[Senate Report 111-373]
[From the U.S. Government Publishing Office]
Calendar No. 648
111th Congress Report
SENATE
2d Session 111-373
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COMBATING ONLINE INFRINGEMENT AND COUNTERFEITS ACT
_______
December 17, 2010.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary, submitted the following
R E P O R T
[To accompany S. 3804]
The Committee on the Judiciary, to which was referred the
bill (S. 3804), to combat online infringement, and for other
purposes, having considered the same, reports favorably
thereon, with an amendment, and recommends that the bill, as
amended, do pass.
CONTENTS
Page
I. Background and Purpose of the Combating Online Infringement and
Counterfeits Act.................................................1
II. History of the Bill and Committee Consideration..................9
III. Section-by-Section Summary of the Bill..........................11
IV. Congressional Budget Office Cost Estimate.......................13
V. Regulatory Impact Evaluation....................................13
VI. Conclusion......................................................13
VII. Changes to Existing Law Made by the Bill, as Reported...........13
I. BACKGROUND AND PURPOSE OF THE COMBATING ONLINE INFRINGEMENT AND
COUNTERFEITS ACT
A. Background
Intellectual property is the engine of the American economy
and critical for job growth. The Chamber of Commerce testified
before the Committee that American intellectual property
accounts for more than $5 trillion and IP-intensive industries
employ more than 18 million workers.\1\ Protecting American
intellectual property from theft is therefore critical to our
Nation's prosperity and welfare.\2\
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\1\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; 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 material 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 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, 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 with copyright protected work.
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\8\See ``Report on Economic Effects of Counterfeit and Pirated
Goods,'' at 8.
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Similarly, sale of counterfeit goods via Internet sites
that appear professional and quickly deliver items in
sophisticated packaging is thriving on the Internet. In many
cases, these Internet sites 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 operate 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 clear
appearance of legitimacy.\12\ They are easily accessible by
entering domain names that sound legitimate or through search
results; they often accept payment through well respected
credit card companies; and they often run advertisements from
trusted companies. All of this presents an air 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
Subcomm. on Gov't Management, Organization, and Procurement of the H.
Comm. on Oversight and Gov't Reform, 111th Cong. 1 (2010) (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) (citation
omitted).
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As Justice O'Connor wrote, 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.)).
\20\This right to be compensated for their work is not simply a
creation of U.S. law, but it is endowed as an essential right. 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 para.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 her recent
hearing before the Senate Committee on the Judiciary, online
infringement supports international criminal 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 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 law enforcement with a
tailored procedure for targeting domain names, and a means for
preventing the importation of infringing goods by rogue
websites, particularly for sites that are registered overseas.
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\23\The Department of Justice, in conjunction with Immigration and
Customs Enforcement, recently used its forfeiture authority to seize
domain names that were being used for criminal activity. See http://
www.justice.gov/criminal/cybercrime/OperationInOurSites.pdf. This
innovative use of forfeiture authority would have a similar effect to
subsection (d)(1) of the Act, which applies to domestically registered
domain names.
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The Committee bill, as reported, gives the Department of
Justice an expedited process for cracking down on rogue
Internet sites by targeting the domain names associated with
those sites. By preventing a domain name from being used for
illicit purposes and limiting the profitability of such
Internet sites, 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 the legislation was introduced, but the Committee
understands that there remain outstanding concerns.
The Committee bill, as reported, authorizes the Justice
Department to file an in rem civil action against a domain name
used to access an Internet site or sites ``dedicated to
infringing activities,'' and to seek a cease and desist order
from the court.
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.\24\ 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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\24\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 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 the Department
of Justice to make one of two demonstrations to the court.
Either that the Internet site satisfies the existing threshold
for forfeiture under current law,\25\ or, alternatively, the
Department must demonstrate that the Internet site's central
activity is to offer goods or services in violation of title 17
or that are counterfeit under the Lanham Act. Under this second
prong, the Internet site must be primarily designed, have no
commercially significant purpose other than, or be marketed for
the infringing activities.\26\
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\25\18 U.S.C. 2323.
\26\The definition is modeled on the definition in 17 U.S.C.
