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

     PROMOTING INVESTMENT AND PROTECTING COMMERCE ONLINE: LEGITIMATE SITES
                           V. PARASITES (PART I & II)

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

                                    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 14 AND APRIL 6, 2011

                                   __________

                               Serial No. 112-153

                                   __________

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

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    20402-0001

                      (COMMITTEE MEMBERS--MARCH 14, 2011)
                           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 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
                       (COMMITTEE MEMBERS--APRIL 6, 2011)
                           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 PIERLUISI, Puerto Rico
    JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
    TED POE, Texas                       JUDY CHU, California
    JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
    TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
    TOM MARINO, Pennsylvania             DEBBIE WASSERMAN SCHULTZ, Florida
    TREY GOWDY, South Carolina
    DENNIS ROSS, Florida
    SANDY ADAMS, Florida
    BEN QUAYLE, Arizona
    [Vacant]

          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

                       BEN QUAYLE, Arizona, Vice-Chairman

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

                         Blaine Merritt, Chief Counsel

                       Stephanie Moore, Minority Counsel

                                C O N T E N T S

                                  ----------

                           MARCH 14 AND APRIL 6, 2011

                                                                       Page

                                    HEARINGS

    Monday, March 14, 2011first date deg.
      Promoting Investment and Protecting Commerce Online: Legitimate
        Sites v. Parasites (Part I)..................................     1

    Wednesday, April 6, 2011second date deg.
      Promoting Investment and Protecting Commerce Online: Legitimate
        Sites v. Parasites (Part II).................................   155

                                    (PART I)

                               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 Lamar Smith, a Representative in Congress from the
      State of Texas, and Chairman, Committee on the Judiciary.......     4

    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..................................     5

    The Honorable Tom Reed, a Representative in Congress from the
      State of New York, and Member, Subcommittee on Intellectual
      Property, Competition, and the Internet........................    12

    The Honorable Howard L. Berman, a Representative in Congress from
      the State of California, and Member, Subcommittee on
      Intellectual Property, Competition, and the Internet...........    12

                                   WITNESSES

    Maria A. Pallante, Acting Register of Copyrights, United States
      Copyright Office
      Oral Testimony.................................................    14
      Prepared Statement.............................................    17

    David Sohn, Senior Policy Counsel, Center for Democracy and
      Technology (CDT)
      Oral Testimony.................................................    27
      Prepared Statement.............................................    30

    Daniel Castro, Senior Analyst, Information Technology and
      Innovation Foundation (ITIF)
      Oral Testimony.................................................    43
      Prepared Statement.............................................    46

    Frederick Huntsberry, Chief Operating Officer, Paramount Pictures
      Oral Testimony.................................................    61
      Prepared Statement.............................................    63

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Prepared Statement of the Honorable John Conyers, Jr., a
      Representative in Congress from the State of Michigan, Ranking
      Member, Committee on the Judiciary, and Member, Subcommittee on
      Intellectual Property, Competition, and the Internet...........     6

                           SUBMISSIONS FOR THE RECORD

    Letter from Timothy Lee, Vice President of Legal and Public
      Affairs, Center for Individual Freedom (CFIF)..................   127

    Prepared Statement of Sandra Aistars, Executive Director,
      Copyright Alliance.............................................   128

    Prepared Statement of A. Robert Pisano, President and Chief
      Operating Officer, Motion Picture Association of America, Inc..   132

    Letter from John Fithian, President and CEO, National Association
      of Theatre Owners (NATO).......................................   138

    Letter from Michael McCurry and Mark McKinnon, Co-Chairmen, Arts
      + Labs.........................................................   140

    Material submitted by MiMTiD Corp................................   141

    Prepared Statement of the Consumer Electronics Association.......   150

    Letter from Kevin Spreekmeester, Vice President of Global
      Marketing, Canada Goose........................................   153

                                   (PART II)

                               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...........   155

    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........   158

    The Honorable Lamar Smith, a Representative in Congress from the
      State of Texas, and Chairman, Committee on the Judiciary.......   159

    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..................................   160

                                   WITNESSES

    The Honorable John Morton, Director, U.S. Immigration and Customs
      Enforcement
      Oral Testimony.................................................   162
      Prepared Statement.............................................   165

    Floyd Abrams, Senior Partner, Cahill Gordon & Reindel LLP
      Oral Testimony.................................................   186
      Prepared Statement.............................................   188

    Kent Walker, Senior Vice President and General Counsel, Google
      Oral Testimony.................................................   200
      Prepared Statement.............................................   202

    Christine N. Jones, Executive Vice President and General Counsel,
      Go Daddy Group
      Oral Testimony.................................................   211
      Prepared Statement.............................................   213

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Material submitted by by the Honorable Bob Goodlatte, a
      Representative in Congress from the State of Virginia, and
      Chairman, Subcommittee on Intellectual Property, Competition,
      and the Internet...............................................   225

    Material submitted by by the Honorable Bob Goodlatte, a
      Representative in Congress from the State of Virginia, and
      Chairman, Subcommittee on Intellectual Property, Competition,
      and the Internet...............................................   244

    Material submitted by 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...................................................   257

                           SUBMISSIONS FOR THE RECORD

    Prepared Statement of the Honorable Darrell Issa, a
      Representative in Congress from the State of California, and
      Member, Subcommittee on Intellectual Property, Competition, and
      the Internet...................................................   271

    Prepared Statement of the Honorable Tim Griffin, a Representative
      in Congress from the State of Arkansas, and Member,
      Subcommittee on Intellectual Property, Competition, and the
      Internet.......................................................   273

    Letter from Maria A. Pallante, Acting Register of Copyrights,
      United States Copyright Office.................................   274

    Prepared Statement of Brian Napack, President, Macmillian........   277

    Prepared Statement of the Motion Picture Association of America,
      Inc............................................................   284

    Letter from David Wallace Cox, President and Chief Enforcement
      Officer, MiMTid Corp...........................................   291

    Press Release from the Interactive Advertising Bureau (iab)......   298

     PROMOTING INVESTMENT AND PROTECTING COMMERCE ONLINE: LEGITIMATE SITES
                             V. PARASITES (PART I)

                                  ----------

                             MONDAY, MARCH 14, 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 4:05 p.m., in
    room 2141, Rayburn House Office Building, the Honorable Bob
    Goodlatte (Chairman of the Subcommittee) presiding.
        Present: Representatives Goodlatte, Smith, Coble, Chabot,
    Reed, Griffin, Marino, Adams, Quayle, Watt, Conyers, Berman,
    Chu, Deutch, and Lofgren.
        Staff Present: (Majority) David Whitney, Counsel; Olivia
    Lee, Clerk; and (Minority) Stephanie Moore, Subcommittee Chief
    Counsel.
        Mr. Goodlatte. Good afternoon. The Subcommittee will come
    to order.
        I will recognize myself for an opening statement.
        For more than two centuries, America's economic strength
    has been built on a firm foundation. The rule of law, respect
    for individuals and private property and the promotion of
    industry through policies that reward creativity and innovation
    are essential virtues that helped a fledgling Nation encourage
    the initiative of its citizens and in time emerge as the most
    advanced and prosperous on Earth.
        But these virtues are not universal. In an increasingly
    connected world, threats that emanate from areas where they are
    not shared can jeopardize our ability to sustain the incentives
    needed to foster growth and development and advance human
    progress.
        These threats create challenges for us in both the physical
    world and the virtual world where the systematic and willful
    violation of intellectual property rights now poses a clear,
    present and growing danger to American creators and innovators,
    U.S. consumers and our collective confidence in the Internet
    ecosystem. Within that ecosystem today, there are legitimate
    commercial sites that authorized goods and services. Indeed,
    many exciting new technologies and websites help content owners
    distribute music, movies, books, games, software and other
    copyrighted works in ways that were not even imaginable 10
    years ago.
        However, there are also what might be called online
    parasites, or rogue sites, that steal the intellectual property
    of others and traffic in counterfeit and pirated goods. The
    Merriam-Webster Dictionary defines a parasite as ``something
    that resembles a biological parasite in dependence on something
    else for existence or support without making a useful or
    adequate return.''
        In a very real sense, that is an apt description of how
    these sites operate. They depend upon the investments,
    creativity and innovation of others while offering nothing of
    benefit in return.
        Indeed, according to the Motion Picture Association of
    America, websites that peddle stolen digital content represent,
    ``the most pernicious forms of digital theft,'' and they
    present a two-pronged threat. They simultaneously weaken the
    film and TV industry by undercutting, eliminating or reducing
    the market for film and television production, which millions
    rely on for jobs, and discourage legitimate companies from
    investing in new business models to provide high-quality
    content and more consumer choice online.
        Frederick Huntsberry, the chief operating officer of
    Paramount Pictures, who is with us today, believes these sites,
    left unchecked, will decimate the motion picture industry. He
    describes an online shadow economy that distributes stolen
    property on a revenue-generating basis, diverting consumer
    spending from the creators into the hands of criminals often
    outside the United States and further robbing Americans of jobs
    and investments in new productions, while depriving governments
    of tax revenue.
        In recent years, these websites have evolved. They have
    become increasingly sophisticated and rival legitimate sites in
    appearance, operation and indicia of reliability. U.S.
    consumers are frequently led to these sites by search engines
    that list them among the top search results. After clicking on
    a site, they may be immediately reassured by the logos of U.S.
    payment processors and the presence of major corporate
    advertising supporting the site.
        But just how popular and profitable are these sites? One
    cyberlocker, that is used to store and stream copyrighted
    content, ranks as the 51st most popular website while a
    business analysis provided by Paramount estimated a minimal
    annual profit of 41 to $304 million for one infringing
    cyberlocker. Who says crime doesn't pay?
        At the request of the Subcommittee, the Acting Register of
    Copyrights, Ms. Maria Pallante, who is also with us today, has
    been meeting with stakeholders to consider the issues
    associated with online parasites. One of her conclusions is
    that these sites exploit highly creative and economically
    valuable copyrighted works because there is no real expectation
    of enforcement. She notes that the most pressing issue is how
    to tackle sites based in foreign jurisdiction and observes that
    the continued evidence of widespread global Internet copyright
    infringement suggests that international cooperation alone
    cannot be the only solution to this global problem.
        Ms. Pallante recommends that copyright enforcement follow
    the money within the Internet ecosystem and cut off these sites
    from U.S.-based revenue. She warns these sites undermine the
    incentives for legitimate commerce and threaten to weaken the
    robust innovation-based markets that exist in the United States
    today.
        This matter has been a top priority and will become a
    principal focus for the Subcommittee in the coming months.
    Today's hearing marks the first of two oversight hearings we
    will conduct to make certain we are fully acquainted with the
    range of issues involved.
        I intend to take the time necessary to build a complete
    record and balance appropriately all the interest before
    introducing a bill that will contain meaningful and effective
    new authority. As this process progresses, I look forward to
    working with Members on both sides of the aisle and with our
    colleagues on the other side of the Capitol, as well as
    stakeholders in the private sector. With 19 million Americans
    employed in IP intensive industries, we owe it to them and to
    ourselves to ensure any legislation we send to the President
    will be effective.
        It is important to note that whatever legislative product
    we enact will be only one solution to this problem. It is my
    strong hope that the stakeholders in content, technology,
    financial and Internet communities will see any legislation we
    enact not as the end of this debate, but as the starting point
    for more discussions among the private parties to find
    additional innovative solutions to the threat of online piracy.
        It is now my pleasure to recognize the Ranking Member of
    the Committee, the gentleman from North Carolina, Mr. Watt.
        Mr. Watt. Thank you, Mr. Chairman, and thank you for
    convening this hearing. There is little disagreement that
    online theft of intellectual property is increasing and
    negatively impacting the rights holders and our economy.
        As the GAO found last year, the problem is sizeable. The
    Internet has provided an explosion of e-commerce and a new
    marketplace for American innovators. Industries with heavy
    intellectual property interests have powered the American
    economy as the Internet has become a dominant venue for
    commerce.
        Today's hearing explores how to promote this commerce
    online by protecting the legitimate sites, but addressing the
    problems that have arisen as what the title to this hearing
    refers to as ``parasites.'' I actually think a more appropriate
    term for them would be pirasites, pirasites, rogue websites,
    mostly foreign, engage in illicit conduct and are generally
    designed to pirate others' property for economic gain.
        A study from Frontier Economics estimates that in 2008
    alone, over $650 billion was lost internationally from online
    counterfeiting and piracy. Counterfeit goods sold online on
    these pirasites posed serious health and safety concerns. Just
    last night, 60 Minutes featured a segment on the sale of fake
    and tainted medicines and medical products that often come from
    illegitimate, online pharmacies.
        Congress must take heed or run the risk that criminals and
    organized crime cartels who profit from piracy and counterfeit
    products hijacked the Internet to the disadvantage of law-
    abiding citizens.
        At a time that intellectual property intensive industries
    provide more than 19 million U.S. jobs and account for more
    than 60 percent of U.S. exports, pirasites and the theft of
    intellectual property represents probably, far and away, the
    largest criminal enterprise in the world, and we are probably
    spending less to prevent it than we spend to counter old-
    fashioned bank robberies. In fact, electronic bank robbery is a
    much more significant threat now than armed bank robbery ever
    was.
        How we preserve due process and free speech rights, as well
    as confront this problem, will be critically important as we
    move forward. We cannot just go around and take sites down
    without due process or probable cause any more than we could
    arrest old-fashioned bank robbers only on suspicion.
        I look forward to hearing each of the witnesses'
    perspectives on the scope of the problem, and I hope that we
    will also hear concrete proposals for legislative solutions to
    help remedy this significant drain on our economy.
        I yield back, Mr. Chairman.
        Mr. Goodlatte. I thank the gentleman. It is now my pleasure
    to recognize the Chairman of the Judiciary Committee and one
    who has been deeply concerned and a leader on this issue, the
    gentleman from Texas, Mr. Smith.
        Mr. Smith. Thank you, Mr. Chairman.
        This important hearing will point out the destructive
    effects of online parasites, those rogue entities that generate
    huge profits from the theft of intellectual property.
        The Internet is a wonderful tool that has forever changed
    the way we communicate, conduct business and relate to one
    another. Most users want a safe computing experience and only
    use the Internet for lawful and legitimate purposes.
        But others employ it as a tool to perpetrate fraud, steal
    identities, traffic and counterfeit or pirated goods or engage
    in even more disturbing crimes such as child pornography. Today
    our focus is on the illicit trade in counterfeit and pirated
    goods. This Committee has long recognized the positive
    contributions of America's intellectual property industries.
    They contribute 19 million jobs, more than 60 percent of U.S.
    exports, support tens of thousands of small businesses and
    generate tens of millions of tax revenue for communities across
    our Nation.
        IP enterprises drive our productivity, produce our
    entertainment and promote our economy, but these industries
    face a threat in the form of exponentially increasing
    counterfeiting and piracy. A recent study revealed that one-
    quarter of global Internet traffic infringes on the rights of
    IP owners.
        Internet piracy is so profitable and pernicious that it
    discourages investments, innovation and licensed content from
    legitimate companies. It is clear that existing laws are
    inadequate and we must do more to confront the problem.
        Just over 2 years ago, then-Chairman Conyers and I worked
    with other Members of this Committee, including the Chairman
    and Ranking Member of the Subcommittee, to enact the
    prioritizing resources and organization for the Intellectual
    Property Act of 2008 or PRO-IP. The purpose of that law was to
    strengthen American industry and protect American jobs by
    improving the government's response to the threats posed by
    counterfeiting and piracy.
        When considered on the House floor PRO-IP, passed by a vote
    of 410-11, a result that demonstrated our bipartisan commitment
    to IP protection. PRO-IP was a good start, but much more needs
    to be done. We will work to strengthen the law to ensure
    criminals who operate online are not able to harm U.S.
    consumers and steal from American innovators.
        Mr. Chairman, it is appropriate that Frederick Huntsberry,
    the COO of Paramount Pictures, is a witness today, since the
    present situation reminds me of a 1987 Paramount motion picture
    that starred one of my favorite actors, Sean Connery.
        In The Untouchables, Connery played Chicago Detective Jim
    Malone. In a memorable scene, Malone tells Eliot Ness that if
    he is serious about getting Al Capone, then he must be prepared
    to pull a gun if one of Capone's gang pulls a knife. You all
    have heard that.
        For IP onlies and other legitimate companies who have had
    to rely upon ineffective online enforcement regimes for far too
    long, it must seem that they have been forced to take a knife
    to a gun fight. It is time we help them fight back. We can no
    longer tolerate a state of affairs that requires U.S. citizens
    to be subjected to the illicit importation of infringing goods
    in violation of Federal law, and the constitutional protections
    that are designed to promote innovation and creativity.
        Mr. Chairman, I look forward to moving strong and
    appropriate legislation through this Committee, and I
    appreciate the witnesses here today and their helping us
    accomplish that goal.
        I yield back.
        Mr. Goodlatte. I thank the Chairman. The Chair now
    recognizes the Ranking Member of the full Committee, the
    gentleman from Michigan, Mr. Conyers.
        Mr. Conyers. Thank you. I wanted to congratulate you,
    Chairman Goodlatte, on the way all of us have come together on
    this important subject. I will put my statement in the record,
    but I would like to get this started by offering a definition
    of rogue site and it will be distributed.
        An Internet site is a ``rogue site'' if it is primarily
    structured in order to, and has no demonstrable, or significant
    commercial purpose or use other than to offer goods or services
    in violation of title 17, including by offering or providing
    access to, in a manner not authorized by the intellectual
    property owner or otherwise by operation of law, copies of, or
    public performance or display of, works protected by title 17,
    in complete or substantially complete form, by any means,
    including by means of download, streaming or other
    transmission.
        Because that is what I think is going to be the important
    consideration for this Committee.
        I join in welcoming, particularly the chief operating
    officer of Paramount Pictures, our register of copyrights and
    our two distinguished experts, David Sohn and Daniel Castro.
        Thank you, Chairman Goodlatte.
        [The prepared statement of Mr. Conyers follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Goodlatte. I thank the Chairman emeritus for his
    remarks. We, by special request and agreement, are going to
    recognize one additional Member on each side of the aisle for
    an opening statement, and then we will ask all of our Members
    to put their statements into the record.
        So the Chair at this time recognizes the gentleman from New
    York, Mr. Reed.
        Mr. Reed. Thank you very much, Chairman, for this special
    consideration. I would like to thank Chairman Goodlatte and
    Ranking Member Watt for calling this important hearing today,
    as well as thank our witnesses who have agreed to participate.
        I firmly believe that criminal domestic and offshore
    websites dedicated to the online theft of music, movies, books,
    pharmaceuticals and other intellectual property harm the U.S.
    economy, our balance of trade, U.S. employment and put
    companies, consumers and other individual artists in New York
    and throughout the country at a severe disadvantage.
        What was once more about college students downloading music
    in their dorm rooms, online piracy has now grown to the point
    to where many U.S. companies and small creators are at risk of
    surviving. I am pleased to see bipartisan legislation
    introduced into the 111th Congress and the U.S. Senate by
    Senators Lee and Hatch. I look forward to working in a
    bipartisan fashion in the House to address many of these same
    issues.
        Many have said that legislative activity aimed at reducing
    piracy could prevent free speech and shut down the
    technological infrastructure which the Internet was built upon.
        I, however, remain convinced that the popularity of the
    Internet, in the first place, is driven largely from the
    availability of high-quality copyrighted content, including
    films and TV programs that are delivered to users in innovative
    ways. I remain concerned these claims have yet to be fully
    vetted and hope this hearing and those that follow touch on
    these claims.
        Finally, I am hopeful for an open dialogue with all
    stakeholders in the Internet ecosystem as it relates to any
    potential legislation out of the Judiciary Committee.
        I am particularly concerned that inclusion of private right
    of action language and the prospective negative impacts on any
    legislation that we put forward. In addition, I amhopeful that
    the Committee will be open to having discussions on search
    engines and how they relate to the popularity of various
    pirated websites.
        I look forward to any comments on these topics at today's
    hearings and I thank the witnesses again, and I thank you, Mr.
    Chairman.
        I yield back.
        Mr. Goodlatte. I thank the gentleman, I think the award for
    earliest riser and greatest distance traveled to be with us
    today goes to the gentleman from California, Mr. Berman. And in
    appreciation for that, we want to recognize him for his opening
    statement as well.
        Mr. Berman. Well, if that is the price of having an opening
    statement, I will exercise it rarely.
        Mr. Goodlatte. I think the strategy, actually.
        Mr. Berman. Thank you very much, Mr. Chairman for holding
    the hearing. I want to associate myself with yours and the
    other opening comments.
        In investigations you follow the money, which is why many
    of us have invested time in trying to understand how those
    involved in the unlawful distribution of trademarked,
    copyrighted works are able to profit from their crimes. Five or
    6 years ago, we worked with Visa and MasterCard to stop the
    misuse of their financial networks by the notorious Russian
    music site, allofmp3.com.
        We also need to turn a spotlight to online advertisers that
    are hoping that effective mechanisms are put in place to ensure
    that some of America's best-known companies and brands are not
    unwittingly helping to make piracy profitable.
        The fight against these parasites or rogue sites is
    difficult, especially when many operate from servers and
    registrars located outside of the U.S. with the goal of selling
    pirated material into the U.S.
        In the Foreign Affairs Committee, the IP coordinator,
    Victoria Espinel, and the ICE Director John Morton describe the
    Administration's innovative efforts to combat counterfeiting.
    They are trying new tactics because the anti-piracy tools we
    adopted in the past are inadequate to confront the crimes of
    today. As we evaluate new legislative tools, I have been
    wrestling with how to define the targets narrowly enough so
    that we can, on the one hand, rein in truly knowing infringers
    without leaving loopholes that provide a roadmap to criminals
    or, on the other hand, to put law-abiding sites at risk.
        I am also wondering how we set up a streamline process to
    address the whack-a-mole problem for seized sites that pop back
    up under a different name. By and large, I trust prosecutors to
    exercise their authority and discretion. Given the growth of
    online theft, the Justice Department may have even been too
    cautious for too long, but we must balance aggressive
    enforcement with real due process.
        And, lastly, as a special and an especially tough question
    for me is whether, due to the lack of resources and competing
    priorities at DOJ, we should take some of the responsibility
    off law enforcement by setting up a mechanism that allows
    private parties to bring the kinds of actions that ICE is now
    bringing to protect their own property. There aren't any easy
    answers, no silver bullets, but it is long past time for saying
    ``no'' to every new idea.
        Thank you, Mr. Chairman.
        Mr. Goodlatte. I thank the gentleman. We have a very
    distinguished panel of witnesses today. Their written
    statements will be entered into the record in their entirety,
    and I ask the witnesses to summarize their testimony in 5
    minutes or less to help you stay within that time, there is a
    timing light on your table. When the light switches from green
    to yellow you have 1 minute to conclude your testimony.
        When the light turns red, it signals your 5 minutes have
    expired.
        And before I introduce our witnesses and as is customary
    for this Committee, I ask that they stand and be sworn.
        [Witnesses sworn.]
        Mr. Goodlatte. Our first witness is Maria Pallante, a
    senior adviser to the Librarian of Congress and the Acting
    Register of Copyrights, a position she temporarily assumed at
    the beginning of 2011.
        The Register of Copyrights is a unique and important
    position. Among other duties, the register serves as the
    principal adviser to Congress on matters of copyright policy.
    Ms. Pallante has spent much of her career in the office where
    she previously served as the associate register for policy and
    international affairs, deputy general counsel and a policy
    adviser.
        In addition, Ms. Pallante spent nearly a decade as
    intellectual property counsel and director of licensing for the
    Guggenheim Museums in New York. She earned her JD from George
    Washington University and her bachelor's degree from
    Misericordia University, where she was also awarded an honorary
    degree of humane letters.
        Our second witness is David Sohn, senior policy counsel and
    director for the Center for Democracy and Technology, CDT's
    project on intellectual property and technology. Prior to
    joining CDT, Mr. Sohn worked for nearly 5 years as commerce
    counsel to Senator Ron Wyden. Before that, he practiced law at
    a Washington D.C. Law firm. He earned his JD from Stanford Law
    School and his BA degree from Amherst College. Mr. Sohn has
    also a degree from the London School of Economics.
        Our third witness is Daniel Castro, a senior analyst with
    the Information Technology and Innovation Foundation, ITIF.
    Before joining ITIF, Mr. Castro worked as an IT analyst at the
    U.S. Government Accountability Office where he audited IT
    security and management controls at various government
    agencies.
        Mr. Castro was also a visiting scientist at the Software
    Engineering Institute in Pittsburgh. He earned an MS in
    information security and management from Carnegie Mellon
    University and a BS in foreign service from Georgetown.
        Our final witnesses is Frederick Huntsberry, the chief
    operating officer of Paramount Pictures, where he is
    responsible for strategic planning and operations for the
    studio. Prior to joining Paramount, Mr. Huntsberry spent nearly
    a decade serving in a wide variety of executive and senior
    management positions at NBCUniversal and affiliated companies
    as well as at Vivendi Universal.
        He also spent over a dozen years with General Electric's
    Europe division. Mr. Huntsberry has a bachelor's degree with a
    concentration in finance from Boston University.
        We welcome all of our witnesses to the Subcommittee on
    Intellectual Property, Competition and the Internet today, and
    we will begin with you, Ms. Pallante, welcome.

    TESTIMONY OF MARIA A. PALLANTE, ACTING REGISTER OF COPYRIGHTS,
                     UNITED STATES COPYRIGHT OFFICE

        Ms. Pallante. Thank you, Mr. Chairman. I would like to
    express my gratitude to you and Ranking Member Watt for having
    this hearing today, and for elevating the importance of
    copyright protection in the context of online commerce.
        I also would like to say that my office greatly appreciates
    the support of Chairman Smith and Ranking Member Conyers on
    these issues.
        As you know, the U.S. Copyright Office is undergoing a
    leadership transition following the retirement of Marybeth
    Peters, and I want to take a moment to assure you that our
    staff is very busy carrying out the work of the office,
    including registering copyrights, eliminating the backlog,
    securing works for the Library of Congress and, perhaps most
    relevant for this hearing, studying and advising on domestic
    and international copyright issues.
        Copyright promotes innovation, by extending the number of
    exclusive rights to creators, including the rights of
    reproduction, distribution, the right to make derivative works,
    and in some instances, the rights of public performance and
    public display. Our law grants these rights, but they are of
    little value to anyone if they cannot be effectively enforced.
        There is nothing redeeming about parasites or rogue sites
    that are entirely or substantially committed to infringement.
    They exploit copyrighted works with impunity, because they have
    little or no expectation of enforcement. And to be clear, we
    are talking about activity that does not constitute fair use
    and cannot qualify for any other defense available to good
    faith actors under the law.
        In support of the Subcommittee's work on this issue, my
    staff and I have met with a broad spectrum of stakeholders, and
    we will continue to do this in the weeks ahead. The issues are
    complex but they present an opportunity for Congress to manage
    the relationship between technology and intellectual property
    as it has done many times before.
        Rogue sites can be located anywhere in the world and have a
    devastating effect on U.S. books, software, music, movies and
    television programming. Unlike traditional brick-and-mortar
    infringers, they can be quite difficult to identify and locate
    and, when pursued, may simply and quickly reappear under
    another domain name.
        Those based outside the United States lack sufficient ties
    to be compelled to appear before U.S. courts, or to allow the
    enforcement of a judgment against them. It can be difficult for
    rights holders, especially small rights holders, to litigate in
    foreign countries or to enforce a judgment abroad.
        So what can be done? Solutions that follow the money, for
    example, sales, subscriptions and advertising revenue, may be
    most successful. Payment processors like credit cards and
    PayPal are essential to the Web-based commerce we all enjoy,
    but rogue sites have no business using trusted companies to
    process profits. Likewise, many rogue sites display
    advertising, allowing them to run lucrative businesses using
    copyrighted works as the hook.
        Search engines are perhaps the most important, perhaps the
    most impressive player in the ecosystem. Without them, the
    Internet would be almost impossible to navigate. Unfortunately,
    both paid and unpaid search results routinely point people to
    rogue sites.
        One solution might be to give enforcement entities like
    Immigration and Customs Enforcement increased authority. For
    example, ICE could request a court order requiring the payment
    processors and ad networks to sever their financial ties to
    rogue actors. Congress might also review the role of domain
    registrars, registries and Internet service providers.
        A harder question for Congress is whether it is reasonable
    and viable to ask search engines to participate in a solution
    by suppressing search results that send users to rogue sites.
        Safeguards are important. Some have warned that some of the
    proposed remedies would risk fragmenting the Internet's global
    domain name system. These assertions would require careful
    examination. It might also be helpful, however, if the dialogue
    that Congress seeks includes the counsel of experts who can
    objectively evaluate these relevant technical facts.
        Principles of due process and freedom of expression are
    also critical. Even the worst of the worst should receive
    notice as well as an opportunity to be heard, and relief should
    be narrowly tailored. However, injunctions have long been used
    in copyright cases, and we do not believe that an order that
    shuts down a web site dedicated to infringement would violate
    the First Amendment.
        Mr. Chairman, thank you again for inviting me to testify,
    and I await any questions that you or the Subcommittee may
    have.
        Mr. Goodlatte. Thank you, Ms. Pallante.
        [The prepared statement of Ms. Pallante follows:]

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                                   __________

        Mr. Goodlatte. Mr. Sohn, welcome.

