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Calendar No. 70
112th Congress Report
SENATE
1st Session 112-39
======================================================================
PREVENTING REAL ONLINE THREATS TO ECONOMIC CREATIVITY AND THEFT OF
INTELLECTUAL PROPERTY ACT OF 2011
_______
July 22, 2011.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary,
submitted the following
R E P O R T
[To accompany S. 968]
The Committee on the Judiciary, to which was referred the
bill (S. 968), to prevent online threats to economic creativity
and theft of intellectual property, and for other purposes,
having considered the same, reports favorably thereon, with an
amendment in the nature of a substitute, and recommends that
the bill, as amended, do pass.
CONTENTS
Page
I. Background and Purpose of the Preventing Real Online Threats to
Economic Creativity and Theft of Intellectual Property Act of 2011
II. History of the Bill and Committee Consideration.................11
III. Section-by-Section Summary of the Bill..........................16
IV. Congressional Budget Office Cost Estimate.......................21
V. Regulatory Impact Evaluation....................................21
VI. Conclusion......................................................21
VII. Changes to Existing Law Made by the Bill, as Reported...........22
I. BACKGROUND AND PURPOSE OF THE PREVENTING REAL ONLINE THREATS TO
ECONOMIC CREATIVITY AND THEFT OF INTELLECTUAL PROPERTY ACT OF 2011
A. BACKGROUND
Intellectual property is the engine of the American economy
and critical for job growth. According to independent studies,
IP-reliant companies account in America for more than $7.7
trillion and employ more than 19 million workers.\1\ Protecting
American intellectual property from theft is therefore critical
to our Nation's prosperity, welfare, and job creation.\2\
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\1\Nam D. Pham, ``Employment and Gross Output of Intellectual
Property Companies in the United States,'' NDP Consulting Research
Paper, January 2011, at 2, available at http://
www.theglobalipcenter.com/sites/default/files/reports/documents/
employment__gross_output_of_ip_companies_in_the_us_-
_jan_2011_low_res.pdf; see also Oversight of the Office of the
Intellectual Property Enforcement Coordinator Before the U.S. Senate
Committee on the Judiciary, S. Hrg. 111th Cong. 2 (2010) (written
statement of David Hirschmann, President and CEO, Global Intellectual
Property Center, U.S. Chamber of Commerce) at 4; Targeting Websites
Dedicated To Stealing American Intellectual Property Before the U.S.
Senate Committee on the Judiciary, S. Hrg. 112th Cong. 1 (2011)
(written statement of Tom Adams, CEO, Rosetta Stone Inc.) at 1
(``Intellectual property industries are a cornerstone of the U.S.
economy, employing more than 19 million people and accounting for 60
percent of our exports''); Oversight of the Office of the Intellectual
Property Enforcement Coordinator Before the U.S. Senate Committee on
the Judiciary, S. Hrg. 111th Cong. 2 (2010) (written statement of Paul
E. Almeida, President, Department for Professional Employees, AFL-CIO)
at 2, 4.
\2\``Strong intellectual property enforcement saves American jobs,
it creates American jobs, it protects American ideas and it invigorates
our economy.'' Oversight of the Office of the Intellectual Property
Enforcement Coordinator Before the U.S. Senate Committee on the
Judiciary, S. Hrg. 111th Cong. 2 (2010) (written statement of Victoria
Espinel, Intellectual Property Enforcement Coordinator, Office of
Management and Budget) at 2.
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The theft of American intellectual property threatens that
prosperity.\3\ While estimates of the harm caused to the
American economy by counterfeit products and the theft of
copyrighted works differ and are difficult to confirm,
copyright piracy and the sale of counterfeit goods is reported
to cost American creators and producers billions of dollars per
year.\4\ Intellectual property theft also reportedly results in
hundreds of thousands of lost jobs annually, and severely
reduces the income of those who are employed.\5\ Simply put,
this form of infringement impacts companies of all types and
sizes and the people who work there.\6\
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\3\``The revenue lost to American businesses from intellectual
property theft carries with it lost funding for public services to
compound the harm caused to our economy.'' Id. at 2.
\4\See Targeting Websites Dedicated To Stealing American
Intellectual Property Before the U.S. Senate Committee on the
Judiciary, S. Hrg. 112th Cong. 1 (2011) (written statement of Tom
Adams, CEO, Rosetta Stone Inc.) at 2 (``The global sales of counterfeit
goods via the Internet from illegitimate retailers reached $135 billion
in 2010. As a consequence of global and U.S.-based piracy of copyright
products, the U.S. economy lost $58.0 billion in total output in
2007''); Press Release, FBI, The Federal Bureau of Investigation and
the U.S. Customs Service today announced the National Intellectual
Property Rights Coordination Center's first conference for members of
Congress and the industry in Washington (July 16, 2002), available at
http://www.fbi.gov/news/pressrel/press-releases/the-federal-bureau-of-
investigation-and-the-u.s.-customs-service-today-announced-the-
national-intellectual-property-rights-coordination-centers-first-
conference-for-members-of-congress-and-industry-in-washington (``Losses
to counterfeiting are estimated at $200-250 billion a year in U.S.
business losses''); Press Release, U.S. Customs and Border Protection
section of the Department of Homeland Security, U.S. Customs Announces
International Counterfeit Case Involving Caterpillar Heavy Equipment
(May 29, 2002) available at http://www.cbp.gov/xp/cgov/newsroom/
news_releases/archives/legacy/2002/52002/05292002.xml (``Customs
estimates that businesses and industries lose about $200 billion a year
in revenue . . . due to the counterfeiting of merchandise''); Stephen
E. Siwek, ``The True Cost of Copyright Industry Piracy to the U.S.
Economy,'' Institute for Policy Innovation, IPI Policy Report No. 189,
October 3, 2007, at 1, available at http://www.ipi.org/ipi/
IPIPublications.nsf/PublicationLookupFullTextPDF/
02DA0B4B44F2AE9286257369005ACB57/$File/CopyrightPiracy.pdf?OpenElement
(``[E]ach year, copyright piracy from motion pictures, sound
recordings, business and entertainment software and video games costs
the U.S. economy $58 billion in total output, cost American workers
375,375 jobs and $16.3 billion in earnings, and costs Federal, State,
and local governments $2.6 billion in tax revenue''); MEMA Brand
Protection Council, ``Stop Counterfeiting Automotive and Truck Parts,''
available at www.mema.org/cmspages/getAttch.php?id=50. For a view that
online infringement is a significant problem, but estimates of harm are
difficult to quantify, see United States Government Accountability
Office Report to Congressional Committees on ``Intellectual Property,
Observations on Efforts to Quantify the Economic Effects of Counterfeit
and Pirated Goods'' (2010) (hereinafter referred to as ``Report on
Economic Effects of Counterfeit and Pirated Goods''), at 18-19.
\5\See Press Release, U.S. Customs and Border Protection section of
the Department of Homeland Security, U.S. Customs Announces
International Counterfeit Case Involving Caterpillar Heavy Equipment
(May 29, 2002) available at http://www.cbp.gov/xp/cgov/newsroom/
news_releases/archives/legacy/2002/52002/05292002.xml (``Customs
estimates that businesses and industries lose . . . 750,000 jobs due to
the counterfeiting of merchandise''); Oversight of the Office of the
Intellectual Property Enforcement Coordinator Before the U.S. Senate
Committee on the Judiciary, S. Hrg. 111th Cong. 2 (2010) (written
statement of Paul E. Almeida, President, Department for Professional
Employees, AFL-CIO) at 4 (``The losses of income arise because
entertainment professionals depend on compensation at two points: first
when professionals do the work, and later when others use and reuse the
intellectual property that the professionals created. . . . For AFTRA
recording artists in 2008, 90 percent of income derived from sound
recordings was directly linked to royalties from physical CD sales and
paid digital downloads. SAG members working under the feature film and
TV contract that same year derived 43 percent of their total
compensation from residuals. Residuals derived from sales to secondary
markets funded 65 percent of the IATSE [Motion Picture Industry] Health
Plan and 36 percent of the SAG Health and Pension Plan'').
\6\See ``Report on Economic Effects of Counterfeit and Pirated
Goods,'' at 9-10.