1201(a)(2)(A). The activities prohibited under this legislation must be
central to the Internet sites accessed through the entire domain name
to ensure that any action taken against the domain name is not
overbroad. See Center For Democracy and Technology v. Pappert, 337 F.
Supp. 2d 606 (E.D. Pa. 2004). The Committee recognizes that 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 off 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.
The Committee bill, as reported, authorizes the Justice
Department to seek preliminary relief from a Federal district
court in the form of a temporary restraining order, or a
preliminary injunction, in accordance with rule 65 of the
Federal Rules of Civil Procedure. The bill would require the
Department to publish notice of the action promptly after
filing.
The Committee bill, as reported, enables the Justice
Department to bring an action against any domain name accessed
in the United States, regardless of where it is registered. In
cases in which the domain name has a U.S.-based registry or
registrar, the bill authorizes the Department to bring an in
rem action in the judicial district where the registry or
registrar is located or doing business. This process is modeled
on the Anticybersquatting Consumer Protection Act.\27\ Once the
court issues an order against the domain name, the bill
authorizes law enforcement officers to serve the domain name's
U.S. based registry or registrar with that order, where
applicable. The recipient registry or registrar is then
required, by statute, to suspend the operation of, and may
lock, the domain name at issue.
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\27\The Anticybersquatting Consumer Protection Act (``ACPA''), 15
U.S.C. 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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Where the domain name does not have a U.S.-based registry
or registrar, the Committee bill, as reported, authorizes the
Department to bring an action in the District of Columbia to
prevent and restrain the importation into the U.S. of goods and
services offered by the infringing Internet site, provided that
the Internet site is used within the United States, conducts
business directed to residents of the United States, and harms
holders of United States intellectual property rights.\28\ The
legislation then authorizes law enforcement officers to serve
the court order on other specified third parties, including
Internet service providers, payment processors, and online ad
network providers. 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 address, 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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\28\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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The Committee bill, as reported, contains protections for
these third parties to ensure that any party acting pursuant to
an order is held harmless for having taken the appropriate
action. It also encourages voluntary action by registrars,
registries, payment processors, and online ad 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. The bill also authorizes the Justice
Department 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.
The Committee understands that whether a domain name is
suspended by a registry or registrar, or blocked by an Internet
service provider, the Internet site is still accessible to a
user who takes certain affirmative steps. For example, in the
case that the Internet site's domain name is suspended, a user
can access the infringing Internet site via its numeric
Internet Protocol address. Additionally, where the Internet
site is blocked by the Internet service provider, 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.
The Committee bill, as reported, includes safeguards to
allow the domain name owner or Internet site operator to
petition the court to modify, suspend or vacate the order where
the Internet site operator takes effective steps to exclude
pirate or counterfeiting activity from the site, or where the
interests of justice require. Similarly, as Internet site
operators subject to the order transition their Internet sites
to new domain names, the bill authorizes the Justice Department
to seek modifications to the order to cover these additional
domain names that are being used for similar illegal purposes,
so long as those domain names access Internet sites that are
both dedicated to infringing activities and jointly controlled,
owned, operated or affiliated with the domain name subject to
the original order.
The Committee bill, as reported, is specific that it may
not be construed to limit or expand the remedies available
under any other Federal or State laws. Further, the legislation
specifies that it shall not be construed to enlarge or diminish
vicarious or contributory liability for any cause of action
under title 17, including any limitation on liability under
section 512 of title 17.
Finally, the Committee bill, as reported, requires the
Attorney General to publish certain procedures, provide certain
guidance, and establish certain standards for implementation of
this Act. The bill also requires the Secretary of Commerce to
report to the Committees on the Judiciary in both the Senate
and House on the ability to deploy Domain Name Security
Extensions.
II. HISTORY OF THE BILL AND COMMITTEE CONSIDERATION
On June 23, 2010, 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 September 20, 2010, Senator 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 joined as cosponsors. This bill was referred to the
Senate Committee on the Judiciary.
