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



 
                  RISE OF INNOVATIVE BUSINESS MODELS:
                        CONTENT DELIVERY METHODS
                           IN THE DIGITAL AGE

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

                                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

                               __________

                           NOVEMBER 19, 2013

                               __________

                           Serial No. 113-74

                               __________

         Printed for the use of the Committee on the Judiciary


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


                                 ______

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                       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

                              ----------                              

                           NOVEMBER 19, 2013

                                                                   Page

                           OPENING STATEMENT

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

                               WITNESSES

Paul Misener, Vice President, Global Public Policy, Amazon.com
  Oral Testimony.................................................     3
  Prepared Statement.............................................     6
John McCoskey, Executive Vice President and Chief Technology 
  Officer, Motion Picture Association of America
  Oral Testimony.................................................    13
  Prepared Statement.............................................    15
Sebastian Holst, Executive Vice President and Chief Strategy 
  Officer, PreEmptive Solutions
  Oral Testimony.................................................    21
  Prepared Statement.............................................    23
David Sohn, General Counsel and Director, Project on Copyright 
  and Technology, Center for Democracy and Technology
  Oral Testimony.................................................    33
  Prepared Statement.............................................    35

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

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.............    45


                  RISE OF INNOVATIVE BUSINESS MODELS:
                        CONTENT DELIVERY METHODS
                           IN THE DIGITAL AGE

                              ----------                              


                       TUESDAY, NOVEMBER 19, 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 1:31 p.m., in 
room 2141, Rayburn Office Building, the Honorable Howard Coble 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Coble, Goodlatte, Conyers, Watt, 
Marino, Smith of Texas, Chabot, Issa, Poe, Chaffetz, 
Farenthold, Holding, Collins, DeSantis, Smith of Missouri, Chu, 
Deutch, Bass, Richmond, DelBene, Jeffries, and Lofgren.
    Staff present: (Majority) Joe Keeley, Chief Counsel; 
Olivia, Lee, Clerk; and (Minority) Stephanie Moore, Minority 
Counsel.
    Mr. Coble. Good afternoon ladies and gentlemen. Welcome to 
the hearing.
    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 our witnesses today and those in the 
audience as well.
    This afternoon we will hear from a group of a--from a panel 
of distinguished representatives, who are involved with some of 
the leading copyright policy in technology issues of our time. 
The benefits to America's economy, brought about by our 
Nation's copyright laws are the envy of the world. Our economy 
is stronger and generates more original creativity than in any 
other country.
    Although probably true that the way I listened to music way 
back yonder, when I was growing up, is certainly not the way 
young people listen today. I can say with certainty that 
America's a better place when the creativity of our Nation's 
artists can be enjoyed by our society. And now that everyone 
seems to own a collection of handheld electronic devices, 
Americans have even more access to more content than any time 
in history.
    One reason why this creativity exists is that our Nation's 
intellectual property laws are designed to reward those who 
invest their time and resources into the developing of original 
works of intellectual property. This intellectual property is 
not just embodied in a song, a book or a movie, but in the very 
device used to enjoy it.
    Our Nation is also not hesitant when it comes to embracing 
new ways of doing business. For example it is safe to say that 
the Internet has simultaneously destroyed old business models 
while developing new ones.
    One of our witnesses works for a company that has 
demonstrated how the Internet has created new business models. 
Built originally around the old-line distribution of books, 
Amazon has grown in less than two decades into a diversified 
company that recently announced a partnership with the U.S. 
Postal Service to expand home deliveries into Sunday in some 
cities. In this case, innovation is changing business models 
and driving government policy to help meet consumers' demand.
    I look forward from all the witnesses this afternoon about 
the rise of innovative business models in the digital age and 
how consumer expectations are changing as a result.
    Good to have you all with us.
    I now recognize the Ranking Member, the gentleman from 
North Carolina, Mr. Watt, for his statement.
    Mr. Watt. Thank you, Mr. Chairman.
    And I am going to pass on the opportunity to make an 
opening statement because I really want to give the witnesses 
to testify. And I understand we are going to have a vote and I 
have got to be somewhere.
    So, I--in the interest of time to get to the witnesses and 
hear their testimony, I think I will submit my statement for 
the record and yield back.*
---------------------------------------------------------------------------
    *The information referred to was not available at the time this 
hearing record was printed.
---------------------------------------------------------------------------
    Mr. Coble. I thank the gentleman. And, as you have--Mr. 
Watt pointed out, there will be a vote, I am told, forthcoming. 
So, we will proceed accordingly.
    If you all will bear with me just for a minute.
    Let me, first of all, just ask you--each of you to stand, 
if you will, and we will. I will swear you in.
    [Witnesses sworn.]
    Mr. Coble. Our first witness today is Mr. Paul Misener, 
Vice President for Global Policy, Public Policy at Amazon.com. 
For the past 14 years Mr. Misener has been responsible for 
formulating and representing the company's public policy 
position worldwide. Mr. Misener received his J.D. from the 
George Mason University School of Law and a B.S. in electrical 
engineering from Princeton University.
    Our second witness today, Mr. John McCoskey, Executive Vice 
President and Chief Technology Officer at the Motion Picture 
Association of America. Prior to the MPAA, Mr. McCoskey was a--
has served as Chief Technology Officer at PBS and Vice 
President of Product Development of Comcast Corporation. He 
earned his M.S. degree in computer science and technology 
management from Johns Hopkins University and his B.S. in 
electrical engineering from the Bucknell University.
    Our third witness today, Mr. Sebastian Holst, Executive 
Vice President and Chief Strategy Officer at PreEmptive 
Solutions. In his position, Mr. Holst is responsible for 
product strategy and management aiming to protect software 
against reverse engineering and piracy. Mr. Holst is also a 
cofounder of The Mobile Yogi mobile app focusing on yoga. He 
received his degree from Vassar College and Harvard Business 
School.
    Our fourth and final witness is Mr. David Sohn, General 
Counsel and Director for the Center on Democracy and Technology 
Project on Copyright and Technology. This project seeks to 
promote reasonable pro-consumer approaches to copyright and 
related policy issues. Prior to joining CDT in 2005, Mr. Sohn 
worked as Commerce Counsel for Senator Rob Wadden and practiced 
law at Wilbur, Cutler & Pickering. Mr. Sohn received his J.D. 
from the Stanford School of Law and his B.S. from Albers 
College.
    And I think I heard a bell, so I think it might----
    Why don't we start with our first witness and get the--and 
then with the bell I will go vote and we will return 
imminently.
    If you gentlemen--we would like for you to confine your 
statements, if possible, within the 5-minute time range. And 
there is a model on your desk. When that red light appears, 
your time is running out. You won't be severely punished, 
however, but if you could stay within that time limit I would 
appreciate it.

          TESTIMONY OF PAUL MISENER, VICE PRESIDENT, 
                GLOBAL PUBLIC POLICY, AMAZON.COM

    Mr. Misener. I appreciate that, Mr. Chairman.
    Mr. Coble. Yes, sir.
    Mr. Misener. Thank you.
    My name is Paul Misener and I am Amazon's Vice President 
for Global Public Policy.
    Thank you and Mr. Watt for inviting me to testify here 
today about the digital content delivery.
    Mr. Chairman, Amazon's mission is to be earth's most 
customer-centric company where people can find and discover 
anything they may want to buy online. In furtherance of that 
mission, we sell millions of different products in a wide 
variety of categories. But, Amazon was born as a media content 
delivery country--company with the provision of content to our 
customers and it remains a very important part of our business 
today.
    When Amazon began selling online, in 1995, the content we 
sold was limited to the text, pictures and other graphics 
contained in physical books. Three years later, in 1998, we 
began to sell music and video content, also delivered on 
physical media, primarily audio compact disks and VHS 
videotapes.
    When I began working for Amazon 14 years ago, our Web site 
had a customer support help page entitled, ``Just what is a 
DVD?'' That described the then new digital video disk 
technology. It included observations like, quote, ``VHS video 
tapes are far too entrenched in the market to disappear any 
time soon,'' and, quote, ``don't worry you won't have to trash 
your VCR, if you don't want to.'' Now, as antiquated as these 
observations seem to us today, the reality then and the reality 
now is that Amazon seeks to provide our customers the greatest 
selection of content using the best, most convenient 
technologies.
    By the end of 2007, however, we had introduced digital 
download services for books, music and video. And now, when we 
speak of digital delivery, we speak primarily of digital 
content delivered electronically via the Internet. And so, our 
digital delivery business today is a natural continuation of 
origins as a place where customers can find and discover what 
they want to buy online.
    Amazon Instant Video is a digital video streaming and 
download service that offers more than 150,000 titles. For 
digital music, the Amazon MP3 store currently has a growing 
catalog of more than 24 million songs in the United States. The 
Kindle digital bookstore opened 6 years ago this month and has 
grown to millions of books, newspapers and magazines. We now 
sell more kindle books than print books. And, remarkably, 
Kindle owners read four times as many books as they do prior to 
owning a Kindle.
    Mr. Chairman, in addition to digital content obtained from 
traditional publishers, Amazon makes it easy for creators to 
self-publish their work. For example, the Amazon subsidiary 
CreateSpace provides digital content delivery of video via 
Amazon Instant Video. Similarly, authors may use Kindle Direct 
Publishing to publish books independently on the Kindle store. 
Amazon Studios is a new way to encourage the development and 
distribution of digital video content. As you may have seen in 
Friday's Washington Post, Amazon Studios has introduced its 
first comedy series, Alpha House.
    Of course, Mr. Chairman, digital delivery of content to 
consumers requires some physical infrastructure and electronic 
devices. You probably have heard of cloud computing. And, as 
you may know, Amazon has a cloud computing business called the 
Amazon Web Services or AWS. Amazon Cloud Drive, which is built 
on AWS, lets customers manage and store music, videos, 
documents, and pictures through the Internet. In addition, the 
Amazon Cloud Player enables customers to securely store their 
personal music in the cloud and play it on a wide variety of 
devices including Kindle Fire. AWS helps enterprise customers 
with various data storage and computation needs. It also has 
partnered with Netflix for the delivery of digital content.
    Digital content can be accessed and played through a wide 
variety of devices including a fabulous little box from Roku 
and available at Amazon that allows me to watch and hear Amazon 
instant video, as well as Netflix, Hulu and Pandora, directly 
on my family room TV. And you can read you Kindle books on a 
large number of devices and platforms. Importantly, customer 
expectations today are not only that an individual customer 
should be able to enjoy digital content on a single device of 
her choice, but also that she should be able to enjoy the same 
content across multiple devices.
    One other, newly available place and time for enjoying 
digital content deserves mention. After working for years with 
the airline industry and others, Amazon is proud to have played 
a key role in the Federal Aviation Administration's decision 
just a few weeks ago to allow consumers to use their 
electronics, like Kindle, during airplane takeoff and landing.
    In conclusion, Mr. Chairman, consumers are enjoying the 
benefit of innovative digital content delivery. And Amazon 
looks forward to working with the Committee to preserve those 
benefits in that innovation.
    Thank you again for the opportunity to testify. And I look 
forward to your questions.
    [The prepared statement of Mr. Misener follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. Misener.
    Mr. McCoskey, we are going to try to get you in before we 
go vote. So, if you would proceed for 5 minutes.

