[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
PROMOTING INVESTMENT AND PROTECTING COMMERCE ONLINE: THE ART ACT, THE
NET ACT AND ILLEGAL STREAMING
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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
__________
JUNE 1, 2011
__________
Serial No. 112-77
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Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
_____
U.S. GOVERNMENT PRINTING OFFICE
66-614 PDF WASHINGTON : 2012
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COMMITTEE ON THE JUDICIARY
LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina JERROLD NADLER, New York
ELTON GALLEGLY, California ROBERT C. ``BOBBY'' SCOTT,
BOB GOODLATTE, Virginia Virginia
DANIEL E. LUNGREN, California MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana MAXINE WATERS, California
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio MIKE QUIGLEY, Illinois
TED POE, Texas JUDY CHU, California
JASON CHAFFETZ, Utah TED DEUTCH, Florida
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
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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 JERROLD NADLER, New York
TED POE, Texas ZOE LOFGREN, California
JASON CHAFFETZ, Utah SHEILA JACKSON LEE, Texas
TIM GRIFFIN, Arkansas MAXINE WATERS, California
TOM MARINO, Pennsylvania DEBBIE WASSERMAN SCHULTZ, Florida
SANDY ADAMS, Florida
[Vacant]
Blaine Merritt, Chief Counsel
Stephanie Moore, Minority Counsel
C O N T E N T S
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JUNE 1, 2011
Page
OPENING STATEMENTS
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Subcommittee on
Intellectual Property, Competition, and the Internet........... 1
The Honorable Melvin L. Watt, a Representative in Congress from
the State of North Carolina, and Ranking Member, Subcommittee
on Intellectual Property, Competition, and the Internet........ 5
WITNESSES
The Honorable Maria A. Pallante, Register, U.S. Copyright Office
Oral Testimony................................................. 8
Prepared Statement............................................. 10
Sandra Aistars, Executive Director, Copyright Alliance
Oral Testimony................................................. 22
Prepared Statement............................................. 25
Michael P. O'Leary, Executive Vice President, Government Affairs,
Motion Picture Association of America
Oral Testimony................................................. 36
Prepared Statement............................................. 39
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Bob Goodlatte, a
Representative in Congress from the State of Virginia, and
Chairman, Subcommittee on Intellectual Property, Competition,
and the Internet............................................... 3
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........... 5
PROMOTING INVESTMENT AND PROTECTING COMMERCE ONLINE: THE ART ACT, THE
NET ACT AND ILLEGAL STREAMING
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WEDNESDAY, JUNE 1, 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 2:05 p.m., in
room 2141, Rayburn Office Building, the Honorable Bob Goodlatte
(Chairman of the Subcommittee) presiding.
Present: Representatives Goodlatte, Quayle, Sensenbrenner,
Coble, Chabot, Marino, Watt, Conyers, Berman, Chu, and Lofgren.
Staff present: (Majority) David Whitney, Counsel; Olivia
Lee, Clerk; and Stephanie Moore, Minority Counsel.
Mr. Goodlatte. Good afternoon. The Subcommittee on
Intellectual Property, Competition, and the Internet will come
to order.
I have an opening statement.
To advance progress and effectively secure the exclusive
rights of authors for a limited time as the drafters of our
Constitution intended, Congress must, from time to time,
revisit existing authorities and assess their efficacy. When
authorities are found wanting, we have a responsibility to take
action to update the law to ensure it properly accounts for
changed circumstances and anticipates reasonably foreseeable
developments.
With the enactment of the No Electronic Theft Act, or NET
Act, in 1997 and the Artists Rights and Theft Prevention Act,
or ART Act, in 2005, Congress exercised this responsibility in
the context of online infringement. In both instances, we took
decisive action to update the criminal copyright infringement
provisions of Federal law to better secure the rights of
authors.
The NET Act was enacted in direct response to the 1994 U.S.
district court decision in U.S. v. LaMacchia. In that case, the
court dismissed an indictment against the defendant because the
law did not provide criminal penalties for someone who
willfully engaged in large-scale copyright infringement unless
there was also evidence they acted with a commercial motive or
had benefitted financially. The NET Act closed this loophole
and made additional improvements to the criminal code and
related provisions to the Copyright Act to better protect
copyrighted works online. Its unanimous passage affirmed the
belief that intellectual property is no less valuable than
physical property.
Several years later, the predecessor to this Subcommittee,
acting under the leadership of Chairman Smith, developed the
ART Act. That measure sought to protect pre-release works by
targeting infringers who knowingly distributed unauthorized
copies prior to their commercial distribution to the public.
The ART Act recognized that copyright owners are
disproportionately harmed by theft that occurs during these
windows and provided prosecutors with an important new tool to
deter the reproduction and distribution of such works.
Notwithstanding these authorities, technological advances
in recent years have enabled infringers to employ new ways to
misuse the Internet in the delivery of unauthorized content.
Their success undermines investments by copyright owners and
has an outsized impact on independent artists and creators as
we will soon hear in more detail from Ms. Aistars of the
Copyright Alliance.
Contrary to some beliefs, their success also undercuts
innovative companies like Netflix, a licensed provider that
developed proprietary technology that allows subscribers to
instantly watch movies and TV programs streamed over the
Internet to their computers and TV's.
Without objection, I ask that I be permitted to place a May
30, 2011 letter from Netflix to myself and the Ranking Member
into the hearing record. Without objection, so ordered.
[The information referred to follows:]
__________
Mr. Goodlatte. Similar streaming technologies are employed
by other services and websites not to generate legal revenue
that is used to license existing works and incentivize the
creation of new works, but instead to undercut legitimate
producers and undermine the legal marketplace. Quite simply,
when the NET and ART Acts were under development in this
Committee, the technology and infrastructure needed to promote
large-scale illicit streaming either didn't exist or wasn't
deployed. If it had, we would have provided appropriate
authorities at that time. As a result, the amendments to the
criminal copyright infringement statutes that were adopted were
confined to technologies that impacted the exclusive rights of
reproduction and distribution, not the public performance
right, which is impacted by streaming.
As infringers have moved to adapt technology to more
efficiently deliver unlicensed content online and evade
prosecution, it is incumbent on Congress to review the law and
to adapt it in a manner that permits contemporary prosecutors
to meaningfully pursue and deter today's copyright criminals.
My view is that Congress adopted the right policies when it
enacted the NET and ART Acts. What is needed is for us to
extend these policies to illicit streaming in a similar fashion
and to ensure our prosecutors are provided with the necessary
tools to meaningfully enforce the law. Going forward, I want to
work with interested colleagues to accomplish these purposes.
But for now, I look forward to welcoming our witnesses and
hearing their specific thoughts on how we should best approach
this matter.
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. I thank the Chairman for
holding the hearing.
I share the Chairman's views that we need to get aggressive
on this issue, and I look forward to the witnesses' testimony
to help us figure out how best to do that.
With that, I yield back the balance of my time.
Mr. Goodlatte. That is about as succinct as can be.
I now see that the Ranking Member of the full Committee,
Mr. Conyers, is here. Would you like to be recognized for an
opening statement?
Mr. Conyers. No. I will submit my statement.
[The prepared statement of Mr. Conyers follows:]
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
Copyright owners face unique challenges to enforcing their rights
on the Internet. Today, our Subcommittee will consider streaming
technology--a subject the Full Committee began consideration of last
Congress on December 16, 2009.
More and more of our media--the music we listen to, the TV shows we
tune into, and the sports we watch--is moving to the Internet.
Piracy has increasingly injured artists and intellectual property
owners as individual consumers have access to faster, more powerful
Internet connections.
There is a loophole in current law that makes illegal streaming a
misdemeanor instead of a felony and fails to capture all of the bad
actors, and I expect that this Committee will begin consideration of
what I hope will be bipartisan legislation to solve this problem.
I want to make clear at this point that I am not talking about
directing the Justice Department to go after every individual who takes
part in illegal streaming with this legislative effort, like college
students downloading unauthorized music. We need to first go after the
people who profit from these illegal activities; the Justice Department
needs to be able to prosecute those who commercially gain from illegal
streaming as felons.
As Internet connections become standard features for TV sets and
people watch their favorite TV shows from their cell phones, content
creators are having to rely more and more on the Internet to market and
broadcast their property. The ``Information Superhighway'' is not just
for information; it is a one-stop-shop for every form of media and
entertainment.
For content owners and broadcasters, this means new and expanding
fan bases, but it also leaves the value of their product vulnerable to
piracy.
