[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                  ROLE OF VOLUNTARY AGREEMENTS IN THE 
                   U.S. INTELLECTUAL PROPERTY SYSTEM 

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                     COURTS, INTELLECTUAL PROPERTY,
                            AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 18, 2013

                               __________

                           Serial No. 113-49

                               __________

         Printed for the use of the Committee on the Judiciary

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


                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

82-846 PDF                       WASHINGTON : 2014 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001



                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama              ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania             KAREN BASS, California
TREY GOWDY, South Carolina           CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada                  SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Courts, Intellectual Property, and the Internet

                 HOWARD COBLE, North Carolina, Chairman

                TOM MARINO, Pennsylvania, Vice-Chairman

F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
Wisconsin                            JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas                   HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE CHABOT, Ohio                     Georgia
DARRELL E. ISSA, California          JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 KAREN BASS, California
MARK AMODEI, Nevada                  CEDRIC RICHMOND, Louisiana
BLAKE FARENTHOLD, Texas              SUZAN DelBENE, Washington
GEORGE HOLDING, North Carolina       HAKEEM JEFFRIES, New York
DOUG COLLINS, Georgia                JERROLD NADLER, New York
RON DeSANTIS, Florida                ZOE LOFGREN, California
JASON T. SMITH, Missouri             SHEILA JACKSON LEE, Texas

                       Joe Keeley, Chief Counsel

                   Stephanie Moore, Minority Counsel



                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 18, 2013

                                                                   Page

                           OPENING STATEMENTS

The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Chairman, Subcommittee on Courts, 
  Intellectual Property, and the Internet........................     1
The Honorable Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Courts, Intellectual Property, and the Internet.............     2
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Ranking Member, Committee on the 
  Judiciary, and Member, Subcommittee on Courts, Intellectual 
  Property, and the Internet.....................................     3

                               WITNESSES

Jill Lesser, Executive Director, Center for Copyright Information
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9
Cary H. Sherman, Chairman and CEO, Recording Industry Association 
  of America
  Oral Testimony.................................................    12
  Prepared Statement.............................................    15
Randall Rothenberg, President and CEO, Interactive Advertising 
  Bureau
  Oral Testimony.................................................    25
  Prepared Statement.............................................    27
Gabriel Levitt, Vice President, PharmacyChecker.com
  Oral Testimony.................................................    35
  Prepared Statement.............................................    37
Robert C. Barchiesi, President, The International 
  AntiCounterfeiting Coalition
  Oral Testimony.................................................    50
  Prepared Statement.............................................    52

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, Ranking 
  Member, Committee on the Judiciary, and Member, Subcommittee on 
  Courts, Intellectual Property, and the Internet................     5
Material submitted by the Honorable Judy Chu, a Representative in 
  Congress from the State of California, and Member, Subcommittee 
  on Courts, Intellectual Property, and the Internet.............    64
Material submitted by the Honorable Doug Collins, a 
  Representative in Congress from the State of Georgia, and 
  Member, Subcommittee on Courts, Intellectual Property, and the 
  Internet.......................................................    85

                                APPENDIX

Material Submitted for the Hearing Record........................   121


 ROLE OF VOLUNTARY AGREEMENTS IN THE U.S. INTELLECTUAL PROPERTY SYSTEM

                              ----------                              


                     WEDNESDAY, SEPTEMBER 18, 2013

                        House of Representatives

            Subcommittee on Courts, Intellectual Property, 
                            and the Internet

                       Committee on the Judiciary

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 2:03 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Howard 
Coble (Chairman of the Subcommittee) presiding.
    Present: Representatives Coble, Marino, Goodlatte, Smith of 
Texas, Poe, Collins, Watt, Conyers, Johnson, Chu, Jeffries, and 
Lofgren.
    Staff Present: (Majority) Joe Keeley, Chief Counsel; Olivia 
Lee, Clerk; and (Minority) Stephanie Moore, Minority Counsel.
    Mr. Coble. The Subcommittee on Courts, Intellectual 
Property and the Internet will come to order. Without 
objection, the Chair is authorized to declare recesses of the 
Subcommittee at any time. We welcome all of the witnesses and 
others in the audience for today's very important hearing I 
will now give my opening statement.
    Good afternoon, and welcome again to today's Subcommittee 
hearing on the Role of Voluntary of Efforts in the U.S. 
Intellectual Property System. Copyright owners have been 
dealing with the increasing acts of power sales of their 
property that is often aided by groups and Web sites that 
glorify theft. This Subcommittee has dealt with the issue for 
some time.
    The Congressional Creative Rights Caucus which I Chair with 
the gentlelady from California, Ms. Chu, has also heard from 
artists impacted by the outright theft of their works. I am 
pleased to learn today of the voluntary efforts now underway to 
reduce piracy. These good works are the result of several 
companies and trade associations that have invested their time 
and effort to cultivate best practice principles that help 
direct consumers to legitimate content while making it more 
difficult for pirates to operate. These agreements are a step 
in the right direction. They promote intellectual property, 
they improve the Internet marketplace for consumers and they 
have been established through a voluntary process.
    I want to especially highlight the efforts by the Center 
for Copyright Information as an example of what can be done. By 
letting ISP customers know about piracy that may be occurring 
using their Internet connections, ISP's consumers may find that 
the wireless network has been hacked, or that their teenager 
needs to join a family meeting about responsible Internet 
usage. I am also pleased that the Center has taken a thoughtful 
approach to implementing an appeals system as well as creating 
an oversight panel of consumer groups.
    While much work has been done, more work is required from 
other groups. I am interested in hearing how existing voluntary 
agreements can be utilized to foster new agreements in new 
areas, and if there is anything we can do to help promote the 
best practices. As most of us know, private sector actions are 
oftentimes more efficient and effective than some regulation 
handed down by the Federal Government.
    Thank you, again, for being here, and I look forward to 
hearing the testimony from our witnesses on today's panel.
    I am now pleased to recognize the Ranking Member from North 
Carolina, Mr. Mel Watt for his opening statement.
    Mr. Watt. Thank you, Mr. Chairman.
    Two years ago, this Subcommittee held several hearings to 
address possible legislative solutions to the epidemic of 
online piracy and sale of counterfeit goods over the Internet. 
Although the Stop Online Piracy Act was itself stopped, the 
problem of piracy was not, as I have noted on a number of 
occasions.
    We are certainly not here to relitigate SOPA, but I do 
believe that the SOPA debate we had helped motivate an 
important shift in the willingness of some parties to engage 
more aggressively in negotiating to develop some of the best 
practices we are considering here today.
    Indeed, some of the entities that fought vigorously to 
defeat SOPA are now constructive parties to voluntary 
agreements designed to combat the drain on our economy and the 
potential harm to consumers that online piracy and 
counterfeiting represent.
    Over the past 2 years, government entities, nonprofit 
organizations, academic institutions and industry stakeholders 
have all issued studies evaluating the problem. Recent examples 
include the July 2013 Department of Commerce Internet Policy 
Task Force report on copyright policy, creativity and 
innovation in the digital economy in which the task force noted 
``while the extent of the losses caused by online infringement 
is hard to calculate with certainty, the proliferation of 
unlicensed sites and services making content available without 
restriction or payment impedes the growth of legitimate 
services.''
    In February, the Administration also reported on the cyber 
theft of trade secrets, and in May, the Nonprofit Commission on 
the Theft of American Intellectual Property found that the 
scale and complexity of the international theft of American 
intellectual property is unprecedented, including the rapid 
growth in online sales of counterfeit goods.
    Earlier this year, Carnegie Mellon professor Michael Smith 
released his findings on the impact of the Department of 
Justice enforcement against the notorious MegaUpload site. In 
general, Professor Smith suggested that providing legitimate 
avenues to obtain content online, coupled with effective anti-
piracy policies, represents the best recipe for combating IP 
theft online. However, yesterday a report entitled ``Sizing the 
Piracy Universe'' by NetNames painted a bleak picture regarding 
Internet-based infringement. The report, commissioned by NBC 
Universal, found that piracy of entertainment content has 
increased dramatically despite the growing number of legal 
options available to consumers.
    Google also released a report last Friday entitled ``How 
Google Fights Piracy,'' outlining its efforts to curtail piracy 
and highlighting how its services provide enhanced 
opportunities for creators. However, this morning the Motion 
Picture Association of America, together with Chairman Coble 
and our colleague on the Committee, Ms. Chu, unveiled a study 
by Compete, ``Understanding the Role of Search in Online 
Piracy,'' which reportedly details how search engines like 
Google introduce consumers to Web sites dedicated to 
infringement.
    The single common thread throughout each of these reports 
is the recognition that there is an ongoing vulnerability for 
U.S. intellectual property in the online environment. That 
threat is not only economic and is not limited to specific 
industries represented here. Counterfeit hard goods, especially 
pharmaceuticals, may pose an additional threat to safety risk 
for American consumers.
    Futile efforts to curtail online infringement and 
counterfeiting does more than deplete the profits of U.S. 
companies and negatively affect the U.S. economy. It also opens 
our citizens to a variety of predictable harms like identity 
theft, fraud, sickness or even death. Failure to address the 
problem may also make our cyber infrastructure less secure and 
facilitate individual criminal activity or encourage criminal 
enterprises.
    So it is important that these voluntary agreements and best 
practices are meaningful endeavors, not just window dressing. 
It is also important that our values of privacy, free speech, 
competition and due process are honored. But it is also 
important that those values are not fraudulently turned against 
us to invite or justify legislative paralysis.
    I applaud the voluntary efforts of the various industry 
stakeholders both to confront the challenge and to embrace the 
opportunities that permeate the digital era. While these 
cooperative measures may or may not be enough, I believe that 
our Subcommittee, which has jurisdiction over both intellectual 
property and the Internet, should encourage these 
collaborations, but it is also our responsibility to consider 
whether additional oversight or legislative action is warranted 
as well.
    I welcome the witnesses and look forward to the testimony.
    Mr. Chairman, I yield back.
    Mr. Coble. Thank you, Mr. Watt.
    The Chair now recognizes the distinguished gentleman from 
Michigan, the Ranking Member for the full Judiciary Committee, 
Mr. Conyers, for his opening statement.
    Mr. Conyers. Thank you, Chairman Coble, and we join in 
welcoming our distinguished witnesses today.
    Voluntary agreements, intellectual property law, should 
facilitate technological advances, while at the same time, 
protecting creators, I think that is what the hearing is all 
about, and we must continue ways to examine how we can prevent 
piracy and fight violations of copyright law. I think that is a 
worthwhile issue to examine here today in the Judiciary 
Committee.
    Although these voluntary agreements have been a positive 
step, we must continue to develop solutions to address digital 
piracy. A primary goal is that we should have to continue to 
inform and change the behavior of the majority of users who 
want to enjoy content legally, and I am hoping that these 
issues will be examined with the care and experience of our 
distinguished witnesses today.
    I will put the rest of my statement in the record. Thank 
you very much, Chairman Coble.
    Mr. Coble. Thank you, Mr. Conyers.
    [The prepared statement of Mr. Mr. Conyers follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                               __________

