[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
    OFFICE OF THE U.S. INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INTELLECTUAL PROPERTY,
                     COMPETITION, AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 1, 2011

                               __________

                           Serial No. 112-33

                               __________

         Printed for the use of the Committee on the Judiciary


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



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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TOM REED, New York                   LINDA T. SANCHEZ, California
TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
TOM MARINO, Pennsylvania
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

  Subcommittee on Intellectual Property, Competition, and the Internet

                   BOB GOODLATTE, Virginia, Chairman

              HOWARD COBLE, North Carolina, Vice-Chairman

F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
Wisconsin                            JOHN CONYERS, Jr., Michigan
STEVE CHABOT, Ohio                   HOWARD L. BERMAN, California
DARRELL E. ISSA, California          JUDY CHU, California
MIKE PENCE, Indiana                  TED DEUTCH, Florida
JIM JORDAN, Ohio                     LINDA T. SANCHEZ, California
TED POE, Texas                       DEBBIE WASSERMAN SCHULTZ, Florida
JASON CHAFFETZ, Utah                 JERROLD NADLER, New York
TOM REED, New York                   ZOE LOFGREN, California
TIM GRIFFIN, Arkansas                SHEILA JACKSON LEE, Texas
TOM MARINO, Pennsylvania             MAXINE WATERS, California
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

                     Blaine Merritt, Chief Counsel

                   Stephanie Moore, Minority Counsel


                            C O N T E N T S

                              ----------                              

                             MARCH 1, 2011

                                                                   Page

                           OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........     1
The Honorable Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Intellectual Property, Competition, and the Internet........     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Ranking Member, Committee on the 
  Judiciary, and Member, Subcommittee on Intellectual Property, 
  Competition, and the Internet..................................     4
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Member, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........     4

                               WITNESSES

The Honorable Victoria A. Espinel, U.S. Intellectual Property 
  Enforcement Coordinator, Executive Office of the President
  Oral Testimony.................................................     5
  Prepared Statement.............................................     8

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Howard L. Berman, a 
  Representative in Congress from the State of California, and 
  Member, Subcommittee on Intellectual Property, Competition, and 
  the Internet...................................................    26
Material submitted by the Honorable Debbie Wasserman Schultz, a 
  Representative in Congress from the State of Florida, and 
  Member, Subcommittee on Intellectual Property, Competition, and 
  the Internet...................................................    46

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Tom Reed, a Representative in 
  Congress from the State of New York, and Member, Subcommittee 
  on Intellectual Property, Competition, and the Internet........    56
Response to Post-Hearing Questions from the Honorable Victoria A. 
  Espinel, U.S. Intellectual Property Enforcement Coordinator, 
  Executive Office of the President..............................    57
Prepared Statement of the U.S. Chamber of Commerce...............    67


    OFFICE OF THE U.S. INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR

                              ----------                              


                         TUESDAY, MARCH 1, 2011

              House of Representatives,    
         Subcommittee on Intellectual Property,    
                     Competition, and the Internet,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:33 p.m., in 
room 2141, Rayburn Office Building, the Honorable Bob Goodlatte 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Goodlatte, Coble, Chabot, Issa, 
Pence, Jordan, Chaffetz, Reed, Griffin, Marino, Adams, Quayle, 
Watt, Conyers, Berman, Chu, Deutch, Sanchez, Wasserman Schultz, 
Lofgren, and Jackson Lee.
    Staff present: (Majority) David Whitney, Counsel; Olivia 
Lee, Clerk; and Stephanie Moore, Minority Counsel.
    Mr. Goodlatte. This hearing of the Subcommittee on 
Intellectual Property, Competition, and the Internet will come 
to order.
    And I will recognize myself for an opening statement.
    Companies that rely upon strong intellectual property 
protection employ 18 million Americans, account for more than 
50 percent of our exports, contribute 40 percent of our 
economic growth, and 6 percent of our gross domestic product.
    Given these numbers, it is apparent that our continued 
ability to promote creativity and innovation and protect 
American intellectual property lie at the center of vital U.S. 
economic and national security interests.
    But how serious are the challenges to U.S. IP leadership? 
What should be our priorities, and what are the appropriate 
roles of the public and private sectors in preserving our 
competitive advantages and protecting intellectual property?
    I would like to note the intelligence community's analysis 
of one of the evolving threats posed by IP theft. Earlier this 
month, the Director of National Intelligence stated that in our 
interdependent world, economic challenges have become paramount 
and cannot be underestimated, from increasing debt to 
fluctuating growth, to China's economic and military rise. He 
went on to say we are seeing a rise in intellectual property 
theft. Industry has estimated the loss of intellectual property 
worldwide to cyber crime in 2008 alone cost businesses 
approximately $1 trillion.
    We believe this trend has gotten worse. Last year, some of 
our largest information technology companies discovered that 
throughout much of 2009, they had been the targets of 
systematic efforts to penetrate their networks and acquire 
proprietary data. The intrusions attempted to gain access to 
repositories of source code, the underlying software that 
comprises the intellectual crown jewels of many of these 
companies.
    Similar findings were included in the intelligence 
community's 2011 Annual Threat Assessment. It is clear that the 
challenges faced by IP holders are serious and that protecting 
intellectual property has important implications for our 
Nation's economy innovation and national security.
    The U.S. Government clearly has both strategic and 
practical interests in ensuring our Nation's IP laws foster the 
continued development of innovative and creative products here 
at home. We also have obligations to ensure our laws are 
administered efficiently and enforced appropriately.
    In recognition of the need to elevate IP enforcement policy 
on the permanent list of U.S. Government priorities, Congress 
passed the Prioritizing Resources and Organization for 
Intellectual Property Act of 2008, or PRO-IP, signed into law 
by President George W. Bush on October 13, 2008. The effort to 
enact PRO-IP was led by our then Chairman and current Chairman 
and current Ranking Member, Representative John Conyers, Jr., 
and Representative Lamar Smith, respectively. The law followed 
unprecedented efforts by the Bush administration to implement 
new strategies to assist IP owners and improve IP enforcement 
at home and abroad. These included the Strategy Targeting 
Organized Piracy, or STOP, and the formation of the Department 
of Justice's first intellectual property task force.
    A key provision of PRO-IP is the requirement to establish 
the intellectual property enforcement coordinator position, or 
IPEC, in the Executive Office of the President. Congress 
determined this was needed to make certain the official charge 
with coordinating IP enforcement policy across all agencies had 
the requisite authority and independence to transcend agency 
boundaries.
    In September of 2009, President Barack Obama nominated 
Victoria Espinel, the former Assistant U.S. Trade 
Representative for Intellectual Property and Innovation, as the 
first IPEC. She was confirmed in December of 2009. Since 
assuming office, Ms. Espinel has been responsible for 
fulfilling the statutory duties specified in section 301(b) of 
the PRO-IP.
    In June of 2010, the Office of the IPEC published the 
inaugural Joint Strategic Plan on Intellectual Property 
Enforcement which identified 33 enforcement strategy action 
items the Federal Government will take to enhance the 
protection of American intellectual property rights. Several 
are of specific interest to the Subcommittee. These include 
efforts to combat the theft of intellectual property online and 
increase information sharing between law enforcement officials 
and rights holders.
    In February, the office published its first annual report 
on IP enforcement, and the President appointed the IPEC to 
chair two new IP enforcement advisory committees. In addition, 
the office reports substantial progress on developing a white 
paper that will contain specific statutory recommendations for 
improving Federal intellectual property laws and enforcement 
efforts.
    I am told one or two issues need to be finalized, but I am 
hopeful the Members of the Subcommittee may receive a brief 
overview of what is expected.
    As you can see, we have a lot to talk about today, 
especially at a time when this Subcommittee is about to 
undertake hearings examining the ever-growing problem of online 
piracy and rogue websites both here in the U.S. and overseas. 
Ms. Espinel has assumed her duties at a historic and critical 
time. Today's hearing, which represents the first formal 
oversight hearing of the office for the IPEC, will examine the 
work of the office since it was established in 2008. I look 
forward to hearing about the progress of the office, as well as 
new ideas that office has for further protecting the 
intellectual property rights of America's authors and creators.
    Now, I think we still have time before we need to depart 
for votes, and if the gentleman is willing, I will recognize 
the Ranking Member of the Subcommittee, the gentleman from 
North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman, for convening this 
important hearing.
    The Prioritizing Resources and Organization for 
Intellectual Property Act, better known as PRO-IP Act, was 
introduced by then Chairman Conyers and Ranking Member Smith in 
2007. Chairman Goodlatte and I also co-sponsored the bill which 
was signed into law October 13, 2008.
    The PRO-IP Act followed countless studies that demonstrated 
the reliance of U.S. businesses and entrepreneurs on 
intellectual property rights to protect their investments, 
resources, and creativity that in turn feed and grow the U.S. 
economy. Patents, trademarks, and copyrights are the backbone 
of many American enterprises and virtually all innovation. 
However, we found that increasing theft, both within and beyond 
the U.S. borders, cost American jobs and often also threatens 
public health and safety.
    We also recognized that there were major challenges in 
coordinating Federal enforcement of existing laws in support of 
intellectual property rights. Numerous agencies shared 
responsibility for interdiction, investigation, and prosecution 
of intellectual property offenses. To address this disjointed 
system of enforcement, the PRO-IP Act created the position of 
the Intellectual Property Enforcement Coordinator and required 
that it be housed in the Executive Office of the President.
    Today we welcome Victoria Espinel, the Intellectual 
Property Enforcement Coordinator to this inaugural oversight 
hearing of IPEC in the House to tell us what progress has been 
made since her position was created. This will be our first 
opportunity, since the President's State of the Union and 
subsequent issuance of the executive order designating the 
strengthened Federal efforts to encourage innovation through 
vigorous enforcement of our intellectual property laws, to hear 
an Administration official on the implementation of concrete 
steps to ramp up our IP enforcement regime. So I look forward 
to hearing from our witness and yield back the balance of my 
time.
    Mr. Goodlatte. I thank the gentleman.
    It is my understanding that the Ranking Member of the full 
Committee, the gentleman from Michigan, Mr. Conyers, also has a 
statement. And I think maybe we can get that in before we 
depart for votes. Does the gentleman wish to be recognized now 
or when we return?
    Mr. Conyers. I would prefer when we come back, Mr. 
Chairman.
    Mr. Goodlatte. Okay. Well, with that in mind, then I think 
the Committee will stand in recess and when we return, we will 
start with Mr. Conyers or Mr. Smith, if he is here. And then we 
will turn to you, Ms. Espinel. Thank you for your patience.
    [Recess.]
    Mr. Goodlatte. The Committee will come to order, and the 
Chair now recognizes the gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Chairman Goodlatte.
    The only thing I wanted to add in welcoming our witness is 
to, first of all, concur with the comments that I have heard 
from Chairman Goodlatte and Ranking Member Watt, is the 
following. This no doubt talented and charming member raises 
the question for me of is she tough enough for this job. That 
remains to be seen, and perhaps I can become convinced of it 
this afternoon.
    There is something else that I would add and then put my 
statement in the record.
    There are several other things that I would like to see 
happen. First of all, I would think that this office requires 
at least 10 full-time staff people, not detailees.
    And further, I feel that the office of IPEC should be moved 
to the Office of Science and Technology Policy instead of where 
it is.
    Finally, I commend the President for the executive order 
issued several weeks ago, and I think it is an excellent step 
toward combating intellectual property theft in our country and 
abroad. But I think this has to be seriously addressed and not 
just have an office in an organizational chart, and that is 
where I hope this Committee can be effective in making this a 
genuine operation.
    And I welcome the witness and I yield back my time.
    Mr. Goodlatte. I thank the gentleman.
    And it is now my pleasure to recognize the Vice-Chairman of 
the Subcommittee, the gentleman from North Carolina, Mr. Coble.
    Mr. Coble. Thank you, Mr. Goodlatte. I will be very brief.
    Thank you and the Ranking Member for having scheduled this 
very important issue involving a very important issue.
    And it is good to have you, Ms. Espinel, with us today.
    Thank you, Mr. Chairman. I yield back.
    Mr. Goodlatte. I thank the gentleman.
    We have a very distinguished and I think pretty tough, too, 
witness today. Your written statement will be entered into the 
record in its entirety, and we would ask you to summarize your 
testimony. To help you stay within the 5-minute time limit, 
there is a timing light on your table. When the light switches 
from green to yellow, you will have 1 minute to conclude your 
testimony. When the light turns red, it signals your 5 minutes 
have expired, but you are going to have loads of questions to 
get any points you didn't make in your opening statement into 
the record.
    It is our custom on this Subcommittee to swear in our 
witnesses. So before I introduce you, I would ask that you 
stand and be sworn in.
    [Witness sworn.]
    Mr. Goodlatte. Thank you.
    Our witness is Victoria A. Espinel, the U.S. Intellectual 
Property Enforcement Coordinator for IPEC. Ms. Espinel is the 
first person to serve in this important position which 
Congress, through enacting the Prioritizing Resources and 
Organizing for Intellectual Property Act, or PRO-IP Act, 
required to be created in the Executive Office of the 
President.
    Ms. Espinel is well known to the Members of this Committee 
through her several appearances and earlier service as the 
first-ever Assistant United States Trade Representative for 
Intellectual Property and Innovation in the Office of the U.S. 
Trade Representative. In that capacity, she served as the 
principal U.S. trade negotiator on IP and chaired the 
interagency committee that conducts the annual special 301 
review of international protection of IP rights.
    Before confirmation as the IPEC, Ms. Espinel was a visiting 
professor at the George Mason University School of Law. She 
holds an L.L.M. from the London School of Economics, a J.D. 
from Georgetown University, and a bachelor of science in 
foreign service from Georgetown University School of Foreign 
Service.
    We welcome her return to the House Judiciary Committee 
where in 2005 she first testified before Congress and look 
forward to receiving her testimony at the first oversight 
hearing that is devoted to the Office of the U.S. Intellectual 
Property Enforcement Coordinator. Ms. Espinel, welcome.

