SPEAKERS CONTENTS INSERTS
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PIRACY DETERRENCE AND EDUCATION ACT OF 2003
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
JULY 17, 2003
Page 2 PREV PAGE TOP OF DOCSerial No. 37
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://www.house.gov/judiciary
COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
WILLIAM L. JENKINS, Tennessee
CHRIS CANNON, Utah
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MARK GREEN, Wisconsin
RIC KELLER, Florida
MELISSA A. HART, Pennsylvania
JEFF FLAKE, Arizona
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
Page 3 PREV PAGE TOP OF DOCSTEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee
JOHN CONYERS, Jr., Michigan
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SÁNCHEZ, California
PHILIP G. KIKO, Chief of Staff-General Counsel
PERRY H. APELBAUM, Minority Chief Counsel
Page 4 PREV PAGE TOP OF DOCSubcommittee on Courts, the Internet, and Intellectual Property
LAMAR SMITH, Texas, Chairman
HENRY J. HYDE, Illinois
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
SPENCER BACHUS, Alabama
MARK GREEN, Wisconsin
RIC KELLER, Florida
MELISSA A. HART, Pennsylvania
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
JOHN R. CARTER, Texas
HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
Page 5 PREV PAGE TOP OF DOCBLAINE MERRITT, Chief Counsel
DEBRA ROSE, Counsel
DAVID WHITNEY, Counsel
MELISSA L. MCDONALD, Full Committee Counsel
ALEC FRENCH, Minority Counsel
C O N T E N T S
JULY 17, 2003
The Honorable Lamar Smith, a Representative in Congress From the State of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property
The Honorable Howard L. Berman, a Representative in Congress From the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property
Ms. Jana D. Monroe, Assistant DIrector of Cyber Division, Federal Bureau of Investigation
Mr. David P. Trust, Chief Executive Officer, Professional Photographers of America
Page 6 PREV PAGE TOP OF DOCOral Testimony
Ms. Linn R. Skinner, Proprietor, Skinner Sisters
Ms. Maren Christensen, Vice President, Intellectual Property Counsel, Universal Studios
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared statement of the Honorable Howard L. Berman, a Representative in Congress From the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property
Letter from Marybeth Peters, Register of Copyrights, Library of Congress to Rep. Lamar Smith
Material Submitted for the Hearing Record
Prepared statement of the Honorable Bob Goodlatte, a Representative in Congress From the State of Virginia
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Prepared statement of the Honorable Zoe Lofgren, a Representative in Congress From the State of California
Prepared statement of American Free Trade Association
Prepared statement of Gary J. Shapiro, Chairman, The Home Recording Rights Coalition
Prepared statement of Susan Poole
PIRACY DETERRENCE AND EDUCATION ACT OF 2003
THURSDAY, JULY 17, 2003
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
The Subcommittee met, pursuant to call, at 1 p.m., in Room 2141, Rayburn House Office Building, Hon. Lamar Smith (Chair of the Subcommittee) presiding.
Mr. SMITH. The Subcommittee on Courts, the Internet, and Intellectual Property will come to order. I am going to recognize myself and the Ranking Member for our opening statements. Other Members, without objection, will have their opening statements made a part of the record, after which I will introduce the witnesses and we will look forward to their testimony.
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I need to make everyone here aware, however, that about 1:30 we are expecting not 1 but 6 votes on the House floor, and so we are going to need to break when those votes are called, and it will probably be about a 30- or 40-minute recess that we will need to take, but then we will return and resume our hearing after that. I will recognize myself for an opening statement.
Today the Subcommittee will consider H.R. 2517, the ''Piracy Deterrence and Education Act of 2003.''
The digital revolution has enriched the lives of Americans while changing the nature of many crimes, including theft of intellectual property. Piracy of intellectual property over the Internet, especially by peer-to-peer networks, has reached alarming levels. Finding effective means to reduce on-line piracy is the subject of intense public debate.
Although the Copyright Act already provides civil and criminal remedies for intellectual property infringement online, aggrieved copyright owners have largely chosen not to pursue these remedies. Hesitant to initiate prosecutions against their customers, copyright owners have instead sued the networks facilitating and promoting online piracy in an effort to reduce that rampant piracy. That hasn't worked.
Testimony received at congressional hearings and recently issued Federal court rulings have noted the availability of civil and criminal remedies and encouraged copyright owners to prosecute individuals engaged in online piracy. It is widely believed that the successful prosecution of even a few online pirates will have a significant deterrent effect on individuals who may engage in that practice.
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In fact, almost immediately after the Recording Industry Association of America brought lawsuits against four students operating file-sharing networks on university computer systems, similar student-run networks shut down. As a result, large entertainment companies currently are pursuing a more aggressive litigation strategy to defend their rights.
In trying to initiate Federal prosecutions of online infringers, copyright owners have often found it difficult to persuade law enforcement authorities to investigate and prosecute these crimes. Congress has directly and indirectly asked the Federal law enforcement agencies to increase investigations and prosecutions of intellectual property crimes on- and off-line.
Specific departments devoted to intellectual property and the Internet have been created. Increases in funding have been authorized. Legislation such as the NET Act have been passed, and letters have been written, all to increase the prosecution of online intellectual property crimes.
Law enforcement officials must be more aggressive in their enforcement of existing law. We can always strive to improve the lawas we are in the process of doing todayregarding cooperation, but why should we pass new and tougher laws when existing copyright laws are not enforced, or at least not enforced adequately?
Law enforcement devotes its time and resources to other crimes, because many believe copyright violations such as downloading songs from the Internet are not important. This week the ''Today Show'' ran a sympathetic story that quoted a parent who approves of her child illegally downloading songs. The parent said it was sharing, not stealing. Do I believe this parent should go to jail? Of course not. That is because penalties in current law are strong. They simply need to be enforced.
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H.R. 2517 further increases cooperation among Federal agencies and intellectual property owners and assists the Department of Justice in its efforts to prosecute intellectual property theft. And before I close, I want to commend the FBI and the Department of Justice on the investigation and prosecution of the individual who made an unauthorized digital copy of the movie ''The Hulk'' and uploaded it on to the Internet in advance of the movie's commercial release, and we are told that cost the producers about $20 million in lost revenue.
I look forward to learning more about why this case was successful and how H.R. 2517 will further enhance criminal enforcement of intellectual property crimes. Now, that concludes my opening statement, and the gentleman from California Mr. Berman is recognized for his opening statement.
Mr. BERMAN. Well, thank you very much, Mr. Chairman. As you mentioned, we have both enforcement of copyright laws through civil actions by copyright owners themselves, and under the Copyright Act the Federal Government has the power to bring criminal cases against egregious infringers. That criminal enforcement provides an important deterrent against infringement by otherwise judgment-proof defendants.
Furthermore, as Ms. Skinner will testify today, many individual copyright owners simply cannot afford the expense of bringing civil copyright cases. Infringers can often better afford the expense litigation than individual creators like photographers and needlepoint designers. As a result, in many cases criminal enforcement provides the only credible deterrent to infringement.
Page 11 PREV PAGE TOP OF DOC The sheer scale of online infringement indicates that millions of Internet users today do not consider credible the threat of jail time for copyright infringement. The 4 million people publicly trafficking in over 850 million mostly copyrighted files on Kazaa at any one time clearly do not fear jail time. The folks distributing tens of thousands of pages of infringing needlework designs through online affinity groups clearly do not fear jail time.
According to the exhibits appended to Ms. Skinner's testimony, many brazenly challenge her in writing to do something about it. We need to turn this ship around before the pirates scuttle it. We need more aggressive enforcement of criminal copyright laws.
H.R. 2517 will significantly improve the ability of law enforcement to enforce criminal copyright laws, and I am proud to be a sponsorcosponsor. Among other things, the bill directs the FBI to warn online infringers they may be subject to criminal prosecution. Furthermore, such FBI warnings will serve an important educational role in an environment where so much disinformation leads many file traffickers to believe their actions are illegal. Finally, such FBI warnings will perform these salutary goals without forcing either law enforcement or individual file traffickers to shoulder the monetary and social costs of a criminal case.
I want to highlight section 6(a) of the bill which enables the Government to bring a criminal suit with regard to an unregistered work. Works are copyrighted from the moment of creation, but for a variety of reasons the Copyright Act prohibits both civil and criminal infringement suits until the work is registered in the Copyright Office. This registration requirement poses a substantial barrier to the protection of new or pre-released works. Such a huge percentage of revenue from work such as books, movies and software is generated in the first weeks after their release. Widespread Internet infringement of new or pre-released works can eviscerate the revenue generated. By letting the Government bring criminal actions with regard to unregistered works, section 6(a) will ensure that protection is available to copyrighted works when they are in their most vulnerable state.
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While H.R. 2517 makes critical contributions to the enforcement of criminal copyright laws, I think more can be done. It is for this reason that yesterday Representative Conyers and I introduced H.R. 2752. I think it complements the provisions of H.R. 2517. While this hearing is on H.R. 2517, I want to take just a moment to describe the most critical portions of H.R. 2752. Section 201 addresses a unique law enforcement challenge posed by the increasingly transnational character of online copyright infringement. In order to ensure that the road across the border does not become an investigative dead end, section 201 requires the Attorney General to assist the appropriate foreign authority in making a case against such online infringers.
Section 301 of that bill clarifies that the uploading of a single copyrighted work to a publicly accessible computer network meets the 10-copy, $2,500 threshold for felonious copyright infringement. Section 301 simply brings the law into accord with the reality that uploading a copyrighted work to a place from which millions can download it is equivalent to the distribution of 10 or more copies having a value of $2,500. We do this because some prosecutors appear skeptical that they can successfully pursue cases against many uploaders of copyrighted works otherwise.
Section 302 addresses the well-documented concern that popular peer-to-peer software programs sometimes allow third parties to hijack personal computers to distribute child pornography and copyright infringing material, come bundled with spyware, and otherwise jeopardize the privacy and security of PC owners.
Section 302 requires that PC owners receive clear and conspicuous notice and provide consent prior to downloading software that would allow third parties to store material on their personal computer or use that personal computer to search for material on other computers.
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Finally, section 305 addresses the all too common phenomenon of operators of copyright-infringing Web sites providing false domain registration information. If the illegal activities on the Web site attract the attention of law enforcement or rightholders, the operators often disconnect it and pop up elsewhere under another domain name with different contact information.
Section 305 directs the courts to consider the knowing and intentional provision of materially false domain registration information as evidence of willfulness with regard to copyright infringements.
Mr. Chairman, I thank you. Look forward to working with you on the issue and yield back.
Mr. SMITH. Thank you, Mr. Berman.
[The prepared statement of Mr. Berman follows:]
PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
I commend you for introducing H.R. 2517, and for convening this hearing.
Page 14 PREV PAGE TOP OF DOC The Copyright Act envisions that enforcement of the copyright laws generally falls to copyright owners themselves. However, the Copyright Act also provides the federal government with power to bring criminal cases against egregious infringers.
Enforcement of the criminal copyright laws provides an important deterrent against infringement by otherwise judgement-proof defendants. Furthermore, as Ms. Skinner will testify today, many individual copyright owners simply cannot afford the expense of bringing civil copyright cases. In fact, infringers often can better afford the expense of litigation than individual creators like photographers and needlepoint designers. As a result, in many cases, criminal enforcement provides the only credible deterrent to infringement.
The sheer scale of online infringement indicates that millions of Internet users today do not consider credible the threat of jail time for copyright infringement. The 4 million people publicly trafficking in over 850 million mostly-copyrighted files on KaZaA at any one time clearly do not fear jail time. The folks distributing tens of thousands of pages of infringing needlework designs through online affinity groups clearly do not fear jail time. In fact, according to the exhibits appended to Ms. Skinner's testimony, many brazenly challenge her, in writing, to do something about it.
We need to turn this ship around before the pirates scuttle it. We need more aggressive enforcement of the criminal copyright laws. We also need to ensure that law enforcement has adequate resources, authority, and incentives to pursue online infringers.
H.R. 2517 will significantly improve the ability of law enforcement to enforce the criminal copyright laws, and I am proud to be a sponsor. Among other things, the bill directs the FBI to warn online infringers that they may be subject to criminal prosecution. An FBI warning is likely to grab the attention of even your most defiant file-trafficker. Furthermore, such FBI warnings will serve an important educational role in an environment where so much disinformation leads many file-traffickers to believe their actions are legal. Finally, such FBI warnings will perform these salutary goals without forcing either law enforcement or individual file-traffickers to shoulder the monetary and social cost of a criminal case.
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I also want to highlight Section 6(a), which enables the government to bring a criminal suit with regard to an unregistered work. Works are copyrighted from the moment of creation, but for a variety of reasons, the Copyright Act prohibits both civil and criminal infringement suits until the work is registered with the Copyright Office.
This registration requirement poses a substantial barrier to the protection of new or pre-release works. Since a huge percentage of revenue from works such as books, movies, music, and software is generated in the first weeks after their release, widespread Internet infringement of new or pre-release works can thus eviscerate the revenue generated. By letting the government bring criminal actions with regard to unregistered work, Section 6(a) will ensure that protection is available to copyrighted works when they are in their most vulnerable state.
While H.R. 2517 makes critical contributions to the enforcement of criminal copyright laws, I believe more can be done. It is for this reason that yesterday Representative Conyers and I introduced H.R. 2752the ''Author, Consumer, and Computer Owner Protection and Security Act.'' I believe H.R. 2752 provides an important complement to the provisions of H.R. 2517.
While this hearing is on H.R. 2517, I want to take a moment to describe the most critical portions of H.R. 2752. Section 201 addresses the unique law enforcement challenges posed by the increasingly transnational character of online copyright infringement. Often, law enforcement may devote substantial resources to an investigation, only to find that the online infringer is outside our borders. In order to ensure that the road across the border does not become an investigative dead end, Section 201 requires the Attorney General to assist the appropriate foreign authority in making a case against such online infringers.
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Section 301 of H.R. 2752 clarifies that the uploading of a single copyrighted work to a publicly accessible computer network meets the 10 copy, $2,500 threshold for felonious copyright infringement. Section 301 simply brings the law into accord with the reality that uploading a copyrighted work to a place from which millions can download it is equivalent to the distribution of 10 or more copies having a value of $2,500 or more. This clarification is necessary because some prosecutors appear skeptical that they can successfully pursue cases against many uploaders of copyrighted works, and in any event are more likely to prosecute felonies than misdemeanors.
Section 302 addresses the well-documented concern that popular peer-to-peer (P2P) software programs sometimes allow 3rd parties to ''hijack'' PCs to distribute child pornography and copyright-infringing material, come bundled with ''spyware,'' and otherwise jeopardize the privacy and security of PC owners. To address these problems, Section 302 requires that PC owners receive clear and conspicuous notice, and provide consent, prior to downloading software that would allow third parties to store material on the PC, or use that PC to search for material on other computers.