    Mr. Coble. We have a very distinguished panel today, and I 
will begin by swearing in our witnesses before introducing 
them. If you would, please, all rise.
    [Witnesses sworn.]
    Mr. Coble. Let the record show that each of the panelists 
responded in the affirmative.
    As I said before, we have a distinguished panel before us, 
and I am pleased to introduce them now. Our first witness today 
is Ms. Jill Lesser, Executive Director at the Center for 
Copyright Information. Ms. Lesser is a long-time consumer 
protection, technology and copyright expert, and also serves as 
a board member for the Center For Democracy and Technology. She 
received her J.D. from the Boston University School of Law, and 
her B.A. in political science from the University of Michigan.
    Our second witness is no stranger on Capitol Hill, Mr. Cary 
Sherman, Chairman and Chief Executive Officer for the Recording 
Industry Association of America, the organization representing 
the Nation's major music labels. Mr. Sherman received his J.D. 
from Harvard School of Law and his B.S. from Cornell 
University.
    Our third witness today is Mr. Randall Rothenberg, 
President and Chief Executive Officer of the Interactive 
Advertising Bureau, a trade association representing over 500 
leading interactive companies that are responsible for selling 
more than 86 percent of online advertising in the United 
States. Mr. Rothenberg received his B.S. in classics from 
Princeton University.
    Our fourth witness today is Mr. Gabriel Levitt, Vice 
President of PharmacyChecker.com. Mr. Levitt helped found the 
company in 2002, and is responsible for all business and 
research operations. Mr. Levitt received his Master's Degree in 
International Relations from the American University, and his 
bachelor's degree from Roger Williams University.
    Our final witness today, Mr. Robert Barchiesi, is President 
of the International AntiCounterfeiting Coalition. Mr. 
Barchiesi received his M.A. from the University of Alabama and 
his B.A. from the John Jay College of Criminal Justice. It is 
good to have all of you with us today, gentleman and lady.
    There is a timer on the desk that will alert you when your 
time is waning, rapidly vanishing. We try to employ the 5-
minute rule. When the green light on the panel turns to amber, 
that is your warning that you have 1 minute to wrap up. Now, 
you won't be keelhauled if you violate that rule, but try to 
wrap up on or about 5 minutes if you would do so.
    Ms. Lesser, we will begin with you. I repeat, it is good to 
have all of you with us.

         TESTIMONY OF JILL LESSER, EXECUTIVE DIRECTOR, 
                CENTER FOR COPYRIGHT INFORMATION

    Ms. Lesser. Chairman Coble, Ranking Member Watt, Ranking 
Member Conyers, and Members of the Subcommittee, my name is 
Jill Lesser and I am the Executive Director of the Center For 
Copyright Information. I am pleased to be testifying on the 
issue of voluntary initiatives aimed at protecting copyright in 
a digital age, a new area of cooperation and progress in a 
policy debate that has long been characterized by sharp 
differences of opinion.
    The Center for Copyright Information was established in 
2011 as part of a groundbreaking initiative among the Nation's 
five leading Internet service providers and virtually the 
entire movie and music industries. The agreement set out to 
stem the tide of digital piracy by accomplishing two goals: 
One, establishing the copyright alert system or CAS; and, two, 
creating an organization that could educate users about the 
importance of protecting digital content while offering them a 
better way to find movies, TV and music online safely and 
legally.
    In the two short years since CCI's formation, we have 
successfully implemented the Copyright Alert System and have 
begun a series of educational efforts aimed at helping users 
make better choices about the way they enjoy creative content. 
Still in its early stages, this initiative illustrates the 
importance of multi-stakeholder, market-driven solutions, and 
more generally serves as a model for addressing challenging 
technology policy issues through collaboration.
    I have addressed the negotiations that led to the creation 
of CCI in my written testimony. Therefore, I will focus here on 
CCI's current and future work in bringing our voluntary 
initiatives to life.
    The Copyright Alert System is an educational program that 
enables copyright holders to notify consumers when their 
Internet access accounts are alleged to have been used 
illegally to download and share movies, music or TV shows over 
peer-to-peer networks. CAS notices are designed to be sent in a 
manner that respects users' privacy, educates them about how to 
correct behavior, and offers them an independent review process 
to ensure that users accounts are not inadvertently 
misidentified as having been used to engage in digital piracy.
    Each of the participating ISP's CAS implementation has 
unique elements, but there are several common components. 
Notices of alleged infringement are generated by copyright 
owners using a methodology that has been reviewed and validated 
by technology experts to capture whole works and avoid false 
positives. The copyright owners forward notices to 
participating ISPs who, in turn, pass on individual notices to 
account holders in the form of copyright alerts. Each alert is 
one way and no information about individual account holders is 
shared with content owners.
    The program includes up to six alerts with a 7-day grace 
period between each, offering consumers time to identify the 
source of and take steps to correct infringing behavior. If a 
user reaches the final or what we call the mitigation stage, he 
or she becomes eligible to seek an independent review of alerts 
received. Administered by the American Arbitration Association, 
the process offers users the ability to challenge alerts they 
believe were sent in error.
    And finally, all of the alerts sent to consumers and CCI's 
Web site offer information about how users can find content 
through the many legal services now available.
    The CAS began operating early this year after nearly 18 
months of research and development. Our research helped us 
understand what consumers do and do not know about peer-to-peer 
technology, and their level of understanding about copyright 
laws. We found that most consumers do not understand or 
appreciate concepts that many of us take for granted, and our 
mandate includes trying to enhance consumer understanding and 
change the conversation about digital copyright.
    Our research indicates that one of the most important 
audiences for our educational effort is young people, and we 
have just completed development of a new copyright curriculum 
that is being piloted during this academic year in California. 
The kindergarten through sixth grade curriculum is as a result 
of CCI's partnership with the California School Libraries 
Association and iKeepSafe, a leading digital reading literacy 
organization. It introduces concepts about creative content in 
innovative and age appropriate ways to help children understand 
they can be both creators and consumers of artistic content.
    A critical element of this entire initiative is our 
Consumer Advisory Board. The associations and companies that 
created CCI recognize the importance of--that the success of 
the program, I am sorry, would depend in large part on whether 
it was fair to consumers.
    Our advisory board provides an important oversight role and 
advises the CCI board on consumer privacy, transparency and due 
process. Now that we have completed the challenging task of 
initial implementation, we are working on a system to evaluate 
the program's impact and over the coming months we will look 
internally at the CAS and evaluate user response to the 
program. We will also look more broadly at the impact on peer-
to-peer piracy and our educational initiatives.
    We hope these self-assessments will allow the CCI to 
continue to enhance the effectiveness of the CAS and our 
central mission of promoting lawful ways to find and consume 
copyrighted content and educating users about the importance of 
respecting copyrights.
    Once again, thank you for the opportunity to appear before 
the Subcommittee, and provide information on this unique effort 
among content owners and ISPs in consultation with consumer 
advocates. The creation of the Copyright Alert System marks the 
beginning of a new age of cooperation and innovation.
    [The prepared statement of Ms. Lesser follows:]
        Prepared Statement of Jill Lesser, Executive Director, 
                  The Center for Copyright Information
    Chairman Coble, Ranking Member Watt, Chairman Goodlatte, Ranking 
Member Conyers, Members of the Subcommittee, I appreciate the 
opportunity to testify today on the important issue of digital 
copyright. My name is Jill Lesser and I am the Executive Director of 
the Center for Copyright Information. I am particularly pleased to be 
testifying on the issue of voluntary initiatives aimed at protecting 
copyright in the digital age, a new area of cooperation and progress in 
a policy debate that has long been characterized by sharp differences 
of opinion.
    The Center for Copyright Information (CCI) was established in 2011 
as part of a ground-breaking voluntary initiative among the nation's 
five leading internet service providers (ISPs) and virtually the entire 
movie and music industries. The agreement among the parties set out to 
stem the tide of digital piracy by accomplishing two goals: 1) 
establishing the Copyright Alert System (CAS); and 2) creating an 
organization that could educate users about the importance of 
protecting digital content, while offering them a better way to find 
movies and music online safely and legally. In the two short years 
since CCI's formation, we have successfully implemented the CAS and 
have begun a series of educational efforts aimed at helping users make 
better choices about the way they enjoy digital creative content, while 
enhancing the ability of recording artists, filmmakers and television 
producers to be compensated for the compelling and creative programming 
they deliver.
    Still in its early stages, this voluntary cooperative initiative 
illustrates the importance of multi-stakeholder, market-driven 
solutions to address the problem of digital piracy, and more generally, 
CCI and its members believe it can be a model for addressing 
challenging technology policy issues through collaboration.
                               background
    As the Members of the Subcommittee know well, the last 15 years 
have witnessed a sea of change in the creation and delivery of all 
manner of content to consumers. After many decades of distribution 
through channels easily managed by content owners, like records, DVDs 
and on-air broadcasting, the digital revolution has turned distribution 
models--and the ability to protect content against piracy--on their 
heads. While this wave of innovation in digital delivery wasn't 
designed to undermine copyright protection, an unfortunate side effect 
has been the dramatic rise in piracy. Exacerbating the effects of these 
technological innovations has been the perception by a generation of 
consumers that content distributed over the internet is or should be 
free, and that the rules that apply to the physical world don't apply 
to the virtual world.
    Against this backdrop, representatives of the movie and music 
industries and major ISPs came together in 2009 to begin discussions 
that ultimately led to the creation of the CAS and the CCI. Those 
ground-breaking discussions focused on what the parties could do to 
stem the tide of piracy online, particularly through the growing use of 
peer-to-peer file sharing systems. After three years of negotiations, 
the nation's largest ISPs--AT&T, Cablevision, Comcast, Time Warner 
Cable and Verizon--along with the Motion Picture Association of America 
(MPAA) and the Recording Industry Association of America (RIAA), and 
their member companies \1\ signed the Memorandum of Understanding (the 
MOU) that established the framework for the CAS and the structure of 
CCI. The MOU was the first, and remains the only, purely voluntary, 
industry-led agreement of its kind.
---------------------------------------------------------------------------
    \1\ In partnership with MPAA and RIAA, the Independent Film and 
Television Alliance (IFTA) and the American Association of Independent 
Music (A2IM), the representatives of the independent music and film 
distributors are also participants in the CAS.
---------------------------------------------------------------------------
                       the copyright alert system
    The CAS, which is overseen by CCI, is an entirely voluntary 
educational initiative that enables copyright holders to notify 
consumers when their internet access accounts are alleged to have been 
used illegally to download and share copyrighted movies, music or TV 
shows. Such notices are sent in a manner that respects users' privacy, 
educates them about how to correct their behavior and offers them an 
independent review process to ensure that users' accounts are not 
inadvertently misidentified as having been used to engage in digital 
piracy.
    Importantly, the CAS is intended to educate consumers and is 
largely targeted to the casual infringer. Indeed, large-scale pirates 
looking to game the system will undoubtedly be able to find other ways 
to engage in illegal activity. Our system, instead, seeks to inform and 
change the behavior of the vast majority of users who want nothing more 
than to enjoy the content they love when and how they desire. It is not 
intended to be punitive in nature but to assist users in finding 
digital content legally and understanding the consequences of sharing 
content illegally over P2P networks.\2\
---------------------------------------------------------------------------
    \2\ The CAS as an educational program does not require any ISP to 
terminate any account holder's internet service. However, the program 
does not affect any obligations ISPs may have pursuant to the DMCA, nor 
does it alter existing provisions in ISPs' terms-of-service relating to 
illegal behavior using their accounts.
---------------------------------------------------------------------------
    While each participating ISP's CAS implementation has unique 
elements, the key common components of the CAS present in each program 
are as follows:

