By: Kristine Holm

What is ACTA?

Although SOPA and PIPA have been shelved for the time being, there is another regulation on the horizon that has raised many of the same concerns as these two bills. The Anti-Counterfeiting Trade Agreement (ACTA) is a trade agreement designed to implement international standards for intellectual property rights enforcement. The main purpose of ACTA is to curb the proliferation of counterfeit and pirated goods. The negotiating parties to the agreement are: the United States, Japan, the European Union, Canada, Switzerland, Australia, Mexico, Morocco, New Zealand, the Republic of Korea, and Singapore. ACTA is intended to complement, not replace, the TRIPS Agreement.

Current Status of ACTA

On October 1, 2011, ACTA was signed by the United States, Japan, Australia, Canada, Morocco, New Zealand, Singapore, and South Korea. On January 26, 2012, the European Union and 22 of its member states also signed. However, ACTA will not go into effect until it is ratified by the European Parliament, for which a debate will be held in June.

Breakdown of ACTA Provisions

Following is a breakdown of the main provisions of ACTA:

Scope of Obligations

• Each Party to ACTA is obligated to provide enforcement procedures that permit effective action against any act that infringes upon the IP rights covered by the agreement, including expeditious remedies to prevent infringements and remedies to deter infringements.
• Each Party to ACTA may determine the appropriate method of implementing the provisions of the agreement within its own legal system. While each Party is free to implement more extensive enforcement than is required by ACTA, no Party is required to apply measures where an intellectual property right is not recognized by, or exceeds the scope of, its own laws.

Civil Enforcement

• Each Party to ACTA must make a private right of action available to rights holders that provides for injunction and damages. In determining damages, each Party’s judicial authorities may consider any legitimate measure of value that the rights holder submits, including lost profits, market value, suggested retail value, and the amount of the infringer’s profit attributable to the infringement. Each Party shall also provide that, at the right holder’s request, its judicial authorities have the authority to order destruction of the infringing goods and of any material or implement used in the manufacture of such goods.

• Furthermore, with respect to infringement of copyright and or related rights protecting works, phonograms, and performances, and in cases of trademark counterfeiting, each Party shall also:
  • Establish or maintain a system that provides for one or more of these remedies:
    • pre-established damages;
    • presumptions for determining the amount of damages sufficient to compensate the right holder for the harm caused by the infringement; or
    • at least for copyright, additional damages.
    • Provide that its judicial authorities have the authority to order the seizure or other taking into custody of suspect goods, and of materials and implements relevant to the act of infringement, and, at least for trademark counterfeiting, documentary evidence, either originals or copies thereof, relevant to the infringement.

Border Measures

• Each Party shall adopt or maintain procedures with respect to import and export shipments to suspend the release of suspect goods, providing that 1) customs authorities may act on their own initiative, and 2) rights holders may request such measure from competent authorities.
  • “Competent authorities” is defined as including the appropriate judicial, administrative, or law enforcement authorities under a Party’s law.

• Each Party may adopt or maintain procedures with respect to suspect in-transit goods or in other situations where the goods are under customs control, to suspend the release of or detain such goods, providing that 1) customs authorities may act on their own initiative, and 2) rights holders may request such measure from competent authorities.

• Additionally, in implementing border enforcement of intellectual property rights, each Party shall include goods of a commercial nature sent in small consignments and may exclude small quantities of goods of a non-commercial nature contained in travelers’ personal luggage.

• Each Party is obligated to adopt or maintain procedures by which its competent authorities may determine, within a reasonable period after initiating border measures, whether the suspect goods infringe an intellectual property right.

• It is further required that each Party’s competent authorities have the authority to order the destruction of goods following a determination that the goods are infringing. When infringing goods are not destroyed, each Party must ensure that, except in exceptional circumstances, such goods will be disposed of outside the channels of commerce and in a manner avoiding any harm to the right holder.

Criminal Enforcement

• Each Party shall provide for criminal penalties in the following situations:
  • in cases of willful trademark counterfeiting or copyright or related rights involving piracy on a commercial scale. Acts conducted on a “commercial scale” includes at least those carried out as commercial activities for direct or indirect economic or commercial advantage.
  • in cases of willful importation and domestic use, in the course of trade and on a commercial scale, of labels or packaging:
    • to which a mark has been applied without authorization which is identical to, or cannot be distinguished from, a trademark registered in its territory; and
    • which are intended to be used in the course of trade on goods or in relation to services which are identical to goods or services for which such trademark is registered.
    • for the unauthorized copying of cinematographic works from a performance in a motion picture exhibition facility generally open to the public.
    • for aiding and abetting any of the above activities.

