Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Posts Tagged ‘Copyright’
Mar 03
2013

New Zealand Court Hands U.S. a Victory in Kim Dotcom Piracy Case

A year ago, we wrote about the indictment in the Eastern District of Virginia of the executives and founders of Megaupload, one of the leading file-hosting sites on the Web. The charges were copyright infringement through the facilitation of piracy of copyrighted materials, money-laundering, and conspiracy. The site was shuttered after the indictment.

The case quickly got tied up in the U.S. Justice Department’s effort to extradite Kim Dotcom, Megaupload’s chief founder, from New Zealand, where he lives. After a series of setbacks, the DOJ just won a victory before a New Zealand appeals court. The extradition hearing is set for August 2013.

The issue before the appeals court was how much information the DOJ was required to turn over to Dotcom before the hearing. One of Megaupload’s defenses is that its activities were protected by the “safe harbor” provisions of the Digital Millennium Copyright Act, which protects Internet service providers from copyright liability for the activities of people who merely use their Web sites.

Dotcom wanted the DOJ to turn over, in advance of the hearing, information that it had about possible copyright infringement on the site – in other words, a good deal of the government’s evidence. Reversing a lower court, the New Zealand appeals court held that the DOJ need not turn over much of this material at this point.

“If a suspect was entitled to demand disclosure of all relevant documents on the basis that he or she wished to challenge not the reliability of the summarised evidence but rather the inferences that the requesting state seeks to draw from it,” the court wrote, then the extradition hearing process would not work properly. Rather, the suspect is entitled to a summary of the evidence but not to the government’s entire case at this juncture.

It thus appears that Dotcom will be able to get access to the DOJ’s entire case and to mount a full defense only if he is extradited to the United States and faces a criminal trial. But in order to hold such a trial, the DOJ will need to make a prima facie case at the extradition hearing, which Dotcom will be allowed to rebut, that Dotcom is guilty of the charged offenses. The appeals court said that this hearing will only involve a “limited weighing of evidence” and that the DOJ is entitled to some deference as to its reliability.

We have said before that this is a highly dubious prosecution. We are confident that despite this setback, Dotcom will get a full chance to present his case before an impartial tribunal.

Jan 14
2013

What Lessons Can Be Learned From Tragic Death of An Internet Activist?

There can be no dispute that the death of Aaron Swartz – the Internet activist who took his own life on Friday, January 11 – is tragic. There can also be no dispute that the grief and anger his family feel is very real. The question is what the appropriate focus for that anger should be in order to give meaning to Swartz’s life – and death.

Swartz, who had blogged about his own battles with depression, was a leading activist involved with the movement to make information freely available on the internet, and is credited with helping to lead the protests that ultimately defeated the Stop Online Piracy Act (SOPA) – a statute that would have significantly broadened law enforcement powers in policing internet content that may violate U.S. copyright laws.  Swartz’s suicide came as he faced federal charges of wire fraud and computer fraud arising from his alleged efforts to make freely available an enormous archive of research articles and similar documents offered by JSTOR, an online academic database, through computers at the Massachusetts Institute of Technology. The allegations in the indictment he faced were a tribute to Swartz’s computer acumen, describing the technological means that Swartz had used to access and download approximately 2 million documents from the JSTOR subscription archive by unauthorized access to the computers at MIT.

Swartz’s family has released a statement in which they blame his death on the decision by federal prosecutors in the District of Massachusetts to pursue “an exceptionally harsh array of charges, carrying potentially over 30 years in prison, to punish an alleged crime that had no victims.” Contrary to the family’s assertion that the prosecution caused Swartz to take his own life, we suggest that the appropriate focus here is not on prosecutorial overreaching, but rather on Congress’s decision to criminalize certain conduct and to set sentencing guidelines that would likely have led to imprisonment if Swartz were convicted.