Section 305 addresses the all-too-common phenomenon of operators of copyright-infringing web sites providing false domain name registration information. If the illegal activities on the web site attract the attention of law enforcement or rights holders, the operators often disconnect it and pop up elsewhere under another domain name with different contact information. Section 305 directs courts to consider the knowing and intentional provision of materially false domain registration information as evidence of willfulness with regard to copyright infringements committed by the domain name registrant.
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Mr. Chairman, I look forward to working further with you on this issue, and hope we can find a way to expeditiously move the salutary elements of both H.R. 2517 and H.R. 2752.
I yield back the balance of my time.
Mr. SMITH. I want to thank all seven Members who are present, both for their interest in the subject at hand and also for taking the time out of a busy schedule to be here today. We always have a good attendance, and today is no exception.
I will introduce the witnesses, and our first witness is Jana Monroe, Assistant Director of the Cyber Division of the Federal Bureau of Investigation. Prior to her current assignment, Ms. Monroe was the Special Agent in Charge with management responsibility for counterterrorism, counterintelligence and white collar crime in the Los Angeles division. Ms. Monroe received a B.S. Degree in criminology from California State University, Long Beach, and a master's degree in public administration from La Verne University.
The next witness is David P. Trust, Chief Executive Officer of Professional Photographers of America. PPA has 14,000 members who represent the entire spectrum of the photography and imaging profession. Mr. Trust joined the staff of PPA in 1998 and has been the Association's CEO since 1999.
Our next witness is Linn Skinner, proprietor of Skinner Sisters. Ms. Skinner, embroiderist and embroidery historian, teaches and exhibits in Europe and the United States. She publishes booklets and designs based on or replicating historic textiles through her commercial enterprise, Skinner Sisters. Skinner Sisters also publishes an online magazine of embroidery history.
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Our last witness is Maren Christensen, Senior Vice President and intellectual property counsel for Universal Studios. A growing portion of her practice is devoted to protecting Universal's digital content from worldwide piracy. Before joining Universal, Ms. Christensen was a partner at the law firm of Rosenfeld, Myer & Sussman in California, specializing in intellectual property litigation.
Welcome to you all. We have written statements from all the witnesses as well, which, without objection, will be made a part of their record in their entirety, and we look forward to hearing from each of you all. Just a reminder, we do need to limit testimony to 5 minutes, and Ms. Monroe, we will begin with you.
STATEMENT OF JANA D. MONROE, ASSISTANT DIRECTOR OF CYBER DIVISION, FEDERAL BUREAU OF INVESTIGATION
Ms. MONROE. Good afternoon. I would like to thank Chairman Smith, Ranking Member Berman and Members of the Subcommittee for the opportunity to testify today. We welcome your Subcommittee's leadership in dealing with the serious issues associated with the theft of intellectual property. My testimony today will address the activities of the FBI's Cyber Division in relation to the theft of intellectual property, including music and movies.
A July 11 story in the Chicago Tribune relates only a small segment of a crime on the Internet. The article discusses the thousands of computers that have been hijacked by purveyors of pornographic Web sites. The hijackers use computers with high-speed connections to host their pornographic sites unknown to the people who own the computers. The hijackers could have found those computers through observation of peer-to-peer networks where users can take advantage of high-speed connections to rapidly download copyrighted music and videos. Hijacking someone's computer, though, is just one of the secondary crimes resulting from theft of intellectual property.
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Your Subcommittee correctly notes that trafficking in copyrighted works has a great impact in many segments of our economy. When you point out that over 2 billion files are transferred each month, it is easy to see why so few believe there will be consequences for sharing copyrighted files. Few realize that their security and privacy are at risk when they share files. The vast majority of file sharing occurs over peer-to-peer networks.
Peer-to-peer networks primarily serve as a ''come and get it'' resource on the Internet, and using such a utility, the user specifically searches for the item they want, for example, music, images or software. The most significant criminal activity involving peer-to-peer sharing centers largely on music and software piracy, an area in which the FBI has been working closely with the private industry already.
The FBI has also seen an increase in peer-to-peer sharing for child pornography files. Your Subcommittee's bill offers the FBI to developorders the FBI to develop a deterrence program and facilitate information sharing among law enforcement agencies, Internet service providers and copyright owners of information. We agree that the FBI must work together with the private sector, and we agree that education and deterrence are the first two moves in this war on intellectual property theft.
You will be pleased to hear that the FBI has been working on this problem for quite some time now. The FBI and the Recording Industry Association of America are now in the final stages of completing a memorandum of understanding regarding the FBI intellectual property rights warning program. This MOU allows for the recording industry's use of the FBI seal, in the same way that it has been used as a warning on videotapes for years.
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We have also drafted a document entitled ''An Open Letter Regarding Illegal Uses and Vulnerabilities Associated with Peer-to-Peer Networks.'' this document will serve as the first step in educating users and the parents of users of peer-to-peer networks.
Theft of intellectual property is only one aspect of cyber crime, and it continues to grow at an alarming rate. Through the efforts of your Subcommittee and our cooperative deterrence and education programs, we hope to stem the tide and strive for a safer and more secure Internet. If we are not successful, the consequences can range from economic damage to espionage.
The FBI is grateful for the efforts of your Subcommittee and others dedicated to the safety and the security of our Nation's families and businesses.
Again, I thank you for your invitation to speak to you today, and on behalf of the FBI I look forward to working with you on this very important topic.
Mr. SMITH. Thank you, Ms. Monroe.
[The prepared statement of Ms. Monroe follows:]
PREPARED STATEMENT OF JANA D. MONROE
Good morning. I would like to thank Chairman Smith, Ranking Member Berman, and members of the Subcommittee for the opportunity to testify today. We welcome your Subcommittee's leadership in dealing with the serious issues associated with the theft of intellectual property. Your Subcommittee's bill, the ''Piracy Deterrence and Education Act for 2003,'' is a positive step toward making Americans aware of the security, privacy and criminal issues related to trafficking in copyrighted works. My testimony today will address the activities of the FBI's Cyber Division in relation to the theft of intellectual property, including music and movies.
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A July 11th story in the Chicago Tribune relates only a small segment of crime on the Internet. The article discusses the thousands of computers that have been hijacked by purveyors of pornographic web sites. The hijackers use computers with high speed connections to host their pornographic sites, unknown to the people who own the computers. The hijackers could have found those computers through observation of peer to peer networks, where users can take advantage of high speed connections to rapidly download copyrighted music and videos. Hijacking someone's computer though, is just one of the secondary crimes resulting from theft of intellectual property.
Your Subcommittee's bill, the ''Piracy Deterrence and Education Act of 2003,'' is an important bill because it focuses on several aspects of Internet theft. You correctly note that trafficking in copyrighted works has a great impact in many segments of our economy. When you point out that over two billion files are transferred each month, it is easy to see why so few believe there will be consequences for sharing copyrighted files. Few realize that their security and privacy are at risk when they share files. The vast majority of file sharing occurs over peer to peer networks.
P2P networks primarily serve as a ''come and get it'' resource on the Internet. In using such a utility, the user specifically searches for the item they want, e.g. music, images, or software. The most significant criminal activity involving P2P sharing centers largely on intellectual property rights (music and software piracy) matters, an area in which the FBI has been working closely with private industry. The FBI has also seen an increase in P2P sharing of child pornography files.
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The FBI has seen an increasing number of instances where a victim has determined that a Trojan/back door was installed on their computer during a download from a P2P network. In some cases, the victim also learned that personal and financial information had also been removed from their computer via the back door.
In addition to traditional Trojans/back doors, the FBI has seen an increase in matters where certain ''bots'' (active Trojans) have been installed inadvertently via a P2P download. In these instances, the victim computer, via the bot, essentially reports to a designated Internet relay chat (IRC) site, awaiting further instructions from its creator. The creator of the bot will often use the compromised computers to launch coordinated denial of service attacks against a targeted site or sites. These bots could also be used to retrieve sensitive information from victim computers in furtherance of an identity theft scheme.
A person using P2P utilities for unauthorized or illegal purposes is not as likely to tell the FBI that an exploit (back door) was found on their system, or that as a result, certain personal or financial information may have been taken. The FBI has been made aware of instances where Trojans or bots have been found on computer systems where P2P programs are present, and where certain personal, financial or other sensitive information has been taken.
THE ''PIRACY DETERRENCE AND EDUCATION ACT OF 2003''
The ''Piracy Deterrence and Education Act of 2003'' orders the FBI to develop a deterrence program and facilitate information sharing among law enforcement agencies, Internet service providers and copyright owners of information. We agree that the FBI must work together with the private sector, and we agree that education and deterrence are the first two moves in this war on intellectual property theft. We hope you will be pleased to know that the FBI has been working on this problem for quite some time. The FBI and the Recording Industry Association of America are now in the final stages of completing a Memorandum of Understanding regarding the FBI Intellectual Property Rights Warning Program. This MOU allows for the Recording Industry's use of the FBI seal in the same way that it has been used as a warning on videotapes, DVDs and movies for years.
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We have also drafted a document titled: ''An Open Letter Regarding Illegal Uses and Vulnerabilities Associated with Peer to Peer Networks.'' This document will serve as the first step in educating users and parents of users of peer to peer networks. We will distribute this document nationwide, and it will be posted on the FBI's website. The letter leaves no doubt as to the illegality of sharing copyrighted works without authorization and distributing child pornography or obscene materiel over the Internet. The letter also addresses the vulnerabilities exposed when using P2P networks.
Investigation of intellectual property rights violations is only a small part of what the Cyber Division is charged with accomplishing. The FBI is in a unique position to respond to cyber crimes, because it is the only Federal agency that has the statutory authority, expertise, and ability to combine the counterterrorism, counterintelligence, and criminal resources needed to effectively neutralize, mitigate, and disrupt illegal computer-supported operations.
THE FBI'S CYBER DIVISION
The FBI's reorganization of the last two years included the goal of making our cyber investigative resources more effective. In July 2002, the reorganization resulted in the creation of the FBI's Cyber Division. In prioritizing Cyber Crime, the FBI recognizes that all types of on-line crime are on the rise.
The Cyber Division addresses cyber threats in a coordinated manner, allowing the FBI to stay technologically one step ahead of the cyber adversaries threatening the United States. The Cyber Division addresses all violations with a cyber nexus, which often have international facets and national economic implications. The Cyber Division also simultaneously supports FBI priorities across program lines, assisting counterterrorism, counterintelligence, and other criminal investigations when aggressive technological investigative assistance is required. The Cyber Division will ensure that agents with specialized technology skills are focused on cyber related matters.
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At the Cyber Division we are taking a two-tracked approach to the problem. One avenue is identified as traditional criminal activity that has migrated to the Internet, such as Internet fraud, on-line identity theft, Internet child pornography, theft of trade secrets, intellectual property rights violations and other similar crimes. The other, non-traditional approach consists of Internet-facilitated activity that did not exist prior to the establishment of computers, networks, and the World Wide Web. This encompasses ''cyber terrorism,'' terrorist threats, foreign intelligence operations, and criminal activity precipitated by illegal computer intrusions into U.S. computer networks, including the disruption of computer supported operations and the theft of sensitive data via the Internet. The FBI assesses the cyber-threat to the U.S. to be rapidly expanding, as the number of actors with the ability to utilize computers for illegal, harmful, and possibly devastating purposes is on the rise.
The mission of the Cyber Division is to: (1) coordinate, supervise and facilitate the FBI's investigation of those federal violations in which the Internet, computer systems, or networks are exploited as the principal instruments or targets of terrorist organizations, foreign government sponsored intelligence operations, or criminal activity and for which the use of such systems is essential to that activity; (2) form and maintain public/private alliances in conjunction with enhanced education and training to maximize counterterrorism, counterintelligence, and law enforcement cyber response capabilities, and (3) place the FBI at the forefront of cyber investigations through awareness and exploitation of emerging technology.
To support this mission we are our cyber training program and international investigative efforts. Consequently, specialized units are now being created at FBI Headquarters to provide training not only to the 60 FBI cyber squads, but also to the other agencies participating in existing or new cyber-related task forces in which the FBI is a participant. This training will largely be provided to investigators in the field. A number of courses will be provided at the FBI Academy at Quantico.
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The importance of partnerships like law enforcement cyber task forces and alliances with industry can not be overstated. Those partnerships help develop early awareness of, and a coordinated, proactive response to, the crime problem. The cyber crime problem is constantly changing, requiring law enforcement to develop a flexible and dynamically evolving approach as well. Critical infrastructures and e-commerce are truly on the ''front lines'' and most often better positioned to identify new trends in cyber crime. Similarly, because of the actual and potential economic impact of cyber criminals, private industry has a vested interest in working with law enforcement to effectively detect, deter and investigate such activity.
The Cyber Division is also embarking on an effort to improve our overseas investigative capabilities by sending FBI personnel to help investigate cyber crimes when invited or allowed by a host country. We believe this high tech training and overseas investigations is the increasing internationalization of on-line crime and terrorist threats.
Through the Internet Fraud Complaint Center (IFCC), established in 1999 in partnership with the National White Collar Crime Center (NW3C), the FBI has appropriately positioned itself at the gateway of incoming intelligence regarding cyber crime matters. The IFCC receives complaints regarding a vast array of cyber crime matters, including: computer intrusions, identity theft, intellectual property rights violations, economic espionage, credit card fraud, child pornography, on-line extortion and a growing list of internationally spawned Internet fraud matters. The IFCC received 75,000 complaints in 2002, and is now receiving more than 9000 complaints per month. We expect that number to increase significantly as the American and international communities become more aware of our mission and capabilities. Later this year, the IFCC will be renamed as the Internet Crime Complaint Center (IC3) to more accurately reflect its mission.
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The FBI and the United States Customs Service (USCS) co-lead the National Intellectual Property Rights Coordination Center (IPR Center). The IPR Center strives to be the FBI and USCS hub for the international collection , analytical support and dissemination of intelligence involving IPR violations. These violations include Theft of Trade Secrets, Copyright Infringement, Trademark Infringement and Signal Theft. Specifically, the IPR Center gathers IPR intelligence from a variety of sources, analyzes the intelligence, and provides a coordinated flow of information for use by the FBI and USCS field components.
Cyber crime continues to grow at an alarming rate, and intellectual property rights violations are a major part of the increase. Criminals are only beginning to explore the potential of crime via peer-to-peer networks while they continue to steal information by hacking, insider exploitation and social engineering. The FBI is grateful for the efforts of your Subcommittee and others dedicated to the safety and security of our Nation's families and businesses. The FBI will continue to work with your Committee and aggressively pursue cyber criminals as we strive to stay one step ahead of them in the cyber crime technology race.