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The growth and success of the Internet as a medium for
commerce has given businesses the opportunity to connect with
consumers throughout the world in ways they never could before.
Unfortunately, along with the success of legitimate commerce,
the distribution and sale of counterfeit products and pirated
content online has also increased dramatically. According to
the Director of Immigration and Customs Enforcement, ``nearly
100 million people shopped [online] on Cyber Monday last
year,'' yet ``[c]ounterfeiters are prowling the back alleys of
the Internet, masquerading, duping, and stealing: masquerading
as legitimate retailers, duping shoppers, stealing from real
businesses and their workers.''\7\
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\7\John Morton, Director of Immigration and Customs Enforcement,
U.S. Department of Homeland Security Prepared Remarks: Operation In Our
Sites v. 2.0--Cyber Monday (November 29, 2010) available at http://
www.ice.gov/doclib/news/library/speeches/112910morton.pdf.
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Copyright infringement in particular, in the form of peer-
to-peer networks, cyber lockers, streaming sites, and one-click
hosting services, has grown rampant on the Internet. Since
digital products are not tangible, they can be reproduced at
very low cost, and have the potential for immediate delivery
through the Internet across virtually unlimited geographic
markets. The GAO reports that ``sectors facing threats from
digital piracy include the music, motion picture, television,
publishing, and software industries,''\8\ but piracy impacts
virtually any online industry that relies on copyright
protection.
---------------------------------------------------------------------------
\8\See ``Report on Economic Effects of Counterfeit and Pirated
Goods,'' at 8.
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Similarly, the sale of counterfeit goods via Internet sites
that appear professional and can quickly deliver items in
sophisticated packaging is thriving on the Internet. In many
cases, these Internet sites are able to conceal the inauthentic
nature and low quality of the product being purchased. The
footwear, clothing, consumer electronics and pharmaceutical
industries, among others, are frequent victims of
counterfeiting.\9\ Preventing counterfeit sales is therefore
not only important to our economy and job creation, but it
protects unsuspecting consumers from inferior and often
dangerous products.
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\9\Id. at 7.
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The online theft of American intellectual property is a
growing criminal enterprise both because of the ease by which
it can be done online and the ability of the sellers and
distributors to remain anonymous, operate from overseas, and
avoid traditional methods for protection.\10\ Operators of
rogue Internet sites, which do nothing but traffic in
infringing goods, can act with impunity from abroad.\11\
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\10\Id. at 8-9.
\11\The Council of Europe Convention on Cybercrime, to which the
United States is a signatory, requires signatories to have in place
criminal copyright laws that apply to copyright infringement on the
Internet. See Convention on Cybercrime, November 23, 2001, TIAS 13174,
available at http://www.state.gov/documents/organization/131807.pdf.
This Act provides an additional mechanism in the fight against online
infringement occurring overseas.
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The rogue Internet sites that operate as virtual stores for
the infringing products are well designed and give the
appearance of legitimacy.\12\ They are easily accessible by
entering domain names that sound legitimate into the users'
Internet browser or typing common search terms into Internet
search engines; they often accept payment through well
respected credit card companies; and they often run
advertisements from trusted companies. All of this presents an
appearance of legitimacy to the virtual store, even though the
products being sold are illegal, and in the case of
counterfeits are often inferior or even dangerous. And, in many
cases, American consumers may unwittingly be giving their
credit card information to overseas organized crime syndicates
when visiting rogue Internet sites.\13\
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\12\For an example of the unfortunate ease with which operators of
rogue Internet sites can clone legitimate Internet sites to trick
consumers, see http://www.bbc.co.uk/news/business-11372689. The
National Electrical Manufacturers Association has exposed similar
examples. See, e.g., http://blog.nema.org/blogs/currents/archive/2008/
04/06/a-letter-from-the-counterfeit-wars.aspx (counterfeit hair irons).
\13\Eric Holder, Attorney General of the United States, remarks at
the Rio De Janeiro Prosecutor General's Office (February 14, 2010)
(``Unfortunately, the success of this worldwide, digital marketplace
has also attracted criminals who seek to exploit and misappropriate the
intellectual property of others. The same technologies that have
created unprecedented opportunities for growth in legitimate economies
have also created global criminal organizations that are eager to steal
the creativity and profits from our domestic industries and workers. .
. . These groups, who do not respect international boundaries or
borders, have developed sophisticated, efficient and diverse methods
for committing almost every type of intellectual property offense
imaginable, including: widespread online piracy of music, movies, video
games, business software and other copyrighted works; well-funded
corporate espionage; sales of counterfeit luxury goods, clothing and
electronics, both on street corners and through Internet auction sites;
and increased international trade in counterfeit pharmaceuticals and
other goods that pose a substantial risk to the health and safety of
our consumers''); see also Protecting Intellectual Property Rights In A
Global Economy: Current Trends and Future Challenges Before the
Subcommittee on Gov't Management, Organization, and Procurement of the
H. Committee on Oversight and Gov't Reform, 111th Cong. 1 (2009)
(written statement of Jason M. Weinstein, Deputy Assistant Attorney
General, Criminal Division, U.S. Department of Justice) at 5 (``Because
intellectual property crime is perceived as a low-risk criminal
enterprise with the potential for high profit margins, it is not
surprising that the sale of counterfeit and pirated goods is also
becoming an attractive revenue source for traditional organized crime
groups''); General James L. Jones, National Security Advisor to the
President of the United States, Remarks at the Sochi Security Council
Gathering, Sochi Russia (October 5, 2010) available at http://
www.whitehouse.gov/the-press-office/2010/10/05/remarks-gen-james-l-
jones-national-security-advisor-sochi-security-counc (Criminal
syndicates ``generate[] trillions of dollars annually from illicit
activities such as money laundering, trafficking, counterfeiting,
environmental crime, and financial fraud. . . . many of these criminal
syndicates operate globally; they are comprised of loose networks that
cooperate intermittently but maintain their independence; and they
employ sophisticated technology and financial savvy'').
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If these rogue Internet sites operated in the physical
world, rather than online, the perpetrator would be the subject
of civil lawsuits and criminal penalties.\14\ But because this
theft is veiled by the complexities of the online world and
many of the perpetrators are located overseas, the task of
enforcing U.S. intellectual property laws on the Internet is a
difficult one. Too often our Government, as well as the
businesses and consumers who are harmed by online infringement,
are forced to sit idly by while this theft continues
undeterred.\15\
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\14\See, e.g., 17 U.S.C. Sec. 506; 18 U.S.C. Sec. 2319; 18 U.S.C.
Sec. 2320.
\15\In her recent hearing before the Senate Committee on the
Judiciary, Victoria Espinel, U.S. Intellectual Property Enforcement
Coordinator, stated that ``legislative action may be required in order
to fulfill our goals'' of effective intellectual property protection.
Oversight of the Office of the Intellectual Property Enforcement
Coordinator Before the U.S. Senate Committee on the Judiciary, 111th
Cong. 2 (2010) (written statement of Victoria Espinel, Intellectual
Property Enforcement Coordinator, Office of Management and Budget).
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The Committee notes that protecting intellectual property
in the form of copyrighted material is not only important to
our economy and jobs, but is also important for advancing the
goals of the First Amendment. The United States Supreme Court
has long held that copyright protection advances the goals of
the First Amendment by ``supply[ing] the economic incentive to
create and disseminate ideas.''\16\ The ``clause [of the
Constitution] empowering Congress to grant patents and
copyrights is [based] in the conviction that encouragement of
individual effort by personal gain is the best way to advance
public welfare through the talents of authors and inventors in
`Science and useful Arts.'''\17\
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\16\See Harper & Row Publishers, Inc. v. Nation Enterprises, 471
U.S. 539, 558 (1985); Sony Corp. of Amer. v. Universal City Studios,
Inc., 464 U.S. 417 (``[T]he limited grant is a means by which an
important public purpose may be achieved. It is intended to motivate
the creativity of authors and inventors by the provision of a special
reward, and to allow the public access to the products of their genius
after the limited period of exclusive control has expired''); Herbert
v. Shanley Co., 242 U.S. 591, 595 (1917) (``If music did not pay, it
would be given up. If it pays, it pays out of the public's pocket.
Whether it pays or not, the purpose of employing it is profit, and that
is enough'').