     TESTIMONY OF THE HONORABLE VICTORIA A. ESPINEL, U.S. 
INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR, EXECUTIVE OFFICE 
                        OF THE PRESIDENT

    Ms. Espinel. Thank you very much.
    Chairman Goodlatte, Ranking Member Watt, Members of the 
Subcommittee, thank you for your continued leadership on 
intellectual property.
    As President Obama said in the State of the Union Address: 
``In America, innovation doesn't just change our lives. It is 
how we make a living.'' Protecting creativity and innovation 
and the jobs, exports, and economic growth that they create is 
what I do every day. It takes effective enforcement to ensure 
that a revolutionary idea can blossom into economic opportunity 
and create the high-paying jobs that will drive our prosperity 
in the future.
    The PRO-IP Act of 2008 created my position, the 
Intellectual Property Enforcement Coordinator, and placed it 
within the Executive Office of the President. Members of this 
Subcommittee were instrumental in creating my position, and I 
am honored to serve as the first coordinator.
    To show the importance the President places on intellectual 
property enforcement, 3 weeks ago he issued an executive order 
establishing a cabinet-level committee, which I will chair, to 
further focus the Administration's IP protection efforts.
    My first order of business upon taking office was to 
coordinate the development of the Administration's Joint 
Strategic Plan. That strategy, which we issued in June, 
resulted from significant public input and the coordinated 
efforts of the Federal agencies. I want to highlight some of 
the concrete steps we have taken to improve enforcement in the 
8 months since we issued the strategy.
    First, we will lead by example and ensure we respect 
intellectual property in our policies and practices. In 
January, we issued a statement setting out the Administration's 
policy to be technology neutral in our procurement and that all 
technology must be properly licensed. We are also reviewing our 
policies on the use of software by Federal contractors.
    Counterfeit products that could harm our military or our 
national security are unacceptable. We are working intensely 
with DOD and NASA and others on a plan to stop counterfeit 
products from entering the military and critical infrastructure 
supply chain and will issue recommendations later this year. I 
look forward to working with you on this important issue.
    Second, we will be transparent so the public knows what we 
are doing and can have input. My office has met and will 
continue to meet with stakeholders as we implement the 
strategy.
    Third, we will we will improve our coordination. We now 
have 30 law enforcement teams in cities across the Nation 
working with State and local law enforcement. We have 
identified 17 countries where enforcement is a priority and the 
embassies there have formed working groups and are drafting 
concrete action plans to address the challenges in those 
countries.
    Fourth, we will enforce our rights overseas. In November, 
USTR concluded negotiations on an enforcement agreement called 
ACTA with 38 countries representing over half of global trade. 
Since June, the U.S. has led and participated in three global 
law enforcement sweeps against counterfeit drugs and online 
piracy, each involving over 30 countries. We are working with 
the agencies and industry to assess China's progress under the 
enforcement campaign announced in October and to encourage more 
action. And USTR just yesterday issued a report on physical and 
online overseas markets that will raise awareness and aid our 
diplomatic efforts.
    Fifth, we will secure our supply chain. That includes 
working to minimize infringing products coming into the United 
States and technology being illegally transferred out of the 
United States. Overall, intellectual property enforcement is 
up. From 2009 to 2010, ICE investigations opened are up more 
than 41 percent. DHS seizures are up more than 34 percent, and 
FBI investigations opened are up more than 44 percent.
    In June and July, ICE and DOJ had two of the largest 
counterfeit goods cases in history, each involving over $100 
million worth of counterfeit goods.
    DOJ and the FBI have made trade secret cases a priority, 
including two recent cases involving the theft of technology 
developed by our automobile industry, one of which involve 
hybrid car technology.
    Securing our supply chain also means fighting infringement 
in the digital world. To do so, we need increased law 
enforcement, voluntary action from the private sector, and 
consumer education. DOJ and ICE have launched ``Operation In 
Our Sites,'' targeting websites used to distribute infringing 
products. We are also working with the private sector to 
encourage voluntary actions that are practical and effective, 
respect privacy and fair process, and protect legitimate uses 
of the Internet.
    In December, we announced that a number of major Internet 
intermediaries agreed to come together as leaders to form a 
nonprofit to take voluntary enforcement actions against illegal 
online pharmacies. By preventing criminals from gaining access 
to consumers and appearing legitimate through the use of 
payment processors, the purchase of ads or a registered domain 
name, these companies can play a critical role in combating 
illegal online pharmacies.
    Voluntary cooperative solutions are a priority focus for 
our office, and we believe, in combination with increased law 
enforcement, voluntary actions by the private sector have the 
potential to dramatically reduce online infringement and change 
the enforcement paradigm. We will continue to push forward with 
voluntary actions on multiple fronts.
    Finally, we will build a data-driven Government to ensure 
our policies are as well informed as possible. We are working 
with leading economists in the Administration on the first-ever 
U.S. Government economic analysis that will measure the jobs 
and exports created by IP industries across our entire economy.
    We are committed to help American businesses, to protect 
American jobs, to increase exports, to protect health and 
safety, and to ensure that innovation continues to drive our 
economic growth. We know we still have much to do, and we will 
continue working.
    Later today, we will deliver to you a strategy to fight 
counterfeit drugs, and in the near future, we will provide to 
you a white paper of legislative recommendations.
    I commend the Subcommittee's leadership and I look forward 
to working closely with you.
    [The prepared statement of Ms. Espinel follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Goodlatte. Thank you, Ms. Espinel.
    I will start the questioning.
    I mentioned in my opening remarks your work on preparing 
legislative recommendations for enhancing IP protections. When 
might we expect to receive those recommendations?
    Ms. Espinel. I hope to have those recommendations to you 
very soon. I think we are very close to completion. It is a 
comprehensive set of legislative recommendations and so it has 
gone through an intense interagency process which is not yet 
completed, but hopefully will be very soon. And we will have 
those recommendations to you as quickly as it is completed.
    Mr. Goodlatte. Thank you. We will look forward to examining 
those.
    This Committee observed that a gap in the criminal law 
discourages Federal prosecutors from pursuing cases of 
unauthorized streaming of television programming over the 
Internet. In fact, we conducted a hearing on related issues 
just over a year ago.
    What are your thoughts on whether Congress should close 
this loophole by providing felony penalties in appropriate 
circumstances?
    Ms. Espinel. We have heard this concern about a deficiency 
in our law related to illegal streaming. We have heard it from 
the industry. We have heard it from law enforcement. It is 
something that we are seriously considering in the context of 
the white paper on legislative recommendations that I 
mentioned. As I said, I hope to have that to you very soon. But 
I think I am safe in saying that this is an issue of great 
concern to us. I think it is critical to helping us fight the 
problem of online piracy, and I hope that we have a 
recommendation to you on that very soon.
    Mr. Goodlatte. Thank you.
    Increasingly we hear that counterfeiting and piracy 
represent a national security threat. Do you agree with that, 
and in what respects does piracy affect our national security?
    Ms. Espinel. I do agree with that, and I am going to answer 
that in two different ways: one, to tell you about an 
initiative that we are already working on; and two, to tell you 
about an initiative that we are just starting. I think I will 
start with the latter.
    There is a number of conversations that we are having with 
the FBI, with NSF, with certain companies that have made clear 
to us that there is a threat to our national security from 
counterfeit products or from other types of IP infringement 
like trade secrets being transferred overseas. So one of the 
things that my office is working on right now is trying to 
assess exactly what the scope of the problem that we are facing 
is and then what we need to do as a Government to address it.
    There is one area of this where we have already identified 
a threat, and we are working intensely with DOD and NASA on how 
to address that. So we have identified a problem with 
counterfeit products coming into the military supply chain. 
That is, as I said, completely unacceptable. We are working 
very intensely with DOD, NASA, and some of the other agencies 
on a plan to address that. We are also working with DOJ and the 
FBI which have made this a priority issue for them in terms of 
law enforcement.
    There are a number of legislative recommendations that we 
are considering in this area, which I hope to have to you 
shortly. And in terms of the overall U.S. Government 
procurement supply chain, we are working on recommendations 
that I am confident that we will have to you within the year, 
if not sooner.
    Mr. Goodlatte. In the plan that you set out last year, you 
proposed to update the executive order requiring Federal 
agencies to use legal software, to also require those doing 
business with the Government to do so as well. Your report said 
in part, quote, to demonstrate the importance we place on the 
use of legal software and to set an example to our trading 
partners, the U.S. Government will review its practices and 
policies to promote the use of only legal software by 
contractors.
    This is a great idea. What is the status of this new 
executive order?
    Ms. Espinel. Well, we think it is enormously important that 
those who are doing business with the U.S. Government respect 
intellectual property. We are also keenly aware that what the 
United States does, in terms of our own policies and practices 
and in terms of the contractors that work with us, can serve as 
an example to other countries around the world. So this is an 
issue that we care about deeply, and I hope that we are soon in 
a position that we can report back to you on the steps that we 
are planning to take.
    But it is very good for me to know that you and this 
Committee are interested in that issue, and I will certainly 
convey that back to the interagency process we have where we 
are discussing this.
    Mr. Goodlatte. We definitely are interested. So, in other 
words, an executive order has not yet been fashioned for the 
President to issue.
    Ms. Espinel. There had been discussion of a number of 
options and updating the executive order is clearly--I think, 
obviously, one of the options that we have discussed, but there 
has been no decision yet as to what the President might do.
    Mr. Goodlatte. Administrations from both sides of the aisle 
and law enforcement agencies have routinely announced their 
intention to dedicate new resources to IP enforcement, 
investigations, and prosecutions. But what is meant by 
``dedicated'' or ``devoted'' resources seems to be amorphous. 
Have you provided any guidance to agencies to ensure that such 
announcements are benchmarked and based on consistent criteria? 
If not, do you think this might be a worthwhile pursuit? We 
hear a lot of people talking about setting priorities, but then 
we do not see a lot behind that.
    Ms. Espinel. Well, hopefully you will see a lot behind that 
in terms of our office. We have talked to a number of the 
agencies, particularly the law enforcement agencies, about 
dedicated IP personnel. I think it has been very clear in the 
conversations that we have had with the agencies that when we 
say dedicated IP personnel, we mean personnel that are spending 
virtually all of their time on intellectual property, that that 
is in fact what they are dedicated to full-time.
    I can tell you that ICE, the Immigration and Customs 
Enforcement, is looking at increasing the number of dedicated 
IP personnel that they have. In fact, in September, they put in 
place their first sort of full-time IP personnel in China. I 
know that the FBI is also seriously considering putting a 
dedicated IP agent in Beijing, which we think would be 
enormously helpful.
    Beyond that, we have also been working with DOJ on putting 
more overseas personnel in place. Now, I think in the case of 
DOJ, it would likely be personnel that had multiple 
responsibilities, but those personnel would be hired with an IP 
background and a significant amount of their responsibilities 
would be devoted to intellectual property.
    In terms of benchmarks, one of the things that we did last 
year was, for the first time, actually canvass the agencies to 
find out exactly what they were spending on IP enforcement and 
where those resources were being spent. That is something that 
we are planning to do again this year. So I would be happy to 
report back to you on the data that we collect at the end of 