I thank you for your invitation to speak to you today and on behalf of the FBI look forward to working with you on this very important topic.
Mr. SMITH. Mr. Trust.
STATEMENT OF DAVID P. TRUST, CHIEF EXECUTIVE OFFICER, PROFESSIONAL PHOTOGRAPHERS OF AMERICA
Page 27 PREV PAGE TOP OF DOC Mr. TRUST. Thank you, Mr. Chairman, Ranking Member Berman and Members of the Subcommittee, thank you for this opportunity to testify regarding H.R. 2517, the ''Piracy Deterrence and Education Act of 2003.'' As previously mentioned, I am here representing professional photographers. This country's 130,000 photographers are quite literally the copyright owner next door. They are Middle America. They work on average 49 hours a week. They earn something about $30,000 a year. They drive carpools, and they cut their own grass. They love making beautiful images, and they try to scratch out a living while they do it. They are the recorders of America's visual history. They make our lives and the lives of our families richer.
Unfortunately, once photo-quality printers and scanners came into widespread use, a photographer's ability to sell images was reduced significantly. Worse yet, they have discovered that even when a photographer catches someone making copies, they have little or no ability to enforce their rights. We believe that H.R. 2517 has the potential to change that by creating a real deterrent to intellectual property theft and by removing unnecessary barriers to prosecution when deterrence fails.
The deterrence elements of this bill are a significant improvement over the status quo. We applaud your vision. Much like the teenager whose friends convince him that shoplifting is a victimless crime, a significant portion of the general public has been trained to believe that stealing is simply sharing when it comes to copyrighted works. The combination of warnings and consumer education, the better coordination of information and the use of visual symbolslike the FBI sealcontained in H.R. 2517 should provide a powerful deterrent that teaches consumers the truth about intellectual property theft.
However, we point out that all of the deterrence efforts in the world will fail unless they are backed up by strong enforcement. This makes sections 4 and 6 the most vital elements of this bill for professional photographers. There is no question that someone who intentionally makes unauthorized copies of a photographer's work is guilty of stealing, period. However, photographers are often shocked to discover that, unlike the clothing retailer next door to their studio, they have little resource through law enforcement when someone steals from them.
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Attaching intellectual property investigators to CHIPS units will ensure that claims of criminal infringement are given their proper weight. In addition to giving copyright owners some real protection, this move will also serve to deter infringers by making sure that intellectual property theft in whatever form it takes is handled seriously and pursued when appropriate.
For photographers, the greatest value of H.R. 2517 is the elimination of the registration requirement for criminal prosecutions. We cannot emphasize enough the importance of this change, which is absolutely vital for granting all copyright owners the full protection of the law. As it stands, 93 percent of all professional photographers have never registered anything with the Copyright Office. That is not because photographers don't want protection; it is simply a function of the photographic business. Unlike most creators who might produce a handful of works each year, a professional photographer can easily create 20,000 images in a single year. The burden of completing the registration forms and compiling and depositing copies of that many images and events is an unintentional Mount Everest of procedure that bars almost all photographers from participating in the copyright system.
Now, while the talented and professional staff of the United States Copyright Office has taken steps to help simplify the process, there is a limit to what can be done through regulatory change. It is for this reason that we wholeheartedly support amending title XVII, section 411(a), to permit the Government to bring criminal infringement action without the work being registered. Without this change, the other provision of the bill become much less useful for photographers.
Page 29 PREV PAGE TOP OF DOC In short, electronic piracyno, electronic theft has brought us to a point reminiscent of the computer hackers of the 1980's. Originally hackers were viewed as more of an annoyance than anything else. However, as time progressed, the American people and Congress realized the economic harm caused by hackers and passed laws to deter and punish such conduct. We firmly believe that the time has come to do the same in regard to intellectual property theft. Let me repeat that: intellectual property theft. It would be no less damaging to photographers if the criminals were wearing masks and carrying bags of money out of their photography studios. It is with that in mind that we strongly urge this Subcommittee to move this legislation forward as quickly as possible.
Mr. Chairman, Ranking Member Berman, we thank you again for the opportunity to tell you our side of the story. Photographers, the small copyright holders of the world, cannot fight this battle on their own. We need your help.
Thank you very much.
Mr. SMITH. And thank you, Mr. Trust
[The prepared statement of Mr. Trust follows:]
PREPARED STATEMENT OF DAVID P. TRUST
Mr. Chairman, Ranking Member Berman and members of the Subcommittee, I appreciate the opportunity to testify before you on the important issues raised by the ''Piracy Deterrence and Education Act of 2003'' (H.R. 2517).
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As the Chief Executive Officer of Professional Photographers of America, I am honored to be here speaking on behalf of our 14,000 members. PPA is the oldest and largest trade association for professional photographers; our members are engaged in all facets of photography and imaging including wedding, portrait, advertising and commercial specialties. I have also been authorized to speak on behalf of two other photography organizations, the International Association of Professional Event Photographers and the Student Photographic Society.
Photographers are the copyright owners that do not make the headlines every day. They are not glamorous individuals who get large corporate endorsements. No one cares which cola they drink or what brand of shoes they wear. Instead, photographers are the creators who help capture the memories of children and families by telling their story through images. They are the ones who help business owners and the media sell their products and tell their stories. In short, photographers are the creators and the caretakers of America's visual history.
As such, photographers are an integral part of communities throughout the United States. They are literally, the ''copyright owner next door.'' Most photographers are small business owners simply trying to earn a living. Some 69% of our members are sole proprietors. They work an average of 45 hours a week and earn less than $35,000 a year. Each year, these small business owners create thousands of copyrighted works and rely on the sale of copies of those works for their livelihood.
And every year, thousands of those works are knowingly and willfully copied for commercial advantage or gain. Since photo-quality color copying equipment and scanners became widely available in the mid-90s, our members have faced declining reprint sales which have led to a reduction in their ability to earn a living and support their families.
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As small business owners, photographers have made adjustments to accommodate the reality that their work can be stolen with impunity. This has led to higher prices for paying consumers to make up for the lost revenue. As an example many portrait and wedding photographers have been forced to go to a ''minimum order'' pricing strategy, knowing that their ability to protect their work once it leaves the studio is nil.
Every day, our members contact us for help with copyright infringement issues. Based on those experiences, PPA and its photographers have come to several conclusions regarding the problems we face as copyright owners.
First, technology is a neutral element. While it makes stealing far easier than ever before, it is not the root of the problem. To borrow a phrase: Technology doesn't steal intellectual property. People do.
Second, different infringers can be dealt with in different ways. Individuals whose infringements are truly innocent, as well as those involved in genuine disputes regarding the interpretation of licensing agreements, can be dissuaded from committing future infringements by education and direct negotiation. The other category of infringer is the willful and knowing thief. This category includes both individuals and commercial enterprises who know the work is copyrighted, but deem the risks of prosecution or civil liability to be so small as to be immaterial. Unfortunately, their assumption is usually correct.
If an infringer has access to competent legal advice, then they know that the costs of pursuing a copyright claim are beyond the reach of almost all photographers, giving the infringer a de facto license to steal. This is compounded by copyright registration requirements that make it nearly impossible for photographers to obtain statutory damages or attorney's fees.
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While the possibility of a civil lawsuit is so remote as to be almost laughable, the thought of a criminal prosecution is so unheard of that it probably never even crosses the willful infringer's mind.
So we now find ourselves at a point not entirely dissimilar to what our nation and Congress went through with computer hackers in the 1980s. Originally, computer hackers were viewed as more of annoyance than anything else. However, as time progressed and technology became better understood, the American people and Congress realized the economic harm caused by hackers and passed laws to deter their conduct, and when deterrence failedto punish their wrongdoing. We firmly believe that the time has come to do the same in regard to intellectual property theft.
We now move to our comments on sections three to six of H.R. 2517 the Piracy Deterrence and Education Act.
SECTION 3: DETERRENCE AND COORDINATION
It has been the experience of Professional Photographers of America that education and deterrence are successful in stopping the vast majority casual copyright infringements. Much like any other law, ordinary citizens generally have no qualms about violating copyright law until they are educated regarding the potential penalties. Once this education takes place, it serves as a strong deterrent to future infringements.
Part of ensuring a proper deterrent to intellectual property theft is the ability to uncover illicit copying and distribution when it takes place. In the past a great number of infringement reports we received at PPA came in the form of a photographer being in a local store and seeing a store employee helping a client make the copies. However, as electronic means of distribution and copying become more prevalent, intellectual property theft is becoming ever more difficult for copyright owners to discover and address.
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The facilitation of information sharing between the government, Internet service providers and copyright owners is absolutely vital to the enforcement of copyright law. Without this feature, infringements will become almost undetectable, once again rendering copyright enforcement meaningless.
SECTION 4: DESIGNATION AND TRAINING OF AGENTS IN COMPUTER HACKING AND INTELLECTUAL PROPERTY UNITS
There is no question in a photographer's mind that someone who makes unauthorized copies has stolen from them. However, they are often shocked to discover that unlike other business owners, they have little recourse through law enforcement when their property is taken. Obviously, local law enforcement has no jurisdiction over the matter. In those cases where a photographer contacts the Federal Bureau of Investigation, they are almost always turned aside there as well.
Professional Photographers of America favors the attachment of intellectual property investigators to CHIPS units to ensure that claims of potential criminal infringement are given their proper weight. With the vast array of skills already required of federal agents, we believe the addition of a team member well-versed in intellectual property theft would be an invaluable asset. By providing such officers as resources, intellectual property owners can be sure that intellectual property theftin whatever form it takeswill be handled seriously and pursued when appropriate.
SECTION 5: EDUCATION PROGRAM
Page 34 PREV PAGE TOP OF DOC As mentioned in our comments on section 3, Professional Photographers of America and its members believe strongly in the power of education and deterrence. We believe that the Internet Use Education Program would serve the interests of copyright owners and consumers alike.
Much like the teen shoplifter whose friends convince him or her that shoplifting is a victimless crime that harms no one, portions of the general public have been convinced that stealing is simply sharing when it comes to copyrighted works.
While the efforts of individual copyright owners and trade associations can go a long way toward eliminating this false perception, the Internet Use Education Program would have far greater effect through its superior reach and access to students, corporations and members of the general public.
SECTION 6: CUSTOMS RECORDATION
It has long been our contention that sections 411 and 412 of the U.S. Copyright Act violate the letter, if not the spirit, of our nation's obligations under the Berne Convention by placing a ''formality'' requirement on the civil and criminal enforcement of copyright law. These requirements are particularly onerous when one realizes that foreign authors are exempt from this registration requirementgiving them greater access our court system than our own citizens who own copyrights.
The registration requirement also places an unfair burden on professional photographers. Unlike most other creators who might produce a handful of works that need to be registered each year, a professional wedding photographer can easily create about 800 new works each weekend. A conservative estimate of a professional photographer's annual creative output is somewhere in the 20,000 plus range. The burden of completing registration forms and sending copies of these images to the U.S. Copyright Office for deposit has created an impossible barrier to the full participation and protection of photographers in the U.S. Copyright system.
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In fact, our research has shown that 93% of professional photographers have never registered a single image with the U.S. Copyright Officeand that less than 1% regularly register more than half of their work.
In looking for ways to eliminate this barrier we have worked with the very talented and professional staff at the U.S. Copyright Office. The Copyright Office has been very sympathetic to the logistical impossibility that the current registration regime presents to professional photographers, and has implemented regulations that reduce those burdens. However, there is a limit to what can be accomplished through regulation.
As mentioned previously, PPA contends the requirement that a work be registered in order to bring a civil suit or to obtain statutory damages and attorney's fee in a civil suit should be eliminated. However, since civil litigation is outside the scope of H.R. 2517 we leave that issue for another day. In the meantime, PPA fully supports the amendment of Title 17, section 411(a) which permits the government to bring a criminal infringement action without the work being officially registered with the U.S. Copyright Office. Likewise, the clarifications of Sections 602(a) and 603(a) will remove unnecessary procedural barriers to enforcement of the law.
SECTION 7: INFRINGEMENT WARNING NOTICE
As part of PPA's commitment to deterrence and education, we believe that granting creators the right to use the FBI seal on their works will go a long way toward placing the seriousness of intellectual property theft in the minds of the American public. An excellent example of this is the FBI warning placed on videos. While we doubt that very many consumers could quote you the content of that warning, recognition of the warning and its implications are almost universal. We have little doubt that consumers are aware that unauthorized reproduction of videotapes is a federal crime.
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Our only comment on making the FBI seal available copyright owners is to make certain that the criteria created by the Attorney General may be met by individual creators who are the most vulnerable to infringement and have the greatest need for such deterrence tools.
Over the last several years, our existing laws have proven to be an ineffective deterrent to the widespread, wholesale infringement of copyrighted works. While civil remedies are technically available, the cost of obtaining such remedies is so high as to prevent their use by the vast majority of independent creators. Likewise, the mechanisms for dealing with criminal infringements appear to have been overtaken by time and technology.
The Professional Photographers of America believes that if passed and implemented, H.R. 2517 may provide an adequate deterrent to all but the most determined copyright infringers. For those who willfully refuse to obey the law and continue to steal from others, H.R. 2517 removes unnecessary procedural barriers to prosecution.
Mr. Chairman and Mr. Ranking Member, we thank you for the opportunity to bring the problems of independent copyright owners to your attention and for your efforts in developing legislation that will finally give the owners of intellectual property adequate protection from theft.
Professional Photographers of America strongly urges the Subcommittee to move this legislation forward.
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Mr. SMITH. Ms. Skinner.
STATEMENT OF LINN R. SKINNER, PROPRIETOR, SKINNER SISTERS
Ms. SKINNER. Thank you. I am an embroidery historian specializing in the study of embroidery and social history of 16th and 17th century Western Europe. I teach classical embroidery techniques and design embroidery for execution for others. I market my copyright designs to individual consumers, to needlework shops and to needlework distributors in the U.S. and internationally. My work has been published in magazines. My fiberart has been exhibited in London and I have appeared on BBC radio on the issues of needlework aesthetics.
In the summer of 2000 I became entangled in an absolute morass of copyright infringement of needlework designs on Internet sites. At that time, a concerned consumer contacted a designer to make the designer aware of a photo site where scans of commercially published needlework charts were being uploaded and distributed to all who cared to download them. An enthusiastic participant in these infringing activities, a Carla Conry of Palmdale, California, created a series of e-groups hosted by e-groups.com. She later in May of 2002 consolidated these groups into an omnibus pattern uploading group named ''Pattern Piggies Unite'' because of their avowed greed for infringed needlework charts.