In a study by the research organization Envisional, it was found
that one-quarter of all global Internet traffic is already devoted to
video streaming, and it is the fastest growing category of traffic.
Unfortunately, as streaming traffic grows, so does the streaming
traffic dedicated to infringement.
As we will hear from representatives from the Motion Picture
Association and the Copyright Alliance, millions of dollars are lost to
the U.S. economy because of streaming and other online piracy.
The copyright and criminal code unfortunately contains a gaping
loophole--not because Congress intended to create a carve-out, but
because when laws like the ART Act and the NET Act were enacted in this
arena, no one anticipated that streaming technology would become such a
dominant source of disseminating information.
Because felony penalties require a ``reproduction'' or
``distribution''--as codified in Title 18 Section 2319(b)(1)--federal
law has unwittingly overlooked streaming-related infringement.
As the Intellectual Property Enforcement Coordinator, Victoria
Espinel, noted in her legislative recommendations to Congress, we
should update the copyright code to reflect technology and ensure
parity in enforcement provisions.
I would applaud Senator Klobuchar for her efforts in this arena,
although I am sensitive to the fact that the concerns of some
industries--including making sure that music is adequately covered--
should be addressed in a House effort.
I would yield back and thank the Chairman and Ranking Member for
this important hearing.
__________
Mr. Goodlatte. I thank the gentleman.
Without objection, all other Members' opening statements
will be made a part of the record.
And we will now turn to our witnesses. We have a very
distinguished panel of witnesses today. All of your written
statements will be entered into the record in their entirety.
And I ask that each witness 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 red, you are done.
Before I introduce our witnesses, I ask them to stand and
be sworn, as is the custom of this Committee.
[Witnesses sworn.]
Mr. Goodlatte. Thank you and please be seated.
Our first witness is Maria Pallante, the 12th appointed
Register of Copyrights in the history of the United States.
Perhaps I should allow that to sink in for a moment. For those
of you who haven't heard the news. The Librarian of Congress,
Dr. James H. Billington, formally appointed Ms. Pallante as
Register in a permanent capacity today. Ms. Pallante takes over
leadership of the office at a time of great challenge and
transition. Her immediate predecessor, Marybeth Peters, served
as Register for 16 years and devoted more than 45 years to
public service. We are pleased to share this momentous day with
Ms. Pallante and honored that one of her first public acts as
Register will be to continue the tradition of having the
Register serve as the principal advisor to the Congress on
matters of copyright policy.
Mr. Conyers. Mr. Chairman, can we give her a round of
applause for that?
Mr. Goodlatte. Absolutely. [Applause.]
Now, to tell you more about the person you just applauded,
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 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 J.D. from George
Washington University and her bachelor's degree from
Misericordia University where she was also awarded an honorary
degree of humane letters.
Given the significance of today's news and if there is no
objection, then I offer Ms. Pallante a moment to address the
Subcommittee before introducing our two remaining distinguished
witnesses. Ms. Pallante?
Ms. Pallante. Thank you very much, Mr. Chairman. I am
deeply honored by Dr. Billington's appointment today and it is
a privilege to begin my tenure as Register by appearing before
this Subcommittee.
Marybeth Peters left behind a tremendous legacy, and it is
my goal to continue her work and to build the premier copyright
registration system for the United States and one that is the
envy of the world.
I also believe that the role of my office is increasingly
important--perhaps more important than ever before--in policy
and international affairs, and I feel very fortunate to have a
talented staff and a diverse and vibrant stakeholder community
to draw upon for assistance.
Thank you again, Mr. Chairman, and I look forward to
supporting the work of this Subcommittee.
Mr. Goodlatte. Thank you, Ms. Pallante, and we look forward
to working with you as well to advance the interests of authors
and the public.
Our second witness is Ms. Sandra Aistars. Am I pronouncing
that correctly? The Executive Director of the Copyright
Alliance, a nonprofit organization established in 2006. Ms.
Aistars took over leadership of the alliance in January of
2011. Immediately prior, Ms. Aistars spent 7 years with Time
Warner where she served in a variety of positions. These
included Vice President and Associate General Counsel. While
there, she coordinated the company's intellectual property
strategies, which included taking advantage of new
opportunities and responding to the challenges associated with
emerging digital technologies.
Before moving to Time Warner, Ms. Aistars spent 12 years as
an attorney in private practice here in Washington. She
acquired her J.D. from the University of Baltimore School of
Law and earned her B.A. in political science, history and
philosophy at Bard College.
Our final witness is Michael O'Leary, the Executive Vice
President of Government Relations at the Motion Picture
Association of America. In that position, Mr. O'Leary is
responsible for overseeing all Federal and State legislative
and regulatory strategies for MPAA. Before moving to MPAA, Mr.
O'Leary served more than a dozen years at the Department of
Justice where he worked on legislative, intellectual property,
and enforcement issues. During his tenure there, he served as
the Deputy Chief of the Computer Crime and Intellectual
Property Section where he prosecuted and supervised some of the
most significant domestic and international criminal and IP
cases ever undertaken by the Department. Before joining the
Department of Justice, Mr. O'Leary spent 5 years serving as
counsel to the Senate Judiciary Committee. He grew up in
Montana and is a graduate of Arizona State University and the
University of Arizona School of Law.
We welcome all of our witnesses to the Subcommittee, and we
will begin with the Register's opening statement.
TESTIMONY OF THE HONORABLE MARIA A. PALLANTE, REGISTER, U.S.
COPYRIGHT OFFICE
Ms. Pallante. Thank you, Mr. Chairman and Ranking Members
Watt and Conyers, for this hearing and also for your attention
to copyright enforcement these past few months.
At the outset, I just want to underscore that our
conversation today is about criminal conduct. In the context of
copyright law, this means willful, large-scale, and egregious,
and it is the type of activity that does not happen by accident
and which inflicts serious economic harm.
Criminal provisions are necessarily stronger than civil
provisions, and they are not a recent development. We have had
criminal provisions in copyright law since 1897.
As described in your opening remarks, Mr. Chairman, the
Internet has brought new challenges for copyright enforcement,
and as you noted, Congress has amended the criminal law twice
in the past 15 years directly responding to copyright theft
online, albeit it for the rights of reproduction and
distribution. If I may make an obvious statement, such work is
a necessary but never-ending task for Congress. Copyright
policy will never be static because technology will always
create new business models for authors and new opportunities
for infringers.
So against this backdrop, I would like to make three brief
points.
First, streaming implicates the exclusive right of public
performance, which is fundamentally important to authors of
certain kinds of works, for example, movies, television
programming, live sporting events, and music. And thanks to
improved bandwidth and innovative business models, it is of
growing importance in the marketplace.
Second, there is a disparity in how the law treats criminal
violations of the exclusive rights of reproduction and
distribution on the one hand and infringement of the exclusive
right of public performance on the other. The disparity was
once appropriate, but it is now outdated.
Third, there are important policy reasons to give
prosecutors the necessary tools to combat illegal streaming,
allowing them in their discretion to bring felony charges.
So starting with my first point, today authors and other
copyright owners license streaming of all kinds of creative
content, often directly to consumers. Performances can be pre-
recorded and streamed to customers on demand or streams can
provide access to live content such as basketball and football
games on a subscription or a pay-per-view basis including from
websites. Customers can also store licensed content or content
they have created themselves in the cloud and access it through
their smart phones and video game consoles.
So all of this suggests that new products and platforms
relying on streaming are a growing segment of the information
and entertainment markets and, therefore, of increasing
consequence for copyright owners. Indeed, according to one
recent study, which I cite in my written testimony, video
streaming traffic accounts for more than one-quarter of all
Internet traffic.
Turning to the disparity under current law, in our
analysis, current law is insufficient to provide a basis for
prosecutions in cases where the primary cause of action is
infringement of the exclusive right of public performance. This
is because an unauthorized public performance is at most a
misdemeanor under current law, even where the conduct is
undertaken purposely and with a profit motive.
So what are the policy issues for Congress? Simply put, the
disparity in treatment requires attention. Illegal streaming--
just like illegal downloading and copying and distribution--has
the capacity to ruin the economic market for a copyrighted
work. Recognizing that, as a practical matter, prosecutors have
little incentive to file charges for a misdemeanor, we believe
the Department of Justice should always have the tools
necessary to file felony charges against infringers when
infringement meets the standards of criminal conduct and causes
great harm to copyright owners and to the global marketplace
that is so important to the United States.
