SPEAKERS CONTENTS INSERTS
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COPYRIGHT PIRACY, AND H.R. 2265, THE NO ELECTRONIC THEFT (NET) ACT
THURSDAY, SEPTEMBER 11, 1997
House of Representatives,
Subcommittee on Courts and Intellectual Property,
Committee on Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:03 a.m. in Room 2237, Rayburn House Office Building, Hon. Howard Coble (Chairman of the Subcommittee) presiding.
Present: Representatives Howard Coble, Bob Goodlatte, Sunny Bono, Edward A. Pease, Christopher B. Cannon, Barney Frank, Howard L. Berman, Zoe Lofgren, William D. Delahunt.
Also present: Mitch Glazer, chief counsel; Blaine Merritt, counsel; Vince Garlock, counsel; Debbie Laman, counsel; Robert Baben, minority counsel, and Eunice Goldring, staff assistant.
OPENING STATEMENT OF CHAIRMAN COBLE
Mr. COBLE. Good morning, ladies and gentlemen. As you all know, we try to be timely here. You all have gone through the effort to be here at 10:00, so I believe in starting it when you are ready to go.
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Unlikely enough, I just came from the Crime Subcommittee where a hearing is being conducted on the subject of cellular telephone fraud. Today we are going to be discussing electronic copyright policy.
I guess the lesson we would learn from this, folks, is that there are a good number of Americans who enjoy stealing. Thievery, larceny, fraud, piracy, call it what you will. It is in their blood, and even in some instances, even when they do not realize remuneration or gain from it. Just the thrill of stealing.
You hear some people ask, well, in the Congress, how long are they going to be up here, and many of them will respond, ''Well, I am too old to work and too nervous to steal,'' so ''I am going to stay here for a while is the answer.''
Many people are not too nervous to steal. In fact, they enjoy it. They enjoy the thrill of it.
So that is going to be the purport of our hearing today. We will hear testimony about electronic piracy of copyrighted works, a growing problem that startles individual and corporate creativity, thereby compromising the economic health of our country.
In addition to exploring the extent to which copyright infringement flourishes over the Internet, we hope to evaluate ongoing Executive Branch and private industry responses to electronic piracy.
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Most importantly, and if possible, we need to identify other ways the Subcommittee can assist in those efforts.
Along these lines, we will also examine a legislative proposal developed by our Subcommittee member, Bob Goodlatte of Virginia. His Bill, H.R. 2265, the No Electronic Theft or Net Act, represents an important legislative response to those persons who cavalierly appropriate copyrighted works and share them with other Internet thieves.
Industry groups estimate that counterfeiting and piracy of intellectual property, especially computer software, compact discs and movies, cost the effective copyright holders more than $11 billion last year. Some claim the actual figure is closer to $20 billion.
Regrettably, the problem has great potential to worsen. The advent of digital video discs and the development of new audio compression techniques, to cite two prominent examples, will only create additional incentive for copyright thieves to steal protected works.
While our hearing is not restricted to the merits of 2265, I want to emphasize that this is not a forum to air complaints about other bills addressing extraneous issues that will be evaluated by the Subcommittee on other days.
More specifically, I want all of our witnesses to understand that we are not here this morning to discuss the on-line service copyright liability of the WIPO Treaty Bill. Now will be for another day, and we will indeed have hearings on that.
I want to—that said, I want to direct the balance of my comments to Mr. Goodlatte's bill, which will deter copyright piracy by further criminalizing the act in a firm, fair manner.
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The NET Act constitutes a legislative response to the so-called LaMacchia case, a 1994 decision, altered by a Massachusetts Federal Court. The style of that case is LaMacchia. OK. I was close.
In LaMacchia, the defendant encouraged lawful purchases of copyrighted software and computer gauged to upload these works by a special password to an electronic bulletin board on the Internet.
The defendant then transferred the works to another electronic address and encouraged others with access to a second password to download the materials for personal use without authorization by or compensation to the copyright owners.
While critical of the defendant's behavior, the court precluded his prosecution under a Federal wiretap statute stating that this area of the law was never intended to cover copyright infringement.
The court's dictated that Congress has treaded cautiously and deliberately in amending the copyright Act, especially when devising criminal penalties for infringement.
It is self-evident that this transgression, that is, the unauthorized access to a company's products, has even greater potential to ruin small start-up companies.
Let us not forget that small businesses still comprise that sector of our national economy which provides the most employment opportunities for American citizens.
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Thousands of independent hackers, motivated like LaMacchia, will cause harm to our nation's workers and the small businesses which employ them.
LaMacchia's behavior was not trivial. It deserves to be criminalized.
Accordingly, the NET Act would proscribe the willful act of copyright infringement either for commercial advantage or for profit for natural gain, all by reproducing or distributing one or more copies of copyright works which have a retail value of $5,000 or more.
In direct response to LaMacchia, the legislation specifically encompasses acts of reproduction or distribution that cover via transmission or computer theft.
In addition, financial gain is defined as receiving anything of value, including the receipt of other copyrighted works.
This change would enable the Department of Justice to pursue a LaMacchia like defendant who steals copyrighted works, but gives them away in lieu of selling them to others.
The legislation includes stiff penalties and prison terms for infringers.
The bottom line is that the public must come to understand that intellectual property rights, while abstract and arcane in many instances, probably in most instances, are no less deserving of protection than personal or real property rights.
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The intellectual property community will continue its work in educating the public about these concerns, but we, in the Congress, must do our job, as well, by ensuring that piracy of copyrighted works will be treated with the appropriate level of fair, but serious, disapproval.
Again, I commend Representative Goodlatte for his leadership in this regard and look forward to working with him, as well as the other members of the Subcommittee, and our witnesses today as we consider the NET Act and other tools to combat electronic piracy.
I am now pleased to recognize the ranking member of the Subcommittee, the gentleman from Massachusetts, Mr. Frank.
Mr. FRANK. Thank you, Mr. Chairman. I will talk about as an example of the bipartisan nature of this, that you will note that the Chairman has selected me as his enunciation tutor, which is not a choice everybody would make, Mr. Chairman. I do have to say up there in Massachusetts, we would disclaim responsibility ultimately for the name, ''LaMacchia.'' It does have other ethnic origins. Adams, we would be the experts on. LaMacchia probably goes elsewhere, but it is LaMacchia, as I understand it.
I am not really going to try to instruct you in the pronunciation of the acronym, WIPO.
What the Chairman said is my point. We are about to enter a phase in the deliberations of this Subcommittee and ultimately, I hope in the full House of the Congress, of a very important, intellectual challenging, wholly non-partisan set of issues, and a wholly non-ideological set of issues. And I will look forward to a series of hearings where we learn from the people who are here, and I congratulate the Chairman for the tone he set. We have a very important set of issues to deal with here.
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In general, the issue that we are dealing with today will be a very important one. How do we protect the very important values of copyright?
How do we protect creative people because it is morally right to do that, and to make sure that we encourage continued creativity, from which we all benefit, while at the same time making sure that the public has the full benefit of the new technology and information that is available.
In particular, I am especially concerned that we not act in ways that would require additional censorship in any way, shape or form, by the providers, and balancing that with the importance of protecting creativity which at times is difficult.
I do not think it is difficult today. I think the Bill that our colleague from Virginia, who has been a leader in this field, brings forward is a very simple one, and I just want to address what seems to me a disturbing tendency in some parts of the country to think that talent justifies abuse of others' rights.
The fact that it may require some special skills to deprive other people of their intellectual property rights does not in any way, shape or form mitigate the viciousness of the offense.
And the fact that people are doing this as a hobby, the fact that they are doing it just to show off to other people that they are doing it and may not be directly or even directly benefitting financially is irrelevant. I say, ''indirectly,'' because I would say that in many cases where this sort of abuse goes forward, as in the case that we're talking about, even where there is no direct financial benefit, the people who are showing off their ability to manipulate the technology, to abuse the rights of others, probably figure that they will be able to make that payoff at some point. But whether they do or do not is irrelevant.
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There simply is no right, just because people are skillful, to take other people's property. Hacker should not be a way of converting the meaning of the word, ''thief,'' into something that is socially acceptable, and that is what we do here today. We make sure that thieves of other people's intellectual property do not get away with it.
And to be very clear, too, for many of us, I will say this, and I wish I could write more formidably. I wish writing came easily to me.
But what if I have written something and witnessed, having that stolen from me, having that abuse would bother me more than losing a few hundred bucks. And so the notion that somehow this is not real theft, when we are talking about the appropriation of other people's intellectual property, is simply wrong.
This is a very important first step. As I said, it is an easier one. We will get into more difficult issues as we do the balancing.
But I appreciate the Chairman's bringing this forward and the last point I want to make is this:
We will be told by some people, ''Well, we shouldn't legislate. Let this all be worked out.
I want to make my position on this very clear.
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I have never been particularly impressed with guilt socialism. The notion that you let people in particular employment groups work these things out among themselves seems to me a terrible idea, and I think we have as the responsibility to make good public policy here.
Some people who come before us and tell us, ''Well, yeah. You are right, but'' what is that move—what is that worker will move me at the beginning.
I am prepared to listen to people's comments about this, but I think that it is important that we move forward, and I thank you, Mr. Chairman, for initiating. I think it can be a very fruitful period.
Mr. COBLE. I thank the gentleman, and what I am about to say, folks, has nothing to do with the hearing at hand.
What the gentleman from Massachusetts regarded by the pronunciation of a word, I recall—I am going to revert ten years now. Mr. Frank was chairing, I think the administrative law, and I was a member of that Committee. And at the conclusion of the hearing, as I was departing the room, I heard one of the—it was either a witness or a reporter. He said to a bystander: ''The trouble with this hearing was that Coble talks too slow and Frank talks too fast.'' So, that probably has not changed too much.
Folks, as you all know, we normally restrict opening statements to the Chairman and the ranking member, but I think I would be remiss if I did not recognize the gentleman from the Roanoke Valley who authored this very important piece of information. The gentleman from Roanoke Valley, Mr. Goodlatte.