that process.
    Mr. Goodlatte. Thank you very much.
    I now recognize the gentleman from North Carolina, Mr. 
Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    And welcome, Ms. Espinel.
    Ms. Espinel. Espinel.
    Mr. Watt. Great to have you here.
    In December, your office announced the formation of a 
private sector nonprofit involving a number of players to try 
to counteract the sale of counterfeit pharmaceuticals. There 
are a number of other segments other than counterfeit 
pharmaceuticals, obviously, where the issue of piracy and 
copyright and other counterfeits are taking place.
    I am wondering whether you see a different set of issues 
related to the pharmaceutical industry and the sale of 
pharmaceuticals as opposed to some of these other things and 
whether you are contemplating doing something similar in other 
segments. And I am also wondering how this plan has progressed 
to this point. So if you can kind of address both of those at 
the same time, it would be great.
    Ms. Espinel. I would be happy to.
    The counterfeit pharmaceuticals raise health and safety 
issues that also, frankly, are raised by other types of 
counterfeited products, although not all types of counterfeited 
products. So that is, I suppose, a difference with counterfeit 
pharmaceuticals.
    That said, my office is committed, as we have said many 
times, to try to reduce infringement across all of our business 
sectors, and it is an amazingly wide array of business sectors 
that have come to us to say that they are suffering from 
infringement.
    In terms of online enforcement, we feel that the types of 
voluntary actions that the private sector said that they would 
take in the context of illegal online pharmacies could also be 
very helpful in trying to reduce other types of online 
infringement. So we are actively engaged in discussions with a 
number of types of intermediaries, including the payment 
processors or credit card companies, for example, with domain 
name registrars, with Internet service providers, with ad 
brokers or the companies that provide for advertising over the 
Internet.
    I think one of the areas that is a priority focus for us is 
trying to make sure that people are not using infringement as a 
way of making money and try to cut this off as a money-making 
venture. So one of the things that my office is very focused on 
is trying to go after the sources of money, and we feel that 
working with Internet intermediaries is one of the ways that we 
can help try to effectively cut this off as a business.
    Mr. Watt. Have you made any progress since December when 
you formed this nonprofit?
    Ms. Espinel. We haven't made any progress----
    Mr. Watt. Any measurable progress.
    Ms. Espinel [continuing]. That I am in a position to 
announce. I think we have had some discussions that are going 
well, but clearly--or at least as I have tried to make clear--
we need to see more action by the private sector. While we have 
had some discussions that seem to be moving in the right 
direction, I think we need for those to be concluded in a 
positive manner. And again, this is a very important focus for 
us, so we will continue to push forward on it. And it is good 
for me to know that you are also interested in it.
    Mr. Watt. How many permanent staffers does your office 
have? And compare that with what you believe you need, if you 
would.
    Ms. Espinel. So my office has me and James Schuelke, my 
confidential assistant who is fabulous. Other than me and 
James, the office is staffed with a number, a few, temporary 
details who have been fantastic, very hard-working, very 
dedicated to the mission, but they are on loan to me from other 
agencies.
    In terms of resources that we need, I think in this fiscal 
environment, obviously, everyone is trying to make do with what 
they have and to get as much out of their resources and to use 
those resources as effectively as they possibly can. We will 
continue to do that.
    I should also note that we have had great support from the 
agencies, and so that has been an enormous advantage and help 
that my office has had in terms of level of commitment and 
support that we have had from the agencies. We will continue to 
assess our resources as we move forward.
    Mr. Watt. So I assume there are some advantages to having 
detailees from other agencies, but when you get people detailed 
from an agency like the Patent and Trademark Office and they 
have a substantial backlog, it raises questions about the 
effective use of people. Can you tell us what the advantages 
are of having detailees and address the concern that that might 
raise about whether some of these other places need the 
employees also?
    Ms. Espinel. I am tempted to kick that question to my 
detail from the Patent and Trademark Office.
    I will just say that David Campos has been very generous in 
giving the office support and sending details to the office 
because I know he has a big job on his hands and likely feels 
that he could use all of his staff. Tom Stoll, who has been in 
the office for about a year now, but is unfortunately leaving 
soon to go back to the PTO, has been an enormous asset. PTO is 
sending over a detail to replace him, and I am confident that--
--
    Mr. Watt. How is that efficient?
    Ms. Espinel [continuing]. The detail will also be an asset.
    Mr. Watt. I mean, it just seems like that would be 
inefficient to keep this revolving door detailee situation 
going.
    Ms. Espinel. Well, I think we have accomplished a lot under 
the circumstances that we face.
    Mr. Watt. I understand that but we are trying to make this 
operation more and more efficient too. And unless there is some 
real advantage to turning the people, the detailees, I mean, I 
don't know what we are gaining from that, which is why I asked 
the question. I was trying to see if there were some advantages 
to temporary detailees, but you haven't addressed that one.
    Ms. Espinel. I think the details that have come to the 
office have been great, and I think the backgrounds that they 
have had--some of them have had IP backgrounds. Some of them, 
frankly, haven't. But they have all done a tremendous job of 
getting up to speed with the challenges of the office and the 
issues that we are facing and have been very, very loyal to the 
office and to the mission and I have to say incredibly hard-
working. I suspect that some of them are eagerly anticipating 
returning to their home agencies and not----
    Mr. Watt. That is all right. Obviously, you are not going 
to answer that question. [Laughter.]So I will just yield back. 
My time has expired.
    Ms. Espinel. I just need time to compliment the details.
    Mr. Watt. I know they have done a great job, but--okay. All 
right. I will let it go.
    Mr. Goodlatte. I thank the gentleman.
    I now yield to the other gentleman from North Carolina, the 
Vice Chairman of the Subcommittee, Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman, our neighbor to the 
north. Thank you, Mr. Goodlatte.
    Ms. Espinel, good to have you with us.
    A key mission of the U.S. Customs and Border Patrol is to 
target and seize imports of counterfeited and pirated goods. 
From 2005 through 2008, there was a steady and dramatic 
increase in both the number and yearly domestic value of 
seizures, with the latter rising from $93 million to $273 
million. In 2009, however, there was a drop in the number of 
seizures and a 4 percent decline in the yearly domestic value 
of seized goods, which you probably know.
    Are you concerned about these declines and what do you 
think accounts for them? What steps should or should have been 
taken to get the Customs and Border Patrol back on the upward 
swing?
    Ms. Espinel. Thank you. So the value of imports did fall 4 
percent in the year that you mentioned, although the value of 
imports overall in that year declined by 25 percent because of 
the economy.
    Mr. Coble. What year was this?
    Ms. Espinel. From fiscal year 2008 to fiscal year 2009. So 
the proportional change in the value of IP was actually much 
less, which I think indicates the priority that was put on 
intellectual property seizures.
    There have been declines in value also, though, from 2009 
to 2010, even though the number of seizures has gone up. And I 
think in that case, the decline in value can be attributed to a 
change in counterfeiter tactics.
    So just to explain that, two of the things the 
counterfeiters are doing right now is they are splitting up 
counterfeit goods and they are shipping them into the United 
States in smaller packages. So that means the individual value 
of seizures can fall. And they are doing this, obviously, to 
try to evade Customs and make it even harder for Customs to 
seize things.
    Another thing that is happening and is happening 
increasingly is that counterfeiters are essentially selling 
direct to consumers. So instead of shipping large pallets 
through Customs that then go to middlemen, they are shipping 
small packages that go direct to consumers. This is a big 
challenge that our Customs is facing, and not just U.S. 
Customs. This is a challenge European customs, for example, is 
facing as well.
    So one of the things that we have been doing is working 
with Customs to see what they need in terms of technology or 
law enforcement tools, including legislative changes to help 
them address this particular problem.
    The one other thing, though, I would mention is that if you 
look at this past year, seizures are up. In terms of the number 
of seizures, seizures are up 34 percent, and I would highlight 
that in terms of sort of critical areas that we are focusing on 
like health and safety and technology, seizures are up 97 
percent.
    Mr. Coble. Thank you.
    This Committee generally, and this Subcommittee 
specifically, has been a strong advocate for the need to 
improve the enforcement of intellectual property rights. 
Indeed, the original PRO-IP bill that led to the creation of 
your position, in fact, and required it to be placed within the 
Executive Office of the President was introduced by our former 
Chairman, Mr. Conyers, and our present Chairman, Mr. Smith. 
Over time, the need to ensure that IP rights are respected and 
enforced is only going to increase in my opinion, as is the 
need to ensure our agencies are working efficiently and 
effectively.
    Let me put this question to you, Ms. Espinel. In your 
opinion, what is the single most important thing that we 
Members who care about strong IP rights can do to ensure your 
office is provided with the resources, certainty, and 
permanence needed to accomplish what we need to do for American 
creators and innovators?
    Ms. Espinel. Well, I would highlight two things, if that is 
acceptable.
    First, I would say in terms of our overall enforcement 
efforts, while enforcement has increased over this past year 
and I can assure you will continue to increase, I think are 
areas where our law enforcement could use more tools. And so 
one of the things that we would really like your help on is 
working with us on legislative recommendations. And I realize 
that we owe you the white paper on legislative recommendations 
that we have been preparing, but hopefully we will have it to 
you soon. And then we would very much like to work with you as 
that moves forward.
    And the second thing I would say is I think it is, as I 
have mentioned, incredibly helpful to us to hear from Members 
directly what their concerns are and to have you highlighting 
the importance of this issue, which is very important to the 
Administration, but we know it is very important to Congress as 
well. Even though we know that, it is always helpful to hear 
that directly. So hearings like this or other ways of 
highlighting the importance of this issue are very helpful.
    Mr. Coble. Thank you.
    Mr. Chairman, I see my red light has illuminated. So I 
yield back.
    Mr. Goodlatte. I thank the gentleman.
    And the Chair now recognizes the gentlewoman from 
California, Ms. Lofgren, for 5 minutes.
    Ms. Lofgren. Thank you, Mr. Chairman, and thanks for this 
hearing. It is helpful to touch base on where we are.
    I note that you have pledged to have transparent 
policymaking and enforcement. And with that in mind, I would 
like to understand better the recent domain name seizures by 
ICE, the so-called Operation In Our Sites. I want to know how 
ICE decided which websites to target, and I am also interested 
in knowing whether there is an assessment when it is a 
copyright case of whether there are affirmative defenses to 
alleged infringement, for example, fair use, and whether a site 
is in compliance with the Digital Millennium Copyright Act 
takedown provisions is considered and whether there is a 
consideration of whether taking down a site will involve 
censorship of material that is protected under the First 
Amendment.
    For example, in the recent domain name seizures, there were 
two hip-hop blogs called OnSMASH and RapGodFathers. I know that 
from my staff, not from my own understanding of rap music. 
[Laughter.]
    And it is my understanding that the sites had no downloads. 
They hosted no copyright material themselves. They were only 
linked to other sites. In fact, one of the sites claimed--I 
read this in the New York Times--that the labels themselves had 
asked them to link to some of the material because they were an 
influential fan site, and both sites claimed that they were 
complying with the DMCA takedown provisions.
    Now, I want to know whether you think it is appropriate for 
ICE to seize the domain names of blogs such as this. Is that 
really a priority for enforcement? And do you have concerns 
about First Amendment implications when blogs such as this are 
seized?
    My understanding is that the top priorities under the act 
are, first, health and safety, links to organized crime, large-
scale commercial counterfeiting and online commercial piracy 