• Penalties for the above offenses shall include imprisonment and monetary fines that are high enough to deter infringement.
• Each Party must give its competent authorities the authority to order the seizure of suspected counterfeit trademark goods or pirated copyright goods, any related materials and implements used in the commission of the alleged offense, documentary evidence relevant to the alleged offense, and the assets derived from, or obtained directly or indirectly through, the alleged infringing activity.

• Each Party’s competent authorities must also have the authority to order the forfeiture or destruction of materials and implements predominantly used in the creation of counterfeit trademark goods or pirated copyright goods and, at least for serious offenses, of the assets derived from, or obtained directly or indirectly through, the infringing activity.

• Each Party may provide that its judicial authorities have the authority to order:
  • the seizure of assets the value of which corresponds to that of the assets derived from, or obtained directly or indirectly through, the allegedly infringing activity; and
  • the forfeiture of assets the value of which corresponds to that of the assets derived from, or obtained directly or indirectly through, the infringing activity.

• Furthermore, each Party shall provide that, in appropriate cases, its competent authorities may act upon their own initiative to initiate investigation or legal action with respect to the above criminal offenses.

Digital Enforcement

• Each Party must ensure that enforcement procedures are available under its law so as to permit effective action against an act of infringement of intellectual property rights which takes place in the digital environment, including expeditious remedies to prevent infringement and remedies which constitute a deterrent to further infringements.
• Each Party shall also promote cooperative efforts within the business community to effectively address trademark and copyright or related rights infringement while preserving legitimate competition and, consistent with that Party’s law, preserving fundamental principles such as freedom of expression, fair process, and privacy.
• Parties may provide their competent authorities with the authority to order online service providers to disclose expeditiously to a right holder information sufficient to identify a subscriber whose account was allegedly used for infringement. The right holder must file a legally sufficient claim of trademark or copyright or related rights infringement, and the information must be sought for purposes of protecting or enforcing those rights.
• Parties shall provide legal protection and remedies against the unauthorized or illegal circumvention of effective technological measures implemented by authors, performers or producers of phonograms in connection with the exercise of their rights in and that restrict acts in respect of, their works, performances, and phonograms. In connection with this requirement, parties must provide, at the very least, protection against:
  • to the extent provided by its law, unauthorized circumvention of an effective technological measure carried out knowingly or with reasonable grounds to know; and
  • to the extent provided by its law, the offering to the public by marketing of a device or product, including computer programs, or a service, as a means of circumventing an effective technological measure; and
  • the manufacture, importation, or distribution of a device or product, including computer programs, or provision of a service that: is primarily designed or produced for the purpose of circumventing an effective technological measure; or has only a limited commercially significant purpose other than circumventing an effective technological measure.

• Each Party shall protect “electronic rights information” by adequate legal protection and effective legal remedies against any person knowingly performing without authority any of the following acts knowing, or with respect to civil remedies, having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement of any copyright or related rights:
  • to remove or alter any electronic rights management information;
  • to distribute, import for distribution, broadcast, communicate, or make available to the public copies of works, performances, or phonograms, knowing that electronic rights management information has been removed or altered without authority.
  • Electronic rights information is defined as:
    • information that identifies the work, the performance, or the phonogram; the author of the work, the performer of the performance, or the producer of the phonogram; or the owner of any right in the work, performance, or phonogram;
    • information about the terms and conditions of use of the work, performance, or phonogram; or
    • any numbers or codes that represent the information described in (a) and (b) above; when any of these items of information is attached to a copy of a work, performance, or phonogram, or appears in connection with the communication or making available of a work, performance, or phonogram to the public.

Establishment of an ACTA Committee

• The agreement establishes the creation of the ACTA Committee, which will have representation from each participating Party to the agreement. Among the Committee’s duties is the review of the implementation or operation of the Agreement, the consideration of amendments to the Agreement, the decision upon the terms of accession to the Agreement of any member of the WTO, and the consideration of matters concerning the development of the Agreement or any other matter that may affect the implementation and operation of the Agreement.

• The Committee may decide to, among other things, establish ad hoc committees or working groups, seek the advice of non-governmental persons or groups, and share information and best practices with third parties on reducing intellectual property rights infringement, including techniques for identifying and monitoring piracy and counterfeiting.

• The Committee shall not oversee or supervise domestic or international enforcement or criminal investigations of specific intellectual property cases.

Signature

• The Agreement is open for signature by participants in its negotiation, and by any other WTO Members the participants may agree to by consensus, from May 1, 2011 until May 1, 2013.