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STATEMENT OF BOB GOODLETTE, A CONGRESSMAN FROM THE STATE OF VIRGINIA
Mr. GOODLATTE. Well, thank you, Mr. Chairman. And first I would like to say that I would be willing to pay more than a few hundred bucks to get something that Barney put down in writing, because I could then study it carefully rather than try to follow it when he speaks.
Mr. Chairman, I would like to thank you for holding today's important hearing, not only on legislation I have introduced, H.R. 2265, the Electronic Theft Act, but also on the larger issue of electronic copyright piracy.
Additionally, I would like to thank you, Ranking Member Frank, and our friend and colleague from Utah, Mr. Cannon, for co-sponsoring this legislation.
The NET Act closes a loophole in our nation's criminal copyright law and gives law enforcement the tools it needs to bring to justice individuals who steal the products of America's authors, musicians, software producers and others.
Additionally, the Bill will promote the dissemination of creative works online and help consumers realize the promise and potential of the Internet.
The Internet is a tremendous opportunity. Its true potential, however, lies in the future when students and teachers can access a wealth of high-quality information through the click of a computer mouse, and businesses can bring the benefits of electronic commerce to consumers.
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Before this can happen, the creators must feel secure that when they use this new medium, they are protected by laws that are as effective in cyberspace as they are on Main Street.
The NET Act clarifies that when individuals sell pirated copies of software, recordings, movies or other creative works, or intentionally take part in works and distribute them to others, even if they do not intend to profit personally, such individuals are stealing.
The legislation affirms the belief that intellectual property is no less valuable than real property.
The Internet allows a single computer program or other copyrighted work to be illegally distributed to millions of users virtually without cost if an individual intentionally makes it available on a server and points others to the location. It is unacceptable that this activity can be carried out by individuals without fear of criminal prosecution.
Pirating works online is the same as shoplifting a videotape, book or computer program from a department store. Through a loophole in the law, however, copyright infringers who intentionally pirate works, as long as they do not do so for profit, are outside the reach of our nation's law enforcement officials.
This bizarre situation has developed because the authors of our copyright laws did not and could not have anticipated the nature of the Internet which has made the theft of all sorts of copyrighted works virtually cost-free and anonymous.
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Imagine the same situation occurring with tangible goods that could not be transmitted over the Internet, such as an individual copying popular movies onto hundreds of blank tapes and passing them out on every street corner, or copying personal software onto blank disks and freely distributing them throughout the world.
Few would disagree that such activities amount to theft and should be prosecuted. We should be no less vigilant when such activities occur on the Internet.
The NET Act of 1997 makes it a felony to willfully infringe a copyright by reproducing or distributing ten or more copyrighted works with a value of at least $5,000 within a 180-day period, regardless of whether the infringing individual realized any commercial advantage or private financial gain.
It also clarifies an existing portion of the law that makes it a crime to willfully infringe a copyright for profit or personal financial gain. It does so by specifying that receiving other copyrighted works in exchange for pirated copies, bartering, is as unlawful as simply selling pirated works for cash.
Initially, the NET Act calls for victim impact statements during sentencing and directs the sentencing commission to determine a sentence strong enough to deter these crimes.
The United States is the world leader in intellectual property. We export billions of dollars' worth of creative works every year in the form of software, movies, recordings and other products.
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By closing this loophole in our copyright law, the NET Act sends the strong message that we value the creations of our citizens and will not tolerate the theft of our intellectual property.
Mr. Chairman, thank you for holding this hearing today on what I feel is a very important issue for Congress to address.
I look forward to hearing from each of the witnesses who will be testifying before us today.
[The Statement of Mr. Goodlatte follows.]
PREPARED STATEMENT OF BOB GOODLATTE, A CONGRESSMAN FROM THE STATE OF VIRGINIA
The House Judiciary Subcommittee on Courts and Intellectual Property held a hearing today on legislation introduced by Congressman Bob Goodlatte, (R–VA) called the No Electronic Theft (NET) Act of 1997, H.R. 2265.
The following is Goodlatte's official statement:
Mr. Chairman, I would like to thank you for holding today's important hearing not only on legislation I have introduced—H.R. 2265, the No Electronic Theft (NET) Act—but also on the larger issue of electronic copyright piracy. Additionally, I would like to thank you, Ranking Member Frank, and our friend and colleague from Utah, Mr. Cannon, for cosponsoring this legislation.
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The NET Act closes a loophole in our nation's criminal copyright law, and gives law enforcement the tools it needs to bring to justice individuals who steal the products of America's authors, musicians, software producers, and others. Additionally, the bill will promote the dissemination of creative works online and help consumers realize the promise and potential of the Internet.
The Internet is a tremendous opportunity. Its true potential, however, lies in the future, when students and teachers can access a wealth of high quality information through the click of a computer mouse, and businesses can bring the benefits of electronic commerce to consumers. Before this can happen, creators must feel secure that when they use this new medium, they are protected by laws that are as effective in cyberspace as they are on main street.
The NET Act clarifies that when individuals sell pirated copies of software, recordings, movies, or other creative works, or intentionally take pirated works and distribute them to others even if they do not intend to profit personally, such individuals are stealing. The legislation affirms the belief that intellectual property is no less valuable than real property.
The Internet allows a single computer program or other copyrighted work to be illegally distributed to millions of users, virtually without cost, if an individual intentionally makes it available on a server and points others to the location. It is unacceptable that this activity can be carried out by individuals without fear of criminal prosecution.
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Pirating works online is the same as shoplifting a video tape, book, or computer program from a department store. Through a loophole in the law, however, copyright infringers who intentionally pirate works, as long as they do not do so for profit, are outside the reach of our nation's law enforcement officials. This bizarre situation has developed because the authors of our copyright laws did not and could not have anticipated the nature of the Internet, which has made the theft of all sorts of copyrighted works virtually cost-free and anonymous.
Imagine the same situation occurring with tangible goods that could not be transmitted over the Internet, such as an individual copying popular movies onto hundreds of blank tapes and passing them out on every street corner, or copying personal software onto blank disks and freely distributing them throughout the world. Few would disagree that such activities amount to theft and should be prosecuted. We should be no less vigilant when such activities occur on the Internet.
The NET Act of 1997 makes it a felony to willfully infringe a copyright by reproducing or distributing ten or more copyrighted works, with a value of at least $5,000, within a 180-day period, regardless of whether the infringing individual realized any commercial advantage or private financial gain. It also clarifies an existing portion of the law that makes it a crime to willfully infringe a copyright for profit or personal financial gain. It does so by specifying that receiving other copyrighted works in exchange for pirated copies—bartering—is as unlawful as simply selling pirated works for cash. Additionally, the NET Act calls for victim impact statements during sentencing and directs the sentencing commission to determine a sentence strong enough to deter these crimes.
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The United States is the world leader in intellectual property. We export billions of dollars worth of creative works every year in the form of software, movies, recordings, and other products. By closing this loophole in our copyright law, the NET Act sends the strong message that we value the creations of our citizens and will not tolerate the theft of our intellectual property.
Mr. Chairman, thank you for holding this hearing on what I feel is a very important issue for Congress to address. I look forward to hearing from each of the witnesses who will be testifying before us today.
Mr. COBLE. I thank the gentleman.
The other members have opening statements they wish to make?
(No response.)
Very well. The first witness this morning is—one of them is unknown to none in the room, the Honorable Marybeth Peters, who is the registrants of copyrights for the United States.
Ms. Peters has also served as Acting General Counsel to the Copyright Office as Chief of both the Examining and Information and Reference Divisions.
She has served as consultant on copyright law in the World Intellectual Property Organization, and authored the general guide for Copyright Act of 1976.
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Our next witness is Kevin Di Gregory, a Deputy Assistant Attorney General in the Criminal Division of the United States Department of Justice. He has spent his entire legal career as a trial prosecutor, beginning in 1979 in the District Attorney's office in his native Pittsburgh, Pennsylvania. Prior to coming to the Justice Department, he served as Janet Reno's Chief Assistant for Major Crimes in Miami, Florida. His current responsibilities serving as a department representative on the Executive Working Group for Federal, State and Local Prosecutors.
This group was established in 1980 to promote cooperation among all law enforcement agencies.
Mr. Di Gregory supervises two of the Criminal Division's litigating sections, the Computer Crime and Intellectual Property Section, and the Child Exploitation and Obscenity Section.
In addition, he has worked closely with the Terrorism and Violent Crime Section in the development and implementation of the Attorney General's National Anti-Violent Crime Initiative.
Because of his expertise in capital litigation, Mr. Di Gregory, along with three other senior Justice Department lawyers, served as a member of the Attorney General's Capital Case Review Committee. This Committee reviews every indictment charging a capital offense brought by the United States and advises the Attorney General on whether the death penalty should be sought.
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We have written statements from both the witnesses on this panel, which I ask unanimous consent to submit into the record in their entirety.
I ask both witnesses if you will, not only you, Ms. Peters and Mr. Di Gregory, but all subsequent witnesses, if you will all try to confine your statements to the five minute rule.
We have a red light that will illuminate ominously in your face at the completion of five minutes.
We will not cane haul anyone who violates it, but if you will extend that courtesy because we have many balls in the air today, and if we can do that, we can move along at a more rapid pace.
Ms. Peters.
STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES
Ms. PETERS. Thank you. Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to testify on the No Electronic Theft Act of 1997.
The Copyright Office supports the purpose and approach of the Bill which would amend the law regarding criminal copyright infringement, to cover willful piracy that may cause serious commercial harm, despite the infringer's lack of a profit motive.
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We agree with the sponsors of the Bill that a significant loophole exists. Deliberate and destructive piracy escapes criminal penalties when done for motives other than financial gain.
In order to preserve legitimate markets for copyrighted works, it is critical, especially in the era of digital transmission, to close this loophole quickly.
While we have a few concerns about some of the specific language of the Bill, we are confident that these concerns can be addressed.
Today, copyright owners lose an enormous sums of money to piracy. Digital technology has the potential to greatly exacerbate the problem. It allows users to make multiple copies in an instant without requiring a major investment in physical manufacturing and distribution facilities.