      TESTIMONY OF DAVID SOHN, SENIOR POLICY COUNSEL, CENTER FOR
                     DEMOCRACY AND TECHNOLOGY (CDT)

        Mr. Sohn. Thank you, Chairman Goodlatte, Ranking Member
    Watt, Members of the Subcommittee. On behalf of the Center for
    Democracy and Technology, thank you for the opportunity to
    participate in today's hearing.
        I would like to say at the outset that CDT recognizes the
    problem posed by online infringement. Large-scale copyright
    infringement affects not just rights holders, but also the
    growth of new media, e-commerce and online expression, all of
    which are values that CDT works hard to promote.
        The main point of my statement today, however, is to
    emphasize that the tactics chosen to fight infringement matter
    a great deal. Some tactics might be superficially attractive,
    but would not work very well in practice. Some tactics could do
    a lot of collateral damage, for example, by inadvertently
    impairing lawful online speech, lawful online communications
    tools, or by undermining cybersecurity.
        And some tactics, particularly the domain name focused
    tactics that I discuss at length in my written testimony,
    suffer from both problems. They won't have much impact on
    infringement, and they risk doing significant inadvertent harm.
        What I would like to do with the rest of my time is briefly
    list some general principles that Congress should keep in mind
    as it considers policy approaches in this area, and then turn
    to the specific question of domain name blocking and domain
    name seizures.
        First in general. One, enforcement tactics should keep the
    targeted focus on the true bad actors and be careful to avoid
    impact on lawful businesses and speech. Doing that requires a
    narrow focus on purposeful wrongdoers, and it requires
    sufficient due process to avoid mistakes.
        Two, proposals for a new law in this area really, as in any
    area, should be subject to careful cost-benefit analysis. If
    there are policies that offer small or ephermal gains at high
    cost, that obviously doesn't make much sense.
        And, three, when the infringers are overseas, cross-border
    cooperation is essential to stop the illegal activity at its
    source, and shut down the wrongdoers for good. Congress should
    not assume that the best approach to foreign infringement is
    necessarily a new domestic law.
        Now, let me turn to the specific question of going after
    infringement websites by blocking or seizing their domain
    names. As I think the Members of this Subcommittee know well,
    the Senate Judiciary Committee last year considered legislation
    to expand this practice, by, among other things, asking
    Internet service providers to block domain name lookup
    requests.
        The first thing to understand about this tactic is that it
    does not actually remove bad sites from the Internet. Nothing
    gets shut down. The servers and all the infringing content they
    contain are still there online.
        If the domain name has been seized, the site operator can
    quickly hop to a new one, this time using a registrar outside
    U.S. jurisdiction. And as for the users, my testimony lists
    several completely easy ways they could reach a site whose name
    has been blocked or changed. The ways aren't highly technical,
    but for those users to whom it still seems complicated,
    software tools would quickly spring up to automate the process.
        So the bottom line is that domain name tactics will have
    rapidly diminishing returns. The more common the interference
    with the domain name system, the more these work-arounds will
    go viral, and the more they will become routine. And I think at
    the end of the day, any actual impact on infringement will be
    fleeting at best.
        Meanwhile, domain name tactics risk collateral damage in a
    number of areas. First, the tactics will have some impact on
    lawful speech. It is important to realize that targeting a
    domain name affects all the content at that domain. It is
    different than, for example, the DMCA notice and take-down
    process where only the specific infringing material is
    targeted.
        Plus there are many domains that are shared by literally
    thousands of individual sites, and we have already seen
    concrete examples of mistakes and overbreadth because of this.
    In February, ICE mistakenly seized a domain with 84,000 sub-
    domain registrations. The result was that numerous, innocent
    people, personal bloggers, small businesses and so forth, had
    their websites replaced with a banner that read, essentially,
    this site has been seized due to child pornography. Needless to
    say, that is a very damaging allegation to have made against
    one.
        Second, there are serious technical and cybersecurity
    concerns. For example domain name blocking is technically
    incompatible with DNSSEC, which is a standard for protecting
    the security of the domain name system that has been a decade
    in the making and is just rolling out. In addition, the
    technologies that users--or, excuse me, the techniques that
    users would employ to circumvent blocking would create new
    cybersecurity risks as well.
        Finally, targeting domain names of purely foreign sites
    would encourage a dangerous jurisdictional scrum
    internationally with each country potentially trying to use the
    domain name system to enforce domestic law against foreign
    sites so that Congress has to consider the international
    implications and the precedent it would be setting.
        For all of these reasons, I believe that codification and
    widespread use of domain name focused tactics would fail any
    serious cost-benefit analysis, and I would urge Congress not to
    go down that particular path.
        Thanks for the opportunity to appear here today.
        Mr. Goodlatte. Thank you, Mr. Sohn.
        [The prepared statement of Mr. Sohn follows:]

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                                   __________

        Mr. Goodlatte. Mr. Castro. Welcome.

        TESTIMONY OF DANIEL CASTRO, SENIOR ANALYST, INFORMATION
              TECHNOLOGY AND INNOVATION FOUNDATION (ITIF)

        Mr. Castro. Chairman Goodlatte, Ranking Member Watt, and
    Members of the Subcommittee, I appreciate the opportunity to
    appear before you to discuss strategies for dealing with these
    so-called parasitic, or rogue sites, on the Internet. These
    websites steal American and intellectual property either
    through engaging in digital piracy or selling counterfeit
    goods.
        Rogue sites stunt economic growth, eliminate American jobs,
    and put U.S. consumers at risk. The problem of digital piracy
    has become so pervasive today that one in four bits traveling
    on the Internet is infringing content.
        With just a few clicks, Internet users can download pirated
    copies of full-length Hollywood movies, watch unauthorized
    video streams of live sports games, and illegally download
    software to use on their computers. Sometimes it is even easier
    to find pirated content on the Internet than legitimate
    content.
        To give just one example, I recently performed a Web search
    for ``watch Inception online,'' and there was not a single link
    to a legitimate website in the first two pages of results.
    Instead, I received a list of rogue sites that earned, had
    revenue every time a user watches the movie illegally.
        Consumers shopping online are also exposed to counterfeit
    shoes, counterfeit goods, including prescription drugs,
    cosmetics, handbags and shoes. Not only are these goods,
    counterfeit goods, often of poor quality, many counterfeit
    items such as infant formula or baby shampoo have been found to
    be harmful to human health.
        Here, too, the problem is substantial. A recent study found
    that traffic to 48 sites selling counterfeit goods averaged
    almost a quarter of a million visits per day. This translates
    into serious consequences for our economy. One groups estimates
    the counterfeiting has directly resulted in the loss of more
    than 750,000 jobs.
        Currently rogue sites operate in a low risk, high reward
    environment. Site operators, especially those outside of the
    United States, face few personal risks from law enforcement and
    encounter few, if any, barriers to distributing illegal content
    online. We need to change the equation.
        More can be done to help reduce online infringement,
    including the following, create a process by which the Federal
    Government, with the help of third parties, can identify
    websites around the world that are systematically engaged in
    piracy or counterfeiting; enlist ISPs to combat rogue sites by
    blocking them, implement notice and response systems for
    repeated infringers and impose data caps where necessary;
    enlist search engines to combat IP theft by removing rogue
    sites from the search results; Require ad networks and
    financial service providers to stop doing business with
    websites supporting IT theft; create a process so that the
    private sector can consult with government regulators on
    proposed uses of anti-piracy or any counterfeiting technology;
    use NSF or NIST to fund anti-piracy and anti-counterfeiting
    technology R&D; and, finally, pursue global framework to
    protect IP internationally, and impose significant pressure and
    penalties on countries that steal from the United States.
        The purpose of these actions should not be to target minor
    violations of the law, but rather to target websites primarily
    designed to steal intellectual property. New tools are
    especially needed for foreign rogue sites such as the Pirate
    Bay, a Swedish site dedicated to stealing software, movies,
    music, video games, books and other digital content.
        One way to address these sites is to block them at the DNS
    level. DNS is like the global phone book for the Internet where
    providers use the number that--provide users the number that
    corresponds to each name. Using DNS to block rogue sites is
    certainly straightforward.
        DNS servers can be instructed to no longer resolve an IP
    address when users look up the domain of a known rogue site.
    Without this IP address, users would not be able to go on and
    visit these sites. Basically this would be like taking a list
    of criminal organizations out of the phone book.
        Some opponents of better enforcement of IP claim this will
    disrupt the Internet. I am here to tell you this claim is 100
    percent false. The simple fact is that using DNS to block
    access to websites or servers is not particularly new or
    challenging. DNS redirection has been used for many years to
    block spam and bot nets and to protect users from malware. It
    is also widely used to provide parental control filters,
    correct typos in URLs and to provide improved search results.
        Another objection some critics make is that blocking rogue
    sites contradicts the idea of a free and open Internet.
    However, websites that egregiously violate the law at the
    expense of American consumers and American workers have no
    place on the Internet. Democratic nations are well within their
    rights to use clear and transparent legal means to enforce IP
    rights online.
        The responsibility for maintaining the Internet falls upon
    each user, each service provider and each business and
    institution that uses it, operates it and profits by it. I
    encourage you to put in place the frameworks and policies
    needed to facilitate and encourage all actors within the
    Internet ecosystem to take some measure of responsibility for
    maintaining its integrity and protecting consumers.
        Thank you.
        Mr. Goodlatte. Thank you, Mr. Castro.
        [The prepared statement of Mr. Castro follows:]

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                                   __________
        Mr. Goodlatte. Mr. Huntsberry, welcome.

                  TESTIMONY OF FREDERICK HUNTSBERRY,
              CHIEF OPERATING OFFICER, PARAMOUNT PICTURES

        Mr. Huntsberry. Thank you, Chairman Goodlatte, Ranking
    Member Watt, and the Members of the Subcommittee for holding
    this important hearing. I am Frederick Huntsberry, Chief
    Operating Officer at Paramount Pictures, and I appreciate the
    opportunity to appear before you today.
        I am here to discuss the theft of motion pictures and other
    American-made products via the Internet, the devastating impact
    the business of theft has on the U.S. economy, and the need for
    legislation to enforce the rule of law on the Internet.
        An online shadow economy has emerged that operates in
    parallel to our legitimate economy. In this online shadow
    economy, every single film we distribute is stolen and then
    illegally made available online. Other forms of content like TV
    shows, music, games, books and software are also illegally
    distributed for profit.
        The U.S. film industry creates jobs and tax revenue across
    America ranging from advertising expenditures to employment at
    movie theatres to retail jobs selling DVDs. But it is often
    overlooked that motion pictures are shot in all 50 States,
    creating local jobs, supporting local small businesses and
    generating significant revenue and tax dollars all across the
    country.
        A typical Paramount motion picture will employ anywhere
    between a few hundred to many thousand American workers. We
    also spend money in States across the country. Last year ``True
    Grit'' was shot in Texas and New Mexico, adding an estimated
    $16 million to those local economies. ``The Last Airbender''
    was shot in Pennsylvania, adding an estimated $72 million to
    the local economy.
        Paramount embraces technology, and we believe that
    consumers will increasingly choose to view our films via
    authorized Internet distributors like Netflix and iTunes.
    Already today, we license our films to more than 200 online
    digital distribution platforms across more than 70 countries
    covering more than 750 films in more than 25 languages.
        The online illegal shadow economy does not create any
    American jobs. It does not reinvest any revenue in the creation
    of new films or goods. It does not pay taxes and it does not
    contribute to the U.S. economy. Instead, it steals from the
    U.S. economy and enriches thieves.
        Today an online search for movies leads consumers away from
    legitimate services by providing results for numerous sites
    that lead the consumer to stolen content. It is so simple and
    convenient that consumers may never know the difference. Some
    of these websites look like legitimate sites, accepting credit
    cards and displaying ads for well-known products. Further
    examples of these are in my written testimony.
        Let me draw your attention to the screens in the room. Just
    to give you an example how simple it is for a consumer who is
    looking for legitimate ways to stream content online to find
    illegal content. So you can go to Google and type in
    ``stream,'' just the word ``stream,'' and you will get an
    auto.fill from Google that says ``stream movies'' or ``stream
    TV shows,'' as well as a list of websites ranked in popularity.
        It turns out all of the websites highlighted in yellow are
    actually pirated websites. We are going to select the first
    one, solarmovie.com. This brings us now to a site that is a
    search engine called solarmovie.com, and this search engine
    finds pirated content on the Internet.
        We can see here movies that have been released over the
    last few weeks, as well as ``Grease.'' We are going to select
    now ``The Adjustment Bureau,'' which was released by Universal
    last week, and then we are brought to a screen where we can see
    all the cyberlockers, meaning the storage websites, where the
    film is located. We are going to select videoBB.com, and two
    more clicks later, we are actually streaming the movie.
        Within 6 months after Paramount released ``Iron Man 2'' in
    theatres, a camcorded copy was available in 12 languages. There
    have been more than 15 million peer-to-peer downloads, and more
    than 153,000 Internet links were made available for download or
    streaming. Twenty Internet storage sites, also known as
    cyberlockers, account for 96 percent of all infringing copies
    of Paramount films found on cyberlocker sites.
        These 20 cyberlockers received a total of 177 million
    unique monthly visitors in February of this year. They use
    incentive programs to encourage the uploading of stolen copies
    of motion pictures. These programs pay cash to the person who
    uploaded the content every time their content is downloaded or
    streamed. Enormous profits can be made in trafficking and
    stolen motion pictures.
        We estimate that Megaupload, for example, earns an annual
    profit of $40 to $300 million. We have reached the limits of
    self-help. Last year, Paramount sent over 40 million
    infringement notices, yet the same content is still a few
    clicks away.
        Legislation focusing on rogue online services is profoundly
    needed to establish the rule of law on the Internet. Doing so
    will not only benefit the countless American jobs and millions
    of dollars in tax revenue that are currently being lost, but it
    will also allow the Internet to fulfill its full commercial
    promise.
        Thank you again for affording me the opportunity to present
    my views here today.
        Mr. Goodlatte. Thank you, Mr. Huntsberry.
        [The prepared statement of Mr. Huntsberry follows:]

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                                   __________