Page 38 PREV PAGE TOP OF DOC This group and those following in its wake transmit designs primarily as scanned e-mail attachments sent as messages to a host group. By July 2002 this group had already posted 12,364 messages, most having infringed material as attachments, and other groups have begun to form as the infringing community hustled to have the largest, the best and the most ''sharing'' of groups.
Mr. SMITH. Go ahead and continue. We are going to wait about 5 minutes before we take a recess.
Ms. SKINNER. E-group services for affinity groups are a boom to many honest hobbyists. They can be found on Yahoo, MSN, Topica, AOL and other sites. However, they are a haven for infringers. Infringers often post messages on groups requesting specific patterns, and they are soon uploaded to not only one group but multiple groups, increasing the loss immensely.
Infringers were soon storing needlework designs on photo sites, e-groups, Web sites and even family history groups. Some infringers simply list their entire pattern collection that is available upon request. Charts are then sent as e-mail attachments to requesting fellow infringers. Some infringers offer lists of designs they will e-mail upon request or provide on a CD by mail. Some infringers sell the copies of infringed material.
At first the affinity groups were public and open and designers joined the groups demanding that they remove infringed material. These designers were deemed by infringers to be ''Trolls.'' trolls were seen as the enemy, and list owners constantly tried to make their groups safe from these disturbing copyright fanatics.
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Although groups were being occasionally closed, mostly through annoyance, they simply morphed into a new group and continued on their merry way. The new group was normally closed to general membership and required approval to join. Even if a hosting site occasionally closed a group, the average time for getting back on line with a previous membership was approximately 4 hours.
I, and other consumers and designers, believed that we needed to make the effort to maintain membership in these clandestine groups and began joining them using an alias. Several of us created an alias and joined several groups. As time went on, groups were added and I was soon a member of 60-plus infringing groups, using several languages, and located on several host services.
Most infringing groups soon began requiring infringing activity of prospective members. I was required to create a PhotoPoint and Picture Trail site, and some designers allowed the use of a design for uploading so that I could remain a member of infringing groups. I was required to create a photo site to bolster my credibility with these groups. Running some of my vacation snapshots through a stitch design program and uploading the resultant charts and a few crochet patterns from an 1886 publication kept them at bay until I revealed myself to these groups.
In the summer of 2001, a group of needlecrafters, mostly crocheters and knitters, joined in the battle. I felt we needed more than anecdotal evidence of the infringement problem and asked for volunteers to completely survey one public group. Ten volunteers from the United Kingdom, the U.S., Australia, Canada and Israel looked at 35,000-plus messages posted to the group and identified 49,500-plus pages of infringed material.
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The group identified insofar as possible the owner of each of these uploaded pages and provided the information to the rightsholders so they could ask for removal under the act. The contents of that survey can be found on my Web site.
Mr. SMITH. Ms. Skinner, I would like to hear from Ms. Christensen before we go vote. Are you to the end of your testimony?
Ms. SKINNER. Just one last bit. And that is, I would like to say that I am very much encouraged by the provisions of H.R. 2517, especially sections 3, 4 and 7, and the educational component and support its enactment. Stronger criminal enforcement of the copyright laws is absolutely necessary, particularly to protect individual creators such as needlework designers. We simply can't afford to undertake civil litigation. The rampant infringement and unrepentant nature of the infringers makes criminal enforcement the only credible deterrent.
Mr. SMITH. Thank you, Ms. Skinner. I am glad we made time for you to say that about the bill. I appreciate those comments.
[The prepared statement of Ms. Skinner follows:]
PREPARED STATEMENT OF LINN R. SKINNER
Page 41 PREV PAGE TOP OF DOC I am an embroidery historian specializing in the study of embroidery and social history of 16th and 17th century embroidery of Western Europe. I teach classic embroidery techniques and design embroidery for execution by others. I market my designs to individual consumers, to needlework shops and to needlework distributors in the US and internationally. My work has been published in Piecework Magazine, amongst other periodicals. My fiberart has been exhibited in London and I have appeared on BBC Radio on the issue of needlework aesthetics.
I have been an active member of the internet community for many years. My online experience began as volunteer staff on one of the first fiberarts discussion groupsFibercrafts Forum on CompuServe. These were early days of online groups. We were using DOSCim at first and finally began using Windows platform in this content group. We've come a long way since then but some of the journey has been most unpleasant.
The pleasant bits have been the presence the internet has provided to cottage industry designers in the leisure arts industry. We can participate in affinity groups, exchange ideas and graphic images with our designer colleagues, provide educational materials to our consumers and sell our products from a website.
A LITTLE HISTORY OF NEEDLEWORK PATTERNS
The first needlework instructions are found in the Bible. The first needlework pattern book was published in 1523 by an Augsburg Germany printer named Schonsperger. By 1527, a printer based in Cologne (Peter Quentell) had copied several of the designs of Schonsperger and this practice of copying continued for many years as the concept of intellectual property was still far over the horizon.
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The next great golden age of needlework pattern publishing came with the development of 19th century ''ladies magazines.'' They were published in many languages and contained instructions and graphs for needlework along with other material deemed proper for Victorian age ladies. Publishing of needlework patterns progressed technically as did all graphic arts printing. Photolithography was a big step and the computer as a compositor took us into a new age. Today desktop publishing capabilities make is possible for individual designers to create charts, stitch diagrams; to insert these designs into publication and to print the final product right in their own home office.
INFRINGEMENT OF NEEDLEWORK DESIGNS
Copying of needlework designs was at first discouraged by the sheer effort involved. It was much easier to simply purchase a design rather than go to the trouble of copying it by hand. Technology made copying and photocopied needlework charts easier to pass around to friends and relatives. The needlework industry tried to cope with these infringements by producing colored charts as color copies were not then generally available and when available fairly expensive.
Although new technology (personal computers, scanners, CD burners, etc.) was a boon to designers, it also opened a floodgate for infringement of needlework designs. Now an infringer did not have to leave the comfort of their own home. They could scan and print a colored needlework chart for pennies.
With the advent of easy web access, the needlework infringers gained a new platform. Photo Sites and e-groups mushroomed. All of these venues offered free storage for graphic images and access to large numbers of downloaders of those images.
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A FEW TERMS
Anonymous File Transfer Protocol (FTP) permits downloads of files by users who don't have to enter a password to access files stored on a website.
Transferring a file or other information from one computer to another
Sending a message to a newsgroup or other online system for communications from one computer to another.
To scan and upload copyrighted material for redistribution via electronic and online sources for other participants without charge. Lastly, we share patterns because many patterns are out of print. Most are unavailable elsewhere. We do not post them to the Internet websites for everyone who wants a copy. We post them for our friends in private groups so that our sharing can continue from the friends we know to the needy we may never know. Occasionally, a pattern that is still available may go through. Nothing in this world is perfect.
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Rec Crafts Textiles Needlework A Usenet group for the discussion of needlework topics in an open, public forum
A global network of discussion groups, with messages posted from one machine visible to other computer users via a central holding system.
An ongoing discussion in a Usenet newsgroup that contains a main message and subsequent replies generally arranged in chronological order.
A Usenet expression describing a person who joins a group for the specific purpose of posting messages in an inflammatory style to cause maximum disruption of the group. The term was co-opted by the ''Pattern Piggies'' to describe anyone who wants copyright infringements stopped
THE DARK SIDE OF THE INTERNET AS IT AFFECTS NEEDLEWORK DESIGNERS
Page 45 PREV PAGE TOP OF DOC In the Summer of 2000, I became entangled in the morass of copyright infringement of needlework designs on internet sites. At that time a concerned consumer contacted a designer to make the designer aware of a photo site (freecharts) where scans of commercially published needlework charts were being uploaded and distributed to any and all who cared to download them.
An enthusiastic participant in these infringing activities, Carla Conry of Palmdale, California created a series of e-groups hosted by egroups.com. She later (May 2002) consolidated these groups into an omnibus pattern uploading group named ''Pattern Piggies Unite'' 1 because of their avowed greed for infringed needlework charts.2 This group, and those following in its wake, transmit designs primarily as scanned e-mail attachments sent as messages to the host group.3 By July 2002, this group had already posted 12,364 messages (most having infringed material as attachments) and other groups had begun to form as the infringing community hustled to have the largest, best and most ''sharing'' of groups.
E-group services for affinity groups are a boon to many honest hobbyists. They can be found on Yahoo, MSN, Topica, AOL and other sites. However, they are a haven for infringers.4 Infringers often post messages on groups requesting specific patterns and they are soon uploaded to not only one group but multiple groups increasing the loss immensely. Infringers were soon storing needlework designs on photo sites, e-groups, websites, and even family history groups.
Some infringers simply list their entire pattern collection that is available upon request. Charts are sent as e-mail attachments to requesting fellow infringers. Some infringers such as ATiggerhouse@aol.com offer lists of designs they will e-mail upon request or provide on a CD by mail.5,6 Some infringers sell the CD's of infringed material.7
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I am a firm believer in fair use. I provide free charts to guild groups and allow them to copy them freely and distribute them to their members. I upload small free designs to my website. I don't object when sellers scan the covers of my designs when selling the originals on e-Bay. However, uploading an entire usable product for free distribution is not fair use. If a consumer could attach a Ford pickup or a load of I-bar or a washing machine to an e-mail and give them away to 1,000 of their closest online friends, I think the idea of an entire product being sent as an attachment would quickly be discovered to not be fair use.
REACTION OF THE NEEDLEWORK INDUSTRY
At first the affinity e-groups were public and open and designers joined the groups demanding that they remove infringed material. These designers were deemed by infringers to be ''Trolls.'' 8 ''Trolls'' were seen as ''the enemy'' and list owners constantly tried to make their groups ''safe'' from these disturbing copyright fanatics.9
MY SCHIZOPHRENIC LIFE AS A DESIGNER BY DAY AND INFILTRATOR BY NIGHT
Although groups were occasionally being closed (mostly through annoyance), they simply ''morphed'' into a new group and continued on their merry way. The new group was normally closed to general membership and required approval to join. Even if a hosting site occasionally closed an entire group, the average time for getting back online with the previous membership was approximately four hours.
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I, and other designers and consumers, believed that we needed to make the effort to maintain membership in these clandestine groups and began joining them using an alias. Yahoo staff encouraged this sort of monitoring of groups by designers. Several of us created alias personae and joined several groups. As time went on, groups were added and I soon was a member of 60+ infringing groups using several languages and located on several host services.
INFRINGING TO GAIN ACCESS
Most infringing groups soon began requiring infringing activity of prospective members.10 Designers who joined groups under an alias determined that they would forfeit membership rather than infringe themselves. I created a PhotoPoint and a Picture Trail site and some designers allowed use of a design for uploading so that I could remain a member of infringing groups.11 I was required to create a photo site to bolster my credibility with infringing groups. Running some of my vacation snapshots through a stitch design program and uploading the resultant charts and a few crochet patterns from an 1886 publication kept them at bay until I revealed myself to the groups. At that time, one of the list owners was still certain I had uploaded infringed materialnot my own photographs turned into incredibly vile cross stitch charts and patterns in the public domaine.12
Non-US sites are particularly difficult to deal with. A group of Russian sites was identified in May 2002.13 Chinese language sites pop-up often and are brought to my attention although I have absolutely no useful suggestions for designers.14 The French are active needleworkers and have had sites for infringing from time to time.15
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EDUCATION OF NEEDLEWORK INDUSTRY
I have found many members of our industry have ''fuzzy'' sorts of ideas about intellectual property issues, particularly as relating to the internet. I have consistently encouraged them in e-groups for designers to take responsibility for learning about the DMCA and enforcing their rights under the act.16 Our largest publisher is Leisure Arts (Southern Living) a Time Warner/AOL company. They came late to the battle and have never funded staffing or other resources to combat infringement of needlework designs in a meaningful way.17
In August 2000, I felt the issue required a public airing and contacted the Los Angeles Times' leading reporter on Napster issues. I offered my alias so she and her staff could research the issue and an article followed. Designers were interviewed, opinions of intellectual property attorneys sought, and a committee on internet piracy formed by one of our trade associations. A project was completed of a book of designs contributed by international designers to raise money for dealing with the issues of internet infringement of needlework designs. Unfortunately there was no mandate given to the committee as to use of the funds and other than a poster on the issue of copyright printed for distribution to retail shops, there has been no action by needlework industry trade groups.
In the Summer of 2001, I was ready to throw in the towel when a group of needlecrafters, mostly crocheters and knitters, joined in the battle and asked what they could do. I felt that we needed more than anecdotal evidence of the infringement problem and asked for volunteers to completely survey one public Yahoo group that had been active for nearly a year, had not been called to task by designers and had a representative membership for the groups of that time. Ten volunteers from the UK, the US, Australia, Canada and Israel looked at 35,000+ messages posted to the group and identified 49,500+ pages of infringed material.
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The group identified insofar as possible the owner of each of these uploaded pages and compiled a list of the designers/publishers furnishing them with thousands of URL's so the owners of the intellectual property identified could file a complaint under the provisions of the DMCA. A CD was created with the results of the survey and educational materials for designers concerning internet piracy of designs. (The contents of the CD can be found at www.skinnersisters.com/copyright) Copies of the CD were provided to members of the needlework industry at a trade show in July 2001.
Again, there was no meaningful response to the problem and groups and websites continued to proliferate. I continued to attempt to notify rights holders of infringements. Some designers saw me as a ''copyright scold'' not a helpful ally.18 Discouragement with fellow designers was taking over my love of my art.19 At this time only a few designers and stitchers were monitoring groups and then our watchgroup dwindled to virtually three peopleSu Poole, an American designer residing in the UK, Barbara Horton, a concerned stitcher and myself.
One federal civil action has been filed concerning uploading of infringed needlework patterns to a photo-site.20 This has not deterred pirating whatsoever.
BEGGING FOR ATTENTION FROM ALL THE WRONG PLACES
By May 2002, I was a member of a large number of infringing groups.21 I was discouraged and tried battering at any door no matter how unlikely any attention would be paid to the issues facing designers. These contacts included the Library of Congress22 and the FBI 23 The Library of Congress did at least respond saying ''not our job'' but I have to date not received a response from the FBI.
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GIVING UP THE CHASE
By 2002, I was convinced watching the groups and trying to encourage designers and publishers to act was futile and Barbara Horton, Su Poole and I unsubscribed from a number of infringing groups after sending them a swan song ''gotcha'' message.24 The pirates remained unrepentant.25
When I stopped following the groups, I offered my identity and archives to those I felt might have resources available to make use of these tools, but there was no interest evidenced.26
IS THERE A SOLUTION?