It has become easy for those without a commercial stake or profit motive, for example, a disgruntled former employee, a dissatisfied customer, an Internet user opposed to the fundamental concepts of copyright law, to do tremendous damage to the market for copyrighted work.
In contrast to the traditional analog world, substantial commercial harm may easily be caused by the act of a single person without any commercial aspect to the piracy itself.
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Moreover, for such infringers, civil remedies are less likely to serve as an effective deterrent. Therefore, criminal sanctions are needed to deter these individuals from causing serious harm to the value of copyright works.
Currently, infringement is a crime only when it is done willfully for purposes of commercial advantage or private financial gain. As Mr. Coble noted, the LaMacchia case drew attention to the current law's shortcomings.
Because LaMacchia lacked a commercial motive, the government charged him with wire fraud rather than criminal copyright infringement. The court, in dismissing the indictment, noted that copyright infringement can be prosecuted only under the copyright law.
LaMacchia demonstrates that in a digital environment, the lack of criminal penalties for willful, non-commercial infringement is a loophole.
The court, itself, decried this loophole or concluded that LaMacchia's conduct could be a crime only if Congress acted.
H.R. 2265 responds to the court's call for a legislative solution to this dilemma. It closes the loophole by making two main changes.
First, it clarifies that private financial gain does include barter; that is, it does include situations where illegal copies are traded for items of value such as other copyrighted works.
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Second, it redefines criminal infringement to include willful infringement by reproduction or distribution, including by electronic means that lacks a commercial motive, but does have substantial commercial effect.
The Copyright Office supports the proposed clarification of financial gain where definition is important because it has become common, for example, for electronic bulletin boards to employ bartering systems where users contribute pirated copies of computer software in exchange for the ability to download illegal copies or the ability to get illegal copies of other software.
The Office also supports the goal of the provisions which address damaging piracy motivated by non-commercial purposes.
While the existing commercial purpose requirement in a world of physical copies has served to limit criminal liability to piracy on a commercial scale, a new standard definitely is needed in the digital environment where significant economic damage can be caused without commercial purpose.
We are concerned, however, that certain aspects of the Bill could cause unintended negative consequences. In our view, it would be preferable to limit criminal liability for infringement without a profit motive to cases of willful infringement that threaten to cause substantial economic harm.
This result could be accomplished by incorporating the limits currently found in the proposed penalty provisions regarding time period, number of copies and retail values directly into the redefinition of criminal infringement. This would leave no doubt that minor, isolated instances of willful infringement would not inappropriately be subject to criminal liability.
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Concern has also been expressed about the impact on libraries, universities and other non-profit organizations. Some have suggested that the proposed language, even as limited as we suggest, might expose these organizations inappropriately to the risk of criminal liability since the retail value limits could easily be surpassed.
Much of this concern, however, should be allayed by the requirement that infringement be willful. The courts have consistently held that it is not enough for the defendant in a criminal case to have had an intent to copy the work. He must have acted with knowledge that his actions constituted copyright infringement.
That is the reason non-profit organizations that implement a conscientious copyright policy should not be subject to the threat of criminal sanctions. In particular, if such an organization believes in good faith that its copying is permissible, as a fair use or under Section 108 or any other provision of the copyright law, it would not be acting willfully.
Congress may wish to consider putting—or you may wish to consider confirming this interpretation in the legislative history. However, if these institutions can identify specific situations where the Bill could create an inappropriate risk of criminal liability, the Copyright Office would be pleased to addressing your concerns.
And so we support the enactment of H.R. 2265 with minor revisions. It will close the gap in the existing legal shields against piracy, particularly as piracy has evolved on the Internet.
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I thank you for the opportunity to testify, and I would be pleased to answer any questions.
[The Statement of Ms. Peters follows.]
PREPARED STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS
H.R. 2265 would amend current law governing criminal copyright infringement to cover willful piracy that may cause serious commercial harm despite the infringer's lack of a profit motive. The Copyright Office supports the bill's purpose and approach, which will close a significant loophole that exists in current law. Although we have some concerns with respect to specific language in the bill, we are confident that they can be resolved.
Existing law provides that copyright infringement can be prosecuted criminally only where the infringement is done ''willfully and for purposes of commercial advantage or private financial gain.'' 17 U.S.C. §506(a). Advances in technology have increased the potential for damage from copyright piracy, as it becomes easier and easier to make and distribute high quality copies without a major investment in equipment and facilities. In particular, the ease with which copyrighted works can be transmitted via the Internet makes it more likely that damaging copyright piracy will occur without a commercial motive on the part of the infringer.
The recent case of United States v. LaMacchia provides a clear example of the current law's shortcomings in the new digital environment, and the enforcement and deterrence problems caused by the lack of criminal penalties for deliberate and damaging noncommercial copyright piracy.
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H.R. 2265 would also improve the existing criminal provisions for commercial piracy. The Copyright Office supports the proposed definition of ''financial gain,'' which encompasses bartering systems and other nonmonetary compensation schemes commonly used by infringers on the Internet.
In addition, the Copyright Office supports the bill's goal of amending section 506 to make serious copyright piracy that lacks a profit motive subject to criminal penalties. A new standard is necessary to account for the damaging copyright piracy that can take place on the Internet without any commercial motive or profit. However, we have some concerns that the language as drafted might cause unintended negative consequences. We suggest incorporating the specific limitations regarding time period, number of copies and retail value, which the bill includes in the penalty provisions, directly into section 506 to make clear that criminal penalties apply to infringement without a commercial motive only where the infringement causes significant commercial harm. This should eliminate concerns that the legislation would criminalize minor, isolated instances of willful infringement.
We are confident that H.R. 2265, with the minor revisions suggested, will close the major loophole in current law and help to prevent copyright piracy, particularly as it has developed in the Internet context.
Mr. Chairman, members of the Subcommittee, thank you for the opportunity to testify on this important piece of legislation, the ''No Electronic Theft (NET) Act of 1997.'' The bill would amend the provisions of current law dealing with criminal liability for copyright infringement to cover willful piracy that may cause serious commercial harm despite the infringer's lack of a profit motive.
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The Copyright Office supports the purpose and approach of the proposed changes. We agree with the sponsors of the bill that a significant loophole exists in current law, which permits deliberate and destructive piracy to escape criminal penalties where it is done for motives other than financial gain. In order to preserve legitimate markets for copyrighted works, it is critical, especially in the era of digital transmission, to close this loophole quickly. While we have some concerns with respect to specific language of the proposed changes, we are confident that these concerns can be resolved.
INTRODUCTION AND BACKGROUND
The Copyright Act provides for both civil and criminal liability for acts of copyright infringement. 17 U.S.C., Chapter 5. Infringement is a crime only where it is done ''willfully and for purposes of commercial advantage or private financial gain.'' 17 U.S.C. §506(a). The penalties for criminal infringement, set forth in Title 18 of the U.S. Code, are determined by its extent: if the infringer has made, in any 180-day period, ten or more copies of one or more copyrighted works with a total retail value of $2,500, the crime is a felony entailing up to five years imprisonment and/or a fine of up to $250,000 for individuals and $500,000 for organizations. 18 U.S.C. §2319(a), 3571(b). For cases not meeting this threshold, the crime is a misdemeanor, with the maximum penalty of imprisonment for up to one year and/or a fine of up to $25,000 for individuals and $100,000 for organizations. Id. §2319(c), 3571(b). There is also an increased penalty for repeat offenders, authorizing a sentence of up to 10 years. Id. §2319(b).
This general approach to criminal liability dates back to the first criminal infringement provision in the copyright law, which required the infringement to be ''willful and for profit.'' Act of January 6, 1897, 54th Cong., 2d Sess., 29 Stat. 481. The profit element was maintained in the 1909 Copyright Act, but was elaborated in 1976 to read ''for purposes of commercial advantage or private financial gain.'' 17 U.S.C. §506(a). Although Congress did not explain the change, see H.R. Rep. 1476, 94th Cong., 2d. Sess. 163 (1976), courts have pointed out that the current language conforms to judicial interpretation of the prior law's ''for profit'' requirement as covering infringers who intended to make a profit but did not actually do so. See United States v. Cross, 816 F.2d 297, 301 (7th Cir. 1987); United States v. Moore, 604 F.2d 1228, 1235 (9th Cir. 1979).
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The damage from piracy has grown over the years as technology has developed, making it easier and easier to produce higher quality copies of copyrighted works in various formats. Copyright owners today lose substantial sums of money to piracy. The advent of digital technology has the potential to exacerbate greatly the impact of piracy, as it allows users to make multiple perfect copies in an instant, without requiring a major investment in physical manufacturing and distribution facilities. As it becomes easier to transmit large amounts of information quickly over the NII, it becomes easier for those without a commercial stake or profit motive—a disgruntled former employee, a dissatisfied customer, an Internet user opposed to the fundamental concept of copyright law—to inflict tremendous damage to the market for a copyrighted work. In contrast to the traditional analog world, substantial commercial harm may easily be caused by the act of a single person without a commercial aspect to the piracy itself. Moreover, for such infringers, civil remedies are less likely to serve as an effective deterrent and criminal sanctions may be needed to deter these individuals from causing serious harm to the value of copyrighted works.
The case of United States v. LaMacchia, 871 F. Supp. 535 (D. Mass. 1994), has drawn attention to current law's shortcomings. David LaMacchia, a student at the Massachusetts Institute of Technology described by the court as a ''computer hacker,'' id. at 536, created and operated electronic bulletin boards on the Internet and encouraged users to upload and download copies of popular copyrighted commercial software. The illegal copying that took place on the bulletin boards resulted in alleged losses to the copyright owners of over one million dollars. Because LaMacchia lacked a commercial motive, however, the government charged him with wire fraud rather than criminal copyright infringement. Id. at 541–42. The court dismissed the indictment, holding that copyright infringement can only be prosecuted under the Copyright Act. Id. at 545 (relying on Dowling v. United States, 473 U.S. 207 (1985)).