\17\See Mazer v. Stein, 347 U.S. 201, 219 (1954).
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Further, Justice O'Connor wrote that copyright law is the
very ``engine of free expression.''\18\ It exists not to
prevent free speech, but to promote it. Justice O'Connor went
on to recall that ``freedom of thought and expression `includes
both the right to speak freely and the right to refrain from
speaking at all.'''\19\ As rogue Internet sites evade U.S.
intellectual property laws, they not only cause economic harm,
but they trample on these First Amendment values.\20\
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\18\See Harper & Row Publishers, Inc., 471 U.S. at 558.
\19\See id. at 559 (quoting Wooley v. Maynard, 430 U.S. 705 (1977)
(Burger, C.J.)). Additionally, in a recent letter to members of the
U.S. Senate Committee on the Judiciary, First Amendment practitioner
Floyd Abrams wrote: ``Copyright violations are not protected by the
First Amendment. Entities `dedicated to infringing activities' are not
engaged in speech that any civilized, let alone freedom-oriented nation
protects. That these infringing activities occur on the Internet makes
them not less, but more harmful.'' Letter from Floyd Abrams, Senior
Partner, Cahill, Gordon, and Reindel LLP, to Senator Patrick Leahy,
Chairman of the Senate Judiciary Committee, Senator Chuck Grassley,
Ranking Member of the Senate Judiciary Committee, Senator Orrin Hatch,
United States Senate (May 24, 2011) (on file with the U.S. Senate
Committee on the Judiciary's Majority staff.)
\20\This right to be compensated for their work is not simply a
creation of U.S. law. Our Constitution provides for this in the
Copyright Clause, U.S. CONST. ART. I Sec. 8, and the United Nations'
Universal Declaration of Human Rights, which has become a model for
treaties and constitutions around the world, proclaimed this ``right of
authors'' as inalienable. Universal Declaration of Human Rights, G.A.
Res. 217 (III) A, U.N. Doc A/810 at Art. 27 2 (December 10, 1948).
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In sum, the theft of intellectual property by rogue
Internet sites is harmful in several ways. First, online
infringement harms the content and trademark owners themselves
in the form of lost sales, lost brand value, increased costs to
protect their intellectual property, and decreased incentives
to invest in research and development. Second, online
infringement harms consumers who receive lower quality
products, inauthentic products, or, in a worst case scenario,
products that cause physical harm or health risks. Third,
online infringement harms Federal and State Governments in the
form of lost tax revenues, higher law enforcement costs, and
the harm caused by the effects of the Government's own purchase
of counterfeit products. Fourth, online infringement harms U.S.
trade by lessening its ability to partner with countries that
have weaker intellectual property enforcement regimes.\21\
Fifth, online infringement reduces the incentives to create and
disseminate ideas which, as the United States Supreme Court has
recognized, harms the free expression principles of the First
Amendment. Finally, as Victoria Espinel, U.S. Intellectual
Property Enforcement Coordinator (IPEC), noted in a hearing
before the Senate Committee on the Judiciary, online
infringement supports international organized crime syndicates,
which pose risks to our national security.\22\
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\21\Id. at 9-10.
\22\Oversight of the Office of the Intellectual Property
Enforcement Coordinator Before the U.S. Senate Committee on the
Judiciary, S. Hrg. 111th Cong. 2 (2010) (written statement of Victoria
Espinel, Intellectual Property Enforcement Coordinator, Office of
Management and Budget) at 2. See also supra, n. 13.
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B. PURPOSE OF THE LEGISLATION
Today, law enforcement officials and rights holders have
limited effective remedies available to fight the purveyors of
infringing goods on the Internet when they operate overseas and
in hiding.\23\ Federal legislation is needed to provide a
tailored mechanism for combating rogue Internet sites.
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\23\The Department of Justice, in conjunction with Immigration and
Customs Enforcement, has recently used its forfeiture authority to
seize domestic domain names that were being used for criminal activity.
See http://www.ice.gov/news/releases/1105/110525washingtondc.htm; see
also Promoting Investment and Protecting Commerce Online: Legitimate
Sites v. Parasites, Part II Before the H. Committee on the Judiciary,
H. Hrg. 112th Cong. 1 (2011) (written statement of John Morton,
Director, U.S. Immigration and Customs Enforcement, Department of
Homeland Security) at 9-11. This authority cannot be used to combat
foreign-based websites accessed by foreign-registered domain names.
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The Committee bill, as reported, gives the Department of
Justice and rights holders an expedited process for cracking
down on rogue Internet sites by targeting the domain names
associated with those sites through injunctive relief. By
making it more difficult for a domain name to be used for
illicit purposes, and limiting the profitability of the
underlying Internet site, the legislation will allow law
enforcement to disrupt the criminal enterprises using domain
names--and American infrastructure--to steal American
intellectual property and profit off American consumers. The
legislation will deter criminals from building up the success
and visibility of rogue websites, because by doing so they will
more likely become the target of law enforcement. The Committee
bill, as reported, also addressed concerns raised by various
parties since similar legislation was introduced in the 111th
Congress, but the Committee understands that there remain
outstanding concerns.
1. Department of Justice actions
The Committee bill, as reported, authorizes the Justice
Department to file a civil action against the registrant or
owner of a foreign registered domain name that accesses an
Internet site that is ``dedicated to infringing activities,''
or the foreign-registered domain name itself, and to seek a
cease and desist order from the court. The Justice Department
should bring the action against the owner or registrant of any
foreign-registered domain name where practicable. However, in
cases in which the Department is unable to find the owner or
registrant, or that person has no address within the United
States, the bill authorizes the Department to bring an in rem
action against the non-domestic domain name itself. This
process is modeled on the Anticybersquatting Consumer
Protection Act.\24\
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\24\The Anticybersquatting Consumer Protection Act (``ACPA''), 15
USC Sec. 1125(d), authorizes a trademark owner to file an in rem action
against a domain name. See Caesars World, Inc. v. Caesars-Palace.com,
112 F.Supp.2d 502, 504 (E.D. Va. 2000) (``There is no prohibition on a
legislative body making something property. Even if a domain name is no
more than data, Congress can make data property and assign its place of
registration as its situs'') (emphasis added). See also Heathmount A.E.
Corp. v. Technodome.com, 2000 WL 33666935, at *3-4 (E.D. Va. 2000)
(unpublished). Further, the Federal Government's recent domain name
seizures, discussed supra at n.23, recognizes domain names as property.
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A domain name is the alphanumeric designation
conventionally used to access a specific Internet address. The
domain name typically comprises at least a top level domain and
a second level domain. For instance, in the domain name
senate.gov, ``.gov'' is the top level domain; ``senate'' is the
second level domain. By typing ``senate.gov'' in a web browser,
the Internet user's domain name server will find the Internet
address associated with the domain name senate.gov. Each top
level domain is operated by a domain name registry which,
through registrars, allows registrants to register domain
names.\25\
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\25\The legislation defines a domain name by cross-referencing
section 45 of the Lanham Act. Pursuant to that definition, a domain
name is the combination of the top level domain and the second level
domain, which is what domain name registries and registrars assign, and
does not include third level domains of files or subfiles.
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The Committee bill, as reported, authorizes the Justice
Department to seek relief from a Federal district court in the
form of a temporary restraining order, a preliminary
injunction, or an injunction, in accordance with rule 65 of the
Federal Rules of Civil Procedure. For an order to issue against
the owner, registrant, or domain name itself, the Justice
Department must demonstrate to the court that the Internet site
accessed by the domain name is ``dedicated to infringing
activities.'' In addition, the Internet site must be used
within the United States, conduct business directed to
residents of the United States, and harm holders of United
States intellectual property rights.\26\
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\26\These factors are derived from the World Intellectual Property
Organization recommendations for determining whether the ``use of a
sign on the Internet has a commercial effect in a Member State.'' See
Joint Recommendation Concerning Provisions on the Protection of Marks,
and Other Industrial Property Rights In Signs On The Internet, adopted
by the Assembly of the Paris Union for the Protection of Industrial
Property and the General Assembly of the World Intellectual Property
Organization, October 3, 2001, available at http://www.wipo.int/about-
ip/en/development_iplaw/pub845-04.htm#P134_6837.