I am not silly enough to believe that all infringement of needlework designs is within reach nor do I believe putting a halt to all internet piracy of needlework designs is an achievable goal. Widespread infringement is too well entrenched. I do believe that criminal enforcement of well written legislation can deter infringers and help contain piracy to a great extent. I am most hopeful that providing the criminal justice system with resources by way of staff and expanding their knowledge of the issues of intellectual property, a decrease in piracy online will be achieved and that they can take on this task that is far beyond any industry or individual. Cease and desist letters from rights holders are simply ignored by infringers 27 and civil litigation is far beyond the means of 98% of needlework designers.
I am encouraged by the enforcement provisions of H.R. 2517, as contained in Sections 3, 4 and 7, and the Educational component, contained in Section 5, and support its enactment.
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Mr. SMITH. Ms. Christensen.
STATEMENT OF MAREN CHRISTENSEN, VICE PRESIDENT, INTELLECTUAL PROPERTY COUNSEL, UNIVERSAL STUDIOS
Ms. CHRISTENSEN. Thank you, Mr. Chairman. Mr. Chairman, Congressman Berman, Members of the Committee, it is a pleasure to appear before you today. My name is Maren Christensen. I am Senior Intellectual Property Counsel for Vivendi Universal entertainment. I appreciate the work that the Members of this Committee and your predecessors have done to protect the rights of creators and to foster an environment where companies like Universal Studios can invest in new creative works.
Page 54 PREV PAGE TOP OF DOC As this Committee knows, piracy is the single greatest threat to America's creative industries. We face huge amounts of piracy, both in the United States and abroad. To an increasing degree, online piracy has become more prevalent through peer-to-peer distribution systems where one illicit copy of a film can be made available almost instantaneously to millions of users around the globe.
Those who traffic in or use pirated materials erode the financial underpinnings of this uniquely creative, collaborative and capital-intensive process. They affect those in front of and behind the camera and threaten the future of popular entertainment, as the unfortunate reality is that some 80 percent of the films and television shows do not recoup their investment.
This is a hit-driven business where the successes have to pay for those that don't make it, and of course it is the hits that the pirates most often steal.
Mr. Chairman, I would like to relay a recent experience regarding a pirated film, and as this is still a pending live case, there is certain information I cannot discuss in open session. The following account mainly comes from the information made public by the U.S. Attorney's Office in its June 25 criminal information as well as from its press release.
On June 6, 2003, 2 weeks before the film ''The Hulk'' was scheduled to open in movie theaters, Universal's antipiracy team discovered that an incomplete work print of the film had been illegally uploaded onto the Internet. Having invested over a $150 million to produce, market and distribute ''The Hulk,'' we were extremely alarmed to find that this work print, with only an early version of the state-of-the-art computer graphics and an incomplete version of the musical score, had been stolen, posted to the Net and made available to PCs around the world. Within days, the original posting turned into tens of thousands of sources from which countless downloads could be made.
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The threat to Universal and the film was obvious. People who watch a film for free do not have to go to the theater. Pirates who get a film for free can reproduce it in DVD format, translate it into any number of languages and sell it on street corners around the world for just a few dollars.
The fact that this was an unfinished version of the film also created an additional threat. As an industry we depend on the subjective reaction of individual consumers and critics and on positive word of mouth. It is critical that audiences see our films, particularly films like ''The Hulk,'' where the visual effects and the music are so important in their final and ultimate form.
The studio has many external and internal procedures to protect a film during production, including physical and technological standards. Each work print of every film carries unique identifying characteristics to help us trace the source of any leak. Universal had supplied such a work print to an advertising agency in New York that we and other Hollywood studios have worked with many times over the years. The agency, like all other outside vendors, had committed to a strict set of security guidelines; but in spite of this agreement, an employee of the ad agency loaned the work print to someone who in turn loaned it to Mr. Kerry Gonzales.
Mr. Gonzales attempted to defeat the security markings embedded in the print. He obliterated some but not all of its unique markings. He then uploaded the digitized copy of the film to an Internet site hosted from the Netherlands, and soon it was available all over the Net.
Page 56 PREV PAGE TOP OF DOC Fortunately, we were able to recover identifying information from the Internet copy and work backward. Through the quick and aggressive action of the FBI's Computer Hacking and Intellectual Property Squad and the U.S. Attorney's Office, Mr. Gonzales was identified and found and pled guilty to felony copyright infringement. His sentencing is set for September, and he faces time in prison.
Mr. Chairman, we are deeply grateful to the FBI, the Justice Department and the Copyright Office. Their prompt action led to this unprecedented conviction. We applaud the New York U.S. Attorney's Office for bringing this important criminal action. The entire copyright community welcomed the message that it sent to people who upload, download and trade movies on the Internet. The crime is not anonymous harmless fun. You will get caught, and you will be punished to the fullest extent of the law.
We commend you, Mr. Chairman, and the other Members of the Committee, for sending a strong message that theft, whether on or offline will not be tolerated.
Universal studios and the other members of the MPAA support H.R. 2517 because further measures to address the illegal distribution of copyrighted material on the Internet will foster legitimate Internet distribution and business models. H.R. 2517 focuses on two of the most basic elements of the effort to stop piracy
Mr. SMITH. Ms. Christensen, I have to interrupt you. We are going to need to go vote, and perhaps we can pick up with your testimony on some of the questions to oura little bit later on. But thank you for your testimony very much.
Page 57 PREV PAGE TOP OF DOC As I explained earlier, we will need to recess for about 40 minutes, and then we will reconvene at that time.
[The prepared statement of Ms. Christensen follows:]
PREPARED STATEMENT OF MAREN CHRISTENSEN
Mr. Chairman, Congressman Berman, Members of the Committee, it is a pleasure to appear before you today. My name is Maren Christensen. I am Senior Intellectual Property Counsel for Vivendi Universal Entertainment. This is the first time that I have appeared before this Subcommitteealthough I have followed its accomplishments for the past twenty years both in private practice and as in-house counsel specializing in copyright law. I appreciate the work that the Members of this committee and your predecessors have done to protect the rights of creators and to foster an environment where companies like Universal Studios can invest in new and innovative audiovisual works. Your work has enabled American filmmakers to entertain the world.
Universal is proud of its recent Oscar winners such as The Pianist, A Beautiful Mind and Gladiator This year we are enjoying great success with films like Bruce Almighty and TV programming including American Dreams and the shows within the Law and Order family. We are looking forward to the opening of Seabiscuit next week, and hope to have many more successful movies for years to come.
Page 58 PREV PAGE TOP OF DOC What is a time of great anticipation for us is also a time of some apprehension. Today, movie studios not only have to find an audience for their films; they also have to stop the pirates who would hijack our audiences using our own product.
As this Committee knows, piracy is the single greatest threat to America's creative industries. We face huge amounts of piracy both in the U.S. and abroadtraditional physical goods piracy where organized enterprises reproduce and distribute VHS tapes and DVDs, and digital piracy exacerbated by the wonders of the Internet. To an increasing degree, on-line piracy is accomplished through peer-to-peer distribution systems where one illicit copy of a film can be made available almost instantaneously to millions of users around the globe.
Those who traffic in or use pirated materials erode the financial underpinnings of this uniquely creative, collaborative and capital intensive process. Quite simply, producers cannot invest their capital if they cannot recoup their investment and make a profit. Tens of thousands of creative artistsmost of whom work off camera and are by no means celebrities or household namesstand to lose their livelihoods, and movie fans stand to lose a major source of popular entertainment.
Despite the headlines, blockbusters are rare. We forget about the films that fail to find an audience or the TV shows that do not survive even one season. We are an optimistic community always looking for new ways to tell a story and enthrall audiences. But the unfortunate reality is that some 80% of the films and TV shows that we make do not recoup the money invested in production, marketing and distribution. This is a hit driven business where the successes have to pay for those that do not make it. This is not a problem for the pirates: they make money by stealing the hits and ignoring the missesa great business model.
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Technology has always presented us with enormous opportunities as well as risks and challenges. Anyone who has seen movies like ''The Hulk,'' or ''The Mummy'' knows how enthusiastically the motion picture industry has embraced technology. My colleagues at Universal work tirelessly to reap the benefits of digital technologies, but also to keep tech savvy pirates at bay. Thanks to the committed teams of professionals at the Justice Department, FBI, Copyright Office, Patent and Trademark Office, United States Trade Representative, Customs Service, Federal Communications Commission and other agencies, motion pictures will continue to be one of America's preeminent trade assets, employers and contributors to the GNP.
I have been asked to describe a recent example of the kinds of threats facing the industry, as well as to discuss H.R. 2517, legislation designed to help ensure that the law keeps up with technological developments and that law enforcement has the tools it needs to protect America's creators.
Mr. Chairman, the following account mainly comes from information made public by the U.S. Attorney's Office in its Criminal Information dated June 25 as well as its press release. As I mentioned to the subcommittee staff, there are some facts that I will not be able to reveal in this open session.
On June 6, 2003two weeks before the film ''The HULK'' was scheduled to open in movie theatresa member of Universal's anti-piracy team discovered that an incomplete work print version of the film had been illegally uploaded onto the Internet.
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The studio invested over $150 million dollars to produce, market and distribute ''The Hulk.'' That is not unusual for big summer films with expensive computer-generated graphics. But even films without special effects are expensive to make and release. Recent MPAA statistics indicate that the averagethe average film released by a major American studio costs $90 millionsome $60 million to make and another $30 million to market and distribute.
With this kind of a capital investment you can imagine how alarmed we were to find that a ''work print'' of the Hulk with only an early version of the state-of-the-art computer graphics, and an incomplete version of the musical scorehad been stolen, posted to the net and made available for downloading to PCs around the world. Within days, the original posting turned into tens of thousands of sources from which countless numbers of downloads could be made. And within those same few days, street vendors all over the world were selling DVDs made from a download of this stolen work print. All of this occurred a week before the film was released in theaters.
The threat to Universal and the film was obvious. People who watch a film for free do not have to go to the theatre. Pirates who get a film for free can reproduce it in VHS and DVD, translate it into any number of languages, and sell if for a few dollars. The fact that this was an unfinished version of the film created an additional threat: In an industry that depends on the subjective reaction of individual consumers and critics and positive word of mouth, we never want people to see a film until it is in its final, best form, and particularly not a film like this for which the visual effects and the music are so important.
Page 61 PREV PAGE TOP OF DOC The studio takes many steps to protect its films. There are internal and external procedures, and we are constantly improving physical and technological safeguards. Each work print of every film carries unique identifying characteristics to help us trace the source of any leaks. Universal had supplied such a work print to an advertising agency in New York that we and other Hollywood studios have worked with many times. The agency, like all other outside vendors who work with early versions of films, had committed to a strict set of security guidelines. The agency had obligated itself to keep the print secure and not to permit anyone to make or distribute a copy. In spite of this agreement, an employee of the ad agency loaned the work print to someone, who in turn loaned it to Mr. Kerry Gonzalez.
Mr. Gonzalez used his home computer to make an unauthorized digital copy of the work print, and then ran a special program designed to defeat the security markings embedded in it. He was able to obliterate some, but not all, of the unique markings on the print. He uploaded the digitized copy of the film to an Internet website chat room hosted from the Netherlands. The site is popular among movie enthusiasts who routinely gather there to post and trade copies of bootleg movies. Soon it was available all over the Internet.
Fortunately, we were able to recover identifying information from the Internet copy and work backward. Through the quick and aggressive action of the FBI's Computer Hacking and Intellectual Property Squad and the U.S. Attorney's office, Mr. Gonzalez was identified and found, and pled guilty to felony copyright infringement [17 USC 506]. He will be sentenced on September 26, 2003. He faces a maximum sentence of three years in prison, and a fine of $250,000.
Mr. Chairman, we are deeply grateful to the FBI and Justice Departmenttheir prompt action led to this unprecedented conviction. We applaud the NY U.S. Attorney's Office for bringing this important criminal action against those who would demolish the creation and investment in a motion picture such as The Hulk. The entire copyright community welcomed the message that it sent to people who upload, download and trade movies on the Internetthe crime is not anonymous, harmless fun. You will get caught and you will be punished to the fullest extent of the law. As Chairman Smith said, ''while ''The HULK'' is a comic book hero known to millions, copyright pirates practice their illegal trade in relative anonymity. In this case the FBI brought the face of copyright piracy public, and for that they are to be commended.''
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The truth is that more criminal actions like this are necessary in order to send the message that Internet theft will not be tolerated under the law. Had the Congress not authorized additional resources for this case, this investigation would have foundered. Had Members of this committee not encouraged law enforcement officials and copyright owners to prosecute and punish this kind of behavior, we would not be sending the strong anti-piracy message that we are able to send today.
H.R. 2517THE PIRACY DETERRENCE AND EDUCATION ACT OF 2003
Universal Studios and the other members of the Motion Picture Association of America support H.R. 2517 because further measures to address the illegal distribution of copyrighted material on the Internet will foster legitimate Internet distribution and business models. H.R. 2517 focuses on two of the most basic elements of the effort to stop piracyconsumer education and deterrent penalties. If piracy is to be abated, consumers must know that theft of movies, sound recordings and other copyrighted works is wrong, and that there are real consequences to unauthorized reproduction and distribution.
The sponsors of H.R. 2517 correctly recognize that that more work needs to be done to protect America's creators. Had the facts of The Hulk theft taken a different twist or turn, this investigation could have ended quite differently.
Our company's experience indicates that the Justice Department still needs additional human and technical resources so that forensic investigations into the tools of the piracy trade can be completed promptly and comprehensively. H.R. 2517 allows for enhanced programs to deter computer users from committing act of copyright infringement. We particularly applaud the provision of the bill that assigns at least one agent to be responsible for investigating intellectual property crimes within the Department of Justice's Computer Crime and Intellectual Property Section.
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Our company's experience also teaches that the law may need to be revised to recognize that some very valuable works may be stolen before the work is finished and registered at the Copyright Office. Under current law, prosecutors require not only that the registration process has been initiated by the filing of the application, but that the certificate has issued from the Copyright Officesomething that ordinarily takes many months due to the volume of registrations at the Copyright Office. Although there is an expedited ''special handling'' procedure, even this requires 57 business days to obtain a certificate. As we found, in this age of pre-release Internet piracy of major motion pictures, this can be too long. While the swift action of the FBI and the federal prosecutors allowed them to identify and find the pirate very quickly, it was not possible to secure the plea until the prosecutor had the completed copyright registration in hand. Only due to the efforts of the Copyright Office and its staff were we able to get a registration certificate issued in time for the prosecutor to proceed.
We commend the sponsors of H.R. 2517 for providing that a copyright registration should not be necessary for instituting a criminal copyright action. In fact, requiring a registration is not practical today for criminal or civil infringement actions, particularly for pre-release cases. Usually in these cases the copyright owners have not yet filed their copyright registration applications because the films have not been completed or published. It is neither fair to the Copyright Office's staff (requiring extraordinary time and resources), nor necessary for the courts to require such registrations before commencing a case. The facts provided by the registration, such copyrightability of the work or the identity of its owner, if challenged by a defendant, can be easily proven in court without a certificate. In short, requiring a registration before commencement of an action would not improve criminal (or civil) prosecutions or judicial efficiency and would not deter piracy. Delay while a registration certificate is obtained significantly diminishes the effectiveness of these cases, and is unnecessary.
