those
checks mean a lot. And I still get checks--I still get a $12
check every time they run Trading Places.
I just want to ask you what it means to artists and people
in the crafts when the piracy prevents you from getting those
residuals. What is the effect of that?
I would like to ask Mr. Meyer what the effect of all of
that is on sort of the business plan when someone is either
giving a green light or not giving a green light to a product,
to a movie or to a TV show, in terms of how that figures in,
because it is not only losing--I think you are not only losing
money on what has already been made, but in a sense, you are
basically having to make a decision, are we going to make this
thing, because our ancillary income is not going to be what it
should be.
Go ahead.
Mr. Almeida. Thank you. I think there is also a
misconception. Most people in America do not work under the
business model of getting paid for part of their work up front
and then waiting to get--for use and reuse, and I think it is a
concept that a lot of people are just totally unfamiliar with.
An A-lister, such as yourself, probably does rather well,
but the----
Senator Franken. Thank you.
[Laughter.]
Mr. Almeida. But the working actors who really depend on
that and the writers who depend on the back-end payments, the
residuals, the back-end payments, it is a huge part of their
survivability. With the stage hands, in particular, that helps
to fund their collective pension and health and welfare fund.
It does not flow to the individual member, but goes to the
collective.
So, again, I think it is a model that most of us have never
worked under. They say, ``What, you get paid part of it now and
you get what? You wait for the checks to come? ''
So I think there is a disconnect there, as well, that
people do not realize this model and how it works, and I think
it is an important part.
And I do not mean to answer Mr. Meyer's part of it, but if
funds are not flowing, then product is not being made. And that
is kind of like part of the intangible. It is like how much--
would I be making another movie if the money was there. And the
piracy is definitely impacting across the board with all of the
entertainment unions.
Senator Franken. I think Mr. Almeida just answered your
question for you. No, no, go ahead. I am sorry.
Mr. Meyer. Well, I actually was going to jump in and
reiterate part of what Mr. Almeida said. Employment in the
motion picture and television production business is
notoriously lumpy for employees. They can work great periods of
time intensely and then not work for another year or two or
sometimes even longer periods of time, which leads to the
importance of residuals.
These payments for the reuse of the product that they have
worked on is what keeps the economic model going, and it is a
stabilizing factor in the economic model for so many employees,
which is one of the reasons why it has been in place for--I
think the first residual model came into play in 1960. So it is
a very, very important consideration.
But getting back to the point about how it affects the
overall economic model, to the extent that this kind of theft
reduces the overall economics for any producer, financier or
production company, of course, it has to affect how many new
projects we make, the nature of the new projects that we make,
which has a concomitant effect on all of the employment levels
for people who are working on it.
There is one other point I would like to make, as long as I
have the floor right now. I guess that is a Senate term.
Senator Franken. Well, you are kind of using my time, but
go ahead.
[Laughter.]
Mr. Meyer. Then I will get off the floor. Then I will get
off the floor.
Senator Franken. Well, I had hoped to say something else,
but these guys just will not stop. But go ahead. Go ahead.
Mr. Meyer. Senator Whitehouse mentioned something before
about the transfer of wealth. One of the things that I think we
overlook when we think about this problem in general is it is
not just how it is affecting the current state of our business.
The digital technologies have provided an opportunity for
so many of our businesses, maybe ours in particular, for the
most robust transformational growth that anyone can imagine.
There is nothing not to like about something that is
faster, less expensive, and much higher in quality. There is
nothing not to like about that. The problem is it is hard to
see where we could have gone, where this could have taken a
great American industry were it not for the dampening effect of
piracy, this effect that is holding it down.
That is why I think everybody has trouble estimating what
the loss is. You do not know what it could have been were it
not for this, and I think that is an important thing for us all
to keep in mind.
Senator Franken. I am sorry, and I know--let me just make
about a 20-second comment, because you talked in your testimony
about sort of all the adaptations you are making that are
almost a response to piracy, and Blu-ray and the different
platforms that you are doing, which I think are just amazing
and are revolutionizing the way we get entertainment, are
changing so fast.
In some small way, they were a response to piracy. So maybe
the innovation was prompted by it. But I think that--I applaud
you for all the different innovation that you are doing in
terms of the kind of platforms that we are seeing. And this is
going to keep transforming and revolutionizing the way we enjoy
entertainment and get our information. So thank you for doing
that.