        Mr. Goodlatte. I will begin the questioning with you and to
    the very point you have raised. Where do you see the motion
    picture industry in 5 years or so, if we don't anticipate and
    provide the necessary tools to ensure effective online
    enforcement of IP rights, at least within U.S. borders?
        Mr. Huntsberry. Well, I think the future can be described
    as one of less volume and different type of product. If you
    look at the history of this industry, it has been one that was
    never constrained by theft or piracy and, therefore, was able
    to produce as many films as the market afforded, the
    opportunity that was created.
        As a result of the theft that has been going on already
    over these last 5-plus years, we have seen a dramatic reduction
    in the number of films produced. The six major motion picture
    studios used to produce over 200 movies just 5 years ago; we
    are down now to 140 movies as of last year. And also the
    profile of those movies has changed, meaning that we are
    concentrating more and more on movies that we believe can at
    least withstand the pressure that piracy is putting on us.
        That means that movies that are sort of in the mid-budget
    range, which is sort of a $50-$100 million range, which are
    dramas with a smaller audience, have a very hard time right now
    reaching audiences. So as I said, we are going to see lower
    volume going forward and we will see more changes in the
    profile, which means there will be less choices offered to
    consumers.
        Mr. Goodlatte. Thank you.
        Mr. Sohn, with that in mind, you stated that addressing
    foreign infringement activity required international
    cooperation. But what if the hosting country fails to act, or
    as in the case of the Piratebay, the service hops to another
    country.
        Why should the U.S. be held hostage to hostile, corrupt or
    uncooperative foreign interests? Don't we have the right and
    responsibility to protect U.S. consumers who are targeted by
    malicious foreign actors, and shouldn't we protect U.S.
    creators who play by the rule?
        Mr. Sohn. Sure. And I think we ought to be looking for ways
    to do that. I do think that, as a starting point, though, it is
    important to recognize that actually trying to punish and catch
    actual bad actors is really the way you get the most bang for
    the buck. If you can do that, you can actually get the problem
    at its source.
        So we have efforts underway to improve cooperation with
    other countries. There is a chapter on that in ACTA. It is part
    of the IPEC annual report. The IPEC, I think, was here and
    listed a number of efforts in that area. I think it is
    essential to pursue that kind of international cooperation. In
    fact, there was a report that MarkMonitor put out in January
    that said that the bulk of digital piracy sites are actually
    based in North America and Western Europe.
        So I think actually a lot can be done cooperating with our
    known trading partners.
        For that category of sites where we can really go through
    the tools on the table and see that they don't work and that
    can actually be shown, I think it is worth thinking about
    whether there are narrowly targeted congressional actions that
    could work. The phrase I have heard several times today is
    ``follow the money,'' and I think that would be a fruitful path
    to explore.
        Mr. Goodlatte. Thank you.
        Ms. Pallante, in your opinion, has U.S. copyright law kept
    pace with technology?
        Ms. Pallante. Well, I think Congress has done a very good
    job over the last hundred years of catching up to technology,
    but we are rarely out in front of it. And the great thing about
    this issue is that it is a chance for us to ensure, before we
    go over a cliff, that there is a vibrant e-commerce environment
    so that there are incentives. So it is not just about going
    after the content that we already know is infringing, but, by
    providing a safe environment, we can provide incentives for
    commerce to flourish.
        Mr. Goodlatte. You noted that operators of these parasitic
    websites have no real expectation of enforcement. What are the
    most important steps that we might take to put teeth in our
    enforcement measures?
        Ms. Pallante. As we said, we have been talking with a lot
    of stakeholders who have a lot of views on this. But the theme
    that has emerged is that by starving them from financial ties
    like credit card processing and PayPal and advertising revenue,
    that that would go a long way toward reducing the impact. Not
    all of them operate with direct financial motivation, but it
    would help a lot to start there.
        Mr. Goodlatte. Thank you.
        And, finally, about a dozen years ago, I spent many, many
    weeks in a cramped room--warm, hot room downstairs in this
    building with many of the Internet service providers, many
    representatives of the content community, some companies that
    had a foot in both camps; and we negotiated some of the key
    provisions, particularly the notice and takedown provision of
    the Digital Millennium Copyright Act, which is, as you know,
    the principal tool copyright owners have to protect their
    intellectual property online. It was written at a time when
    relatively few people were connected to the Internet, and those
    who were generally had a maddeningly slow connection.
        Looking forward, do you think the balance struck in the
    DMCA provides appropriate respect and protection for creative
    works, or do we need to take a another look at it?
        Ms. Pallante. Well, that is a big question.
        Mr. Goodlatte. It is.
        Ms. Pallante. I think it always helps when Congress takes a
    look at existing law that relates directly to technology, so we
    would not be afraid of that process. It is an important tool,
    the takedown, and a lot of good companies have built into their
    business practices ways to deal with those. Others don't. They
    ignore them. They are not set up for them. They are set up so
    that they have automated systems that repost the content
    immediately through computer software. So there is that. And in
    this context that we are talking about today, Chairman, the
    DMCA doesn't help with the offshore rogue websites.
        Mr. Goodlatte. Thank you very much.
        The Chair now recognizes the gentleman from North Carolina,
    Mr. Watt.
        Mr. Watt. Thank you, Mr. Chairman.
        I am not sure exactly where to start here. So many issues.
        Ms. Pallante, let me be clear first, that, although your
    testimony is directed at copyright, are there also similar
    problems in trademark infringement and other areas and whether
    you would treat those areas the same way as you would in the
    copyright area?
        Ms. Pallante. Thank you for the question.
        Mr. Watt. Or whether there is an impediment to doing that?
        Ms. Pallante. There are clearly very important trademark
    violations and counterfeiting problems relating to drugs,
    relating to toys, and relating generally to consumer products.
    They were not the focus of my testimony because we administer
    the copyright law in my office.
        Mr. Watt. So my point is, whatever system we set up to deal
    with one industry, we probably need to set it up to deal across
    the board, right?
        Ms. Pallante. Yes----
        Mr. Watt. I am trying to cover a lot of territory here. I
    just want to be clear on that.
        Mr. Huntsberry, you described--you gave us these visuals on
    a number of things that you all license, and you have pretty
    good information about the people who are pirating. There seems
    to me to be a dual track here that has to be being pursued.
    That is the one that is on the criminal side, and one is on the
    civil side. I thought you put up, identified, 18, 20 sites that
    were doing 80, 90 percent of the pirating. What are you all
    doing on the civil side to pursue those, or is there some
    impediment to doing that?
        Mr. Huntsberry. What we do is we work through the MPAA to
    take action against those sites.
        Mr. Watt. Why is that not an individual business
    imperative? I mean, given the extent of this, you are working
    through an association to do it, as opposed----
        Mr. Huntsberry. That is right, because all studios are
    affected by the same sites, typically.
        Mr. Watt. What is the MPAA doing to really aggressive--can
    they bring a lawsuit in the name of----
        Mr. Huntsberry. In the name of some of the studios, that is
    correct.
        Mr. Watt. You also put up, identified on the screen the
    companies that you all license to do this. Is there any way
    that electronically or technologically you could require before
    something is shown, some kind of discrete identification that
    would enable it to be easier to identify the rogue sites?
        Mr. Huntsberry. Mmh-hmm.
        Mr. Watt. You understand what I am asking?
        Mr. Huntsberry. I do, and I appreciate the question.
    Because the problem that we run into is we find that----
        Mr. Watt. Somebody would pirate that, too, right?
        Mr. Huntsberry. That is exactly what happens today. In
    fact, McAfee, which is a well-known protective software for
    consumers, their logo is stolen and then used on the pages
    where the rogue sites are asking consumers to subscribe to the
    site.
        Mr. Watt. There has got to be more than a logo. I am
    talking about some unique identifier of some kind.
        Mr. Huntsberry. Yes, but, again, what happens is whatever
    you flash up can be copied by others. We even have an example
    where a rogue website was luring consumers with a well-known
    brand URL, www.redbox.com, which is a well-known company that
    licenses legally or that rents DVDs in stores; and they were
    using that brand name to then send consumers to a rogue
    website.
        Mr. Watt. Maybe in California you see a lot more coverage
    of this, but I have seen very little coverage of any civil
    litigation about this. Am I missing something here? Is that
    being aggressively pursued?
        Mr. Huntsberry. We are definitely pursuing it wherever we
    can. Absolutely.
        Mr. Watt. It doesn't seem to be getting much coverage.
        Mr. Huntsberry. Well, many of the sites you also have to
    remember are outside the United States; and so it becomes more
    difficult to go after them because there is the question about
    where does the management reside----
        Mr. Watt. Law enforcement has them--domestic law
    enforcement has that same impediment going across into another
    country.
        Mr. Huntsberry. That is part of the issue that we have here
    today, is that we cannot go after the foreign sites.
        Mr. Watt. My time has expired all too quickly. I will go on
    to the next round if we have one.
        Mr. Goodlatte. The gentlewoman from Florida, Mrs. Adams, is
    recognized for 5 minutes.
        Mrs. Adams. Thank you, Mr. Chair.
        Ms. Pallante, I want to thank you for coming and agreeing
    to meet with the stakeholders and everything to investigate
    this matter.
        Can you give us a sense of the process you have gone
    through, the types of stakeholders you met with, and what
    themes are emerging from those discussions?
        Ms. Pallante. Yes, thank you very much for the question.
        In the last month, we have had over 30 meetings with
    probably over 50 stakeholders, really in a fact-gathering
    approach. We have met with everybody from representatives of
    small authors, book authors, for example, to corporations that
    are in the music or movie businesses. We have met with search
    engines. We have met with ISPs. We have talked to payment
    processors. So we have really tried to cast a wide net. We have
    also met with ICE, and we have met with the FCC. Because there
    are other government entities that come into play on this, and
    they have very valid perspectives that have been quite helpful
    to us.
        So we are still vetting the issues; and, as I keep saying,
    they are very complex. But, in general, the complexity in the
    view of most stakeholders is not a reason not to approach the
    issue. In other words, just because these technical pirates may
    be so smart and may get around anything that you may enact is
    not a reason not to go down that road.
        Most people do agree that there should be a role for all
    who benefit in the ecosystem, and there should be a mix of
    legislative and private procedures and practices that come into
    play to solve it. Due process is extremely important, and
    everybody agrees with that, and the remedies should not affect
    the current doctrines of copyright liability. In other words,
    this is really about remedies.
        Mrs. Adams. Search engines, I know you noted that search
    engines are perhaps the most important player on the online
    ecosystem and stated search engines have sought algorithms that
    currently often provide Internet users with search results for
    rogue websites that technology makes--to allow search engines
    to block such sites from paring the search results, much as
    search engines have eliminated child pornography from results.
        So as part of your discussions, has the Copyright Office
    attempted to engage the search engine community? Do you think
    it might be productive to discuss the adoption of voluntary
    agreements to address the piracy through either the removal of
    the illegal sites in search results and/or giving
    prioritization to authorize domains in search results?
        Ms. Pallante. I think all voluntary cooperation is a part
    of this. The question is, can the suppression of searches to
    rogue sites be possible technically? Is it viable? Would it
    ruin the process that search engines engage in for good-faith
    customers and in their good-faith business? And we don't know
    the answer to the technical questions in the Copyright Office,
    but we think that they need to be explored.
        Mrs. Adams. You do agree they do need to be explored,
    correct? I think we need to be looking at all avenues to try to
    at least discourage the rogue sites from popping up so quickly.
        I am curious, and maybe anyone--but what would you see as
    Congress' role to the new--if they were to grant new
    authorities to the Federal agencies, what resources do you
    believe they would need?
        Mr. Huntsberry. I think what we need is the ability to go
    after foreign rogue sites, first and foremost.
        Mrs. Adams. Mr. Castro.
        Ms. Castro. I would just echo what has been said here
    today, that it needs to be comprehensive. Too many of these
    recommendations are only looking at domestic solutions; and
    piracy, as we know, is global. So, yes, it needs to be a global
    solution.
        Mr. Sohn. In terms of resources I would say it is
    especially important that law enforcement has the resources to
    pursue actual cases against bad actors and to do the hard work
    of working with other governments to try to pursue entities
    that are abroad as well. I think some of that can be done. I am
    sure it is resource intensive.
        Mrs. Adams. You are grinning.
        Ms. Pallante. Yes. I think our law enforcement entities
    have something like 400 Federal laws that they are responsible
    for enforcing. So, assuming they are doing the absolute best
    that they can, they would need very clear parameters about what
    they can go into court and request a court order for. So could
    they shut down payment processors? Could they ask ISPs to
    block? They would need to know exactly what the parameters of
    the law were before they undertook the resources to go after
    these kinds of sites.
        Mrs. Adams. So very clear and distinction legislative laws,
    I would agree, coming from the law enforcement community. Thank
    you.
        Mr. Goodlatte. I thank the gentlewoman.
        The gentleman from Michigan, Mr. Conyers, is recognized.
        Mr. Conyers. Thank you, Chairman Goodlatte.
        This sounds like a 101 in copyright law in which everybody
    redescribes the problem in their own unique way. But the
    purpose of a hearing is for the witnesses to come to us and
    give us some recommendations; and, so far, I haven't gotten one
    concrete recommendation about what we do. You are all
    describing the problem.
        And I am disappointed in all the witnesses. I mean, here is
    a trillion-dollar industry losing billions of dollars every
    year. The Judiciary Committee holds a hearing, and what do you
    four come and tell us? That this is a big, complicated problem,
    much of it is offshore, so we can't do anything about it. And
    the question comes down to, when this is all over, we are going
    to read through this transcript and say, what did we learn?
        And I can tell you what I have learned.
        Now let me take the rest of my few minutes and ask you each
    one specifically, starting with Paramount, what do we do in the
    Congress?
        Mr. Huntsberry. Right. So, as I said earlier, we need to
    have the ability for law enforcement to pursue the owners of
    foreign rogue websites. That is one of our biggest hurdles
    today. These sites know exactly how----
        Mr. Conyers. You mean you haven't--you don't have lawyers
    that have recommended something specific to you?
        Mr. Huntsberry. Oh, sure. But therein lies----
        Mr. Goodlatte. Well, why don't you tell us?
        Mr. Huntsberry. Because therein lies the problem. It is
    today impossible to even discover who the owners are of these
    sites as well as where the sites are served. It becomes very
    complicated.
        Mr. Conyers. That is an excuse. That is not answering my
    question.
        What do you say, Mr. Expert?
        Mr. Castro. There are a number of recommendations that we
    have that are very specific about what you can do.
        Mr. Conyers. Name them.
        Ms. Castor. You can block the DNS-level foreign sites and
    domestic sites that are systematically engaged in piracy. You
    can require search engines, ad networks, financial service
    providers to stop doing business with these sites. You can
    create a process for the Federal Government to work with
    industry to identify these sites, create a master list of all
    of these sites. And then with this list, once you know where
    all the rogue sites are, you can work to create a culture that
    rejects piracy.
        As you pointed out, we all know this is a big problem. If
    we had a list and said, here are the top thousand sites that
    are engaging in piracy--everyone in the Internet needs to be
    involved in doing this. You can use a carrot, you can use a
    stick, you can use a gentleman's agreement, but you can get it
    done if you have that list.
        Mr. Sohn. I wish that I had an easy answer for you to solve
    the problems----
        Mr. Conyers. I am not looking for an easy answer.
        Mr. Sohn [continuing]. But here is what I would suggest.
        Number one, I think Congress needs to continue the process
    it started with the PRO-IP Act of trying to improve our law
    enforcement capability, make sure that we are as effective as
    possible in our actual prosecution of bad actors. That requires
    the hard job of working with other countries, and I think
    Congress has a really important oversight role there.
        I think that it is worth looking at narrowly targeted ways
    to address situations where we can show that that process can't
    work. In other words, ordinary law enforcement can't work. And
    the approach I would recommend that Congress look at is this
    follow-the-money approach that has been discussed a couple of
    times today. I think that trying to make sure that rogue
    websites can't make a profit, can't turn this into a profitable
    business enterprise, would be an important step.
        Ms. Pallante. At this stage, our primary recommendation is
    exactly that, that you find a way to give enforcement agencies
    like ICE the authority to request a court order to ask payment
    processors and ad networks to cut off their financial ties to
    rogue sites.
        Mr. Conyers. Thank you, Mr. Chairman. I can see why the
    industry is losing so much money.
        How many times do you think this Committee is going to have
    hearings on this subject in the 112th Congress?
        Well, this may be it. So I thank you, Chairman Goodlatte.
        Mr. Goodlatte. I thank the gentleman; and the Chair now
    recognizes the gentleman from New York, Mr. Reed, for 5
    minutes.
        Mr. Reed. Thank you, Mr. Chairman.
        I am going to go down a path here that Mr. Conyers is kind
    of exploring. When I have looked at this issue, I have looked
    at it from a traditional model of historical thinking that this
    is a common theft situation and we need to arm our law
    enforcement with the traditional means and methods of enforcing
    the laws and go after those offenders.
        One thing that I have been asking myself recently when
    looking at this issue is, is there something that we are
    missing that the Internet presents to us in a new environment?
    Is there something within the Internet itself, technological
    protective measures or enforcement measures, we could be arming
    our law enforcement with to go after these offenders? By that,
    I mean the Chairman in the full Committee in his opening
    comments said something about if you are getting into an armed
    robbery situation you make sure you go in and cut off the
    offender.
        Is there some way that the technology offers us to utilize
    to go after these offending entities that are engaged in this
    clearly illegal activity--we go through the courts, we get the
    appropriate measures, but is there something that technology
    can provide to us that the law enforcement would be looking for
    in order to go after the offending parties?
        And I guess I will go to the government office to see if--
    does law enforcement have any ideas that could be of assistance
    to us?
        Ms. Pallante. Thank you for the question; and, just to be
    clear, our office is not a law enforcement agency.
        Mr. Reed. I understand, but from the government, from your
    dealings with the Department of Justice and whatever.
        Ms. Pallante. In the greater government family, the law
    enforcement piece is obviously the big hammer. It has to be
    there or there is no real expectation of enforcement. The
    technology has really been a huge investment on the part of
    private rights holders based on everything they can do to track
    infringement, to bring infringement to the attention of ISPs,
    for example, so that they can put takedown notices out there in
    the hopes that people will comply.
        One interesting question is what responsibility, if any,
    should those who host sites have in employing technology, say
    filtering technology, to weed out infringement as a good
    corporate citizen?
        Mr. Reed. Okay. Any other suggestions? Any other tools that
    could be at our disposal that we are missing, given the nature
    of the Internet and its technological advancement?
        Mr. Sohn. I think, at the end of the day, there are some
    limits to what technology can do. Information technology puts
    powerful tools in the hands of users, and I think in the long
    run the solution here is not going to be so much the users not
    having the technological capability to reach bad sites, but it
    is going to be more trying to develop some norms and some
    deterrents that prevent people from using it that way.
        I think technology can play an important role as different
    entities in the ecosystem try to roll out tools to stop
    infringement. For example, technology can be used to make the
    DMCA notice and takedown processes more effective, more
    streamlined.
        So I think there is lots of ways that individual entities
    within the system--within the ecosystem, I should say--can be
    more effective in the role they are trying to play. And that
    can include, for example, YouTube, which has a process right
    now for trying to identify infringing videos when they are
    uploaded and for allowing rights holders to monetize that.
        So I think there are lots of ways that technology can be
    deployed. I think the difficulty is that it is unlikely to be a
    one-size-fits-all technology solution, and it would be
    difficult for Congress to go down the path of trying to mandate
    particular technologies here. This is something that different
    players have to explore.
        Mr. Reed. I guess what I am hearing here--and I don't mean
    to cut you off; I am running out of time--is we really have two
    points of potential areas to look at this from, the money
    perspective and also from the structure of the Internet
    perspective.
        Am I clearly understanding? Does anybody disagree with
    those two points of areas where we can step in and potentially
    attack this issue? Are there any other areas out there?
        Mr. Huntsberry. I see it as money and technology. Those are
    the two.
        Mr. Reed. Money and technology?
        Mr. Huntsberry. That is right.
        Mr. Reed. Does anybody else disagree with that? Okay.
        When we deal with the size of the enforcement mechanisms we
    need, are there any limits that we should be considering on the
    size of the penalties or tools that are at our disposal or
    should we just be fully unlimited?
        Anyone? Ms. Pallante.
        Ms. Pallante. Well, one question that has been raised in
    the stakeholder discussions that we have had is whether there
    will ever be enough government resources for the government to
    pursue this as a priority, this being infringement or
    counterfeiting, for example. So even if the law were changed
    and it were clear and they had more of an ability to cut off
    the money and to starve these rogue websites and get at the
    offshore operators and to block those sites here, the question
    would still be, would you still be ahead of the problem? Or
    would you still be limited to kind of the really, really big,
    grossly infringing sites?
        And so the question that I think is down the road is
    whether there should be some additional right of private actors
    to get into court on their own without always going through the
    Department of Justice or ICE, for example. And you will hear
    that from stakeholders as you talk to them.
        Mr. Reed. Thank you. I yield back, Mr. Chairman.
        Mr. Goodlatte. I thank the gentleman.
        The Chair now recognizes the gentleman from California, Mr.
    Berman.
        Mr. Berman. Thank you very much, Mr. Chairman.
        Mr. Sohn, one very quick, hopefully, answer to a quick
    question.
        You write in your testimony CDT recognizes the problem of
    websites that seek to profit by distributing copyrighted
    material without authorization and without paying the lawful
    rights holders.
        We are having a debate on what you meant. Is it one or the
    other? Or even if they are paying the lawful rights holders, if
    they did it without authorization that is wrong and you oppose
    it?
        Mr. Sohn. I think all we intended by that phrase was to
    refer to entities that are violating the law because they had
    not properly licensed the material that they are distributing.
        Mr. Berman. So paying rights holders what you think is just
    compensation if you don't have their permission or the license
    from them is still wrong.
        Mr. Sohn. Correct. I was envisioning by that phrase a
    voluntary transaction in which the rights holder is paid a
    licensing fee that the rights holder has agreed to.
        Mr. Berman. Mr. Sohn's testimony, as he says there,
    acknowledges the problem, talks about solutions that involve
    the forfeiture and blocking of a website as ineffective. His
    testimony, if you have a chance to read it in detail, it is
    filled with lots of very interesting things which you can't do
    justice to in 5 minutes. But challenging the effectiveness of
    this approach, raising issues about the potential for
    encompassing websites that may be doing some infringing work
    but also are exercising non-infringing First Amendment
    expression raises the philosophical question of the right of
    U.S. law to try and affect behavior by parties in other
    countries and then raises consequences of that approach in
    terms of cybersecurity and inefficiencies in terms of the
    Internet functioning.
        Mr. Castro, I don't know if you have read the testimony,
    but I would like to get your reaction to some of the points Mr.
    Sohn raised in his much longer written testimony.
        Ms. Castor. Absolutely. And, obviously, in the shortened
    time, if you look at my written testimony, I believe I have
    addressed all of those objections that have been raised. They
    have been raised in a number of forums before.
        If you look at the issue of DNS blocking, which is I think
    where most of the objections have been raised, or blocking even
    at the IP level, DNS blocking is something that is used already
    today. There is a service, for example, called open DNS. People
    actually subscribe to this service, and this service provides
    users a number of tools like parental controls. It corrects
    typos and URLs, and it ensures people get to only safe sites.
        We can do something very similar with DNS blocking for
    rogue sites. If you look at the objections that are raised,
    most of them are speculative. If you look at the data, there is
    none that supports it.
        And if you look at what even the creators of DNS--for
    example, Paul Vixie, he runs ISC, which is the company that
    creates BIND which is a software that actually runs DNS on the
    computers all over the world. He has even come out and said
    that the idea that any site should be able to just have a
    domain name, if they are a rogue site, that you should be able
    to--the purpose of DNS is not to facilitate rogue sites. It is
    not to facilitate piracy. It is not to facilitate
    counterfeiting.
        We can change the way these standards are written to
    respond to this. We can create secure DNS protocols that allow
    for the types of controls and mechanisms that we are talking
    about today that would allow you to block rogue sites but still
    have a very secure, even more secure, Internet architecture.
        And that is the result we want. We want a result that
    protects consumers and also gives a secure Internet experience.
        Mr. Berman. Mr. Sohn, if I could, well, hopefully, I can
    get this question in.
        The issue of diplomacy and cooperative approaches--if you
    look at Attachment 8 to Mr. Huntsberry's testimony, which lists
    reasons why Pirate Bay based in Sweden refuses to comply with
    DMCA takedown requests from copyright owners, it says it is not
    a U.S. company and damned if it has to follow U.S. law. It will
    not comply with requests to take down unlawful material and
    then proceeds to call the victims of that theft morons and
    suggest a number of acts which I prefer not to repeat in
    public. But it is in Attachment 8 for those who want to read
    it.
        What do we ask the Government of Sweden to do? And if they
    don't do it, do we put them on the USTR's 301 list? Lay out the
    diplomatic strategy that might work in all the remaining time
    that you have.
        Mr. Sohn. Well, I think absolutely. What you try to do is
    work with Swedish authorities to identity the people behind the
    site and actually go after the individuals. That is where you
    have a real deterrent effect, and that is where you have the
    ability to seize the computer servers that the bad guys are
    using.
        My understanding is that in a number of ICE actions they
    have done exactly this. They have cooperated with the
    Netherlands, for example, in connection with some of the domain
    name seizures. They have actually taken down some bad guys in
    cooperation with foreign authorities. And I guess----
        Mr. Berman. We have a good example, WikiLeaks. They go
    after them on sexual misconduct charges.
        Mr. Sohn. Ultimately, I think it is very difficult to use
    the DNS system in a way that is going to effectively make these
    sites inaccessible. That is why I am saying we have to do so
    the hard work of actually trying to get the bad guys. Because I
    think however much we like to use the DNS for that purpose, it
    is not ultimately going to work.
        Mr. Berman. I think my time is more than expired.
        Mr. Goodlatte. I thank the gentleman, very pertinent
    question.
        The Chair now recognizes the gentleman from Arizona, Mr.
    Quayle for 5 minutes.
        Mr. Quayle. Thank you, Mr. Chairman. Thanks to all of you
    for coming.
        Mr. Sohn, during your testimony, you were talking about how
    we shouldn't be overreaching in any law just to go after a few
    bad actors. And I found that curious that you said ``a few bad
    actors.'' Because if you are basing it on in comparison to
    everybody who uses the Internet I think that might be accurate,
    but when you are actually basing it on people that are
    legitimately using copyrighted material, do you still believe
    that it is just a few bad actors, not a large number of people
    or entities that are doing this?
        Mr. Sohn. Well, it is interesting. I think there are
    certainly a large number of users that engage in infringement.
        There was a recent study that looked at a couple of the top
    BitTorrent sites and found that actually a relatively small
    number of users, on the order of 100, were responsible for
    uploading the large majority of the infringing material that
    was found there. So it does appear that there are some power
    users who are burning up their Internet connection trying to
    upload pirated stuff day in and day out. So I do think that
    going after some of the worst of the worst can make a dent in
    the problem.
        I also think that is where you send a strong deterrence
    message to everybody else to say, look, you are not as
    anonymous as you think you are. We will go through the effort
    to track you down, and we can shut you down. If we do come
    after you, there is going to be criminal penalties to pay.
        Mr. Quayle. Going to the whole shutting-down part, in your
    testimony you also presented several reasons why domain name
    seizures would not be 100 percent effective and focused
    primarily on how such a block might be circumvented. Can you
    gave other examples of situations where authorities should not
    take action against criminals because they can find a way
    around it?
        Mr. Sohn. I certainly don't think that a law enforcement
    action has to be 100 percent effective in order to be worth
    taking. I do think, though, that at the outset, when we are
    talking about what new authorities could we create, we would
    want to at least make sure it meets a certain minimum bar of
    effectiveness.
        And I guess my argument would be not that domain name
    seizures and blocking are less than 100 percent effective but
    that it is really going to be hardly effective at all, that if
    you had a graph you will see a brief dip and then you will see
    piracy levels go right back up because it is so easy to
    circumvent for everybody in the system. And at the end of the
    day what I think would happen is, if domain name seizures and
    blocking are something that happens on an occasional basis, I
    don't think that causes any great consequence. I think if that
    becomes a mainstream tool of law enforcement, it will lose all
    of its bite. People will just build other ways around the
    navigation system.
        To use an analogy that Mr. Castro bought up, he said it is
    kind of like taking some of the bad guys' numbers out of the
    phonebook. It is kind of like that. But, unfortunately, on the
    Internet there are lots of ways to get information. You don't
    have to use the phonebook. There are lots of navigation
    opportunities to find out how to get to these sites. So just
    purely on a practical level I think it is not a tactic that is
    effective enough to be worth the risks that it causes.
        Mr. Quayle. So you don't have any examples of other laws
    where we can not push for it without 100 percent ability to not
    having a circumvention of that law.
        Mr. Sohn. I think when Congress weighs legislation on a
    daily basis, probably the scrap heap floor is littered with
    examples where we thought of ideas and decided they won't work.
        Mr. Quayle. Thanks.
        Now, Ms. Pallante, I was just wondering, to go back to
    illegal streaming, as technology advances, do you think that
    illegal streaming of copyrighted material is now the primary
    chosen method to actually use and deliver those copyrighted
    material over the Internet?
        Ms. Pallante. I think for some works it will be. I am not
    sure--I am sure Mr. Huntsberry can tell us what the breakdown
    is between downloading and streaming for movies, for television
    programming, and for sports streaming. It is very, very big.
        Mr. Quayle. And so if that continues to kind of be the wave
    of the future, do you think that it makes sense to actually
    have a lesser penalty for those that illegally stream videos or
    stream copyrighted content over the Internet rather than those
    that provided them in downloaded form?
        Ms. Pallante. Thank you for that question.
        If that is a business model that is a primary way for bad
    actors to pirate material and to make it available without
    authorization, it doesn't make sense from a policy perspective
    for that to be a misdemeanor and not a felony, as is the
    reproduction and distribution right under copyright law.
        Mr. Quayle. Thank you very much. I yield back.
        Mr. Goodlatte. The gentleman from Florida, Mr. Deutch, is
    recognized for 5 minutes.
        Mr. Deutch. I thank you, Mr. Chairman.
        Mr. Sohn, you say in your written testimony that
    quantifying the problem is exceedingly difficult, and you point
    out that parties commissioning studies that show the impact of
    this type of piracy have vested interest in the results,
    seeming to suggest that perhaps we are taking this more
    seriously than we ought to.
        I guess, Mr. Huntsberry, let me turn to you. Can you speak
    to the vested interest that might exist here and can you talk
    for a moment about the overall impacts on our economy?
        Mr. Huntsberry. Well, I can tell you that there are a lot
    of jobs at stake and they occur at different levels. So, for
    one, you have the films themselves that, as I said, hire
    between a few hundred up to 5,000 employees to actually produce
    a movie. And so as volume of films decreases, there is a direct
    correlation to the number of people who are being hired to make
    those films.
        The second part is that, at a local level, when we produce
    films in the 50 States, we are not spending money in those
    States, i.e., not hiring people in those States.
        And then, finally, also at the studio level, where you have
    people that are in the business of helping to produce those
    movies, market, and distribute them, you have a direct impact
    there as well, and we have seen decreases in the last few
    years.
        Mr. Deutch. Mr. Sohn, you can agree that there is no reason
    for us to argue about the relative impact, that this is a
    vitally important issue we ought to be tackling?
        Mr. Sohn. It is an important issue, and my only point was
    to try to emphasize that I think that some of the specific
    statistics that get thrown around, when the GAO looked at it,
    the GAO said, we can't really verify any of these statistics.
        Mr. Huntsberry. Congressman, may I add something to that.
        In fact, it plays also to a question that was raised
    earlier. Last year, just Paramount alone, we actually issued 40
    million infringement notices. Now infringement notices are
    specifically targeted at peer-to-peer sites or users of peer-
    to-peer networks who are downloading content. So we issue the
    notice to the ISP, who then forwards it to the consumer.
        With respect to cyberlockers, which are the online storage
    sites, we issued 1.5 million takedown notices. That means there
    were 1.5 million places where anybody in the world would have
    been able to stream or download the movie.
        Mr. Deutch. I want to go back--Mr. Sohn, you point out in
    your written testimony that in 2007, 2008, which is generations
    ago in terms of what we are combating, what we are dealing with
    now, particularly in terms of cyberlockers and video streaming,
    that CDT compiled a music download warning list.
        Now if you agree that the primary focus here ought to be on
    addressing--focusing the rogue sites so that they can't make a
    profit, make this a profitable enterprise, which you said
    earlier, shouldn't we be looking not only at advertising, as
    you point out, but shouldn't we also be looking at the way that
    they ultimately do make this a profitable venture, which is
    making people--driving traffic to their site?
        Isn't there an opportunity for the Internet service
    providers to be involved here? Why shouldn't we be focusing on
    that component as well? Since without those ISPs and without a
    discussion about the various ways that we can ensure that these
    sites don't come up and we can watch pirated content in one or
    two clicks, without that, these aren't profitable ventures.
    Shouldn't that be a key piece of this legislation?
        Mr. Sohn. Well, the hard question there is, what is the
    role that ISPs could play that would be effective? Because,
    again, the kind of DNS blocking that was suggested in the
    Senate bill last year I think just doesn't have any ultimate
    effect if you actually track through what would likely happen
    and if you look at the many ways to avoid it----
        Mr. Deutch. Let me interrupt you for a second, because I am
    running out of time.
        Instead of--it seems like you are bending over backwards to
    acknowledge that there are lots of ways to get around efforts
    that we might wish to take in order to make this a less
    profitable venture. Shouldn't we be looking at it the other
    way, to come up with the technological ways that we can make it
    more difficult for others to access this, as Mr. Castro points
    out is eminently doable?
        Mr. Sohn. I guess I disagree with Mr. Castro that it is
    eminently doable to make sites hard to reach. If you look at
    something like the WikiLeaks controversy, the lesson is it is
    very hard on the Internet to just make stuff not reachable.
    That is why I think the more effective approach would be to
    say, if they can't process payments, for example, if they
    can't----
        Mr. Deutch. I understand that part of your testimony. Can
    you get back to the ISPs, please?
        Mr. Sohn. Right. So on the ISPs specifically, I think it is
    very difficult to figure out how ISPs could actually block
    people from getting somewhere in a way that wouldn't be
    overbroad and have a lot of collateral consequences.
        Mr. Deutch. I understand it is difficult. If there is a way
    that it can be done without the collateral damage that you
    fear, obviously, that should be something we consider.
        Mr. Sohn. I think it is worth considering. I think what
    Congress will probably find as it looks at that is that those
    collateral damages, if you are looking at it from the ISP
    level, are difficult.
        Mr. Deutch. Thank you. I yield back, Mr. Chair.
        Mr. Goodlatte. I thank the gentleman.
        The Chair now recognizes the gentlewoman from California,
    Ms. Chu, for 5 minutes.
        Ms. Chu. Thank you, Mr. Chair.
        I wanted to follow up with you, Mr. Huntsberry, about the
    true economic impact of piracy; and the reason I wanted to get
    more deeply into it is I represent a district in Los Angeles
    County. There are many, many jobs that are related to the
    entertainment industry; and, of course, Paramount Studios are
    headquartered in Los Angeles County. So what happens to you
    certainly has a great deal of impact on my constituents.
        So in your written testimony you talk about the pre-
    production investment by the studio. Taking an award-winning
    move like ``True Grit'' for an example, can you describe the
    investment for this economy?
        Mr. Huntsberry. Sure. As you said, ``True Grit'' was shot
    in Texas and New Mexico but then also produced in Los Angeles,
    so it had an impact on multiple economies. And in the case of
    ``True Grit,'' we would have been spending in Texas, New Mexico
    on hiring local laborers to build sets. That would include
    carpenters. That would include painters. That would include set
    designers. It would include caterers and so forth. In other
    words, these are literally ten, sometimes hundreds of people
    that we have to have on the set on location to service the
    production of the movie. And so, again, like in the case of
    ``True Grit,'' it was an impact of $16 million between those
    two States alone. That is not accounting for what we spent in
    Los Angeles, which was even more than that.
        Ms. Chu. And I understand residuals from DVD sales are an
    important part of a compensation package for actors, directors,
    electricians, painters----
        Mr. Huntsberry. Absolutely. The guild members, as well as
    the union members, are compensated as a percentage of the
    revenues that we draw from DVD sales or from the sales of the
    movies in general.
        Ms. Chu. I understand ``True Grit'' was officially released
    on December 22, 2010. How long did it take before the movie was
    available on line for free?
        Mr. Huntsberry. It turned out that in the case of ``True
    Grit'' it took about 5 days, and it was a copy of a screener
    that we had sent out to Academy members for the voting. And the
    screener, by the way, was copyright protected.
        Ms. Chu. Thank you. I yield back.
        Mr. Goodlatte. Thank you.
        The gentlewoman from California, Ms. Lofgren, is recognized
    for 5 minutes.
        Ms. Lofgren. Well, thank you, Mr. Chairman. I have so many
    questions. I hope I can get them out and get answers promptly.
        Mr. Huntsberry, I am wondering, the Senate bill last year
    would have given government the exclusive power to initiate
    legal actions to block domains. Is this satisfactory to you, or
    do you believe that there should be a private right of action
    to obtain DNS blocking orders?
        Mr. Huntsberry. Well, first of all----
        Ms. Lofgren. If you could just say ``yes'' or ``no,'' I
    have only got 5 minutes.
        Mr. Huntsberry. We don't know yet.
        Ms. Lofgren. Okay, you have here 20 slides, and I am
    wondering, of those, according to your written testimony, it is
    about 90 percent of what is of concern was represented in those
    20 slides. How many lawsuits have been brought against the
    actors in those 20 slides?
        Mr. Huntsberry. Against the what? I am sorry.
        Ms. Lofgren. The actors that you identified in your slides,
    how many lawsuits?
        Mr. Huntsberry. It is not a number that I could quote you
    here right now. But it is a large number.
        Ms. Lofgren. Could you provide it to me later?
        Mr. Huntsberry. Absolutely.*
    ---------------------------------------------------------------------------
        *The information referred to was not received by the Subcommittee
    at the time this hearing was printed.
    ---------------------------------------------------------------------------
        Ms. Lofgren. Thank you very much. I appreciate it.
        I am wondering about digital locker sites. Do you believe
    that Congress should give the government the right or power to
    seize those domains, even if they comply with the DMCA?
        Mr. Huntsberry. Well, today they don't comply with the
    DMCA.
        Ms. Lofgren. But the question is, if you give the notice in
    take down and they comply, do you think they still ought to be
    subject to----
        Mr. Huntsberry. If ``complied'' is defined as that you can
    no longer find stolen content on the site, then yes.
        Ms. Lofgren. You said in your testimony that, even with
    DMCA takedowns, there is never a moment that stolen copies of
    ``True Grit'' are not accessible. Is your goal really to make
    sure that there is not available anywhere a stolen copy of
    ``True Grit?'' Do you think that is achievable?
        Mr. Huntsberry. What we are trying to do, we are trying to
    level the playing field here between the good guys and the bad
    guys. Today, even after 40 million infringement notices and 1.5
    million takedown notices, the film is still available. So what
    it has proven so far is that we are not able simply with these
    notices to bring the problem to a halt.
        Ms. Lofgren. You know, I do think that we have a problem
    here. And the question I am trying to get at is what is an
    adequate remedy that doesn't cause collateral damage? And I
    think about we have heard from Hollywood, and that is an
    extremely important industry for the United States. There is no
    question about it. I hear from my constituency more about
    software, because there is certainly a theft problem there. But
    we have gone round and round with my software constituents and
    finally agreed that, although it is always wrong to have
    piracy, not every piracy is a lost sale, because a lot of what
    is taken would never been sold. It doesn't mean it is right to
    do it, but it is worth putting a grain of salt, as the GAO has
    done, in terms of the dollar loss.
        Thinking about that, how do we focus on dealing with bad
    actors without avoiding the collateral damages?
        I was listening to some of our freshmen Members about
    illegal. I was designing this scenario in my mind. You have a
    Tea Party website, and they are running without authorization
    clips of the Patriot to inspire those who come to their
    website, and they are also ad supported. Republican candidates
    are buying ads on the site, and they are soliciting funds from
    people who visit the site, and they are also hosting blogs from
    people who believe in the Tea Party principles.
        They have violated the copyright act. They are subject to
    blockage, if I am reading the Senate bill correctly; and yet
    there would be significant First Amendment collateral damage.
        How would you deal with that, Mr. Sohn, that scenario?
        Mr. Sohn. Well, I think, at a minimum, any step that
    Congress takes here needs a much narrower definition than the
    Senate bill contained about what constitutes a website
    dedicated to infringing activity. The Senate bill used that
    phrase, ``website dedicated infringing activity,'' but I fear
    the actual definition they used was much broader than that and
    could apply to any of a range of sites that do a range of
    things and then happened to get some infringement on them
    because users post some there.
        Ms. Lofgren. For example, I notice this is not just foreign
    nationals. Most of the companies listed on the site are
    California companies, Google and Netflix and on and on and on,
    Facebook. Facebook has tons of infringing material on it that
    people have uplifted, and yet I wouldn't call Facebook a rogue
    site. And yet I think it would be subject to--the entire site,
    if ICE is to be believed, that whole thing would be taken down,
    wouldn't it?
        Mr. Sohn. Well, one certainly hopes that law enforcement
    would not pursue a case like that, but there is no question
    that----
        Ms. Lofgren. Well, are the facts any different?
        Mr. Sohn. And, furthermore, the process for seizures is
    essentially a one-sided process. So law enforcement decides it
    wants to target a site. It goes in and tells that to the judge.
    The site can get seized without having an opportunity for the
    site operator to come in and say, no, wait a minute, here is
    why I am actually a lawful enterprise and why you've got this
    wrong. And I think whenever you have a one-sided process like
    that, the risk of either mistakes or just overaggressive action
    is significant.
        Ms. Lofgren. I see that the red light is on, Mr. Chairman.
    I don't want to abuse your courtesy to me.
        I yield back.
        Mr. Goodlatte. We may have a question or two more here, and
    so the gentlewoman might hang in.
        Mr. Sohn, as you know, ICE has used authority provided by
    PRO-IP over the past year to seize more than 100 domains that
    judges found were engaged in online IP theft. In every
    instance, the domain name owner had the right to petition a
    Federal judge to require the return of the domain name. Can you
    tell the Committee how many of these owners have actually filed
    such a petition and appeared in Federal District Court?
        Mr. Sohn. It is my understanding that nobody has done that
    to date.
        Mr. Goodlatte. Is that not an indication that seizing
    domain name might be somewhat effective?
        Mr. Sohn. Well, the fact that they haven't done it could
    indicate a number of things. Number one, it could indicate that
    some of them think that challenging the Federal Government in a
    lawsuit is going to be costly litigation, and some of them may
    figure it is just easier to----
        Mr. Goodlatte. Has anyone come forward and said that of
    these 100 sites, said, we are right. We have a legitimate
    complaint that our domain name was seized improperly. We are
    not engaged in facilitating pirated works, yet we don't want to
    take on the Federal Government because of the cost or other
    concerns?
        Mr. Sohn. Sir, there are some entities that have publicly
    said that they believe they were wrongly targeted. There were
    some music blogs that said they actually had obtained the
    material they posted from the record labels on a promotional
    basis.
        There was the example--I guess this is not an intellectual
    property example, but there was an example just last month of a
    service called moo.com which shares a domain among 84,000
    registrants, as I mentioned in my testimony. And the entire
    domain got seized because, presumably, there were some
    individual sites there that were engaged in that criminal
    activity, and a number of innocent individuals were affected
    there. So there certainty have been cases where innocent
    individuals have been affected.
        I actually think the real reason that you probably don't
    see entities challenging it is, number one, certainly the bulk
    of them probably are just illegal enterprises and they have an
    easy way around it. They can just go register a domain with a
    foreign registrar that isn't subject to U.S. jurisdiction. So
    why bother challenging it when you have that easy route around?
        Mr. Goodlatte. Amongst these 100, have we seen evidence of
    that occurring?
        Mr. Sohn. Absolutely.
        Mr. Goodlatte. Mr. Castro, what do you have to say in
    response to that?
        Ms. Castor. I would say that if the fear is that these
    sites will go abroad that is why exactly why we need to be
    blocking these sites. That is specifically the reason that
    enforcement mechanisms that only target domestic sites and
    domestic bad actors ultimately will be ineffective. You can
    think of the problem of having four----
        Mr. Goodlatte. But what do you say to Mr. Sohn's contention
    that that is not effective because they simply go and get
    another domain name and keep right on going?
        Ms. Castor. Well, I would say this Committee could perform
    an experiment. If you have a domain name that everyone knows,
    if that disappeared for a day, I bet your traffic would
    disappear as well. I don't think it is that easy for people to
    find sites when a domain that they know and use is gone.
        Mr. Goodlatte. What do you have to say to that, Mr. Sohn?
        Mr. Sohn. Well, I did a little experiment myself after ICE
    seized I think 10 sports streaming domains back in January. And
    I was curious. By the way, I did not want to engage in piracy
    on these sites. I just wanted to find out if they had
    resurfaced somewhere. So I just did a little bit. It really
    only took 5 or 10 minutes of sleuthing on the Internet, if
    that, really just a few searches. And what I discovered was
    that there were plenty of people out there discussing precisely
    this issue, people who had various posts and comments, various
    places saying, hey, where did that site go? And someone answers
    the question. Well, it has moved, and it is now located at this
    other foreign top-level domain.
        So what I found was, in looking at those sites, it is
    actually quite easy to figure out where they had gone. And this
    kind of gets back to my point----
        Mr. Goodlatte. But no one knows what happened to the volume
    at the site. I understand that the more dedicated person would
    do exactly what you are talking about, and they will find the
    new domain name and the new address and reach it fairly easily.
    But the more casual customer can't find the site. Is that
    having an effect? Is that reducing the volume of piracy or is
    it not? I think that is a question I would like to have an
    answer to.
        Mr. Huntsberry.
        Mr. Huntsberry. Yes, I think that is precisely the point.
    We know that theft is always part of the business model. It is
    no different than in the brick-and-mortar business. Brick and
    mortar every day has to deal with theft, and so this will also
    occur in the online space.
        What we are trying to do here is level the playing field so
    at least the average consumer is doing the right thing. The bad
    guys will always find ways to find the content.
        Mr. Goodlatte. What do you and Mr. Castro have to say about
    the collateral damage that Mr. Sohn cited with regard to a
    domain name that is shared and one violator messed up the other
    63 or--how many? More than 63. You had----
        Mr. Sohn. There were 84,000 registrations.
        Mr. Goodlatte. There were 84,000 registrants.
        Mr. Castro. What you have to do in this case is you want to
    make sure that there are the right kind of processes in place.
    This is something that this Committee can exactly work on, how
    can you set up the right processes so mistakes aren't made?
    Certainly in law enforcement this isn't the first time mistakes
    were made. This won't be the last time. But the idea that free
    speech trumps theft is I think absolutely ridiculous, and there
    is no reason we can't take action.
        Mr. Goodlatte. Thank you.
        Mr. Watt, does that prompt any further questions?
        Mr. Watt. Yes, let me pick up on right there. Because,
    really, the question I was trying to get to, wanted to get to
    is how can we set up a due process mechanism that takes these
    things into account? What would be the ideal due process
    mechanism, Mr. Sohn? How would you change the current process
    that ICE is authorized or is undertaking?
        Mr. Sohn. The ideal due process mechanism is always to let
    the defendant have his day in court essentially and come in and
    explain why it is not----
        Mr. Watt. And what is the problem with doing that, Mr.
    Castro? If I go to a judge and I have got a captive judge and I
    got all the facts and no opportunity for anybody on the other
    side to respond, that says, hey, I am legitimate, I got free
    speech issues, how do those issues ever get raised before the
    takedown?
        Ms. Castor. I think there are a number of things you have
    to keep in mind. If you are talking about domestic sites, you
    have to have processes that can respond in Internet time. You
    have to have, I think----
        Mr. Watt. Well, you got to tell me what the processes are.
    That is what we are here for. We are trying to set up a
    mechanism now. I don't mean to be impatient like Mr. Conyers
    has been, but you can't just tell me, you got to do this, you
    got to do this. I don't understand what it is you are asking me
    to do.
        Ms. Castor. I think the right solution would be----
        Mr. Watt. And while I think I agree with you that most of
    the First Amendment defenses are crap, even though I am
    probably the biggest First Amendment defender on this
    Committee--or one of them at least, I would think--but I am not
    much on allowing somebody's property to be taken without some
    kind of opportunity to defend themselves. I am kind of on both
    sides of this issue with you and Mr. Sohn.
        But you got to tell me how to get around this. If one side
    can go to a judge and get an immediate order, it seems to me
    that the other side could come to that same judge and defend
    themselves immediately. That is Internet fast time, I would
    take it.
        Are you advocating something different than that?
        Mr. Castro. Well, I think there are a number of things you
    could do. Well, one thing you could do is you could set a limit
    on how long to have a site taken down without, you know, the
    right to a appear before a judge.
        Mr. Watt. But once the site is taken down, the damage is
    done, if it's done wrong.
        Mr. Castro. Well, you could do it, a very short site. You
    could have administrative and other kinds of reviews before it
    could be taken down in the first place, and you could also, of
    course, have liability.
        Mr. Watt. Well, that is I am asking you. Are you telling me
    you can't get an administrative review? What's a judge? That's
    an administrative review.
        Mr. Castro. Well, before it's done internally.
        Mr. Watt. Before it's done, internally, that is right. Why
    can't I, as the site owner, have the opportunity to appear and
    present my side at that administrative review?
        Mr. Castro. You could certainly do that.
        Mr. Watt. Okay, all right. So you all are saying the same
    thing, then. I mean, that satisfies you, Mr. Sohn?
        Mr. Sohn. I think, that, yes----
        Mr. Watt. Okay. Then we agree we finally got some
    reconciliation. It satisfies you, Mr. Huntsberry?
        Mr. Huntsberry. I think I am not prepared yet to agree with
    my colleagues here at this point.
        Mr. Watt. Well, are you disagreeing with them or you just
    not prepared to agree with them?
        Mr. Huntsberry. No, no. I think that, look. I think due
    process----
        Mr. Watt. You told Ms. Lofgren that too. You didn't have an
    answer to the question. We need you to answer questions here
    today, otherwise we won't get anywhere.
        Mr. Huntsberry. So, again, the parallel I like to draw here
    is that if a store is selling----
        Mr. Watt. I don't want you to draw parallels. I want you to
    tell me how I can do this and give due process, and give you
    what you are looking for at the same time.
        Mr. Huntsberry. I think that once a site has been blocked,
    I think, very quickly, the site owner has the ability to say
    was it done justly or not done justly.
        Mr. Watt. But the blockage of the site for somebody who is
    legitimate, to give them the opportunity to the next day come
    back and say you really blew this up, you screwed up, I don't
    think is fair.
        Mr. Huntsberry. But we know today who is stealing our
    content. It is very obvious to us, because we know exactly who
    we license to. Therefore any site at which we find our content
    that we do not license is stealing our content.
        Mr. Watt. Even the Facebook Tea Party people that Ms.
    Lofgren described?
        Mr. Huntsberry. Again, if we know our content is on a site
    that we have not licensed to, we know that it is fraud.
        Mr. Watt. Even if it's the Tea Party people on the Facebook
    site that Ms. Lofgren described that you said you didn't have
    an opinion about yet.
        Mr. Huntsberry. And I still don't have one.
        Mr. Watt. Well, but you just made a very broad statement,
    anybody who puts something up that you haven't licensed is
    violating your license.
        Mr. Huntsberry. Yes. Well, that's true because that is how
    the licensing agreement is reached. It is reached formally
    between the studio and the site, and to the extent that the
    site has not entered into a license----
        Mr. Watt. So if law enforcement is going to go out and
    seize that site, the Facebook site that Ms. Lofgren described,
    without a hearing, and without that person, without the Tea
    Party or whoever it is being able to come in and say, this is
    legitimate First Amendment protected, you would say they are
    violating it and they shouldn't be given that right?
        Mr. Huntsberry. They should absolutely be given the right
    to speak. I think what we are talking about is before----
        Mr. Watt. But 2 days later you want to be given the right.
        Mr. Huntsberry. Right. To me it should be the day after.
        Mr. Watt. The day after?
        Mr. Huntsberry. It should be after the seizure.
        Mr. Watt. I don't know about that. Mr. Castro, you wanted
    to make a point. Go ahead.
        Mr. Castro. I just wanted to say that if you look at
    physical goods, physical goods are seized before there is court
    review. So if you want to have a similar----
        Mr. Watt. I wasn't too hard on that process either. You
    know, I am at least, you know. I try to be consistent. I am not
    a big pre-seizure person. I never have thought that it was all
    left there. Even if you are seizing unlawful stuff, you ought
    to give people an opportunity to tell people that it's not
    unlawful.
        Anyway, my time has expired and I am far, far over.
        But I wanted to ask Mr. Huntsberry one other question, and
    you can answer for the record.
        Mr. Goodlatte. Go ahead.
        Mr. Watt. I am trying to find out what authority you are
    advocating for on the civil side. I heard you say authorized
    law enforcement to go do stuff in foreign countries. I need to
    know what authority you need on the non-law enforcement side
    that you don't currently have? We don't have time to have you
    answer that not now.
        Mr. Huntsberry. I will follow up.
        Mr. Watt. You didn't seem to have a lot of opinions about a
    lot of this stuff anyway, so this will give you a chance to
    answer some of the questions that you haven't formulated
    opinions about, and that's one you can spend several days and
    then get back to us about.
        Mr. Goodlatte. We will afford all the Members of the
    Subcommittee the opportunity to submit questions in writing,
    and we will afford you an opportunity to respond. Let me see if
    anyone has a question they would like to ask right now. The
    gentleman from Florida.
        Mr. Deutch. Thank you, Mr. Chairman. It's a fascinating
    conversation about whether or not the government has the right
    to shut down Facebook.
        But I believe that we have gone slightly astray here. Mr.
    Sohn, let me ask you a question. When CDT put out that list of
    47 sites that were falsely posing as legitimate music stores,
    which is the way your testimony describes it, you put that list
    together. When you put that list out, were you worried that
    these might be legitimate sites that somehow by an organization
    like yours putting on this list that somehow you might be doing
    damage to them?
        Mr. Sohn. Well, I will say first we did do due diligence
    there.
        Mr. Deutch. Right. I understand that. You did due
    diligence. Of course you did.
        Would we be wrong to suggest or to believe that there is a
    difference between something that might get posted on Facebook
    and what SolarMovie does or what a site--a movie site that
    clearly is illegally streaming movies is doing, number one; or
    a book site that is clearly permitting the illegal downloading
    of copyrighted material; or in the case of music, a site that
    is clearly permitting the illegal downloading of music without
    respect for the intellectual property there.
        Aren't there instances where, yes, we need to be worried
    about the broader implications and making sure we get it right.
    But aren't there instances where we ought to have enough,
    enough faith in the Federal Government that they, just like
    CDT, could get it right?
        Mr. Sohn. Well, I think there is a big difference between a
    private actor taking action and a small group like ours, and
    the Federal Government taking action.
        Mr. Deutch. Right, Mr. Sohn, I agree. Just, Mr. Chair, if I
    may. I agree that there is a difference. And I don't know about
    CDT's ability to gather, to do their due diligence before
    putting out a list.
        But I believe that probably most of us here would
    acknowledge that there is no one who has more resources at
    their disposal than the Federal Government in compiling such a
    list, number one.
        And number 2, with respect to some of these very specific
    sites where there is nothing except what's illegal being done,
    clearly, we ought to be in a position to acknowledge that and
    the Federal Government ought to be in a position to make that
    determination before moving forward on shutting down that
    domain there.
        Mr. Sohn. I think whenever you have government action
    involved you do want to have due process, you want to have some
    procedural guarantees of fairness, and, you know, unfortunately
    we have already seen an example where the Federal Government
    made a mistake here, went after moo.com and there were lots of
    innocent users of that. Why?
        Because they didn't quite understand that this was a--I
    think, because they didn't quite understand because this domain
    was shared between many users. So I think any time you don't
    have due process, there are risks.
        Mr. Deutch. Mr. Chairman, just before yielding back. I
    would acknowledge. I would just point out that I think this
    hearing was incredibly helpful in starting to flesh out some of
    the tough issues that we need to grapple with.
        At the same time, I think, also putting us in a position to
    realize that if we grapple with those issues, that we can draft
    legislation that will be respectful of due process, that will
    build in sufficient due process, but will also permit us to
    protect the intellectual property rights that are being
    violated every single day.
        I yield back. Thank you.
        Mr. Goodlatte. Well, said. The gentlewoman from California.
        Ms. Lofgren. Thank you, Mr. Chairman. I realized that I
    wanted to ask Ms. Pallante if, you mentioned that you had
    convened a group of stakeholders, a large number, I can't
    remember the number you said.
        Could you provide, later, a list of who have those
    stakeholders were that you met with?
        Ms. Pallante. Yes, I would be happy to.
        Ms. Lofgren. Thank you very much.
        You know, I was thinking about the DMCA, and I remember
    very well, Mr. Chairman, I was a freshman, but the years that
    we spent trying to sort through that, and although I don't
    think it was perfect, by the time we finished it, it was a lot
    better than it was when it started. I mean, the original draft
    outlawed Web browsing, although I don't think it intended to.
        Now we are being asked for new remedies. The question isn't
    whether we shouldn't consider remedies, but whether they are
    narrowly tailored to deal with a specific problem, and we won't
    have collateral damage. That's, I think, one of the big issues.
        And I was interested in, I think, this is a rough, I didn't
    write down word for word, but that search engines and ISPs
    should be required to prevent access to the bad actors,
    essentially, that that was asserted as something that should
    happen.
        And in thinking about that, since the bad actors are not a
    static list, I mean, there's constant movement in the Internet,
    I am wondering how that squares with the Supreme Court's
    decision in the Betamax case that basically says that
    technology is capable of substantial non-infringing users, are
    not inherently guilty of copyright infringement, and really,
    our position as the government has been that we are not going
    to either shut down non-infringing technologies if they have
    substantial non-infringing uses, nor are we going to go in and
    do the engineering from the government's point of view of
    technologies that are in that category.
        How does that precedence square with the assertion that we
    should require ISPs and search engines to block an ever-
    expanding list and technologies that we probably haven't
    thought of? Can you think of that, Mr. Sohn, how that would
    work?
        Mr. Sohn. Yes. I think you raise a very good point. There's
    a long tradition in this country of dealing with Internet
    service providers and information tools like that in a certain
    way. We have the DMCA that's addressed that.
        I do think that one risk is that the current legislative
    process could take us into really groundbreaking territory
    where, you know, we toss aside some of our long-standing
    principles regarding how the Internet operates and how ISPs and
    intermediaries in the online context work.
        One of the fears that I have tried to express here is that
    I think that some of those proposals just wouldn't work anyway.
        So it's asking us to really do a sea change in a legal
    approach to some of these entities for results that I actually
    don't think would make much difference in infringement.
        Ms. Lofgren. One of the things that I think Mr. Deutsche
    mentioned it and others, the utility of addressing the payment
    scheme, and that intrigues me as an opportunity, because if you
    do have a site where you are getting paid to stream or to
    download material that you don't have a right to profit from,
    that is an opportunity, you know, it seems to me, to deal with
    it.
        Visa came in to my office--and I didn't talk to their
    representatives, but they talked to my staff last week--and
    said they are watching the Senate bill, that in the last 6
    months, they have been asked only 30 times. They have got a
    voluntary system where they will block payment for infringing
    uses, but they have only been asked 30 times in the last 6
    months to do that.
        So I am wondering how, why would that be, and are we using
    the tools that have already been made available?
        I mean, apparently, they are not very agitated about this
    bill because they don't feel it would--I don't want to speak
    for them, but my impression was they didn't think it would be a
    big burden because nobody is asking them to do it now and they
    are willing to do it.
        Maybe you can comment on that, Mr. Huntsberry. Do you know
    why only 30 times would Visa have been asked to block these
    sites?
        Mr. Huntsberry. No, as a matter of fact, we have been in
    contact with Visa intensively over the last year, and also I
    should say with MasterCard. And I will say that MasterCard has
    done amazing steps forward in correcting this situation.
        So we absolutely agree with you that this is a very good
    area, as is, by the way, working with the ad providers, because
    advertising revenue is another type of revenue that these sites
    benefit from.
        Ms. Lofgren. I know my time is up. I just would like to
    make one comment that you are right. I mean, you have got
    counterfeit goods. We don't have a due process issue when you
    have got counterfeit goods, but you never have a problem
    usually that counterfeit goods could be engaging in First
    Amendment rights activity. It's a whole different type of risk
    that we have as a country when we move into this.
        And some of the, you know, there is a concept, of fair use
    in the United States. It is possible to use some material and
    have it be protected by the First Amendment. That's been really
    not mentioned here today.
        And just a final thought, if we move into designing
    technology by the United States Government, that too will move
    offshore as we know, Mr. Chairman, not all engineers currently
    live in the United States. Not all technology is designed in
    the United States.
        That's another collateral issue that we should be
    discussing and mindful of as we continue to discuss this
    important issue.
        I yield back with that. Thank you.
        Mr. Goodlatte. I thank the gentlewoman. I thank all the
    members of the panel. This has been a very good hearing. I
    agree with some of the Members who have said that a number of
    good ideas have been discussed here, a number of good caveats
    about how to make sure how we don't violate legitimate
    operators, due process, have been brought forward as well, and
    I would encourage everybody involved here, the Internet service
    providers, the content owners, everyone, to find as many
    business model solutions to this problem as possible as well,
    because while it is imperative that this Committee act, and I
    believe that we will act in this area, and the Senate is hard
    at work on this as well, that just like with the DMCA, we won't
    find all the solutions here. They are going to have to be found
    through the use of technology and through the use of better
    business models to protect intellectual property as well.
        So I thank everybody for their contribution today. We will
    be hard at work at this. This is not our last hearing on this
    subject. We will be working on legislation.
        I would like to thank our witnesses for their testimony
    today.
        Without objection, all Members will have 5 legislative days
    to submit to the Chair additional written questions which we
    will forward to the witnesses and ask them to respond to as
    promptly as possible so that their answers may be made a part
    of the record.
        Without objection, all Members will have 5 legislative days
    to submit additional materials for inclusion in the record.
        With that, I again thank the witnesses and adjourn the
    hearing.
        [Whereupon, at 6:15 p.m., the Subcommittee was adjourned.]