To be clear, the Copyright Office is not offering an
opinion on when it might or might not be appropriate for the
Department of Justice to bring criminal felony charges under
any particular set of circumstances. Rather, we are
underscoring the fact that prosecutors have a handicap when
pursuing egregious cases of unauthorized streaming. Moreover,
Congress may have a chance here to get in front of the issue of
illegal streaming before it proliferates further.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Pallante follows:]
__________
Mr. Goodlatte. Thank you.
Ms. Aistars, welcome.
TESTIMONY OF SANDRA AISTARS, EXECUTIVE DIRECTOR, COPYRIGHT
ALLIANCE
Ms. Aistars. Thank you. Chairman Goodlatte, Ranking Member
Watt and Ranking Member Conyers and Members of the
Subcommittee, it is an honor to appear before you today on
behalf of the Copyright Alliance to discuss illegal streaming
and its impact on the creative community.
The Copyright Alliance is a public interest and educational
organization supported by more than 40 entities comprised of
individual artists and creators, as well as the associations,
guilds, and corporations that support and invest in them.
Besides these institutional members, we have more than 7,000
individual, one-voice artist advocates who give their personal
time and creativity to support our work.
To be specific, we support harmonizing the laws applicable
to criminal streaming of copyrighted works with those
applicable to criminal reproduction and distribution of
copyrighted works. This is an issue of great importance to many
of our members, including independent filmmakers, songwriters
and composers, sports leagues and creators of live events,
sound recording artists, and unions and guilds in the creative
community.
In truth, making illegal streaming a felony crime is simply
a technical clarification. Illegally disseminating other
people's works without their permission should be punished the
same way under law regardless of the technology used.
On a grander scale, however, this issue is another phase in
the battle between creators and lawful distributors of
copyrighted works on the one hand and parasitic websites on the
other. Operators of these websites expropriate the property of
creators, diminish the compensation and benefits of creators
and workers and harm communities across the United States by
depriving them of jobs and of tax revenues.
The Copyright Alliance represents the copyright holder next
door. Our members are living and working in all 50 States and
include, among others, the independent filmmakers who self-
finance films that tell as-yet-untold stories, the talented
crafts people who are behind every television show and motion
picture you enjoy, the tens of thousands of professional
photographers and videographers across the country who run
their own studios, employ a handful of workers, and contract
with a dozen more, and there are people working in unexpected
places on extraordinary projects, like a music producer living
in Wrightsville, North Carolina, who is working from his home
studio with musicians as far away as Glasgow and as recognized
as Neil Young.
Copyright Alliance members unreservedly embrace the
technologies that enable our works to be seen and heard by our
audiences. Nevertheless we are daily faced with an ever-
changing parade of unlawful website operators who stream our
members' works, yet stand little risk of criminal prosecution
under today's laws.
Just like the legitimate marketplace, which has embraced
streaming technology, illegitimate distributors are
increasingly turning to streaming because it is faster,
cheaper, and more convenient for the consumer.
Enacting legislation to ensure that such sites can't avoid
criminal prosecution based purely on their choice of technology
is critical. Bringing penalties for illegal streaming online
with other forms of infringement would send a message that
operators of and large-scale contributors to rogue streaming
sites are not immune from serious prosecution. It would also
provide the Justice Department the same tools to battle
infringing streaming sites as they use to battle physical or
download operations.
When considering issues of copyright infringement, the
public often thinks about large copyright owners and
distributors, but digital theft, regardless of the methods that
are employed to accomplish it, affects all creators and it has
an outsized impact on independent artists and creators.
The experience of Copyright Alliance member, Ellen Seidler,
is representative of the experiences of other independent
artists and is instructive. Ms. Seidler is the director and
creator of the film ``And Then Came Lola.'' She and her co-
director financed the film by taking loans from their families,
by putting liens on their homes, and by borrowing against their
retirement savings. While the total budget for the movie would
be considered small in terms of major Hollywood productions,
the $250,000 of personal capital invested by Ms. Seidler and
her colleague is a huge amount for an individual creator to put
at risk for a single project. Ms. Seidler released the movie
approximately 1 year ago and it was very popular. Within a few
days, illegal copies began circulating online and within a
couple of months, Ms. Seidler had counted 35,000 illegal
streams and downloads, and she was overwhelmed and stopped
counting.
The film could be viewed legally for less than the cost of
a latte, and Ms. Seidler had spared no effort to ensure that it
was available conveniently in multiple languages and formats.
Yet, the film popped up on illegal streaming sites in the U.S.
and throughout the world. She counted the film on one Chinese
streaming site which claimed 300,000 views and on another site
in Spain claiming more than 60,000 views. Often the sites that
were streaming her works were monetizing her work by selling
advertising against the streams, and ironically on one of the
sites, Google's AdSense program was placing ads for legitimate
streaming services including Netflix, a legitimate distributor
of her film.
When she contacted the sites and the advertising networks
that were placing ads on them, she got very dismissive
responses. One website in Russia basically responded your laws
don't apply here, and she is still involved in an unresolved
exchange with Google about the use of AdSense by such sites.
Ms. Seidler describes the remedies available to her and to
other independent artists as the equivalent of being handed an
umbrella and being told to stand under Niagara Falls.
Despite the diligent efforts of creators to police against
illegal streaming of their works, the problem is only growing,
in part, because the risk to operators of such sites is so low.
Law enforcement agencies don't readily take on such cases
because with limited resources, misdemeanor crimes are just not
a priority.
So we applaud the Subcommittee for its focus on harmonizing
the penalties applicable to illegal streaming with those
applicable to other forms of infringements, and we stand ready
to assist you in your work.
[The prepared statement of Ms. Aistars follows:]
__________
Mr. Goodlatte. Thank you.
Mr. O'Leary, welcome.
TESTIMONY OF MICHAEL P. O'LEARY, EXECUTIVE VICE PRESIDENT,
GOVERNMENT AFFAIRS, MOTION PICTURE ASSOCIATION OF AMERICA
Mr. O'Leary. Thank you. Mr. Chairman, Ranking Member Watt,
Members of the Subcommittee, I appreciate the opportunity to
testify today on behalf of the Motion Picture Association of
America and our member companies regarding online streaming and
the role that it plays in global theft.
The U.S. motion picture industry plays a unique role in
today's American economic infrastructure. We provide high-
paying jobs to workers in all 50 States. We fuel small business
growth. We inject capital at the State and local level, and we
are one of the few industries in the United States that has a
consistently positive balance of trade around the globe.
High-speed broadband networks present tremendous
opportunities for exchanging information and ideas.
Unfortunately, as you have heard today, the laws and
regulations put in place to protect consumers and innovation in
the physical marketplace have not kept pace with the growth of
illegal conduct online. As a result, a key foundation of
American industry, the expectation that hard work and
innovation is rewarded, is imperiled by thieves that steal
America's creative products and enrich themselves along the
way.
Currently the most pernicious forms of digital theft occur
through the use of so-called rogue websites. These are
increasingly sophisticated websites that look to the untrained
eye to be legitimate. They use legitimate payment processors
like Visa and MasterCard and PayPal, and they run legitimate
advertising. Frequently they offer reward programs for frequent
buyers who purchase their illegal wares. Streaming technology
is rapidly becoming the most popular mechanism for transmitting
stolen content on these rogue sites.
I want to be very clear at the outset, that the subject
that we are here to talk about today is not a debate between
technology and innovation and the creation of content. The
issue before us today is about crafting a policy that favors
legitimacy over theft, about promoting and preserving
creativity and production and punishing people that seek to
profit through stealing the hard work of others.
Streaming technology is an emerging way to deliver content
and information to consumers the world over, and it is a
technology being used and embraced by our industry. There are
more than 35 legitimate business ventures such as Hulu,
Crackle, Netflix, and HBO GO using streaming to deliver their
products today.
In December of 2009, the full Judiciary Committee held a
hearing on this very issue in the context of live sporting
events. In the year and a half since that hearing, the problem
has gotten worse. And it is a problem that doesn't just affect
live sports events but all forms of audiovisual entertainment
from live transmission of television programming to streaming
of major motion pictures.
In preparation for today's hearing, I visited one of the
websites that I was talking about. If you go to that website,
you will see a number of interesting things. For example, there
were a number of comments by users that are waiting in
anticipation for an illegal copy of a movie that will be
released this coming Friday. It is not in the theaters until
Friday, but they anticipate that they will be able to see an
illegal copy in the next 24 to 48 hours.