TESTIMONY OF JOHN McCOSKEY, EXECUTIVE VICE PRESIDENT AND CHIEF 
   TECHNOLOGY OFFICER, MOTION PICTURE ASSOCIATION OF AMERICA

    Mr. McCoskey. All right. Thank you, Mr. Chairman.
    Chairman Coble, Ranking Member Watt and Members of the 
Subcommittee, my name is John McCoskey and I am Executive Vice 
President and Chief Technology Officer for the Motion Picture 
Association of America. Thank you for the opportunity to 
testify on behalf of the MPAA and its member companies. You 
have my written testimony, I would like to go through some of 
the highlights of that in my spoken words.
    So, in the United States and throughout the world, an 
explosion of innovation is occurring, irrevocably changing much 
of our daily lives. The majority of consumers will experience 
this revolution in the way they consume the content that they 
love: the films, television series, and other video content 
they watch; the music they listen to; and, the books they read.
    In the media and entertainment industry, digital technology 
advances are affecting everything from glass to glass, that is, 
every element between the camera lens and the screen where 
consumers experience our content. This is also a time of 
unprecedented change in consumer behavior. There are now more 
mobile devices than people in the United States, and 
smartphones and tablets have outpaced sales of desktop and 
laptop computers combined.
    As the primary advocate throughout the world for American 
film, television and home video industries, MPAA and our member 
companies are committed to promoting a climate that provides 
audiences with as many options as possible for experiencing the 
great video entertainment our country produces.
    Nearly 42 million homes in the United States now have 
Internet-connected media devices including game consoles, smart 
TVs and online set-top boxes. And more than 90 legitimate 
online services are already enabling those homes to download or 
stream movies and TV shows, and that number continues to grow. 
MPAA's wheretowatch.org Web site offers a one-stop shop for 
finding legal content to Americans.
    And Americans are visiting these services at an incredible 
and growing rate. Last year alone, U.S. audiences consumed 
nearly 3.5 billion hours of movies online. Our member companies 
have embraced this movement of portability, flexibility and 
ease of access for viewers.
    And one way they have done so is through UltraViolet, a 
free digital storage locker that allows a consumer, after 
purchasing UltraViolet media such as BlueRay, DVD or electronic 
purchase over the Internet, to then access that content on any 
UltraViolet-compatible device registered to them. Consumers 
have the option to either seamlessly stream the content or 
download it for later viewing without a broadband connection. 
Consumers can choose from a wide number of UltraViolet-enabled 
services like Flixster, Walmart's Vudu, Best Buy's Cinema Now, 
and so forth.
    Our member companies, along with other in the Digital 
Entertainment Content Ecosystem consortium of more than 60 
studios, retail stores, and technology firms, created 
UltraViolet to further enable consumers to watch what they 
want, when they want, where they want. And because UltraViolet 
is powered by such a diverse consortium of innovative 
companies, consumers are not locked to one portal and shift 
from one service to another as each continues to innovate. 
UltraViolet also enables sharing of content among up to five 
connected accounts and 12 devices. And more than 13 million 
accounts have registered for UltraViolet to date.
    The overwhelming success of these legal services and 
distribution models in the bridging digital marketplace is a 
testament to the success of the U.S. copyright regime, which 
promotes investment in both creativity and delivery of content. 
Recognizing creators' property interest in their creations 
encourages them to create even more innovative content. And 
this in turn spurns investment in applications, services, 
devices, and other technologies for viewing that content.
    The Copyright Act enables and encourages entrepreneurs to 
innovate and creates a competitive marketplace for these 
products and services. This is reflected in companies like 
Netflix, Hulu and Amazon, whose online streaming services began 
as distribution outlets for content created by others, but now 
also drive development of new original programming.
    This is a transformative time for content creators and 
distributors of types, but especially for those working in the 
American film and television industry. Our industry supports 
nearly 2 million jobs in the United States. It is responsible 
for 108,000 businesses across all 50 States, and 85 percent of 
those employ fewer than 10 people. In 2011, the industry 
supported $104 billion in wages, $16.7 billion in taxes, and a 
$12.2 billion trade surplus.
    And, as the marketplace continues to evolve in the digital 
age, we will continue embracing these innovations and the 
plethora of legitimate services for delivering content to 
consumers when they want, how they want, and on the platforms 
they want.
    Mr. Chairman, Ranking Member, Members of the Subcommittee, 
I thank you again on behalf of the MPAA and our member 
companies for the opportunity to testify today. And we look 
forward to working with you, in the days, months and years 
ahead, to ensure that this revolution in content creation and 
delivery continues to be embraced by all members of the digital 
economy, and that creators and makers continue to be encouraged 
to experiment and innovative.
    And I am happy to answer any questions you may have.
    [The prepared statement of Mr. McCoskey follows:]

    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. McCoskey.
    You all stand easy and we will return imminently.
    [Recess.]
    Mr. Coble. We will resume the hearing.
    I owe you an apology, I told you I would be back 
imminently, but our return is not so imminent. But, I had no 
control over that.
    Good to have you, Mr. Holst. If you will be--if you will 
kick us off on the second event.

  TESTIMONY OF SEBASTIAN HOLST, EXECUTIVE VICE PRESIDENT AND 
          CHIEF STRATEGY OFFICER, PREEMPTIVE SOLUTIONS

    Mr. Holst. Okay.
    Chairman Coble, Member Watt, distinguished Members of the 
Committee, my name is Sebastian Holst and I appear today 
wearing many hats.
    I am the Chief Strategy Officer at PreEmptive Solutions. 
Our software products are used by tens of thousands of 
developers to secure and to monitor their apps, increasing app 
quality, improving user experience and securing intellectual 
property. I am an app creator who, along with my wife Dawn, 
have published a family of yoga apps for consumers and small 
businesses. I am the founder of a cyber-security and brand-
monitoring service that provides threat analysis for public and 
private institutions. And I am also here representing the 
Association of Competitive Technology, ACT, the world's leading 
app association representing over 5,000 small and medium-sized 
tech companies.
    Today I am pleased to have the opportunity to share a 
software developer's perspective as the Committee considers the 
transformative impact of emerging content delivery methods in 
the digital age.
    To truly appreciate the magnitude of innovation occurring 
around us it helps to consider this one fact: no technology has 
been adopted faster by consumers than the smartphone ever; not 
the car, the microwave, not electricity, or even the Internet. 
And just what makes these smartphones so smart? Quite simply it 
is the apps they run. In just 6 years, smartphone apps have 
grown into a $68 billion industry and are expected to top $140 
billion by 2016.
    The industry's growth is also a job creation machine. Over 
750,000 jobs in the U.S., and over 800,000 in Europe have been 
created through this new app economy. And with the median 
salary for a software developer topping $92,000, these are 
great jobs to have.
    The rise of the mobile app economy has also significantly 
changed how apps are developed and marketed. Before the 
smartphone paradigm shift, developers faced enormous obstacles 
reaching consumers. We either sold packaged software in a store 
involving huge overhead or over the Internet where getting 
noticed was hard and managing payments and financial data could 
be exceptionally burdensome and even risky. Taken together 
these challenges posed significant barriers to entry and 
stunted growth.
    And then came the smartphone app store: a simple, 
centralized one-stop shop for the consumer. In an app store a 
developer sells software directly to consumers. And, for a 
reasonable percentage of the topline, app stores handle 
financial transactions, product placement and ensure a safe, 
standardized shopping experience. With the app stores, 
consumers find that what--with app stores consumers find the 
apps they are looking for and developers can do what they do 
best--build great apps.
    Of course app stores are not all created equal. How are 
stores curated? Meaning how apps are vetted for quality, truth 
in advertising, and even for how they use underlying hardware 
and network services can make the difference between a safe and 
satisfying shopping experience or one where malware, piracy and 
privacy risks cannot be safely ignored. Some of the most widely 
used--surprisingly, non-curated stores are popular. Some of the 
more widely used smartphones cater to this category. Yet, 
ironically, while usage is high in many of these ``wild west'' 
marketplaces, curated stores still deliver more than 75 percent 
of the revenues earned by app makers.
    Another byproduct of app store popularity is that they are 
starting to exhibit some of the old problems. Specifically, 
with over a million apps available in app stores, 
discoverability, the ability to stand out in a crowd, is once 
again becoming difficult. But now developers have a better 
answer to this problem. Reputation, quality and a focus on 
users, experiences and their preferences are critical to 
standing out in a crowded marketplace.
    One key innovation here has been the rise of application 
analytics. Application analytics provide visibility into user 
trends, end user behaviors and all manner of quality. 
Application analytics technology, like PreEmptive's, has 
emerged as one of the key competitive weapons successful 
developers are using to separate themselves from the rest of 
the pack.
    Now some people will tell you that technology changes 
everything. But, when it comes to basic notions of right and 
wrong, fairness and innovation, nothing could be further from 
the truth. Thanks to technology, the potential for growth and 
innovation has never been higher. But that is why the need to 
stay grounded in our basic beliefs has never been greater. I am 
confident that a review of the copyright system will be 
successful, as long as we remain true to these principles that 
have guided our judgment on the universal themes of 
intellectual property, fostering innovation and fairness.
    Thank you for the opportunity to speak here today. And I 
look forward to answering any questions you may have.
    [The prepared statement of Mr. Holst follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. Holst, I appreciate it.
    Mr. Shaw--Sohn? Sir, am I pronouncing your name correctly?
    Mr. Sohn. Sohn, yes.
    Mr. Coble. Sohn.

