[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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                  (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.*
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    *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

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[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.
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    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

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 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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