Chairman Leahy. Senator Whitehouse, and then Senator
Klobuchar, and then we will be through.
Senator Whitehouse. Thank you, Mr. Chairman. Mr. Meyer, you
have talked about online piracy being rampant, described how
sophisticated criminal enterprises are behind it. But it is
also an area in which legitimate sophisticated enterprises are
also deeply involved.
If I want to go and download a stolen product of yours, I
get there on a search engine that is a legitimate search
engine, Google, and I download it across an internet service
provider, like AT&T. And if there is a way that I am asked to
pay for it, it is not impossible to have Visa and MasterCard be
there on that pirate Website.
So you have these very legitimate businesses that are
participating in and supporting the online piracy that is
degrading your asset base and stealing your revenues.
Why is this not being adequately worked out in the private
sector between these industries? You say you spend tens of
millions of dollars fighting this issue. I assume a lot of that
goes to lawyers. Everybody knows where the courthouses are.
What are the things that are inhibiting industries like
yours from bringing in Visa and MasterCard, from bringing in
the ISPs, from bringing in the search engines and saying,
``Look, you guys, you cannot keep supporting this in this way.
We are going to ask for a court order,'' and hash it out
through that mechanism?
What are the failures in that traditional, well established
mechanism for private dispute resolution?
Mr. Meyer. Well, I think it is a great question. Having
legitimate enterprises participate in the illegal activity, has
a certain backhanded way of legitimizing it. If you can pay
with your MasterCard, it cannot be illegal.
But in answer to your question, there is nothing. I think
that we are working very hard now, especially with the ISPs in
the first place, to try to make sure that they are policing
their networks in a way to distinguish between illegal activity
and legitimate activity.
One of the technical problems that we have, is that the
illegitimate activity has gotten so facile. You referred before
to taking four or five clicks to get to an illegal download. We
worry that it is just one click.
But the distinction, it is so hard to make the distinction
that we are trying to technically work with them to sort out
how you find these distinctions.
But when we do, we are not finding an awful lot of
resistance on principle. What we are finding is that there are
some technical obstacles that we have to face together.
I will say this, that, clearly, in the last short period of
time, a year or two or three, the involvement, the interest of
the government in protecting intangible intellectual property
has really, I think, weighed heavily on the industry, including
those who might not have been as interested in it before.
So even though we are not specifically asking for
legislation right now, the overall impact of the government's
interest in protecting this industry has had an enormous effect
on the conversations in the private sector.
Senator Whitehouse. Well, we certainly want to help,
because there is a distinct national interest, given what I
consider to be the scale of this theft. I mean, I really do
think that you could take Willie Sutton, Bonnie and Clyde, and
the James Gang and add them all up together and they are penny
ante. They are nothing compared to the scale of the theft that
we are suffering as a Nation right now, and, by and large,
often oblivious to it.
But I still do not--I will just leave you with the thought
that it seems incongruous that with the level of effort that
you have dedicated to this, with the level of stake that you
have in this as a business, with the level of attention that
this gets from Congress, that I could probably leave this
hearing and go to my computer and within a very few clicks, use
Google to get to an illegal Website, facilitated by whoever the
ISP is here, AT&T, Verizon, I do not know, and Visa pops up on
the thing and nobody has--you would have thought that your
lawyers would be there in 30 seconds saying not--as long as I
can find it, I am going to take it and shut it down, because
somehow Google is getting me there.
Somehow the ISP is delivering the service. Somehow Visa is
involved. And if it can be done, it can be cut off, I would
think, and I do not know why it is not being cut off on a much
more aggressive basis.
Mr. Meyer. Well, Senator, we do utilize the takedown notice
provisions of the DMCA. We send out thousands of notices, when
we notice things are up, that they be taken down.
The problem with that as a mechanism is that it is after
the fact and once something is up, it is virally distributed
and there is not much you can do about it.
We are talking about a process here that disables the
enablers. In your example, if you could not go to Google and
search for it, if that were not able to happen, all the other
illegal activity would be prevented.
So that is an enabling practice that we have to look at,
and we are looking at it right now.
Senator Whitehouse. I think we might have just heard a goal
scored, sudden shouting from the anteroom.
Senator Klobuchar. And what people want to hear next are my
questions, I am sure.
Maybe we can get a report, Mr. Chairman.
Chairman Leahy. Hold on. Right here, we have got it.
Senator Klobuchar. You should read it.