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If the court issues an order against the domain name or its
registrant, owner, or operator, the legislation authorizes law
enforcement officers to serve the court order on specified
third parties, including operators of nonauthoritative domain
name system servers (``DNS operators''),\27\ search engines,
payment processors, and online advertising network
providers.\28\ These parties monetize the Internet site by
enabling U.S. consumers to access the infringing website, to
purchase content and products off the website, and to view
advertisements on the website. Without partnering with these
entities, the financial incentive to run an infringing Internet
site is greatly diminished. The bill requires these third
parties to take appropriate action to, respectively, prevent a
domain name from resolving to its Internet protocol
address,\29\ prevent a search result from linking to an
Internet site, prevent payment processing for purchases on the
underlying Internet site, or prevent its network from providing
advertisements to the underlying Internet site.
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\27\Most Internet service providers operate a DNS server that they
offer to their subscribers, but subscribers can use DNS services that
are not affiliated with their Internet service provider. The Committee
bill applies to all DNS operators.
\28\The Act includes a requirement that a plaintiff serve this
order on ``similarly situated'' third parties. This provision is
intended to avoid any competitive disparity that could result from
selectively imposing burdens on some entities within a given class, but
not others.
\29\The actions required of an operator of a domain name system
server is limited by the Act to those designed to prevent the domain
name from resolving. The Act defines a domain name by reference to the
Lanham Act, see supra note 25, and therefore orders issued pursuant to
this Act would not require such operators to block particular
subdomains or subdirectories.
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The Committee bill, as reported, affords due process to
both defendants and third parties compelled to action by the
legislation. The Justice Department must send notice of the
alleged violation and intent to proceed under the legislation
to the registrant of the domain name that is the subject of the
action. Additionally, the Justice Department must provide
notice to any third party that might be required to take action
as the result of a resulting court order.
The Committee bill, as reported, includes safeguards to
allow the domain name or Internet site owner, operator,
registrant, registry or registrar to petition the court to
modify, suspend or vacate the order where the Internet site
operator takes effective steps to exclude infringing or
counterfeiting activity from the site, or where the interests
of justice require. The bill also authorizes any third party
receiving an order to petition the court. Similarly, as
Internet site operators subject to the order transition their
Internet sites to new domain names, the bill authorizes a
plaintiff to bring a related action against the additional
domain name in the same judicial district.
2. Qualifying plaintiff actions
The Committee bill, as reported, similarly authorizes a
``qualifying plaintiff,'' defined as either the Attorney
General or a rights holder, to file an action for civil
injunctive relief against the registrant or owner of any domain
name that accesses an Internet site that is ``dedicated to
infringing activities''--or the domain name itself--and to seek
a cease and desist order from the court. That action can be
brought regardless of whether the domain name at issue is
registered in the United States or abroad. Such an action is
subject to the same due process and notice requirements
described in Part I.B.1.
The mechanism is identical to that reserved for the Justice
Department in non-domestic actions; however the resulting
remedies are more limited. A qualifying plaintiff may only seek
the court's permission to serve a court order resulting from an
action brought under this provision on a payment processor or
online advertising network. Neither a DNS operator nor a search
engine can be required to take action as the result of an order
issued under this provision.
3. Internet site ``Dedicated to Infringing Activities''
The definition of an Internet site ``dedicated to
infringing activities'' in the legislation is narrowly tailored
to implicate only the most egregious rogue websites that are
trafficking in infringing goods. For an Internet site to fall
within the definition, the legislation requires a party
bringing an action, whether against a domestic or non-domestic
domain name, to make one of two showings. The plaintiff can
show that the Internet site has no significant use other than
engaging in, enabling, or facilitating the (1) reproduction,
distribution, or public performance of copyrighted works in
violation of title 17, (2) violation of section 1201 of title
17, or (3) sale, distribution, or promotion of counterfeits
under the Lanham Act. Alternatively, the plaintiff can show
that the Internet site is designed, operated, or marketed
primarily as a means for engaging in, enabling, or facilitating
the (1) reproduction, distribution, or public performance of
copyrighted works in violation of title 17, (2) violation of
section 1201 of title 17, or (3) sale, distribution, or
promotion of counterfeits under the Lanham Act.\30\
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\30\The Combating Online Infringement and Counterfeits Act
(``COICA''), S.3804, introduced and reported by the Committee on the
Judiciary in the 111th Congress, used a far broader definition of an
Internet site dedicated to infringing activities. COICA's definition
included sites that satisfy the criteria for forfeiture under section
2323 of title 18. The Committee heard concerns that this definition had
the potential to include Internet sites with a significant amount of
protected speech. The Committee responded to those concerns in the
Committee bill by crafting a narrower definition, although the
Committee recognizes that it means there will be rogue Internet sites
whose operators may be violating criminal law that are nonetheless
beyond the scope of this legislation. The Committee also recognizes
that even with the new, narrower definition, there may still be some
minimal amount of lawful content accessed through the domain name. The
Supreme Court has upheld similar ancillary restraints for content
neutral regulations. See Arcara v. Cloud Books, Inc., 478 U.S. 697
(1986).
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Importantly, in targeting only the ``worst of the worst''
Internet sites, the definition maintains the protection of fair
use. The Committee intends for the legislation to target only
those Internet sites clearly profiting from stolen American
intellectual property, and not to be used where there is fair
use or where there is an objectively reasonable interpretation
of an express license to use intellectual property.
4. Protections for third parties
The Committee bill, as reported, contains protections for
those third parties required to take action under the Act, to
ensure that any party acting pursuant to an order is held
harmless for having taken the appropriate action. This immunity
extends to any acts reasonably designed to comply with an order
or reasonably arising from an order. Additionally, no third
party is required to take action to comply with an order beyond
what is technically feasible and reasonable. It is also not the
Committee's intent that compliance with an order issued under
this legislation create an ongoing duty on the part of a third
party to affirmatively monitor its systems to ensure that it
does not allow access to an Internet site or transact with an
underlying merchant that is the subject of an order, where the
site or merchant has reconstituted under an alias.
The Committee bill, as reported, also encourages voluntary
action by payment processors and online advertising network
providers, by providing a safe harbor if these third parties
voluntarily take action authorized by the legislation relating
to an Internet site that it reasonably believes is dedicated to
infringing activities.\31\ Further, the bill encourages
voluntary action by domain name registries, registrars, search
engines, financial transaction providers, and online
advertising network providers against Internet sites that
endanger the public health, either where the site is
``dedicated to infringing activities'' relating to controlled
or non-controlled prescription medicines, or has no significant
use other than, or is used primarily as a means for, the
distribution of prescription medicines without a valid
prescription, or the distribution of misbranded or adulterated
medicines.
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\31\This safe harbor should not be construed to imply that there is
liability for other entities that undertake voluntary action to combat
online infringement and counterfeiting, or for payment processors or
online advertising networks undertaking other actions against rogue
websites, outside of those prescribed in this section.
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The Committee bill, as reported, authorizes the plaintiff
to bring an action to compel compliance from any third party
required to take action under this section that knowingly and
willfully fails to comply with a court order. The Committee
anticipates that these actions will be used only in those
situations where a third party does not fulfill its legal
obligation under the Act. These provisions do not open the door
to fishing expeditions in the form of frivolous litigation
brought simply to initiate broad discovery. A third party would
not be monetarily liable for any action or inaction under this
Act.
5. Impact of the legislation
The Committee understands that when access to an Internet
site is blocked by a DNS operator or a search engine, the
Internet site is still accessible to a user who takes certain
affirmative steps. For example, where the Internet site is
blocked by the DNS operator, a user can access the Internet
site by changing the Domain Name Server to which the Internet
service provider communicates to an alternative Domain Name
Server. In the Committee's view, however, a substantial portion
of users are not intending to commit or facilitate an
intellectual property-related crime. Rather, many consumers are
being lured to the illegal Internet sites as discussed above.
These consumers will be protected as a result of the remedies
outlined in the Act and will, instead, visit Internet sites
offering legitimate content or products.
Similarly, the Committee understands that when a payment
processor or advertising network suspends a particular merchant
account in compliance with the Act, that website may in fact
find a way to process payments through another alias. The Act
requires payment processors and advertising networks to make
reasonable efforts to stop payment transactions from merchants
associated with the Internet site at issue, and the Committee
believes that this will substantially diminish the financial
viability of that site.
