[Senate Hearing 112-47]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 112-47
 
       TARGETING WEBSITES DEDICATED TO STEALING AMERICAN 

                     INTELLECTUAL PROPERTY

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



                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 16, 2011

                               __________

                           Serial No. J-112-5

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
CHARLES E. SCHUMER, New York         JON KYL, Arizona
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
SHELDON WHITEHOUSE, Rhode Island     LINDSEY GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
AL FRANKEN, Minnesota                MICHAEL S. LEE, Utah
CHRISTOPHER A. COONS, Delaware       TOM COBURN, Oklahoma
RICHARD BLUMENTHAL, Connecticut
            Bruce A. Cohen, Chief Counsel and Staff Director
        Kolan Davis, Republican Chief Counsel and Staff Director
                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Franken, Hon. Al, a U.S. Senator from the State of Minnesota, 
  prepared statement.............................................   175
Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa.     3
    prepared statement...........................................   176
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................   189

                               WITNESSES

Adams, Tom, President and Chief Executive Officer, Rosetta Stone 
  Inc., Arlington, Virginia......................................     5
Dailey, Thomas M., Vice President and Deputy General Counsel, 
  Verizon Communications Inc., Arlington, Virginia...............    10
Jones, Christine N., Executive Vice President, General Counsel 
  and Corporate Secretary, The Go Daddy Group, Inc., Scottsdale, 
  Arizona........................................................     8
Turow, Scott, President, Authors Guild, New York, New York.......     6
Yee, Denise, Senior Trademark Counsel, Visa, Inc., San Francisco, 
  California.....................................................    12

                         QUESTIONS AND ANSWERS

Responses of Tom Adams to questions submitted by Senators 
  Grassley and Coburn............................................    34
Responses of Thomas M. Dailey to questions submitted by Senators 
  Coburn, Grassley and Klobuchar.................................    42
Responses of Christine N. Jones to questions submitted by 
  Senators Grassley, Klobuchar and Coburn........................    51
Responses of Scott Turow to questions submitted by Senators 
  Coburn and Grassley............................................    61
Responses of Denise Yee to questions submitted by Senators 
  Grassley, Klobuchar and Coburn.................................    95

                       SUBMISSIONS FOR THE RECORD

Adams, Tom, President and Chief Executive Officer, Rosetta Stone 
  Inc., Arlington, Virginia, statement...........................   103
AFL-CIO, William Samuel, Director Government Affairs, Washington, 
  DC, February 15, 2011, letter..................................   118
AT&T, James W. Cicconi, Senior Executive Vice President, 
  Washington, DC, March 24, 2010, letter.........................   120
COICA, New York, New York:
    Floyd Abrams, February 11, 2011, letter......................   125
    Sascha Meinrath, and Aparna Sridhar, February 15, 2011, 
      letter.....................................................   135
Castro, Daniel, Senior Analyst, Information Technology and 
  Innovation Foundation (ITIF), Washington, DC, statement........   138
Center for Democracy & Technology, Washington, DC, statement.....   144
Computer & Communications Industry Association, Edward J. Black, 
  President and Chief Executive Officer, Washington, DC, 
  statement......................................................   152
Consumer Electronics Association (CEA), Michael Petricone, Senior 
  Vice President, Government Affairs, statement..................   162
Dailey, Thomas M., Vice President and Deputy General Counsel, 
  Verizon Communications Inc., Arlington, Virginia, statement....   164
Jones, Christine N., Executive Vice President, General Counsel 
  and Corporate Secretary, The Go Daddy Group, Inc., Scottsdale, 
  Arizona, statement.............................................   177
Keane, Brian A., Chief Operating Officer, Blue Sky, Greenwich, 
  Connecticut, February 15, 2011, letter.........................   188
Motion Picture Association of America, Inc (MPAA), Washington, 
  DC, statement..................................................   191
Net Coalition, statement and attachments.........................   194
New York Times, Scott Turow, Paul Aiken and James Shapiro, 
  February 14, 2011, article.....................................   211
Siy, Sherwin, Deputy Legal Director, Public Knowledge, 
  Washington, DC, statement......................................   214
Roberts, Nora, February 13, 2011, letter.........................   222
Turow, Scott, President, Authors Guild, New York, New York.......   223
U.S. Chamber of Commerce, Washington, DC, statement and joint 
  letter.........................................................   238
Yee, Denise, Senior Trademark Counsel, Visa, Inc., San Francisco, 
  California, statement..........................................   249


TARGETING WEBSITES DEDICATED TO STEALING AMERICAN INTELLECTUAL PROPERTY

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2011

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 10:05 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Whitehouse, Klobuchar, Franken, 
Coons, Blumenthal, Grassley, Kyl, and Coburn.

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Chairman Leahy. Good morning. I want to thank the witnesses 
who are here today to testify about how we can make some 
progress in the fight against online copyright infringement and 
also the sale of counterfeit goods. Last Congress, I introduced 
legislation, cosponsored by 12 other Senators on this 
Committee, to combat ``rogue websites'' that do nothing but 
traffic in infringing material. I thank those Senators who 
joined me, including Senator Hatch, who was the lead cosponsor 
and is a long-time leader on intellectual property issues, and, 
of course, our Ranking Member, Senator Grassley. I note that 
because sometimes you only read that members of opposite 
parties only work against each other, and this Committee has 
had a long record of working together in a bipartisan way on a 
whole number of issues, certainly in the high-tech area, but in 
the criminal area, fraud, oversight, and so on.
    The legislation was then approved unanimously by the Senate 
Judiciary Committee, 19-0. Now, there are some concerns on both 
sides of the aisle which we will try to address. Some 
intellectual property owners argue that the legislation did not 
go far enough; others are concerned it may go too far. Senator 
Coburn asked me if we could hold this hearing to give all sides 
an opportunity to address this issue. At his request I have 
done that.
    We work to address issues, but let us be clear. When we 
look at those issues, the problem of online infringement is 
real; it is substantial; and it causes a drain on our economy, 
it costs American jobs. Copyright piracy and the sale of 
counterfeit goods are reported to cost the American economy 
billions of dollars a year, thousands of lost jobs. A January 
study found that nearly 24 percent of all Internet traffic 
worldwide is infringing. It is a staggering number; it is 
growing. Certainly those of us on this Committee who have been 
in law enforcement--and there are several; I see Senator 
Blumenthal has just joined us. If you had somebody who was 
breaking into a warehouse and stealing a few hundred thousand 
dollars' worth of items, why, you would want to get after that. 
Well, you have these people stealing millions and billions of 
dollars. We ought to be just as incensed on that. So inaction 
is not an option. I think we have to pass online infringement 
legislation in this Congress before rogue websites harm more 
businesses and result in more lost jobs, because what they do 
is theft, pure and simple. They are no more than digital stores 
selling stolen and, in the case of counterfeits, often 
dangerous products. If they existed in the physical world, 
everybody would agree that you should shutter them and their 
proprietors arrested. And we cannot excuse the behavior because 
it happens on the Internet and the owners operate overseas. The 
Internet needs to be free and open, but not lawless.
    Every one of the witnesses here today has an interest in an 
Internet marketplace that remains vibrant and continues to 
expand. I suspect no one here condones rogue websites. We have 
an interest in keeping Internet activity lawful. If we lose 
confidence that the products we are purchasing online are the 
real things rather than counterfeit, it hurts the entire 
Internet ecosystem.
    I know some market participants have become more aggressive 
on their own initiative since we began consideration of a 
legislative approach to this problem last June. I commend them. 
After all, legislative action alone cannot possibly achieve the 
effects of self-policing in the private sector. MasterCard, for 
instance, has been working closely and productively with the 
intellectual property community to make sure they are not 
processing payments from sites that are trafficking in illegal 
goods. I know Visa has begun discussions with the IP community 
in that same way.
    But voluntary conduct is not enough. Court orders are often 
necessary for appropriate action. AT&T first suggested in 
written comments an approach that allows law enforcement to 
seek a court order that could be used by AT&T and other 
Internet service providers to prevent rogue websites based 
overseas from reaching us. I applaud their leadership. That 
model not only became the basis of our legislation last year, 
but it is consistent with the work law enforcement has done 
recently.
    So I am convinced we will pass legislation to target rogue 
websites this year. I want to hear from all sides. But I do 
refuse to accept that the problem is too difficult because 
people who want to steal will always find a way. That is like 
saying we should not prosecute drug crimes or child pornography 
because people will always find a way to do bad things anyway. 
As a former prosecutor, I find that line of argument 
unacceptable.
    I have talked with Chairman Smith in the House. I intend to 
work closely with him and with other Members of the House who 
have been leaders on this issue. And I look forward to 
continuing to work with Senator Grassley and other members of 
this Committee. This issue is one of those like patent reform 
on which we can work in a truly bipartisan and bicameral basis. 
After all, as I said in a speech earlier this month, when you 
have the Chamber of Commerce and organized labor come together 
in support of legislation to address this problem, then so can 
Democrats and Republicans in both the House and Senate.
    Senator Grassley.

STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. Before I go to my statement, I would 
follow up on three things. One, I may have to temporarily leave 
to go down the hall to help make a majority in the Finance 
Committee. And that reminds me. Since this involves 
intellectual property and trade and piracy, it is also issues 
that we deal with on trade issues down in the Finance Committee 
as well over the last several years. And the third one would be 
a commentary on your comment about this being a bipartisan 
issue. Very true, and stressing that, because people think that 
everything around here is very partisan. And I always remind my 
constituents that the reason they think everything is partisan 
around here is because controversy is what makes news, you 
know. And, consequently, when people get along, it is not very 
well noticed by the press.
    I appreciate your holding this hearing on this very 
important subject. I agree that increased online theft of 
intellectual property has really become a rampant problem. 
There is a lot of interest in going after criminals who engage 
in pervasive piracy and counterfeiting online. That is because 
the impact of copyright piracy and sale of counterfeit goods 
imposes a huge cost on our American economy, which means lost 
jobs and lost sales and lost income. In fact, these detrimental 
impacts go far beyond the American economy. We recently had a 
report estimating that counterfeiting and piracy resulted in 
2.5 million jobs lost in the G-20 economies, and that the 
global value of counterfeited and pirated goods exceeds $650 
billion. Obviously, those are staggering numbers.
    Piracy and counterfeiting also can present serious health 
and safety problems because we have counterfeit products such 
as ineffective pharmaceuticals, defective electrical products, 
tainted toothpaste, malfunctioning equipment, and sub-par 
materials, all posing dangers to the American consuming public. 
Addressing this problem would help protect consumers.
    A large chunk of this piracy and counterfeiting is done 
online. That is because the internet reaches across the globe 
and is mostly anonymous. Moreover, part of the problem is that 
many Internet websites that engage in offering infringing 
content and counterfeit goods are actually foreign owned and 
operated. These websites appeal to American consumers because 
they reside at familiar top-level domains, such as .com or 
.net. These websites also appear to be legitimate because they 
have corporate advertising and credit card acceptance.
    Today our testimony on the scope of intellectual property 
theft over the Internet and what efforts have been undertaken 
to combat this scourge, of course, is very needed information. 
I am interested in hearing whether the witnesses support or 
have concerns with the legislation that the Senate has proposed 
to address the problem. I am certain that everyone supports the 
underlying goals of S. 3804, the Combating Online Infringement 
and Counterfeiting Act, a bill that was introduced in the last 
Congress.
    That said, a number of concerns have been raised about that 
bill, and it is appropriate for the Committee to look into 
those concerns to determine whether they are legitimate and 
should be addressed. Certainly, we should act responsibly so 
that we do not harm consumers, innovation, or economic growth.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you.
    Our first witness--and I should ask Senator Kyl, how long 
are you going to be able to stay with us?
    Senator Kyl. Mr. Chairman, I have got the same problem 
Senator Grassley does. We both are going to have to get over to 
the Finance Committee, and, therefore, I have the opportunity 
to introduce the witness, if I could be excused.
    Chairman Leahy. I am going to take the witnesses in the 
order they are here, but if you would like to introduce Ms. 
Jones out of order, why don't you just go now. Then you will be 
able to leave.
    Senator Kyl. I appreciate it. And I want to join Senator 
Grassley in thanking you for holding this hearing on an 
extremely important topic and to re-emphasize what he did about 
the bipartisan nature of this and, of course, my work in 
support of the Leahy bill on patent reform, which is just 
another example.
    But I would like your permission to introduce a good friend 
of mine and a very important witness for us, and that is 
Christine Jones. She is the general counsel and corporate 
secretary for the Go Daddy Group of companies and is 
responsible for all of the legal affairs of that Go Daddy 
Group, including the two departments which deal with websites 
devoted to stealing intellectual property, which is the subject 
of the hearing today. She was the company's first lawyer and 
made it a priority to put Go Daddy on the leading edge of 
addressing bad actors on the Internet. She has helped to push 
through legislation aimed at protecting kids online, fighting 
the problem of illegal online drug sellers, and she has been a 
repeat visitor to the witness table here in Washington, having 
testified on numerous Internet-related issues in Congressional 
committees in recent years.
    On a personal note, prior to joining Go Daddy, Christine 
worked as a commercial litigator and prosecutor and CPA. I 
first met her in 1997 when she first moved to Arizona. She has 
been very active in our community affairs, and I just also 
would add that one of the soft spots in my heart for Go Daddy 
is the fact that they are a big sponsor of car racing, which I 
am kind of a nut for, both Indy car racing and NASCAR racing. 
But obviously they do some incredibly important work in this 
problem of intellectual property, and I am delighted that 
Christine Jones will be here to testify today.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you. I will resist talking about the 
ad Go Daddy once had about appearing before a Senate Committee.
    [Laughter.]
    Chairman Leahy. This is not the one.
    Senator Coburn. Mr. Chairman.
    Chairman Leahy. Yes?
    Senator Coburn. Just to note I will have to go to the 
Finance Committee as well, so I am going to be here, and if I 
do not get a chance to question, I will submit questions.
    Chairman Leahy. Well, thank you very much. As I said before 
you came in, the reason we are having this hearing is at your 
request.
    I wanted to give Senator Kyl, because I know he has to 
leave, that opportunity of introducing Ms. Jones because even 
privately he said some very nice things about you, too. So I 
wanted him to have the chance----
    [Laughter.]
    Chairman Leahy. You know, it is not just what we say on the 
record, but if we say it in private, it is even better.
    Tom Adams is chief executive officer of Rosetta Stone, a 
position he has held since joining the company in 2003. In his 
role as CEO, Mr. Adams was recognized in 2009 as the Ernst & 
Young Entrepreneur of the Year National Category Winner, and 
well deserved, I might say. As a native of Sweden, Mr. Adams is 
fluent in a number of languages, including Swedish, French, and 
English, and a working knowledge of Spanish. C'est bien.
    Mr. Adams received his bachelor's degree from Bristol 
University in England, his master's from the international 
business school INSEAD.
    Please go ahead, Mr. Adams. What I am going to do is I am 
going to have each witness testify, and then we will open it up 
for questions for all of you.
    Go ahead, Mr. Adams. There should be a button that says 
``Talk.''

STATEMENT OF TOM ADAMS, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
            ROSETTA STONE INC., ARLINGTON, VIRGINIA

    Mr. Adams. Senator Leahy, Senator Grassley, and the rest of 
the Committee, thank you very much for holding this meeting 
today. My name is Tom Adams. I am CEO of Rosetta Stone, and our 
company, Rosetta Stone, has sort of grown up here in America. 
We have over 2,000 employees right now. We teach 30 languages. 
And over the past several years, we have frankly been under 
attack by pirates and counterfeiters that over time have 
appropriated our name and have used the ecosystem here in the 
United States to reach the U.S. consumer.
    So I want to thank you for recognizing the harm that rogue 
websites cause the American consumer and businesses, too. 
American companies today are losing the battle against the 
counterfeiters. The amount of criminal activity is astounding. 
Our company has had over 1,000 websites created like these 
websites right here. None of these are legitimate website home 
pages of RosettaStone.com, although they look very similar. 
They have very similar URLs where they will, for example, call 
themselves RosettaStone-site.com, and so the entire purpose of 
these websites is to deceive the U.S. consumer.
    While we welcome all aspects of the legislation 
contemplated, we are concerned that a key element of the 
ecosystem is not being addressed directly. Almost all these 
websites are first discovered--or the preponderance of 
discovery of these websites happens through search engines. So 
American consumers are looking for Rosetta Stone, let us say. 
They will type into the search box, and they will see on 
websites like Google and Yahoo! search results. Some of these 
search results are organic, and some are paid. And you can see 
here all the marked areas where these are fraudulent sites 
claiming to be selling Rosetta Stone. The URLs use the word 
``Rosetta'' very often, and ``Rosetta'' is used in the header. 
And all of this is to confuse the consumer.
    The consequences of this are that consumers end up with 
product that is faulty. It often does not work. They believe 
they have transacted with our company so they call our customer 
service. And so on a daily basis we get calls from customers 
who believe that Rosetta Stone is not a quality provider of 
software products, although we take great pride in the 
legitimate products that we sell through our own site. And so 
as a result, there is brand damage; there are consumers passing 
over their financial information to sites that they trust 
because they show ``Rosetta Stone.'' And all of this is 
happening, frankly, because of an ecosystem that is supporting 
this activity and which makes this activity profitable.
    Many of the search engines say that it is very difficult 
for them to work against this problem, but we have seen a 
repeated number of times that they put on filters which do not 
have any pirates for a while. I would contend that that is the 
case today, but those pirates come back time after time.
    The key issue is, of course, that there is a profit that is 
being made on these activities by payment processors or by 
search engines and so on. So there are many companies here in 
the ecosystem that make money from this illicit activity, and 
we simply must stop that, and we hope that this Committee is 
successful in moving the legislation forward.
    I want to thank you all again for giving us the opportunity 
to appear at this hearing today. We are passionate about your 
issue, and we will do whatever we can to help support the very 
positive actions that you have taken so far.
    [The prepared statement of Mr. Adams appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much. I share your 
frustration. I am one who goes online often, and you want to 
make sure you are in the right place. But we will get further 
into that.
    Our next witness is Scott Turow, a writer and an attorney. 
He is here today as President of the Authors Guild, the largest 
society of published authors in the United States. He has 
written eight best-selling books including ``Presumed 
Innocent.'' He has been a partner in the Chicago office of--I 
am going to mispronounce this. Sonnenschein?
    Mr. Turow. Yes.
    Chairman Leahy.--Nath and Rosenthal since 1986. He has 
concentrated on white-collar criminal defense and pro bono 
matters. He was an Assistant U.S. Attorney in Chicago. He 
graduated from Amherst College and received his law degree from 
Harvard. We have known each other for years, and I believe it 
was Senator Durbin of this Committee who first introduced us.
    Please go ahead, sir.

 STATEMENT OF SCOTT TUROW, PRESIDENT, AUTHORS GUILD, NEW YORK, 
                            NEW YORK

    Mr. Turow. Thank you, Mr. Chairman.
    First I want to express my gratitude that these hearings 
are being held. I do not believe it is hyperbolic to say that 
if piracy of intellectual property is allowed to go unchecked, 
it will either gravely damage or even destroy the creative 
community in the United States. And if I may, I would like to 
augment my written remarks with some personal observations.
    I published a new novel----
    Chairman Leahy. And I should note that all the statements 
will be placed in the record in full, but please go ahead, sir.
    Mr. Turow. With gratitude, thank you, Mr. Chairman.
    I published a new novel last May. I was lucky enough that 
it landed almost immediately on the various best-seller lists. 
And within the first week or two that it was available for 
sale, I had friends, four of them from different venues, some 
in publishing, some who had just been cruising the net, who 
informed me that there were pirated versions of my book 
available and, of course, at a fraction of the price at which 
legitimate venues were selling it. And what began then was, 
frankly, a game of whack-a-mole with my publisher sending take-
down letters and new sites popping up where pirated copies of 
``Innocent'' were on sale again.
    You know, I came today with my iPad. I enjoy the benefits 
of the digital revolution, but it brings enormous peril 
particularly for authors. The sale of these devices, of course, 
is growing rapidly. The bigger that market gets, the larger the 
market is for the pirates. And my concern is not to protect the 
incomes of best-selling authors. My concern instead is for the 
sake of our literary culture.
    At this point in time, because of the Internet and a number 
of other sources, American publishing is, frankly, wobbly. In 
2008, which is the last year for which I have statistics, there 
were only two American publishing groups that reported a 
profit. And if the pirates destroy the remaining margin in the 
publishing industry, it will, frankly, collapse and with that 
will go the guidance of editors and, more significantly, the 
function that publishers actually play as the investment 
bankers or the venture capitalists, really, in our literary 
culture. They advance money to authors so authors can write 
books in the hope that those books will be profitable.
    As you might expect, as the President of the Authors Guild, 
my concerns are even more so for our members. It is a hard 
world in which to get a book published. If piracy destroys the 
small margins that remain for publishers in books that are not 
going to be best sellers, those books will not be published at 
all. We will not hear new voices. Authors who are at the middle 
of their career will be stilled, and our cultural conversation 
will become stilted and impoverished.
    The consequences are dire, with authors, frankly, headed in 
the same direction as our colleagues who are musicians, without 
the same options of performing to augment our incomes. As a 
result, I find myself with little patience for the third 
parties who enable the piracy of books and music and movies. 
And I would call to the Committee's attention. That I, too, was 
a Federal prosecutor. My career started in the late 1970s and 
ran into the 1980s. At that time we began to recognize that the 
selling of dangerous illegal drugs was becoming an 
international industry, that it could not be combated simply 
with on-street arrests, and that we had to follow the trail of 
money into the financial institutions where it was being 
deposited. And those financial institutions, of course, raised 
Cain. They said this was Government intrusion. They said that 
they could not afford the price of vigilance, that it would 
destroy their business. It did not. It was necessary, and the 
same kinds of steps are necessary now for those who profit by 
advertising, by collecting fees from payments for this form of 
intellectual piracy. There needs to be legislation, and as you 
said, Mr. Chairman, inaction really should not be an option for 
the Congress.
    So I thank you for your attention to this very, very 
important issue.
    [The prepared statement of Mr. Turow appears as a 
submission for the record.]
    Chairman Leahy. Thank you, and I appreciate the fact you 
brought up all the different things that might be on there, not 
only books but products. Somebody thinks they are getting a 
medication that controls a heart condition, for example, and 
they are getting a fake medication and they die.
    Ms. Jones, you have already been introduced. I cannot do 
better than Senator Kyl has introducing you. Please go ahead.