and trade secret thefts or economic espionage. How would this 
operation fit with those priorities and how many--well, I guess 
that is a lot of questions for you to answer.
    Ms. Espinel. So, first, let me say I think copyright 
enforcement, online enforcement, Internet piracy is a big 
issue. It is a big issue for our economy, and I think it fits 
well within the mandate that Congress gave me in the PRO-IP 
Act.
    I think in terms of Operation In Our Sites, as I have said 
repeatedly, we think increased law enforcement has to be part 
of what we are doing to try to battle rogue websites and the 
online piracy and counterfeiting problem that we face with 
other actions as well by the Administration and by the private 
sector, but increased law enforcement needs to be part of that.
    Operation In Our Sites is based on our seizure authority 
and has the due process protections built into it that will go 
along with any seizures.
    Ms. Lofgren. Well, there aren't really any--I mean, they 
have sued the Department and they have had to go to the expense 
of getting lawyers to sue you. But there is no real due process 
provisions.
    Ms. Espinel. Well, actually before any seizure under 
Operation In Our Sites is taken, the agents, working with the 
prosecutors from DOJ, have to go to a magistrate judge to get a 
showing of probable cause before they can take any action 
against the website. And then, as you said, there is also the 
ability to challenge the seizure after the case. That is the 
due process that is built into our----
    Ms. Lofgren. Well, with all due respect, I mean, judges 
sign a lot of things. For example, the FreeDNS takedown. It 
wasn't a copyright enforcement. It was supposedly a child 
pornography enforcement. ICE took down 84,000 websites of small 
business people that had nothing to do with child pornography 
at all and put up a little banner saying this was taken down 
for child pornography, really smearing. If I were them, I would 
sue the Department. These were just small businesses. They had 
nothing to do with anything. And yet, a judge signed that. So 
if that is the protection, it is no protection.
    I want to know what is the Department doing to think about 
the affirmative defenses, to think about--yes, there is piracy 
and all of us are united that we ought to do something about 
piracy. But there is also a First Amendment that you should be 
considering when you go and destroy a small business. Are you 
thinking about that?
    Ms. Espinel. Yes, we are definitely thinking about that.
    I will go back to your question, but just to say for a 
moment, I think one of the things that the United States--the 
United States as a government--can do very effectively in the 
space of online enforcement is take an approach--and we have, 
we believe, a very well considered approach--that will serve as 
an example to other countries. We are a government that really 
cares about due process. We are a government that really cares 
about the First Amendment, and I think what we do is an example 
to other countries but I think a very positive example. And we 
do consider all of those issues. We will continue to. And that 
is one of the reasons I think it is so important for the United 
States to be very active in this space.
    You mentioned a case, an incident recently related to child 
pornography. It is not an IP case, obviously, so I am not 
familiar with the details, although I do know that ICE realized 
that there was a problem quickly and moved quickly over the 
weekend to rectify it. I understand, from talking to our law 
enforcement, that there are safeguards in place in Operation In 
Our Sites to avoid any similar type of mistake from happening.
    And I guess I would just emphasize, as you also alluded to, 
what our law enforcement wants to do is go after criminals. 
That is what they do every day. They are incredibly dedicated 
to that task and I think that is where the Administration is as 
well.
    Ms. Lofgren. I have a lot of other questions and perhaps--I 
know we have an opportunity to submit them for the record.
    But I will just say in closing that there is a lot of 
large-scale commercial piracy that is going on, and the 
Department is doing very little about it. I think that that is 
something that needs attention. And some of the people who are 
into copyright enforcement in Silicon Valley--Mr. Berman, there 
are many of them--thought that--and I can't say what they said. 
It was chicken poo in terms of the report they saw. They 
thought it was small time and the big fish are getting away. 
And I think that that needs some attention.
    I will submit my further questions for the record.
    I yield back.
    Mr. Goodlatte. I thank the gentlewoman.
    The gentleman from Utah, Mr. Chaffetz, is recognized for 5 
minutes.
    Mr. Chaffetz. Thank you.
    I appreciate you being here. My understanding is part of 
your responsibility is regarding domestic but also 
international, and it is mostly that international aspect that 
I would appreciate focusing on.
    And Mr. Coble was getting at this, but help me understand 
the metrics behind some of the numbers. You made a big point in 
your written testimony and your verbal testimony about these 
dramatic numbers and the increases that are happening with ICE 
and the seizures and the arrests are up and the Department of 
Homeland Security's seizures were up. Can you help me quantify 
what those are? I worry sometimes when I hear just percentages. 
I mean, are we going from 12 to 15 or are we going from 12,000 
to--help me understand when you use these numbers, what actual 
numbers are we talking about, not just percentages.
    Ms. Espinel. I know, with respect to the DHS seizures, for 
example, that are up 34 percent--well, my understanding is that 
we are looking at an increase from 12,000 to about 16,000. I 
think your overall point is are we sort of starting from zero 
and therefore----
    Mr. Chaffetz. Yes.
    Ms. Espinel [continuing]. A dramatic increase is not really 
an indication of that much action. But we are not. IP 
enforcement has been a priority for the U.S. Government for 
many years. I think we are starting from a solid base but 
trying to increase dramatically from that.
    Mr. Chaffetz. Can you help me quantify? How much of it do 
you think you are actually getting to? I mean, it is like if we 
were taking an analogy of people speeding down the freeway and 
you say, well, we have been ticketing more often, but still 
everybody is going 90 miles an hour. What percentage do you 
think you are actually getting to when you are actually doing 
these seizures and arrests and all that? How much more is 
getting by us?
    Ms. Espinel. I guess I would say this. One, we recognize 
that even though seizures are up and even though cases are up, 
there is a lot of infringement that we are not catching.
    So let me give you two examples of----
    Mr. Chaffetz. I guess the question is--because my time is 
so short--do you have any metrics that actually quantify the 
actual numbers? And if you do not have them right off the top 
of your head, I understand that. I guess as a written response 
perhaps as a follow-up that is what I would be interested in 
because I think we are all united, both sides of the aisle 
here, in making sure that we do have more enforcement. But it 
is hard to quantify when you use just those percentages. And 
they seem so dramatic. But I want to know much of it are we 
missing.
    Ms. Espinel. I think they are dramatic. We will get back to 
you with the numbers behind the percentage increases.
    I would, though, like to mention that in terms of--I mean, 
one of the things that we are very conscious of is law 
enforcement. By law enforcement, I mean DOJ and FBI and 
Customs, and the agencies where you are seeing those law 
enforcement statistics go up, that in many areas, including in 
the online enforcement area, it is not possible for law 
enforcement to, by itself, be able to deal with the scale of 
the problem that we are facing. And so that is one of the 
reasons that my office has been so focused on and why I have 
mentioned repeatedly in this hearing that we really need to 
have the private sector. We really need to have Internet 
intermediaries working cooperatively with us on voluntary 
solutions because without that, I think it is going to be much 
more difficult for us to effectively address it.
    Mr. Chaffetz. Yes, and there are a lot of distinct----
    Ms. Espinel [continuing]. Go hand in hand.
    Mr. Chaffetz. There are a lot of distinct problems and 
challenges that I have with trying to make sure that these 
people--their being a the law enforcement agency as well. And I 
am very sympathetic to the challenges that that poses upon them 
when the Administration, the law enforcement side, is not doing 
their job. And I hate to put the onus on those individuals. But 
that is another discussion.
    You mentioned verbally--somebody had put their first IP 
person in China. Do you recall that earlier in your testimony 
talking about how many personnel we actually have?
    Ms. Espinel. We have personnel that are overseas in China. 
First of all, I was talking about law enforcement. For example, 
PTO has had people that work on IP enforcement, among other 
things, in China for many years. In terms of law enforcement, 
we of course have law enforcement personnel stationed in China 
who work on a variety of issues, including intellectual 
property, but in terms of having law enforcement that is 
essentially solely dedicated to intellectual property, ICE has 
a solely dedicated person. They made the decision to do that in 
September.
    Mr. Chaffetz. One person.
    Ms. Espinel. And the FBI is putting a person in place as 
well, or they are at least seriously considering doing that.
    Mr. Chaffetz. And, Chairman, I can see my time is running 
up. But to think that we have one person in China who is solely 
dedicated to this and now we are going to get two is a 100 
percent increase. Wow, look at the great dedication. That is a 
shockingly small number. I walked into this hearing not knowing 
that number. It is absolutely stunning to me that we have so 
little focus on that. Somehow we have 2.2 million Federal 
employees and we only got two working in China on this issue. I 
think it is laughable.
    Thank you, Mr. Chairman. I yield back.
    Mr. Goodlatte. I thank the gentleman.
    The Chair now recognizes the gentleman from California, Mr. 
Berman, for 5 minutes.
    Mr. Berman. Thank you very much, Mr. Chairman.
    Good to have you here, Ms. Espinel, again.
    A couple of issues I wanted to try and raise with you. I 
want to deal with sort of the change of distribution of piracy. 
If one is using a search engine and type in the words ``free 
Beatles mp3'' or ``free King Speech movie,'' that person will 
be taken to unauthorized copies of those valuable works. If 
they type in similar wording in blog postings, they may find 
links to unauthorized copies of works and sponsored advertising 
nearby. You have talked about the work on illegal pharmacies 
and on dealing with searches for kid porn.
    And there was an interesting article recently in the New 
York Times about Google and searches involving J.C. Penney. I 
would like to put that article in the record, if that is all 
right. I ask unanimous consent to have that article from the 
New York Times included in the record.
    Mr. Goodlatte. Without objection.
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    Mr. Berman. Thank you.
    Basically Google thought J.C. Penney was gaming the search 
results and took action. The article said one moment J.C. 
Penney was the most visible online destination for living room 
furniture in the country. The next, it was essentially buried. 
That suggests that Google can circumvent organic searches when 
they want to, for example, as the article suggests, take manual 
action. The same thing with respect to advertising provided 
next to those unauthorized links.
    Given your experience with the illegal pharmacies, doesn't 
it stand to reason that they could take similar manual action 
against criminal enterprises engaged in IP theft? Have you 
spoken to any of these search engines or advertisers about 
taking corrective action to prevent IP theft? And can you relay 
whether Google is attempting to address this problem and how 
and what next steps will be taken? And if you could do that in 
a way that gives me a minute to ask one last question, I would 
appreciate it.
    Ms. Espinel. We are talking to a whole range of Internet 
intermediaries, including Google, both in their capacity as an 
advertiser, as you mentioned, as well as others that control 
Internet advertising. And we have raised the issue of search 
with them, and we will continue to do so. So I guess I would 
just say----
    Mr. Berman. And what do they say?
    Ms. Espinel. And I don't want to speak for Google in terms 
of what they are doing. I think it is fair to say that the 
companies that we have talked to, you know, legitimate 
companies, don't want bad actors in their systems. Different 
companies have taken different approaches to how exactly they 
address that. I feel, in the discussions that we are having 
with a whole range of companies, that we are making progress, 
but I think, frankly, it would be premature for me to tell you 
at this point how those conversations are going to end because 
they are still in process.
    Mr. Berman. Okay.
    On another point, not to respond now, but at some point I 
would like a briefing, if I could get it, from your office on 
what the Indonesian--sorry-- not Indonesia--Singapore. 
Singapore is promulgating regulations with respect to licensing 
of television shows that are exclusive. I would like to know 
what we are doing, how those regulations would affect the 
rights of copyright holders to sell their product.
    And my last question. In PRO-IP, we have a sense of 
Congress resolution focusing on criminal intellectual property 