Criticism of ACTA

A Closed-Door Drafting Process

Details of ACTA were unavailable to the public until a series of discussion papers and other related documents were uploaded to Wikileaks from mid-2008 – 2010. The leaks spurred criticism concerning the reputed secrecy of the negotiations from the Party countries’ citizens. Further criticism arose when it was discovered, through a FOIA request, that many large corporations and lobbying groups received or were able to view portions of the draft under nondisclosure agreements with the Office of the United States Trade Representative (USTR). These organizations include Google, eBay, Dell, Intel, Business Software Alliance, Consumer Electronics Association, News Corporation, Sony Pictures, Time Warner, Motion Picture Association of America, and Verizon. Additionally, some individual members of USTR Advisory Boards were given access to the text. The negotiating parties to the Agreement published an early draft of the Agreement on April 20, 2010. Afterward, there was much criticism concerning the breadth of the Agreement and the power given to enforce intellectual property rights, especially online. In June 2010, a group of academics, legal practitioners, and public interest organizations from six continents convened at American University Washington College of Law to analyze the text and determined that ACTA threatened numerous public interests, including: fundamental rights and freedoms; internet governance; access to medicines; scope and nature of intellectual property law; international trade; international law and institutions; and democratic process. Additionally, a group of over 75 law professors signed a letter to President Barack Obama that urged him to direct the USTR to halt its endorsement of ACTA and subject the text to a meaningful participation process that could influence the shape of the agreement going forward.

On April 15, 2011, the final draft of the text was published by the negotiating parties. In this final draft, significant changes were made, with some of the more onerous provisions removed. However, criticism of the closed-door negotiations has continued. The Electronic Frontier Foundation (EFF) asserts that ACTA “bypassed the checks and balances of existing international IP norm-setting bodies, without any meaningful input from national parliaments, policymakers, or their citizens.” Further, the EFF finds fault with ACTA’s establishment of the ACTA Committee to oversee the implementation of the Agreement and which would be comprised of “unelected members with no legal obligation to be transparent in their proceedings.”

On January 27, 2012 the European Parliament’s rapporteur for ACTA resigned and publicly condemned the entire process leading up to signature of the Agreement.

Constitutional Concerns

Furthermore, it has been debated whether the United States’ signing of ACTA is Constitutional. ACTA has been categorized by the US as a “sole executive agreement.” If it were classified as a “treaty,” it would require ratification by a 2/3 vote in the Senate. As a sole executive agreement, it can be negotiated under the President’s power and would not require Congressional approval. Thus, if it is considered a sole executive agreement, ACTA became binding on the US when USTR Ambassador Ron Kirk signed it in October 2011. Constitutional scholars have called this classification into doubt, noting that the president has no independent constitutional authority over intellectual property or communications policy and there is no historical practice of making sole executive agreements in this area, while the Constitution gives primary authority over these matters to Congress, which is charged with making laws that regulate foreign commerce and intellectual property. Additionally, Senator Ron Wyden has challenged the constitutionality of ACTA as a sole executive agreement in a letter to President Obama.

Enforcement in the Digital Environment

The earlier draft of the Agreement contemplated imposing liabilities (along with a safe harbor) on online service providers. It also provided for a three-strikes rule, whereby online service providers would be required to terminate access to users who are found to have illegally downloaded infringing materials three times. These requirements sparked the most fervent criticism of ACTA, but they were removed from the final draft.

The language of the final draft now includes several vague mandates for each Party with respect to enforcement digitally. This is a contrast to the previous draft, which outlined more specific methods of enforcement. What remains in the Agreement is a broad mandate to “ensure that enforcement procedures are available that permit effective action against an act of infringement, including expeditious remedies to prevent infringement and remedies that are a deterrent to further infringement” and to “promote cooperative efforts within the business community to effectively address trademark and copyright or related rights infringement.” The scope of this language may arguably be interpreted and implemented quite broadly. EFF believes that it could “lead to ‘voluntary agreements’ by Internet intermediaries to restrict Internet access and to monitor and censor Internet communications under threat of legislation or criminal sanctions,” as well as “exacerbate existing pressures on Internet intermediaries to monitor, censor and block online communications, and stifle freedom of expression across the globe.”

Others have criticized ACTA as an attempt to force global U.S.-based IP policies at the behest of Hollywood. A leaked lobbying letter sent in April 2011 by the MPAA and 21 other groups reportedly urged the European Parliament to sign ACTA without further review or delay.

While there was initial criticism that the Agreement’s information sharing provisions would violate the EU’s strict data protection laws, the final draft makes it clear that nothing in the Agreement requires a Party to disclose information that would be contrary to its own laws.

By: Kristine Holm

Seven executives connected to the Megaupload site were indicted yesterday by the Department of Justice (DOJ), four of whom were also arrested, in what the DOJ is calling one of the “largest criminal copyright cases ever brought by the United States.” The charges include two counts of criminal copyright infringement, conspiracy to commit copyright infringement, conspiracy to commit racketeering, and conspiracy to commit money laundering. The charges could result in more than 20 years in prison for the defendants. Additionally, Megaupload.com and 17 other related “Mega” domain names were seized by the DOJ pursuant to court order.