  STATEMENT OF CHRISTINE N. JONES, EXECUTIVE VICE PRESIDENT, 
 GENERAL COUNSEL AND CORPORATE SECRETARY, THE GO DADDY GROUP, 
                   INC., SCOTTSDALE, ARIZONA

    Ms. Jones. Thank you, sir, and I really appreciate you 
letting Senator Kyl introduce me. That was very gracious. As 
with most Arizona citizens, I was very sad to learn of his 
impending retirement. He has done a lot of good for the 
community, and we really wish him the best in the future.
    But I want to thank you, Chairman Leahy, and the members of 
the Committee, for the privilege of testifying today. We 
appreciate the efforts of the Committee and your staff, whom we 
have worked with closely----
    Chairman Leahy. If I might interrupt, Ms. Jones, it may not 
surprise you to know that I was at my home in Vermont when I 
heard the news, and I called Senator Kyl to tell him how much I 
was going to miss him on this Committee.
    Ms. Jones. Yes, that is a mutual feeling.
    But we appreciate what the Committee is doing. We have long 
taken it as a priority at Go Daddy to make the Internet a 
better and safer place, and so we are honored just to be a part 
of this conversation to try to move the ball forward on that.
    For many years, we have taken an aggressive approach to 
assisting IP holders in their efforts to police and protect 
their marks, copyrights, designs, and other works on the 
Internet. We have established a series of standard operating 
procedures designed specifically to assist the IP community in 
the difficult task, sometimes very difficult task, of enforcing 
their intellectual property rights against the often elusive 
or, as Mr. Turow put it, whack-a-mole online infringers. In 
fact, we are arguably more willing to help IP holders than any 
of our fellow members of the Internet ecosystem, a position we 
take very seriously.
    We do this because we are a large holder of intellectual 
property ourselves, and we understand the frustration of trying 
to keep up with the bad guys. And we do it because we 
appreciate the significant efforts of the MPAA and 
organizations like them to protect their members. But mostly we 
do it because we believe it is the right thing to do. And at Go 
Daddy, we always try to do the right thing.
    I would like to address some of what my colleagues have 
already discussed, but from the standpoint of the registrar and 
hosting provider, and to put the comments in perspective, let 
me point out we sit at the on ramp to the Internet. Every 
single website operator must have a domain name to function. So 
we end up in a unique position. We enable access to the 
Internet to a whole lot of people, more than 46 million as of 
today, to be exact. And while we understand the Internet is 
used for many, many really good things, we also know--we are 
not naive. We understand there is a whole host of bad stuff 
happening out there as well. We understand how easy it is for 
the bad guys to put up a website, copy a few books or some 
foreign language CDs, launch their online business, and start 
collecting money.
    Because we do not wish for our service to be used to enable 
people to break the law, we have been very aggressive in taking 
action against some of these websites. And at the outset, to 
allay the fears of the EFF and the ACLU and some of the people 
who have opposed the legislation we are talking about today, 
let me make it clear, our position as a default is leave the 
website up. OK? We are in favor of the open exchange of ideas 
on the Internet. We like that. But we do not provide a platform 
for illegal activity, and that is what I want to talk about 
now.
    We believe a hybrid approach to this problem is the best 
way to address it, and by that I mean we need a multi-
stakeholder group, companies from the entire Internet 
ecosystem, to voluntarily cooperate in disabling their 
services, whatever the relevant service is, for infringing 
websites. It means we need targeted, narrowly tailored 
legislation to pick up the slack for the people or companies 
who cannot or will not cooperate, and it means preventing 
frivolous lawsuits, which we get from time to time, against the 
companies who voluntarily help IP holders by terminating those 
services. And there are a variety of ways to go about this once 
we get the framework in place.
    At the end of 2010, for example, this Committee--no, that 
was the end of 2008. I am sorry. At the end of 2008, this 
Committee was instrumental in passing the Ryan Haight Online 
Pharmacy Consumer Protection Act, and we have used that very 
effectively in addition to our voluntary efforts to help end 
the rogue pharmacy contacts. And I would say that has been one 
of the most effective hybrid approaches we have had. We did a 
similar thing in the child pornography context where we got 
cooperation from all of the Internet ecosystem players, have 
legislation that is on point, work with the National Center for 
Missing and Exploited Children, and today it is much more 
difficult to find, buy, host, or register child pornography 
online. And so this kind of hybrid approach is what I would 
support and what I think is the best and most effective way to 
do it.
    I am just going to jump to the end because I know I am 
short on time here, but I will just say we are happy to be part 
of this conversation, and we are happy that the Committee is 
really working hard to figure out how best to do it. And I do 
not think we can really make progress on this until we have the 
cooperation from all of what we call the Big Five players. That 
would be domain name registrars, hosting providers, payment 
card processors, Internet service providers, and online 
advertising providers, which, by the way, some people call 
``search engines.'' Without the cooperative efforts from all of 
these players, the criminals that Go Daddy works hard to take 
offline every day will come back almost certainly as customers 
of one of our more lax competitors. We do not like the whack-a-
mole game any more than anybody else, and we want it to stop.
    Thank you very much. I will be happy to take questions 
later.
    [The prepared statement of Ms. Jones appears as a 
submission for the record.]
    Chairman Leahy. Thank you very, very much.
    Our next witness is Thomas Dailey. He is vice president and 
deputy general counsel for global internet strategy broadband 
programming for Verizon. He has the responsibility for the 
development and implementation of policies in areas such as 
anti-piracy, content regulation, and privacy. He has served as 
Verizon's chief Internet counsel since 1998. Prior to that, he 
was general counsel to Verizon's telephone business in Vermont. 
He received his bachelor's degree from Colby College and his 
law degree from Suffolk University Law School.
    Mr. Dailey, it is good to see you again.

   STATEMENT OF THOMAS M. DAILEY, VICE PRESIDENT AND DEPUTY 
   GENERAL COUNSEL, VERIZON COMMUNICATIONS INC., ARLINGTON, 
                            VIRGINIA

    Mr. Dailey. Thank you very much, Chairman Leahy, Ranking 
Member Grassley, and members of the Senate Judiciary Committee. 
Thank you for the opportunity to testify today and to present 
Verizon's perspectives on the Combating Online Infringement and 
Counterfeits Act.
    As we have heard from the other witnesses, online 
trafficking in counterfeit goods and infringing content is an 
important and legitimate concern for rights holders, and it is 
a concern that Verizon very much shares. This legislation, 
while offering a new approach to combating piracy, raises 
issues for a variety of different stakeholders who are 
concerned about the consequences of the bill beyond its impact 
on piracy, including its impact on global Internet policy 
interests. I am not here today to address these important 
issues, but I do urge the Committee to take in the views of 
other concerned stakeholders directly as you continue your 
review of the legislation.
    The reason I am here today is that the Committee asked 
Verizon to comment on the legislation from the perspective of a 
service provider who would need to respond to a judicial order 
to restrict access to designated websites if the bill becomes 
law.
    Before I get to our concerns with the legislation, let me 
first mention a few things that we think that the bill got 
right.
    First, we appreciate the fact that the Committee has 
included in the legislation provisions that appropriately limit 
the bill's impact on Internet service providers, such as not 
requiring a service provider to modify its network or 
facilities to comply with a judicial order.
    Second, we think the limitation that ISPs will be required 
to take action only pursuant to a judicial order issued in a 
lawsuit filed by the Department of Justice will help ensure 
COICA is narrowly invoked.
    Third, the bill includes appropriate immunities for taking 
action in compliance with the law or arising from a judicial 
order issued under it.
    And, finally, the bill recognizes that DNS-based 
restrictions are not 100 percent effective, and it protects 
service providers from liability based on actions taken by 
their subscribers to circumvent the restrictions that are put 
in place.
    These provisions strike the proper balance between 
protecting a rights holder's property and allocating the 
burdens of that effort, and we thank the Committee for 
including them.
    However, there are several changes to the legislation that 
we believe are necessary to ensure that the mechanisms 
described in the bill remain narrowly focused in their use and 
application and target only the worst of the worst Internet 
sites.
    So the changes we propose--and I will just cut through them 
quickly because they are in my written testimony--are the 
following:
    First, the bill should be clarified to ensure that service 
providers are required to take action only with respect to 
their U.S.-based DNS servers. Limiting the scope of a judicial 
order to DNS servers located here in the U.S. keeps the 
enforcement effort narrower, and it helps limit 
extraterritorial impact.
    Second, the legislation should expressly forbid private 
rights of action and require that DNS restrictions be imposed 
only where they are the least burdensome form of remedy. This, 
too, will help keep the focus of the bill more targeted and 
narrow by ensuring only that the Justice Department can seek an 
order to restrict access to a website and that the DOJ must 
conclude that the website restriction is truly necessary in the 
circumstances.
    Third, there are a number of operational perspectives that 
we believe should be put into the bill, particularly those 
around ensuring that ISPs are properly notified of what they 
need to do and, most importantly, that they are notified when a 
website that has been subject to a restriction is no longer 
subject to that restriction.
    And, finally, we believe that service providers will incur 
costs in implementing these DNS restrictions, and to encourage 
the Government to keep the list of restricted websites short 
and to reimburse providers, we believe that the bill should 
place appropriate limits on the number of domain names that can 
be subject to restriction without cost reimbursement.
    So, in closing, Verizon supports the efforts of Congress, 
the Department of Justice, and rights holders to combat the 
online theft of intellectual property. We believe that 
responsible members of the Internet ecosystem should work with 
Congress, law enforcement, and the courts to take efficient, 
effective, and judicially sanctioned steps to address this 
important problem. However, we also note that the new 
approaches to combating online privacy in the legislation raise 
complex issues and that Government--sanctioned website blocking 
represents a major shift in U.S. policy that requires careful 
consideration and input from a wide variety and group of 
stakeholders.
    I hope this testimony is useful to the Committee, and I 
look forward to your questions.
    [The prepared statement of Mr. Dailey appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much.
    Our next witness is Denise Yee. She is senior trademark 
counsel for Visa. In her role at Visa, she heads the overall 
responsibility for managing Visa's trademark and domain name 
portfolios worldwide. She is also responsible for global 
enforcement of the Visa trademark worldwide and has played a 
significant role in developing Visa's anti-counterfeit and 
anti-piracy policies. She has been with Visa since 1999. She 
received her bachelor's degree from the University of 
California at San Diego and her law degree from Santa Clara 
University School of Law.
    Ms. Yee, we are delighted to have you here.