It also had the top three box office films from last week
available, Hangover II, Kung Fu Panda, and Pirates of the
Caribbean. There is really something for everybody in that
trio. And they were all available from multiple links to other
sites where you could watch any of those movies.
What was particularly interesting was a ``coming soon''
page which detailed the movies that will be available in the
coming days. It listed four blockbusters which will be released
in the United States between June 10th and July 1st of this
year. There are over 800 people who have put comments on the
site saying that they can't wait to see those movies. Those are
movies that won't even be out for 3 or 4 weeks and people are
already queuing up to see an illegal copy.
A recent review of this very same site found that 33
percent of all traffic generated from the search query ``free
streaming movies'' ended up on this site. This site and the
people who run it are not engaged in innovation in any way,
shape, or form. What they are engaged in is theft. And this is
just one example of the types of criminal infringement we
confront every day.
As you have heard through the other witnesses and through
the Chairman's statement, the law in this area in the past has
gone through different changes. We have typically focused on
distribution and reproduction. There was the NET Act which was
very important, and there was also the ART Act which was very
important. But today, as copyrighted content is increasingly
streamed online, uncertainty remains whether Internet streaming
can be prosecuted as a felony. This results in a significant
gap in the enforcement of this Nation's intellectual property
laws which must be addressed legislatively.
This point was made clear earlier this year by the U.S.
Intellectual Property Enforcement Coordinator when she
recommended that the Congress clarify that infringement by
streaming or by other means of similar technology is a felony
or should be made a felony in appropriate circumstances. This
is a real problem with real consequences for American creators
and workers. And we applaud the Committee's decision to address
this threat.
If we fail to address this problem now, in addition to
leaving a sizeable gap in the U.S. law, we will promote
additional theft of America's creative work by allowing
emerging means of illegal distribution to persist without
remedy.
We will permit an unjustified technology-specific disparity
between the forms of infringement that have increasingly
similar commercially destructive impacts.
Third, we will ensure that very few, if any, Federal
prosecutions, even for the most blatant and notorious global
intellectual property criminals, will go forward as Federal
prosecutors and investigative agencies will be unlikely to
devote limited resources to cases that will net, at most, a
misdemeanor conviction.
Fourth, failure to act will harm America's long-held role
as a world leader in protecting and promoting creativity by
signaling to the rest of the world that our products are not
protected in the online world in the same manner that they are
in the physical world. The failure of the United States to move
against criminals engaged in streaming will undoubtedly result
in less enforcement around the world, and that will be
particularly true in cases where you have an American victim.
Fifth, the failure to move forward at this time will stifle
innovation and creativity by allowing thieves that utilize
streaming to continue to have an advantage in the online
marketplace. We must set policies that favor legitimate
business models over theft.
These are consequences which are all avoidable if we work
to fashion a comprehensive and focused legislative response. We
look forward to working with this Committee to achieve this
critically important goal.
Again, I want to thank the Committee on behalf of the
members that I represent for holding this hearing and for
allowing us to testify today.
[The prepared statement of Mr. O'Leary follows:]
__________
Mr. Goodlatte. Thank you, Mr. O'Leary.
I will begin the questioning with a general one directed to
all of you.
Do you agree with the principles and policies embodied in
the NET Act and ART Act. And specifically, do you agree that a
prosecutor should have discretion to pursue a felony indictment
in a streaming case where the evidence shows a violator
willfully committed large-scale infringement but there is no
evidence of a commercial motive?
Ms. Pallante, we will start with you.
Ms. Pallante. Yes, thank you for the question.
I do. I think the NET Act and the ART Act were quite
responsive to evidence of online infringement in 1997 and 2005,
respectively. But today we know that streaming is a primary and
growing market for copyright owners. And I will say as a person
who has young teenagers in my house, not everybody thinks in
terms of copies anymore. Streaming is a major way of receiving
content and only likely to get bigger.
So as a pure policy issue, it is a question of parity. We
have certain tools available to prosecutors for reproduction
and distribution which once were the primary means of
exploitation. We don't have the same tools available for the
right of public performance.
Mr. Goodlatte. Thank you.
Ms. Aistars?
Ms. Aistars. Yes. Thank you, Mr. Chairman.
I agree with Ms. Pallante's comments and I would also add
that I think that the ART Act and the NET Act were both
motivated by very important policy considerations and that the
Committee was very thoughtful in crafting a solution to those
policy questions.
I know from our experience that there are definitely hard
core uploaders, hard core opponents of copyright issues who
sometimes work in organized release groups to upload content
for purposes of notoriety or who otherwise aren't necessarily
motivated by private commercial gain. And those sorts of
uploads and distribution by streaming by these rogue websites
are equally harmful to creators like Ms. Seidler and
independent creators throughout this country who don't have the
resources to go after those sites and don't have the ability to
be taken seriously by those sites when they raise their
concerns with them.
Mr. Goodlatte. Indeed, those were the facts in the
LaMacchia case that motivated the NET Act, which I introduced
almost 15 years ago.
Mr. O'Leary?
Mr. O'Leary. I would answer yes to both of your questions.
The policy base that went into both the decision to pass the
NET Act and the ART Act were sound at the time, and they are
still sound today.
Mr. Goodlatte. Let me direct another question to all three
of you.
Are you satisfied that the pre-release provision in current
law clearly addresses unauthorized streaming of live
performances such as live pay-per-view sporting events? If not,
how would that provision need to be amended in order to
encompass infringement occurring simultaneously with the live
performance, and do you think it should be clear that these
types of performances should be covered?
We will start with you.
Mr. O'Leary. Mr. Chairman, I think that it should be made
clear that those types of performances should be covered. I
think that the ART Act is very effective at protecting products
which will have a subsequent distribution to the public like a
motion picture, but when you are dealing with live sporting
events and also with television programming, it has proven to
be perhaps less effective.
And so I would encourage this Committee in your
deliberations to look very closely at both of those factors and
see if there are not amendments necessary to fulfill the full
intent of the ART Act and cover those types of activities. Your
hearing in 2009 focused on the harm caused to live sports. It
is also a problem caused for people that create television, and
we would welcome the Committee looking at that issue.
Mr. Goodlatte. Thank you.
Ms. Aistars?
Ms. Aistars. I don't have much to add to Mr. O'Leary's
response other than to note the probably obvious to the
Committee point that with respect to a sporting event or other
live events--it is very hard to have a pre-release of that sort
of an activity since you have got to wait for the event to
begin in order to stream it.
Mr. Goodlatte. Quite right.
Ms. Pallante?
Ms. Pallante. Yes, I completely agree. The current law is
focused on distribution of copies as the intended marketplace,
and as we know, that is not always the case for some kinds of
works.
Mr. Goodlatte. Further to you, what exclusive rights under
copyright are implicated by the streaming of copyrighted works?
What protected rights are infringed by illegal streaming?
Ms. Pallante. Thank you for the question.
Potentially three exclusive rights could be infringed but
in different ways and potentially with different outcomes under
the law.
Starting with perhaps the major right for most streaming,
we are almost always going to have the exclusive right of
public performance at issue. Beyond that, it is also possible
that the right of reproduction could be implicated. For
example, there could be a copy on the sender's server. There
could be a buffer copy implicated. And it is possible also,
though not likely, with the distribution right that perhaps a
file is being sent through the stream that resides on the
receiving person's computer.
The issue, though, is does Congress want prosecutors to be
able to address these kinds of issues, illegal streaming,
through the back door or the front door. In other words, even
if prosecutors could cobble together a case focused on the
reproduction and distribution right, which personally I think
is very difficult, is that really the right policy outcome?
Mr. Goodlatte. Thank you.
And one last question. Mr. O'Leary, you noted in your
testimony that illegal streaming is a problem that affects not
just sports but all forms of audiovisual entertainment from
live retransmission of television programming to streaming of
major motion pictures. What industries in particular are
impacted by illegal streaming and have these industries taken
any action on their own to address the issue such as civil
litigation or non-litigation enforcement such as notice and
takedown?
Mr. O'Leary. Absolutely, Mr. Chairman. The industry that I
represent, the American motion picture and television
production industry--we frequently avail ourselves of civil
remedies. In fact, we are frequently criticized for doing that.
But we believe that it is an important part of the IP
enforcement regime.
It is important to state up front that what we are talking
about today is the criminal enforcement. Criminal enforcement
is a very small piece of a much larger IP enforcement regime,
and we take our responsibility under the civil part of that
very seriously. We have moved against a number of sites that
are engaged in this type of activity in different types of
civil settings, and we would be happy to provide the Committee
with further specifics on that following the hearing.