TESTIMONY OF DAVID SOHN, GENERAL COUNSEL AND DIRECTOR, PROJECT 
     ON COPYRIGHT AND TECHNOLOGY, CENTER FOR DEMOCRACY AND 
                           TECHNOLOGY

    Mr. Sohn. Chairman Coble, Ranking Member Watt, Members of 
the Subcommittee, on behalf of the Center for Democracy and 
Technology, thank you very much for the opportunity to 
participate in today's hearing.
    My statement today will focus on how consumer expectations 
and behaviors are evolving in today's marketplace for 
copyrighted works. What I would like to do is highlight a few 
trends and then offer some thoughts on what those trends mean 
for congressional action on copyright.
    So first, consumers increasingly expect the ability to get 
what they want when they want it. The Internet--Internet 
delivery--gives them convenience and immediacy. It also frees 
them from the limits of what is on TV at a particular time or 
what physical inventory will fit on the shelves at their local 
store. So, increasingly consumers expect to have comprehensive 
selection, to be able to pick precise content to suit their 
individual tastes, and to enjoy that content at times of their 
own choosing. In short, it is becoming more of an ``on demand'' 
world.
    The second trend I would point to is the rising importance 
of mobility and portability. Rather than being tethered to a 
particular place or a particular device, consumers increasingly 
want seamless access to their content on a mobile basis and 
across multiple devices.
    Third, and in some ways most significant, there has been a 
massive increase in creative activity by the public. Consumers 
today are not just passive recipients of creative material. 
They create and interact with copyrighted works as never 
before. They blog, they distribute photos and videos on social 
networks, they use excerpts of other works to create their own 
remixes or commentary. In sum, digital technology really blurs 
the lines between creators and consumers, enabling greater 
public involvement and interaction with creative works than 
ever before.
    The good news is that distribution models and technologies 
are rapidly evolving in ways that both cater to and fuel these 
trends. There are new business models, such as streaming 
services based on subscriptions or advertising. Social networks 
play prominent new roles in empowering individual creators and 
artists to distribute works either with a commercial purpose or 
without a commercial purpose. Creative Commons offers a more 
diverse set of licensing strategies. New classes of devices, 
like tablets and e-readers, create new options for consumers.
    In lots and lots of ways, the market is working. But, 
inevitably, it is also a work in progress. Responding to these 
kind of evolving demands is not a onetime challenge. It 
requires ongoing experimentation and innovation.
    So, with these trends in mind, I would like to offer 
several thoughts for Congress's review of copyright law.
    First, Congress should focus on ensuring that the legal 
regime encourages continued innovation to give consumers what 
they want. Now, to be clear, consumers are not legally entitled 
to on-demand access to everything they want any more than they 
are entitled to get everything they want for free. But, 
everyone is better off if the market can develop new offerings 
that recognize what consumers want and find ways to provide it 
lawfully. Because whenever legal services don't do a good job 
of catering to market demands, unlawful sources are out there 
waiting to fill the gaps. In the end, the best and most 
effective defense against widespread infringement is a robust 
and evolving content marketplace.
    To promote that goal, Congress should start by taking care 
not to undermine those elements of the current regime that 
encourage marketplace and technology innovation. My written 
statement highlights three in particular: the safe harbor, set 
forth in section 512 of the DMCA; the ``Sony doctrine'' 
concerning products capable of substantial non-infringing use; 
and the flexible and hugely important doctrine of fair use.
    Congress should also consider reforming the Copyright Act's 
statutory damages provisions. The current regime acts as a 
massive risk multiplier for any company or individual trying to 
navigate any unsettled area of copyright law. It therefore 
discourages innovation. And it undermines the trend toward 
public creativity and interaction by threatening individuals 
with disproportionate sanctions for any mistake they might 
make.
    Another step Congress should consider is providing greater 
legal certainty for personal noncommercial uses, such as moving 
content among devices for one's own personal use.
    And finally, Congress should make simplifying the Copyright 
Act one of the goals of any reform effort. As more and more of 
the public creates, remixes and otherwise interacts with 
copyrighted material, copyright needs to be easier for the 
public to navigate.
    Once again, thanks for the opportunity to participate 
today. We look forward to working with the Subcommittee as its 
work on copyright continues.
    [The prepared statement of Mr. Sohn follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


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    Mr. Coble. Thank you, Mr. Sohn.
    I appreciate the testimony from each of the witness. And I 
appreciate those in the audience. Obviously, your presence here 
represents more than a casual interest in the subject at hand.
    Gentlemen, we try to comply with the 5-minute rule as well. 
So, if you all could keep your responses terse, we would 
appreciate that.
    Mr. Misener, as your company has grown, what challenges, 
from a copyright perspective, have you faced?
    Mr. Misener. Thank you, Mr. Chairman.
    There are three that I have outlined in my written 
statement and I can briefly summarize them here.
    One is with respect to music licensing. The process is very 
difficult and cumbersome. If the policy goal is to get as much 
copyrighted works available out to paying consumers, this--the 
current process for licensing is in need of reform.
    Second, as Mr. Sohn has just described, the statutory 
damages provisions currently in law are--can produce some 
exorbitant penalties and create high risks for--especially for 
large libraries of copyrighted works. And it seems to me that 
those damages might be limited in some way that recognizes 
good-faith efforts to not infringe or to use fair use or when a 
defendant faces a novel question of law.
    And lastly, all of this innovation depends heavily on 
maintaining an open and nondiscriminatory Internet.
    Mr. Coble. Thank you, Sir.
    Mr. Holst, with extremely low or even no-cost price points 
for apps, what justifications do you hear from pirates who 
cannot claim that prices are too high as a justification for 
their theft?
    Mr. Holst. The fact that an application is either free or 
low-cost doesn't really represent either the work that has gone 
into it or the strategy--the total market strategy. From a risk 
point of view, pirating and counterfeiting of these free apps 
essentially is equivalent of being able to deliver counterfeit 
car parts or pharmaceuticals. So, very often, branded, 
recognized software is remarketed and redistributed with 
certainly nefarious motivations.
    Mr. Coble. I thank you, sir.
    Mr. McCoskey, for you and Mr. Sohn. What are the most 
effective ways, in your view, to convince consumers to use 
legitimate alternatives to online piracy?
    Mr. McCoskey. One of the things we try to do is actually 
make sure that consumers know that there are legitimate sources 
of content. And that is one of our challenges in this 
ecosystem, we got all these different players, actually being 
able to get those legal access to content in front of 
consumers, when there is a mix of access to illegal content. 
So, a big part for us is, not only creating paths and 
distribution mechanisms where we do distribute this content 
legally, but also getting consumers ways where they can find 
that content.
    Mr. Coble. Thank you, sir.
    Mr. Sohn?
    Mr. Sohn. I think it is largely a question of having lots 
of choice and lots of innovation in the marketplace. It is 
going to require experimentation to see what forms of services 
consumers are most interested in. But, I think the early 
success of iTunes, which was kind of a pioneer in digital 
music, showed that when services give consumers a broad 
selection at an attractive price point and a service that works 
well, consumers are interested in using the lawful marketplace.
    Mr. Coble. Thank you, sir.
    The Chair is recognizing the Ranking Member for the full 
Committee, the distinguished gentleman from Michigan, Mr. 
Conyers.
    Mr. Conyers. I would yield to the gentlelady, Ms. Chu, if 
it is all right with her and you.
    Mr. Coble. It is fine with me, if it is okay with her.
    The gentlelady from California, Ms. Chu?
    Ms. Chu. Thank you so much, Mr. Chair.
    Well, first I would like to submit for the record three 
items. First is testimony from Sandra Aistars, Executive 
Director of the Copyright Alliance. Ms. Aistars testimony 
illustrates that it is not just major motion picture studios 
and TV show creators who are inventing--investing and 
supporting new distribution models, but an entire alliance of 
creators, from church music publishers to remixers to medical 
illustrators to illustrators, who are engaging in expanding in 
all kinds of digital delivery models. Which demonstrates that 
copyright owners of all mediums and backgrounds work actively 
to ensure that their work is easily accessible and can be 
enjoyed as widely as possible.
    And then the second is a study that was released today from 
the Intellectual Property Alliance, which solidifies the fact 
that U.S. copyright industries, for the first time, contributed 
over $1 trillion to the U.S. economy accounting for nearly 6.5 
percent of GDP. I mean, obviously, with this report, we know 
that creative rights are driving economic growth and 
innovation.
    And thirdly, I am submitting a Copyright Alliance article 
about this intellectual property report.
    Mr. Coble. Without objection, they will be received----
    Ms. Chu. Thank you.
    Mr. Coble [continuing]. And made a part of the record.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