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LaMacchia demonstrates that the lack of criminal penalties for willful, noncommercial infringement has become a significant loophole in the digital environment. The court itself decried this loophole, expressing frustration with the confines of section 506(a):
[O]ne might at best describe [the defendant's] actions as heedlessly irresponsible, and at worst as nihilistic, self-indulgent, and lacking in any fundamental sense of values. Criminal as well as civil penalties should probably attach to willful, multiple infringements of copyrighted software even absent a commercial motive on the part of the infringer. . . . But, it is the legislature, not the Court which is to define a crime, and ordain its punishment.
Id. at 545 (quotations omitted).
H.R. 2265 responds to the court's call for a legislative solution to its dilemma. The bill would close the loophole in current law by making two main changes. First, it clarifies that the ''private financial gain'' element of criminal infringement includes barter—that is, situations where the illegal copies are traded for items of value such as other copyrighted works, not only where they are sold for money. Second, it redefines criminal infringement to include willful infringement by reproduction or distribution, including by electronic means, that lacks a commercial motive but has a substantial commercial effect.
ANALYSIS
A. Definition of ''Financial Gain''
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Section 2(a) of the bill would introduce a new definition in section 101 of the Copyright Act for the term ''financial gain.'' Under the current section 506(a), the standard for criminal liability is that the infringer acted ''willfully and for purposes of commercial advantage or private financial gain.'' The new definition of ''financial gain'' would clarify that the term ''includes receipt of anything of value, including the receipt of other copyrighted works.'' This language ensures that criminal liability will not turn on the technicality of whether the infringing copies were sold for money, as opposed to other valuable benefits.
The Copyright Office believes that the proposed clarification is desirable. The new definition will be particularly important in protecting copyright owners from piracy on the Internet, where a multitude of economic models have developed to compensate infringers for their illegal copies. It has become common, for example, for electronic bulletin boards to facilitate bartering systems where users contribute copies of infringing software in exchange for the ability to download copies of other software. See, e.g., Sega Enters. Ltd. v. MAPHIA, 948 F. Supp. 923, 927–28 (N.D. Cal. 1996); LaMacchia, 871 F. Supp. at 536.
B. Substitution of Commercial Impact for Commercial Purpose
Other sections of the bill allow criminal liability for willful infringement to be based on the commercial impact on the copyright owner rather than the commercial purpose of the infringer.
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Section 2(b) of the bill renumbers the existing criminal infringement provision in section 506(a) as subsection 506(a)(1), and adds a new subsection 506(a)(2). Under the new subsection, any person who infringes a copyright ''willfully . . . by the reproduction or distribution, including by electronic means, of 1 or more copies, of 1 or more copyrighted works'' is subject to the criminal penalties set forth in Title 18. The core of this subsection is its omission of any requirement of commercial purpose or financial motive. In addition, it makes explicit that reproduction and distribution of electronic copies via the Internet can qualify for criminal sanctions.
The bill also revises section 2319 of Title 18 to set forth the penalties for violation of the proposed new subsection. Under the revisions, the criminal infringement would be a felony if the offense involves the copying or distribution, in any 180-day period, of ten or more copies of one or more copyrighted works with a total retail value of $5,000. See H.R. 2265, §2(d) (adding new section 2319(c) to Title 18). The maximum sentence is up to 3 years in prison and/or a fine of up to $250,000 for individuals and $500,000 for organizations (the bill does not amend the existing fine amounts found in 18 U.S.C. §3571). Repeat felony offenders could receive a sentence of up to 6 years. A less extensive violation of section 506(a)(2) would be a misdemeanor, with the maximum sentence of up to one year in prison and/or a fine of up to $25,000 for individuals and $100,000 for organizations. See H.R. 2265, §2(d) and 18 U.S.C. §3571.
As discussed above, the Copyright Office supports the goal of the proposed revisions in addressing damaging piracy that is motivated by non-commercial purposes. While the existing ''commercial purpose'' requirement, in the the world of physical copies, has served to limit criminal liability to piracy on a commercial scale, a new standard is needed in the digital environment, where significant economic damage can be caused without a commercial purpose.
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We are concerned, however, that certain aspects of the language of H.R. 2265 as drafted could cause unintended negative consequences. Because of the placement of all the factors delineating the extent of the infringement in the penalties section in Title 18, the structure of the bill indicates that willful infringement through reproduction or distribution of a single copy of a copyrighted work could lead to criminal liability. While the more serious cases listed in Title 18 would constitute felonies, cases of less severity appear to qualify as misdemeanors.
In our view, it would be preferable to limit criminal liability for infringement without a profit motive to cases of willful infringement that threaten to cause substantial economic harm. When Congress last revised criminal penalties for copyright infringement, the legislative reports made clear that de minimis copying would not be subject to the new criminal penalties. See H.R. Rep. No. 102–997, 102d Cong., 2d Sess. 6 (1992). At that time, the House Judiciary Committee stated that the new felony provisions would not apply to ''children making copies for friends as well as other incidental copying of copyrighted works having a relatively low retail value.'' Id. We believe a similar distinction is appropriate here.
This result could be accomplished by a change in drafting technique. We would suggest incorporating directly into section 506(a)(2) the limits currently found in the proposed penalty provisions regarding time period, number of copies and retail value. This approach would make clear that the new criminal provisions are limited to situations like LaMacchia, where the infringer's conduct substantially damages the market for the copyrighted works. The definition of the criminal conduct itself would then contain limitations—requiring the conduct to take place within a 180-day period and involve 10 or more copies of works worth $5,000 or more—that would leave no doubt that minor, isolated instances of willful infringement would not inappropriately be subject to criminal liability. The bill already takes similar precautions in this area by increasing the current felony ''retail value'' threshold for commercial piracy from $2,500 to $5,000. See section 2(d)(1).
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Concern has also been expressed about the impact of the bill on libraries, universities and other nonprofit organizations. Some have suggested that the proposed language, even if limited as proposed above, might expose these organizations inappropriately to the risk of criminal liability, since the retail value limits could easily be surpassed, particularly by large nonprofits.
Much of this concern should be allayed by the requirement that the infringement be ''willful,'' given the interpretation that courts have given this term in the criminal context. The courts have held that it is not enough for the defendant in a criminal case to have had an intent to copy the work; he must have acted with knowledge that his conduct constituted copyright infringement. See, e.g.,United States v. Cross, 816 F.2d 297, 300 (7th Cir. 1987) and United States v. Moran, 757 F. Supp. 1046 (D. Neb. 1991). In Cross, the Seventh Circuit upheld the following jury instruction for determining willfulness under the criminal provision of the Copyright Act:
'[W]illfully' as used in the statute means the act was committed by a defendant voluntarily, with knowledge that it was prohibited by law, and with the purpose of violating the law, and not by mistake, accident or in good faith.
816 F.2d at 300.
In Moran, the defendant was charged with criminal infringement for his practice of making backup copies of the videotapes he purchased for his video rental store. The court held that the ''willful'' element of criminal copyright infringement was similar to that in federal criminal tax statutes, and thus requires a ''voluntary, intentional violation of a known legal duty.'' Id. at 1049 (citing U.S. v. Cheek, 111 S.Ct. 604, 610 (1991)). The court therefore held that because the defendant believed, albeit incorrectly, that he had a right to make such copies, he could not be convicted of criminal infringement. Id. at 1051–52.
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Thus, libraries and other nonprofit organizations that implement a conscientious copyright policy should not be subject to the threat of criminal sanctions under H.R. 2265. In particular, if such an organization believes in good faith that its copying is permissible as fair use or under section 108 or another provision of the Copyright Act, it would not be acting willfully. In order to confirm this interpretation, the legislative history could refer to the case law described above. To the extent that nonprofits may identify specific situations where the bill could create an inappropriate risk of criminal liability, the Copyright Office would be pleased to assist in developing language to meet their concerns while maintaining the intended purpose of the legislation.
The Copyright Office has one additional technical suggestion about the language of the bill. We recommend that the phrase ''copies'' that appears both in section 506(a)(2) and in section 2319(c) of Title 18 be expanded to read ''copies or phonorecords,'' in order to cover all forms of material objects in which copyrighted works may be embodied. See definitions of ''copies'' and ''phonorecords'' in 17 U.S.C. §101.
CONCLUSION
The Copyright Office supports enactment of H.R. 2265, with the minor revisions suggested. The bill would close a gap in existing legal shields against the piracy of copyrighted works, particularly as piracy has evolved into different forms in the Internet context.
Mr. COBLE. Thank you, Ms. Peters. I failed to mention earlier when I asked you all to try to confine your comments to five minutes, be assured—I say to the witnesses, your written testimony will not casually be discarded and tossed away. It will be carefully and thoroughly and deliberately examined.
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So just because we are holding you to five minutes, do not think that your written testimony is going to be cast aside.
Mr. Di Gregory.
STATEMENT OF KEVIN V. DI GREGORY, DEPUTY ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE
Mr. DI GREGORY. Good morning, Mr. Chairman and members of the Subcommittee. Thank you for this opportunity to describe the Department of Justice's enforcement of the criminal laws protecting copyright and to express the Department's strong support for the goals of H.R. 2265, the No Electronic Theft Act.
Intellectual property is one of this nation's most important resources, and with the help of Congress, the Department will ensure that the theft of copyright is vigorously prosecuted as we move further into the digital age.
Copyrighted goods, as has been already noted, can be illegally distributed, either physically or electronically. When distributed physically, copyrighted works are illegally reproduced here or abroad in a factory, and the pirated goods are sold to wholesalers, and then, in turn, to retailers, who sell the goods on the street.
One feature of this model of distribution is that the sale of goods on the streets is highly visible, making it more likely to attract the attention of law enforcement. Once the crime problem is targeted, the nature of the distribution scheme permits law enforcement to infiltrate the organization by obtaining the cooperation of the retailer to make a case against the wholesaler, and then use the cooperation, perhaps, of the wholesaler to make a case against the factory owner.
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Through this process, an entire distribution scheme can be shut down, resulting in the seizures of a substantial number of illegally copied works.
To an ever-increasing extent, however, copyrighted works are being distributed electronically. This is a significant problem because computers that can easily copy and transmit digital information are relatively inexpensive.
Moreover, with digital copies, there is no deterioration in quality when second and third generation copies are made.
