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Hearing of the Courts, the Internet and Intellectual Property Subcommittee of the House Judiciary Committee - Intellectual Property Act of 2007

Location: Washington, DC


REP. ADAM B. SCHIFF (D-CA): Thank you, Mr. Chairman, and I join my colleagues in strongly supporting legislation. And I congratulate the chairman on all his superb work. I appreciate in particular also inclusions of sections 511 and 512 that we proposed parts of to create the state and local law enforcement grants as well as strengthen the CHIP units.

I had a couple questions -- some ideas that we have been kicking around. It actually gets to -- goes a little shy of what Mr. Sherman and Mr. Berman were just proposing on the international front.

REP. BERMAN: I was kidding around.

REP. SCHIFF: I know you were. I have a more modest idea I'd like to run by the committee, and before I do I just want to make a comment on Section 104, which has some surface appeal to me, but I'm still wrestling with -- when I think about the analogy, Mr. Cotton, that you mentioned of prosecutors or judges separating out petty larceny from grand larceny, I also think about the fact, though, that we don't -- when we charge someone for theft of an automobile, charge them for theft of the automobile, theft of the radio in the automobile, theft of the seats in the automobile -- even though -- or a theft of a briefcase in the automobile, even though the briefcase might belong to someone different than the automobile belonged to, it would be theft of an automobile -- and just looking at the discretion we've given to the judge to determine whether distinct works have independent economic value, you could say that also about objects in a car.

So I think we need to think about it a little more. I haven't reached a conclusion on it. I can see certainly the value to be added by it.

But I wanted to run some other thoughts by you on the international front. For example, one of the thoughts that we were kicking around was the idea of tasking the Commerce Department with posting a list of websites that clearly infringe. We know many of the most well known. A lot of them use major credit cards -- take major credit cards, a lot of them have advertisements from major companies. Presumably, some of those companies and credit card agencies aren't aware that these are, you know, websites that are dealing in hundreds of thousands of pirated works every day.

Do you have any feedback on whether you think that kind of idea, whether it be House in Commerce or the copyright office or somewhere else, might have value to it?

And then a second thing I'd like to throw out there, which is, I guess, more incendiary -- we do a favor for some of our institutions of higher learning, which are also often very problematic from an IP point of view, by giving them a broad safe harbor. Should we require the use of filtering devices if we're going to allow that safe harbor?

So if I could throw those two ideas out there and get your feedback.

MR. COTTON: Well, I'm delighted to make a comment, because this entire area is really the second focal point, in addition to governmental action, of the Coalition Against Counterfeiting and Piracy. It is a recognition that there are sectors of the economy that are intermediaries. Frequently, they are actually business partners of many of the brand owners in the sense of working with us.

But the question that you pose is whether perfectly legitimate businesses, but who by virtue of their infrastructure become the means by which counterfeit and pirated goods get into the stream of commerce, have some responsibility to address that issue and to take action to reduce the degree to which their infrastructure is used.

My primary example of this would be the collective judgment that we as a society came to concerning financial institutions and money laundering. Banks are perfectly legitimate and important institutions. We have imposed on them an obligation not simply to take cash and close their eyes as to who brings it to them and what the source of that money was but to ask questions about their customers and to ask questions about the source of cash that may be deposited with them.

The question is a delicate question, and I would cite to you the most recent example where I think there was a successful negotiation between brand owners and intermediaries in the case of YouTube-like sites, where a number of user-generated content sites signed a voluntary agreement of principles with content owners, adopting and committing to adopt by the end of this year filtering technology, which they recognize was commercially available and technologically feasible.

And I think the question becomes for other institutions, other sectors such as the one you referenced, financial intermediaries, I think you could ask the same question about shippers, warehousers, retailers -- the question becomes, what is reasonable for those sectors, what actions are reasonable for those sectors to take and how can they work collectively with brand owners from the point of view of protecting the health and safety, in many cases, of consumers and preventing pirates and counterfeiters from using their infrastructure, what actions can they take?

REP. SCHIFF: Would it be feasible to have a government agency tasked with developing, you know, sort of the IP terrorist watch list that at least companies would be on notice -- even if there wasn't a legal prohibition against doing business, they couldn't very well claim ignorance if they're processing credit card transactions or advertising on clearly pirate or piracy-oriented sites?

MS. SOHN: Yeah, I think Mr. Cotton just pointed out what the problem is in doing something like that is that you're just opening up the floodgates to massive litigation against every single company that might have any kind of tangential relationship to copyright infringement.

I mean, this is -- a court in California in a case involving a pornography site had sued MasterCard and Visa claiming that, you know, because it had given financial services to other websites that had stolen their, you know, pornographic pictures, that they were not liable. I just think that, you know, if you open the floodgates in that way, then you're going to be flooding the courts with people going -- copyright trolls, basically -- you've heard of patent trolls -- copyright trolls going after every single company which might have the most tangential relationship to an infringing website.

REP. SCHIFF: So you might be if you enacted some liability for doing business with someone on the list, but if you post a list of piracy sites, I mean, how does that expand the liability other than putting people on notice?

In other words, if the top 10 websites are responsible for 60 percent of all piracy -- and I'm just guessing at a big number -- and you can identify those and you can stigmatize doing business with those, why does that open floodgates to litigation, and if it would deter legitimate companies from doing business with those websites, wouldn't that be desirable?

MS. SOHN: I think that might be a good marketplace solution to the problem. I'm not sure government should be involved, but it might be nice -- yes, to do a, you know, to do a watch list or a hall of shame. I don't have a problem with that.

REP. BERMAN: The time of the --

MR. COTTON: If I might just make one point of -- just to be clear what I said, which was I was referring to negotiated agreements between sectors, and that is what the CACP is endeavoring to accomplish before we turn to the question of legal standards or legal questions.


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