It is true that the maximum statutory sentence of imprisonment for the wire fraud charge in the indictment against Swartz is 30 years. But there is no question that the likely sentence that Swartz would have faced if convicted of wire fraud and/or the other charges in the indictment would have been far less than that. The advisory range under the U.S. Sentencing Guidelines would have depended on the loss (or intended loss) suffered, among other things, but Swartz likely faced (based on back of the envelope calculations) a sentence of no more than two to four years in prison – a fact that he almost certainly knew from the lawyer who represented him. While four years in federal prison is significant, it is much less than the 30-year sentence mentioned by the family.

It is also not entirely clear that the prosecutors’ decision to pursue charges against Swartz was unreasonable. This is not just a case alleging the distribution of materials protected by copyright law – an issue on which there is fair debate as to whether conduct should be criminalized. Rather, in this case, Swartz was accused of having accessed the MIT computer systems and the JSTOR subscription (for which MIT paid approximately $50,000) through illicit means. There were also allegations that Swartz’s computer intrusions crashed some computers and caused some legitimate subscribers to the JSTOR service to lose access for a period of time. Thus, assuming the truth of the allegations in the indictment, the alleged crime here was not entirely victimless. Moreover, everyone agrees that illegally accessing a computer system is not conduct that should be condoned. For these reasons, Swartz’s family’s attacks on the prosecutors as overreaching – while understandable given their grief and anger – may actually be misplaced.

On the other hand, there is a fair question whether the conduct with which Swartz was charged is really the kind of conduct for which we need to send a person with no other criminal record to prison for a period of years. That, however, is not an issue of decision-making by the prosecutor’s office. Rather, that is a question for Congress, both in terms of establishing criminal liability and in terms of setting astronomical maximum statutory sentences (which increased the base offense level for this crime). And it is a question for the U.S. Sentencing Commission, which has raised Guidelines levels over the years. It is also a question for Congress in terms of setting Guidelines scoring that increasingly fails to reflect any expertise of the Sentencing Commission, but rather reflects only a congressional mandate to support increasingly harsh advisory sentences under the Guidelines for white-collar offenses.

Prosecutors may have been justified in seeking charges against Swartz for his conduct. But if his family, friends and supporters wish Swartz’s death to have as much meaning as his life, they should focus instead on the decisions that created the harsh potential penalties that Swartz faced.

Dec 05
2012

D.C. Circuit: Restitution Order Must Involve Victim’s Loss, Not Defendant’s Gain

On November 9, 2012, in a unanimous opinion in United States v. Fair, the U.S. Court of Appeals for the D.C. Circuit found that the district court had abused its discretion in ordering restitution in the amount of $743,000 in a criminal copyright infringement case. The appeals court vacated the lower court’s restitution order, finding that the order was based on “a clear legal and factual error.”

The appeals court emphasized that a restitution order may not be based solely on the ill-gotten gain of the defendant but must be directly related to the victim’s actual loss, which is not always the same thing.

In this case, Gregory Fair had offered customers an appealing but illegal way to acquire up-to-date Adobe software at less than half the retail price. Fair’s company sold outdated Adobe software (Photoshop and PageMaker) on eBay and included numerical codes that the buyers could use to purchase an update of the same software directly from Adobe. This scheme lasted from February 2001 until September 2007, when Fair was shut down by the United States Postal Inspection Service.

In 2009 Fair pleaded guilty to charges in exchange for a reduced sentence. Although Fair admitted to receiving roughly $1.4 million in revenue from the sale of pirated software on eBay, his plea agreement was based on an infringement category of greater than $400,000 but less than $1 million. Based on the Sentencing Guidelines for that category, Fair was sentenced to 41 months in prison followed by three years of supervised release. At sentencing, the prosecution also insisted that the court order the maximum restitution. The district judge ordered restitution of $743,000 to Adobe, based on prosecutors’ calculations of Fair’s ill-gotten gains.

At first blush that makes sense, right? Not so quick; there is a fatal flaw. Under federal law, restitution is not based on what the defendant gained; it’s based on what the victim actually lost. In many cases those are the same, but here it certainly was not.