enforcement and really the value of a criminal prosecution, 
both in terms of the justice it seeks for the illegal conduct 
and the people perpetuating it, but also for a tremendous 
deterrent value. There was recently an enormous copyright 
judgment where the defendant who lost the judgment, SAP, 
stipulated to all the facts, which constitute an intentional, 
willful violation of copyrights on software. This is not for 
your response. This seems like a classic case, but there are 
probably other ones as well where a criminal enforcement 
action, where the facts are clear and just out there, really 
has benefits far beyond just that particular case but to all 
those who might be contemplating doing that kind of stuff. And 
I just think that that sense of Congress provision in the PRO-
IP Act is worth taking a look at and hopefully Justice is doing 
that because they can play a very helpful role here on this.
    And I thank you very much.
    Ms. Espinel. Thank you very much.
    Mr. Berman. I yield back.
    Mr. Griffin [presiding]. I would like to just yield myself 
5 minutes and ask a few questions, Ms. Espinel.
    First and foremost, have you ever visited an overseas 
military installation? I would assume maybe you have in 
Afghanistan or Iraq. The reason I raise that is you will find, 
if you go to just about any U.S. base or post in Iraq/
Afghanistan--you will see a lot of pirated materials 
particularly DVD's and CD's but mostly DVD's, and I don't mean 
five or six. I mean thousands and thousands. And I was just 
wondering whether--I mean, it was that way when I was in Iraq 
in 2006. I am wondering if you have ever had any sorts of 
conversations with folks at DOD about that, why we allow that, 
and if there is any conversation about that at all.
    Ms. Espinel. Sure, I would be happy to. If I could just--I 
was going to say something in response to your question. So if 
I could just turn to Mr. Berman for a moment----
    Mr. Griffin. Sure.
    Ms. Espinel [continuing]. To say in terms of the sense of 
Congress and the point you made about even a few criminal 
actions having a deterrent effect that goes far beyond the 
number of those actions, I completely agree with you.
    And I would also say in terms of the level of priority that 
DOJ has put on this issue of IP enforcement, I know that it is 
a priority issue for Attorney General Holder. It is something 
he is very focused on. He has made that very clear to DOJ and 
the FBI. So I am happy to take back to them concerns about 
criminal copyright enforcement, but I also just want to assure 
you that I think he personally and his staff take this issue 
very seriously.
    In terms of the military bases, I have only been on one 
military base installation in the past year. And for whatever 
reason, the problem that you mentioned was not actually in 
evidence in that particular military base, but I believe you 
that it exists. And in fact, we have heard concerns about this 
before. As I think I mentioned, one of the first sort of 
overarching principle we had in the strategy that we issued for 
the Administration is that the United States needs to protect 
intellectual property in what we do to serve as an example to 
other governments and to our citizens, and we take that very 
seriously. We have heard this concern and we are actually 
discussing with the Department of State what can be done about 
it.
    Mr. Griffin. And I would point out that there is a 
distinction to be made between, say, a U.S. military base in 
Germany, for example, where I know of nothing like this going 
on. I am primarily talking about Iraq and Afghanistan where on 
post you will have a PX where you can go in and buy all the 
legitimate DVD's, and then about 100 yards right down the road 
there will be a little office--I mean, an office or a store 
where you can just--even if it is a tiny storefront with just 
stacks of what would be illegal DVD's in the United States. If 
you could take a look at that, I would appreciate it.
    I think I have got a little more time here. I would like to 
ask you about Russia. And we hear a lot about China in the 
context of pirated materials, but I would be interested to hear 
your take on Russia and whether, based on your work, you 
believe--what level of respect they have for the rule of law in 
this area, whether we are making any progress with regard to 
Russia or is it possible that we are sort of putting our 
differences with Russia on these issues--maybe we are putting 
them aside and emphasizing what we may consider more important 
concerns. Could you comment on that?
    Ms. Espinel. Sure, I would be happy to.
    You know, I think with respect to Russia, clearly IP 
enforcement is a big issue there. You asked whether or not we 
have made any progress. I think Russia has recently passed a 
few pieces of legislation that I think are significant and are 
helpful.
    But in terms of enforcement, they still have a big problem. 
And in my experience, in terms of Internet, in particular, they 
have a problem. They have become sort of a safe haven in many 
cases for websites that are distributing illegal products into 
the United States and around the world. So that is a big issue 
for us. That has been a priority focus for the WTO accession 
negotiations, and we have made clear to Russia that we need to 
make progress there.
    I guess the only other thing that I would mention is that 
the Vice President is going to be traveling in March to Russia. 
Vice President Biden cares deeply about intellectual property 
enforcement. He has for many years. And I have discussed this 
issue and I am confident that he will raise it when he is in 
Russia. It is something that he cares about a great deal.
    Mr. Griffin. Great. Thank you.
    Who do we have next? Ms. Chu, you have 5 minutes.
    Ms. Chu. Thank you, Mr. Chair.
    I have questions about international infringement. I know 
that the U.S. Government, through your work and the work of the 
USTR and the work of other agencies, is doing much to press our 
trading partners to respect intellectual property rights. To 
use a recent example, yesterday the Office of the United States 
Trade Representative released the Out-of-Cycle Review of 
Notorious Markets spotlighting more than 30 Internet and 
physical markets that exemplify key challenges in the global 
struggle against piracy and counterfeiting. It identifies these 
very, very blatant sites, the physical markets that range from 
Argentina to Ukraine and Internet sites such as Baidu of China, 
the vKontakte of Russia, to Canada's IsoHunt and Sweden's 
ThePirateBay. And there they are identified just blatantly.
    I am wondering what actions you are going to take since 
they are listed just right there.
    Ms. Espinel. Thank you for raising that.
    So as you mentioned, USTR just yesterday issued its report 
on notorious markets that includes both physical markets but 
also the online markets that you mentioned. I think that this 
report, which is part of the Administration's strategy to put 
out this report, essentially highlighting or naming and shaming 
particular websites will be useful to us partly to help guide 
our diplomatic efforts and make sure that our diplomatic 
agencies are coordinated in raising concerns with other 
governments. I think in terms of public awareness and raising 
public awareness about the dangers of counterfeiting and piracy 
and where those dangers might be found, this report will be 
very useful.
    Ultimately, we need foreign law enforcement to do more, and 
so this report is only part of our efforts to try to get 
foreign law enforcement to take action against sites that are 
trafficking and infringing products. U.S. law enforcement is 
obviously limited in terms of what it can do with respect to 
overseas markets or overseas online markets, but I think the 
USTR report will, hopefully, help raise awareness of that and, 
as I said, is part of our overall strategy to try to get 
foreign law enforcement to take more action here.
    Ms. Chu. Now, since certain sites have been identified, 
should they be accessible in the U.S.? If we are asking other 
countries to enforce against those sites, shouldn't we be 
willing to cut off those sites to the U.S. market?
    Ms. Espinel. Well, first of all, I think the question of 
cutting off sites to the U.S. markets with respect to any 
particular site is a complicated one and a tricky one. That 
said, I think you just sort of honed in on something that we 
think is very important, which is even with these foreign 
websites, to the extent they have access to U.S. consumers and 
to the extent there are things that we can do to try to limit 
the market, including the U.S. market, for foreign websites, we 
think that would be very helpful.
    In other words, even if we can't ultimately eliminate a 
website or take a website down that is based overseas because 
we don't have a jurisdictional reach, if we can do things to 
try to reduce its ability to reach into the United States and 
get products to our own consumers, we think that could be 
enormously helpful and we are trying to work on that in a 
number of ways, including with respect to getting the Internet 
intermediaries to take more voluntary actions. So I think that 
is very important.
    Ms. Chu. Are you talking about only voluntary actions or 
anything more forceful?
    Ms. Espinel. Well, I think, again, you are talking about 
foreign sites. So our law enforcement is limited in terms of 
what they can do. And there may be legislative fixes that would 
give our law enforcement more additional authorities, and we 
would like to work closely with Congress on any ideas that they 
have for legislative fixes.
    But I think assuming the legal regime exists as it is 
today, two things that we can do: one, try to encourage the 
private sector to take steps to reduce the reach to U.S. 
consumers and to try to encourage foreign law enforcement to 
take responsibility for its sites or for activity that is going 
on within their borders and to take action.
    Ms. Chu. Well, let me try this question. President Hu's 
visit provided an opportunity for President Obama to emphasize 
the importance of IP protection to the U.S. He raised this 
concern by noting that Microsoft estimates that only 1 in 10 
users of Microsoft products in China actually pay for the legal 
copies. If American companies are going to compete in the 
global marketplace, we truly have to address this problem.
    So based on your experience, what more can the U.S. do to 
promote intellectual property enforcement in China?
    Ms. Espinel. As you mentioned, during President Hu Jintao's 
visit, President Obama had the opportunity and took the 
opportunity to raise the need for better enforcement by China 
repeatedly and forcefully with China. China has also heard in 
recent months the level of concern from senior Administration 
officials across the Administration. Secretary Geithner, 
Secretary Locke, Attorney General Holder, and others have all 
raised this.
    There are a number of things that I think that we can do to 
try to improve the situation in China. Ultimately, though, 
China needs to take action for itself. Attorney General Holder 
and ICE Director Morton traveled to China in the last 6 months 
to press their counterparts for the need to do more directly. 
It is actually the first time an ICE director has ever gone to 
China.
    In addition to that, while the numbers may not be 
impressive to everyone, trying to get IP personnel, law 
enforcement personnel placed in China--part of the reason that 
we want to do that is because having personnel there on the 
ground can help build the relationships with foreign law 
enforcement that we need in order to get them to take action.
    Beyond that, the JCCP and the SED and President Hu Jintao's 
visit, probably most importantly, was an opportunity--and we 
took that opportunity--to have China make commitments with 
respect to the software problem that you mentioned with respect 
to not tying its innovation policies to procurement 
preferences, which is a very important issue. And so one of the 
things that we need to do as a Government is follow up and make 
sure that China follows through on those commitments.
    Ms. Chu. Thank you. I yield back.
    Mrs. Adams [presiding]. Thank you.
    The gentleman from Arizona, Mr. Quayle, for 5 minutes.
    Mr. Quayle. Thank you, Madam Chairman.
    Thank you, Ms. Espinel.
    I want to go back to the penalty disparity between 
streaming and downloading illegally. And I know that you are 
going to have a white paper and I really look forward to 
reading that. But if you could give me kind of just the bird's 
eye view or the Cliff Notes version of what do you think is the 
correct solution to solve this. Is it just simply making it so 
illegal streaming of copyrighted material is now a felony or is 
it something else that we can kind of get behind? Because it 
doesn't seem like that big of a--not a difficult task to 
actually improve that part of the enforcement provisions.
    Ms. Espinel. Well, far be it for me to comment on what is 
difficult legislatively and not to accomplish.
    I do think having infringement not clearly identified as a 
felony does hamper our enforcement efforts in terms of the 
types of cases that prosecutors are going to focus on in terms 
of the types of penalties that are going to be assessed for 
that activity. So I think that is a significant issue that we 
are considering and, again, hope to have a recommendation to 
you on that very soon.
    Assuming that we and you are in agreement that it makes 
sense to fix this deficiency, then obviously we then need to 
have law enforcement take advantage of that and start bringing 
the cases. So I don't know if that is what you were alluding 
to. That would clearly be part of it or that clearly sort of 
the end result here is to get more law enforcement action. But 
I think one of the things we are seriously considering is 