                           SUBMISSIONS FOR THE RECORD

                                  ----------

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

     PROMOTING INVESTMENT AND PROTECTING COMMERCE ONLINE: LEGITIMATE SITES
                             V. PARASITES (PART II)

                                  ----------

                            WEDNESDAY, APRIL 6, 2011

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

        The Subcommittee met, pursuant to call, at 10:49 a.m., in
    room 2141, Rayburn Office Building, the Honorable Bob Goodlatte
    (Chairman of the Subcommittee) presiding.
        Present: Representatives Goodlatte, Smith, Quayle, Coble,
    Chabot, Issa, Jordan, Poe, Marino, Adams, Watt, Conyers,
    Berman, Chu, Deutch, Sanchez, Wasserman Schultz, Lofgren,
    Jackson Lee, and Waters.
        Staff present: (Majority) David Whitney, Counsel; Olivia
    Lee, Clerk; and (Minority) Stephanie Moore, Subcommittee Chief
    Counsel.
        Mr. Goodlatte. Good morning. The Subcommittee on
    Intellectual Property, Competition, and the Internet will come
    to order.
        And I will recognize myself for an opening statement.
        Today's hearing is the second of two oversight hearings the
    Subcommittee will conduct to examine issues that surround
    digital theft and online counterfeiting.
        At our first hearing on March 14, we received testimony
    from the Acting Register of Copyrights, a representative from
    the Center for Democracy and Technology, a representative from
    the Information Technology and Innovation Foundation, and the
    Chief Operating Officer of Paramount Pictures. While there was
    disagreement as to solutions, each witness affirmed the
    importance of protecting intellectual property online. They
    also acknowledged the need to ensure that whatever legislation
    Congress considers is appropriately balanced and takes into
    account the views of a variety of stakeholders.
        In discussing the first hearing, I want to take a moment to
    clarify a point that arose and that we may revisit today. The
    seizure process for IP crimes committed within the jurisdiction
    of the United States is current law. It was enacted as part of
    the PRO-IP Act that this Committee originated and passed on a
    bipartisan basis several years ago. That process utilized by
    the Government is the remedy for infringing sites over which
    the U.S. can bring a seizure action. This includes, for
    instance, domestic and foreign sites that are registered on the
    dot com and dot net top level domains.
        The purpose of these hearings is in a broad sense to
    examine current and anticipated threats to IP online. As part
    of that inquiry, we are looking into the adequacy of existing
    laws that were enacted to protect investment and promote
    creativity online. Foreign-based and foreign-registered
    infringing sites are not reachable by U.S. authorities. Yet,
    the Internet enables criminals anywhere in the world to defraud
    and jeopardize U.S. consumers while generating revenue from
    U.S.-based businesses.
        Any legislation that grants new authority to protect
    Americans and deny access to our market to wholly foreign
    parasites will not be based on our seizure laws and processes.
    That is because there is no property such as a server or a
    domain name in the U.S. to be seized.
        However, it has become increasingly clear that new tools
    are, indeed, necessary to meet the growing levels of theft
    online. Online theft significantly impacts the music, movie,
    software, digital book, and other industries that are
    increasingly moving to digital delivery of goods and services.
        However, it is not limited to these industries. Indeed, it
    also impacts traditional manufacturers. I hold in my hands a
    real and a knock-off Vibram shoe. I challenge anyone to tell me
    which one is real. They both have the toes that you all are
    familiar with. And these fake goods, along with even more
    dangerous goods, like fake medicine, car parts, and others, are
    being sold illegally online and shipped directly to consumers
    in the U.S.
        These foreign sites go to great lengths to make their
    illegitimate goods appear legitimate, including promoting the
    logos of financial services companies, hosting advertising on
    their sites from legitimate companies, and even charging close
    to the same prices for fake goods that the lawful owner
    charges. We must aggressively combat this theft.
        Today we will receive testimony from an outstanding panel
    of witnesses. First, ICE Director John Morton is here to
    describe the critical role his agency plays in combating IP
    theft in the physical world and on the Internet. Director
    Morton will discuss the important role of the IPR Center which
    brings together 17 key domestic and foreign investigative
    agencies to leverage resources, skills, and authorities in
    order to provide a comprehensive response to IP theft.
        He will also describe the Operation in Our Sites
    initiative, a law enforcement operation that uses the authority
    contained in PRO-IP to target websites used to sell counterfeit
    goods or distribute pirated merchandise and copyrighted digital
    materials. Since June 2010, this high visibility and labor-
    intensive operation has executed judicially authorized search
    warrants and resulted in the seizure of 119 domain names as
    part of ongoing criminal investigations. According to the
    Motion Picture Association of America, the seizure of nine
    sites that trafficked in infringing movies and TV programs in
    the first operation had a huge deterrent effect and resulted in
    the voluntary suspension of 81 of the 300 most active pirate
    websites.
        Our second witness, Floyd Abrams, is one of our Nation's
    leading authorities on the First Amendment. Appearing on his
    behalf, Mr. Abrams refutes the suggestion that the Internet,
    while free, should also be lawless.
        Our third witness is Kent Walker, the Senior Vice President
    and General Counsel of Google. Best known for its interactive
    search function, Google is the dominant player in web-based
    advertising and applications and it is increasing its market
    share in Internet-enabled mobile devices. Mr. Walker states
    Google leads the industry in helping to combat copyright
    infringement and the sale of counterfeit goods online. To their
    credit, Google has taken positive steps such as developing the
    content ID technology it uses on its YouTube platform. Google
    has also announced the intention of taking additional steps to
    improve copyright enforcement online.
        That said, the question is isn't so much what Google has
    done as much as it is what Google ought to do. Many
    rightsholders have serious questions about Google's willingness
    to cooperate in a meaningful way. Among their concerns, they
    note the revenue that flows from Google's ad networks to
    unlicensed sites that are clearly infringing, the prominent
    posting of infringing files on Google's blogspot which is
    hosted on Google-owned servers, and the time it takes for
    Google to comply or even respond to DMCA notice and takedown
    requests.
        Time will not permit a complete discussion of all of these
    concerns with Mr. Walker today, but I will appreciate his
    public and personal commitment to myself and the other Members
    of this Subcommittee to work closely with us to respond fully
    and promptly to any further questions we have that we might
    forward after today's hearing.
        Our final witness is Christine Jones who serves as the
    Executive Vice President and General Counsel of the Go Daddy
    Group. As the world's largest registrar of domain names and a
    hosting provider, Go Daddy maintains a large, 24/7 abuse
    department whose mission it is to preserve the integrity and
    safety of Go Daddy's network by investigating and shutting down
    websites and domain names engaged in illegal activities. Go
    Daddy's policy is to immediately investigate complaints that a
    customer is engaged in unlawful online activity and to
    permanently suspend services to any domain name, website, or
    registrant they conclude is engaged in illegal activity. Go
    Daddy voluntarily and permanently suspends support for all the
    parasites associated with such a customer's account.
        Ms. Jones has several specific recommendations on steps we
    can take to make the Internet a safer and more trustworthy
    place for consumers and owners of valuable IP.
        In my own estimation, the need to fashion new tools to more
    effectively and meaningfully combat digital theft and online
    counterfeiting is beyond reasoned discussion. The most serious
    questions relate to the scope of appropriate relief and the
    balance of interests among stakeholders and the public.
        In addition, I want to note that this is the furthest thing
    from censorship. A civilized society respects property and
    promotes lawful individual expression whether it occurs online
    or in the public square. This hearing is another important step
    in advancing the public debate and enhancing the ability of our
    members to assess the true character and impact of criminal
    infringement on the Internet and to design new tools that will
    be adapted to current and emerging technologies.
        I look forward to working with Members on both sides of the
    aisle and with our colleagues on the other side of the Capitol
    as we advance this effort.
        It is now my pleasure to recognize the Ranking Member of
    the Subcommittee, the gentleman from North Carolina, Mr. Watt.
        Mr. Watt. Thank you, Mr. Chairman. And let me thank
    Chairman Goodlatte for providing the Subcommittee with two
    hearings on this important issue. I think it is critical that
    we look more broadly at how we promote investment and protect
    legitimate commerce online, and a primary means of doing that
    is deterring the electronic theft of legitimate commerce and
    products just as aggressively as we try to deter theft of
    products on the ground. These hearings are affording us the
    opportunity to do that.
        I look forward to working with you, Mr. Chairman, to
    fashion an appropriate remedy for what might romantically be
    called piracy but what we still refer to in my neighborhood as
    theft or simple stealing.
        As I noted in our first hearing, online theft of
    intellectual property is increasing and negatively affecting
    both the rightsholders and the Nation's economy. Theft of
    digital work such as music and movies carries with it
    substantial downstream damage, hitting the pockets and
    livelihoods of businesses, large and small, and their workers
    and artists. Who wants to make something or use their
    intellectual innovation or creative talents if the fruit of
    their labor is just going to be stolen?
        Businesses are hemorrhaging profits, shrinking staff, and
    in some instances facing extinction. Counterfeit products of
    all kinds sold online not only create a drain on the economy,
    but they can also pose serious health and safety risks for an
    unknowing public and jeopardize the financial security of
    individuals. Luxury goods, automobile parts, foodstuffs, and
    pharmaceuticals have all been hijacked by criminals with the
    tacit assistance of credible payment processors and, yes,
    reputable players in the Internet ecosystem and spurred by the
    demand of consumers. The criminals would rather use their
    ingenuity to deceive and exploit than to conduct legitimate
    business. The magnitude of digital theft and online
    counterfeiting together is simply staggering, and they have to
    be stopped.
        While the anti-circumvention provisions of the Digital
    Millennium Copyright Act, the DMCA, have provided rightsholders
    with some protections against theft, the scope of these
    protections is narrow and their reach provides no protection
    against threats from foreign websites.
        Similarly, the notice and takedown provisions of the DMCA
    established an enforcement model that, while engaging many
    actors in the Internet ecosystem, relies in the final analysis
    upon ISP's and other online service providers to implement
    enforcement.
        The gaps in the DMCA suggest that the time to supplement
    its provisions to address the broader range of theft is upon
    us. The scope of the problem has become so immense that every
    participant within the Internet ecosystem must assume some
    responsibility for taking the profit out of piracy.
        As a member also of the Financial Services Committee, I am
    familiar with the laws and regulations imposing obligations on
    banks to curb the tide of money laundering. While we require
    banks, not because they are bad actors, to report deposits in
    excess of $10,000, we do so because we want to deter criminals
    from using reputable financial institutions to further their
    criminal enterprises.
        Similarly, I believe it is incumbent on us to ensure that
    legitimate Internet intermediaries are protected from criminal
    elements which the evidence overwhelmingly suggests are
    exploiting U.S.-based businesses to infiltrate the U.S. market,
    reaping profits while undermining our economy.
        This applies also to criminals who operate beyond our
    borders and register domain names with foreign registrars.
    Despite current efforts of IP rightsholders and law enforcement
    officials, it seems clear that new authorities and enforcement
    strategies and enhanced cooperative partnerships are critically
    needed to combat the use of foreign websites by criminals to
    reach American consumers.
        Additionally, any law we craft must, to the greatest extent
    possible, account for new technologies and anticipate the
    creativity of criminals to circumvent the law. This is even
    more important in a global economy.
        I look forward to the recommendations of our witnesses and
    thank them for being here.
        And, Mr. Chairman, I yield back.
        Mr. Goodlatte. I thank the gentleman for his very cogent
    remarks.
        And I am now pleased to recognize the Chairman of the
    Judiciary Committee and a leading advocate for efforts in this
    area, the gentleman from Texas, Mr. Smith.
        Mr. Smith. Thank you, Mr. Chairman.
        This important hearing is the second of two of the IP
    Subcommittee devoted to the destructive effects of online
    parasites, web-based entities that steal intellectual property.
        Practically anything capable of being reproduced digitally
    or available for sale in stores is only a click or two away
    today. That is a good thing when consumers purchase from
    legitimate businesses, but increasingly consumers are being
    steered to web stores that traffic in counterfeit products.
        According to the Alliance for Safe Online Pharmaceuticals,
    95 percent of online pharmacies are unlicensed or traffic in
    counterfeit drugs. When patients go online and end up buying
    fake medicines, more than a trademark is in jeopardy. The lives
    of those or their loved ones are placed at risk. So this is
    about both protecting lives and intellectual property.
        It is also about jobs, jobs lost as a result of digital
    theft and online counterfeiting. The jobs lost in legitimate
    industries tend to be high-paying jobs that provide income and
    security to tens of thousands of Americans. For instance, jobs
    in the U.S. entertainment industry have an average salary of
    $76,000. This is 72 percent higher than the national average.
    When jobs like these are lost, entire families become victims.
        With digital theft, what is distributed was created by
    those who have had their property stolen. Perfect reproductions
    of movies, sound recordings, books, software, and musical
    compositions compete directly with licensed goods.
        The Constitution provides for the progress of science and
    useful arts by giving Congress the specific responsibility and
    duty to spur creativity and innovation by securing those IP
    rights. Our job on the House Judiciary Committee is to protect
    the right of free expression and to provide due process of law.
        A recent study of online activity revealed that nearly one-
    quarter of global Internet traffic involves stolen IP. This
    digital theft is now so pervasive, profitable, and pernicious
    that it discourages creative companies from investing in the
    production of new licensed content. IP theft not only adversely
    affects creators but also undermines investments in new
    technology by innovative companies such as Netflix.
        Securing property rights and protecting IP is a matter that
    unites Members on both sides of the aisle and on both sides of
    the Hill. While we will never achieve unanimity, there is a
    great deal of consensus that new legislation is needed to deal
    with threats that have emerged as technology has progressed.
        Thank you, Mr. Chairman.
        I yield back.
        Mr. Goodlatte. I thank the Chairman.
        And it is now my pleasure to recognize the Ranking Member
    of the full Committee, the gentleman from Michigan, Mr.
    Conyers?
        Mr. Conyers. Thank you, Mr. Chairman.
        We were yesterday over on the other side meeting with the
    Chairman of the Senate Judiciary, the Chairman of this
    Committee, the Subcommittee Chairman of this Committee, the
    distinguished gentleman from California, Mr. Berman, and myself
    pledging publicly to be as cooperative as we can in this
    ongoing examination of how to get a bill out of here that will
    satisfy at least a few, maybe even most of you that are present
    in the room today.
        Now, there are a number of companies--and Google is not the
    only one--and other search engines that act as intermediaries
    that facilitate what all this lecturing is about on piracy and
    stealing and so forth. We are beginning to examine what
    responsibility do they have. Are we all the innocents, and all
    the bad guys are overseas doing all this?
        Under title 17 and sections 501 and 506, this Government
    and copyright holders cannot adequately stop, so far, online
    infringement at the speed that is necessary to stop the crimes.
    On the Internet, once a file of an illegal movie has been
    uploaded, for example, days and even minutes can result in
    copies of the file traveling to every corner of the Web. The
    Department of Justice and our civil suit system move at a very
    slow pace. The DMCA has been insufficient to stop what is going
    on. There has been a proliferation of sites operating off our
    shores. As fast as we close a few down, others spring up.
        And so I am glad that Floyd Abrams is here, the number one
    man in First Amendment concerns, because we have got a big
    challenge in front of us.
        Now, we are going to move toward closing down some of this
    international illegal activity, and the challenge is how to do
    it without violating due process and the First Amendment.
        So I join everybody here in all the rhetoric.
        But why don't we just cut off some of the money? These
    streams of pirate sites--instead of cutting off each one every
    time it pops up to pop up somewhere else, why don't we
    eliminate some of the financial incentives by cutting off
    funding from the customer through the payment processing system
    or cut off the funding from the advertising networks?
        What about the Department of Justice with the authority to
    go after the worst, we could permit them to order court-
    supervised takedowns and allow them to block access to rogue
    sites from within the United States? And it may be we need to
    talk to the Attorney General again on this subject.
        Finally--and this is almost unthinkable--we could begin to
    grant a right of private action to allow people to challenge
    some of these providers, search engines and payment processors.
        I will be the first to be critical if we step over the
    line, but I think that there is more that can be done and I
    think that we need to use this hearing as another opportunity
    to come up with some legislation that we will all be proud of.
        Thank you, Mr. Chairman.
        Mr. Goodlatte. I thank the gentleman.
        And without objection, other Members' opening statements
    will be made a part of the record.
        We have a very distinguished panel of witnesses today.
    Their written statements will be entered into the record in
    their entirety, and I ask the witnesses to summarize their
    testimony in 5 minutes or less. To help you stay within that
    time, 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 to red, it
    signals your 5 minutes have expired.
        Before I introduce our witnesses, I would ask them to stand
    and be sworn.
        [Witnesses sworn.]
        Mr. Goodlatte. Thank you and please be seated.
        Our first witness is John Morton, the Director of
    Immigration and Customs Enforcement. ICE is the principal
    investigative arm of the U.S. Department of Homeland Security
    and the second largest investigative agency in the Federal
    Government. The primary mission of ICE is to promote homeland
    security and public safety through the criminal and civil
    enforcement of Federal laws that govern border security,
    customs, trade, and immigration.
        Before his confirmation in 2009, Mr. Morton spent 15 years
    at the Department of Justice. While there, he served as an
    Assistant United States Attorney, Counsel to the Deputy
    Attorney General, and Acting Deputy Assistant Attorney General
    of the Criminal Division. During his tenure, Mr. Morton has
    sought to strengthen ICE's investigative and enforcement
    efforts with a particular emphasis on border crimes, export
    controls, intellectual property, and child protection.
        Our second witness is Floyd Abrams. Mr. Abrams is a partner
    at the New York law firm of Cahill, Gordon & Reindel. His
    practice is diverse and includes intellectual property, media,
    and communications law. An internationally noted trial and
    appellate attorney, Mr. Abrams is best known for his experience
    and expertise in First Amendment issues. He is the recipient of
    countless awards and honors, which I will not attempt to
    enumerate, but perhaps none is more noteworthy than the
    description of Mr. Abrams by Senator Daniel Patrick Moynihan
    as, quote, the most significant First Amendment lawyer of our
    age. End quote.
        Mr. Abrams earned his bachelor's from Cornell University
    and his J.D. from Yale Law School. I understand he is
    testifying in his personal capacity today.
        Our third witness is Kent Walker. Mr. Walker is a Senior
    Vice President and General Counsel of Google. In the latter
    role, he is responsible for managing Google's global legal team
    and advising the company's board and management on legal issues
    and corporate governance matters.
        Before joining Google, Mr. Walker served in a variety of
    senior legal positions at other technology companies. These
    include eBay, Liberate Technologies, Netscape, America Online,
    and AirTouch Communications. Prior to serving in these
    positions, he served as an Assistant United States Attorney
    where he focused on the prosecution of technology crimes.
        Mr. walker graduated magna cum laude from Harvard and
    earned his J.D. with distinction from Stanford Law School.
        Our final witness is Christine Jones. Ms. Jones is the
    Executive Vice President and General Counsel and Corporate
    Secretary to the Go Daddy Group, Incorporated. With more than
    47 million domains under management, godaddy.com is the world's
    largest domain name registrar. In addition to being responsible
    for all legal affairs, Ms. Jones oversees the domain services,
    network abuse, government relations, compliance, and legal
    departments of the corporation. She has been active in her
    support of Internet-related legislation to, among other things,
    protect children from predators, protect patients from
    counterfeit and unlicensed drugs, and enhance transparency and
    accountability among those who operate online.
        Before affiliating with Go Daddy, Ms. Jones practiced
    privately and worked for the Los Angeles District Attorney's
    office.
        She earned her bachelor's from Auburn University and her
    J.D. from Whittier Law School. In addition to being an
    attorney, she is also a certified public accountant.
        We welcome all of our witnesses to the Subcommittee on
    Intellectual Property, Competition and the Internet today, and
    we will begin with Mr. Morton's opening statement.