Accordingly, computers can illegally distribute copyrighted products around the world in the space of a few minutes.
At present, computer software companies are suffering the most at the hands of these copyright pirates, but as technology is permitting different types of work to be easily digitized and copied, other industries are being affected.
For example, the music industry is now beginning to suffer serious losses, and within a few years, the movie industry will find its products vulnerable to computer theft.
Pirates who operate electronically are often organized in gangs. Many pirate organizations operate through bulletin board services, or BBS's; that is, a computer or several computers often located in someone's home and reachable by customers or subscribers through telephone lines or computer modems.
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Some of these BBS's operate by selling membership. Others operate on a trade or barter basis, requiring prospective members to contribute valuable software to the BBS.
These BBS's offer their membership hundreds of different programs, including expensive software from both large and small companies, and may even include software in versions not yet available to the general public.
Technology is also offering many new methods for distributing copyrighted works online.
Pursuing copyright pirates who operate in cyberspace presents different challenges for law enforcement than does combatting the illegal, physical distribution of copyright goods.
Electronic copyright violations are easy to overlook because rather than taking place openly on the streets, they take place hidden in cyberspace. Even when computer copyright violations are targeted, the lack of a vertical distribution scheme makes it difficult for a single case to noticeably impact the amount of copyrighted material available through illegal channels.
Finally, it is important to note that while a tangible distribution of copyrighted goods can be investigated by any law enforcement agent, computer violations require technically adept agents, who are in short supply.
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Despite these formidable problems, the Department of Justice has made great strides for addressing the difficulties associated with electronic theft of copyrighted products.
We hope that by bringing the criminal laws to bear on some of the worst offenders, we will deter others.
One of the most important initiatives that we have taken is creating, in 1996, the computer crime Intellectual Property section within the Criminal Division, and one of the section's top priorities has been training Federal investigators and prosecutors.
We have recently published in May of this year, 175 page manual entitled, ''Federal Prosecution of Violations of Intellectual Property Rights, Copyrights, Trademarks and Trade Secrets.'' This manual has been distributed to each of the 93 United States Attorney's offices and is available online.
The Computer Crime and Intellectual Property Section and U.S. Attorney's Offices around the nation have also been investigating and prosecuting copyright cases with increasing frequency. The FBI has made intellectual property protection one of its national crime priorities.
The Department strongly supports the goals of H.R. 2265. The LaMacchia decision holding that criminal statutes do not reach not-for-profit illegal distribution of copyrighted goods has impeded the Department's ability to prosecute copyright pirates in instances where clear proof of motive has been lacking.
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NET would fix this statutory hole by creating a new provision that would criminalize willful infringement, even where there is no profit motive.,
We do have some concerns about H.R. 2265 in that it may sweep too broadly. These concerns, we believe, are easily remedied, and we are confident that we will be able to work with the Subcommittee to fine tune this particular provision.
In short, NET would give law enforcement the statutory tools we need to combat copyright crime. We look forward to working with the Subcommittee on this important matter.
And as a final note, Mr. Chairman, if I may say both you and Mr. Frank noted this in your opening statements. I think it is important that, as we proceed through this hearing, that we focus on the fact that we are talking about criminal activity and that we are talking about stealing, and we are talking about the impact of that theft on the victim and also the impact of that theft on the prosecutor; that is to say that we should also focus on the prosecutor's decision-making process with respect to these thefts, recognizing that these kind of thefts, in many ways, are no different than other thefts in that the prosecutor's job is simply to decide whether or not someone either intended to steal or someone wanted to aid someone who was intending to steal.
[The Statement of Mr. Di Gregory follows:]
PREPARED STATEMENT OF KEVIN V. DI GREGORY, DEPUTY ASSISTANT ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE
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Mr. Chairman and members of the Subcommittee: Thank you for this opportunity to describe the Department of Justice's enforcement of the criminal laws protecting copyright, and to express the Department's strong support for the goals of H.R. 2265, the ''No Electronic Theft (NET) Act.'' Intellectual property is one of this nation's most important resources, and with the help of Congress, the Department will ensure that theft of copyright is vigorously prosecuted as we move further into the digital age.
A. Copyright Protection in the Digital Landscape
The advent of powerful and inexpensive computing is bringing many changes to the way that copyrighted works are being illegally distributed, and hence to the methods that law enforcement uses to combat copyright piracy. Traditionally, copyrighted works—including books, records, and audiotapes—have been illegally reproduced here or abroad in a factory. The pirated goods are sold to wholesalers, and then in turn to retailers, who sell the goods on the street. In this type of distribution scheme, the damage to copyright owners, while substantial, is subject to certain technological limits. That is because the equipment necessary to reproduce the works in bulk is relatively expensive to purchase, and second generation products (i.e., copies of copies) are either impossible for the customer to make (for records and compact disks), or else suffer in quality (for audio and video cassettes).
Another feature of this model of distribution is that the sale of goods on the street is highly visible, making it likely to attract the attention of law enforcement. Once the crime problem is targeted, the nature of the distribution scheme permits law enforcement to infiltrate the organization by obtaining the cooperation of the retailer to make a case against the wholesaler, and then use the cooperation of the wholesaler to make a case against the factory owner. By this process, an entire distribution scheme can be shut down, resulting in the seizure of a substantial number of illegally copied works.
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This illegal distribution of copyrighted goods through tangible means continues to present a pressing problem for copyright owners, particularly for producers of books, movies, music, and computer software.(see footnote 1) Accordingly, law enforcement continues to concentrate a great deal of attention on investigating and prosecuting these copyright pirates. To an ever-increasing extent, however, copyright piracy is being carried out through computers. Anything capable of being digitized—that is, reduced to a series of zeros and ones—is capable of being transmitted easily from one computer to another. Pirates have used this capability of the computer to steal vast amounts of copyrighted material, and illegally transfer it to others.
Up to now, it has been computer software companies who have suffered the most at the hands of the pirates. As technology is permitting different types of works to be easily digitized and copied, other industries are being affected. For example, the music industry is now beginning to suffer serious losses from computer pirates. And within a few years, the movie industry will find its products vulnerable to computer theft.
Pirates who operate electronically are often organized in gangs. Many pirate organizations operate through ''Bulletin Board Services,'' or BBS's: a computer or several computers often located in someone's home, and reachable by customers or subscribers through telephone lines and computer modems. Some of the BBS's offer pirated software—called ''warez''—exclusively. Others offer legitimate services, such as discussion groups, or a platform for trading ''shareware'' (software not covered by copyright), and contain pirated material on parts of their BBS's accessible only through a password.
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Some of these BBS's operate by selling memberships. Others operate on a trade or barter basis, requiring prospective members to contribute valuable software to the BBS. In either event, the member is permitted to access and copy copyrighted software from the BBS. These BBS's often offer hundreds of different programs, including expensive software from large and small companies, and may even include software in versions not yet available to the general public. The unauthorized distribution of valuable works by pirates has almost destroyed some software developers and seriously injured countless others.
Although distributing software through BBS's is the method of choice for present-day computer pirates, other computer network services are providing new means for copyright crime to occur. For example, there are certain electronic ''chatrooms'' devoted to the discussion of the availability of illegally copied programs. Programs can be sent through e-mail or, more typically, through World Wide Web sites or other programs that allow for the rapid exchange of digital information.
Pursuing copyright pirates who operate in cyberspace presents different challenges for copyright owners and for law enforcement than does combating the illegal physical distribution of copyrighted goods. First, unlike the equipment necessary to make large-scale physical copies of tapes and disks, computers than can easily copy digital information are relatively inexpensive. Second, with digital copies, there is no deterioration in quality when second or third generation copies are made. Accordingly, a copyrighted product can be placed on a BBS or website and copied by hundreds of people. Those people can then redistribute the copy to others, illegally spreading the product around the world in the space of a few minutes.
For law enforcement, electronic copyright violations are easy to overlook, because, rather than taking place openly in physical space, they take place hidden in cyberspace. Even when computer copyright violations are targeted, the lack of a hierarchical distribution scheme makes it difficult for a single case to make a noticeable impact on the amount of copyrighted material available through illegal channels: the software no longer available from one BBS can simply be found elsewhere. Finally, it is important to note that while the tangible distribution of copyrighted goods can be investigated by any law enforcement agent, computer violations require technically adept agents. These agents are in short supply, despite the efforts of federal law enforcement agencies to hire and train agents to deal with computer crime. Even when investigative agencies have such resources, they are often needed to investigate other computer crimes, such as attacks on the confidentiality, integrity and availability of computer systems and data.
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B. Law Enforcement's Approach to Computer Copyright Theft
Despite these formidable problems, the Department of Justice has made great strides toward addressing the difficulties associated with electronic theft of copyrighted products. We hope that by bringing the criminal laws to bear on some of the worst offenders, we will deter others from engaging in these illegal activities.
One of the most important initiatives that the Department has undertaken in this area is creating, in 1996, the Computer Crime and Intellectual Property Section (CCIPS) within the Criminal Division. As its name indicates, CCIPS is responsible for coordinating both the Department's policies regarding computer crime and the enforcement of criminal laws protecting intellectual property. CCIPS is headed by Scott Charney, a highly-regarded expert in these fields. The Section has particular expertise in the area this Subcommittee is considering today: computer-based copyright theft.
One of the Section's top priorities has been training federal investigators and prosecutors. In May of this year, CCIPS published a 175-page manual entitled, ''Federal Prosecution of Violations of Intellectual Property Rights: Copyrights, Trademarks and Trade Secrets.'' The Manual has been provided to each of the 93 U.S. Attorney's Offices and is available on line.(see footnote 2) The Manual provides agents and prosecutors with a detailed resource for undertaking prosecutions in the law.
In addition, CCIPS works with a ''Computer and Telecommunication Coordinator'' (CTC) in each U.S. Attorney's Office. The CTC is a prosecutor specially designated by the U.S. Attorney as the expert in that district on high-tech crime, and is given specialized training in both computer crime and intellectual property protection.