          Copyright owners use a methodology that has been 
        reviewed and validated by technology experts to identify 
        instances of copyright infringement over P2P networks and 
        generate notices associated with particular IP addresses;

          Copyright owners forward those notices to the ISP to 
        which the IP address has been assigned;

          The ISP, in turn, matches the identified IP address 
        to a particular account holder and passes on the copyright 
        owner notice to the primary account holder in the form of a 
        Copyright Alert (Alert). Each Alert is a one-way notice and no 
        information about the individual account holders is sent back 
        to the content owners;

          Primary account holders may receive up to six Alerts 
        with a seven-day grace period in between each Alert to allow 
        the consumer time to correct his or her behavior or to identify 
        who in the household (or through an external hack of the 
        account) might be intentionally or unintentionally engaging in 
        copyright infringement;

          Within those six Alerts, there are three levels of 
        notice--Educational, Acknowledgement and Mitigation--each 
        designed to offer increasingly clear educational messages about 
        how the user can ensure his or her account is not used for 
        illegal purposes and where and how to find legitimate, licensed 
        sources of movies, music and TV shows;

          If a user reaches the Mitigation Stage, (which 
        happens after receiving either three or four previous Alerts) 
        he or she becomes eligible to seek an independent review of the 
        Alerts received. Our review process, administered by the 
        American Arbitration Association, offers users the ability to 
        challenge the Alerts they received if they believe the Alert 
        were sent in error.

    The CAS began operating early in 2013, after 18 months of research 
and development. Each ISP invested significant resources to design its 
implementation of the CAS, including the creation of consumer 
interfaces that would not simply identify instances of digital piracy, 
but help users understand how P2P technology works, when its use might 
be illegal and how to find content legally and safely.
    To support the companies' work, the CCI engaged in consumer 
research that helped us understand what consumers do and do not know 
about P2P technology and their level of understanding about the 
copyright laws. We found that most consumers do not understand or 
appreciate concepts that many of us in the policy and legal communities 
take for granted--like the meaning of copyright. This research is 
helping us to better understand the drivers of consumer behavior around 
piracy and, we hope, will help us to improve the CCI's effectiveness in 
communicating our messages and ultimately reduce the level of online 
piracy and increase content consumption through legal means.
                        consumer advisory board
    Another very important aspect of the CAS is our consumer advisory 
board. The member associations and companies that designed the CAS 
recognized that the success of the program would depend, in large part, 
on whether the program was fair to consumers and was perceived as such 
by the user community. While, the MOU signatories had worked hard to 
build in strong privacy protections, and to make each stage of the 
program (including the independent review process) fair, accurate and 
impartial, the participants recognized that external review and 
validation was critically important. Thus, the MOU provided for the 
establishment of a consumer advisory board, to be comprised of outside 
industry experts and consumer advocates, who would work with the CCI 
and its members to ensure that the interests of consumers were 
adequately considered and protected as the CAS was implemented. The 
consumer advisory board has provided and continues to provide an 
important oversight role and valuable advice to the CCI board on 
consumer privacy and other issues, including the building of a fair 
independent review mechanism for challenging Alerts.
                      cci's educational activities
    CCI's initial work has focused on implementation of the CAS and the 
creation of online support for the CAS, including helping users find 
better ways to access movies, music and television programming. 
However, an equally important part of our mandate includes helping to 
change the conversation about digital copyright--to enhance consumer 
understanding of and respect for creative content in the digital age.
    Based on our research, we believe one of the most important 
audiences for our educational efforts is young people. As a result, we 
have developed a new copyright curriculum that is being piloted during 
this academic year in California. The kindergarten through sixth grade 
curriculum, entitled ``Be A Creator''TM, is the result of 
CCI's partnership with the California School Libraries Association and 
iKeepSafe, a leading digital literacy organization. The curriculum 
introduces concepts about creative content in innovative and age-
appropriate ways. The curriculum is designed to help children 
understand that they can be both creators and consumers of artistic 
content, and that concepts of copyright protection are important in 
both cases. We hope to use this pilot period to enhance the curriculum 
and ultimately encourage schools across the country to integrate it 
into their digital literacy programs.
                               evaluation
    Now that we have completed the challenging task of the initial 
implementation of the CAS and begun expanding our educational 
initiatives, we are working on a system to evaluate the impact of this 
innovative partnership among content owners and ISPs. Over the coming 
months, we will look internally at the CAS in order to evaluate user 
response to the program, including the impact it is having on the 
behavior of those receiving Alerts. We will also look more broadly at 
the impact on P2P piracy of the CAS and our broader educational 
activities. We hope these self-assessments will allow the CCI to 
continue to enhance the effectiveness of the CAS and our central 
mission of promoting lawful ways to find and consume copyrighted 
content and educating users of all ages about the importance of 
respecting copyrights.
    We are aware that stakeholders around the world are watching the 
program with interest and we have been sharing our lessons-learned so 
far when asked. We also stand ready to expand here in the U.S. to 
additional members and will continue to look for additional 
opportunities to raise awareness and that our educational messages will 
expand consumers' respect for copyrights beyond P2P software to other 
methods of online piracy.
    Once again, thank you for the opportunity to appear before the 
Subcommittee and provide information on this unique effort among 
content owners and ISPs, in consultation with consumer advocates. The 
creation of the Copyright Alert System marks the beginning of a new age 
of cooperation and innovation, as we all work to stem the tide of 
digital piracy and enhance consumers' ability to find the movies, music 
and TV shows they love in a safe and legal manner.
                               __________

    Mr. Coble. Thank you, Ms. Lesser.
    Mr. Sherman.

   TESTIMONY OF CARY H. SHERMAN, CHAIRMAN AND CEO, RECORDING 
                INDUSTRY ASSOCIATION OF AMERICA

    Mr. Sherman. Thank you. Chairman Coble, Ranking Member 
Watt, Ranking Member Conyers, Members of the Subcommittee, 
thank you for inviting me to testify today. I am Cary Sherman, 
Chairman and CEO of the Recording Industry Association of 
America.
    The creative industries are undergoing a complete digital 
transformation. It was not long ago the consumers had limited 
choices for accessing the music they wanted. Today, the music 
industry is leading the way beyond the physical CD, licensing 
hundreds of services worldwide offering tens of millions of 
songs with digital now making up nearly two-thirds of our 
revenue.
    For the digital marketplace to truly work, we must ensure 
that these vibrant new services are not undermined by illegal 
activity. Voluntary initiatives with Internet businesses are a 
key component of that objective.
    So what has been done? First, as Jill Lesser just 
discussed, the content community and major Internet service 
providers collaborated to address infringing activity over 
peer-to-peer networks, resulting in a new Copyright Alert 
System administered through the Center For Copyright 
Information.
    Second, as Bob Barchiesi will describe, Visa, MasterCard, 
American Express, Discover and PayPal and now others have 
collaborated with content and product owners to establish a 
process for terminating relationships with Web sites that 
persist in selling illegitimate products.
    Third, with regard to advertising on the Internet, Randall 
Rothenberg will discuss the IAB's new quality assurance 
guidelines for ad networks and exchanges. We applaud IAB for 
this effort, although we are a little disappointed that 
complaints about IP infringement do not yet affect 
certification.
    Grand advertisers and their ad agencies and several ad 
networks have also established best practices to deter the 
advertising of products on rogue sites. Information from 
companies such as Mark Monitor, Double Verify and White Bullet 
can provide useful data and metrics to measure the 
effectiveness of these programs.
    Fourth, as part of the rollout of new generic top-level 
domain names, ICANN recently passed a resolution requiring 
registrars to prohibit domain name holders from engaging in 
trademark or copyright infringement or other deceptive 
practices and to impose consequences if they do, including 
suspension of the domain name.
    Fifth, a series of principles relating to user generated 
content were negotiated by leading commercial copyright owners 
and UGC services. The parties addressed such issues as the use 
of effective content identification technology to eliminate 
infringing uploads, removing or blocking links to sites that 
are clearly dedicated to infringement, all while accommodating 
fair use.
    So what is missing? Search engines are the roadmaps, 
indeed, the turn-by-turn directions to rogue sites online. They 
can be a key partner in addressing infringing activity, and yet 
there is no voluntary agreement regarding search results. There 
is certainly many actions that could be taken. Google has tools 
in its Chrome browser to warn users if they are going to sites 
that may be malicious. Perhaps that technology could be used to 
warn users of rogue sites. Imagine if search results linking 
authorized content were labeled with a certification mark or 
badge indicating that the site is licensed and actually pays 
royalties to creators. That educational message could have a 
profound impact on user behavior.
    Similarly, there are no best practices for storage or 
locker services. Unfortunately, some storage companies appear 
to be the go-to host for rogue Web sites, and some locker 
services have an abundance of infringing content available for 
distribution.
    The notice and take-down process under the DMCA would also 
benefit from collaboration. As interpreted by service providers 
and the courts, the law requires copyright owners to monitor 
millions of Web sites and networks every day and send detailed 
notices to all of them specifically identifying each and every 
individual infringing file and requesting that each be removed 
with nothing to prevent the same works from being immediately 
reposted.
    Shouldn't stakeholders sit down and negotiate practical 
solutions that will make notice and takedown more meaningful 
and effective? For more stringent repeat infringer policies to 
takedowns that don't automatically repopulate, many 
programmatic solutions can be devised. Also, voluntary 
activities today to focus on Web and wire line activity. With 
the rapid adoption of mobile devices, we need to focus our 
efforts on the mobile space and deal with unique challenges it 
presents.
    We are encouraged by the growing support for voluntary 
initiatives. We are grateful for this hearing which shines 
light on the current efforts underway. We urge the Subcommittee 
to do even more; to further encourage collaborations by using 
its good auspices to monitor data from ad verification 
companies to see whether the programs are working effectively, 
monitor best practices that may develop among registries and 
registrars to implement the ICANN resolution; encourage and 
facilitate discussions with search engines and locker services 
leading toward voluntary best practices; and convene 
discussions of practical means to improve the notice and 
takedown process under the DMCA.
    Implementing voluntary initiatives will never be a silver 
bullet, but as reports have shown, taking action against 
infringing services can have a major positive impact on the 
usage of licensed services. Working together, we can grow 
legitimate commerce for everyone.
    We look forward to working with this Subcommittee and all 
our partners in the Internet marketplace to make these 
initiatives a success. Thank you.
    [The prepared statement of Mr. Sherman follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
                               __________

    Mr. Coble. Thank you, Mr. Sherman.
    Mr. Rothenberg.