whether or not this legislative fix would help our law 
enforcement be able to do that.
    Mr. Quayle. And also previously in your testimony, you were 
talking about how the private sector has been helping you, 
especially with pharmaceutical infringements on the Internet. 
What role do you see the private sector helping you in really 
reducing IP Internet theft going forward?
    Ms. Espinel. I think they could be helpful in a number of 
ways, and we are having discussions with, again, various types 
of Internet intermediaries about a whole range of IP 
infringement issues, including copyright issues, trademark 
issues. I think voluntary cooperation has the potential to 
dramatically change things because I think Internet 
intermediaries have the ability to stop infringement from 
taking place. Now, it is very important to us as an 
Administration that whatever voluntary solutions are worked 
out, that they work, that they be practical and efficient, that 
they not be unduly burdensome, and that they bear in mind 
policy principles, even though they are taken by the private 
sector, that are very important to this Administration and to 
Congress such as due process and privacy and other issues. But 
we think there is enormous potential there if the private 
sector, if Internet intermediaries step up and take more action 
to dramatically reduce online infringement.
    Mr. Quayle. And this is going to be my final.
    In 2008, Congress passed the PRO-IP Act which established 
your position, and it also authorized appropriations for the 
Department of Justice. Congress then provided increased 
appropriations to the FBI to combat counterfeiting and IP 
theft. In particular, the FBI created 31 IP-dedicated agents in 
fiscal year 2009, an additional 20 IP-dedicated agents in 
fiscal year 2010. The DOJ also assigned 97 assistant U.S. 
attorneys to work with CHIP units, with all CHIP units having 
two or more attorneys assigned to it.
    However, a recent GAO study stated that along with reports 
from FBI and DOJ, pursuant to PRO-IP, indicate that there has 
not been a corresponding increase in IP investigations by these 
agents. I think this is kind of a concern because Congress was 
very specific and couldn't have been clearer with their 
mandate.
    What corrective actions have you taken to address this 
issue?
    Ms. Espinel. So the FBI had all of their new agents, the 
agents that you referred to, hired, trained, and on the ground 
as of the end of this year. They have been sort of coming in 
throughout the year, but they were all on the ground as of the 
end of this year. Obviously, my office doesn't get involved in 
specific prosecutions or specific enforcement cases, but we 
have been talking to the FBI and DOJ about their game plan 
overall to try to use those agents as effectively as possible 
and see increased enforcement actions coming out of them.
    One of the things that they have done over the last few 
months is set up--and I am probably going to forget the 
technical term they use for them, but essentially set up sort 
of regional task forces or working groups with the new FBI 
agents that are on the ground in some of the key cities to make 
sure that those FBI agents are both working with the other 
Federal law enforcement that are already on the ground and on 
State and local law enforcement to try to multiply the effect 
that they have.
    It is going to take some time, I think, to see prosecuted 
cases because it takes time to investigate cases and develop 
them. But one thing that we know has happened over the last 
year, which I think is a good indicator of where this is going, 
is that the number of cases that have been opened by the FBI 
over the past year has increased dramatically. Now, those 
opened investigations haven't yet turned into prosecuted cases 
because that will take some time, and obviously, let me assure 
you this issue of how those resources are being spent is one 
that is of great importance to my office. So we will continue 
to work with the FBI and DOJ generally on the overall game plan 
for enforcement.
    Mr. Quayle. So you think that as the FBI agents become more 
familiar with various counterfeiting agencies that are out 
there, then the actual efficiency of bringing people to 
prosecution, to trial will actually be increased in the next 
couple years?
    Ms. Espinel. I do.
    Mr. Quayle. Thank you.
    Mrs. Adams. The Chair recognizes the gentleman from 
Florida, Mr. Deutch, for 5 minutes.
    Mr. Deutch. Thank you, Madam Chair.
    Ms. Espinel, thank you for being here, and I think the 
accolades you have been receiving are well deserved.
    I would like to circle back to Operation In Our Sites 
again. I discussed the operation with John Morton when he 
appeared before the Foreign Affairs Committee last year, and I 
appreciate the way that ICE took initiative and found ways to 
tackle the problem within their existing authority. I believe 
that he and his team deserve recognition for innovative and 
aggressive action to stop theft and for doing so, I also 
believe, with appropriate caution and discretion.
    Millions of people have visited the site since the seizure, 
have seen the seizure notices. And so I asked my staff to 
investigate whether Operation In Our Sites was impacting the 
online environment. And I learned something interesting that I 
would like you to address.
    One well known music video website that for years had been 
the source of leaks, making videos available illegally before 
they hit the legitimate marketplace, has apparently modified 
its behavior since the ICE seizures. The owner had a successful 
advertising-based business. They did not want to see that 
jeopardized. So they reached out to the music industry how to 
figure out how to clean up his act, and they took remedial 
action. They continue to operate now legitimately after having 
consulted with industry.
    I wonder if there is other evidence of the deterrent effect 
of increased Federal IP law enforcement like that that you are 
aware of.
    Ms. Espinel. So one of the things that I would point to, 
which you alluded to, in terms of the overall deterrent effect 
is the number of visitors that have gone to the sites and have 
seen banners saying that the U.S. Government, the DOJ, and ICE 
have taken action--I think over 36 million citizens have seen 
those banners at this point, and I think that sends a very 
powerful signal and hopefully acts as a deterrent as well that 
this is a crime that this Administration takes seriously and 
that it is not activity that people should be engaging in.
    Beyond that, I also understand from law enforcement that 
there are a number of sites that have voluntarily essentially 
taken themselves down because of Operation In Our Sites. And I 
think that is a great example of the type of deterrent effect 
that you and that Mr. Berman referred to that can go beyond the 
enforcement actions that are taken.
    Mr. Deutch. Thanks.
    I wanted to broaden the discussion a bit. All of the 
discussion about online music, stolen music, and stolen film 
and stolen books--the discussion always seems to focus on the 
Internet intermediaries and what role the ISP's have in all of 
this. I would like us to focus specifically, though, on 
something else.
    These entrepreneurs who deal in stolen music and deal in 
stolen film start these websites in other countries not because 
they think they are providing a great service to the youth of 
our country who may choose to go to their sites and partake in 
this stolen intellectual property. They do it to make money. 
And if you could speak to conversations that you may have had, 
your ongoing discussions, with the credit card companies whose 
business is crucial to the success of these sites or to either 
the advertisers directly or those advertising firms whose 
business is to get eyeballs. They know that they will get 
eyeballs on these sites, so this is what they pursue. Can you 
tell us about the interaction you have had with those groups?
    Ms. Espinel. Sure, I would be happy to and also hope to be 
in a position to come back to you with more details on that 
soon.
    So we have talked to a number of the credit card companies 
and other payment processors such as PayPal about steps that 
they can take to stop processing transactions from sites that 
are engaged in exactly in the kind of activity you are talking 
about, you know, infringement as a money-making venture, 
infringement as a business. I think those discussions are going 
well. Some of the companies in particular have sort of stepped 
up and said that they want to do more. I think all the credit 
card companies that we have talked to are seriously considering 
what more they can do. And we sort of very intensely engaged in 
those discussions and hope, in fact, to within a very short 
time frame be able to report on more specifics. But it is 
something that we are pushing very intensely.
    The other source of revenue that you mentioned is ads. I 
think that is also a very important one and consistent with our 
overall approach. So we have been talking to a number of ad 
brokers. We have been talking to some of the companies that 
advertise, legitimate companies that advertise on the Internet 
but find their ads ending up on pirate sites where they don't 
want them to be. We are actually convening a meeting later this 
week with a number of companies that have ad networks on the 
Internet to see whether or not there is more that they can do. 
So I would be happy to come back to you on those discussions as 
they move forward, but it is something that we are actively 
working on.
    Mr. Deutch. Thank you, Ms. Espinel.
    I will yield back.
    Mrs. Adams. Thank you.
    The Chair recognizes myself for 5 minutes.
    You mentioned in your testimony that part of the Joint 
Strategic Plan on Intellectual Property Enforcement--one of the 
priorities is make sure that the U.S. does not purchase or use 
infringing products. Can you elaborate on the specific steps 
you are taking or have taken?
    Ms. Espinel. Yes, I would be happy to.
    So in January we issued a statement that went out to all 
the Federal procurement officers of the U.S. Government setting 
out the Administration's policy in two areas: one, for us to be 
technology neutral in our procurement but also reminding the 
Federal agencies that all technology has to be properly 
licensed. So that is something that we already did and is 
publicly available.
    There are at least two other issues in this area that we 
are actually working on. I will mention them briefly.
    One is with respect to our contractors, the Federal 
contractors, and the software that they use. One of the things 
that we committed to do and will do is review our policies with 
respect to Federal contractors that use software. It is very 
important to us that those--not just the U.S. Government but 
those who are doing business with the U.S. Government also 
respect intellectual property. And we hope to have that review 
done shortly.
    And then the second issue I would mention, which I think is 
one of critical importance, is we have a problem with 
counterfeit goods entering the U.S. supply chain across all 
agencies. In our view, that is a particularly critical problem 
when you are talking about the Department of Defense, NASA, our 
military, and our critical infrastructure. So we have been 
working very intensely with DOD and NASA on a number of 
recommendations to try to address that problem. I think we are 
still in the middle of that process but I think it is safe to 
say that that is probably going to be some combination of 
policy changes, possibly regulatory changes, and I dare say 
legislative changes that we would like to work with Congress 
on. It is an extremely complicated issue, but we hope to have a 
set of recommendations to you within the year certainly and 
hopefully as soon as we can.
    Mrs. Adams. I am going to go back to a question you had 
earlier, and I want you to, if at all possible, just answer yes 
or no, just make it that easy. Details. Are they more 
efficient, more effective? Yes or no?
    Ms. Espinel. It is a very difficult question to answer yes 
or no.
    Mrs. Adams. That is what I am looking for. You prefer not 
to answer it?
    Ms. Espinel. Yes. I mean, I think it is difficult to say 
that details are more efficient.
    Mrs. Adams. So they would be less efficient and less 
effective.
    Ms. Espinel. I think what is important, you know, at this 
point we have the budget we have, and we and the team of 
details have been tremendous in trying to work with what we 
have and----
    Mrs. Adams. I understand. I listened to you earlier. I was 
trying to get to the core of it. As you know--and I think you 
understand where I am going with this. So would it be your 
opinion that details are less effective, less efficient. Yes or 
no.
    Ms. Espinel. I think it is difficult for me to answer that 
question.
    Mrs. Adams. Okay.
    The Chair recognizes the gentlelady from Florida, Ms. 
Wasserman Schultz, for 5 minutes.
    Ms. Wasserman Schultz. Thank you to the gentlelady from 
Florida.
    Ms. Espinel, it has been really interesting and helpful to 
listen to your testimony and your answers to questions.
    I appreciate the fact that you have been able to help work 
with companies like MasterCard, American Express, which is a 
constituent company in my district, on not enabling pirate 
websites by helping to make sure that those companies no longer 
process transactions on those sites. So I am glad to hear that 
some of those businesses are beginning to do their part.
    But I want to go back to rogue websites that Mr. Berman 
talked about earlier because many of those get their primary 
source of revenue from advertising. I want to ask unanimous 
consent, Madam Chair, to admit these two screen shots to the 
record.
    Mrs. Adams. Without objection.
    [The information referred to follows:]

