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Wednesday, February 15, 2012

Online Copyright Infringement and Counterfeiting: Legislation in the 112th Congress

Brian T. Yeh
Legislative Attorney

The global nature of the Internet offers expanded commercial opportunities for intellectual property (IP) rights holders but also increases the potential for copyright and trademark infringement. Piracy of the content created by movie, music, and software companies and sales of counterfeit pharmaceutical drugs and consumer products negatively impact the American economy and can pose risks to the health and safety of U.S. citizens. Although rights holders and law enforcement agencies currently have some legal tools to pursue domestic infringers, they face difficult challenges in enforcing IP laws against actors located abroad. Many websites trafficking in pirated copyrighted content or counterfeit goods are registered and operate in foreign countries. These foreign “rogue sites” sell subject matter that infringes U.S. copyrights and trademarks to U.S. consumers, yet the website operators remain beyond the reach of U.S. courts and authorities.

Some believe that legislation is necessary to address the jurisdictional problem of holding foreign websites accountable for piracy and counterfeiting. On May 12, 2011, Senator Leahy introduced S. 968, the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act), that would allow the Attorney General to seek an injunction from a federal court against a domain name used by a foreign website that engages in, enables, or facilitates infringement; such court order may then be served on U.S.-based domain name servers, Internet advertisers, search engines, and financial transaction providers, which would be required to take actions such as preventing access to the website or suspending business services to the site. IP rights holders may also sue to obtain a cease and desist order against the operator of an Internet site dedicated to infringement (whether domestic or foreign) or the domain name itself.

On October 26, 2011, Representative Lamar Smith introduced H.R. 3261, the Stop Online Piracy Act (SOPA). SOPA is similar to the PROTECT IP Act yet is broader in scope by including several provisions not found in S. 968, such as those that increase the criminal penalties for online streaming of copyrighted content, create criminal penalties for trafficking in counterfeit drugs, and require the appointment of dedicated IP personnel in U.S. embassies.

There has been considerable public debate about the PROTECT IP Act and SOPA. Critics claim these measures amount to “Internet censorship” and that they would impair free speech. There are also concerns that the legislation will disrupt the technical integrity of the Internet. Supporters of the bills argue that in order to reduce digital piracy and online counterfeiting, new enforcement mechanisms are vital for U.S. economic growth and needed to protect public health and safety. After intense lobbying against the legislation, Senator Reid on January 20, 2012, postponed a cloture vote that had been scheduled for the PROTECT IP Act, and Representative Smith announced that the House Judiciary Committee would similarly postpone consideration of SOPA, until a compromise could be reached between supporters and opponents of the legislation.

An alternative to these bills is the Online Protection and Enforcement of Digital Trade Act (OPEN Act; S. 2029, H.R. 3782) that would authorize the International Trade Commission (ITC) to investigate foreign websites that allegedly engage in willful IP infringement. The ITC may issue a cease and desist order against the infringing foreign website; such an order may be used by the rights holder to oblige financial transaction providers or Internet advertising services to stop doing business with the website. Unlike the PROTECT IP Act and SOPA, the OPEN Act does not apply to domestic websites and also would not require search engines or domain name servers to block access or disable links to foreign websites.

Date of Report: January
20, 2012
Number of Pages:
Order Number: R42
Price: $29.95

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