At sentencing, Fair’s attorney raised this point in several different ways, emphasizing that the prosecution had completely failed to prove any actual harm to Adobe. This was a critical issue in this case, because Fair was actually directing each of his buyers to make a legitimate $200 purchase from Adobe. Fair’s attorney argued, correctly, that the burden was on the prosecution to show actual, provable loss (i.e., that purchasers of Fair’s outdated material, which Adobe no longer offered for sale, would have actually purchased the full-price, up-to-date merchandise from Adobe AND that the aggregate sales that Fair directed to Adobe were less than the sales that he supposedly thwarted).

The trial judge ignored Fair’s arguments, referred to the prosecution’s unsubstantiated calculation as “hard proof,” and fallaciously based the restitution order on his belief that it was “undisputed that Fair’s revenue from the sale of pirated products was at least $767,000.”

In so doing, the trial judge overstated the weight of the prosecution’s evidence and misinterpreted the law regarding restitution. As the appeals court explained, the purpose of the Mandatory Victim Restitution Act (MVRA) is “to compensate victims for the loss caused by the defendant’s criminal conduct.” Thus the trial court’s restitution order must be “limited to the actual, provable loss suffered by the victim” at the hands of the defendant. The appeals ruling made it clear that the prosecution must “articulate specific factual findings underlying its restitution order,” and it “may not substitute the defendant’s ill-gotten gains for the victim’s actual, provable loss.”

Prosecutors and judges must not lose sight of the fact that victims are free to seek full restitution in separate civil lawsuits. In fact, civil restitution suits actually allow for the disgorgement of all of the defendant’s profits, including those in excess of the victim’s loss. The Fair case is a perfect example of federal prosecutors and criminal trial courts losing sight of their role in the justice system. Fortunately, the appeals court stepped up to rein them in. In the words of D.C. Circuit Judge Judith Rogers, “the abuse-of-discretion standard may be generous, but it is not one that will countenance the clear legal and factual error present here.”

Nov 15
2012

China, Other Nations Need to Crack Down on Software Piracy

Reuters recently quoted Tian Lipu, head of China’s State Intellectual Office, complaining about China’s reputation for rampant software piracy. According to Tian, “China is the world’s largest payer for patent rights, for trademark rights, for royalties, and one of the largest for buying real software . . . We pay the most. People rarely talk about this, but it really is a fact.”

Tian’s protestations are akin to the shoplifter who defends his theft of a coat by pointing out that he also bought two shirts from the same store. China, as well as other countries worldwide, needs to stop looking the other way at copyright and trademark piracy, and to crack down on this form of theft.

According to the Business Software Alliance’s (BSA) 2011 Global Software Piracy Study, 42% of PC software worldwide – with a commercial value of more than $63 billion — is pirated. The rate of software piracy in China is an astounding 77%. By comparison, the percentage in the United States is 19%, while it is 26% in the UK, 21% in Japan, and 27% in Canada. In fairness, while the value of pirated software in China eclipses all other countries (excepting, ironically, the United States, where the relatively low piracy rate still results in almost $10 billion worth of pirated software), China is not the only, nor is it the worst, offender. Among the world’s 20 largest economies, Indonesia and Venezuela have higher piracy rates than China (86% and 88%, respectively), and Russia, India, Mexico, Thailand, Malaysia and Argentina all clock in with piracy rates over 50%.

Technical means of quashing or impairing the performance of pirated software (for instance, the Microsoft Genuine Advantage program) can help. But they are not a cure-all, nor can they put a dent in the pervasive levels of piracy. A multifaceted approach is needed to protect software and application developers from this pervasive form of theft. To start, developers must incorporate anti-copying mechanisms into their software and applications and must have strong and enforceable license agreements with users. From there, it is up to the developers to take a firm stand against theft of their product. However, it is equally important that governments, starting with China, bring their intellectual property laws into the 21st century, adapting them to encompass apps and other new and emerging technologies; enforce those laws; and make clear that software and application piracy will not be permitted. Until China and other nations do this, software and app developers will continue to be the constant victims of theft and the forward march of innovation will be stunted.