The Committee does not intend the Act to deter voluntary
action otherwise taken by third parties against rogue websites,
nor does the Committee intend the Act to serve as a substitute
for such voluntary action. Voluntary, cooperative action taken
by private parties to prevent infringement and the sale of
counterfeits over the Internet can be an effective approach to
combat online infringement.
6. Savings clauses
The Committee bill, as reported, may not be construed to
limit or expand the civil or criminal remedies available under
any other Federal or State laws for infringing activities on
the Internet. The legislation does not enlarge or diminish
vicarious or contributory liability for any cause of action
under the Lanham Act or title 17, including any limitation on
liability under section 512 of title 17. Finally, nothing in
this legislation shall serve as a basis for determining the
application of section 512 of title 17 to any party.
7. Guidelines and reports
The Committee bill, as reported, requires the Attorney
General to publish certain procedures for implementation of
this Act. The bill also requires the Attorney General to
develop a deconfliction process with other law enforcement
agencies, including U.S. Immigration and Customs Enforcement,
for implementation of this Act.
The Committee bill, as reported, also requires the
Secretary of Commerce, the Register of Copyrights, the Attorney
General, and the Comptroller General to issue reports. The
Secretary of Commerce is required to report to the Committees
on the Judiciary in both the Senate and House on the ability to
deploy Domain Name Security Extensions. The Register of
Copyrights is required to report to the Committees on the
Judiciary in both the Senate and House on the effectiveness and
burden of carrying out this legislation. The Attorney General
is required to report to the Committees on the Judiciary in
both the Senate and House on actions brought under this
legislation. The Comptroller General is required to report to
the Committees on the Judiciary in both the Senate and House on
actions brought by a rights holder under this legislation.
8. Importation of counterfeit products and infringing devices
The Committee bill, as reported, provides that Customs and
Border Protection (``CBP'') may identify and prevent
counterfeit products from being imported into the United States
by clarifying that, notwithstanding the Trade Secrets Act, the
Secretary of Homeland Security is authorized to share samples
or photos of suspected counterfeit products and their packaging
or labels with the relevant rights holders to determine whether
the shipment should be seized at the border. Similarly, it
ensures that the Secretary of Homeland Security can share
information and samples relating to anti-circumvention devices
that have been seized with affected parties. These provisions
are intended as clarifying in nature and do not imply that
anything in the Trade Secrets Act currently prohibits the
sharing of such information and should not limit or affect what
specific information CBP may be required to or prevented from
disclosing through subsequent legislation or rulemaking.
II. HISTORY OF THE BILL AND COMMITTEE CONSIDERATION
A. INTRODUCTION OF THE BILL
On September 20, 2010, in the 111th Congress, Chairman
Leahy introduced the Combating Online Infringement and
Counterfeits Act, S. 3804, along with Senator Hatch. Senator
Bayh, Senator Durbin, Senator Feinstein, Senator Klobuchar,
Senator Kohl, Senator Schumer, Senator Voinovich, and Senator
Whitehouse, were original cosponsors of the bill. Senator
Alexander, Senator Cardin, Senator Coburn, Senator Gillibrand,
Senator Graham, Senator Grassley, Senator Inhofe, Senator
McCaskill, and Senator Menendez later joined as cosponsors.
This bill was referred to the Senate Committee on the
Judiciary.
The bill was on the agenda for the September 23, 2010
business meeting, but was held over. On November 18, 2010, the
Committee on the Judiciary considered S. 3804. Chairman Leahy
offered a substitute amendment, which was adopted by unanimous
consent. That was the only amendment considered during this
debate. Senator Coburn submitted a statement for the record
that indicated certain Internet service providers, search
engines, Federal agencies in charge of intellectual property
enforcement, and other interested parties had outstanding
concerns over some provisions in the legislation, and noted the
need for further discussion of those issues in the form of a
hearing prior to the final passage of the legislation. The
Committee then voted to report the Combating Online
Infringement and Counterfeits Act, with an amendment in the
nature of a substitute, favorably to the Senate by a roll call
vote of 19-0.
On May 12, 2011, Chairman Leahy introduced the Preventing
Real Online Threats to Economic Creativity and Theft of
Intellectual Property Act, S. 968, along with Senator Hatch and
Senator Grassley. Senator Blumenthal, Senator Coons, Senator
Feinstein, Senator Franken, Senator Graham, Senator Klobuchar,
Senator Kohl, Senator Schumer, and Senator Whitehouse were
original cosponsors. Senator Alexander, Senator Ayotte, Senator
Blunt, Senator Boozman, Senator Cochran, Senator Corker,
Senator Durbin, Senator Gillibrand, Senator Hagan, Senator
Lieberman, Senator Rubio, Senator Shaheen, and Senator Tom
Udall joined as cosponsors. The bill was referred to the Senate
Committee on the Judiciary.
B. HEARINGS
On June 23, 2010, in the 111th Congress, the Senate
Committee on the Judiciary held a hearing on ``Oversight of the
Office of the Intellectual Property Enforcement Coordinator.''
This hearing was attended by Chairman Leahy, Senator Coburn,
Senator Franken, Senator Grassley, Senator Hatch, Senator
Klobuchar, and Senator Whitehouse. Testifying on Panel I was
the Honorable Victoria A. Espinel, Intellectual Property
Enforcement Coordinator, Office of Management and Budget.
Testifying on Panel II were Barry M. Meyer, Chairman and CEO,
Warner Bros. Entertainment Inc.; Paul E. Almeida, President,
Department for Professional Employees, AFL-CIO; David
Hirschmann, President and CEO, Global Intellectual Property
Center, U.S. Chamber of Commerce; and Caroline Bienstock,
President and CEO, Carlin America. The following materials were
submitted for the record: Letter from the Copyright Alliance to
Chairman Leahy dated June 23, 2010, with attachments; statement
of James M. Yates; prepared statement of Victoria A. Espinel;
prepared statement of Barry M. Meyer; prepared statement of
Paul E. Almeida; prepared statement of David Hirschmann; and
prepared statement of Caroline Bienstock.
On February 16, 2011, in the 112th Congress, the Senate
Committee on the Judiciary held a hearing on ``Targeting
Websites Dedicated to Stealing American Intellectual
Property.'' This hearing was attended by Chairman Leahy,
Senator Grassley, Senator Blumenthal, Senator Coburn, Senator
Coons, Senator Franken, Senator Klobuchar, Senator Kyl, and
Senator Whitehouse. Testifying at this hearing were Tom Adams,
President and CEO of Rosetta Stone, Inc.; Scott Turow,
President of the Authors Guild; Christine N. Jones, Executive
Vice President, General Counsel, and Corporate Secretary of the
Go Daddy Group, Inc.; Thomas M. Dailey, Vice President and
Deputy General Counsel for Verizon; and Denise Yee, Senior
Trademark Counsel for Visa, Inc.\32\ The following materials
were submitted for the record: Letter from William Samuel,
Director of Government Affairs for the AFL-CIO, dated February
15, 2011; letter from AT&T to Victoria Espinel, U.S.
Intellectual Property Enforcement Coordinator, dated March 24,
2010; letter from Brian Keane, CEO of Blue Sky, to Senator
Blumenthal, dated February 15, 2011; statement of the Computer
and Communications Industry Association; statement of the
Consumer Electronics Association; statement of the Center for
Democracy and Technology; letter from Floyd Abrams to Chairman
Leahy, Senator Grassley, and Senator Hatch, dated February 11,
2011; letter from Sascha Meinrath, Aparna Sridhar, M. Chris
Riley, Open Technology Initiative, New America Foundation, and
Free Press Action Fund to Chairman Leahy, dated February 15,
2011; statement of Daniel Castro, Senior Analyst, Information
Technology and Innovation Foundation; statement of the Motion
Picture Association of America, Inc.; statement of the
NetCoaltion, with attachments; Op-Ed by Scott Turow, Paul
Aiken, and James Shapiro from the February 14, 2011 edition of
the New York Times; statement of Public Knowledge; letter from
Nora Roberts to Chairman Leahy and Members of the Senate
Judiciary Committee, dated February 13, 2011; letter from
multiple companies and associations to Members of the United
States Congress, dated February 15, 2011; statement of the
United States Chamber of Commerce; prepared statement of Tom
Adams; prepared statement of Scott Turow; prepared statement of
Christine N. Jones; prepared statement of Thomas M. Dailey; and
prepared statement of Denise Yee.