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CCIPS also provides training to state and local agents and prosecutors in a variety of settings. Finally, CCIPS is active in training law enforcement officials from other nations. Section attorneys have traveled to Russia, Egypt, and many other countries to give guidance to our counterparts there, and regularly instruct foreign officials visiting the United States on U.S. laws and techniques for combating copyright piracy. These efforts are particularly important to the United States because many of the products being illegally copied abroad are produced by U.S. companies, and because computers make it easy to send such pirated works across international boundaries.
CCIPS and U.S. Attorneys' Offices around the nation have also been investigating and prosecuting copyright cases with increasing frequency. The Department's enlarged focus on the issue has been matched by the investigative agencies assigned to this area: the Federal Bureau of Investigation and the U.S. Customs Service.
The FBI has made intellectual property protection one of its national crime priorities. Two of the notable operations that have recently arisen from the FBI's stepped-up enforcement efforts are ''Operation Cyber Strike'' and ''Operation Counter Copy.''
Operation Cyber Strike was an eight-month undercover investigation of pirate BBS's, run out of the FBI's International Computer Crime Squad in San Francisco. Earlier this year, search warrants were executed on ten large pirate BBS's around the country, receiving publicity from both the mainstream press and (perhaps more important for deterrence purposes) the pirate community. That investigation is continuing. Operation Counter Copy, while not focused exclusively on computer piracy, brought together a number of the FBI's cases involving criminal copyright and trademark cases. The operation resulted in thirty-five indictments in April, as well as eight guilty pleas.
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The U.S. Customs Service is also actively involved in protecting against the illegal importation of infringing products, and seizes $45 million in such products annually. Recently, an undercover effort aimed at the importation of ''bootleg'' compact disks—recorded without the permission of the recording artist—resulted in a 39-count indictment and subsequent guilty pleas by fifteen defendants, as well as the seizure of 800,000 CD's worth over $20 million.
C. The No Electronic Theft (NET) Act
As we look toward the future, it is clear that the effort to deter electronic theft would be greatly aided by new legislation. The Department believes that H.R. 2265, the No Electronic Theft (NET) Act, contains a number of important provisions that will help the Department protect copyright in the digital age. We commend the sponsors of the bill,(see footnote 3) and strongly support legislation on this subject.
One of the key provisions of NET is the creation of a new criminal offense to cover the unauthorized distribution or reproduction of copyrighted materials, regardless of whether the distributor was trying to profit from the activity. The provision would cover a gap in the current criminal statute that was exposed by the District Court's dismissal of an indictment in United States v. LaMacchia, 871 F. Supp. 535 (D. Mass. 1994).
In LaMacchia, an MIT student operated a computer bulletin board system over the Internet that allowed anyone with a computer and modem to send to the board or acquire from the board copyrighted software programs. His actions caused an estimated loss to copyright holders of over $1 million during the six-week period the system was in operation. The student could not be charged with violation of the criminal law protecting copyright, 17 U.S.C. §506, because he was not acting ''for commercial purpose or private financial gain,'' an element of the criminal copyright offense. Instead, he was charged with conspiracy to commit wire fraud, 18 U.S.C. §1343.
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The district court dismissed the indictment, because it viewed the copyright law as the exclusive remedy for protecting intellectual property rights from this kind of theft, even while recognizing that the current copyright law fails to cover this conduct. The Court explicitly invited Congress to remedy this gap in the law:
This is not, of course, to suggest that there is anything edifying about what LaMacchia is alleged to have done. If the indictment is to be believed, one might at best describe his actions as heedlessly irresponsible, and at worst as nihilistic, self-indulgent, and lacking in any fundamental sense of values. Criminal as well as civil penalties should probably attach to willful, multiple infringements of copyrighted software even absent a commercial motive on the part of the infringer. One can envision ways that the copyright law could be modified to permit such prosecution. But, ''[i]t is the legislature, not the Court which is to define a crime, and ordain its punishment.'' [citation omitted].
871 F. Supp. at 545.
The LaMacchia decision has impeded the Department's ability to prosecute copyright pirates in instances where clear proof of a profit motive has been lacking. NET would fix this statutory hole by creating a new provision, to be codified at 17 U.S.C. §506(a)(2), which would criminalize willful infringement, even when there is no profit motive, and establish a three-year felony for reproducing or distributing, during any 180-day period, ten or more copies of one or more copyrighted works which have a total retail value of more than $5,000.
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We do have some concerns that H.R. 2265 may sweep too broadly.(see footnote 4) These concerns are easily remedied, however, and we are confident that we will be able to work with the Subcommittee to fine tune this particular provision.
Filling the gap caused by the LaMacchia decision is only one of the benefits that this bill brings to criminal enforcement of the copyright laws. The bill has a number of other important provisions. They include:
Establishing a recidivist provision, which raises penalties for second or subsequent felony criminal copyright offenses;
Extending the statute of limitations from three to five years, bringing it in line with most other criminal statutes;
Clarifying that the term ''financial gain'' includes the receipt of anything of value, including the receipt of other copyrighted works, to ensure that pirate operations that require barter rather than cash are covered;(see footnote 5)
Clarifying that ''reproduction or distribution'' includes electronic as well as tangible means;
Extending victims' rights by allowing the producers of pirated works to provide a victim impact statement to the sentencing court; and
Directing the Sentencing Commission to amend the Sentencing Guideline for copyright and trademark infringement to allow courts to impose sentence based on the retail value of the good infringed upon, rather than the often lower value of the infringing good.
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In short, NET would give law enforcement the statutory tools we need to combat copyright crime. We look forward to working with the Subcommittee on this important matter.
I would be pleased at this time to answer any questions you may have.
SUMMARY
The increasing prevalence of copyright theft through electronic means is creating new challenges for law enforcement. Computer pirates organized in gangs illegally distribute copyrighted software and other works at rapid speed, causing untold harm to the producers of such works.
The Department of Justice has responded to this challenge by creating a new Section in its Criminal Division devoted to protecting against computer crime and intellectual property theft. That Section is training federal and state prosecutors and agents on the techniques of combating this type of crime, and training foreign officials to help ensure that copyright is protected world-wide. The Department and the law enforcement agencies that protect copyright—the Federal Bureau of Investigation and the U.S. Customs Service—are placing increasing emphasis on investigating and prosecuting thefts of intellectual property, whether by physical or electronic means.
The Department is highly supportive of the goals of H.R. 2265. The bill would allow the Department to prosecute large-scale theft of copyright, even when the perpetrator was not acting out of a profit motive. The bill would also accomplish a number of other important objectives, including establishing a recidivist provision; extending the statute of limitations; clarifying that ''financial gain'' includes the receipt of other copyright works; clarifying that ''reproduction or distribution'' includes electronic as well as tangible means; extending victims' rights by permitting victim impact statements in intellectual property cases; and directing the Sentencing Commission to reflect more accurately the harms caused by copyright piracy by imposing sentence based on the retail value of the good infringed upon, rather than the value of the infringing product.
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We look forward to working with the Subcommittee on this important piece of legislation.
Mr. COBLE. I thank you, and your written testimony, as supported your oral testimony today, indicates to me that each of you is supportive of Mr. Goodlatte's Bill, but you may want it tweaked maybe here or there.
Ms. Peters, would you recommend defining the term, ''willful,'' in the statute, or do you believe that report language and existing case law on the subject will suffice to protect libraries, universities and other non-profit organizations?
Ms. PETERS. I would defer to what Congress decided in 1992. In 1992, when Congress amended the law to add additional criminal penalties to cover all types of works, the question was whether or not willful should be defined in the statute. And Congress, at that time, decided not to include that and that the courts would continue to define it in the way that it had consistently been applying it in the past.
So I basically think that you could handle it through legislative history and the courts and not necessarily have to put it in the statute. And that was the decision that was reached in 1992.
Mr. COBLE. This—let me say it a different way. This might be difficult to handle precisely, but what percentage of computer users who infringe actually know what they are doing?
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In other words, how many infringers know they are breaking the law? And the reason I ask this, folks, I have some empathy with people who break the law, but who do it innocently, who lack intent.
Do you all have a read on that?
Ms. PETERS. I cannot answer that question. Certainly my employees know about it.
I think maybe there is a significant lack of knowledge, but not with the people that we are talking about because they are willful infrigners.
I think that education is a critical part, and I know that there are a lot of people, including the Copyright Office, whose aim is to get education at the lowest possible level, so when people sign onto a computer, they learn the rules of the road and learn about intellectual property.
But hearing you talking about willful, the ones we are talking about are people who do know they are infringing.
Mr. COBLE. Each of you pretty clearly at least suggests in your written testimony that you believe the contents of H.R. 2265 may, at different points, constitute overreach.
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How about elaborating a little more in detail how we might improve on that if, in fact, Mr. Goodlatte is overreaching.
Ms. PETERS. We—you can go.
Mr. DI GREGORY. I was going to actually—I had a chance to look at Ms. Peters testimony prior to coming here, and I think in her written testimony, she proposes a rather interesting and probably useful solution.
Ms. PETERS. What we basically said was that the way that it reads now, it talks about one or more works and one or more copies, and that if you take what is in the penalty section, which makes it clear that you have to have ten or more copies whose value is $5,000 in the 180-day period, and you put that in the definition, you will, in fact, take away the one individual who sends a song to his friend on e-mail.
Mr. DI GREGORY. And from our perspective, I am not sure that we—that we want to be in a position to Federally prosecute that particular individual who decides to take that one piece of copyrighted material and send it to a friend or a relative. And I am not—and I do not know whether or not you all can answer that, whether or not it would be your intent to, again, Federally criminalize that type of activity when what we really want to deter clearly are those people who are engaged in willful, knowing violations of the law, whether for profit or not.
Mr. COBLE. The gentleman from Massachusetts, Mr. Frank.
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Mr. FRANK. That seems to me to be a clear example of where we can get agreement on the concept, but then the implementation will be an issue. I have to read the testimony of Mr. Nimmer about the Telephone Association because I am not going to be—sure about his input.
I mean we would have to ask both of you very well, because both of you would be involved in the enforcement of this.
Their fear is that the language here—I would assume the word, ''distribution,'' say on line 12 of page 2 of the Bill, when it says, ''by the reproduction or distribution, including by electronic means, of one or more copies,'' that a service provider would be criminally liable simply because some infringer used the service.