The following persons or groups submitted letters or
releases of support for the Combating Online Infringement and
Counterfeits Act: Co-Chairs of the National Association of
Attorneys General Intellectual Property Committee, A.G. Jim
Hood of Mississippi and A.G. Rob McKenna of Washington; The
United States Chamber of Commerce; The Vermont Chamber of
Commerce; The International Brotherhood of Teamsters; 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 Screen Actors Guild; The
California Teamsters Union; The Writers Guild of America, West;
The Romance Writers of America; The International Brotherhood
of Electrical Workers; The Bakery, Confectionery, Tobacco
Workers, and Grain Millers International Union; Building and
Construction Trades Department, AFL-CIO; The International
Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths,
Forgers, and Helpers, AFL-CIO; Communication Workers of
America; International Association of Fire Fighters;
International Union of Painters and Allied Trades; The American
Federation of Musicians; Commercial Photographers International
/ Society of Sports and Event Photographers; Professional
Photographers of America / Student Photographic Society; The
Motion Picture Association of America; The Recording Industry
Association of America; The National Music Publishers
Association; The Entertainment Software Association; The
American Society of Composers, Authors, and Publishers;
Broadcast Music, Inc.; SESAC; The Songwriters Guild of America;
The Gospel Music Association; The American Association of
Independent Music; Association of Magazine Media; Newspaper
Association of America; The American Federation of Musicians;
Association of American Publishers; National Association of
Theatre Owners, Inc.; The Independent Film and Television
Alliance; The International Trademark Association; The
Coalition Against Counterfeiting and Piracy; The International
Anticounterfeiting Coalition; The Coalition Against Domain Name
Abuse; The Software & Information Industry Association; The
Property Rights Alliance; Viacom; Sony Pictures; Cengage
Learning; HarperCollins Publishers LLC; Macmillan; Pearson
Education, Inc.; Penguin Group (USA), Inc.; RR Donnelley;
CALinnovates.org; Chanel; Fortune Brands; Imaging Supplies
Coalition; Moet Hennessy Louis Vuitton; Major League Baseball;
National Basketball Association; National Football League; NBC
Universal; The Recording Academy; Oakley; OpSec Security; True
Religion Apparel, Inc.; 1-800-PetMeds; Activision; Acushnet
Golf; Cable and Satellite Broadcasting Association of Asia;
Church Music Publishers' Association; Copyright Alliance;
Disney; EMI; Entertainment Software Association; Fashion
Business Inc.; Guru Denim, Inc.; Johnson and Johnson; Merck;
NagraStar; Nagravision; Nervous Tattoo Inc., dba Ed Hardy;
Newscorp; Nike; Premier League; Sony Music Entertainment;
Sports Rights Owners Coalition; STOP Streaming Group; Tiffany
and Co.; Time Warner; Ultimate Fighting Championship;
Underwriters Laboratory; Universal Music Group; Warner Music
Group; Xerox; Zondervan; Association of Test Publishers; and
the Creative Coalition Campaign.
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. Senator 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. The Committee
proceeded by roll call vote as follows:
Tally: 19 Yeas, 0 Nays.
Yeas (19): Leahy (D-VT), Kohl (D-WI), Feinstein (D-CA),
Feingold (D-WI), Specter (D-PA), Schumer (D-NY), Durbin (D-IL),
Cardin (D-MD), Whitehouse (D-RI), Klobuchar (D-MN), Franken (D-
MN), Coons (D-DE), Sessions (R-AL), Hatch (R-UT), Grassley (R-
IA), Kyl (R-AZ), Graham (R-SC), Cornyn (R-TX), Coburn (R-OK).
Nays (0).
III. SECTION-BY-SECTION SUMMARY OF THE BILL
Section 1. Short title
This section provides that the legislation may be cited as
the ``Combating Online Infringement and Counterfeits Act''.
Section 2. Internet sites dedicated to infringing activities
Subsection (a). This subsection provides the definition for
an Internet site that is ``dedicated to infringing
activities''. Under this definition, an Internet site is
``dedicated to infringing activities'' if it falls into one of
two categories. The first category is an Internet site that
would otherwise satisfy the criteria for criminal infringement
because it constitutes property that is subject to forfeiture
under section 2323 of title 18 (subsection (a)(1)(A)). The
second category is an Internet site that is primarily designed,
has no demonstrable commercially significant purpose, or is
marketed by its operator to offer infringing goods and
services, or counterfeit products (subsection (a)(1)(B)(i)),
and those activities are the central activities of the Internet
site accessed through the domain name that is the subject of
the action (subsection (a)(1)(B)(ii)). A domain name is defined
under section 45 of the Lanham Act, as the ``alphanumeric
designation which is registered with or assigned by any domain
name registrar, domain name registry, or other domain name
registration authority as part of an electronic address on the
Internet.''