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\32\Google Inc. was asked by the Committee to testify as a hearing
witness, but declined.
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On June 22, 2011, in the 112th Congress, the Senate
Committee on the Judiciary held a hearing on ``Oversight of
Intellectual Property Law Enforcement Efforts.'' This hearing
was attended by Chairman Leahy, Senator Grassley, Senator
Blumenthal, Senator Coburn, Senator Coons, Senator Franken,
Senator Klobuchar, Senator Kohl, and Senator Whitehouse.
Testifying at this hearing were Victoria Espinel, United States
Intellectual Property Enforcement Coordinator; Jason Weinstein,
Deputy Assistant Attorney General for the Criminal Division,
United States Department of Justice; Gordon M. Snow, Assistant
Director for the Cyber Division, Federal Bureau of
Investigation; Allen Gina, Assistant Commissioner, Office of
International Trade, United States Customs and Border
Protection; and Erik Barnett, Assistant Deputy Director, United
States Immigration and Customs Enforcement. The following
materials were submitted for the record: Letter from the
American Federation of Musicians, the American Federation of
Television and Radio Artists, the Directors Guild of America,
the International Alliance of Theatrical Stage Employees,
Moving Picture Technicians, Artists, and Allied Crafts of the
United States, Its Territories, and Canada, the International
Brotherhood of Teamsters, and the Screen Actors Guild, dated
June 20, 2011, to Chairman Leahy and Senator Grassley; letter
from Paul Williams, President and Chairman of the Board of the
American Society of Composers, Authors, and Publishers, dated
June 20, 2011, to Chairman Leahy and Senator Grassley; letter
from Tom Giovanetti, President of the Institute for Policy
Innovation, dated June 20, 2011, to Chairman Leahy and Senator
Grassley; letter from Mitch Bainwol, Chairman and CEO of the
Recording Industry Association of America, Inc., dated June 21,
2011, to Chairman Leahy; letter from the Motion Picture
Association of America, Inc., and member studios, dated June
22, 2011, to Chairman Leahy and Senator Grassley; statement of
Colleen M. Kelley, National President of the National Treasury
Employees Union; statement of the United States Chamber of
Commerce; prepared statement of Victoria Espinel; prepared
statement of Jason Weinstein; prepared statement of Gordon M.
Snow; prepared statement of Allen Gina; and prepared statement
of Erik Barnett.
C. LEGISLATIVE HISTORY
The bill was on the agenda for the May 19, 2011 business
meeting, but it was held over. On May 26, 2011, the Committee
on the Judiciary considered S. 968. Chairman Leahy offered a
substitute amendment, which was adopted by unanimous consent.
Chairman Leahy and Senator Grassley offered an additional
amendment to clarify that when Customs and Border Protection
suspects a product that is being imported or exported of being
counterfeit, it is not prohibited by the Trade Secrets Act to
share samples of packaging or labels of suspected counterfeits
with the purported rights owner. This amendment was adopted by
voice vote. No other amendments were considered during this
debate.
The Committee then voted to report S. 968, with amendments,
favorably to the Senate. The Committee reported this bill by
voice vote.
The following companies or groups submitted letters in
support of S. 968: United States Chamber of Commerce; AFL-CIO;
Business Software Alliance; National Cable and
Telecommunications Association; National Association of
Broadcasters; National Association of Manufacturers; Comcast/
NBC Universal; Copyright Alliance; American Federation of
Musicians; American Federation of Television and Radio Artists;
Directors Guild of America; International Alliance of
Theatrical Stage Employees, Moving Picture Technicians, Artists
and Allied Crafts of the United States, Its Territories, and
Canada; Screen Actors Guild; International Brotherhood of
Teamsters; National Music Publishers' Association; Institute
for Policy Innovation; Software and Information Industry
Association; Writers Guild of America, West; Viacom;
Independent Film & Television Alliance; Motion Picture
Association of America; National Association of Theatre Owners;
Paramount Pictures Corporation; Association for Safe Online
Pharmacies; Small Business & Entrepreneurship Council;
Songwriters Guild of America; Sony Pictures Entertainment Inc.;
Twentieth Century Fox Film Corporation; Universal City Studios
LLC; Walt Disney Studios Motion Pictures; Warner Bros.
Entertainment Inc.; Deluxe Entertainment Services Group; 1-800
Contacts, Inc.; 1-800-PetMeds; ABRO Industries, Inc.; Acushnet
Company; Adidas America; Advanced Medical Technology
Association (AdvaMed); Alliance of Automobile Manufacturers;
Alliance of Visual Artists (AVA); American Association of
Independent Music (A2IM); American Board of Internal Medicine;
American Made Alliance; American Society of Composers, Authors
and Publishers (ASCAP); American Society of Media
Photographers; Anti-Counterfeiting and Piracy Initiative
(ACAPI); Arts+Labs; Association of American Publishers (AAP);
Association of Equipment Manufacturers; Association of
Independent Music Publishers (AIMP); Association of Test
Publishers; Autodesk, Inc.; Automotive Aftermarket Industry
Association; Beachbody, LLC; Beam Global Spirits & Wine; Blue
Sky Studios, Inc.; Bose Corporation; Brigid Collins Family
Support Center; Broadcast Music, Inc. (BMI); Burberry; Cascade
Designs Incorporated; CBS Corporation; Cengage Learning; CFA
Institute; Chanel USA; Church Music Publishers Association;
Coalition Against Counterfeiting and Piracy (CACP); The
Collegiate Licensing Company/IMG College; Commercial
Photographers International; Copyright Clearance Center (CCC);
Coty Inc.; Country Music Association; Dayco Products, LLC;
Deckers Outdoor Corporation; Dolce & Gabbana; Dollar General
Corporation; Electronic Components Industry Association (ECIA);
Eli Lilly and Company; Entertainment Software Association
(ESA); ERAI, Inc.; The Estee Lauder Companies; Evidence
Photographers International Council; Ex Officio; Exxel
Outdoors; Far Bank Enterprises; Fashion Business Incorporated;
Federation of State Boards of Physical Therapy; Ford Motor
Company; Fortune Brands, Inc.; Gemvision Corporation; Gospel
Music Association; Governors America Corp.; Graduate Management
Admission Council; Greeting Card Association (GCA); Guru Denim;
HarperCollins Publishers; Harry Fox Agency; Hastings
Entertainment, Inc.; ICM Distributing Company, Inc.; IDS
Publishing; IEC Electronics Corp.; Imaging Supplies Coalition
(ISC); Independent Distributors of Electronics Association
(IDEA); Innate-gear; Intellectual Property Owners Association;
International AntiCounterfeiting Coalition (IACC);
International Trademark Association (INTA); John Wiley & Sons,
Inc.; Johnson & Johnson; Kekepana International Services;
Leatherman Tool Group, Inc.; Lexmark International, Inc.;
L'Oreal USA; LVMH Moet Hennessy Louis Vuitton; Macmillan; Major
League Baseball; Marmot; The McGraw-Hill Companies; Merck &
Co., Inc.; Messy Face Designs, Inc.; MicroRam Electronics,
Inc.; Microsoft; Monster Cable Products, Inc.; Music Managers
Forum-U.S.; Nashville Songwriters Association International;
National Association of Recording Merchandisers (NARM);
National Basketball Association (NBA); The National Collegiate
Athletic Association (NCAA); National Electrical Manufacturers
Association (NEMA); National Football League (NFL); Nervous
Tattoo Inc., dba Ed Hardy; Netflix; New Era Cap Co Inc.; News
Corporation; Nike, Inc.; Nintendo of America Inc.; Oakley,
Inc.; OpSec Security, Inc.; Outdoor Industry Association;
Outdoor Power Equipment Institute (OPEI); Outdoor Research,
Inc; Pacific Component Xchange, Inc.; Perry Ellis
International; Personal Care Products Council; Petzl America;
Pfizer Inc.; Picture Archive Council of America (PACA); PING;
Premier League; Production Music Association (PMA);
Professional Photographers of America; Quality Float Works,
Inc.; The Recording Academy (National Academy of Recording Arts
and Sciences); Recording Industry Association of America
(RIAA); Reebok International Ltd.; Reed Elsevier Inc.; Revlon;
Romance Writers of America (RWA); Rosetta Stone Inc.; Schneider
Electric; SESAC, Inc.; SG Industries, Inc.; SMT Corp.; Society
of Sport & Event Photographers; Sony Music Entertainment;
SoundExchange; Specialty Equipment Market Association (SEMA);
Sports Rights Owners Coalition; Spyder Active Sports, Inc;
Stock Artist Alliance; Stuart Weitzman Holdings, LLC; Student
Photographic Society; SunRise Solar Inc.; Taylor Made Golf
Company, Inc.; Tednologies, Inc.; Tiffany & Co.; The Timberland
Company; Time Warner Inc.; Toshiba America Business Solutions,
Inc.; Ultimate Fighting Championship; Underwriters Laboratories
Inc.; Universal Music Group; Uniweld Products Inc.; Vibram USA,
Inc; W.R. Case & Sons Cutlery Co.; Wal-Mart; The Walt Disney
Company; Warner Music Group; Winestem Company; Xerox
Corporation; Zippo Manufacturing Company.