        TESTIMONY OF THE HONORABLE JOHN MORTON, DIRECTOR, U.S.
                  IMMIGRATION AND CUSTOMS ENFORCEMENT

        Mr. Morton. Good morning, Mr. Chairman, Ranking Member
    Watt, Members of the Subcommittee. Good morning as well to
    Chairman Smith and to Ranking Member Conyers from the full
    Committee.
        As you know, ICE is an aggressive investigator of
    intellectual property offenses, and we run the National
    Enforcement Center for IP Crime just across the river in
    northern Virginia.
        Now, why is ICE so heavily engaged in intellectual property
    enforcement? The answer is simple. American businesses and
    consumers are under assault from organized counterfeiters and
    copyright thieves. American jobs, American innovation, the
    safety of our people are all at risk, not minor risk, serious
    risk, risk calculated in the billions, risk that threatens the
    foundation of certain U.S. industries, risks that put people in
    hospitals.
        Remember, counterfeiters and copyright thieves aren't
    trying to make America great. They don't pay taxes. They don't
    create jobs. They don't provide health care or pensions. They
    don't invest in the next Oscar-winning movie, the next
    lifesaving drug, or the next technological advance. They don't
    care about safety or health standards. Instead, they wait for
    others to do the research, for others to work hard, for others
    to play by the rules, and then they take what they can't make
    on their own and profit at our country's expense.
        In short, we have a significant problem on our hands, and
    resolute action by Government, by industry, and the consumer is
    necessary to turn the tide.
        Why are we pursuing enforcement online? Again, the answer
    is simple. That is where crime is taking us. The days of
    counterfeiting and copyright theft occurring solely through the
    mails, on the streets, or through our ports are over. Today
    these crimes are just as likely to occur over the Internet as
    they are on the corner of 4th and Main.
        Let me be clear here. We are investigating crimes online
    because copyright thieves and counterfeiters have led us there.
    We are not seeking to regulate the Internet. We are not out to
    stifle free speech. We are not out to trample anyone's
    constitutional rights. Any suggestion to the contrary is simply
    false. Full stop. We are a law enforcement agency out to deter
    and prevent crime. Nothing more, nothing less. Crime is crime
    wherever it occurs and we do not accept the view that the
    Internet should somehow be off limits to enforcement if it is
    knowingly being used to commit crime.
        So what is ICE doing to combat the problem? Well, we are
    making IP enforcement a priority for the agency and pursuing a
    record number of IP cases. Last fiscal year, for example, we
    opened over 1,000 new IP investigations, the largest number in
    our agency's history.
        Wherever we can, we pursue the traditional investigative
    model; that is, we investigate the alleged crime, we seize the
    contraband, we arrest and prosecute the perpetrators. That
    approach doesn't always work well, however, on online cases as
    online crime is frequently centered overseas and outside of our
    legal jurisdiction. Take an online counterfeiting site, for
    example. More often than not, the server, the criminals, and
    the counterfeiting operation are all outside the U.S. The same
    is true for infringing sites. Nothing need be based in the U.S.
        As a result, we have also seized 119 domain names of sites
    used to sell counterfeit goods and to illegally distribute
    copyrighted materials. 119 sites, mind you, out of well over
    200 million on the Internet. The majority of the sites were
    linked to counterfeiting of hard goods; the rest were involved
    in illegal streaming or downloads of entertainment or software.
        Please note that we are not targeting lawful businesses,
    blogs, or discussion boards. The sites we go after are
    commercial and have engaged in repeated and significant
    violation of the law. They are increasingly sophisticated and
    often seek to dupe consumers.
        I don't know if we can throw up--so here is just two quick
    examples. Here is a website purporting to be an authorized
    Louis Vuitton outlet and it offers Louis Vuitton products--and
    I quote--100 percent handmade from France. The website has the
    Louis Vuitton logo, name, and designs. What is missing, of
    course, are any genuine Louis Vuitton products. Instead, none
    of the products are handmade in France, but they are all
    counterfeit in China and shipped to the United States.
        The next slide, if you would. This is allegedly an
    authorized retailer of Nike shoes, another site that we seized.
    In fact, none of these shoes are authorized or made by Nike.
    They are all counterfeit. Here you have Nike, one of the major
    U.S. manufacturers based in Oregon, and it is if not the most
    targeted, one of the most targeted companies in terms of
    counterfeiting.
        Let me close very quickly by saying we spend a lot of time
    and attention on process. We can talk about that more in
    detail.
        I also recognize that good people can have different views
    on how to solve counterfeiting and copyright infringement. That
    is okay. I don't pretend to have all of the answers. Addressing
    online crime is not an easy task and criminal investigation is
    but one part of the solution.
        I do know this, however, Mr. Chairman. If we do nothing to
    keep pace with online criminals or give up this fight, little
    good will come of it.
        Thank you.
        [The prepared statement of Mr. Morton follows:]

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                                   __________

        Mr. Goodlatte. Thank you, Mr. Morton.
        Mr. Abrams, welcome.

              TESTIMONY OF FLOYD ABRAMS, SENIOR PARTNER,
                      CAHILL GORDON & REINDEL LLP

        Mr. Abrams. Thank you. Mr. Chairman, Mr. Ranking Member,
    Mr. Chairman, Mr. Ranking Member, Members of the Committee, I
    appreciate the opportunity to be here today and to offer a few
    First Amendment views on the topic you have.
        You have got three competing, sometimes overlapping themes
    here today. We deal with the Internet, which is probably the
    greatest enabler of free speech by everyone in the history of
    the world. We deal with the copyright law which is a great
    enabler of free speech by providing a basis for people to
    engage in it, to create, and to profit from it. And we deal
    with the First Amendment which limits the ability of government
    in many areas to control free speech.
        That we deal with the Internet does not mean that we are
    dealing with an entity that is so unique that we must act as if
    we are in a law-free zone. The law is the same with respect to
    libel on the Internet as it is with respect to libel in a
    newspaper. The law is the same with respect to invasion of
    privacy on the Internet as it is with respect to television
    broadcasts, and the law is the same with respect to copyright
    on the Internet and off the Internet.
        It is simply then not so for some people to suggest that
    the Internet is the wild west and that we should leave it that
    way. Even the wild west had sheriffs and even those who use the
    Internet have to abide by our laws.
        Now, how should you address the question which every Member
    of this Committee has agreed is a significant one and, indeed,
    a dangerous one as it currently exists in a way that complies
    with the First Amendment?
        First, any legislation has to be narrowly drafted, really
    narrowly drafted so it only impacts websites, domains that are
    all but totally infringing. We don't want a situation, either
    as a matter of public policy and certainly not as a matter of
    the First Amendment, where we are wiping out in some sense or
    blocking in any sense protected speech. But if an entity, as so
    many of the ones at issue here are, is nothing but a
    transmitter of infringing products, which is to say acting
    criminally under our laws, you are permitted to deal with it so
    long as you do so without getting into an overbreadth
    situation.
        I suggest to you that so far as you can, you ought to base
    any legislation on the law that currently exists. You don't
    have to start from scratch as if there is nothing that can
    guide you. We have a copyright law. We have means of
    enforcement. Injunctions have been issued by courts since 1790
    when the copyright law was first enacted by Congress before we
    even had a Bill of Rights.
        I would recommend to you that any legislation should
    include some reference to and, I would urge, inclusion of
    Federal Rule 65 which is the Rule of Civil Procedure which
    deals with the modalities of assuring that people have notice
    to appear, that judges don't have to issue injunctions, but
    that they may do so, and which provides great procedural
    protections for all that may be affected by legislation.
        And I would simply sum up what I have to say in greater
    length in my prepared statement by saying that by enacting
    legislation in this area, we are not abdicating America's
    leadership of the world with respect to freedom on the
    Internet. We are simply enforcing well established, deeply
    rooted, frequently abided by, until rather recently, copyright
    law which exists for the purpose of furthering free expression
    in the first place. There is no constitutional right to steal
    someone else's intellectual property. And I urge the Committee
    to act with that in mind.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Abrams follows:]

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                                   __________
        Mr. Goodlatte. Thank you, Mr. Abrams.
        Mr. Walker, welcome.

            TESTIMONY OF KENT WALKER, SENIOR VICE PRESIDENT
                      AND GENERAL COUNSEL, GOOGLE

        Mr. Walker. Thank you, Mr. Chairman, Ranking Member Watt,
    Mr. Chairman, Mr. Ranking Member, Members of the Committee.
        As you have mentioned, Mr. Chairman, before I joined
    Google, I was a Federal prosecutor. As an Assistant United
    States Attorney, I prosecuted cyber crime. I brought some of
    the first cases against criminal copyright enforcement in the
    country. I recognize the challenges and the difficulties of
    protecting intellectual property online.
        The legal issues that we will discuss today are complex and
    challenging. They require thoughtful approaches to preserve and
    enhance the benefits of the Internet for consumers and
    businesses in America and the world. And Google is dedicated to
    addressing issues of online copyright infringement and
    counterfeiting. We know that the future growth and the success
    of our industry relies on fighting the bad guys who break the
    law. And we stand ready to support further enforcement measures
    against rogue foreign websites, focusing on financial
    transactions and advertising where those measures are
    appropriate and narrowly targeted against the worst of the
    worst foreign websites, in line with Mr. Abrams' comments this
    morning.
        We do have concerns, however, about extending new law to
    dictate natural search results. We would like to work together
    to ensure that these efforts are effective, while not harming
    legitimate services and technologies that drive U.S. economic
    growth and our country's leadership in the global information
    economy.
        Let me share several ways that Google combats copyright
    infringement and counterfeiting and then discuss principles for
    how to address rogue foreign websites.
        At YouTube as, Mr. Chairman, you recognized, we designed a
    powerful tool that rights holders use to block or monetize
    infringing content. Our content ID system, developed using
    50,000 engineering hours at a cost of over $30 million, scans
    every video uploaded to YouTube and typically within seconds
    compares it against more than 4 million reference files
    provided by rightsholders. Today over 1,000 media companies,
    including every major U.S. studio and record label, use content
    ID, and most of them choose to monetize rather than to block
    the content. This shows the win-win possibilities that Internet
    technologies can bring, getting money to rightsholders and
    innovative services to users.
        When it comes to online services like our search engine, a
    major part of the explosive growth of the Internet in the
    United States and around the world is due to the strong legal
    foundation created by Congress in the Digital Millennium
    Copyright Act. Last year, Google processed over 3 million DMCA
    takedowns across our products, including search. These came
    from copyright owners of all sorts from big movie studios to
    small publishers of needlepoint patterns. And currently Google
    engineers are building new tools so we can act on reliable
    copyright takedown requests on our search engine within 24
    hours. We are already testing the new tool with a content
    industry partner and we hope to invite other partners into that
    test in the weeks ahead.
        When copyright owners tell us about infringement, we
    disable access to the infringing content whether that content
    comes from foreign or domestic sources. The shared
    responsibility of the DMCA works. It assures that online
    platforms like Google or Facebook or Twitter will not face
    crippling liability when users post comments or files to online
    sites. And as we committed last year, we are already excluding
    several piracy-related terms from appearing in
    ``autocomplete,'' a feature on Google that predicts queries as
    users type. And we have asked content industry representatives
    to provide other terms for consideration.
        Turning to our advertising programs, in AdSense we prohibit
    ads on infringing web pages and we use automated and manual
    review to weed out abuse. Last year alone, we took action on
    our own initiative against over 12,000 sites for violating that
    policy.
        To address counterfeiting our policies ban selling ads to
    advertisers who market counterfeit goods, and they always have.
    We use automated tools to prevent violations of our policies,
    and last year alone, we invested over $60 million in these
    efforts. After all, a Google user who is duped by a fake good
    is less likely to click on another Google ad. So the integrity
    of the sponsored links on our sites is of paramount importance
    to us. In the last 6 months of 2010 alone, we shut down 50,000
    accounts for attempting to advertise counterfeit goods, and 95
    percent of those shutdowns came not as a result of a complaint
    but as a result of our own efforts. While it sounds like a
    lot--and it is--the legitimate complaints we received concerned
    less than one-quarter of 1 percent of advertisers.
        We have also committed to an average response time of 24
    hours to handle counterfeit complaints involving sponsored
    links, and that too is in process and should be rolling out
    fairly soon.
        So finally, as you address the challenge of rogue foreign
    sites, I would ask that you keep in mind the following three
    points.
        First, aim squarely at the worst of the worst foreign
    websites without hurting legitimate technologies and
    businesses. We agree with the goal of going after websites that
    are outside the reach of U.S. law and whose main purpose is
    commercial infringement. Procedural safeguards are critical,
    though, to ensure due process and to avoid mistakes costing
    legitimate businesses the use of their domain names.
        Second, don't rewrite the DMCA and existing law that works.
    Businesses benefit from stable and predictable rules with clear
    standards. Targeted legislation to address rogue foreign
    websites must not inadvertently dismantle the legal framework
    that America's technology companies and innovators rely upon.
    The DMCA strikes the right balance between thwarting
    infringement and preserving free speech and we should build
    upon it, not undermine it.
        Third and last, tailor intermediary obligations
    appropriately. Let me repeat Google is open to working with the
    Subcommittee on additional enforcement tools. Search engines
    already remove infringement by domestic and foreign sources, so
    we think it is right for additional measures to focus on
    financial transaction providers and advertising services, both
    of which Google provides. But any legislation should avoid a
    private right of action that would invite shakedowns against
    companies making good faith efforts to comply with the law.
        To sum up, these are complex issues. We need to address the
    enforcement problems, while protecting the overwhelmingly
    positive benefits of the Internet for our country and the
    world. And we look forward to working with each of you to do
    just that.
        Thank you very much.
        [The prepared statement of Mr. Walker follows:]

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                                   __________
        Mr. Goodlatte. Thank you, Mr. Walker.
        Ms. Jones, we are pleased to have your testimony.

     TESTIMONY OF CHRISTINE N. JONES, EXECUTIVE VICE PRESIDENT AND
                    GENERAL COUNSEL, GO DADDY GROUP

        Ms. Jones. Good morning, Chairman Goodlatte. Thanks so much
    for the opportunity to be heard today.
        You know, we put a lot of time and energy into getting rid
    of bad actors from other Internet at Go Daddy. So we sincerely
    appreciate that you guys have made parasites a priority for the
    Subcommittee this Congress.
        And I also want to extend my personal thanks to Ranking
    Member Watt and Chairman Smith and Ranking Member Conyers of
    the full Committee as well and, frankly, all the Members of the
    Subcommittee because I spend a lot of my personal time on these
    issues not because I have to but because I think it is the
    right thing to do. Let me tell you it is nice to know that I
    have an ally in this fight because sometimes we feel like we
    are out there all by ourselves.
        Having worked closely with law enforcement, the
    intellectual property community, and others on a wide variety
    of issues related to parasites, it is clear to me that we still
    have a long way to go. I will be the first to admit there is no
    silver bullet--no silver bullet. It doesn't exist. Just like in
    offline crimes, it appears there will always be bad guys on the
    Internet. That is a stark reality we all must face. And
    although some of us have done a lot, there is still a lot more
    that some can do. So let's talk about what that looks like.
        We have had great success in the past with a hybrid
    approach to illegal content. That means voluntary industry
    cooperation on the one hand among all of the industry players
    accompanied by targeted, specific Federal legislation designed
    to protect the companies that are doing the right thing, but
    provide a consequence for those who do not.
        We have used this approach in addressing child pornography,
    for example, to great effect, and Go Daddy and Google recently
    worked together with the White House Intellectual Property
    Enforcement Coordinator to gather representatives from all of
    the major industry players to address rogue online pharmacies.
    We feel like we are making progress there as well. That effort
    resulted in the formation of a group known as the Center for
    Safe Internet Pharmacies. That group's mission is to share
    information among all of the players, work together to
    terminate services for illegal online drug sellers. Whatever
    your service is, if you are a payment card provider, if you are
    a paid advertising provider, if you are a domain name
    registrar, whatever it is, turn off your services. We feel like
    that hybrid approach there is going to make it possible for us
    to address a significant number of illegal drug sellers who
    operate online today.
        So we support that type of hybrid approach to address a
    variety of types of criminal activity such as child abuse,
    rogue pharmacies, spam, phishing, identity theft, intellectual
    property infringement, terrorism, hate speech, on and on and
    on. We think it works in all of those situations.
        Of course, it is always just as important to focus on
    enforcement as it is to enact new legislation. To do that, we
    would suggest a few simple things. I think Ranking Member
    Conyers mentioned this in his statement, that is, follow the
    money, shut down all of the choke points in the system because
    we have to disincentivize the bad actors. So in the IP context,
    for example, we would take away the ability to search for, pay
    for, ship, and make money from selling stolen or counterfeit
    goods, but we have to do that while encouraging new innovation
    and research and development. One thing we know is that the
    better we get, the better we get. That means we have to think
    of things we can hardly even imagine right now.
        So what happens, for instance, in the case of cyberlockers
    or infringing mobile applications or whatever infringement is
    going to come up that is invented in the future? If we
    establish a set of rules and procedures such as the DMCA which
    can be applied to a wide array of situations, we can possibly
    address those things that aren't, as if they were.
        None of us can predict the next big thing. I mean, who
    knows what is the next eBay or AOL or Netscape or Go Daddy or
    Google or Twitter? Who knows? Not so long ago, there was a
    monopoly for selling domain names. Nobody had ever heard of an
    Internet browser or even a search engine. The term ``social
    media'' didn't exist. It is common understanding now. And not
    too long from now, there is going to be another idea like that
    that nobody has ever heard of. We have to think in terms of
    concepts rather than URL's or domain names or IP addresses or
    whatever to make legislation that is designed to outlast the
    current ideas.
        And because these issues reach outside our borders, we
    should all take steps to bind our foreign affiliates to the
    actions that we take here in the United States.
        A huge number of our customers make a living operating
    online businesses. That is how they make their money. And their
    ability to continue to do so is very important to us. We would
    challenge our counterparts in the Internet ecosystem to do what
    we do at Go Daddy, that is, to voluntarily take action against
    the people that we know to be using our system for illicit
    purposes, and that includes registrars, registries, hosting
    providers, payment processors, shippers, ISP's, search engines,
    online advertising providers and, oh, by the way, whoever joins
    the community next, whoever that is. We challenge them all to
    make the same commitment.
        And I would submit that unless and until we provide a
    consequence for the businesses that facilitate criminals in
    their system, there will always be a safe harbor, a place where
    crooks can go to engage in crimes online, and we must fix that
    hole in the fence.
        Thank you very much for the time.
        [The prepared statement of Ms. Jones follows:]

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                                   __________
        Mr. Goodlatte. Thank you, Ms. Jones.
        I will recognize myself to begin the questioning. Let me
    warn my Committee Members I may take a little extra time here
    because I want to go into some detail with this issue with some
    specific examples.
        Let me say at the outset that I want to restate my belief
    that tech and content, two areas in which this Committee has
    great interest, are not enemies and that they both bring
    innovation to the table to solve various problems, and they
    need each other, and we need both of them contributing to solve
    this problem.
        Mr. Walker, let me just say I am an avid user of Google's
    search engine, and I welcome your comments here today that you
    want to work with the Committee on some legislative solutions
    that might involve your company and other players in the tech
    community in this. And we hear your concerns as well.
        And I want to commend you for a news release, which I will
    put in the record, that says, ``Google boots Grooveshark from
    Android Market,'' and it noted that this was done yesterday.
    Grooveshark is a music app that has been found by many of the
    top music labels to be violating copyright law, and a Google
    spokesman said, ``We remove apps from the android market that
    violate our terms of service.'' And it was also noted that we
    were having a hearing on the subject here today. But we commend
    you for that.
        [The information referred to follows:]

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                                   __________