STATEMENT OF DENISE YEE, SENIOR TRADEMARK COUNSEL, VISA, INC., 
                   SAN FRANCISCO, CALIFORNIA

    Ms. Yee. Chairman Leahy, Ranking Member Grassley, members 
of the Committee, my name is Denise Yee, and I am senior 
trademark counsel for Visa Inc. With me today is Martin 
Elliott, who is the senior business leader from P Payment 
System Risk. Visa welcomes the opportunity to provide its views 
on the targeting websites dedicated to stealing American 
intellectual property.
    Visa fully appreciates the value of IP. The ``VISA'' 
trademark itself is one of our company's most valuable assets. 
We fight phishing scams and other infringements to the ``VISA'' 
trademark every day and expend millions of dollars doing so.
    To promote growth in e-commerce, to protect the Visa brand, 
and because it is the right thing to do, we go beyond any legal 
requirements to prevent the use of our payment system for 
illegal e-commerce transactions. Our policy is unequivocal: Our 
system must not be used for illegal transactions. The integrity 
of the Visa brand is critical to the success of the system. The 
system works because of consumer confidence in its security and 
reliability. We are committed to ridding our system of 
merchants that engage in illegal transactions, including IP 
infringement.
    Our payment network includes four parties: acquiring banks 
that sign up merchants, and issuing banks that sign up card 
holders. Visa has no direct relationship with either merchants 
or card holders; rather, we provide the network that enables 
these four parties to conduct transactions. Our rules state 
that the transaction entered into the Visa system must be both 
legal in the card holder's jurisdiction and the merchant's 
jurisdiction. In the context of IP, Visa enforces this rule 
through a simple approach. At no cost, the IP owner may report 
instances of online infringement to Visa. We then conduct a 
test transaction to identify the acquirer that signed up the 
merchant in the system. Visa instructs the acquirer to conduct 
an investigation into the alleged infringement and to report 
the conclusion of its investigation within 5 business days. 
Absent proof of legality, the acquirer must demand that its 
merchant comply with Visa rules or terminate the merchant. 
Also, we educate acquirers that they should not sign up 
merchants engaged in the sale of infringing content.
    However, taking voluntary action against infringing 
merchants is not without risk. In 2006, Visa received a 
complaint that a Russian website called AllofMP3.com was 
allowing the unauthorized downloads of music, and Visa and its 
acquirer terminated the merchant from the system. That decision 
backfired, resulting in the merchant suing the acquirer. And 
even more surprising, the Russian courts found that AllofMP3 
did not infringe under Russian copyright law and the acquirer 
breached its contract by terminating service. The court ordered 
us to resume processing transactions, which we allowed only 
between the west side and Russian customers.
    There are other challenges to protecting third-party IP 
online. First, we are not well positioned to identify 
counterfeit or copyright-infringing content. IP owners are best 
situated to bring instances of infringement to our attention, 
but they rarely do. Second, where legality is not clear, we 
have no authority to decide what is lawful. We are then force 
into the precarious position of either agreeing with the IP 
owner or the merchant. Either decision could expose Visa to 
multiple lawsuits around the world. Third, when Visa is 
notified of an infringing merchant, Visa must work through the 
merchant's acquirer. These infringing merchants often cover 
their tracks by creating multiple shell companies under 
different names and entering into agreements with numerous 
acquirers under false pretenses.
    Despite these challenges, Visa is committed to expelling 
bad merchants from our system, but we cannot permanently 
eliminate infringement from the Internet. The payment systems 
are only capable of limited enforcement to disrupt this 
activity. An effective long-term solution involves sustained 
international cooperation among law enforcement agencies and 
all e-commerce stakeholders, as my colleague from Go Daddy 
mentioned.
    We appreciate the Committee's interest in exploring legal 
mechanisms to protect American IP, and Visa supports COICA's 
objectives. But imposing a regulatory framework on top of our 
existing voluntary procedures could have some unintended 
consequences. For example, extraterritorial application of U.S. 
law may invite retaliation by other countries' governments, or 
it may set an unrealistic expectation that payment systems can 
singlehandedly eliminate online infringement. It could also 
increase the likelihood that payment systems would be subject 
to conflicting legal obligations, such as AllofMP3.
    Notwithstanding these concerns, Visa supports the objective 
of COICA: targeting and expelling websites dedicated to 
stealing American IP. Visa believes that its own voluntary 
procedures have the same objective and, thus, COICA and Visa's 
procedures should be viewed as complementary.
    In conclusion, Visa supports legislation such as COICA and 
is committed to working with the Committee to help to American 
intellectual property and fight this global menace.
    Thank you.
    [The prepared statement of Ms. Yee appears as a submission 
for the record.]
    Chairman Leahy. Thank you. Let me ask one question of each 
of you and just answer this quickly because we will go into 
more detail.
    Do you all agree that rogue websites that do nothing but 
traffic in infringing goods constitutes a problem for our 
Nation's economy and job growth that needs to be addressed? In 
other words, is it safe to say that none of you are here to 
defend rogue websites? Mr. Adams.
    Mr. Adams. Absolutely not.
    Chairman Leahy. Mr. Turow.
    Mr. Turow. The faster we get rid of them, the better the 
United States will be.
    Chairman Leahy. Ms. Jones.
    Ms. Jones. Yes, I would agree with that. We see a whole lot 
of them every day, and they definitely take away jobs from 
Americans.
    Chairman Leahy. Mr. Dailey.
    Mr. Dailey. I agree as well.
    Chairman Leahy. Ms. Yee.
    Ms. Yee. I agree as well. We do not defend rogue websites.
    Chairman Leahy. Let me ask you this: We are trying to find 
solutions to this. Do any of you think that to date private 
sector solutions have been sufficient to stop these rogue 
sites? Mr. Adams.
    Mr. Adams. Absolutely not, especially given the 
concentration of search around key engines like Yahoo! and 
Google.
    Chairman Leahy. Mr. Turow.
    Mr. Turow. Private actions have not provided any solution 
whatsoever, Mr. Chairman.
    Chairman Leahy. Ms. Jones.
    Ms. Jones. I do not think so. I wish that everybody would 
do what Go Daddy does. Not to hurt myself by patting ourselves 
on the back too much, but I think we have got to keep in mind 
not everybody has the scale to do what we do, which is why the 
hybrid approach where you have to pick up the slack with the 
legislation I think is really important.
    Chairman Leahy. Mr. Dailey.
    Mr. Dailey. I think I am inclined to agree. I think that 
there are certainly existing mechanisms in the U.S. for dealing 
with U.S.-sited websites, and that is certainly--you know, 
there are a number of ways that we can go after those. We have 
seen some in the past, in the recent past, through some of the 
ICE efforts and others.
    The issue I think comes to a head as a legal and policy 
matter when we are dealing with the non-domestic domains that 
are part of the subject of the statute.
    Chairman Leahy. Ms. Yee.
    Ms. Yee. We have voluntary procedures to address issues 
relating to copyright infringement and counterfeit, but few 
rights holders have come forward.
    That said, we do believe that with the objectives of COICA 
and we do believe that with collaboration among the private 
sector, we can combat counterfeit and copyright infringement on 
the Internet.
    Chairman Leahy. Well, let me ask each of you this: There 
will be legislation. If you were sitting in the room drafting 
that, what would you say is the most essential element in 
legislation to combat online infringement? Mr. Adams.
    Mr. Adams. The No. 1 most important thing is to make it 
more difficult for these criminals to find a market here in the 
United States. That means that they cannot be allowed to buy 
advertising, and that means that they cannot be allowed to 
operate the way they do today on search engines.
    Chairman Leahy. Mr. Turow.
    Mr. Turow. I agree with what Mr. Adams said. Advertisers, 
payment processors, ISPs, anybody who is profiting from this, 
whether intentionally or not, once put on notice, needs to 
desist from aiding these illegal enterprises.
    Chairman Leahy. Ms. Jones.
    Ms. Jones. I am not sure I can narrow it down to one, but I 
might be able to narrow it down to three.
    Chairman Leahy. Go ahead.
    Ms. Jones. The most important thing is to have a 
hierarchical approach which targets the bad guys first and then 
works up the chain of custody, if you will, to use the former 
prosecutor analogy.
    Second, provide a safe harbor for those of us who do the 
right thing against these lawsuits that Ms. Yee mentioned and 
the ones that we get from time to time, which cost a fortune to 
defend but have no merit whatsoever.
    And then this might really raise the ire of some of my 
Internet colleagues, but I am just going to say it anyway. Have 
a consequence if they do not do the right thing.
    Chairman Leahy. That appeals to those of us, like Senator 
Klobuchar, who have been prosecutors.
    Mr. Dailey.
    Mr. Dailey. To pick up on a couple of the statements that 
have been made so far, I think that the notion of all players 
in the ecosystem participating equally is something that 
Verizon has believed for a long time. And so I think that 
following the money is always a good place to go.
    The safe harbor aspect, to the extent that a law is passed, 
I think is very important. Immunity from liability is very 
important because we do not want to be dealing with lawsuits 
that might follow from some of the activity that could be 
required under the law.
    And then the final thing that I think is very important in 
the current draft of the bill, if it goes forward, is the 
requirement that there be a judicial order. I think that is a 
very important safeguard over the overbroad application.
    So I think those would be the three things that I would 
suggest.
    Chairman Leahy. Ms. Yee.
    Ms. Yee. We think that in order to curb counterfeit and 
copyright infringement, it is necessary for all of the 
stakeholders in the e-commerce environment to cooperate. It is 
a shared responsibility, so that we hope that all of the 
stakeholders in e-commerce are a part of the bill.
    We are not opposed to legislation. We think it is 
important. And the essential part of the legislation--and I 
agree with my colleagues here, with Verizon and Go Daddy--is 
the safe harbor and to make sure that we are not penalized for 
trying to do the right thing.
    Thank you.
    Chairman Leahy. I am going to yield to Senator Grassley, 
but I want to put in the record an op-ed that Mr. Turow had in 
the New York Times. It says that the ability of creators to 
make a living off their work is essential to culture in this 
country. Was it Oliver Wendell Holmes who said, ``If music did 
not pay, it would be given up'' ? I think it is the same in 
this.
    Chairman Leahy. Senator Grassley, and then Senator 
Klobuchar.
    Senator Grassley. I was a cosponsor of last year's bill, 
and I think we will probably get to a point where we will have 
broad bipartisan support for a bill this year. But let me ask a 
question that we always ought to ask before we think a new law 
is the answer to every question.
    Before we enact new legislation, it is important to 
determine whether there is an actual need for more laws. Some 
argue that statutes already on the books like the Digital 
Millennium Copyright Act or the PRO-IP Act are sufficient to 
fight criminal activity on rogue websites.
    Number one, I want to know if you agree. Number two, do you 
believe that additional legislation like last year's bill is 
necessary? And, three, do you believe the Justice Department 
should have authority to bring legal action against rogue 
websites? And I am asking the questions of all of you, but try 
not to be repetitive, so maybe all of you do not need to 
answer. But I sure want your opinions, on either side. Go 
ahead.
    Mr. Adams. So I will just start by saying that since most 
of these sites operate from overseas, current legislation does 
not help us in enforcing our intellectual property. And since 
current legislation does not really hold the ecosystem to 
account, we are unable to cutoff the actual merchants of this 
illicit product. And so either we have got to tackle the 
ecosystem here, or we have got to change the laws of China, 
Russia, and numerous other countries.
    Mr. Turow. I agree with Mr. Adams. The safe harbor 
provisions of the DMCA, while well intended, have not 
functioned well. Although I understand that my colleagues on 
this panel have tried to be good corporate citizens, that is 
not a universal truth, and not everybody is as vigilant. We 
need the help of legislation to make sure of that.
    One of the suggestions that I make in my written testimony 
is that we require anybody who is going to get credit card 
payments to have a registered agent for service of process so 
that we do not have to deal with the intractable jurisdictional 