I think that, as I mentioned in my previous answer, this
implicates not just motion pictures. It implicates sports. It
implicates television. Television has a significant problem,
frankly, with this type of thing. You can have a situation
where you could be sitting in your home in Virginia watching a
show and it could be streaming to someone on the West Coast
before it is even aired on the West Coast, and that has a
significant impact.
And so I think also another factor to look at is it is not
just the major studios that I represent. This has a significant
impact on independents and smaller creators as well, a number
of whom Sandra identified in her opening remarks. So there
really is no part of the creative community that is immune from
the harm of streaming.
Mr. Goodlatte. Thank you.
I now recognize the gentleman from North Carolina, Mr.
Watt.
Mr. Watt. Thank you, Mr. Chairman.
I think I started to develop a reputation on this Committee
as one who tries to get diverse views, and we had trouble
getting diverse views on this issue, as the panel seems to be
all in one location, one position. Even when I disagree with
the folks who are on one side or the other, I think the purpose
of these hearings is to educate ourselves and understand. But
all of you seem to be saying the same thing.
Is there somebody out there who is not a crook who would be
saying something different I have asked myself, and I haven't
come up with an answer, although there seems to be some
mounting objection to a Senate bill that prohibits streaming as
a public performance by electronic means. I am advised--this is
secondhand, so I apologize to the cable people if I am
misrepresenting their position. But they seem to be arguing
that public performance by electronic means is too broad a
language.
Mr. O'Leary, can you give me your perspective on that? They
seem to be saying that it would allow criminal prosecutions of
executive managers of companies which are in commercial
licensing disputes with programmers. Does that have any
credibility? Or am I misunderstanding what they are saying?
Mr. O'Leary. Mr. Watt, I don't want to characterize what
they are saying. From my perspective, you are not
misunderstanding what they are saying. From the perspective
that I look at this, I do not believe that that is a legitimate
concern for a number of reasons.
First of all, if you look at the current situation in the
law, there are any number of commercial disputes between
producers and distributors of content. And those inevitably
always take the form of some type of civil dispute. There are
disagreements over what the contract says, what the license
says, those types of arrangements. Under the current law, for
reproduction and distribution, to my knowledge there has not
been one cable company executive prosecuted as a result of
anything that was going on in regard to those disputes.
Looking at the streaming issue, this is, as you have heard
from the other witnesses, just the logical extension of the
existing law.
Mr. Watt. Well, I can't say that I disagree with you. I
just wanted to make sure I understood. And had I known prior to
scheduling all the witnesses, I would have invited whoever has
a different position to come and state that position. I am just
trying to understand it.
The more important question, it seems to me, is how we get
to foreign culprits. Can I have each one of you give me your
thoughts on how we do that? Because a lot of this stuff that is
going on offshore or by websites or through electronic means
that are offshore are very, very difficult to get to.
Mr. O'Leary. Mr. Chairman, I think you raise a very
important point. This is a global problem and we need to deal
with it in a global way. I think there is a number of things
that we can do.
One, this country has historically been a leader in strong
enforcement of intellectual property rights. Setting the right
precedent here, making it clear to the rest of the world that
in the United States we take this seriously and we protect
creative works will allow the Administration, any
Administration, to go around the world and to spread that
message and to get other nations to put similar laws in place.
I also think--and this is based on my experience at the
Justice Department--having these laws in place is an
enforcement tool that allows our Justice Department to work
with their contemporaries in other countries. When I was at the
Justice Department, we did one case that involved police
activity in 12 nations dealing with an organization which was
global----
Mr. Watt. But is there any way we can do this statutorily
here? Anybody have any suggestions on that? We are having that
problem in a number of different contexts it seems. Is there
anything we can do domestically to really get at this?
Mr. O'Leary. As a practical matter, Mr. Chairman, if you
don't have the law in place here, there is virtually no chance
that a foreign law enforcement agency will even have a
discussion with you. So that would be the first step I would
think.
Mr. Watt. Any other ideas from either of the other two
witnesses?
Ms. Pallante. Well, I would just say as a kind of global
issue that the rogue websites discussions that this Committee
has already had this session and this streaming issue are
related and to some degree overlap, but they are both
important. So for streaming, even if the streaming is happening
abroad, keep in mind that it is often U.S. programming that we
are talking about.
I don't want to prejudge the issue of unintended
consequences and whether there should be carve-outs, for
example. But my impression is that they are not necessary
because, again, we are in the criminal code and we have two
safeguards. We have the requirement that the behavior be
willful and we have the discretion given to the Department of
Justice.
Mr. Watt. I am out of time, but I want to clarify. I am
just advised that NCTA was invited to be a part of this hearing
and they declined our invitation. I would just say to them
publicly if they want me to understand what they are saying,
they better come and talk to me because I don't think it has
much credibility right about now with me. Maybe I just don't
understand it. So I am sending that shot over the bow and
publicly right now.
I yield back, Mr. Chairman.
Mr. Goodlatte. I thank the gentleman.
And to clarify further, I share the gentleman's interest in
hearing other perspectives on this. A number of other major
companies, cable, satellite, and so on were invited and all
declined.
We have a vote on with just 3 minutes remaining, and the
Committee will stand in recess until the completion of the
votes. We will resume as soon as the votes are over.
[Recess.]
Mr. Goodlatte. The Committee will reconvene.
And the Chair recognizes the Vice-Chairman of the
Subcommittee, the gentleman from Arizona, Mr. Quayle.
Mr. Quayle. Thank you, Mr. Chairman, and thank you for
holding this hearing.
Ms. Aistars, we have had a couple of hearings on this
matter, and a lot of times we were dealing with the large
economic implications that affect a lot of U.S. companies. And
they are huge and they are broad that happen because of these
parasitic websites. But the one thing that you brought up and I
wanted to kind of go into a little further is if we don't do
anything right now in terms of increasing the penalties, what
happens in the future to the creativity that occurs in this
process? Because like you said, it is not just the large
companies, the large motion picture studios, it is also the
individual creators that are getting hit by this because it
seems like it will be creating a disincentive for them to
actually create things because they won't be properly rewarded
for their efforts.
Ms. Aistars. Thank you for the question, Mr. Quayle.
I think you have outlined it exactly correctly. You can
look at the independent artists and creators as the canary in
the coal mine for the rest of the creative community. They are
the ones that are going to be hit first by any infringement.
They are the ones that have the lowest level of resources to
combat infringement by these sites.
I know in my past experience I have worked with large teams
at big corporate entities that pursue online infringements of
copyrighted works, and the resources that those entities devote
are astounding in terms of pursuing notice and takedown
processes, cease and desist letters, negotiations with sites,
and so forth.
If you are an independent artist or creator, you don't have
those resources at your disposal. You don't usually have the
money to hire a lawyer to help you through the process. And
more importantly, these people make their living by actually
creating. So if you are spending your whole day on the phone
and on the computer trying to knock down these illegal
streaming sites, then you are not doing what you are trained to
do. So you are exactly right. It will impact creativity in the
United States.
I would also note, for instance, Ms. Seidler's example is a
very good one, and it is instructive about the impacts of
illegal piracy, streaming by rogue websites on the creative
community as a whole. Oftentimes that is where independent
artists and creators get their start in these small,
independent projects. They cut their teeth on this work and
they move on to bigger projects and have more resources to
devote to them. So if you cut them off at the very beginning
stages of their career, you are also depriving our community
across the country of those voices. They just won't be heard.
Mr. Quayle. Thank you.
Mr. O'Leary, a lot of the young people right now have come
up in an age where they can get pirated music, pirated movies
at their fingertips. They don't really realize that there is a
place where you are supposed to be paying for them.
Now, if you are going to have felony penalties put on this,
how does that actually help dissuade those young people? And
actually on the demand side, will it have the effect necessary
to actually be able to make a dent in the piracy that is going
on right now?
Mr. O'Leary. It is a good question, Mr. Quayle. I think
that we don't look at felony penalties as a silver bullet. They
are part of a larger effort to deal with this problem.
You are exactly right when you talk about the problem of
young people wanting things now, wanting them for free. I have
two young boys. They have grown up in that environment. And as
a parent, obviously, you do the best you can and you tell them
not to steal. But there are a lot more temptations perhaps than
there were when I was a kid.
But what this deals with is kind of a different part of the
same issue, and that has to do with people that are putting
massive amounts of illegal content into the environment which
people can then ultimately see. So you would take different
approaches in regard to both of the groups that are in your
question.