Those indicted include Megaupload Limited’s founder, Kim Dotcom, as well as the company’s chief marketing officer, chief technical officer, head of business development, graphic designer, and two programmers. Although producer Swizz Beatz was at one time listed on Megaupload’s site as the company’s CEO, he is not named in the indictment and reportedly holds no equity in the company.

The indictment alleges that Megaupload committed copyright infringement by inducing users to upload copyrighted works for others to download. It also alleges that several of the defendants, including Kim Dotcom, committed direct infringement by supplying the site with copyrighted material. The indictment further claims that Megaupload failed to comply with take-down notices issued by copyright holders under the DMCA. Megaupload’s harm to copyright holders is alleged to be over $500 million.

The 72-page indictment was handed down by a grand jury two weeks ago but was not unsealed until yesterday. The arrests, coming just a day after widespread protests against SOPA and PIPA, mark a symbolic victory for the content industry. However, in an apparent response, the hacker group Anonymous has claimed responsibility for DDoS interruptions yesterday to the websites of the DOJ, Universal Music Group (UMG), and the Recording Industry Association of America (RIAA). As of this writing, service is restored to the DOJ and RIAA sites, but UMG’s site remains unavailable.

Sources:

Wired

The New York Times

The Indictment

Update January 20, 2012

I. Summary of SOPA

II. Summary of PIPA

III. Criticisms of SOPA/PIPA

IV. Proponents of SOPA

A. BUSINESSES AND ORGANIZATIONS

B. HOUSE SPONSORS

V. PROPONENTS OF PIPA

A. BUSINESS AND ORGANIZATIONS

B. SENATE SPONSORS

VI. CRITICS OF SOPA and PIPA

I. SUMMARY OF SOPA

SOPA is a bill that is in the House of Representatives.  The bill is an attempt by lawmakers to combat online piracy and intellectual property theft. The bill is divided into two sections: “Combating Online Piracy” and “Additional Enhancements to Combat Intellectual Property Theft.”

(1) Combating Online Piracy

“Combating Online Piracy” attempts to provide tools to the attorney general and rights holders to protect from intellectual property infringement.

(A) The Attorney General

The Attorney General is charged with guarding against “foreign infringing sites.”   Generally, a foreign infringing site is defined as a website outside of US jurisdiction but directed at the US, “committing or facilitating” intellectual property infringement.

In the AG’s discretion, the AG may commence an action against any website the AG believes to be a foreign infringing site.   After the commencement of the action, the court may issue a court order against the site to cease and desist from the allegedly infringing activities in the form of a temporary restraining order, a preliminary injunction or an injunction.

In addition to restraining the site, the court order may also be used to cut off the site from service providers, Internet search engines, payment network providers, and Internet advertising services. The AG may bring court actions against any of these entities that do not comply with the court order and entities that provide a means to circumvent the restriction on the site.

SOPA does provide immunity to these third party entities from suits related to any action taken to comply with court orders.  Except for technical unfeasibility, there is no immunity for not complying with the court orders.

(B) Rights Holders

SOPA also provides tools to rights holders against any Internet sites “dedicated to theft of US property”, which includes foreign and domestic sites.

The definition of these sites is broad.  It includes sites that “engage in, enable, or facilitate” intellectual property violations and sites that have taken “deliberate actions to avoid confirming a high probability of use” to violate intellectual property rights.

Under the SOPA regime, if a rights holder believes a site is dedicated to theft of US property, the rights holders may send notice to payment network providers and Internet advertising services, requiring these entities to stop serving the site. If these third parties do not honor the rights holder’s request, then it could be subject to liability from the rights holder.

Payment network providers are companies that facilitate payment transactions, such as Paypal or CCBill.  Internet Advertising Services are companies that facilitate the placement of advertisements for compensation.

The allegedly infringing site may send a counter notification to these third parties to resume services.  There is no requirement that the third parties have to comply with the order.  Further, the third parties are provided immunity from suit from all involved parties, except the right holder.

This scheme allows rights holder to require payment network providers and Internet advertising services to stop service to an allegedly infringing site without judicial oversight. The payment network providers and Internet advertising services are most likely going to adhere to the rights holder’s request as not doing so may subject them to liability.  Further, these third parties may continue to block service to the site, as there is no penalty for not complying with a counter notification.

(C) Immunity

SOPA provides complete immunity from suit for service providers, payment network providers, Internet advertising services, advertisers, Internet search engines, domain name registries, or domain name registrars for taking voluntary actions against foreign sites believed to be engaged in theft of US Property or endanger public health.  This provides an incentive to voluntarily monitor/censor.

(2) Additional Enforcements to Combat Intellectual Property Theft.

The “Additional Enforcements To Combat Intellectual Property Theft” section clarifies criminal law as applied to intellectual property rights, enhances punishments related to the leaking of government information, increases penalties for economic espionage and creates resources to enforce US IP rights abroad.