Jul 23
2012

In Effort to Extradite UK Man in Piracy Case, DOJ Is Overreaching

A current anti-piracy case demonstrates the U.S. government’s intent to enforce its copyright laws not just beyond national borders, but beyond the extent of logic. The U.S. Department of Justice has issued an arrest warrant and extradition order for a 24-year-old college student in England who ran a website that contained links to independent websites that hosted pirated television shows and movies. By holding a mere intermediary accountable for allegedly pirated content offered on other websites, the department has set an alarming precedent with major free speech implications.

Richard O’Dwyer, who has never left the United Kingdom, is at the center of a heated debate regarding U.S. laws related to copyright, free speech, and jurisdiction. O’Dwyer ‘s website, TvShack.net, is registered in the United States, thereby giving the U.S. government a claim to exert jurisdiction over it and its owner even though the servers hosting the website are not U.S.-based. The website allowed users to search for and link to other websites; the government alleges that some of those links led to pirated movies and television shows. The government seized the domain on June 30, 2010, for “violations of federal criminal copyright infringement laws.” O’Dwyer has been charged with conspiracy to commit copyright infringement and criminal infringement of copyright.

The government’s case against O’Dwyer raises a number of important issues. First, O’Dwyer himself did not host the allegedly infringing material. His website allowed users to run searches that returned links to both legal and allegedly illegal content on external websites. If O’Dwyer can be criminally prosecuted for the dissemination of copyrighted content that he did not host, where would the chain of liability for such content end? Would search engines linking to such websites bear responsibility for their content? Would anyone sending a link to that website face criminal prosecution, even someone who actually download or view the content? There is no telling how far the DOJ intends to push this issue, but O’Dwyer’s case is a good indication that the DOJ seeks to extend the limits as far as the courts will allow.

O’Dwyer’s status as a British subject raises less novel but no less compelling questions about the United States’ jurisdiction to extradite and prosecute individuals on copyright infringement charges. O’Dwyer’s extradition has been approved by the British courts as well as the British home secretary, but many still believe that any trial should take place in Britain since O’Dwyer has never set foot in the United States and the servers hosting the website were also not on our shores.

O’Dwyer is currently appealing the extradition. Last month, Wikipedia founder Jimmy Wales, in a rare political intervention, called upon British Home Secretary Theresa May to stop the extradition efforts.

The circumstances of this case are reminiscent of the high-profile Megaupload case, in which the U.S. government issued an extradition order for Kim Dotcom in New Zealand. Dotcom ran an internet “lockbox,” in which users could upload content, including video and music, to a website and then share access with other users. Factually, these cases differ in that Megaupload hosted the content that was uploaded by users, whereas O’Dwyer only provided links to other websites. New Zealand also appears less willing to approve extradition, having pushed a hearing on the matter to March 2013, while Dotcom remains free on bail.

In instances of intermediary liability, the need to protect copyrighted works is outweighed by an individual’s interest in remaining free from criminal prosecution for the acts of another. The remedy, if one is justified, is better addressed through civil penalties rather than criminal prosecution.

 

 

Apr 10
2012

Second Circuit YouTube Ruling Will Have Major Impact for Online-Piracy Debate

What had been touted as a great victory for Google in particular and for “Internet freedom” in general was just dealt a major blow when the U.S. Court of Appeals for the Second Circuit Court of Appeals overturned a lower court decision in Viacom’s lawsuit against Google and Google-owned YouTube.