Obviously, dealing with the criminal element, there is
probably no amount of education in the world that is going to
stop a rogue website operator from being one. He is in it for
the profit and trying to do the different things that he is
trying to do to make money off of other people's hard work.
With young people, I think you are starting to see a
recognition that there--a part of our responsibility and it is
something we take very seriously is educating kids at a younger
age and teaching the difference between right from wrong and
showing them that there are legitimate alternatives out there.
In my testimony, I mentioned that there are at least 35
legitimate sites in our industry alone that are now using
streaming. We have a responsibility to get that message out
there so that kids have someplace else to go and that they can
actually get things in a legitimate fashion.
So these are all part of a large puzzle that we are trying
to deal with. The felony piece that we are talking about today
is very important, but so is the educational piece that your
question references.
Mr. Quayle. This isn't about streaming, but do you see any
other technological advances that we should be addressing with
this coming up on the horizon? We are dealing with streaming
now and technology advances very quickly, but do you see any
other mode of transmission that we should be taking notice of?
Mr. O'Leary. Well, I would suspect that right now somewhere
in the city there is probably a 14- or 15-year-old who has
already got the next iteration in his head and it is bouncing
around and probably 6 or 7 years from now he will be a multi-
millionaire because he is able to bring that to fruition.
But I think that your question evidences an important part
of this debate which is that if we do deal with this problem,
it is important to maintain kind of the tech-neutrality
approach that the copyright code has because if you don't do
that, then in 5 or 6 years, when there is the next version of
streaming, we will be right back in this room trying to deal
with that, and 5 years after that, the next iteration. So I
suspect that there are smarter people out there than me who can
tell you what the next version will be. I think from a policy
perspective, we need to put down kind of a broad imprint that
allows us to deal with whatever that is.
Again, we are not against technology. We support
technology. This is not a debate between us and the technology
industry. This is a debate between the creators and the people
who are stealing from the creators.
Mr. Quayle. Thank you.
Thank you, Mr. Chairman. I yield back.
Mr. Goodlatte. I thank the gentleman.
The Chair recognizes the gentleman from California, Mr.
Berman, for 5 minutes.
Mr. Berman. Since I came late, if it is all right, I would
yield to my--without waiving my----
Mr. Goodlatte. We will come back to you.
Ms. Chu, are you also going to defer down to Ms. Lofgren?
She was here before you, but I was instructed to go by
seniority on your side of the aisle. It is your choice.
We are going to recognize the gentlewoman from California,
Ms. Lofgren, for 5 minutes.
Ms. Lofgren. I just want to make it clear I would be happy
to go in seniority order, but I appreciate being recognized.
Professor Seidler has been mentioned. I had a chance to
meet with her for an extended period of time in my district
office which was very helpful. And what happened to her was
completely wrong. It is just not right what happened to her.
There is no question about it.
In our extensive conversations, it is clear to me, given
what happened to her, if this had been the law, it wouldn't
have kept that from happening to her. And really, we got into a
big discussion about the need to follow the money really. That
is the answer. You follow the money. You are not going to
prevent all crime through criminal law statutes. I mean, we
know that from everything else. But if you follow the money,
that is our best chance I think to get ahead of this whole
situation.
I have a couple of questions, and I am going to direct them
all to the Register because she is the neutral party. And that
is not negative about the other witnesses. They are advocates.
They have every right to be advocates. But the Register is the
neutral party here.
I wanted to explore potential for collateral damage on
innovation. It has been suggested--and I agree--that we do not
want to deter creators. We also do not want to deter
innovators. And so here is the question about how the statute
could play out. I am going to go where the Ranking Member did
not. There are two cases that I know of--there may be others--
where there is an argument about whether something is
infringing or not.
In one case, Viacom sued Time Warner Cable over its iPad
app. Now, Time Warner Cable thinks that this just allows their
own cable customers to watch their cable content on the iPad.
Viacom says no. And they are in court, and that will be settled
in court hopefully, whatever the proper way is. I don't have a
side in that litigation.
The other has to do with the MPAA has sued a company called
Zediva. Zediva has come up with a novel way to stream movies,
and it is based on the ability to rent an individual DVD. And
what they have done, apparently from the press reports is they
have bought physical DVD's and they have a whole bunch of
machines, and they are streaming them. And they think that that
fits within the copyright law. MPAA disagrees. And again, that
is in court. It will be settled there.
Here is the question. The companies that are engaging in
these activities are certainly doing it willfully. They know
what they are doing, but they don't believe that they are
infringing. I don't want to just trust the prosecutors. I want
to make sure that we have some protections in here so that
people who believe in good faith that they are pursuing a
lawful business model don't get caught up in the criminal
justice system when really it is a civil dispute. It needs to
be settled civilly.
I also have concerns about liability for people who are not
directly infringing, and let me give you an example. YouTube
has lots of stuff, and I think they do--it has been
acknowledged by other witnesses on other panels. They are
making an aggressive effort to try and get infringing content
off of their site. However, they get lots of notice and
takedown notices, and they comply readily. The volume of notice
and takedown really is an indicator of knowledge, and the
question is with that level of knowledge, could they be
prosecuted because they did not successfully remove all
content.
And the reason why I am asking this question is that John
Morton, the Director of ICE, in a letter to me said they
completely disregard the DMCA in the prosecution of crime. And
the fact that a technology company has made every effort to
stem infringement is meaningless to them, they are going to
prosecute them anyhow. And so the question is on innovation, if
you know that somebody might be using your site--say you are
Facebook or Twitter or Google or YouTube--that there could be
infringing sites despite your best efforts, you are going to be
afraid to innovate. You are going to be afraid to have that new
technology.
So do we need a safe harbor here as we did in DMCA? Do we
need to closely define--because you can't just say we will
trust the prosecutors, they would never do a bad thing because
the chilling aspect is the possibility of criminal obligation.
And it is not just that the individuals who are largely like 23
years old might be deterred but they will never get venture
capital to actually build the business. And so you could end up
destroying tech innovation even though I am absolutely sure
that is not the motivation of any party here.
Could you address those issues?
Ms. Pallante. Yes, thank you, Congresswoman Lofgren.
Those are very important questions, particularly the issue
of unintended consequences, and that is why we are having this
discussion.
But let me maybe step back and at the risk of sounding like
a copyright lawyer start again with what we are looking at as a
matter of statutory law. So nobody is suggesting that the
Department of Justice should, even if they were inclined to and
had the resources, start going after actors who, as part of
their business model, inadvertently may implicate the right of
public performance and, for that matter, already may implicate
the rights of reproduction and distribution.
There are two threshold prongs. One is willfulness and that
is not defined in the Copyright Act, but I can read to you for
some peace of mind from Nimmer on Copyrights. It is in my view
a pretty high standard. So willfulness in terms of copyright
infringement is voluntary, intentional violation of a known
legal duty, not accidental, not inadvertent.
Ms. Lofgren. Could I interrupt? If I may indulge the
Chairman, on the duty part, if you could address that issue
because this is a new frontier in some of these areas. And I
think it is still an unknown issue. ICE and the DOJ--well, ICE
went after--I don't know that the prosecution has occurred--
search engines. Nobody ever thought search engines had any
liability, and yet there was a law enforcement action. So what
is the duty there? Because we had a whole different scheme that
we put in place in the DMCA when we acted in the 1990's.
And I am sorry for interrupting, but if you could address
that as well, it would be very helpful.
Ms. Pallante. Certainly. And yes, the standard for civil
infringement is very different from the standard for criminal
prosecution.
But in addition to willfulness and understanding that there
is a clear duty, say, in this instance to obtain permission
before streaming because it implicates the copyright interest
that is the public performance right--under current law. Let me
do it in reverse.
Under current law, even if you are implicating the public
performance right and you are doing it for commercial advantage
and with a profit motive, at most that is a misdemeanor, and
that is at odds with the law for the same activity with respect
to reproduction and distribution. So I really do see it as a
parity issue. I see it as an extension of the work begun with
the NET Act in 1997 and the ART Act in 2005, and it is timely
now because streaming is----
Ms. Lofgren. I understand that. And I actually supported
those measures as you may or may not recall.
But what is new here is prosecution for activity that no
one ever thought was a violation of law.
Mr. Goodlatte. The time of the gentlewoman has expired.
The Chair recognizes the gentleman from North Carolina, Mr.
Coble, for 5 minutes.
Mr. Coble. Thank you, Mr. Chairman.