(A) IP Criminal Law

In terms of IP criminal law, SOPA merely clarifies existing statutes. For instance, SOPA adds language that makes it explicit that IP crimes include those perpetrated through “electronic means.”  There is also a provision of SOPA that calls for the US Sentencing Commission to review and possibly adjust punishment levels for IP crimes.

(B) Government Information

SOPA provides the government with more tools to prosecute leaks.  SOPA makes the punishment for IP infringement crimes more severe where the IP infringement is related to the leak of classified information, impairment of combat operations or creates harm to the armed forces or government.

(C) Economic Espionage

SOPA increases penalties for economic espionage (essentially trade secrets).  The maximum jail sentence would go from 15 to 20 years and the applicable fine would go from under $500,000 to between $1million and $5million.

(D) Intellectual Property Attaché

SOPA would create a new government position, the intellectual property attaché, who is assigned to embassies and diplomatic missions to protect US IP rights worldwide. The attaché would report to the US Intellectual Property Enforcement Coordinator and work with the Department of Commerce and State and the Copyright Office. The duties of the attaché would “focus primarily on intellectual property matters, including development, protection, and enforcement of applicable law. “

(3) How SOPA changes the law?

●   Places a burden to protect IP rights from foreign infringement on service providers, Internet search engines, payment network providers, and Internet advertising services.

●   Could expand secondary liability under copyright law.  (see below in criticisms)

●   Immunizes blocking of websites by service providers, payment network providers, Internet advertising services, advertisers, Internet search engines, domain name registries, and domain name registrars

●   Places liability on payment network providers and Internet advertising services

II. SUMMARY OF PIPA

PIPA is the Senate’s version of the current anti-piracy legislation, while SOPA is the House equivalent. Although the momentum behind SOPA has slowed recently due to vocal opposition by the American public, plans for PIPA are still moving forward at full speed from the efforts of Senate Majority Leader Harry Reid.

(1) Process – What is the current status of PIPA and how did it get here?

Reid just stated on Sunday that he will push forward with PIPA because it is “job-saving,” while at the same time acknowledging that there are still issues to be resolved with the bill.

On Jan. 23, 2012, when the Senate reconvenes, Reid will continue the cloture process that he began on Dec. 17, 2011. Cloture is basically the only means by which the Senate can vote to place a time limit on consideration of a bill, and thereby overcome a filibuster. Voting yes on cloture ends debate of the bill, with a vote of three-fifths of the Senate (60 Senators) required. If the requisite number votes yes, then any further consideration of the bill is limited to only 30 additional hours. However, if 60 Senators do not vote yes on cloture, then the Senators opposing the bill will be allowed to speak against it indefinitely. Practically speaking, if the bill fails to get the 60 yes votes, either the bill is withdrawn and a compromise is negotiated, or the bill officially dies.

On Jan. 24, the cloture motion will have matured the requisite 30 hours and the vote can officially be taken.

By all accounts, there seems to be a rush to get this bill passed. There is rampant speculation that the sheer amount of lobbying money spent by the entertainment industry is the driving force behind the urgency of this bill. The biggest proponents of the bill are the MPAA and RIAA, and Politico has reported that the entertainment industry spent over $94 million last year on its total lobbying efforts in Washington.

(2) Who will be affected by PIPA?

Although the bill is intended to combat “rogue” websites operated overseas, the text of the bill, as currently written, has a much wider application. In addition to the much-discussed DNS blocking provision of the bill, many in the NY tech community would be directly affected if PIPA is passed. The bill is a potential burden on many bootstrapped startup companies, as it imposes compliance requirements on any site that either processes financial transactions, sells or serves online advertising, or provides even a single link to content that somehow infringes upon an intellectual property right.

PIPA provides both the Attorneys General and rights holders with the ability to bring suit against: 1) nondomestic domain names dedicated to infringing activities, 2) owners/operators of websites dedicated to infringing activities that are accessed through nondomestic domain names, and 3) if no individual person is identifiable, an in rem action can be brought against the nondomestic domain name itself.

Although the bill provides for temporary restraining order, preliminary injunction, or injunction against nondomestic domain names, there are other provisions contained within the bill that would apply to U.S.-based companies, which significantly broadens the scope of the bill.

PIPA imposes required actions based on court orders on the following types of entities:

(A) Application to Operators of domain name system servers:

This is the onerous “DNS blocking provision” that for the time being seems to be off the table for SOPA and PIPA.

This section requires a DNS server, used to provide the IP address associated with a domain name, to take reasonable measures to prevent the domain name from resolving to its associated IP address. Furthermore, for any site that is effectively yanked from the Internet via this method, the DNS server must instead resolve to a page that displays text indicating the site was removed pursuant to a court order obtained by the Attorney General.