Viacom, along with the English Premier League and various film studios and television networks, sued YouTube in 2007 alleging copyright infringement based on YouTube’s broadcast of some 79,000 copyrighted videos. The lower court had thrown out the case, granting summary judgment to YouTube and holding that YouTube was not responsible for the infringing activities at issue. The plaintiffs appealed. The Second Circuit brought new life back to the suit — and new life to the complaints some have made against online piracy, which recently hit the headlines with the introduction of the SOPA and PIPA bills in Congress.

At the heart of the lawsuit is the application of a 1998 federal law, the Digital Millennium Copyright Act, and one of its “safe harbor” provisions. The DMCA was enacted to carry out an international copyright treaty and to protect intellectual property online through anti-circumvention rules. Essential to Internet innovation (and to the growth and success of YouTube) are the DMCA’s safe harbor provisions, which limit liability of Internet service providers (ISPs) for copyright infringement by their users.

It’s been generally understood that, provided the ISP has a notice-and-takedown system in place for receiving complaints of infringing behavior and promptly responds  to those complaints by removing the infringing material, the ISP would be good to go. That general understanding gave online services a major boost. A Wired article celebrating the 10-year anniversary of the DMCA attributed the success of blogs, search engines, e-commerce sites and social networking portals to the safe harbor provisions. And the lower court’s earlier decision in the Viacom-YouTube suit appeared to be an affirmation for “Internet freedom.”

But the recent Second Circuit reversal could mean a major change in philosophy and practice. The court effectively held that a notice-and-takedown regime is not enough to shield an ISP from copyright liability for users’ infringing activities. If it appears that an ISP had knowledge or awareness of specific infringements, it may need to take action before a copyright owner provides notice of the infringing behavior. The Second Circuit asked the lower court to determine whether any specific infringements of which YouTube had knowledge or awareness (as evidenced by internal emails at YouTube) correspond to the clips at issue in these actions. It further asked the lower court to determine whether YouTube made a “deliberate effort to avoid guilty knowledge.”

This latter question of whether an ISP could be held liable for “willful blindness” has not been fleshed out before in the context of the DMCA safe harbor provisions. If the lower court ends up determining that YouTube is on the hook for willful blindness, ISPs’ current M.O. of relying on notice-and-takedown procedures will need to change. Some might argue such a move could stifle innovation and curb “Internet freedom.” But adoption of a willful blindness doctrine may end up benefitting service providers and hosting companies: It could strengthen the argument that new legislation à la SOPA or PIPA is unnecessary as the DMCA already provides sufficient protection against copyright infringement, otherwise known as online piracy.

posted in:
Internet Law
Feb 12
2012

Better Anti-Piracy Bill Introduced in Wake of SOPA, PIPA

We previously wrote about the broad protests over two bills in Congress targeting online copyright infringement – the House’s Stop Online Privacy Act (SOPA) and the Senate’s Protect Intellectual Property Act (PIPA). We were pleased that the protests and other activities were effective in ending efforts to pass those versions of the legislation.

The protests were led by Internet businesses that argued that the bills would lead to censorship of the Internet and to the cutting off of useful, legal online content. Under these bills, websites such as Facebook and YouTube could have been found liable if they hosted infringing content. As a result of the massive protests, Congressional leaders were forced to table PIPA and SOPA for the time being.

Many critics of SOPA have instead announced their support for legislation sponsored by Sen. Ron Wyden (D-Ore.) and Rep. Darrell Issa (R-Calif.) as a means of preventing online piracy without threatening free speech. The Online Protection and Enforcement of Digital Trade Act (OPEN Act) would allow people or groups that own content on the Internet to ask the International Trade Commission (ITC) to investigate whether a foreign website is dedicated to piracy. The ITC would be given power to collect fees from complainants and to hire additional personnel for investigations. The website owner would be allowed to offer evidence to rebut the claim. If the ITC ruled in favor of the content owner, it could then direct payment firms and advertising networks to stop doing business with the site and require search engines to delete links.

SOPA and PIPA had contained language that would allow for the Department of Justice to “disappear” a website, meaning that it would require Internet service providers to disable the resolution of the site’s name by the Domain Name Service to an IP address. This would effectively eliminate the web site from the Internet. The OPEN Act would not give DOJ this power.

