Senate Judiciary Committee Issues Report on PROTECT IP Act

As previously reported in this Blog, Senator Leahy introduced on May 12, 2011, the "Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011" (S. 968) (the "PROTECT IP Act of 2011"). Just last week, Senator Leahy published the Committee's Report on the Bill (S. Rep. 112-39, released July 22, 2011). In this Report, he explains why a legislative solution is necessary.

He identifies the "footwear, clothing, consumer electronics and pharmaceutical industries" as being frequent victims of such counterfeiting enterprises. S. Rep. at 3. He explains that "the music, motion picture, television, publishing and software industries" face continual threats from copyright infringement in the digital world. Id.

Indeed, the President and CEO of Rosetta Stone testified during the February 16, 2011 Judiciary Committee Hearing on this topic that pirated copies of the newest versions of Rosetta Stone software are made available through sites that at least facially appear legitimate, causing confused customers to purchase (essentially) defective software bearing Rosetta Stone's name. Prepared Statement of Tom Adams, Feb. 16, 2011 at 2.

Author Scott Turow (speaking on behalf of the Authors' Guild) testified that he published a new book in May of 2010, and within a week or two of its release, friends informed him that pirated copies of his book were available for sale online. Webcast of Scott Turow's Tesimony is available through the Committee's hearing notice. This type of counterfeiting poses not only additional costs on the authors/publishers, but can also cause physical harm to the customer if what is counterfeited is pharmaceutical, but yet is distributed bearing legitimate trademarks and other indicia of legitimacy.

The Committee Report summarized the various harms that result from this type of activity:

• 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. 

S. Rep. at 5 (footnotes omitted).

While a large portion of the Bill relates to government action that can be taken by the Attorney General, the private right of action included in this Bill provides separate benefits to rightsholders, allowing them to enforce their rights, independent of any action that the government may take against the wrongdoer. This private right of action is more limited than the enforcement tools provided to the AG.

As the Committee Report explains, while the private right of action can extend to websites operating outside of the U.S., "the resulting remedies are more limited [than those reserved for the Justice Department]. 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." Id. at 8. As a result, private rightsholders cannot use this process to require that web hosting companies or search engines disable access to the domain name when it is found to be a "rogue Internet site."

Moreover, when court orders are served on third parties (such as payment processors or search engines), no ongoing duty on the part of the third-party – for instance, to ensure that the infringing domain does not pop up again under a different name at a later time – will be established. Id. at 9. Instead, the third-party's obligations begin and end with the court order served upon it – even then, the third party is only required to comply to the extent such compliance is "technically feasible and reasonable." Id. This safe harbor allows third parties to avoid significant expenses that might result from having on-going, extensive obligations to police against the re-appearance of these rogue sites when they resuscitate themselves after a successful enforcement action.

This Bill also limits the remedies that a qualifying plaintiff can seek against a third-party who "knowingly and willfully" fails to comply. Id. Specifically, actions to enforce the order at issue will be limited to requiring compliance with it – "These provisions do not open the door to fishing expeditions in the form of frivolous litigation brought simply to initiate broad discovery." Id. Monetary damages are also not available in these situations.

Notably, the drafters did not intend the Bill to deter voluntary action by third parties to police their own networks for infringing or counterfeiting activity, nor does it intend to allow the Bill to act as a substitute for such voluntary action. Id. at 10.

Overall, the Bill would provide needed assistance to rightsholders to continue to fight the battle against infringement and counterfeiting. It is not a complete solution, however. Even Senators who support this Bill recognize that it's only the first step – but an important one nonetheless. See Prepared Statement of Sen. Leahy, May 26, 2011 ("The PROTECT IP Act targets the most egregious actors, and is an important first step to putting a stop to online piracy and the sale of counterfeit goods.").

Background

In general, this Bill provides a remedy both to the Attorney General and to certain private rights holders ("Qualified Plaintiffs," as specifically defined) to combat copyright infringement and counterfeiting against websites whose primary purpose is infringement or counterfeiting. The statutory definitions make this a bill of somewhat limited application (not every infringement will qualify, nor will every infringer, involved third-party or level of conduct), but it undoubtedly would provide rightsholders with another tool in the toolbox to enforce their valuable copyright and trademark rights.

In effect, this Bill constitutes an amendment to the COICA bill introduced last session, which did not reach a floor vote in the Senate before the session ended. (More on the COICA bill and related hearings can be found here.)

Senators Hatch, Grassley, Schumer, Feinstein, Whitehouse, Graham, Kohl, Coons and Blumenthal co-sponsored the PROTECT IP Bill, which was referred to the Committee on the Judiciary on May 12. The Committee scheduled an executive business meeting on May 19, which was rescheduled for May 26 to consider the bill and to review proposed amendments. The Committee accepted both amendments and approved the bill unanimously by a voice vote. (The audio recording of the session – very short – can be found here: http://judiciary.senate.gov/webcast/5-26-11_Exec_Bus_Mtg.mp3. It also appears on the meeting announcement changing the date of the session to May 26.)

Following the announcement that the bill had passed the Committee on the Judiciary and was moving to the full Senate floor for consideration, Senator Wyden announced a hold on the motion to proceed to the bill, thus perhaps indefinitely tabling consideration of what seems to have been a substantial bi-partisan effort to combat a very real threat to American commerce.

The Bill has received both praise and criticism, with interest groups and other organizations going on record with their opinions about the Bill and its anticipated impact. (See my prior post for a short summary of some of the opinions that had already been made public before the Judiciary Committee voted on the bill on May 26. Undoubtedly, more groups have made their opinions public in the intervening months, but I have not searched since.)