Now, obviously, that is not what we would want to see any of this—when we—I assume that we agree on that, that we do not want to see that.
So if that is the case, what is your view of the argument and is there anything that we could do that would make it clear that that is not what we mean?
Ms. PETERS. Can I just start with saying that I think it has no impact on online service provider liability. Today, under the copyright law, you are only criminally liable for aiding and abetting only if you willfully associate with the criminal venture, you willingly participate in it and you willingly seek to make it succeed. So you have to do something that aids and abets that activity.
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Mr. FRANK. Well, my concern is that someone might interpret making it physically possible for everybody to read this as aiding and abetting. And I certainly would not want to think of my service provider as trying to deter me or retard me.
Ms. PETERS. They can answer how they would do that, but certainly, there is a knowledge standard, and you cannot be just a passive carrier. You have to do more.
Mr. COBLE. What you are saying is if that is the current state of the law that passive carriers are protected——
Ms. PETERS. Absolutely.
Mr. FRANK [continuing]. And that nothing in here changes that?
Mr. Di Gregory.
Mr. DI GREGORY. I do not think anything in here changes that, either.
In fact, I mean going back to the point that I made at the very end of my statement, I think what—what we are looking to do in enforcing the law is to decide whether or not somebody had the criminal intent to steal or decide whether or not somebody had the criminal intent to aid or abet that——
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Mr. FRANK. Well, I mean, one way we might be—if we agreed that—if their suggestion—and I will ask Mr. Nimmer when he comes forward—is that we have somehow here changed the standard that now obtains for a provider, then obviously, we are going to reach that later on. But would there be harm in adding a sentence or two that said, ''Nothing in this Act is intended to change the current law regarding the liability of the service provider.''
Ms. PETERS. Mr. Frank, what I was saying is, that is very similar to the argument that I was raising with regard to libraries and other institutions who would have computers in their institutions and a student would come in, and unless they actively aided and abet—and my suggestion was that, in the legislative history, you could basically put out the parameters of willful.
Mr. FRANK. Yeah. But you got to remember—I appreciate that little bit of history, but we do confront, at least in the presence of Justice Scalia, a man with at least in his capacity as a Supreme Court Justice, a man with a limited attention span; that is——
Ms. PETERS. Well, he certainly——
Mr. FRANK. He will direct his attention to the words of the statute and nothing else.
Ms. PETERS. Exactly. I was just going to say this.
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Mr. FRANK. So what about simply trying to find some language to put into the statute—when we go through this—I have to say sometimes raise these issues not because they are concerned about them, but because they do not like the whole Bill and they do not want to say so. But I do not think that is what the phone company is doing here.
And when people are not raising an issue like that and you think that it may not be the real issue, the best way to deal with it is, in fact, to concede that point so if they have an underlying agenda——
And I would say, I want to put a computer key on the keyboard down in the Legislative Council office that says, in effect, ''This Bill does not do what this Bill does not do.'' And I would want to put a clause like that in here saying, ''Nothing in this legislation changes those things.''
Would there be any reason not to do that, and would that not be a shoo in, Mr. Di Gregory?
Mr. DI GREGORY. I think that I had a very brief opportunity to look at Professor's Nimmer's testimony. I think that this is certainly an issue that we would be glad to discuss with the Committee with respect to when we go from—because I am concerned about the impact about specifically defining, ''willfulness,'' for the purposes of this statute and——
Mr. FRANK. There are two separate issues here, right, and one is willfulness, but there was at least, in our—a definable issue which is they do not want, by this statute—they do not want a broader definition of willful to somehow change what would be the liability of the online service provider.
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And maybe we should just explicitly say we are not here trying to change whatever that is because we are going to deal with it later.
And people sometimes change that unnecessarily. I think there is one principal, because there is going to be a lot of fears we are dealing with, and I hope we accept this throughout.
Legislation is not literature. Redundancy is not a problem. The amount of paper we are using is diminimus.
And if people are uncertain, there is nothing to be lost by simply being explicit.
And the fact that you think it already says that is no reason not to say it again, because it does not have other negative implications.
So I would ask you many times to explain—to address that question about how do we deal with the feelings that are expressed in Mr. Nimmer's testimony that someone might take this beyond where we intended it to go so we could then limit it to exactly what we wanted or as close to it?
Mr. COBLE. Thank you.
Mr. FRANK. Thank you.
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Mr. COBLE. The gentleman from Virginia, Mr. Goodlatte.
Mr. GOODLATTE. Thank you, Mr. Chairman.
Mr. Di Gregory, how difficult is it to monitor this kind of electronic piracy?
Mr. DI GREGORY. I think you can monitor it through various investigative techniques. It is just—I think the most significant problem that we have is lack of resources in order to be able to monitor a great deal of it.
But there are literally hundreds of thousands of web sites, and it is rising at an enormous rate, so for every one that may be found in the active—in the act of giving out information that they are not supposed to, and I am sure that the vast majority of people who maintain web sites do not intend to infringe people's copyrights, but for every one that is, there may be a great many who are not detected.
Mr. GOODLATTE. What about the rate of recidivism of those who participate in these types of things?
Mr. DI GREGORY. I do not have any statistics for you on the rate of recidivism, but I suppose with respect to many of these pirates who are operating, when they are found out, it is probably not the first time they have done—engaged in the particular activity that they have engaged in.
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Mr. GOODLATTE. Is there a problem with this within the Federal Government agencies themselves? Do you make any effort to deal with infringement?
Mr. DI GREGORY. I would have to get back to you on that because I am unaware of any efforts that we have any specific efforts that we have undertaken with respect to infringement.
Mr. GOODLATTE. OK. So you would not know, agency by agency, which one may have a serious problem with this, which ones may not?
Mr. DI GREGORY. No, I do not. I am sorry, but as I said, I can check on that for you.
Mr. GOODLATTE. We would welcome any information that you might have in that regard.
And Ms. Peters, we take note of your concern that we place in the actual Section 506 criminal offenses, the definition of what constitutes an offense here, to make that clear. And we will certainly discuss with the other members of the Committee whether we think that is necessary to make that clear.
It certainly is not our intent, and I want to make it very clear that one person sending one item, however, contrary to the concept of intellectual property that might be, we are not out to create a law enforcement mechanism to deal with that. We are talking about people who are giving away wholesale amounts of pirated software.
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Thank you, Mr. Chairman.
Mr. COBLE. The gentleman from California. I recognize you for five minutes.
Mr. BERMAN. Thank you, Mr. Chairman.
I am curious. Civil remedies against copyright infringement, is the issue of commercial gain an issue there?
I guess for damages, well, I do not know, the loss or the gain, is there a quick answer to that question?
Ms. PETERS. Well, there is willful infringement that has higher damages, and certainly, when you are talking about actual damages, and even with regard to statutory, you take into account commercial harm.
Mr. BERMAN. If someone has——
Ms. PETERS. Yes.
Mr. BERMAN [continuing]. LaMacchia——
Ms. PETERS. Right.
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Mr. BERMAN [continuing]. Was there a basis here for holding him civilly liable for what he did, even though he could not be found criminally liable——
Ms. PETERS. Absolutely.
Mr. BERMAN. Because——
Ms. PETERS. Because he based it——
Mr. BERMAN [continuing]. He is not a——
Ms. PETERS. Basically he——
Mr. BERMAN [continuing]. Element of the——
Ms. PETERS [continuing]. Infringed the work, he would be subject to actual damages, and if you can prove the million dollars that was alleged and he had the money to pay it.
Mr. BERMAN. I am trying to understand Mr. Frank's issue. There is a law and now there is a bill dealing with the elimination of the for profit as the prerequisite to criminal culpability.
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How does the issue of innocent reproduction or innocent distribution change by virtue of anything that Mr. Goodlatte is suggesting doing? Is distribution a new concept in Mr. Goodlatte's bill?
It does not exist in the existing law?
Mr. DI GREGORY. No. It is—I think it is—there is a clarification in the law to ensure that electronic distribution—electronic reproduction is included.
Ms. PETERS. So is the reproduction and distribution includes by electronic means.
Mr. BERMAN. So the fear that all of a sudden it will be somewhat easier to convict a willful infringer, because you will not have to prove commercial gain in some sense has no impact on the issue of—well, I guess the issue is whether it is a willfully distributes, and that is the same, and what Mr. Frank is suggesting, is there a way of insuring that there is nothing in the elimination of commercial gain standard that now impacts a distributor differently than he was impacted under— Ms. PETERS. Right.
Mr. BERMAN [continuing]. Existing law.
Is that a fair——
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Mr. FRANK. Are you talking now to me?
Mr. BERMAN. Yes.
Mr. FRANK. He is clarifying for me the fact that with the language, even if it does not have anything to do with that, it does not mean he is making—because you say all they are doing is relying on the commercial aspect. And I do not know any of the online service providers that distribute this stuff for free. They may ruin the commercial business.
So eliminating the commercial motive would not seem to implicate them anymore than they already are implicated now, but to say I do not mind a little reassurance, if that calms people down.
Mr. BERMAN. All right. That is what occurred to me. And I had another question, but I forgot it, so you can get back——
Mr. COBLE. I thank the gentleman from California.
Mr. Bono, for five minutes.
Mr. BONO. Thank you, Mr. Chairman. I just actually had the same concerns that Barney had, and they are kind of rolling out here. And if that is very clear, I think that that is the big issue.
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I am concerned about otherwise protection of copyright. I could not be more for it. I think that intellectual property and technology is going to become the product of America, and it is becoming that way more and more.
And to have any loopholes in the theft of it is a big mistake for us because I think it takes the world market away from us. And I think that it is terrible economically.
So I am all for it. I would like to see it protected, and if it needs a little extra language and you are not concerned with that, maybe we could look at that so that everybody feels comfortable about it.
But I think that it is great that we are making this effort to protect intellectual property any way we can and copyrights any way we can. So I am——
Mr. COBLE. I thank the gentleman.
The gentlewoman from California is recognized for five minutes.