        Mr. Goodlatte. I want to go into some details about some of
    the things we found in recent searches, however. In preparation
    for today's hearing, we conducted searches in Google for free
    mp3 Taylor Swift, quote/unquote. Over the past several days,
    the first page of each search return appeared to show all
    unlicensed sites. We checked with the distributor of Taylor
    Swift's recordings, and they provided us three screen shots
    from yesterday that show only two authorized sites out of
    nearly 30. To access the first of those, a consumer would have
    to scroll past the first 14 suggested by Google.
        You wrote recently that Google was, quote, a big fan of
    making authorized content more accessible, end quote, 4 months
    ago, and yet this is the result.
        I intend to check in a week, in a month, in 3 months, in 6
    months. When I do that, will I find this same problem in
    existence? What is Google doing about this?
        Mr. Walker. Thank you, Mr. Chairman.
        Let me go to the Grooveshark example first. I want to flag
    that this is not the first time we have removed items from the
    App Store. We have removed almost 2,000 different applications
    from the App Store over time, something like 200 or 300 in
    February alone. So we continue to look not just for copyright
    infringement but malware and many other things. There are I
    believe about 200,000 different applications. So it is a major
    challenge for us to go through all them.
        Mr. Goodlatte. And we commend you for that.
        Mr. Walker. With regard to the additional items in the
    search results, we do try and remove--when we get notice of
    these individual infringing items, obviously, we try and take
    them down. And at the same time, we have said we are eager to
    work with the content industry on ways of making their sites
    more accessible. In some cases, when they offer preview content
    or other kinds of things where you can listen to 30 seconds or
    a minute or a trial copy of the song, for example, that is very
    attractive to users. And we talk with them about ways of
    partnering that would actually make that more visible within
    the snippets, within the search results that are returned, and
    so as you get users clicking on that, that is sort of a natural
    signal. The cream rises to the top even as we try and pull the
    bad guys out.
        Now, that said, the Internet is a big place, and as I think
    all of the witnesses have said, we are never going to get rid
    of all the bad guys. We play the Whac-A-Mole problem as much as
    the content industry does, and it frustrates us. When you hear
    me talk about taking down 50,000 sites for this or 12,000
    accounts for that, that costs us a lot of time and effort. It
    drives us crazy trying to get rid of these guys because, of
    course, we take them down one place, they come back up in
    another place using a different credit card, using a different
    IP address. So it is a constant battle.
        We think the best way to fight that battle is
    collaboratively, to your point about the content industry and
    the technology industry working together. We are in the best
    position to rapidly remove content and build tools and filters
    to help do that. The content industry is in the best position,
    maybe a unique position to let us know what is authorized and
    what is not because, of course, there are multiple authorized
    sites for different kinds of songs. The music industry is a
    very complicated place with label rights and publisher rights
    that expire over time in different geographies and the like.
    They know what is authorized and what is not, and we rely on
    them to let us know and then we take action.
        Mr. Goodlatte. Let me follow up on that. As I indicated, I
    use Google frequently. I am frequently amazed at the
    sophistication of the algorithms that you use in your search
    process. When I type in things, I like to see how many letters
    I have to type in before Google knows what I am looking for.
    And I am frequently very impressed.
        3 days ago, we conducted a search for ``watch movies
    online.'' We typed in those words. Without prompting, the first
    suggestion that appeared in the dropdown box that comes--which
    is exactly what I am talking about, anticipating what I want.
    In the dropdown box, the first suggestion was ``watch free
    bootleg movies online.'' And I am sure as a former Federal
    prosecutor, you know the meaning of the term ``bootleg.'' If
    you click, you go to a results page full of infringing links.
    Clicking on one of the sites at the top of the page takes you
    to a website that is a notorious infringing site. It even
    advertises pre-release movies. We have a movie coming out on
    Friday that they are advertising now will be available online
    illegally. ``Hanna'' is the movie and it is going to appear in
    the theaters on Friday, and you will be able to see it online
    on Friday too apparently. It even advertises pre-release
    movies.
        Why exactly does Google suggest to users that they click on
    ``watch free bootleg movies online''?
        Mr. Walker. So the functionality you are speaking to is
    referred to as autocomplete. It is essentially the sum of what
    other users are doing. So it is not really Google knowing what
    you want. It is you asking for things that other users are
    interested in, and the fact that some of these terms come up
    actually reinforces the importance of education among the
    American public because it is a reflection of how many users
    are, in fact, trying to seek illegal, bootleg, pirated,
    otherwise infringing content out there.
        Mr. Goodlatte. Well, let me ask you this. Would Google
    think it appropriate to, when these things are called to your
    attention, review the things that you anticipate and put up
    there and block some of them from occurring?
        Mr. Walker. Absolutely. In fact, we have committed to do
    just that. And the challenge in doing it, obviously, is making
    sure that the terms we are blocking are uniquely or highly
    correlated with infringing material and not with other sort of
    material. So, for example, if you put in ``cheap'' or ``free,''
    many of those are perfectly appropriate and legitimate
    searches. You wouldn't want to not suggest that. Even terms
    like ``faux'' or ``replica,'' in many cases it is faux leather,
    or even to go farther, terms like ``knock-off,'' there are
    knock-off dresses that are sold by Macy's and Nordstrom's. So
    we have to figure out what are the list of terms that really
    are pushing people to something that is almost unambiguously,
    to Mr. Abrams' point, infringing material.
        And we have started that process, and in fact, we are in
    dialogue with the content community to ask them what are your
    key terms. What terms would you like us to include in that
    list, and how can we do that analysis and move forward?
        Mr. Goodlatte. Thank you.
        And let me follow up on that. As I think you know, many
    Members of the Subcommittee are interested in your December 2
    policy blog post regarding steps Google would take to address
    the growing number of issues involving the use of its services
    in connection with copyright infringement. Interesting among
    them was a pledge to, quote, prevent terms that are closely
    associated with piracy from appearing in autocomplete, the
    Google feature whereby Google's search engine will suggest
    search terms to its users as the users type, based on its
    prediction of what they might be looking for.
        As you know, I am the co-chair of the bicameral
    congressional International Anti-Piracy Caucus, along with
    Congressman Adam Schiff. Last year we released our annual
    international piracy watch list which included six foreign
    websites that are notorious for providing access to infringing
    copies of works by U.S. creators. These included sites like the
    Pirate Bay, whose principals have been criminally convicted or
    their activities in Europe, and isoHunt, which is a file
    sharing site that is the subject of an injunction issued by a
    U.S. court for copyright inducement and whose owner is
    described another Federal court as, quote, an admitted
    copyright thief.
        I am told that a review of the 15 sites identified 6 weeks
    ago by the USTR as notorious markets for piracy show nearly
    identical results. In other words, Google continues to suggest
    each one of those sites as search terms through the
    autocomplete function.
        I would like to know what you are doing to address this
    problem and if you are doing your best to prevent terms that
    are closely associated with piracy from appearing in
    autocomplete. Again obviously somebody looking for something,
    they can type out that whole word and will not get to it, but I
    think it would help Google's reputation as not aiding and
    abetting the infringement by not having these pop up on your
    autocomplete.
        Mr. Walker. We understand the optics of it, and we are
    working on it. I think it is an extension of our prior
    conversation. The challenge is that a lot of those sites are
    broad-based sites. The Chinese search engine Baidu, for
    example, I believe appears on that list, and Baidu does allow a
    large amount of pirated and infringing material to be
    accessible through its search engine. And yet, we are in a
    difficult situation essentially discriminating against a search
    competitor and leaving them out of autocomplete.
        But I think the spirit of my answer here would be the same
    as before, which is we really want to identify things that are
    unambiguously infringing and we are open to removing those from
    the autocomplete list.
        Mr. Goodlatte. Thank you, Mr. Walker. I appreciate your
    answering those difficult questions.
        And to not single you entirely out, I have one for Ms.
    Jones. You mentioned that Go Daddy strongly prefers DNS
    blocking by registrars, registries to DNS filtering by ISP's as
    a strategy to shut down rogue websites because DNS filtering
    will not provide 100 percent protection. Is DNS blocking, as
    you describe it, effective against websites hosted and
    registered through overseas companies, and doesn't DNS
    filtering provide a better way to disable access to those types
    of foreign-based websites? Should both types of technologies be
    employed to combat the problem?
        Ms. Jones. To answer your last question first, yes, I think
    that is absolutely necessary, and it is a pretty complicated
    technical explanation. I will try not to get too much into the
    weeds. But if you block DNS at the definitive root level,
    nobody can access the website from anywhere. The problem comes
    where you don't have cooperation from entities who are willing
    to do the blocking, and then if you want to block at least some
    access, you may have to engage in some filtering. And we know
    that both blocking and filtering take place today in a variety
    of contexts.
        The Internet community is a little bit remiss to employ
    these kind of tactics because the more you filter, the more you
    splinter, the less stable and secure the root becomes, and you
    end up with a giant grid, a three-dimensional grid actually, of
    things that are blocked by people, from people in various
    geographies, and it gets very shaky. So really, that suggestion
    is more of a technical approach as opposed to a policy approach
    or a policy belief.
        I was going to answer one of Mr. Walker's questions, but I
    know I am not allowed to ask questions here. So I will just
    leave it at that.
        Mr. Goodlatte. That is good advice to yourself. [Laughter.]
        Now I will recognize the gentleman from North Carolina, Mr.
    Watt.
        Mr. Watt. I can't resist. I got to let her answer whatever
    question she wanted to answer. [Laughter.]
        Mr. Watt. If she is willing to answer it, I am willing to
    listen to the answer.
        Ms. Jones. It just occurred to me that once in a while we
    have foreign websites that we can't block because they are
    foreign, and we don't have a good, cooperative U.S. company
    that is willing to do it. So the example that the ICE gentleman
    put up here of the fake Louis Vuitton or the fake Nike, those
    are almost certainly--I don't know--I haven't looked them up,
    but they are almost certainly foreign registrars and foreign
    hosting providers, and they won't take them down. No offense,
    Mr. Walker, but that doesn't mean that we can't disable the
    search to those because I can almost guarantee you that Louis
    Vuitton and Nike have contacted somebody to say could you
    please stop sending people to those websites. It is an
    approach.
        Now he is going to have to answer.
        Mr. Watt. What do you say to that, Mr. Walker?
        Mr. Walker. Thank you, sir.
        It is exactly right. I am sure we are contacted by many of
    those sites, and we remove them. And that is the way the system
    should work. Louis Vuitton and Nike are in the best position to
    know what is appropriate and what is not. In many cases, when
    you put those search terms in, you may get ads for competitors,
    for example, and that is a good thing. Competitive advertising,
    comparative advertising helps consumers, helps them find out
    about more products that are out there, pay less money for
    them.
        Mr. Watt. What do you say to that, Ms. Jones?
        Ms. Jones. I happen to hear from the Louis Vuitton and Nike
    lawyers all day every day, and they are very willing to tell
    you which sites they want you to take down. So I don't have the
    data from any of the other providers except for the ones that I
    represent. So I don't know if they have the lists, but I would
    be shocked if they hadn't provided those.
        Mr. Watt. Mr. Morton, would it be more effective to block
    them or filter them?
        Mr. Morton. Well, as Ms. Jones noted, it gets very
    complicated, the sort of technical arrangements. What I will
    say is, first of all, on those sites, they weren't seized or
    terminated by industry. We seized them, both of those sites. We
    seized them and we forfeited both of those sites because they
    were notorious counterfeiting sites and they were referred to
    us by industry. And those are the instances in which you can
    have good cooperation between the Government.
        I think what you have heard going before suggests, however,
    that industry can do a lot more and on a much greater scale
    than Government ever can. We are part of the solution. We are
    not the solution by a long shot.
        Mr. Watt. Mr. Abrams, any free speech implications in any
    of those situations?
        Mr. Abrams. You know, everything we are talking about today
    is suffused with a danger of free speech violation. We don't
    want Google taking down sites just because people are angry at
    them or upset. We don't want the public to have less access
    unless we are talking about genuinely infringing or otherwise
    criminally or civilly violative sites.
        It seems to me that the hard issue here is that we are
    often talking about taking down an infringing movie, say,
    taking down an infringing design when the real problem is very
    often that these sites are only infringing sites. Everything on
    them is infringing. And there the question is, as a
    congressional matter, what can you do about that? That is what
    the Senate focused on in its attempt to draft legislation, and
    I suggest to you that when you focus on drafting anything, that
    you ought to propose legislation which focuses not just on
    individual files, not an individual movie or an individual
    design only, but on the sites themselves which contain them.
        Mr. Watt. But wouldn't a convenient way, quick way around
    that be just to----
        Mr. Abrams. I am sorry. I didn't hear.
        Mr. Watt. Wouldn't a quick way around that be just to put
    up some legitimate stuff on the same site? I mean, seldom are
    you going to have a criminal that is not--if you tell him that
    all you are doing is taking down sites that are exclusively
    dedicated to criminal activity, he is going to mix in a little
    legitimate stuff, don't you think?
        Mr. Abrams. That is a fair point. Therefore, what I am
    talking about will never be a complete solution.
        But law enforcement authorities deal with that when they
    deal with stores that sell 90 percent of child pornography.
    They can close down the store in that circumstance. If you get
    to a much lower amount, A, you have done something. You have
    accomplished something I think of a serious public policy
    nature, and then, yes, you have to go after the individual sale
    of an individual book. All I am saying is that it is a step
    forward to try to deal with the sites which is the reality, as
    I understand it, today where there are many sites which are
    either nothing but or almost nothing but infringing entities.
        Mr. Watt. I am sure I have plenty more questions, Mr.
    Chairman, but out of respect for other Members, I will come
    back around the next time I guess.
        Mr. Goodlatte. I thank the gentleman.
        The gentleman from Arizona, Mr. Quayle, is recognized for 5
    minutes.
        Mr. Quayle. Thank you, Mr. Chairman, and thank you for
    holding this hearing.
        Annually billions of dollars are being stolen through
    pirated or counterfeited goods. In the last hearing that we
    had, a number of us, including myself, had mentioned some of
    our concern of how illegal streaming was being treated. I am
    actually very pleased that the IP Enforcement Coordinator,
    Victoria Espinel, issued a white paper recently which states
    that illegal streaming should be a felony and not a misdemeanor
    as it currently is. And I know the Chairman of this
    Subcommittee and the full Committee have been working on this,
    and I look forward to seeing a piece of legislation soon.
        I would also like to specifically thank Mr. Morton and ICE
    for all their good work in enforcement against illegitimate
    sites, and I thank you for being here today.
        My first question is for you, Mr. Walker. Now, does Google
    currently have algorithms in place that allow ads that are paid
    for to show up during search results based on the search terms
    that are placed into the query?
        Mr. Walker. Yes. That is fundamentally how what is called
    the AdWords side of our business works.
        Mr. Quayle. So those algorithms are basically personalized
    for each search result based on the search terms that are
    utilized. Correct?
        Mr. Walker. They are personalized based on a lot of
    different factors. So, for example, a different part of a
    country, different time of day, different time of season, et
    cetera, but there is a correlation that takes a lot of things
    into account.
        Mr. Quayle. Are these updated regularly, daily, weekly,
    monthly?
        Mr. Walker. Almost instantaneously because it looks at the
    quality of different websites, the amounts that different
    advertisers are paying, user preference. The more users click
    on an ad, the more popular it becomes and therefore more
    relevant. There are a lot of factors that go into that. But it
    is almost in real time.
        Mr. Quayle. I went to law school. I wasn't an engineer. So
    that sounds pretty----
        Mr. Walker. That makes two of us.
        Mr. Quayle. That sounds pretty sophisticated.
        So based on that, I mean, Google has extremely
    sophisticated algorithms that it uses in its search results and
    queries, and because of that, Google has really become a noun,
    not just a verb. But based on that, a recent report stated that
    domains classified as digital piracy attracted 32 million daily
    visits. Do you think that a company that has sophisticated
    algorithms like Google could create an algorithm in which
    search requests, using words that are among the most frequently
    associated with a crime, are able to filter out those results?
    Have they tried to do this or have you chosen not to?
        Mr. Walker. The challenge is that it is sort of a different
    kettle of fish. It is a different task to solve. In the context
    of trying to come up with what is most relevant or related to a
    keyword, taking all those different factors into account, you
    can use user feedback. As I referred to, if you rank something
    fourth and all your users click on that, well, you probably
    made a mistake and it probably should be ranking higher and
    vice versa.
        In the context of trying to target what is authorized and
    what is unauthorized on the Web, that is a much harder
    challenge. And the feedback loop we use there is essentially
    DMCA notices. We referred to before our process for when we get
    a notice of something from the rightsholder, then we know it is
    illegal and we remove the link from our system. We don't just
    demote it. We take it out entirely.
        Mr. Quayle. I remember an article in the New York Times--I
    think it was earlier this year--regarding J.C. Penney and how
    it had been pushed to the top of the search results for
    everything from SkinnyJeans to grommetted top curtains.
    Anything that you put into the search query in Google came up
    J.C. Penney.
        Now, when you guys were actually notified of this, you
    changed your algorithm so that that wouldn't happen. How can
    you not then use that type of sophistication that you do--I
    mean, I know you just explained that portion of it, but I think
    that it would seem to be feasible that those common search
    terms that are used to find pirated works on the Internet could
    be put into the algorithm so that those searches and the
    results are actually filtered out of that.
        Mr. Walker. There are two problems there. I mean, one is
    that a lot of times searches, queries that are used to find
    pirated stuff are also used to find all sorts of other things
    as well--the word ``cheap'' or ``discount'' that I talked about
    before. So you are trying to separate the wheat from the chaff.
    That is problem one. You don't want to be over-inclusive and
    knock out a lot of legitimate sites.
        Problem two is figuring out what the wheat is, and there we
    need to partner with the content industry because there are
    lots of sites out there that make fair use of items, that have
    remixes and different sorts of things that are protected under
    the DMCA again that we don't want to knock out. So we rely on
    the content industry to say that is bad. That site is bad, pull
    that out of your index.
        We don't want--and I don't think the Members of the
    Committee want--us or any company to be the judge, jury, and
    executioner against an entire site.
        Mr. Quayle. I agree with that, but you have got to
    understand the frustration. I think Google does understand the
    frustration of those that have copyrighted work that is being
    infringed because recently, just last week, you reached a
    settlement--Google did--with six companies in which Google was
    suing because the companies were misusing Google's trademarks
    and name. In addition, I have read other pending lawsuits
    Google was involved in over domain names that are oddly similar
    to Google's domain name and logo. In all of these instances,
    other companies were profiting off of Google.
        So I think you can see where I am going with this. I think
    you can understand the frustration of copyright holders because
    they are having their content being illegally sold via the top
    results from searches on your search engine, and they are
    actually making a profit from that.
        So can Google play a more proactive role in this in
    combating some of the deliberate illegal sites without
    infringing on any other----
        Mr. Walker. Yes, I think we can. And look, we not only
    understand the frustration, we share it. As you said, we are a
    big IP owner ourselves. We went after some bad guys who were
    misusing our name in scammy sort of ways that were misleading
    consumers. You know, buy the Google work at home kit which, of
    course, had no association with Google, and pay 100 bucks to
    get a bunch of worthless paper. And we went after those guys
    and won that case. And we are committed to doing that against
    all these bad guys when we can identify them and clearly know
    who to go after. It is one thing for us, though, to be able to
    remove the individual links to stuff that we can look at and
    say, yes, that is infringing, and another to try and go after
    the entire domain. That is a harder procedural thing for us as
    a private company to do.
        Mr. Quayle. Thank you very much.
        Mr. Goodlatte. I thank the gentleman.
        The Chair now recognizes the Ranking Member of the
    Judiciary Committee, the gentleman from Michigan, Mr. Conyers,
    and as I do that, I will ask the Vice-Chairman of the
    Committee, Mr. Quayle, to take the Chair.
        Mr. Conyers. Thank you.
        Attorney Christine Jones, why can't you organization build
    intellectual property protections into its user agreements and
    terminate customers that provide or facilitate online piracy?
        Ms. Jones. I am sorry. I missed the last word. Online
    privacy?
        Mr. Conyers. Piracy.
        Ms. Jones. Oh, piracy. I think we do substantially build
    those protections into our agreements, and the agreements are
    written generally very broadly.
        Like Google and other providers, we do rely on the content
    industry to let us know when they find things that are
    inappropriate.
        But what we do that is somewhat more aggressive than most
    is if there is some infringing content and the person who runs
    the website doesn't cure it, we disable the entire website
    because you either are engaged in unlawful activity or you are
    not. There is no such thing as halfway. So if your domain name
    contains bad stuff and you don't take it down, we kill the
    entire domain. Period. If you fix it, we will put it back up.
    But we don't incentivize people to make part of their website
    good and part of their website bad because as our First
    Amendment professor--I call him a professor--says, some of it
    is good and some of it is bad, and you have to be able to make
    a decision.
        Mr. Conyers. You say you are doing it already.
        Ms. Jones. I think we do it already, yes, to the extent
    that we can.
        Mr. Conyers. Mr. Kent Walker, when someone types in child
    pornography into a Google search, Google doesn't connect the
    user to images of child abuse. Now, that means to me that the
    technology exists to block illegal material from appearing in
    your searches. Why don't you employ the same technology to
    block searches for illegal content and illegal goods?
        Mr. Walker. When it comes to child pornography, we do two
    things that are unique compared to the problem of online
    counterfeiting and infringing material. Child pornography is
    recognizable to some degree with filters. You can build a
    filter that will detect flesh tones, for example, most flesh
    tones, and that gives you a clue. And then you can use human
    reviewers to look at the sites one at a time, and to some
    degree, as the Supreme Court has put it, you know it when you
    see it. And we have people who are working on that.
        In the context of unauthorized goods where it is not clear
    who has got the legal rights to something, it is much harder.
    You may remember the case that Viacom brought against YouTube
    not long ago. Viacom itself sued us over thousands of clips
    from their files that they had actually authorized--they or
    their subsidiaries had authorized be uploaded to YouTube. So
    they themselves didn't actually know what was legitimate or
    what wasn't. So it is a harder problem.
        Mr. Conyers. So why can't you block the searches? Tell me
    the answer again.
        Mr. Walker. Sure. We can in cooperation with the content
    owner. If they let us know that a given item is unauthorized,
    we block that search. We take that link out of our results if
    it is for copyrighted material.
        Mr. Conyers. Could I ask the Director of ICE? I am glad you
    didn't mention all the lack of due diligence and collateral
    damage that occurred February in your organization during
    recent seizures where legitimate sites were taken down in
    droves. Do you want to admit that before we get to the
    question?
        Mr. Morton. Either way.
        Mr. Conyers. What do you mean ``either way''?
        Mr. Morton. If you want to continue with your question----
        Mr. Conyers. I mean, didn't that happen?
        Mr. Morton. What happened in that case, Ranking Member
    Conyers, was this. That wasn't an IP investigation. It had to
    do with child pornography. We were investigating 10 sites that
    were offering images of children as young as 4 and 5 engaged
    in--you know, in sex----
        Mr. Conyers. Yes, but how did you get the good guys
    involved? That is what I am getting to.
        Mr. Morton. What happened in that particular case was that
    in one of the 10 sites that we were seizing, the seizure was
    overbroad and the site we were going after was a subdomain of a
    secondary domain level. And we seized for a little less than 2
    days more than that site. Two people contacted us. We noticed
    our error and we put all the sites back up.
        Mr. Conyers. Okay.
        The last question, with your forbearance, Mr. Chairman, to
    Professor Abrams. What did you think of the Senate attempt on
    the same subject we are working on?
        Mr. Abrams. I thought the Senate attempt was
    constitutional.
        I think the notion of trying to define a rogue site in a
    way which requires a very stiff showing, a very difficult but a
    possible showing, of a site itself or a domain itself being so
    devoted, dedicated in the draft statute's language to
    infringement works--and I think that it works in a way which
    goes beyond the simple question of what can happen to that
    site. It raises issues, at least, about intermediaries. If you
    have a court and the court says this whole site at this moment
    as it is today, this whole site is an infringing site, and you
    get a court order to that effect and you serve it on ISP's, it
    seems to me perfectly constitutional to require the ISP not to
    carry material from the site. And that would be true of other
    intermediaries as well at least with respect to direct links to
    the site.
        I mean, I don't think you can limit information about the
    sites. I don't think Google can be limited any more than the
    Washington Post can be limited in writing about, containing a
    summary, describing, mentioning the website involved. But I
    think intermediaries might well be able to limited after being
    served with a finding by a court from linking to a site that
    has been held by a court to be an infringing one.
        Mr. Quayle [presiding]. Thank you.
        The Chair now recognizes the gentleman from North Carolina,
    Mr. Coble, for 5 minutes.
        Mr. Coble. Thank you, Mr. Chairman.
        Good to have you all with us, I will say to the panel.
        Mr. Abrams, I think you touched on this. I was going to ask
    you how precise does the definition of rogue websites need to
    be in order to be constitutionally sound. Did you want to add
    anything to it? I think you have touched on that.
        Mr. Abrams. Not really. I mean, obviously, language has to
    be very carefully drafted, but I think the notion at least of
    the Senate bill which focuses on dedicated to infringing with
    no other commercial purpose than infringing, which as I said is
    a very tough standard to meet, but if that can be met, I don't
    think there is a constitutional right of that site anymore to
    continue as it had been operating previously.
        Mr. Coble. I thank you, sir.
        Mr. Walker, some have alleged that Google benefits from
    illicit websites through advertising revenue. What do you say
    in response to that allegation?
        Mr. Walker. These sites cost us money, sir. They cost us
    money to try and get rid of them. They cost us money when we
    find them and we refund money to advertisers. They cost us
    money when they use fake credit cards or stolen credit cards to
    pay for what they are doing. We have no interest in having
    advertising on these sites. We have no interest in having
    advertising leading to these sites.
        There are two separate problems here. One is a problem of
    the digital piracy, songs and videos, which typically are given
    away for free on the Web. Those sites have no trouble drawing
    traffic. Everybody wants something for free. Those sites have a
    problem with monetization and so they use ad services to try
    and raise money, and we want to block that. And in fact, every
    time you see a Google ad on one of those sites, if they have
    gotten through our systems, there is a way to click on that ad
    and report that site for having infringing content on it.
        There is a separate problem with regard to people selling
    counterfeit and real goods, analog goods, traditional stuff.
    Those sites have no problem making money because they are
    making the good for this much and they are selling it for that
    much. Their problem is they are trying to drive traffic. And so
    on that side for our systems, that is an AdWords problem, and
    so we go through the ads on the Google sites and try to make
    sure that we don't have ads going to sites that are infringing
    like the Louis Vuitton sites that we talked about before. And
    when we find it, when we hear about it, we pull them out.
        Mr. Coble. I thank you, sir.
        Let me ask you another question, Mr. Walker. If Google
    learns that certain websites are illicit or illegal, can it
    restrict those websites from its searches?
        Mr. Walker. So we have been talking sort of on the
    advertising side. The search is more challenging, and again, to
    Mr. Abrams' point, we need to be very focused here. It is
    correct that if we have the Government come and tell us that a
    given site is illegal, we can address that problem in our
    search results. But we want to do that in a way that,
    obviously, has appropriate due process involved and doesn't put
    us in the position of having to make those evaluations. Right
    now, we need to work together with the content industry to do
    that.
        Mr. Coble. I thank you, sir.
        Ms. Jones, what is your recommendation for the best
    approach to eliminate these websites in the United States and
    abroad? Or do you have a recommendation?
        Ms. Jones. Sure. I always have a recommendation.
        We have had a really good----
        Mr. Coble. Truth is a good defense. If you can do it, it
    ain't bragging.
        Ms. Jones. We have had a really good string of luck with
    voluntary cooperation from all of the players on the Internet
    to take action against operators of websites that are engaged
    in bad action, whatever their service is. So I recommend that
    we as an industry do that first and foremost. So, in other
    words, if I send to Google the 36,000 domain names that we took
    down under the Ryan Haight Act in 2010, I think Google ought to
    disable the search to those sites, and I think Visa and
    MasterCard and PayPal and Discover should disable the payment
    processing. And I think FedEx and UPS and the United States
    Postal Service should stop shipping drugs for those companies,
    and so on and so forth.
        However, we know that not everybody cooperates and not
    everybody is a good guy. So in addition to that, I think we
    have to have legislation that says if you don't, there is a
    consequence. If we give you notice and you take down your
    services, you're good. If we give you notice and you fail to
    respond, you're not good. That is my recommendation.
        Mr. Walker. Mr. Coble, could I jump in on that for a
    moment?
        Mr. Coble. Sure.
        Mr. Walker. I want to make the point that the real way to
    go after these guys is to go after these guys and get them off
    the Web. Because if they are out there just saying they can't
    be in a search engine or they can't be in Facebook or they
    can't be on a blog or a link to them can't be there isn't going
    to solve the problem because people are going to talk about
    them, and when they talk about the Pirate Bay or someone else,
    those links are going to come back up in any search engine
    worth its salt. So our worry is that we can cut--we would
    recommend cutting off the money to these guys. Cut off the
    advertising. Cut off the financial services. When you start to
    go after the pure search side of it, the risk is that you are
    both overbroad and ultimately ineffective in doing it.
        Mr. Coble. I see my red light has illuminated. I yield
    back.
        Good to have you all with us this morning. Thank you.
        Mr. Quayle. Thank you.
        The Chair now recognizes the gentlewoman from California,
    Ms. Lofgren, for 5 minutes.
        Ms. Lofgren. Thank you, Mr. Chairman. I think this is an
    excellent hearing and it shows how complicated some of these
    issues are, and yet it is important that we deal with the
    challenges in a way that is serious but also works as a
    technical matter and also with an eye to our Constitution, not
    only the First Amendment, but the Fourth Amendment. We want to
    make sure that we are effective but smart.
        And along those lines, Mr. Morton, I was interested in the
    Operation in Our Sites effort. How many of the owners of those
    sites that were the subject of your action were arrested? And
    for the seizures that have not been followed by an arrest, has
    ICE attempted to make arrests, and if not, why not?
        Mr. Morton. I will have to get you the exact numbers, Ms.
    Lofgren, but a couple of things are going on. Several of these
    cases are part of an ongoing criminal investigation. So I can't
    really predict one way or another how they are going to end up.
    A few people have been arrested and I can get you those stats.
        But the real challenge, as I alluded to in the beginning,
    is that in many of these cases, we have a criminal
    investigation but most of the actors are, for practical
    purposes, outside of our reach. They are not in this country.
    They are in----
        Ms. Lofgren. Perhaps what I can do off calendar is just get
    the stats because you are going to court, you are bringing a
    criminal action, you are getting a matter signed by a
    magistrate, and I want to know then what. How many criminal
    prosecutions? How many arrests? And I am eager--I understand if
    somebody is outside our jurisdiction, that is a more
    complicated factor which goes to the other question I have
    which has to do with the jurisdiction itself.
        Now, my understanding is that the customs part of ICE--they
    have jurisdiction over goods that cross international borders.