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    Ms. Chu. Thank you so much.
    Well, my first question is for Mr. McCoskey. One of the 
consumer complaints out there is that content creators do not 
do enough to make their works available and accessible. But, 
now we have more than 90 legitimate streaming services offering 
movies and TV shows in the U.S., such as Amazon, Netflix and 
UltraViolet, just to name a few. There is truly a service for 
every type of content consumer out there, whether it is for 
your smartphone or tablet so that you can watch whatever, 
whenever you want.
    And although Americans legally consumed about 3.5 billion 
hours of movies online in 2012, a recent study by NetNames 
showed that 24 percent of total Internet bandwidth worldwide 
involves traffic on infringing sites and services. Why do you 
think that is the case, considering the rise of all these 
innovative ways for consumers to watch content legally in their 
digital space? And what more can the key players in the 
Internet ecosystem do about this?
    Mr. McCoskey. Well, as you have pointed out, this is a 
problem that continues to evolve. And so, the fact that now 
there are 90 places that you can find legitimate in the--
content in the country is important. And that number is 
growing. But the reality is that piracy still is a big issue 
for the industry. This is a multi-stakeholder ecosystem. And we 
think that voluntary measures of getting all the players 
together in the ecosystem are working toward solving that 
issue. So, for example, we have a thing we call the Copyright 
Alerting System that helps identify when consumers are 
accessing infringed content. And we use that as a mechanism 
along with other players in the ecosystem. But, it is a 
constant issue and it is evolving and we think the best way to 
deal with that is to continue talking and working with every 
player in the ecosystem.
    Ms. Chu. Okay.
    Mr. Misener, I want to thank you for testifying on behalf 
of Amazon today. Not only am I a longtime Amazon Prime member, 
but a fan--I am also a fan of Prime Instant Video. So, I 
certainly enjoy what you're doing. And it is great to see that 
your company is now contributing to the Internet ecosystem with 
creative works, with your Alpha House in which you have 
invested $11 million. But, you now would be facing unauthorized 
streaming. And so, I was a bit curious about your role or your 
stance on statutory damage, because now you could be the victim 
of this piracy. What is--how do you reconcile that?
    Mr. Misener. Yeah. Thanks, Ms. Chu, very much.
    Amazon abhors piracy. We have from our very beginning. Our 
very first day was selling legitimate copyrighted works. And 
so, every time some pirated material is used or made available 
a sale is lost. So we are in a position of always trying to 
work with content creators and now with original content 
creators, like with Amazon Studios, we want to be in a position 
to ensure that legitimate copyrighted works are available 
conveniently at competitive prices for our customers. And that 
is going to dissuade piracy in the first instance.
    As far as the statutory damages go, the limitations that we 
are suggesting are ones that go to legitimate mistakes, 
perhaps. When someone has--makes a good faith effort and 
perhaps comes up against--they believe they are not infringing 
or they believe that they are engaged in fair use in a 
legitimate way. Or for example, if they are at a point where 
there is a novel question of law that is raised and reached by 
a court. At that point, that is where the statutory damages 
ought to be limited.
    Ms. Chu. Okay.
    Well, I think my time is out so----
    Mr. Coble. The gentlelady's time is expired.
    The distinguished gentleman from Pennsylvania, Mr. Marino?
    Mr. Marino. Thank you, Chairman.
    Good afternoon, gentlemen, thank you for being here.
    I have been studying search engines for some time now, 
several weeks now. I have been studying the types of search 
engines and the big search engines that are out there. And one 
thing that seems to be a common thread running through the 
search engines are: even though we are aware of a pirate Web 
site, whether it is telling us that we can give this--send this 
music free or they charge us 10 cents for it or movies or any 
other technology that you want to get into--they are appearing 
at the top of Web--of the search engines as an entity, which 
one can get into immediately.
    Do you understand my question so far?
    Okay. No response. You must understand it.
    What do we do, what does industry do, what do the search 
engines do about having these pirate sites pop up at the top of 
a search, compared to the legitimate entities that are out 
there that are several pages down? Anyone care to venture into 
this first?
    It is like school, I will call on you.
    Mr. Misener?
    Mr. Misener. I can defer to my colleagues. [Laughter.]
    So, naturally we like it when Amazon shows up first. But, 
when it doesn't----
    Mr. Marino. Very legitimate.
    Mr. Misener [continuing]. There should be a good reason for 
it. And so, I--we don't have a search engine business, per se. 
We have a site that is searchable, obviously. But it is a 
question--it is a difficult question. We think that the DMCA is 
out there for addressing infringement on particular Web sites, 
right? There is this notice and takedown provision for 
platforms. And we think that is what strikes the right balance 
between the interests of the creative community and the 
platform operators.
    But, as far as Web site searches themselves go, I think 
maybe Mr. McCoskey has a stronger view.
    Mr. Marino. Mr. McCoskey? Because I have--last weekend I 
visited New York and had the opportunity to visit businesses. 
And one of their biggest complaints, in the technology end of 
things, was piracy. And I actually took down a couple of rogue 
sites. But we know that as soon as that site is taken down, ten 
others go up. So, again, to reiterate my question so it is 
clear I probably didn't present it clearly. What do we do about 
preventing those rogue sites popping up at the top of the list?
    Because how many of us go through page after page to find a 
legitimate entity? No, we look at the first three or four. And 
routinely I am coming up with the first two or three, at least, 
are rogue sites. And the reason I know this is because my kids, 
18 and 14, and I--you saw me come in with my music. And I 
download music and listen to it all the time, but they tell me, 
``Dad, stay away from this one and stay away from that one, 
because a guy in your position can't afford to have headlines 
saying that I am downloading music and not paying for it.'' And 
I have to agree with them.
    So, how do we address this issue? How does--from a 
technical standpoint, how does the industry address this? 
Because I am not--you notice I am not mentioning any names, and 
I do not want to, because I have been in rooms where we have 
taken down things by all the big companies.
    Mr. McCoskey. So, I think the--you know, it is a big 
problem and it is a dynamic problem, so it does change. I think 
it is a combination of approaches to this. The most important 
one, we believe, is actually having a dialogue between the 
players and the ecosystem, who are generally not bad actors. 
The bad actors are the infringing sites. And working together 
on algorithm changes.
    And an example we have is we did work with one of the big 
search players several months ago. They did an algorithm 
change, targeted at reducing the problem that you have 
identified. And, unfortunately, the results of--after several 
months of that change, where that did not really change the 
problem much. So, we are going to go back to the table and work 
with them on tying to modify algorithms to the point that we 
can change that equation. But it is a problem.
    Mr. Marino. Is--as we were talking and doing this right 
here on an iPad and I know that the three that came up are 
rogue Web sites. They are at the top. So, I would prefer that 
the industry take care of this, we not legislative, but 
seriously take care of this because this is one of the biggest 
complaints I am hearing.
    And then I also want to address----
    Mr. Holst. Yeah, I----
    Mr. Marino. Go ahead, John.
    Mr. Holst. I would say, first, that it--algorithms can 
address, at a moment in time, the kinds of issues that you are 
raising. But, it is a cat-and-mouse game. So, as soon--you 
know, people--the game of trying to gain the search algorithms 
for both good, you know, good actors and bad actors, started on 
the first day of the search engine. One of the differences 
though is that, if you are a bad actor, you will say and do 
anything because why not, right? So it is very similar to 
making false claims, you know, on a product you might sell in 
an infomercial. And so, they will play with metadata. They will 
play with false endorsements. They will make up phantom 
accounts. So they do cheat, you know. So, by--so on the 
technical, it is a cat-and-mouse game. It will be--I do not 
think you can ever stamp it out----
    Mr. Marino. I see that my time has run out. So, if you 
could--if you would like to respond in writing to me. And I 
would love to hear from anyone on how we resolve this.
    I yield back. Thank you, Chair.
    Mr. Coble. The gentleman's time is expired.
    The distinguished gentleman from Michigan, Mr. Conyers is 
recognized.
    Mr. Conyers. Thank you, Mr. Chairman.
    This is a very interesting and very important hearing. But, 
what are your opinions about voluntary solutions? Are we 
relying too heavily on this? Or is this just a, you know, 
polite discussion here that nobody really sees as a serious way 
to reduce piracy? What are any of your thoughts about that?
    Mr. Sohn. Sure, I will weigh in on that. I think voluntary 
solutions can be a very productive way to try to reduce 
infringement. I think there are opportunities. The Copyright 
Alert System is a system that is launched between the major 
ISPs and some of the major rights holders. And I think that is 
an example of an effort that is voluntary. It is aimed 
primarily at education to make sure that users understand the 
difference between infringing behavior and lawful behavior.
    So, I think there is a role for discussion on voluntary 
measures. I think there is also--it is important that we be 
somewhat cautious in approaching those as well in that the more 
voluntary measures aim at punishing or sanctioning particular 
entities, the more it starts getting into a role that we 
normally do through government or with some kind of due 
process. And so the balance for voluntary measures is to figure 
out where they can be productive without causing risks of 
overreaching or abuse or short-circuiting the due process that 
we would normally expect.
    Mr. Conyers. Mr. Misener?
    Mr. Misener. Yes, Mr. Conyers. I think it is a great 
question.
    The way we have tried to approach it at Amazon is to make 
the legitimate content as easily available and as inexpensively 
available as possible. In books, in particular, we have seen a 