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This is not to say that registration itself, including the requirement of supplying a deposit copy for the Library of Congress, is unnecessary. It is simply a question of timing. There are many incentives for registration that will lead most copyright owners to register their works within three months of release whether or not it is a prerequisite for instituting a judicial proceeding. We would welcome the opportunity to explore with the Subcommittee ways in which the registration requirements can evolve to better meet the threat of Internet piracy.
There is no doubt that an effective government deterrence program, coupled with more prosecutions such as the one regarding ''The Hulk,'' will be a tremendous help in the war on piracy. Law enforcement and private industry must use our collective efforts to make infringers of copyright understand that they are not anonymous and that they will be prosecuted.
For that reason, the educational provisions of H.R. 2517 stress the need to inform users of the potential serious risks they face from participating in peer-to-peer network activities. Many people do not understand that trafficking in copyrighted works on the Internet is a Federal crime, or appreciate the risks associated with the use of peer-to-peer (P2P) file sharing networks.
For example, studies and recent congressional hearings have highlighted that many users of P2P networks have no idea that they are not only sharing music and movies, they are frequently sharing their entire C drive. In many cases, a P2P program installed on your computer can make all your files available to other P2P users. If your son or daughter downloads music through KaZaA during the afternoon, the information you work on at nightprivate tax returns, medical records, financial portfolios and private communicationsmay also be available to other P2P users on the network. Furthermore, P2P network use creates significant exposure to viruses and other security threats.
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Fortunately, research indicates that consumers may change their behavior with regard to Internet theft if they are warned about legal action and if they perceive a risk of being caught. According to a recent nationwide survey conducted by Edison Media Research, 33% of downloaders said they would disable their file sharing software if they received a pop-up message warning they are at risk for legal penalties for downloading from file-sharing services. The educational programs established under Section 5 of H.R. 2517 will help to accomplish the critical task of alerting users about the dangers they face from participating on P2P networks.
Finally, by facilitating coordination among law enforcement agencies and removing procedural barriers to prosecution, H.R. 2517 will stimulate greater law enforcement activity against pirates and increase their effectiveness
Today the interests of honest consumers, as well as the livelihood of thousands of hard working artists, crafts persons and others employed in the creative industries are being threatened by a relatively few malicious, ignorant or uncaring people. H.R. 2517 will help inform these people that piracy is wrong, and where education is not sufficient, it will impose consequences in response to their illegal acts. It is a good measure that should become law.
I thank you Mr. Chairman for this opportunity to testify before the Subcommittee today on this thoughtful legislation. I look forward to discussing these important issues in greater detail.
Mr. SMITH. The Subcommittee will reconvene. I would like to thank our witnesses for their patience. Obviously the votes were unavoidable, but we appreciate your understanding that.
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Let me direct my first question to Ms. Christensen. And Ms. Monroe, we are going to get to you, working this way, and give you a chance to respond to some of the other answers because I will be asking a lot of them about law enforcement.
Ms. Christensen you described the successful prosecution in ''The Hulk'' case. Obviously that is something that you would like to see more of. What was it, in your opinion, that was done by the Department of Justice that helped you? What can we expect to see more of, given your experience?
Ms. CHRISTENSEN. I think one of the things that made it right is that we, through our internal procedures, were able to track the source of the leak, and we had people who got on it right away at the studio. And when they found it, it was sort of a code blue; in the case of ''Hulk,'' a code green perhaps, and everybody really went into action. We were very very serious about finding this person and we were fortunate enough that the FBIwe contacted the FBI right away and they were very serious about helping us. And we were able to turn over a certain amount of evidence to the FBI through our own efforts and they really ran with it.
Mr. SMITH. It just seems to meand that is interesting to hear, because it seems to me it was a combination of your efforts and the FBI efforts that led to this prosecution, and maybe that says something about mutual effort in the future. But it is perhaps likely that the law enforcement officials would not have been so interested had you not been able to get them the information that they needed or that attracted their interest or whatever.
Page 67 PREV PAGE TOP OF DOC Ms. CHRISTENSEN. Well, it is hard for me to speak for the FBI.
Mr. SMITH. I don't want you to, because we have a witness from the FBI and I will ask her.
Ms. CHRISTENSEN. They can do that.
Mr. SMITH. I will check with her in a second. Thank you for that answer.
Ms. Skinner and Mr. Trust, both of you have had experiences dealing with law enforcement officials in regard to copyright infringement. What was your experience, briefly, in your dealings? Ms. Skinner, why don't you go first and then we will go to Mr. Trust.
Ms. SKINNER. Not greatly favorable at this point, although I am feeling that even this hearing will bring better rapport in that regard. I have reported our problems to my L.A. Office of the FBI in 2002 and got no response from them.
Mr. SMITH. Okay. Mr. Trust.
Mr. TRUST. I think, Chairman, it's safe to say that photographers generally feel so hopeless, in some ways disenfranchised, that truthfully there isthere is very little that goes on. That is not to say law enforcement hasn't been helpful. They have been, and I am sure that they continue to be helpful. But photographers don't register their works for the most part because they just find it to be too difficult of a process. And then onceeven those who do register their work, they just find it almost impossible to do anything about someone stealing a photograph, that it drops basically right there. So it is really ain some ways, just a very hopeless sort of mentality for professional photographers.
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Mr. SMITH. And frankly, the law enforcement personnel, they have to pick and choose and set priorities, and not every case of copyright infringement can be prosecuted, necessarily.
But still I think, Ms. Monroe, and this leads to couple of questions for you, I think it is safe to say that almost everyone agrees that we expect law enforcement officials, FBI, Department of Justice and others, to do more than they have been doing and to do a better job of enforcement than they have been doing. In regard to ''The Hulk'' case, is that the first time that there has been a prosecution of a pre-release piracy, to your knowledge?
Ms. MONROE. To my knowledge, yes.
Mr. SMITH. Okay. The reason I am asking is quite obvious, and that is why don't we prosecute more often? Why don't we prosecute more examples of infringement?
Ms. MONROE. Well, yes, sir. To indicate how seriously the FBI is taking this crime problem, it was in June of 2002 that the Director did create our Cyber Crime Division, so we are sort of in the embryonic stages, if you will, with this whole cyber umbrella, and we do take that very seriously.
And part of our Cyber Crime, our criminal branchwe have two branches, which is Computer Intrusion is number one, which that deals with our national security. The other part of this is our Cyber Crime, which is criminal violations. And our number one criminal violation within that section is copyright violations, intellectual property rights.
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Mr. SMITH. Would you expectwould you reassure us and tell us that in the future you would expect to see many more prosecutions of piracy?
Ms. MONROE. Yes, definitely. I can't, of course, attach a number to that, but that is what division is about, and creating the section. We have a unit called the Public and Private Alliance, which is dealing with private industry, and that is what the section, the unit, will be doing, is reaching out and working with partnering with private industry.
Mr. SMITH. Okay. Thank you, Ms. Monroe.
The gentleman from California, Mr. Berman, is recognized for his questions.
Mr. BERMAN. Well, thank you, Mr. Chairman.
In H.R. 2517, Ms. Monroe, one of the provisions of the bill relates to eliminating the registration requirements. There are some people who think that the registration requirement now only applies to civil actions on copyright infringement and that there is no obligation before criminal prosecution. Are you familiar with this issue and do you have an opinion on that?
Ms. MONROE. Excuse me just a moment. The element of the writ is that there has to be a valid U.S. Copyright for a criminal violation.
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Mr. BERMAN. And you could have a valid U.S. copyright without a registration.
Ms. MONROE. While pending, there can be a valid U.S. copyright.
Mr. BERMAN. In other words, there has to be an application for registration and
Ms. MONROE. Correct.
Mr. BERMAN. All right. And then on section 7, infringement warning notice, Ms. Christensen, how do youthis will direct the Attorney General to provide these warning notices? Since we are authorizing and, in fact, directing the FBI, whodoes the motion picture company for instance, now, or entertainment company put out these warnings, under what authority?
Ms. CHRISTENSEN. My understanding of that, Congressman, is that there is ahas been an agreement in place for many years between the FBI and the Motion Picture Association which allows us to use an FBI warning at theat least at the opening of the VHS and the DVD. Maybe it allows other things.
Mr. BERMAN. All right. Now, turning to a provision in this bill that Mr. Conyers and I introduced, the single upload provision, it provides, again, that the single upload of a copyrighted work to a publicly accessible computer network meets the copy and value thresholds for a felony. I am curious about your opinion on whether this will be helpful in combatting piracy.
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Ms. CHRISTENSEN. Congressman, we certainly welcome any tools that will help us in protecting against the illegal trafficking in our works. Clearly, the uploading, if it were to the Internet where it is made available for hundreds of thousands, if not millions, of copies to be made, creates a situation where the valuation exceeds the felony threshold. On the other hand, the fact that it is so unique to find a prosecution such as ours, even though so many pre-release films are all over the Net, means that a clarification along these lines would be helpful.
Mr. BERMAN. Thank you.
Ms. Skinner, you touched onyou may have touched on this issue in your testimony, but the infringers that you have spoken about, the ones that are writing these nasty e-mails all the time, the boldness suggests that they have no fear of civil liability. I am curious about your views about their fears of private actions and the extent to which anything less than criminal prosecution will end these practices.
Ms. SKINNER. I think their lack of fear is well founded. We have had one civil case brought that was settled out of court. And I have heard from them consistently, We will stop this when the cop is at the door.
Mr. BERMAN. And one last question on this round for Ms. Monroe. The issue of false domain name registration information, WHOIS data, we know from previous hearings that we have had, that law enforcement investigators frequently use WHOIS data and that false WHOIS data substantially impairs law enforcement investigation. Would increased accuracy and completeness of the WHOIS database be helpful to FBI investigations of cyber crime?
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Ms. MONROE. Yes, it would be, sir.
Mr. BERMAN. Okay. Thank you very much, Mr. Chairman.
Mr. SMITH. Thank you, Mr. Berman.
The gentleman from Florida, Mr. Keller, is recognized for his questioning.
Mr. KELLER. Thank you, Mr. Chairman.
Ms. Monroe, can you tell us a little bit more about what the FBI is doing to make it easier for the copyright owners to use that FBI seal to let online pirates know that what they are about to do will cause them to suffer someor make them subject to penalties?
Ms. MONROE. Yes. The FBI is combatting the problem of intellectual property rights in kind of a three-pronged approach, and that is through investigation, education and training. And what we are doing within the education realm is we are formulating a letter to relate to the general public the dangers of peer-to-peer technology. And this letter also informs individuals of the illegality of trading in copyrighted material, whether it be music, movies, software. This letter will be posted on the FBI Web site and it is also going to be made available to private industry to include in any publication that they will have on the Internet.
Mr. KELLER. What about that seal? Aren't these folks really looking for the use of the seal, just like if you rent a movie down at Blockbuster, the seal comes up showing that there are penalties for, you know, making copies of this movie? Aren't they looking for some sort of protection like that and they want to use your seal?
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Ms. MONROE. Yes. We are working on that direct issue with them and coming up with a memo of understanding for that usage.
Mr. KELLER. Okay. Let me walk you through a hypothetical and ask how the FBI would be involved. Next week, for example, a major movie called ''Sea Biscuit'' is going to be opening up by Universal, I think. Let's say that today it was posted on the Internet somehow, that an advance copy got out similar to what happened with ''The Hulk'' movie, and that the folks down at Universal Studios in Orlando, Florida in my district found out about it through their own internal investigation. What would be their procedure for dealing with the FBI? Would they contact the Orlando FBI office, or is there some specialized FBI unit, some other location they would contact?
Ms. MONROE. If this was originating in the Universal Studios in Orlando, they could contact theOrlando is one of our resident agencies out of the Tampa office. They would contact the Tampa office.
Mr. KELLER. I am wondering if there should be some sort of like an online intellectual property SWAT team in place that people like that could contact if they know that there is an imminent up loading of their movies, some group of FBI officials somewhere that this is their expertise, rather than some generic agent in Tampa.
Ms. MONROE. To address that, we actuallywe are working on several things within the Cyber Division to have some uniformity. But at this point what we have in each one of our field divisions are agents that are specifically trained in cyber matters, so they do have the knowledge, the intake knowledge as to how to work these cases.
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Mr. KELLER. So there would be someone in every field division that has that expertise?
Ms. MONROE. Yes.
Mr. KELLER. Okay. And they would handle it there. And then let's say they collect the evidence from someone like Universal, then they would then turn over it to the local prosecutor for the Middle District of Florida.
Ms. MONROE. It is basically situational, depending on how large or voluminous of a case this would be. We also have regional offices where we have additional agents if we needed more manpower resources on this, that they could assist in that office and it could be handled that way. So it kind of depends situationally how large of a case that we are talking about.
Mr. KELLER. Okay. A couple of months ago we had Attorney General Ashcroft here, and I asked him if there had ever, at that time, been a single prosecution of an Internet pirate for theft of music or movies over the Internet based on the peer-to-peer file-sharing. And he admitted that there had not been, although there are other intellectual property crime victories that the FBI and Attorney General's Office have had, but not in that area. Since then we have ''The Hulk'' prosecution, which is worthy of merit and praise. Do you see there the potential to be additional prosecutions in the future for these type of crimes now that we have some precedent for this?
Page 75 PREV PAGE TOP OF DOC Ms. MONROE. Yes, I do. Definitely. And as I indicated, the FBI is verythe emphasis is working with private industry on these specific issues.
Mr. KELLER. Okay. Thank you Ms. Monroe. And Mr. Chairman, I yield back the balance of my time.
Mr. SMITH. Thank you, Mr. Keller. The Committee has also received a letter from Marybeth Peters, Register of Copyrights; and, without objection, that will be made a part of the record. We will go now to the gentleman from Virginia, Mr. Boucher, for his questions.
[The material referred to follows:]
Mr. BOUCHER. Well, I thank you very much, Mr. Chairman. I want to join with you in welcoming these witnesses and thanking them for their testimony here today. I share the concern of everyone who has spoken here about the inappropriate use of peer-to-peer file-sharing, the use of it for the commission of piracy across the Internet, and I also think that more should be done in order to stem that use.
Page 76 PREV PAGE TOP OF DOC I want to commend the Department of Justice for the recent prosecution of ''The Hulk'' incident and I was glad to hear Ms. Monroe say that her office, the Department of Justice, generally does intend to step up its effort for law enforcement in this area. I think that is very appropriate.