The OPEN Act would be able to deal with a primary concern of copyright holders — that the process would not be able to catch up with the speed that pirates are stealing intellectual property. Under the OPEN Act, copyright holders could request temporary restraining orders to protect their intellectual property in the short term, a provision that would be particularly important for websites seeking to protect live broadcasts over the Internet, such as sporting events.

NetCoalition, a technology industry group that counts Google, Yahoo!, Amazon, eBay, PayPal, Expedia, Bloomberg LP, and Wikipedia among its members, has said that it supports the OPEN Act.

The Senate version of the OPEN Act has been referred to the Finance Committee, and the House bill has been referred to the Judiciary Committee.

It is good news for Internet entrepreneurs, and for free speech, that SOPA and PIPA were defeated. In addition to the chilling effect on the Internet that would have occurred under either SOPA or PIPA, it makes no sense to use scarce criminal resources to prosecute piracy cases. The OPEN Act would represent a much better approach to combating online piracy.

The dispute resolution process under the OPEN Act would provide both parties with the opportunity to present their positions before an experienced tribunal that could resolve the issues on the facts before them.

posted in:
Internet Law
Jan 23
2012

Indictments of Megaupload Are a Greater Threat to Web Users Than Piracy

In last week’s Megaupload indictment, the U.S. government has raised the debate over copyright infringement on the Web to a whole new level – treating the operators of one of the most popular sites on the Internet as if they were part of organized crime.

On January 19, 2012, a federal grand jury in the Eastern District of Virginia charged executives, founders and employees of Megaupload.com, one of the leading file-hosting services on the Web, with copyright infringement, conspiracy to commit racketeering and money laundering. The U.S. Department of Justice is charging that Megaupload.com caused over $500 million in lost revenue from “pirated” content such as music and movies. In addition, the government seized Megaupload’s domain names and shut down all of its sites, contending that Megaupload is an organization dedicated to copyright infringement.

These actions, more suitable to the type of steps that the government takes against an organized-crime enterprise dedicated to murder, theft and racketeering, are astonishing. The government seems to have ignored the fact that other popular content-sharing sites have successfully defended themselves in civil cases by using the safe harbor provisions of the Digital Millennium Copyright Act, which provide immunity to a site that promptly takes down infringing content.

Among those charged in the indictment were Megaupload founders Kim Dotcom and Mathias Ortmann, chief marketing and sales officer Fin Batato, and lead programmer Bram Van der Kolk. All four were arrested in Auckland, New Zealand. On Monday, the Auckland district court denied bail, making way for extradition proceedings that will likely be contested. In addition to the arrests, approximately 20 search warrants have also been executed within the United States and in eight additional countries. The Eastern District of Virginia has called for the seizure of 18 domain names associated with the site, and about $50 million in assets and targeted sites have been seized thus far.

The indictment is riddled with inconsistencies. On the one hand, the government asserts that Megaupload is not entitled to use the safe harbor provisions. According to the government, everything on the site was doctored to create a veneer of legitimacy, while its employees knew full well that the site’s main use was to distribute infringing content. Yet the government readily admits that it has Megaupload emails talking about using U.S. courts and lawyers to file actions against other “pirate” sites and that the site did take down illegal content and build an abuse tool. To top it all off, many big-name artists support the site, as evidenced by an entirely legal video posted on YouTube, which Megaupload tried to save in U.S. courts from takedown requests.

The 72-page indictment is not some knee-jerk reaction to the ongoing protests of proposed misguided legislation that would strengthen protections against piracy at severe costs to the Internet. This action was clearly in the works for some time. But the filing of a criminal case against one of the most popular sites in the world is remarkable to say the least, given that other popular content-sharing sites have never faced criminal charges for allegedly facilitating piracy. Indeed, when these other sites have been targeted in well-financed civil cases, they have successfully asserted defenses.