willingness on customers' behalf to pay for books. They will 
pay for them. We have over a million that are priced at $4.99 
or less, 1.7 million priced at $9.99 or less. And people are 
happy to pay that if there is an easy way to do it. And so, 
from an industry player, like Amazon, our goal is to make it 
easy to obtain that legitimate content for pay.
    Mr. Conyers. Mr. McCoskey.
    Mr. McCoskey. So, I think as long as we have a strong 
support of the property right of the content, the industry is 
really working together on these kinds of issues and it is a 
very dynamic situation. You have got all kinds of new 
distribution paths, new devices for consumption. But, at this 
point, I think that voluntary approach is--letting the industry 
try to work this out is really what we would like to see 
happen.
    Mr. Holst. I would say that detecting bad behavior, 
preventing it, you know, helping people do the right thing 
through discovery and ease of use that is a fluid activity that 
really has to be able to be agile and to move quickly. On the 
other hand, there needs to be clear guidelines when someone is 
a bad actor, and that should not be by consensus. That needs 
support.
    Mr. Conyers. Well, thanks for the variety of views on that 
subject.
    Let us turn to app piracy. Do our current legal tools allow 
us to effectively address the subject of that piracy at all?
    Mr. Holst. I will go first. I will say, I have actually 
been the subject of app piracy myself. I have found my content 
in someone else's app actually beating me in the marketplace 
because they took my paid version and made it free. And, in 
fact, the response was quick once I found it, right? So, I 
think we don't need more legislation. We need--I think we have 
clear recourse. Again, I think the slippery slope is finding 
those bad guys quickly and preventing them from reintroducing 
themselves with a slightly different name, right? But that is--
but it is a technical and a community issue. I am not sure I 
need tougher laws.
    Mr. Conyers. Anyone else want to weigh in on this?
    Then I yield back the balance of my time.
    Mr. Coble. Thanks. I thank the gentleman.
    In order of arrival time, I recognize the gentleman from 
North Carolina for the next questioner.
    Mr. Holding. Thank you, Mr. Chairman. I thank the gentleman 
from North Carolina.
    Mr. McCoskey, the technology obviously changes incredibly 
quickly today and is something this Committee grapples with and 
has grappled with throughout history. So, some say recent 
technological changes demand changes in the copyright law. But, 
is there really a problem today that needs fixing? I mean, 
hasn't technological change made it easier to get existing 
content to viewers? And, in fact, hasn't it also made it easier 
to get new content to viewers? Isn't it--the video marketplace 
thriving, you know, under the legal regime that we have right 
now?
    Mr. McCoskey. I think it is doing exactly that. We have 
this strong property right and because we have that it is 
encouraging companies to innovate, try new things and work with 
consumers on what they want. So, I think it is absolutely a 
good, good program now.
    Mr. Holding. Mr. Misener, one of your recommendations is 
for a streamlined statutory licensing process for music. Would 
an accessible and robust ownership database solve most of the 
problem of connecting music copyright owners and licenses, 
without the need for any statutory license?
    Mr. Misener. Thank you for the question.
    I think that there is a need for some sort of centralized 
information source. And I agree that if it were legislated I 
think it would be obviously taken more seriously perhaps. But, 
you are right to say that the problem is trying to find 
information on rights holders and to find the authors and the 
artists, in order to obtain the license permission to make that 
content available to our customers. And so, it may go a ways to 
doing that. I also could see just some reform within the 
statutory licensing scheme that exists today.
    Mr. Holding. Lastly, do you, Mr. Sohn--what are the ways 
that you see, you know, right now that Congress can ensure a 
robust competition in the marketplace for digital goods?
    Mr. Sohn. Well, I think the first things that it can do are 
take care to preserve those elements of the legal regime that 
are successfully enabling innovation right now. So, the ones I 
highlighted in testimony are fair use, which has been the 
subject of some important court decisions recently. Also 
section 512 in the DMCA, which provides important safe harbor 
for innovators. And then, some of the court-made doctrine, 
particularly the Sony doctrine from the 1984 case involving the 
VCR, where they said that if a product has a substantial non-
infringing use, it is lawful to distribute it even if some 
users might end up using it for infringement. So, those are 
some core principles that have enabled innovators to develop 
innovative technologies, innovative services. And those need to 
be preserved. I think that is first and foremost.
    The second one that I highlight in my testimony is 
statutory damages reform, because I think that is one that 
creates very high risk for any company that is trying to 
navigate an uncertain or unsettled area of the law. And, in 
this digital age with Internet technologies, we find that 
happening in copyright law all the time. You have new devices 
with storage capability that are connected to the Internet, so 
they can be used to send data. There are lots of ways that 
copyright creates questions for new technologies. And so, we 
need a statutory damages regime that doesn't make it too risky 
to experiment with that.
    Mr. Holding. Well, you also recognized in your testimony--
either written or oral, I didn't hear your oral, but I read 
your written--that streaming has grown in popularity as a 
primary means to distribute copyrighted content online and as 
an alternative to downloading. So, would you therefore agree 
that criminal penalties for illegal streaming should be on par 
with penalties for illegal distribution and copyrighting?
    Mr. Sohn. I think where the streaming activity is of a 
scale where it is comparable to a criminal downloader, then 
yes, there is no particular reason the law should distinguish 
between the particular mode of infringement. I think what it 
should focus on is the culpability and the scale of the 
activity.
    Mr. Holding. Thank you.
    Mr. Chairman, I yield back.
    Mr. Coble. I thank the gentleman from North Carolina.
    The distinguished lady from California is recognized.
    Ms. Bass. Thank you very much, Mr. Chairman.
    I want to thank the witnesses for their testimony today.
    I think it is great what companies are doing to promote 
access to legitimate content, by making it available on so many 
different devices, platforms and services. And it is 
particularly mind boggling to think of how much access 
consumers have to content.
    I have also been impressed with what Internet companies are 
doing to promote content partnerships. And the motion picture 
and recording industry associations have done great work to 
help connect content producers with consumers. And I am 
especially grateful for the ongoing partnerships, since I 
represent both. In my district there is Sony, Fox Studios, 
Culver Studios, Google is right next door. There is many other 
entertainment companies in my district.
    The one thing I am concerned about is the BitTorrent sites 
and I wanted--I know the MPAA won a major copyright victory in 
its settlement with IsoHunt. But, just a couple of weeks after 
the settlement, it is my understanding, that fans of the sites 
created a duplicate site loaded with millions of infringing 
files. And, I know we all agree we have to stop this. So, I 
just had a couple of quick questions.
    I wanted to know what else do you think the industry could 
do, besides providing access to content, to help fight 
BitTorrent sites, is my question.
    Mr. McCoskey. So, as I said earlier, this is a dynamic 
problem. And it is a problem that is still significant for the 
industry. We think that techniques such as the copyright 
alerting system, that basically helps consumers understand when 
they are accessing infringed content, is a good mechanism for 
battling this. We think--again, back to the multi-stakeholder 
model of finding the good actors and working together on 
solving these problems across the whole Internet ecosystem, is 
a way to address these. But it is--it will be a continuing 
issue and continuing work and it will adapt and change, you 
know, as we change our tactics.
    Ms. Bass. And do you think that there is a perception that 
content owners have been slow to get their products out and 
that that is one of the contributing factors?
    Mr. McCoskey. I don't think so. I mean, when you look at 
how many outlets there are for content now and consumers are 
finding it in places that they have never been able to find it 
before legally, I think the industry has done a really good job 
of actually recognizing the desires of consumers and trying to 
meet them.
    Ms. Bass. Thank you.
    And we are still working on getting Amazon to L.A.
    Mr. Misener. I am sorry. Ms. Bass?
    Ms. Bass. I said we are still working on trying to get 
Amazon to L.A.--to move to L.A. Well I know, but, you know, 
they can expand and they told me about their expansion.
    I yield back the balance of my time.
    Mr. Misener. Thank you, Ms. Bass.
    Mr. Coble. I thank the gentlelady.
    The gentleman from Utah.
    Mr. Chaffetz. Thank the Chairman.
    And I thank you all for being here. It is an interesting 
world where--I remember when my son, who is now 20, I remember 
when he came running around the corner and he said, ``Dad! 
Dad!'' And, you know, ``Mom, look at this great big CD.'' It 
was a record. I was kind of feeling like, ``Wow, okay. Things 
have changed.'' Now he is 20 and the world is changing ever so 
fastly.
    Mr. Misener, I want to ask you about your perspective 
where--in the digital age, as we move forward and things become 
perhaps all digital and move that direction, what happens when 
you die? What happens when you want to pass that along? Should 
you own that content? Are--should you have some certain 
privileges? Should the government just stay out of this? Should 
every person just make this--every organization make it up and 
have different rules?
    And then, I want to follow up and allow the MPAA to answer 
this as well.
    Mr. Misener. Thanks, Mr. Chaffetz.
    You are talking, in part, about the First Sale doctrine and 
what happens. And, as you know, for the most part digital 
downloads and streaming are licenses that are granted to the 
users. At Amazon, if you do die and your family has access to 
your account, yes, you get access to that digital content as 
well. But that seems like kind of an extreme way to circumvent 
the licensing rule.
    So, hopefully this can be resolved in a way that is clear. 
And I think we are happy to work with the Committee and also--
--
