Intellectual property (IP) infringement on the Internet is not limited to digital content. Counterfeit goods, often of poor quality, are widely available online through retail websites and online auctions. Counterfeiters sell goods such as infant formula or baby shampoo that expose young children to serious health risks. Illegal online pharmacies sell counterfeit prescription and non-prescription drugs to consumers for a variety of health conditions. At best, these drugs may simply be ineffective; at worst, they can be harmful, or even lethal, to consumers. Consumers shopping online may inadvertently purchase counterfeit goods, especially luxury goods such as jewelry, cosmetics, handbags, garments and shoes. Often these products are sold on sites that appear legitimate, charge reasonable prices, and may even link to the customer service of the brand owner. A 2011 study found that traffic to forty-eight sites selling counterfeit goods averaged more than 240,000 visits per day or more than 87 million visits per year. As Director of Immigration and Customs Enforcement John Morton put it, “Intellectual property violations have become big-time international crime. We’ve got to focus and do something about it.”
Against this backdrop, in September 2010, Senators Patrick Leahy (D-Vermont) and Orrin Hatch (R-Utah) introduced S. 3804, the Combating Online Infringement and Counterfeits Act (COICA), one of the first serious efforts by Congress in recent years to crack down on online piracy and counterfeiting. A modified version of COICA was introduced in 2011 in S. 968, the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act or PIPA). Most recently, Rep. Lamar Smith (R-Texas) and his co-sponsors introduced H.R. 3261, the Stop Online Piracy Act (SOPA). While these bills have important differences, many of their enforcement mechanisms are the same. In particular, the legislation enables Internet intermediaries, including Internet service providers (ISPs), payment processors (e.g. credit card companies), ad networks, search engines, domain registrars, and domain registries to take action against websites that are dedicated to infringing activities, in particular foreign sites that are otherwise outside of the jurisdiction of U.S. law enforcement and current remedies.
PIPA/SOPA has generated considerable controversy, much of it driven by false or misleading information. Much of this has been driven by “Internet exceptionalists.” For these advocates, the Internet is inherently different from the offline world and should be off-limits to the societal rules that a democratically-elected government wants to impose on it. Any attempt to impose limitations on illegal activities is decried as the first step to totalitarian repression. For example, the Electronic Frontier Foundation (EFF), using some especially over-the-top language, calls SOPA “censorship,” a “massive piece of job-killing Internet regulation,” and claims it will “break the Internet.” As we will show in this report, these claims are completely false.
Some criticism of PIPA/SOPA is driven by individuals and interests groups who oppose the current state of U.S. copyright law. These opponents believe (or hope) that the Internet Age marks the end of intellectual property rights. They generally believe U.S. copyright laws are too expansive and do not want to see them enforced. They bring criticism against PIPA/SOPA in the hopes of blunting the effects of policies they do not like.
Other opponents of PIPA/SOPA are simply willfully blind to the current severity of the problem of online piracy and counterfeiting. For example, Andreessen et al. argue that “the [Digital Millennium Copyright Act] gives rights-holders a way to take down specific infringing content, and it is working well.” Such a claim is clearly false given the level of piracy today and the fact that the DMCA only applies to domestic sites and users. For the most part, this report will not address claims made by those who refuse to recognize even basic facts, such as that online piracy is a substantial problem that hurts the U.S. economy. The interested reader can find this information in other reports.
Other critics make claims about the effects of PIPA/SOPA that are simply inaccurate. Some Internet engineers claim that the measures enabled by the legislation would “break the Internet” in general or its domain name system in particular. Network engineers frequently claim that certain technologies “break” the Internet in whole or in part. These statements do not mean that the Internet itself will cease to work; they are complaints about deviations from certain narrow engineering principles, protocols, or standards that may not be widely used or even widely understood. This does not necessarily translate into any meaningful implications for the average user. For example, many Internet engineers have insisted that network address translation (NAT), a technology used in the routers that provide Internet connectivity to millions of homes and businesses, breaks the Internet by violating core principles such as the end-to-end principle and the use of globally unique identifiers. According to this critique, NAT also breaks specific protocols such as Session Initiation Protocol (SIP) used for voice-over-IP (VOIP) calling. Yet the Internet continues to thrive and users still make VOIP calls.
Policymakers should understand that no bill that targets foreign infringing sites would be acceptable to ideologically-driven advocates, including those who populate Internet standards bodies, regardless of their claims that they also want to reduce piracy. However, other critics have raised reasonable questions about aspects of the legislation, particularly of SOPA. While the countermeasures proposed in PIPA/SOPA that make it more difficult to distribute, locate, and earn revenue from foreign infringing websites should be adopted, policymakers should also listen to the legitimate concerns of stakeholders who make good-faith efforts to improve the legislation, rather than kill it. In particular, policymakers should ensure that the enforcement mechanisms in PIPA/SOPA are targeted, fair, and effective. Finding a reasonable solution to the problem of online piracy and counterfeiting is too important to let hysterical, ideological posturing and threats influence public policy. It is time for policymakers to take a deep breath and consider this issue on the basis of facts and rational argumentation.
In summary, Congress should:
- Recognize that online piracy and counterfeiting are serious problems in need of new policy solutions;
- Create new countermeasures that narrowly but aggressively target websites clearly dedicated to infringing activities, especially U.S.-directed foreign sites;
- Encourage and enable intermediaries in the Internet ecosystem to disallow the use of their services to distribute, locate, and earn revenue from online infringement;
- Demonstrate to other nations that combatting online infringement, including by blocking illegal sites, will neither “break the Internet” nor harm free speech; and
- Take into account the concerns of stakeholders who are negotiating in good faith to reduce online infringement, such as by ensuring that legislation is not overly broad or vague.
The purpose of this report is threefold: 1) to respond to the inaccurate claims that have been made about PIPA/SOPA by opponents of the legislation, particularly with regards to DNS filtering; 2) to offer an assessment of legitimate areas of concern that policymakers should address before proceeding with legislation; and 3) to propose an alternative solution to the most controversial aspect of SOPA.