Ms. Aistars, you refer in your testimony to an outsized
impact on independent artists and creators. Elaborate on that,
if you will, in a little bit more detail.
Ms. Aistars. Sure. As I was referring to in my testimony,
Ms. Seidler is a very good example of what independent artists
across the country face when dealing with these companies and
websites that stream their works. It is an outsized impact on
these independent creators because of the lack of resources
they have to pursue these bad actors civilly and because of the
lack of attention that these types of websites are willing to
afford them as independent creators.
It is also an outsized impact on creativity in this country
generally because these independent projects are where creators
kind of get their start and hone their skills and their craft.
These are also the projects that are difficult to fund.
They are self-funded. They are independent voices that probably
wouldn't be heard in a big studio environment perhaps. So if
those voices disappear from our culture and our communities, we
will all be the poorer for it.
Mr. Coble. Thank you.
Mr. O'Leary, piracy has a chilling effect on innovation.
Can you predict any consequences that we should expect if
illegal streaming continues unabated?
Mr. O'Leary. Thank you, Mr. Coble.
I think certainly one of the consequences if it continues
unabated is that you will see a dramatic--the shift is already
happening. People engaged in content theft are shifting to
streaming, and that will become probably the primary and the
most often used means for engaging in this type of piracy not
just in the United States but on a global basis.
I think that the amount of resources that are put into
trying to deal with content theft right now, certainly for the
studios that I represent, is an enormous number, and that is
money that is not going into production. That is money that is
not going into innovation. One of the things that we like to
talk to people about--you are talking about the impact of
content theft. It doesn't impact the names you see on the
marquis when you walk into the theater, but if you sit through
the movie and you watch the credits at the end, that long list
of people that you have never heard of that go by, they are the
ones who feel the pinch because there is less production. There
is less opportunity to work. A lot of those people work project
to project. They may string together six or eight projects a
year. If a studio has to cut back because they are not having a
chance to recoup their investment, those are the people who are
going to feel it the most acutely. So that is going to be the
impact overall.
Mr. Coble. I thank you, sir.
Finally, Ms. Pallante, what exclusive rights under
copyright are implicated by the streaming of copyrighted works,
and what protected rights are infringed by illegal streaming?
Ms. Pallante. Thank you, Mr. Coble.
Three exclusive rights. In the context of streaming, we are
talking about one that is of growing importance for certain
kinds of works, and that is the public performance right. That
is very important to works, for example, like the movies that
Ms. Aistars is describing and Mr. O'Leary, as well as music, as
well as television programming, and live sporting events. They
are streamed. That implicates the public performance right.
It is also possible that the reproduction right is
implicated and it is conceivable that the distribution right
could be implicated, but probably not in the ways that Congress
intended. So, for example, current law talks a lot about the
reproduction and distribution of copies of works because that
is the way that copyright owners primarily exploited their
copyright interest in the past. Today when we talk about
illegal streaming, we are talking about buffer copies. We are
talking about copies left on servers, not the copies that are
out in the marketplace doing damage. The damage isn't coming
from the copies. The damage is coming from the streaming.
Mr. Coble. I thank you.
I yield back, Mr. Chairman.
Mr. Goodlatte. Thank you, Mr. Chairman.
The Chair will again turn to the gentleman from California,
Mr. Berman, and ask if he would like to be recognized for 5
minutes.
Mr. Berman. On behalf of the Ranking Member's desire, I
will.
Ms. Lofgren and I have had discussions around these issues
for many, many years, and I throw out a different scenario. We
want to incentivize creators but not necessarily creators of
pornography or materials on how to make nuclear weapons. We
want to incentivize innovators, but not necessarily all--I
mean, our whole export control laws and a lot of other
regulations we have are to discourage and disincentivize
certain kinds of innovators. So I am not so sure the sweeping
generalization will necessarily decide the issue.
On this issue of civil liability under DMCA versus criminal
liability, it seems to me--well, first of all, the fact that
there is a safe harbor in DMCA done at a certain time, given a
certain technology, may not mean that is the exact, correct
safe harbor 10 or 20 years later based on the advances in
technology. I just throw that out. This issue isn't coming up
in this hearing.
But secondly, hypothetically what if someone was marketing
a process by which people would put--encouraging people to put
infringing material on their site, saying then, oh, and we will
comply with the notice and takedown, but they had a willful
intent to disseminate copyright protected material. Why under
criminal law couldn't that under the right circumstances meet
the test of a criminal violation without--why should Customs
automatically assume that any conduct should--if you comply
with notice and takedown, you have a safe harbor from any of
your conduct, even if it has nothing to do with getting a
notice and taking it down. I throw that out perhaps to the
Copyright Office.
And then just to pursue a line of questioning that I think
Mr. Watt got into.
Streaming, by the way, is not exempt from copyright law as
Ms. Pallante said. Its offense is a misdemeanor offense.
As we try to make consistent the application of law over
different technologies, whether they are viewed as a
reproduction, a distribution, or a public performance, what
would the person who was against that say here to say there
should be a difference between streaming as a public
performance--and even that, of course, is a matter under some
discussion--versus a reproduction and distribution? The witness
who isn't on the panel--what would they give as their most
compelling argument?
And is there something--as we draft legislation, if we
decide to try and get a consistent approach, are there things
we need to be careful of in drafting the legislation?
Ms. Pallante. Thank you, Mr. Berman. I will start.
I suppose that a person not on this panel might say there
is a reason that the public performance right has been treated
differently since 1897 under criminal law. That is because the
greatest harm to copyright owners occurs through reproduction
and distribution. And I think our answer is the time has come
for Congress to be reasonably out in front of this issue, and I
say that knowing that the content owners next to me do not
believe that we are in front of this issue, but I think
relatively speaking, it shouldn't be the case that we wait
until the illegal streaming activity has so terribly
proliferated that we can hardly make a dent.
They might also say that there haven't been any
prosecutions for illegal streaming. There haven't been any
attempts that at least we know about. Again, I think that is
not a symptom that it isn't an issue so much as it is not easy
to get the attention of the Department of Justice to go after
illegal streaming and to expend resources when the most that
they can do is bring misdemeanor charges.
Ms. Aistars. Congressman Berman, in answer to the beginning
part of your question where you raised the possibility of a
site actually going out there and incentivizing people to
contribute copyrighted materials to an illegal rogue site, I
would just like to comment that those sites actually do exist
today. I put an example of one of them in my testimony which
was streaming Ms. Seidler's work, as well as the work of many,
many other copyright owners. This is only one of numerous such
sites. But this particular site was offering cash rewards for
people who were uploading the most popular files. So if you got
1,000 streams of a particular file that you had uploaded, you
would get a cash incentive from that company. So it shows that
you are, in fact, correct, that these sorts of risks do exist
today and that there are companies out there that are
incentivizing people to aid in their piracy.
Mr. O'Leary. Mr. Berman, I think that your hypothetical
that you posited at the beginning of your question highlights
the significant drawbacks to creating exceptions to the
criminal law. I think as was alluded to earlier in the hearing,
there are a number of safeguards in place that will protect
legitimate businesses that are in legitimate business disputes
from prosecution. The willfulness standard has been mentioned.
There are a number of activities that lawful businesses engage
in.
And I think having sat in those conversations where you are
making charging decisions, I can also tell you that Federal
prosecutors do not make decisions rashly and they do not make
decisions without looking at all the evidence.
One of the things which I think is important to note is if
you look at the website of the Computer Crime and Intellectual
Property Section, there is a victim referral sheet that they
would ideally like everyone coming forward with a criminal
claim to fill out. Among the list of questions on that sheet
are is this part of a civil dispute or do you anticipate this
becoming a civil dispute. The reality of it is, most
prosecutors--if you answer yes to either of those questions, it
is a big red flag and you are not going to get embroiled in
something like that.
The hypothetical you were talking about would be that
instance where someone maybe is engaging in some type of sham
or something. They are actually engaged in a criminal act but
they are trying to avail themselves of kind of the patina of
legitimacy that a legitimate company would have in order to
avoid prosecution. The way the criminal law in this country
works is the prosecutors are vested--Congress writes the laws,
obviously, and then prosecutors have the discretion to enforce
those. The scenario that you are talking about where someone
has set up kind of a fraudulent scenario to pretend they are a
legitimate company--there is no policy reason that should not
be prosecuted if the evidence is there. And that means meeting
the elements of the crime: willfulness, commercial or private
financial gain, and commercial scale impact, those types of
things. So to answer that question, you have highlighted the
very problem when we start to carve people out of the criminal
law.