Also of note, the DNS server, by its compliance with this provision, will not lose any of its immunity from liability provided under the DMCA. The DMCA provides a safe harbor for online service providers that remain “hands-off” with respect to content on their sites. Therefore, a service that complies with PIPA will not lose its immunity for becoming involved in regulating content under its purview, and so this provision acts as an incentive to comply with the court order.

(B) Financial Transaction Providers

As defined in the text of the bill, a financial transaction provider means almost any service that processes financial transactions, including regular banks, electronic fund transfers, and any type of online payment processing service such as PayPal or CCBill.

PIPA would require financial transaction providers to comply with a court order by taking reasonable measures, as fast as possible, to prevent, prohibit, or suspend completion of payment transactions that involve any U.S. customers associated with the domain name listed on the court order.

(C) Internet Advertising Services

As defined in the text of the bill, an internet advertising service is any service that, for compensation, sells, purchases, brokers, serves, inserts, verifies, or even clears the placement of an advertisement (including paid or sponsored search results, links, or placements) that are able to be viewed in any form and for any period of time on a website.

Examples of internet advertising services include: Google’s advertising products such as AdWords and AdSense, as well as any other online advertising company such as adBrite, AppNexus, Undertone Networks, etc.

PIPA requires that, after receiving a court order listing the domain name accused of infringement, an Internet advertising service that contracts with said website to provide or knowingly serve advertising to or for such site, must take technically feasible and reasonable measures, as expeditiously as reasonable, designed to i) prevent its service from providing advertisements to the Internet site associated with such domain name; or

(ii) cease making available advertisements for that site, or paid or sponsored search results, links or other placements that provide access to the domain name.

(D) Any site that provides “information location tools” that merely refer to infringing content

As indicated in the bill, an information location tool simply means any type of link, directory, or index that points users of a site to an online location that contains infringing material or infringing activity.

This section has a very broad application and could include such major sites as Wikipedia, YouTube, and any search engine.

PIPA requires that any provider of an information location tool must (i) remove or disable access to the Internet site associated with the domain name set forth in the order; or (ii) not serve a hypertext link to such Internet site.

(E) Failure to comply with a court order

Those who comply will be immune from liability with respect to any claims that arise from compliance with the court orders. However, those who knowingly and willfully fail to comply with a court order may be compelled to comply by an action for injunctive relief brought by the Attorney General.

III. CRITICISMS OF SOPA/PIPA

●   Drive Market Overseas. There is a possibility that SOPA/PIPA will drive U.S. dollars overseas.  Several sites have moved to foreign registrars that will not be subject to US jurisdiction under SOPA/PIPA.

○      Counter Argument: Proponents of both bills have sometimes argued that they would actually strengthen jobs as it would revive industries that have been hurt by Internet piracy.

●      Overly Broad Definition of Infringing Site.

○      The applicable definitions for infringing sites include the word ‘facilitate’, which can encompass a wide array of websites including User Generated Sites.

○      SOPA imposes on sites in which only “a portion of” the site is infringing.  Conceivably, an entire website containing tens of thousands of pages could be targeted if only a single page were accused of infringement.

○      Effect: Severe practical problems arise for sites with substantial user-generated content, such as Facebook, Twitter, and YouTube, and for blogs that allow users to post videos, photos, and other materials.  This may ultimately require UGC sites to police themselves.

●      Incentivizes Blocking. SOPA encourage over-enforcement by making companies immune from suit for mistakenly punishing sites outside the bills’ scope.

●      First Amendment. SOPA is a violation of the First Amendment because it allows a private party to suppress speech without prior notice or a judicial hearing.

○      Reasoning: Private parties can unilaterally get payment network providers and Internet advertising services to stop service to allegedly infringing sites.  SOPA’s immunity provisions create an incentive for advertisers and payment processors to comply.  This is a potential violation of the First Amendment as this scheme restrains speech without a judicial determination.

○      Law: The Supreme Court has stated,  “only a judicial determination in an adversary proceeding ensures the necessary sensitivity to freedom of expression [and] only a procedure requiring a judicial determination suffices to impose a valid final restraint.” Freedman v. Maryland, 380 U.S. 51, 58 (1965).  “[P]rior restraints on speech and publication are the most serious and the least tolerable infringement on First Amendment rights.”  Nebraska Press Assn. v. Stuart, 427 U.S. 539, 559 (1976).

●   Due process concerns

○      Where notice to the owner/operator of the site is required under PIPA, there is no corresponding opportunity for the aggrieved site operator to be heard before the allegedly offending site or link is removed from the Internet.

○      Under SOPA’s private right of action, no notice is necessary before a plaintiff can have a site cut off from payment network providers and internet advertising services.

●      Expands secondary liability under copyright law. In defining an infringing website, SOPA uses words like ‘facilitate’ and ‘enable’.  There is potential that a site could qualify under the statutory definition but not meet the requirements for secondary liability under existing law.  In this regard, SOPA could cause a lot of uncertainty in the law.