Senator Whitehouse. This is chairman's news. If it went the
other way, I would announce it.
Chairman Leahy. On the important things, not that Senator
Whitehouse's question and your answer are not. The U.S. soccer
team has scored a goal and this one is being allowed to count.
So it is U.S.-1, Algeria-0.
[Applause.]
Chairman Leahy. This is somewhat unprecedented for me. Is
this the last minute? Is the game over? Can somebody find out
if the game is over?
[Laughter.]
Senator Klobuchar. You can spruce up my questions if you
could announce that in the middle.
Chairman Leahy. Ten minutes left in the game. Take all the
time you want, Senator Klobuchar.
I might note, on a more serious thing, Senator Klobuchar
and Senator Whitehouse and I are all former prosecutors, and I
have got to tell you, it is not just closing it down, and
important that is. It is not just bringing suits.
I would like to see a few people go to jail. It is theft.
If you steal $1 million, you go to jail. If you steal $10,000,
you are going to go to jail.
I would like to see a few people go to jail for stealing
this stuff. It may focus the attention.
I am sorry. Senator Klobuchar, go ahead, please.
Senator Klobuchar. Well, thank you very much, Mr. Chairman.
And thank you very much, Mr. Almeida, for going through all
those numbers, which it will help me when we are in these
discussions with the Canadians, which I was referencing
earlier, because I think sometimes it just seems like big
corporations and when you start talking about the individual
people and what the residuals mean.
I was also harkening back to my law school days. My senior
essay got published and I would get about--I think like $200 a
year for royalties for Uncovering the Dome, which Mr. Meyer--my
book on the politics behind the building of the Metrodome in
Minneapolis and never got picked up as a movie. But I am still
getting those royalties.
Mr. Meyer. Is it still available?
Senator Klobuchar. Yes, it is. That would be probably be an
ethical violation that I do not want to commit here.
But I wanted to, first, maybe follow-up with what the
Chairman was talking about with the criminal. We actually had a
case set. I think Warner Brothers was aware of it. But a case
in Minnesota where they actually prosecuted someone, I think it
might have been music, for illegally downloads, an individual,
who was just a person that did it, and a jury verdict came in.
I cannot remember what happened on appeal.
But the funny part about the story was my daughter was in
middle school in Arlington, Virginia. We pick her up 1 day and
she said, ``Mom, did you hear what happened in Duluth? You can
get prosecuted.'' The librarian had called them all in and told
them about it.
So I was just wondering if what the Chairman was talking
about here with the prosecution, as difficult as it is and so
many multiple violations that are going on right now, do you
think that is helpful; if education efforts along those lines
are helpful?
Ms. Bienstock. I do think it is helpful. I think it is
helpful, because it enables the conversations to occur in
people's households, like you had in the car, about the
possibility of prosecution for an individual.
While we, as an industry, had issues about suing our own
customers, because these are people who, in theory, wanted
music and, therefore, would have been customers, the net result
of litigation was that there were many conversations not only
in the home, but in schools, and there was an education process
that occurred at a university level about what it meant to
provide bandwidth to college students and then not pay
attention to what they did with it.
So I think that the prosecution efforts have been useful,
but they are limited. It's a game of whack-a-mole. You have to
work with the ISPs to get them to acknowledge that they are
something other than a dumb pipe, and I think that has been a
challenge for us.
They are not--because those people are their customers, I
think there has been an unwillingness on the part of the ISPs
to take responsibility for self-policing without pressure from
the private sector, but that pressure would be greatly enhanced
from the government.
So we are looking for pressure on the ISPs, to address
Senator Whitehouse's point, because we have not been able to do
that alone. We have met with pushback. So getting the
government involved in working with the ISPs would be very
useful for us.
Senator Klobuchar. That would be a much bigger way to do
it, and, also, these organized efforts that we have been
referring to, which are much bigger prosecutions.
Mr. Meyer, I know that the movie industry took a slightly
different approach to going atfer some of this piracy. The
music industry was the first hit by it, just because it was
easier to steal.
Could you talk about what you did, what was the difference
in the approach, and the changes you are seeing when it was,
say, peer-to-peer, which I referenced the bill I have with
Senator Thune, and now it is more about these streaming sites
or Cyberlockers or some of the new ways that people are
stealing things?