    Mr. Chaffetz. But what do you think should happen?
    Let me have the MPAA answer and then I will come back to 
you for a second.
    What should happen? Somebody gets an extensive library of 
movies, you know when they purchase a DVD it is pretty simple, 
right? But, when they go out and they license all this, do they 
own it? Do they not own it? Is it a combination? What is the 
right answer?
    Mr. McCoskey. I think it is a grey area today. And I will 
say that with a flag that says I am an engineer not a lawyer. 
And--but I do think, when you look at a product like the motion 
picture industries put together like UltraViolet, one of the 
things that anticipated is the need to share content across 
accounts. So that is one way to deal with that is to allow 
multiple people actually to have access to that content, you 
know, as long as they are----
    Mr. Chaffetz. So, let us say I go out and I purchase a 
thousand movies over the course of time, which seems like we 
have done in our family. And I wanted to sell that. Are you 
okay if I sell that?
    Mr. McCoskey. Again, I am going to claim to be an engineer 
here and not go down the legal path on that.
    Mr. Chaffetz. And I guess for my colleagues on the 
Committee, this is one of the questions is who owns that? And 
you are right this is First Sale doctrine and how does that 
work in an electronic age? So, does----
    Mr. Sohn, did you--I see you nodding your head. Please, 
jump on in here.
    Mr. Sohn. Sure. No, I think you have put your finger on a 
really important issue. The First Sale doctrine, as it 
currently exists in law, seems to be mostly focused on tangible 
products. But certainly consumers have some expectation that 
when they have engaged in a transaction that looks like a 
purchase, that they ought to have some rights to then dispose 
of that content down the line or share it and so forth. And I 
think it is an important issue for the Subcommittee to consider 
as it is reviewing copyright law is how can we structure some 
approach to these issues that works for the digital age that 
recognizes both that, when people purchase things, they do want 
to be able to pass them along. But, at the same time, to 
recognize that there are a lot of new business models out 
there, often people get things on a subscription basis, and it 
is less clear that that is really an appropriate context in 
which First Sale should apply. So----
    Mr. Chaffetz. All right, so----
    Mr. Sohn [continuing]. An appropriately cabined First Sale 
doctrine that applies to the digital age is, I think, something 
Congress should work on.
    Mr. Chaffetz. And I guess it is--and we will allow you, Mr. 
Holst, to jump on in here--but that is one of the core 
questions. We got the question somewhat surrounded. But I need 
help for you all and others in the audience, what is the answer 
to these questions, not just restating the question.
    But--Mr. Holst, please jump in here. I think my time is 
expiring. So----
    Mr. Holst. I would just say that however you land on that--
the always to that question, transparency and consistency, is 
the most important thing. If people know what is expected, most 
will comply. So confusion is way worse than a slightly 
imperfect----
    Mr. Chaffetz. So, if I said that you--when you buy it you 
own it, you should be able to do what you want with it. Is 
that--would everybody agree or disagree with that?
    Mr. Holst. I would say--briefly, I would say, if that was 
the term at the point of sale, I would reflect that in my price 
and in my model and I could be fine with it.
    Mr. Chaffetz. And I actually like the way a lot of movies 
you can get right now, you can rent it or you can buy it and 
purchase it. But I think one of the questions for this 
Committee is how do we deal with this in a broader context.
    I will let you each quickly--but my time is expired, 
Chairman.
    Mr. Misener. Well, we will work with you, obviously, Mr. 
Chaffetz, and try to figure this out. It is not an easy 
question, it goes to the core of copyrights. And it is--you 
know, we are--I think you are seeing four people who understand 
the issue and don't have all the answers. But hopefully we will 
be able to work with the Committee to come up with answers.
    Mr. Coble. The gentleman's time is expired.
    Mr. Chaffetz. Thank you, Chairman.
    Mr. Coble. And the--gentlemen you will have 5 days to 
respond to whoever so we are okay time wise.
    The distinguished gentleman from Louisiana?
    Mr. Richmond. Thank you, Mr. Chairman.
    Let me just say, as I have been studying these issues, it 
has become clear and I think that Mr. Chaffetz's questions 
highlight the complexity of what we are dealing with here. But 
also, I think that, you know, as you all have testified, the 
importance of intellectual property and copyright in the 
country is critically important that we understand and that we 
get it right. Part of my fear is that we will move so slow, as 
a deliberative body, that technology will pass us by as we do 
that.
    And sometimes, even as you all in your complex world 
negotiate, we miss things. And the example I gave today at 
lunchtime was ringtones. Friends in the music industry came and 
they said, ``Cedric, I realize that I sold a million ringtones 
and I don't have any money from it.'' It wasn't covered in the 
contract because nobody knew you would have ringtones that you 
could sell. And the question became: who owned it and all of 
those. So, we have to make sure we get it right. We have to 
make sure we understand it.
    But here is a question that I will pose to anybody out 
there is that, what are the international implications of any 
changes we consider to licensing models for digital delivery of 
content to the consumer? And what are some of the things that 
we should consider, as we talk about that, to make sure that 
the global consumer has access to innovative U.S. products via 
efficient digital delivery and so forth?
    Anyone?
    Mr. Misener. Mr. Richmond, I will take a stab at it. I 
think it is probably a question best addressed by the rights 
holders, the publishers, and maybe Mr. McCoskey will take a 
shot at it. But, a lot of the content itself is geographically 
limited. That is to say that distribution rights are cordoned 
off by the rights holders. And so, from a technology platform 
that is global, we would love to see much more trade in this 
area. But much of it is limited, again, by the rights holders 
themselves.
    Mr. McCoskey. So, I think for our member companies, it is a 
big part of their business. It is a huge amount of growth in 
the emerging worlds. And it is a place there--where there is a 
lot of interest and consumption of American content.
    I think, you know, we would certainly like to see, you 
know, a few barriers to that and a few barriers to the movement 
of content into those international markets. Now that it is all 
digital it is pretty ubiquitous, from a distribution 
standpoint. So, it really comes down to, you know, open markets 
and, you know, free markets with--around the world.
    Mr. Holst. I would say that the basic constructs of right 
and wrong in ownership and fairness don't know any 
international boundaries. So, as a developer and as a vendor 
who works with lots of developers, we care very much about 
these issues. But, in terms of implementing and expressing 
those consistent perspectives that is, I am afraid, beyond the 
scope--that is an international issue, which I am no expert in. 
But, the rules should be--the basic rules are the same.
    Mr. Sohn. And I would just add, there is--there are trade 
treaties around these topics that provide for some basic 
principles of intellectual property internationally. I do think 
that the basic dynamic is true on a global level the same as it 
is on a domestic one, which is: it is crucially important that 
we find ways to license content and distribute content in 
attractive lawful ways around the world. Because certainly, if 
content isn't available in those other markets, it is going to 
fuel piracy in those markets and it is going to fuel sort of 
the dark side of the market. And we want the lawful market 
growing.
    Mr. Richmond. And in--as I close, and you all can submit 
this in writing or just any ideas that you have that we should 
keep in mind as we ensure or at least I try to ensure that we 
look at this from a very balanced approach when we start 
talking about new content delivery. We are talking about a new 
consumption economy. But, we also have to make sure that we are 
still driving innovation and making sure we continue the 
economic growth. So, anything you have and any thoughts I would 
certainly appreciate. And my office is always open for you all 
to drop by and have these conversations.
    With that, Mr. Chairman, I yield back.
    Mr. Coble. I thank the gentleman.
    The gentleman from Texas.
    Mr. Farenthold. Thank you very much, Mr. Chairman.
    And I want to revisit the digital First Sale doctrine for a 
second. You know, back in the old days, when you had a book and 
you bought it, the copyright holder got paid and then it was 
your book to sell. And, of course, when you sold it you didn't 
have it anymore. And that is kind of the problem now in the 
digital age. You can make a near perfect or perfect copy of 
something and then sell your original. There is no real 
technological way to deal with that. Any sort of DRM, digital 
rights management, you put in get taken away. Do you all see a 
solution? Or are we really--are looking at something that is 
dead, from a--digital First Sale is dead, from a practical 
standpoint.
    I will start with Mr. Misener?
    Mr. Misener. Thanks, Mr. Farenthold. I think that we have 
been able to make a very good business for our customers with 
the current arrangements of licensing for both books and music 
and video.
    Mr. Farenthold. I did learn from Mr. Chaffetz's line of 
questioning, I need to give my wife my Amazon password in the 
event I get hit by a bus. [Laughter.]
    Mr. Misener. And she would have access to it. But again, 
that seems like a pretty extreme way to handle a First Sale----
    Mr. Farenthold. Well, I do buy my MP3s from you because 
it--they do not come with any DRM. I have got, you know, 
offices in Corpus Christi and Washington and a laptop. I have 
run up against the five computer limit on iTunes. So, you do 
have a competitive advantage there.
    But, Mr. McCoskey, do you see a way to make the digital 
First Sale work?
    Mr. McCoskey. Well, I think you have hit on the real issue 
is that it is different from a physical property. And one of 
the challenges that we have got is our content creators are 
taking that same piece of content and selling it different 
ways. Sometimes they are selling it as a sale, sometimes they 
are selling it as a rental, sometimes they are selling it as--
--
    Mr. Farenthold. All right. So, when I pay 15 bucks on 
Amazon or iTunes to, quote, ``bu,'' a movie, am I really just 
licensing it?
    Mr. McCoskey. I think it depends on the actual terms on 
that sale. And I think that is going to vary widely from 
distributor to distributor. So, I think--you know, this is 