problems of trying to bring our legal system to bear against 
people whose sites are completely foreign. If they want to do 
business in the United States, then they should be amenable to 
process here.
    Senator Grassley. Anybody else have anything to add?
    Ms. Jones. Just briefly, if I could, the DMCA has worked 
great for us, and so have other already enacted bits of 
legislation. I think in 2010 we took down around 36,000 domain 
names and websites under the Ryan Haight Act, for example, in 
the pharmacy context. We took down around 13,000 copyright and 
trademark infringements under DMCA or DMCA-like statutes. So 
that works great.
    And with all due respect to Mr. Turow, those of us who do 
the right thing need the safe harbor, so let us not toy with 
that.
    But should the DOJ have the right to bring an action? The 
answer is yes, and that gets back to my earlier answer, which 
is you have to have a consequence for the people who do not do 
the right thing.
    Senator Grassley. Did somebody else want to answer?
    Mr. Dailey. I was just going to echo Ms. Jones' remarks.
    Senator Grassley. OK.
    Ms. Yee. I also agree with Ms. Jones' remarks.
    Senator Grassley. OK. The Department of Homeland Security, 
its immigration and customs people, has been successful at 
combating online infringement through the authorities provided 
under the PRO-IP Act and the Operation In Our Sites efforts. Do 
you believe that ICE has done a good job with its existing 
authority? Or could it do better? And if better, how? To any of 
you.
    Mr. Adams. So we have worked quite a bit with ICE, and we 
think that they are doing a great job, but they need more 
resources. They need more help. And given that a lot of this 
activity is outside the United States, I think that they are 
not able to help quite as much as they would like.
    Senator Grassley. Does anybody else have anything to add to 
that?
    Ms. Jones. We had experience with the take-down at the 
beginning of the year or the end of the previous year--I think 
there were 85 domain names that were seized, and then there 
were another nine that have first-run movies. And we cooperated 
and participated in that investigation and that worked well.
    The focus on the top of the Christmas tree, if you will, is 
not our favorite way to approach. Again, we like going to the 
bad guy first, and I think this gets to Mr. Adams' point, which 
is a lot of the bad activity is offshore. You can disable the 
domain name, but you do not get to the root of the problem.
    So what ICE is doing is great. It is a solution, but not 
the only solution.
    Senator Grassley. Would it be all right with you, Senator 
Klobuchar, if I ask one more question?
    Senator Klobuchar. Of course it would, Senator.
    Senator Grassley. Thank you.
    What do you believe is the appropriate role for search 
engines to play in combating rogue sites?
    Mr. Adams. Well, personally I think that if a domain or a 
counterparty is identified as one that on a serial basis is 
involved in criminal activity, search engines cannot be allowed 
to continue doing business with them. And as it stands, they 
repeatedly just take down the infringing ad but continue doing 
business with the counterparty. This must cease. There must be 
very serious consequences for a company like Google for that 
kind of behavior. We have sustained it over a number of years. 
It is really whack-a-mole, and it is impossible to discipline a 
company with that kind of market power, with a 70-percent share 
of search, and to get them to change their behavior. We need 
you to act now and legislate to protect IP owners like Rosetta 
Stone.
    Mr. Turow. I agree with that. With regard to the matter of 
a safe harbor, my own view would be that those who respond to 
this legislation and act consistently with it, of course, 
should be granted immunity. But I do not think, again, that the 
safe harbors that currently exist are sufficient to compel 
other people in the Internet ecology to be as vigilant as some 
of the people who are sitting at this table.
    Ms. Jones. So it sounds like we are probably saying the 
same thing on that. But getting back to search, if I could just 
briefly--and we have gone around and around with the search 
providers on this, and not casting aspersions on anybody who 
operates in the Internet community, but you got to stop selling 
your product to the bad guys. Whether you are a search 
provider, whether you are a credit card processor, whether you 
are a domain name registrar, whatever you are, you have to stop 
the sale. But there is simply no reason why you should be able 
to search for any fake good or any replica good and have that 
search result return access to thousands upon thousands of 
websites that do this. There is no reason for that.
    I do not run a search engine. I do not write that 
algorithm. I do not know what the issue is there, but we seem 
to get a lot of resistance from the search companies. And I am 
sorry they are not here today to answer that question, but we 
do not think you should be able to search for that and get a 
result so that you can go get fake Rosetta Stone from all of 
those websites that Mr. Adams displayed.
    Senator Grassley. I will yield, and, Mr. Chairman, I am 
going to have to submit questions for answer in writing.
    [The questions of Senator Grassley appears under questions 
and answers.]
    Chairman Leahy. You mean you are going to leave me here on 
my own?
    Senator Grassley. Yes.
    Chairman Leahy. Kind of scary.
    Senator Klobuchar. No. I am here. I am here.
    Chairman Leahy. No, no. I was just talking about from their 
side of the aisle.
    [Laughter.]
    Chairman Leahy. I would never forget you, Senator 
Klobuchar, a former prosecutor, a valued member of this 
Committee, and I yield to you.
    Senator Klobuchar. Well, thank you very much, Senator 
Leahy, and thank you, both of you, for your work in this very 
important area. As a daughter of an author and an author 
myself--OK, my book is for $7.99 on Amazon, ``Uncovering the 
Dome.''
    [Laughter.]
    Senator Klobuchar. Sadly, I wrote a book in college. Unlike 
you, Mr. Turow, I wrote a book on the politics behind the 
building of the Metrodome, as in the one that just sunk. OK?
    [Laughter.]
    Senator Klobuchar. But it did bring the value up a little. 
So I am very aware, mostly from my father's work, about the 
importance of protecting intellectual property, and I am very 
concerned as a former prosecutor, as Senator Leahy pointed out, 
about what is going on here, that we are basically losing a 
huge amount of money in our economy in an area where I think we 
can actually make a lot of money in our economy.
    And I guess I would start with you, Mr. Adams. You 
mentioned the global sales of counterfeit goods via the 
Internet from illegitimate retailers reached $135 billion in 
2010, and as a consequence of a global U.S.-based piracy of 
copyrighted materials, the U.S. economy lost $58 billion in 
total output in 2007. Do you know where those numbers came 
from? And could they be an underestimation given that we do not 
really know?
    Mr. Adams. Those numbers are all from the Chamber of 
Commerce.
    Senator Klobuchar. Very good. I just think people have to 
start looking at it in this way as we look at every way that we 
can grow jobs and the economy, that this is a major problem, 
and that is the way I look at it.
    I guess my first question would be, as a fan and a sponsor 
of doing something here, would be one of the questions we get 
back with this legislation. Would these crooks just go to 
another website? You know, you shut one down and then they just 
go to another website. What is your answer to that?
    Mr. Adams. I think that is exactly the problem. If you shut 
down one website now, within minutes there is a new one that 
appears. And so you have to tackle the problem in the ecosystem 
given that we cannot change the laws and the behaviors and the 
enforcements in countries like China, Russia, et cetera.
    So what you have to do is deal with search engines, which, 
by the way, in other areas of intellectual property, like, for 
example, the YouTube site, they do a review before a video is 
posted, very often, because there were so many infringing 
videos. Why wouldn't we have a company like Google review a URL 
and just see is this legitimate? It is a very easy action. They 
do it for video. And here we are talking about not a video clip 
that someone would watch where, of course, it is an 
infringement on the intellectual property itself, but it is 
relatively harmless from a commerce perspective. Why wouldn't 
we stop the commerce by having the search engine review who 
they are doing business with? Instead, if you simply have a 
credit card and if you are based abroad, you can open an 
account immediately and start posting your ads and having them 
link these ads to illicit websites hosted on servers that are 
overseas, and you can do an enormous amount of transactions. 
Google does a manual review of the sites when you ask them to 
take them down. So it takes 3 days or so for them to take down 
an infringing site, but it takes the infringer minutes to set 
up a new site. We need to flip that. We need to have Google 
review a new counterparty and the domains that they are wanting 
to put in front of the customer to see if it is legit. And if 
it is legit, they can start advertising, and that would change 
the entire burden of policing this to them.
    Senator Klobuchar. Flipping the burden.
    Mr. Adams. Which is where it should be, because we are not 
profiting at all from any of this activity, and yet we have to 
police it enormously because we do not want to have a harmed 
brand.
    Senator Klobuchar. Very good.
    Mr. Dailey, just one of the concerns I know that Verizon 
has raised as we look at how we are going to combat this, what 
I consider crimes going on out there, and I will mention that 
Senator Cornyn and I have a bill to actually up the penalties 
for this. But my question of you, Mr. Dailey, is: I know one of 
the concerns is that Verizon customers would somehow be 
confused if a website was shut off, and I understand that the 
customer would see an error message instead of actually seeing 
the website. Well, from my understanding just from our staff, 
the error message would say something like ``404 error'' 
without any explanation to the customer regarding the court 
order. And my question is: Does Verizon have the technology and 
the capability to shape the wording of the error message to 
explain why the customer cannot get to the website and just 
update the technology to get at that concern?
    Mr. Dailey. Yes, and thank you, Senator. The technology 
does exist. It is not within our licenses, shall I put it that 
way. So it is a several million dollar effort to change the 
error message for the purpose that you have just described, but 
it is available, at least to us. I do not know about other ISPs 
who might be affected by the requirement.
    Senator Klobuchar. It just seems to me that there is a way 
to get around that.
    Then the last thing I just have, and I will submit some 
questions for the record, of you, Ms. Jones, is: I am working 
on this legislation, as I mentioned, with Senator Cornyn that 
will keep our laws up to date with these new technologies. I 
have always believed that we need to be as sophisticated as the 
crooks that are breaking the laws, which is not happening right 
now. And currently, as you know, a person that streams pirated 
works for commercial gain can only be convicted of a 
misdemeanor regardless of the amount of content that is 
streamed. And then at the same time, if they sold $2,500 worth 
of DVDs, they could be convicted of a felony. And so we plan to 
introduce legislation that will make the penalties for 
streaming the same as it is for selling the DVDs on the street. 
And I just wondered if you thought that would be helpful.
    Ms. Jones. Well, I can tell you, we have worked with the 
recording industry a lot on that exact issue, and the MPAA, for 
example, go after these websites that stream movies all the 
time, and I can tell you, there is more than $2,500 worth of 
product going out. We had one recently--I think it is OK to 
disclose this--where----
    Senator Klobuchar. Oh, everything is just between us.
    [Laughter.]
    Ms. Jones. I will not use any names. How about that? The 
customer----
    Chairman Leahy. Everybody else in the room, do not listen.
    Ms. Jones. The customer had 32 dedicated servers. Now, to 
put that in perspective, that is a lot of data. OK? A lot of 
data. And the MPAA worked with Federal authorities. They came 
and seized the boxes, and I think the guy is now in jail. But 
they did not prosecute him for a felony for the streaming 
website. And I mean, come on, there were thousands upon 
thousands upon thousands of movies on that website. Clearly 
there was more than $2,500 worth of damage. So I think you are 
on to something there.
    Senator Klobuchar. OK, very good. I am out of time. I also 
wanted to thank you, Mr. Turow, for coming to Minneapolis for 
the legal aid dinner at one point. I was there and you came and 
gave of your time, so thank you for that. Thank you to all the 
witnesses.
    Chairman Leahy. Thank you very much.
    Senator Whitehouse.
    Senator Whitehouse. Let me thank the Chairman for his focus 
on this issue. I contend that America is on the losing end of 
the largest transfer of wealth through theft and piracy in the 
history of mankind. Perhaps the Spanish kings who were having 
the treasures of the New World sunk and stolen in the galleons 