Mr. Meyer. Well, peer-to-peer piracy was really basically a
method of trading files and downloading those. So we were
always concerned about download times and at what point it
became inconvenient for people to steal as opposed to buying
legitimate product at--actually, really in answer to your
question, Senator, one of the things that we tried to do was
some of the things I talked about earlier, which is just making
our product available on a wide variety of different platforms
and at very reasonable price points. The price points of the
product that we have produced have really come down in many of
these venues.
So we have, in a certain way, tried to compete with the
pirates in the peer-to-peer world, that required downloading
and time and effort, by making the product more available
legitimately, more useable on a wide variety of platforms.
As the world migrates into a streaming and now a
Cyberlocker world where one or two clicks away and you can have
something that requires no downloading time, that just streams
in real time, and for a small subscription fee to an illegal
subscription site, you can get an unlimited number of illegally
obtained movies.
Our efforts in adjusting our business models and adjusting
our use of the technology to put our product out there are
becoming impaired. So we are now looking for--we are going to
now have to look for government help and more help from the
technology enablers to allow us to really deal with this,
because it has gotten to a brand new level now.
Senator Klobuchar. Are you familiar with the Canadian
situation? Because I think people always think about China and
other countries, but that they do not have good enough
intellectual property laws right now.
While you guys make movies up there sometimes, they have
not put into place the protections. I think people would be
surprised by that.
Mr. Meyer. Well, we were aware a number of years ago. Our
industry has done a lot of production in Canada, motion picture
production, especially television production, and we were aware
a number of years ago that our good neighbors to the north did
not really have in place a camcording law, an anti-camcording
law.
And frankly, thanks to Senator Feinstein and Senator
Cornyn, two members of this committee, in a very, very strongly
worded letter to the appropriate Canadian governmental
official, they put one in place relatively quickly.
Our impression is that they are moving along in that
direction, continuing to move along in that direction, but are
not yet there. I do not have anymore specifics about it,
though.
Senator Klobuchar. Mr. Esper.
Mr. Esper. Yes, Senator. I just wanted to add one point, as
well, to build on what was said here, and that is this problem
is only increasing and increasing exponentially.
As more and more people gain access to the Internet and as
Internet speeds increase, the problem will just continue to
escalate. And it is not just movies and music. I would bet a
good deal of money right now that somebody is online streaming
the FIFA Webcast that you are watching right now, that staff is
watching in the back room.
That signal is being stolen and you cannot capture it, as
Barry said a little while ago, in some of these cases. And that
is happening across industries, across our own sports leagues.
And the problem is also now moving into publishing houses and
e-books across the board.
So when you see the confluence of all these factors, you
really become worried that the 18 million Americans that depend
on IP industries for their jobs and the tens of millions more
that are indirectly employed by these industries, we have a lot
at risk.
Senator Klobuchar. I agree. And again, I really see this as
the key. I commend you for the industries you are in, as we
look at where we have grown and where we should focus our
attention in this country, from medical device to biotech to
high tech to the work in the movie/TV industry.
We have to look at those areas that are growing and
exporting and those are the areas that we want to make sure
that we are protecting, because it is so easy to put such a
deep gash into profits by simply stealing the idea.
So I want to thank you all for what you are doing. I know I
am devoted, as the rest of us are who stayed here, not just to
hear your testimony, but to hear the final World Cup score.
Chairman Leahy. We won. The U.S. won in overtime.
[Applause.]
Chairman Leahy. The U.S. won in overtime.
Senator Klobuchar. Overtime? I thought it was one out.
Chairman Leahy. It was, but they had 2 minutes left, and
they won--we won.
Senator Klobuchar. We won, good.
Chairman Leahy. It would have been two, except for one of
the calls, but I am not going to suggest that anyone would make
a mistake on a call in soccer.
I should also state, just for full disclosure, you talked
about your residuals and Senator Franken his. I also get
residuals from three Batman movies, the last being Dark Knight.
I should also add that every cent of that goes to the
children's library in Montpelier, Vermont, the Kellogg-Hubbard
Library, where I had my first library card when I was 4 years
old, and I use that to encourage kids to read, as they should.
We would be all better off if kids read better.
With that, I thank you all for being here. This has been a
fascinating thing. Obviously, what I am trying to do is build
support for even more and tougher legislation and enforcement
by the Administration.
I applaud both the Republicans and Democrats on this
Committee who have joined so well in that.
Thank you all very much.
[Whereupon, at 12:02 p.m, the hearing was adjourned.]
[Questions and answers and submissions for the record
follow.]