Having said that, I have some concerns with this bill, d I want to highlight just a couple of the areas that give me concern in the brief time that I have available, and ask these witnesses what their reaction to these problemsthat to me are apparentis.
First of all, section 3 of the bill directs the FBI to deter the obtaining by the public of unauthorized copies of copyrighted works from the Internet. I think that is a quote from the Director. Can anyone on the panel tell me what ''unauthorized'' means in this context? Does it mean that the consent of the owner of the copyright has not been obtained for the download? Or is ''unauthorized'' in this context a synonym for unlawful? And there is a very substantial difference between the two? Would anyone like to venture an opinion? Ms. Christensen?
Ms. CHRISTENSEN. Congressman Boucher, I notice that section 3 begins with the language that the Director of the Federal Bureau of Investigation shall, one, develop a program to deter members of the public from committing acts of copyright infringement. Copyright infringement would, of course, contain all of the normal and usual defenses that any copyright infringement violation would have attached to it, and there is no reason I can see to believe that it would be any different with regard to this bill.
Mr. BOUCHER. So when the word ''unauthorized'' is used here, your interpretation is that it really means unlawful, meaning that the download does constitute an infringement; is that correct?
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Ms. CHRISTENSEN. I think the download has to constitute an infringement.
Mr. BOUCHER. Okay. So if someone is downloading for the exercise, for example, of their fair-use rights to excerpt a section from something that they see on the Internet that is copyrighted, that would not be conduct that the FBI should be deterring. That is unauthorized in the sense that the copyright owner has not given his direct permission to download that excerpt. But your opinion would be that in that particular instance, the FBI should not deter. Is that stated correctly? A simple answer is needed here, just a sort of a yes or no. I think I have fairly summarized what you said. Is that correct?
Ms. CHRISTENSEN. Well, except that I would like to add that in the context of this bill, when you are talking about file-trading on a public peer-to-peer network, you are almost never going to find an instance in which it is fair use to upload somebody's property onto that network. If you are talking about file-sharing
Mr. BOUCHER. I am going to reclaim my time because it is limited. I am not suggesting that we alter the definition of ''fair use'' here or that we expand it into new areas. What I am saying is that when something is unequivocally a fair-use application, it would not be your intent that this language be used in order to deter the downloading of that material; is that correct?
Ms. CHRISTENSEN. That is correct. But I don't think you are going to find a fair use
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Mr. BOUCHER. Now let me take you one step further and just say that with that understanding, would you agree that we should change the language here from ''unauthorized,'' which is ambiguous in its interpretation, at least potentially in the minds of some, to the simple word ''unlawful?''.
Ms. CHRISTENSEN. I don't think it is necessary, Congressman.
Mr. BOUCHER. Okay. Let me move to another area because my time is limited. I am concerned also by the notion that we are going to direct the Federal Bureau of Investigation to launch a public education campaign about the niceties of copyright law.
And I am just wondering, and I would ask Ms. Monroe this question: Will the agents or the individuals at the Bureau responsible for fashioning this public education campaign include material on the fair-use rights of consumers and devote substantial effort and volume of the communication to that to make sure that those rights are also fairly communicated?
Ms. MONROE. Well, at this point I am not permitted to testify on the merits of any legislation.
Mr. BOUCHER. All right. Thank you.
I just have one other question of you, and that is this. I see no authorization in this legislation for additional money, and so presumably this bill anticipates that you will carry out the new responsibilities of mounting an education campaign, assigning agents under section 4, mounting this deterrence program under section 3, with your existing resources and existing personnel. Do you have sufficient existing resources and personnel to undertake all of these responsibilities without any new dollars from the Congress?
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Ms. MONROE. Once again, I am not able to
Mr. BOUCHER. Thank you very much, Ms. Monroe.
Thank you, Mr. Chairman.
Mr. SMITH. Thank you, Mr. Boucher.
The gentleman from Florida, Mr. Wexler, is recognized for his questions.
Mr. WEXLER. Thank you, Mr. Chairman. I first would like to thank you, Mr. Chairman, and Mr. Berman, for both of your tireless campaigns in regard to this issue, in regard to protection of intellectual property. And it is not often I think thatI will speak for myselfthat we get an opportunity to applaud the FBI for what seemingly is a first-case very aggressive use of law enforcement that has resulted in a very positive result. And I, from my perspective if nothing else, just wanted to say tremendous applause to the FBI for the effort that was brought forth in ''The Hulk'' case.
And I think the ramifications of the FBI's actions are much greater than simply the legal ramifications. In fact, if you are talking about the education benefits, as a result of the FBI's reaction, you have to really look no further than the editorial in ''Ain't it Cool News,'' which ordinarily, as I understand it, wouldn't necessarily be a friendly venue for what people would view as being intellectual property rights. But because of the manner in which the FBI went about its business protecting intellectual property, we now I think, I hope, see a discussion occurring within the community in relation specifically, I think, to some of the concerns that Mr. Boucher raised, where even those people who ordinarily may not view the protection of intellectual property as might Universal, people are beginning to reexamine what intellectual property theft really means to society at large and not just in economic terms and not just in legal terms. And I wanted to applaud the FBI for that.
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Having had the experience of that case, I would be curious if Ms. Monroe could share with us how the FBI might recommend this Committee further the efforts of the FBI in a legitimate way in terms of doing what they did withI guess my question is, Do you have all the tools that you need legally to do, in fact, what you did with ''The Hulk''? But anticipating what will be coming in the future, in terms of the greater use of technology, in the effort to steal intellectual property, in the effort to go after people who will be uploading, are there recommendations that you could make that this Subcommittee might consider so as to make the ability of the FBI greater in terms of preventing this kind of theft in the future?
Ms. MONROE. I would be willing at a later date to give a further briefing on that. But one thing I know, we would have to have more of our personnel to be trained in these areas to address this.
Mr. WEXLER. When you say ''more personnel trained,'' do you mean the prosecutors, or are you talking about the people investigating or just generally?
Ms. MONROE. I think in general, but I am specifically talking about investigators.
Mr. WEXLER. Okay. If I could to Ms. Christensen, having gone through the experience from the person havingor the company having their property rights violated, are there any suggestions that you might provide to this Committee that we specifically should provide to enhance the ability both of companies like your own to respond and the ability of companies like your own to interact with the FBI that may be the rights that you don't already have?
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Ms. CHRISTENSEN. I think one of the important issues is the issue that has already been touched upon and that is the registration. It used to be that people couldn't get their hands on a motion picture until it had been released and by that time it had been registered. Now, as we see, they can get their hands on things far before they are registered, because they are not ready to be registered at that point. They are not finished. And I think that is true both in the criminal context and in the civil context.
So I applaud that part of the statute with regard to criminal, and would like to have it considered even with regard to civil. I don't, by the way, I don't mean to be misunderstood in thinking that registration isn't important. We register all of our works, and we will continue to register all of our works for other advantages that registration gives us, whether or not they had to be registered in order for a proceeding to begin.
Mr. WEXLER. Thank you.
Mr. SMITH. Thank you, Mr. Wexler.
And let me say to the witnesses that if you have additional comments that you want to make to respond to questions that have been asked today, you are welcome to submit that to us and we will make those a part of the record.
Thank you all for your testimony. It has been very interesting and I have to say to you all that weoh, Mr. Weiner has returned.
Page 82 PREV PAGE TOP OF DOC Pardon me. The gentleman from New York, Mr. Weiner, is recognized for his questions.
Mr. WEINER. Thank you, Mr. Chairman. I will take the hint and be brief. I just think that in fact, what is noteworthy about the prosecution of this whole case is that it is noteworthy at all. And I think that Mr. Ashcroft, in response to questions that I put to him at our last hearing, and Mr. Keller did, frankly did not give a great indication that this was a very high priority.
Let me ask you, Ms. Monroe, if we right now put down a computer, connected to the Internet in front of you, how long do you think it would take for you to find an illegally pirated motion picture?
Ms. MONROE. Me personally, or one of my staff?
Mr. WEINER. Well, hopefully
Ms. MONROE. Not very long, to answer you seriously. Not very long.
Mr. WEINER. And if you were to discover that, putting aside the leg work of the industry, I mean, would there be anythingwould you fire off an e-mail to the person, tellingsaying, you know, this is the FBI, you are doing something illegal? Would you say this clearly is a crime? Let's try to sort this out?
Page 83 PREV PAGE TOP OF DOC I mean, is thereyou know, this was clearly a case that Paramount broke and they brought it to you all wrapped and bundled.
Ms. CHRISTENSEN. That would be Universal.
Mr. WEINER. I am sorry. Aren't you just one monolithic kind ofUniversal. This is a case that Universal brought kind of packaged, and it was someone who with the technology developed by the industry was able to track it down. Isn't thisI mean, why don't we have more of these cases when it is just so rampant on the Internet?
Putting aside the international needlepoint issue also that has been called to our attention, why is it that the fact that there was a prosecution supposed to give us such greatI mean, why are we supposed to be here cheering so loud? It is amazing that there aren'tyou could literally, if you wanted to, probably initiate another one every single day, quite easily.
Ms. MONROE. We do currently have undercover operations that are addressing this specifically that will be prosecuted.
Mr. WEINER. Okay. Is there any effort made, when these things are discovered by your team or anyone else, to do some kind of notice to the people who are selling them or sharing them that this is illegal?
Ms. MONROE. That is what we are working on currently with private industry and with our own agency.
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Mr. WEINER. On having a seal for the industry to do. I am askingI guess my frustration here is, frankly, there is absolutely no deterrent value right now to the effort of law enforcement. I think Ms. Skinner alluded to it. I mean, you can just intuitivelywe have laptops here that might be on ''Live Fire'' or something. You could probably be doing it right now, be downloading a movie. I mean, there is really just nothere is no disincentive, because the Government seems to not be taking this very seriously.
Can you give me just numerically, generally, if you had to say, since there are thousands of these things that go on every day, are there dozens of prosecutions, dozens of investigations going on, hundreds, thousands? I mean, give me a sense for how likely it is that someone who is currently uploading a stolen print of Sea Biscuit, that they are going to get caught. I mean, is itare there that many investigations going on right now?
Ms. MONROE. We address all the investigations that we are capable of investigating with the manpower resources that we have. But we do take this extremely seriously, and like I had mentioned previously, that is why we have created the Cyber Division to address these instances in each one of our field offices.
Mr. WEINER. Okay. Thank you.
Mr. SMITH. Thank you, Mr. Weiner.
Let me make sure no other Members have arrived. And if not, I can thank our witnesses again for their testimony.
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I started to say a minute ago that we expect to mark up this bill next week, and so your testimony is timely and we will take to heart suggestions that you have made and suggestions that we have received from others as well.
Thank you again. And we stand adjourned.
[Whereupon, at 3:10 p.m., the Subcommittee was adjourned.]
A P P E N D I X
Material Submitted for the Hearing Record
PREPARED STATEMENT OF THE HONORABLE BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA
Thank you, Mr. Chairman, for holding this hearing on this important legislation to combat copyright piracy.
Article I Section 8 of our Constitution lays the framework for our nation's copyright and patent laws. It grants Congress the power to award inventors and creators, for limited amounts of time, exclusive rights to their inventions and works. The Framers realized that this type of incentive was crucial to ensure that America would become the world's leader in innovation and creativity.
Page 86 PREV PAGE TOP OF DOC These incentives are just as important today as they were at the founding of our country. As we continue our journey into the digital age, we must be sure to continue to reward our innovators and creators with the exclusive rights to their works for limited periods of time. This incentive is still necessary to maintain America's position as the world leader in innovation.
However, the proliferation of copyright piracy in America is growing and is threatening to undermine the very copyright protections the Framers envisioned.
One area that is of particular concern is piracy via the Internet and peer-to-peer networks. When used properly, the Internet and peer-to-peer networks can provide users with incredible access to vast amounts of information in the public domain. When used improperly, they can be used as a tool by millions to steal music, movies and other copyrighted works. Thieves can easily abuse the access that the Internet provides to such vast amounts of copyrighted material to commit the kind of widespread theft that could potentially devastate huge sectors of our economy and ruin the Constitutional incentives for innovators to create new works and products.
Efforts must begin now to deter these thefts and to educate the public about the repercussions of copyright theft. Copyright owners are beginning to step up efforts to enforce their rights by deciding to bring actions against individuals for copyright infringement. While these aggressive tactics may help, any attempt to end widespread copyright theft must include equipping federal law enforcement with the tools they need to prosecute these criminal acts, as well as increased public education of the effects of copyright theft.
Page 87 PREV PAGE TOP OF DOC Although on-line copyright piracy is on the rise, federal law enforcement efforts to investigate and prosecute those crimes have not kept up to speed with the piracy. Strapped by insufficient funding and training, these federal law enforcement agencies need additional resources to combat intellectual property crimes.
H.R. 2517, the Piracy Deterrence and Education Act of 2003, is a commonsense bill that gives federal law enforcement the tools it needs to prosecute intellectual property crimes. The bill also includes provisions designed to facilitate public education about the devastating effects of copyright crimes. Specifically, the bill (1) requires the FBI to create a deterrence program that prevents online piracy, (2) encourages information sharing among law enforcement, Internet Service Providers, and copyright owners, (3) requires that the DOJ specifically dedicate one agent within each Computer Hacking and Intellectual Property Unit to investigate intellectual property theft, and (4) establishes a program within the Office of the Attorney General to educate the public about copyright law, privacy, and security with respect to Internet use.
I believe that H.R. 2517 is an important step in the fight against copyright piracy and I look forward to the testimony of the witnesses today on this important legislation.
PREPARED STATEMENT OF THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
We are here once again to discuss ways to deter and punish Internet piracy. Online piracy is indeed a threat to America's copyright owners, and I'm glad that this Congress is taking the issue seriously.
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But I am becoming increasingly dismayed by the fact that this Subcommittee only examines digital issues from one perspective. We have had numerous hearings this year on how online piracy affects content owners. Today, we are having yet another one, with four witnesses who seemingly support the bill we are considering. Among them, we have a witness from Universal Studios, who will no doubt tell us of the devastating effect that online piracy is having on movie studios. But according to statistics I've seen, yearly domestic box office gross has increased every year since 1992, including an 8.6% increase last year to over $9 billion dollars.
If you want to see an industry in turmoil, don't look to the movie industry, look to the technology industry. Unemployment in Silicon Valley is now 8.5%. One-third of households in Silicon Valley have experienced a layoff since January 2001. Consumer confidence and investment are down. It is not a recession in the tech world, it is a depression.
I do not make this point to downplay the piracy issue, nor to suggest that the content industry is not suffering from online piracy. My point is that this Subcommittee should examine digital issues from all sides, not focus solely on how they affect copyright owners. We should look at how our laws affect the technology industry. We should examine whether or not the DMCA is chilling investment and innovation.