          TESTIMONY OF RANDALL ROTHENBERG, PRESIDENT 
            AND CEO, INTERACTIVE ADVERTISING BUREAU

    Mr. Rothenberg. Chairman Coble, Ranking Member Watt, Senior 
Member Conyers, Members of the House Judiciary Subcommittee on 
the Courts, Intellectual Property and the Internet, thank you 
for the opportunity to testify at this important hearing. My 
name is Randall Rothenberg and as you heard, I am the President 
and Chief Executive Officer of the Interactive Advertising 
Bureau and I am very honored to be here.
    IAB is the trade association for ad-supported digital media 
in the United States. IAD's more than 500-member companies 
account for 86 percent of the interactive advertising sold in 
the U.S. Our members include many of the recognized names, most 
of the recognized names of the media world, AOL, CBS, Facebook, 
Google, Microsoft, The New York Times, Time, Inc., Walt Disney, 
Yahoo among them, as well as scores of smaller publishers, 
advertising networks and specialists in such areas as digital 
video advertising and mobile advertising.
    I am also here for a personal reason. Prior to joining the 
IAB, I spent the first two-thirds of my career as an author and 
writer. I have written several books, hundreds of newspapers 
and magazine articles. I own hundreds of copyrights. I continue 
to be a contributor to many publications.
    Having spent my career in the creation of intellectual 
property, I firmly believe the meaningful protection of 
intellectual property rights is the foundation on which the 
U.S. economy depends. As the Framers of the U.S. Constitution 
understood, if we wish to remain the world's leader in 
innovation and entrepreneurship, we must reward both hard work 
and risk-taking through the protection of intellectual 
property.
    On behalf of our member companies, IAB is dedicated to the 
growth of the interactive advertising marketplace. IAB drives 
toward this end by educating marketers, advertising agencies, 
media companies and the wider business community about the 
value of interactive advertising, and we recommend technical 
standards and best practices for this evolving marketplace.
    In this regard, we are proud of our efforts to bring 
together the most significant representatives of this digital 
marketing supply chain to develop strong protections for 
intellectual property and greater trust in the digital 
advertising marketplace.
    The vibrant online advertising ecosystem that was created 
by innovative and legitimate individuals and companies has 
gained the attention of illegitimate actors that wish to 
undercut the market for creative content through the illegal 
activity of copyright infringement. This is a major reason, a 
foundation reason, the IAB developed the quality assurance 
guidelines that Mr. Sherman referred to.
    The guidelines were created to help establish trust between 
the buyers and sellers of advertising in a very complex and 
ever-evolving digital advertising ecosystem. The program helps 
promote the flow of advertising budgets into digital 
advertising by establishing industry principles that offer a 
framework for increasing brand safety.
    We consider the piracy of intellectual property 
antithetical to the concept of brand safety. For that reason, 
the IAB guidelines provide specific prohibitions against 
selling certain types of advertising inventory, including ad 
inventory on sites involved in intellectual property violations 
such as Web sites hosting and streaming infringing copyrighted 
content, torrent sites and peer-to-peer sites.
    In April of 2013, IAB released an update to the guidelines 
for public comment. This revision focuses on increasing the 
applicability, visibility and influence of the guidelines 
program as well as the advancement of other vital program 
elements. I would like to identify three important changes we 
made.
    First, we took a program that was originally designed for 
ad networks and exchanges solely and expanded it into a true 
multi-stakeholder process by including all buyers and sellers 
of digital advertising. The program will now represent the full 
diversity of the industry and reinforce the role all parties 
play in building a more accountable, transparent and safe 
marketplace.
    Second, the guidelines now explicitly include an option for 
the lodging of intellectual property infringement complaints by 
rights holders to the IAB which will then direct the complaint 
to the relevant contact at each company participating in the 
guidelines. The IAB is committed to working with all parties to 
strengthen the protection of intellectual property rights 
through the guidelines including through a strengthened 
complaints process.
    Third, the program was also strengthened with the 
introduction of the option of independent third party 
validation of a company's certification to create a new level 
of trust in the marketplace.
    Going forward, we will continue to evolve, strengthen and 
drive adoption of the guidelines. The program has received a 
tremendous amount of exposure because of recent acknowledgments 
by Victoria Espinel, the former U.S. Intellectual Property 
Enforcement Coordinator. We would welcome additional public 
support from you and other Members of Congress.
    Thank you for considering the views of the IAB on these 
issues. We greatly appreciate your focus on our work and the 
work of all the others on this panel to strengthen the 
protection of intellectual property and understanding the role 
of the advertising industry in creating additional strengths to 
those protections. Thank you.
    [The prepared statement of Mr. Rothenberg follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                   __________

    Mr. Coble. Thank you, Mr. Rothenberg.
    Mr. Levitt.

         TESTIMONY OF GABRIEL LEVITT, VICE PRESIDENT, 
                      PHARMACYCHECKER.COM

    Mr. Levitt. Chairman Coble and Ranking Member Congressman 
Watt and Ranking Member Conyers, I am Gabriel Levitt, the Vice 
President of PharmacyChecker.com, which for the past 10 years, 
has been helping Americans find affordable medication from safe 
online pharmacies by checking and verifying the credentials of 
these pharmacies and posting price comparisons.
    We believe that voluntary agreements can be a useful tool 
in protecting Americans from counterfeit products, but they can 
also be misused in anti-competitive ways which scare and thwart 
Americans from accessing affordable medications. This leads to 
poor medication compliance with negative health consequences 
and also goes against the Administration's desire that 
voluntary agreements not be used to impede competition. I will 
present recommendations which can keep this from happening.
    Last year, 50 million Americans, ages 19 to 64, did not 
fill a prescription due to cost, up from 48 million in 2010, 
according to the Commonwealth Fund. We also know that nearly 5 
million Americans have been buying their medication from 
outside the U.S. in order to get affordable prices because the 
cost to buy brand name medicine is often 80 percent lower in 
other countries than in the U.S.
    Independent studies and over a decade of experience have 
demonstrated the safety of domestic and international online 
pharmacies approved in rigorous programs such as 
PharmacyChecker's. A voluntary agreement of particular concern 
is one established by a group of Internet and credit card 
companies called the Center For Safe Internet Pharmacies, or 
CSIP. While CSIP has been effective at taking down some rogue 
pharmacies, it also acts to discourage Americans from accessing 
safe affordable medications outside the United States.
    CSIP uses a company called Legit Scrips to help it identify 
rogue sites for takedown and to power an online tool for 
consumers to look up the status of an online pharmacy. 
Unfortunately, if you use this tool to look up any online 
pharmacy operating in any country other than the U.S., such as 
Canada, it will tell you that the pharmacy is unapproved, 
regardless of the fact that it may be licensed, require a 
prescription and safely selling only genuine medication.
    The CSIP Web site has become a clearinghouse for 
information from the pharmaceutical-funded groups such as the 
Partnership For Safe Medicine and the National Association of 
Boards of Pharmacy with scare campaigns conflating all non-U.S. 
pharmacies with rogue pharmacies. In fact, any pharmacy outside 
the U.S. which sells to Americans is labeled by NABP as a 
rogue.
    To keep voluntary agreements from misleading Americans, we 
ask that your Committee make sure that CSIP does not discourage 
Americans from accessing safe and affordable medication online. 
In particular, we would urge that the basis for defining a 
rogue pharmacy include any of the following, but not simply 
whether or not it is licensed in the U.S. It intentionally 
sells adult rated or counterfeit medication; sells prescription 
medication without requiring a prescription; engages in 
fraudulent and deceptive business practices; does not follow 
generally accepted safety standards of pharmacy practice; and 
sells medication that is not regulated.
    We would also like to see CSIP and other institutions 
established under voluntary agreements be more transparent by 
providing the following information: Clearly state what 
recourse companies and people have if their businesses are shut 
down by actions taken by CSIP; provide information on those 
sites that were shut down and the reasons they were shut down 
based on applicable intellectual property laws and identify the 
precise public health risk of the Web site.
    Last, it is important to recognize that voluntary 
agreements are being afforded considerable market power. To 
ensure these powers are used properly, we recommend the 
appointment of an independent ombudsman to oversee these 
agreements. The ombudsman would analyze voluntary agreements to 
make sure private sector actions aren't blocking Internet 
competition and are consistent with the Administration's other 
goals of due process, free speech and transparency.
    I have provided the Committee with a transcript of this 
presentation and included our public comments submission to the 
U.S. PTO in Exhibit A. Thank you for your time.
    [The prepared statement of Mr. Levitt follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
                               __________

    Mr. Coble. Thank you, Mr. Levitt.
    Mr. Barchiesi.