●      PIPA Contrast to DMCA regime: The DMCA provides a take-down and counter-notice procedure. There is no counter-notice procedure contemplated in PIPA, and thus no chance for an aggrieved site operator or owner to protest the removal. The DMCA also provides for immunity for system-caching, while PIPA do not contemplate system caching. Furthermore, the DMCA also provides penalties for those who knowingly misrepresent a copyright violation, which are absent in PIPA and can lead to abuse of claims.

●      DNS Blocking. Under certain situations, SOPA and PIPA may require a service provider to block access to a foreign infringing site’s domain name.  Some have argued that DNS blocking could compromise the architecture of the internet.

○      NOTE: This provision now seems to be shelved by Congress in both SOPA and PIPA.

●      Ease of obtaining a court order: Although the act of obtaining a court order to effectuate removal of an infringing site may seem like a procedural hurdle, it really is not a high barrier, as evidenced by the numerous sites shut down last year by the Justice Department. Particularly troubling is the ease with which the DOJ has been able to receive court orders to seize domain names as part of its “Operation in Our Sites” program, a program that was also created to curb copyright infringement online. In fact, SOPA and PIPA may be viewed as an attempt to codify these domain seizures, which have been implemented under questionable authority and received much scrutiny in the press.

●      IMPOSES ON DOMESTIC SITES. A lot of proponents say SOPA will only affect foreign sites.  This is completely untrue.  Besides the impositions SOPA places on third-party sites, the private right of action under SOPA applies to all sites, not just foreign.

●      MONETARY CUTOFFS MAY BE INEFFECTIVE PROTECTION. Some have argued that the private right of action under SOPA would be ineffective in protecting rights holders anyway.  There has been arguments that a large portion of infringement still would occur even without a monetary incentive.  Further, some have argued that there are potential work arounds, such as advertisers not subject to U.S. jurisdiction. 

●      VEOH Case.  Although SOPA provides damages where a private plaintiff makes a material misrepresentation as to an infringing site, this does not necessarily protect sites from long and expensive litigation.  In Veoh, the defendant Veoh was accused of IP infringement but was ultimately proven to be free of liability.  Although Veoh won in court, the company went into bankruptcy due to the costs of the litigation.  SOPA does not do anything to fix this problem.  If anything, it exacerbates it by providing another cause of action that can be brought.  

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Spotify, Amazon Cloud Player, Apple iTunes Music Store, Guvera, Grooveshark…So many opportunities, most are fundamentally different. How do you evaluate which deals are good? What are the differences between the models and monetization? What are the licensing issues? If regulatory and case law is primarily reactive, then it follows the cutting edge of music law is contract practice and how exactly the above questions are answered.

Moderator:  David Mazur, MasurLaw

- David Leibowitz, CH Potomac- Managing Partner

- Matt Laszuk, IRIS Distribution – President

- Jason Pascal, The Orchard- Vice President & Associate General Counsel

- Lee Knife, DiMa- General Counsel and Director

- Adam Parness, Rhapsody- Senior Director of Music Licensing

Date: November 29th 2011

Location: Benjamin N. Cardozo School of Law

2011 witnessed the birth of many new websites and fileshare services (ie: Spotify, Turntable.fm, Bandcamp) that are of interest to anyone interested in music law.  These new technologies and websites create interesting issues regarding licensing, royalties and publishers’ rights. On November 29th 2011,  IPLS will be hosting a panel of distinguished music and technology lawyers to discuss how these new technologies impact license agreements, music synchronizations and various other topics.  Students will have the chance to ask questions and network with panelists.

Pfizer recently agreed to pay out over $60 million to settle U.S. government investigations into whether the company paid bribes to boost business overseas in violation of the Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. §§78dd-1, et seq. The investigations prompted several pharmaceutical companies to develop anti-bribery compliance programs to identify foreign doctors and healthcare workers who may qualify as “foreign officials.” To avoid heavy business costs like those suffered by Pfizer, any company doing business overseas should familiarize itself and comply with the FCPA.

The FCPA was enacted in the 1970s when an SEC investigation uncovered that 400 U.S. companies made questionable or illegal payments in excess of $300 million to foreign public officials. It created criminal and civil sanctions for bribing a foreign public official. The FCPA provisions falls under two main categories: 1) anti-bribery and 2) accounting. The accounting provisions generally require corporations covered by the FCPA to make and keep books and records to accurately reflect the corporation’s transactions and to create and implement a system of internal accounting controls. The anti-bribery provisions prohibit any U.S. individual or firm and certain issuers of securities, from bribing a foreign official or politician to act, or refrain from acting in violation of his official capacity, or otherwise misuse his official capacity in order to 1) obtain or retain business for or with any person or 2) direct business to any person. (Note that the Department of Justice interprets “obtaining or retaining business” broadly so that it covers more than a mere award or renewal of a contract.) The FCPA criminalizes the act of bribery, whether the bribery achieves its purpose or not. Bribery under the FCPA includes an offer, gift, promise to give or authorization of the giving of anything of value.