in the great treasure ships across the Atlantic were contenders 
for that role. But I think we take the prize, and we are doing 
virtually nothing about it. And it has many dimensions. It has 
the dimension of outright theft and fraudulent charges on 
credit. It has the dimension of industrial espionage, 
everything from entire fighter jet plans being exfiltrated to 
scientific processes. Often because there you are not stealing, 
you are copying, it can be a crime that is often unknown to the 
victim and, therefore, requires very energetic efforts to 
pursue it.
    What we are talking about today is yet another element of 
it, and that is, public sales in violation of copyright and 
licensing agreements that are facilitated by legitimate members 
of our business community. And probably the most dangerous is 
the intrusion and insertion of potential attack mechanisms into 
critical private infrastructure, and they all have a common 
theme, which is our failure to adequately defend our interests 
in what is called ``the wild, wild Web.''
    I was delighted to hear Ms. Yee describe this as a global 
menace, and I think everybody on the panel agrees with that 
description.
    Ms. Jones indicated that efforts to voluntarily cooperate 
are important.
    I think it is very important that the ISPs who provide the 
connections, that the search engines who provide the location, 
and that the payment providers who make it a profitable 
transaction for the criminals all work together to guide us in 
the best possible way. But I also worry that unless we act 
legislatively, there is an incentive to let everybody else go 
first--on the ISPs to let the payment people go first; on the 
payment folks to let the search engines go first; within the 
search engine, ISP, or payment communities to let the other 
card or the other engine or the other telecommunications 
company go first; and that as a result of those natural 
tendencies, we are simply not addressing what is particularly 
in our economy a really catastrophic loss of wealth to the 
American people.
    And so I could not agree with you more about the importance 
of voluntarily cooperating, but please do not think that we are 
not going to be legislating in this area. You will do us great 
assistance and advantage by voluntarily cooperating in ways 
that guide that. But I really think we are well past the point 
where we can count on mere voluntary cooperation among all 
these different interests as being adequate to the task. There 
is simply too much being stolen right here as we speak.
    I would be interested, Ms. Yee, to know if I went back to 
my computer and dialed in a--how long it would take me to find 
a website that Visa was attached to that was selling pirated 
product. I bet I could do it in less than 5 minutes.
    And so I think it is really important that the scale of the 
effort that we engage in match the scale of the theft and 
piracy that America is suffering, and I guess I just would say 
that by way of encouragement to all of you to really take this 
seriously, because the legislation will be much more successful 
if it is worked out in really cooperative fashion. But we do 
have to see this as urgent. It is too important to our economy 
and to our National security not to see it as urgent, and I 
think the Chairman's leadership on this is particularly 
appropriate and important and particularly significant given 
his long and very distinguished career in the protection of 
civil liberties area. And so he has bona fides there that are 
unmatched, and his willingness to address this I think is very 
significant.
    Chairman Leahy. Thank you very much. I think as you listen 
to some of these comments, you realize there will be 
legislation, and we want your cooperation in doing the best 
possible. But this is a major, major issue. The transfer of 
wealth that Senator Whitehouse talked about is not overstated.
    Senator Blumenthal.
    Senator Blumenthal. I want to join in thanking you, Mr. 
Chairman, for your leadership and the bipartisan commitment 
from Senator Grassley and others on the other side, and I want 
to associate myself with the remarks just made so compellingly 
by Senator Whitehouse in terms that I am sure would qualify for 
one of Mr. Turow's novels if----
    [Laughter.]
    Mr. Turow. Eloquence far greater than I can muster.
    Senator Whitehouse. All right. Enough on that.
    Senator Franken. Yes, enough, enough.
    [Laughter.]
    Senator Blumenthal. You can tell I am the junior Senator.
    First of all, on that topic, I want to say that I found 
your op-ed piece in yesterday's New York Times a very succinct 
and cogent statement of why this is so important in historical 
terms, and I would like, with permission, Mr. Chairman, for it 
to be entered in the record.
    Chairman Leahy. Without objection.
    Senator Blumenthal. Thank you.
    [The op-ed appears as a submission for the record.]
    Senator Blumenthal. You know, I approach this subject from 
the standpoint of an enforcer, having tried to hold accountable 
many of these enablers and facilitators in other contexts, not 
necessarily the intellectual property area but abuses 
concerning child predators and pornography. And I view it as 
imposing basic fairness and accountability, basic 
responsibility for the enabling or facilitating of the outright 
lawbreaking and theft of property that should be countenanced 
by no one. And so I welcome and support this measure, but with 
the perspective of enforcement.
    I would like to ask perhaps Mr. Turow, as a former 
prosecutor and a litigator, will these measures really be 
effective in terms of stopping practically, immediately, these 
kinds of abuses? Are they enforceable? And will they be 
enforced to effectively stop them?
    Mr. Turow. Well, I certainly regard the legislation that 
was proposed in the last session called COICA as a great first 
step. Speaking from our perspective and from the perspective of 
a lawyer, I do believe there should be a private right of 
action so that there is some forum in which private parties can 
put the various members of the Internet community on notice 
that there is offending conduct taking place. Certainly in an 
era of budget deficits, it is unrealistic to expect the 
Government to dramatically increase enforcement efforts despite 
the fact that I have no doubt that the Justice Department is 
greatly interested in this problem.
    And so if there is some form of private Attorney 
Generalship that is permitted, one that does not penalize the 
people who respond in good faith to the legislation so that 
they are immune from civil suits if they respond to the efforts 
of the orders that come down as a result of that private 
litigation, then I think we would be far better off that way.
    Senator Blumenthal. And, in fact, in many of our areas of 
enforcement, private rights of action incentivize the public 
enforcers to do their job better, don't they?
    Mr. Turow. That is, in fact, the structure that we have 
throughout our intellectual property laws. That is the way 
copyright is routinely enforced, the way patents are routinely 
enforced.
    Senator Blumenthal. Without putting any of you on the spot, 
as you know, the Department of Justice and the Department of 
Homeland Security have begun a more vigorous enforcement 
effort. I think it is called Operation In Our Sites. And I 
gather your feeling is that it has been insufficient to stem or 
stop this problem.
    Ms. Jones. Can I talk to that for one second? It is not 
that it has been inefficient or insufficient, even. It is just 
these ICE agents are people, and they have to investigate these 
things just like any other crime. So what they have done has 
worked. We just need more of them and more voluntary 
cooperation so that we never have to get to the criminal 
prosecution in most of these cases.
    And going back to what Senator Whitehouse said, if you get 
all of the players to cooperate, it really helps solve the 
problem of sort of the frogs jumping off the barrel overseas, 
because if you cannot buy this stuff with a credit card and you 
cannot search for it on a search engine and you cannot browse 
to it because the hosting provider or the ISP took the content 
away, it does not matter really where the source is coming 
from. It really helps to solve that problem.
    But getting back to ICE, it is not that they are doing an 
insufficient job. They are really, really trying hard. They 
just need more people and more money and less infringers.
    Mr. Turow. And I would also add that, as you, Senator, are 
familiar with from firsthand experience, mounting a criminal 
prosecution where you need to gather evidence of intent as 
opposed to mere infringement is also a substantial burden on 
those who are doing a great and diligent job, but they are 
still trying to fulfill an evidentary standard that enhances 
the burdens on them.
    Senator Blumenthal. And the standard of proof, combined 
with the necessity for evidence of mens rea, or intent, is a 
very substantial burden. I agree.
    Mr. Dailey. Senator, if I could comment on the private 
right of action point in particular, I think it is precisely 
the discipline that an investigation brought by the Justice 
Department would bring to the process that is important, 
particularly when we are talking about blocking websites. And 
it is not just because it is a difficult process, it raises a 
number of policy issues. But I would also be concerned about 
the risks associated with private rights of action where there 
is less discipline, less rigor about what is being requested to 
be blocked, because if a court order comes in to us, we are 
going to have to follow it. And if you are overblocking 
consistently, that is going to be a recipe for disaster for the 
bill.
    And so one of the themes in our testimony is that we should 
be looking--particularly when we are talking about orders to 
block access to website, that we should be looking for ways to 
narrowly tailor those orders so that they are properly 
effective, because this is an enormously complicated issue. I 
will not bore the Committee with a discussion about second-
level domains, third-level domains, and what we are actually 
targeting with these. But it is the type of thing that experts 
really need to consult with each other about.
    We fully understand the scope of the problem. It is 
enormous, and we want to help. But we have to be careful here 
that we are not blocking more than what we really intend to do, 
which is bad as a general matter, but could also be bad for the 
law, and we do not want to see that happen either.
    Chairman Leahy. Thank you.
    Senator Blumenthal. My time is up, but if I may just say, 
Mr. Chairman, maybe we will have time for a second round.
    Chairman Leahy. We are. Senator Whitehouse has also 
requested time, and we will.
    Senator Coburn, thank you for rejoining us. Like everybody 
else here, he has got about three different things going on at 
the same time.
    Senator Coburn. Mr. Chairman, first of all, let me give you 
my personal thanks for having this hearing. I think it is an 
important area. I do not think the Bush administration did a 
good job on IP. I do not think this administration has done a 
good job in protecting intellectual property. And I think we 
need to be much more aggressive in it.
    I am very sorry that there is not a search engine here 
represented because I think we need to hear from them. I think 
the fact Google refused and Yahoo! said they did not have 
anybody competent----
    [Laughter.]
    Senator Coburn.--bothers--and that is my word, not theirs.
    Chairman Leahy. If the Senator would yield for a moment, 
you know they were invited.
    Senator Coburn. I do. I know they were invited. But I think 
the fact that they are not here--and I think, Mr. Adams, it 
kind of goes to one of the things that you put forward. You 
showed American Airlines and AOL. Why do you think they do not 
have all the junk on the right side of the website when you go 
to Google? Do you think it is because their legal counsel has 
been rather aggressive on it? Or is it because they have so 
much more traffic than maybe Rosetta Stone? Or why is it that 
you do not see all that on their line but they see it on yours?
    Mr. Adams. So our sense is that there are--you know, there 
is an arbitrary behavior, and it is very apparent. Rosetta 
Stone is not the most valuable brand in the world. There are 
many brands that are much more valuable and that do not see any 
competition. We have asked Google why they treat different 
companies different ways. They always tell us, ``I cannot talk 
about that.'' So I cannot explain to you---the account manager 
talking to our account manager cannot explain why.
    I think that the fact that they are not here to sort of 
answer to their actions in this field of intellectual property 
is very disappointing. We very much want to partner with 
companies. We think this is a shared issue. We think that the 
ISPs, the payment processors, the search engines would all do 
much better in a world where this was not going on, and yet 
there is clearly a profit relationship right now between an 
illicit website and Google.
    Senator Coburn. Because of the paid advertising.
    Mr. Adams. Because they pay them for every single click. If 
you can imagine that there are a thousand websites that have 
been created, independent websites multi--levels deep that are 
replicas of the Rosetta Stone website, where they are selling 
ripped off software and they have payment processing on every 
single website, and each of those websites is doing business 