My bill, H.R. 1066, the BALANCE Act, which is supported by my Judiciary colleagues Rick Boucher and Chris Cannon, seeks to address some of these issues. I hope this Subcommittee will hold a hearing on this legislation soon, or at the very least look at how laws under our jurisdiction affect the technology industry, as well as Hollywood.
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PREPARED STATEMENT OF THE AMERICAN FREE TRADE ASSOCIATION
This testimony is offered on behalf of the American Free Trade Association (AFTA). The American Free Trade Association is a not-for-profit trade association of independent American importers, distributors, retailers and wholesalers, dedicated to preservation of the parallel market to assure competitive pricing and distribution of genuine and legitimate brand-name goods for American consumers. The parallel market embraces a broad range of products but AFTA's members have historically been involved in sale and distribution of fragrances, colognes, health and beauty aids (e.g. shampoo, soap, etc.).
AFTA has been an active advocate of parallel market interests for nearly twenty years. It has appeared as amicus curiae in the two leading Supreme court cases affirming the legality of parallel market trade under the federal trademark, customs and copyright acts (the 1985 Kmart case and the 1998 Quality King case) and in numerous lower court decisions.
AFTA is concerned by Section 6 of H.R. 2517, which would expand the authority of Customs officials to seize genuine articles at U.S. Ports of Entry on behalf of U.S. copyright owners to circumstances in which the copyright owner has neither recorded its federal registration with the Bureau of Customs and Border Protection (CBP) nor, in fact, even registered its copyrighted material with the U.S. Copyright Office. By removing both of these pre-requisites for border enforcement of intellectual property rights, H.R. 2517 eliminates the ability of importers and international traders to determine what may or may not be permitted entry into the United States and facilitates monopolistic control over U.S. distribution and pricing of authentic merchandise by U.S. manufacturers alleging to own exclusive rights in intellectual property for which there has been no objective determination as to copyrightability.
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I. Any tangible expression of an idea may be copyrightablewhether or not the product itself is eligible for such protection.]
AFTA members understand that the genesis for H.R. 2517's border enforcement provision may be legitimate concerns expressed by the entertainment industry about the rise in ''bootleg'' motion pictures. However, there is nothing in the existing language which would limit the scope of products for which CBP will have this expanded statutory seizure authority for alleged infringement of unregistered and unrecorded U.S. copyrights. Accordingly, labels on cosmetic bottles would be subject to this legislation to the same extent as proprietary software; perfume packaging would be as risky an import as unauthorized copies of first-run movies. As drafted, Section 6 of H.R. 2517 would, without cause, reason or purpose, apply equally to hair barrette packaging and unauthorized reproductions of not-yet released phonorecords.
AFTA does not suggest that a mere limitation in scope would be sufficient to otherwise remedy its overall concern about elimination of the requirement that intellectual property owners invest in at least federal copyright registration and recordation in order to enjoy the benefits of border enforcement of their private rights by government employees. Fair notice to legitimate importers and exporters to avoid restricted goods, or to challenge inappropriate claims for restriction, must be preserved.
II. Although federal copyright registration is not a requirement under U.S. law, because it serves the purpose of creating a public record of enforceable IP rights, the U.S. Copyright Act does expressly encourage and reward such federal copyright registration.
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Following is text found in the U.S. Copyright Office's publication entitled ''Copyright Basics'' which describes the benefits of federal copyright registration (http://www.copyright.gov/circs/circ1.html):
Even though registration is not a requirement for protection, the copyright law provides several inducements or advantages to encourage copyright owners to make registration. Among these advantages are the following:
Registration establishes a public record of the copyright claim.
Before an infringement suit may be filed in court, registration is necessary for works of U. S. origin.
If made before or within 5 years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate.
If registration is made within 3 months after publication of the work or prior to an infringement of the work, statutory damages and attorney's fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.
Registration allows the owner of the copyright to record the registration with the U. S. Customs Service for protection against the importation of infringing copies.
Page 92 PREV PAGE TOP OF DOC It is clear that while federal copyright registration is not required, it is encouraged. As a type of ''trade-off'' for voluntarily creating a public record of enforceable rights, which the U.S. Copyright Office makes available to any party interested in researching existing U.S. copyrights, the federal copyright registration holder is provided with the ability to file an infringement action, recover increased damages for infringement and has the right to record its copyright registration with U.S. Customs.
The U.S. Copyright Office recognizes the value of the public record for purposes of fair trade, fair use and free circulation of copyrighted materials. The U.S. Copyright Office also realizes that border enforcement is a privilege reserved only for those copyright owners committed to those same ideals. H.R. 2517, however, by statutorily removing such incentives for U.S. copyright registration, creates no obligation on U.S. intellectual property owners to facilitate a competitive marketplace for the benefit of lawful traders or American consumers. Moreover, H.R. 2517 eliminates any such public record of enforceable U.S. copyrights making such enforcement arbitrary, capricious and, in and of itself, a type of non-tariff trade barrier.
III. Without copyright registration, there is no means to verify a copyrightable property and border enforcement of U.S. intellectual property rights becomes solely a measure to territorially control and monopolize product distribution.
While anything may be claimed to be copyrighted upon creation even without federal copyright registration, it is only through the process of securing federal copyright registration that any determination as to enforceable rights under U.S. Copyright law is determined. This is because while a claim to copyright may be automatic, copyright registration (and, as a result its concomitant benefits and rewards) is not a foregone conclusion upon the mere filing of an application.
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A) Copyright protection is not available to ideas, or information without original content or creation nor does it extend to useful articles. Section 102 of the U.S. Copyright Law specifically provides the following:
(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.
B) At the time of application, the Registrar of Copyrights determines copyrightability. Section 407 of the U.S. Copyright Law provides the following:
(a) When, after examination, the Register of Copyrights determines that, in accordance with the provisions of this title, the material deposited constitutes copyrightable subject matter and that the other legal and formal requirements of this title have been met, the Register shall register the claim and issue to the applicant a certificate of registration under the seal of the Copyright Office. The certificate shall contain the information given in the application, together with the number and effective date of the registration.
(b) In any case in which the Register of Copyrights determines that, in accordance with the provisions of this title, the material deposited does not constitute copyrightable subject matter or that the claim is invalid for any other reason, the Register shall refuse registration and shall notify the applicant in writing of the reasons for such refusal.
Should CBP be permitted to deny importation to products for purported violation of U.S. copyright laws without requiring an underlying federal copyright registration, CBP will be eliminating examination to determine whether any enforceable rights exist. U.S. Copyright law provides that federal registration is only granted once such an examination has been successfully completed and, without federal registration, there is, under existing U.S. law, no ability to record a copyright with CBP. To contradict this long-standing U.S. law by incorporating in H.R. 2517 a provision doing away with both registration and recordation is, at least, of great concern.
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AFTA recognizes the importance of legislation seeking to eliminate digital fraud and piracy and, for this reason, requests that Section 6 of H.R. 2517 be eliminated entirely as a controversial measure that must be reconsidered in light of existing U.S. Copyright law and free trade objectives. H.R. 2517 was introduced on June 19, 2003 with no publication or hearing on its Section 6a provision that would compromise the tenets of long-standing U.S. copyright law and that will have a chilling effect on free circulation of articles which purportedly are copyright-protected. In this short time, AFTA has not been able to consult sufficiently with its members and others operating within the parallel marketplace to provide substantive solutions to its obvious deficiencies.
AFTA does, however, look forward to working with the initial sponsors and co-sponsors of this legislation on finding a solution to the problems and concerns giving rise to Section 6, while not prejudicing the legitimate business operations of AFTA's members and others within the importing community. If the legislation is to move ahead at this point, we urge elimination of the language in H.R. 2517 in Section 6 for the reason that it would erect a barrier to free trade, would eliminate incentives for U.S. copyright registration and would encourage CBP's resources to be used for enforcement of intellectual property rights that may not even be enforceable under U.S. law and would go well beyond the purpose of the legislation.
Thank you for the opportunity to provide this testimony to the Subcommittee.
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PREPARED STATEMENT OF GARY J. SHAPIRO
Since January 17, 1984, it has been settled law that consumers are protected by an aura of quiet enjoyment in their use of home entertainment technology. On that date, the U.S. Supreme Court found that unauthorized recording of an entire audiovisual work may be a ''fair use,'' and held that a product with a substantial or commercially significant non-infringing use may be lawfully distributed to consumers.(see footnote 1) The Home Recording Rights Coalition (HRRC) hopes that, as we approach the 20th anniversary of this decision, the personal freedoms it recognized will not be chilled out of reaction to further technical advances.
HRRC was founded in October, 1981, when personal use of new technology had been cast into doubt by a decision declaring the sale of consumer video recorders to be illegal. Originally, a consumer and a retailer had been sued along with the device manufacturer. However, editorials and editorial cartoons gave such emphasis to the prospect of civil and criminal action against ordinary consumers and their children that these defendants were dropped. It is now a cliché to point out how severely some in the entertainment industry and in the Congress reacted to home video and audio recording, and that the consumer electronics devices that enable such recording have served as foundations for new and enormous content industries. Yet when these industries face challenges from even newer technology, the risk of over-reaction emerges again.
The bill being considered today, H.R. 2517, would engage our criminal, law enforcement, and border processes in areas that may intrude into ordinary consumer conduct:
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It suggests that all unauthorized consumer copies of copyrighted works are infringing;
It would involve the Federal Bureau of Investigation in development of a program to ''deter'' certain consumer conduct, including unauthorized home recording;
It would tie up investigational resources, now addressed to serious ''computer hacking'' crimes, with activities that may involve simple consumer home recording;
It would establish an Education Program within the Office of the Associate Attorney General;
It would remove registration and recordation requirements with respect to criminal and border enforcement; and
It would authorize routine use of the FBI Seal on designated copyrighted works (but not on others).
HRRC must oppose this legislation. We urge further study of these proposals. We have strong concerns over any legislation that would shrink the aura of personal privacy and security that attaches to home use.
The Internet ties homes and institutions together in some ways that are clearly positive and some that are seen as threatening to content owners. It is tempting to chill, constrain or even criminalize all ties and practices that are considered potentially threatening. But to do so would be just as short-sighted as it would have been to outlaw consumer tape recorders in 1984.
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First, H.R. 2517 should not brand all unauthorized consumer home recording as criminal, or as a copyright infringement, merely because the content is obtained ''from the Internet.'' 17 U.S.C. §107 assures that certain unauthorized ''fair uses'' of content do not constitute copyright infringement, and provides for no exception according to source. Indeed, just this week, it was announced that the largest Internet Service Provider, which is closely affiliated with a major motion picture studio, would facilitate home recording via the scheduling information it carries on its service.(see footnote 2)
Second, whether the content is from the Internet or otherwise, the FBI should not be involved in gathering data on private home recording practices of individuals. Federal law prohibits as an invasion of privacy the disclosure of data about video rental transactions,(see footnote 3) which depend for their legality on 17 U.S.C. §109another exception to general copyright principles. Private noncommercial home recording protected by Section 107 is no less lawful than the rental transactions protected by Section 109; consumers engaging in this practice are entitled to the same measure of consumer privacy. Moreover, the ''sharing'' of information on consumer practices, among law enforcement agencies and private groups, as also provided for in Section 3, has the potential to aggravate privacy abuses with respect to lawful behavior.
Nor should the FBI or other law enforcement agencies be involved in issuing ''warnings'' to consumers about activity that may in fact be entirely legal. In HRRC's view this would raise constitutional issues. Many such cease and desist ''warnings'' issued in the private sector have turned out to be erroneous. Moreover, a new ''deterrence'' responsibility would detract from the FBI's traditional roles of investigation and law enforcement. Only in the context of national security has such a diversion of resources been made.
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Third, HRRC is concerned about the requirement in sec. 4 that intellectual property specialists be attached to any unit responsible for investigating computer ''hacking.'' A mandatory, administrative tie between ordinary consumer practicesor even ordinary piracyand ''hacking'' may do justice to neither issue. While content providers have been taking steps to improve the security of their theatrical editing, distribution, and screening practices, it is widely acknowledged that purloining films and distributing them illegally commonly does not involve ''hacking'' or, indeed, the circumvention of any technical measure. Rather, unprotected copies emerge from the distribution chain or from early or overseas theatrical display.
Even when these vulnerabilities have been addressed through better electronic and physical security, it is difficult to see how adding specialists in intellectual property crimes to ''hacking'' units will improve their efficiency. The protective measures used in the entertainment industry are likely to be proprietary and best enforced by commercial entities. Any productive use of ''hacking'' resources would likely involve a sharing of proprietary ''keys'' and other commercial secrets with the government investigators. This would pose long term threats both to the content and to the willingness of others to rely on these proprietary technologies.
Fourth, while HRRC has great respect for the Office of the Associate Attorney General, we do not believe that law enforcement authorities should take the lead in any public education campaign where so much of the conduct involved is, in fact, legal. The requisite balancing, line-drawing, and recognition of lawful practices involved in any appropriate campaign could compromise the ability of the Justice Department to prosecute cases in circumstances where it believes such prosecution is warranted. DOJ cannot be both arbiter and advocate. Either the ''educational'' or the advocacy function of the Justice Department would have to be compromised.
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Fifth, in light of the fact that fair use is recognized by both the U.S. Code and the Supreme Court, HRRC strongly opposes the notion that the FBI Seal be routinely used on content, for the purpose of intimidating consumers. Moreover, U.S. law provides that all writings are copyrighted when fixed, but the bill would make the seal available only for selected writings. It would be grossly discriminatory and probably unconstitutional, as a violation of free commercial speech, for the Attorney General to award such status only to some writings, but not to others, as the bill contemplates. Yet surely the Congress would not want the FBI Seal awarded to all writings occurring within U.S. borders.
Finally, HRRC believes that evidence should be adduced as to why the registration prerequisite for a criminal copyright case should be less than that for a civil case, and as to the need to eliminate existing registration and recordation preconditions to border enforcement. HRRC, however, agrees that enforcement against commercial piracy, at the border and otherwise, is an important law enforcement activity and should receive appropriate resources and legal tools.
The Home Recording Rights Coalition appreciates this opportunity to submit its views. As we have for more than two decades, we look forward to cooperating with the Subcommittee and the Committee to help achieve a proper balance between public and proprietor interests in copyright.
PREPARED STATEMENT OF SUSAN POOLE
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(Footnote 1 return)
Sony Corporation of America v. Universal City Studios, 464 U.S. 417 (1984)the ''Betamax'' case.
(Footnote 2 return)
''TiVo Offers Remote TV Programming to AOL Users,'' Reuters, July 14, 2003.
(Footnote 3 return)
See Video Privacy Protection Act, 18 U.S.C. §2710.