    What is the limit on ICE's authority over the Internet? Is it
    the international aspect of it, or is it ICE's position that
    you have jurisdiction over the Internet itself?
        Mr. Morton. That latter proposition is not our position.
    Our position is that we have jurisdiction over the relevant
    Federal offenses provided there is the necessary constitutional
    nexus to the United States for the Congress to assert
    jurisdiction. So in practical terms, that means there needs to
    be some element or instrument of the crime occurring here in
    the United States.
        Ms. Lofgren. So it is wrongdoing crossing into the United
    States. Is that your position?
        Mr. Morton. That is right, involving the United States or
    United States rightsholders, some U.S. interest.
        Ms. Lofgren. But it has to be an international component to
    it.
        Mr. Morton. That is right. So if you were engaged in
    counterfeiting of Indian goods in China and there was no nexus
    whatsoever to the United States at all, that is not a case we
    would investigate.
        Ms. Lofgren. Let me ask you this, and it is something that
    I think people--obviously, we have a need for enforcement, but
    we also want to make sure that things are done in a proper way.
    Recently--obviously, we are not the same, but Russia used
    copyright enforcement--it was pirated copies of Microsoft
    software. They used those pirated copies as an excuse to go in
    and take computers and shut down dissident groups. And there
    was, in fact, infringement going on, but they used it really
    for a political reason. What do we have in place that would
    prevent the Government from that sort of activity here?
        Mr. Morton. Well, I am not familiar with that particular
    case, but I think the short answer to your question is that we
    have a wonderful judicial system in this country. We have a
    great sense of the rule of law. We have a great sense of
    ethical behavior on the part of Government. I have to go----
        Ms. Lofgren. No, but procedurally. Right now there is an ex
    parte communication. You go to a magistrate. You say what you
    think. There is nobody on the other side saying what they
    think. You get, in most cases, the order. You take it down.
    What constraint is there on you?
        Mr. Morton. I have to demonstrate that there is probable
    cause for the seizure to the Federal judge, and the day we do
    it, you can walk into court and challenge that seizure
    immediately in addition to the separate rights you have to
    challenge the ultimate forfeiture if the Government pursues a
    permanent seizure of the site. So there is a tremendous amount
    of process that is provided upon seizure. The seizure itself
    follows the traditional rules in rule 41 where we go to a
    magistrate judge ex parte, and we say we believe a crime is
    being committed.
        Ms. Lofgren. I have about five pages more of questions for
    you. So, Mr. Morton, I will deliver those to you in writing.
        As I listened especially to the testimony from Go Daddy and
    Google, I am reminded that this stuff is more complicated than
    is obviously understood and how useful it might be to have some
    of the big tech presences engage in more deep conversations
    with content holders who are understandably concerned about
    what is happening to them. That might yield an effective result
    that is far superior to what the non-engineers in the Congress
    might craft. So I would just leave that suggestion with the
    panel. They don't need the permission of the Congress to do
    that. But I think that might be a good outcome of this hearing.
        And I yield back the balance of my time.
        Mr. Quayle. Thank you.
        The Chair now recognizes the gentleman from California, Mr.
    Issa, for 5 minutes.
        Mr. Issa. I thank the Chairman.
        I think I will take the liberty of taking us a little off
    IP for a moment since we have a representative of ICE here.
    What is the financial threshold for you to care about
    counterfeiting?
        Mr. Morton. Typically there isn't one. We are quite
    aggressive when it comes to intellectual property enforcement.
    Obviously, the various prosecutors, the United States
    Attorney's offices we deal with do have at some point some
    limitations. There is enough work out there----
        Mr. Issa. Why don't you give us an idea? You know, there
    was a movie back, I think, in the 1930's with Cagney, ``Never
    Steal Anything Small.'' It was actually a union organization,
    but it was a great one because basically he stole enough to be
    the hero of the union.
        How do we change the system, which Congress has the right
    to do, so that every single crime that you know is a crime can,
    in fact, be pursued in a way that will allow a change of
    behavior? Now, I am not talking about going after the P2P
    swapper who is exchanging his own library with somebody down
    the street. But I am talking about somebody who commercializes
    the selling of counterfeits. And I did not say intellectual
    property. I said counterfeits. I don't see a difference. I
    don't think anyone on this panel should see a difference of
    whether it is tangible and you can feel and touch it or it
    simply plays through a speaker.
        What change in the law would allow you to pursue everyone
    for all practical purposes where today you probably pursue
    what? One-half, one-quarter, one-tenth of 1 percent? Certainly
    you pursue less than 1 percent in the tangible world, don't
    you? If you find--and I will get to the question.
        And I will take an example from my own life. If you find
    500 Viper alarms inside a shipment of--my former life, if you
    will--clothing and it is designated as clothing and you find
    it, basically you seize it and that is the end of the story.
    Isn't it? So you found tens of thousands of dollars of value.
    You found registered trademarks, copies of the images that make
    the product real, patented product, tangible, and the most you
    will do is destroy it. That is the practical reality today.
        And you are shaking your head yes. That is the record that
    I hope we will make here today. And I appreciate all the people
    in the IP world. We are talking about organizations. We are
    saying you have to do better. You have to get it down to zero.
        What can we do, in your opinion--and I will take it from
    each of you, please--to get to a zero tolerance? And I am not
    trying to get you to go after fake Viper car alarms or any of
    the other things from my own past. But I will give you a recent
    one, and I will give it to you as anecdotal.
        About a year ago, my congressional office ordered a USB
    thumb drive. They were tired of me carrying three different
    thumb drives. So we ordered one of the new 256-gig thumb
    drives. We ordered it from one of the major companies not
    represented here today. Their vendor was a group, which I will
    give, called Fantastic Deal. Now, today they are called Good
    Old Deal and Fantastic Deals, but if you Google them, you will
    get the actual company selling on that other company. So the
    meta-data that they put in to make sure that they still come up
    under their old name of Fantastic Deal--and by the way, they
    are still Fantastic Deal when they tell you that we at
    Fantastic Deal are committed to your satisfaction. Please don't
    hesitate to contact us. They flat shipped on its face--it was
    256 gig, but it was not made by Kingston. It was not authentic
    in any way, shape, or form. And they shipped it out. They are
    still selling. They paid no price for it. The most they had to
    do was live up to that company's guarantee of letting me cancel
    the credit card, which I did around them anyway.
        What change from the dais here will allow you to not let
    those go because they didn't meet a financial threshold that
    was in the tens or hundreds of thousands of dollars?
        Mr. Morton. Let me start and then I will try to be brief so
    the rest of the panel can give you their thoughts as well.
        Some of it is a resource issue. Some of it is--take ICE,
    for example--a question of balancing competing enforcement
    priorities. Obviously, we have to go after the cartel members
    and child pornographers and other things of weighty importance
    to the Nation.
        I think the big challenges are focusing on the foreign
    actors who are in the game as a form of organized crime and
    have no intention whatsoever of coming to the United States, of
    basing their operations here. They are able, sadly in many
    instances, through the Internet to commit a crime on the United
    States on a grand scale, on a repeated scale from afar.
        So we need, I think, a balance of authorities. Criminal
    authorities will never get us all there. Civil authorities that
    address that, aggressive seizure, penalties for where we can
    bring U.S. enforcement action. International cooperation is
    critical. You could give ICE triple the number of agents it
    has. We have no authority to arrest people in China. We have no
    authority to----
        Mr. Issa. I appreciate that, although all the examples I
    gave had a U.S. nexus.
        Could the rest of you weigh in please?
        Mr. Abrams. I agree with Mr. Morton. I think all we can
    do--but it is important--is to do everything we can to drain
    actions of this sort of the profits that have been building up
    over the years and increasing, indeed, more and more as time
    passes because I agree that the criminal law is not going to
    work very easily or comfortably when you deal with foreign
    actors that never come here. So we are going to have work, I
    think, in the main through changes in our civil legislation to
    take all the steps that we can to make it impossible or at
    least very difficult for these entities to continue to engage
    in the criminal--and it is criminal--activity that they are
    currently engaged in.
        Mr. Issa. Mr. Walker?
        Mr. Walker. I would have three thoughts building on the
    comments here.
        First, go after the bad guys directly whether that is more
    resources for ICE or otherwise.
        Second, it is an international problem. Right now the MLAT
    process, the Multilateral Legal Assistance Treaty process, is
    broken. It can take months, sometimes up to 6 months, for
    international law enforcement to cooperate with each other in
    going after these guys. That doesn't work for them and it
    doesn't work for us in trying to stop it.
        And then lastly, I agree again: follow the money. If we can
    cut off the funding sources, if we can identify the bad guys
    and then cut off advertising on their sites, that will be
    powerful.
        Mr. Issa. Ms. Jones?
        Ms. Jones. Thank you, sir. I would second the comments of
    my fellow panel members, but also from the dais what you can do
    to be helpful to us, to answer your question, is give us cover
    so that if we take action against these people, we have a safe
    harbor. We don't have people suing us. We are not going to
    jail. We want to help you but you have to help us help you.
        Mr. Issa. Thank you for the best of all answers.
        I yield back.
        Mr. Quayle. Thank you.
        I just want to put everybody on notice we have been called
    for a vote, but the Chair recognizes the gentlelady from
    California, Ms. Chu, for 5 minutes.
        Ms. Chu. Well, thank you, Mr. Chair, for convening this
    important hearing.
        As you know, this issue of online piracy is of great
    concern to my Los Angeles district, given the importance of the
    motion picture and recording industry to the city and the many
    residents who are employed by them. So I hope that we can all
    work together to come up with a solution that gives law
    enforcement a real tool to stop this practice.
        While the Combating Online Infringement and Counterfeits
    Act that was introduced in the Senate last year is a great
    start, I am concerned that it doesn't address the problem of
    cyberlockers that are flooded with infringing content. It is
    important that we don't hurt legitimate business interests, but
    these businesses that reward these customers for uploading
    infringing content and refuse to penalize the offenders are not
    legitimate business interests. So I hope that we can address
    these infringing websites and cyberlockers.
        I also want to thank Mr. Morton for joining us today and
    for all the great work that he has done on the Operation in Our
    Sites.
        And let me just start then by asking Mr. Walker. I am very
    concerned, of course, as you heard, about the infringement
    facilitated by the cyberlockers, but I don't want to affect
    legitimate developments in cloud computing. How can Congress
    help law enforcement go after the bad actors in the cyberlocker
    space without interfering with legitimate economic interests?
        Mr. Walker. It is the right balance to draw, Congresswoman.
    The challenge with cyberlockers, which are really just a
    different way of describing storing content online, is a real
    one because, as you can tell, the entire direction of the
    industry is in favor of moving toward the cloud, allowing
    people across the country, across the world to access music,
    video, content, documents, email in much more flexible ways
    than they were able to even a dozen years ago. That is a great
    thing for consumers and then we think ultimately a great thing
    for the content industries because it provides more platforms
    and more ways that people can consume content lawfully and
    legitimately. iTunes is in a sense a version of the cyberlocker
    that allows you to download information from the cloud. We have
    seen other significant companies launch ways of offering online
    storage.
        When you get into the question of the legitimacy of the
    business or not, it really goes to the question of an intent to
    induce infringement, and the existing copyright laws have been
    used in some cases to go after companies that clearly, again,
    are sort of dedicated to just having illegal content hosted and
    promoting that kind of activity, distinguished from legitimate
    companies who may have broad-based, multipurpose storage that
    is abused by some of their users. That does raise more
    difficult First Amendment questions.
        Ms. Chu. How about you, Ms. Jones? I understand Go Daddy
    also provides remote storage services. How can we ensure that
    law enforcement has all the tools that it needs to go after
    cyberlockers that intentionally promote the sharing of
    infringing content without impeding legitimate businesses?
        Ms. Jones. We are a very large provider of cloud-based
    services. And it is difficult for us to go, say, scan all of
    the files that are stored on our online file folder product.
    But what we can do is limit storage, limit bandwidth usage, and
    know patterns of behavior so that if there are very, very, very
    large quantities of data and they all seem to be copies of
    movies, our system might pick that kind of thing up.
        But short of that, it is really important to us to have
    information from the content providers. So if it is the song
    makers, the movie makers, the video producers, whatever those
    people are, to help us be helpful and also so that it helps law
    enforcement to know which ones to go after because it is not
    enough for me to just say customer A has 47 dedicated servers
    and they are all filled with video stuff. It is not good enough
    because I don't know if it is legitimate content or not. That
    guy could have bought 47 dedicated servers worth of videos.
        So it is really important for us to be able to identify--
    and I think Mr. Walker has pointed this out as well--what is
    the legitimate content and what is not. Again, we don't want to
    be facilitating bad guys, but we need help to identify which
    ones they are.
        Ms. Chu. Thank you.
        And, Mr. Morton, what are the next steps in Operation in
    Our Sites?
        Mr. Morton. Well, we are going to continue to work with
    industry. We have been very careful not to focus on any one
    industry over the other. As you know, sadly the whole landscape
    of American industry is under assault right now. So we will
    focus on pharmaceutical sites. We will focus on entertainment
    sites. The counterfeiting sites we can do all day long, sadly;
    there are so many of them. And we are just going to keep at it.
    Wherever we can, we are going to pursue a full criminal
    investigation for those sites. Where all of the elements of the
    crime, other than the domain name, are outside of the United
    States, we will focus on the domain names and take them down as
    aggressively as we can, recognizing that is not the long-term
    solution. It is one part of trying to combat this problem.
        But we got to do something. My perspective is do nothing
    and you fail, and so we have tried very hard to get out there,
    do something, and work with the other parts of the system to
    get us to a better, more comprehensive solution.
        Ms. Chu. Thank you.
        I yield back.
        Mr. Quayle. Thank you very much.
        As previously noted, we have a vote. So this hearing shall
    be temporarily adjourned until immediately following the vote.
    Recessed. Thank you, Mr. Watt.
        [Recess.]
        Mr. Goodlatte [presiding]. The Committee will reconvene.
        Before I turn to the gentleman from California, I would
    like to ask unanimous consent to enter in the record two
    letters: one from the National Center for Missing and Exploited
    Children dated March 30, 2011, addressed to Chairman Smith and
    pertinent to the issue raised by the gentlewoman from
    California; and another a letter to the Members of the United
    States Congress from a coalition of groups dated March 30, 2011
    on a related subject.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Goodlatte. At this time, it is my pleasure to recognize
    the gentleman from California, Mr. Berman, for 5 minutes.
        Mr. Berman. Well, thank you very much, Mr. Chairman, and
    thank all of you for your testimony.
        Mr. Morton, I want to join with others in praising some
    very effective initiatives you are undertaking to deal with the
    problem we are discussing today.
        Mr. Walker, I appreciate your testimony and your comments
    about the Digital Millennium Copyright Act. I am sure the
    Chairman of the Subcommittee does. He spent a great deal of
    time negotiating that legislation, and a lot of us were
    involved in it. But if that legislation were really working, I
    don't think we would be having this hearing. I don't think
    there would be a Senate bill. I don't think Customs would be
    undertaking the initiatives it is undertaking.
        Ms. Lofgren is right. This is a complicated subject. But
    there is one element that is quite simple, and that is truly
    billions of dollars and thousands of jobs are being lost
    because of digital theft. I think we are focused on trying to
    do something about it.
        In terms of a legislative approach, I wanted to take off on
    what you said. You said that Google doesn't want to be the
    judge, jury, and executioner. But right now under the Digital
    Millennium Copyright, you are the judge, jury, and executioner.
    You don't just take down anything that you are asked to take
    down. You go and try and go through some process to determine
    if it is a valid request, if in fact it is directed at
    infringing material.
        The legislative approach is an approach to try and create a
    process where a judge is the judge and all you have to do is be
    the executioner. I am wondering if in that sense this might be
    something you would be more enthusiastic about because it puts
    the onus of looking at the whole site and whether it is--I
    mean, nothing is going to be 100 percent infringing because
    some things will be in the public domain that could be on that
    site. But fundamentally it is a site that is marketing
    illegally placed content, content without permission of the
    copyright owner.
        So I guess I would like your thoughts. Let me ask a few
    questions and you can answer them. One is I would like your
    thoughts on whether having a judge rule that a site itself is
    dedicated to infringement and blocking that site may be a far
    more effective way of ensuring due process while actually
    making a difference, and also your reaction to the notion that
    the DMCA, as good as it is, in the context of today's
    technology, yes, you get that takedown letter.
        You try to do it expeditiously, although there is testimony
    submitted for the record which says that it frequently takes as
    much as 20 days for you--or maybe that is an average of time
    before actually the link comes down. And I believe Google has
    said they are going to try and do this within 24 hours. But I
    do notice that the searches and the algorithms take a few
    seconds. And when you are talking about a newly released film
    or music, 24 hours on a site is disaster in terms of the
    millions of people who can then get it for free.
        But your notion of why a judge doing this isn't more
    effective than putting all the onus on you.
        And correct me if I am wrong, but when you get such a
    letter, you take down the link to that site. I don't even know
    if you have the legal ability or the functional ability to take
    down that site as a site. So all you are doing is taking out a
    link to one of what could be thousands of different works that
    are on that site. It is a little bit like trying to empty the
    ocean with a bucket. And I would like to get your reaction to
    some of those things.
        Mr. Walker. Sure. There were a lot of comments there, so
    let me try and address them all, and if I miss one, please let
    me know.
        I would say our fundamental position is that we agree that
    there is a way to complement the DMCA. The DMCA has been very
    effective for what it has done, but there are additional
    measures that can be taken to go after the money, to go after
    some of the advertising, to go after the payment processors
    that may reach some things that are outside the copyright
    domain, counterfeiting and the like. And we have indicated we
    are happy to work with the Subcommittee on that.
        There is a balance, obviously, because there are millions
    of dollars--billions of dollars on each side of the table.
    Google accounts for $54 billion in economic activity in the
    United States.
        Mr. Berman. Yes, that is important and innovation is
    important. But to the extent that some portion of that billions
    of dollars is coming from giving people access to copyrighted
    works that they didn't have their permission to use, it is
    fruits of poisonous trees.
        Mr. Walker. Sure. No, we understand and we don't want money
    from illegal services and never have. But most of it, the vast
    majority is going to small businesses, small publishers,
    advertisers whose businesses actually exist because the
    Internet is out there. So we are trying to, again, separate the
    wheat from the chaff and do it in the most effective way we
    can.
        The DMCA has been a good model for what it has done. That
    notice and takedown has been very robust and the work of this
    Committee and Congress has been adopted around the world in
    Europe and elsewhere. So we want to be careful about doing
    something that would undercut that. But that is not to say we
    are opposed to additional sort of targeted measures that go
    after things.
        To your comments and Ms. Lofgren's comments earlier, we are
    in fairly frequent conversations with the general counsels and
    representatives of the trade associations, of the major motion
    picture studios, the RIAA, et cetera to try and refine and
    improve and streamline our processes. In many cases it is
    challenging. It does take a long time--and we are hoping to
    make it a much shorter time--to go back and forth through the
    different DMCA notices we get. There are a lot of people out
    there who just don't understand copyright law or are using them
    for abusive purposes to try and take down competitors' sites
    without a legitimate legal claim. And we need to sort through
    those, but I think we can do it, especially with regard to some
    of the online tools that we are soon to be launching in a much
    faster way than we are doing now.
        You had asked also with regard to question of--there was
    one question about pre-release movies. We have actually talked
    to the studios about that and are there ways of being able to
    address that in an even more expedited fashion where there is
    real economic injury at issue there.
        And then lastly, I would say we do have--focusing on your
    question with regard to whether or not a court finding would be
    useful in this, before anyone takes significant steps of taking
    away a domain name or cutting off advertising to a site, I
    think it is appropriate for a court to weigh in with
    appropriate due process to review that. And the model of doing
    that in a way that is targeted on the truly bad sites--and I
    think for some reasons we have talked with the staff on the
    Senate side with regard to the bill that was introduced in the
    last session. In some ways that definition was somewhat
    overbroad and created some of the free expression and due
    process issues we have talked about. But we are optimistic that
    we can work together to get to a more focused definition and we
    would be prepared to support that.
        Mr. Berman. Mr. Chairman, my time is quite expired. Could I
    squeeze one more in here, though?
        Mr. Goodlatte. Without objection.
        Mr. Berman. In your testimony, you say the DMCA has
    practical and real effect on thwarting infringement, and
    legislation that targets the worst of the worst should not
    increase liability for online services that are playing by the
    rules.
        What if we maintained the level of liability, not increase
    the liability, but required more affirmative steps to be
    undertaken under that standard of liability?
        Mr. Walker. Well, I think much of the proposal, again, on
    the Senate side would have required affirmative steps based on
    a finding that a given site was dedicated to illegal content by
    having us remove it from our search results. And we are----
        Mr. Berman. But that doesn't increase your liability.
        Mr. Walker. No. I think generally not. Ms. Jones has raised
    concerns about needing to have a safe harbor on that side, but
    generally speaking, we have been able to terminate people for
    violating our policies without getting suits back from the bad
    guys in response.
        Our focus has been mostly on the collateral consequences of
    undermining the DMCA. For example, if a site is judged to be
    bad and that URL is out there and then somebody using our
    services posts that URL in a Google doc or in an email--I send
    you an email that includes that URL--well, Google is now
    hosting that content in a sense. Are we liable for including
    that URL? I think the common sense answer is no we shouldn't be
    and that the DMCA insulates that from liability, but if just
    that sort of in rem order were deemed to be de facto red flag
    knowledge, there would at least be an open question. So we need
    to clarify those kinds of unintended consequences.
        Mr. Berman. Thank you.
        Mr. Goodlatte. The gentleman from Florida, Mr. Deutch, is
    recognized for 5 minutes.
        Mr. Deutch. Thank you, Mr. Chairman.
        Director Morton, you and I have spoken many times about the
    recent ICE seizures of rogue websites, and I have been very
    open about my admiration for the way that your office took the
    absolute worst of the worst of these websites hosting illegal
    content. And I would just like to say publicly again that more
    agencies, I think, ought to take a look at their existing
    authorities and find new ways to use those clear and
    established powers to combat and recognize problems, and I hope
    that others will learn from your excellent example.
        Mr. Walker, I wanted to follow up on two online points and
    then shift slightly.
        You had spoken earlier about autocomplete and the fact that
    autocomplete really reflects what people are searching for.
    That is how it actually works. Is there anything that you can
    do to change that? For example, drugs, pornography. Is there
    any way that you ever modify autocomplete so that it doesn't
    show the list of search terms that might actually be a popular
    search term?
        Mr. Walker. There are, in the pornography realm, for
    example, terms that are facially offensive to virtually every
    user of the site that are blocked. Yes.
        Mr. Deutch. So it is possible. It is not simply the will of
    the masses that will dictate what autocomplete shows. It is
    possible to actually----
        Mr. Walker. No. Absolutely, and we have already said that
    we are doing that in this context as well.
        Mr. Deutch. And then one other follow-up. The issue of
    searches and the efforts that you have taken on specific
    websites and specific searches where it is clear that they lead
    to pirated material, stolen material. In addition to those
    terms, do you also include specific websites that are provided
    to you? I mean, a lot of times people who search the Web who go
    on Google are fairly sophisticated. They know what they are
    looking for. They don't need to search free movies or free
    music. They know the site that they heard about in their high
    school class. That is what they go to search for. So have you
    taken steps and can you take steps to stop so when someone
    starts typing in whatever that violating website is, that that
    website name won't come up as well?
        Mr. Walker. Yes, and that is consistent with the effort we
    have already announced. And we are working with the content
    industries to try and focus on that.
        Mr. Deutch. Great.
        And so I would like to just shift then and move on to
    really where the world is going and that is apps. There was a
    conversation earlier, an exchange that you had, where there was
    some discussion of this Grooveshark app that was removed from
    your marketplace. I just wanted to pursue that a little bit
    further. That was ultimately taken down. When were you first
    made aware that that site was available--that app was available
    in your marketplace?
        Mr. Walker. I am not sure, Congressman. We can get back to
    you.
        I will tell you that the apps marketplace has probably been
    in existence for a little bit more than a year. During that
    period of time, we have removed something on the order of 2,000
    different applications for a variety of reasons, including
    intellectual property infringement.
        Mr. Deutch. Okay, because I played around on one of my
    staff member's Google phones and went to the App Store, and
    still when you type in ``free,'' the autocomplete on the phone
    will finish and you can find free music. And if you go to free
    music within the marketplace, you can still find what appears
    to me to be hundreds of sites that deal in stolen music, stolen
    movies as well, perhaps stolen books. I couldn't quite tell.
    That wasn't as easily identifiable.
        So if you could speak to the efforts being made to crack
    down. There is one example, this one app that you took down.
    But what steps are taken? What do you do to actually take them
    down?
        And if I can suggest, when you are in the store, there is
    an opportunity for you to flag as inappropriate the app that
    comes up. and I would respectfully suggest that in addition to
    the reasons that you list already, sexual content, graphic
    violence, hateful or abusive content, and other objection, that
    it might be helpful for those of us who are concerned about
    these issues and who monitor this to include a specific check-
    off box for stolen content, pirated content, whatever you think
    is most helpful. I think that might help you investigate.
        But if you could speak a little bit about the steps that
    you do take.
        Mr. Walker. It is a helpful suggestion, Congressman, and we
    are, across our products, trying to have a more standardized
    approach to Web forms that allow people to report all of the
    kinds of content that we are talking about here today and
    create cues for review and processing that in an expeditious
    way.
        We do have a team of people who review the apps in the App
    Store. It is sometimes challenging because any number of people
    have an incentive to get their app in there. In some cases
    those apps are camouflaged or difficult to determine. There are
    legitimate apps that will allow you to obtain free content, and
    there is a lot of legitimate free content out on the Web. And
    so we are trying to distinguish the apps that are well
    intentioned from the apps that are essentially designed to
    induce infringement. And that is the approach that we have
    taken there and continue to take as we review these, as well as
    apps that are trying to get malware out and various other sort
    of negative content.
        Mr. Deutch. And again, what I am concerned about is your
    marketplace. And if you could actually help me understand this
    a little better. Your marketplace functions essentially as an
    online mall, and stores open in this mall. In a traditional
    bricks and mortar mall, those stores would pay rent. Can you
    explain how Google is compensated by these apps that pop up in
    the marketplace?
        Mr. Walker. Sure. It varies which is perhaps one of the
    reasons why it is not as clear as it could be. Many apps are
    free, so there is not compensation per se. Some of those are
    supported by advertisements; some of them are not. And then
    some of them where you actually pay for the app, and in that
    case, Google takes a small amount of money as a fee for its
    service in providing the platform.
        Mr. Deutch. On the free apps, the ones that are free to the
    consumer, is there any other way that Google is compensated for
    those? Are there advertisements that----
        Mr. Walker. Yes. They may choose to use advertisements or
    they may not. And they may use Google ads or other forms of
    ads.
        Mr. Deutch. I hope that you can understand my concern here.
    In a traditional shopping center, there would be no place for
    any store that opens that sells illegal goods. In this case,
    Mr. Morton and his good folks are effectively playing the role
    that the sheriffs in Palm Beach County would play if a shopping
    center opened in my district that wanted to sell illegal
    merchandise. And those stores would immediately be shut down as
    soon as they were notified.
        Just trying to bring this full circle, I would ask that you
    can provide the Committee with some details on the Grooveshark
    example since it has been touted as a great example of your
    efforts to try to crack down on these apps that merchandise in
    illegal goods. I would like to understand when you were first
    notified and how long it took to investigate. If there is any
    way for you to determine how many songs might have been
    downloaded illegally during the period of that investigation,
    that would all be most helpful, I think, as we go about this.
        And finally, Mr. Chair, if I could also ask--I know you are
    going to be requesting some additional information as well. I
    hope that you can broaden your request to focus on the
    application world as well, given that this is really the
    direction that we are going.
        Mr. Goodlatte. Yes. If the gentleman would yield. If the
    gentleman would work with the Committee staff, we will be happy
    to incorporate your question into the questions that we will
    submit to the members of the panel.
        Mr. Deutch. I appreciate it, Mr. Chairman, and I will yield
    back.
        Mr. Goodlatte. I thank the gentleman.
        The gentlewoman from Florida, Ms. Wasserman Schultz, is
    recognized for 5 minutes.
        Ms. Wasserman Schultz. Thank you, Mr. Chairman.
        Mr. Chairman, Ranking Member Watt, who I know is not here
    at the moment, I really want to start off by thanking you for
    holding this hearing today and for officially opening this
    investigation into rogue websites here in the House.
        As our economy continues to recover, we really must take
    every action that we can to create jobs and meaningfully
    address intellectual property theft. It is a great place to
    start.
        That is why I have been having a conversation with Google
    about this for almost 3 years now. Mr. Walker, it is good to
    see you.
        In the last hearing, Mr. Chairman, I focused on the problem
    of advertising on rogue sites, advertising which not only lines
    the pockets of those who facilitate theft, but also advertising
    that makes many of these rogue sites seem legitimate to
    unwitting users.
        Today, Mr. Walker, I would like to talk with you about two
    related issues, as you have spent the morning doing talking
    about your autocomplete feature on search and your notice and
    takedown times under the DMCA. First I want to start with
    autocomplete.
        In your testimony, you say that Google is committed to
    prevent terms that are closely related with piracy from
    appearing in autocomplete. And you go on to say that you are
    working with the industry stakeholders to suggest specific
    terms that shouldn't appear in autocomplete.
        And you were kind enough to come see me in my office almost
    a month ago, March 10th, and I raised this issue with you then.
    So I know you won't be sandbagged by my raising it here now. I
    showed you--let me just grab it--this screen shot, and it was a
    screen shot that lists what comes up in a search when you type
    in the word ``knock-off.''
        Then Google's algorithm automatically filled in the
    suggested search terms that I described, some of which UGGs and
    Coach were the names of specific brands. I showed you this
    screen shot which showed all the suggested autofills when I
    typed in the word ``knock-off'' into the search engine window.
    It showed knock-off handbags, knock-off UGGs, knock-off Coach
    handbags, knock-off shoes, knock-off watches, and knock-off
    sunglasses, among others.
        Now, all I typed in was ``knock-off.'' I didn't type in
    anything else, and that is the list that came up. These weren't
    words that I typed. It is what your autofill automatically
    filled in.
        Mr. Chairman, I would like to ask unanimous consent to
    admit this screen shot into the record.
        Mr. Goodlatte. Without objection.*
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        *The information referred to was not received by the Subcommittee
    at the time this hearing was printed.