with an organization like Google, it is clear this is a massive 
issue, and they are very well aware of the size of----
    Senator Coburn. So it is a revenue issue to them. Their 
balance--and we are putting words in their mouth, but that is 
fair to do if they are not here. The fact is that it is a 
revenue issue versus protecting intellectual property in this 
country.
    Mr. Adams. That is correct. In our opinion, that is the 
tradeoff that they are making.
    Senator Coburn. Well, I would just tell you, as Ranking 
Member on the Permanent Subcommittee on Investigations, I plan 
on sending a letter to Google. And with the authority that we 
have to subpoena, if they do not answer us, then I will seek my 
colleague and we will subpoena an answer to these questions 
since they refuse to come and testify.
    Mr. Chairman, I want to thank you for having the hearing. I 
am going to submit some questions for the record to each of our 
guests, and I want to thank each of you all for your 
attentiveness to this issue.
    [The questions of Senator Coburn appears under questions 
and answers.]
    Senator Coburn. There is one other that maybe we can talk 
about before I go. What would happen to Go Daddy if last year's 
legislation would have been passed in terms of your costs?
    Ms. Jones. Candidly, for us, not a whole lot would change 
because we have been voluntarily taking the actions mostly 
described in that legislation for a lot of years, almost 10 
years now. What would happen to people who have smaller 
registrars and smaller hosting operations? I guess it would 
mean a couple more head count. It probably would cost them some 
money. Certainly every time we shut down a domain name or 
terminate a hosting account, it costs us revenue. So, yes, I 
mean, there is----
    Senator Coburn. There is a cost.
    Ms. Jones. There is a cost.
    Senator Coburn. How about for Verizon?
    Mr. Dailey. Well, I think from Verizon's perspective, the 
answer is it sort of depends. We raised----
    Senator Coburn. How aggressive we are with it.
    Mr. Dailey. Well, yes, there were a number of aspects of 
the bill that we commented on that, if narrowed, would make it 
administratively easier and, of course, affect costs. One of 
the big issues, as I mentioned a minute ago, in terms of 
structuring the type of domain name that is actually the 
target, if it is a second-level domain--Verizon.com, Verizon is 
the second-level domain there, .com is the top-level domain. If 
the order is to block Verizon.com that affects third-level 
domains, so e-mail.verizon.com. So it goes further down the 
stream. So it makes it a much bigger effort.
    Senator Coburn. So it can be expensive.
    Mr. Dailey. It could.
    Senator Coburn. How about with Visa?
    Ms. Yee. Well, Visa today, you know, I just wanted to first 
mention that in six months Visa has received a total of 30 
inquiries from IP rights holders, and so our voluntary 
procedures we provide at no cost. And so part of the problem 
really is to have the rights holders come forward, and we would 
like for them to try procedures first before they consider 
things like private right of action, as Mr. Turow suggested. 
But assuming that the legislation was passed as is, you know, 
we already have the voluntary procedures that are very 
consistent with what the legislation contemplates.
    Senator Coburn. I wonder if you all might suggest to the 
Committee how we make that more effective in terms of them 
coming voluntarily to you to request those things, if you would 
submit that to the Committee. Knowing what is going on, how do 
we make it where they are more aware that you are in voluntary 
compliance if you are asked and except you are saying you are 
not getting asked very much. And so, you know, that is a void 
in what we were doing in terms of legislation. We do not need 
to legislate something that cannot be fixed if we increase 
information. So I am supportive of the concept. I know there 
were a lot of false rumors about our bill last year, and I 
fought back on those. But I think cost is an important aspect 
for us, and so I look forward to hearing the answers to the 
questions that I will submit for the record.
    Thank you, Mr. Chairman.
    Chairman Leahy. Well, thank you very much, and thank you 
for your involvement, Senator Coburn.
    Following Dr. Coburn, we have Senator Franken.
    Senator Franken. Thank you, Mr. Chairman. Thank you for 
your hard work on this very important issue, and also thanks to 
Ranking Member Grassley.
    As many of you know, I am a copyright holder of 
intellectual property or, as Senator Whitehouse said to me 
coming in, in my case quasi-intellectual property.
    [Laughter.]
    Senator Franken. And I resented that, but still would like 
to associate myself with his remarks, nevertheless.
    Like Mr. Turow, I am well aware of how important it is that 
we protect the intellectual property of today's writers and 
artists and innovators. You know, this affects not just the 
writers and the producers and the movie stars and movies, but 
the people who work on the movies, the craftsmen and the 
technicians and the craft services people, because it changes 
the business model when this stuff is stolen.
    Now, I have a longer statement on this that I would like to 
add to the record, if there is no objection, Mr. Chairman.
    Senator Blumenthal. I will not object.
    Senator Franken. Thank you.
    [The prepared statement of Senator Franken appears as a 
submission for the record.]
    Senator Franken. You know, I also think it is essential 
that we move cautiously before we create a structure that will 
direct Internet service providers to block content at the 
domain level.
    Let me start my questions with Ms. Yee. There are many 
people who believe that the best way to attack this problem is 
to follow the money and focus on rogue sites' means of 
financial support rather than targeting and blocking domain 
names. What do you think of this approach? I realize it would 
place more of a burden on companies like Visa and on 
advertising networks. But we have seen great success at 
shutting down child pornography sites with this approach, and I 
would think it would be even more effective for pirate sites, 
especially since these sites exist purely for financial 
reasons.
    Have you looked at what percentage of pirated content you 
could stop with this approach?
    Ms. Yee. Well, I want to answer your first question about 
our ability to interrupt this activity, and as I mentioned in 
my oral testimony, similar to domain name registration, 
nefarious merchants will find a way to get into the system. 
They will change their merchant account name. They will sign up 
with different acquirers. So once Visa takes swift action to 
terminate a merchant with the acquirer's assistance, the 
nefarious merchant will move on to another account name with a 
different acquirer under false pretenses.
    So it is a whack-a-mole game for us, too. We honestly do 
not want it in our system; neither do the acquirers. Our policy 
is very specific.
    Senator Franken. Well, how is this different than on child 
pornography?
    Ms. Yee. Well, I think our approach is very similar. You 
know, to the extent that we are made aware of the infringing 
activity by rights holders, we are, you know, happy to provide 
assistance to help terminate the merchant out of the system. At 
the end of the day, Visa does not want this type of activity in 
the system.
    Senator Franken. Mr. Adams, have you looked into this at 
Rosetta Stone? If we just shut down the advertising and payment 
processing functions of counterfeit goods sites, could we stop 
the vast majority of sales of counterfeit goods?
    Mr. Adams. We believe that is true.
    Senator Franken. Thank you.
    Mr. Dailey, I have heard that the process of blocking 
domain names will not work, that it will be incredibly easy to 
circumvent, and it will ultimately drive users to rely on 
unreliable foreign domain name services. I have heard that this 
could lead large numbers of users to abandon the current 
domestic DNS system and, therefore, threaten network stability 
and lead to more identity theft. Are you concerned about this? 
How easy do you think it will be to get around this process? 
And do you think there is a more effective tool to stop these 
pirates?
    Mr. Dailey. I think those are legitimate concerns. I think 
how widespread the problem becomes is something we just have to 
wait and see to see how many users actually go through the 
effort of reprogramming their computer to bypass their domestic 
ISP, such as Verizon's own DNS servers.
    It is not terribly complicated to do, although I actually 
asked one of our folks to walk me through it yesterday, and I 
got bogged down in the process a couple of times. So I am not 
so sure that it is quite as easy----
    Senator Franken. That is reassuring.
    Mr. Dailey. Yes, but----
    [Laughter.]
    Senator Franken. I think.
    Mr. Dailey. It certainly can happen, and that is one of the 
problems with DNS blocking, that it is certainly not 100 
percent effective. I do not think that is really the bill's 
goal. The bill, as indicated, is really not designed to clamp 
down 100 percent, and I do not think that there are really very 
many 100-percent solutions in anything we try and do to 
regulate commerce on the Internet.
    So I think that, yes, there are ways around it. If you 
start using a foreign DNS server that is also not secure, that 
has also been compromised so that you do not necessarily know 
where you are going on the Internet in terms of the results 
that are returned to your computer, yes, you certainly could 
increase phishing risk and privacy theft. How big a problem 
that really is is really hard to determine at this point.
    Senator Franken. Thank you. My time has expired. I guess we 
are going to do a second round.
    I see, Mr. Turow, that the Screen Actors Guild, Directors 
Guild, the American Federation of TV and Radio Artists have all 
endorsed this legislation. I am a member of all three. I voted 
for this bill last year. I am glad that the Chairman has made 
some modifications. I am also interested in the architecture of 
the Internet to make sure that there is as much freedom on it--
and, you know, I will be back for a second round, I guess.
    Mr. Chairman?
    Senator Whitehouse. Everybody on the panel except perhaps 
Mr. Adams is a lawyer, correct?
    Mr. Adams. That is certainly true in my case.
    Senator Whitehouse. OK, so we are four out of five. I am 
interested in Mr. Turow's notion of the private Attorney 
General aspect here, and it has certain historic resonance 
because, as long as you have got pirates out there, why not 
send privateers after them, which is what we in Rhode Island 
did years ago when we had pirates coming after our shipping. 
And so the notion of the private Attorney General is an 
interesting idea, but it raises the question of how effective 
our judicial branch has been in being an arbiter and forum for 
resolving these problems. And it strikes me that the judicial 
branch is sort of ready, willing, and able to do it, but it has 
not been used very much. The only case that I can think of that 
was exciting and interesting in this respect was Microsoft's 
lawsuit that went after--I want to say the domain providers 
that were connecting the botnets that were attacking Microsoft 
with their control nodes so that when the bad guys sent the 
signal to the control node to fire off the bots that they had 
out there, the signal went no place. They had been basically 
disabled from the net. And that was a wonderful countermeasure 
taken by Microsoft to counterattack, really, and it was done by 
going to court and getting an order from a United States 
district judge in California someplace, and the defendant, I 
think perfectly willingly once they had the case in front of 
them, complied and the attack on Microsoft was intercepted and 
shut down.
    And it would seem to me that that ought to be happening 
more, and I would love to hear your opinions on why it is that 
we are--I mean, there are huge amounts of money at stake here, 
and why is it that you are not in the courts more often sorting 
through this with customers, with--I mean, it is not--there are 
theories that would tie you pretty closely to the criminal 
activity if they were stretched a bit. And certainly there are 
civil theories that could connect you to this. Why is it that 
this is not a more active Article III issue? Is it a lack of 
subject matter expertise? Is it a reluctance to go to the 
courts on the part of potential plaintiffs? Are there 
particular defenses and privileges that you have that keeps 
these things out of the court?
    It just seems like that would be a very logical place to 
begin to develop a sort of common law in this area that could 
be much more flexible than what we do by statute here, and yet 
I see so little of it actually happening in practice.
    Mr. Turow. If I may answer, Senator, just from our 
perspective, there are two major issues, of course: one is the 
safe harbor in DMCA that allows people to say, ``Not my 
fault,'' you know, the three monkeys routine, frankly. And the 
other, of course, is gaining personam jurisdiction over sites 
that are very often extraterritorial, which is why we think it 
would be wise to require a registered agent for anybody who is 
going to get a credit card payment to an overseas site.
    Ms. Jones. Can I be heard on that just briefly?
    Senator Whitehouse. Yes, of course.
    Ms. Jones. Since we do operate a massive percentage of the 
Internet's DNS around the world, the reason you do not see that 