When Viacom filed its lawsuit against YouTube in 2007 based on charges that YouTube and its parent, Google were engaging in “massive intentional copyright infringement,” the government did not arrest YouTube or Google executives. In fact, the U.S. District Court for the Southern District of New York held that YouTube was shielded from liability in that case by the safe harbor provisions.

Similarly, when IO Group, Inc. filed a complaint against Veoh Networks for copyright infringement, the U.S. District Court for the Northern District of California held that Veoh’s video-sharing website was entitled to the protection of the safe harbor provision. In both cases, U.S. courts recognized that simply providing access to content did not equate to engaging in infringing activities.

Megaupload, an online storage and web hosting service site, counts itself in the same category as YouTube and Veoh — merely acting as a hosting company that provides access to content. By invoking the full wrath of U.S. criminal laws, the government is using tools that were never meant for this situation – and is potentially doing incalculable harm to thousands of Internet users and to the integrity of the Web itself.

Jan 20
2012

Online Protests Hit Hard Against Anti-Piracy Bills

Organized online protests over two bills in Congress targeting online copyright infringement — the House’s Stop Online Piracy Act (SOPA) and the Senate’s Protect Intellectual Property Act (PIPA) — seem to have crippled these bills’ progress and ended their chances of becoming law in their present form.

We have previously written about the protests mounting against the bills.

Just this week, high-profile protests cropped up all over the Internet. On January 18, Wikipedia shut down all English content on the site in protest; Reddit.com also went offline for the day; Google covered its homepage logo with a black box; and an estimated 10,000 smaller websites participated in some kind of protest over the bills.

Google’s online petition to Congress expressing opposition to the bills obtained over 7 million signatures in the United States in a very short period of time.

The bills’ supporters continue to argue that the legislation is important to protecting intellectual property. The bill would allow the Justice Department as well as private parties to seek court orders against foreign websites that steal content from American authors and would prohibit advertising networks and payment facilitators from doing business with the offending companies. The bills would also criminalize the streaming of restricted content, with a maximum penalty of five years in prison.

The bills enjoy strong support from organizations that rely on copyright protection, such as movie, music, and cable companies. The bills have also garnered the support of business groups such as the U.S. Chamber of Commerce. The Chamber estimates that American industry loses roughly $135 billion every year to online piracy.

The protests have been led by Internet businesses that argue the bills will lead to censorship of the Internet. Under SOPA, websites such as Facebook and YouTube could be found to be liable if they host infringing content. This would require these sites to police the content that users post, opponents say, and essentially have a censoring effect on the content.

Supporters of the bill stress that the bill is targeting activity that is already illegal and targets foreign websites that infringe on American copyrights.

Due to the protests, at least 13 lawmakers who co-sponsored the legislation have withdrawn their support. According to one media outlet, from the beginning of January 18 to the end of January 19, seventy members of Congress announced their new opposition to the bill.

The Senate has a procedural vote scheduled on January 24 on proceeding with PIPA. Senate leaders currently still plan to move forward with the vote, but it remains unclear if the bill has the 60 votes it needs to pass the procedural vote. Senate Minority Leader Mitch McConnell (R.-Ky.) has called for a delay of the bill because of “serious legal, policy, and operational concerns.”

In the event the bills were to make it out of Congress, President Obama might veto them, but he has not yet made a definitive statement that he intends to do so. The Obama administration did respond to a petition against the bill stating that it would not support legislation that could lead to Internet censorship or reduced Internet security.

Opponents of the current bills are looking toward another proposed bill, the Online Protection & Enforcement of Digital Trade Act, known as the OPEN Act, which takes a much narrower approach to copyright issues by trying to cut off the money that flows to foreign piracy sites.