    ---------------------------------------------------------------------------
        Ms. Wasserman Schultz. And then we searched the word
    ``fake'' and got similar results. Fake Rolexes and fake Louis
    Vuitton purses.
        Now, I realize--and from our conversation--fake can be
    attached to a lot of different kinds of things. As we discussed
    in my office, ``knock-off'' doesn't really conjure up anything
    other than trying to steal something that is someone else's
    intellectual property. And I know you referenced that they sell
    knock-off dresses and other kinds of products in Nordstrom's
    and Macy's. It would be very simple to simply have your
    autofill put those search terms in after knock-off if that is
    really what someone is searching for. But instead, your
    autofill brings up things that are not appropriate and are, in
    fact, facilitating illegal content and illegal products.
        Now, I had my staff perform--this was a month ago that we
    had this conversation. I had my staff perform the same test
    yesterday, and they got the same results as they did before I
    shared these concerns with you a month ago. So nothing has
    changed since we talked. And I am concerned that your
    autocomplete feature continues to suggest that people visit
    websites with pirated content, that Google enables and
    facilitates theft by suggesting words that people haven't even
    typed in yet.
        And I want to suggest to you, Mr. Walker, the word ``knock-
    off,'' as I just said, is probably a word you don't need to get
    consensus on from the Nation's designers of purses, handbags,
    watches, shoes, and furry boots. It is probably okay to
    eliminate those words after the word ``knockoff.'' What other
    meaning is there for the word ``knock-off'' than a fake product
    that is meant to be passed off as the real thing? Couldn't you
    instead redirect that traffic to legitimate sites?
        Now, Chairman Goodlatte brought up Taylor Swift earlier.
    Way back in 2008, Mr. Walker, I sat down with some of your
    colleagues. Several of them are here today. And way back then,
    I showed them screen shots of unauthorized Hannah Montana songs
    on Google-hosted blogger sites with Google's ads on them on top
    of that. We talked about Google's obligations under the DMCA
    and we asked for you to help rightsholders by designing a
    product that would help them identify infringing content and
    pull it down more quickly. You said you would try to work with
    us, but that was 3 years ago. I continue to hear from the
    rights community that it was taking too long for Google to pull
    down pirated content.
        So a year later, in November 2009, I facilitated a meeting
    between your lobbyist and RIAA President Cary Sherman. In that
    meeting, Google said you would try again to develop a product
    cooperatively. That was 2 years ago. Again, no real impact.
        In May 2010, Google sent Rick Klau to meet with my staff,
    and I was so excited by what I believed was finally a new
    attitude at Google that I actually drafted a letter commending
    you for your leadership and your willingness to address these
    issues. Mr. Chairman, if I can ask that--well, is there a
    Chairman? [Laughter.]
        If I can ask unanimous consent to admit this into the
    record. Sorry.
        Mr. Goodlatte. Yes, Virginia, there is a Chairman.
    [Laughter.]
        Ms. Wasserman Schultz. Thank you.
        Mr. Goodlatte. Without objection, so ordered.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Ms. Wasserman Schultz. Thank you.
        And I realize that my time has run out. If I can ask
    unanimous consent for just a couple of extra minutes, Mr.
    Chairman. I am wrapping up.
        That was a year ago. But I have learned since then that
    there still has been very little improvement on notice and
    takedown times. According to the IFPI, for the month of
    February 2011, the latest month for which they have records, 46
    percent of the blogspot infringement notices sent to Google
    remained active for longer than 7 days.
        So, Mr. Chairman, would it be possible to include notice
    and takedown times as part of your investigation? Chairman
    Goodlatte?
        Mr. Goodlatte. Yes. The answer is yes.
        Ms. Wasserman Schultz. That would be great.
        Mr. Walker, you really have an obligation to take those
    down within 24 hours. You know that you do. We have discussed
    it. But for a blogger in February, almost half were still up
    after a week. There really isn't a question here, Mr. Walker.
    You are Google. You helped overthrow the head of an entire
    country in a weekend. I mean, really, you are Google. Okay? So
    really, to suggest that this is difficult, too difficult for
    Google to accomplish, it seems to me that it is more expression
    of a lack of will, and I think that is unacceptable. I know
    that you say your heart is in it. Prove to use that you want to
    go beyond the boundaries that the law requires you to do
    because that is the right thing to do. Short of that, you are
    essentially promoting trafficking of stolen property, and that
    is just unacceptable.
        Thank you, Mr. Chairman.
        Ms. Lofgren. Will the gentlelady yield?
        Ms. Wasserman Schultz. Oh, I would be happy to yield.
        Ms. Lofgren. As you were talking, I just went on my little
    android and typed in ``knock-off Coach purses,'' for example,
    on Google search. The first one, if you go to it, there is a
    site from ICE saying it has been taken down. The second one, if
    you go to it, the site is not found. And the third one is how
    to spot a fake Coach bag. So I think we can get overwrought
    here. The World Wide Web is a great big place, and we need to
    make efforts to get these counterfeit goods taken down.
        Ms. Wasserman Schultz. Reclaiming my time. I don't really
    have any more.
        Mr. Goodlatte. The gentlewoman's time has expired, and I
    think it would be only fair to allow Mr. Walker to respond to
    both comments.
        Ms. Wasserman Schultz. Thank you very much.
        Mr. Goodlatte. Mr. Walker is recognized to respond, and
    then we will move on to the next Members of the Committee.
        Mr. Walker. Thank you very much, Mr. Chairman. I will look
    forward to addressing both of those points. Thank you.
        And congratulations, Congresswoman, on your appointment
    yesterday.
        Let me do it in reverse order, if I can, because the most
    important thing to me and to us is that you do believe and
    recognize that we are actually making progress here.
        Over the last 6 months or so, we have announced commitments
    to this 24-hour turnaround time. It is about to be unveiled in
    the next week or 2. We actually have it up and running now in a
    test mode, and that goes to both copyright and the
    counterfeiting materials that we have talked about. So that is
    a dramatic change and streamlining with the sort of key tools
    that we have been able to implement. There is engineering work
    there and there is also partnering work there with the key
    companies we are working with.
        Beyond that, in the last month or so, we have unveiled a
    Web tool, a Web form that goes across many of our products
    because one of the problems we were having was that we were
    getting so many low quality notices from people who didn't
    understand copyright. In some cases things were abusive,
    meaning one competitor was taking down another competitor's
    materials, fans of one football team were trying to take down
    the websites or links on another football team's listings using
    the DMCA. These are the kinds of things we need to sort out.
    The Web tool replaces a lot of the old paper and faxes and
    emails we were getting with a more standardized process.
        And as a result of that, the good news is it is much easier
    for rights owners to be able to file material. The bad news is
    we have had blip in terms of being able to respond as quickly
    as we would like to, but we are looking forward to getting
    those response times down as we go forward. And that is above
    and beyond the 24-hour commitments we have talked about with
    the express tools.
        So I think we are seeing progress. I recognize it has been
    a continuing conversation with you and your office. But judge
    us on--as we are going forward, I think we are making really
    material progress.
        And to Congresswoman Lofgren's earlier comment, we spent a
    lot of time working with the content industry on this. I have
    talked to most of the general counsels of most of the MPAA and
    RIAA and their trade association. We understand where they are
    coming from. While there may always be some difference with
    regard to scope of fair use and these sorts of issues, there is
    no reason for grit in the system to be slowing down the
    operation of the DMCA, and we are trying to really make sure it
    is an efficient tool for everybody.
        Ms. Wasserman Schultz. Mr. Chairman, I realize I am
    yielding back time I don't have, but I do appreciate your
    willingness and expression that there is will. And I will just
    point out that when I did type in ``knock-off,'' it was simply
    ``knock-off'' and those other words came up in your autofill.
        Mr. Goodlatte. This discussion is going to go on for quite
    a while.
        Ms. Wasserman Schultz. Thank you very much. I yield back
    the time I don't have.
        Mr. Goodlatte. I have been very generous.
        And now we will recognize the gentlewoman from California,
    Ms. Sanchez.
        Ms. Sanchez. Thank you, Mr. Chairman. I want to begin by
    thanking Mr. Morton for the initiative you have shown in being
    proactive in going after infringers. I do have some questions
    for you that I will come back to, but I want to start with Mr.
    Walker.
        Mr. Walker, I want to address your AdSense program, if I
    may. In your written testimony, you stated that you respond
    swiftly when notified by rightsholders that an ad is being
    placed on an infringing site. And I am just curious to know on
    average how long does it take Google to comply with a DMCA
    notice.
        Mr. Walker. It varies dramatically, Congresswoman, based on
    the different products and the different nature of the request.
    We get requests in foreign languages, paper, they are
    incomplete, et cetera.
        Ms. Sanchez. Ball park figure?
        Mr. Walker. Our gold standard right now is YouTube where we
    are typically able to process DMCA requests in a matter of
    minutes, and we have a very sophisticated system. That is above
    and beyond the content ID system that we have already talked
    about that automates the process for rightsholders.
        With regard to other products, our goal is to move that
    within 24 hours for people able to use our sort of advanced and
    sophisticated tools. There will always be some cases that take
    longer, in some cases days, as we go back and forth with the
    rightsholders to clarify or correct defective DMCA notices,
    DMCA notices that aren't really about copyright, for example,
    and the like.
        Ms. Sanchez. Okay. So there really isn't a typical time
    that you can say a ball park figure that it takes?
        Mr. Walker. Unfortunately, it is very different for
    different products.
        Ms. Sanchez. Okay. Let us start this way then. What is the
    shortest length of time it takes Google to respond?
        Mr. Walker. I would say it is the YouTube example, a matter
    of minutes.
        Ms. Sanchez. And the longest amount of time?
        Mr. Walker. Well, some notices----
        Ms. Sanchez. I am just trying to get a scope here of time.
        Mr. Walker. I don't mean to be evasive. Many notices are
    actually never processed because they are incorrect.
        Ms. Sanchez. But for a correct notice. Let's qualify that
    and say for a correct notice. What is the longest amount of
    time it has taken?
        Mr. Walker. You know, I think it is certainly in days and
    might even be in weeks depending on the nature of the notice,
    if it is in a foreign language, if it is submitted in a way
    that is difficult for us to process or we have questions.
        Ms. Sanchez. Let's leave that topic
        Let me ask you what happens to the ad revenue that was
    generated by that site while it was hosting infringing
    material. Does the ad revenue go to the rightsholder?
        Mr. Walker. There are different scenarios with regard to
    our AdSense product which is the product that puts ads up
    against publisher websites and our AdWords product which are
    ads on Google essentially or hosted ads that go out. But when
    we discover somebody who is infringing, we stop payments to
    them if they are on the publisher side of it, and we refund
    money to the advertisers if money has been paid out.
        Ms. Sanchez. But none of that money goes to the
    rightsholder who is being infringed upon.
        Mr. Walker. It is in many cases difficult for us to
    determine who the rightsholder is in some of these situations.
    In the case of music, as you know, there are labels and
    publishers and artists.
        Ms. Sanchez. Sure. So somebody is making money off of these
    sites, but it is almost like the rightsholder is--it is sort of
    a double whammy. They are being infringed upon by somebody else
    who is using their content in a way that isn't authorized, and
    then somebody who is selling ad revenue then on those sites is
    also making money and that is not going to the rightsholder.
        Mr. Walker. I want to be clear. We are not making money
    really because we are refunding the money back to the
    advertiser when we discover that the site that the ad was
    appearing on was infringing. So it is not as though Google is
    holding that money.
        Ms. Sanchez. Well, you and I will have to disagree on
    whether or not there is profit to be made in advertising on
    infringing sites.
        I want to go back to Mr. Morton and your public education
    efforts. Now, you mentioned a successful symposium that you had
    last year and you talked about one that is also planned for
    this year. And the question that I have for you--and I am not
    trying to be impertinent here, but it seems like symposiums,
    which are a great idea--it is sort of like preaching to the
    converted because the folks that are attending those symposiums
    are probably the most informed or at least the most aware of
    the problem of IP theft. And I am talking specifically about
    industry leaders, Government officials, and congressional
    staffs. And reinforcing information to those folks may be
    beneficial, but if we are talking about the vast scope of IP
    theft, I would think that probably education efforts are
    probably better aimed toward a younger audience and the people
    who are actually doing the infringing.
        So I want to know if you are taking any steps to inform,
    say, teenage kids who are looking for the new album of their
    favorite artist or a college student who is looking to watch a
    movie online or that type of crowd. Are there any efforts that
    you are dedicating toward making them more aware of the issue?
        Mr. Morton. It is an excellent question. The Government has
    not typically been expert in the public education arena in this
    area, but it is exactly where we need to be.
        So one of the things that we have been thinking about is
    the seizure banners that we use right now are static, and they
    just say we have seized this site. One of the things we have
    been contemplating is when we actually forfeit a site that was
    dedicated to infringing or counterfeiting, can we use the fact
    that so many people are going to see our banners. I mean, they
    have become a sort of unanticipated Internet phenomenon. Can we
    use those as an educational opportunity and instead of them
    just being static, have a public service announcement?
        The other thing that we need to do and work on is working
    with the rightsholders so that we have--let's take the
    entertainment industry--updated public service announcements in
    the movie or maybe it is on iTunes or using the platforms that
    already exist that people are going to that are legitimate to
    help preach the gospel as it were. So we are very much focused
    on that. It is a need. It is a work in progress.
        Ms. Sanchez. Great. Thank you.
        And I thank the Chairman and I yield back.
        Mr. Goodlatte. I thank the gentlewoman.
        The gentlewoman from California, Ms. Waters, is recognized
    for 5 minutes.
        Ms. Waters. Thank you very much, Mr. Chairman.
        And to our Ranking Member, all of the Members of this
    Committee, this is a fascinating discussion and one that is
    very much needed, and I am really appreciative for the
    opportunity to engage our folks who have come here today to
    help us to learn about this problem of rogue sites and
    infringers, et cetera.
        And while I thank everyone, I am particularly drawn to Ms.
    Christine Jones of Go Daddy Group who is so confident about
    what she is attempting to do and your description of the
    volunteer effort that you are attempting to get everyone
    involved in.
        I notice in your testimony, I think you said you had
    identified 36,000 infringers or websites and that you told
    Google about them, and you expected them to take them down. Is
    that what you meant, or did you mean something else that you
    didn't have time to discuss about what you expected of Google?
    Would you elaborate a bit on that?
        Ms. Jones. Sure. In 2010, we disabled 36,000 websites that
    were engaged in selling drugs illegally online. We worked
    together with the Intellectual Property Enforcement Coordinator
    from the White House and Google who has co-led this effort with
    me the entire way to form a group that would address those
    sorts of things. So if I suggested that I gave them a list that
    they did not act on, I misspoke and let's correct the record on
    that.
        Ms. Waters. Okay.
        Ms. Jones. What I am saying is that is exactly the sort of
    thing that voluntary cooperative group is designed to address,
    and I think it can be done effectively and successfully in
    other contexts as well.
        Ms. Waters. Is there some way that we could be helpful
    incentivizing everyone so that there is more cooperation and
    that people are looking out for each other? Is there something
    that we can do legislatively?
        Ms. Jones. Well, one of the things that we have heard from
    some of our brethren in the industry is that, look, we are not
    as big as Google and we are not as big as Go Daddy. You guys
    have scale. You have resources to effort against these
    problems. We don't. Some registrars have 10 employees in the
    entire company. We have thousands. So one of the things that
    they have specifically asked for--and I think I can speak on
    their behalf here--is help them know when a site is engaged in
    illicit activity. Don't leave it to them to decide. And
    frankly, we would like to have that too. It is just that we
    might have some experts on our staff who have some knowledge
    and some judgment. So I think help them know. Don't threaten
    them with a lawsuit if they take action against a website. Give
    them a safe harbor if they do what they are supposed to do and
    then provide a consequence for the people that refuse to do it.
        I mean, I think we have to keep in mind here we are
    vilifying Google because they are big, and they have the
    ability to influence a whole lot of what happens on the
    Internet. And some people vilify us because we are big and we
    have the most domain names under management of anybody in the
    whole world. But we don't engage in infringing other people's
    intellectual property. Right? So I think you have to be a
    little careful about throwing the spears against the people who
    are trying to make it better. And that is my one single defense
    of Mr. Walker today. [Laughter.]
        Mr. Walker. And for the record, Mr. Chairman, I don't feel
    particularly vilified here.
        Ms. Waters. Well, let me turn to Mr. Walker. I am glad you
    don't feel that you have been vilified. Perhaps you don't know
    it when you see it. [Laughter.]
        But I would like to know what you think you can do better.
    You obviously have identified ways that you have tried and the
    complications of that. What else can you do?
        Mr. Walker. I think we can continue to work with the
    content industry to make the process faster. We have a common
    goal on that and we are in the late stages of actually being
    able to deliver in a big way on that. And that has been an
    initiative that we announced in December and has been
    universally applauded, I think, by the folks on that side of
    the aisle.
        Also as we have said, we are open to working on the
    advertising side, which is really the right complement to the
    DMCA process, to try and cut off advertisements to sites that
    courts have adjudicated to be illegal essentially and dedicated
    to infringing content. That makes sense to us as a complement.
        We are also doing a lot of things to try and make life
    easier for rightsholders. We have hundreds of people working on
    this problem now. We spend, as I have told you, tens of
    millions of dollars to try and address it in a better way. We
    are trying to take the friction out of the system. And there
    are a lot of ways of doing that. Having a simplified Web form
    is one. Faster turnaround time is another. Working on the
    advertising system is a third.
        Ms. Waters. Thank you.
        I yield back the balance of my time.
        Mr. Goodlatte. I thank the gentlewoman.
        The gentlewoman from Texas, Ms. Jackson Lee, is recognized
    for 5 minutes.
        Ms. Jackson Lee. Let me thank you very much, and I think
    you can just look at the activity on the dais of Members coming
    in and out that this is an important hearing. And Mr. Chairman
    and Ranking Member, I thank you for holding this hearing. Many
    of us are in a number of different hearings, and so we are very
    appreciative of this particular meeting.
        I would like to focus on some of the issues that you have
    addressed but allow me the benefit of just trying to delve in
    it further.
        I don't take ownership of this, but what I will take
    ownership of is the very interesting and important byline here,
    ``Fight Online Theft.'' And I think each and every witness
    here, from the Government on, would say that you are
    unanimously in support of fighting online theft. I think I need
    yeses so it will be audible.
        Ms. Jones. Yes, Congresswoman.
        Mr. Walker. Yes.
        Mr. Abrams. Yes.
        Mr. Morton. Yes.
        Ms. Jackson Lee. In the course of that, the documentation
    notes 2.5 million jobs lost to counterfeiting, $135 billion
    total global sales of counterfeit goods--I have seen it as I
    have traveled--$75 billion, cost of global piracy of copyright,
    $1.77 trillion by 2015. I think that is an enormous dent in the
    genius of America and the creation of jobs. I really think we
    are talking about jobs.
        Let me just go right to Google because I frankly think it
    is important that you are here. I feel that there is going to
    be legislation, but it will not be punitive and it should not
    be punitive. It should be collaborative, and I encourage the
    collaborative process.
        I will use the term ``web crawling'' to identify--and I
    want to know the difficulty that Google would have in
    identifying and working with better site placement and, as
    well, the taking down. You are committed, know that there is a
    job issue here. But I want you to know there is a genius issue
    here. We are proud of Google. We are proud of all of the
    witnesses that are here as it relates to their input into this
    economy, into the new job creator of the 21st century into the
    22nd century. We are discovering something every single minute.
    The better discoveries we make--or as my son explains to me,
    the development side of the business and, if you will, the
    programmer or the person who is coming up with the ideas--the
    better off we are.
        But can you tell me what would be the challenge for a
    greater engagement in the work of taking these sites down?
        Mr. Walker. Sure. Congresswoman, thank you.
        The key issue is the need for collaboration and
    identification of who the bad guys are, sorting out the baby
    from the bath water. We already do a lot of that on the DMCA
    side. We hear from the content industry.
        Ms. Jackson Lee. So do you have a team? Do you have a
    department, a section that deals with that?
        Mr. Walker. Yes, we do.
        Ms. Jackson Lee. That has the expertise.
        Mr. Walker. Yes.
        Ms. Jackson Lee. So those individuals could give us input
    into the crafting of the legislation, to be honest with you.
        Mr. Walker. No, absolutely, and we would be delighted to
    work with both this Subcommittee and the folks over at the
    Senate to try and make sure that we are coming up with a
    refined definition of who the bad guys really are.
        Ms. Jackson Lee. So I get to other witnesses, just quickly
    what do they do in the pulldown? You are pulling down now. What
    can you do better to pull it down even more?
        Mr. Walker. Sure. We can do it faster. We can do it with
    less friction. We can make it easier for rightsholders, and we
    are working on all three of those things.
        Ms. Jackson Lee. Mr. Morton, you need help. Your staff is
    dwarfed by the employees that are in these companies that are
    sitting with you, but behind you I know are people in different
    industries. Musicians are being impacted. People with unique,
    inventive talents--their products are being taken. In the old
    days, you would go to a certain country and find people's
    pocketbooks were labeled and weren't the correct pocketbooks
    that you thought you were purchasing.
        What tools do you need? I think you need an expanded team
    in ICE, to be frank with you, that is dedicated solely to this
    issue. But give us a point that we can hang our hats on.
        Mr. Morton. A couple of things. Just a real focus on
    additional tools for foreign actors where there really isn't
    much based here in the United States, particularly either the
    defendants or the server. Help from Congress understanding that
    the challenge here is so much broader than simply the
    traditional entertainment industry. This has gotten to a point
    where it is an assault on U.S. industry.
        Ms. Jackson Lee. So the foreign element is something we
    need to include in the legislation and give you tools to reach.
    Is that what I am understanding?
        Mr. Morton. It is really a collaborative one. It is not
    just Government. It is again allowing Government to work with
    the people to my left and to encourage the people to my left to
    work on this in a collaborative way. They can do so much more
    on a grander scale than we do. We are a specialized tool in the
    toolbox. It is important to have us, but we are not the end all
    and be all.
        Ms. Jackson Lee. Let me just quickly, Mr. Chairman, if I
    could. Mr. Abrams, the First Amendment. This whole question of
    cyberlocking, this whole question of these parasite sites, your
    leadership on the First Amendment. And I am thinking about
    people stealing people's ideas. We have got to do a statutory
    fix I believe. Is there a comment that you want to expand on?
        Mr. Abrams. All I would say is that I agree with you that
    you need to do something which involves additional methods,
    that enforcement of the copyright law that already exists. We
    have a copyright law. We are talking about entities that are
    already routinely and increasingly violating our copyright law
    by taking, stealing intellectual property that doesn't belong
    to them. And I think one of the main things that you can do
    which would be constitutional is to come up with a definition,
    difficult as it is, but a definition of a site or a domain that
    by its nature is so overwhelmingly dedicated to copyright
    infringement that a court can enter an order so designating it
    and that that order can be used and is available to entities
    such as, but not limited to, Google but the whole range of
    intermediaries in this area who, once they have it, can at
    least not be in the position of having to decide for themselves
    on an ad hoc basis all the time whether this is too much taking
    or that is too much taking. If we can get a judge, if we can
    get a magistrate to play that role--and I think a properly
    drafted statute can--I think that would be a very, very big
    step.
        Mr. Goodlatte. And with that, the time of the gentlewoman
    has expired.
        Ms. Jackson Lee. I thank the Chairman.
        Mr. Goodlatte. Mr. Abrams' comments are a good note to end
    the hearing on with one exception. We are going to submit many
    questions to the panel for you to answer in writing and any
    other Members who wish to do so will have an opportunity to do
    so.
        Mr. Watt wants to pose one of those questions which you can
    answer in writing, but he wants to pose it verbally. So we are
    going to yield to him for that purpose and then we will
    conclude the hearing.
        Mr. Watt. I thank the Chairman for providing me this
    opportunity. I do this not to get a response today. It is
    addressed to Mr. Walker and Ms. Jones, but it is also addressed
    to people in the audience who are invested in this issue in
    various ways.
        It has occurred to me that one of the areas we are going to
    have to look more aggressively at is this safe harbor notion. I
    am not sure I understand how it is being applied, but it seems
    to me that one possibility might be to impose some of the
    greater obligation and risk on the people who are requesting
    these takedowns, rather than just you having potential
    liability. The people who are best positioned to identify the
    culprits are the owners of these intellectual property, songs,
    materials that are being counterfeited. And when they request
    you to take something down, what I need to know is there some
    viable way to structure something that would put them at risk,
    in addition to putting you at risk, as opposed to just
    providing an absolute safe harbor here because safe harbors, it
    seems to me, are subject to being more abused than if somebody
    has some skin in the game, so to speak.
        Ms. Lofgren. Would the gentleman yield?
        Mr. Watt. Well, I am not sure the Chairman is going to let
    me yield.
        Ms. Lofgren. Just on the point. One of the things we
    worried about when we wrote the DMCA--at least I worried about
    and expressed at the time--was that when you have notice and
    takedown request, who is going to stand up for the First
    Amendment. If it is somebody who has a different agenda, you
    know, the smartest thing for the person who it is directed to
    is just to comply. I think that gets to the issue you are
    talking about.
        Mr. Watt. All I am trying to do is get all of these issues
    out. So I would welcome written comments from anybody on this
    whole notion of how the safe harbor works, whether it could
    work more effectively if we put some additional incentives in
    for people to put something on the line when they assert that
    they ought to be given a safe harbor.
        And with that, Mr. Chairman--my, you have changed.
    [Laughter.]
        Instantly you changed.
        With that, I yield back.
        Mr. Marino [presiding]. And I am not going to touch that
    statement.
        Thank you, Mr. Watt.
        Mr. Marino. I think I am the one left that has some
    questions, and I apologize for running in and out of here, but
    it is one of those days where several Committees are going at
    the same time. Actually I will be brief.
        First, there was a statement made earlier, and I think it
    was by Attorney Jones, and Attorney Walker responded to it to a
    certain extent on giving notice. And I liked that idea of
    people within the industry giving each other notice of rogue
    websites and getting them shut down.
        Does anyone on the panel--and I will start with you, Mr.
    Walker--have any problem with that?
        Mr. Walker. The challenge, Mr. Chairman, is the
    verification of what is legitimate and what is illegitimate.
    Some of the bills that are being talked about here would have
    appropriate due process and a court review, and that is, I
    think, where we are most comfortable before we are talking
    about something like taking down somebody's website or cutting
    off access to their services or advertising.
        There have been other examples in the pharma case and the
    like where there are a limited number of authorized websites
    out there. You know, there may be only 20 people who are
    allowed to buy ads for pharmaceuticals. That is somewhat
    different than in the content industry where there are a
    million different people. Everybody who posts something on
    YouTube, including their home movies--that is a copyrighted
    act, copyrighted work. So we have to be a little careful about
    that.
        That said, we are delighted to work with the rest of the
    industry to share information. We have worked, in fact, with
    ICE. We have somebody down at the IPR Center today helping them
    get up to speed on some of the technology issues at play here,
    and we are delighted to do that.
        Mr. Marino. Does anyone else care to respond to that?
        Ms. Jones. I will briefly. I mean, I suggested it. We like
    getting information from people and we like sharing information
    with other people.
        I think it might be slightly disingenuous to suggest that
    somebody can't verify that a pharmacy is selling drugs without
    a prescription. That is a pretty easy case. I will agree that
    it is much more difficult to determine a genuine Louis Vuitton
    bag or a song recording that has been authorized by the
    production company, the distributor, or the writer, and so on
    and so forth. So the issue is very complicated, but the sharing
    of information is really, really important.
        Mr. Marino. Attorney Walker, you noted that defining a
    rogue site is not simple. Would you be able to come up with at
    this moment a definition of what you would propose?
        Mr. Walker. Absolutely, at least at a level of principle.
    Because we thought the comment may come up, forgive me as I
    refer to my notes here.
        Mr. Marino. Sure.
        Mr. Walker. I think we are in the process of actually
    sharing specific statutory language we propose, but at a high
    level, we would say there are four key principles to be looked
    at. One is that the site is knowingly violating copyright law.
    Second is that it contains complete copies of works or
    counterfeit goods. Third is it has a commercial purpose. And
    four is that it refuses to respond when notified by rights
    owners. Within that construct, I think we are comfortable with
    a notion of a site that is dedicated to infringement.
        Mr. Marino. Would you agree with me--and see if my research
    is right. You were an Assistant United States Attorney.
        Mr. Walker. That is correct.
        Mr. Marino. And I was a United States Attorney. Many times
    we have prosecuted people for omission, turning a blind eye. A
    scenario I could use is when I made a drug arrest and went into
    a crack house, and there were several individuals who were not
    particularly selling the drugs but they were facilitating the
    dealers and knew that it was going on. Would you agree with me
    that those individuals could be prosecuted for aiding and
    abetting?
        Mr. Walker. So long as there is a finding of specific
    knowledge and intent to have the transaction proceed, yes, sir.
        Mr. Marino. Sure. I would think a specific knowledge is
    here I have the cocaine in my pocket and I am going to give it
    to the guy at the door so he can sell it. So I think we get
    over that hurdle.
        But not equating the industry with that, but don't you
    think there could be a situation where it may appear that
    industry is turning an eye and simply saying because of cost or
    other reasons, this is just too much for us to address?
        Mr. Walker. I want to be very clear that we are not saying
    that. I recognize it is a growing problem, and as I say, it is
    a frustration for us, as it is for the content industry. When
    the bad guys' sites proliferate or change their identity or
    Congressman Issa earlier referred to a site that changed its
    name to avoid detection, we have that problem too. And it is
    important to not confuse the message with the messenger. It is
    a difficult problem and we work on it hard every day.
        Mr. Marino. And please continue.
        One more question I have for the Director. How would
    enforcement be affected if prior notice of seizure blocking
    orders was given to parasites before they were shut down, and
    how easy is it for websites to change domain names or redirect
    traffic to other websites?
        Mr. Morton. The answer to your question depends on whether
    or not we are in a civil or criminal context. I think the
    Government's view in the criminal context would be that we
    shouldn't alter basic criminal procedure which doesn't provide
    notice in most instances to Government search warrants or
    arrests prior, obviously, to the execution of the search or the
    arrest.
        In the civil context, it is a different story, and I think
    there is plenty of room for prior notice. That is a common
    hallmark of civil enforcement, and I don't see why it would be
    any different than it is in other areas of the law.
        Mr. Marino. Anyone else wish to make a comment pursuant to
    my questions to the Director?
        [No response.]
        Mr. Marino. No? Well, I think that concludes our hearing
    today. I would like to thank our witnesses for their testimony,
    and I really appreciate your being here. I certainly want to
    thank my colleagues for the in-depth questions.
        And without objection, all Members will have 5 legislative
    days to submit to the Chair additional written questions which
    we will forward to the witnesses and ask them to respond to as
    promptly as possible so their answers may be part of the
    record.
        Without objection, all Members will have 5 legislative days
    to submit additional materials for inclusion in the record.
        With that, I again thank the witnesses.
        This hearing is adjourned.
        [Whereupon, at 2 p.m., the Subcommittee was adjourned.]
                           SUBMISSIONS FOR THE RECORD

                                  ----------

     Prepared Statement of the Honorable Darrell Issa, a Representative in
      Congress from the State of California, and Member, Subcommittee on
              Intellectual Property, Competition, and the Internet

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