issue in court more often is because all Microsoft has to do is 
pick up the phone and say, ``Hey, Go Daddy, the Conficker virus 
is driving us crazy,'' and we say, ``OK, we will fix it.'' And 
so do most of the other legitimate good corporate citizens. You 
do not have to go to court to get an order. We will just fix it 
for you, right? And this is the same thing that happens when 
there are other major massive attacks on people's systems, 
whether they come from in this country or outside the country. 
We just work on it, and we fix it for people, right? Do not go 
waste your money on a lawyer and file a lawsuit, for the love 
of God. Just pick up the phone and call us.
    Senator Whitehouse. Don't the studios whose content is all 
over the pirated sites pick up the phone and call you?
    Ms. Jones. They do every single day. Thousands upon 
thousands upon thousands a year.
    Senator Whitehouse. So that does not work so well.
    Ms. Jones. And it works, right? The DMCA works in that 
context. We actually have a trademark policy that works in that 
context. You do not have to go to court and get a lawsuit in 
most of the cases. You only have to do that when there is a bad 
guy on the other end. And that is why--I think Mr. Turow and I 
are saying the same thing. Give the safe harbor to the good 
guys and give the consequence to the bad guys.
    Senator Whitehouse. My time has expired.
    Chairman Leahy. Thank you very much, and also thank you for 
all the behind-the-scenes work you have done on this, Senator 
Whitehouse.
    Senator Coons, we are delighted to have you here, sir. 
Please go ahead.
    Senator Coons. Thank you, Chairman Leahy, and thank you to 
the members of the panel. I serve, as most of us do, on two 
committees that are having simultaneous hearings, so I enjoyed 
reading your submitted testimony in advance and appreciate a 
chance to be with you today.
    Counterfeiting and, in particular, online copyright 
infringement and the piracy of intellectual property is a very 
real and dramatically growing problem for us here and overseas, 
and it saps the creative energy and the resources that help 
sustain the sorts of innovations and service that you and your 
companies provide. But I also think, as we move forward in 
considering COICA, we have to balance America's historic role 
as a Nation that promotes free expression, and particularly 
given recent developments in Egypt and elsewhere, we have to 
make sure that we strike the right balance, that we continue to 
advance and promote democracy and free speech and strike the 
appropriate balance against infringing speech and outright 
theft, which are not things that we want to sustain.
    Given that last exchange, if I could, Ms. Jones, I am just 
interested in how we might work in partnership with our 
counterparts abroad to help facilitate the efforts that are 
imagined under this bill and get your view on whether you think 
COICA, which allows the DOJ to compel third parties to take 
measures regarding sites registered abroad, either could help 
or hurt relations with counterparties around the world that we 
need to engage. How might we effectively engage them and how 
might this challenge that relationship?
    Ms. Jones. Counterparties means foreign governments?
    Senator Coons. Foreign governments and, frankly, their 
comparable law enforcement entities.
    Ms. Jones. We have been told repeatedly--and I think this 
is right--that the foreign governments with whom we are 
friendly, at least, are compelled and follow the example of the 
actions that are taken by the U.S. Government and U.S. law 
enforcement. And most of the countries that we have good 
relationships with will say, OK, the U.S. Government took this 
seriously, they made this a criminal action, their law 
enforcement are asking us for our cooperation, and to the 
extent that that action is illegal in this country, we are 
going to give it to them.
    We routinely work with FBI--they have some clever name for 
it, but anyway, their local liaisons in foreign countries to 
help them investigate cases. It happens all the time. But to 
Ms. Yee's earlier point, you have to have the hook, OK? Because 
it is not enough for--let us use Great Britain, for example, to 
come and say, hey, Visa, hey, Go Daddy, can you help us out 
with this if what the person is doing is not illegal in their 
country.
    Senator Coons. Right. Then my next question, in trying to 
strike that right balance between free speech protection and 
promotion of free speech and blocking outright piracy, how easy 
will it be for offending sites to effectively insulate 
themselves from domain name seizure if they, for example, Mr. 
Turow, take the pirated copies of your latest work and 
intermingle them with forwarded copies of the latest speech 
against the Government of Iran, you know, or other governments? 
How do we strike a balance that allows you to single out those 
sites that really are overwhelmingly dedicated to piracy from 
those that begin to insulate themselves from domain name 
seizure by mixing the two in a way that then makes it quite 
difficult to make the argument effectively overseas and at 
home? Any opinions on that, Mr. Turow?
    Mr. Turow. Well, first of all, I should say--and it will 
not come as any surprise--as president of the Authors Guild, 
the guild is obviously concerned about anything that borders on 
censorship, and we are clearly not advocating that and never 
would. We believe in due process before these sites are brought 
down.
    You are completely right, Senator Coons, that this is a 
difficult enterprise, and there are all kinds of strategies to 
avoid whatever laws you craft. But I think that the point that 
has been raised here many times that a law that insists on 
coordinated activity by everybody in the Internet ecology is 
the best approach, so that, you know, the subtle alterations of 
websites can be addressed either through payment issues or by 
having the search engines be more vigilant about what they are 
allowing to be searched for in the first place.
    Ms. Jones. Can I----
    Senator Coons. My time has expired. I think with the 
Chairman's forbearance----
    Ms. Jones. Can I just add to that real quick? As the 
company that probably responds to more of these than anybody 
else, our position is if there is any offending content, the 
whole website comes down. If you fix it, you take off the fake 
Rosetta Stone, you take off Mr. Turow's book, we will put it 
back up. OK? But it is either all of nothing, because we do not 
want that crap about, Are you 50/50? Are you 80/20? Are you 
really engaged in illegal activity? Are you really not? No. We 
want it to be black and white. Either you are or you are not. 
If you fix it, press on. But until you fix it, you are all 
gone.
    Mr. Dailey. May I comment on that as well?
    Ms. Jones. I know he is going to hate that.
    [Laughter.]
    Mr. Dailey. No, not necessarily. But it is good insofar as 
it goes in a notice and take-down environment. You pull down 
the site, and then it gets fixed, and then it gets put back up. 
The issue, I think, that the Committee is struggling with is 
what to do about non-domestic websites where we do not have a 
notice and take-down procedure necessarily. So that is a more 
complicated problem, and I think that the issue that you raised 
about websites restructuring their architecture, for example, 
to avoid a judicial order is a very real one, and that is part 
of the complexity that I was alluding to in my testimony 
earlier, that these are things that need to be, I think, 
discussed and figure out how do we work it, because we would 
like to see an effective mechanism to help the various 
copyright interests that are out there. We have no interest in 
seeing piracy continue, and we have done a lot of work at 
Verizon over the years with the content community to try and 
address the problem domestically.
    But I just wanted to make that distinction between notice 
and take-down, which works, I think, reasonably well in the 
United States, different from, though, the issue that we are 
dealing with where we do not have that procedure abroad.
    Senator Coons. Thank you. I just wanted to thank the 
Chairman in particular for this hearing and for his work on 
this. Global piracy is an enormously difficult thing that is 
draining billions of dollars of resources, and I want to thank 
the panel for the work that you represent today on behalf of 
your companies and you individually.
    Thank you.
    Chairman Leahy. Thank you, and before I yield to Senator 
Blumenthal, I would note, as I did earlier, both Yahoo! and 
Google were invited to be here today. I wish they had come 
because a number of the answers you have given, each of you, it 
would have helped if they could have responded. But I would 
note to both those companies, there will be legislation, and it 
would have been helpful to have had their testimony here as we 
prepare for it, but we will have the legislation one way or the 
other.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Mr. Chairman. And I join in 
your feeling that it would have been very helpful for them to 
be here and there will be legislation. And may I just say with 
all due respect to Mr. Dailey and Ms. Jones, taking down the 
website and then putting it back strikes me at least as an 
insufficient deterrent to this kind of conduct, almost part of 
the cost of doing business, which is why I think a private 
right of action, with damages, maybe treble damages, punitive 
damages, and an effective enforcement mechanism is absolutely 
necessary.
    And to Mr. Dailey's point--I think it was your point--that 
there may be overuse or even abuse, that potential danger 
strikes me as no different in material respects than exists in 
many of our consumer protection laws where there are private 
rights of action and where it imposes costs that are in effect 
commensurate with the damage that is done.
    I just want to say my view is--I know it may sound 
oversimplistic--that we are dealing here with a situation that 
is comparable to the drug dealing kind of situation where the 
planes or the transport mechanisms that provide the vehicle 
that enable and facilitate the drugs to be imported or dealt in 
effect are knowingly going on with that activity without any 
real accountability. And if that were happening in the world of 
drug dealing, if planes or ships were knowingly transporting 
mules or the drugs directly, we would have a very different 
attitude toward them and should have a very different attitude 
toward the facilitators and enablers in this situation.
    So I welcome your support for a private right of action, 
and my hope is that it will be in too big to fail.
    Thank you, Mr. Chairman.
    Chairman Leahy. I thank the panel very much. I also thank 
all the Senators who have asked questions. We will keep the 
record open for one day for further questions. I will have a 
couple others that I will submit for the record.
    [The questions of Chairman Leahy appears under questions 
and answers.]
    Chairman Leahy. Thank you for taking the time. It has been 
extremely helpful. This is a matter that we will have 
legislation. I appreciate the broad support from users, 
industry, authors, others.
    We have at least two areas that everybody should have in 
their mind. You have websites that supply consumer goods. It 
can be everything from parts for your car to medication. If 
they are counterfeit, if they are such that can damage, people 
can die. I mean, that is not oversimplification. People can die 
from that. And that we should be concerned about.
    But, also, if you are an author, you are a composer, you 
are a writer, you make a movie, if you have got something that 
is really not any good, well, you are not going to make money 
on it. But if you have got something you worked hard on and it 
is good, you ought to have the value of that and not have 
somebody who has simply stolen it, has a website, they get the 
value of it.
    We had testimony once talking about the movie ``Ray.'' 
Taylor Hackford, the producer of that movie on the life of Ray 
Charles, a great movie, one of my favorites, but he had spent 
years borrowing the money, trying to put this movie together. 
He put a lot of his own time and money and effort into it. He 
was so proud of the movie that he had a premier in New York 
City. The next day he decided to walk up just to see the 
marquis with his name and the name of the movie on it. As he 
came around the corner, somebody offered to sell him a 
counterfeit copy. Now, at least he could go and say to the 
police, ``The guy standing over there is doing it.'' But the 
same counterfeit copies are coming across the web.
    Again, if people are going to make this effort, they ought 
to be rewarded. Mr. Turow, your comment about at least if you 
are a best-selling musician you can also do a concert. Authors 
cannot go out and do readings.
    [Laughter.]
    Chairman Leahy. But even the people that have the music, it 
is great they can make money on their concerts, but they should 
not have to do that. And you have a lot of people who are 
writers of the music but are not the ones that are going to be 
seen in the concert.
    So I think it is a very important issue. I do regret that 
the two companies invited here are not here, but we are going 
to push forward. Remember, this bill passed 19-0 in the 
Committee last year. We have bipartisan support. It will pass.
    I thank everybody for being here, and we stand in recess.
    [Whereupon, at 11:56 a.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

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