III. SECTION-BY-SECTION SUMMARY OF THE BILL
Section 1. Short title
This section provides that the legislation may be cited as
the ``Preventing Real Online Threats to Economic Creativity and
Theft of Intellectual Property Act''.
Section 2. Definitions
This section provides definitions referenced in the Act,
including the definition of an ``Internet site dedicated to
infringing activities.'' Under this definition, provided in
paragraph (7), an ``Internet site dedicated to infringing
activities'' means an Internet site that falls into one of two
categories. The first category is an Internet site that has no
other significant use other than engaging in, enabling, or
facilitating the infringement of substantially complete
copyrighted material (paragraph (7)(A)(i)); the circumvention
of copyright protection systems (paragraph (7)(A)(ii)); or the
sale of goods, services or materials bearing a counterfeit mark
(paragraph (7)(A)(iii)). The second category is an Internet
site that is designed, operated, or marketed by its operator,
primarily as a means for engaging in, enabling or facilitating
the infringement of substantially complete copyrighted
material; the circumvention of copyright protection systems; or
the sale of goods, services or materials bearing a counterfeit
mark.
Section 3. Enhancing enforcement against rogue websites operated and
registered overseas
Subsection (a). This subsection authorizes the Attorney
General to commence either an in personam action against a
registrant or owner of a nondomestic domain name dedicated to
infringing activities (subsection (a)(1)), or an in rem action
against a nondomestic domain name dedicated to infringement
(subsection (a)(2)). An in rem action is only authorized where,
after due diligence, the defendant owner or registrant cannot
be found. The Attorney General is required to identify any
third parties that may be required to take action under
subsection (d) (subsection (a)(3)).
Subsection (b)(1). This subsection provides the court with
the authority to issue a temporary restraining order, a
preliminary injunction or an injunction, in accordance with
rule 65 of the Federal Rules of Civil Procedure, against an
infringing nondomestic domain name, registrant, or owner or
operator of such a site. The injunction directs the site to
cease and desist from further infringing activity, provided
that the domain name is being used within the United States to
access an infringing site, conducts business directed at
residents of the United States, and harms intellectual property
rights holders in the United States.
Subsection (b)(2). This subsection provides factors the
court may consider, among other indicia, to determine if a site
is conducting business directed at residents of the United
States. These factors include whether a site is providing
infringing goods or services to users in the United States
(subsection (b)(2)(A)); whether there is evidence that the site
is not intended to provide such goods to users in the United
States, or access or delivery of such goods to users in the
United States (subsection (b)(2)(B)); whether the site has
reasonable measures in place to prevent such goods and services
from being accessed from or delivered to the United States
(subsection (b)(2)(C)); whether the site offers services
obtained in the United States (subsection (b)(2)(D)); and
whether the site offers goods and services for sale in U.S.
Dollars (subsection (b)(2)(E)).
Subsection (c). This subsection directs the Attorney
General to send notice of an alleged violation and intent to
proceed under the Act to the registrant of the domain name of
the Internet site. This notice can be sent to the best
available postal or email address, or in any other form the
court finds necessary, including in the manner provided to
serve individuals in foreign countries under Rule 4(f) of the
Federal Rules of Civil Procedure. The Attorney General is also
required to notify any third parties that may be required to
take action under subsection (d).
Subsection (d)(1). This subsection requires Federal law
enforcement to serve a copy of a court order issued pursuant to
this section on any third party which has been identified
either in the complaint or any amendments thereto.
Subsection (d)(2). This subsection details the reasonable
measures that identified third parties must take after being
served with an order. There are four classes of third parties
described in this subsection: Operators of nonauthoritative
domain name system servers (subsection (d)(2)(A)), financial
transaction providers (subsection (d)(2)(B)), Internet
advertising services (subsection (d)(2)(C)), and information
location tools (subsection (d)(2)(D)). Operators of
nonauthoritative domain name system servers shall take the
least burdensome technically feasible and reasonable measures
to prevent the domain name described in the order from
resolving. Safeguards prevent the operator from having to
modify its network, software, systems, or facilities in order
to comply with this subsection. Financial transaction providers
must take reasonable measures to prevent, prohibit or suspend
their service from completing payment transactions associated
with the site involving U.S. customers. Internet advertising
services must take technically feasible and reasonable measures
to prevent their service from providing advertisements to the
infringing site, and cease making available any advertisements
for that site, or any paid or sponsored links that provide
access to the site. Information location tools must take
technically feasible and reasonable measures to remove or
disable access to the infringing site and not serve a hypertext
link to such a site.
Subsection (d)(3). This subsection gives third parties
discretion to determine if and how they will communicate
actions taken under this subsection to their users.
Subsection (d)(4). This subsection is a rule of
construction that ensures that the obligations of a third party
relating to an action commenced under this section are limited
to those described in the section.
Subsection (d)(5). This subsection provides immunity to
third parties for actions taken to reasonably comply with an
order issued under this subsection (subsection (d)(5)(A)). In
addition, actions taken by customers or users of a third party
to circumvent any good faith effort to restrict access to an
infringing site pursuant to this subsection shall not incur
liability for that third party (subsection (d)(5)(B)).
Subsection (e). This subsection authorizes the Attorney
General to bring an action for injunctive relief against any
party that receives an order under this section and willfully
fails to comply with the order. This is the sole legal remedy
to enforce the obligations under this section for any third
party described in it. A defendant in this action may establish
an affirmative defense by showing that it does not have the
technical means to comply with the subsection without incurring
unreasonable economic burden, or that the order is inconsistent
with the Act.
Subsection (f). This subsection provides the manner in
which an order under subsection (b) can be modified, suspended,
or vacated. After the issuance of such an order, a motion to
modify, suspend, or vacate the order may be filed at any time
by: Any person, owner or operator of property bound by the
order (subsection (f)(1)(A)); any registrant of the domain name
or the owner or operator of the site subject to the order
(subsection (f)(1)(B)); any domain name registrar or registry
that has registered or assigned the domain name of the site
(subsection (f)(1)(C)); or any third party required to take
action under subsection (d) (subsection (f)(1)(D)). Relief can
be granted if the court finds that the site associated with the
domain name is no longer or never was dedicated to infringing
activities, or the interests of justice require that the order
be modified, suspended or vacated (subsection (f)(2)). The
court can also consider whether the domain name has expired or
been registered to a different party (subsection (f)(3)).
Additionally, third parties can intervene at any time in an
action commenced under subsection (a), or in any action to
suspend, modify, or vacate an order (subsection (f)(4).
Subsection (g). This subsection authorizes the Attorney
General, if alleging that the underlying Internet site at issue
was previously determined to be an ``Internet site dedicated to
infringing activities'' in a prior action, to commence a
related action against the domain name owner, registrant or
site itself, in the same judicial district as the previous
action.