    
    
    
    

                               __________
    Ms. Wasserman Schultz. Thank you very much.
    Many people assume that these rogue websites are 
legitimate. There are blue chip companies that are advertising 
on them. They are advertising. Those advertisements appear 
right next to supposedly free content.
    This screen shot right here from the website buzznet offers 
free downloading of the movie ``Hall Pass,'' which just came 
out this weekend and is only in theaters right now. General 
Electric and punchbowl are the advertisements that are right on 
this website. I don't think GE or punchbowl have asked to have 
their ads put on websites that promote illegal content.
    And then this other screen shot is from the blogspot site. 
It also is promoting free live streaming of ``Hall Pass.'' It 
has a series of ads by Google on it. I understand that Google 
owns blogspot. So perhaps there is an inference to be made that 
Google, by putting its own ads on a site that it owns with 
clearly infringing materials, is facilitating this conduct.
    On the same blogspot web page, there is also an ad for 
Starwood Hotels, another blue chip company. I don't think 
Starwood asked to have their advertisement listed on a site 
with illegal content.
    I mean, there are two significant problems. There are more, 
but significant ones include that--I mean, online advertising 
is making piracy profitable, and that is a huge problem. And 
online advertising makes piracy seem falsely legitimate. Those 
are two huge problems.
    I would like a little more detail in your answer than you 
gave to Mr. Berman. What can be done to make the online 
advertising marketplace safe for companies that want to be good 
corporate citizens? They are not asking to have their ads 
placed on these sites, and they are accidentally promoting 
piracy as a result.
    Ms. Espinel. First, let me just say I think you set out the 
problem exactly, and we are in complete agreement. I think 
there are two separate problems with advertising. One is that 
it makes sites appear legitimate when they are not legitimate. 
And I have, in fact, had members of the public say, oh, well, 
this site--look, there are ads on it from, you know, X large, 
legitimate--you know, X company. Therefore it must be legal. 
And we all know that that is not true, but it is not surprising 
that the public might have that reaction. So in terms of 
helping these sites obtain legitimacy and confuse the public, 
that is an enormous problem, and it is also an enormous problem 
because it is a source of revenue. So it allows these sites to 
exist and to keep running.
    In my view--just my view--I think there are sort of two 
different angles that we come at to try to address this 
problem. Part of that is working with the ad networks, so 
working with the companies that place these ads on the sites, 
and seeing if there is more that can be done to make sure that 
ads aren't placed on illegal sites. And part of it is working 
with the advertisers. So working with the big companies that 
you named who I don't believe--and certainly in our discussions 
that we have already started having with them don't want their 
ads on these sites and seeing if there is more that they can do 
to make sure that their ads aren't, in fact, placed on these 
sites.
    So I think it is enormously important, and we are having 
both of those discussions in parallel because I think one of 
those alone might address it, but we are going to try to attack 
this on as many fronts as we can, and we hope to be able to 
make progress on that over the next few months.
    Ms. Wasserman Schultz. Thank you. And I would think that 
there would be a way, a mechanism that you could establish or 
that you could negotiate that could be established where there 
could be more of a review before ads are placed because it 
doesn't appear--there couldn't possibly be one that exists now 
or there wouldn't be as many legitimate ads on illegal sites or 
sites promoting illegal content.
    Ms. Espinel. Yes. I mean, this is not to say we don't think 
something can be done. But I do want to emphasize it is 
technologically complicated, and just because it is 
technologically complicated doesn't mean it can't be 
accomplished. But there are, as I understand, literally 
billions of these ads being placed every day because of the way 
e-commerce works. So it is not a simple endeavor but I think 
there is more that can be done and we are working with the 
companies that we think could help us to see how we can do that 
in a practical and efficient way.
    Ms. Wasserman Schultz. Thank you. I know my time has 
expired and I won't ask the question on the record. But I would 
like to talk to you about the whole issue of taking down sites 
with illegal content and the time frame that sites like Google 
utilize. I mean, there is far too lengthy a period of time and 
a frustrating process in terms of their responsiveness, not 
just Google, but others. So if we could have an opportunity to 
talk about that, that would be helpful. Thank you.
    Thank you. I yield back.
    Mr. Goodlatte [presiding]. I thank the gentlewoman.
    And it is now my pleasure to recognize the Chairman of the 
Government Oversight and Reform Committee, the gentleman from 
California, Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    Ma'am, it has been helpful to wait and listen to some of 
these others. I came in a little late.
    I have got a number of questions. Some of them will be deja 
vu because they have already been asked.
    Ms. Chu of California had asked you about sort of the 
domestic versus overseas, and you didn't really answer the 
question.
    So you have been on the clock for a year and 3 months. You 
have got a year and 11 months left until the President's term 
is over presumably. Unless there is an extension by him or his 
successor, you don't have another term. So you are getting 
closer to halfway through.
    And if I understood correctly--and correct me if I am wrong 
on any of these--Congress gave you significant new resources in 
both FBI and U.S. attorneys and the best answer you could give 
was we have opened more cases but there is a delay in 
prosecution. So you have to wait on that.
    It seems like 2 years after that new authority and the 
ramping up of these individuals--they didn't come like fresh 
out of grammar school. They came as FBI agents with prior 
experience. They came as U.S. attorneys that did not just get 
their law degree yesterday.
    First of all, why is it that you can't show us positive 
results after 2 years and hundreds of millions of dollars 
invested, if you know?
    Ms. Espinel. So, first of all, I want to clarify something. 
I didn't mean to say or imply that there had been a delay in 
prosecutions. I don't think there has been any delay.
    Mr. Issa. No, it wasn't a question of delay though. But you 
had said, look, they have opened more cases, but it is going to 
take time to get to where that turns into prosecutions. The 
Congress invested 2 years ago substantially. It has ramped up. 
These are not brand new people. An assistant U.S. attorney is 
supposed to arrive day 1 as a qualified prosecutor or they 
don't get the job. It's not a beginner's position.
    So my question to you is why is it Congress should not be 
impatient that not enough is happening and that it appears as 
though the status quo of we are forming nexuses, we are 
leveraging more individuals, we are trying to get more for our 
money, when in fact you have 2 years under your oversight--not 
your command, but your oversight--that we are not getting it. 
Do you have an answer to that question?
    Ms. Espinel. So what I want to clarify in terms of the 
timing is that the FBI agents that were put in place were all 
in place as of the end of this year. So they have not been in 
place for 2 years. They have been----
    Mr. Issa. You said 31 and 20. You had 31 for more than a 
year, 20 as of the end of the year. 31 FBI agents on board for 
more than a year and you are not coming to us with tangible 
results.
    I will move on and let you answer for the record, and if 
you don't mind, I will submit a detailed question for the 
record as to that.
    Getting past opened cases, there was a question from the 
gentlelady from Florida, if I understood it correctly--and it 
is an extremely good question that we are interested on both 
sides of aisle. Within your oversight of what should be done, 
you said you don't have jurisdiction overseas, and yet if there 
is a legitimate U.S. ad being placed on a banner of a pirater, 
there is a conduit benefit. There is a benefit to that 
advertiser in that if they get ads, any revenue, anything at 
all, they have benefitted from piracy. They are a willing 
participant in piracy because the reason that ad got a hit is 
because somebody went to the pirated space.
    Have you explored and/or begun any possible prosecution of 
people who advertise and thus make piracy profitable? It is not 
hard. You don't need new jurisdiction, as far as I know--new 
authority. There are laws on the books that would allow that 
prosecution at least to be attempted. Have you looked into it?
    Ms. Espinel. I should speak to DOJ before answering that 