I also think to highlight the point that Ms. Pallante made,
as a practical matter, having been in these discussions,
investigative agencies and prosecutors are just not going to
spend resources on cases that are going to yield at best a
misdemeanor. It just doesn't get the attention. There is a ton
of pressure on law enforcement and they are not going to have
the time or the resources to do it. It is not a criticism of
them. It is kind of a fact of the world we live in particularly
in the last decade. They are given more and more things to do
every year and it just doesn't fit with the current approach to
things.
Mr. Goodlatte. The time of the gentleman has expired.
The Chair recognizes the gentleman from Pennsylvania, Mr.
Marino, for 5 minutes. The gentleman has no questions.
The gentlewoman from California, Ms. Chu, is recognized for
5 minutes.
Ms. Chu. Thank you, Mr. Chair.
Ms. Aistars and Mr. O'Leary, you both talked about
cyberlockers and the fact that it is one of the new places for
hosting and disseminating illegal content. And there are
companies like SideReel that claim that they are nothing more
than a specialized search engine. They claim that they only
link to content that they think users would find relevant,
including legitimate sources like Amazon.com, iTunes, and Hulu.
Any illegal content on their sites is hosted by other sources.
More commonly they link to cyberlockers such as Megavideo which
actually hosts the streaming video files, some legal and some
not. SideReel claimed that they immediately remove links
whenever they receive notice that it is directing people to
infringing content.
So based on your experience, what is the best way to tackle
sites that provide the links to the illegal content?
Ms. Aistars. Is your question what is the best way to
handle the sites that provide links you mentioned out to some
legal sites, and some sites that aren't legal?
Ms. Chu. Yes, that they are providing the link to some
legal sites, but then also to the illegal sites.
Ms. Aistars. I mean, I guess I would say to begin with that
I think the Judiciary Committee as a whole and this
Subcommittee in particular has done an excellent job in setting
out the criminal penalties that are applicable to all manner of
websites in terms of addressing the policy considerations that
one looks at to determine whether you should be bringing a
prosecution or not, whether someone has met the threshold for
being held criminally liable. And what we are looking to adjust
here is simply a technical fix that one should not determine
that a site is either in or out based on the fact that they are
using streaming versus reproduction and distribution of a work.
So I guess I would want to think this through a bit more
closely and discuss this a little further, but my initial
impression would be that one way to address these issues would
simply be by adding the public performance right to all of the
currently existing criminal provisions and then you would have
the benefit of the protections that are already built into the
ART Act and the NET Act that ensure that these are truly large-
scale illegal reproduction operations and the infringers are
acting willfully and there are commercial motives and that sort
of thing.
Ms. Chu. Mr. O'Leary, and then I would like to hear from
Ms. Pallante on this.
Mr. O'Leary. I agree with what Ms. Aistars has said. There
are instances out there, hypotheticals and different instances
that arise, that are rarely black and white. And that is part
of the process.
As I said earlier, the vast majority of enforcement takes
place on kind of the civil plane. When we reach out to sites
and ask them to stop, the ones that are trying to do the right
thing stop. Some don't. Now, that may be a situation where we
would proceed against them civilly, and in many cases, if not
most cases, that resolves the problem in some fashion, assuming
that you can actually get civil jurisdiction over them.
When we make a referral to the Justice Department for
criminal prosecution, it is not uncommon--and I did this when I
was there and they do it now, as they should, but they will
look at a case and say this doesn't meet the requirements for
bringing us a criminal case. You should handle this civilly or
we are not going to take it. It is not as though the simple
referral of a case to the Justice Department will result in it
being prosecuted. In fact, I think you would find in a lot of
cases there are probably as many cases denied as are accepted,
if not more. So I think that depending on the facts and the
circumstances, it is kind of a holistic approach to dealing
with different facts and different types of activity. Again,
though, the vast majority of it is going to be handled civilly.
What we are really talking about here is the willful,
massive, clearly criminal type of activity, and that is the
distinction that has to be made looking at the specific facts
of the specific case.
Ms. Pallante. Thank you.
I will just add to that by saying cyberlockers are, in my
opinion, the most difficult issue at play in general with
online enforcement. They have a lot of very legitimate uses. A
lot of people are very excited by the multiple things they can
do and the multiple ways they can be used. It is possible that
in the rogue website legislation in the follow-the-money
approach, depending on the definition of a rogue website, you
can get to them that way, at least the ones that, for example,
may offer rewards programs to encourage the downloading and
sharing of files that are found to be unauthorized. And it is
possible in the criminal context that you could get to some
kind of aiding and abetting if the providing of links itself is
not sufficient for a cause of action. That is kind of the
general answer. But it is an extremely difficult issue.
Ms. Chu. Thank you. I see my time is up. I yield back.
Mr. Goodlatte. I thank the gentlewoman.
Mr. O'Leary, I think you may have been wanting to respond
to Ms. Lofgren's question regarding the knowledge of
infringement based upon receipt of DMCA notices.
Mr. O'Leary. Thank you, Mr. Chairman. I think it is a
legitimate question and one that is worthy of discussion. I am
not familiar with Mr. Morton's letter, so I am not going to
address that. I would note that it is the prosecutor who will
ultimately make the charging decision, not the investigative
agency, and that is true in any case.
At the same time, I think again we keep going back to the
fact that there are----
Ms. Lofgren. Could the gentleman yield on that point? And I
will be happy to make a copy of Mr. Morton's letter available
to you.
But the point I am making is that if there is an
enforcement action, somebody is arrested, that is sufficient to
deter. I mean, even if there is no prosecution, that is
definitely going to have a chilling effect on people engaging
in that activity and certain chill venture financing for a
technology developer.
Mr. O'Leary. Again, your question is well taken. I am not
quarreling with your point.
One thing I will say is there has been this notion that has
been bandied about that people are going to be arrested. Most
of these cases will not result in an arrest. It will be handled
in a different way.
But having said that, I think the important thing is within
the criminal statutes, within the criminal code that we have
now, there are safeguards built in. Ms. Pallante talked about
them. They are the elements of the crime, their willfulness. If
you have a legitimate business that is truly involved in a
legitimate dispute with another legitimate business, as a first
principle that is going to send up a red flag with 99 percent
of the prosecutors, if not all of them out there.
The second part of it is--let's take the YouTube example
that you mentioned. YouTube does a number of things. And I am
speaking generally, not in regard to any specific case, and I
am not speaking to the case they are involved in. But they do a
number of things that go directly to the state of mind of that
organization. For example, they are not members of the UGC
principles but they adhere with them, which basically is a
process whereby if they are notified that something infringing
is there, they take it down. They utilize filters. They utilize
notice and takedown. These are all steps that go to their state
of mind.
I suppose it is possible that there is a hypothetical that
you could somehow ignore all of those facts and say that they
are willfully violating a known legal duty and somehow engaging
in some type of commercial-scale infringement. I just think it
is very unlikely, and I think that that risk exists for them
right now, to the extent it exists at all, under reproduction
and distribution. That is my only point. I don't know that
there is anything new going on here frankly. I think this is
just a variation on the same theme that has been in place for
decades.
Ms. Lofgren. Could I do just a quick follow-up on that, Mr.
Chairman?
Mr. Goodlatte. Sure.
Ms. Lofgren. YouTube--I mean, they have evolved. I mean,
there was a time when they didn't do those things. Now they are
doing all kinds of things, filtering and the like.
Facebook doesn't do any of that. I don't know, but I assume
there is a lot of infringing material on people's Facebook
websites. But they don't do filtering. Twitter does a lot of
notice and takedown. I don't know how that has really worked
with Facebook.
I just think when the next Facebook comes along, you don't
want to deter that innovation by chilling the whole tech
development environment. By their state of mind, they are not
doing any of the things that YouTube is doing now, and so what
would their intent be?
Mr. O'Leary. I don't disagree with anything you just said.
I don't want to deter the next Facebook. I would like them to
play by the rules, though. That is my point.
Mr. Goodlatte. I thank the panel and the witnesses because
this has been a great discussion and very helpful as we craft
this component of legislation that will be forthcoming.
Without objection, all Members will have 5 legislative days
to submit to the Chair additional written questions for the
witnesses which we will forward and ask the witnesses to
respond as promptly as they can so that their answers can be
made a part of the record.
Without objection, all Members will have 5 legislative days
to submit any additional materials for inclusion in the record.
And with that, I again thank our witnesses and congratulate
our new Register of Copyrights and declare the hearing
adjourned.
[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.]