going to be one of the topics that I think the Committee is 
going to dig into in deeper hearings.
    Mr. Farenthold. Let us shift gears a little bit and talk 
about piracy.
    I kind of divide pirates into three different groups: those 
that are out to try to make money from selling copyrighted 
content, kids who do not know any better or at least say they 
do not know any better, and then ideologues who think all 
information should be free. Do you have any sort of breakdown 
as to the classes? If we were finding as solution, as Chairman 
Issa has suggested, in, you know, his open and going after the 
financial end of it. Is that going to solve the problem 
substantially for you? Or are you going to--are we going to 
still have a problem with the ideologues and the kids?
    Mr. McCoskey. I mean, we go after all of the problems. And 
I think the problem is, after you go after them, they tend to 
morph and the shift goes from one to another. You know, if 
there is piracy out there, we are going to continue to go after 
it. And going after the folks that are making money on it is a 
good way to go, but----
    Mr. Farenthold. Those are the clear----
    Mr. McCoskey. Yeah.
    Mr. Farenthold [continuing]. The clear bad actors and 
seem--would seem to be the low-hanging fruit.
    And I guess my other question, and it reflects something 
some of the other Members have been--I think we really have 
seen a shift as the cost to find--get legitimate things have 
come down--music down to under a buck in most cases. These 
micropayment systems are working. I don't know if that works 
for the economies of movies and motion pictures. But are--is 
the delay time in releasing it--you know, you--obviously you 
want it to play in a theater for a while and then you have 
different stages you have. Is that delay time driving piracy as 
people are looking to avoid the movie theater experience and 
still be culturally hip having, you know--having seen the 
latest Superman movie without having to go to the theater?
    Mr. McCoskey. It is a complex problem, as you know. And I 
think--what our member companies look to do is actually try and 
recover the incredible investments they make in these 
properties. And windowing and the way they release the product 
across the world is part of that equation. So, it is--there is 
not even a fixed answer to that.
    Mr. Farenthold. All right.
    Well, I see I am about out of time. I yield back my last 
few seconds.
    Mr. Coble. I thank the gentleman.
    The distinguished lady from Washington.
    Ms. DelBene. Thank you, Mr. Chair.
    And thanks all of you for being here today.
    As a representative from Washington State, I can say I know 
firsthand the impact innovation has had on our economy. And I 
want to thank you, Mr. Misener, for being here today. Amazon 
has been a huge contributor to that.
    You know, I think you said, Mr. Misener, that four times--
people are reading who were reading now were reading four times 
the number of books that they had before. What do you think are 
the reasons behind that?
    Mr. Misener. Well, because--thanks, Ms. DelBene, very much. 
The reasons behind that, I think, are slightly complicated, but 
they are also right in front of us. I mean, when you use a 
device, like a Kindle, you can obtain the books, the music, the 
videos that you want immediately. And it is very convenient. It 
is a great way to be able access video and music, but also 
books. So the variety of books that are available on a device 
like this are staggering and something that local stores just 
never could keep up with. And it is no slight against them.
    But it is that convenience and now with the low pricing. We 
recognized from the very beginning that our customers wanted 
the lowest prices for everything. But also the willingness to 
pay for things, and so it is not free. It is something low. And 
one thing they also have told us, very clearly, is that they 
believe that a digital book should be less expensive than a 
physical book and for the very obvious reasons that there isn't 
paper and print and covers and shipping and all those things. 
And so we agree. And those--all those factors, the convenience 
and the price and the selection have all led to this increase 
in reading that we see.
    Ms. DelBene. And you think it is for--as a content creator 
that, even though the price might be lower because it is a 
different medium, that the increased volume generally leads to 
a benefit for content creators in terms of getting their 
information out there and the return they would get?
    Mr. Misener. Yeah, absolutely.
    In fact, we have seen a couple of different cases where--
well, there are now over a dozen individual authors who have 
sold a million copies each of a work that they have self-
published through Amazon. And that is a big deal. And so--but 
our--also from the perspective of traditional media, I am not 
sure you are aware, but many of the books that appear in a 
physical bookstore end up not being read by anybody, but sent 
back and actually recycled. And that--those numbers are 
somewhere on the order of 30 percent of the books are never 
read. They are actually just shredded. And so that kind of 
wastefulness just goes away with an electronic distribution 
model like this.
    Ms. DelBene. Thank you.
    Mr. McCoskey, you had talked about increased usage of, you 
know, of, you know, videos, et cetera, given the UltraViolet 
service. Do you have similar metrics or ideas, in terms of what 
has happened in terms of consumer behavior?
    Mr. McCoskey. Well, I think it is actually really 
interesting, because when the media entertainment industry 
started looking at consumption and the changes in consumption, 
I think there was a big fear that people were going to get 
tablets and mobile devices and they were going to stop watching 
in their homes and they were going to stop watching linear 
television and broadcasts and all those things. And what the 
numbers have shown, in this country, is that people are just 
consuming more content.
    So, the fact that they have got access to content, in more 
places on more devices actually has increased their consumption 
overall. Broadcast television viewing is up, you know, even 
though people are now watching more online and watching more on 
mobile devices. So, that won't continue indefinitely and, at 
some point, you know, people run out of hours in a day. But, 
right now, the fact that there is so much good content out 
there on so many different available legitimate platforms, 
people are embracing that.
    Ms. DelBene. So, as we see, kind of, movement to more 
centralize or, you know, cloud-based services and access to 
information, what concerns do either of you have in terms of 
privacy? These issues have come up a lot. Have you--in terms of 
how that may impact your business models.
    Mr. McCoskey. I am sure others want to answer this too.
    That is, frankly, not the biggest concern for us, Ms. 
DelBene. It really is maintaining that open, nondiscriminatory 
Internet so that consumers continue to have the access that 
they have enjoyed to date on the Internet. And so, any kind of 
threat to that openness, including things like data caps, are a 
concern. They haven't been a problem so far, but it certainly 
is worth the vigilance of this Committee to make sure that that 
does not get into the way of--in the way of consumer access to 
that content.
    Ms. DelBene. Do others have feedback on that?
    Mr. Sohn. Sure.
    So, on privacy issues, I think it is sort of separate from 
the topic of this hearing. But, there is a very real need to 
address the basic privacy expectations of consumers to make 
sure that, as people go to these markets to participate in 
these increasingly thriving markets, they are not dissuaded by 
the amount of personal information that they have to turn over 
or uncertainty about how that information might be stored or 
passed along or used. So, I do think there is a role for 
Congress to look at privacy issues. And doing so would help 
build confidence in these lawful online marketplaces.
    Mr. Holst. I would just say that the release cycle of 
application publishing is at a much higher rate than a movie or 
a collection of music. And rather than doing focus groups and 
large surveys, there are analytics that are collected to allow 
for continuous improvement. And I don't think there are privacy 
concerns, as long as the application analytics are targeted for 
the developer of the application, you know, as a separate 
stream. So, the word ``analytics'' is thrown around a lot. 
Application developers need to have insight into how their 
software is being used to improve it. And I don't think there 
are concerns, but it just needs to be--people need to be 
mindful of why that telemetry is collected.
    Ms. DelBene. Thank you.
    And I yield back, Mr. Chairman.
    Mr. Coble. The gentlelady's time is expired.
    The distinguished gentleman from Georgia.
    Mr. Collins. Thank you, Mr. Chairman, I appreciate it.
    A lot of things, you know, have been said and some of this 
we have done before. And I think the industry working some of 
this out--you know having the, not only the vested interest but 
also other interests as well to make this work--is a good route 
to take.
    And I want to turn my questions a little bit to, I think, 
the underpinnings of some of the discussion today, except for 
this first question. And it is going to go a lot to you, Mr. 
Sohn. We--you and I are going to have a conversation on some of 
it.
    You had mentioned, and Mr. Holding had a great question, on 
the--concerning should the penalties be the same, you know, for 
the infringers. And you said, ``Well, it depends on the 
scale.'' Well, can you define that for me? Okay, is it--if I 
infringe 20 times or if I put it out or copy and sell it 20 
times, 30 times, 1 time, what scale is appropriate for them to 
be a similar penalty?
    Mr. Sohn. Sure.
    Excuse me, so, under current law, frequently penalties for 
copyright are civil.
    Mr. Collins. Exactly.
    Mr. Sohn. There is that civil enforcement. And then, when 
it reaches a certain threshold, we get to criminal enforcement. 
So, my only point really was that we don't want to be setting 
too low a bar for criminal enforcement. We want to make sure 
that criminal enforcement is targeted at the true bad actors, 
people that are doing things for a profit, people are doing 
things at substantial scale, not small-scale actors who are 
engaged in noncommercial behavior. So, I think we already have 
some standards for that, regarding the distinction between 
civil and criminal. And my only point was, for streaming, I 
don't think that the mode of delivery what is--is what is 
important. What is important is that the law draw that 
distinction and set an appropriate bar for criminal treatment.
    Mr. Collins. Well, I think--and that is something that we 
are going to have to get--you know, elevate our different 
standards. I think, as we get into this new realm and we are 
looking at new areas, I think this is coming out as a question 