         TESTIMONY OF ROBERT C. BARCHIESI, PRESIDENT, 
         THE INTERNATIONAL ANTICOUNTERFEITING COALITION

    Mr. Barchiesi. Chairman Coble, Ranking Member Watt, Members 
of the Subcommittee, thank you for the opportunity to appear 
before you today. I am proud to be representing the 
Intellectual AntiCounterfeiting Coalition and our partners from 
the financial industry. My testimony today will address our 
ongoing collaboration regarding the trafficking of counterfeit 
and pirated goods online.
    With over 230 members that span across industries, the 
International AntiCounterfeiting Coalition is one of the 
world's largest organizations representing the interests of 
companies concerned with trademark counterfeiting and 
intellectual property theft.
    While legitimate retailers increasingly leverage the 
Internet as a platform for sales, the same is true of 
counterfeiters. Once confined to brick and mortar shops, the 
Internet has created new opportunities for the sale of illegal 
goods as well as an ever-widening pool of customers. 
Additionally, the shift to online distribution has raised a 
variety of practical difficulties for our enforcement against 
criminals who operate with anonymity and beyond the 
jurisdiction of U.S. courts or law enforcement.
    The proliferation of this illicit trade threatens consumer 
confidence in the legitimacy of the Internet as a commercial 
platform. Consumers expect and deserve the honest cooperation 
of all of the players in the e-commerce ecosystem. That point 
of view has driven our partnership with the financial industry 
and informed the development of our ongoing collaboration.
    In January 2012, the IACC launched its payment processor 
program in collaboration with some of the largest multi-
national brands and leading financial companies. This launch 
followed the establishment of a set of best practices 
facilitated by the Administration's Intellectual Property 
Enforcement Coordinator, Victoria Espinel.
    The program is, in laymen's terms, a ``follow the money'' 
approach that seeks to diminish the ability of criminal 
counterfeiters to turn a profit. Our program is dependent on 
the financial partners' policies which prohibit merchants from 
using financial services for illegal transactions. Merchants 
that sell counterfeit goods violate those policies and as such, 
subject themselves to remedial action, including termination of 
their merchant accounts. Because those policies apply to 
merchants regardless of their jurisdiction, the program has a 
global reach.
    At its inception, the IACC and its partners identified 
several goals for the IACC payment processor program. These 
include increasing the cost of doing business for and 
decreasing the profits to the counterfeiters; shrinking the 
universe of merchant banks willing to do business with those 
sellers; facilitating an efficient use of resources by both 
rights holders and our financial partners; and dismantling 
counterfeit networks by developing deeper intelligence on those 
networks' methods of operating.
    In the context of these goals, the program has been a 
resounding success. We have referred nearly 7,500 Web sites for 
investigation, resulting in the termination of over 2,100 
individual counterfeiters' merchant accounts which likely 
correspond to a much higher number of affected sites.
    The collaboration between the IACC and its partners has 
resulted in opportunities to provide training to banks and 
others all around the world. While there remain challenges to 
quantifying the impact of this program on the overall 
availability of counterfeit and pirated goods online, there is 
significant anecdotal evidence that online sales of such elicit 
product are becoming more difficult.
    Further, the program has created a growing pool of data 
that may be leveraged by both public and private sectors. Since 
the launch of our program, we have seen a number of trends, 
including a decline in the use of traditional credit card 
payments in favor of alternate payment methods; the misuse of 
anti-fraud measures in an attempt to thwart legitimate 
investigations by law enforcement and private industry; and the 
shift from the use of individual merchant accounts to reliance 
on illegitimate and sophisticated payment service providers who 
provide full service infrastructure for illegal sales and 
promise bulletproof processing.
    It is our hope that this paves the way for further cross-
industry collaboration. The success of this program proves that 
when rights holders and others work side-by-side to ensure a 
safe and trusted marketplace, everyone wins.
    [The prepared statement of Mr. Barchiesi follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                   __________

    Mr. Coble. Mr. Barchiesi, I know you weren't advised that 
you were going to be here until rather late in the game, but 
you brought it up to speed. Folks, we try to apply the 5 minute 
rule to ourselves so I will keep my questions in a very terse 
way.
    Mr. Sherman, are voluntary agreements a better approach to 
solving issues in lieu of legislation for companies that want 
to do the right thing on the one hand in contrast to companies 
that simply want to take advantage of intellectual property 
owners?
    Mr. Sherman. I am sorry, I heard the first part of the 
question but not the last.
    Mr. Coble. Are voluntary agreements a better approach in 
resolving these problems?
    Mr. Sherman. I have been a big fan of voluntary agreements. 
We have seen what happens with legislation. We are carving in 
stone certain standards, certain processes, certain 
expectations, and everybody gets nervous on each side. It 
becomes very, very difficult to agree on that.
    With voluntary agreements, you can be flexible. You can 
agree on things, knowing that they can change without going 
back to Congress. You have the ability to learn from the 
marketplace what is working and what is not and modify the 
agreement, so there is flexibility, there is an ability to 
change as you go, and there is an ability to learn from 
experience. I think it makes people a lot more willing to try 
things and it begins to build trust.
    So, yes, I think that for a start, voluntary measures are a 
great way to begin basically closing the gap between the 
business side of the Internet and the content side of the 
Internet.
    Mr. Coble. Thank you, Mr. Sherman.
    Ms. Lesser, what role, if any, should the U.S. Government 
agency exercise with these arrangements are being negotiated 
while they are in effect?
    Ms. Lesser. I am sorry, Mr. Chairman, what role are the 
agencies playing now?
    Mr. Coble. What role should there be, if any, for U.S. 
agencies while these agreements are playing out or are in 
effect?
    Ms. Lesser. As several of the witnesses have said, you 
know, the leadership of Victoria Espinel, when she was the 
Intellectual Property Enforcer at the White House, was very, 
very important and continued to be important not only as the 
negotiators came up with this agreement, but as we moved toward 
implementation.
    I think as Federal agencies, Congress has a very important 
oversight role in helping us do what we want to do well. At the 
same time, as we look to evaluating the program and what 
changes need to be made, we are doing that on an ongoing basis, 
and as Mr. Sherman just said, we are very able to be very 
nimble and respond to the needs of the program on really a 
regular basis.
    So I think oversight should continue. There should be 
hearings like this. I don't think there should be a rubric 
where there are consistent requirements for voluntary programs 
to report to the government however.
    Mr. Coble. Mr. Rothenberg, what say you to this?
    Mr. Rothenberg. It would be very hard for me to improve on 
the way Mr. Sherman articulated, although I am forced to try a 
little bit. But the voluntary agreement, self-regulation by 
industry has the benefit of being able to be more flexible in 
the pursuit of its objectives. Legislation and regulation have 
a tendency to fix in stone certain methods by which 
infringements have to be identified and punished. And 
technology, especially the infringers and especially those 
infringers outside our borders, will find new ways to evade 
them. It can be much, much more effective, certainly in the 
short and medium term, to get widespread adoption of voluntary 
agreements, in turn, industry participants, especially the 
largest and the most legitimate industry participants, into the 
police of the industry itself. We think that could uncover lots 
of infringements and help create a self-reinforcing system of 
abeyance.
    Mr. Coble. I thank you for that. Mr. Levitt, do you want to 
weigh in on this?
    Mr. Levitt. Once again, I think that commonsense voluntary 
agreements can be helpful. I come with a perspective that over 
time you could see entrenched interests who come together in 
carrying out these voluntary agreements could take actions that 
will stifle the emergence of other companies if there is not 
oversight. So I think that all of the people here have given 
good examples of how voluntary agreements can work and have 
worked, but there is an inherent risk when you deputize the 
private sector to take on a roll that I think you guys, I am 
sorry, you had tried to do through passing other laws, and I 
think there should be some oversight, there should be an 
independent ombudsman who is reviewing all of these voluntary 
agreements to make sure that they are transparent and not 
stifling competition.
    Mr. Coble. Well, my red light has illuminated, so I will 
recognize Mr. Watt from North Carolina.
    Mr. Watt. Thank you, Mr. Chairman. As has been my practice, 
I am going to defer and go last in the queue and defer to Mr. 
Johnson. Mr. Conyers disappeared on me. He was there and then 
he disappeared.
    Mr. Johnson. Well, your pause gave me a moment of concern.
    Mr. Watt. You mean, you thought I had forgotten your name?
    Mr. Johnson. Or something worse.
    Mr. Watt. I defer to whoever this guy is. I defer to Mr. 
Johnson and I will go last in the queue.
    Mr. Johnson. Thank you, Mr. Ranking Member, and thank you, 
Mr. Chairman.
    Today's hearing represents another opportunity for this 
Subcommittee to discuss how innovative market-place solutions 
are protecting copyright holders. Recently the White House 
Office of the IP Enforcement Coordinator joined with Google, 
Yahoo, AOL, Microsoft and the Interactive Advertising Bureau 
and other ad networks to announce the completion of voluntary 
best practices guidelines for ad networks to address piracy and 
counterfeiting. These industry guidelines are also the product 
of several years of coordinated efforts and represent a follow-
the-money approach to stopping rogue sites dedicated to 
intellectual property theft.
    To demonstrate the magnitude of this problem, in 2012, 
Google disabled ads that served 46,000 sites for violating 
Google's policies on copyright infringing content. Google shut 
down more than 82,000 accounts for attempting to advertise 
counterfeit goods, which were almost entirely discovered 
through Google's engineering to protect copyrighted works.
    So I want to--and I also commend Victoria Espinel, the 
former U.S. Intellectual Property Enforcement Coordinator, on 
her hard work during her tenure.
    Needless to say, copyright theft hurts everyone. 
Songwriters and artists depend on royalties for their 
livelihood and companies depend on protection so that they can 
make new content and products, and consumers want to know that 
when they purchase a good that it isn't counterfeit.
    Alarmingly, a recent study commissioned by NBC Universal 
indicates that copyright infringement grows proportionally with 
Internet usage. But this isn't altogether surprising. There is 
a strong temptation to illegally download a copyrighted work 
without accessible alternatives to infringement. Regardless, 
there are serious challenges that continue to face movie 
studios, music companies and other industries.
    Mr. Sherman, please describe some of the challenges facing 
artists, producers and songwriters, and also how does copyright 
infringement affect the ability for music labels to cultivate 
new and unproven talent?
    Mr. Sherman. Well, the challenge is how you make a living 
when one of the basic forms of revenue for musicians, 
songwriters, publishers, labels is basically going away as 
people are able to get for free what they previously had to pay 
for. It just means that you are going to be doing a lot more 
live touring. You are going to be looking at alternative 
revenue streams. You are no longer going to be relying on CD 
sales or downloads in order to make a living. And because live 
touring is a hard life and because these alternative revenue 
streams are growing very slowly, it means the opportunities to 
be able to make a living in music is compromised.
    Hopefully it will get better, and certainly the Internet 
has provided a level playing field where any musician can find 
a worldwide audience, so there is great opportunity. There is 
just a lot of difficulty in monetizing that opportunity so that 
you can actually eat and raise a family and send your kids to 
college.
    So it is tough. And the labels, which are now 40 to 50 
percent the size that they used to be, and about 40 percent the 
number of employees, have less money to invest in new artists. 
They have less money to promote them, less money to market them 
and less money to keep them on the label hoping that the next 
album will do a little bit better or the third album will do a 
little bit better. It is just a much tougher business.
    Mr. Johnson. I see. So becoming a full-time musician, 
songwriter, performer, is getting much more difficult, and for 
the labels to be able to exploit that talent, it is very 
difficult to do when all of your product is being distributed 
in a way that you cannot collect any revenue from?
    Mr. Sherman. Exactly right.
    Mr. Johnson. So how has this access to illegitimate means 
of capturing this content, explain the consumer behavior that 
is behind that?
    Mr. Sherman. Consumers, especially the younger generation, 
have grown up to believe that anything on the Internet is free. 
It is the way it started and it has become an expectation. It 
is something that has to change over time, not only for music, 
but for all the content industries to be able to flourish, and 
I think it will change over time, but it will take awhile until 
there is a cultural shift on that.
    So at this point the ease with which a music fan can get an 
illegal copy of music or illegal streams of movies or 
television shows has basically changed the expectation with 
respect to the value of music and entertainment. And that is a 
devastating thing when the value of music and other forms of 
entertainment are killed off because at that point, the pricing 
that legitimate services can charge becomes not enough to 
support the infrastructure necessary for investment and 
artists, new content, movies, television shows and the like.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Coble. The gentleman's time has expired.
    The distinguished gentleman from Texas, Mr. Poe, is 
recognized for 5 minutes.
    Mr. Poe. Thank you, Mr. Chairman. Thank you all for being 
here.
    There is a phrase that brings fear and trepidation into the 
hearts and souls of men and women across the country and that 
is ``We are from the government and we are here to help you.'' 
Whether it is a business or whether it is an individual, I 
mean, I have always thought that and I am part of the 
government and I really think that now, that that is a great 
concern among people.
    We have in your all's situation a process that is working 
where different entities get together and follow contract law, 
something that is preserved in the Constitution, the right to 
contract.
    I think it is working fairly well in your situation.
    My question is does the government--should we legislatively 
now jump in the middle and sort things out and make it better? 
I mean, by ``better,'' I mean that facitiously. Would it make 
it worse, or would it make it better? Or should we continue to 
encourage the ability to contract and work out in the 
marketplace disagreement and compromise, something that we 
don't do too well here, Congress, compromise.
    So I just kind of open that question up, and I would like 
to hear all five of your opinions on that role of government, 
if any. Ladies first.
    Ms. Lesser. Well, I will speak from the perspective of my 
program, which, as I said during my testimony, has only been in 
operation for 6 months. I think what we found during the 
implementation process, which took more than 18 months, was 
that the negotiators who were at the table for 3 years coming 
up with the framework for our contract, our Memorandum of 
Understanding, and for the copyright alert system, didn't 
really know all of the elements that should ultimately go into 
the program. And so the 18 months we spent doing research, 
looking at the implementation, looking at the words in the 
contract, and in some cases changing those words so that we 
could make sense of the implementation, I think shows me that 
that collaborative process really allowed us to respond to the 
needs of the marketplace, to be flexible, and, most 
importantly, to work with our consumer advisory board.
    Many people on that advisory board were really the people 
sitting across the table from the content industry during the 
renowned SOPA debate, and here they were at a table with us 
envisioning and constructing a program that we think is working 
well.
    Now, we only have 6 months under our belt, so the next part 
of the answer is that we have to wait and see. We are already--
I will give you an example. We have, as I said, an appeal 
process. The American Arbitration Association is overseeing 
that process. So if a consumer thinks that an alert has been 
sent in error, and they file an appeal, the American 
Arbitration Association is assigning copyright lawyer neutrals 
to adjudicate that appeal, not in a traditional sense of 
adjudication, but within the confines of our program. What we 
found early on is that indications were that our defense 
explanations were not that clear. And so immediately----
    Mr. Coble. Ms. Lesser, if you could wrap it up.
    Ms. Lesser. Within a month we went back in and redid those 
defense explanations. So we are changing the program as we go.
    Mr. Poe. I want everybody to answer that question. Now, you 
all are down to a minute, 25 seconds apiece or so. So, Mr. 
Sherman.
    Mr. Sherman. Do not underestimate the value of government 
encouragement. I certainly understand the difference between 
legislation and the imposition of rules. But the role of 
encouragement can be very, very helpful in getting parties 
together.
    Mr. Poe. Get it done, or we are going to do it. And then 
everybody's going to be----
    Mr. Sherman. That often helps. Hopefully it won't be 
necessary, but it does help. So encouragement is important.
    Mr. Poe. Okay. Mr. Rothenberg.
    Mr. Rothenberg. Sir, the ad-supported Internet contributes 
$530 billion to the U.S. economy. It is responsible for about 
5.1 million jobs. Those are based on platforms that have been 
built on the backbone of the Internet, platforms like eBay and 
Facebook and Google. They are responsible for jobs. One of most 
important things this Congress can do is promote our voluntary 
guidelines in global trade agreements to assure that the rest 
of the world doesn't shut down these platforms irresponsibly.
    Mr. Poe. Thank you.
    Mr. Levitt.
    Mr. Levitt. I would like to answer that how I think a 
consumer will--what they might want you to hear. There is a 
group called RX Rights. That is RxRights.org. It is a coalition 
that has about 40- to 50,000 people, and they buy drugs, often 
from Canada, online from verified and safe sites. They don't 
want the government stopping them from being able do that, 
because they know that it is safe because that is what they 
have been doing. And I think there has to be a balance when we 
are taking actions to shut down sites selling counterfeit drugs 
that we don't overreach where real people end up getting hurt 
because they can't afford their medications.
    Mr. Poe. Lastly.
    Mr. Barchiesi. We firmly believe in the efficacy of 
voluntary agreements and this proof of concept. What we do, it 
works. Our partnership with the financial industry works. But 
the operative word is it takes a willingness on the other 
party's side to work together, roll your sleeves up and get it 
done. We were able to go over to China and recently put 
together an agreement with Tow Bow and Alibaba Group.
    So I think there is a role with government. I am a bit 
frustrated that I can't go over to--in California to Google and 
do the same thing. So I agree with Cary Sherman that I think 
there is a role for government to play to help encourage these 
groups to get together and get it done.
    Mr. Poe. Thank you, Mr. Chairman.
    Mr. Coble. The gentleman's time has expired.
    I am pleased to recognize the lady with whom I cochair the 
Creative Rights Caucus, the distinguished lady from California, 
Ms. Chu for 5 minutes.
    Ms. Chu. Thank you, Mr. Chair.
    Before I begin, I would like to submit testimony for the 
record on behalf of the Copyright Alliance on the role of 
voluntary agreements. The Copyright Alliance has been a great 
advocate for the rights of individual creators. So I am happy 
that they are weighing in on this very, very important hearing. 
And so that is this. And I would also like to submit for the 
record this study entitled ``Understanding the Role of Search 
in Online Piracy,'' commissioned by the Motion Picture 
Association of America. This report indicates that search 
engines play a facilitating role, even if inadvertently.
    Mr. Coble. Without objection, they will be received.
    [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
                               __________