Ms. LOFGREN. Thank you, Mr. Chairman.
I am interested Ms. Peters, in your judgment that criminal penalties, if we are to attach them, should be reserved for cases where, on page 7, you say, ''in willful infringement that would cause substantial economic harm''——
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Ms. PETERS. Right.
Ms. LOFGREN. And the issues you have raised about fair use and libraries and schools.
Do you think that merely defining ''willful,'' as you expressed in your testimony, either through legislative history or in the statute itself, is sufficient to protect non-profits, libraries, and schools in the fair use arena?
Ms. PETERS. What we said was we felt that that was enough. However, I do not—I live in a library, but I am not a librarian. And if they see specific instances that they think are problems, we would be glad to try to address those problems.
But, yes. We believe that the way that courts have continuously interpreted ''willful'' would end, we said, and if they have a policy that basically is a good copyright policy and they believe that they are operating under fair use that they cannot be held liable criminally.
Ms. LOFGREN. At least in my personal experience with schools and libraries, they are scrupulous. I mean really much more than ordinary citizens. They take the responsibility pretty seriously, which is good. They should.
I am wondering, Mr. Di Gregory, do you concur with Ms. Peters?
Mr. DI GREGORY. I think I would again go back to my earlier comment that what prosecutors are going to be looking for is whether or not they can establish that there was an intent to steal or that someone was aiding or abetting an intent to steal.
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Ms. LOFGREN. I agree with that, but copyright law is and always has been a balance. We want to protect the intellectual property of the creator, and yet society has an interest in dissemination of ideas in intellectual property, as well, hence the fair use doctrine.
And so we need a strong right of fair use, even though, in fact, a prosecutor likely would not go in and prosecute the third grade teacher for making a back-up copy of the educational software.
So I was intrigued by your idea in terms of should there be—Ms. Peters' referenced in a different way the number of copies or——
Ms. PETERS. Well, actually, that is—it is just in the penalty part. And we just wanted to make it clear in the definition.
But I strongly believe that the willful standard that is there today would make it so that libraries and educational institutes who operate in a normal way, unless they actively involve themselves in aiding and abetting, would not have any liability. And I have never, certainly in the Library of Congress, I would never expect there to be liability because the library would never aid and abet, to my knowledge.
Ms. LOFGREN. Aiding and abetting is one of the issues that has been of concern. This is something that in the whole copyright arena, as we move into the Internet era, there is going to be a lot of thinking and readjusting. I mean not just in Congress, but in society and how we think about our existing laws and how they apply to this wonderful new world.
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In your judgment, if one makes available a search engine or a browser or a hypertext link, is that aiding and abetting?
Ms. PETERS. That is an interesting question. I do not really have an answer. I have to go back and think about it. We have looked at linking in relation to our own site, what should we link to?
And we made a determination that we were going to be very close in what we link to because we wanted to limit any possible liability and we did not want anybody saying that we had linked to a pirated site.
I think that maybe the online service providers could answer how the links are made, and I think maybe you can answer that more.
Mr. DI GREGORY. I do not think that we are trying to do, nor does this law try to prevent the dissemination of information. What we are looking to try to prevent is people intentionally disseminating copyright information.
I do not think this statute requires anything of the service providers other than to—other than not engaging in intentionally providing copyrighted information.
Ms. LOFGREN. I think we are of one mind, really. I am just trying to explore unintended consequences here which is important to do in the Internet age.
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Ms. PETERS. Clearly you would aid and abet if you had a site that said, ''Top ten pirated sites,'' and led everybody to them.
Mr. DI GREGORY. I do not know that—yeah. I do not know that we would necessarily prosecute them because you have got to look at all the facts and circumstances before you make such a decision.
But I think certainly we are not looking at simply prosecuting somebody for passing on copyrighted information if they had no intention of passing on copyrighted information. And maybe there is a more articulate way to say it, but I cannot come up with it right now.
Ms. LOFGREN. Mr. Chairman, Mr. Delahunt just asked if I could yield for a follow-up. I do not have any more time. Perhaps you would let——
Mr. COBLE. It is going to be all right.
You may—without objection, the lady is asking for an additional minute.
Ms. LOFGREN. Mr. Delahunt, I will let you take my minute.
Mr. DELAHUNT. Mr. Di Gregory, I respect what you say about prosecutorial discretion. It seems to me that there is a legitimate concern about, prosecuting schools and librarians. I presume that it is not the position of the Department of Justice to initiate a special task force on copyright infringement to go around and focus in on the villages and towns of the United States, chasing librarians and similarly situated users.
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Mr. DI GREGORY. We are aware of no need to do that. Right.
Mr. DELAHUNT. In fact, how many cases has the Division brought in this area other than the LaMacchia case?
Mr. DI GREGORY. I do not have an exact number.
Mr. DELAHUNT. Not a lot, though?
Mr. DI GREGORY. Not a lot.
Mr. DELAHUNT. OK. We're really talking about a situation, I presume, where there is a recognition that civil litigation has not been an effective deterrent in terms of the kind of scenarios that developed in LaMacchia.
Mr. DI GREGORY. That's right.
Mr. DELAHUNT. So now it has come to a situation where it is appropriate for Congress to determine and make a decision as to whether criminal sanctions will, in fact, deter.
Mr. DI GREGORY. That's right.
Mr. DELAHUNT. I think that's where we stand in terms of the policy.
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I happen to have been a prosecutor in a former life, and I honestly believe that if there is such a concept as deterrence, this is one of those cases in which it can be effective. That is why, maybe with some tweaking and some amendments, I intend to support Representative Goodlatte's bill.
But I think the concerns that we have here, in many cases, are exaggerated. I really honestly believe that we are not going to see a rash of United States Attorney's offices sending out hordes of FBI investigators to track down librarians and teachers in schools. That is just not going to happen.
In fact, as was mentioned earlier, how do we even discover these crimes?
Well, the reality is, unless it is brought to you, you are not going to discover it. So it is going to be somebody who has a concern about his or her work being pirated who is going to complain to the United States Government.
Is that a fair statement?
Mr. DI GREGORY. I think in most cases, that is true.
Mr. DELAHUNT. Right. I mean these are not investigations that are initiated sua sponte?
Mr. DI GREGORY. In most cases, I think that is true.
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Mr. DELAHUNT. Thank you.
Mr. COBLE. The gentleman's time has expired.
The gentleman from Utah, Mr. Cannon. Recognize you for five minutes.
Mr. CANNON. Thank you, Mr. Chairman.
I am intrigued by the idea of the hyperlinks or the hot links. I think it would be following up on Mr. Delahunt's question.
I know in my district we have software producers who spend a great deal of time searching for people who are stealing their software through web sites.
It would seem to me that it is fair to say that if you have a hyperlink or a hot link that it would indicate some awareness, and therefore, would be an indicator to you, but not dispositive of willfulness, Mr. Di Gregory.
Mr. DI GREGORY. I think so. I mean that is certainly something that you would consider.
And I want to make the point again, just with respect to the determination of criminal intent, whether it is a violation of copyright or simply stealing an automobile, we are still talking about criminal intent to commit the act.
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Mr. CANNON. Right. Now when you—in your opening statement, you pointed out you made your manual available on the Internet. I take it that is so people who are concerned about Internet theft of intellectual property will know what your standards are and how you proceed with those so they can help the accused for you?
Mr. DI GREGORY. Well, I—that—not necessarily know what our standards are, but become familiar with—hopefully help them become familiar with the copyright law and become familiar with the parameters within which we work.
Mr. CANNON. Thank you very much.
Mr. COBLE. Thanks, gentlemen.
The gentleman from Indiana, Mr. Pease, is recognized for five minutes.
Mr. PEASE. Thank you, Mr. Chairman.
Mr. Di Gregory, I wanted to go into the discussion you had with Mr. Goodlatte on the penalty section of the Bill, and I thought I heard you say that you would prefer a definition that did not go after the one-time offender or the person who occasionally violated—technically violated the copyright law.
Can you help me understand where you—what you said and where you were headed with that?
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Mr. DI GREGORY. I think what we would like to do is work with the Committee on that because we want to make sure that the greatest deterrent effect possible occurs, and I think one of the ways you do that is to punish those persons who are trying to do more than just copy something for—for grandma, grandpa, brother or sister, and who were copying—as I think the Senate will suggest—ten or more copies with a certain value.
Mr. PEASE. The reason I ask is that I am the one who shares a concern with several members of the Committee on what has sometimes been called a tendency to Federalize crime.
But it appears to me this is an area where there clearly is a Federal crime. And so not to at least have a violation of that law, even a one-time violation be a criminal offense seems to me to be wrong. It should be a criminal offense.
And then we get into the question of prosecutorial discretion, about whether it ought to be prosecuted if there is a one-time violation.
Mr. DI GREGORY. Certainly, we do have exclusive responsibility in this area, but I think it is important also to keep in mind that there are civil remedies for even that one-time copy that can be pursued by the holder of the copyright.
And I think when you—when you consider whether or not you want to Federally criminalize that single copying event, even as a misdemeanor, you—and consider that we are it in that area, you also need to consider the resources that we have to devote to the enforcement——
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Mr. PEASE. I understand that, but prosecutors do not prosecute every violation of the law.
Mr. DI GREGORY. Sure.
Mr. PEASE. They use their discretion, what resources are available. ''How do we make a determination?''
It seems to me that we ought perhaps to look at a system of graduated penalties or something else that might reinforce the fact that you do not have enough resources, but not to say that any one violation ought not be a criminal offense, even if it is never prosecuted does not track for me.
Mr. DI GREGORY. As I said on other—we would certainly be willing to sit down with Committee staff and work that out.
Mr. PEASE. OK. I appreciate that.
Then related to that, the penalty provision that is included calls for three years of imprisonment.
Can you tell me how that compares with similar crimes, whether that penalty is in the same range of expectation for other electronic——
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Mr. DI GREGORY. Or other kinds of theft?
Mr. PEASE. Yes.
Mr. DI GREGORY. I think it is within that range, but I would be glad to check on that for you with respect to the sentencing guidelines and the maximum penalties for those offenses and get back to you.
Mr. PE