The online protests have placed a major roadblock in the way of these bills. The bills’ potential to stifle speech and Internet entrepreneurship are too great and the strength of the online protests appear to have put Congress on notice that these bills in their current form should not go forward.

posted in:
Internet Law
Jan 03
2012

Protests Mount Against Proposed Law That Would Cripple the Internet

From the Arab Spring to the Occupy Wall Street movement, 2011 was a year of protests. It was capped off with a little-covered (by traditional media) but important protest that will carry on into 2012. We’ll call it the “Pioneers Strike Back” movement of Internet entrepreneurs. The issue is a piece of controversial legislation pending before Congress — H.R. 3261, commonly known as the Stop Online Piracy Act, or SOPA.

The bill, which is supported by Hollywood, major media companies, and labor unions – along with many corporate monoliths – is supposed to combat copyright and trademark infringement over the web. The general tactic is to create new causes of action against websites for facilitating intellectual property violations. The problem is that the legislation is so broad that it could change the dynamics and use of the Internet as we know it. And in the process, it could run roughshod over the Constitution – undermining free speech and due process.

Through a notice and cutoff system, SOPA would allow private parties to effectively shut down any supposedly infringing site based merely upon the rights-holder’s allegations. For instance, a rights-holder could require payment processors and advertising networks to sever ties with an allegedly infringing site upon a five-day notice. Any subsequent determination by a court in favor of the alleged infringer could be too little, too late.

And SOPA goes even further: Service providers would be forced (for their own protection) to shut down entire domains, without regard to the content of each specific site.

Also troubling is the evisceration of safe harbors for websites established under the Digital Millennium Copyright Act. The DMCA limited websites’ responsibility to monitor content posted by users. Under SOPA, so long as a site is determined to “facilitate” infringing behavior, it could be considered liable under the law. So Facebook could find itself in hot water for something a user posted on his or her Facebook profile. The law, therefore, would require websites to institute policing measures to avoid liability. The law would also make it hard for smaller, emerging services to stay clear of litigious online entities that may constantly challenge the new sites’ content and/or architecture.

The prospective law’s measures risk stifling speech and innovation. Moreover, as many have pointed out, it could institute a framework for government censorship. (See an interesting review of this by the Cato Institute.)

These concerns over SOPA, along with concerns about potential cyber security and stability risks, have been written about extensively across the web and have been addressed to Congress. Most compelling is an open letter to Congress signed by 100+ law professors who express concern about both technological and constitutional infirmities of the law.

But the legislation, with some 31 co-sponsors, may very well make its way through committee to a potentially successful House vote. The reason would be the extensive big business backing of the bill. A non-exhaustive list of supporters identifies major players such as the Chamber of Commerce, News Corp., CBS, Viacom, MasterCard and Visa, and the Teamsters Union, just to name a few (some strange bedfellows, by the way!). In the world of political currency, the deep pockets that support the bill are formidable competitors. OpenCongress.org provides detail by identifying which deep pockets are supporting which congressmen.

SOPA supporters argue that the legislation is important to protecting intellectual property. The Chamber of Commerce, for instance, has estimated that online piracy costs U.S. companies roughly $135 billion a year. Detractors have a very different take on the economic – and non-economic costs – of the legislation.

Fortunately, all hope is not lost. Internet pioneers and entrepreneurs have been actively countering supporters of the bill. GoDaddy, which initially supported the bill, was “encouraged” to change its position after a registrant rebellion incited by Reddit.com. RedState.com is going after supporting legislators. And, best of all, major online presences like Google, Facebook, Yahoo!, and Amazon are taking a stand against the legislation, even considering the “nuclear option” of temporarily shutting down their services in protest. Yahoo! is rumored to have declined to renew its membership to the Chamber of Commerce in response to the group’s support of the bill. There is speculation that Google will do the same. Hopefully these moves will signify success for the Pioneers, and not the Empire.

posted in:
Internet Law
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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, healthcare, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen, David Deitch, and associates Rachel Hirsch, Jeff Hamlin, Steven Eichorn, Sarah Coffey, Nicole Kardell, Casselle Smith, and Griffin Finan. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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