    Ms. Chu. Thank you.
    This morning Mr. Coble and I did indeed participate in a 
press conference with the Motion Picture Association for the 
release of this study that found that search is a major gateway 
to the initial discovery of infringing content online. In fact, 
74 percent of consumers surveyed cited using a search engine as 
the navigational tool that they use to find infringing content 
for the first time.
    And so I would like to ask Mr. Sherman or Ms. Lesser, we 
know that the largest search engine, Google, made an effort 
last year to change the algorithm to take into account the 
number of copyright takedown notices the site has received, 
which is a positive step, but we have a long way to go. 
Unfortunately, there isn't anyone here today to represent them. 
But could you give your thoughts on what more search engines 
can do to reduce online infringement? What proactive steps do 
you think they could take?
    Mr. Sherman. There are lots of practical steps that they 
could be taking when you think about the various ways in which 
search is leading people to infringing content. They did 
promise to demote sites that received a lot of takedown 
notices. We were very taken with that approach. We commended 
it. But 6 months, a year later, we have seen basically no 
difference whatsoever. The most rogue of rogue sites are still 
showing up on the first page of search results. We have sent 
about a million and a quarter notices on one site called MP3 
Skull, yet it still shows up regularly on the first page of 
search results. Clearly, even though their intention was good, 
it hasn't been implemented well.
    We also think they could be promoting more effectively, 
promoting the legitimate sites. I mentioned before the 
possibility of a certification mark or a badge. If we can 
provide a white list of sites that are licensed and actually 
pay creators, and they could put an indication like that in the 
search result, it could make a huge difference in the way that 
consumers use the search engine.
    They could provide warnings about rogue sites. Just like 
they do when they encounter malware on a site in their own 
browser, they give a warning notice. Maybe they could do it 
with respect to rogue sites that are identified by third 
parties as sites they should be suspicious about.
    They could also do things about autocomplete. Right now, if 
you enter in the name of an artist and a track, it will suggest 
to you MP3. And if you click on MP3, it will give you basically 
6 to 8 illegal sites in the first 10 results.
    And also the fact that we are sending millions of notices, 
and they are just going right back up again without any 
limitation. We send 100 notices about URLs with the same song 
on the same site, but you would think, therefore, that the 
other 1,000 songs on the same site would be taken down. But, 
no, we have to send each one individually.
    We ought to be able to sit down and work out more efficient 
means for us and for them and for the piracy problem generally. 
There is a lot of motion, but what we need is impact.
    Ms. Lesser. The only thing that I would add, since my 
program applies primarily--exclusively really at this point--to 
peer-to-peer is that I think when the negotiators who came up 
with this Memorandum of Understanding first sat down, there was 
very little optimism about the ability to get not only to a 
sense of agreement, but also to actually create an existing 
real program that is changing consumer behavior. So I would say 
to Google and other search engines, it is important to come to 
the table and not see this as an ``us versus them.'' This is a 
problem that we all need to solve. And the 5-year dialogue and 
agreement among these parties is just evidence that can be 
done.
    Ms. Chu. Let me follow up and talk about the copyright 
alert system, which is a successful voluntary system where ISPs 
alert Internet subscribers when they have downloaded pirated 
content and point them to legitimate sites. It is successful 
because, for one thing, the largest ISPs committed a 
significant amount of their own resources to this effort and 
invested significant resources to its design. And, secondly, 
the voluntary initiative took into account the views of all the 
key stakeholders.
    While it is a great step forward, it does have limited 
impact unless other players like search engines get involved. 
How could they be integrated into this system? Mr. Sherman, you 
have ideas on that?
    Mr. Sherman. Well, the copyright alert system is really 
based on peer-to-peer piracy, which is not something where 
search has a big role to play. So the ISPs are the appropriate 
party for that kind of operation. But because we have been more 
successful with peer-to-peer, because peer-to-peer has actually 
declined, other forms of piracy are increasing, Web site 
piracy, and certainly search engines would have a huge role to 
play there, one of the reasons we would like to be able to sit 
down with a multistakeholder process and see if we can come up 
with some improved mechanisms.
    Ms. Chu. Thank you. I yield back.
    Mr. Coble. Gentlelady has expired--time is expired.
    The distinguished gentleman from Georgia Mr. Collins is 
recognized for 5 minutes.
    Mr. Collins. Thank you, Mr. Chairman. I appreciate the 
opportunity to be back here. And seeing this panel, it reminds 
me of one of my favorite movies of all time, ``Groundhog Day,'' 
because we see you here again as we go through this.
    Mr. Chairman, I would ask unanimous consent to enter 
Google's report on how they fight online piracy into the 
record.
    Mr. Coble. Without objection.
    [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
                               __________