question because there may be pending investigations I would 
not be aware of.
    Mr. Issa. The question really was simple. Have you looked 
into it?
    Ms. Espinel. But what my office has been looking into is 
working with the advertisers to try to have them pull those ads 
off of the sites so that sites are not using them as a viable--
--
    Mr. Issa. Ma'am, your position was created to make a 
difference. If you are negotiating with people who are willing 
participants and are gaining from criminal activity, that you 
agree is criminal activity but you are telling us is outside 
your reach, then in fact you are talking to the enablers and 
telling them to quit enabling. Well, you are not going after 
them as, in fact, criminals in that process because they are, 
in fact, participants and benefitting. Have you explored that 
theory in the 1 year and 3 months you have been on the job?
    Ms. Espinel. Well, we think there is a great deal of 
potential in talking to advertisers or talking to these 
companies and seeing what they will do on their own. That said, 
our overall goal is to reduce infringement. So if that approach 
doesn't work, we will, of course, consider other approaches, 
including possible legislative approaches.
    Mr. Issa. I keep hearing about legislation, but if you 
don't prosecute credit card companies who are participants and 
knowingly participating in this, then you are missing an avenue 
if you are not at least trying it. If you don't go after the 
profits from ads, then you are not trying.
    And on top of that, I will add one more for the record that 
I'm sure you haven't looked at. If the FCC can come out and say 
that they can enforce net neutrality because they have 
authority over the Internet, then the FCC has an absolute right 
to deal with whether access into our country occurs by these 
transmissions, if you will, of material which is illegal, 
unauthorized, and inappropriate. Will you please commit to at 
least talk to the FCC and look at whether or not their 
relationship with ISP's that they now have asserted control 
could, in fact, bring a difference to this on your remaining 1 
year and 11 months?
    I thank the gentleman and yield back.
    Mr. Goodlatte. I thank the gentleman.
    And I now recognize the gentlewoman from Texas, Ms. Jackson 
Lee.
    Ms. Jackson Lee. Thank you very much.
    Mr. Goodlatte. We have 10 and a half minutes remaining in 
the vote.
    Ms. Jackson Lee. Thank you, Mr. Chairman.
    I have a different opinion. I think it is almost night and 
day for the work that you have been able to do over the last, 
say, 8 years as we look back on a previous Administration.
    So let me try and expand what you are doing. I think it is 
important to note I am looking at the spotlight here, and I see 
more a blueprint that talks about the various initiatives that 
you have had. So I am going just allow you to take these two 
questions. I don't want to recount all that you have done. I am 
probably going to want to have maybe a one-on-one meeting with 
you to be able to address some particular issues.
    But there are a lot of countries in South Asia and 
throughout Asia, if you will, that have unfortunately been 
notorious on taking intellectual property, particularly 
software and other hard goods, if you will. Can you give me 
specifically what you think under your leadership and the Obama 
administration and the authority that we have given you in 
Congress that you have actually done to be able to impact on 
that? And forgive me if you have said it, but I want to hear it 
again.
    And the last point I want to ask you is the question about 
this whole issue of jobs. I think intellectual property theft 
is directly connected to American jobs, and I am ravaged about 
the jobs lost because of intellectual property violations and I 
am interested in your Administration and Mr. Obama's 
administration, the President's administration, being called, 
if you would like to say it, ``wild dogs'' on this issue. So my 
question is how many jobs would you estimate would be created 
in the United States in the next year if the Office of 
Intellectual Property Enforcement Coordinator is successful in 
achieve the Joint Strategic Plan and in thwarting 
counterfeiting activities? And do you have job creation in your 
mind as you do your job?
    Ms. Espinel. I have job creation in my mind every day. I 
had job creation in my mind before I took this job. I think 
that was the issue I most want to focus on in terms of sort of 
my own personal success that comes out of this job. I think if 
I leave this job feeling like I saved someone from losing their 
job and hopefully create more jobs for the American people, I 
will feel like this was a success. That is enormously important 
to what we do every day.
    You asked a question about data and the number of jobs that 
are going to be created. That is an excellent question. It is 
not something the U.S. Government has looked at before, but it 
is actually one of the things that my office is doing with the 
Department of Commerce and with a whole group of chief 
economists from across the Administration. We are working on 
what will be the first U.S. Government economic analysis of the 
number of jobs and the number of exports that are created by 
our IP industries across our entire economy. And I think that 
will be enormously helpful to us as we are moving forward with 
policy decisions.
    But job creation is one of the absolute top priorities that 
we have. Increasing exports is also a big priority, but that 
feeds right back into job creation, as you know. In general, 
innovation is incredibly important to our economy. Without IP 
enforcement, we will lose our innovation unfairly to 
competitors overseas. So that is in our mind every day.
    Mr. Chabot. Would the gentlelady yield for just one moment? 
Just very brief.
    Ms. Jackson Lee. I will yield to the gentleman.
    Mr. Chabot. Thank you for yielding.
    I would ask the Chairman if I could ask a question in 
writing and ask for the response in writing.
    Mr. Goodlatte. Yes. We will provide for all Members to 
submit questions in writing within 5 days, 5 days legislative 
days.
    Mr. Chabot. Thank you and I thank the gentlelady.
    Ms. Jackson Lee. My pleasure.
    May I quickly just--you know that--well, let me just say I 
am a believer that the genius of America is founded in small 
businesses and minority businesses. They invent things. Do you 
have a focus in your office? And they are hurt the most. They 
have no big lawyers when their intellectual property is co-
opted. Do you have a strong emphasis on protecting those little 
ones who don't have the resources to protect themselves who 
create major jobs in the United States? Minority, small 
businesses, women-owned businesses.
    Ms. Espinel. I was just going to say small businesses not 
only create ideas but they also create our jobs. So they are a 
big focus for us.
    One of the concerns I have is that as we are pushing to 
increase exports from our small businesses in overseas markets, 
which is very important and we want to do that, but we also 
don't want our small businesses to end up in markets where they 
are not protected and they don't have the resources or the 
experience that some other companies do to try to protect them. 
So one of the things that we are doing with the Department of 
Commerce is to see if there are new and innovative ways that 
our Government can help our businesses so they know when they 
are in those overseas markets that we are 100 percent behind 
them and are supporting them. We don't want to put them in a 
position where the jobs that they create and the exports that 
they are trying to increase are in danger because of IP 
infringement.
    Ms. Jackson Lee. Let me thank the Chairman and the Ranking 
Member.
    Your enforcement is imperative to create and save jobs in 
the United States of America. Let me thank you for your 
service.
    I yield back.
    Mr. Goodlatte. I thank the gentlewoman.
    And I would like to thank our witness, Ms. Espinel, for 
enduring a good battery of questions here, and we are going to 
have some more headed your way too as we will submit some to 
you in writing.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witness which we will forward and ask the witness to respond to 
as promptly as she can so that her answers may be made a part 
of the record.
    Without objection, all Members will have 5 legislative days 
to submit any additional materials for inclusion in the record.
    And with that, again I thank Ms. Espinel and the Members of 
the Committee, and this hearing is adjourned.
    [Whereupon, at 3:52 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

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               Material Submitted for the Hearing Record





                                

   Response to Post-Hearing Questions from the Honorable Victoria A. 
Espinel, U.S. Intellectual Property Enforcement Coordinator, Executive 
                        Office of the President























                                








                                 
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