However, an individual, firm or an issuer covered by the FCPA may assert two affirmative defenses if charged with bribery of a foreign official or politician. First, the individual, firm or issuer may argue that the payment, gift, offer, or promise of anything of value was lawful under the written laws and regulations of the foreign official’s and politician’s country. Second, it could argue that the payment, gift, offer or promise was a reasonable and bona fide expenditure incurred by or on behalf of a foreign official or politician. Additionally, the expenditure was directly related to 1) the promotion, demonstration or explanation or products or services or 2) the execution of performance of a contract with a foreign government or one of its agencies.

Businesses and individuals should comply with the FCPA because it imposes heavy sanctions. From the outset, the Department of Justice may, in its discretion, bring a civil action to enjoin the bribery in a U.S. district court with proper jurisdiction. A U.S. firm or issuer found to be in violation of the FCPA may be fined up to $2,000,000. An officer, director, employee or agent of a U.S. firm or issuer found to be in violation may subject to a $10,000 civil penalty but a willful violation would result in fines up to $100,000 or imprisonment up to five years, or both.

Also, just because you are not a U.S. individual or firm does not necessarily mean you don’t have to worry about foreign anti-bribery law. First, the FCPA also applies to foreign firms and persons who take any act in furtherance of such a bribe while in the U.S. Second, other countries have similar provisions to the FCPA where they have signed onto the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”). Signatory nations to the Convention have agreed to enact domestic laws to criminalize, sanction and prevent bribery of foreign public officials.

To avoid the high costs, a globalized company should pay attention to the FCPA and laws similar to the FCPA, especially in countries where a state government is an active player in the market. As precaution, a company should ascertain 1) whether the party with whom it is doing business is a “foreign official” and 2) whether the payment is a “bribe” or “improper payment” under the FCPA or a similar law. For a more thorough summary of the FCPA anti-bribery provisions, see the Department of Justice’s “Lay-person’s guide” to the FCPA.

I have been corresponding with a PHD student who is studying how to stimulate entrepreneurship, and what programs can be developed to do so.  I reacted negatively at first, because it is my feeling that entrepreneurship is a self-selected thing that you can’t really train people to want to do.  As a result, any program you create aimed at inputting regular people and spitting out entrepreneurs is doomed to failure.  However, she mentioned kids programs, and I am open to the idea that you might be able to train people in skills any entrepreneur needs, in the hope that they might self select entrepreneurship.

But what happens to the kids once you take them out of the program, and give them the lonely task of doing it on their own, with no one telling them what to build, or how to do it right?  That’s what entrepreneurs have to do.  …because ultimately, advisors are not invested, so they can’t really tell you how to do it right, just like a ski coach can’t ski the course for you.  It is how YOU do it that matters.

What I think does the most to give kids (or anyone) the feeling of being an entrepreneur, is to make your own money from a venture that YOU created.   You can help kids create their own businesses, and if those businesses make money the kids can put in their pocket, THAT is the feeling of being an entrepreneur.  That feeling of making money from nothing is what entrepreneurs find addictive.  Every time it works, it is like an epiphany.  You say to yourself, “wow, this really worked!  People liked what I made, and bought it with their own hard earned money.”

The bigger plans and more lofty ideas of what to make develop later, but they develop from that basis.  Much later, when the entrepreneur has made enough that the money doesn’t matter, they remain addicted to the process of building new things that didn’t exist before.

So it’s money that first drives people to become entrepreneurs, and it is making new things that people like, and the feeling of accomplishment from succeeding that locks them in.

S

Mayor Bloomberg spoke at the October New York Tech Meetup (nytm.org) right after Steve Jobs died.

Bloomberg said that one of the things he learned early on when he was creating the Bloomberg information service is that what people said in the focus groups was very different than what he observed them doing on the trading floors.  He said that this is because the people who buy your product are not necessarily good at making your product.

Rather, they are more likely to be good at what THEY do.   So if you ask them how they want your product to be, you are asking them about something they don’t know much about, and they respond accordingly.  So it follows that if what people say they will do is different than what they actually do, then what people say they will buy is different than what they actually buy.  So in order to be successful as an entrepreneur, you should let your customers be good at what they do, and focus on how they actually behave in order to make good products for them.  Bloomberg said that Steve Jobs understood this.

The way I would say it is that Steve Jobs clearly understood that as much as you should give your customers what they want, the truth is they don’t really know, so it is best to create what they should want, relentlessly promote it to them, and then adapt your products based on user feedback.  Steve Jobs was brilliant at all three of these things.

S