    Mr. Collins. And would have also entered the Motion Picture 
of America's filing as well, but my distinguished colleague, 
Ms. Chu, beat me to it.
    Mr. Coble. Without objection.
    Mr. Collins. As we look on this.
    To the witnesses, I would like to thank, you know, all for 
being here. I have listened a great deal. I have been listening 
even out of here in a meeting for--and holding this hearing. I 
believe we have got to continue to examine the volunteering 
issue before the industry, because I believe they are a step 
forward. In considering any legislative remedies, we need to 
see what is already being done, because the last thing I would 
like to see is just come again. What I think we do too many 
times in all forms of government, from local to Federal, is we 
rush in with the, quote, ``legislative fix,'' and then all of a 
sudden that fixes it for all of 6 months. And then somebody is 
not happy, let us fix it again. We have got to have some common 
sense here.
    And also, I think, a little bit of marketplace issue as 
well. Government will not, cannot, and should not solve all of 
your problems. You need to get this right, and you need to get 
it together voluntarily, and then, as is spoken of just a few 
minutes ago, then government can step in where need be and help 
the process along.
    In looking at this, I am encouraged by what I am hearing 
and have been encouraged by some meetings that I have had even 
this week. But I believe there is still a lot of work that 
needs to be done. In fact, even this morning, did a quick 
Google search for ``Parks and Recreation'' episodes online, and 
at the bottom of the search results on the first page, I read 
this: ``In response to a complaint we have received from the 
U.S. Digital Millennium Copyright Act, we have removed one 
results from this page. If you wish, you may read the DMCA 
complaint that caused the removals or removal at 
chillingeffects.org.''
    Okay. There is a little bit of a political comment right 
there. That is fine. I get it. And, look, I would like to have 
Google here to discuss this.
    Now, in full disclosure, I have talked to Google this week 
in one of their offices, and we have brought up some of this as 
we went along, because I think they have an already important 
role that search engines play in this and the possibility that 
they can really dramatically alter the online piracy landscape 
for the better.
    However, I am concerned that maybe we are not addressing 
this or investing in this as much as we should. In fact, I want 
to go to you, Mr. Sherman, because out of your written 
testimony, you seem to indicate that they are not invested at 
all and, in fact, do not seem to be making any effort to 
promote legitimate options for streaming content. I just want 
to ask you, is that an accurate representation of your 
testimony?
    Mr. Sherman. No, I don't think so. I think Google has done 
things. My problem is that they are measuring their actions by 
how much stuff they are doing rather than the impact that it is 
having. When they run their own business, I doubt that if they 
keep a lot of people busy, they would regard that as 
sufficient. They probably want to make sure that it results in 
a meaningful revenue impact. We need the same thing.
    Mr. Collins. So you are saying quantity doesn't always 
recommend to quality.
    Mr. Sherman. Right.
    Mr. Collins. Okay. Would others like to address this? I 
will open it up to the rest of the panel, from Ms. Lesser all 
the way down. Anybody want to take a bite?
    It is okay, guys. It is afternoon, you can laugh.
    Mr. Coble. It is afternoon provided they beat the red 
light.
    Mr. Collins. Exactly. As we do that. They are saying, we 
are going to get in under his minutes as we can.
    Here is the question. Look, I am going to actually give 
back a little bit of my time today, because this is something 
that our office has been heavily involved with and will 
continue to be involved with.
    I want to go back to my statement just a few minutes ago. 
This applies not only in this environment here. There is 
definitely a need for this Committee, and we will be heavily in 
jurisdiction with the fine folks from both sides of the aisle 
here looking at this. I think there are going to be ways that 
we can work to protect the owners and protect the rights and 
then still provide content, because I believe by protecting 
those rights, you actually expand innovation, you expand 
productivity, and we are going to be a part of that.
    But I think what we also got to come to the conclusion here 
is that this is an issue that needs to be addressed, it needs 
all parties to the table, and to do so in a long-lasting way. 
So, again, to come here is voluntary agreements are fine. Those 
are what needs to be happening. We need to continue this 
discussion. But I am also not convinced this is going to be 
where it ends. So it will continue this process as we go 
further.
    With that, Mr. Chairman, I yield back.
    Mr. Coble. I thank the gentleman.
    The distinguished gentleman from New York Mr. Jeffries is 
recognized for 5 minutes.
    Mr. Jeffries. Thank you, Mr. Chairman.
    And let me thank the witnesses for your testimony today.
    It is clear to me that reasonable people should be able to 
agree that online piracy is a significant problem, deserves to 
be addressed. The people who create content, it seems to me, 
should have the opportunity to benefit from the fruits of their 
labor and encourages creativity moving forward. It is fair, and 
it is just as consistent with Article I, Section 8 of the 
Constitution designed to promote the progress of science and 
useful arts.
    But it is also the case, I think, I believe, that the 
Internet has been a wonderful field of opportunity for 
entrepreneurship, for innovation, for growth beyond which many 
could have even contemplated 15 or 20 years ago. And so we 
don't want to do anything in the Congress certainly, or even in 
the business context, that limits the ability for that 
innovation and that growth and that entrepreneurship to 
continue to flourish on this field of opportunity called the 
Internet.
    And you have got a lot of different players in the Internet 
ecosystem, I gather. You know, you have the search engines, the 
ISPs, content creators, payment processors, ad companies.
    And so I guess I will start by asking Ms. Lesser, and then 
maybe Mr. Sherman and Mr. Rothenberg can weigh in, from your 
perspective, what is the best way to get all of the individuals 
in this ecosystem to work together in a manner that deals with 
the online piracy, that clearly should be a problem that we 
take seriously and confront, but also respects the Internet in 
a manner not designed to limit the opportunities that have been 
available through the innovation and the entrepreneurship and 
the growth in this medium?
    Ms. Lesser. What I would say from the experience that we 
have had thus far in our small group involving ISPs and the 
content industry is that if you look at this in your silo, you 
are not going to find a solution. If we start from where you 
started with the Constitution, that there is a value in 
protecting creative content, something that if you ask people 
on the street they agree with, something that we are trying to 
teach to kids, I think if you start with that premise and you 
move down, what you find is that innovation and the development 
and the distribution of content cannot only coexist, but can 
help each other. And I think what we are learning in our group, 
that there are benefits to both.
    So our program is an educational program, is focused on the 
attitude toward creative content generally and then helping 
people find the legal ways that they can access content.
    So I don't think that it should be as hard as it is. And it 
is based on, you know, 15 years of back-and-forth in the policy 
arena, in the business arena. But everything is really moving 
toward the same place, and I think once this group came to the 
table, it was very clear that their interests were aligned, 
which is why you see companies like the five leading ISPs 
investing their own resources in this agreement and bringing 
this agreement to fruition.
    Mr. Jeffries. Thanks.
    Mr. Sherman.
    Mr. Sherman. I think there is no substitute for dialogue, 
and I mean nonthreatening dialogue where it isn't over 
liability, it isn't over responsibility; it is how you can work 
together.
    When we engaged in conversations with the ISPs, we started 
in very different places, but we learned a lot from each other 
by just talking it through. And we brought in additional 
stakeholders who looked at consumer viewpoints, and privacy 
viewpoints, and so on. And the end of that stew was a process 
that everybody could buy into and support.
    That is the kind of process I think we need to replicate 
with respect to multiple industry sectors to get lots of people 
involved in solving this. And as soon as you have two groups 
and three groups and four groups, more and more people will be 
willing to do it.
    On the advertising side, because of the best practices that 
the ad networks and the IAB did, we have been contacted just in 
the last couple of weeks by a number of additional ad networks 
asking for our help and for information so that they could do a 
better job themselves. You get buy-in because you have had buy-
in, and that is the process we need to get going.
    Mr. Rothenberg. Again, thank you for the question, Mr. 
Jeffries. And, again, I can't really improve on what Mr. 
Sherman and Ms. Lesser have said, but I will try.
    You can't get them all in a room. There are hundreds of 
millions of people around the world that are part of the 
Internet ecosystem. The beauty of the Internet supply chain is 
also the great vulnerability of the digital supply chain. It is 
basically open source. It allows for enormous innovation from 
the smallest players, but it also creates great 
vulnerabilities.
    You can get the biggest and most significant players in the 
room to reach voluntary agreement. And as Mr. Sherman has said, 
that process, with encouragement from the Congress and from 
other bodies, can actually yield great results.
    Importantly, one of the big changes over the past several 
years is that many of the biggest players in the digital 
technology industry have also become content creators. Google, 
Microsoft, AOL all are presenting slates of original digital 
video programming, and they are basing a very substantial part 
of their evolving business on being content creators. So they 
have stakes in this game on all sides.
    I think working together among major stakeholder groups to 
create a coherent program in which all have skin in the game is 
the best way to go about it. Now, I would tell you that my 
ideal, and I am not necessarily speaking for all my members, 
but certainly what I would like to see happen is the 
development of some kind of Good Housekeeping Seal of Approval 
program for participation in the digital supply chain, so that 
buyers of digital advertising, for example, can look and see 
who is a legitimate player and who is not. I would like to see 
us push in that direction.
    Mr. Coble. The gentleman's time has expired.
    Mr. Levitt, if you and Mr. Barchiesi wish to respond very 
briefly.
    Mr. Barchiesi. From our perspective, I hear a lot about 
content, but the International AntiCounterfeiting Coalition, we 
represent cross industries, there is health and safety issues, 
there is content issues. Ultimately again I will emphasize 
voluntary agreements work when there is willing partners. There 
is proof of concept. We have had this program for 2 years. And 
could I tell you 3 years ago, if I said I want to work with 
MasterCard, Visa, or American Express, PayPal, MoneyGram, 
Western Union, they wanted to run me out of town. Now we host 
events together. We work together on public service messaging. 
I think it is a model that could be used and established in 
other arenas to move forward.
    Mr. Coble. Very briefly, Mr. Levitt. We are running out of 
time.
    Mr. Levitt. Okay. Well, you know, Pharmacy Checker's area 
is not copyright content. It has to do with the purchase of 
medication online. And I just think it is important when we 
look at these voluntary agreements that different areas should 
be treated differently.
    Former Intellectual Property Enforcement Coordinator 
Espinel, I quote, ``challenged the private sector to 
voluntarily address the health and safety issues presented by 
rogue online pharmacies.'' And I just want to reiterate that 
this is the only way we should engage in this area for shutting 
down those sites that endangers a person's health.
    Mr. Coble. Gentleman's time has expired.
    I am trying to keep this train rolling. You know, of 
course, your complete statements are in part of the record. So 
even though I may have been accelerating my pace at one time, 
your information will be read by all.
    I am now pleased to recognize the gentlelady from 
California Ms. Lofgren for 5 minutes.
    Ms. Lofgren. Thank you, Mr. Chairman.
    And thanks to the panel for your testimony.
    And I remember just a short time ago, when we were having a 
rather raucous discussion of SOPA, that the discussion was 
maybe we should follow the money, and it looks like actually 
some of that has occurred here, to good effect. So I want to 
congratulate those who have worked to try and find solutions. 
And I am sure there is lots more to do, but sometimes it is 
worthwhile to celebrate what has been achieved, not just 
complain about what yet remains to be done.