Section 4. Eliminating the financial incentive to steal intellectual
property online
Subsection (a). This subsection authorizes a qualifying
plaintiff, which is defined as the Attorney General or a U.S.
intellectual property rights holder, to commence either an in
personam action against a registrant, owner, or operator of a
domain name used by a site dedicated to infringing activities
(subsection (a)(1)), or an in rem action against a domain name
used by a site dedicated to infringing activities, if after due
diligence such persons cannot be found (subsection (a)(2)). The
qualifying plaintiff is required to name any third parties that
may be required to take action under subsection (d) (subsection
(a)(3)).
Subsection (b)(1). This subsection provides the court with
the authority to issue a temporary restraining order, a
preliminary injunction or an injunction, in accordance with
rule 65 of the Federal Rules of Civil Procedure, against an
infringing domain name, registrant, or owner or operator of
such a site. The injunction directs the site to cease and
desist from further infringing activity, provided that the
domain name is registered or assigned by a domain name registry
located or doing business in the U.S., the domain name is used
within the U.S. to access such an infringing site, and the site
conducts business related to the residents of the U.S. and
harms U.S. intellectual property rights holders.
Subsection (b)(2). This subsection provides factors the
court may consider, among other indicia, to determine if a site
is conducting business directed at residents of the U.S. These
factors include whether a site is providing infringing goods or
services to users in the U.S. (subsection (b)(2)(A)); whether
there is evidence that the site is not intended to provide such
goods to users in the U.S., or access or delivery of such goods
to users in the U.S. (subsection (b)(2)(B)); whether the site
has reasonable measures in place to prevent such goods and
services from being accessed from or delivered to the U.S.
(subsection (b)(2)(C)); whether the site offers services
obtained in the U.S. (subsection (b)(2)(D)); and whether the
site offers goods and services for sale in U.S. Dollars
(subsection (b)(2)(E)).
Subsection (c). This subsection directs the qualifying
plaintiff to send notice of an alleged violation and intent to
proceed under the Act to the registrant of the domain name of
the Internet site. This notice can be sent to the best
available postal or email address, or in any other form the
court finds necessary, including in the manner provided to
serve individuals in foreign countries under Rule 4(f) of the
Federal Rules of Civil Procedure. The qualifying plaintiff is
also required to notify any third parties that may be required
to take action under subsection (d).
Subsection (d)(1). This subsection requires a qualifying
plaintiff to serve a copy of a court order issued pursuant to
this section on any third party which has been identified
either in the complaint or any amendments thereto.
Subsection (d)(2). This subsection details the reasonable
measures that identified third parties must take after being
served with an order. There are two classes of third parties
described in this subsection: Financial transaction providers
(subsection (d)(2)(A)) and Internet advertising services
(subsection (d)(2)(B)). Financial transaction providers must
take reasonable measures to prevent, prohibit or suspend their
service from completing payment transactions associated with
the site involving U.S. customers. Internet advertising
services must take technically feasible and reasonable measures
to prevent their service from providing advertisements to the
infringing site, and cease making available any advertisements
for that site, or any paid or sponsored links that provide
access to the site.
Subsection (d)(3). This subsection gives third parties
discretion to determine if and how they will communicate
actions taken under this subsection to their users.
Subsection (d)(4). This subsection is a rule of
construction that ensures that the obligations of a third party
relating to an action commenced under this section are limited
to those described in the section.
Subsection (d)(5). This subsection provides immunity to
third parties for actions taken to reasonably comply with an
order issued under this subsection (subsection (d)(5)(A)). In
addition, actions taken by customers or users of a third party
to circumvent any good faith effort to restrict access to an
infringing site pursuant to this subsection shall not incur
liability for that third party (subsection (d)(5)(B)).
Subsection (e). This subsection authorizes the Attorney
General to bring an action for injunctive relief against any
party that receives an order under this section and willfully
fails to comply with the order. This is the sole legal remedy
to enforce the obligations under this section for any third
party described in it. A defendant in this action may establish
an affirmative defense by showing that it does not have the
technical means to comply with the subsection without incurring
unreasonable economic burden, or that the order is inconsistent
with the Act.
Subsection (f). This subsection provides the manner in
which an order under subsection (b) can be modified, suspended,
or vacated. After the issuance of such an order, a motion to
modify, suspend, or vacate the order may be filed at any time
by: Any person, owner or operator of property bound by the
order (subsection (f)(1)(A)); any registrant of the domain name
or the owner or operator of the site subject to the order
(subsection (f)(1)(B)); any domain name registrar or registry
that has registered or assigned the domain name of the site
(subsection (f)(1)(C)); or any third party required to take
action under subsection (d) (subsection (f)(1)(D)). Relief can
be granted if the court finds that the site associated with the
domain name is no longer or never was dedicated to infringing
activities, or the interests of justice require that the order
be modified, suspended or vacated (subsection (f)(2)). The
court can also consider whether the domain name has expired or
been registered to a different party (subsection (f)(3)).
Additionally, third parties can intervene at any time in any
action commenced under subsection (a), or in any action to
suspend, modify, or vacate an order (subsection (f)(4)).
Subsection (g). This subsection authorizes the qualifying
plaintiff, if alleging that the underlying Internet site at
issue was previously determined to be an ``Internet site
dedicated to infringing activities'' in a prior action, to
commence a related action against the domain name owner,
registrant or site itself, in the same judicial district as the
previous action.
Section 5. Voluntary actions against websites stealing American
intellectual property
This section provides a safe harbor from liability to
financial transaction providers and Internet advertising
services that voluntarily take actions described under sections
3(d) or 4(d) with regard to an Internet site if those entities
act in good faith and based on credible evidence that the site
is dedicated to infringing activities (subsection (a)). This
section also protects domain name registries, registrars,
financial transaction providers, information location tools, or
Internet advertisers from liability if they voluntarily stop
providing or refuse to provide service to sites that endanger
the public health by selling counterfeit, misbranded, or
adulterated pharmaceuticals, or regularly sell pharmaceuticals
without a valid prescription, so long as the third party's
action is taken in good faith and based on credible evidence
(subsection (b)).
Section 6. Savings clauses
These savings clauses ensure that nothing in the Act will
be construed to limit or expand civil or criminal remedies
available to any person for infringing activities on the
Internet pursuant to other Federal or State laws (subsection
(a)); enlarge or diminish liability for any cause of action
under either the Lanham Act or the Copyright Act, nor create an
obligation to take action pursuant to section 5 of the Act
(subsection (b)); or serve as a basis to determine the
application of section 512 of the Copyright Act, providing
limitations on liability relating to material online
(subsection (c)).
Section 7. Guidelines and studies
Subsection (a). This subsection requires the Attorney
General, in consultation with other relevant law enforcement
agencies, to publish procedures to receive information from the
public about Internet sites dedicated to infringing activities,
and to develop a deconfliction process with relevant law
enforcement agencies to coordinate the enforcement activities
brought under the Act.
Subsection (b). This subsection requires a series of
reports designed to review the effectiveness of the Act and
related oversight. The Secretary of Commerce, the Register of
Copyrights, the Attorney General, and the Government
Accountability Office are required to produce reports under
this subsection.
Section 8. Preventing the importation of counterfeit products and
infringing devices
This section clarifies that when Customs and Border
Protection suspects a product that is being imported or
exported of being counterfeit, the Secretary of Homeland
Security is not prohibited by the Trade Secrets Act from
sharing samples of packaging or labels of suspected
counterfeits with the purported rights owner. Similarly, it
ensures that the Secretary of Homeland Security can share
information and samples relating to anti-circumvention devices
that have been seized with affected parties.
IV. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
The cost estimate provided by the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974 was not available for inclusion in this report. The
estimate will be printed in either a supplemental report or the
Congressional Record when it is available.
V. REGULATORY IMPACT EVALUATION
In compliance with rule XXVI of the Standing Rules of the
Senate, the Committee finds that no significant regulatory
impact will result from the enactment of S. 968.
VI. CONCLUSION
The Preventing Real Online Threats to Economic Creativity
and Theft of Intellectual Property Act will provide the Justice
Department and rights holders with an important new mechanism
for combating online copyright infringement and the sale of
counterfeit goods.
VII. CHANGES TO EXISTING LAW MADE BY THE BILL, AS REPORTED
Pursuant to paragraph 12 of Rule XXVI of the Standing Rules
of the Senate, the Committee finds no changes in existing law
made by S. 968, as ordered reported.