Subsection (b). This subsection provides the Attorney
General with the authority to seek a temporary restraining
order, preliminary injunction, or injunction against a domain
name property that is determined to be ``dedicated to
infringing activities'' in an action commenced under subsection
(c).
Subsection (c). This subsection provides the Attorney
General with the authority to commence an in rem action against
a domain name used by an Internet site that is ``dedicated to
infringing activities.'' This subsection specifies that the
action must be brought in the judicial district where the
domain name registrar or registry is located, or alternatively
in the District of Columbia if neither the registrar nor the
registry are located in the United States.
Subsection (d)(1). This subsection outlines criteria to be
used to determine a domain name's situs in an in rem action
where either the registrar or registry is located or doing
business in a judicial district within the United States, or
where documents sufficient to establish control and authority
regarding the disposition of registration are located in a
judicial district within the United States.
Subsection (d)(2). This subsection provides grounds under
which the Department of Justice may bring an action in the
District of Columbia to prevent and restrain importation into
the United States of infringing good and services, even if the
registry and registrar for the domain name are not located in
the United States. Such an action requires that the domain name
be used by users within the U.S. to access the Internet site,
that the Internet site conducts business directed to residents
of the U.S., and that the Internet site harms holders of U.S.
intellectual property rights.
Subsection (e). This subsection authorizes a Federal law
enforcement officer to deliver a copy of the court order to a
domain name registrar or registry (subsection (e)(1)), an
Internet services provider (subsection (e)(2)(B)(i)), a
financial transaction provider (subsection (e)(2)(B)(ii)), and
an Internet advertising network service (subsection
(e)(2)(B)(iii)). The subsection prescribes the action that the
respective party must take upon receipt of the order. This
subsection further provides the entity taking action under this
subsection with immunity from any related causes of action
(subsection (e)(5)).
Subsection (f). This subsection requires the Attorney
General to inform the IPEC and other law enforcement agencies
of any order issued under this section, and requires the IPEC
to post the domain name against which an order has been issued,
along with other relevant information, on a publicly available
Internet site.
Subsection (g). This subsection provides the Attorney
General with the authority to bring an action against a party
that knowingly and willfully fails to comply with an order
delivered under subsection (e). This subsection further
provides that a showing by the defending party that it does not
have the technical means to comply with an issuance of the
order serves as a defense to an action brought under this
subsection to the extent that it causes the inability to
comply.
Subsection (h)(1). This subsection authorizes the Attorney
General to seek a modification of the court order to include an
additional domain name(s) where an Internet site that is
``dedicated to infringing activities'' is able to be accessed
by that different domain name(s). This subsection addresses the
problem of an Internet site that is ``dedicated to infringing
activities'' otherwise reemerging under a different domain name
to avoid the implications of an order that is issued against
it.
Subsection (h)(2). This subsection authorizes the defendant
or owner or operator of the domain name to seek a modification,
suspension or vacation of the court order where the Internet
site associated with the domain name is no longer dedicated to
infringing activities, or where the interests of justice
require.
Subsection (h)(3). This subsection authorizes a party to
move for dismissal of the court order where the domain name has
been deleted following expiration of its registration, and has
been re-registered by a different party.
Subsection (i). This subsection is a savings clause to
ensure that this Act is not construed to limit or expand other
civil or criminal remedies available under current Federal or
State law, or to enlarge or diminish vicarious or contributory
liability under title 17, United States Code.
Section 3. Required actions by the attorney general
This section requires the Attorney General to publish
procedures and provide guidance to carry out the activities of
this section in coordination with those harmed by the illegal
activity, as well as other law enforcement agencies.
Section 4. Report
This section requires the Secretary of Commerce to study
and report to Congress on this legislation's impact on the
ability of an entity described in section 2(e) to effectively
use Domain Name System Security Extensions.
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. 3804.
VI. CONCLUSION
The Combating Online Infringement and Counterfeits Act will
provide the Justice Department with an important new mechanism
for combating online piracy 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. 3804, as ordered reported.