    Just a couple of questions, and I don't want these to be 
taken as opposition to making progress, because they are not. 
But one of the things that these voluntary agreements raise is 
the issue of due process for people who are legitimate, but 
maybe aren't found to be legitimate. For example, and you said, 
Ms. Lesser, we start with the Constitution. Yes, we have a 
protection for intellectual property, copyright, and patent. 
But in the copyright arena we also have the First Amendment and 
the fair use doctrine. So how do we make sure that, I mean, 
people who are making fair use, that their rights are 
protected? How do you address that in your system?
    Ms. Lesser. Well, that is one of the very important aspects 
of the system. As I said in my testimony, we developed a system 
that on the front end is very much focused on notifying 
consumers about copyright violations of whole works. So there 
is a methodology that has been put in place and streamlined so 
that we are very assiduously trying to avoid capturing works 
that are not covered by copyright or that would fall into this 
fair use category. So on the front end, there has been a lot of 
work put into making sure there are not false positives.
    At the end of the process, however--and our process does 
not end with really a punitive consequence; it ends with a 
heightened measure we call mitigation--but just before a user 
would have that mitigation measure imposed, they are offered 
the right to an appeal. And I put ``appeal'' in quotes.
    Ms. Lofgren. If I can interrupt. It is not that I don't 
want to hear the whole thing, but we have limited time.
    The user has interests, but the speaker also has interests, 
and the two are not always perfectly aligned. So if you are the 
speaker, and let us say you have a belief, maybe correctly or 
incorrectly, I don't know, that what you are doing is a parity, 
or it is a political speech, or that it is protected, how do 
you protect your rights without relying on the Internet user to 
establish your rights?
    Ms. Lesser. I am not sure that the protection of that right 
actually falls within the program. The program itself assumes 
that an alert has been sent to an account holder, and that 
account holder has the ability to go during that appeal process 
and say, this file was a fair use.
    Ms. Lofgren. Right. Right. But what about the person who 
created the content that is being dinged? Are they being 
notified?
    Ms. Lesser. They are not. But I actually think the best way 
to protect people engaging in fair use is on the front end, 
which is to enforce copyrights against----
    Ms. Lofgren. Right.
    Ms. Lesser [continuing]. Protected files.
    Ms. Lofgren. In terms of payment processing, I remember 
during the SOPA discussion we had a substantial discussion 
about cutting off credit card payments for infringing sites. 
And I remember Visa, which is right outside my district, said 
that they would be happy to do that, but they were rarely ever 
asked to do so. And it sounds like that has changed 
considerably in the time that has processed. And I think that 
makes sense. But, again, for example, a notice and takedown, 
the person who has an opportunity to dispute that if they feel 
that it is incorrect.
    You know, cutting off payments is a death sentence for a 
Web site. Do they have any opportunity to contest that if they 
think that there is an incorrect decision that has been made? 
What is the process for that?
    Mr. Rothenberg. In our program, which is about cutting off 
or helping to choke off advertising revenues, it is basically 
an information system between the buyers and the sellers. They 
are the ones who are the trading partners; they are the ones in 
contract. We don't have a consumer-facing side to it. And I 
agree with you that there needs to be some form of due process 
in there.
    But by the same token, I think what we ought to be most 
concerned about are the largest and most persistent violators. 
I am less worried, although I, as you do, I worry about smaller 
players falling through the cracks deeply. But I think if we 
keep our focus on the worst violators and the most persistent 
violators, those problems will not--the problem of the--the 
small fry being shut off will not be so----
    Ms. Lofgren. I just have one final question. I know from 
the study that was released this morning that about 30 
percent--what was the number--37 percent of the searches for 
infringing content were searches for a domain name or a 
specific service, like Mega Upload or something like that. So 
at least, you know, a big chunk of the people that are looking 
for infringing content know what they are looking for, they are 
looking for infringing content, and not being confused.
    So I guess that leads to the question, and MPAA isn't here. 
What further efforts are being made to have digital content 
more freely available for a fee? And I will just give you an 
example.
    You know, there was a movie. It is out on DVD now. I wanted 
to watch it streaming. I Googled it. The only place it was 
available were infringing sites. I won't do that, but I imagine 
other people do. So the more that you could actually pay for 
stuff, the more that is out there, I think the less than honest 
people will infringe. So I am just wondering what further 
efforts are being made. And I think it is probably more for the 
movie industry than for the music industry.
    Mr. Sherman. Certainly the music industry, we are almost 
two-thirds now of our revenues being digital. And all the music 
is out there, all the music is up there in every possible way. 
We think that movies and TV are getting there quickly. I can't 
speak for that.
    But that same survey that you mentioned also had a figure 
that 58 percent of the people were using search where they 
weren't entering anything indicating they were looking for an 
illegal copy, but they were led to an illegal copy anyway, 
because search engines can be used for discovery. How did they 
find out about Mega Upload the first time? Now they know to 
go--no longer, fortunately--but how do they know to go to the 
Pirate Bay or MP3 Skull? Search takes them there. That is why 
we would like to work with them to try and find ways to address 
that.
    Ms. Lofgren. My time is up, Mr. Chairman. I don't want to 
abuse the clock. Thank you.
    Mr. Coble. I thank the gentlelady from California.
    The distinguished gentleman from North Carolina Mr. Watt is 
recognized.
    Mr. Watt. Thank you, Mr. Chairman. And I want to thank the 
Chairman for having another hearing about this. I want to make 
sure that nothing I say gets misconstrued to imply that I don't 
believe in these agreements. I think they are great.
    I am not sure I agree with Mr. Poe that all of this can be 
done without some government involvement. I suppose if private 
agreements worked to solve all criminal activity, it would be--
we wouldn't need any enforcement in the non-Internet world. I 
think we still need some help in this area.
    And the magnitude of the problem, I hope, is going down, 
but I assume there is nobody on this panel who believes that 
this can all be done by private agreements. If there is, I 
certainly want to hear from them and give you the opportunity 
to express that opinion, because we need it on the record.
    But you were getting ready to press your button?
    Mr. Rothenberg. I would just say, Mr. Watt, I think we 
would all, or at least most of us, agree that we should start 
with the voluntary agreements, and then where there are gaps 
that cannot be filled by the voluntary self-regulation, then 
and only then would we seek to fill them with legislation and 
regulation.
    Mr. Watt. Okay. We started our SOPA discussions dealing 
with foreign sites. Has any of these private agreements dealt 
with that problem effectively? Can somebody address that for 
me?
    Mr. Barchiesi. The ICC's program does deal with foreign 
sites because it doesn't matter where in the world the site is 
hosted. These are contractual agreements between credit card 
companies and banks and merchants, and it has global terms to 
it, and they could terminate merchant accounts regardless of 
where they are, anyplace in the world.
    Mr. Watt. And it is a voluntary agreement.
    Mr. Barchiesi. Yes.
    Mr. Sherman. I think it is important to remember that the 
voluntary agreements are built on contractual relationships 
that already exist. So Visa has contractual relationships with 
the people it serves that they will not process payments for 
illegal activities. So if illegal activities are called to 
their attention, and then they do their own investigation and 
confirm that, they have a contractual right to terminate 
whether it is domestic or foreign, but it is under their own 
contractual relationship.
    The voluntary agreement is simply providing a mechanism for 
routing all of these complaints through one portal to make it 
efficient, to not have duplication of efforts, to have a 
standardized system. That is the benefit of these agreements. 
It creates a mechanism for everybody to go forward in the same 
direction to address the issue in a similar way.
    Mr. Rothenberg. And to your specific point about foreign 
infringement, again, we would be very much in favor of this 
Congress pushing in the direction of incorporating the 
frameworks that we are talking about into global trade 
agreements. Whether you call that public solutions, or private 
solutions, or a quasi public-private, there is definitely a 
role for the public sector there.
    Mr. Watt. Another major problem that we were trying to 
solve with SOPA was the problem of repeat offenders. Sites that 
went up one day, got the DNCA notice, they got taken down, they 
were back up the next day, how the voluntary agreement is 
solving that problem.
    Mr. Sherman. That is one of the core elements that we would 
like to see in all of these agreements, like with locker 
services or search engines who--for example, there are mobile 
apps. We asked Google to take it down because it is clearly 
infringing. Google takes it down. They go up again a week later 
using a slightly different name, but it is the same app.
    Repeat infringement policies there would make a difference 
where developers could be banned from the app store if they are 
going to continue to infringe.
    Mr. Watt. But I guess my question is can that be done 
through a voluntary agreement?
    Mr. Sherman. I don't see why not.
    Mr. Watt. Who would be the parties to that agreement?
    Mr. Sherman. Well, the policy would be basically 
articulated by whoever the platform is. It could be Google, it 
could be Visa, it could be a locker service. Basically saying 
that if you are----
    Mr. Watt. Encourage them to come to the table and enter 
into that agreement, I guess.
    Mr. Sherman. Exactly. Just that we are going to adopt as a 
best practice a repeat infringement police. For one company, it 
might be two; for another company, it might be five. But they 
are going to have a policy so that they don't basically have 
the up, down, up, down, up, down process. But after a while 
they are saying----
    Mr. Watt. So you would have a ``three strikes and you are 
out'' policy----
    Mr. Sherman. Whatever number of strikes.
    Mr. Watt [continuing]. Or ``five strikes and you are out'' 
policy that sometimes we apply criminal law.
    Mr. Sherman. After all, we are talking about people who are 
in business, and they don't want to be in the business of 
basically harboring illegal content or dealing with the same 
problem over and over again, just like an ISP doesn't want to 
have to deal with somebody who keeps violating their terms of 
service. They have an absolute right to decide who they are 
going to serve if they continue to engage in illegal conduct.
    Mr. Watt. Okay. Well, I do want to applaud everybody who 
has been parties to these agreements. I think it is great that 
the private sector and all of the parties are trying to solve a 
problem. I am not sure I believe you are going to be able to 
solve all of the problem that way, but I guess if we keep 
having hearing after hearing after hearing about whether 
something is necessary, maybe it at least keeps the focus on 
the issue.
    At some point I think we are actually going to have to do 
something other than have a hearing about it. So that is kind 
of where I come down on this.
    But I applaud it. I applaud your efforts. I heard Mr. 
Levitt's concerns about--and especially in the pharmaceutical 
area. But I encourage all parties to continue to try to work 
toward these voluntary agreements so that we don't have to keep 
having the hearing after hearing after hearing, and ultimately 
so that possibly we don't have to do anything that would 
involve the government being involved. Surely that would be the 
worst thing that could happen. We could disband the police if 
we had enough voluntary agreements.
    So anyway, I yield back, Mr. Chairman.
    Mr. Coble. Gentleman's time is expired.
    I want to thank the very fine panel of witnesses. I also 
want to thank those in the audience who have remained for this 
entire hearing. This indicates to me that you have more than a 
casual interest in this subject matter. And I thank all of you.
    This concludes today's hearing. Thanks to all of you for 
attending.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    This hearing stands adjourned.
    [Whereupon, at 3:41 p.m., the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


         Links to Additional Material submitted for the Record

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 