that needs to be addressed.
    But I want to move on to something else. And I am not going 
to do digital First Sale. We could spend all day on that issue 
and how we get----
    But, I read with interest, and I think it really goes to 
your written testimony, which I read and along with others. And 
it goes back to the issue, in my mind, of protection of rights 
and encouraging innovation and being a part of this process. 
And I think, in reading your written testimony, it became 
interesting to me, especially when you said, ``Consumers are 
creators too, not just passive recipients.'' And, as I look 
through that, your--as I read through it, I came to this quote 
here and it says, ``Of course, some manipulations of creative 
works can rise under issues under copyright law, but there is 
no question that the flexibility of digital technology 
facilitates greater involvement and interaction with creative 
works.'' I want to stop right there and I am going to come back 
to it.
    And then you go on, just a little bit further, and talk 
about innovation in the marketplace, which is interesting. You 
start off by saying, ``To be clear, the fact the consumer 
increasingly expect on demand access to the copyrighted content 
of their choice does not mean they are legally entitled to it 
any more than they would be entitled to get it all for free.'' 
But then, you come down by the end of that paragraph, you said, 
``But where the market fails to cater to substantial customer 
appetites, that represents lost opportunity. Everyone is better 
off in the market--if the market can develop new offerings that 
recognize what consumers want and find and provide a way for 
that.''
    And then, the next page over it says, ``Encouraging the 
continued development of innovative business and technology is 
the most productive thing that Congress can do,'' and the 
reason was--the statement was, ``evolving content providing 
convenient and attractive options for satisfying consumer 
demand is the best defense against widespread infringement.''
    In other words, what I gained from listening to this is, 
one--there are two parts that I would like for you to talk 
about. One, to have the creative manipulation by users, you 
have to inherently have a starting point to do that. They 
cannot--they are not creating in--according to what you framed 
your example, they are not creating ex nihlio. They are not 
creating from nothing. They are creating from what someone else 
has created. And, in your statement there was, is that the 
flexibility has caused this. And I think there has to be an 
understanding that there is a creative right there. And that 
there is a property right issue.
    As you move through your testimony though, it seemed to go 
to the fact of this--that, if we can get it, then we should 
have a right to it. And I think that--I would like to hear your 
balance there. Because it seems to me you are, in some ways, 
you are contradictory in stating that there is a content right, 
you accept that.
    But, as someone said, and I am not sure who it was and it 
may not have been anyone on this panel, said, ``they were just 
slow to get the content out.'' Well, if I create something and 
I do not want to put it out that is my right. That is 
inherently the right of the creator to either expose it or not 
expose it, no matter if you desperately want it or not. How do 
you justify--or how do you come to these, basically, seemingly 
contradictory terms in your own written testimony.
    Mr. Misener. Sure.
    So, what I was trying to get at there was I think there is 
a--it is, as you say, yes, if you create some content, you have 
legal rights to that content, you can control how to distribute 
it, when to distribute it and so forth. I do think, as a 
practical matter, where there is substantial demand in the 
marketplace to access certain content and people are willing to 
pay for that, everyone is better off if we can get to a 
marketplace where providers are able to provide to consumers 
the kinds of copyrighted content that they want when they want 
it and find lawful business models for doing that. That makes 
money for the creators. That gives consumers what they want. 
And, as a side effect and a very important side effect, it 
moves us more in the direction of a lawful content marketplace 
and discourages the unlawful content marketplace.
    So, it is really--I think the contradiction you point to is 
me saying one hand, well there is a legal right and on the 
other hand, there is this practical consideration. And I think 
what I am trying to say is, as a practical matter, the best 
place for us to get to is for the producers to produce the 
content in a way that consumers want to enjoy it.
    Mr. Collins. My time is expired. That is something I will 
address further, but thank you.
    Mr. Coble. I thank the gentleman.
    The gentleman from Florida.
    Mr. Deutch. I thank you, Mr. Chairman. Mr. Chairman, thanks 
for holding the hearing today.
    I am glad to talk about the roles of copyrights in America. 
I think that this hearing is a great opportunity for us to 
challenge the notion that innovation and copyright protections 
are at odds or that content technology are looking to Congress 
to balance competing interests, far from it I think. Having 
access to movies and music gives people a reason to adopt the 
latest technology, the latest innovative platforms help 
creators reach audiences that they would never otherwise touch.
    So, it seems like our goal as a Nation is to grow the pie 
for everyone fairly, instead of fighting about how we slice up 
what we see here today. I think our witnesses would agree. I 
believe the long-term success of our country depends on the 
work of inventors as well as artists and creators in moving the 
country forward, improving all of our lives with new medicines, 
technologies, shaping our culture. But, all of that progress 
and innovation is threatened when copyrights aren't protected.
    So, Mr. Holst, I just wanted to follow up on something that 
you had spoken about. You talk about the enormous opportunities 
that digital content in the digital marketplace can offer. But 
your testimony referenced the problem of the uncurated app 
stores, where some app stores are more cooperative than others 
in removing infringing versions of pirated apps. As a victim of 
piracy yourself, you had to go through the process of trying to 
have illegal versions of your app removed. And I was hoping 
that you could just tell us a little bit more about what the 
process is like for a small business. What do you have to do? 
Are the stores--the app stores the same? Are some more or less 
cooperative? And, what is the response--what is their response, 
if they refuse to take action?
    Mr. Holst. Thank you.
    Well the question is an excellent one and has a number of 
different parts--they always have a number of different parts. 
The trickiest part is the discovery. Okay, if somebody steals 
your content and then markets it in a way that isn't your brand 
name, you might not find it amongst the millions of apps that 
are available. So, discovery is a challenge, and that is not a 
legal question, it is just the hard thing to do.
    Once I discovered it, and I discovered it quite 
accidentally. I was just seeing who was beating me in my 
category. And the cover page was actually different. Out of the 
corner of my eye, I saw a phrase that I use. I drilled down and 
literally saw pictures of my wife, who is the yogi in the app. 
And I said, this is definitely infringement. I will have no 
problem proving this. And, in fact, I didn't. And I--it was--I 
was provided with some forms to fill out. And, within 48 hours, 
the app was removed.
    However, the bad actor, the publisher themselves, were not 
banned from any of the marketplaces. And in fact I looked--this 
was 2 years ago and that publisher still publishes apps. And, 
if I look at what is in those apps, they are language 
translation services, the Bible for children. Clearly, in my 
view, content that they likely have, I can't prove it, but they 
have likely lifted, right?
    And so the question of finding the infringement is hard. 
Once you find it, I think it is fairly straightforward. And 
everybody wants to do the right thing. But then the question 
is: what do you do when you don't have proof around other apps 
and those bad actors? Because they can put on all sorts of 
veils and hide themselves. That is a difficult challenge as 
well.
    Mr. Deutch. Does it make a difference in the nature of the 
store? Uncurated--having someone----
    Mr. Holst. Yeah. And so--great point. So, the question 
isn't how quickly they respond, although uncurated they tend to 
just have less of an infrastructure to interact with 
publishers. The real danger there is that the quality of the 
basic--the original inventory. So, if I look at a thousand apps 
in one of these uncurated marketplaces--and there are a number 
of studies, I will be happy to send those on, that show that 
not just infringing content, but apps that violate privacy have 
unexpected behaviors significantly higher. So, it is a more 
dangerous neighborhood to visit. And so you are more likely as 
a consumer to get something dangerous. Not now as a publisher, 
but as a consumer. That is the----
    Mr. Deutch. And thank you.
    Mr. Misener, I just wanted to circle back. There are a lot 
of phrases that get thrown around on our committees, 
particularly in this area. The nondiscriminatory Internet--what 
is your definition of the nondiscriminatory Internet?
    Mr. Misener. It is ensuring that network operators don't 
interfere with their users' ability to obtain content from the 
sites and sources of their choice. And so, basically, end 
users, you and I in our homes, have a contract with a network 
operator to have Internet access. Through that contract, that 
end user ought to be able to access all the lawful content that 
he or she wants.
    Mr. Deutch. But it wouldn't be discriminate or 
discrimination against copyright infringers would be permitted, 
wouldn't it?
    Mr. Misener. Yeah, I said lawful.
    Mr. Deutch. Right.
    Mr. Misener. So, correct. So all the lawful content they 
should be entitled to reach. And the discrimination concern is 
very real, especially where some network operators are also the 
provision of--the provisioners of competing video and content 
services. And so, if they are providing services in parallel 
with the services that their customers want, that would be 
untoward. And that is something that I think the Committee 
should keep an eye on.
    Mr. Deutch. I appreciate that.
    Thank you, Mr. Chairman.
    Mr. Coble. Thanks gentlemen.
    I thank the witnesses and I thank those in the audience. As 
I said, your presence here for the past 2 hours, indicates more 
than a casual interest in this very significant issue.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional material for the record.
    This hearing stands adjourned.
    [Whereupon, at 3:26 p.m., the Committee was adjourned.]

                                 
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